THE WEST'S BANKERS and politicians are misleading the public with their assurances that the huge load of short-term international debt constitutes a manageable problem. The fact is that much of the interest on these loans cannot be paid, and most of the principle will not be.

The situation is spinning out of control and poses a clear and present danger for the entire international financial system comparable to the one preceding 1929. Only drastic action by Western governments impelled by a realistic sense of urgency will head it off.

The theater provided by the House the week before last, when it narrowly approved a complicated transfusion of up to $8.4 billion for the International Monetary Fund, advertises the problem rather than solves it. A band-aid is being prepared for application with full ceremonial flourish, but the hemorhage continues.

The proposed $32 billion increase to be raised from all the IMF's members would buy time. But it would also nurture the dangerous illusion that we have time. In fact, it comes too late and offers too little to solve the underlying problem.

New short-term loans to keep interest payments rolling into Western banks will not revive the world economy. They will not start cargos of goods moving between ports, or finance productive new investment. They will only pile debt upon debt, most of it unpayable.

I know I have been described on Wall Street as the "prince of pessimism," but I prefer to describe myself as an "early bird alarmist" -- an optimist who believes solutions are possible. But it does not help to promise that the crisis can be handled with business-as-usual methods. People who do that are not doing simple arithmetic. The debt of developing countries and communist Eastern Europe is now in the neighborhood of $750 billion. At 14 percent, the interest on that float comes to around $105 billion a year. Put another way, bank interest compounded on unrepayable principle will double the debt load in five years, even without adding in the heavy charges and fees that the Western banks have been "persuading" their debtors to accept in the latest rounds of refinancing.

The charade has crossed new frontiers of creative accounting. Banks advance the interest owed them with one hand and take it back with the other. No real money changes hand. It's a numbers game.

The realistic definition of bankruptcy is the point at which a debtor can no longer borrow the interest owed. By that stern test Poland and Brazil already are cold, stone broke. One official default is all it will take to stampede the other busted borrowers into a full- fledged cartel of defaulting debtors.

What is to be done to stave off catastrophe? The IMF can help, but only in the context of an emergency rescue plan that goes far beyond what government officials have yet been willing to consider.

What is needed is a program big and bold enough to convert the mounting short-term debt of the developing countries and the Soviet bloc into a genuinely manageable structure of medium and long-term debt. The purpose would be to get the creditors in New York off these countries' backs and to free up current cash and permanent capital for trade and investment. This calls for shaking loose the idled dollars accumulated in the Arab sheikdoms and the financial capitals of Asia and Europe.

Radical as I know this sounds, the present situation also demands massive conversion of interest-bearing Treasury securities into new long-term government bonds bearing no current interest but paying the holders a profit at maturity.

I hold no brief for the developing countries which got themselves into this mess, and certainly not for the Western banks, which, with winks and nods of approval from Washington, were their smug accomplices. Hindsight leaves no doubt that any government official who encouraged the banks to play this reckless game during the past decade violated the spirit and the letter of the banking and securities laws.

Ask any country bank examiner what he does when he catches a rural banker advancing the interest on a loan to his debtor. The examiner marks the loan bad and makes the bank take a loss. Yet the federal examiners have allowed the puffed-up earnings statements of the international banks.

The extra charges levied by the banks on their customers is another matter. No usurer in a Charles Dickens novel would have dared charge his customers for the cost of high-powered lawyers and accountants brought in to rewrite old loans -- and then bill them for compound interest to boot. It is fortunate that the House's IMF legislation would put a stop to this malpractice.

Meanwhile, the banks themselves are in jeopardy. Citicorp, for example, attributed 22 percent of its earnings last year to Brazil, a country's whose debt has risen from $56 billion to $90 billion in the past year.

The position of the U.S. banks, strained though they are, looks comfortable alongside that of European, Japanese and Canadian banks. True, guarantees by European governments cover some of the losses. But this only adds to the charade. Polish debt to Western banks fell by $1 billion in the first quarter of 1983. But the decline was not a result of debt repayment. It simply resulted from the transfer of the Polish debt from the banks to government insurance agencies such as West Germany's Hermes, France's Coface and the United States' Commodity Credit Corporation.

The liquidity crunch crippling debtor nations is choking the flow of exports from industrial countries to the Third World. In 1982, the imports of developing nations declined by $42 billion. Nothing like these declines have been seen since the 1930s. The industrial countries really have been buying their exports to the Third World and the Soviet bloc through their own banking systems. But the ability of the banking system to support trade is nearly exhausted.

The Bank for International Settlements in Basel has just reported that private bank lending to developing countries fell from an annual average quarterly level of $16.5 billion in 1981 to almost nothing in the first quarter of 1983. Mexico has just earned a gold star from Wall Street for making an interest payment. But Mexico is in even in worse shape than other countries, such as Poland, which have taken a hard line with their foreign creditors in an attempt to ease the lot of their people and stave off political unrest. Mexico, Hungary, Yugoslavia and some other countries have imposed virtual embargos on imports, yet that cannot continue for long without serious repercussions.

The bad-debt problem is also dragging down the prices of commodities that developing countries must sell to survive. This is prolonging and deepening the worldwide slump, spreading it to the former boom area of the Pacific Basin and delaying any restoration of credit-financed commerce anywhere in the Third World. When cash runs out, countries are forced to barter the commodities they cannot sell. This results in lower prices and less cash to commodity sellers to pay for the things they need.

The ultimatum served on Brazil last June by the Bank for International Settlements for a petty-cash $400 million back-interest bill has made the crisis official. Brazil last week reached a tentative agreement with the IMF that could take some of the near-term pressure off, but Brazil's difficulties in borrowing its current deficiency, despite austerity measures, confirms the need for action.

Nevertheless, the illusion persists in Congress that the U. S. contribution to the IMF by itself will revive trade. America is not conditioned to anticipate its recurring crisis, but it is now on notice that a financial Pearl Harbor could threaten it if it does not act.

The most comprehensive, common sense idea advanced so far has come from Britain's Lord Harold Lever, former cabinet minister and respected financier. In Lever's view, the world is suffering from a "liquidity problem, not a solvency crisis." The debtors, he says, will be able to service their loans if given some breathing room. But the situation is "deteriorating alarmingly."

Lever would set up a central international agency, made up of all the various national agencies that now insure, or grant credits for, their countries' export business, such as the U.S. Export-Import Bank.

These agencies now provide credits that enable foreigners to buy equipment and goods produced by home industry. The Lever plan would authorize the export and credit agencies to insure and guarantee foreign loans for broader purposes. Meanwhile, the central coordinating agency would monitor the trade flows, relying heavily on the advice of the IMF. Lending would be limited -- and tied into carefully monitored economic adjustment programs. The borrowers would, in turn, have a basis for securing future financing because of the guarantees and monitoring programs. This would open the way to the industrial countries to resume lending to the Third World.

Lever reasons that "world trade can flourish only if the public authorities provide insurance for export credit on a very substantial scale" -- even in good times. His proposed remedy to the present hard times calls for making sure that new guaranteed loans would be only for productive purposes calculated to earn enough to keep interest payments current. He estimates that $40 billion to $60 billion of new insured credit would be needed in the first year or two, and could be easily raised through the private credit markets because of the guarantee provisions.

One hopeful byproduct of his plan is that the international monitoring system he proposes would put a stop to unproductive borrowing that in the past has "financed wars, ludicrous levels of armaments purchases and economic megalomania of all kinds."

The disadvantage of the plan is that the government export agencies involved are fierce competitiors which have intensified their rivalries into a trade and currency war. Lever acknowledges that the turbulence in the exchange and credit markets, accentuated by the pressure building in each economy to increase exports, is not promising for cooperative action.

This drawback argues for giving top priority to moves Washington can make on its own, without the drum and bugle fanfare of any more Williamsburg summits.

The first move must be to convert as much as possible of the astronomical overhang of short-term Treasury debt held abroad into some other form. This would help reduce interest rates -- essential for the financial solvency of Third World countries -- and it would free up vast sums of money, now being squandered in interest payments on this government debt, for redirection to the international rescue effort proposed by Lever.

I recognize that it may seem unrealistic at first blush to ask professional investors to trade in high-yielding, readily marketable Treasury securities for new issues of non- marketable Treasury paper paying no interest at all.

Why would foreign banks, wealthy Arab investors and others want to cooperate? In the first place, those who purchased the new, no- interest securities would be guaranteed a profit when the notes matured, just as holders of old-time savings bonds were when they bought $25 bonds for $18.75. Foreign investors last year purchased billons of dollars worth of "zero coupon" bonds issued by private corporations whose credit standing is not as good as that of the U.S. government.

These investors showed they were willing to defer receiving current interest for the sake of taking future profits. Moreover, foreigners have another compelling reason for cooperating: not to do so puts the whole financial system at risk.

But the U.S. Treasury has nonetheless continued to bleed itself and batter the markets by saturating them with interest-bearing securities. This is just postponing what must be done eventually to convert the short-term debt into medium and long-term instruments that can be used to finance productive investment.

My proposal would insulate governmental dollar holders abroad from the risk of losses in the roller-coaster bond markets. Moreover, it would feed the insatiable appetite of foreign investors abroad for dollars, or dollar- dominated securities. Any dollars the Treasury can save on short-term interest payments in this emergency will not only bring interest down for everybody, but it will free money now being wasted for recycling into the productive long-term investment needed to revive the Third World as a solvent, working partner that the industrial world cannot prosper without.

Moreover, the expedient I am proposing would give America an edge in the competition to sell to the Third World, once we bring it out of the financial intensive care unit.