OUR DEBT TO AMERICA.
THERE has been a great deal of talk—indeed, a great deal too much talk—about our Debt to the United States. There was no need for any discussion on the matter, and nothing could have been more inappropriate than such headings as " The Problem of Our Indebtedness to the United States." The facts of the case show this quite plainly. When we were in trouble we asked the American Government to lend us money as friend to friend. With the generosity, friendliness and promptness with which the great Republic acts, they lent us money to the amount of about eight hundred millions sterling, or thereabouts. We shall, of course, repay that debt to the uttermost farthing. ' There is not now, there never has been, and there never could be, the slightest doubt or question on this point. Any British Government which proposed to try and wriggle out of our obligation, to ask the American Govern- ment to let us off, or to inflict any other humiliation of this kind upon us would be driven from office with ignominy. We do not mean by this that we are too proud to accept help from America if we should really need it. We go further and say, without fear of contradiction, that should it ever be necessary we could and would accept help from America—i.e., from a people who are of our own kin, who speak our language, who arc controlled by the same political and legal principles as we are, and to whom honour and truth mean exactly what they mean to us. Our deter- mination to pay our debts is due to our sense of self-respect, and not to any surly feeling that we do not want to let anybody do us a kindness. Therefore, as we have said, there is no question or problem about our duty to pay America, and the sooner the mailer is placed upon a clear and business- like footing the better. We are very grateful to America for the three years' breathing-space which she allowed us in the matter of interest, but, happily, the time has now come when that breathing-space is no longer needed. The moment that the agreed breathing-space finished, our Treasury at once began to make arrangements for the payment of the first six months' interest, which we understand will become due in the autumn.
Though the acknowledgment of our Debt is complete and unconditional, we do not suggest that we should be so foolish as to upset the delicate mechanism of exchange by dumping bags of gold on the doorstep of the United States—already too much encumbered with the yellow metal. We have no desire to behave like some old farmer who insists on paying off a mortgage to his bank at some very inconvenient moment and in some archaic form. It is our obvious duty to consult with our creditor as to the way which will be most convenient, first to him, and then to us. In a word, we must imitate the polite bank clerk, who bows to his client across the counter when a cheque is presented and inquires, " How would you like to take it, sir ?" Unless we are' greatly mistaken, the first thing that will be said by Mr. Mellon, the great financier who presides over the Treasury at Washington, will be : " Not in gold, please. For the moment we have not any place in which we could put it. All our strong-rooms arc bursting with metal, and it is not the kind of thing one would like to lie about on the quays. We should prefer to take it in the form of bonds or stock." In other words, the debtor and creditor treasurers ought at once to begin a friendly discussion (1) as to the best way of carrying out the transaction, (2) as to the rate of interest which is to be charged, and (3) generally as to the conditions which will be most convenient to the United States. We must never forget that they are in this matter the obliging Power and we the obliged. The transaction, in truth, is not quite so simple as it looks. There are a great many ways of paying money under our modem system of trade, and these will have to be explored. It is not for laymen like ourselves to discuss too minutely the inner mysteries of Lombard Street, but we trust we shall not be thought impertinent if we ask that, when the funding of the Debt takes place, as we feel sure it will, due consideration should be given to placing the Debt in the form of terminable, rather than of perpetual, annui- ties. We mean by this that, instead of making the Debt last for ever, it shall only run for a fixed period of say ninety-nine years. We do not desire to trick our creditors into the smallest pecuniary loss by this proposal. We merely want a plan which will, so to speak, carry with it its own sinking fund. If the period of ninety-nine years, instead of perpetuity, is taken, a minute fraction added to the rate of interest will be enough to form what might be called an automatic sinking fund. At the present moment the value of a perpetual annuity and an annuity for ninety- nine years, if valued in the City of London, would be almost the same. We have used ninety-nine years by way of illustration, but it might be found that seventy, or even sixty-five years, was a better period. All we want is to avoid a perpetuity. Again, we do not want to name an actual day for repayment in gold some thirty or forty years hence, for that might conceivably prove embarrassing to ourselves or to' America. • -What might be a :good form of annuity would be one for, say, sixty-five years, which, beginning with .a lowish rate of interest for the first twenty ;years, would not carry any extra interest for the creation of an automatic sinking fund. After, however, the first twenty years had run, there might be s "well-;narked increase of interest, and, after the second . period of twenty years had elapsed, yet another. This would have the effect of taking away any seeming,grievanee fromthebondhoklers whose last increase• had only twenty-five years to run. At the same •time, the increase of the annual interest would give a stimulus to - the British Treasury to buy up their bonds. But here we speak with diffidence. For all we know we may be .making some most perilous suggestion or adopting some dangerous heresy which -was exposed in the days of Mr. Pitt or Lord Liverpool—periods when people talked of sinking funds and.of funding And refunding, quid even of repudiation, across the walnuts and wine. In 1822 many _quite serious people doubted whether the burden of the National Debt could possibly be borne by the nation.
We all remember the orator •who spoke against a national monument to Mr. Pitt in the following words : " Mr. Pitt needs no monument. Eight hundred millions of irredeem- able debt are his -everlasting, monument." We have very much developed our. ideas of indebtedness since then, and we may now feel.eute that we shall ' beable to bear the eight thousand millions as easily as our ancestors did their eight hundred. Proof of oar :ancestors' "feeling about the National Debt is afforded by Orator Hunt's quip : " Ah I gentlemen, it is the Knifes Navy, and the King‘s But it is the NationairDebt !"
There. is a.nother, point which, no doubt, will have to be considered in the talks between the two 'treasuries, wad 'that is whether -the United States -will be able to make the bonds or stock, which- will have to be created repay- ment purposes, a taxable or a . non-taxable security. •It is not our business to inquire-whether 'the system, of nen- taxable securities is in the abstract good or bad. That is a purely -domestic canon of the United 'States, and there is, no doubt,. a' good deal to be said on both sides.
Granted, -however, that the system exists in America, and granted that we . raise the funding loan for this • par- ticular debt in America, it might be found useful if the United States would grant this loan the privilege of non- taxability when held by its citizens. •We do not mean by this that we wish to evade any part of our obligation, but it might make the flotation easier, provided that flotation were to take place in America. But, as Cromwell said, " These may be carnal •thoughts," and we should not be surprised to hear that a financial expert would be able to show usi'in five minutes' talk that in the exis • state of the markets it would be better to conduct a funding operation here rather than in New York. All we want to do is to make the suggestion and then leave it on the knees of the financiers. We are not in the very least afraid of the big business men on -either side wanting to trick their opposite numbers. Both sets of experts will, we know, feel-that this is not going to be the last trans- action between Great Britain and the United States, and that, therefore, there is no room for " pound of flesh " tactics, even if either nation should desire them, as we are certain they would not. One of the great advantages of a prompt and exact settlement with the United States will be that we shall cease to be in the true sense a debtor nation. 'We shall financially stand side by side with the other half of the English-speaking race. Our position having become the same as that of the Americans, we ought to be able to agree on a common; policy in regard to the.indebtedness of the French, Italians, and other nations to each of us. It is, we feel sure, unneces- sary for us to explain-that we say this not as a preliminary to any plan for -squeezing our Allies, but for the very opposite reason. If we are no longer embarrassed by the; thought of owing a vast sum of money to the United States, we can with a much better grace make suggestions to her for rendering the position easier for France and Italy, and the other Debtor Powers, and inquiring carefully and sympathetically into .the whole position.
Here, again, we do not mean to say that we are rushing to the other extreme and suggesting that France and Italy should, pay nothing of their Debts, either to us or to America. On the contrary, we believe that .Ftance and if she can she certainly •will, meet-a large portidn of her obligations. Though the French, no doubt,. are, Hite most nations, intolerant of taxation, •there is no reason Why they should not, even if they have to take a little more time, meet their bonds. After all, France is, in essentials, a very rich nation. All her people are at work, and her taxes per man are considerably lower than they are in this.country. Seven or eight French departments suffered terribly during the 'War, but the rest 'of Trance passed quite as unscathed as Scotland, or Wales, or the greater part of the North .of England. Further, we must not forget that in many parts 'of France vast sums-of money were poured into the 'country by the four millions or -so of Englishmen and, in the last year by the -million-of Americans who were their -military " paying-guests." "We have no sympathy with the people who blame the French shopkeepers and business-men for charging war prices to English and American soldiers. They could not 'help 'themselves in this respect, but, at the same time, we do think that the effect of this river of gold cannot be ignored. Take it altogether, we should say that- the com- mercial position of Prance -was really sounder than our own and theburden of taxation less. A family in France with't 500 a year is distinctly better off than one with the same income in the United Kingdom. Surely the proof of French prosperity is to be found in the fact that there are practically no unemployed in France, while 'we have some two Million in this unhappy category. France, again, finds it possible to keep up a very large army, not merely to watch the Rhine frontier, but to .carry on a policy of imperial development in Morocco and 'North Africa generally. We should be •the,last people to grudge France such expansion, and are delighted to4iee that she has the financial power to do so, • but it seems 'to us that it is not wise for her English advocates in this country to talk as if the financial position of France were worse than that of England when, in all probability, it is a .great deal better than our own. In any case, France need never be afraid that, because we have ceased to be indebted to America, we shall contem- plate dealing harshly with our gallant ally. Anyone who thinks that greatly misunderstands the genius of English people. -We would far rather prove the greater sufferers than give anyone an excuse for saying that we have acted meanly or unchivalrously. We may, as some of our French neighbours appear to think, be weak and foolish sentimentalists, but, as they will find, we are not Shylocks.
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