Courtesy Reuters

The British War Debt: Retrospect and Prospect

THE problem of the war debts owing to the United States Government, mainly by its Allies in the World War, has long been the subject of discussion and controversy. Throughout the period since 1932 payments have been in practically complete default. The debts are now carried on the books of the Treasury at an aggregate principal amount of about $11,200,000,000, while the unpaid interest thereon amounted on November 15, 1937, to $1,200,000,000.

Sixteen nations[i] received cash advances from the United States principally to enable them to purchase munitions in this country and to meet other commitments incurred here in connection with the war. The remainder of the debt covers surplus American war materials disposed of by our government after the war, and relief supplies furnished to states created by the peace treaties. The aggregate of the loans made in these three categories was nearly $9,900,000,000. At various dates from 1923 to 1930 all the loans but one small one were funded into longterm obligations, bearing interest at various rates. When this was done, interest unpaid to date was added to the debts, bringing the aggregate principal sums up to $11,600,000,000. The total payments made on these obligations up to the end of 1937 have amounted to $2,500,000,000 (net), most of these payments being applicable to accruing interest. A net amount of only $400,000,000 was applied in reduction of principal. As a result, the present balance of principal alone, without counting unpaid interest, is greater by $1,300,000,000 than the original debt.

The problem of the collection of this money, long dormant, has been revived by the recent offer of Hungary to pay the principal of its debt, without interest, over a term of years. Though this obligation is one of the relatively minor items on our books, the details of the proposal are significant. The Hungarian debt was incurred for relief supplies furnished at a cost of $1,685,000. In 1924 the debt was funded; and the unpaid interest which was added then and later brought the total principal amount up to $1,982,000. Of the total payments made on

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