Another technical term employed in connection with the foreign exchanges is _the gold points_. These are the points above and below the par of exchange fixed by the addition in the one case, and the subtraction in the other, of the cost of shipping gold between the two places in question. They are the points between which the rates of exchange fluctuate, or the points at which, when the rate of exchange reaches them, gold moves between gold standard countries. Assuming for example, that the cost of shipping gold between New York and London is two cents per pound sterling, the gold points are 4.8865 and 4.8465, it being profitable to ship gold from New York to London when sterling exchange reaches the former figure and to import gold from London when it reaches the latter figure. In the conduct of the foreign exchanges several classes of bills are employed upon which the quotations differ, in part on account of differences in their quality and in part on account of the interest element entering into the value of time bills. For example, New York regularly quotes on London _cables_, _demand_, and _sixty-day_ bills. The rates on a certain date were: Cables, 4.8860; demand, 4.8790; and sixty days, 4.8370. Inasmuch as these are all bankers' bills and consequently of the same quality, the differences in their quotations are due to the interest element and to the fact that in the case of the cables the cost of the cablegram is included. When a New York banker sells a cable on London, his balance with his correspondent is reduced by the amount in a few hours, and the interest he receives on such balances is proportionately diminished at once, and he is also out the cost of the necessary cablegram. When he sells a demand bill, his account with his London correspondent remains undiminished during the time required for sending the bill by mail across the Atlantic and for its presentation for payment. He draws interest on his entire balance during this period. When he sells a sixty-day bill, his balance does not suffer diminution on its account for sixty days. In order to place these bills on a footing of equality so far as he is concerned, therefore, he must quote demand and sixty-day bills lower than cables; the former by the cost of the cablegram plus interest on the amount of the bill, say for ten days, at the rate he receives on his London balance, and the latter by the amount of the cablegram plus interest on the amount for sixty days at the same rate. Trade, or mercantile, as well as bankers' bills are also frequently and, in some markets, regularly quoted. Being of a quality ranked as inferior to bankers' bills, they must be negotiated at a lower rate and are quoted accordingly. CHAPTER III THE PROBLEMS OF COMMERCIAL BANKING