K 1 I. 





II 1 I. 



A person in I-omKm has a p:nm 

 .: convenience, f I DUD/. Insl 



l.i an i X'-h 11 

 from him a bill on Paris equivalent to Unit sum 



ii to l>o a-ceri.uned, or, in other MO: 

 what amount in Kirnch money i- ill,' lull to foe !i 

 In the li-liTiniii:ilion of this question ti. 



'.dilation. The hill will he payable in franc*; 



ho-v m:\nyfrancalhen are equal tn luoo/. By tho mint 



regulation! between England and Fr.ince. I/, sterling of 



iKil to 25 francs, 20 routs, which is 



therefore the nominal or standard far of exchange between 



th-- Mo countries. According to this si-ale then. I TOO/, in 

 London would he worth 2.J.200 franc;, in Pans. 15ut the par 

 is fixed on the supposition that the rnrrrncies of the two 

 count ctively are uniformly of the wci'.'ht and 



purity established by the Mint, whereas not (infrequently 

 the coin is debased by alloy or attrition, and the relative 

 value undergoes a correspond ins; alteration. This devia- 

 tion however is well known, and may he r-L'arde 1 as com- 

 paratively ronstant. But there arc other circumstances 

 n fleet inn' tfoe ratio of value of a more fluctuating and un- 

 steady operation. When, for instance, any considerable 

 ]i <rtion of the circulating medium of either of the two coun- 

 tries between which the exchange is to he effected consist! 

 of a pnpcr currency, the standard is materially affected by 

 the quantity of paper in circulation. \Viilmut entering into 

 an exposition of the law of this variation, it is sufficient to 

 remark, that a redundancy of paper money has invariably 

 the effect of depreciating the standard, or, in other words, of 

 raising the value of tho standard coin ns compared with 

 the same nominal sum in paper -mnm-i/. This ellect is tem- 

 porary only when the paper is convertible into sp. 

 ileina'nd ; "if inconvertible, it is both permanent and consider- 

 able. Thus it is well known that, at one period of the late 

 war. the English guinea was worth 2o*. in money, estimated 

 according to the value of the I/, sterling in bank notes. At 

 that time therefore the English pound would fall far below 

 the Mint standard of 3/. 17*. 10V/. per ounce, and a : 

 tionate effect would he produced on the rate ..!' exchange 

 with any other country in which the standard -.-.;; n:ain- 

 taincd. 'Taking, as before, the instance of France, the par 

 would vary, other things rcmaii "t, from -JJ francs 



i'lcw'here about 19 francs, ur 1000/., in a li 

 and note, would buy a bill on 1'aris, not for 25,200 

 francs, font for about 19,000 francs only. But it is evident 

 that tlie same cause might be operating in a greater or less 

 e in France aUo, in which case the calculation would 

 till further complicated foy a ritmpnrimni of the dcpre- 

 .11 in the one country with that in the other. The va- 

 riation here taken for an example is of coi:rsn an extreme 

 , but fluctuations the same in kind, though less in de- 

 gree, are still of continual occurrence, and must foe carefully 

 taken into account in all calculations as to the price of bills. 

 But besides these monetary inlluenccs on the nominal 

 par, there are other causes in operation which materially 

 ailed the rate of exchange, and by consequence the price ol 

 bills. The accommodation of a remittance in the form of a 

 bill of exchange is worth a calculable sum, the maximum 

 being the compound of the labour, expense, and risk of tin 

 transmission of money in S" > ' Sup|>oso this maximum 

 to be one per cent., it is evident that it is worth the while o! 

 the remitter to pay any sum short of Id/. tor the purchase 

 of a bill equivalent to IOOO/. Now the market price of bills 

 like that of every other commodity, is mainly dependant on 

 the relation of the supply to the demand, and this auuin 

 is primarily regulated foy the state of trade !><: ecu two 

 given countries. When 'the \nlue of the experts to any 

 country in a uivon |icriod is equal to the value of the imports 

 from tno same country in the same period, the trade i* said 

 to be b :. lanced : the bills drawn in each country upon the 

 other will he equal in amount, and this equilibrium con- 

 stitutes what is called the real par of exchange. Hut it is 

 obvious that this state of things c.m never actually exist, that 

 t is the point on each side <>f which the exchanges will con- 

 tinually oscillate, and at which they will never r.-t. KM-II 

 where, upon the avenge of year, or months, the trade i* 

 nearly even, there will be disturbing circumstances \\ hull 

 will : ip.ir.iry elf. ct u|....i tlie . xchangos. Tin-re 



will ''ly foe occasional S'-arcity and occ 



Abundance of foreign bills in the inarl.i t. V. 

 their price - . as it K ordinarily ex;. 



|h<!y i limn. At such limo to'' in:; 



tint 



tu. Si i 



.ic of our impu !' our 



. tle.-t i. f 



:e left to I: 



remittance-, to Trance three 

 uid that I'"- 1 bills in which the : 



n nle would be al -iium price, that i king 



doptl d. w ,ulil ! :.::lllil of all bill 



r cent. Hut it is a fact, ineontcstahh . '. that 



n i-vcry tr ; llu- 



xports'tn'..' upon an average, very r.carly 



balanced by the value of the \vh r, in 



other word-, that ultimately all commodities in' ; 

 paid for directly or indirectly in commodities i-xp' 

 ;ly, therefore, the hills drawn in England up 

 countries, say in one vear, nearly balance the bills diavvn m 

 foreign countries upon England in the i 



t.i take a familiar instance, although there may be a 

 ciency in L-nidon, to the extent of three-fourths, of hills 

 upon Kr.mcc, there may be an excess, in nearly the 

 ratio, of foills upon Belgium, and in li' 



be an excess in Belgium, to the same extent, of lulls upon 

 l-'rance. Acting on tfoe knowledge of this fact, the London 

 bill-merchant by menus of his agent will buy lulls upon 

 Paris at Antwerp, where they are cheapest, and bring 

 lor sale to London, where they are dcare-t. '1 

 procuring, and the profit of the hill-merchant, 

 upon this transaction, constitute the third ehi'.u-nt in the 

 calculation. Supposim; then the bill !. ,' one. that 



is to say, guaranteed foy nar.ies of known and i 

 credit, the only remaining operation is to estimate th. 

 count according to mercantile practice, or, in other v 

 the interest if 1 (it'll/, in in nicy f.ir the timewhich will i ' 

 foefore payment of the bill; and the cou.hined result v. ill 

 give the bum in francs for which the bill is to be dra 

 the amount of bills already drawn to be given in 

 for 101 ()/. 



The same remarks, mutatis mutandis, are applicable, if 

 in.-tcad of a remittance to Paris a sum of money wa> ' 



ed from thence; for the mode adopted would be this. 

 The party in London would draw a bill upon his debtor in 

 Paris. f..r which the exchange-broker would imnicdi 

 give him the value, ascertained as before, either in c,i-! ; 

 bills up m I^ondon, or in both ; and although the system, as 

 here explained in detail, may seem, as in truth it 

 complexity, ytt practically tiie price, like that of every other 

 commodity, readily adjusts itself. In London it ; 

 tiee for the foill-broi. nnd to the principal mer- 



chants and inquire whether they are fonve 

 bills. The relation of supply and demand beinu' Ur 

 certained, a few of the ino..t inlluential mercl 

 the average jirice at the Roj al Exchange; and a doc\.: 

 known as \\ '. tenhaH's List' contains the record i.f rates 

 accord i ni' to actual transactions. By the-e nu-atis th.- - 

 of particular bills, varying of course according to the 

 of the parties to them, or, as it is generally calk-.:. 

 Hfx* 'if III" ;MW,, i- easily determined. 



Bills of exchange are also in frequent use for the pi. 

 of remittance from one part of tlie United K 

 another. Thus the trader in Mnncl,- Bir- 



mingham, who has a payment to make in London,: 

 bills of his customers in the country. 1 discounted 



by the monied capitalists through the intervention of bill- 

 brokers. A tew of the London bankers also .1 

 the accommodation of their customers, anil the Bank of 

 England deals extensively in that department. The bills 



lied are transmitted to the provincial banks to 1 

 vented at maturity for payment. Convcr cly, in tin 

 vincial towns the country bankers discount bills a 

 and transmit them to their correspondents then- lor pay- 

 ment. The rate of discount varies according to the demand 

 tor money, and the character of the particular bnN ; but it 



! >m. ii|>on regular transactions-, more than four, ' . 

 than two and a half per cent. 



Hitherto bills of excbang' :i considered, in their 



primary application, as media of remittance, btr 

 other pui-p iy important, to which, foy nil 



I, llicy have been made -ubscrvient. For, 

 the use and properties of hills being once understood, and 

 their . a More natural than 



ipplied to I 

 A liader d --irons of puiciui ing a commodity 



