The Judgment

Vaporings. Since January last, when the experts designated by the Reparations Commission began their secret deliberations, mankind has been pestered with mad, wild guesses on the part of neurotic journalists who have professed to have unimpeachable information regarding the unvoiced thoughts of each individual expert. Alas, this harmless mental vaporing is now demode! Last week the experts presented their reports to the Reparations Commission which published them.

First Situation. The complex reparations tangle has been bound up closely with U. S. foreign policy. In December, 1922, U. S. Secretary of State Charles E. Hughes made a speech-- which was soon forgotten. Last October U. S. Ambassador-to-Britain George Harvey made his valedictory address to the Pilgrims' Society in London and reminded Dame Europa that Mr. Hughes had made a speech and had offered to help her in that speech. The then British Foreign Secretary Lord Curzon woke up and cabled to Mr. Hughes to ask if he really had made a speech offering to help Europe. His motive was to bring pressure to bear on France. Mr. Hughes replied in the affirmative, but made four conditions to a prospective Economic Conference:

1) That Germany must not be relieved of her responsibility for the War or her just obligations.

2) That the findings of the Conference should be advisory and not binding on the interested Governments.

3) That the question of the Allied debts to the U. S. should not form the subject of any discussion.

4) That the questions involved cannot be finally settled without the concurrence of the European Governments directly concerned, which was the diplomatic parlance for "France must be represented."

After a fortnight of bickering France poleaxed the conference idea by restricting its scope, or, in the words of Mr. Hughes, by making it "wholly futile and useless."

Second Situation. It appeared that the prospect for an international conference was as dead as mutton when, a few minutes before its demise, Premier Poincare of France suggested (through the Reparations Commission) the formation of two committees of experts from representatives of the Allied Powers and unofficial representatives from the U. S. All international obstacles having been removed and at least temporary unanimity having been established between the Allies, Louis Barthou, Chairman of the Reparations Commission, invited the various financial and economic experts from the interested European countries and the U. S. to become members of the two committees.

The Report. In January the two committees began work. Now they have presented their reports.

No. 1 Committee (Chairman Charles G. Dawes of Chicago), whose task was to stabilize German currency and balance the German budget," recommended:

1) Institution of a single gold bank with central office in Berlin, which with the exception of the State banks of Bavaria, Wuertemberg, Baden, Saxony, shall be the sole bank of issue in Germany. The capital to be $100,000,000, part of which is to be raised in Germany and part abroad; the gold reserve to be at least 33 1-3% of the capital; the bank to be governed by a German Managing Board and a General Board of 14 members: seven Germans and a member from each of the following countries: Belgium, France, Great Britain, Holland, Italy, Switzerland, the U. S. The German Government to be debarred from issuing bank notes.

2) Payment of reparations, costs of armies of occupation and other treaty charges to be met by Germany from taxation, railway earnings and industrial debentures. Payments to be fixed on a sliding scale, starting with $250,000,000 (cash and deliveries in kind) and rising to a standard payment of $625,000,000--. A system of supplementary payments, based on an "index of prosperity," to augment the sum of $312,500,000 for the financial years of 1929-30 to 1933-34; thereafter the supplementary payment shall be added to the standard payment of $625,000,000.

3) An international loan of $200,000,000 to ensure the successful establishment of the gold bank and to cover internal payments on account of reparations for the financial year 1924-25.

4) German railway system (about 33,000 miles) to be controlled by a specially created corporation, capitalized at $6,500,000,000--by the issue of mortgage bonds. The corporation to be governed by a board of directors of 18 members, half appointed by the German Government and the public, and half by an Allied "Railway Commissioner," who is to be "a person accepted in the railway world as being in the front rank," whose duties are to be fixed "in considerable detail." The net revenue from the railway is expected to surpass $250,000,000 per annum, the whole of which is applicable to reparations payments.

5) German Government to mortgage German industry and provide guaranteed debentures to the capital value of $1,250,000,000; the debenture stock to be handed over to a trustee to be appointed by the Reparations Commission, who shall apply the proceeds to reparations payments to the Allies. The income from this source is expected to be $75,000,000, or 6% interest. No. 2 Committee (Chairman Reginald McKenna, head of the London Joint City and Midland Bank, previously Chancellor of the Exchequer under Premier Herbert H. Asquith), had as its purpose to compute the value of German capital exported abroad and report on the means of "repatriating" such funds. The main findings of No. 2 Committee were:

1) Estimation (in the face of enumerated difficulties) of the total amount of German capital abroad as about $2,175,000,000. This is made up of

Mean amount of capital

abroad by Germans $1,500,000,000

Foreign Currency in Germany 300,000,000

Real Estate and securities in Germany owned by foreigners 375,000,000

Total $2,175,000,000

2) Inflation must be stopped permanently in order to prevent a further exodus of capital from Germany.

3) No recommendations in respect to bringing back exported capital could be made, except that, in the opinion of the Committee, "special terms be offered for subscription to Government [German] loans made in foreign currencies" as an inducement to Germans to reinvest their foreign holdings. This Committee was further of the opinion that, once a permanent financial equilibrium had been established, the return of exported capital would be hastened.

Action. The Reparations Commission approved tentatively the experts' reports. France, Belgium and Britain were expected to approve the report in principle. The attitude of Germany was uncertain, but the general view in Europe was that Germany will accept because of the tremendous benefits the reports will shower upon her, such as:

1) Fixation of taxation at a figure consonant with the burdens being borne by foreign countries.

2) Guarantee of territorial integrity (if France gives up her economic hold on the Ruhr).

3) Harnessing German industrialists to the yoke of reparations payments, which they have hitherto evaded.

4) Stabilization of currency and balancing of budget. France was expected to agree to the "economic evacuation" of the Ruhr, providing that the guarantees contained in the report of No. 1 Committee meet her requirements.

*"Why should the nations concerned with reparations not invite men of the highest authority in finance in their respective countries, men of such prestige, experience, honor, that their agreement upon the amount to be paid and upon a financial plan for working out the payments would be accepted throughout the world as the most authoritative expression obtainable? Governments need not bind themselves in advance to accept the recommendations. . . . I have no doubt that distinguished Americans would be willing to serve on such a commission."

*In December, 1922, the Conference of London fixed the total of Reparations at $33,000,000,000. No. 1 Committee of Experts made no recommendations concerning the total amount of the Reparations bill, nor were they required to; it was presumed, therefore, that the above total still stands. Under the experts' plan, it will take Germany, at a rough estimation, about 17 years to pay off her $33,000,000,000 bill.