ABSTRACT
This chapter examines the various factors which cause the fluctuations in rates of exchange. They may be grouped as follows: Balance of indebtedness; Rates of interest; Political events or rumours with financial reactions; Speculation; Loans and credits; and Inflation of currency and credit. The balance of indebtedness is made up of five sub-factors: The visible balance of trade; Invisible exports and imports, such as shipping and insurance services, banking, and acceptance services; Interest on capital invested abroad; and Payments arising out of social intercourse. The visible balance of trade can of course always be gauged from the Board of Trade returns, which give statistics of imports and exports. The complications arise because not merely does the balance of trade affect the exchanges, but the exchanges themselves have a counter-effect on the balance of trade.
