Evening star., 1934-06-18
HISTORY Of DEBTS
IS VICIOUS CIRCLE
Germany's Loss of Foreign
Trade Begins and
Closes Cycle.
By the Associated Press,

BY the Associated Press.
One of history's most striking VIC
ious circles was closed last week.
Sighted from the respective view
points concerned. the progress of the
circle passes through Germany's loss
of foreign trade. her consequent claim
that she couldn't pay her creditors,
her creditors claims that they couldn't
pay the United States, the United
States decision not to loan these
debtors any more money, Germany's
creditors drive for Germany'S world
trade, and Germany's claim that she
was losing her world trade.
Blaming the War.
The World War, of course, was to
blame. The war was even blamed for
that excessively rainy Summer of 1918.
There is no question, however. that
the United States loaned a great many
millions of dollars to the allies who
fought against Germany in that war,
and there is no question that many
of those millions were paid out by
patriotic citizens buying Liberty bonds.
There is equally no question whatso-
ever that those countries who received
that money promised to pay it back,
lust as the United States Government
promised to pay back the money
loaned it by the citizens who bought
Liberty bonds. Thus far, only the
United States Government and Fin
land have kept those promises.
1t is also a fact that. by the Treaty
of Versailles officially ending the
World War. Germany promised to pay
many millions of reparations to the
allies. Germany promised because
she had to.
"War" Follows War.
The Treaty of Versailles ended a
World War of bullets, but it did not
even interrupt the commercial war
which caused the World War. That
went on even more deliriously than
before. Germany announced that she
couldn't possibly pay those millions
in reparations if she wasn't cut in on
the international trade winnings.
That suggestion seemed sensible
enough, so two successive committees
were formed. one with former Vice
President Charles G. Dawes as chair
man and the other headed by Owen
D. Young, American financier. They
established plans by which GermanyS
former enemies would raise money and
loan it to Germany to pay back money
which Germany owed her former
enemies.
The plans were lauded in banking
circles. Many millions of dollars were
contributed to them by investors, who
expected to get their money back
again with interest.
The unfortunate fact developed.
however. that Germany. in borrowing
money with which to pay debts, was
also confronted by the fact that she
had to pay interest on the money she
had borrowed. 1t was an experience
which many private individual has
undergone after taking out second and
third mortgages on his property.
The End of ReparatiOns.
The commercial war still went on
blithely and Germany's trade position
got no better rapidly. She said she
couldn't pay reparations and she
didn't.
The allied powers such as France
and Italy and, finally, Great Britain,
announced that they had been figur-
ing on those reparation payments in
order to pay back the money they
had borrowed from the United States
in order to win the war by which they
forced Germany to pay them repara-
tions instead of Germany forcing
them to do the same.
The United States said she was
sorry, but that was no business of
hers. She had loaned the money
with no strings attached and eX-
pected to be paid back in the same
way. And if she were not paid back
she would have to crack down on
loans in the future. Banks, grocers,
and ordinary citizens have been
known to say the same thing to
those who borrowed and failed to
pay back. In the case of the United
States. the action is known as the
johnson law.
Then, indeed, there was a clamor.
The English said the johnson law
was mot cricket" and the French
and Italians joined in the COM
plant.
Germany's Crisis
Meanwhile, things had reached a
crisis in Germany. The Reichs-
banks coverage in gold on the ma
tion'S currency was down to 3.4 per
cent. The situation was one that