THE DEBT TO AMERICA.

New Zealand Herald, Volume LIX, Issue 18225, 19 October 1922, Page 6

THE DEBT TO AMERICA.

The payment of 50,000,000 dollars by the British Government to the United States Treasury as the first instalment of interest on the war debt is also a contribution toward counteracting the unfavourable im-

ression created in America by the

Balfour Note. The determination of the Government to commence the

payment of interest during the present financial year with a six months' instalment of £25,000,000 was announced in the Budget of 1921, confirmed in the last Budget, and reaffirmed by the Chancellor of the Exchequer immediately after the publication of the Balfour Note to France when, in the House of Commons, Sir Robert Home said; "I wish to make it clear beyond all

possibility of misapprehension that we realise and recognise to the full our obligation to pay our debt to the United States of America." Definite arrangements have not yet been

made between the two Treasuries regarding the terms and method of

payment, but the subject is being discussed on the basis that interest and sinking fund on the principal of £850,000,000 will involve payments of £50,000,000 annually for 25 years. Apart from the question of Britain's ability to discharge these obligations, which is not regarded as v questionable although the burden is

recognised as heavy, there is the corollary of America's capacity to absorb them. The payments can be made only in gold, or goods, or services, or in a combination of the three. America already possesses an enormous quantity of gold, far more than she can use to any practical advantage. Similarly she already receives more goods from Britain and utilises more British services—such as the Atlantic transport services—than she wants. On the one hand, she has erected a high tariff wall with the express purpose of preventing British, among other, goods entering the country, and strenuous efforts are being made to reduce dependence on British shipping. Already Britain is importing more goods from America than she is exporting to that country.

Her exports are at the rate of about £70,000,000 a year, so that if the debt charges of £50,000,000 are to be paid by means of goods, the limitations of ' British production and the obstacles of the American tariff will leave no other alternative than a drastic curtailment of British purchases from America, the restrictive factor being an adverse exchange rate. Almost the whole body of expert criticism on the Balfour Note has been based on a consideration of these principles, and the view has been strongly urged that the only sound and dignified policy for Britain was to tender payment without any suggestion of grievance or plea for rejiof. Then when the politicians and the mass of the people realised that international debts cannot be paid in " money " but only in goods or services, the acceptance of which produces unexpected economic repercussions, the creditors and' not the debtors will move for cancellation, Expert opinion in America has for some time been striving to convince public opinion that payment of the European debts will cause widespread economic injury in the United States. How long the practical experience of British payments will take to complete this instruction remains to be seen. *