TRACTS FOR THE TIMES.

Auckland Star, Volume LXIV, Issue 73, 28 March 1933, Page 6

TRACTS FOR THE TIMES.

THE DEBT PROBLEM. j —"■"■" ~~' (By PRO BONO PUBLICO.) . : One of the most remarkable letters I have received since I first started this series of notes comes from an old fellow (the description is his own) to say he lived through the slump of half a century ago. He declares that the cause of this slump is just the same as the cause of the last big one—debts that can't be paid. "Slumps, he says, "always start because some people can't pay their debts. That means other people can't, and so on, until the can't pay answer travels right round the world." "The last slump ended," he goes on, "when people got rid of their debts or the worst of them, never mind how they paid or didn't pay. They had to make'a new start. Some of them lost everything they had and started from scratch. Some of them made compositions with their creditors and had a little to go on with. It took a long time. I think this slump will take a long time to work itself out unless the world does something to help people out of their debts. People who lent money are going to lose a lot of it. They can make up their minds about that. They won't be paid. They might as . well lose it first as last and let the world gets its fresh start right away." After some personal details that have no bearing on the general questiqn my correspondent gets to his point. "Instead of haggling about whether a man can pay interest or how much he can pay, reduce the debt straVjht away. I don't mean only in New Zealand, "but in the whole world. Cut all debts defwn by a third or even a half and make it apply to everyone. Then in each country have courts or committees to which a man can go if he thinks his debtor is able to pay the lot and make the debtor .present a true statement "Think this out," my correspondent says, "and you will find it will do the trick." Well, I have thought about it, and I don't think it will put the world on its feet. I agree that compositions and arrangements between creditors and debtors will continue and that lenders will lose a lot_ of money, but I don't think an arbitrary writing down of all debts, public and private, would be the way out of the slump. What the world has to find is some method of enabling debtors to pay their debts, or even half of them. What good would it do to write a man's debt down by a half if he still could not pay the interest on the half that remained and could not even begin to think about paying back the capital, which is the position of millions of debtors in the world to-day? The debt problem will have to be solved, of course, but it does not seem to me to be the major problem. The most urgent requirement of the world is probably the restoration of reasonably free trading conditions and the removal of arbitrary restrictions on the sale of goods. If the world can get trade moving again it will be possible to arrive at a fairly sound idea of the real value of debts. At present no debt can be assessed even approximately.