The New York herald., 1922-07-06
Sir DrummOnd DrummOnd-
Fraser Lays Financial Evils
to Want of Trust.
REMEDY IS CONFIDENCE
English Economist FavOrs
Adoption of Modified Inter-
national Credits Plan.

HERALD, were written by Hartley
Withers, editor OF the London "Econo-
mist" other articles VIII follow.
ny SIR DRUMMoND DRUMMoND-
FRASER, X. b. E., M. Com.
Copyright in oil countries roserucd.
Special Correspondence to THE NEW YORK
HERALD.
LONDON, June 24.-The world at the
present time is suffering from an in
sidious disease called mistrust. This
mistrust has been slowly undermining
the sound basis upon which international
trading was conducted before the war.
The cause of the mistrust was the mis-
use of credit by the Governments for
non-productive purposes during the war,
followed by the misuse of credit by the
traders for the world supply of goods
at any price during the boom immedi-
ately after the war.
This misuse of credit brought about
instability Of exchanges, which induced
mistrust in the ability of the taker Of
credit to pay the giver of credit, and
naturally gradually reduced interna-
tional trading to a minimum. The mis-
use of credit by the Governments re-
suited in floating debts (Which have
constantly to be renewed) as well as ex-
cessive note issues. It is necessary that
these be assimilated by the people in
the form Of Government loans bearing
an attractive rate OF interest, the re-
payment of which is deferred for a
period of years.
International trading has also suf-
1sn nf nvfA 1r1
banking facilities. AS long as the banks
| are called upon to finance these floating
debts they cannot adequately finance the
international trading Of the world And
the importers. although they could OBJ
tain credits, are afraid to take these
| credits because of the continual depre-
/ citation of their own currency. This is
why an international credits plan must
be devised which will pierce its way
| through this massive block to return
OF the old confidence between traders
| and countries.
The Ter Meulen Plan.
| The international credits plan ter
Meulen) Of the League of Nations was
universally adopted by the financial
| experts at the Brussels conference. This
plan. which was evolved for the restora-
| ton Of international trade between the
| ordinary importer and the ordinary ex-
! porter by means of collateral bond
| to be issued against the pledging of
national assets, the writer soon found
would not appeal to the impoverished
| countries.
The plan has now. been modified to
include long term credits for recon-
struction purposes, which the war torn
countries are willing to adopt. AND for
which they are willing to pledge their
national assets and even (where neces-
| sary) to submit to outside control
| Some of the countries which have ap-
piled for the international credits plan
are liable for reparations. AS the
| Reparations Commission has first
charge on their national assets. mat
ters are rather complicated. But the
most tangled skeins can be disentagled
by patience and the will to deal fairly
and impartially.
To Restore Confidence.
What is needed to restore universal
! confidence Is strong lead from the
governments in lending countries. The
vaclllating policy OF. for instance. the
British Government. has had a deter
! rent effect instead OF acting as a con-
structive stimulus. 1t is only natural
that the war torn countries should
seize every promise offered Of a golden
harvest without the pledging of their
resources and the adopting O, the
drastic internal reforms required by
the international credits plan.
But as each glittering hope proves
| to be n mirage. the countries are grad
ually finding that the stable, unroman-
tic and unpopular original plan ac-
cepted by the business and export COM
munity of Europe and America is to
be their one hope of outside help. be-
cause It IL dependent on concurrent in
side reform.
This plan alone has an economic
value. because the ultimate loss falls
on the borrowing and not on the lend
| ing countries. The export credits
I scheme of the British Government,
throws the ultimate loss upon the tax
payers Of the lending countries. who
thus shoulder the risk and find the
money as well. while the borrowing
countries gain the credit without the
risk. The proposed corporations will
/ also depend on the governments guar
anteeing the capital and interest. I,
will be surprising ~ the conditions at.
4 tached to such a guaranty art not toe
onerous to be accepted.
Lessons From History.
II history Is OF value Its lessons
must be applied to present day condl.
tions. After the Barring collapse ir
the nineties credit was damaged and
unemployment was rife. All sorts OF
export credit schemes were devised q
cope with the stagnation of trade. II
was only after the colonial and for.
eign borrowers realized that they hac
to cover their expenditure by theiI
revenue before they could obtain Brit
ish capital for their economic develop.
ment that they set to work TO become
solvent borrowers" Then their re-
covery was rapid. This Is what 1,
necessary to-day
This Ia what America recognized
when the writer laid the principles -
the international credits plan befor,
Americans of note Influence, business
acumen and larger vision. They wer,
prepared to adopt the plan. although
they refused to go To Genoa and The
Hague. and although IL was a plar
fathered by the League OF NatIonr. be.
cause they saw that the league made
the ideal, nonpolitical trustee for tn,
pledged assets. They. with the insight
and alertness which n big. new coun.
try seems to produce. saw the value
Of expansion Of credit: they saw tn,
advantages of a bond on tap to at.
tract peoples money: they saw ths
necessity. above all. of the inslstencs
on the fiscal internal reforms. leadins