The Washington times., 1919-09-26
BOersianerS
Comment
on Business
By BOERsIANER.

It is reported the Secretary OF the
Treasury has a plan 70 relieve for
eign governments" By permitting
them to defer interest payments on
their obligations TO the United states
Government.
What Mr.. Glass proposes Is con
fessiOn Of subjunctive insolvency on
the part of the foreign governments.
Suspension Of interest payment i'm
plies provisional default and pro
visional default suggests contingent
bankruptcy.
The idea must be original with Mr..
Glass. No foreign finance minister
could have suggested tat least not
at present. Further, were Congress
to concur in Mr. Glass premature
proposal, II may be doubted II any
FIRST class power should avail itself
Of it at this time.
What a European finance minister
should accept IS a loan from America
or elsewhere-to cover interest
charges for, say. hve years; which
does not imply that Americans as %.
dividuals should be urged to extend
long time credits to Europeans. what
ever their Government may be dis
posed to do.
The question Of long or, short time
credits in this crucial period is Of para
mount Importance. In deciding for
the former the post-eivil war Eastern
creditors Of the West brought on the
panic Of 1873.
To draw an analogy between the
civil war Of the COS and Americas
war on Germany may appear far
fetched, in the first glance. But
there are certain kindred funda-
mentals which allow Of the simile.
Following the peace Of the COS,
the watchWord was TO exploit the
West To develop the then com
paratively undeveloped West would
surely restore a country that had
been somewhat exhausted BY four
years Of internecine strife. It proved
a successful slogan, successfully con
summated,
Today, after the war with Ger
many, the words are Foreign Trade;
Exploit Foreign Countries; Connect
with Latin-American Lands, with the
Orient, Near and Distant: Develop
them Commercially and Financially
This is the right economic cry But
in uttering Il and putting IL into
practice. the experience Of the SOS
should not be forgotten.
After the civil war, eastern and
European capital was poured into the
West. The loans. unfortunately for
the lenders and subsequently for the
country-at-large, were for a very
long period; a condition that bred
carelessness in the borrowers. Upon
two post-bsllum boom years-es-
pecfally in land values-there ensued
a gradual depression which culmi-
mated In the basic panic Of 1878. The
West could not meet its obligations.
The East, with its money placed in
the West, could get no aid from
Europe. which was eXasperated BY
the defaults in the western part Of
the United States
Land values and some other val
ues are inflated in a relative degree,
as they were in the COS. American
capital is prepared to go to foreign
communities, as Eastern capital went
into the West.
Let capital go abroad, but let it be
for a much briefer period and let
the collateral be Of a liquid char
acter, for it was the toO-lOng-held
illiquid collateral held BY the east
in the 6C's that sealed the fate Of the
lenders.
Europe must be aided by Ameriea.
American money can be profitably
employed IN the ASIAN Last anu az
South America. But the lesson OF
the past is. make the maturities short.
At every maturity the borrowers will
be. in all likelihood, in a stronger po-
sition and can give better security.
This arrangement spurs the debtor.
fortifies the creditor and forefends a
crisis.
In finance governments are not un-
like individuals. Too much lesway
to the creditor fosters pusillanimity.
Deferred interest payments induce
yet further postponements that de-
generate to a habit which loses the
sense OF responsibility.
The while, a sentimental and
chronically impecunious Congressman
or possibly a Senator may propose a
reduction OF the debts OF a total for
giveness OF them-which would in
tensify the pusillanimity OF the