participation, etc., in the administration of commissions, state banks or other financial and economic organizations. There is no justification to be found for this exclusion, which would reduce Germans all over the world to the status of pariah. It is without doubt contrary to the principles accepted by us and by the other Powers in the exchange of notes concerning the armistice.

Finally, Articles 259 and 261 are contrary to every conception of justice and wholly contradictory in themselves: on the one hand Germany is to deliver large sums of money in gold to the Allied and Associated Governments on behalf of Turkey, Austria and Hungary, and to recognize her obligations in this respect; on the other hand, it is demanded that Germany transfer her claims against Austria, Hungary, Bulgaria and Turkey, especially claims dating from the period of the war, to the Allied and Associated Governments, but it is not stated what value is to be attributed to these claims in the general reckoning. But it follows from the nature of the case that the obligations of Germany toward her former allies can not be separated from the claims of Germany against the same allies. A balancing of accounts is here absolutely necessary. The relation with Turkey in particular is so complicated that partial obligations could not be treated separately without an agreement at the same time between the original parties to the treaty.

VI.

On account of the shortness of the time given for discussion we must renounce, for the time being, a more detailed discussion of all the single stipulations of the draft which were to be treated here. While reserving other details for later discussions, for the present we limit ourselves to a brief mention of the following:

In Article 248, paragraph 2, it is stipulated that no gold may be exported before May 1, 1921, without authorization of the Reparation Commission. Even though the Reichsbank cannot be counted on to redeem its notes in gold in the immediate future, nevertheless the Reichsbank must be allowed to export gold in the case of guarantees which the bank itself has furnished, and which she is not in a position to redeem by other means.

Article 262 provides that all payments which are to be made in currency and which are expressed in terms of gold marks, shall be payable, at the option of the creditors, in pounds sterling payable in London; in dollars payable in New York; in francs payable in

Paris; in lire payable in Rome; the coins mentioned being of the weight and fineness of gold according to the currency laws in force January 1, 1914. In reply to this we must state emphatically that Germany is in a position to organize her delivery of goods and her other financial measures in an orderly manner only if she is authorized once for all to effect her payments in the currency in which the debt was contracted. For reparation in Belgium and France, sums would of course have to be indicated which would be payable definitively in Belgian and French francs respectively.

In the paragraphs dealing with Germany's financial obligations it is repeatedly stated that the payments are to be effected in gold. But on account of the disastrous terms of payment for the provisions imported during the armistice, the gold reserve of the Reichsbank will, in the immediate future, be extraordinarily small, so that it will be impossible to effect payments in actual gold. In order to avoid mistakes, it ought to be understood that all payments in gold marks or in gold may be effected by Germany in foreign currency at the rate of gold parity in force on January 1, 1914.

Above all, the Commission must call attention to the great dangers in Article 296, paragraph 4 d, according to which the German debtors of an enemy country are to be forced to discharge the debts contracted by them in German marks, in the currency of the enemy country concerned, the value of the mark to be computed according to the rate of exchange prevailing before the outbreak of the war. In this way grave injury will be done, in a quite arbitrary manner, to the German debtor, as well as to the German Empire in its capacity of guarantor, for we do not recognize any legal right upon which to base the demand for this conversion into foreign money of the debts contracted in marks. Furthermore, the clearing will not accomplish its purpose if a period of six months is granted in which the different states can declare their adherence or non-adherence. If the idea of "clearing" is intended to be carried out, the uniform and immediate adherence of all the states must be demanded.

VII.

We are about to conclude. The proposals of the Allied and Associated Governments are in their present form and extent positively impossible of execution. Even if they could be imposed upon Germany, they would most severely disappoint the hopes of our present adversaries. This would become apparent even with the first instal

ment of 20,000,000,000 marks. For even if they should succeed in collecting a considerable part of these 20,000,000,000 marks, by confiscation of the German merchant marine, by forced construction of ships in German shipyards, by forced deliveries of coal, dyestuffs and chemical drugs, by placing to their account all German credits and the proceeds of the sale of all German property in the Allied and Associated countries as well as in the German territories to be ceded, they would still have gained very little for the satisfaction of the reparation demands. After deducting the costs of the military occupation, accumulated in the meantime, and the very considerable amounts necessary for furnishing Germany with even the scantiest supplies of food stuffs and raw materials, very little, if anything at all, would be left for the purposes of reparation. Any further payments whatsoever could not be counted on from a Germany deprived in such a manner of her most important means of subsistence. No German administration would be equal to the task of extracting further payments. But a foreign power which should attempt to practice still further extortion upon the devastated land, would soon have to recognize that the costs of an administration which could work only under the protection of a strong military force, occupying the whole country, would cause the Allied Governments financial losses so great that, within a short time, they would exceed all Germany's previous payments on account.

A different method must be sought, the method of negotiation. In all countries, just as in ours, there are people who preach revenge, hate, militarism and chauvinism. But in all countries there are also people who fight for right and equality, men of insight who know that the whole world would become poorer if the German people, with its capacity for work, its needs as a consumer, and its intellectual attainments, were excluded from the cooperation of the world. It is not Germany alone that at present needs credit on a most extensive scale in order to replenish her exhausted stores, to procure the absolutely indispensable amounts of food stuffs and raw materials, and to consolidate the great floating debts, but almost all the belligerent countries of Europe must resume their normal economic life under the most difficult conditions. To concentrate all the forces of the world upon this problem and to give to all peoples the chance of continued existence is the first and most pressing task. Only when that is accomplished will Germany be in a position to discharge the heavy obligations for reparation assumed by her, obligations which she is determined to

discharge according to the best of her abilities. This is based upon the assumption, however, that Germany shall be allowed to preserve that territorial integrity which the armistice promises; that we keep our colonial possessions and merchant ships, even those of large tonnage; that we have the same freedom of action both in our own country and in the world at large as all other peoples; that all war laws shall be abrogated at once; and that all infringements of our economic rights in German private property, etc., which were suffered during the war, shall be settled according to the principle of reciprocity. Only if these assumptions are recognized can we make great financial sacrifices and present the following proposal:

The amount of the debt to be fixed shall be recognized and the loans which Belgium has contracted for purposes of war with her allies up to November 11, 1918, shall be paid by us. The manner of payment shall be regulated as follows:

The debt to France is to be fixed in French francs, the debt to Belgium in Belgian francs.

Germany is ready, within four weeks after the exchange of the ratifications of the peace treaty, to issue a certificate of indebtedness to the amount of 20,000,000,000 gold marks payable not later than May 1, 1926, in instalments to be determined by the Allied and Associated Powers; she is ready, furthermore, to issue in the same manner the necessary documents of indebtedness for the remainder of the sum of the fixed damages and to make yearly payments upon the same, beginning May 1, 1927, in instalments bearing no interest, with the reservation that the sum total of the damages shall in no case exceed the sum of 100,000,000,000 gold marks, including the payments to Belgium for the sums advanced to her by the Allied and Associated Powers, as well as the above-mentioned 20,000,000,000 gold marks.

In the first certificate of indebtedness of 20,000,000,000 gold marks should be counted all those payments which Germany has already effected or shall effect by virtue of the armistice, such as railway materials, agricultural machinery, all kinds of war materials and non-military materials, and other things; as well as the value of all payments to be effected by Germany according to the peace treaty and to be credited to her reparation account, as for example, the value of railways and state property; the final assumption of state debts; the claims to be ceded to the Powers allied with Germany in the war; a part, to be fixed by agreement, of the freight revenues

arising from placing the German merchant marine in the international pool; further, those payments in kind which are to be fixed by negotiation in conformity with Annexes III to VII of Part VII; further, the value of the labor performed and materials furnished on the part of Germany for the reconstruction of Belgium and France as well as the restitutions to be made to Belgium, possibly in the form of a special loan, for the amounts advanced to her by the Allied and Associated Powers. The limitations provided for in the preceding in regard to Germany's capacity to pay are applied to the annual non-interest-bearing instalments of amortization to be paid up to the amount of 80,000,000,000 marks. The instalments shall not exceed a fixed percentage of the German imperial and state revenues. Germany is prepared to assume, for the benefit of the indemnities to be paid to the Allied and Associated Powers, an annual charge approximating the total net budget, up to the present time, of the German Empire in times of peace.

Accordingly, the annuity to be paid every year is to be fixed as a certain percentage of the revenues of Germany from direct and indirect taxes, excess profits and customs dues; in the case of the latter, payment in gold may be exacted. These dues, however, shall not, in the first ten years of payment, exceed the equivalent at the time of 1,000,000,000 marks in gold. Two years before the expiration of the ten years the sum total is to be fixed by fresh negotiations. The payment of the annuities may be insured by a guarantee; Germany could undertake to deposit in this fund up to the year 1926 an annuity derived from the proceeds of the indirect taxes, monopolies and customs duties and, subsequently, to maintain this fund at the same level.

Only in case Germany should be in arrears with the payment of an annuity would she consent to permit the Allied Powers the control of the administration of this fund until the deficit had been wiped out, but not to accept measures of an arbitrary sort, such as are threatened in section 18, Annex II to Article 244 (page 107). The amount of the damages shall be determined by the Reparation Commission in collaboration with a German commission, and in case no agreement should be reached, by a mixed court of arbitration with a neutral chairman; the same procedure should be followed in fixing the value of the payments in kind, and in negotiating concerning the necessary amounts of food stuffs and raw materials to