FINANCIAL NOTES.
A correspondent in a recent issue of the Spectator suggests that I might: explain the exact form in which the British Debt to the United States is being repaid at the present time. It is only possible to do this up to a certain point, because, of course, secrecy is properly observed as to the precise methods employed ; but I think it will sufficiently elucidate the point raised by Mr. A. A. Lea if I mention a few general facts. In the first place, of course, we have to meet a dollar debt, and each half-year the payment consists of, say, 80,000,000 dollars. We can make these payment&. in the form of gold or the Government can purchase dollar credits at the rate of the exchange of the day. We have, however, a further special option of making payments in certain forms of existing; American. Liberty Bonds at their nominal face value, and when therefore these are at a discount in the New York market, it becomes profitable to purchase them with the proceeds of our exchange or gold remittances. It is quite clear from the published details that a good deal of our payments so far have been in the form of actual gold purchased in the first instance by the Government out of the arrivals from South Africa, and then sent across the Atlantic.
In considering the whole question of our Government's indebtedness to the U.S. Government in its relation to the doctrine of our foreign. indebtedness having to be paid for by our exports, it will be well, however, to regard the matter as though the British Government were simply in the position of traders on this side of the Atlantic who happen to be indebted to the United States.. It follows that the total sum of the indebtedness will be far too great to be covered entirely by gold shipments, and therefore a large mass of the payments will, on balance, have to be effected by exchange remittances. It is just here, therefore, that. Government and private traders alike will be affected by whether the exchange moves favourably to New York or to us, and that movement in its turn will largely be determined by the extent to which the value of goods and services rendered by the United States to us exceed the valne of those which we render to them, or (conceivably) vice versa. Of course, there are other factors which will enter into the matter, such as loans and advances between the two countries and the cross movements in the exchanges resulting from international trade move_
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