THE WAR DEBTS

Hokitika Guardian, 10 September 1931, Page 2

THE WAR DEBTS

HOOVER MORATORIUM. GENERAL SATISFACTION EXPRESSED NEW YORK, August 0. The monthly review of economic conditions issued by the National City Bank usual,y sounds the keynote of opinion in higher financial circles. The review for July is of particular importance because of its analysis of President Hoover’s proposals for a moratorium upon war debts. This article, wr.tten with great care by a high banking authority treats the sulked with great- seriousn. ss. It says that the proposal has nipt with spontaneous and general acclaim. A like situation never existed I t lore and firm no other source could this proposal have come with like effect, the Doited States being the ultimate creditor of all the countries involved in the network of obligations arising out of the war. A SPONTANEOUS IDEA. “It is a source of satisfaction,” the bank says, “that this important proposal on the part of the President is thus far supported without p litieal division in this country.” It shows that the idea has been developing spontaneously. A practical people will meet new developments with a view to the present nml future rather than to the past, The National City Bank points < >*tthat there is an abundance of rnpit-i 1 available to finance a revival of I. siness over the world, but there mu-t be confidence in the maintenance of peace and normal financial relations between countries, in ordeitha.b capital may flow freely from the centres where it tends to accumulate in idleness to the places and employments in which it is needed. GERMAN ABILITY TO PAY. Germany’s ability 'to pay has been affected by a world crisis such as nobody foresaw when the reparations agreement was made. The econonii and political situation throughout Cen-' tral Europe is under great strain and the information reaching president Hoover through official gave warning that the situtatipn should be brought under the co-operative control of the nations most concerned in the maintenance, of peace and , rder and the revival of world prosperity. “It cannot be reasonably said,” the bank continues, “that the present payments upon reparations and debts are the sole cause of the world depression but it must be generally recognised that the settlements were made in a time of general prosperity when production and trade were expanding in all countries, and the proposed payments although large seemed likely to diminish in importance as the years passed, DIFFICULTIES ARISE. “However, in the face of a world crisis, difficulties have arisen. The outlook is changed, perhaps pot permanently, but at present a great derangement of trade and - price relationships ha 8 occurred, particularly affecting international payments. President Hoover has not assumed the situation to be permanent. He proposes an agree ment for the relief of present conditions, “The proposition that debts and reparations are a disturbing factor in the present world situation is <>iiu upon which the United States will the chief burden under the proposal. The chief beneficiary of the moratorium would be Germany. The chief direct contributor would be the United States, with France chief beneficiary of reparations, second.

ROAD TO PROSPERITY. “But the President has sought to avoid reopening any of the original con troversies on account of the importance of prompt action. The one great problem in which all countries are now most concerned is that of restoring prosperity, and the way to prosperity lies through normal business relations. The world needs a respite from uncertainties and alarms.” Probably the most significant statement made by the National City Bank is the faith expressed in Germany: “Of the ultimate soundness and strength of the German economy there can he no doubt, but at this time the country is dependent upon large amounts of foreign short-term credits withdrawals of which are a menace to the country’s gold reserves,” PRIVATE DEBTS. President Hoover’s proposal does not contemplate any moratorium upon pri-' vate debs, or even upon the loan of 300,000,009 reichmnrks which was distributed in several markets under the Young Plan. It does not affect the Dawes loan or any of the German State, municipal, or corporate loans sold in foreign markets, the proceeds of which have been received by the borrowers. It relates, wholly to the iter-Govern-mental obligations, which differ from obligations sold on the public market? and widely distributed to individual buyers. There ha s been no agitation in Germany over any class of ligati~ns excepting the so-called political ones between Governments. A BETTER TONE. Commenting on general business conditions the National City Bank, said that the President’s proposal already

has to its credit a remarkable resurgence of confidence and activity in all markets, and has measurably lightened the strain of fear and unsettlement under which business has been labouring, What this relief may finally lead to in tangible terms of trade, through putting deferred projects into execution, making long term borrowing easier, and increasing purchases by ultimate consumers who now fear to spend freely, remains to be demonstrated, and will be affected by the further course of events. Beginnings of commodity market improvement had appeared even before the President’s announcement, prices having made their lows in the forepart of the month. Thereafter all the weekly price index numbers turned upward some advancing for three consecutive weeks.