Fluctuations in the Foreign Exchanges. 7 



3. Thirdly, there are certain countries such as India, Japan, 

 Mexico, Brazil, and the Argentine, which have a semi-gold 

 standard They will issue silver or paper currency against gold, 

 but have no obligations to convert the silver or paper currency 

 into gold on demand. Such countries usually take measures to 

 keep the exchange value of their currency at or near the legal 

 ratio. Thus India maintains balances in London, so that the 

 (Tovernmcnt can supply English monej^, when the demand for it 

 in India becomes so great, as to depress the purchasing power of 

 the rupee to too great an extent. 



4. Fourthly, there are the few silver standard countries of 

 which China is the only important example, and lastly, 



5. There are the few purely paper money countries where 

 gold is simply dealt with as ordinary merchandise, and always 

 stands at a premium. 



We see then that the intrinsic value behind the currencies of 

 different countries varies considerably. Gold is the international 

 medium of exchange — acceptable everywhere — and while the 

 notes of a country are perfectly serviceable in that country, they 

 are useless for international trade. It is for this reason that the 

 gold-backing of a country's currency has such an important 

 influence on its foreign exchange. 



Having considered thus briefly the money of different 

 countries, which is the subject matter of the Foreign Exchanges, 

 we must now see how demand for the money of one country 

 arises in another. A claim for money between nations arises in 

 exactly the same way as between individuals. An individual may 

 be regarded as exporting the services, which he renders, in his 

 business or profession, and for which he is paid in money. He 

 imports the food, shelter, clothing, amusements, and all the 

 luxuries and necessaries of life which he enjoys, and pays for them 

 by cheque or cash. At the end of the year, if he has kept careful 

 accounts, he can see what he has received, how he has spent it, 

 and the exact amount of his balance, or overdraft, as the case 

 may be. 



