ists, in
Turkey especially by Germans, and in China by Americans and Europeans.

The countries in the second column are doubtless on the whole debtors,
but in varying degrees. The excess exports of some are insufficient
even to pay all the current interest, and they are borrowing still
more (possibly the British colonies, Japan and several South American
countries); others have ceased to borrow and are simply paying
interest; whereas the United States at least with its excess of
exports was at this time both paying interest and getting out of debt.
With the outbreak of the war in 1914 the United States began rapidly
buying up its foreign-held securities, and events are fast making it
a creditor nation. Its imports must therefore in future more nearly
equal if not exceed its exports, the actual outcome being dependent
as well on various other items in the balance as on those here
considered.

Sec. 8. #Cancelation of foreign indebtedness.# In the international
business of any two important countries to-day, such as England and
America, the number of credit and debit transactions is enormous. If
each trader had to attend to the forwarding of the means of payment
for his purchases he would, of course, deduct from the amount of his
indebtedness the amount due him from his foreign correspondent, and
might from time to time "remit" the balance in the form of a shipment
of gold. This simple offsetting and cancelation of debits and credits
would greatly limit the amount of gold that would have to be shipped.
But still, under such conditions, there must be a very large number of
shipments of gold by different individuals, and a large proportion
of these shipments would be going in opposite directions at the same
time. Now a merchant in New York called M may have a balance to pay in
London to X and at the same time a merchant in London called Y have a
balance to pay in New York to a man called N. If M can buy from N his
claim in the form of an order, draft, or bill of exchange, and send it
to X, the latter may through his bank collect the sum from Y. In this
way a further cancelation of indebtedness would occur.

When all persons having either debits or credits to be paid in New
York and in London, respectively, are dealing with the banks in these
cities, and the banks and special exchange brokers are constantly
buying and selling these bills, a market is created for London
exchange in New York (and conversely in London), and a