372 
INTERNATIONAL TRADE 
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chain of events similar in character might start the other way. 
An increased movement of goods from India to Great Britain might 
set in because of an increase of demand for them ; and this would 
lead to a rise in rupee exchange. 
We have here merely another case of the sort of distinction 
just made for the case of paper money and paper exchange. The 
rate of rupee exchange may be the cause of merchandise move- 
ments, or the merchandise movements may be the cause of the 
rate of exchange. Rupee exchange might go up or down from 
causes which have no immediate connection with the import and 
export goods — from loans, interest payments, government remit- 
tances. Thereupon merchandise movements would respond to 
the new condition of exchange. Or, the other way, crops might 
fluctuate from season to season, or trade disturbances might 
affect the volume of Indian exports (cotton, say, during the Ameri- 
can Civil War). Then exchange would respond to the new condi- 
tions in the movements of the goods. And, at a subsequent stage, 
other goods, not the originators of the disturbance, would be 
affected precisely as if the rates of exchange had been shifted 
because of non-merchandise transactions. 
To this analysis, however, there must obviously be added, in 
the case of silver exchange, the consideration of a factor different 
from any that enters in the case of paper money and paper ex- 
change. It is the price of silver bullion in terms of gold. The gold 
price of silver may alter from causes that have nothing to do with 
rupee exchange and nothing to do with the trade between the gold 
and silver countries. The price of silver may fall in London 
because larger quantities come from the mines, or because the 
demand for use in the arts declines, or because governments buy 
less silver for subsidiary coin. The price of rupee exchange will 
follow that of silver. Merchandise movements will then be 
influenced exactly as if the rate of exchange had been disturbed 
by loans er other non-merchandise transactions. The converse 
chain of events may also take place. Merchandise movements 
may themselves be a cause influencing the gold price of silver 
bullion. An increase of exports from India, or a decline of imports