I

THE TREATY OF PEACE

55

large funds in overseas trade. But the practiceof foreign investment, as we know it now, is avery modern contrivance, a very unstable one,and only suited to peculiar circumstances. Anold country can in this way develop a new oneat a time when the latter could not possibly doso with its own resources alone; the arrange-ment may be mutually advantageous, and outof abundant profits the lender may hope to berepaid. But the position cannot be reversed.If European bonds are issued in America onthe analogy of the American bonds issued inEurope during the nineteenth century, theanalogy will be a false one; because, taken inthe aggregate, there is no natural increase, noreal sinking fund, out of which they can berepaid. The interest will be furnished out ofnew loans, so long as these are obtainable, andthe financial structure will mount always higher,until it is not worth while to maintain any longerthe illusion that it has foundations. The un-willingness of American investors to buyEuropean bonds is based on common sense.

At the end of 1919 I advocated (in TheEconomic Consequences of the Peace) a reconstruc-tion loan from America to Europe, conditioned,however, on Europe ’s putting her own house inorder. In the past two years America, in spiteof European complaints to the contrary, has, infact, made very large loans, much larger thanthe sum I contemplated, though not mainly inthe form of regular, dollar-bond issues. Noparticular conditions were attached to these