MOVEMENTS AND TRADE 123 
The explanation of the stimulation of British exports lies in 
the ‘compensatory tendency’ indicated by Hawtrey. Con- 
tractors, labourers, and retail dealers employed in Australia 
upon the constructional work obtain an increase of purchasing 
power during the term of the contract. This purchasing power 
being spread through the country is translated into demand for 
both foreign-trade and home-trade products. 
‘In so far as they buy the latter, they bring about a rise of internal 
prices and an increase in the incomes derived from producing and 
dealing in home-trade products. These incomes, in turn, are applied 
partly to foreign-trade products. The process must go on till imports 
are so increased relatively to exports that equilibrium is attained, 
and the whole of the capital imported is being received in the form 
of goods.’ 
Again, the part played by Australian banks concerns the 
necessity for the provision of increased credit facilities con- 
sequent upon the capital imports. The effect of this inflation, 
whether it is temporary or cumulative, is to raise the price-level 
in Australia sufficiently to make it a more favourable market 
for foreign-trade commodities; and so to help in the tendency 
‘to attract a relative excess of imports equivalent to the amount 
of the capital imported’. 
The play of loans upon the export trade of Britain in parti- 
cular does not, however, urgently concern our present purpose. 
The fact that fluctuations in the volume of capital available 
in Britain for investment abroad do normally occur, and that 
the demand abroad for this capital also varies very widely, is 
the fact of primary importance. It is with the latter phenomenon 
rather than the former that dealers in loans are. chiefly con- 
cerned. The demand periodically becomes excessive; and, as 
we have seen, the consequences of the inevitable stoppage of 
investment upon importunate borrowers are salutary but un- 
pleasant. Regulation of the demand is, in fact, always necessary, 
and is practised as a usual function of the loan market. Far 
more strict control, and a process of ‘queuing loans’ is, 
indeed, strenuously advocated by some authorities. 
The first indication that demand is exceeding available 
supplies is usually that a large proportion of the new issues is 
left on the hands of the underwriters. In such a case the market 
itself automatically regulates the situation; and a decrease in