Hitherto we have noticed only the importation and exportation of goods between the United States and England. We must now give attention to other factors that enter into determining the balance of trade. First, there is a steady stream of credit obligations, such as stocks and bonds, flowing between the two countries. An English investor, let us say, orders a New York broker to buy for him a number of Illinois Central railroad bonds. This transaction has the same immediate effect on the balance of trade as the same amount of exports from the United States to England would have had. Later, however, the effect on the balance of trade arising from paying interest on these bonds is the same as imports from England to the United States would have produced. This important fact is the basis of a trade movement which many people fail to understand. Before the Great War the annual value of England's imports exceeded that of her exports by several hundred million dollars - that is, England had an unfavorable balance of trade. This balance she paid, in part, with the interest on the investments Englishmen had made in American industry. Three other less important transactions act in a similar manner: the money English immigrants residing in this country remit to their folk in England, the money American travelers spend in England, and the freight earned by English vessels carrying American goods, affect the balance of trade exactly like the payment of interest on English investments in this country. Hence a creditor people, such as were the English before the Great War, might easily go on forever with an unfavorable balance of trade. Conversely, a debtor people might also continue indefinitely to export more than they import, using the balance to pay travelers' cheques, immigrants' drafts, freights, and interest charges. The mere fact, therefore, that a country's trade for any period of time is highly favorable does not indicate, as many people believe, that that country is thereby increasing its gold supply by having the balance paid in that metal. Instead of gold it is more likely to be receiving canceled drafts, bond coupons, and freight receipts.

We may now extend our illustration in which it was assumed that imports into the United States were valued at one million dollars and exports at nine hundred thousand dollars. Let us assume that during the same period English capitalists invested $100,000 in American bonds, that $5,000 were paid to English investors in the form of interest, that American travelers spent $20,000 in England, that English immigrants remitted $15,000 to England, and that English merchantmen earned $25,000 in freights. Our accounts for the United States would then be: