Let us assume that a drain is threatened from Paris. The gold in an English sovereign is, we can see, worth about 25·22½ francs, and if only 25·12½ is being offered on 'Change, it follows that bullion will soon be exported to France. This the Bank wants to prevent. The cost of transmission of bullion between the two countries is about one half per cent.; therefore, in order to induce French capitalists to invest in English bills of three months' date, the rate of interest in London must be more than two per cent. in excess of that in Paris before it will pay them to ship bullion to this country, if it be the intention of the purchasers to withdraw their capital when the bills mature, as the gain of two per cent. per annum for three months only just balances the loss of 10s. per cent. incurred on specie shipments, while no margin is left to defray possible loss through unfavourable exchanges at the time of withdrawal. Were a purchase of six months' bills contemplated, the difference in the two rates would only have to exceed one per cent. before bullion could be exported profitably. When, therefore, the Bank of England wishes to influence the foreign exchanges, it raises its rate by one, instead of by one half as is usual when the drain is caused by the currency requirements of this country, or by an increased demand for loanable capital when trade is active and the foreign exchanges favourable. One constantly hears the question: Why has the Bank of England raised the rate by one instead of by one half as it did last time? A glance at the foreign exchange tables will generally supply the answer. If the expenses for transporting and insuring bullion between any two countries are appreciable, then were the Bank rate raised by one half (remembering that an addition of one half per cent. per annum gives a profit of only 2s. 6d. per cent. on a transaction in three months' bills) it is evident that the inducement is not sufficient to attract gold over here for that consideration alone. By raising its rate, and, if necessary, borrowing in the market in order to bring the market rates in touch with its own, the Bank makes an investment in English bills a profitable transaction; and the greater its excess over foreign rates, the stronger is the inducement to send money to England. Of course, were this country really living on its capital, this influx of gold would only postpone the inevitable day of settlement, for a bankrupt does not increase his wealth by borrowing from one person in order to pay off another. But our receipts do not always coincide with our payments; and when, for instance, gold is sent to the United States in the autumn to help to pay for crops imported here, the Bank of England, by raising its rate of discount, and making that rate a representative one, attracts gold from the Continent, in order to tide over the interval between debts payable by us immediately and debts due to us at a future date.