NORMAL EXCHANGES 20% 
10 be effected. On the other hand, it permits of debts and 
credits being set off against each other in so far as they 
balance, when for one reason or another the currency 
which is available on one of the two markets is not accepted 
on the other. The rate of exchange, viz., the rate at which 
the negotiation takes place, can iz the first case only vary 
within the limits corresponding to the cost of transporting 
bullion. In the second case it fluctuates outside any limits, 
It is clear, therefore, that the phenomenon of exchange 
shown by variations in the cost of transporting a given sum 
of money between two markets only arises when there is no 
method of settlement which is more economical and capable of 
being carried out at a fixed cost. Thus, for instance, there 
was at one time a rate of exchange as between Lyons and 
Paris as well as between Paris and Brussels in order to 
avoid the difficulty and expense of transporting bullion 
backwards and forwards between these two towns. The 
Bank of France, which offers its services free or in return 
for an insignificant and fixed remuneration, nowadays 
makes it unnecessary to resort to the process of exchange 
between the first two towns, and the Bank does not thereby 
appear to have violated the “natural laws” of economic 
life. It is easy to conceive, however, that the same system 
might work as between Paris and Brussels or between 
Paris and Rome or Madrid, if a common bank of issue 
extended all its operations over all these markets; and it 
does not require a violent stretch of the imagination to see 
an international bank of issue at work as the successor to 
the various national banks of issue, substituting for the 
various national notes a single fiduciary currency and 
having the task of effecting all the world over payments as 
between one market and another similar to those carried 
out at the present day within the limits of a great nation. 
It is true, of course, that such a scheme may be utopian for 
political reasons ; we only wish to emphasise here that it is 
€asy to imagine. 
It is obvious that the exchange, which is an economical 
method of settlement but of varying cost, and is based on a 
mechanism of clearing, is not necessarily international in