512 THE WORK OF THE STOCK EXCHANGE
take payment in this form. Yet serious limitations are in
practice placed upon the extent to which gold shipments can
be employed to right trade balances. In the first place, the
amount of gold in the world plus the likely future gold pro-
duction today is small in proportion to the debits and credits
contracted in terms of gold, and for this reason it is necessary
either to restrain the growth of both international and do-
mestic business, or to find substitutes for gold payments. Also,
gold shipments are in practice attended by some delay, and
considerable expense from cooperage, cartage, freight, insur-
ance charges, and insurance in transit. Furthermore, since
the currency and bank credit of the exporting and importing
nations are normally based upon gold, any considerable gold
shipments may result in financial deflation in the exporting
country and financial inflation in the importing country. This
explains the intense “news interest” and public attention which
invariably attends gold shipments. These serious deterrents
to gold shipments therefore render them a last resort in right-
ing trade balances, and practically compel the resort to alter-
native methods where these are possible.
International Shifting of Bank Credit.—One common
alternative to the use of gold shipments in righting interna-
tional trade balances is, of course, the shifting of bank credit
between nations. This can be done swiftly and inexpensively
over the international cables, and it is daily resorted to between
nations as a more efficient way not only of righting trade bal-
ances but of doing business at all.
This use of bank credit in international trade is centuries
old, and has developed a very extensive and complex technique
of its own. Not since the Middle Ages has it been always
necessary in international business transactions to exchange
the actual metal money of one country for that of another;
instead, dealings in credit in terms of foreign currencies have
developed in every important country. This credit usually
takes the form of bankers’ bills of exchange.
