German Foreign Trade and the Reparation Payments

I. Germany's economic paradox, 482. — The pre-war trade balance, 483. — Why the London Settlement on reparations broke down, 483. — The two periods of falling exchange since the Armistice, and the different behavior of the foreign trade, 485. — II. The reasons for the paradox: composition of the exports and the imports, 487. — Effect upon imports of the abolition of food price control, 489. — Relation of United States exports to German imports last year, 489. — The system of export control, 490. — Effects of depreciating exchange on home buying, 492. — The export trade has responded more sympathetically to a moderate rise of the mark, 493. — A growth of exports sufficient to pay reparations depends largely upon recovery of the Russian market, 493. — How the imports have been paid for and the reparation charges met, 495. — III. Germany's experiences furnish light on the theory of foreign exchange under paper, 498. — Export and domestic prices compared, 499. — The causal sequence appears to have run as follows: reparation payments, depreciating exchange, rising export and import prices, rising internal prices, budgetary deficits and increased private demand for credit, increased note issue, 501.