FOOTNOTES:
[32] The preamble states that the settlement is “in accordance with Article 233 of the Treaty of Versailles.” This Article prescribes that the scheme of payments shall provide for the discharge of the liabilities within thirty years, any unpaid balance at the end of this period being “postponed” or “handled otherwise.” In the actual settlement, however, the initial limitation to thirty years has been neglected.
[33] This actual text is printed below in full, Appendix No. 7.
[34] It is not competent for a single Ally (e.g., Portugal) to claim its share of the Bonds and market them at the best price obtainable. Under the Treaty of Versailles Part VIII. Annex II. 13 (b) questions relating to the marketing of these Bonds can only be settled by unanimous decision of the Reparation Commission.
[35] The Committee is to coöpt three representatives of neutrals when a sufficient proportion of the Bonds to justify their representation has been marketed on neutral Stock Exchanges.
[36] And it really is an adequate rejoinder to deputies like M. Forgeot. If a partisan or a child wants a silly, harmful thing, it may be better to meet him with a silly, harmless thing, than with explanations he cannot understand. This is the traditional wisdom of statesmen and nursemaids.
[37] The effect of this provision is discussed in The Economic Consequences of the Peace, pp. 165–167.
[38] Cf. Baruch, The Making of the Reparation and Economic Sections of the Treaty, p. 46; and Lamont, What Really Happened at Paris, p. 275.
[39] Assuming exports of 10 milliards, which is double the actual figure of 1920.
[40] The Truth about the Treaty, p. 305.
[41] Exports for the six months May–October 1921 were valued at about 40 milliard paper marks (exclusive, I think, of deliveries of coal and payments in kind to the Allies), as against imports valued at 53 milliard paper marks. If the monthly export figures are converted into gold marks at the average exchange of the month, the exports for the six months work out at about 1865 million gold marks, or at the rate of rather less than 4 milliard gold marks per annum.
[42] In The Economic Consequences of the Peace, p. 203, I expressly premised that my estimates were based on a value of money not widely different from that existing at the date at which I wrote. Since then prices have risen and fallen back again. The same proviso is necessary in the case of the present estimates. It would have been more practical if, in fixing Germanyʼs liability in terms of money for a long period of years, some provision had been made for adjusting the real burden in accordance with fluctuations in the value of money during the period of payment.
[43] See Excursus III.
[44] I first published this prediction in August 1921. As this book goes to press, the German Government have notified the Reparation Commission (December 15, 1921) that, having failed in their attempt to secure a foreign loan, they cannot find, apart from deliveries in kind, more than 150 or 200 million gold marks towards the instalments of January and February, 1922.
[45] The United States has the right to retain and liquidate all property, rights, and interests belonging to German nationals and lying within the territories, colonies, and possessions of the United States on January 10, 1920. The proceeds of such liquidation are at the disposal of the United States “in accordance with its laws and regulations,” that is to say, at the disposal of Congress within the limitations of the Constitution, and may be applied by them in any of the three following ways: (1) the assets in question may be returned to their original German owners; (2) they may be applied to the discharge of claims by United States nationals with regard to their property, rights, and interests in German territory, or debts owing to them by German nationals, or to the payment of claims growing out of acts of the German Government after the United States entered the war, and also to the discharge of similar American claims in respect of those of Germanyʼs Allies against whom the United States was at war; (3) they may be turned over to the Reparation Commission as a credit to Germany under this head.
[46] The rates for conversion of paper marks into gold marks have been taken as follows: Number of paper marks per 100 gold marks in May, 1465.5; June, 1647.9; July, 1832; August, 1996.4; September, 2443.2; October, 3942.6
[47] Provisional figures.
[48] The ordinary revenue and expenditure were estimated to balance at 48.48 milliard paper marks. The extraordinary expenditure was estimated at 59.68 milliards, making a total expenditure of 108.16 milliards. Included in this, however, were 14.6 milliards for various Reparation items. These are in respect of various pre–May 1, 1921, items and do not allow for payments under the London Settlement; but to avoid confusion I have deducted these from the estimate of expenditure as stated above. The extraordinary revenue was estimated at 10.5 milliards, making a total revenue of 58.98 milliards.
[49] I have allowed nothing so far for the costs of the Armies of Occupation, which, under the letter of the Treaty, Germany is under obligation to pay in addition to the sums due for Reparation proper. As these charges rank in priority ahead of Reparation, and as the London Agreement does not deal with them, I think Germany is liable to be called on to pay these as they accrue in addition to the annuities fixed in the London Settlement. But I am doubtful whether the Allies intend in fact to demand this. Hitherto the expense of the Armies has been so great as to absorb virtually the whole of the receipts (see Excursus V. below), having amounted by the middle of 1921 to about $1,000,000,000. In any case, it is now time that the agreement, signed at Paris in 1919 by Clemenceau, Lloyd George, and Wilson, should be brought into force, to the effect that the sum payable annually by Germany to cover the cost of occupation shall be limited to 240 million gold marks as soon as the Allies “are convinced that the conditions of disarmament by Germany are being satisfactorily fulfilled.” If we assume that this reduced figure is brought into force, as it ought to be, the total burden on Germany for Separation and Occupation comes, on the assumption of the lower figure for exports, to 3.8 milliard gold marks, that is, to 76 milliard paper marks.
[50] “This estimate is based on an average wage of about 800 paper marks monthly for male, and about 400 paper marks monthly for female, employees.” Converting these figures at the rate of 12 paper marks equal to 1 gold mark, he arrived at an aggregate national income between 30 and 34 milliard gold marks. It is not easy to see how these wage estimates, even assuming their correctness, can lead to so high an aggregate figure.
[51] There are twice as many male commercial employees as there are female.
[52] For a full examination of the purchasing power of the paper mark inside Germany, see an article by M. Elsas in the Economic Journal, September 1921.
[53] A summary of this Agreement and other papers relating to it are given in the Appendix No. 8.
[54] See Appendix No. 8.
[55] Incidentally the Wiesbaden Agreement sets up a fairer procedure for fixing the prices of supplies in kind than that contemplated in the Treaty. According to the Treaty the prices are fixed at the sole discretion of the Reparation Commission. In the Wiesbaden Agreement this duty is assigned to an Arbitral Commission consisting of a German representative, a French representative, and an impartial third who are to fix the prices, broadly speaking, on the basis of price existing in France in each quarterly period subject to this price being not more than 5 per cent below the German price.
[56] See Appendix No. 8.
[57] I return to the theoretical aspects of this question in Chapter VI.
[58] Any one, who can fully persuade himself of the unalterable truth of the proposition that every day the sales of exchange must exactly equal the purchases, will have gone a long way towards understanding the secret of the exchanges.
[59] Furthermore, every improvement in the value of the mark increases the real burden of what Germany owes to foreign holders of marks and also the real burden of the Public Debt on the Exchequer. A rate of exchange exceeding 400 marks to the dollar has at least this advantage that it has reduced these two burdens to very moderate dimensions.