CHAPTER VIII 
AUSTRALIA'S RELATIVE DISADVANTAGE IN 
OVERSEAS TRADE AFTER 1890 
In popular talk on these matters it is assumed that a creditor country ipso facto 
has an excess of merchandise imports and a debtor country an excess of exports. 
The creditor country—so people imply in their everyday tallk—has payments to 
receive, the debtor country has payments to make: the former is expected to show 
2 net credit in its accounts, the latter a net charge or net outgo. Not at all. The 
state of the merchandise account, the balance of the money values of imports and 
sxports, may run either way, for either debtor or creditor country. It depends on 
the stage which credit operations have reached.’ —Prof. F. W. Tavussia, Inier- 
national Trade. 
Thus it is usual to speak of countries such as Brazil, Argentina, and (before the 
war) the United States as “‘debtor countries’ because “they had an adverse balance 
»f indebtedness”. All this was intended to mean was that such countries have 
sorrowed large sums on capital account in Europe. . . . How was this “adverse 
indebtedness” liquidated ? All that happened was that, in addition to exporting 
enough to pay for current purchases of goods, these countries exported wheat and 
maize, meat and rubber, in sufficient quantities to meet their instalments of debt 
interest as these fell due. There was no “adverse balance’ at all in the sense that, 
taking all the items into account, during each successive period, there was not avail- 
able sufficient means of payment.’—Prof, T. E. GREGORY. Foreign Exchange Before, 
During, and After the War. 
TuE last three chapters have been concerned with the history, 
description, and statistics of the decade previous to 1893. The 
entire episode, comprising the collapse and the events which led 
up to it, has been regarded as a means of verifying the theory 
of international trade by observing the effects of an experiment 
in the course of which great quantities of capital were injected 
into a community small in numbers and isolated in an unusual 
degree. We have now to trace the causal connexion between 
capital imports and the commercial crisis, and to investigate 
the influence of protracted borrowing upon national prosperity. 
The approach to the investigation is indicated by the foregoing 
argument; and consists, in the main, of an analysis of the 
Australian balance of trade. Since, however, so much of the 
data necessary for adequate analysis has either not been recorded 
or demands so much assistance for its dissection, we are com- 
pelled to adopt the methods devised and applied with con- 
spicuous success by other investigators in similar circumstances. 
But before entering upon this task a few preliminary observa- 
sions having reference to the terms to be used in the discussion