WAR DEBT REVISION

Greymouth Evening Star, 24 January 1931, Page 9

WAR DEBT REVISION

ITS PROSPECTS AND EFFECTS This question of a revision of war debts, 'incuding, of course, Germany’s reparation liability, is now very much in the air behind the scenes, and occasionally comes into the open when some prominent person makes observations on the subject (writes Hartley Withers, the eminent English economist).

The most remarkable of their utterances was that reported by the Washington correspondent of the “Times” in its issue of November 12, as having been made by Mr. James Gerard, who was the American ambassador in Germany at the time of the beginning of the war. His remarks were rightly considered to be all the more significant because he made them to a gathering of pressmen at the moment when he had emerged from an interview with President Hoover. He said that Germany would be forced to denounce the Young Plan within eighteen months, and after that would not trouble to make a new plan; further, that those who had bought Geiman Reparation bonds would not see then money back; and that he doubted whether Great Britain would much longer be able to bear the burden she was now florced to carry. That the ex-ambassador was talking rather foolishly is clear from his remark about Great Britain, for this country, as far as war debts and leparations are concerned, merely collects from its debtors what it pays to its creditor, the United States. It has, it is true, made big sacrifices in order to put itself in this position, and if it had been less considerate to its debtors it might have been drawing a useful revenue on war debts account. But as things are, to say that it will not be able to bear its burden is absurd, because it has not got a burden in this connection at all, and any burdens that it has on other accounts it will certainly bear, though grumbling as usual, in its fashion, about the extravagance of the wastrels whom it permits and encourages to fleece it. Equally absurd was Mr. Gerard s forecast that Germany would be unable to meet the service of the Repetition bonds, that she has placed with the American and other publics. In a recent speech in the Reichsrat, Heir Curtius, the Foreign Minister, stated clearly that the Government could not tell whether the financial reforms (incluidng a. £50,000,000 reduction in the 1931 budget) that had just been passed, would suffice, or whether they would have to demand a moratorium on the Young Plan. But Germany is much too clever, to say nothing of hei integrity, to thing of lowering her credit in the eyes of foreign investors who have bought her promises to pay.

AMERICAN OPINION Nevertheless, this Indiscretion of Mr. Gerard .is likely to be effective in preparing American opinion for a revision of war debts. Being received there in the light of the speaker’s authority, as an ex-ambassador in Germany, it will stir the minds of the many investors who have put money not only inflo German Government loans, but also into State and municipal obligations, and into various forms of enterprise. Such investors, it is said, have already been given food for thought' by the eloquence of Dr. Schacht, who has been discoursing in the United States on the difficulties that beset the German Government in fulfilling the Young Plan, and on the consequently weakened position of all those who held any form of a German promise to pay. The effect of this fear, in the minds of American private creditors of Germany, is believed tb be causing the growth of a large body of opinion among the citizens of the world-creditor country in favour of reparations’ revision. If the present trade depression lasts, the case for such revision is very strong. To expect an industrial country to provide a large surplus of exports, at a time when the world market is glutted and industry in all countries is forced to work at half speed, and the fall in prices has greatly increased the real value of the money contracted to be paid, is con-i trary to all the laws (of equity. Will a revision of reparations, if it happens, carry with it a general revision of war debts? The answer to this question lies with American public opinion, and the prospect of a deficit in the American Budget is not on the side of a favourable reply. America has already, in the 1 compositions that she arranged with her Ally debtors, made considerable concessions —- very great concessions in the case of France and Italy. The contention put forward by Continental critics that she might well have remitted her whole claim, seems absurd in view of her'' much more remote interest in the war. But what America, like the rest of us, most eagerly desires now is an end of this miserable and ridiculous trade depression, due to too much abundance. With the investors who fear for the value of their, securities are all those whose industrial interests are affected by trade depression in favouring any restoration of the world’s economic balance that will quicken the speed of the wheels bf trade. Fate has given America a wonderful opportunity for doing a good stroke of business for herself and her industry, and conferring a great bene-, fit on all the world of producers and consumers, by an act of generosity which would lighten the weight of one of the obstacles that lies in the way of world recovery. As to the effect of such revision, there can be no doubt that, in general, it would lighten the whole economic situation. How it would affect the various creditors and debtors would, of course, depend on the terms of the arrangement. But no harm would be done if these terms caused some inconvenience to those parties to the war debt settlement which were most generously treated by their creditors, and have since taken advantage of this generosity by hoarding gold and by disturbing the political atmosphere of. Europe.