nal obligations imply neither increase nor decrease in physical wealth, or the ability to command it. A nation may create an immense internal debt while its physical assets remain just what they were. It does not follow from this, however, that an internal debt is a matter of no importance, or that it is not a burden for the reason that the people owe it to themselves. The fallacy in any such thought is that it considers the people only as a whole and disregards the effect upon groups of people or individuals. If every individual held a portion of the internal debt in exact proportion to his wealth, and if every individual paid taxes in the same proportion, cancellation of the debt would create no disturbance, for each individual would save in taxes what he would lose in interest. However, that situation does not exist, and is impossible; and practically the existence of an internal debt implies a re-distribution of wealth, which may have violent effects on the national welfare, and indeed has had such effects. That the nations of the world will ever liquidate the entire amounts of their debts, external and internal, and their issuances of currency which are of the nature of debt, is doubtful. No solution of this problem has been offered.
As between nations the concern is to what they owe each other. France, for example, owes an immense sum to the United States. France on her own part is looking forward to recouping herself out of the German reparations. We fall back therefore, in large degree to the question whether Germany can pay. Obviously the only method whereby Germany can pay is to work hard in the production of goods for the use of other countries. What that means for those countries is
