if the Allies are willing to accept this form of payment, by the direct employment of her labour in reconstructing devastated areas.” There can hardly be much question that vacillation in the reparations policy has been productive of serious injury to our foreign trade. Inter-Allies Debts The restoration of international trade depends also on a sound and sensible recognition by those of the Allies who are creditor nations of the economic effects of enforcing payment of the indebtedness to them by the Governments of debtor nations, coupled with such action as they, in the interests of civilization and of their own countries, find themselves able to take in the direction of modification. Government war-debts have produced for no debtor country any increase of its national wealth; they can be paid by the debtor country only out of its capital or its income. In regard to the first alternative, no debtor country can possibly, under any scheme of finance, pay its government war-debts out of capital, that is to say, out of home or foreign securities in the hands of its Government or its nationals, or out of cash balances standing to the credit abroad of either or both of them. If those debts are to be paid at all, it must be out of income, that is to say, out of the surplus realized by the export of natural products, manufactured goods, services and “invisible exports,” after payment of the expenses involved in producing such surplus, e.g. cost of raw material, labour involved in manufacture, and other costs of production and expenses of rendering the services. Now, the dominant fact to-day is that the debtor nations’ available surpluses are either insufficient, or not more than sufficient, to cover their pre-war debts. How then in each case is the surplus to be so enormously increased as to cover the fresh indebtedness resulting from the Great War? In one way only—by enormously increased production, and by a reduction in the national standard of living. Nothing is more certain than the absolute impossibility of any debtor country being able to pay its war-debts under its present standard of production and of living. Supposing, however, it to be practicable, and that it is determined to compel each debtor country to create the requisite surplus, what would be the peril to international trade of such forced payments? Mr. F. C. Goodenough—the Chairman of Barclay’s Bank—has explained the position with cogent clarity; his illuminating exposition will be found in _The Times_ of April 11, 1922.