Nelson Evening Mail MONDAY, FEBRUARY 13, 1933 BRITAIN’S DEBT TO AMERICA

Nelson Evening Mail, Volume LXVI, 13 February 1933, Page 4

Nelson Evening Mail MONDAY, FEBRUARY 13, 1933 BRITAIN’S DEBT TO AMERICA

THE progress of negotiations for the settlement of Great Britain’s debt to the United States is of interest to this coun-

try, whose welfare is so greatly interwoven with that of Great Britain, which is the principal market for New Zealand produce. When Great Britain is prosperous prices paid there for New Zealand products are good ; when, as at present, Great Britain is suffering, in an economic sense, the prices are not good, and this country suffers accordingly.

Therefore, anything which affects the welfare of Great Britain is of interest to New Zealand, and the negotiations in connection with Great Britain’s debt to the United States are consequently followed closely in this country. When the Americans entered the war, in the first half of 1917, President Wilson urged his fellow-countrymen to extend to the Allies ’ ‘the most liberal credits, in order that our” (the United States') “resources may as far as possible be added to theirs.” The result was Congress almost immediately agreed to lend to the Allies 3000 million dollars. By the end of the war this sum had been increased to 7000 million dollars. Furthermore. after the Armistice was signed, advances totalling 2500 million dollars were made, and in addition 740 million dollars “for war relief supplies,” making the total of loans to the Allies 10,240 million dollars. Nearly all this money was spent in the United States, and it may he added that, prior to borrowing, the Allies spent large sums there, so that the American people benefited by the Allies’ financial policy. The amount of the British debt to America was 4000 million dollars, and it was agreed that payment- should he spread over a period of sixty-two years, “with a varying interest rate, averaging 3.3 per cent, for the whole period, and making the total payments of principal and interest amount to 11,000 million dollars.” In all, some twenty debtor nations made similar settlements with the United States; in each case the gradual payment of the principal being demanded, hut the interest varying “in accordance with the formula of capacity to pay.” Thus while Great Britain paid, on the average, slightly more than 3.3 per cent., France was to pay only 1.64 per cent, and Italy as little as 0.405 per cent. As regards payments made, here are some illuminating figures: —Up to Ist January of last year, the U.S. Government had received from all debtor countries, on account of principal and interest, a total of 2600 million dollars, to which amount Italy had contributed 98 million dollars, France 486 million dollars, and Great Britain 1900 million dollars, or 73 per cent, of the total amount of war debts received by the United States since payments began to he made, some ten years ago.

During that time there has been a great controversy in the United States as to the effect economically of such large sums of money being transferred from Europe (principally from Great Britain) to America. The trade experts and the political economists of America have argued consistently and strongly that such large payments must necessarily weaken the sale of American goods in the markets of the debtor-nations. lii American financial circles there has been freely expressed the opinion that these war-debts will never be paid in full, because the payment of them would paralyse the nations, paying, to such a degree that ultimately they would be unable to pay. Indeed, the whole array of financial experts in the United States —the leading bankers, economists, and tlie foremost authorities on finance and trade—have been almost unanimous in declaring that nothing but an extensive moratorium will enable the debtor nations to pull themselves together sufficiently to enable them to avoid repudiation. The American press lias been uniformly in favour of the whole question of war debts being reconsidered, in view of the economic situation in Europe. Congress, however, led by such individuals as Senator Borah, Speaker Garner, and the members of the Foreign Relations and Finance Committees of both Houses, has almost unanimously and consistently opposed any sort of leniency being extended towards the debtor nations. But a new element will he created by the advent of the new President, Mr Franklin Roosevelt, at the White House, in a few weeks’ time. He has been interviewed by Sir Ronald Lindsay, who has just visited London, and it will have been noticed that the President-elect cautions the British Premier on the necessity for “ministerial silence” in relation to the negotiations which are proceeding. Mr Roosevelt is evidently anxious that his proposals in reference to a readjustment of .Great Britain’s debt settlement shall not reach. Congress and the American public before he communicates them., after his inauguration. What those proposals are, of course, it is impossible to say; but plainly they must differ from those of Congress, which seems to he opposed to the extension of any leniency to debtor nations. To France and Belgium, who have defaulted, Congress says, “You must pay.” To Great Britain and Italy, who have paid the recent instalment due, Congress says, “As you have paid, you can go on paying.” It remains to be seen what the new President will say. He comes into power with tlie overwhelming approval of the American people, and he will be supported by a Democratic majority in both Houses. It will he a strange thing if his views on tlie payment of war debts are net endorsed by the nation and by the Congress which has been elected ta co-operate with him.