THE UNITED STATES, III. AFTER 1914 313 
of the lending country’s goods. But in this case it was the pur- 
chase of the goods for export which came first; thereafter came the 
efforts — efforts that grew desperate as time went on — to borrow 
in the exporting country itself the money means wherewith to make 
payment for these precise goods. It was not the loans from the 
United States that brought about the export of merchandise duit 
was the previous purchase of merchandise that led to the loans, 
the export of capital. The chain of causation is the reverse of 
what is ordinarily to be expected in the international borrowing 
operations and is ordinarily found in them. 
I speak of an export of capital from the United States. In 
good part the outcome of the operations was not so much an export 
of capital as a repayment or redemption of past loans — a re- 
import of capital, if that phrase be permissible. To a considerable 
extent American securities were definitively returned by European 
investors, and were purchased by American investors. Dividends 
and interest that had been previously payable to European holders 
now became payable to American holders. In the readjusted 
balance of international payments the item of income from these 
securities, which so far had figured as a debit item for the United 
States, ceased to figure on either side. For the time being, 
the income item was insignificant; it was the enormous transac- 
tions on capital account that signified. As regards these trans- 
actions, it was immaterial whether the Europeans found the 
means of paying for their purchases of goods by selling obligations 
of their own in the United States or selling their holdings of Ameri- 
can securities. In both cases it was the exports of goods that 
caused them to turn to the sales, and it was the unusual connection 
between the two sets of operations that gave the whole situation 
its peculiar character. 
Proceeding now to the second great stage of the war operations, 
that which followed the entrance of our United States into the 
conflict, we find again phenomena of quite an unusual kind; in 
part similar to those of the first stage, in part different. 
As regards the continued exports and the use of loans in paying 
for them, the situation remained in the last analysis unchanged.