Evening star., 1932-11-13

Were it not for the overhanging
threat of the undetermined reparations,
Germany would be in excellent position
so far as her foreign-owed debt is con-
cerned, according to a new study of
German finance which has Just been
completed by American authorities. The
German Republic owes only about $780,
600, 900 outside her borders.
In sharp contrast to this Is the POSI-
ton Of Great Britain. Not counting the
debt of more than $4,000, 900 900 to the
United States Government, a debt
which has been funded and is being
taken care of under the terms Of a
statutory sinking fund, the British gov
ernment owes to holders of its obliga-
tions outside Great Britain some
1000, ,000, 900 This it will be seen, is
20 times the German external debt.
The relative financial strength Of a
nation is determined by the extent of
its external debt. The theory Is that II
a debt is held by the citiZsns of a nation
they can, by agreement among them
selves, cancel it, reduce it. or extend it
indefinitely. A nation in such a position
is like family, members Of which have
borrowed money from each other. They
can, If they choose, cancel of the obh-
cation and the family will be no poorer
as q family.
When a nation has an external debt
the foreigners who hold its bonds are
in q position to demand payment when
the debt is due. When some nations
have defaulted on payments of prin-
cipal or even interest battleships have
been sent in some instances to collect
at the guns muzzle. It is like sending
the constable to collect when a family
owes bills and debts outside the family
circle.
The United States is pretty much in
the position Of the family the members
Of which eve money to each other Very
little money is owed by the United
States Government to foreigners. Only
here and there, where some foreigner
has bought Unitd States bond to en-
joy the certain inttreSt it draws, does
an external debt exist. In the aggregate
these foreign-held United States bonds
would amount to good many millions,
but in percentage of the whole debt and
resources an external debt is practically
absent from American public finances.
Popularity Of Government Bonds.
The showing that Germany's external
debt Is only 100000, 900, as against $2,-
900 900, ,000 indicates the relative finan-
CAdl pOSlIlOIlo u bLl6 LWO COUNTRIES.
The large. externally held debt of
Great Britain arises from the fact that
for so many generations she has been
the worlds banker. Planters in Malata,
orchid hunters in Borneo, widows in
Montreal, sheep herders in Australia,
South African gold and diamond
miners, and Egyptian orphans have for
many years past invested in British
consols. Large numbers of Americans,
Frenchmen, Turks, South Americas
people of every country in the world
have regarded British bonds as the
acme of soundness and their juugment
has always been justified. Great
Britain has never defaulted. In con-
sequence, Britain has a host of foreign
creditors, not so much because she has
desired to borrow from them as be-
cause they have wanted to have such
a reliable nation as a debtor. And the
total has risen to s2,000,000, 900. This
is about twice as much as the entire
American national debt in the pre-war
years.
The external debt Of most nations
is not public debt, but debt arising
from private transactions. The new
study of the German external debt puts