370 
INTERNATIONAL TRADE 
rad 
EM 
Ra 
move both ways. As regards a paper country, to sell goods in 
it and so to have at one’s command bills of exchange on it, means 
only that purchasing power in the paper country becomes available ; 
nothing more. One can either sell the exchange, or (ordinarily 
the less convenient alternative) use the purchasing power in buying 
any goods of the paper country which one happens to want. 
The paper itself is worth nothing in any other way.! But the sale 
of goods to a silver country and the consequent possession of silver 
exchange mean that one can get a specified quantity of silver, 
a commodity which is readily vendible in any country. And 
similarly the purchase of goods from a silver country does not 
necessarily involve the purchase of exchange on that country 
as a means of effecting payment for the goods. Silver bullion 
can be bought in the open market and the silver itself transmitted. 
The converse is the case where goods move from a silver country to 
a gold country. The vendor who sends the goods from this silver 
country has command not merely of purchasing power in the gold 
country, but of gold itself; and for this as bullion he can always 
find a ready market in his own country or anywhere else. An 
alternative exists which is not present in the transactions between 
paper countries and gold countries; and the conditions on which 
the rate of exchange depends are more complex. 
We may take for illustration the trade between India and Great 
Britain — the Indian (rupee) exchange as it was between 1876 
and 1893, that is, between the year in which the great fall in 
the price of silver began and that in which the Indian mints were 
closed to the coinage of rupees. The general trend of the trade 
with the Orient need not be rehearsed. It led to a flow of specie 
toward the Orient, both of gold and silver. The gold moved to 
the silver country (India) as a commodity. The silver moved more 
1T bar from consideration the minor and negligible movement of paper to and 
fro in the pockets of travellers. I set aside also (as quite exceptional) substantial 
purchases of paper money by speculators in a foreign country. Such purchases 
played a large part in the extraordinary phenomena of the German currency debacle 
of 1921-23, and, like the other phenomena of that episode, stand outside the scope 
of the present analysis. Indeed the whole German episode stands outside the 
analysis of what may be regarded as the normal case of inconvertible paper issues 
— that in which they do not reach the stage of collapse.