International trade

Bibliographic data

Monograph

Identifikator:: 1758394757

URN:: urn:nbn:de:zbw-retromon-136209

Document type:: Monograph

Author:: Taussig, Frank William http://d-nb.info/gnd/120199459

Title:: International trade

Place of publication:: New York, NY

Publisher:: Macmillan

Year of publication:: 1927

Scope:: XXI, 425 Seiten; graph. Darst.

Digitisation:: 2021

Collection:: Economics Books

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Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Part I. Theory

Collection:: Economics Books

i28 sa] INTERNATIONAL TRADE Proceed now a step further. Assume again a simple case, for elucidation of the principles. Suppose that loans go on year after year, the same amount annually. Each year Englishmen lend to Americans a given sum, say 10 millions. Assume also, for simplicity, that there are no direct purchases by the borrowers, but always — in the first instance, that is — a flow of specie into the borrowing country. In due time, the length of the interval depending on the sensitiveness of prices to the increase or decrease of specie, a continuing favorable balance of trade appears in Great Britain and the reverse appears in the United States. The lend- ing country has a steady excess of exports, the borrowing country a steady excess of imports. Specie no longer flows; the continuing loans are made thru the mechanism of merchandise movements. At an early stage in the operations, however, another factor begins to enter. Each year the borrowing country has to pay interest on the loans contracted so far; and to that extent the amount which the lending country has to remit on capital account is reduced, as regards the net balance of the international account. The interest charge to be paid by the borrowing country grows with every year. The capital sum from the lending country remains (under our supposition) the same from year to year. The accumulating interest charge will grow, and in time will be equal to the constant capital sum. Eventually, it will be greater. At the outset the transactions lead the lending country to make remittances to the borrowing; in the end it is the borrowing coun- try which has to remit. These shifts in the relations between creditor and debtor country will manifest themselves in the flow of specie between them and in their merchandise transactions. The initial flow from the lend- ing country is destined to be checked in any case by the changes in prices. But it will be checked the more quickly by the accruing interest charge. The accommodation of the merchandise balance (the balance of trade) to the balance of payments will therefore take place more promptly than in the case of other invisible items, such as tourist expenditures. And eventually there will be a reversal of the initial features. Specie will flow back to the

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