The Brookings register. [volume] (Brookings, Brookings County, S.D.) 1903-1971, 1922-11-09

steps to pay any part of the interest
on the large loans, due this fall when
the present moratorium expires.
While the debts exist on paper,
they are not now an actual burden on
the debtors, the r~eparations debt ex-
ceptcd. Nevertheless, these debts
represent a heavy potential burden to
European nations; and, until the un-
certainty which this occasions is re-
moved, there is small encouragement
or prospect for governmental finan-
cial reforms on a ~far-reaChing scale.
There have been frequent efforts
in Europe to reach agreements regard
ing some of the inter-goVernment
debts, and the reparation debt actual
ly has been turned into long-term
bonds. These negotiations however,
have not sufficiently recognized two
essentials; namely, the extent to
which the debtors can pay or the cred
itors are willing to receive payments
in goods and seryices-which is the
only way payments can be transferred
from II country to another, since
gold is not available in sufficient quan-
tty to be of material usefulness for
this purpose. AS a consequence, the
agreements made have not been fruit
tul of concrete or beneficial results.
The Congress of the United States,
nOw about to enter into similar nego-
~tiatiOns with our debtors, has appoint
ed a Debt Funding Commission, but
has limited the scope of action of the
Commission by laying down terms of
settlement in advance Of both inYeS-
tigation of the facts and negotiation
of a funding scheme.
The reparatons problem has reached
largely because of the vast overhang-
ing burden OF the inactive Series &
bonds, amounting to approximately
S2O, 600, 000, 600, which are held by the
Preparations Commission awaiting a
time when Germany can pay interest
On them. The burden of the series
A and b bonds, totaling approximately
Sl2, O00, 900 900, already issued and
subject to interest and amortization
charges, is quite within reasonable
estimates Of Germany's ability to pay,
although, owing to the present tinan-
cial decentralization of Germany, a
moratorium on cash payments has
been found necessary.
1t is the potential burden Of the Ser
les & bonds, similar to hat Of the
other great inter-governmental debts,
which has encouraged the German
government to let it's currency be-
come debased and it's finances disor-
ganized almost to the point Of insol-
vency.
The economic difficulty in obtain
ing payment Of PREPARATIONS and other
inter-governmental debts lies in the
fact that transfer of funds from one
country to another can now be made
only through the medium of transfers
OF goods and services. So far, how
ever, the foreign trade of most of the
European countries Is only a small
fraction of their pre-war trade, and
the trade balances most Of them be-
ing very unfavorable to the debtors,
are still %tiuctuating widely.
We can hardly expect, then, that
any very serious effort will be made
except by Great Britain, to meet pay
ments due this fall on the debts owed
to the United States government. On
the other hand, efforts to devise a
funding scheme on the basis Of the
terms laid down by Congress will be
of doubtful efficacy; while establish
ing more lenient terms, as regards a
further moratorium before beginning
interest payments, would only leave
the question where it is, continuing
the potential burden and it's uncer-
tainties.
1t is desirable, therefore, from a
purely business point of view, that
this uncertainty about what may be
the ultimate actual demand on Euro
pean national treasures should be
removed at the earliest possible mo-
ment. 1t has been suggested that
this can be done under present cir.
cumstances only by cancellation OF
certain inter-governmental debts by
AL the creditor governments, leaving
a comparatively small part Of the
reparations debt and a few of the less.
er obligations covering transactions
indirectly connected with the var
Such a course would under any con.
ditions, have its drawbacks, and II
would be quite useless, II 1t we're pur.
sued without obtaining sufficient guar
antees and substantial evidence that
the debtor governments of Europe
would stop further imitation of their