Evening star., 1932-05-22
Default in Political and Com
merClaI Debts Would Affect
All Industry.
INTEREST REQUIREMENTS
ARE ABOUT S260,OOO,OO0
Favorable Trade Balance Indicates
Payments May Be Continued.
Problems Analysed.
BY DIR. MAX WINKLER.
Dispatch to The Star.

| NEW YORK, May 21-With sub
stantially more than $1,000, ,0OO, 900 Of
| American funds invested in GERMANY
and its enterprises, the question
whether the Reich will default on both
| political and commercial obligations is
| OF more than academic interest. Re-
gardless of the wisdom of fallacy Of
having staked such large sums in that
| country American investors, both indi-
vlouals and institutions, are vitally af-
fected by Germany's attitude toward
her contractual obligations.
Is the situation really hopeless, or is
1t still possible to remedy conditions
and avert crisis of serious proportions.
which might conceivably lead to the
bankruptcy of most of continental Eu-
ropean countries which have, so far.
somehow managed to service their for
elgn debts? Or, shall the United States
adopt a policy of aloofness, consoling
itself with the thought that America
can continue to prosper regardless of
What happens TO the rest of the world?
Debt Status Analysed.
What is the real debt status of Ger
many?
Germany's foreign long-term debt
may be estimated today at about So
OOOOOO,000, of which the Dawes and
Young loans account for about $525.-
100000. The remainder is represented
oy mortage and municipal issues held
abroad. Principal due this year is
placed at $4,000 900, in addition to
which several medium-term issues and
opIlgatlons fall due, aggregating about
Sl9O 100000. This amount includes
credit OF 5000 900 which has all
ready been extended until November
1883. Necessity rather than choice is
responsible for the postponement of
TINS credit, which was arranged. to a
very large extent, in the American
market
Interest and sinking fund on the
iong-term foreign debt should not ex-
coed $160, 0,000,0 600. The service on the
short-term commitments under the
standstin agreement may be placed to-
Gay at not more than 500, 900 900, tax
ing into account large repayments al
| ready made and the decline in the
value of currencies in which part of the
oeot Is payable. In other words total
oepG requirements for the current year
should approximate $3.50 900 900. or ma
terlally less than is generally believed.
The favorable trade balance for the
nrSt Tour months of 1882 amounts to
about $116,000,000, indicating that con-
tlnuance Of payments on account OF
German external debts Is not at all i'm
probable> The diScouraging aspect Is
the sharp setback in the figures for the
past month. The excess of exports for
April was only about 100000 COM
pared with about $4,000, 900 in March.
There Is, however, a redeeming fea-
ture in the German trade statistics for
April. Total commerce showed an in
crease over the March figures of 12O.-
100000 marks, or about $50, 900 900, an
advance of materially more than Is per
cent. Few allegedly more prosperous
nations can point to such results.
To students of international finance,
the Reich's fiscal problem, while extraor-
dinarily difficult, is not of such nature
that solution is impossible. What
Germany really needs, besides elimina-
tion Of the political debt problem,
which to many seems the sine qua non
to German recovery, is greater free
dom of commerce with the rest of the
world. Superficial observers and pseudo
economists among whom politicians
predominant. hold that the collapse of
the mark has freed Germany of an
enormous internal debt To begin with,
this is only partially true According
to the revaluation law Of July, 1925,
German internal loans, scheduled to be
payable in marks, were revalued, and
their service today abSorbs a consider
OF greater significance, however, Is
the fact that the collapse of the paper
currency resulted in the destruction of
Germanys working capital. The Reich
had to start all over again. While its
plants and fixed assets were in fairly
good physical condition, there was
nothing to put them into action. Ger
many had to go out and obtain funds.
Thus began the country's borrowing in
foreign countries. In other words, Ger
many is really paying today for the
havoc wrought by the deterioration and
eventual disappearance of the mark.
Those who claim that Germany has
benefited from the debacle of her cur
rency display complete ignorance Of
the actual state of affairs.
New Crisis Looms.
1t Is becoming increasingly evident
that something will have to be done
to prevent a new crisis on the continent,
which is likely to spread over an already
haraSSed Europe and eventually over
the entire world. Few nations are in
a better position to assume leadership
than the United States. Will America
be able to rise above politics and take
a role which she is eminently qualified
to play? Events in the past two and a
half years should have been sufficient
to prove the fallacy of isolationist views,
irrespective of how enticing they might
appear to some on purely sentimental
grounds.
The time within which steps can still
be taken to avoid the continuance of
the economic crisis is dangerously short.
To wait until it Is virtually too late
may neutralize the effects of whatever
constructive measures may be adopted.
Lausanne must not be permitted to
fail. Let us hope that it won't!
(Copyright. 1882. by the North American
Newspaper Alliance, Inc.)