Evening star., 1932-02-28
Economic Expert Doubts Ma
tion's Ability to Pay Public
and Private Debts.
REVIEWS LONG EFFORTS
TO DEAL WITH PROBLEM
Declares 1nsistance Upon Prompt
Remittances Will Cause Suspen-
sion of All Payments.
BY DIR. MAX WINKLER.

Special Dispatch to The Star.
NEW YORK, February 27.-The
world OF finance was neither surprised
nor alarmed at the statement by DR..
Heinrich Bruening, chancellor of Ger
many. The Reich, said DR.. Bruening.
can no longer pay reparations. He is
sued no further explanations. He felt
apparently that he was merely yoictng
the views held by a group of notable
experts assembled at Basel to study
Germany'S capacity to pay.
For almost 13 years. Germany's
creditors have been struggling with the
problem OF reparationS. From the out
set they have been dealing with
theories rather than facts. They naively
believed that Germany could pay for
all the damage that was said to have
been caused by the war, and much
more.
Whence the funds would come, no
one seemed to care. Germany's cred
itors merely knew that article 23l of
the Versailles treaty fixes upon Ger
many the responsibility for the damages
suffered by the allied governments and
their nationals resulting from the war.
They also knew that, by virtue of
article 232, a reparations commission
would be created to fix the amount and
the conditions of payment. They fur
ther knew that, by virtue of article
234, the commission has the right to
examine from time to time Germany's
resources and capacity to pay, to ex-
tend the period or modify the method
OF payment, the right of complete in
vestigation and control, as we'll as to
adopt such measures, in the event of
Germany's default, as may seem ex-
pedient, without these measures being
considered by Germany as hostile acts.
Spa Conferences.
In July, 1920, conference was con-
vened at Spa, where the amount was
fixed which each creditor was to re-
ceive. France was to get the lions
share, So per cent. Great Britain was
to follow with % per cent, Italy 10 per
cent, Belgium per cent, Portugal and
Japan three quarters of l per cent
each. In June, 1921, Sebria was listed
as a future recipient to the extent of 5
per cent and Rumania also was award
ed part.
In April, 1921, reparations were fixed
at 1892 ,000. 100000 gold marks, or
about $50, 900 900 900 gold. This is sew
eral times the total available supply of
the yellow metal. but no one seemed to
care about that. OF course, the
amount was not to be paid at once.
Bonds were to be created to the
amount, bearing interest at the rate
Of 5 per cent, with a sinking fund of
per cent, or total of per cent.
These bonds were to bear no maturity.
Germany was to pay on forever.
Annual payments were to comprise
a fixed amount of 1000, 100000 marks
(gold) and an additional sum equiva-
lent to 26 per cent of the value of Ger
many's exports. The agreement, which
is dated May 5, 1921, provides for pay
ment either in cash or in kind.
Germany continued to make pay
mentS in accordance with these ar
rangements. Funds were derived from
the sale of German paper known at the
time as government, state, city and
corporation bonds and German cur
rency. The decline in the mark was in
direct proportion to the promptnesS. Of
payments. Again. no one cared.
The toboggan of the mark continued.
1t declined to an infinitesimal traction
of its pre-war value. Cost Of printing
exceeded the price it fetched. Sales of
marks ceased and so did reparatiQps.
Germany defaulted in November, 1922.
The allies decided to act.
In January, 1928, France and Belgium
marched triumphantly into and took
possession of the Ruhr. Germany's col
lapse was complete, and the collapse OF
France, the victor, also was threatened.
A rescue party was organized in Novem-
ber, 1923. In fact, two--one headed by
Reginald McKenna. and one directed by
Gen. Charles G. Dawes.
Dawes Committee.
The McKenna Committee was
charged with ascertaining the amount
of German capital abroad and with
devising means of repatriating 1t. The
Dawes Committee was charged with
seeking means of balancing Germany S
budget and stabilizing ker currency.
AS might have been suspected, the
McKenna group achieved little. The
Dawes Committee was eminently sue
ceSsful. The results were embodied in
document known as the Dawes plan.
It provided for reparaticn5 payments
beginning with 1000 100000 gold marks
per annum, and rising 10 $500, 900 600
in the fifth year, the so-called standard
year. Subsequent payments were sub
ject to increase according to variations
as expressed in an index of prosperity
constructed for such purpose.
The plan gave representatives OF Ger
many,S creditors the right to participate
in the management of the Reichs Bank
and the state railways. The Reich'S
finances were to be inspected and su-
pervised by an agent of the Preparations
Commission, with headquarters in
Berlin.
BY virtue Of the provisions of the
Dawes plan, Germany was reduced to
of the victorious allies. She
now took her place in the realm OF
finance with Haiti. Santo Domingo and
Once more, the amount TO
be paid by Germany was left In
On August 80, 1924, the Dawes. plan
went into effect. Germany's borrowing
on a large scale began. The first trans
action involved a loan of 300, 900, 900
gold marks, or 5000, 100000. Thus she
obtained funds with which to carry out
the provisions of the plan. The latter
was a huge success, largely because
Germany succeeded in borrowing. She
secured funds from Peter to pay Paul.
During the first four years in which
the Dawes plan was in operation Ger
many borrowed about $1.84 for each
dollar paid in reparationS. This process
could not go on.
In February, 1929, a committee of
experts headed by Owen D. Young con-
vened at Paris. Germany, for the first
time, participated in the hearings. In
June, or four months after the confer
ence first met. new plan was an
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of affecting other factors in the near