CHAPTER 12 
NoN-MERCHANDISE TRANSACTIONS FURTHER CONSIDERED 
LoANs AND INTEREST PAYMENTS, FREIGHT CHARGES 
Loans made by the people of one country to those of another, 
and interest payment on such loans, have already been mentioned 
as among the most important of the non-merchandise items in 
international trade. They also, while having effects similar in 
the main to those of other invisible items, present some problems 
of their own. 
For illustration we may suppose that loans are made by British 
to Americans. For brevity, we commonly speak of such loans as 
made by Great Britain to the United States; as if one govern- 
ment made them to the other, or the British as one body or entity 
made them to the Americans as another. In fact, the transactions 
are commonly between individuals, or (what comes to the same 
thing for our purpose) between individuals on one side and political 
bodies on the other. Loans are indeed sometimes deliberately 
made by one state to another; such operations played a large 
part in the Great War of 1914-18, and were not unknown in earlier 
periods. They are the results of political or military exigencies, 
and while involving no principles different from those applicable 
to the transactions between individuals, are vet likely to have a 
range and scope quite beyond those of ordinary commerce. For 
this reason they will be considered separately in later chapters. 
Here we confine attention to loans by individuals, not of an emer- 
gency or catastrophic sort, made for profit, exercising their effects 
gradually and as a rule quietly on the every-day phenomena of 
international trade. 
Such loans by the one party, borrowings by the other, must 
result in a flow of specie from Great Britain to the United States. 
“Must result” — this puts the case too strongly. The flow will 
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