Evening star., 1932-04-03

Germany To-Day STANDS far below the
level of efficiency and completeness
which must be achieved II the rest Of
the economic machinery Of the country
is to function successfully and preserve
the narrow margin of balance between
our earning capacity and our indispens-
able requirements from abroad
The scarcity OF capital available, at
any reasonable rate, for these erNsr-
prises is, of course, by-product OF eur
general economic confusion as well as
of the immense drain upon the savings
of the German people each year
through the reparation clauses. The
limitation of capital for the improve
ment of services has had the effect Of
slowing up the distribution Of goods.
Vital to the maintenance Of economic
life In Germany in sense even more
striking than in the cases of most other
countries. transportation and other COM
munications must be furnished with
capital, in the future, at a cost within
reason"
Prof. Walther Lotz Of the University
of Munich, writing on Public Finance
after reviewing Ger1nany's financial
difficulties, says:
However discouraging these conclu-
sionS with regard to the effect Of the
high rate Of interest upon the public
OF Germany must be regarded in gen.
eral way, there are few more hopeful
and cheerful aspects of the situation
for the future.
IF after the revision of the obliga-
tions of the Reich and of the Treaty of
Versailles it should prove possible to
reduce the load on the budget. and II
new taxes and a further drastic reduc-
ton of expenditures should make DOS
nf G14
budget then the outlook would be sub
stantially improved. Above all, the I'M
provement Of the technic Of public bor-
rowing in line with the conclusions
reached as result of recent investiga-
ttons, would make it possible to organ
lie and develop our public finances in
a more practical and durable fashion"
Under Banking and Credit" Prof.
M. j. Bonn Of Handelschochschule
Berlin, writes:
THE high rate Of interest between
1925-1930 of from to 10 per cent hae
had exceptionally grave consequences
for the banks and for foreign commerce.
AS far as retail trade was concerned, the
influence of high rate Of interest has
probably been exaggerated. In foreign
Gin some cases exclusively of the export
trade by foreign banks, especially by
English banks. The rates of interest
quoted by them are probably identical
with the rates demanded from native
concerns Of the same standing.
Credit Made More Expensive.
"But the obligation Of settling his
foreign exchange accounts includes q
certain amount of risk for the Germek
merchant and makes credit more ex-
pensive to him by the amount of the
cost of covering his transactions by
foreign exchange than to his foreign
competitors. Moreover, the scarcity Of
capital from which he suffers and of
which the high rate of interest Is merely
the outward expression discriminates
against German traders whenever an
extension OF terms Of payment is de-
manded. He must either sell his goods
more cheaply, to counterbalance the
additional cost Of long credits, or insist
on earlier payments"
Karl Diehl, professor of economics at
the University Of Freiburg, gives the
general conclusions as to GeTmauy's
economic situation. He states:
THE high interest rates are due not
to economic causes, but to causes that
are quite outside the economic category.
Political causes are Of primary tmpor-
tance. The interest rate does not ade-
quately reflect the relations of demand
and supply upon the credit market, but
1T is in large measure affected by a
definite increase in the economic rate OF
interest, or what we call the pure rate
of interest. This addition to the rate
Of interest is a sort OF premiuxn for risk.
Shortage Of Capital Keeps Rate Up.
Il -, IT,
nual addition to the worlds gold supply
or like factors, but the shortage Of capi-
tai, which must be held responsible Tor
the continuing high rate of interest In
these years. The maldistribution Of gold
among the different nations, which Is q
consequence of the unnatural now OF
capital resulting from interferences OF
political character, Is vital factor IN
determining the high rate of interest.
1.-The tremendous competition for cap
ital drew foreign funds into Germany,
vet not enough to meet her require
ments. Something like 13,600, ,000,0 900
marks of foreign capital were imported
IN the years 1924 to 1928 according to
Deutches Institute fur Konjunkturfors-
chung. Savings, however, were made
each year more and more dlfhcuIt as
new heavy taxes were developed.
THE peoples of other countries bear
heavy burdens and most OF them share
with us today the confusion and un-
certainty of economic disorder, but 1t Is
not excessive to claim that no country
in Europe or America, whatever It's
price level and whatever the purchas-
ing power of its currency, imposes enec-
tive rates like these upon its citizens.
"And it is only natural that when
the State, in fulf1llment OF obligations
which it has assumed in order TO as
sure the continued integrity OF the ma
tional sovereignty, exactS heavy sacrl-
fees from the people, 1t should nnd IT
self obliged to assume also very heavy
burdens of a social character. One cam
not ask the German people to make the
sacrifices they have been called upon
to make since 1919 without guarantee
ing at least bearable margin of exist
ence. Seventeen years ago Ills per cent
of the aggregate national income went
into taxes and social expenditures, and
in 1929 28.6 per cent was so employed.
Situation Today "Unwholesome."
"The shortage of capital, then, ex-
plains the exhorbitant interest rates
that have aggravated our economic life
over the last few years, and the short
age of capital IS explainable only by
the draining off of our economic re-
sources to satisfy the stipulations Of the
successive instruments based upon the
treaty of Versailles.
1.-The transfer question Is today, as It
has always been, a question Of sub
stance, a question of resources and the
power over them, and not a mere tech
nical detail
"And Germany has, after all, trans
ferred so much in these IL years that
the world can give her the slight con-
ISOLATION, at least, Of conceding her good
faith.
1.-The economic state Of Germany to-
day is both unwholesome and, in some
dangerous. Men endure much
for their native land, so long as q pros
pect of accomplishment within the fu-
tuYe measurable for most Of them for
titles and guides them. The economic
state Of the German people at the close
of 1881 can neither strengthen their
hope for the future nor even enable