ABSTRACT
The first statement of John Maynard Keynes' new foreign trade position is to be found in the Treatise on Money. These are the volume of foreign lending and the size of the foreign balance. In diagnosing the British disorder, Keynes found two factors at work. The first was the existence of higher gold-costs of production in Great Britain relative to those prevailing elsewhere - a condition which he attributed to Great Britain's return to the gold standard at the pre-war parity of exchange. The second was the increased attractiveness of foreign over home investment. In view of the fact that the Central Bank had no direct means of increasing the size of the foreign balance, it had no alternative but to try to reduce the volume of foreign lending by increasing the interest rate. Keynes points out that Great Britain is an old country whose population will soon cease to grow.
