EXCHANGE

in commerce, that epecies of transactions by which the debts of individuals residing at @ distance are cancelled by order, draft, or bill of exchange, without the transmi ion of specie. Thus, a merchant in London who owes £100 worth of cotton goods in Glasgow gives a bill or order for that amount which can be negotiated through banking agencies or otherwise against similar debts owing by other parties in Glasgow who have payments to make in London. The creditor in Glasgow is thus paid by the debtor in Glasgow, and this contrivance obviates the expense and risk of transmitting money. The proce of liquidating obligations between different nations is carried on in the same way by an exchange of foreign bills. When all the accounts of one country correspond in value with those of another, so that there is an even balance, the exchange between the countries wili be at par, that is, the sum for which the bill is drawn in the one country will be the exact value of it in the other. Exchange is said to be at par when, for instance, a bill drawn in New York for the payment of £100 sterling in London can be purchased there for £100. If it can be purchased for le , exchange is under par and is against London. If the purchaser is obliged to give more, exchange is above par and in favour of London. Although the numerous circumstances which ince antly affect the state of debt and credit prevent the ordinary course of exchange from being almost ever precisely at par, its fluctuations are confined within narrow limits, for since the Great War most countries have gradually stabilised their currencies. If direct exchange is unfavourable between two countries this can often be obviated by the interposition of bills drawn on other countries where an opposite state of matters prevails. Rate of exchange is influenced by trade balances, the volume of gold in a country, . See BILL OF HXCHANGE.—BIBLIOGRAPHY: G. J. Goschen, Theory of Foreign Exchange; H. Withers, Money Changing.