be sent. This point is called the “shipping-point” of gold. When the exchanges are at $4.90, it will be found that gold is going abroad. On the other hand, when the supply of bills is greater than the demand, their price will fall. A man having a bill on London to sell—i.e., a claim to a pound in London—will not sell it at a price here lower than $4.86, by more than the expense of bringing the gold itself across. Since this expense is about 3-¼ cents, bills can not fall below about $4.83. When exchange is at that price, it will be [pg 415] found that gold is coming to the United States from England. This price is the “shipping-point” for imports of gold. This, of course, applies to sight-bills only.
Formerly, we computed exchange on a scale of percentages, the real par being about 109. This was given up after the war.
When bills on foreign countries are at a premium, it is customary to say that the exchanges are against the country, or unfavorable to it. In order to understand these phrases, we must take notice of what “the exchange,” in the language of merchants, really means. It means the power which the money of the country has of purchasing the money of other countries. Supposing $4.86 to be the exact par of exchange, then when it requires more than $1,000 to buy a bill of £205, $1,000 of American money are worth less than their real equivalent of English money: and this is called an exchange unfavorable to the United States. The only persons in the United States, however, to whom it is really unfavorable are those who have money to pay in England, for they come into the bill market as buyers, and have to pay a premium; but to those who have money to receive in England the same state of things is favorable; for they come as sellers and receive the premium. The premium, however, indicates