The terms favourable or unfavourable apply to the debtor, that is, the buyer of the bill. When the exchanges with any particular centre are said to be favourable to this country, the rate is tending towards that point when gold will be imported. Conversely, the rate is unfavourable to this country when it tends towards the other specie point, when gold will be exported.

When the rates are quoted in foreign money to the pound sterling, high rates are favourable to this country; low rates, unfavourable.

When the rates are quoted in shillings and pence to the foreign units high rates are unfavourable, low rates are favourable.

These remarks apply both to the prices quoted in London for bills payable in other countries, and also to the rates quoted in foreign centres for sterling bills. It will be observed that both in the London Course of Exchange and in the table of cabled rates there are, in the case of some of the more important centres, a "sight" or cheque rate and a three months' or "long" rate. Many papers in their list of cabled rates give a fuller list of long rates than that quoted in the "Times," but, given the short exchange with any centre and the market rates of discount prevailing in that centre, the long rate can be calculated with approximate certainty.

The long rate is the rate at which a certain sum will buy a bill to realise the same amount as the cheque which can be bought for that sum at the short rate, allowance being made for the fact that the bill will be subject to a charge for discount and for bill stamps, if the man to whom it is sent wishes to realise it.

For instance, take the rates on Paris quoted in our Course of Exchange. A London merchant wishes to remit to his Paris agent 100, and to do this buys a cheque on Paris at the short rate 25.25, getting, of course, one for 2,525 francs, which he sends to his agent, who presents it for payment at the bank on which it is drawn. Supposing he prefers to buy and remit a bank bill at three months. He will, at the rate quoted, get a bill for 2,535 francs. This bill is taken to the agent's banker in Paris for discount, and a reference to the "Times" shows us that the market rate of discount prevailing at the time in Paris was 1 1/8 to 1 1/4. The charge for discount at the higher rate will be about eight francs, and the cost of bill stamps will bring the charge to nearly ten francs. Thus, the bill would realise practically the identical amount of the cheque, 2,525 francs, and the two methods of remitting are seen to have cost the same.

A great many bills are dealt in on 'Change which are neither sight bills nor three months' bills, but have, let us say, thirty or forty days to run before maturity. In these cases a rate called a "tel quel,' or"t.q." rate, is calculated from the long rate to fit the bill in question.

Most countries draw bills in the currency of the country where they are payable. Paris, for instance, usually draws upon us in sterling, upon Berlin, in marks; upon New York, in dollars, and so on. In England, however, commercial bills are often drawn upon other centres in sterling, probably owing to the fact that, outside a limited circle, the foreign exchanges are but little understood by English business men. In this case, when the bill is sold in London, the market rate is specified in the endorsement on the bill: "Pay Blank & Co., or order, at the exchange of 25.27," and a memorandum of the amount in foreign currency is made on the face of the bill.

For the student who finds any difficulty in grasping the effect of a rise or fall in the rates upon the value of a foreign bill, the maxim quoted by Mr. George Clare, (b) in his excellent work on the Foreign Exchanges, will be found extremely useful:

(b) The A. B. C. of the Foreign Exchanges, G. Clare, p. 51.

"Buy high, sell low; the better the bill, the lower the rate."

A word of caution must, however, be added. This maxim only applies to those rates which are quoted in foreign units to the £1 sterling.

In dealing with bills drawn upon countries which London quotes in shillings and pence to the foreign unit, the exact reverse of this is true, and the rule to be remembered is the usual commercial rule for buying and selling commodities: "Buy low, sell high; the better the bill, the higher the rate."