II. _Germany's Capacity to pay_

The forms in which Germany can discharge the sum which she has engaged
herself to pay are three in number--

1. Immediately transferable wealth in the form of gold, ships, and
foreign securities;

2. The value of property in ceded territory, or surrendered under the
Armistice;

3. Annual payments spread over a term of years, partly in cash and
partly in materials such as coal products, potash, and dyes.

There is excluded from the above the actual restitution of property
removed from territory occupied by the enemy, as, for example, Russian
gold, Belgian and French securities, cattle, machinery, and works of
art. In so far as the actual goods taken can be identified and restored,
they must clearly be returned to their rightful owners, and cannot be
brought into the general reparation pool. This is expressly provided for
in Article 238 of the Treaty.

1. _Immediately Transferable Wealth_

(_a_) _Gold_.--After deduction of the gold to be returned to Russia, the
official holding of gold as shown in the Reichsbank's return of the 30th
November, 1918, amounted to $577,089,500. This was a very much larger
amount than had appeared in the Reichsbank's return prior to the
war,[117] and was the result of the vigorous campaign carried on in
Germany during the war for the surrender to the Reichsbank not only of
gold coin but of gold ornaments of every kind. Private hoards doubtless
still exist, but, in view of the great efforts already made, it is
unlikely that either the German Government or the Allies will be able to
unearth them. The return can therefore be taken as probably representing
the maximum amount which the German Government are able to extract from
their people. In addition to gold there was in the Reichsbank a sum of
about $5,000,000 in silver. There must be, however, a further
substantial amount in circulation, for the holdings of the Reichsbank
were as high as $45,500,000 on the 31st December, 1917, and stood at
about $30,000,000 up to the latter part of October, 1918, when the
internal run began on currency of every kind.[118] We may, therefore,
take a total of (say) $625,000,000 for gold and silver together at the
date of the Armistice.

These reserves, however, are no longer intact. During the long period
which elapsed between the Armistice and the Peace it became necessary
for the Allies to facilitate the provisioning of Germany from abroad.
The political condition of