nineteenth century, the United States was perhaps the leading debtor nation of the world.

For several generations the flow of foreign capital into our railway and industrial enterprises had gone on, with a consequent shipment abroad of American securities and the inevitable payment abroad of coupons and dividends on them each year. The Spanish War, however, resulted in the expansion of this nation into the sphere of world policies, and a great broadening of American interest in foreign lands and foreign affairs. It was followed almost immediately by the very costly Boer War, during which the resources of financial London were diverted from their ordinary commercial and investment channels to carry on the struggle. With this abnormal brake on the London market, a few international borrowers for practically the first time sought the then prosperous financial market in New York as a source of capital. As a result, a few foreign securities made their appearance on the New York Stock Exchange, and some financial students hailed the event as a sign that this institution was at last entering an international phase of operations as a capital market. But in reality this view of the matter was premature. The annual creation of capital in this country was still quite out of proportion to the tremendous demands for capital which American industries themselves were still making. American prosperity therefore went on to its spectacular climax in 1907, while the London market soon reasserted itself as the great source for international funds and the great market place for international securities.

The basic position of the United States as a debtor nation was clearly revealed at the outbreak of the World War in 1914, when the imminent danger that European countries might attempt to liquidate billions of dollars' worth of American securities in New York compelled the closing of the New York Stock Exchange for the longest period on record.

The coming of the European War, however, was destined to mark the beginning of a new definite international phase in the history of the New York financial centre, and perhaps nowhere was this fact made more clearly manifest than on the New York Stock Exchange itself. During the period of American neu

trality in the War vast amounts of American securities previously held in the creditor nations of Europe were sold in New York to the rapidly increasing class of American security buyers, and thus absorbed within this country. By this gradual process the claims and participations of foreigners in our leading industries were vastly reduced, and for the first time the obligations of American business to foreign investors fell swiftly to comparatively small amounts. On the other hand, New York suddenly became the only free market for new capital on a large scale, and very naturally a considerable number of government obligations of the warring European nations appeared on the list of the New York Stock Exchange. This occurrence of course represented the flow of American capital or American goods abroad in large amounts, in exchange for our imports of foreign securities. For a time this process was interrupted, owing to our own eventual participation in the War. It was obvious good sense for the United States as a belligerent to concentrate its financial efforts on the flotation of its own huge government loans, to the exclusion of issues of the Allied countries in competition thereto. But after the final United States War Loan, the purchase by Americans of new foreign security issues was soon resumed, and, except for what have after all been only temporary interruptions, this process has continued on a large scale ever since. The growth of New York as an international capital market has likewise come to be governed by economic rather than purely political circumstances, and loans have been floated here for the recent enemy nations as well as for the Allied countries. Countries which were neutral during the recent conflict have likewise had recourse to the New York financial market, and have placed their securities, sometimes in considerable volumes, with the ever broadening investment public of this country.

On December 1, 1926, there were listed on the New York Stock Exchange 134 separate foreign government bond issues with an aggregate market value of $3,234,686,848.00. Of these issues sixty-five represented national or subdivisional governments in Europe, while South America was similarly represented by fortyone, North America and the West Indies by seventeen, Australasia by seven, and Asia by four. In addition there were on our list

forty-eight stock and bond issues of foreign railway companies and fifty-eight issues of foreign non-railway enterprises, making a total of 106 foreign company issues with an aggregate market value of $1,596,408,480.00. Thus the total foreign issues listed on the New York Stock Exchange on December 1 last possessed an aggregate market value of $4,831,095,328.00. While this amount is still less than ten per cent. of the total market value of securities listed on the New York Stock Exchange, it is nevertheless sufficiently large to command the serious attention not only of financial specialists but also of the public at large.

IV

So sudden and so striking a change in the American capital market, and indeed in the whole economic situation of this country internationally, has very naturally produced considerable bewilderment and confusion of thought throughout the country. By some this wholesale investment of American funds in foreign fields has been viewed with alarm, not only on the score that the investments themselves were necessarily dangerous and risky, but also on the ground that American enterprises themselves were, because of this new development, deprived of capital needed for their operations at home. The assumption by this country of the active functions of an international creditor nation has very naturally given rise to large considerations of this sort upon which even yet it is difficult to place any absolutely final opinion. But it should be obvious to all that foreign investment has, for better or worse, become a definite and permanent process in this country. Already our national evolution as a creditor nation has gone too far for us to doubt this fact. We are facing in this respect a condition and not a theory. For, as I have already pointed out, it has not been America that has made capital an international commodity. This was done fully a century ago by the very European creditor nations which were at that time purchasing American securities. It therefore seems inevitable that we must view the new international aspects of American finance simply as the arrival of a more mature phase in the financial evolution of this country.

While arguing from analogy always possesses its peculiar dangers, there seems to be little fundamental difference between the investment policy of an individual and that of a nation. Naturally the individual employs his savings strictly for his own benefit before undertaking to loan them to others. However there is little more reason for criticizing a nation which makes foreign investments, than an individual who has a surplus of funds available for lending to other individuals.

It is a well known fact that the exports of any nation are apt to be closely connected with the country's foreign loans. In this regard the British have long fostered and increased their exports by the judicious investment of British capital in foreign lands. When, for example, British capitalists purchased Argentine railway securities, much railway equipment business came in to British manufacturers as a result. Already American manufacturers have become aware of this aspect of foreign loans, and in some cases have already benefited considerably by them. It is not necessarily true, however, that the proceeds of a foreign loan must be expended in the lending nation to benefit the lender. For, wherever these proceeds are expended, prosperity and buying power will be increased to that extent, and a large scale international lending country invariably benefits indirectly by prosperity in other countries. It could be rather easily demonstrated today that if Americans loaned money to a South American country which desired to buy equipment in Europe with it, our claims as a creditor of Europe would be proportionately improved and benefited.

Holdings of foreign securities are also of great potential value to a creditor country whenever the necessity arises to obtain funds in foreign lands. No better instance of this fact could be given than the recent experience of Great Britain during the War. When it became necessary for the English to make large purchases of war supplies here, they were able to obtain credit by returning to us tremendous amounts of American securities which their investors had previously held. One can think what one wishes about the likelihood that this country may in the future find the establishment of such foreign credits necessary or desirable. At any rate it should be a comforting reflection to

Americans that we possess large holdings of foreign securities which in the future could presumably be realized upon abroad in case of actual need.

The income no less than the principal of foreign investments is also an important item entering into any nation's international balance. It is a well-known fact that for years England was able to import more merchandise than she exported, largely through the fact of her receiving payments each year on her foreign securities. The practical meaning of this particular development in the American trade balance is, so it seems to me, that America will in future years be increasingly able to import luxury products of all sorts from all over the world, and will be able to support financially the tremendous expenses of American tourists abroad each year. Any of these items may of course, by growing out of proportion to the other items in our trade balance, occasion certain misgivings among our economists. Yet unless they are thus suddenly overdone, they simply represent the superior ability of a rich over a poor country to enjoy the good things of the world. There are, it is true, Americans who are as apt to be terrified by national prosperity as by national depression. Despite such apprehension in regard to the changing character of the American trade balance, however, it is not impossible that the United States may in coming years experience a steady development toward the condition of the international trade balances of England and other creditor nations before the War.

A final intangible and yet vitally important aspect of the question of foreign investing lies in its tendency to broaden the knowledge and sympathies of countless Americans with other lands, other peoples and other civilizations. The War undoubtedly taught America much concerning the geography of Europe, yet the time is coming when American foreign investment will prove even more instructive regarding not merely Europe but also the other continents of the earth. The American foreign bondholder, however small his holdings may be, is humanly bound to exhibit a new curiosity regarding the borrowing country. For the first time, it may be, he will investigate the subject by reading not merely foreign financial statistics, but also books upon foreign political and economic conditions. The United States is