Evening star., 1932-10-30
BY FRANK H. SIMONDS.

TINE warning uttered by the Ger
man chancellor the other day
In the matter Of the private
i debts owed abroad by Germany
opens a dismal prospect not
merely for the United States but for
Britain and to a lesser degree for
France And along with these three
great powers must be reckoned Holland
and Switzerland, who are also consider
able foreign lenders. What Papen
actually foreshadowed was the end Of
the payment not of governmental debts
but of the obligations incurred by
smaller municipal divisions and private
borrowers of the Reich. In reality it
was the end of repayment Of interna-
tional debts of all sorts.
While the German chancellor's utter
ance will be reckoned premature 1t is
nevertheless something which has long
been expected. In the natural course
of events the process was to be three
fold, first, reparations. then war debts
and then. finally private debts. Papen
is thus only forcing the pace. Germany
has gotten rid of reparations. she has
no war debts and there Is for her moth
ing now but the private debts.
But it must be perceived at once that
all three hang on the same peg. That
Is to say that whether a country owes
abroad on account of reparations i'm
posed after military defeat, for monies
borrowed during war or merely for
loans contracted by her cities or citizens
the process of payment will be the
same. In a word, payment will have
to be made in one of three ways, by
gold, by services or by goods. and. in
practice, all three methods would
naturally be employed.
Gold Barely Adequate.
At Lausanne Germany finally escaped
from reparations because the world per-
ceived at last that it was impossible
for her to pay annually abroad some
thing like $500 100000. Her gold supply
was barely adequate to protect her own
currency, the services which she could
render in the form of shipping, etc.,
were relatively insignificant and there
vas no available market for this amount
/ Of German goods over and above the
amount which she was compelled to
sell in order to cover her necessary pur-
chases in raw materials and foodstuffs.
Now. the immediate question concerns
the annual payment Of something like
/ S250.000,000 interest upon the s5.000.-
000, GOO Germany has borrowed during
/
came from the United States. The
problem is the same. The German gold
reserve is too small to be employed, the
services are inconsiderable, there re-
mains only the matter of the export
surplus of goods In addition to her
normal exports to cover essential i'm
ports Germany must sell abroad goods
to the value of s25o,0o0,0 ,00O
But where? Every country in the
world has been engaged since the great
depression arrived in raising its tariff
walls. Britain has not only abandoned
| free trade but at the Ottawa confer
ence launched herself upon the sea of
! imperial preference. The United States
has constructed the Hawley-Smoot tar
Iff wall South America, like Germany,
cannot pay its own debts let alone sup
| ply larger market for German goods.
sia is but limited market and largely
a question of longtime credits.
What Germany in effect indicates is
purpose to return to the basic prin-
ciple of the Dawes plan. That cele-
brated scheme provided that Germany
| should raise by domestic taxation each
year some s500,000,0 900. the annual in
stallment Of reparations. That sum was
/ to be turned over in marks to S. Parker
/ Gilbert, agent general of the Dawes
! system, who was to apportion it among
4 the reparations creditors But they
were to be allowed to take it out OF
/ Germany only as such an operation
| was possible without affecting German
| exchange. This meant simply that
| they had to be paid out of German
| goods directly or out of the proceeds
of German goods sold abroad which
built uD an eXDOrt sllrDlus
| The Dawes plan was never really
tested because Germany went out into
the world and borrowed S5.000,000 000
and used about half in paying repara-
tons and the other half in German
| interests. BY the time she was unable
! to borrow further the Dawes plan had
been replaced by the Young plan and
the crash arrived But now Papen says
in effect what the Dawes plan said
that the creditors of Germany must
get their money without disturbing Ger
man currency And this means they
must take their pay in goods.
Provides Debt Payment.
The Ottawa conference was not mere
! ly British attempt to get the domin-
ion markets to revive British trade. but
was quite as much an effort to provide
;o6 Ey,nl lich