THE FOREIGN EXCHANGES 239

more to borrow, bids are less readily made except at reduced
prices. So, too, holders of produce or of stock exchange
securities, finding it less easy to borrow the funds wherewith
to meet current obligations, or to renew the loans without
which they cannot continue to hold their stocks of produce
or of securities, are forced to realise part of their holdings.
Thus a check to demand and readier offerings leads to a
downward movement in prices. This movement may bring
some commodities to a price-level which makes it worth
while to export them, and thus an increased obligation to
make payments to the country concerned is created. The
reduction of prices of securities operates in like fashion. On
the other hand, the fall in prices checks shipments to the
country, and the supply of bills drawn on it (or the demand
in it for means of remitting in payment) in connection
therewith, since the profit margin on some lines of goods
will be destroyed by the downward price movement. It
will be observed that, from the nature of the operative cause,
the influence will be felt generally, if not in every market,
and thus there is no need to look for influences specially
affecting individual commodities or securities. Some will be
more affected than others, in the nature of things, and some
may escape the general influence.
Thus the balance of indebtedness is modified in favour of
the country in which the loan rate, and with it the discount
rate, has risen. Further, bills of long date will afford an
investment yielding a rate of interest corresponding to the
discount rate, as already shown. Hence they offer a favourable
 investment for funds of foreigners, who will hold them
till maturity, under such conditions, in place of forwarding
them for prompt discounting as a means of procuring credit
in the market on which they are drawn. The demand for
such bills as an investment leads to a rise in their price, and
sight bills follow, so that the exchanges on the country which
has raised its discount rate move away from the specie point,
ot, as it is called, move in favour of that country, Should
discount rates elsewhere rise equally with that in question,
the investment demand just considered would not be noteworthy,
 since other uses of money would yield equal