International trade

Bibliographic data

Monograph

Identifikator:: 1758394757

URN:: urn:nbn:de:zbw-retromon-136209

Document type:: Monograph

Author:: Taussig, Frank William http://d-nb.info/gnd/120199459

Title:: International trade

Place of publication:: New York, NY

Publisher:: Macmillan

Year of publication:: 1927

Scope:: XXI, 425 Seiten; graph. Darst.

Digitisation:: 2021

Collection:: Economics Books

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Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Part III. International trade under inconvertible paper

Collection:: Economics Books

344 INTERNATIONAL TRADE rd is Rae | 4 Li £0 Or, what comes to the same thing, the demand in London for “dol- lars,” by the bankers who have to meet drafts sent them by their New York correspondents, becomes greater than before. The price of dollar exchange rises in London; the price of sterling ex- change falls in New York. It is not material whether the trans- actions are carried on in the one market or the other, or partly in one and partly in the other. We may follow the traditional way of quoting exchange, so many dollars to the pound. For conven- lence we may treat the problem also as if all the transactions were executed in one place; the two to which resort is made in practice being in effect one connected market. Let the place be New York. Then 25 per cent more of sterling exchange is offered in New York. There is no more demand for sterling exchange than before; no more purchases of British goods are made than before, and no larger remittances have to be made to London. The situation is of a kind not unfamiliar in economic analysis, that in which two fixed quantities meet. Such a situation was assumed in the old reasoning about the wages-fund; such too was assumed, and I think may still be reasonably assumed, in the rea- soning which underlies the quantity theory of money. In the present case, there is in the foreign exchange market a given sup- ply of sterling exchange, a given quantity offered for sterling. The price in Bradburys of dollar exchange will rise exactly in pro- portion to the increased quantity of sterling exchange offered. Exchange will go to $8.00 to the pound. The same number of pounds will buy less dollars than before; the same number of dollars will buy more pounds than before. If all the transactions took place in London, and if quotations were made the other way — in terms of the amount of British money which one dollar would buy — then exchange would shift from a previous rate of 2 shillings per dollar to a new rate of 2s. 2d. per dollar. The essential point is that the price of foreign exchange, the purchasing power of one currency in terms of the other, depends at any given time on the respective volumes of remittances. It results from the vmpact of two forces that meet. The outcome is simply such as to equalize the remittances; such that the money

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