Evening star., 1932-11-13
Belief Expressed That Amer
ica Once More Will Lead
World.
OBLIGATIONS CONTINUE
TO HOLD BACK RECOVERY
Negotiations Now Under Way Are
Expected to Reach Definite
Conclusion.
BY DIR. MAX WINKLER.

GpcCldl DASphtCi W blC Obdis
NEW YORK, November 12.-RequeSts
by France and Great Britain that the
United States agree to an extension Of
the Hoover moratorium providing for
suspension of inter-allied debt pay
ments for one year, is directing once
again attention to one OF the most
important postwar problems still
awaiting solution.
Political debts, that is, obligations
arising from the war, and owing to the
United States, were created when
America decided to throw in her loo
wi h the allies. To fight the war to a
successful conclusion, and take care OF
the needs of the allies Immediately
after the conflict, 1t was necessary for
the United States to make advances to,
and establish credits on behalf Of, her
allies, totalling about $9,500,000,000.
Sl3,75O, 100000 Spent.
Against these advances and credits,
there was spent in the United States
almost $l3,750, 100000, the difference
being derived largely from the sale OF
American securities owned by Euro
peans. and the shipment of gold. In
other words. for every dollar OF credit
thsre was spent in the United States
o1SO. Niblb S1+oA nAASAA
the allies are scheduled to pay to the
United States for every dollar received,
according to the terms OF the various
debt funding agreements.
1t is obvious that purchases resulting
from the credits referred to above
meant abnormally large profits to the
American people. Every branch OF the
coun+ry's economic life benefited. In
dustry as well as agriculture reported
profits larger than at any time in their
history. America was being called upon
to supply increasingly large amounts Of
wool and cotton and wheat, of sugar
and copper, and numerous other
products.
American establishments we're work
ing at 100 per cent capacity; wages
and salaries rose higher and higher.
So did profits and dividends. Excess
goods were readily absorbed at huge
profits. The standard of living rose
to higher levels. AMI everv one willing
and able. to work found ready en-
ployment
To facilitate the rebuilding of Eu-
rope after the war and the restoration
of devastated territories, America
made available to the rest Of the
world credits and loans absorbed by the
American investing public. Thus, the
production by American enterprises
could be maintained at the same high
rate.
In order to make it possible for
Americas customers to continue to pur-
chase her goods. it was deemed desir-
able to adjust the so-called war debts
on the basis of capacity to pay. This
was done by means of funding agree
ments between the United States AMI
her various debtors,
Three Considerations.
Three considerations determined the
terms of the arrangements:
l-Conviction on the part OF the
United States that the funding OF the
debts would contribute to. rather than
impede, Europe's economic recovery.
2-Conviction on the part Of the
United States that payments, as fixed
in the debt funding agreements, were
within the capacity of the debtors.
3-Conviction on the part of the
United States that continuance Of pay
ments by the various debtors, in ac-
cordance with the terms of the debt
funding agreements, would not tend to
| impair their standard of living.
But, before long. American began to
loan money promiscuously The pur-
poses of loans became irrelevant I'M
mediate gain was all that mattered
Later America learned she had per-
| mitted her neighbors to buy more than
| they could comfortably carry. She
stopped lending 1t was too late.
Americas debtors needed to borrow to
| pay existing engagements, in the crea-
| ton of which the United States was
| chiefly instrumental. Nations grad
ually fell down on their commitments
Their credit became impaired. Their
purchases were contracted. American
| factories were still equipped to produce
on a large scale. American farmers
still produced large quantities Of wheat
| and cotton. American mines still
| turned out large amounts OF copper
| and coal. There were no customers
That is. there were customers, but they
/ lacked the means Of buying.
America sold less, and the result was
that profits and income began tC
shrink The Nation had to curtail it,
| purchases from its debtors whose re-
serves rapidly became exhausted. They
ceased to have regard for contractua
oblgations-in most cases out Of nee
essity rather than choice. Moratorium
standstill, default, and Reputation
were the result. The commerce OF the
world became paralyzed. Economic
chaos reigned everywhere. First, ir
the debtor countries, from where II
spread over the rest of the world. Nc
one proved immune.
Those who believed it possible tc
localize difficulties were keenly disap-
pointed. The interdependence of ma
lions is too pronounced to permit one
to enjoy lasting and genuine prosperity
when chaos reigns in the land of it:
neighbors. The economic depression
has been under way for more thar
three years, and has engulfed prac-
tically the entire civilized world.
Adjustment of political debts, which
on careful analysis have in actually
been collected with handsome interest
in the bargain. will facilitate tacklinf
the problem of commercial engage