THE THEORY OF EXCHANGE 131 
berween countries which have similar currencies made of the 
same metal which can be freely exported, imported and coined, 
the rate of exchange is found to express the ratio between the 
wial claims and the total debts which can be immediately 
enforced by the one against the other, or, in other words, the 
position of the balance of accounts which is in #his case the 
determining factor in the rate of exchange. 
It should be added that exchange fluctuations, so 
restricted within the gold points, are in no way connected 
with the volume of currency in either country unless 
variations in the volume of currency are held to affect the 
balance of payments, an assumption which we shall 
examine later. It is hardly necessary to add that as derween 
two countries with a silver currency, i.e., one of which is a 
monometallist country on an effective silver standard and 
the other is also a monometallist silver standard or a 
bimetallist 1 country, the exchanges are restricted in the 
same way and by the same factors within the sifver points,? 
but in the absence of a fixed rate for the conversion of 
silver into gold, these silver points are variable and 
fluctuate with the rate of silver bullion in terms of gold 
currency. 
Lastly, a country which has a paper currency can have 
a stable exchange with another country which has a 
the public, to the fact that the credit of the issuing bank was such that its 
paper was quoted above the metallic currency; but the notes passed by 
some tourist to a banker were accepted by him as a first class draft on the 
country where they originated, and if they were passed to him at a time 
when his market was indebted to that country, it enabled him to save the 
expense of shipping specie, and therefore justified him in purchasing above 
ar. 
P 1 In the strict meaning of the term involving the free coinage of silver 
as well as of gold, this kind of monetary system no longer exists. 
2 This is so in fact; for a country on a silver standard has no gold, or, at 
least, not enough to make its foreign payments, and in any case its silver 
is not convertible into gold at a fixed rate. Hence shipments of silver sold 
abroad at the market rate determine the limits of the exchange when it is 
a debtor. When it is a creditor, countries with a gold currency will manage 
to purchase silver in the market, and use it if necessary ; and so again the 
rate of silver in terms of gold will determine the limit of the exchange, if 
the costs of transport be added.