7 6 INTERNATIONAL FINANCE 



The experience of Canada is the same as that of other countries supplied with large 

 amounts of capital from abroad. Although the expansion in the exports of goods 

 from Great Britain to Canada has not corresponded to the great amounts of capital 

 supplied by British investors to that country, the capital invested has brought an 

 increased demand from other countries for British goods, and the generous credits 

 granted to Canada have been settled by the expansion in the exports of goods by 

 Great Britain to the world in general. 



In brief, the great loans of capital by the lending countries in the last few years of 

 good credit have brought about an expansion of trade in all the countries which produce 

 things needed by other nations. 



The spirit of enterprise which has been so marked in the last three or four years 

 has in some measure been fostered and stimulated by the international political situa- 

 tion in Europe, and by the fear that the building of a great navy by Ger- 

 poiitic* a many and the corresponding increase in the British navy might ultimately 

 lead to a conflict between these powers. Furthermore, the Moroccan 

 difficulty between France and Germany, which became acute in 1911, the seizure of 

 Tripoli by Italy, and later the attack upon Turkey by all the Balkan States with the 

 exception of Rumania, created intermittent feelings of anxiety lest a European con- 

 flict should become inevitable. It is true that these difficulties were settled one after 

 the other; that Germany withdrew all claims upon Morocco on receipt of compensa- 

 tion in the French Congo; that Italy and Turkey arranged peace; that the relations 

 between Germany and England steadily improved throughout 1912; and that the rapid 

 success of the Balkan Allies simplified one part at all events of the problem in the 

 east of Europe; nevertheless, these events caused investors to place capital outside of 

 Europe to an unprecedented extent. At the end of 1912 additional anxiety was caused 

 by Servia's claim not only to all the territory forming part of Old Servia, but also to 

 Albania, a claim which caused preparations for war and the mobilisation of a great 

 army by Austria. There was, indeed, for a time in November and December serious 

 uneasiness lest a peaceful solution of the situation, as between the Great Powers them- 

 selves, should not be found. Much was done to dispel these fears at the end of the 

 year by the prospect of a general agreement to create an open port on the coast, of 

 Albania, to construct a railway from Servia to the sea under the guarantee of the 

 Powers, and to set up an autonomous Albania. The immediate consequence, even 

 while the conclusion of peace between Turkey and the allies was still uncertain, was 

 a renewed feeling of confidence in the stability of the European situation and in the 

 strength of European securities; but on balance the prices of European securities showed 

 a serious decline, owing to the desire of investors to purchase stocks not likely to be 

 affected by the political complications in Europe. 



Another influence affecting the security market has been the desire to dispose of 

 low-interest stocks and to transfer the capital to securities giving a higher return. In 

 fact, the fashion in securities in the last few years of good credit has been, 

 Effect of as one would expect, the exact opposite of that in a period of bad credit. 

 yieidon W ^ n * ne nme ti es > when the credit of the young countries was at a low ebb 

 securities, and capital accumulated in the older countries, the denand was almost 

 exclusively for safe stocks, and no thought was paid to the rate of interest 

 so long as the stocks were considered secure. In the recent period of good credit 

 stocks possessing " chances " have been much sought for, and little or no attention 

 has been paid to the security of the stocks provided there was the prospect of increased 

 dividends and the possibility of a substantial increase in the market value of the se- 

 curity. The result of this fashion has been that speculative securities upon which 

 the dividends were increasing have been in great demand, while stocks and bonds 

 upon which the dividends were stationary whether shares of public companies, or 

 the obligations of governments have been out of favour. A comparison of the 

 prices of securities in various countries shows that the change of fashion has been 

 universal, the securities sought after being those upon which dividends were increasing 



