158 
POLITICAL ECONOMY 
of carriage) between the recorded imports 
and exports of the two countries would be 
inevitable. It would be inevitable because in 
international trade the only final form of 
payment must consist in goods, including 
bullion, or services. But actually equivalence 
is not to be found, because all the circum 
stances which have been ruled out of our 
hypothetical case exist in actual practice. 
The quantity of international loans is 
enormous, and for a substantial proportion 
of them Englishmen are responsible as 
lenders. When a foreign loan is made the 
exports of the lending country are stimulated, 
and so are the imports of the borrowing 
country. Imagine, for instance, that people 
in England invest £1,000,000 in Canadian 
industries. Then at first the quantity of 
money in England is diminished so that 
prices fall, and the quantity of money in 
Canada is increased so that prices rise. 
Consequently Canada becomes a good market 
to sell in and a bad market to buy in, while 
England becomes a good market to buy in and 
a bad market to sell in. Extra buying from 
and reduced selling to England, and extra 
selling to and reduced buying from Canada, 
continue until the level of prices in the two 
countries has been brought to the old level,