MOVEMENTS AND TRADE 121 
measure to defer the actual exchange operations until ‘the 
compensatory imports begin to come into the market’. When 
this becomes difficult, as it did on at least one occasion between 
1900 and 1913 and more than once since 1920, critical dis- 
turbances of the exchange are the outcome. But the out- 
standing advantage of a gold exchange standard is the virtual 
elimination of this risk, and the facilities which it offers in the 
financing of seasonal exports. Any temporary discrepancy 
between imports and exports can be quite well taken up by 
the creation of credit instruments to bridge the interval be- 
tween paying the producer in Australia and selling the exports 
abroad, and this is what normally happens. 
[+ must be understood, too, that for Australia, as a primary 
producer, the seasonal disturbance of the exchange is accom- 
panied by a parallel disturbance of the currency due to the 
purely domestic business of paying for the products. At shearing 
and harvest times the producers have to make exceptionally 
heavy payments in cash to their workmen, and the producers 
themselves or their local bank branches are compelled to hold 
a supply of coin and notes much larger than usual as ‘pocket- 
money’. Wheat merchants, wool agencies, and fruit firms are 
also drawing more actively upon their current accounts to pay 
the farmers ; and the gross effect is a big seasonal increase in the 
circulation of currency. Under such circumstances the credit 
system must be flexible in a marked degree, as the events of 
1923-4 taught us. The disturbance of the currency as between 
urban and rural areas at these times is a somewhat similar 
phenomenon to the disturbance in the exchange between 
Britain and Australia as the exports are marketed. 
With the consideration of capital movements, the second 
non-monetary cause of disturbance to the balance of payments, 
we enter upon the discussion of the predominant factor as far 
as Australia is concerned. Capital which is assigned for invest- 
ment in Australia accumulates in London, and the real problem 
is constituted by the remoteness of the area of investment from 
the investing country. Hawtrey rightly puts the emphasis upon 
fluctuations in the volume of capital awaiting investment! 
1 See Hawtrey, Trade and Credit: ‘The stream, however, is far from continuous. 
Capital projects are frequently very large. And only large issues are suitable for 
dealings in the investment market, and more especially for international dealings.’ 
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