Fluctuations in the Foreign Exchanges. 19 



and payments for our invisible exports in the services of our 

 ships and banks. During the war the greater part of our invest- 

 ments have been sold, and owing to the disorganised state of 

 international trade the return for the Banking services greatly 

 reduced. How then are we paying for that ,£790 millions worth 

 of excess of imports? A large part of it still represents payment 

 for the services of our ships, for though the tonnage is greatly 

 reduced, the freights are much higher. But what about the enor- 

 mous balance still unaccounted for"? Our expenditure has exceeded 

 our incotne, and for a nation, as for an individual, that is a serious 

 matter. We have sold our securities abroad, and we are now 

 mortgaging our capital assets to pay for imports which we cannot 

 pay in exports. Worse still, we have raised enormous sums in 

 the United States and in neutral countries on Treasury Bills and 

 other short-dated securities. In the case of an individual we 

 would call them I.O.U.'s, but in National affairs the other term 

 sounds better, though they amount to the same thing. The 

 money raised in this way has been used by the Government to 

 pay for the goods it has bought in the United States and 

 elsewhere, or it has been lent to the banks which have re-lent it 

 to importers. In short, the excess of imports has been paid for 

 by bori'owed money. We have, of course, lent large sums to 

 our Allies and to the Dominions ; but while many of their debts 

 to us are likely to prove " bad debts " our debts to others must 

 be made good. In any case, we have borrowed abroad much 

 more than we have lent, and there is a considerable balance of 

 foreign debt against us. We have changed from the position 

 of a Creditor nation to that of a Debtor, and it is only now 

 when the exchanges are set free to work on normal lines that we 

 are beginning to feel the serious effects. 



Up to March last the Exchanges were regulated by our 

 Government so as to prevent them moving against us. During 

 the war we made heavy purchases of war material and supplies 

 from the United States and other countries, so that, on balance, 

 we were their debtors. As a result, the foreign exchanges 

 would move against us, and so, to prevent this the exchanges 



