378 
INTERNATIONAL TRADE 
to have new aspects; but it does not make the final outcome 
different. 
“Pegging” of the dislocated exchanges by government action 
or by the action of powerful private interests, is in one way the 
opposite from speculation, in another way not unlike it. It is the 
opposite in that its design is to stop fluctuations, and thus to 
discourage speculation and what are supposed to be the effects of 
speculation. It has a similarity to speculation in that it cannot 
override for an indefinite time the main forces that determine the 
rates of exchange. 
For purposes of prestige, a government may wish to prevent the 
quoted rate on its money unit from sagging or falling. A great 
bank or group of bankers may wish to support the rate for purposes 
of profit on loans or on remittance operations. The end can be 
achieved by simply buying in the market at a given price all the 
exchange offered. The effect of such purchases is essentially the 
same as if a new demand arose in the ordinary course of trade. 
The relation of offerings and takings is affected in the same way, 
and the exchange rate modified or maintained in the same way. 
The quoted figure is still the result of the impact of the two forces. 
The peculiarity of the case is merely that one of the forces, that 
of demand, is so adjusted as to equalize the impact of the supply 
at a given point. Not a specific quantity is purchased, but such a 
quantity as will keep the rate of exchange at a specific point. 
Whatever supply of exchange is offered will be bought at the set 
price. 
The extent to which pegging will influence the exchange rate 
depends, of course, on the extent to which it is carried, on the 
amount of money which the pegger is prepared to spend in buying 
bills at the set price, and on the length of time for which he is pre- 
pared to keep up the process. With plenty of funds in hand, and a 
courageous willingness to use them to the full, he can go far in 
affecting the rates of exchange, and can maintain his rate for a long 
time. And the conditions may be more favorable to him or less 
so; more if the ordinary conditions of trade are interrupted or set