of the war our excess of exports over imports exceeded $11,800,000,000. This unprecedented balance was in part met by the belligerent countries through shipments of gold, and its net/import during the war period exceeded $1,000,000,000. Even this enormous sum left a balance of about $10,800,000,000 still to be offset. This task was accomplished by the creation of credits with American banks in favor of the belligerent countries. Even before the outbreak of the war both Allied and Central powers, anticipating the impending conflict, resold large blocks of American rail and industrial securities to purchasers in the United States. In this manner American securities to the extent of over $2,000,000,000 were returned to this country during the four years of the war.

Soon after the outbreak of the conflict the allied nations sought capital in the American money market and in time floated loans estimated at $1,520,000,000. This method of establishing credits was employed until the United States entered the war in 1917, when the financing of the allied needs was assured by the American government, which granted direct advances totaling $7,319,500,000.

BALANCE SINCE THE ARMISTICE

The annual balances of payments since the Armistice have been estimated as follows:1

1 Commerce Reports, Trade Information Bulletin, No. 215.

Includes interest received by United States Government from foreign Governments.

As seen from the above table, the export of goods exceeded the import in all five years, but at a declining ratio.

During the first five years of the post-war period, the net import of gold amounted to $1,089,000,000, which was applied largely to the purchase of American goods.

Within the same period new securities were floated in the American market to the amount of $2,621,000,000, from which however must be deducted $1,443,000,000 of old issues maturing, thus leaving a net amount of but $1,178,000,000. The movement of foreign holders to re-sell American securities to the United States was countered in 1921, 1922, and 1923 by the opposite tendency on the part of many foreigners to buy American issues. These buyers were influenced largely by the unsettled conditions in their own country and their consequent desire to place surplus funds in a currency which would not depreciate or which, in terms of their own money, would most likely appreciate in value.

After the close of hostilities the United States Government continued to grant direct advances to its war associates until the total was $12,300,000,000. This outflow ceased after 1919 and in fact in 1922 the tide turned in the opposite direction with the intitial payment by Great Britain of $102,812,000 as interest on her share of the allied debt.

Pronounced tendencies may be noted in the items

for services. Freight charges continued on the credit side of the balance sheet until 1923 when we paid out $8,000,000 more than we received in ocean freights. Immigrant remittances show a sharp decline from the high point of $700,000,000 in 1920 to but $350,000,000 in 1923 due to some extent to the curtailment of immigration. On the other hand, tourist expenditures increased from $140,000,000 in 1920 to about $500,000,000 in 1922.

In summary, the United States has passed from the state of a debtor nation to that of a creditor country, and as she continues to export capital, an excess of imports over exports must be anticipated.

CHAPTER II

INTERNATIONAL CREDIT

DEVELOPMENT OF THE MEDIA OF EXCHANGE

The previous chapter has explained the various kinds of transactions which enter into international business. It was there seen that payments are effected between the individuals of different countries. When merchandise is bought, securities purchased, loans granted, cargoes carried, consignments insured, remittances sent, or when a variety of other services are performed, the mechanism or system by which these transactions are paid for is known as exchange. In the stage of local economy described above, people satisfied their wants by "swapping" or interchanging the goods which they possessed for those which they desired. This system of direct exchange was known as barter. It frequently happened that the party who possessed the desired goods was not willing to accept the articles offered by the other party, and so an interchange was often impossible. This and other disadvantages became greater as specialization in production developed when the period of local economy gave way before the stage of national economy.