The Guardian And Evening Star, with which is in corporated the West Coast Times TUESDAY, SEPTEMBER 29, 1931. ECONOMIC SICKNESS.

Hokitika Guardian, 29 September 1931, Page 4

The Guardian And Evening Star, with which is in corporated the West Coast Times TUESDAY, SEPTEMBER 29, 1931. ECONOMIC SICKNESS.

The report of the Committee set up by the Bank of International Settlements to consider the credit situation in Germany is of special interest at the present juncture. The committee was instructed to “inquire into the immediate further credits of Germany and to study the possibilities of converting a portion of her short-te;m credits.’’ In spite of the somewhat limited terms of reference to which the bankers were confined, they have succeeded in producing a very important document which deserves the most careful study by the various Governments concerned.” said “The Times” in a leaning article. “It is true that the significance of their report lies rather in its implications and omissions than in any new and positive proposals; but that is precisely why it should provide food for reflection. For the committee was debarred at the outset from dismissing or even mentioning What are called political questions. Yet the whole essence of their conclusions is to show with an unmistakable clearness that no solution of Germany’s financial difficulties is possible unless the fundamental problem of reparations is settled on a realistic basis. That such very plain speaking should have been endorsed by the French representative of the committee is very satisfactory.” On the recommendation of the London Conference private efforts were made by banking groups to arrive at a settlement by which the creditor countries agreed to renew their credits and to refrain from further withdrawals. That agreement was completed by the committee, and in a document signed on August 18 at Basel the “standstill consortiuhi” decided to prolong existing credits l'or a space of six months, provided that the central hanks do the same. The danger of a foreign drain has thus for the moment been averted, hut the question remains, how German industry can continue to keep alive on the reduced volume of credit at its disposal. The concluding passages of the committee’s report have a special significance at the present moment “But time is short,” said the committee jusfc five weeks ago. “The body of the world’s commerce—whose vitali ty is already low—has suffered a severe I shock in one of its chief ipenibers.

This has resulted in a partial paralysis which .can only be cu.ed by restoring the free circulation pf money and of goods. We have that this can be accomplished, but only if the Governments of the world realise the responsibility that rests upon them and will take prompt measures to re establish confidence. Their action alone can restore it. We-think it essential that before the period of prolongation of credits recommended by the London Conference comes to an end they should give to the world the assurance that international political relations arc .established on a basis of mutual confb dence, which is the ‘sine qua non’ of economic recovery, and that the international payments to be made by Germany will not be such as to imperil the maintenance of her financial stability ’’ The report goes on to point out that the German problem is part of a larger issue, and in this connection makes two observations. The first is that, in order to revive demand and thus put an end ta the continuous downward movements of prices, it is essential that the normal process of investment of fresh capital should be resumed with a well-defined economic purpose in view—namely, an increase in. me purchasing power of the world. The second is that the case of Germany provides the most forcible illustration of the fact that in recent years the world has been endeavouring to pursue two contradictory policies in permitting the development of an international financial system, which' involves the payment of large sums by debtor to creditor countries, while at the same time putting obstacles m the way of the free movement of goods. For the sake of" world economic prosperity, the committee holds, tliere must be a radical change in this policy and international commerce must be allowed to resume its natural development. The committee concludes : “Tire clearly defined and technical investigation to which we have confined our attention does not permit us to offer suggestions of a political character, but we have felt lit. to be our duty to point out the reasons why it is impossible in the present to suggest definite plans for securing to Germany long-term credits. Wo wish, however, to add that if a situation, were brought about in which the confidence of the investing public in the future economic and political stability of Germany could be restored, wie are satisfied that the consolidation of a part of her shortterm debt and the provision of the additional' working,,.capita), needed bv hep trade and indiistl'y would Present tlo seriotis difficulties. Thei'e arc many ways in which this object could be achieved. If we refrain from putting forward detailed schemes to this end it Is only because our conviction that action which lies outside our province must first be taken before any long term German bonds however welL secured, can be sold. We therefore conclude by urging most earnestly upon all Governments concerned that, they lose no time in taking the necessary measures for bringing about such condi tions as will allow financial operations to bring to Germany, and thereby to the world, sorely needed assistance.