There has also been some discussion of the relative merits of domestic and foreign loans, and their differing economic effects. Sometimes it has been claimed that foreign loa ns involve less disturbance of domestic industry. The intimate relation existing between modern nations in their commercial and industrial enterprises destroys to-day almost all the significance that might formerly have attached to such a discussion. The payment of the French indemnity of 5,000,000,000 francs to Germany after the war of 1870 was carried out in twenty-seven months, and not one single serious difficulty or disorder in the financial centres was produced by it.1 So great is the mobility of modern capital and so vast are the current transactions, that all of this money could be easily turned into the same stream without disturbing its placid surface.

Public credit is a plant of slow growth; more than that it is a delicate plant. It may be injured beyond recovery by a single case of failure to fulfil the promise in which it found expression.

1 Blackwood''s Edinburgh Magazine, Feb., 1875, pp. 172-187.

Many of the commonwealths of the United States have repudiated their debts, and have since then recovered their power to borrow but slowly, and in some instances scarcely at all.1 Weak nations which may be or have been coerced by stronger and wealthier nations in the interest of citizens of the latter who were creditors of the former, generally borrow more easily than stronger independent nations, or parts of strong confederations, which have failed to meet their obligations and cannot be coerced.

The credit of local governing bodies depends in great measure upon their powers and duties in public law. Generally speaking, a "municipal corporation," when acting legally within the sphere prescribed to it, is like a private company ; — its obligations can be enforced by legal or judicial procedure. Unlike the sovereign State, a municipality can be sued without its consent. Only with the positive sanction of the sovereign State can a municipality default and escape punishment therefor.

1 Under the Eleventh Amendment to the Federal Constitution, a State cannot be sued in a federal court. This is contrary to the original intention of the constitution. See my monograph, Das Kreditwesen der Staaten und Städte der Nordamerikanischen Union in seiner historischen Entwickelung, Jena, 1891. Egypt is a good example of foreign coercion to enforce debt payment.