II

THE DEMAND FOR BILLS OF EXCHANGE

Turning now to consideration of the various sources from which springs
the demand for foreign exchange, it appears that they can be divided
about as follows:

1. The need for exchange with which to pay for imports of
merchandise.

2. The need for exchange with which to pay for securities (American
or foreign) purchased by us in Europe.

3. The necessity of remitting abroad the interest and dividends on
the huge sums of foreign capital invested here, and the money which
foreigners domiciled in this country are continually sending home.

4. The necessity of remitting abroad freight and insurance money
earned here by foreign companies.

5. Money to cover American tourists' disbursements and expenses of
wealthy Americans living abroad.

6. The need for exchange with which to pay off maturing foreign
short-loans and finance-bills.

1. Payment for merchandise imported constitutes probably the most
important source of demand for foreign exchange. Merchandise brought
into the country for the period given herewith has been valued as
follows:

1913 $1,813,008,000
1912 1,653,264,000
1911 1,527,226,000
1910 1,556,947,000
1909 1,311,920,000

Practically the whole amount of these huge importations has had to be
paid for with bills of exchange. Whether the merchandise in question is
cutlery manufactured in England or coffee grown in Brazil, the chances
are it will be paid for (under a system to be described hereafter) by a
bill of exchange drawn on London or some other great European financial
center. From one year's end to the other there is constantly this
demand for bills with which to pay for merchandise brought into the
country. As in the case of exports, which are largest in the Fall,
there is much more of a demand for exchange with which to pay for
imports at certain times of the year than at others, but at all times
merchandise in quantity is coming into the country and must be paid for
with bills of exchange.

2. The second great source of demand originates out of the necessity of
making payment for securities purchased abroad. So far as the American
participation in foreign bond issues is concerned, the past few years
have seen very great developments. We are not yet a people, as are the
English or the French, who invest a large proportion of their accumulated
savings