A consequence of World War I, the significance of which was little recognized save the wartime flow of gold across the Atlantic, was the sudden transformation of the United States from a debtor to a creditor nation. Like other new countries, the United States hitherto had been consistently a borrower. Its canals, railroads, and industry had been built in large measure with capital borrowed in Europe, which it had been enabled to service by an excess of exports over imports. By the end of the century, the United States was also lending or investing money abroad, but in 1914 it was still on balance a debtor, owing Europe from $4.5 to $5 billion against $2.5 billion invested abroad, chiefly in Canada, Mexico, and Cuba.
Early in the war, large quantities of U.S. securities held abroad were sold in New York in order to finance purchases of American war materials by the Allied governments. By the fall of 1915, those governments found it necessary to float a bond issue of $500 million in the United States through the agency of J. P. Morgan and Company, and such borrowings continued until the United States entered the war (1917). The role of lender was then assumed by the U.S. government, which advanced to friendly governments more than $7 billion before the armistice of 11 November 1918, and $3.75 billion in subsequent months. Without counting interest, therefore, the U.S. government at the close of World War I was a creditor to its wartime associates to the extent of $10.35 billion. Although the war impoverished Europe, it brought great wealth to the United States and thereby created a large fund of surplus capital ready to seek investment abroad. By 1928 private investments in foreign lands totaled between $11.5 and $13.5 billion. Acceptance of the new creditor role should have entailed changes in policy, especially tariff policy, which American statesmanship proved incapable of making.
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