GERMANY AS A BANKRUPT.

Dunstan Times, Issue 3131, 21 August 1922, Page 8

GERMANY AS A BANKRUPT.

(By Lord Beaverbrook).

The proposals put forward by the committee of international bankers are, in. themselves, sufficiently startling. But they are doomed to failure because the counter-claims set up by France are more strange still, and absolutely bar the way to an advance in this direction. And even if this was not the case the public would he absolutely opposed to tlic whole idea of British credit going to a German loan. The chief clause in the bankers’ plan for granting Germany a loan is that the German indemnity should be reduced by one half. The chief item in the French counter-proposal is that, in that case. Great Britain must forego all share in the reduced indemnity. That the House of Commons would ever agree that (he British Government should subscribe to such a loan is unthinkable, and 1 feel sure that flic British investor would adopt the sumo attitude of refusal. Why ? Because it is neither safe, ■ advisable, nor profitable. Germany is a. bankrupt concern. liver since tho armistice she has committed every kind of economic and financial sin. and there is no way out for her hut a red-hot financial purgation. Economically she is doomed. She has lived by inflation until the mark has reached a point where it is beginning to cease to have a value even for internal transactions. Now three alternatives are placed before her: — 1. Del lot ion—stopping the paper machine and enhancing the value of the mark. 2. Stabilisation—an attempt to keep the mark at its present level and to make expenditure. balance incoiW. 6. More inflation—a panic—and bankruptcy. It is impossible for her to adopt cither of the first two courses, for the following reasons:— 1. What does deflation mean? A ri.-c in the value of the mark equivalent to a fall in the value of what it purchases. A manufacturer who borrows 1.200 marks to buy raw material would find that purchase worth 600 marks three: months afterwards. But he would still find himself due to pay the 1.200 marks, and would 1 have lost 600 marks on the transaction. Under these circumstances no man would buy at all. and the whole wheels of industry would cease automatically. And this would not be the only trouble—the question of wages and employment would promptly reach ai crisis. German inflation to-day :i,s fifty times greater than that of the British postwar boom. Consequently, the reaction must be fifty times more severe when it overtakes Germany. 2. The second alternative is stabilisation of the mark and the conditions of prices and livelihood in Germany at tho piescnl level. That is to say, the Government would not spend more than it had got. and prices and wages would remain a t existing levels. This would be a possible solution but for the fact that it is impossible. The reason is this : No German believes any longer in the value of his own currency. Suppose he put by 1000 marks in 1019—be saw it worth 600 marks in 1920, 260 in 1921, 126 in 1922. Naturally, he believes that in 1920 it will he worth 76 or 60 marks or nothing. As a result, he will neither save nor invest money which is a vanishing quantity. He will spend it recklessly, or ho will transfer it into the form of permanent or portable property. Tho moment a people reaches (his state of mind in the modern and complex State, all is over. 3. We therefore reach the third conclusion—that inflation will continue in Germany simply because i( is impossible to stop it without precipitating the crash —and then the crash will come all tho same. Currency will cease Lo have any value; credit will bo non-existent; wages will only he paid in money which has no value. The whole machinery of production will stop in a wholesale national bankruptcy —and until that bankruptcy is liquidated Germany will not lx; able to begin again. And Ibis is the country lo which we are to be asked to lend money! It would Ijo as sensible to throw it into the gutter. If we have losses in Germany, wo shall do boiler io cut those losses. Lei us come home iroin Europe and let ns devote ourselves in all matters of money and credit to our own people and to our own industries; let us direct our energies to the resources of our own Empire and lo the great markets of (he Americas and (be East.