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 —
