Allied borrowing to prosecute the war left a complicated network of debts that became closely bound up with the matter of German reparation. Britain and the United States were the main lenders. Britain lent roughly 1.7 billion pounds ($8 billion) to its European Allies, and in turn borrowed some 1.4 billion pounds ($6.4 billion), most from the United States. The United States steadfastly refused to bow to Allied pressure for a general cancellation of all Allied debts in the name of the common victory, and all of the borrowers intended that German reparations should help repay their loans. By 1922 the British no longer believed that Germany could be made to pay in full, and so they sought to encourage a reduction in reparation demands. This they did by proposing to collect from their debtors only enough to meet their American debt. The following document, the note of August 1, 1922, addressed to the French Ambassador and signed by the Foreign Secretary, Lord Balfour, reviews the network of debts and outlines this proposal.
KeywordsComplicated Network European Ally Internal Borrowing Federal Reserve Bulletin International Indebtedness
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