162 A REVISION OF THE TREATY chap.

If European bonds are issued in America on theanalogy of the American bonds issued in Europe during the nineteenth century, the analogy will bea false one; because, taken in the aggregate, thereis no natural increase, no real sinking fund, out ofwhich they can be repaid. The interest will befurnished out of new loans, so long as these areobtainable, and the financial structure will mountalways higher, until it is not worth while to maintainany longer the illusion that it has foundations. Theunwillingness of American investors to buy European bonds is based on common sense.

At the end of 1919 I advocated (in The EconomicConsequences of the Peace) a reconstruction loanfrom America to Europe , conditioned, however, onEurope 's putting her own house in order. In thepast two years America, in spite of European com-plaints to the contrary, has, in fact, made very largeloans, much larger than the sum I contemplated,though not mainly in the form of regular, dollar-bondissues. No particular conditions were attached tothese loans, and much of the money has been lost.Though wasted in part, they have helped Europe through the critical days of the post-Armistice period.But a continuance of them cannot provide a solutionfor the existing dis-equilibrium in the balance ofindebtedness.

In part the adjustment may be effected by theUnited States taking the place hitherto held by