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Priscilla
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PostSubject: Old Debt   Wed 18 Feb 2015, 14:23

Viz mentioned  that Britain owed the US for WW1 loans. I know nothing of this and assume that there must many others in history that will never be repaid.... I mean money, not the  blood sweat and toil sort. Any knowledge of this rather disgraceful subject from the past?
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PostSubject: Re: Old Debt   Wed 18 Feb 2015, 14:33

This is from wiki, Priscilla.

Britain borrowed heavily from the US during World War I, and many loans from this period remain in a curious state of limbo. In 1931, President Herbert Hoover announced a one-year moratorium on war loan repayments from all nations, due to the global economic crisis, but by 1934 Britain still owed the US $4.4bn of WWI debt (about £866m at 1934 exchange rates). Adjusted for inflation, that would amount to around £40bn today, and if adjusted by the growth of British GDP, to about £225 billion. During the Great Depression Britain effectively ceased payments on these loans, which have never been formally written off.
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PostSubject: Re: Old Debt   Wed 18 Feb 2015, 15:34

I thought Britain had finally paid off the main outstanding loans due to the USA arising from money borrowed during WW2, particularly those relating to the Lease-Lend agreements. It was just a couple of years ago and I seem to recall the Chancellor (Gordon Brown?) making a statement to that effect in the Commons. However it was decided not to pay off the main oustanding WW1 loans as the rate of interest is so incredibly low by today's terms that it is far better to continue to pay the interest on the loans, in preference to paying the higher interest on loans taken since. As I understand it while the principal WW1 loan repayments are deferred, it has been done with the agreement of the US, who are nevertheless still receiving interest payments (although I'm not entirely sure about that), in accordance with the original agreement. There is no suggestion that Britain is going to default on this loan, nor indeed any other.
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PostSubject: Re: Old Debt   Wed 18 Feb 2015, 16:34

Don't they still owe HM Revenue and Customs a load of back tax from 1773?
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PostSubject: Re: Old Debt   Wed 18 Feb 2015, 22:53

The ongoing debt surprised me - that the dough boys used much French and British hardware was surely taken into account - not to mention rent-a-trench  and no late comers fee either. But that is how it seems to be; enemies get flooded with aid to recover and friends whose efforts were joined  somewhat late must pay up. Not that I ought belittle the aid that Britain received nor the awful cost of getting support to us. I am just echoing noises I heard in my youth really; but that we are still paying interest on that old war loan does grate a tad. Interesting stuff MM.
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PostSubject: Re: Old Debt   Thu 19 Feb 2015, 09:09

I wasn't entirely correct.

With Lease-Lend (formally, 'An Act to Further Promote the Defense of the United States'), the aid was in general given free, the materiel being provided in exchange for leases on bases in Allied territory. Also tacit in the Lease-Lend agreement was that Britain would supply several very valuable technologies, including those related to radar, sonar, jet engines, nuclear weapons, anti-tank weapons, rockets, engine superchargers, gyroscopic gunsights, submarine detection, self-sealing fuel tanks and plastic explosives. The terms of the agreement provided that the materiel supplied to Britain could be used until time for their return or destruction. In practice very little equipment apart from a few surviving ships was returned. 
 
Large quantities of Lend-Lease goods were in transit to Britain when the war ended and hence the agreement was formally terminated, and Britain wished to retain some of this equipment in the immediate post war period. Further supplies that arrived after the termination date (2 September 1945) were sold to Britain at a large discount of 10% of the nominal value (for £1.075 billion), using a long-term loan, the Anglo-American loan negociated in 1946. According to this loan, repayment was to be stretched out over 50 annual payments, starting in 1951 and with five years of deferred payments, at 2% interest.

The final payment of $83.3 million (£42.5 million), due on 31 December 2006 (repayment having been deferred in the allowed five years), was made on 29 December 2006 (the last working day of the year). After this final payment Britain's Economic Secretary to the Treasury (in 2006 it was Ed Balls) formally thanked the U.S. for its wartime support.

The Lease-Lend arrangement also applied to equipment supplied to the USSR. Again as with Britain, repayment of the interest-free loans was required after the end of the war, but in practice the U.S. soon realised that it was unlikely to be repaid. The U.S. received $2million in reverse Lend-Lease from the USSR, mostly in the form of wartime landing, servicing, and refueling of transport aircraft. Some industrial machinery and rare minerals had also been sent to the U.S during the war. The U.S. asked for $1.3billion at the cessation of hostilities to settle the debt, but was only offered $170million by the USSR. The dispute remained unresolved until 1972, when the U.S. accepted an offer from the USSR to repay $722million linked to grain shipments from the U.S., with the remainder being written off.
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PostSubject: Re: Old Debt   Thu 19 Feb 2015, 09:40

What about the aid sent to the USSR from Britain - was that subject to similar terms, I wonder? Wasn't there a decision earlier this week to pay off a load of WWI debt because the interest rates now favoured replacing it with new debt?
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PostSubject: Re: Old Debt   Thu 19 Mar 2015, 23:28

The UK Chancellor mentioned the paying off of all old debts -  from the time of the South Sea Bubble? Did I hear that right  - or was it a joke?  Anyone know what was owed there? And to whom? Probably there is a well guarded little corner job at the Treasury for someone who quietly guards and services these debts - nice little position - inherited, even? I have seen such in the East. The man who ensures that once a month chalk powder is scattered in the centre of town gutters because of carriage horse doppngs swept there. The job having been in the family for over 100 years. That there have been no carriage horse for the lat 60 years makes no difference.
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PostSubject: Re: Old Debt   Thu 19 Mar 2015, 23:39

Same answer as above - it is now so cheap to borrow that all the undated debt (i'e' that with no date at which it must be redeemed) is to be replaced with new 30-year debt. Not paid off - just borrowed from Peter to pay Paul, makes sense though - don't owe Dodgy George money at 2000% per annum when Holy Justin's Credit Union will let you have it at 5%.
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PostSubject: Re: Old Debt   Sun 22 Mar 2015, 09:04

As I understand it some government bonds called 'consols' (short for for consolidated annuities or consolidated stock) are still outstanding from the 1920s.

Consols are a government perpetual bond redeemable only at the option of the government. The first bonds were issued in 1752 at 3½%, and at the same time all currently outstanding bonds of redeemable government stock were converted into one bond, the Consolidated 3½% Annuities.The rates for all these bonds were further reduced to 3% in 1757, and there was a further issue of bonds at 3% in 1855 (presumably to help pay for the Crimean War). The coupon (interest) rate remained at 3% until 1888 when the Chancellor of the Exchequer, George Goschen, converted the 1752 Consolidated 3½% Annuities, along with Reduced 3% Annuities (1752) and the New 3% Annuities (1855), into a new bond, the 2¾% Consolidated Stock, under the National Debt (Conversion) Act 1888. Under the Act, the interest rate of the stock was to be further reduced to 2½% in 1903, and the stock given a first redemption date of 5 April 1923, after which point the stock could be redeemed by Act of Parliament. This happened and so in 1923 Britain finally paid off these loans, some of which had been originally taken to pay for the War of the Spanish Succession and the Seven Years War against Louis XV of France (and possibly for even earlier conflicts).

Further consolidated bonds were issued at 2½% from 1923 onwards and these have not yet been redeemed. Their market price jumped when the redemption of the WW1 War Loan was announced in December 2014 (and the government announced that the Act of Parliament required to redeem Consols would be introduced), but they still stand at a significant discount to par value, implying that there is little likelihood of their being redeemed in the immediate future. Although current market interest rates are extremely low compared to recent years, for very long-dated bonds they have been above 2½%, so there has been no immediate financial incentive for the government to redeem these bonds. So these pre-WW2 loans still remain outstanding, although they comprise a very small part of the total UK government debt.
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PostSubject: Re: Old Debt   Sun 22 Mar 2015, 10:28

@Priscilla wrote:
The UK Chancellor mentioned the paying off of all old debts -  from the time of the South Sea Bubble? Did I hear that right  - or was it a joke? 

No joke P ...

After the bubble burst, the South Sea company continued to trade with Spanish colonies (when not interrupted by war) until the end of the Seven Year's War (1763). However its main function was always managing part of the National Debt and in this role it continued until disestablished in 1853, at which point the debt was reconsolidated. This debt was not paid off by World War I, at which point it was consolidated again, under terms that allowed the government to avoid paying down the principal. All the outstanding debt was indeed finally paid off at the end of 2014!

PS

.... or maybe not, the Chancellor announced that he would introduce the necessary legislation for the redemption of the consols (see above post) and I suspect the payment of the outstanding debts from the South Sea Company may be linked with that: the South Sea debt itself may be in part as consols. But I note it's only been announced for future action, so I doubt it has actually been paid off.

I found a link to the announcement (made on 3 Nov 2014) ... but the UK government's website doesn't seem to work (you'd all tell me if the UK's just been nuked wouldn't you?).

https://www.gov.uk/government/news/chancellor-osborne-to-repay-part-of-our-first-world-war-debt
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PostSubject: Re: Old Debt   Mon 23 Mar 2015, 13:47

There was an interesting programme on BBC2 last night about the Caribbean, and one of the subjects which came up was Haiti paying reparations to France for French losses when Haiti became independent. Payments which continued throughout the 19th century and crippled Haiti's economy;

http://en.wikipedia.org/wiki/Haiti_indemnity_controversy
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PostSubject: Re: Old Debt   Sat 27 Jun 2015, 22:00

Amongst all the brouhaha surrounding the current Greek financial crisis, I've just learnt that Germany only finally paid off the loans that it took out to pay for the reparations after WW1 ... in 2010.

According to 'Das Bild' (25 Sept 2010), on 3 October 2010 Germany was set to pay the last and final instalment of the interest it owed on loans it took out in the 1930s to pay £22bn in reparations ordered by the 1919 Treaty of Versailles. The sum would of course normally have been paid off much earlier were it not for Adolf Hitler, who exploited public resentment at the economic crisis caused by said reparations to firstly refuse to pay them, and then secondly to kick off another war ..... leading to a whole further load of reparations. But I was still interested to learn that Germany was still paying reparations from 1919, until 2010.
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PostSubject: Re: Old Debt   Wed 08 Jul 2015, 23:47

I have just read a small note that Germany still has reparation still to pay to Greece. Is that so? If correct, I assume it is one of those long term things  and possibly no longer a huge amount. Speedier payment seems called for if there is a debt - or would that open old wounds?
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