Under some circumstances the demand on banks may be such as to necessitate a more drastic operation than that of rediscounting. It may be necessary to acquire or purchase specie by importing it. For instance, assume that a country has for a long time been suffering from an adverse balance of trade which has exhausted its specie stock. As a result we may suppose the specie reserves of all banks in the country have become very low. A stringency developing or severe demand for cash continuing, the prospect is that some or all of the banks may find their specie stock exhausted, with the result that a suspension of specie payments by common consent may be necessary; or, lacking this, that some banks will be unable to maintain specie payments and unable to obtain more specie from other banks, so that they will fail, with the injurious results to be expected from such action. In these circumstances it is necessary for the banking system of the country as a whole to get aid from abroad, and it may do so either by disposing of securities to foreign investors, or by rediscounting some of its own paper in foreign countries, or by protecting the foreign banks in any other way that will induce them to transfer a part of their specie. When such specie has been received the banks obtaining it have correspondingly strengthened themselves and are in a position to proceed with their business upon a conservative basis, meeting their obligations as requested by their customers and granting new accommodation moderately to those who require it.

This is a kind of international rediscount process which involves the transfer of specie. In ordinary domestic rediscounting no such transfer is necessary because the country within which the operation takes place is operating upon a single uniform standard of value, and a credit granted, say, in New York is easily made available in Texas. The case is different when a transaction of the kind occurs between two independent banking systems which operate upon a different currency basis, so that an actual shift of resources from one to another is necessary. Something of this kind is seen in the Federal Reserve system at times of stringency. Under the Federal Reserve Act, provision has been made whereby one Federal Reserve bank which finds its reserve running down is enabled to rediscount, through the Federal Reserve Board, with other Reserve banks. The effect of the rediscount is to transfer gold from the account of the bank granting the rediscount to the account of the bank applying for it, thus cutting the reserve of the granting bank and increasing the reserve of the applying bank. This, as will be apparent to students of banking theory, cuts down the volume of further credit supply in some parts of the country and increases it in others. The outcome is to readjust the specie resources and the outstanding banking credit of the different parts of the country, and so to bring about a better and fairer balance between them. The method is analogous to the process of acquiring specie by importing it, which is resorted to when one country goes to the banks of another for help.