WAR DEBTS

Evening Star, Issue 23122, 23 November 1938, Page 13

WAR DEBTS

GOLD STANDARD METHOD An interesting letter appeared in ‘ The Times,’ London, recently’ on the war debts question, written by Mr W. Craven-Ellis, chairman, and Mr C. Morgan Webb, economic adviser, of the parliamentary Monetary Committee. Referring to a previous letter, which quoted President Coolidge as saying, “ They hired the money, didn’t they?” they go on to say, “ The answer to this is No, they didn’t.” Whatever construction may be put on Britain’s war purchases of munitions, they were not the hiring of money. Being made in the gold standard era. it was implied that the debts would be settled by the gold standard method —goods for goods, with only the small unsettled balances payable in gold. But the United States made a revolutionary departure from international convention (and incidentally ensured the destruction of the gold standard) by making the stipulation that the debts should be paid in gold. This stipulation rendered the debts ultimately unpayable. Britain used her outstanding commercial position to skin most of the countries of the world of their gold and drive them into insolvency and default, in order to satisfy the, debt payments to the United States. Instead of allowing the gold so received to circulate, it was hoarded, with the result that President Hoover, finding the war debts unpayable, owing to the withdrawal of gold from the international currency in 1931, granted a moratorium.

' Tho hoarding of gold by the United States (and Prance) raised the sterling price of gold by 54 per cent., with the result that when the time came for the resumption of payments on the expiry of the Hoover moratorium Britain was confronted with the payment of £30,000,000 for her December instalment, instead of £19.000,000, the amount of the bond. Britain naturally demanded an inquiry into this artificial enhancement of the burden of her debts, and offered a token payment of £4,000,000 per annum in acknowledgment of the debt while the inquiry was being made. The offer is contained in the dispatch of the British Government to the United States dated December, 1932. The inquiry was refused, although the following year the Supreme Court of the United States ruled that the enforcement of the gold clause in a debt contract was illegal. Britain’s offer of December, 1932, has never been withdrawn. The war debts have never been repudiated. Apart from formal demands for payment, the war debts stand where they did at tho beginning of 1933, in a refusal of the

United States to consider the equity of the payments demanded. The following statements of Mr Storey (the previous correspondent referred to) are outstanding as being perversions of the facts:England joined our other late allies in refusing to make further payments to use on account of the war debts. When England takes its stand beside the other war debtor Governments in not paying us, she is “ passing the buck ” to us. All we wish is to be repaid loans made simply as such. GOODS FOR GOODS. Had the United States wished to be repaid in loans simply as made, she would have received goods for goods. She insisted on being paid in a medium which, largely by her own action, had appreciated by 54 per cent, when the payment due in December, 1932, was demanded. The suggestion that the war debts ,< should be repaid not in cash, but in a very definite kind of goodwill,” is one that has never entered the consciousness of any Englishman. It is a fantasy of Mr Storey’s imagination. Britain wants to pay in goods, not in goodwill. Tho goodwill exists, and is independent of any payment or commercial transaction. _ Another statement is most misleading, to the effect that the American public realises the many great difficulties in paying the war debts while Britain has an unfavourable trade balance. The American public has no realisation whatever that the unfavourable trade balance te an extent of I'HO.UOO per annum was created by the Hawley-Smoot tariff. This tariff, imposed shortly after the war debt settlement of 1924, was a breach of the understanding on which that settlement was made. It added greatly to the stipulation that payments must be made in gold, in rendering the war debts unpayable. Britain proved by her payments up to 1930 her anxiety to settle the war debts with the United States. But her efforts to settle have been frustrated by the following actions of the United States:— 1. The stipulation that they must be paid in gold. 2. The hoarding of gold by the i United States, with the result that

the counters in which the debts were to bo paid have appreciated in value from 84s IOJd an ounce to 144 s an ounce. 3. The Hawley-Smoot tariff, which destroyed Britain’s capacity to pay in goods to the extent of £40,000,000 per annum. 4. The Hoover moratorium, which resulted in the cessation of British receipts of reparations from Germany and of war debts from her allies, by which payments of the war debts to the United States had hitherto been financed. 5. The refusal to accept the British request for an inquiry into the equity of the war debt settlement in 1931, in view of the change in the international situation since the settlement was made in 1924. Britain has not defaulted. She is a debtor whose attempts have been defeated by the policy of a creditor to whom the receipt of payment is an embarrassment rather than an asset.