Elements of Foreign Exchange A Foreign Exchange Primer   By: Franklin Escher (1881-)

A FOREIGN EXCHANGE PRIMER

By FRANKLIN ESCHER Special Lecturer on Foreign Exchange at New York University

Fifth Edition

NEW YORK THE BANKERS PUBLISHING COMPANY 1915

LONDON EFFINGHAM WILSON, 54 THREADNEEDLE ST.

Copyright 1910 By the Bankers Publishing Co. New York

CONTENTS

PAGE

CHAPTER I. WHAT FOREIGN EXCHANGE IS AND WHAT BRINGS IT INTO EXIST 3

The various forms of obligation between the bankers and merchants of one country and the bankers and merchants of another, which result in the drawing of bills of exchange.

CHAPTER II. THE DEMAND FOR BILLS OF EXCHANGE 15

A discussion of the six sources from which spring the demand for the various kinds of bills of exchange.

CHAPTER III. THE RISE AND FALL OF EXCHANGE RATES 25

Operation of the five main influences tending to make exchange rise as opposed to the five main influences tending to make exchange fall.

CHAPTER IV. THE VARIOUS KINDS OF EXCHANGE 45

A detailed description of: Commercial "Long" Bills Clean Bills Commercial "Short" Bills Drafts drawn against securities sold abroad Bankers' demand drafts Bankers' "long" drafts.

CHAPTER V. THE FOREIGN EXCHANGE MARKET 59

How the exchange market is constituted. The bankers, dealers and brokers who make it up. How exchange rates are established. The relative importance of different kinds of exchange.

CHAPTER VI. HOW MONEY IS MADE IN FOREIGN EXCHANGE. THE OPERATIONS OF THE FOREIGN DEPARTMENT 68

An intimate description of: Selling demand bills against remittances of demand bills Selling cables against remittances of demand bills Selling demand drafts against remittances of "long" exchange The operation of lending foreign money here The drawing of finance bills Arbitraging in Foreign Exchange Dealing in exchange "futures."

CHAPTER VII. GOLD EXPORTS AND IMPORTS 106

The primary movement of gold from the mines to the markets, and its subsequent distribution along the lines of favorable exchange rates. Description (with presentation of actual figures) of: The export of gold bars from New York to London Import of gold bars from London Export of gold bars to Paris under the "triangular operation." Shipments to Argentina.

London as a "free" gold market and the ability of the Central Banks in Europe to control the movement of gold.

CHAPTER VIII. FOREIGN EXCHANGE IN ITS RELATION TO INTERNATIONAL SECURITY TRADING 130

Europe's "fixed" and "floating" investment in American bonds and stocks a constant source of international security trading. Consequent foreign exchange business. Financing foreign speculation in "Americans." Description of the various kinds of bond and stock "arbitrage."

CHAPTER IX. THE FINANCING OF EXPORTS AND IMPORTS 141

A complete description of the international banking system by which merchandise is imported into and exported from the United States. An actual operation followed through its successive steps.

PREFACE

"Where can I find a little book from which I can get a clear idea of how foreign exchange works, without going too deeply into it?" that question, put to the author dozens of times and by many different kinds of people, is responsible for the existence of this little work. There are one or two well written textbooks on foreign exchange, but never yet has the author come across a book which covered this subject in such a way that the man who knew little or nothing about it could pick up the book and within a few hours get a clear idea of how foreign exchange works, the causes which bear upon its movement, its influence on the money and security markets, etc.