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0) 
Ri 3 
INTERNATIONAL TRADE 
not necessarily take place; possibly there will be none at all. 
And such flow as does take place is not likely to be equal in volume, 
either in the very first stage or later, to the amount of the loan. 
And yet it can be said almost with certainty that some specie 
movement there will be. 
The possible but improbable case where there will be no move- 
ment of specie at all is when the borrowers use the entire amount 
of the funds put at their disposal by the lenders, in buying commod- 
ities in the lenders’ country. And further: the borrowers not 
only make purchases in the lenders’ country, but these purchases 
are additional to what would have been made in any event. Sup- 
pose the lenders, for example, to be British, the borrowers Ameri- 
cans — the sort of relation which existed between these two peo- 
ples thru the 19th century. Suppose the Americans are railway 
promoters who use the entire proceeds of the loan in Great Britain 
for buying rails, locomotives, bridge material, and the like. Other 
American purchases go on as before, and other goods continue to 
move from Great Britain to the United States as before. The 
new purchases and new exports exactly absorb the funds which 
British lenders have put at the disposal of American investors. 
No remittances at all will be made from Great Britain to the 
United States. English commodities will go to the United States 
as the direct result of the loan. 
This sort of consequence — an immediate export of goods from 
the lending country, and for the time being no further change — 
may ensue as the result either of the ordinary economic forces, or of 
a set policy in which there is deliberate or conscious diversion of 
international trade. In the period since 1890 there has been much 
endeavor of the second kind. This was often the case in France and 
Germany during the generation preceding the Great War of 1914-18. 
It was the undisguised policy of the governments in both countries, 
and of the financial promoters and institutions which were in 
close touch with the governments, to arrange the terms of foreign 
loans in such way that the borrowers should spend the entire pro- 
ceeds in France or Germany. Virtually the same sort of thing 
appeared in the huge loans which were made from the United States