528 THE WORK OF THE STOCK EXCHANGE 
of thought and our specific financial practices have failed to 
keep pace with our actual economic status. Yet, both from 
our own experience and from-that of the older creditor nations 
of Europe, it is possible to generalize as to the benefits which 
foreign security investing can be expected to confer upon the 
United States, and also as to some of the problems and dan- 
gers which may thereby arise. 
The relationship between foreign security investments and 
righting foreign trade balances has already been discussed, 
and may here be only summarized. Foreign security investing 
renders all foreign trade more flexible because it furnishes an 
additional and flexible method of payment. It thus lightens 
the pressure upon gold stocks and gold shipments, as well as 
upon the shifting internationally of bank credit and short- 
loans; in consequence, it may be said to stabilize foreign ex- 
change rates and both domestic and foreign interest rates, to 
minimize any tendency for commodity inflation, and to assist 
the work of the great central banks in stabilizing foreign and 
domestic business. Foreign security investing in general tends 
to increase both exports and imports. Then export of capital 
often directly creates foreign demand for the export of domes- 
tic goods, and indirectly raises foreign productive power and 
income so as to permit a greater export of goods from the 
lending to the borrowing nation.?® Conversely, the lending 
nation can afford to spend interest and dividends accruing on 
its foreign investments to pay for imports of foreign goods. 
In the second place, a nation benefits from making and 
holding foreign security investments in much the same way 
that an individual does from owning any securities. In each 
case a surplus of negotiable wealth is stored up and kept at 
hand to meet all possible exigencies. The nation which holds 
sound foreign securities listed on its own or foreign stock ex- 
changes can usually obtain instant funds abroad with which 
27 An admirably impartial summary, from the pre-war British viewpoint, of the 
rdvantages and disadvantages of foreign investment, may be found in the introduction 
(pp. xviii-xxv) to C. K. Hobson's classic study, “The Export of Capital ” 
28 Cee Stabilization Hearings, pp. 300 and 365