FINANCE PUBLIC AND PRIVATE.
INTERNATIONAL DEBTS.
MARKETS QUIETER—GERMAN REPARATION PAY- MENTS--•A SUGGESTED SCHEME—VIEWS IN THE CITY — ATTITUDE OF AMERICA — PRIVATE INITIATIVE.
[To THE EDIT= OP THE " SPECTATOB."3 Sig,—Apart from the English Railway Market, which is stimulated for the moment by the various merger schemes, the Stock Exchange has been rather dull during the past week, and Investment stocks in particular have suffered alike from the domestic political crisis and from the diversion of attention to fresh capital issues. Altogether these issues have, since the beginning of this year, aggregated well over £100,000,000, and as the instalments• on these large flotations become due, there are signs that sales of existing securities are rendered necessary to meet them. Nevertheless, the response on the part of the investor to the new issues remains good, and even during the past week something like 10 millions in French Railway and English Industrial issues have been readily absorbed ; and if certain foreign loans now in course of preparation should be issued upon sufficiently attractive terms, the Stock Exchange is looking for a renewed response from the investor.
Nevertheless, the exuberance of markets apparent at the beginning of the year has undoubtedly been checked by the extent of the capital issues and by the political situation, while all the time the political and economic chaos prevailing in so many of the countries of Europe provides a kind of skeleton at the feast. For it is realized that until something has been done to improve matters in that direction there can be no real revival in trade, pending which there can be no return of enduring prosperity to any of the great trading countries, however much the paper value of securities may be hoisted in consequence of the cheapness of money, due in its turn to the dullness of trade. Whether the proposed Conference at Genoa will materialize or not, and, if it materializes, whether any tangible results will follow, the future alone can show. The whole problem, however, is so complicated by international debts and German reparation payments that, having regard to the aloofness on the part of the chief creditor, the United States, the City, as I said last week, is not very hopeful.
Meanwhile, there have emanated from the Continent certain definite proposals for a general settlement of these international debts and reparation payments. Ostensibly the scheme is entirely of an unofficial and tentative character, but, all the same, it bears the impress of careful if not of official preparation. Briefly stated, the proposal appears to be that all debts between the Allies and between the Allies and America—a total of something like 3,000 millions—should be wiped out and the amount deducted from the German reparations account of about% 000 millions, thus leaving that country with a comparatively moderate sum to repay over a period of years. " To put the matter arithmetically," says the Daily Chronicle :— 44 (1) Germany owes the Allies in reparations 6,600 million pounds, or, deducting what she has already paid up to January 1st, 5,500 million pounds. (2) The total debt owed by the Allies to one another and by the Allies to the United States amounts to 3,250 million pounds."
By cancelling this total debt and reducing Germany's reparation debt to an equal amount, the sum to be paid by Germany would, it is maintained, be within sufficiently manageable dimensions to justify the floating of an international loan on the British and American markets.
Certainly it cannot be said of the foregoing proposals that they are not sufficiently crisp and definite. More- over, it can also be admitted that they have at least the merit of suggesting a line of action best calculated to adjust the great difficulty of effecting these huge inter- national cross-payments through the already demoralized exchanges. Whether the suggested concession to Germany may not err on the side of liberality is, of course, a fair matter of opinion ; but at all events there is a good deal to be said for the contention that, while international trade continues to be disorganized by the economic chaos in Europe, the creditor countries themselves are suffering to an extent which might well justify judicious generosity, if only on the grounds of expediency.
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Nevertheless, these proposals have only excited a very languid interest in the City. This is due to the fact that in business circles it is felt that, so long as proposals of this character emanate only from the Continent of Europe without a very formal and definite endorsement by the United States, their likelihood of materializing is small. At present America, as we • know, is disposed to take a amnewhat narrow view of the post-War financial problems, and is very much disposed to adhere to the strict letter of the bond in everything pertaining to international indebtedness. Even more she is, more !perhaps than any other of the creditor nations, indisposed even to face the fact that these international debts can only be wiped out by an exchange of goods and services. By high tariff walls and other methods she is, in fact, inclined to discourage rather than encourage foreign purchases by her people, whether of goods or of securities. Therefore, just as the anticipated absence of America from Genoa has weakened interest in the City in that Conference, so business circles will not be disposed to pay too much heed to the suggested scheme for dealing with inter- national indebtedness until Ameit:a's view on the matter is learned.
* * Having regard to the extent to which the whole financial i outlook is affected by this question of international indebtedness, and by the question of an improvement in economic conditions on the Continent of Europe, it is, perhaps, rather surprising that more schemes of a practical character should not have emanated from banking and financial quarters here. The reason, however, I think, is not far to seek. We have become accustomed now for so many years to see all great financial schemes emanate from the Government rather, than from business quarters, and financial resources themselves have been so monopo- lized by taxation arising out of huge Government expenditure, that the initiative faculty in these matters seems for the time being to have been transferred to Downing Street. To sonic extent, of course, this must almost inevitably be the case with international politics themselves in so disorganized a condition. The feeling is growing, however, that it will be through private initiative and private enterprise, rather than through Government schemes, that a solution will ultimately be found for most of the financial problems with which Europe is confronted after the War.- As time proceeds, and the effect of economic chaos upon trade and, fresh wealth- producing power of every kind becomes more clearly manifested, there will, I believe, be an increasing tendency for political considerations to recede and business con- siderations to reassert themselves.
Already, indeed, we are seeing that, as a result of an abundance of credit resources here, we are beginning to finance the requirements of foreign countries ; and the considerable improvement- which has taken place in recent weeks in the French exchange alone is no doubt due in part to the large sums which have been lent by English investors to certain of the French railways. Moreover, in the c,aseof some other foreign loans which have yet to come, I think we shall see forces once 'more set in motion whereby capital, for which at the moment there is an inadequate use here, will go to promote activity in other directions, but will, at the same time, minister also to improved conditions here through the devotion of some part of the proceeds of the loans to purchases in this country..
Meanwhile, the position of some of the Foreign Exchanges themselves continues to be most unsatisfactory, the feature during the past week being the further slump in Austrian currency and in the German mark. As regards the first of these we have, unfortunately, a flagrant example of the difficulty of effecting improvement by " conference."' It is now nearly two years since the Economic Conference at Brussels came to certain unani- mous conclusions with regard to the best methods for aiding the impecunious countries of Europe by what was known, as the system of Ter Meulen Bonds. Moreover, it was generally admitted that Austria was a particularly suitable and desirable case for receiving ail along the lines laid ' down. Nothing, indeed, has stood in the way of the scheme being set in motion but -the rack of co-operation between the various countries con- cerned.' Austria herself appeared to be willing to consent to the necessary amount of external financial control long since, but interminable political disputes and political xed tape seem to have barred the way to the adoption of a really comprehensive scheme,' and' the result is that matters in Austria have gone from bad to Worse.—I am, Sir, yours faithfully,
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