CHAPTER XIX
THE IMMEDIATE FUTURE IN RELATION TO
CAPITAL REQUIREMENTS
‘Whether the wealth to be consumed in the outlay which is the primary cause of
borrowing be derived from the stores of home or foreign lenders may have some
immediate influence; but when we bear in mind the close connexion of all the
countries of the world, and the great mass of private borrowing from foreigners,
it is evident that the distinction may easily be exaggerated.’—BASTABLE, Public
Finance, p. 679.
‘The great additional foreign indebtedness incurred since 1914, much of it resulting
from economically unproductive military expenditures, from the completion of
an extravagant programme of railroad and town building, from the construction
of an unprofitable merchant marine, and from the further extension of manu-
facturing industries of which few would have any expectation of surviving if their
tariff subsidy were withdrawn, will intensify the seriousness of the problem which
will face Canada when the borrowings cease and the difficult burden of repayment
must be assumed.’ — VINER, Canada’s Balance of International Indebtedness, p. 306.
THE economic reactions set up within the Australian national
economy by borrowing have now been examined in some detail.
In particular, for three separate and independent cycles, similar
long-period changes in prosperity, operating through rising and
falling prices in the earlier and later phases, respectively, of
each cycle have been traced ; and the necessity imposed upon
the community for assigning an increasing proportion of its
disposable income to the payment of interest upon the external
debt has been indicated. The mechanism for adjusting the
disequilibrium set up in the international balance by heavy
external borrowings, and the parallelism of gold movements
and capital importations, have been investigated. Lastly, an
equation between the volume of capital imported and the total
difference between the debits and credits in the international
account over the long period has been established ; and an
attempt has been made to synchronize credit restriction within
the Commonwealth with the temporary divergence between the
moving averages of capital imported and the excess of debits
over credits in the balance of external indebtedness. It now
remains to consider the development and persistence of a world
credit situation which might involve a reversal of the whole
process ; and to anticipate as nearly as possible the effects which
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