The Dominion THURSDAY, NOVEMBER 10, 1921. GERMAN FINANCIAL TRICKERY

Dominion, Volume 15, Issue 40, 10 November 1921, Page 4

The Dominion THURSDAY, NOVEMBER 10, 1921. GERMAN FINANCIAL TRICKERY

At the closing quotation cabled yesterday, the German mark (with a par value of close on one shilling) was exchanging for little more than one-fifth of a penny, that is to say, at less than a third of its exchange value only a couple of months ago. This astonishing depreciation of the German national currency is palpably artificial, and the only feasible explanation is that offered by the London Times in an article quoted to-day—ini effect, that Germany is preparing to stagemanage her own bankruptcy in the hope of evading reparation payments, or of securing a great reduction in the Allied demands. Within reasonable limits, a continued fall in the exchange value of the mark during recent months would not have been surprising. Outlining early in September the factors which must make for further depreciation in tho exchange value of the mark—then at about 345 to the i pound sterling as compared with 1075 to the pound yesterday an English financial authority remarked that “the yield of the new FGerman] taxes cannot be expected to make itself felt yet awhile, and by tho time they are in full operation the rise in prices consequent i upon the present fall in the mark will inevitably have increased expenditure still further, while next year’s reparations payments must prove a burden far greater than any which Germany has yet had to bear.” Making all possible allowance for ..these factors, it cannot be contended, however, that they come within measurable distance of explaining such a fall in the exchange value of the mark as is now recorded. \ A collapse on this scale must be attributed to deliberate inflation and is only to be explained on the assumption that the financial magnates who wield enormous power in Germany hope to create conditions in which it will be impossible for the Allies,to enforce the reparation terms. As a matter of fact financial and economic conditions in Germany are already somewhat difficult to gauge with any approach to accuracy. Some extraordinarily contradictory features are manifest. Against the wild confusion of the national accounts and the huge deficit they disclose there is to be set the fact that many branchep of German industry are remarkably well placed to resume prosperous trading. Apart from the advantage of exchange—a very great advantage in export trade—direct comparisons have shown that while British manufacturing enterprises are heavily handicapped by the effects of war and post-war taxation and the high valuation of plant and equipment, corresponding concerns in Germany have right up to date escaped very lightly in the matter of taxation and in addition have been enabled to write down their capital costs to a very low figure, in some cases almost to vanishing point. These conditions obviously make, with others, for a developing increase in production which would tend to rehabilitate the mark. Another test of industrial conditions in Germany is the volume of unemployment. In this matter > she has been remarkably fortunate in comparison with most other manufacturing countries. For instance, at a recent date the unemployed throughout Germany were estimated to number only about 300,000. Britain. with little more than fwothirds of Germany’s population, has five times as many unemployed. On the other hand, and in spite of some very manifest advantages she enjoys in existing conditions, Germany’s export trade has fallen away seriously in recent months. Her foreign trade in May showed, as regards both exports and imports, a heavy decline in volume and value as compared with December, 1920. Incomplete particulars of later date indicate that the decline has continued. Actual difficulties in recovering and retaining a foothold in foreign markets may have combined with devious financial trickery to bring about the position now reached, but there is no doubt that this position, as measured by the inflation of the mark, is very much worse than it need have In considering the policy of the German financial magnates, it has to be remembered that in their campaign to evade the payment of reparation they are not at all likely to study the interests of tho mass of the German population. Such conditions as have been created and are now being intensified will no doubt subject a host of small investors in Germany to ruinous loss and, by the dislocation of industry and in other ways, inflict great hardship on German wage-earners and their families. Such 1 incidental results of their policy will hardly trouble the representatives of German “big business,” however, if they achieve success in their leading aim of creating conditions in which it will be difficult for the Allies to enforce the reparation terms. The occasion, of course, calls for a firm stapd by the Allies in support of their claims, but it may Tie anything but easy for them to arrive at a policv which will checkmate tho Gorman design now visibly taking shape. Several complicating difficulties are already in sight, of which the most serious is perhaps the Wiesbaden agreement recently concluded between France and Germany. This provides that by May, 1926, Germany is to deliver to France building materials to the value of 7,000,000,000 gold marks to be used

in reconstruction in the devastated areas. Staging a national bankruptcy, Germany may find, or hope to find, in such an agreement the means of sowing dissension between the Allies. ■ln fact, from the German standpoint an arrangement which gives France some advantage over her Allies where the collection of reparation is concerned may have commended itself as part and parcel of the scheme of as far as possible evading payment. Of all the Allied Powers, France has shown herself most inclined to take strong measures with Germany, but it is quite possible that she may now be disinclined to prejudice her separate Interests in co-operating to enforce general Allied claims.