Evening star., 1934-06-15
Default Friday.

June IS, 1894, as Default Friday. Not
only does it mark the failure of Euro
pean war debtors to meet the semi
annual installments due on their
American obligations, but 1t also finds
Germany defiantly declaring mora
torium" on all its foreign indebted
ness, including particularly the pay
ments on loans comprehended by the
Dawes and Young plans. 1t is too
early to foreshadow the effect of
the Reich's decision, but 1t Is certain
to provoke immediate and far-fiung
reaction. Americas interest in the
German moratorium is extensive. At
least 500. O.0O0,0 900 of the Dawes and
Young loans is held in this country,
while $60O,OO0,0O is said to repre-
sent the aggregate of other affected
issues-of German municipalities, gov
ernmental subdivisions and industrial
corporations-in possession of Ameri-
can investors. On all of these obliga-
tions the Reichsbank has formally
proclaimed a suspension Of payments
between July and December 81.
The World Bank for International
Settlements charges that Germany
has broken her contract.
DR.. Schacht, the Reichsbank head,
who is in supreme direction OF Ger
many's financial operations, scorns
the suggestion that devaluation of the
mark, with the dreaded aftermath of
imitation, will be the inescapable re-
suit of the moratorium he has or
dained. He declares that the mark
will be kept stable and insists that
the Reich has the power requisite for
that purpose. Meantime, Great
Britain, France and other countries
are considering swift and stern re-
prisals in the form of a special Gus
toms tax on German goods, or the i'm
pounding Of German trade balances.
For the necessity to cease the serv-
icing of their international indebted
ness the Germans bitterly blame the
outside world. They have been hard
hit by the boycott of German wares
instituted in Europe and the United
States as a protest against Hitler
policies, especially anti-Semitism. The
Reich argues that as long as Germany
Is debarred from selling abroad on a
normal scale and building up COM
mercial balances by that means she
cannot possibly maintain her gold re-
serve or develop the foreign exchange
resources necessary for transfer of debt
payments. The Reich has come to
look upon the boycott as on q par
with the reparations which the Ger
mans repudiated, and they are plainly
determined to resort to every recourse
at their command to enforce its re-
moval. DR.. Schacht is bent upon
showing that nations which will not
trade with Germany cannot expect
to collect from Germany.
International financial relations are
so closely interlocked that any crisis
that undermines Germany neces-
sarily involves the rest of Europe,
and to certain extent, this country,
as well. The Germans are not blind
to this phase of their difficulties and
are counting upon other governments
to take remedial steps in a spirit of
self-interest
AS to default by all of Americas S
war debtors, with the minor exception
OF Finland, matters are left where they
long have benin deadlock. Sug-
gestions that Great Britain and others
might salvage the situation by max
ing payments in kind have already
run into difficulties. To begin with,
President Roosevelt indicates that
kind" payments under any circum-
stances could only be accepted on q
very partial" scale. In the second
place, the British evince no enthus-
iasm for that plan. There is finally
the question of Americas capacity to
absorb, without arrangement of its
domestic economy. any considerable
quantity Of foreign commodities ten
dered as debt payments.
Twenty years after the outbreak OF
the war the world faces sea OF
financial troubles and anxieties al
most as ominous for peace as the
political unrest which produced the
great outbreak in 1914.