6 F. T. Lloyd-Dodd on 



It is necessary for us to grasp, therefore, two things — (l) 

 the degree of intrinsic value that lies behind the currencies of 

 different countries ; and (2) the causes of the fluctuations in the 

 demand and supply of foreign money, which result in the 

 fluctations of the Foreign Exchanges. 



With regard to the first, we find on examination that we can 

 group the currencies of the commercial countries of the world 

 into five classes : — 



1, Under the English system money carries the right of being 

 immediately turned into gold. In the United Kingdom sovereigns 

 are legal tender up to any amount, as are also Bank of England 

 notes. Bank of Ireland notes are legal tender in Ireland only. 

 Silver and copper are only token money, silver being legal tender 

 up to 40/- and copper up to l/-. If a Bank of England note is 

 presented to that Bank, it cannot meet it with another note, but 

 must pay sovereigns against it. So that normally all the money 

 we use, except our small change, consists either of gold or of 

 paper that can be unquestionably turned into gold. I used the 

 word normally because the use of Currency Notes as a temporary 

 war measure is a deviation from the usual system. 



2. In the second class we may place the currencies of the 

 so-called gold standard countries, under which money can be 

 converted into gold when it is convenient to the Central banks of 

 these countries. German currency is an example of this class. 

 In theory the notes of the Reichsbank can be turned into 

 gold on demand. In practice they cannot except when it is 

 convenient to Germany. In France the Bank of France can meet 

 its notes in five franc pieces. In the United States " gold 

 certificates " can be turned into gold, but there is an enormous 

 amount of American paper money which does not possess this 

 right, while silver dollars are legal tender up to any amount. The 

 American banks keep the gold certificates in hand as far as 

 possible, and meet demands on them in other forms of legal 

 tender. So that if it does not suit the convenience of American 

 bankers to permit gold to leave the country, they can practically 

 refuse it, and still meet their legal obligations, 



