Page:The New York Times, 1925-12-14.djvu/6

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6
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THE NEW YORK TIMES, MONDAY, DECEMBER 14, 1925.


PUTS REICH ON ROAD TO FULL RECOVERY
By Lincoln Eyre
Continued from Page 1, Column 4.

years and begun to resemble those before the war. At the same time German business and industry have found themselves confronting the double problem of replenishing their working capital and remoulding their organization along lines that the changed conditions require.

"In some industries this has meant conditions approaching a crisis, which must properly be regarded as the inevitable basis of the return to stable conditions and as marking a further stage of readjustment.

"From the point of view of reparation payment the plan has brought order into the management of the problem and assured determination by actual experience of the reparations that can be safely paid and transferred. Under it payments and deliveries are moving regularly to the creditor powers and in accordance with expectation.

"From its beginning, moreover, the administration of the plans has gone forward on the basis of mutual faith and confidence, and the Allied Governments, the German Government and all the various agencies concerned in its execution have worked together to carry out the plan in the spirit in which it was concieved.

The present report is the second of a general character sent to the Reparation Commission by Mr. Gilbert, the first having been issued on May 30 last and having concerned the plans for the first eight months of operation. The Dawes program started functioning officially on Sept. 1. 1924, but attained "full force and effect" only two months later.

Real Test That of Adjustment.

Emphasizing the wholly satisfactory results of the first year, Mr. Gilbert says this period has been "not so much a test of German capacity to pay as a test of the ability of German economy to adjust itself to a return to stable conditions."

Recalling that the initial annuity of 1,000,000,000 gold marks payable up to Sept. 1 last was paid in full and divided among the creditor countries according to allied agreement, the Agent General paints out that the second annuity year, now in progress, involves for the first time a possible charge on the German budget totaling 500,000,000 marks. This amount, however, is expected to be covered, he remarks, through the transfer to the Reich of German railway bonds of equivalent value. Hence, in his opinion, the annual payment to the Allies, aggregating 1,220,000,000 marks during the coming ten months, is assured. Interest on its bonds is being met monthly by the railway company. 50,000,000 marks having been paid into the Agent General's account in October and November. The German Government is also paying 20,000,000 marks monthly out of its budgetary funds.

Dealing with the distribution of the first annuity, Mr. Gilbert observes that the bulk of the payments has been made in reichsmarks within Germany, chiefly for deliveries in kind. Discussing the share assigned to the United States for "American claims on account of the American Army of Occupation and awards of the Mixed Claims Commission," he states:

"The share of the United States in the first annuity amounted to about 15,328,000 gold marks. Up to this time no part of this share has been utilized by the United States Government and it remains to the credit of the United States on the books of the Agent General."

Under the Spa convention percentage the lion's share of the year's receipts, 454,000,000 marks, went to France. Of this sum France gets 136,000,000, or about 30 per cent., for her Rhine Army alone. The French balance with the Agent General amounts to 23,000,000 marks. Britain and Belgium devoted only about one-sixth of their respective shares to their occupational forces.

The report affirms that "it has been possible from the outset to administer the annuity in accordance with business principles" and adds that the system of monthly adjustments will be continued as far as possible in the second year, the Reich's installments totaling at least 90,000,000 marks.

The Agent General prides himself that the administrative expenses of his organization have been only 3,700,000 marks, or four-tenths of 1 per cent. of the fund administered.

No Cash Transfers Made.

Discussing the Transfer Committee, whose function it is to guard against reparational deliveries harmfully affecting foreign exchange, Mr. Gilbert observes that the committee authorized no cash transfers during the first year. The payments either have taken the form of deliveries in kind or cash supplied to the armies of occupation and other allied bodies within the Reich. The principal deliveries consisted of coal, coke and lignite. Deliveries of gold and certain food stuffs have been barred absolutely.

Through the operation of their Reparation Recovery acts Great Britain collected about 155,000,000 and France about 25,000,000 marks of their respective annual shares, the report shows.

Mr. Gilbert devotes considerable attention to the flourishing condition of the German railways organized as a private corporation, as the Dawes plan stipulates. The company's profits for the eleven months ending Aug. 31 were 765,000,000 gold marks, of which 200,000,000 was turned in to the Agent General as interest on bonds and more than 200,000,000 more was set aside for future service of these obligations. Thus, Mr. Gilbert affirms, the company will have no difficulty in meeting the charge of 845,000,000 marks imposed on it during the second year. He adds that "it is still too early to make definite plans" about the marketing of railway bonds to the value of 11,000,000,000 marks issued to the Dawes trustee.

Stressing a surplus of nearly 900,000,000 gold marks recorded at the end of the last fiscal year, Mr. Gilbert evinces complete satisfaction with the German budget. He points out that the actual excess of revenues over the budgetary estimate during 1924-1925 was more than 2,000,000,000 marks and deduces that while the final estimates for the current year's budget have not been submitted to the Reichstag "it seems reasonable to expect the final accounts to show the budget balanced by a safe margin."

The Government, however, he declares, must practice rigid economy and "accomplish further reform in the field of taxation." Certain German States and municipalities, he says, have found themselves so unexpectedly affluent that they have embarked on extravagant non-productive enterprises.

The Revalorisation Process.

Dismissing Germany's present public debt as virtually non-existent as a result of inflation, Mr. Gilbert says of the revalorization process that it is contingent on the discharge of the Reich's reparations liabilities and cannot affect the Dawes program. The total sum ultimately due to the holders of revalorized State bonds may reach 1,00,000,000 marks, he thinks.

Great weight is laid in the report on the stable character of the new German reichsmark, as the present currency is officially called. There are 5,083,000,000 of these marks in circulation, backed by a gold reserve or its equivalent in foreign notes of 1,555,000,000. The gold cover has steadily increased since the plan began to function.

Turning to credit conditions in Germany, the Agent General observes that since the end of inflation the country has passed through three stages: first, when any form of credit was obtainable only at prohibitive rates; second, when short-term credits of an emergency character were available, and, third, when strong industrial concerns have been able to get some long-term loans and the weak have succumbed altogether. This transnational stage, he says, still prevails and he adds:

"In so far as the business crisis is attributable to credit conditions. It may be said that the situation which developed in the Spring and to some extent still remains was precipitated by dependence upon short-term credits for capital purposes. Since the placing of the German external loan, which yielded about 800,000,000 reichsmarks, long-term loans to rather more than an equivalent amount have been made to German States, municipalities and industry."

The comparative opulence of the German Government, Mr. Gilbert avers, has produced a "public banking structure not only exceptionally complicated but more elaborate than the volume of business justifies."

"Instead of being borrowers," he says, "the Reich and its agencies are very large lenders. An expert view of this credit policy is that it is manifestly important to bring the administration of public funds more under control of the Reichsbank as the central bank of Germany and guardian of its credit and currency reserves."

Foreign Trade Balance

In dealing with German foreign trade the Agent General quotes from Government figures showing that the daily average excess of imports over exports at the end of October was 7,000,000 marks, compared with less than 2,000,000 in 1913. He observes, however, that it is possible that the official figures err on the side of conservatism and that the excess of imports is not so large.

Among factors adversely affecting the trade balance he cites the extension credits from aboard,, arising chiefly from the "general need of replenishment," the necessity of finding markets for German exports and the effort to overcome trade barriers abroad. Germany, in Mr. Gilbert's view, has many difficulties of this last nature to surmount and "much will depend upon the extent to which next year she is able to lower the barriers to trade that now exist."

His report shows that the United States to be by far the biggest purveyor to the Reich, American imports being valued at more than 1,500,000,000 marks in 1925. Britain comes second with 570,000,000.

German industry Mr. Gilbert describes as passing through an adjustment period "approaching a crisis," but by no means desperate. Human business enterprises built up on inflations, he says, have had to go and the famous vertical trusts have been found to be economically inferior to consolidating competitors in "a less closely knit trust."

He shows the coal and iron industries to be in reasonably good shape, the production of steel indeed being somewhat greater than in 1913. Business in general, as demonstrated by the volume of bank clearings, is about one-third below the pre-war turnover. Unemployment, while growing, is less than it was a year ago, some 500,000 persons now receiving State aid. Commercial failures are less numerous than in 1913.

Prices of basic commodities declines slightly during the year, but the margins between wholesale and retail prices, in Mr. Gilbert's opinion, remains unduly wide.


WALKER A GODFATHER
Drops Politics for a Day—Attends Gambol and Hospital Dance.

Mayor-elect James J. Walker took a day off from politics yesterday and on his return from Washington, where he attended the Gridiron Club dinner, postponed all consideration of appointments and other public matters until today.

Senator Walker was godfather for Harry Frazee 3d, son of Harry Frazee Jr., and grandson of the theatrical producer, at a christening at St. Patrick's Cathedral in the afternoon. He then called on friends. In the evening he attended the Lamb's Gambol and the dinner and dance of the United Israel Zion Hospital at the Commodore Hotel.


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