The fluctuations in the value of bills of exchange within or even beyond the limits set by the gold points are caused by a variety of influences which must now be particularized and described. In this section we will consider those which are operative in ordinary times and under ordinary circumstances.

A. Trade influences. - The most important of these are the regular imports and exports, the former creating the largest demand, and the latter the largest supply, of bills. In the New York market, for example, most of the bills on London are drawn against our exports of grain, cattle, minerals, and various manufactured products to England, and the demand for these bills comes chiefly from the importers of English goods. In the fall and early winter, when our exports are relatively large, the price of London bills is, therefore, apt to be low, and in the seasons when imports predominate it is apt to be high. This would always be the case, if many other influences did not tend to counteract that of imports and exports. The price of London bills is affected by our trade with other countries, it being customary to send bills on that market in payment of imports from many other parts of the world, especially from the English colonies, and to draw bills against the London correspondents of firms situated thousands of miles from that city. This practice is explained by the extensive commercial connections of English merchants and especially of the London banking houses.

In estimating the influences of trade upon the exchanges, freight, commission, brokerage, and insurance charges must not be overlooked. Inasmuch as these are separate items of expense payable to different individuals and firms, special bills are purchased and drawn in connection with them. Whether they exert their influence on the demand or the supply side, however, depends upon the nationality and location of the firms who do the business. On the New York market freight charges figure chiefly on the demand side of London bills, since a large part of the ocean carrying trade is in the hands of English ship-owners, who receive their pay in London bills. The great German transportation companies also have a large New York business which influences the demand for German bills. The same principle holds with the other expenses involved in modern commercial processes. If foreign commission houses act as intermediaries in our international trade, their charges increase the demand for foreign bills; if domestic firms transact this business, their payment does not affect the foreign market, and if they transact business for foreign houses, their charges increase the supply of foreign bills. These various minor items are of the greatest significance in the interpretation of the London exchanges owing to the size of the English merchant marine, which does a large part of the international transportation business of the world, and to the extensive development of the commission and marine-insurance business in England. Should a large share of these various branches of industry be transferred to capitalists of the United States in the not distant future, as now seems probable, the rates of foreign exchange on the New York market will be affected thereby.

B. The influence of international commerce in securities. - The corporate form of industrial organization at the present time dominates the industrial world, and is responsible for the existence of an enormous mass of industrial securities in the form of stocks and bonds of many varieties. Add to these the credit documents which represent the huge public debts of the various nations, states, municipalities, and other political divisions of the world, and the aggregate reaches a figure so large as to be almost incomprehensible. The greater part of these securities are negotiable, and for their purchase and sale markets have been developed in all large commercial centres, many of which are international in their character. Indeed no markets are more cosmopolitan than the great stock exchanges of New York, London, Paris, and Berlin. On these are listed the chief industrial and public securities of the different countries of the world, and by means of the telegraph and telephone international transactions are of daily occurrence. Like ordinary imports and exports, the settlement of these accounts is accomplished through foreign bills, and accordingly they must be included among the influences which affect the rates of exchange.

The London Stock Exchange will best serve as an illustration, since its international dealings are most extensive and frequently influence the exchanges in every part of the world. Its lists contain the names of more international securities than those of any other market, and it is the chief means through which English capital is invested in every country in the world. Suppose an English capitalist wishes to invest his money in the New York Central Railroad, or in some other enterprise in the United States. He will apply to a London broker, who will cable some member of the New York Exchange to secure for him the desired stocks or bonds. When the purchase has been made the New York broker will draw a bill on London for the amount due him, including his commission, andwill sell it to a banker or a bill-broker like any other merchant. The bills thus drawn against securities purchased for Englishmen swell the supply which results from the regular exports and help to lower the rate of exchange on London. If Americans were to invest money in English enterprises, the payment for the securities sent them would create a demand for London bills, and thus tend to raise the rate of exchange.

Besides the transfer of securities from one country to another, representing more or less permanent investments of capital, the business of the stock exchanges includes speculative purchases and sales on foreign account. The magnitude of these is sometimes very great and their effect upon the price of bills marked. An Englishman, for example, may deal in American futures through a New York broker. This amounts to betting on the price of certain securities on a certain date in the future, but takes the form of purchasing stocks or bonds for delivery at some future date with the option of paying or receiving the difference between the price agreed upon and that which rules on the market at that date. In case the Englishman wins, his margin will be paid by means of a bill on London. If he loses, the New York broker will draw on him for the amount due, and sell the bill on the New York market. In the one case the demand for London bills is increased, and in the other the supply.