After the foregoing explanation the following example from the Economist (giving the rates current abroad for bills payable in London) needs no comment:—

FOREIGN RATES OF EXCHANGE ON LONDON.

The term Short Exchange is used to denote cheques and bills on demand or at sight, or up to 3 days' sight; the rate is based on the Mint par of exchange. The term Long Exchange is applied to bills drawn for a "term"-2 mos., 3 mos., &c.; the rate is based on the "short exchange," any difference between the "long" and the "short" rate being due to the rate of interest or discount which has to be calculated for the time the bill has to run, the cost of bill stamps, and the financial standing of the drawer and drawee.

Eastern Exchanges. In exchange with Eastern countries, the foreign coins (rupees, dollars, and taels) are generally taken as the fixed quantity, the fluctuations being in the British money. The only exception is with regard to the Dutch possessions of Batavia and Surabaya, the exchange with which is quoted in florins per £1 sterling.

The following extract from the Times gives the Eastern "Course of Exchange" for the day :

Council Bills and Telegraphic Transfers.-There are two other modes of transmitting money from England to India which it is perhaps desirable to explain here; we refer to the Council Bills and Telegraphic Transfers sold on behalf of the Government of India.

The first are bills drawn by the Secretary of State for India (London) on the Government treasuries in India. Up to about 20 years ago the Secretary of State always drew on India by demand drafts, but since then he has sold both demand drafts (or "Council Bills," as they are termed) and "Telegraphic Transfers," whichever might be required.

The reason for these drawings is this. The Government of India has to pay to the British Government every year a sum of 17 or 18 millions sterling, for interest on debts contracted in England, pensions to retired civil and military officers, home charges for troops serving in India, and the purchase of stores, &c. The revenues of the Indian Government are, of course, received in silver, i.e., rupees, and the money is kept at the three principal treasuries in India, viz., Bombay, Calcutta, and Madras. This silver has to be converted into gold, in order to pay India's gold debts, and the readiest way of doing this is for the Government of India to sell its drafts in

London, where it receives gold for an equivalent amount in rupees, payable in India.

The way this is done is as follows:-The Secretary of State for India is advised from India that there is such and such an amount in the treasury available for remittance or ready for drawing upon. Thereupon the Secretary of State advertises that he is prepared to receive tenders for so many lacs of rupees. On the appointed day (Wednesday in each week) the tenders are opened. Tenders at or above the rate which the Secretary of State has decided shall be the rate for the day are accepted in full, whilst tenders below that rate are only partially accepted. The following extract from a Calcutta newspaper contains the usual announcement of the sales :

Council Bills.-The amount of Bills sold during the week ending Tuesday evening, July 12th, including the public sale on the previous Wednesday was 50,00,000 rupees. At the periodical drawings on Wednesday last, which were for 40,00,000 rupees, the following were the allotments :

Tenders at 1s. 3 d. (min. rate) received 9 per cent. ; above that rate in full. The average rate of allotment was 15.76d.

Telegraphic Transfers were also allotted:

Tenders at 1s. 313d. (min. rate) received in full. The average rate of allotment was 15'81d.

30,00,000 Rupees will be offered to-morrow.

"

This almost explains itself. The term "Council Bills has been already defined. A telegraphic transfer means that the Secretary of State telegraphs to the Government Treasury concerned to pay a certain bank or firm (the nominee of the purchasers of the transfer) so many rupees.

The peculiar division of the figures representing rupees, requires some explanation, perhaps. In India, the name for the number 100,000 (whether used in reference to rupees, people, or otherwise) is "lac," or, as it is generally written, "lakh." Thus, 125,000 would be called "one lac twenty-five thousand," and would be expressed in figures thus, 1,25,000. A "crore" is a hundred lacs,

equal to ten millions, therefore the number 22,125,000 would be divided thus, 2,21,25,000, meaning "two crores, twenty-one lacs, twenty-five thousand."

Telegraphic Transfers are not confined to the dealings of the Government of India. They are largely used between one bank and another, or one firm and another, carrying on business in different parts of the world. The "modus operandi” is in each case the same. The person who wishes to remit goes to a bank which has a branch or an agent at the place to which he desires to remit, and all he has to do is to give the necessary instructions, and pay the equivalent of the amount at the current rate of exchange, plus cost of telegraphing. The telegraphing is, of course, done by a "code," and is usually effected in three words (exclusive of the address of the telegram). By this means money is transferred at once, thus obviating the delay caused by the transmission of a bill of exchange or a council bill by post. The usual abbreviation for the term telegraphic transfer is "T.T."

Exchange Operations.-These may be effected in two ways, viz., by direct exchange or by indirect exchange.

Direct Exchange means that the exchange is effected direct between the two countries concerned. Take for example the case of a person in London owing money to a firm in Berlin; if the debtor were to buy and remit a London bill drawn on Berlin, or if on the other hand the Berlin firm were to draw a bill on their London debtor, that would be a direct exchange.

Indirect Exchange means that the exchange is effected through a country or countries other than those immediately concerned. For example the London debtor above referred to might find it advantageous to buy bills drawn on Paris, and send them for sale to a correspondent in that city with instructions to purchase with the proceeds bills on Berlin; or he might, after sending the bills to Paris, instruct his Berlin creditor to draw on his Paris friend. Again he might remit to Hamburg in the first instance, then to Paris, and finally to Berlin. Each of these complete operations would be an indirect exchange. Indirect exchange operations are somewhat absurdly termed "arbitrations of exchange," and the average rate obtained, the "arbitrated rate of exchange."

Exchange Calculations. The method of converting English money into foreign, and vice versa, is, like most other things, a very simple matter when once it is understood.

Direct Exchange. In this case the calculation is extremely simple. To convert foreign money into English (when the £ is the "fixed quantity") all one has to do is to divide the foreign money by the rate of exchange. Thus, if it were desired to convert 5,760 francs into £'s at 25.30 exchange, and 2,380 marks into £'s at 20.60 exchange, the calculations would be as follows:

Francs 5,760 ÷ 25:30 ==
Marks 2,380 ÷ 20.60

=

£227 668 or £227 13s. 44d.
£115.534 or £115 10s. 9d.

To convert £'s into foreign money, the £'s must be multiplied by the rate of exchange. Thus, to convert £227 13s. 44d. into francs, and £115 10s. 9d. into marks, at the above rates of exchange, the calculations would be as follows:

£227 13s. 4 d. or £227 668 × 25.30 = francs 5,760.
£115 10s. 9d. or £115.534 × 20.60

=

marks 2,380.

When the foreign money is the fixed quantity, the above calculations are reversed. For example, if we wished to convert into sterling 3,000 taels at 291d. exchange, and 6,000 rupees at 1s. 41d. exchange, we should proceed as follows:

To convert £365 12s. 6d. into taels, and £406 5s. into rupees, at the above rates of exchange, the calculations would be as follows::

Indirect Exchange.

In this case the calculation is more complicated, and is usually made by the "chain rule." The mode of calculation will perhaps be best explained by the following example.

We buy in London a bill on Hamburg at 20-50; we remit it to Hamburg for collection, and with the proceeds buy bills on