I

THE TREATY OF PEACE

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of the unit of value, have made us lose all senseof number and magnitude in matters of finance.What we believed to be the limits of possibilityhave been so enormously exceeded, and thosewho founded their expectations on the past havebeen so often wrong, that the man in the streetis now prepared to believe anything which istold him with some show of authority, and thelarger the figure the more readily he swallows it.

But those who look into the matter moredeeply are sometimes misled by a fallacy, muchmore plausible to reasonable persons. Such aone might base his conclusions on Germany ’stotal surplus of annual productivity as distinctfrom her export surplus. HelfFerich ’s estimateof Germany ’s annual increment of wealth in1913 was £400,000,000 to £425,000,000 (ex-clusive of increased money value of existingland and property). Before the war, Germany spent between £50,000,000 and £100,000,000on armaments, with which she can now dis-pense. Why, therefore, should she not payover to the Allies an annual sum 0^500,000,000?This puts the crude argument in its strongestand most plausible form.

But there are two errors in it. First of all,Germany ’s annual savings, after what she hassuffered in the war and by the Peace, will fallfar short of what they were before, and, if theyare taken from her year by year in future, theycannot again reach their previous level. Theloss of Alsace-Lorraine, Poland, and UpperSilesia could not be assessed in terms of surplus