WAR DEBTS.

Evening Star, Issue 21746, 14 June 1934, Page 8

WAR DEBTS.

The American Note on the subject of war debts in reply to the latest British Note does not carry the subject further to any effect. The best thing that could happen would be a moratorium on the fruitless discussion for five years. The gist of the British Note was that it was impossible for Great Britain to resume payments in full while payments due to her from her debtors were suspended, and that she could not call upon them to pay, reviving the past system, at the cost of postponing indefinitely the chances of world recovery. Without repudiating its obligations, therefore, the British Government was constrained to suspend further payments till an ultimate settlement of international war debts could be discussed with a reasonable prospect of agreement. It is obvious enough that if payment were demanded from Great Britain’s debtors it would not be forthcoming. The American Note in reply puts forward three points. The first is that Britain would have to pay only the amount of the latest June instalment to avoid being considered in default under the recently passed Johnson Law. But even that amount would be many times greater than, the “ acknowledgment ” payments which Britain has made on the last two occasions, and, seeing that the full debt has actually been paid several times—in view, also of the tragic results for all countries of attempting to abide longer by the original terms of settlement—leas concern is felt to-day as to what America may consider as default. British credit is unlikely to be affected, because the fundamental difference between these war debts and ordinary commercial obligations is generally recognised. The second point made by Washington is that there is no connection whatever between the debt owed to the United States by Britain and those owed to Britain by other countries. Legally that may bo so from the United States’ viewpoint, but practically the interdependence of debts makes the crux of the • whole matter, and could only do so.. The'entire debt system was based from the beginning on an impracticable supposition, that the costs of the war could really be paid by Germany. Thirdly, the Washington Government invites suggestions for either a readjustment of the debt or payment in goods and services. Proposals of the first nature that would satisfy Washington arc not likely to be practicable at the present time, and the American Government knows, quite as well as Great Britain, how its tariff debars payment in kind. The war debt never did any good to America while.it was being collected. It cannot be collected further except at the cost to,her of an unfavourable balance of trade, which she deems too high a price. The whole series of settlements was a defiance of economic laws, which have proved stronger than the .settlement. No ono in America was surprised by the British

postponement of payments. It was what was expected. The world will only begin to find its financial bearings, in the larger sense, when it is recognised that, in this matter of war debts, “ London bridge has broken down.” It may be built up again, at some later date, with pins and needles, but it will be very unlike the original structure.