loss of interest while the gold is on the ocean. At this moment there are weekly arrivals of gold from Europe, and the market quotation for sterling exchange is about one per cent. below par. Perhaps a clipping from a daily paper1 will serve to explain the situation:

"The par of sterling exchange is 4.867. The rate of demand sterling bills at which gold can be exported to London without loss is 4.883 for bars, and 4.891 for coin, and the rate at which it can be imported without loss is 4.832.

"The market for sterling was firmer in tone in the forenoon, and 60 day rate advancedcent at 12:11 P. M. Posted rates now 4.80 and 4.84. The rates for actual business were as follows, viz.: Sixty days, 4.79; demand, 4.83; cables, 4.83 to 4.84. Commercial bills were 4.78 to 4.78. supply of cotton bills was fair."

The

Let us go over this in detail, considering the balance of trade when "favorable.” The New York bankers whose business it is to carry on the financial part of foreign

1 The New York Evening Post, October 13, 1891.

trade have such a strong desire for gold that for every pound sterling deliverable by their correspondents in London, on cable order, they are willing to accept, here, $4.833 to $4.84; for every pound sterling deliverable there, on demand, they would accept, here, $4.834; and for every one deliverable there, after the lapse of sixty days, these bankers would accept, here and now, $4.79, the bankers making interest in the meantime. Or we may say that the London correspondents of the New York bankers feel an unusually heavy demand for London bills of exchange drawn against New York, and have instructed the New York bankers to provide themselves with the money necessary to meet these bills. In the same newspaper paragraph we learn that there was a fair supply of cotton bills (a portion of the mass of commercial bills) and that commercial bills were worth only $4.781 to $4.78 for each £1 sterling, which means that whoever, in America, at that moment, was in the act of making a sale of cotton, wheat, petroleum, or other product, to a

buyer in any foreign country, would have to lose the difference between $4.783 and $4.867 upon each £1 sterling, the banker's profit included, less the interest from the date of selling his bill of exchange to the date of maturity of the bill. This is the state of affairs when it is said that the balance of trade is "favorable." In reality, when gold comes this way under these favorable conditions, the cost of bringing it must be borne, largely, by our exporters of merchandise, for when they ship goods they draw commercial bills of exchange against the foreign receivers of those goods and these bills of exchange must be sold to bankers who are already heavily loaded with similar bills of exchange.

If, when the balance of trade is "favor able," you should go to a banker and ask him for money to cover the value of merchandise which you were then exporting, he could rightly say: "So many exporters want to obtain money, just now, that I cannot supply them without fetching the money from England, and each exporter must pay his share of the necessary expense.

Your commercial bill of exchange must be cashed in London, at maturity, and the money must be shipped to New York, for that is the way at present to reimburse me." When, therefore, the balance of trade is "favorable" to this country our exporters, finding it difficult or expensive. to obtain cash for their bills of exchange, contract their buying of exportable merchandise and force down the price of it, thus passing along to the farmer and the manufacturer a portion of the burden of expense entailed by the fetching of gold from Europe to America. Even if in adjusting the prices of goods to the point where exportation is possible, the expense of transporting gold be fastened partly upon the foreign buyers of the merchandise, still this expense is a tax upon our export business.

In regard, now, to our import business. when the balance of trade is "favorable." At such a time European bankers will pay high rates for commercial bills of exchange drawn against New York, for by buying these bills and sending them to the bank

ers' New York correspondents these latter will be put in position to obtain here the money which we have seen to be in so great demand. Shippers of goods to America will find that, in addition to receiving the agreed-upon price for their goods, they possibly may receive a premium upon the bill of exchange drawn against the consignees of those goods, or, at least, receive the par value of their bills. When trade is "favorable" to this country, foreign shippers to America will be encouraged by this advantage, and may lower their prices to American buyers to induce them to buy more largely.

We thus see that when the balance of trade is "favorable" there are forces at work which both check the exportation of merchandise and encourage the importation of merchandise; and, on the other hand, we might as easily show that whenever the balance of trade is "unfavorable" there must be forces at work which check the importation of merchandise and encourage the exportation of merchandise. There are forces always at work which,