T HE Eastern exchanges are subject to all the ordinary factors governing the movement of exchange rates, named at the beginning of Chapter VI, and in addition they vary with the price of silver. They are the exchanges of the silver-using countries, and there are therefore in these cases no pars of exchange 1 and no gold points. In the last instance, silver, and not gold, is shipped for what it will fetch. Purchasing Eastern exchange is really purchasing a claim to silver. Hence these exchanges fluctuate according, not only to the general factors influencing exchange fluctuations which we have examined, but also according to the price of silver, in terms of, before the war, gold, and now, of our paper currency. The price of silver plus or minus shipping charges roughly fixes the rate above and below which the Eastern exchanges will not go. That statement of course is subject to the very important exception of India, which is governed by special con-

ditions. During and for some time after the war, the price for silver went up very considerably, and the Eastern exchanges appreciated accordingly. The rise in the price of silver was due to both the decrease in the supply and the increase in the demand. The decrease in the supply, due directly or indirectly to the war, can be seen by comparing the figures for the total world production of silver in 1913 and r918. Between those dates it had declined by something over 18 per cent. The increase in the demand was brought about by various factors, of which we may name three as the chief:

(1) Silver, and of course paper, was required to take the place of gold which went out of circulation in this and other belligerent countries ; while the need for silver as a medium of circulation, independently of its replacing gold, was increased in those parts of the world which were blessed with a British Army of Occupation, such as Egypt and Mesopotamia.