NORMAL EXCHANGES 21 
plethora of yellow metal would be inclined merely to hand 
over to the poor relations of the League of Nations a pro- 
portional share and as they would at most be inclined to 
subscribe to an international loan for their benefit, e.g., in 
dollars or in gold francs, we are led to contemplate another 
possibility whichappears to be capable of practical develop- 
ment. 
The gold required for converting one national currency 
into a foreign currency on a stable basis would not 
be transferred to each country in order to constitute a gold 
reserve. An international credit institute would be created, 
its capital being subscribed by an international loan. 
It would open for the benefit of every country which 
could offer the necessary securities a credit adequate to its 
normal requirements for its balance of payments.2 Among 
these securities there might figure in the first place the 
payment of interest in gold out of the balance of valuta of 
the exporters in each country. Out of this credit the bills 
1 This International Institute of Credit would not be a bank; it would 
only give credit to exchange offices. We should see no objection in principle 
to this International Institute being empowered to issue notes; on the 
contrary, it would be desirable; but this issue, which would be destined 
exclusively for international payments, would need to be almost entirely 
covered by gold unless the notes were legal tender currency in all countries. 
{See on this subject the author’s note on the Vanderlip Plan, Revue 
Economique Internationale, January 1922). Moreover, as this Institute would 
play the part of an International Clearing House, it would hardly need to 
transfer gold even if it had no power to issue notes, for the book transfers 
which it would undertake would enable it to effect large international 
payments with the minimum amount of bullion. It is only fair to point out 
here that the idea of an International Clearing House was mooted and 
defined long ago by the distinguished Italian financier, Luigi Luzzatt, 
who, in principle, induced the Congres de 1'Union Economique Inter- 
nationale to adopt it in 1912 at Brussels; see on this point the minutes of 
the Conférence Interparlementaire du Commerce for May 1922, and “La 
Paix Monétaire,” by Luigi Luzzatti. We believe that this same idea 
should be carried out more systematically and in conjunction with the 
creation of national exchange offices. 
2 It is essential that this credit should be ear-marked; if, as is contem- 
plated in the ter Meulen or Vanderlip system, credits are opened for the 
benefit of individual private persons, facilities might be given for certain 
transactions but there need not necessarily result a stabilisation of the 
exchange. 
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