ciable surplus towards Reparation before 1921, she
will have to find a sum of $375,000,000 annually from 1921 to 1925, and
$900,000,000 annually thereafter.[113]

3. As soon as the Reparation Commission is satisfied that Germany can do
better than this, 5 per cent bearer bonds are to be issued for a further
$10,000,000,000, the rate of amortization being determined by the
Commission hereafter. This would bring the annual payment to
$1,400,000,000 without allowing anything for the discharge of the
capital of the last $10,000,000,000.

4. Germany's liability, however, is not limited to $25,000,000,000, and
the Reparation Commission is to demand further instalments of bearer
bonds until the total enemy liability under Annex I. has been provided
for. On the basis of my estimate of $40,000,000,000 for the total
liability, which is more likely to be criticized as being too low than
as being too high, the amount of this balance will be $15,000,000,000.
Assuming interest at 5 per cent, this will raise the annual payment to
$2,150,000,000 without allowance for amortization.

5. But even this is not all. There is a further provision of devastating
significance. Bonds representing payments in excess of $15,000,000,000
are not to be issued until the Commission is satisfied that Germany can
meet the interest on them. But this does not mean that interest is
remitted in the meantime. As from May 1, 1921, interest is to be debited
to Germany on such part of her outstanding debt as has not been covered
by payment in cash or kind or by the issue of bonds as above,[114] and
"the rate of interest shall be 5 per cent unless the Commission shall
determine at some future time that circumstances justify a variation of
this rate." That is to say, the capital sum of indebtedness is rolling
up all the time at compound interest. The effect of this provision
towards increasing the burden is, on the assumption that Germany cannot
pay very large sums at first, enormous. At 5 per cent compound interest
a capital sum doubles itself in fifteen years. On the assumption that
Germany cannot pay more than $750,000,000 annually until 1936 (_i.e._ 5
per cent interest on $15,000,000,000) the $25,000,000,000 on which
interest is deferred will have risen to $50,000,000,000, carrying an
annual interest charge of $2,500,000,000. That is to say, even if
Germany pays $750,000,000 annually up to 1936, she will nevertheless owe
us at that date more than half as much