380 INTERNATIONAL TRADE 
lB 
attaining its object; and it may seem to be indefinitely successful. 
And yet here also the long-run consequences are not to be evaded. 
The flow of loans from country to country depends in the end on the 
relative conditions of capital supply, just as the flow of commodities 
depends on the relations between prices; and any rates of foreign 
exchange which do not accommodate themselves to these funda- 
mental forces cannot be permanently maintained. 
The gold exchange standard is virtually a case of pegging, and 
what has been said in the preceding paragraphs applies. Tt differs 
chiefly in that the process is expected to be carried on for a longer 
time. The term pegging is commonly applied to the support or 
regulation of the exchanges for a few months or at most years. 
The gold exchange standard contemplates the permanent mainte- 
nance of a fixed rate of exchange, and the conduct of international 
trade for an indefinite period without the actual use of gold as 
circulating medium, and with no flow of gold from country to 
country in the process of adjusting the international balance of 
payments. 
Often the design is to keep the ruling rate of exchange at the same 
point at which it would be if there were the complete gold standard. 
While the currency of the country which adopts the exchange 
standard is not made convertible into gold, international trade is 
to be carried on as if it were. Even tho there be a stock of the 
metal in the hands of a central bank or government treasury from 
which in emergency gold may be sent to other countries, no flow of 
specie is expected to take place in the ordinary settlement of inter- 
national payments. It is the rate of discount at banks which is 
expected to serve as the lever for influencing the offerings of bills of 
exchange, the course of business and prices, and finally, the com- 
modity exports and imports. The rate of discount, however, is 
not dependent on a changing stock of gold held by the bank or 
banks. It is deliberately managed — manipulated, if that word 
may be used without implication of ill — in order to influence both 
the rate of exchange and the flow of remittances in such way as to 
enable the normal specie rate of exchange to be maintained.