MOVEMENTS AND TRADE 117 
gold would move to one or the other but in relatively small 
amounts. If, however, the excess on one side or the other were 
long continued, gold would be drained away in such quantities 
that bank reserves would be in danger of exhaustion in the 
debtor country. The manipulation of a gold exchange standard 
demands, in fact, continuous and close consideration of adverse 
movements of the exchange because of their tendency to stimu- 
late the export of gold, and it also necessitates the formulation 
of measures to check undue depletion of gold reserves, i.e. credit 
contraction, which, as we have seen, may be sudden and severe 
enough to produce a crisis. 
Hawtrey has examined very exhaustively the root causes of 
such movements of gold, and has shown that they arise both 
from purely monetary and non-monetary causes. The monetary 
causes of gold movements are connected with changes in the 
relative value of British and Australian currency. Gold moved 
from Australia to Britain either because British currency 
appreciated in value owing to contraction of credit there, or 
because Australian currency depreciated through expansion 
of currency here.! Keeping in mind the conditions between 
1900 and 1913, consider the case of an inflation of credit in 
Australia in its effects on trade and gold movement. An ex- 
pansion of credit increases temporarily the purchasing power 
of the community affected. Exporters of Australian products 
may be expected to enlarge the scope of their operations by 
working on increased overdraits. Primary producers from whom 
they buy receive the money as income; and, as this is spent, 
the demand for both foreign-trade and home-trade commodities 
is increased. Foreign-trade commodities are those which might 
be either exported or imported, together with Australian 
commodities which compete with imports, that portion of 
primary products which is consumed in Australia, and, lastly, 
any commodities which, though wholly produced and consumed 
in Australia, are so far exposed to potential competition that 
they are tied approximately to world-prices. All commodities 
on foreign countries ruling in London, and fix their rates with London according 
to the state of their cash balances in London. Only in exceptional circumstances 
do the (British and Australian) rates move far from parity. —Copland. 
L An excellent treatment of the Anglo-Australian exchange situation will be 
found in Chapter IT of Foreign Banking Systems (Henry Holt) entitled ‘The Banking 
System of Australia’, by Professor D. B. Copland.