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country. This sending or receiving of bullion, however, is important principally as it affects the banking situation. It is the banks which will part with the gold, and with each fall in their reserves they will tend to restrict credits, of which gold forms a basis. A rise in the discount rates tends to check the outflow of gold. On the other hand, with a reasonable influx of gold, banking reserves reach that point when a low rate can be put in operation, with a corresponding impetus to trade and production.

The Influence of Trade Conditions

So far as individuals are concerned, it is the debtors to whom the terms "favorable" or "unfavorable” apply. They must buy the bills of exchange to send to their creditors, and the question of how much of the foreign currency units they can get in exchange for each unit of the home currency is of vital importance to them. Trade conditions exercise the greatest influence upon the exchanges, since it is from the exports and imports of a country that the supply of bills of exchange principally emanates. It is the contention of economists that a national loan acts in precisely the same way as an import to the lending country and an export to the borrowing country. The reverse is true when the interest on such loans is paid.

The United States now has capital to lend. It is a creditor instead of a debtor nation, and the American dollar is becoming as important a unit of international exchange as the pound sterling. It is the beginning of a new era in the economic history of the United States.

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The First Port of the Pacific; its present and its future. An Exposition in Politics and Economics.

NEW YORK
THE BANCROFT COMPANY, PUBLISHERS

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