CHAPTER 28

SPECULATION, PEGGING, THE GoLD EXCHANGE STANDARD

WHAT has been so far said needs to be qualified and amplified
by a consideration of the short-period movements of dislocated
exchanges. Something in this direction has already been done in
the preceding chapters. Tho these were concerned mainly with
long-period results, they dealt also with some transition phenomena
of short or of moderate duration. Still other phenomena of similar
character will now be examined. Partly they are inevitable
incidents of a transition from one stage of equilibrium to another,
and in that sense are normal ; partly they are of irregular character,
not evineing any underlying trend.
The reader should bear in mind that the discussion is still confined
 to conditions relatively stable; that is, it proceeds on the
assumption that the currency amounts are fixed. The consequences
 which arise from an increase or decrease in the quantity of
paper are still ruled out, it being important, I am convinced, to
distinguish between the consequences of the mere fact of dislocated
exchanges and those which result from increase or decrease of the
currency.
First, speculative dealings. In the case of dislocated exchanges
and especially paper exchange, these are of much greater importance
 than under gold exchanges, and have very different effects.
Between gold countries the fluctuations in the rates of exchange
are restricted within the narrow limits of the gold points. The ups
and downs cannot in any event be great. And this very circumstance
 brings it about that usually they are not rapid. The purchases
 and sales are made chiefly by a small knot of bankers
and brokers, professional dealers who are conversant with the
general course of the market, experienced in its movements, well-374