It is fashionable at the present time to urge a reduction of the Allies' claims on Germany and of America's claims on the Allies, on the ground that, as such payments can only be made in goods, insistence on these claims will be positively injurious to the claimants.

That it is in the self-interest of the Allies and of America to abate their respective demands, I hold to be true. But it is better not to use bad arguments, and the suggestion that it is necessarily injurious to receive goods for nothing is not plausible or correct. I seek in this chapter to disentangle the true from the false in the now popular belief that there is something harmful in compelling Germany to ‘fling goods at us’.

The argument is a little intricate and the reader must be patient.

1. It does not make very much difference whether the debtor country pays by sending goods direct to the creditor or by selling them elsewhere and remitting cash. In either case the goods come on to the world market and are sold competitively or co-operatively in relation to the industries of the creditor, as the case may be, this distinction depending on the nature of the goods rather than on the market in which they are sold.