LOANS AND INTEREST PAYMENTS 131 
by that analysis, so far from being completely obliterated by the 
irregularities, rather become accentuated and more conspicuous. 
The unmistakable fact of experience is that a country which is 
in the early stages of lending to others has an excess of merchandise 
exports; it has a “favorable” balance of trade. On the other 
hand, a country in the early stages of borrowing has an excess of 
imports — an “unfavorable” balance. At the further end of the 
international credit cycle, a country which for decades and genera- 
tions has been making foreign investments, and to which, therefore, 
interest payments have been steadily accumulating, has an excess 
of merchandise imports, an “unfavorable” balance. Conversely, 
a country which is in the early stages of borrowing does in fact 
have an excess of imports; but when it has been a borrower 
over a long period, it has an excess of exports. If the borrowing 
process has ceased, or has greatly declined, this stage is the more 
pronounced. It is reached, if its borrowing operations have 
already gone on for decades and generations, even in the face of 
continuing large loans. With all the irregularities in the steps by 
which the successive stages are traversed, the stages themselves 
are In almost every case to be discerned; and they follow one 
upon another in the order which general reasoning leads us to 
expect. 
Reverting now to that part of the theoretical analysis which 
relates to the barter terms of trade, the reader will observe that 
while these terms tend to be made more favorable to the borrowing 
country during the earlier phase of the cycle, they become in the 
later phase less favorable to the borrowing country and more favor- 
able to the lending. What the borrowers as a people lose at the 
start, they are likely to regain at the end. Obviously, the balanc- 
ing of loss and gain is not likely to be precise; least of all is any 
such offsetting to be clearly discerned or measurable. Whether 
there proves to be in the end a final surplus of gain one way or the 
other will depend on the demand for the commodities of each 
country by the people of the other. Both as regards the commodi- 
ties exchanged and their demand schedules, there may easily be 
changes during the long period — a generation, a half-century —