the bondholders who subscribed to his issue simply have to say goodbye to their money, with the best grace that they can muster, in the absence of any law by which a lender can recover moneys advanced to a sovereign State.  With this essential difference in the conditions under which a banker lends his depositors’ money to a local customer, and those under which an international house lends its clients’ money to a borrowing country, it follows that the responsible party in the latter case ought to exercise very much more care to see that the money is well spent.

In the second place, the customers to whom bankers, in economically civilized lands, lend the money entrusted to them, may fairly be presumed to know something about the use and abuse of money and to be able to take care of themselves.  If they borrow money, and then waste it or spend it in riotous living, they know that they will presently impoverish themselves, and that they will be the sufferers.  But in the case of a young country, with all its financial experience yet unbought, there is little or no reason for supposing that its rulers are aware that they cannot eat their cake and have it.  They probably think that by borrowing to meet a deficit or to build a Dreadnought they are doing something quite clever, dipping their hands into a horn of plenty that a kindly Providence has designed for their behoof, and that the loan will somehow, some day, get itself paid without any trouble to anybody.  Moreover, if they are troubled with any forebodings, the voice of common sense is likely to be hushed by the reflection that they personally will not be the sufferers, but the great body of taxpayers, or in the case of actual default, the deluded bondholders; and that in any case, the trouble caused by over-borrowing and bad spending is not likely to come to a head for some years.  Its first effect is a flush of fictitious prosperity which makes everybody happy and enhances the reputation of the ministers who have arranged it.  When, years after, the evil seed sown has brought to light its crops of tares, it is very unlikely that the chain of cause and effect will be recognized by its victims, who are much more likely to lay the bad harvest to the door not of the bad financier who sowed it, but of some innocent and perhaps wholly virtuous successor, merely because it was during his term of office that the crop was garnered.  So many are the inducements offered to young States, with ignorant or evil (or both) rulers at their head, to abuse the facilities given them by international finance, that there is all the more reason why those who hold the strings of its purse should exercise very great caution in allowing them to dip into it.