FOREIGN MARKETS 135 



theory make much of the argument that a uniform " general " rise 

 or fall in prices is never observable, as the prices of some commodities 

 fall when others rise. I am inclined to believe that a " general " 

 rise can and does occur. A change in the discount rates and a change 

 in the rate of exchange is tantamount to a general change in the level 

 of prices; as it affects all bills alike, it affects all sales alike. It is the 

 resultant of those forces which affect all prices uniformly, other 

 forces being at work on the different commodities separately, causing 

 the divergences which have obscured the issue. Such a change in 

 the rates of exchange is the very phenomenon demanded by the old 

 theory as the cause of the international movement of money. The 

 old theory does not require that merchants get out new catalogues or 

 change violently from what would otherwise have been the bids they 

 make or accept on the exchanges. A sale of wheat by a Chicago 

 shipper to London on a day when he can sell his bill at $4.89 is worth 

 one per cent more than if the sale took place on a day when exchange 

 is $4.84. Here we have a difference of one per cent which can 

 occur without a single change in quotations. Every such fluctuation 

 is felt at once by the delicate machinery that moves the tides in the 

 ebb and flow of bullion in international payments. As to the 

 argument that we have no evidence in current index numbers, showing 

 clearly that a rise in prices has followed an increase in the stock of 

 bullion, it may be said that we have no statistical device for watching 

 prices which will record such a change with the requisite delicacy, 

 even if we were warranted in looking for the change in the prices 

 current. The change required by the theory is too slight to be 

 detected by any statistical device yet invented. Such a criticism 

 amounts to saying that the governor of a steam engine does not 

 regulate its speed unless the arms and balls are gyrating violently up 

 and down, when, as a matter of fact, the better the governor, the 

 slighter the fluctuations. The weight of the argument in this con- 

 troversy that has recently grown so hot seems to me to sustain those 

 who have rushed to the defense of the quantity theory, and there seems 

 to be no occasion to qualify the statement made above that the theory 

 of foreign exchanges has undergone no important modification in 

 recent times. 



PART II 



A Review of Some of the More Important Recent Events in the Economic 

 History of Foreign Markets 



Although the economic theories relating to foreign markets have 

 been quiescent enough of late, there has been stir and bustle indeed in 

 the markets themselves, and during the past five years certain great 

 changes affecting them have come to pass which are worthy of 



