The operations of foreign trade create a great number of claims and obligations on the part of citizens of one country against, as well as in favour of, the citizens of all others. These claims consist of drafts, bills of exchange, letters of credit, etc., and are expressed in every kind of money that exists, whether based on gold or silver, or simply inconvertible paper. Through the medium of foreign exchange banks these claims are offset against each other and cancelled. Between two countries having the same monetary standard there exists what is called the par of exchange; that is, the ratio between the weights of gold or silver in their respective units. The actual rate of exchange--that is, the price which will be paid in one money for claims expressed in another--seldom conforms to this nominal par. The bills of exchange, etc., representing claims of the exporters of one country against the importers of another may be regarded as a sort of commodity, and subject to the law of supply and demand. If one country, A., has more claims against another, B., than B. has against A., then the demand will be stronger for those which are fewer, and the price will rise, and _vice versa_. The prices of exchange cannot vary from the par of exchange between gold-standard countries much more than the cost of shipment of gold; for if they do, it will become profitable to export or import gold, and this will create new claims balancing the others. The variation of exchange rates within these limits is quite sufficient, however, to cause the _actual_ exchange rate, and not the nominal one, to be reckoned on by those engaged in foreign trade. There exists, and always has existed, an _actual_ exchange rate between the money units of all countries, or between the claims expressed therein, no matter what the money was based on; although there cannot be a par of exchange except between moneys based on the same metal. These actual rates are continually varying, even between countries like England and Australia, which not only use the same standard, but a common unit, and there is, therefore, no difference in the practical working of exchange between countries having the same standard and those having different ones. The inference to be drawn from these facts and theories is, that it would make no difference in the foreign trade of any country if it did not possess an ounce of gold or of silver, or whether its money was based on gold or was inconvertible paper; if the country produces commodities that other countries want, and wants some that other countries produce, the commerce will continue.