CONTINUOUS BORROWING 233 
for Australia since 1890, and corroborates the evidence accumu- 
lated by Viner for Canada. 
Still another effect, and, from the standpoint of fluctuations 
in business, one of critical importance, is the effect of borrowing 
abroad upon the regulation of credit. It is an economic dis- 
advantage of the utmost influence that expansion by means of 
borrowing should be initiated in one community, when the 
control of that capital stream, and consequently to some extent 
the control of domestic bank credit, is dependent upon the 
decisions arrived at in another community, remote, independent, 
and organized industrially in a vastly different manner. In 
other words, it is a relatively easy matter for Australian banks 
to regulate the momentum of development and to regulate the 
flow of credit and hence to control the factors generating crises ; 
but it is a relatively difficult matter, if not impossible altogether, 
to prevent crises from developing when the check to expansion 
is applied in London, and through causes that are only remotely 
connected with Australian conditions. The only course of 
action for the Australian banks when that check is applied is a 
proportionate, or, since the stimulus to pessimism then operates, 
a more than proportionate constriction of credit in Australia. 
This contraction, since it is necessarily rapid, is almost certain 
to cause depression or even crisis. And, in the position occupied 
by London, dependent to such an extent upon world economic 
conditions, and sensitive to a superlative degree to economic 
fAuctuations in any quarter of the globe, this contraction at 
the London end is always liable to take place more or less 
suddenly. 
Finally, and solely in the domestic field, the effect of borrowing 
in stimulating imports must be further considered in relation to 
government revenue. Owing to the operation of the Federal 
tariff system the effect of borrowing is to inflate the revenue 
from customs, since imports are accelerated. Thus a part, and 
a relatively large part, of the capital imported becomes trans- 
formed in the process of entering the Commonwealth into 
current revenue which drains away along many channels. 
Whether the uses to which this revenue is put are productive or 
otherwise is beside the question, gince they are presumably 
quite alien to the purpose for which the loan was floated in 
the first place. This, of course, bears very closely upon the 
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