stable exchange rate under the classical gold standard (4)

also, in those days ocean transport was slow and costly : so there were "gold points " around the true mint parities within which band the pound and dollar exchange rates could fluctuate . Thus ,if it cost 2 cent to ship 25% ounce of gold either way across the Atlantic Ocean (inclusive of insurance and interest costs ),could the exchange rate depart a little from $5? yes.In new York , the quoted price of a pound could rise to as much as $5.02 before it would pay to get gold bars and ship them to London to be exchanged for pounds :price higher than $5.02 could not prevail because enough gold would be flowing to keep the price no higher than the upper gold point. it should be evident that the pound could fall below the mint parity of $5by 2cent to $4.98 .when the exchange rate got down to this lower gold point , it would be cheaper for gold to be shipped from Europe to America. All this actually happened (except that $5 is substituted here for the correct Pre -1914 parity of $4.87 to simplify the arithmetic ,and the shipping costs are given only approximately). Before 1914 ,the foreign exchange rate of the pound and dollar stayed essentially stable , varying but a trifle from these weight-determined mint parities until the gold points were touched and gold had to flow in the indicated direction .