Perth Amboy evening news., 1923-10-19
AMoRsTIzING NATIONAL DEBTS
BY Frederic j. Haskin

to assist Europe out of the seeming
ly hopeless economic and financial
tangle that was the heritage of the
years of war. The treaty of Versail-
les sowed dragons teeth all over Eu-
, rope and the harvest which IN peing
reaped is one of national and eco-
nomic disorganization. 1t has thrust
Germany through a series of vtcissi-
tudes which have almost as much
horror as war itself but without any
of the pomp and glory of armed
conflict. 1t has kept France in a
/ state of national chills and fever and
has brought to Great Britain serious
| Industrial depression and unemploy-
ment.
The keynote of the whole tragic
situation has been debt. Inability
to meet indebtedness has been the
principal bane of the European ma
tions. Their currencies have deprec-
lated to fantastic figures with all
the consequent arrangement of
trade. Where trade is deranged in
dustry languishes and without IN
dustry and trade new wealth cannot
be produced. These sorrows have
been caused by debt.
The ovefshadowing debt is that of
Germany-the separations. Whether
they are too large or too small is a
subject on which there are many
shades of opinion. The outstanding
fact is that the Preparations consti-
tute a debt which is holding Euro
pean developments back and thereby
r~etarding the trade and disturbing
the tranquility of the whole world.
To solve the debt problem, therefore,
is probably the most important task
in the world today.
What is now being regarded by
statesmen of various nations as the
best suggestion for a solution is a
plan which has beer perfected by
the American group of the Inter-
national Trade Commission, under
the general direction of DIR. Clarence
j. Owens, Washington, d. C. The
plan is based on the theory of amor
tization. 1t proposes to set in oper-
alton a system of payments where
by by gradual degrees not only the
German ~reparations but all of the
European debts can be linquidated.
The plans which have been present.
ed to Germany for payment of the
Preparations thus far have provided
for a huge initial payment. The In
ternational Trade Commission plan
merely provides that a series of pay
ments, approximately equal, shall be
made, extending over a period of
sixty-six years. Each payment would
include part principal and part in
terest, bringing about a progressive
4 Il i'm v 1.ftA. E. 4f fIn A@fa1AZ lALA Y.af;I
it finally becomes extinguished.
When the British Debt Funding
Mission, headed by Stanley Baldwin,
then Chancellor of the Exchequer.
now Prime Minister of Great Britain
came to Washington last winter to
arrange for the payment of the
British debt to the United States, the
amortization tables which the In
ternational Trade Commission had
worked out were laid before him and
also before Chairman Andrew W.
Mellon, Secretary of the Treasury
and Chairman of the American
World War--Debt Funding Commits
sion.
The tables excited, the attention
of these leaders of finance and of
their colleagues on the commissions
which they headed, and it appeared
to be more than coincidence that
when the terms of the settlement of
the British debt were made public
they revealed adoption of an amorti-
cation plan along the lines followed
by the Owens tables. BY an initial
payment of an odd amount the debt
was brought down to the round sun
OF $4,000, 600, 600. To this the amor
tization table was applied. stipulat-
ing the annual payments to include
a part of both principal and interest.
extending over sixty-two years, The
first annual payment amounted to
S161 100000. These payments ap-
proximate this amount, reaching a
high point of about $187, 900, 900. At
the end of sixty-two a the whole
debt is paid.
The general arithmetical principal
on which the table is worked out is
that an annual payment of $35,0O0,-
600 will amortize a debt of $1,000
600. 000, 900 in sixty-six years. Seven
ty millions will amortize a debt of
$4,000, 100000 and so on indefinitely
in the same proportion. The interest
rate is three per cent and one-half
of n per cent is devoted to pairing
down the principal.
The table may be applied to anNof
the debts of the European allies and
show what payments need be made.
Applying the theory of the debts of
the Allies to the United States, it
will be seen hat the debt of Bel
GUM which amounts to $3.50, 000,-
600 could be paid in sixty-six years
annual installments of only $13,-
100000. Italy's debt of $1,700, OOO,-
600 could be paid in the same time
by annual instalments o f$59,500,-
900.
There has been much dispute
about the French debt. France is
the second largest debtor to the
United States. Her indebtedness
amounts to about $4,000, 900, 600. It's
| payment has been deferred owing
to the fact that France has been un-
der heavy expense in the Ruhr &C.
cupation. Many leaders in politics
and finance say that it will not be
possible for France to meet the OBJ
legation. So far, only preliminary
negotiations for the settlement of the
debt have been entered into between
the American Debt Funding Commits
sion and the French Government.
When the negotiations do begin, the
International Trade Commissions
amortization tables will be laid be-
fore the commissioners and, in all
probability, will be adopted. The
French debt could be extinguished
in sixty-six years by the annual pay
ments of $1O5.000,000