Bulletin HASKINS & SELLS 33
T H E time is not so long since past when
the man with a knowledge of foreign
exchange was looked upon as a sort of
superior being. He is still sufficiently rare
from an economic point of view to be in
great demand. That the demand will increase
can scarcely be doubted.
Opinion probably is undivided, among
those who have opinions, as to the important
part which this country will play in the matter
of foreign trade after the present conflict
shall have ceased.
Foreign trade and foreign exchange are
so inextricably connected that if we as a
nation would participate in the former we
must understand the latter.
Trading originally meant barter; the exchange
of goods for goods. In the modern
sense it means the exchange of goods for
money. In a transaction between two parties,
the first has the obligation to turn over
the goods; the second to make payment
Payment may generally be effected in one
of two ways; accepting and paying the
draft drawn by the seller against the purchaser,
or remitting the funds.
The method of payment will usually depend
on the credit relation existing between
the two parties. When the purchaser is
not well or favorably known to the seller
the goods are apt to be sold on the condition
that the draft will be paid before the
goods are released. If the relations are of
long standing the goods may be sold on open
account, in which case the purchaser remits
Trading may take place between two parties
within the same country or between two
parties, one of whom is in one country while
the other is in a different country. The
first transaction is called a domestic transaction;
the second a foreign transaction.
The question of the currency involved in
the settlement does not arise in the case of
the domestic transaction. If the transaction
occurs in the United States there is
but one kind of currency possible.
If one party to the transaction is in one
country while the second party is in a
country where the system of currency differs
there arises an international problem
as to the kind of money to be used in settling
for the goods.