EXCHANGE. 



weight of gold or silver which the sum 

 of Portuguese money for which it is 

 drawn is supposed to contain, exchange 

 between London and Lisbon is said to be 

 at par ; when it can be procured for less, 

 exchange is said to be below par, or in 

 favour of London ; when more must be 

 given, exchange is said to be above par, 

 or against London. 



The value of all the bills of exchange, 

 which the merchants of London can 

 draw upon the merchants of any other 

 place, must in general be regulated by 

 the value of the consignments and re- . 

 mittances, direct or indirect, through 

 other countries, which they have made to 

 that place, and consequently the course 

 of exchange affords an indication of the 

 state of the trade between different coun- 

 tries. When bills upon Lisbon, for in- 

 stance, are scarce in London, and ex- 

 change consequently above par, it is a 

 sign that London owes more to Lisbon, 

 than Lisbon to London : and the reverse 

 is a sign of the contrary. 



But there are other circumstances by 

 which the course of exchange is very 

 materially affected. Should the circu- 

 lating coin of any country, v. g. be consi- 

 derably debased, and its real value, the 

 quantity of gold or silver which it really 

 contains, be much less than its nominal 

 value, exchange may appear to be against 

 a country, while actually it is in^favour of 

 it. Before the reformation of our silver 

 coinage in the reign of William III. we 

 are informed by Dr. Smith, the exchange 

 between England and Holland, comput- 

 ed by the standard of their respective 

 mints, was 25 per cent, against England; 

 but the current coin of England was at 

 that time rather more than 25 per cent, 

 below its standard value, and consequent- 

 ly exchange was really in favour of Eng- 

 land. The issue of assignats, during the 

 revolution, depreciated the currency of 

 France in a greater degree than was ever 

 known in any other instance ; and ac- 

 cordingly the exchange between London 

 and Paris became between 60 and 70 per 

 cent, against the latter place 



An unfavourable state of the exchange 

 with any country furnishes a motive for 

 exporting commodities to it. The mer- 

 chant, under these circumstances, can af- 

 ford to sell his commodities as much 

 cheaper as the premium which he is 

 obliged to pay for a bill of exchange 

 amounts to. Hence the course of ex- 

 change always tends' to an equilibrium. 

 Indeed it can never really exceed the 

 expense of sending gold or silver bullion 

 to the place upon which the bill is 



drawn : since this is the money of the 

 commercial world, and will every where 

 be accepted in payment. Its apparent 

 rise above this expense is to be ascribed 

 to a depreciation of the currency, or 

 some similar cause. We shall now en- 

 ter more into the practical part of ex- 

 change. 



In treating this subject, we shall first 

 give an idea of the nature of exchanges; 

 and in the second place, we propose ex- 

 plaining the peculiar terms in use among 

 merchants relative to bills. 



In transactions between a buyer and 

 seller, both residing in the same place, it 

 is obvious that the mode of payment .is 

 extremely simple. It takes place either 

 in cash or by bill, and is attended with 

 no intricacy of computation. Transac- 

 tions between two towns in the same 

 country are almost equally easy. Pay- 

 ment in cash is out of the question, but 

 the seller either draws on the buyer a 

 bill payable at the residence of the buy- 

 er, or, if this residence is not a town of 

 extensive trade, the buyer domiciles his 

 acceptance at a place of this description; 

 that is, he makes it payable there. The 

 simplicity of this process arises from the 

 money being of the same denomination 

 in both places, and nearly of the same va- 

 lue. But in dealing with foreign coun- 

 tries, the calculation becomes less simple 

 from the difference of denomination ; and 

 although this causes no real difference in 

 the value of money, yet obstacles exist 

 to the conveyance of specie, which almost 

 always prevent money from being of 

 equal value in two different countries at 

 the same time. 



Among merchants resident in different 

 countries, bills serve nearly the same pur- 

 pose as cash to the inhabitants of the 

 same town. They are the current coin, 

 by which the buyer in one country re- 

 pays the seller in another ; they pass like 

 money from hand to hand ; and this faci- 

 lity of circulation would always make mo- 

 ney of nearly equal jvalue in two coun- 

 tries, whose exchange of merchandize 

 should be nearly equal. But it seldom 

 hap pens that the exchange of merchandize 

 is equal ; there is almost always a balance 

 on one Side or the other. Hence the 

 fluctuations of exchange. These fluctu- 

 ations are greater or less, according to 

 the amount of the balance to be paid, 

 and according to the expence and diffi- 

 culty of conveying specie. By the ex- 

 pense of conveying specie, is meant the 

 carriage and insurance ; by the difficulty, 

 is meant the hazard of evading those 

 prohibitory regulations, which in most 



