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Taranaki Daily News, 25 August 1931, Page 5

EFFECT OF MORATORIUM DEBTORS’ INTOLERABLE STATE. • INFLUENCE OF TRADE FACTOR. (From Our Own Correspondent). Wellington, Aug. 24. When President Hoover launched his moratorium scheme, which has since been accepted by the Powers interested, it was a foregone conclusion that the whole problem of reparations and war debts would be forced* to the front. A debt contracted must be discharged in some way unless the creditor decides to forego payment. The war or inter-Governmental debts are on a different plane from commercial debts; the latter do not come into the picture, for no nation or Government would tolerate repudiation of purely commercial obligations. The war debts were funded at a time when the price level was high. It is now from 30 to 50 per cent, lower, which means that the debt is increased, for the debtor has to sell more goods or render greater services by 30 to 50 per cent, to discharge his obligation and on that ground alone the debts i\re entitled to revision and to scaling down. The economics of the United States make the position of the debtor intolerable. The European debtor must pay his American creditor in dollars, he must buy dollars with his goods in some way or other, and if he cannot obtain all the dollars he needs by the sale of his goods, he must find gold, the common currency of the gold-standard countries, for whatever balance is neecssary. The position was aptly described by Sir Allen Anderson at the conference at Washington of the International Chamber of Commerce. He said that nations had excited each other to more and more competition until now there was scarcely a trade or commodity in which rival nations were not compteing to 'secure business for their own producers by restraining the sales of other nationals. In the race to get rich did they not forget that to make business someone must buy and be able to pay; that trade was barter; that civ-, ilised life was only possible because each nation was willing not alone to be em-

ployed, but to employ, not only to pay debts, but to receive payments? Contrary to pre-war conditions the “capacity to pay” that was demanded o'f debtor nations no longer found its international economic counterpart in a capacity to be paid by “creditor countries.” TRe United States has insisted upon the payment of the war debts, and as Mr. A. H. Wiggins, of the Chase National Bank of New York, has pointed out, the most serious of the adverse factors affecting business in the United States is the inability of foreign countries to obtain dollars in amount sufficient both to make interest and amortisation payments on their debts and to buy American exports in adequate volume. In confirmation of this it may be stated that the foreign trade of the United States has been falling precipitately this year. As compared with the first three months of 1929, the peak period, total exports during the first quarter of this year declined by 50 per cent, in value, and about 36 per cent, in quantity. “The prospect of an immediate revival in our general export trade (writes the Standard Statistics Company of New York) is exceedingly remote. The tendency towards circumventing the effect of tho ‘most favoured’ nation clause of the post-war treaties portends the probable renloval of a stimulant which aided in the post-war export boom. It is an inescapable conclusion that a sharp' and sustained improvement in exports will be contingent upon an admixture of in-.-creased loans, a mitigation of the war debt, a lowering of tariff schedules -and further reductions in selling prices.

The problem of scaling down the war debts or cancelling them altogether iA receiving support in influential quarters in the United States, and that President Hoover is silent on the matter can be understood. His job as President of the Republic will come up for review next year, and he is not anxious to make a false move, which easily might be the case at the present juncture. In any case we can be morally certain that now the campaign of cancellation of war debts has been started it will gain in momentum, and the Americans, who are as easily swayed by the big drum as by the big advertisement, will push the campaign to success. The cancellation, or even reduction, of war debts will bo the first major movement making for the return of prosperity.