CHAPTER XII 
THE AUSTRALIAN BALANCE OF INTERNATIONAL 
INDEBTEDNESS FROM 1900 TO 1913 
‘In New and Old countries alike, consumption and therefore imports are usually 
large in an ascending phase of general commercial credit; and at the same time 
prices are high, and therefore imports appear larger than they are. But a lending 
country, like Britain, generally exports capital largely when credit is good ; and her 
working and other classes are spending freely ; while a borrowing country is likely 
to swell her imports by goods obtained on credit, just when her imports would be 
largest and at the highest prices, even if she were not borrowing.’ —ALFRED 
MamrsuarL, Money, Credit, and Commerce. 
*We draw so extensively upon other countries for many commodities, while at the 
same time the prices of our great staple products are so affected by the foreign 
demand for them as to render the Australian price level more a product of two sets 
of factors, domestic and foreign, than is the case in most other countries. It is thus 
necessary to consider the whole problem relative to Australian conditions before 
any general conclusion may be stated concerning the relation of currency and 
prices.—Prof. D. B. CopLanp, ‘Currency Inflation and Price Movements in 
Australia,’ Economic Journal, Dec. 1920. 
ALTHOUGH in these days the use of certain terms borrowed from 
the writings of theorists upon international trade has become 
common in press and forum, some confusion in thought and 
language still persists. This ambiguity in economic discussion 
arises not so much from difficulties in the conception of inter- 
national indebtedness, or from the want of thought upon the 
subject, as from failure to agree upon the exact connotation of 
the terms employed. There is little doubt that the attempt to 
express the two aspects of the international account in terms 
of ‘exports’ and ‘imports’ is primarily responsible for this con- 
fusion, since many items making up the total of international 
indebtedness can be thus described only by a somewhat violent 
distortion of language. It would therefore appear to be ex- 
pedient to classify the items in indebtedness rather as ‘debits’ 
and ‘credits’ ; and thus to emphasize the effect of the transfer of 
goods and services, rather than the direction of such transfers. 
Since strict consistency in the use of terms is indispensable to 
scientific discussion it is necessary to state here the exact sense 
in which they are employed. Transactions which create mone- 
tary obligations by Australians to individuals or firms abroad 
are debits, while transactions which create similar obligations 
to Australians are credits. The Australian ‘balance of indebted- 
ness’ is therefore taken to mean the equilibrium established