1383 MODERN MONETARY SYSTEMS 
S 4. Fluctuations in abnormal exchanges—limited influence of 
the balance of payments—influence of speculators and of 
their forecasts. 
As those exchange phenomena which chiefly concern 
economists are connected with abnormal exchanges and 
have as their characteristic the instability of the rate, it is 
important to seek the causes of fluctuations. 
Among the possible causes, there is one which will 
immediately occur to the reader, viz., the position of the 
balance of payments ; for the rate of exchange registers the 
rate of bills drawn on foreign countries.! These drafts 
represent debts which are immediately recoverable from 
foreign countries, and so the aggregate of the drafts 
offered corresponds to the aggregate of such debts. 
And as these drafts are bought by persons owing 
money abroad, the total demand depends upon the total 
amount of the debts which 1s recoverable from abroad at 
any given moment. Hence the ratio between the total 
amount owed #0 foreign countries and the total amount 
owed &y foreign countries and recoverable at any given 
moment will determine supply and demand on the ex- 
change market at that moment ; and this 1s admitted to be 
the determining factor, so long as the exchange fluctuates 
within the gold points. 
This factor will not, of course, cease to have an impor- 
tant influence when the exchange fluctuates outside the 
gold points ; this becomes clear from the mere perusal of 
the weekly review in the financial Press, in which the 
editors follow day by day the events which are likely to 
1 A Frenchman, in order to pay a debt in England, instead of buying a 
draft on London may wait for his English creditor to draw a bill on him 
and negotiate it. In these circumstances his debt will not immediately 
appear on the Paris market; but an equivalent English credit will appear on 
the London market; this amounts to the same thing, as the two markets are 
in complete harmony and their rates are always being brought to the same 
level by continuous arbitration. 
2 Even if the drafts which are negotiated are only payable after a certain 
interval, they can nevertheless be discounted and are therefore a means of 
immediate payment.