NORMAL EXCHANGES 223 
of francs in New York could no longer differ widely from 
this rate; for Americans having a debt to recover in Paris 
would rather ask their debtor to make them a remittance 
than sell francs (bills on Paris) at New York at a lower rate 
than 15 francs to the dollar. On the other hand, the rate 
of the franc in relation to the dollar could not rise above 
15 francs (after deducting the cost of transporting gold) 
if the Exchange Office receives gold at this rate, or even if 
it purchases at the same rate of 15 francs (minus the cost 
of transporting gold to France) bills drawn by French 
exporters over and above the actual requirements of the 
market. For these exporters will have the certainty of 
receiving not less than 15 francs (after deducting the cost 
of transport) for each dollar in selling their bills at this 
rate to the Office and will, therefore, refuse to sell their 
bills on the market at a lowerrate than the new parity, after 
deducting the import gold point. The franc quotations in 
New York could not, even in these circumstances, differ 
widely from the Paris rate. For purchasers of francs in 
New York instead of paying more than 15 francs to the 
dollar (plus the cost of transport) would ship gold to 
France, where every gold dollar would be exchanged for 
15 francs. Or, again, they would request their French 
creditors to draw bills on them and, as we have seen, these 
bills would be negotiated in Paris at a minimum rate of 
I§ francs less the cost of import. 
This mechanism is in no way imaginary; it is, in fact, 
employed for the purpose of holding the exchanges in 
countries which make a rational use of the gold exchange 
standard, such as Austria and the Philippine Islands. It 
has no other basis than the normal play of arbitration for 
the benefit of a market which will guarantee the conver- 
tibility of its home currency into foreign currencies and of 
foreign currencies into home currency at the same rate. 
It prevents the appreciation as well as the depreciation of the 
home currency, which will only fluctuate within the two gold 
points. It is fundamentally identical with the classical 
mechanism of gold points as between countries with a gold 
circulation ; it merely affords the possibility of substituting