How Germany Pays.

Hokitika Guardian, 13 May 1922, Page 4

How Germany Pays.

(By E. D. Kissan.)

How • wills. Germany pay reparations iii good money? She is lavishly printing paper marks but the Reparations Commission does not accept those. The reparations are payable, theoretically, iu gold, but there is not enough of that for the purpose. The Reparations Commission requires the equivalent of gold in sterling or other good money.

‘ So far the reparations payments received by this country have been almost entirely in kind or have been set off against German balance already here. When cash payments become due how will they bo made? It will be necessary for the German Government to get sterling through tlio foreign exchange market in the same way as a German importer does in paying sterling for British goods. And sterling means a slim at a British bank in pounds shillings and pence. A concrete example will illustrate the Way ill which this c.an happen. Mr England, of London buys 80,1X10 marks’ worth of hardware from Herr Deufsch, qf Beilin- Mr England has fiUH) at a London hank, and the current exchange being 800 marks to the £. lie instructs his hank to remit 80,000 marks to the credit of Herr Peutsch at a Berlin hank. Stripped of its complications, Gns transaction means in effect that the §IQO still remains on deposit- at the London hank—not in the name of j England hot of smn e °"c in Germany, prolpibl.v a hank or exchange firm. Ry sucli transactions German hanks and (iIIUS become possessed of sterling —that is, sums qn deposit ill ILitish banks. When the German Government Wishes to obtain sterling to pay reparations, it gpcs ji|to thp exchange market in Germany, aiu] buys this strling from the linns that possess it.

T|)is puts the German Government ip possession of sterling deposits ui

London, probably at fhose hanks that have soecial German connect inns.

An iiisK'iictipn from the German Government to those banks to transfer so much to the Bank of l-'.ngland—instruc-tions that would probably not give any indication of the purpose of the transfer—is all that is necessary in order to

effect the payment of reparations to the Reparations Com mission. There are, of course, other ways, besides exports to Great Britain, by wii Germany can obtain sterling balances. Any mark notes shipped from Germany and sold to speculators and others here mean the transfer of so much sterling to German hands.

Again, if a loan uf, say, 20 million pounds were raised in Londun for the German Government or for German commercial undertakings, it would u I'ectly place Germany in possession o that amount of sterling. ‘ -Moreover, trade with other countries might indirectly give Germany sterling through the complicated processes of i.:e foreign exchange market. Sales of German goods to New York would give (leimany command of dollars which slie could sell in exchange for sterling.

This broad explanation of the means b.Y which Germany obtains good money of other States Lo pay reparations in cash is sufrcpiit to make it clear that she must either get credit here or

elsewhere, li.v raising a loan or selling mark notes (as she has lav-islilv done in the past!, or sell sufficient German goo,ls or perform sufficient services (shipping and the like) outside Germany in order to obtain command of good nionev.