Evening star., 1932-12-02

handed to Secretary of State
Stimson yesterday by Sir Ronald
Lindsey, follows:
l. In their note Of November 10 his
majesty's government in the United
Kingdom put forward a request to the
United States Government to enter
upon discussions with view to the ad-
justment of the British war debt, and
at the same time they suggested sus-
pension Of the payment due on Deem
Der IS, their purpose being to avoid the
financial and political unsettlement
which must follow resumption Of war
oe5t payments. to avert the intensifica-
ton OF the present worlc depression by
the further disturbance OF t..e CX-
changes, to foster the revival Of COM
n7rc{al confdencc-of which scme hesi-
tating signs have recently appeared
and, finally, to allow Of a close exami-
nation between the United States and
Crs2t Britain Of the whole subject in
preparation for the International Eco
nonlic Conference
3. His maje3ty'S government warmly
welcome that part Of the reply of the
United States Government in which
they express their Willingness to facili-
tate such discussions, ard. noting that
1t does not appear to the United States
Government that sufficient reasons have
been given for their request for sus-
pension of the December installment,
they now propose to set out in greater
detail the consideration which actuated
them in presenting their previous note.
Crisis Culrninates Disorder. ...
3. The war produced profound dis
order in the course of international
trade, and after "A years this disorder
has eliminated in crisis of unparal-
leled severity. It has resulted in a
general collapse of trade throughout the
civilized world, with widespread unem-
ployment and a disastrous fail in all.
national incomes. including those of
hoth the United States Of America and
OF the United Kingdom. The causes of
the depression may be manifold, but it
has been generally recognized that war
debts and reparations have been one of
the major causes, and that afsettlenfent
OF these debts. which will relieve world
anxleties under this head, is an indis-
pcnSable condition of revival of gen.
erl prosperity. AS the Bale Commit 2
tee declared in December last, 1.-The
adjustment of all reparations and war
debts to the troubled situation of the
world Is the only lasting step capable of
establishing confidence which is the
very condition Of economic stability and
real peace" The committee proceeded:
We appeal to the governments on
whom the responsibility for action rests
to permit of no delay in coming to de-
clsions which will bring an ameliora-
ton OF this grave crisis which weighs
SO heavily on all alike" While in some
respects it may be difficult for govern
ments to remedy the troubles of the
world, there are certain steps which it
is clearly within their powers and
their responsibility to take. H..
I. The system of war debts was called
into being by the war requirements of
the belligerent nations. The resources
IN man power and production of the
allied countries had from 1914 been
wholly employed in the prosecution of
the war. Their normal trading activf-
ties were to large extent suspended.
ana they had therefore less than their
normal resources available for pur-
chaSeS abroad. But the vast require
nents for war purposes in any case far
exceeded any normal means to pay and
could only be financed by means Of
loans from producing countries. The
loans raised, whether they were market
loans or government loans, were taken
not IN the form of money, but in the
form OF goods and enormously aug
mented the volume of the exports of
the lending countries. For example,
before 1915 the United States export
surplus normally varied from S20O, ,0OO,-
600 to $500, 100000. In 1917 and 1918
IT exceeded $3,000,000,000, and in 1919
IT was about S4,o00,000,000. The United
States made loans to the allies Qnclud-
ing the United Kingdom) totaling ap-
rrnYir1 tp1u G1n mn
OO0 at par the United Kingdom made
loans to its European allies amounting
TO 81 800 100000, equivalent tat par) to
$500, 100000; the French government
had made similar loans equivalent cat
par) to $2,237 100000. In the aggre-
gate, these loans reach the colossal
total Of approximately $40, 600 OOO, 900
equivalent at par to over E4,0O0,-
100000.
Prosperity Was IIlusory.
5. If the course Of commerce were
detected to the extent required to repay
these wartime debts, 1t would entail a
radical alteration in the economy both
of debtor and of creditor countries.
During the first few years after the war
this was recognized, and no attempt was
made to collect them. But It proved
impossible to secure general agreement
Tor their remission, and the debtor
powers were called upon to fund their
engagements. From 1928 onward a
series Of agreements were concluded
providing for their repayment on vary
ing terms, and in 1924 a provisional
settlement was reached of German
reparationS on the basis of the Dawes
plan. The annuities provided for in
most OF these agreements were low dur
ing the earlier years, and their payment
was rendered possible by the flow of
investment capital from the United
States of America to the Continent of
Europe, which was then taking place.
But the prosperous period from 1929 to
1929 was to a large extent illusory,
and the seeds of future trouble had
already been sowed.
6. In the Summer of 1929 the storm
that was brewing was not yet visible,
and it was hoped that conditions were
sufficiently stabilized for a final settle
ment of reparations in the form of the
Young plan, under which Germany un-
dertook to pay annuities of about $780,
000,000 (f100,000,000 at par), of which
the major part was passed on as war
debt payments. Unhappily, almost be-
fore the ink had dried on the agree
ments embooying the Young plan the
storm had burst upon the world.
Startled and alarmed, lenders who for
five years so literally poured their cap
1tal into the Continent of Europe with
drew such funds as were immediately
recoverable. The debtors made desper-
ate efforts to meet their liabilities, but
confidence became more and more
shaken, and toward the middle of 1881
something like panic prevailed. Since
then the world has been living under
the stress Of repeated shocks which have
completely undermined the confidence
on which the system of investment
depended. The process of disintegration
has been pursued to the point where 1t
has become an attempt to liquidate not
only private fortunes and industries, but
whole countries. Currencies are threat
1ened with instability, If not with COL
1aDse and controls and restrictions in