SPECULATION 
377 
So it is when there are other changes that prove to affect the 
exchange rate permanently but operate by slow stages, such as 
tourist remittances, or a series of loans made from time to time by 
the people of one country to those of another. Just how much the 
needed remittances amount to, how rapidly they will follow one or 
the other, how soon cease, is usually a matter for guesswork. 
Spread over a season, a year, even a couple of years, they gradually 
bring their pressure to bear on the exchange market, with ups and 
downs but none the less with a movement which persists in the 
same direction. Underneath the fluctuations and speculations 
there is the inevitable: the balance of payments must be met, and 
the first step in the settlement, the only one that is effective, is the 
readjustment of the exchange rate. 
Where, on the other hand, new factors enter suddenly and on a 
large scale, the exchange market feels a great wave of influence at 
once. The rates move suddenly, yet move irregularly. This 
sort of thing happens, for example — to refer again to a case 
already used for illustration — when crop fluctuations cause abrupt 
shifts in agricultural exports. It happens, too, when remittances 
of a political or military nature have to be made once for all at a 
stated date. A quasi-catastrophic effect ensues, and, as need 
hardly be said, is accentuated if additional paper money issues 
are made or are expected. In all such cases the altered relation of 
offerings and takings in the market reflects itself at once in the 
exchange rates. And when sharp fluctuations are repeated and 
seem to have become habitual, the outside public is drawn in more 
and more. Speculation becomes rampant; fluctuations are 
intensified ; the market may be rigged ; the day-to-day quotations 
become quite unpredictable. Commonly enough, when this stage 
is reached, the speculation which has resulted from the disturbances 
is regarded as their cause, and there ensue legislative inquiries and 
government interventions. Buthere too, underneath all the irregu- 
larities, there is a steady trend, induced by the altered relation 
of the supply of bills to the demand; a trend which may be mis- 
understood but cannot be reversed or long checked. Speculation 
1s caused bv the new situation. and in turn causes the situation