Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-08-10
BACKGROUND OF EVENTS
BY PAUL Y. COLLINS.

this Government will be out Of debt
within the next fifteen years. and can
not AFFORD, then, to look down upon
struggling European nations owing us
what they will still owe under the terms
Of their funded obligations. So we will
cance-perhaps.
The Young plan even envisages lust
that contingency in q memorandum
suggesting an agreement between Ger
many's creditors (already signed by
Great Britain, France, Italy and Bel
GUM, but not by the United States,
providing that, up to 1866, one-third OF
any relief which any creditor power
may effectively receive in respect to its
! outward payments on account of war
debts" shall be enjoyec BY that power,
and two-thirdS shall be passed on to
Germany. After 1866, the full amount
OF any remission is to be passed on to
Germany on account Of her annuities-
her reparation payments.
In plain English, IT, before 1866. the
United States should reduce Frances
debt by, say, $4,000, 00o, 900, then France
must credit $4,000, ooo, 900 on her claim
against German reparations. II we wait
until 1867, and France has delayed her
own payments or repudiated them. and
we then forgive 90, 900 900 600. 1t will all
| be applied to reduction of what Ger
| many will then owe France.
In short. the "Shylock" Of 1929 shall
be the goat OF 1867, so that everybody
will be happy. Luckily, as we have not
become party to such an agreement,
there is not the slightest obligation that
we shall ever become such.
In his fiery speech at The Hague con-
ference on the Young plan, this week,
Mr.. Snowden undertook to illustrate
how Shylockian the United States set
Element with Great Britain had been,
saying:
less than 1000. O00, 900 pounds ($5 o00.-
000. 00o). for which she must pay over q
period of 50 years an aggregate Of about
Sll, 000, 00o,0
The exact indebtedness Of Great
Britain to the United States, June 30.
1919, was $4,277, 000.000 and when the
debt was funded. some years later. ac-
crued interest brought it up TO $4,60o.-
000, 00O She settled In that latter
course, If a debt remains unpaid. it
continues to accrue interest. If we let
Great Britain's debt run q thousand
years and she paid only the interest. it
would total a good deal more than
81, DOT, 900 900, but what does that
prove? Mr.. Snowdens sophistry was
rather cheap and befuddling.
It is o peculiar kind Of financing that
counts an option spread over long
period as q hardship. No stipulation
exists requiring Great Britain to pay
on the installment plan. She has the
privilege of paying spot cash and set
Ting the claim on the mathematical
basis of present worth" If she desires.
In fact nothing would please 'shylock'
better than spot cash.
without applying that familiar but
rather intricate calculation Of present
worth" to the British debt. the same
can be applied to one dollar to be paid
In 50 years A dollar promised IN so
years, II discounted at per cent, has
4 "present value" of 50 22sl070s--a little
less than % cents II discounted at 5
per cent, its present value" is less than
9 cents. Now all the money we raised
to loan to the European nations during
and since the war cost US about per
cent on our Liberty bonds-some more,
basis Of about per cent interest, so
we lose 2 per cent covering the full 81
years. In short, we lose about 50 cents
on the dollar OF interest in excess OF
what interest we pay and what We COL
lect. Should we not urge the debtor;
VINO RTUInDle over the OF years CllnC
we permit that they should discount
their bills and pay spot cash. with a
saving of some so cents on the dollar?
For example. the schedule on the
Young plan calls for payments by
elusive. Of q total principal on the
debt, amounting TO $1.Se2,453,657. If
that were computed on present
worth" basis, discounting the face
value at the rate Of per cent, 1t Is
equivalent to only 46S,121 ,033-about
a quarter of the face of the principal
Besides, II cash be paid now in settle
ment. there would be immense saving
Of annual interest on deferred pay
ments
II the amount be discounted, at iden-
tically the rate Of interest we are pay
ing on our own Liberty bondS-4N per
cent-the 81, se2, 453,657 could be casfed
in for $267, 428, 1874. We could then re-
deem our Liberty bonds to that amount,
without cost to our own Treasury, and
France might save o billion and o half
dollarS-dollarS, not francs.
The same principle applies to all the
other debts due us, on which "Shylock"
is so "graspingly" liberal in time al
lowed. We are not. as q Nation. at all
concerned in Elrope's squabble over &C
cepting the Young plan, although the
chairmen of both plans-Mr. Dawes and
Mr.. Young-chance to be American
financial experts called in by Europe as
unbiased and capable authorities and
auJueeoLb. ees-s-ss@.,..ss-