The mirror. (Stillwater, Minn.) 1894-1925, 1920-02-19
Loans by Governments to Governments

One remarkable incident of the great war-an
incident that creates curious problem for peace times
is the loans made by certain governments to their
allies. Ordinarily foreign war loans made to
begerent governments by the investors bankers of
another country, but hundred years ago loans
or subsidies were sometimes made direct by govern
ments to governments. Thus the French king lent
money to the American states to help them pay the
of the Revolutionary War; and repaid the loans
to France after we had adopted our Constitution.
When Pitt was premier of the British govern
ment during the war with France at the end of the
eighteenth century, he advanced $45 100000 to
the German states and to other allies of England,
which never repaid the loan; but in spite of those in
stances loans from government to government
never made in those days any such scale as that
which has marked the international money trans
actions of the last four years. When the war ended
in Nov, 1918 the British government had lent 81 $780,
100000 to its allies, of which $2,84O,0O0O00 had
gone to Russia and $3,350,000,00O to France. Be-
tween April, 1917, and that date our own govern
had lent 81 $780, 100000, of which So, 70O 000
900 had gone to England the rest to other allies.
Even France, with all its own burdens had advanced
$690,O00,O00 to weaker allies like Belgium. The
German government is believed to have lent about
$2,250,000,000 to Austria, Bulgaria and Turkey. /.
None of those loans represented real money paid
by government its allies Usually, the transaction
consisted of allied governments buying food war
material say from American producers and those pro-
ducers received their pay, from the allied govern
ment, but from own, in money that the United
States Treasury raised by selling American govern
ment bonds. The allied government would then de-
liver to our Treasury its own bonds for the full
amount, payable at future date. During the fiscal
year that ended with last june Treasury received
$107 900 in interest such foreign obligations
1t is often asked how such huge accounts can ever
be settled. Our government has the right to sell in
the investment Market at the price it paid the foreign
bonds that holds In the course of time
it may do so just Great Britain may sell the foreign
government bonds that it holds although the three
billions of Russian bonds that the British and
the American government bought would hardly find
ready market Some of the states that have borrowed
will undoubtedly float loans home and use the pro-
ceeds to take up their obligations other
Possibly some of the loans will never be collected
There has been vague proposal that the strong cred
tor governments forgive the debts of the financially
more exhausted nations and cancel the Indebtedness
but it is scarcely probable that they will do it. An
other suggestion that all such loans of the Allies be
pooled in great consolidated loan, or in several
such loans guaranteed by all the Allied governments
and that the certificates of the loan be sold in the in
vestment market That suggestion will probably be
heard again.-Youths COMPANION.