The other circumstance referred to is that, as regards its lending and discount business, the Bank has lost ground while the large joint-stock banks have gained ground, and wield a heavier weapon in the market than the Bank itself. If the Bank finds the new line it has taken in this respect pays the best, then we think it would be decidedly wiser to abolish its notices of changes in the rate-a reform which would sweep away other difficulties which are and have long been a source of trouble and annoyance to the London money market.

We see, therefore, the great importance which is attached to the changes in the rate of discount, aud are able to understand the connection between the fluctuations in the rate of discount and the foreign bill market. There are many continental cities which hold large amounts in bills on London, and, if the rate of interest here falls below the continental rate, those bills will be immediately sent to England, and the gold returned to be invested in the higher rate of interest ruling on the Continent. A rise in the price of bills on England is sure to be accompanied by a fall in the price of foreign bills in England.

Following these remarks about the theory of the foreign exchanges we shall now examine their practical working.

Every quotation of exchange between two places is given by taking the money of one place as fixed, and that of the other as variable. We have therefore to make a distinction between the quotations when the English money is giving the fixed amount and the foreign money is variable, and those when the English money receives the fixed amount in foreign money and itself expresses the variations.

1. Exchanges when London 'gives' the fixed amount ,

2. Exchanges when London 'receives' the fixed amount.

Ten years ago Portugal was, except England, the only European country using the gold standard exclusively, and the exchanges between this country and the continental cities depended upon the relative price of gold and silver. A great change has, however, come over Europe by the adoption of the single gold standard by Germany in 1871, for the consequence of this has been the complete or partial demonetization of silver in most European states. To-day the standards employed are as follows:

Austria, Italy, and Russia have an inconvertible paper currency.

Holland has introduced the double standard, as a step from the silver to the gold.

England, Germany, the Scandinavian kingdoms, Portugal, and, since the restriction in the coinage of legal tender five-franc pieces in France, practically also the countries of the so-called Latin convention, i. e. France, Belgium, Switzerland, Greece, and Italy (for her metallic money), use the single gold standard. Spain and Rou-mania have also adopted the French monetary system, but, like Greece, those countries have not yet completed their currency reform. France still retains nominally her inconvertible paper currency, but, as a matter of fact, the Bank of France pays her notes, which have long since been at par, when presented in small sums, over the counter.

These changes have simplified our 'exchange list;' and although they have somewhat contributed to the disturbance of the silver market, they have established a secure metallic basis for the commerce between all the countries using the gold standard, for which the Mint par can be easily ascertained. For these countries it is as follows:* - Amsterdam, 12.107; Copenhagen, 18.16; France and the Latin union, 25.22 3/20; Germany, 20.429; Portugal, 53.28; New York, 4.8666.

* ' Foreign Banking Arbitration.' By Herman Schmidt. London: Effingham Wilson.

The 'specie point' at which, under ordinary conditions, bullion begins to flow between these countries are generally taken as follows:

In London the exchange days for the negotiation of foreign bills are Tuesdays and Fridays (2 to 3 p.m.), and the custom is that all bills purchased are paid for on the next post day. If a bill is shorter than three months, or sixty to ninety days respectively, interest is allowed to the seller at the market rate of the place the bill is drawn upon.

If a bill is longer than three months, it is not readily negotiable, and is only to be sold by allowing to the purchaser a rate of interest usually above the bank rate of the place on which it is drawn.

The days of grace that may be customary abroad are not taken into consideration in London. If foreign bills are stamped, the stamps are usually charged to the buyer.

Bills on Spain and Portugal are not negotiable unless their tenor says that they are 'payable in gold or silver' Bills on New York must bear the remark 'payable in gold ' in order to ensure their not being paid in greenbacks.

Bills drawn on London from abroad are sometimes at 'usance;' this means :