THE WORLD'S FINANCIAL SITUATION AN ADDRESS DELIVERED BY SIR GEORGE PAISH, KT. Before the Empire Club of Canada, Toronto, PRESIDENT HEWITT in introducing the speaker said,Whether the mission of Sir George Paish to America is official or otherwise matters little. It is of infinite importance that the knowledge which he possesses of the needs of Europe be imparted as widely as possible throughout this continent. As an Empire Club, we welcome Sir George for what he is, a thorough Britisher. (Applause) We welcome him for what he has done for the Empire, we welcome him for what he is doing, and we welcome him for what we believe he will yet accomplish. To say that there is anxiety as to what may develop as a result of the dire needs of European Countries which have suffered so dreadfully from the war, is to put the case mildly. In dollars, America's balance against Europe is a huge one, but it must not be forgotten that there are other obligations in which the account is not so one-sided. I believe that Sir George Paish's mission will be successful. (Hear, hear) In a recent address Mr. Wm. C. Redfield, former Secretary of Commerce in the United States Government, said: "We at last saw that the English and French and Italian and Belgian armies were fighting our battles; that it was after all just the modern phase of the old battle of Christianity against Apollyon-of Christ against the Devil. We saw it at last, and we came into the struggle, and, through the Providence of God, the struggle was won and the Devil was chained." But the waste places were still left, and the idle hands and the ruined homes and empty factories. Are we quit ters? Do we call our boys home when the physical fighting is done, to say, "Thank God it is all over. Now we are at peace here; with an ocean on each side we can be perfectly safe. There is nothing for us to worry about. Let us take care of our own affairs, and let them look after their own affairs?' We cannot: we laid our hands to the plough and we must plow the furrow to the very end. Why? We are parents with the other nations, young countries, infants of ours,--Czecho-Slovakia, Serbia, New Roumania, and others beside them. are the parents of these people; we cannot forsake them; we cannot longer say-we have said it far too long already-Take care of yourselves; it is no concern of ours.' But once let our people catch the vision of a world we have in part created ourselves, and you may be sure America will respond. We Gentlemen, let us show Sir George the warmth of our welcome to the Empire Club of Canada. (Loud applause) SIR GEORGE PAISH Mr. Chairman and Gentlemen,-The welcome you have given me is indeed one that warms my heart; it is one that will go from this gathering over the water, and will warm the hearts of the people at home. At the present time, it is of the very greatest moment that we British people, wherever we are--whether we are in Canada or in England or in Australia or wherever we may beshould stand together. If we stand together, success and prosperity will carry us and I think, with us, will carry the world to a better time; but if we do not stand together, we will find trouble, maybe, not only for ourselves but for everyone. In no small measure does the salvation of this present situation depend upon the British Race. We have got to do all in our power to help put it right. To the utmost limit of the credit of the British Empire, we have got to help; the situation demands it. And your welcome to me here to-day shows that you, at any rate, are prepared to do whatever is necessary to save the old world and save humanity from the danger that now threatens it. (Applause) Yesterday I had the pleasure of speaking here to the Canadian Club, and referred to the economic condition of the world. That economic position is a very grave one. The war has disturbed production and distribution. Nations are now producing and are able to sell products that they could not or did not produce and could not sell before the war; other nations are not producing and have no means of buying, unless they are supplied with goods and products on credit. How long it will take to readjust that situation depends upon the amount of energy, on the amount of thought and wisdom, displayed in the re-adjustment; but one thing above all other things that needs to be done at the present time is to look the facts of the situation straight in the face so that every nation may know what needs to be done and will try to do it. During the past year the nations have been engaged in making peace. In no small degree, that process has As soon as the war was retarded the work of recovery. over steps needed to be taken to restore production, to get unnecessary expenditure for unproductive purposes down, and to get the world back to an equilibrium of production and distribution. Unfortunately, the work of making peace was much more difficult than anyone had anticipated; and here we are, at the beginning of 1920, in a situation that certainly, even if one uses very moderate language, one must describe as dangerous. But the situation is one that can be overcome, if the statesmen and peoples of the world will only render not only their assistance but give their good-will in helping to solve these problems. Good-will is the foundation of what is needed in order to re-adjust the situation. I do not propose again to go over the ground covered yesterday, except to this extent. The nations that have surplus balances and which will probably continue to have surplus balances, even if everything possible is done to restore Europe's productive power at the earliest moment possible, must be willing to take payment of these balances in securities of one kind or another; and failing securities that are now existing, then some new security must be created which everyone will take. I suggested yesterday that that security,, in case of need, should be a League of Nations Bond which everyone would be interested in, everyone would guarantee, and everyone would accept. To-day I want to speak upon the question of the financial situation. To most of you the financial situation would seem to be more dangerous and more difficult than the economic situation, but in my judgment, it is much easier to solve than the economic. People on the other side of the boundary, and in many other places, are saying that Europe is bankrupt, and being bankrupt, why should we give her more credit-we should only be throwing good money after bad. Now I want to reply to that statement. I want to prove to you that Europe is not bankrupt, and I want to prove to you, particularly, that the Old Country is not bankrupt (loud applause) and that any money which you subscribe for securities to be loaned to Europe and to the Old Country in order to overcome the Exchange difficulty and enable Europe to buy your food and the food of other nations, and the raw material and manufactured goods that Europe needs, that you may be sure that that money will sooner or later be repaid with interest. Now, what is the situation in Europe? Well, those nations have created an immense amount of debt. The amount is so large that it is almost difficult for a man to take in the figure and understand it. The amount is something like 40,000 millions sterling-an enormous sum-but when you come to look at the matter and analyze it, you find that it is not such a great matter after all. Let me tell you what happened in the Old Country so that you will understand what has happened in the other Countries, and how, if we face the situation, we shall be able to overcome the financial difficulty at any rate, whatever may happen to the economic situation. In England, you know, we have now an annual debt of some 8,000 millions sterling. Of that amount 7,500 millions have been created owing to the war. Well, how has that been created? Where does the money come from that has subscribed that great amount of debt? Well, in the first place, we have sold abroad probably 500 millions sterling of securities of our pre-war foreign investments. Then we borrowed abroad, probably, another 1,500 millions. We borrowed in America; I dare say we may have borrowed a certain amount in Canada; we borrowed in Argentina, in Japan, in India, a total of 1,500 millions. That shows how we have raised 2,000 millions out of the 7,500 millions; the other 5,500 millions has been raised at home; and I very much wish you to understand that the 5,500 millions that we have raised at home has come out of the income that was derived during the war. Our wealth at home has not been reduced during the war. Our wealth at the end of the war, even on the pre-war basis of prices, was just about as great as it was prior to the war. We have subscribed for 5,500 millions securities during the war out of current income. In normal times, we received about 400 millions a year; but prices have been very much higher during the war and the rate of profit very much greater; the people who had savings have been able to save a great deal more, and the rate of saving has been just about twice the normal. Our income has been more than twice the normal and our savings have been twice normal. Now, an internal debt of 5,500 millions is very different from an external debt of that kind. The interest on it is paid in the country, and that interest is available for the purpose of taxation. In fact, if you consider the matter, already that income is paying a very considerable amount of taxation. Owing to the war, we have had to put up the rate of income tax on all incomes, it does not matter whether it is on the whole debt or otherwise, to six shillings in the pound. We are paying 5% interest on our war debt; but if you will allow for six shillings in the pound income tax, the real rate of interest we are paying is 32%. Well, how are we going to pay the interest on this great debt? Of course, if we were to maintain our current rate of expenditure, it is obvious that we should have very great difficulty in meet |