CHAPTER 18 
THE FOREIGN EXCHANGES AND THE INTERNATIONAL 
MOVEMENT OF SECURITIES 
SoME further aspects of the movement of specie from country 
to country will be considered in the present chapter: the influence 
of dealings in foreign exchange, and the somewhat similar influence 
of the international movement of securities. 
It is not within the scope of this book to follow the details of 
the mechanism of the foreign exchanges. The intricacies of the 
subject are adequately set forth in the books on this special 
subject, and need the less attention here because they are of 
little significance for the broader problems of international trade. 
There is occasion for no more than a summary statement of the 
way in which dealings and speculations in the foreign exchanges 
serve to postpone, to smooth, to reduce to a minimum, the actual 
transmission of gold. 
If there were no such thing as speculative purchases and sales 
of foreign exchange, the rate (the price of bills on a foreign country) 
would always stand in one of three positions. It would be at the 
first position (par) when imports and exports exactly balanced ; 
or rather, when the total of all payments, including non-merchan- 
dise items, exactly balanced. It would be at the second position 
(specie-export point), when the balance of payments was against 
the country; and at the third (specie-import point), when the 
balance of payments was toward the country. 
In fact, the rate fluctuates all thru the range between the two 
extremes, and only by accident is it at any one time precisely at 
the parity point. This unstable and shifting situation is due to 
the calculations and trading of the bankers and brokers who buy 
and sell exchange. They sell forward, at less than the export 
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