158

POLITICAL  ECONOMY

of  carriage)  between  the  recorded  imports
and  exports  of  the  two  countries  would  be
inevitable.  It  would  be  inevitable  because  in
international  trade  the  only  final  form  of
payment  must  consist  in  goods,  including
bullion,  or  services.  But  actually  equivalence
is  not  to  be  found,  because  all  the  circumstances ­
  which  have  been  ruled  out  of  our
hypothetical  case  exist  in  actual  practice.
The  quantity  of  international  loans  is
enormous,  and  for  a  substantial  proportion
of  them  Englishmen  are  responsible  as
lenders.  When  a  foreign  loan  is  made  the
exports  of  the  lending  country  are  stimulated,
and  so  are  the  imports  of  the  borrowing
country.  Imagine,  for  instance,  that  people
in  England  invest  £1,000,000  in  Canadian
industries.  Then  at  first  the  quantity  of
money  in  England  is  diminished  so  that
prices  fall,  and  the  quantity  of  money  in
Canada  is  increased  so  that  prices  rise.
Consequently  Canada  becomes  a  good  market
to  sell  in  and  a  bad  market  to  buy  in,  while
England  becomes  a  good  market  to  buy  in  and
a  bad  market  to  sell  in.  Extra  buying  from
and  reduced  selling  to  England,  and  extra
selling  to  and  reduced  buying  from  Canada,
continue  until  the  level  of  prices  in  the  two
countries  has  been  brought  to  the  old  level,