OKLAHOMA ACADEMY OF SCIENCE 99 



foreign bills would often cause greater daily fluctuations in ex- 

 change rates than now prevails, if it were not for the fact that 

 speculators stand ever read}' to buy or sell foreign exchange bills 

 regardless of the immediate demand and supply of those bills. 



Among the speculators in foreign exchange bills there are doubt- 

 less many plungers who do not base their activities on intelligent 

 knowledge of foreign exchange conditions. To the extent to which 

 foreign exchange speculation is carried on b}^ this class of specula- 

 tors, speculation is a distrubing factor which causes wide fluctua- 

 tions in the rates and consequent losses to the speculators. But 

 taken as a whole foreign exchange speculation is carried on by men 

 who have devoted the larger part of their lives to the business 

 and who speculate on the basis of knowledge of the rnarket. To 

 the extent to which foreign exchange speculation is carried on by 

 this class of speculators, speculation is a stabilizer of foreign ex- 

 change rates. 



There are many people who believe that foreign exchange be- 

 tween America and the various European countries can be stabilized 

 as a result of an agreement betwen the American Government and 

 the governments of Europe, and American bankers and foreign 

 bankers. The advocates of exchange stabilization point out that 

 the English government stabilized the exchange value of the pound 

 sterling in the American market throughout the duration of the 

 war. So the English government did : but it did so at first by send- 

 ing vast quantities of gold to the United States and by forcing 

 Engl'sh citizens who had American securities to sell those securities 

 in the American market in sufficient quantities to hold up the ex- 

 change rate of the pound sterling. By the time Englishmen had ex- 

 hausted their supply of American securities the Government of the 

 United States made extensive loans to the Government of England, 

 which loans were used by the English Government to support the 

 price of the pound sterling in the American market. 



Today the European countries have little or no gold, neither 

 have they any American securities to sell in the American market, 

 nor have they European securities which are, under present condi- 

 tions, acceptable to American investors, and, therefore, they can- 

 not hold their exchange rates up by the shipment of gold or the 

 sale of securities in America. Nor can the European governments 

 borrow additional vast sums of money from the oGvernment of the 

 United States to be used for this purpose. Consequentl}', so long 

 as they buy an excess Cjuantity of goods from America and other 

 foreign countries and are unable to pay for these goods by the ship- 

 ment of eold to .America, or bv the sale of long time securities in 



