The existence of the great war debts is a menace to financial stability everywhere.  There is no European country in which repudiation may not soon become an important political issue.  In the case of internal debt, however, there are interested parties on both sides, and the question is one of the internal distribution of wealth.  With external debts this is not so, and the creditor nations may soon find their interest inconveniently bound up with the maintenance of a particular type of government or economic organization in the debtor countries.  Entangling alliances or entangling leagues are nothing to the entanglements of cash owing.

The final consideration influencing the reader’s attitude to this proposal must, however, depend on his view as to the future place in the world’s progress of the vast paper entanglements which are our legacy from war finance both at home and abroad.  The war has ended with every one owing every one else immense sums of money.  Germany owes a large sum to the Allies, the Allies owe a large sum to Great Britain, and Great Britain owes a large sum to the United States.  The holders of war loan in every country are owed a large sum by the State, and the State in its turn is owed a large sum by these and other taxpayers.  The whole position is in the highest degree artificial, misleading, and vexatious.  We shall never be able to move again, unless we can free our limbs from these paper shackles.  A general bonfire is so great a necessity that unless we can make of it an orderly and good-tempered affair in which no serious injustice is done to any one, it will, when it comes at last, grow into a conflagration that may destroy much else as well.  As regards internal debt, I am one of those who believe that a capital levy for the extinction of debt is an absolute prerequisite of sound finance in everyone of the European belligerent countries.  But the continuance on a huge scale of indebtedness between Governments has special dangers of its own.

Before the middle of the nineteenth century no nation owed payments to a foreign nation on any considerable scale, except such tributes as were exacted under the compulsion of actual occupation in force and, at one time, by absentee princes under the sanctions of feudalism.  It is true that the need for European capitalism to find an outlet in the New World has led during the past fifty years, though even now on a relatively modest scale, to such countries as Argentine owing an annual sum to such countries as England.  But the system is fragile; and it has only survived because its burden on the paying countries has not so far been oppressive, because this burden is represented by real assets and is bound up with the property system generally, and because the sums already lent are not unduly large in relation to those which it is still hoped to borrow.  Bankers are used to this system, and believe it to be a necessary part of the permanent order of society.  They are disposed to believe, therefore, by analogy with it, that a comparable system between Governments, on a far vaster and definitely oppressive scale, represented by no real assets, and less closely associated with the property system, is natural and reasonable and in conformity with human nature.