to meet more than a small part of their external liabilities, and in the existing condition of Europe a definite postponement of any payment by them is desirable in the interests of all the parties.

The actual amount which the other debtors could ultimately pay should, as in the case of Germany, be ascertained by inquiry into their exportable surplus at a full and frank conference between creditors and debtors.

It remains only for me now to thank you for the patience with which you have heard me. I have strictly confined myself to a consideration of the economic aspect of reparations and international debts, how they are payable, the general capacity of a debtor country to pay, and the effect of payment.

If I have become convinced that an attempt to enforce payment beyond the debtor's ability is injurious to the international trade of the whole world, lowers wages, reduces profits, and is a direct cause of unemployment, the conclusion is founded solely on economic grounds and is uninfluenced by any political considerations or any regard to the moral obligations of the debtors.

I know very well that there are other considerations affecting these debts, but these are matters of statecraft to be determined by the rulers of the creditor countries according to their view of wise policy, which covers many interests besides those of trade and finance. The fact that a debtor cannot pay does not of itself discharge the obligation. The debt may become the subject of negotiation and bargain by which if the debtor obtains relief, the creditor may still recover some advantage to which he may be justly entitled. But I conceive it to be the duty of bankers

to help so far as they can in forming a sound public opinion upon the financial and commercial aspects of these international debts, and it is in pursuance of this duty that I have ventured to make these observations today.

IV

THE REPAYMENT OF EUROPEAN DEBTS TO OUR GOVERNMENT

By HERBERT HOOVER
Secretary of Commerce

Address Delivered at Toledo, Ohio, October 16, 1922

Proposals have been repeatedly made over the last three years that the loans from our Government to foreign countries during the war should in part or in whole be cancelled, either for moral reasons or in the interest of economic stability. Less sweeping proposals have been made that the payments of interest and instalments as required by Congress should be further postponed or moderated. The question is one of the most complex and difficult in character that the American people have ever confronted. It greatly concerns American commerce and I feel that widespread discussion is of great value to the better understanding of the economic issues involved. Full understanding can be advanced only by full and frank discussion.

I have the feeling that many men in Europe are thinking of these things in terms of despair, due to their immediate difficulties. There is no need for despair in the future of Europe if she can maintain peace. Her hard-working population, her tremendous industries, her enormous productivity and her mag

nificent intelligence, her fabulous development of skill and scientific knowledge, are vital forces that must win if they have half a chance.

These economic problems are problems that we must vision over years and decades. They must not be obscured by fluctuation in exchange or by calculations of trade balances in terms of war and depression. Europe has made great economic progress since the armistice. Her troubles today are solely in the political and fiscal field. Her social organization, her agriculture, industry, transportation, and commerce have found extraordinary recuperative powers from the depths of disorganization and famine of 1919.

These loans to twenty nations amounted to about $10,000,000,000 and were nearly all demand obligations. They now amount to $11,500,000,000 in principal and accrued interest. Congress has laid down the conditions under which payment can be extended over a term of twenty-five years. It is the duty of the Funding Commission to see that these terms are carried out, and of course no alteration would be possible except through action of Congress.

There are certain phases of this discussion that seem to me to require emphasis.

First. These loans are often spoken of as debts to our Government. They are, in fact, debts owing to our taxpayers. These loans were made at the urgent request of the borrowers and under their solemn assurance of repayment. The loans were individual to each nation. They have no relation to other nations or other debts. The American taxpayer did not participate in reparations and acquired no territory or any other benefits under the Treaty, as did our debtors. There is no question as to the moral or contrac

tual obligation. The repudiation of these loans would undermine the whole fabric of international good faith. I do not believe any public official, either of the United States or any other country, could or should approve their cancellation. Certainly I do not.

Second. While it is probable that some of the weaker debtors will need relief from interest, yet I am convinced that the capital sum of these debts can be paid some time with the exception of say 5 per cent. I am also convinced that this can be done without realization of the oft-expressed undue strain on the debtor countries or the threat of a flood of goods from debtor countries in such quantity as would endanger employment of the factories and workmen of the United States. In the arguments put forward on these points some very important economic factors have not been given sufficient weight.

Third. The proposals for abolition or reduction of interest for a certain number of years arise from the belief that certain countries can not physically make these payments at the present time without undue. strain, or that such action would contribute to general economic stability and the more rapid recovery of these countries, in which everyone would benefit. The British do not make claims for such assistance from us and are arranging their payments. This covers some $4,750,000,000 of the total debt and thus clears up nearly one-half of the problems at once. The proposition, therefore, narrows itself to debtors on the continent. The burden of payments falls with different weight upon each of the nineteen different debtors and each case is a problem to itself, and it will be found that respective annual payments due to us. from different countries vary in their burden upon