siness above referred to.
Few war rumors ever come to anything, but there are times when they
circulate with astonishing frequency and persistence and cause decided
uneasiness concerning financial conditions at important points. At such
times bankers having money on deposit at those points are apt to become
influenced by the drift of sentiment and to draw down their balances.
Here, again, operators in exchange, keenly on the alert for such
chances, will very likely begin to sell the exchange market short and
often succeed in breaking it to a degree entirely unwarranted by the
known facts.

4. But of all the sure depressing influences on exchange, none is more
sure than a rise in the money market. More gradual usually than a
decline caused by such an influence as the sale of American bonds
abroad, the influence of a rising level of money rates is nevertheless
far more certain.

The theory of this "counter" movement in money rates and exchange is
simply that when money rates rise, say at a point like New York,
American bankers find it profitable to draw in their deposits from all
over Europe for the purpose of using the money in New York. Such a
process means a wholesale drawing of bills of exchange on all the
leading European cities, with consequent offering of the bills and
price-depression in the leading American exchange markets.

The number of banks scattered all over the United States which keep
running deposit accounts in the leading European cities has become
surprisingly great during the past ten years, and a movement to bring
home this capital has to go only a little way before it reaches very
large proportions. That is exactly what happens when money rates at a
point like New York become decidedly more attractive than they are over
on the other side. Arrangements with foreign correspondents usually
call for a minimum balance of considerable size, which must be left
intact, but under ordinary circumstances there is considerable leeway,
and when the better opportunity for loaning presents itself here,
drafts on balances abroad, in large aggregate amount, are apt to be
drawn and sold in this market. Especially is this the case when the
cause of the higher money level appears to be deep-rooted and the
outlook is for a continuance of the condition for some time to come.

5. Lastly, as a depressing factor, there is to be considered the
condition which arises when money at some important foreign center,
such as L