The New York herald., 1922-10-05
EngInnd's Experience Cited.

stretching your patience beyond the
limit of extreme~good nature.
EngInnd's Experience Cited.
"It seems to me that the most COM
pact form in which l can present the
case is by calling your attention to the
experience of England as creditor
country. For over two centuries Brit
ish capital has been lent to other ccun-
tries. Year by year England produced
more than she either consumed herself
or could exchange for the products of
other nations and she could not obtain
a market for the surplus unless she gave
the purchaser a long credit. Foreign
loans and foreign issues of all kinds
were taken up in England and the pro-
ceeds were spent In paying for the sur
plus production. British factories and
workshops were kept In good employ
ment. but 1t was a condition of their
prosperity that a part of their 'utput
should be disposed of in this way.
Taking the aggregate of the trans
actions British creditors have received
a good return on their investment but
the ability OF the debtors to pay has
been dependent. speaking generally, on
the development Of their country being
fostered by the receipt of further loans.
If we take the whole field of British
foreign investment we shall find that
every year England has returned in
loans more than sne received in inter-
est, and the balance Of the worlds in
debtedness to her has been steadily
growing.
From this view OF loans made to for
eign countries they might seem at first
sight to be somewhat -undemunerative.
re Ana - on an q N
order to be paid the interest on pre-
vious loans. bad debt would appear
to be the only possible end to the busi-
ness. But this is by no means the case.
While this continuous lending has been
true in the past in the aggregate or
foreign loans II Is not necessarily true
in any individual instance, nor does II
follow that 1t will always be true OF
the loans as a whole"
'In our experience as bankers 1t Is not
uncommon to see loans TO corporations
and firms justifiably increasing In
amount. The borrower may show by the
growth OF his business and expanding
turnover that such advances are thor
ouphly warranted and in spite Of his
greater total Of Indebtedness his credit
NAV be improving and his balance sheet
NAV disclose an increasing surplus.
What Is true of an individual or corpora
ton may be true of country. but on a
larger scale and viewed over much
more extended period of time.
u, s. Greatest borrower.
"The life of an individual or even OF
the most successful company is as moth
ing compared with the life of a nation.
Take the case of your own country. The
United States has been the greatest ex-
ternal borrower in history. You re-
aulred foreign capital for your internal
development and you took from Eng
land alone not less than three billion
dollars It is estimated that at the
time of the outbreak of the war your
external debt had become stationary
in amount and that your exportable
surplus of commodities sufficed to pay
the whole of the interest.
Repayment of the capital. however,
would have been beyond even your ca
pacity for very long period had It not
been for the opportunity afforded by the
war As you know there arose then an
!nexhaustible demand in Europe for
american goods which led to an i'm
mense increase In your exports. Pay
ment for these exports was largely
made out of the proceeds of the sale
Of the stocks and bonds held in Eng
land. and thus capital liability which
had been growing for over two centuries
was almost entirely discharged In a
few years.
we see. then, that a. debtor nation
may In certain circumstances pay off It's
foreign debt with remarkable ease and
rapidity. The Indispensable condition
for such rapid repayment is that there
should be an extraordinary demand for
its goods, a demand which is a natural
accompaniment Of war but does not ex-
list In peace. / cannot help thinking that
there has been general, though very
natural, Misunderstanding Of the condi-
tlons under which international pay
ments are made. In its present magni-
tude the subject is new.
'In the past we have been accustomed
only to the discharge of comparatively
small liabilities between nations, which
has been effected partly by the remit
tance OF gold and partly by an extension
OF export trade facilitated by fall In
the exchange OF the debtor country. and
Il is not easy for us now to free our
selves from the. ideas we have formed In
the course of~6ur past experience. Mis-
taken opinions on these economic ques-
tions are not surprising. but they are
grave disasters throughout the
world.
1T is not many years ago--it Is well
within my own recollection--that a want
OF understanding of sound principles Of
banking led TO repeated financial crises
which were then believed TO be inevita
BILE. AS they usually happened at inter-
walls of ten or eleven years, many seri-
Gus persons attributed them TO the vari-
ations which occur In the spots on the