WELLINGTON NEWS

Hokitika Guardian, 22 December 1931, Page 7

WELLINGTON NEWS

WAR DEBTS AND REPARATIONS. /• (Special Correspondent). WELLINGTON, December 18. At last the nations have got down to a realisation of the basic cause ol the depression. War debts and' high protection tariffs have been tlie burden of the world and the fundamental causes of the world-wide depression. The situation as regards war debts and reparations are now the live subjects of international discussion, tariffs for the time being are held in abeyance. With regard to reparations it is quite evident that Germany is incapable of making full payment. Germany and Austria are both virtually bankrupt, and that must be fully recognised. With respect to inter-governmental war debts a settlement of that complex problem is in sight. Although President Hoover’s one-year moratorium has not been confirmed by Congress, that it will be confirmed is not a matter of doubt. President Hoover has gone further and has suggested to Congress the granting of a ten-year moratorium, to which there will probably be some objection. Ultimately it is certain that Congress will do something, and it is probable that the debts will be scaled down. ' Mr Andrew Mellon, the Secretary of the United States Treasury, is strongly in favour of reducing the debt, Mr Mellon advocates a renewed investigation of war debts, and observed “What intelligent business man would blindly refuse to investigate or consider the altered circumstances of a debtor whose unsecured debts increased approximately by one-half.” A committee composed of Congress leaders and financial experts is certain to be set up, and we may bo reasonably sure that the war debts will be presently so reduced ns not to be the inconvenience and menace to world prosperi+ As the Prime Minister observed at the Lord Mayor’s banquet in November: “A series of piecemeal and ephemeral compromises of a purely temporary nature will not meet the circumstances. A comprehensive and firm settlement is now required. All States must make concessions for the simple reason that if they do not the world will go from bad to worse until collapse and revolution may be the only way out. What Government and what nation is going to be responsible for that? See how everything hangs together and runs into a vicious circle. An examination of the monetary crisis leads inevitably back to the economic chaos. Why? This’chaos has been attached by committee after comm:.fctee set up by the League of Nations and also by certain governments, but every one bus SOMler of later cotne up against tilt! prohibitive tariffs, reparations and war debts, n The next two months will be a period of anxiety for the statesmen of Europe and the United States,, for a ,sett 1 meat must be reached by February 29, when the stand-still short-term credits to Germany will cease. The next three months will be ser ions for us in New Zealand. The Minister of Finance has stated quite frankly that the Budget for 1931-32 will not balance. There is thus every probability that Parliament will begin an emergency session in February, when a third effort will be made to balance the "Budget. Some further taxation may be imposed, but the Minister for Finance must be aware of the disappointing results of burdensome taxation. The law of diminishing returns operates and the revenue has been falling short of the estimate, and of course of the expenditure. Since the revenue cannot be raised then the only course open to the Government is to reduce expenditure. After tile war the price of everything rose and a new level of values was established which a.s the people became accustomed to it seemed to be real and permanent. A great volume of indebtedness was erected upon tinbasis of these values, and when it turned out that they were inflated the position of the debtors became a most difficult one.

Now we have to make adjustments and that is the calamity that we face. It is easy enough to adjust upwards, but to adjust downwards is tragic. It is important thae the Government insist upon further evonomies and the Government has a mandate for that.