BORROWING TO - PAY.
The explanation of this phenomenon in one respect is Simple, though, as will be seen, it has been attended with a new Complication. Germany was able to meet these remittances without breaking her exchange because all the time she was borrowing heavily from the United States and other foreign countries- to an extent probably exceeding the volume of Reparation payments themselves. These loans took various forms, but all of them helped to offset the effect on the exchange of the Reparation remittances. It will readily be seen, however, that each fresh loan contracted abroad increased the amount which Germany had to pay annually in 'interest. Not only so, but it will be seen that every fresh million paid abroad in interest with its strain upon the exchange, tends to some extent to imperil the effectiveness of the Dawes Scheme and to accelerate the moment when the powers of the Transfer Committee already referred to might have to be exercised. Not that, in a general sense, Germany is to be blamed for borrowing, because her need for fresh capital resources was such that without them she could hardly be expected to achieve the necessary amount of industrial prosperity to compass the Reparation payments themselves.
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