The Washington herald., 1918-11-20
The Greater Obligations.

The Greater Obligations
OF course the American banks. pow
eTful as they are. or private capital in
associa ton with the banks, could not
finance obligations which now amount
to more than 5000, 10000 and wIich
represent borrowings by European
governments for the purpose Of pay
ing American manufacturers, farmers.
and others for munitions and material
of war bought in this country and for
other supplies. Therefore the gov
ernment was compelled. really as a
war necessity. after We entered the
war. TO furnish our allies with means
whereby they could make payment in
the expectation that in the course OF
time those obligations would be paid
But they cannot for a long time be
paid. Secretary McAdoo says. even
by imports of foreign commodities or
by sending gold to the United States
The gold cannot be spared and IL will
be a long time before foreign nations
will be able so greatly to increase
their exports TO the United States as
to furnish a means by which their OBJ
legations to this country can be met
Secretary McAdoo does not refer to
one fact which will stand in the way
of utilizing foreign commodi-
ties as a means OF offsetting the obli-
cations which Europe has incurred in
the United States. For. however large
the imports from Europe may be.
they are sure to be offset for some
years at least by the magnitude Of our
exports. Some excellent authorities
estimate that the balance of wade in
favor OF the United States will for
the next FIVE years be considerably
in excess OF 81, 900 OO0Oo That may
be an overestiplate, but IL is certain
that a large international trade bal
ance will be created in our favor.
Therefore, the United States must
carry. as an investment, these loans
perhaps for many years. The amount
should not be included in the state
ments which set forth estimates Of the
total cost to the United States OF car
r-ying on the war. The government Is
TO pay interest to the purchasers of
the liberty bonds, but it is not to pay
any interest upon the 5000. .0oo. coo
which our friends have borrowed ~
this country but, instead. will receive
interest each year, which will aggre-
gate until some part Of the princTpa,
is Huuidated, from $40O. 1000 to $780,
coo. 900.
The leading financiers speak OF this
investment as a remarkably good one
for the United States. II is incon-
ceivabIe that the nations which have
borrowed from us should default pay
ment Of interest. or ultimately fail TO
liuuidate the principal.
Mr.. McAdoo says that to continue
these loans is. from one point Of view
an act of enlightened self-interest.
Because in this way We enable the
European countries to continue heir
purchases Otherwise they might not
be able to do this. and that would
cause immediate diminution OF Amer
lean industries, and might result in
great reduction in prices and wages
suddenly brought about, possibly lead
ing to a serious condition OF unem-
ployment of labor
Therefore, we must continue to sell
on credit, we furnishing the credit
and this credit to be regarded really
as an investment. Furthermore. IL is
10 be expected that large amounts of
American capital will be invested in
the securities issued by other nations.
bv their railroad companies. their re-
sponsible manufacturing and other in
dustrial corporations.
Investment Of this kind will to a
considerable extent serve to make
the IiGuidation ~ the billions which
Furope now owes us all the mor~
easy. II Is estimated in the financial
district that should Congress give the
authority to Secretary McAdoo. as II
|. probabIy will. the aggregate of our
loans to our friends across the sea
will be found in the course OF year
or two TO amount to approximately
s.. 600. .Oo0. e0O. So much as that repre-
sents an investment. nominaliy by the
government, really by the people. in
the evidences OF obligations which
those who who borrowed from us will
give as security for the debt.