PEGGING 
379 
aside, less if trade is in its usual grooves. During the Great 
War governments were lavish in their expenditure for pegging, 
as they were for others, and in this direction as in others their 
operations often were not only recklessly extravagant, but of 
negligible effect for the military objects which were supposed to be 
promoted. But they did serve to peg the rates for long periods. 
The success in attaining this immediate object was made com- 
paratively easy because the ordinary course of international trade 
was itself profoundly disturbed, and the ordinary transactions 
greatly restricted. The reflex influence which pegging exercises 
on merchandise movements, and on all international transac- 
tions, was impeded or even completely obviated. 
In time of peace, however, and under normal commercial condi- 
tions, that reflex influence becomes strong, and in the end may 
bring the pegger’s efforts to naught, unless indeed he has 
succeeded in adjusting his set rate to the figure which would prevail 
on the whole without his interposition. Both the imports and 
exports of goods will necessarily be affected if he tries to keep the 
rate at a different figure. Exports will be stimulated if the rate is 
set high as compared with current prices of exportable goods; or 
(the more common case) imports will be stimulated if it is set low 
as compared with the current prices of imported goods. The 
oreater the discrepancies, the more strain will be put on the 
resources of the pegger. 
Similar is the situation with the invisible items. These two will 
respond to stimulus or discouragement, as the case may be. It is 
true that the invisible items, and especially the sales and purchases 
of securities, lending or borrowing operations of all kinds, are 
subject to influences of their own. For short periods, and indeed 
for periods of considerable length — not only for months, but for 
a year or two — they are themselves affected by the rate. Short- 
time loans by financial houses, loans by governments themselves, 
may be made more or less easy of negotiation by the state of the 
exchanges; and the very negotiation of loans then has its effect on 
the demand and supply of bills and so on the maintenance of the 
pegger’s figure. In this way pegging may long be successful in