Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-08-08
BANKERS TAKE Up
GERMAN PROBLEM
Opening of Basel Conference
PresageS REIMBURSEMENT
in World Finance.
BY A. R. DECKER.

BY Cable to The Star.
BASEL Switzerland, August S.-The
Bankers Committee agreed upon at the
| London Conference meets here today
under the auspices of the Bank for In
ternational Settlements.
The London Conference recommended
that the Bank for International Set
Elements be invited to set up without
delay a committee representative of and
nominated by the governors OF central
banks interested, to inquire into the i'm
mediate further credit needs OF Ger
many and to study the possibilities OF
converting portion Of the short term
credits into long-term credits"
This means that the politicians have
passed the problem to the central banks
and the central banks nave passed the
problem to private bankers, which Is
just where the problem should be" as
one banker tcld me-.
World Review Necessary.
The committees work will neceSsitate
teview of the world situation, for there
are credit givers and borrowers to be
considered and both need to be reas-
sured before capital can flow freely
again.
The withdrawal CT capital from nearly
all European countries following loss
of confidence has brought ABOUT draSClc
deflation. The creditor countries, whlch
can be counted en- ones hand-tne
United States, France, Switzerland, Hol-
land, Sweden and Great Brltaln-Iet
that their funds were insecure IN the
borrowing countries ana Wnere IL was
possible withdrew them.
The nationals of borrowing countries
likewise felt that their capital was not
safe in their own countries and found
ways and means of getting their savings
into what they thought would be safer
places.
High interest rates for the time be-
ing lost their attraction and old not
afford sufficient inducement to hold
funds Even century-old financial CEN
tiers like London we're pressed.
DefiatiOn Has Good Sides.
This deflation has its good as well as
bad sides.
The fall of the wholesale price index
did not begin until a few years after
the war peak The fall was not ac-
centuated until a year ago, when, IL
years after the war, production sur
passed the present day restricted con-
sumption enough to cause the inverted
price pyramid to topple over. Obviously
part of the world cannot continue to
live under the old high price condi-
tons and the other part under new
conditions Radical readjustments were
necessary and they came.
Those nearest to nature, wheat farm
ers. coal and diamond miners, coffee
cocoa and rubber planters, felt the
pinch before the Others.
Government relief proved ineffective
against the offensive delivered by sup
ply and demand Consumption was
not increased and production was not
restricted
Governments. caught between the two
millstones OF the need of more revenues
and poorer taxpayers, adopted the easy
means of borrowing. They borrowed
from creditor nations to the limit and
from themselves in the form of short
term treasury notes
Nearly all governments also adopted
a concealed form of imitation, named
the gold exchange standard, a system
which the British are advocating for
the empire dominions as Australia New
Zealand and India.
DepresSion's End Nearing.
Through overborrowing and gold
standard imitation, three-quarters of the
European governments went bankrupt
This def1ation, drastic and painful as
it might be, is good thing in the sense
that the world had to go through with
if someday, so it was best to have il
over with.
There are signs which indicate that
1882 will see the end of the worst of the
depression
Where it was possible. ss in the case
with the Swiss Central Bank. foreign
exchange holdings are being sold and
gold purchased. The Scandinavian coun-
tries are doing the same and Central
European countries will follow when
their condition permits
Another sign of deflation is the re-
duction in the costs of governments
Virtually all the central European
countries have reduced the pay of their
state employees by from S to 10 per cent.
Governments are trying to get out of
business. However. social schemes
have gone so far that 1t is going to
be hard TO retire.
American Refusal Justified.
The American refusal to purchase
European bonds has been given as an
obstacle to Europe's comeback, for this.
1t is said prevents the changing of
Short-term credits into long-term
credits. However, present prices show
that the American bond buyers was
right. Europe's credit barometer can
be read from the average price of for
eign bonds on the New York market.
Europe can use all the funds with
drawn, plus those still frozen, plus
more. because once the present defiation
Is finished, millions of productive peo-
pie accustomed 70 a high standard of
living viii make their wants known.