Evening star., 1934-12-02
BY FRANK H. SIMONDS.
T T IS profound pity that one more
due date for the war debts is
/ destined to pass marked not by
j any attempt at an INTELLIGENT

T T IS profound pity that one more
due date for the war debts i,
destined to pass marked not by
i any attempt at an intelligent
disposition Of this question, but
| only by a new flood Of recrimination.
and resentments. And this. in turn
means that it is still impossible
| for the Roosevelt administration
politically. to do what is practical.
Even today 1t would still be possible
to collect something like $500, 900 ,00(
on these accounts If accepted as q
| final payment The countries which
no longer admit the economic validity
Of the debts land 1t Is the economic
validity alone which counts now are
still ready to pay something to escape
the continuing reproach Of repu.
diation.
I said that the debts have nc
| economic validity because it is cleal
to all who have viewed the question
effectively that when the United
States set out to collect the war debts
and at the same time to raise the
tariff barriers to protect its own do
mestic market it rendered it practically
impossible for the debtor nations tc
continue their payments over any long
period of time-in fact, beyond the
extent of their gold reserves.
Couldn't Pay without Loans.
The whole structure of the wal
debt settlements would have collapsed
almost as soon as it had been COM
pleted If the United States had not
launched itself in 1924 upon that cam
paign Of foreign lending, which lasted
to the panic of 1929. 1t would have
collapsed because without our loans
the debtors could not have paid at all
With our loans however, they paid
until We stopped lending They even
paid for another year, while the pro-
ceeds of our past loans were still
available.
But our debtors only paid US be-
cause We lent Germany more than
enough to permit her to pay our
debtors reparations. which they turned
back to us. When We stopped lending,
the first German crisis led Mr. Hoover
TO decree his moratorium. In effect
he offered to let the war debtors of if
they would let Germany of. And Mr..
Hoover wanted Germany left of be-
cause we had several billions of dollars
invested in the Reich which would
become worthless If Germany crashed.
Then the allies and the Germans
met at Lausanne and reparations were
abolished, although there was a saving
clause that such release was con-
tingent upon American cancellation of
war debts. But the source of all debt
payments was now dried up. We lent
no more. so the cancellation by de-
fault began. France led off; Britain
paid @1ce more and then fell back
upon token payments, which stopped
with the johnson law.
Not Question Of Law.
Now the case o. the debtor nations
Is not based on a question of law.
They do not deny the validity Of our
claims. What they say, in effect, is
we borrowed raw materials and
manufactures from you to fight a war
and gave our note for those goods
measured in money, but We never took
any considerable amount of money
from you and therefore we have none
OF your money with which to pay you
back. If you will buy our goods we
shall get the money and can pay you.
But If you refuse to buy our goods and
then continue to insist that we pay,
while your claim is legal, your method
OF collecting is contrary to common
sense. We are helpless because you
refuse to accept payment in any form
in which it can be made"
A good deal Of light upon the whole
question has been supplied in recent
months by German events. The Ger
mans owe very large sums to us and
the British and French. But since
they buy more Of US than they sell,
they can claim inability to pay us be-
cause Of our higher sales. On the
other hand, the British and French
buy more of Germany than they sell
They are therefore in position to
keep the difference and apply it to the
payment of their debts. Their debt
claims are legally no more valid than
ours, but their economic validity is
quite different.
AS a consequence, Schacht makes
arrangements to pay the French and
British and tells us he can only pay
us If we buy more German goods. We
have no remedy and economically no
case, because Germany has no liquid
capital, no considerable gold reserve,
no favorable balance in foreign trade.
So step by step international trade
falls to the level of direct barter.
British Appreciate Situation.
The British have appreciated the
situation more clearly than any other
creditor nation. Argentina, for ex-
ample. owes them for past loans. The
British buy enough wheat from the
Argentine to enable the South Amer
ican debtor to keep up the interest on
the loan. Little by little the British
have adjusted their foreign trade to
the point where they can collect the
debts by buying. We, by contrast,
have no such resource. so we continue
to send the bill on due date.
What has not arrived as yet in this
country, either in political circles or
outside of them, is the recognition
that no foreign debt has any value
save as we are able to accept payment
for it in goods. And within the cate
CORY of goods, Of course, Is included
services-the sums we spend on for
eign travel and on foreign freight car
riers. All the talk in this country
about the revival of our foreign trade
is still based upon the idea of finding
fresh markets for American products.
What is worst about the whole debt
mess is the fashion in which it has
served to create the impression in this
country that in some fashion the clever
European got the best of us, that we
were innocent and guileless and funda-
mentally honest, and were deceived.
Our trouble was really the fact that
no one appreciated that foreign trade
was barter, that what o country sold
had to be balanced by what it bought,
that once we set out to collect debts
we had to reduce sales. The only
other way was to increase purchases.
Europe No Wiser Than U. s.
At the outset the Europeans were no
wiser than we're we. They made the
ma y,,ict okoc rha nritiet, g.