WAR DEBTS

Manawatu Standard, Volume LIII, Issue 23, 23 December 1932, Page 5

WAR DEBTS

IF AMERICA IS OBDURATE. WHAT WILL BE THE OUTCOME P In discussing the question of war debts and tho British proposal that they should he abolished, Messrs J. B. Were and Son, financiers of Melbourne, in their weekly letter to clients, express the following ( pinions : WORLD TRADE. “If Cong ress remains obdurate, it seems certain that world trade, now so dangerously low, will be still further diminished, and that gold prices of commodities will fall still further. “When Great Britain was forced off gold in Soptomber, 1931, the nations of the world fell into two groups —the one containing those with currencies allied to sterling, the other those with currencies remaining on gold. This may ultimately prove to have been the first phaso of a struggle to overthrow the domination of gold over the world currency systems.

“If a satisfactory solution of the war debts problem is not speedily found the struggle may become acute. “If gold prices continue to fall, those countries within the sterling area will be forced into still closer economic relationship, and will be obliged to seek for more complete satisfaction of their trade requirements within that area. They will have to evolve a new system of currency management, and the management of currencies may havo to be designed to produce further devaluation in terms of gold so as to sustain commodity prices within the area, and to maintain the social structures of the countries concerned.

“In this regard a great responsibility will rest upon Great Britain. “This is not a cheerful prospect, but it is a possible and logical result of American olxluracy in regard to war debts, and necessary to bring the tine position home to the minds of the American people. “It is not impossible for matters so to develop that in tho end devaluation of the dollar will be the only way out of the difficulty; in other words, that the system of managed currency will have prevailed over the system of automatic control through gold which has become unworkable. “In the final analysis, therefore, the war debts problem is one of monetary systems and monetary policy. “One great evil of the debts is that they have greatly assisted to make the gold standard unworkable, so that the distributing system of the world is dislocated and mankind is poor and in want in the midst of plenty. “If, contrary to expectation, tho war debts question can he speedily and satisfactorily settled, tho world is likely to make rapid progress on the path towards recoverv. PAYMENT" IN KIND THE ONLY POSSIBLE METHOD. “The loans were received by the debtor nations in the form of goods and services. They must be repaid in kind. There is no other way, and the refusal of the United States, as expressed in prohibitive tariff barriers, to accept payment in the only possible way, when associated with insistence on payment, brings their claim for the honouring of war debts to a reductio ad absurdum from which there is no escape. “The following figures, also quoted

from The Economist, are illuminating: “The first annuity of £33,000,000 sterling was paid by Great Britain to the United States in 1923, and, as in that year Britain exported to the United States goods valued at £61,000,000, the annuity payment was equivalent to little more than six months’ exports. The annuity which is due to he paid in 1933 is £56,000,000 sterling, and as the value of the goods exported by Great Britain to the United States in 1931 was £17.000,000, and during 1932 will he less, tho annuity now payable represents between three and four years’ exports.”