In the foreign exchange operation, these transpor tation charges are proportionately larger than in in land exchange because greater distances are involved. They are more or less concealed by the fact that the two sides of a transaction are in terms of different currencies, and are usually modified or even offset by the competition of bills of exchange, the supply and demand of which govern the proportion of such charges which a remitter is called upon to bear.
In inland exchange these charges are rendered more apparent by being expressed in the form of a com mission or premium. They are also more uniform and stable and, being governed by the conditions of the banking system of the country, they tend to dimin ish as the system improves and better facilities obtain.
5. Training in foreign of the most essential features of a training in foreign exchange is a thoro knowledge of values and methods of con version of the currency of different countries. All calculations by a beginner should be made independ ent of exchange tables. In many offices, the first calculation is made by one clerk, and checked by means of exchange tables by a second clerk. The training thus obtained and the facility and rapidity with which such calculations can be made, form the of a technical education in foreign ex change, which is daily becoming more valuable as in ternational transactions increase.
In this connection, there are four things to be care fully studied. When these are mastered, foreign ex change will be robbed of most of its apparent in tricacy: 1. Mint par 2. Gold or specie points 3. Rates of exchange and the reason of their fluctuations 4. Conversion.
6. Mint par of exchange.—The mint par between any two countries is the value of the monetary unit of one country expressed in terms of the monetary unit of another country using the same metal as a standard of value, tho the degree of fineness of the metal need not be the same. All coins, whether of gold or silver, are made of so much pure metal and so much alloy; the latter is used to harden the coins, thus re ducing abrasion to a minimum. The term "fineness" expresses the number of parts of pure gold or pure silver contained in a thousand parts of the combina tion. The British sovereign is 916% parts fine, or 11 parts fine gold and one part alloy. The gold coins of Turkey and Brazil are also 916% fine. Those of nearly all other countries are on a basis of 900 fine, or 9/10 fine gold and 1/10 alloy.
The folder opposite page 36 gives a list of the prin cipal gold standard countries with the names, weights in grammes and values of their various units.
7. Computing the mint mint par is ar rived at by dividing the number of grains or granunes of fine gold in the one coin into the number contained in the othei. For instance, compare the sovereign, the unit of Great Britain, and the gold dollar, the unit of the United States: Similarly, a franc contains .2903225 grammes of fine gold, while the dollar contains 1.50463 grammes. Hence, The mint par between any two countries can be ar rived at in the same way. The mint par between two countries that use the same metal as a standard is constant. It varies only when one of them alters its coinage regulations by increasing or decreasing the quantity of pure metal in its monetary unit.
Between a gold standard country and a silver standard country there can exist no fixed par of ex change, since the value of silver in relation to gold is subject to great fluctuation.
8. Par of mint par is the pivotal point of the rates of exchange between two countries. In other words, it is also the ratio at which the stand ard coin of the country will be exchanged for that of another. Theoretically, a sovereign is worth par in New York ($4.86656), but practically this ratio holds good only for large amounts. If a traveler wants to change ten sovereigns in New York he would prob ably receive only $48.50 or $48.60 for them instead of $48.66%, the difference being retained by the bank as payment for its services and to cover the interest on the amount until it had collected sufficient sover eigns, say, one thousand, to warrant the trouble of taking them to the United States mint where they would be exchanged for $4,866.56, less a small melt ing charge. If the ten sovereigns are in London the traveler will realize on them by selling to a New York bank the "right," in the form of a check or order, to draw these ten sovereigns in London, and the banker would repay him according to the current rate of ex change. If there is an active demand for sterling ex change he will get a good price for his check on Lon don, say, $48.75 (over par) . If, on the other hand, there is little or no demand for sterling exchange and the supply of checks and bills of exchange is plenti ful he will get a low price, say, $48.50 (below par) .