plus
charges, to meet the draft. As will be seen from the figures of an
actual shipment, given further on, the banker who ships gold gets the
money to buy the gold from the Treasury here, by selling a sterling
draft on London. Suppose, for example, a New York banker wants to
create a L200,000 balance in London. Figuring how many ounces of gold
(at the buying price in London) will give him the L200,000 credit, he
buys that much gold and sends it over. Suppose the combined cost of the
gold and the charge for shipping it amounts to $976,000. If the banker
here can sell a L200,000 draft against it at 4.88, he will just get
back the $976,000 he laid out originally and be even on the
transaction.

Before passing from the theory to the practice of gold exports and
imports, there is to be considered the fact that bar gold sells in
London at a constantly varying price, while in New York it sells at a
definitely fixed price. In New York an ounce of gold of any given
fineness can always be sold for the same amount of dollars and cents,
but in London the amount of shillings and pence into which it is
convertible varies constantly. So that a New York banker figuring on
bringing in bar gold from London has to take carefully into account
what the price per ounce of bar gold over there is. Sovereigns are
seldom imported because they are secured in London not by weight but by
face value,--even if the sovereigns have lost weight they cost just as
many pounds sterling to secure. Where the New York banker is exporting
gold, on the other hand, the price at which bar gold is selling in
London is just as important as where he is importing. For the price at
which the gold can be disposed of when it gets to London determines
into how many pounds sterling it can be converted.

These matters of the cost of gold in one market and the crediting of
the gold in some other market are not the easiest thing to grasp at
first thought, but will perhaps become quite clear by reference to the
accompanying calculation of actual gold export and gold import
transactions. All the way through it must be remembered that the
figures of such calculations can never be absolute--that insurance and
freight charges vary and that different operations are conducted along
different lines. The two operations described embody, however, the
principle of both the outward and inward movement of bar gold at New
York.

_Export of Bars to London_

In the transaction descr