ust be understood in a much broader sense than that of
the movements of merchandise merely. The proposition might better be
expressed: the total credits of a nation (including money actually
sent abroad) must just equal its total debits (including money
imported). Into the balance of accounts between any two nations enter
many items: the cash values of the imports and exports of merchandise;
freights, insurance premiums, and commissions; the expenses of
citizens while traveling abroad; money brought in or taken out by
immigrants; the cost of the governmental foreign services (such as the
salaries of consuls and of diplomatic representatives); subsidies
and war indemnities received from or paid to foreign nations; the
investments of foreign capital; and credit items of many kinds, on
both sides of the account.

The effect of loans upon the equation differs at different periods
according as they are just being made, are continuing, or are being
repaid. When foreign capital is first invested in a country, whether
it is loaned to the government or to individuals or to corporations,
either gold must be remitted to the borrowing country or goods be
sent. But later the interest payments and the eventual repayment of
the principal of the loan act in the opposite direction. Accruing
interest must be offset annually by exports from the debtor country
and the repayment of the principal requires that either money or goods
be exported equal in value to the original obligations. In popular
opinion an excess of exports of merchandise is an index, if not the
real cause, of national prosperity; but evidently it is no true index
whatever on this point. An excess of exports may at any given moment
indicate that the country is rich and is lending abroad, or that it is
in debt and is paying interest, or that it is repaying the principal.
On the other hand, an excess of imports may indicate either that a
country is poor, and is borrowing from abroad, or that it is rich,
with many foreign investments, and is receiving the income from them
in the form of a regular shipment of goods from the debtors.

The following statistics of the foreign commerce (merchandise imports
and exports) of the principal countries of the world are given in
significant groupings which call for various explanations.

Figures are in million dollars ($1,000,000) and are mostly for the
year 1908, (Stat. Abst. 1908, p. 769). At the present writing the war
has altered a