132 MODERN MONETARY SYSTEMS 
circulation of the same paper currency and there will be 
even greater exchange stability in these circumstances 
than when there are gold points, because the cost of 
sending insured notes is much less than the cost of sending 
gold.! 
But when a country is so situated, as is normally the 
case, that, having a paper currency, the circulation is 
purely internal, its exchanges with other countries, 
whether their currencies be gold or silver, or, like its 
own, paper, can of course no longer be restricted within 
limits corresponding to the costs of importing or exporting 
specie. 
It will therefore be observed that exchange problems 
do not arise as between countries which have the same 
kind of currency, whether it be gold, silver or paper. 
For in these circumstances exchange fluctuations and their 
effects on economic life are exceedingly small and the 
study of the exchange hardly goes beyond a technical 
examination of the operations of bankers and exchange 
brokers. It may therefore be said that the economic 
problem of exchange is due to the fact that whereas 
commercial and financial transactions between the 
inhabitants of different countries take place the world 
over, currency has largely remained national in character. 
Certain countries only possess an internal currency (paper 
money) ; the circulation of others is composed of monetary 
units which are different but are all legally convertible into 
gold, which, owing to the freedom of coinage, constitutes 
an international currency apart from the mere formality of 
recoinage ; but even in the latter countries the exchange 
1 In particular, we may quote, as an instance of the complete harmony 
between the currencies of two countries having the same paper currencies, 
the case of Madagascar and France, due to the fact that as the former 
country does not possess a currency of its own, the notes of the Bank of 
France constitute the entire fiduciary circulation. On the other hand, the 
exchange between the French franc and the franc in the Antilles is 
unstable because the same circulation is not common both to the mother 
country and this group of colonies. The paper francs of Algeria, Tunis and 
Morocco are in complete harmony with the paper franc of the mother 
country owing to the possibility of unlimited conversion.