Evening Star Newspaper, December 2, 1932, Page 4

THE EVENING " 11 STAR, WASI ) ON.- D C,. ¥ TEXT OF BRITISH AND FRENCH NOTES AMPLIFYING PLEA FOR STAY | CONFERENCE URGED BY GREAT BRITAN ‘Conveniently Arranged’ Post- ponement of December 15 rday by Sir Ronald Payment Sought. 1. In their note of November 10 his majesty’s govern: in the United Kingdom put forward a request to the United States Covernmenf to enter tipon discussions with a view to the ad- Jjustment of the British war debt, and at the same e they sugzested a sus- on D handed to Secretary of State national Eco- rnment warmly the reply of the ment in which ingness to facili- ‘noting that United States ient reascns have on of the December instaliment, v T out in greater h actuated years this di in a crisis of unpsral hies resulted in d a disastrous fail in all . including. those of States of America and m. The causes of manifold, but it y recognized that war parations have been one of les under this head, is an indis- Demsable condition of a revival of gen- ergl prosperity. As the Bale Commit- tea declared in December last, “The acjustment of all reparations and war debis to the troubled situation of the warld is the only lasting step capable of establishing confidence, which is the vety condition cf economie 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- cisions which will ring an ameliora- tion of this grave crisis which weighs 50 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. ‘The system of war debts was called into being by the war uirements of the belligerent nations. e resources in man power and production of the allied countries had from 1914 been :;lh:!ly em;'arlgixed in th: t};rmecuflon of 2 r normal trading gctivi~ ties g.ere to a large extent m’:’d:’d and they had therefore less than their normal resources available for pur- chses abroad. But the vast require- ments for war purposes in any case far exceeded any normal means to pay, and could only be financed by means of 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 Upited States export surplus normally varied from $200,000,- 000 to $600,000,000. In 1917 and 1918 it exceeded $3,000,000,000, and in 1919 # was about $4,000,000,000. The United States made loans to the allies (includ- ing the United Kingdom) tot: ap- prox tely $10,000,000,000 (£2,055,000,- 000 at par); the United Kingdom made loans to its European allies amaunting to £1,600,000,000, equivalent (at par) to $7,800,000,000; the French government had made similar loans equivalent (at par) to $2237,000,000. In the aggre- gate, these .loans reach the colossal total of approximately $20,000.000,000 (equivalent at par to over £4,000,~ 000,000). Prosperity Was Illusory. 5. If the course of commerce were deflected to the extent required to repay these war-time debts, it would entail a radical alteration in the economy both of debt and of creditor eountries. During the first few years after the war this was recognized, and no attempt was made to collect” them. But ft proved impossible to secure a general agreement for their remission, and the debtor Powers were called upon to fund their engagements. From 1523 onward a series of agreements were concluded providing for their repayment on vary- ing terr and in 1924 a provisional settlement was reached of German Teparations 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 1923 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- deartook to pay annuities of about $500, 000,000 (£100,000.000 at par), of which the major part was passed on as war debt payments. Unhappily, almost be- fote the ink had dried on the agree- ments embodying the Young plan the storm had burst upon the world. Startled and alarmed, lenders who for five years so liberally poured their cap- ital into the Continent of Europe with drew such funds as were immediately retoverable. The debtors made desper- ate efforts to meet their liabilities, but canfidence became more and more shaken, and toward the middle of 1931 something like a panic prevailed. Since then the world has been living under the stress of repeated shocks which have completely uncermined the confidence on which the system of investment depended. The process of disintegration has been pursued to the point where it has become an attempt to liquidate not only private fortunes and industries, but whole countries. Currencies are threat- =ned with instability, if not with col- Mapse, and controls and restrictions in- Sended to remedy the trouble have merely aggravated it. Everywhere tax- ation has been ruthlessly increased and expenditure drastically curtailed, and yet budgets are in deficit or are bal- anced with ever-increasing difficulty, In all directions there are signs of lysis of trade and the threat of and of financial collapse. ‘The international monetary mechan- dem, without which the modern world effectively conduct its = ‘broken ints forms of HE text of the British note, | rder | tress which this iuvolves. The coun- tries of the world cannot even begin to consider how to restore this mechanism until the causes which undermined con- fidence have been removed. One of the most important of these is the system of intergovernmental debts. Differ From Commercial Loans. 7. These intergovernmental debts are radically different from commercial loans raised by foreign governments on the market for productive purposes. Such commercial loans are normally self-liquidating. The market loans thus raised during the last hundred years have converted whole territories from desolate swamps or uninhabited plains to flourishing provinces teeming with human life and_producing great addi- tions to the wealth of the world. Such ctive leans directly afford micans rcby the borrower can repay them interest and at the same time be- come more prosperous. But reparations and war loans represent expenditure on | destruction. Fertile fields were ren- dered barren and populous cities a that- tered ruin. Such expenditure, instead of producing a slow and steady a mulation of wealth. destroys in a few | hours stored-up riches of the past | Like the shells on which they were largely spent, these loans were blown to pieces. They have produced nothing to repay them, and they have left be- hind nothing but fresh complications d perplexities. yment of these war debts s unnatural transfers which In s made possible, v, by further foreign the part of creditor cour temporarily conceal but gravate the difficulties. In the long run international debts can | cnly be paid in the form of goads or | services. Bale report of Au- 1931, truly pointed out: “In re- cent y s ing to pursue two contradictory policies in permitting the development of an in- | ternational financial system which in- volves the annual payment of large sums by debtor to creditor countries while at the same time putting obstacles in the way of the free movement of goods. So obstacles remain, such ements of capital mu:t necessarily thro world’s financial brlance out Gold Reserves Drained. 9. The creditors, in so far as they rment in | ors to pay in gold. This hasled to a drain on the gold reserves of many countries, | and this in turn has forced up the price of gold in terms of commodities; or, in cther worcs, has forced down the price of commodities in terms of gold currencies. This fall in prices has caused widespread ruin to producers in debtor and creditor countries alike, and threatens disastrous social and political repercussions. It has seriously increased the burden of commercial debts, but it has rendered intolerable the pecuniary burden of unpraductive war debts. 10. The difficulties of maintaining payments fixed under cxisting agree- ments first became acute in the case of Germany, and, despite the moratorium adopted as the result of Mr. Hoover's initiative last year, apprehensions cre- ated by the situation in that country caused large withdrawals of credits, which in turn involved London as a leading - international center. Conse- quent moyements of capital forced the United Kingdom to abandon the gold standard, and while sterling has re- mained more stable in terms of goods than gold currencies, the .events of Sep- tember, 1931, gave a profound shock to confidence in the monetary system throughqut the world. Thus the bane- ful effects of these unnatural transfers in respect of reparations and war debts have gravely accentuated the difficulties of all five continents, including many countries which were neither debtors nor creditors in “the tragic bookkeep- ing” which resulted from the war. Con- fidence and credit cannot revive until an end has been put to these attempts to force the stream of capital to flow uphill. Cites Mellon Report. 11. In this connection it is pertinent to recall the statement made by the Secretary of the United States Treasury in his annual report for 1924-25 that the principle of capacity to pay does not require the foreign debtor to pay to the full extent of its present or future capacity. The debtor government must, he continued, “be permitted to preserve and improve its economic position, to bring its budget into balance, and to place its finances and currency on a sound basis, and to maintain, and, if possible, to improve the standard of living of its citizens. No settlement which s oppressive and retards the re- covery and development of the foreign debtor is to the best interests of the United States or of Europe.” The re- sumption of war debt payments in pres- ent circumstances appears altogether inconsistent with the principles here laid down. Experience has, in fact, shown that when dealing with international trans- fers of the character and of the un- precedented magnitude of the post-war intergovernmental obligations, the prin- ciple of “capacity to pay” of the cebtor —even if thus applied—can only be regarded as of secondary importance compared with an even wider principle, viz: that of the capacity of the world to endure the economic and financial consequences which those transfers would involve. 12. 1t is in the light of these wider economic and financial consequences that successive British governments have framed their well known policy on this question, which is referred to in a | later passage of this note. His majesty’s government are aware that any Te- mission of the war debts may be criticized as transferring liability from the taxpayer in the borrowing coun- try to the taxpayer in the lending | country, and in this respect tax- | payers in the United Kingdom and !in the United States are in much the same position Both are already bear- | ing a large share of the burden of the | war debts, and would continue to bear | 1t even if all existing war debt arrange- ments between the governments could | be maintained. For example, in the case of the United Kingdom the effect of its reparation and war debt arrange- | ments was to provide the sum suffi- clent to cover current payments to the | United States Government. But this | does not mean that the British tax- _ | payer was relieved from his burdens in respect of the advances made to the allies during the war. On the contrary, he was left to find over £80,000,000 a year ($390,000,000 at par) for interest on internal loans out of which those ad- vances had been made. For all the | reparation and war debt receipts of the United Kingdom are required to cover the current payments due on its own war debt to the United States Gov- ernment, and the United Kingdom tax- payer has had each year to find from his own resources the amount required for interest on advances made by the United Kingdom to the allies, which, as stated above, amounted to a total of about £1,600,000,000 ($7,800,000,000 at par). In the case of the United States the amount due from foreign govern- ments in respect of war debt payments is now $270,000,000 & year, and if this were not recefved it would increase by that amount the burden on the Ameri- can taxpayer. It will be seen, there- fore, that the policy which his majesty's government have consistently advocated is one which, if it involves sacrifices on the part of American taxpayers, has involved similar sacrifices on the part of their own taxpayers. The interests of the two countries looked #t from this standpoint are the same. ‘But it would be taking alto- gether too narrow a view to regard those interests as being limited to se- curing payment of these war debts from the borrowing governments. 13. Payments across . stricted as they are the oct,:-f tariffs and trade tlally different from payments made by the taxpayer in his own currency, and the burden of these vast inter- governmental debts must be judged by comparison not with the volume of in- trade. are compelled by every means to aug- meet intergovernmental debt burdens, they cannot play their part in the nor: mal economic operations of commerce, and their diminished purchasing power will reflect itself in diminished receipts | for producers in the creditor count | with”consequent fall in prices, depres- |sion of industry and unemployment. Even a partial recovery of business activity in creditor countries as a con- sequence of the removal of these ab- normal conditions would result in add: tional receipts from tax on the existing scale which would compensate the ex- chequers of the creditor countries many times over for the loss of revenues in- volved in | settiements. | 14, The loss which both the United | Kingdom and United States tax- | payers would suffer from reconsidera- | tion of the war debts cannot be meas- | ured in same scales as the untold | 1oss of weith and human misery caused |.by the present economic crisis. The {value of international trade had al- ready six months ago decreased in three years by 50 per cent, or by the cquivalent of $5,000,000 for every hour, ht and day, that passes, and th tion has sinco detericrated even r. It will not profit a creditor country to collect a few million pounds or dollars if it thereby perpetuates a world disorder which, reacting on itseif, involves losses of revenue many times | ereater. And a settlement, however | generous it may scem, which relicves he economic machinery of the world | by clearing up these intergovernmental | payments ‘would be repaid again and again by the contribution which | would make to world revival. | Potentizlities Unimpaired, | 15. For this loss and suffering is not | due to the niggardliness of nature The triumphs of physical sclence are r growing and the vast potentialities e production of real wealth remain unimpaired. It is in the power of the governments of the world, and particu- Jarly of the United States and of the United Kingdom as the two greatest creditor nations, if they unite in co- operating, to make the first and essen- | tial step toward averting disaster, finan- | cial, economic and political. | "16. For the reasons given in the pre- | ceding paragraphs his majesty’'s gov- ernment base their request for a re- examination of the whole situation on the fact that payment of the war debts | has t their view been proved to be in- | organization of the world and that any resumption of these payments is bound | to accentuate the gravity of the present | crisis and to compromise fatally all efforts to counteract it. But apart from these general considerations. his majesty’s government hold the sincere cenviction that this request is fully justified on the grounds of the past record of the United Kingdom in the matter of intergovernmental debts and of their present position. 17. In the first place they would draw attention to the unprecedented efforts which have been made by the United Kingdom. The total British war expenditure in the United States amounted to approximately $12,000,- 000,000 (£2,400,000,000). Of this total only about one-third was financed by borrowing from the United States Gov- ernment. Approximately $3,000,000,000 of gold and of securities representing available capital assets which His Majesty's Government had at its dis- course reduced the permanent wealth of this country. In addition His Maj- esty’s Government raised commercial loans on the United States market before the entry of the United States into the war to the amount of about $1,480,000,000 (£304,000,000 at par). The balance of the British war expend- by the export of British goods and by the reimbursement on the part of the United States Government of expendi- ture incurred by His Majasty’s Govern- ment on behalf of the Allies and of sterling supplied by His Majesty's Gov- ernment to the United States troops. Of these market borrowings $1,340,000,~ 000 (£275,000,000) have been repaid. In respect of the debt to the United States Government payments have been made amounting to- $1,352,000,000 (£278,000,~ 000 at par), of which $202,000,000 (£42,000,000 at par) were in respect of the principal of the debt as funded. Furthermore in addition to the pay- ments under the funding agreement His Majesty’s Government have paid $233,000,000 (£48,000,000) in respect of war debt before funding and they have repaid in full both the loan for the purchase of silver amounting to $122,- 000,000 and the debt of $16,000,000 for relief supplies to Austria. The total of these debt payments which His Majes- ty's Government have made to the United States since the war amount to the sum of $3,063,000,000 (£629,~ 000,000). ¥ Had Claims on Allies. 18. Meanwhile the United Kingdom had claims on its Allies in respect of the war loans it had made. The ad- vances made by this country amounted, as stated above, to £1,600,000,000 ($7,800.000,000) and had increased sub- sequently by the addition of unpaid interest to the capital. Shortly after the war His Majesty’s Government offered to join in any equitable ar- rangement for the reduction or cancel- lation of inter-allied debts provided it was of an all-around character. That proposal was not accepted and His Majesty’s Government were called upon to fund their debt to the United States of America. They then announced that they would limit their demands on their own debtors to the amount that they were themselves required to pay to their creditor. The faet that His Majesty’s Government were the first to fund their debt to the United States of America, and that some time elapsed before their debtors completed funding agreements with them, has resulted in their receipts from”their debtors being less than half their payments to their creditor. The relative position is that the United States of America made loans amount! to $10,000,000,000 (£2,055,000,000) and the United King- dom made similar loans amounting to $7,800,000,000 (£1,600,000,000) ; the United States have received for the benefit of their tax payers $2,112,000,000 (£434,000,000) and the United Ki dom have received for the benefit of their taxpayers nothing, have passed on all their receipts to the United States and have paid out of the pockets of | their taxpayers to the United States | $651,000,000 (£134,000,000). In fact, when interest has been taken into ac- count, some £200,000,000 ($973,000,000 at par) has been found by the British taxpayer. It may be observed that while the British share of the total in- debtedness to the United States is only 40 per cent of the total debt payments made to the United States 80 per cent has come from Great Britian. The efforts which this has involved to the British nation, coming as they did after the losses resulting from the war, constitute in the view of His Majesty’s Government a strong claim to con- sideration on the part of the United Btates Government. 19. Moreover His Majesty’s Govern- ment feel justified in calling attention to the changes of circumstances which have increased the burden of thelr obligations, Cites Exchange Ratio. In the first place the British debt is expressed in terms of gold, but the burden on the British people is meas- ured in terms of mrlg}o. ‘The pay- ment due on December 15 is owing to this circumstance increased from £19- 760,000 to approximately £30,000,000. The importance of this from the na- tlonal standpoint needs mo- emphasis. In fact, however, as mr& the ternal revenue but with the balance of | So long as the debtor nations | ment their export surpluses in order to | revision of the war debt | consistent with the present economic | (£600,000,000) was obtained by the sale | posal the transfer of which has of | iture in the United States was financed | discharge of all international debts must in the long run take the form of a transfer of goods or 'services. The average wholesale price index in the United States during the period when the debt was incurred with 189 and is now under 94 (taking 1913 as a basis in each case). The debt, therefore, represents today in terms of goods not less than twice the amount which was borrowed. In this connection His Majesty's Gov- ernment would point out that the effect of the American tariff has been to re- strict rather than to facilitate the im- port of manufactured goods which the United Kingdom produces, and the difficulties in this respect have not de- creased in recent years. In 1923, when the British war debt was funded, the | war debt annuity amounted to £33,- | 000,000, or appreximately half the value of British comestic exports to the United States (£60,000,000). From 1933 onward the annufty which ve should have to pay in respect of the war debt would amount at the present ! rate of exchange to approximately £60,- | 000,000, whereas British domestic ex- | ports to America amounted to only £18,000.000 in 1931, and are not likely to exceed £16,000,000 for 1932. Imports into the United Kingdom | from the United States show an equally remarkab’" fall from £211,000,000 in 1923 | to £104,00C,900 in 1931 and £59.000,000 in the first rine months of 1932. The total trade between the two ccuntries from the time of the funding agreement ‘has fallen from about £300,000,000 a | year to £100,000,000. Would Cut U. S. Trade. 20. If, therefore, war debt payments had to be resumed, it is apparent that the exchange pos n of this country would need to be strengthened by a reduction of the very heavy adverse | balance of the visible trade of the United Kingdom and the United Sta | In_present circumstances this could {only be done by adopting measures which would further restrict British purchases of American goods. The | United Kingdom has up to the present gencrally been the best customer of the United States, and the result of such restrictions would inevitably be to re- duce specially the market in the United Kingdom for American farm products. To the extent therefore that payments | were resumed to the United States Treasury a definite and unfavorable re- | action must follow to the United States producer. Moreover, His Majesty's Government would also have to guard against the effects which would follow if the facili- ties offered by the British market were used by other debtors of America to | obtain sterling, which they would then sell across the exchange in order to meet their obligations to the United States Government. After the war the United Kingdom attempted to maintain | imports, with the result that debtor countries throughout the world sold their geods on the British market and took the proceeds away over the ex- change or in gold to meet their obliga- tions elsewhere. Under the stress of the present crisis His Majesty's Gov- ernment have had to modily their sys- | tem and to adopt tariffs, but the United | Kingdom still imports from abroad goods to the value of several hundreds | of million pounds in excess of what it exports, and it would be necessary to consider what action could bz taken to secure that the sterling proceeds of these imports were used more largely for the benefit of the British market. 21. President Hoover ,hls proposal for a suspension of inter- ginning July 1, 1931, stated that its ob- | ject was “to relieve the pressure of the difficulties resulting from the fall in prices and the lack of confidence in economic and political stability and to | assist in the re-establishment of confi- | dence, thus forwarding political peaca |and economic stability in the world. The action then taken gave a much- needed respite, but it was not sufficient to restore confidence. Depression still continues, and a resumption of war debt payments today would for the reasons outlined above involve economic reactions which must intensify the in- stability of the world. Hoover’s hopes are to be realized, defi- nite remedial action requires to b taken to deal not merely with the Brit- ish war debt to America but with the whole system of intergovernmental ob- ligations with which it is related. German Burden Relieved. 22. The initiative in devising a set- tlement of reparations was taken by the_creditor governments of Germany at Lausanne, with the-cognizance and approval of the United States Govern- ment. An arrangement was there signed under which Germany would be sub- stantially relicved of a burden whis had become intolerable. and the par- ticipating creditors agreed provisionally among themselves to a waiver of their inter-governmental debts. It was in the nature of things inevitable that that settlement was provisional and that its completion was dependent upon a sat- isfactory settlement in respect of the debts for which the creditor powers States Government. 23. The United States Government have frequently reiterated that they do not admit any connection between rep- arations and war debts; but this differ- entiation in the matter of intergovern- mental obligations arising out of the war is not accepted by other countries which have creditor claims on the Ger- man government and whose ability to meet their own debt payments to the United States and to the United King- -dom is undoubtedly affected by the extent to which they themselves are paid by Germany. Whichever view is academically correct, there is a de facto connection between these two sets of intergovernmental obligations, and this was by implication admitted by the pre a_ moratorium on all inter- governmental obligations last year. Moreover, His Majesty’s Government take it for granted that preferential treatment would never be claimed for war debts due to the United States as compared with those due to this coun- try, and a situation,in which this country was required to continue war debt payments while foregoing war debt payments due to it would be admitted at once to be unthinkable. Thus, if payment of the sums due in respect of the British war debt to the United States Government were to be resumed, His Majesty’s Government would be obliged to reopen the question of pay- ments from their own debtors—France, Italy, Portugal, Yugoslavia, Rumania, Greece and also the British dominions. The debtor countries would in turn have to demand payment by Germany of her obligations under the Young plan and the United Kingdom would have to do likewise. Without a re- adjustment of war debt obligations the Lausanne agreement could not be rati- fied, the question of reparations would remain unsettled, the improvement in confidence which followed the Lau- sanne agreements would be undone and fatal results might well be found to have accrued to the solution of many grave political as well as financial prob- lems now under discussion. Delay Held Imperative. 24. His Majesty’s Government under- stand that the Government of the United States have already appreciated the force of these considerations, in the light of which they have recognized the desirability of a discussion of the major point stressed in a previous com- munication, namely, the revision of the existing debt obligations. But His Maj- esty’s Government wish to emphasize their conviction that their proposal for a suspension of the December payment, a proposal which would in no way affect present. ces so great and would involve mc‘hll:g-‘-1 reactions, both financial m%mmcmmmgamm anxieties in regard to the immediate | which amounted to £78,000,000 in 1931, | its traditional trading system of free | in explaining | governmental payments for a year, be- | If President | themselves were liable to the United | United States Government when they | situation would distract the attention of governments and peoples when the chief need was an objective and sys- | tematic approach to the problem to be solved. | 25. Allusion has been made in the| last paragraph to the difficulty of any | attempt to meet the payment December | 15 by transfer across exchange. It has | been the object of his majesty’s gov- ernment to take all possible steps to mitigate fluctuations "in the relative | value of sterling and gold currencies. | To this end, having in the first place repaid in full large temporary credits | | borrowed in connection with the finan | cial crisis of the preceding year, they | have acquired certain reserves in gold and in foreign exchange, but though these reserves are adequate for the pur- pose for which they are designed, they were not intended and would not suffice to cover as well the payment of $95, 500,000 due on December 15. The ex- | | the device were adopted of payment in | sterling to a blocked account; for the existence of a large sum awaiting trans- fer would affect the ma al seriously as an actual purchase c | change.” The'only remaining alicrnat By the Associated Press. 1 PARIS, Dccember 2—Following s a translation of the text of the French | rebly to the American debts note of | November 23, as given out here by the forcign office handed to Secretar; lof State Stimson in Washington by | Ambassader Ps he leiter dressed to me on N | tergovernmental debts and payment of | the installment due December 15 i | inspired cn the part of the French ernment, considerations and thoug which it has instructed me to submiit without delay to the most serious con- sideration of the Federal Government My government notes first of all with satisfaction that the President finds himself disposed to recommend to the | Congress a new study of the question 2s & whole, which implies that in his opinion suc! udy would seem neces- sary. The French government fail to realize that redu | contracted by European po the United States may react upon the American economic siit | It does n at an arrange- { ment concerning its debts was con- | sented to by the American Government. World Crisis Cited. On the other hand one cannot con- | test that since this period the gravity {of the financial and economic crisis | which has raged throughout the werld | | has forced all interested governments to modify their positions with respect {to settle of intergovernmental debts, and has led them to adopt a| | series of h does not concerted measures Wwhich | affect simultanecusly reparations and | debts and which are destined to meet | the necessities exacted by existing cir-| cumstances. | Without prejudicing the character and form which a new study of the problems growing out of settlement of | intergovernmental debts might takg my | | government_is happy too register the | accord of the federal givernment con- cerning the motives which justify it, | namely the reductions of “payments | agreed to by the creditor nations at Lausanne, the increasing weight of debts resulting from the world economic | depression and the parallel fall of prices, the difficulty of obtaining foreign !exchanges, and finally the influence | which a solution of the debt question | may exercise on the world sitaation. The well féunced nature of these | .miotives, is. moreover, so evident, and | the necessity of a new arrangement so | pressing, that it would be difficult to understand. being admitted, that there should be a fulfillment of an accord which is con- | sidered as no longer corresponding to he present situation. Admits “Juridical Validity.” The French government desires to emphasize that it never has been in its mind to contest the juridical va- lidity of the various engagements which | are bound up with the origin of the war debts. My government desires to emphasize that the result for postponement as it has been presented implies a simple | carrying over, leaving intact the rights of the parties concerned. It ‘does not seem to it, consequently, to gu beyond the proposal which Presi- dent Hoover himself made in May, 1931 On the contraty, it appears to it to be | a normal, equitable, necessary sequel. It was at the request of the Presi- dent of Germany that President Hoover put forth on May 20, 1931, his pro- posal for postponement for one year of all intergovernmental debt payments, including reparations. On that occasion the Federal Govern- ment explained that it envisaged a moratorium on debts due it “only on condition that there would be a similar adjournment for one year of payments on intergovernmental debts due the | principal creditor powers.” The American memorandum made it clear that the burden of intergovern- mental debts which could be supported in normal times weighed heavily in these times of crises. This initiative, as the French Gov- ernment has pointed out, caused direct prejudice to all existing agreements, and notably suspended the working of the mechanism set up by the Young plan for settlement of reparations. ‘The development of events has shown that this suspension, once consented to. was destined to be prolonged beyond | the delay originally fixed. Laval Visit Recalled. Furthermore, on the occasion of his trip to Washington, the French premier reached an agreement with the Presi- dent of the United States on the phrase- ology of a communique stating that with respect to intergovernmental debts a new arrangement covering the period of the depression might be necessary on condition that the initiative came from the European powers principally inter- ested. In conformity with this text, which appeared to constitute something moral- ly new with respect to the intergovern- mental debt regime, this initiative was undertaken and in so far as the European powers themselves were concerned, the arrangement suggested was brought about. Germany, the principal debtor, ob- tained in addition to diminution of her debt to a lump sum of three billion marks—tantamount to a reduction of about 90 per cent—a moratorium for three years. Believing that this settlement should become part of a general arrangement, the creditor European powers unani- mously agreed that in any event the payment due them in the form of inter- governmental debts would be postponed until negotiation of a settlement of the problem as a whole. It would indeed be grave if the regime obtained with so much difficulty at Lausanne should have to be recon- sidered. ‘Would it not be equitable if, in the same spirit of international solidarity, with a vi::: ‘:loedoom:ltlodnfing m results already af and to permitting com- pletion of the work already undertaken, the Federal Government would accept in its turn the postponement of the payment due December 152 imperious necessity wiveh this work answers certainly has not escaped of the Federal Govern- ment. In making his moratorium proposal in 1931 the President of the United States affirmed that the attitude of the Pederal indicated juthorities their disposition 'wmmmmmmhmnsmm change difficulty would remain even if | | the United Stat | collaboration am the principle of revision | would be ent\ in gold. Such & method of rx’;‘ni:'nem “would involve the sacrifice of a considerable part of the | | gold reserves of the Bank of England [Posits, French or forefgn, which are widely regart'ed as no more than sufficient for the rexponsibilities of London as a financial center. 26. His majesty’s govexnment trust that the full statement of their vie which they have now made will de; | strate clearly the ground upo | their request was based; narn | own profound conviction that a tion of the war deb? pay: would inevitably deepen |in world trade and would {falls in commodity price | trous consequences from which no_ na- | tion would be exempt. They bekeve |that a discussion between the United Stotes Government and themselves these matters might b depres: to further with dises: ould be the postponement of staliment and th sid X Text of French Reply to U. S. Note Offers Reasons for New Exiension Communique Quoted. “The du of statesm the Wash- ington ccmmunique of October 19 ind cated, “is not to o eans of The economic depression w spired the proposal by the Pre and his ng the peoples ha STOWN Worse since the Spring of 1931 Everywhere misery and unemployment are ‘increasing. This depression cen only grow worse if payment of inter- governmental debts must be resumed before the coming of a general arrange- ment is provided for. The French government is acquainted with the formal reservations ma the time of ratification of the H { moratorium by the American Co | whose prerogatives it has no intention | of bringing into this discussion. But it _should be recalled that the | French Parliame on its part, has conditioned its approval on its own in- | terpretation of ‘the moratorium pro- posed by President Hoover. It must also be recalled that the committce of experts which met at Basel in December, 1931, as a result of the Washington interview, and on which sat an eminent American personalit did not limit its work to recognizing the monentary impossibility of Ger- many’s mecting her reparations obliga- tions. 1 s ppeal for It unanimously condemned in forma manner as being especially pernici transfers of funds without a counter- part, which the payment of war debts makes necessary. Conclusion of Report. ‘Trat report concluded as follow “In the first place, all transfers from one country to another on a scale so large as to upset the balance of pa ment can only accentuate the present s. It also should be borne in mind t the release of a debtor country from the burden of payment which it is unable to bear may merely have the effect of transferring that burden to a creditor country which in its character as a debtor it may be unable to bear. “Again, an adjustment of all inter- governmental debts to the troubled situation of the world—an ad- justment which should take place with- jout delay if new disasters are to be avoided—is the only lasting step capable of re-establishing a confidence which is the very condition of economic stability and real peace.” Guided by these general considera- tions, the French government accepted the Lausanne accord on condition that that they would receive the approval of the French Parliament. Despite a budget deficit of nearly $500,000,000, the balancing of which already has necessitated and will neces- sitate in the future very stringent mea: uses, Prance will thus have voluntari abandoned an annual revenue, while paying her war debt, in the neighbor- hood of $85,000,000, this in the interest of world economic restoration. She accepted this heavy sacrifice under the conviction that the paymen provided for under the existing agre ments could not be made without caus- ing profound economic and financial perturbations. Situation “Misunderstood.” Her situation with respect to this has often been misunderstood and jus- tifies detailed explanation. The fiow of gold toward France in the last few years has been caused or made inevitable essentially because of conditions existing in the world. This gold does not belong to the French are specialists in surge almost every trade. This bank serves in particular department your disposal.. . | duction of us to restoration of world economy the | existing A BANK for the INDIVIDUAL v This Is an Age There are specialists in medical practice; there in the various branches of the law; there are sfilcialists in almost every profession and in banking.: We have for years made a study of serving the individual —taking care of his financial needs, making available to him the advice of our officials 1n connection with his personal financial affairs either as a borrower, orasasaver. QOurofficials are expert in this 1n this specialized field is, we believe, evidenced by our growth; and the fact that we have made over fifty thousand banking loans to Washingtonians and have thousands of savings accounts of persons who are not borrowers. If we can be of service, to you as a savings depositor or as a borrower, our facilitiesare at Morris Plan Bank Under Supervision U. S. Treasury 1408 H Street Northwest Capital & Surplus, $250,000 | treagury. It is not for France a source of richness. It is a guarantee of all de- made in Its normal and desirable re- tribution can only come after there |is & general return of confidence and from needs which spring from this re- | turn of confidence. ' The | France | dis | | | improvement manifested | after senne accords came from the hope of the peoples that a world | ttiement would come. The imp: | ment whi owed itself cannot tinue if the next payment of intergo rnmental debts is insisted upor | It chould be noted that unless there | is a radical shift in the American com- | mercial balance with Europe, a balan | which is today largely favorable to the | United States, these payments would | necessitate, because of progressive re- foreign revenues of debtor countries, an increasing number of operations soon to be ruinous for the entire world—on the credit and ex- vernment is unable to American people would is in their in fulfilled an_agreement lication of which would t the creation of more sery in the world. The ms which do not corre- | pond to the exchanges are liable pro- | foundly to throw out of balance inter- national relations, believe find in Postponement Asked. | It is under the sway of these grave | cupations, cogn: t of respon: - hich weigh upon the great powers | ct to the safeguarding of the | d economic order that the ch government asked of the Fed- 1 Government the 11th of November ent of the payment In asking quest in the considerations it to re-examine its re- light of the foregoing decms that it # ful- y not only national, but | conscious ¢f the role which lled upon by circum: | | to play in Europe. It has no intention | of priding itself upon efforts it already | | has made for restoration of economic | stabiity and resumption of business, | | nor upon the conditions in which it | finds itself permitting co-operation | toward these ends in the future, but it | asks, apprehensively, how it can con- tinue its efforts if the co-operation of the United States, upon which it thought it could count, fails to materi- | alize. Such are the considerations which | lead the French government today to renew through me to your excellency | |its earnest and considered request to | | examine again the application for sus- pension of the payment due Decem- ber 15, The reception which will be given | this request is awaited with confidence |by my government, which realizes all the consequences which the decision of the President of the United States may have for improving or making worse the tragic situation resulting from the war, |SENATOR REED PROTESTS RULING ON COAL TARIFF iCalLs Treasury Order Calamitous After Conference With Hoover and Stimson. By the Associated Press. | Senator Reed, Republican, of Penn- | sylvania, after a joint conference with | President Hoover and Secretary Stim- | son, said today he had lodged a protest against a Treasury Department ruling that the coal tariff violated the most {favored nation clause of the United | States commercial treaties with Great | Britain and Germany. Reed asserted this ruling, if main- tained, would “be calamitous.” “It would shut up any number of mines in Pennsylvania, West Virginia and_ elsewhere,” he said. ‘The Pennsylvanian, who was closeted with the President and Secretary of State for about five minutes, said he had not discussed debt matters and that this talk had been suspended while he placed his protest against the Treas- ury ruling. THOMAS WILL ADDRESS CAPITAL SOCIALISTS Former Presidential Candidate Principal Speaker at Sunday Night Meeting. Norman Thomas, Socialist candidate for President in the recent election, will make the principal address Sunday night at a mass meeting called by ‘Washington Socialists to inaugurate the | Winter educational program of their party. The meeting will be held at 8:30 o'clock in the Masonic Temple, Thir- teenth street and New York avenue. Other speakers include Darlington Hoopes, Socialist member of the Penn- sylvania Legislature, and Leo Krzycki, member of the National Executive Com- mittee of the Socialist party. Charles Edward Russell will act as chairman of the meeting. of Specialists ry; there are specialists a specialized field ia of banking. Our success OPINOH 1§ LONDON BXPECTS PAYMENT First Reaction, However, In- dorses Government’s Debt Arguments. By the Assgclated LONDON, Dece action to Gréat B to the United States ment and revision of war meny ments. r 2—The first re- ritain’s second note - postpone- debt pay- indersed the government's argu- tions published to- ude would finally be taken by the American Congress was the main subject of c ture. decision in case the latest arguments were turned cown ecross the Atlantic, There was a growing belief, however, that the government id' pay. the $95,550,000 due Decemt 15, and pay in gold, if the United States insisted in payment. Editorial writers especially sought to press home the idea that dire results would follow the rejestion of the plea contained in the two notes that have gone to Washing' In varying lan- guage, they foresaw world chaos, ruin and cataciysm if debt payments were continued. ‘The publication of the British debt note only slightly aflected the pound sterling on the sterling-dollar exchange today. At first the rate improved to 3.24154, but eased to 3.23%; around noon. The Stock Exchange similarly reacted but slightly, conditions remaining quiet and steady. The giit-edge security is- sues hardened between s and % of & point, while transatlantic securities ads * Justed themselves to overnight Wall street news. e LADY ASTOR IN VIRGINIA RICHMOND, Va., December 2 (#).— Lady Nancy Astor for a day will become a student of social welfare in Virginia ?day when she visits tobacco factories ere, _The former Nancy Langhorne of Vir- ginia later will be the guest of honor at a luncheon. At her request the subjects discussed will be related to in. dustrial conditions, relief work and so- cial welfare, Meyers Mens Shop After Tuxedos FO RGET the cares of the day— enjoy your evenings— smartly groomed in one of our meticulous- . ly tailored " tuxedos. $| 9.50 Others up to $49 EVER MEN'S SHOP . 1331 F Street