PAYING IN GOLD

Dominion, Volume 26, Issue 68, 13 December 1932, Page 9

PAYING IN GOLD

Britain’s War Debt to U.S. VITAL QUALIFICATION View to Final Settlement A CAPITAL PAYMENT Official Wireless. Rugby, Dec. 10. The British Government to-day addressed a Note to the United States Government announcing its intention to pay in gold the amoun of war debt due on December L», and stating that the payment will be treated as a capital payment of wli account should be taken in any final settlement.

The Note is in the following terms ‘•His Majesty’s Government, having received the Note addressed to it bJ the United States Government on December 7, observes with satisfact that the United States Gorernment web comes the suggestion for a cio. examination between the two countries oi the whole subject dealt with in the British Note of December 1. His Majesty’s Government feels that it w 11 be appropriate to reserve for this joint examination its comments on certain ot the views expressed in the United states Note of December 7, but it thinks it right to state that, after further careful consideration, it sees no reason to modify the general conclusions set forth in its Note of December 1 His Majesty’s Government will therefore in the present communication deal only with the last portion of the United States Government Note which relates to the immediate question ot payment on December 15. Difficulties of Transfer. “His Majesty’s Government observes that the United States Government recognises the difficulties of effecting a transfer. It remains convinced that no solution other than suspension would obviate these difficulties. It notes therefore with profound regret that, notwithstanding the arguments contained in the British Note, the United States Government has decided not to recommend this solution to Congress. "In view of this decision his Majesty’s Government has determined to make payment of the amount due on December 15 under the Funding Agreement of June 18, 1923, but it thinks it desirable to take the opportunity of stating clearly its position in regard to this payment and of explaining the circumstances in which it has arrived at that conclusion. "For reasons which have already been placed on record his Majesty’s Government is convinced that the system of inter-governmental payments in respect of war debts, as It existed prior to President Hoover’s initiative on January 20, 1931, cannot be revived without disaster. Since it is agreed that the whole subject should be reexamined between the United States of America and the United Kingdom, this fundamental point need not be further stressed here. Not Resumption of Annual Payment. “In the view of his Majesty’s Government therefore the payment to be made on December 15 is not to be regarded as a resumption of the annual payment contemplated by the existing Agreement. It is made because there has not been time for discussion with regard to that Agreement to take place and because the United States Government has stated that in its opinion such payment would greatly Increase the prospects of a satisfactory approach to the whole question. “His Majesty’s Government proposes accordingly to treat the payment of December 15 as a capital payment of which account should be • taken in any final settlement, and it is malting arrangements to effect this payment in gold as being, in the circumstances the least, prejudicial of tile methods open to it. "This procedure must obviously be exceptional and abnormal, and his Majesty’s Government desires to urge upon the United States Government the Importance of an early exchange of views with the object of concluding the proposed discussion before June 15 next in order to obviate the risk of a general breakdown of existing intergovernmental agreements.” NO ACTUAL TRANSFER Gold Stays in Bank Vaults GROUNDLESS RUMOURS (Received Dec. 12, 7.15 p.m.) London, Doc. 11. Britain’s decision to pay in gold means that the gold will be earmarked in the vaults of the Bank of England awaiting America’s Instructions. In the case of two friendly nations no actual transfer takes place. A rumour that France is lending Britain gold with which to make payment on December 15 is officially denied, and a suggestion that the payment involves a second Budget is similarly groundless. WISDOM QUESTIONED London Financial Opinions “DEFAULT INEVITABLE” London, Dec. 11. A “Suu” Agency representative says that the city is becoming increasingly dubious as to the'wisdom of Britain’s paving on December 15. The “Investors’ Chronicle” declares that payment in gold would be a profound and tragic mistake in view of the Government’s contention that Britain’s gold reserves would be unable to stand the strain. The “Economist” repudiates orthodoxy. and advises default, contending that this is inevitable sooner or later. “If it is a crime in chilly December, It is equally base in balmy June, but a contract ceases to bind when contemplated conditions are not realised," it savs. “There is no shame if a contract lg broken by force majeure. Nobody expected the catastrophic decline in trade and prices. It is fantastic to suggest that if Britain cut the war debt tangle, it will precipitate a wholesale repudiation in commercial obligations,

because these stand in quite a different category. The world must not suffer by Britain’s fatal policy of doing the right thing too late.” THE NEWS IN LONDON Contrary Aspects Emphasised (Received Dec. 12, 11.30 p.m.) London, Dec. 12. Early editions of the London newspapers give prominence to the fact that Britain is going to pay but with reservations. The latest editions, however, emphasise the contrary truth: “The United States rejects the British offer.” Details of thus Note arrived too late for real criticism, and the text had not yet been circulated by the British Foreign Ofiice. “The Times” says that the very prompt American reply naturally pointed out that the United States

Treasury had no authority to accept payment except according to the existIng agreement, but, adds “The Times, “the British Government has done right in refusing to make default. It is equally clear that it has done right in coupling its announcement with a plain intimation in regard to the payment as a step in the final settlement. FINAL FIXED SUM Enlightened Self-Interest LAUSANNE’S EXAMPLE Official Wireless. Rugby, Dec. 10. Sir Arthur Salter, addressing the National Peace Council Conference yesterday, put the point of view of the American citizen on the war debts, but urged that the enlightened self-interest of the United States demanded cancellation or reduction. European creditors or reparations at Lausanne had commuted Germany’s remaining liability for a final fixed capital sum, and hud provided that this should be dis* charged in a way which would never involve an annual payment by Germany of more than about one-tenth of what was required by the Young Plan of three years ago. That was not altruism, but enlightened self-interest. He was sure that, if America acted similarly, it would -also in balance prove immensely to the advantage of the whole world and of herself. But if the people in Britain would look at the situation coolly and sympathetically, they should at least understand, though they might regret it, America’s reluctance. Peace and economic progress depended in every sphere upon co-operation between America and Europe and that in turn depended upon the public temper and the psychology of the peoples of the two Continents. War debts was one, but, as President Hoover had pointed out, only one of many pressing problems. Others were now focused in preparations for the World Economic Conference. There they should aim at: (1) A world policy of controlled deflation. (2) They must restore and reform the world’s credit system. This meant dealing with existing indebtedness, encouraging new lending and securing that in future it was better directed than in the past. (3) They must reduce trade barriers. WITH A RESERVATION France to Pay Instalment CABINET’S DECISION Paris, Dec. 11. The French Cabinet has decided to pay the debt instalment of 19 million dollars due on December 15 with a reservation which will be announced to-morrow. Cabinet unanimously supports M. Herrlot, but the decision has antagonised a large section of the public. Despite police precautions 6000 exservicemen marched from a protest meeting to the Qual d’Orsay while Cabinet was sitting. The nolice scattered the demonstrators, but hundreds reached the front door shouting, “Not one cent for America.” The police will strongly guard the Chamber of-Deputies to-morrow, when M. Herrlot will submit the debt proposals. His opponents include the Royalist newspaper “Action Franraise," which describes it as a dishonourable payment and urges citizens to go to Parliament in protest. NOT CONCERNED Canada and War Debts MR. BENNETT IN LONDON (Received Dec. 12, 7.40 p.m.) , London, Dec. 11. The Canadian Prime Minister, Mr. R. B. Bennett, has arrived in London. Questioned as to whether he had brought a Canadian oiler to help Britain over war debts, he replied that Can-

ada was not concerned with war debts. Canada had incurred a war debt of 2000 million dollars, but she had no intergovernmental debts in this connection, either to Britain or to America. “We abandoned all claim to reparations at Lausanne,” he said. "The whole of Canada’s war bill is now part of our funded debt.” RESPITE FOR DEBTORS Position of Dominions ■ (Received Dec. 12, 7.40 p.m.) London, Dee. 11. The "Daily Telegraph’s" diplomatic correspondent says that the British decision not to demand the payments

QUICK RESPONSE ' Conditions Rejected AMERICA’S ANSWER Adherence to Agreement By Telegraph—Press Assn. —Copyright. (Received Dec. 12, 8.15 p.m.) Washington, Dec. 11. A few hours after the British Ambassador, Sir Ronald Lindsay, had delivered to the Secretary of State, Mr. H. L. Stimson, the British Note saying that payment of 95 million dollars with qualifications would be made in gold cn December 15, Mr. Stimson handed to Sir Ronald Lindsay America’s answer, which declared that the intention to pay had been noted with satisfaction, but payment could not be accepted with conditions "extending outside the debt funding agreement.” The British Note specified that the payment would not be regarded as a resumption of payments under the existing agreement but as “a capital payment of which account should be taken in any final settlement.” As the nature of the Note was generally what had been expected, Mr. Stimson’s quick response is interpreted as a move to leave the onus entirely on the British with a full understanding that their conditions are rejected and that if payment is made it will only be accepted as coming under the existing agreement. Change Rests With Congress. The American reply stated that the Secretary to the Treasury has no authority to accept war debt payments except as provided in the funding agreement. ‘Congress holds the finally decision in respect to changes in intergovernmental obligations and acceptance of the December instalment cannot constitute approval of or agreement to any condition or declaration of policy inconsistent with the terms of the agreement.” The Note added that it would seem undesirable for any steps to be taken which by causing misunderstandings would increase the difficulty that must be overcome in finding an ultimate solution satisfactory to both nations.

Mr. Stimson took up the position that accepting payments with condidions was illegal. He explained that Congress must act in changing the funding agreement in any respect.

The American Note apparently wishes to clarify the legal status of the British Note and suggests that the conditions mentioned be construed as a simple declaration of Britain's future policy which Is. in no way binding on the United States or injures the legality of the existing agreement. “It is therefore assumed that iu the conditions of payment you are not proposing to make this payment otherwise than in accordance with the terms of the funding agreement, but that you are stating your views as to the steps your Government may desire to propose subsequently after re-examination ot the whole problem.” The speed with which the Note was prepared 'is a direct indication to France what she must expect if she attempts to supplement payment with similar conditions. This is considered exceedingly timely as the Chamber of Deputies has scheduled a debate on payment for Monday. Mr. Stimson was considerably surprised that the British Note was delivered to-day, as it was not expected until to-morrow. Mr. Stimson immediately summoned the Secretary to the Treasury, Mr. Mills, and several aides and drafted the American Note. The contents were then communicated to President Hoover, who approved them and the reply was delivered to Sir Ronald Lindsay.

Early Reaction. The Congressional reaction was immediate and favourable to Mr. Stimson’s policy. While the first Press reports from England indicated that it might fortify those favouring default, observers here admitted that it might create an impasse, but believed that the gap between the two Governments was not so wide as might appear; also that the British Note was merely laying tlie groundwork for future negotiations. Representative Rainey, a prominent member of the Ways and Means Committee of the House, declared that Mr. Stimson’s answer is "eminently proper.” Senator Borah said: “The Secretary of. State could not reply in- any other way than to say that payment could be received only under the terms of the Debt Funding Agreement.” During and after the conference where the Note was drafted Messrs. Stimson, Mills and others appeared anything but gloomy. They apparently feel that Britain has now admitted that she had the money to pay and that whatever conditions she sought to attach could not stand against this administration. It is noted that she did not request a waiver of the £3O million principal.

shortly due from France, Italy, and other Allied debtors raises the question whether the Dominions, which are also liable for early payments, will be granted the same further respite. REDUCTION FAVOURED American Visitor’s View According to Mr. L. T. llighieyman, an ex-banker of Miami, Florida, there is a feeling among a great many Americans that the British war debt should be cut down. England, in its settlement with the United States, he said, had agreed to pay a much greater proportion than the other countries, and France, which was in a comparatively prosperous condition, was paying only a small percentage of what was owing. "We are very strong on disarmament in the States.” said Mr. Highleymau, “and one of tlie strongest arguments in favour of compelling the European countries to meet their obligations is the fact that most of them can still apparently afford to spend large sums on armaments. Look at Canada and the United States. There is not a battleship on the lakes and not a soldier on the border except for the Customs officers. As long as countries are armed there will be the danger of war.”