The Manawatu Herald. SATURDAY, NOVEMBER 4, 1916. A BANK KEPT NATION.

Manawatu Herald, Volume XXXVIII, Issue 1633, 4 November 1916, Page 2

The Manawatu Herald. SATURDAY, NOVEMBER 4, 1916. A BANK KEPT NATION.

IN retiring from •the editorship of tin l “London Economist” not, long ago, Mr E. W. J hirst said that bankruptcy threatened some of the great belligerent Powers. The same thing' has been said by others many limes. Bankruptcy for an Egypt, a Turkey, a Latiu-Auierican republic, a shattered Southern Confederacy, is easily imaginable; but it is not easy to imagine how a stale like Clermany or Prance, with nearly all of its indebtedness owned by its own citizens, and retaining full national sovereignty, could become bankrupt in any sense which that term commonly conveys. In two years the belligerents have borrowed forty billion dollars, but far the grimier part of it has been borrowed at home and spent at home. The important exception* consist of loans by England to her allies, by (iermany to Austria, and of about a billion dollars of credit obtained by the Allies in the Ended Stales. A part of this billion dollars, howevei —presumably half of it —is secured by collateral; the remainder is a comparatively trivial item. As for tile borrowing at home, if the interest charge pinches, taxation will offset it. Already when an Englishman draws the interest on his war loan the (lovernment lakes out a quarter of it for the income tax. If this total income is below a certain amount he can claim a rebate; but there is nothing to prevent the (lovernment from levying the full 25 per cent, on small incomes or from raising the rate to 50 per cent. In a word, war debt held at home is simply a problem of taxation. It is easy to see how every belligerent will get info a deep slough; but it looks as though exhaustion would stop the war before either side —with unimpaired power to tax and issue paper money — reaches a state of actual bankruptcy.