When individuals of a nation exchange commodities they exchange it as in national legal tender. There is, however, no international legal tender. When nations exchange commodities the payment is made in different instruments, such as bills of exchange. Whenever gold is exchanged it is exchanged solely as a monetary commodity, and not in its national legal character as money. The gold in the sovereign is valued according to its quantity, and not by its value as a legal instrument, token or claim. But it is rarely that gold passes from one country to another in payment for goods received. This payment is managed in a much easier and less expensive fashion. CHAPTER II WHAT IS MARKET MONEY? What is the money that is bought and sold in the money market? Who are the merchants there? Who are the middlemen? Who are the sellers and buyers? What sort of a place is this money market? We can visualize a cattle market, where farmers bring their cattle to sell, and we can visualize Covent Garden, where fruit, vegetables, and flowers are sold: but can we visualize a money market? Is it in some vast building in the City? Is Lombard Street a mighty emporium where many merchants congregate at their stalls and offer, in the same fashion as vendors of apples and sweets do, pounds, shillings, and pence for sale? It is not located in any spacious building, like the London Stock Exchange. Buyers do not go there and offer golden sovereigns for golden sovereigns and silver shillings for silver shillings. To the ordinary man, who is perplexed by the mysteries of the money market, it sounds strange, indeed, that money can be bought with money. This is because he associates money with pounds, shillings, and pence, and cannot understand a sovereign being bought with a sovereign. Yet he understands the business of a money-lender and he understands borrowing. He knows that when he borrows from a money-lender he borrows money and pays something for the loan, something that he calls interest. Well, the vendors of money in Lombard Street are purely and simply money-lenders on a great scale. Banks are wholesale business houses where money is made, and where money is sold. The selling is not, however, on all fours with apple selling. When we sell apples we part with the apples for good. We do not lend them for a definite period to the buyer, and the buyer does not return them at the end of that period. In buying and selling apples an absolute exchange is made, money and fruit being definitely parted with. In the money market the merchandise of the merchants is not exchanged in this absolute fashion, so that, in the literal connotation of the word, Lombard Street is not a market.