gone much further in the direction of
Socialism than we had. Those were great days for all who handled the
machinery of oversea investment and in the last few years before the
war it is estimated that England was placing some 200 millions a year in
her colonies and dependencies and in foreign countries. Old-fashioned
folk who still believed in the industrial strength and financial
stability of their native land waited for the reaction which was bound
to follow when some of the countries into which we poured capital so
freely, began to find a difficulty in paying the interest; and just
before the war this reaction began to happen, in consequence of the
default in Mexico and the financial embarrassments of Brazil. Mexico had
shown that the political stability which investors had believed it to
have achieved was a very thin veneer and a series of revolutions had
plunged that hapless land into anarchy. Brazil was suffering from a
heavy fall in the price of one of her chief staple products, rubber,
owing to the competition of plantations in Ceylon, Straits Settlements
and elsewhere, and was finding difficulty in meeting the interest on the
big load of debt that the free facilities given by English and French
investors had encouraged her to pile up. She had promised retrenchment
at home, and another big loan was being hatched to tide her over her
difficulties--or perhaps increase them--when the war cloud began to
gather and she has had to resort for the second time in her history to
the indignity of a funding scheme. By this "new way of paying old debts"
she does not pay interest to her bondholders in cash, but gives them
promises to pay instead, and so increases the burden of her debt, which
she hopes some day to be able to shoulder again, by resuming payments in
cash.

Mexico and Brazil were not the only countries that were showing signs,
in 1914, of having indulged too freely in the opportunities given them
by the eagerness of English and French investors to place money abroad.
It looked as if in many parts of the earth a time of financial
disillusionment was dawning, the probable result of which would have
been a strong reaction in favour of investment at home. Then came the
war with a short sharp spell of financial chaos followed by a halcyon
period for young countries, which enabled them to sell their products at
greatly increased prices to the warring powers and so to meet their
debt charges with an ease that they had