Of the diate effect of Colonel Stimson's reply to the British Note on the War Debt issue there is no doubt. The United States of America, in the most courteous and friendly manner, declines to waive the instalment due. on Thursday. She makes certain suggestions with the object of making the process of payment as little burdensome as possible to the debtor but the debtor prefers to pay in gold, according to present advices. The two countries take divergent views in regard to various transactions in the past. Generally this may be said to be an academic issue. The resolution of Congress: time last year, in rej President Hoove: Propo! reconstitute the War Debt Commission, was to' the effect that the "indebtedness of foreign countries ta the United States" should not be cancelled or reduced. This holds the field in definition of American policy rather than the statements made in Congress in 1917, such for example as that of the Chairman of the Appropriations Committee:
"I have little sympathy with the suggestion that. possibly we will not get our money back, "I care not go much if we do, if American blood and American lives be preserved by the ing of the of that of the Chairman of the Ways and Means Committee of the House:
They will be fighting with, our money their battles and will be fighting with" our money our battles: too, "Most of this money. that we will loan to the Allies for the purchase of their arris will have to be expended in the United States."
The United States of America does not, however, refuse to recognise the need for review of the subject. There is a clear indication of readiness to discuss the whole question of economic recovery and to examine—not to cancel—the war debt problem in that regard, ference of opinion lies in two directions. The American Gov-that the debts went are related and that the debts and repor Great Britain plainly is at a loss to combat the former contention. As she is the chief debtor and the Note from Washington is mainly concerned with her position, she cannot help being surprised that emphasis is laid on "competitive armaments" without apparent recognition of the fact that, in unilateral disarmament she has proceeded to startling extrem Hes, as was shown in these columns last week.
The clear link between War experts among an official American representative served. It was the basis of the Lausanne Agreement, although as the Stimson Note points out, the Lausanne discus: sions were conducted wolving the United State: Going back to January 29, 1919, when the United States Treasury. rejected the first formal sugge yn (from France) that the reimbursement of the debts should be discussed, it should be noted that rejection was conveyed by the Secretary to the Treasury, Mr. Glass, with the following significant remark:
1 am entirely in accord with the that the scheme should take {nto account the recoveries from the enemy which are likely to. be effected by your Government. I do not, however, feel that these considerations lead to the conclusion that discussions of the plans for repayment of debts to' the United States can advan-rageously-be undertaken in Paris conjunction with the Peace Conference. The conclusion draw therefrom-is rather that the United States should be willing! to postpone discussions until, the probable amount time and form recovery from the enemy can be estimated and the financial Position of the receiving Govern ment considered in the light of this, information."
That public opinion in America is not impervious to argument on this point was revealed lately by a dictum of Senator Borah who, reversing his previous opinion, definitely associated War Debts with Reparations, The Balfour Note of August 1922 embodies the pivotal principle that Great Britain would not ask, more from her debtors than was necessary to pay her creditors. The importance of this declaration was overlooked at the time it was made. Its essential wisdom is only now being appreciated. The policy of the Debt Funding Commission which Congress has refused to. re-establish at President Hoover's invitation was thus officially defined in 1925; "Nor does the principle of capacity to pay require the foreign debtor to pay to the full limit of hhis present or future capacity. Te must be permitted to preserve and improve its economic position, to bring its budget into balance. and to maintain, and if possible, to improve the standard of living of its citizens."
It is not surprising that Congress, in "its present mood, refuses to reconstitute this Commission. Yet just as capacity to pay depends on the' amount receivable from Reparations, so is the disarmament issue linked up with security on which responses from America have been consistently disappointing.
Critics who would cover this controversy with the facile contention that Europe is endea vouring to saddle the United States of America with the role of the hard-fisted creditor are doing no service. There is only one criterion: the policy of the creditor must be directed towards" the maintenance of his own interests. That is why the business man, faced with the choice of insisting on fulfilment of a contract made when conditions were radically different and thereby calling upon his debtor to perform a physical impossibility, prefers to reduce his Joss by agreeing to a variation in terms. America is taking that line in agreeing to the review mentioned in the Stimson Note. A special complication arises from the fact that the British Note, not denying the physical possibility of paying the instalment due, maintains that the operation will so depress the market that the recipient, even more. perhaps than the payer, will suffer economically. Colonel Stimson does not consider that the War Debts have that supreme influence on the world economic position, as the British Note suggests, He is right up to point. Yet he is, apparently, on Weak ground if the crisis of 1931 be correctly assessed. In nine years the United States Trea sury had received—$2,000 millions on war debt account. During that period (1922-80) America had an export surplus of $5,500 millions. To cover the "surplus $700 millions gold was shipped to America und $4,300 millions was invested abroad by American banks and companies. The raising of the import tariff' militated against an import surplus so the burden of the war debts fell on the shoulders of the American investor, In 1929, the. process of lending abroad' was stopped. By 1931 American banks were endeavouring to recall portio of their loans. This helped to bring about the crisis which sent the European countries off the gold standard and was pre-ated from being a complete disaster only by the temporary expedient of the Hoover Moratorium. This brief and admittedly rough outline of the fundamentals of the present situation should be sufficient to show how difficult it is to believe that War Debt payments are not an important factor in the. present Terisis. The American taxpayer position is not enviable. The cessation of War Debt payments falls on his shoulders and he is therefore paying the price for the high tariff walls erected by his representatives. Now further gold shipments to America [to be made. They must increase the unevenness of Igold stocks and enhance currency uncertain. ties. Tt is pertinent, too, to consider the position of the British taxpayer. If, as seems probable, Great Britain waives the debts due to her in the shape of annuities - (about- £1,000 million) she still has to meet an internal debt of £7,435 millions or twelve times the pre-war figure. Tt is not unnatural that the United States Government should be reluctant to-tread the same path. The question re-
Text read from the printed page and cleaned; old type leaves the occasional error.