in a general sense, a contract or agreement, whereby one thing is given or exchanged for another.
in commerce, is the receiving or paying of money in one country for the like some in another, by means of bills of exchange.
The security which merchants commonly take from one another when they circulate their business, is a bill bill of exchange, or a note of hand: these are looked upon as payment.
The punctuality of acquitting those obligations is essential to commerce; and no sooner is a merchant's accepted bill protested, than he is considered as a bankrupt. For this reason, the laws of most nations have given very extraordinary privileges to bills of exchange. The security of trade is essential to every society; and were the claims of merchants to linger under the formalities of courts of law when liquidated by bills of exchange, faith, confidence, and punctuality would quickly disappear, and the great engine of commerce would be totally destroyed.
A regular bill of exchange is a mercantile contract, in which four persons are concerned, viz. 1. The drawer, who receives the value; 2. His debtor in a distant place, upon whom the bill is drawn, and who must accept and pay it; 3. The person who gives value for the bill, to whose order it is to be paid; and, 4. The person to whom it is ordered to be paid, creditor to the third.
By this operation, reciprocal debts, due in two distant parts, are paid by a sort of transfer, or permutation of debtors and creditors.
(A) in London is creditor to (B) in Paris, value 100l. (C) again in London is debtor to (D) in Paris for a like sum. By the operation of the bill of exchange, the London creditor is paid by the London debtor, and the Paris creditor is paid by the Paris debtor; consequently, the two debts are paid, and no money is sent from London to Paris, nor from Paris to London.
In this example, (A) is the drawer, (B) is the acceptor, (C) is the purchaser of the bill, and (D) receives the money. Two persons here receive the money, (A) and (D), and two pay the money, (B) and (C); which is just what must be done when two debtors and two creditors clear accounts.
This is the plain principle of a bill of exchange. From which it appears, that reciprocal and equal debts only can be acquitted by them.
When it therefore happens that the reciprocal debts of London and Paris (to use the same example) are not equal, there arises a balance on one side. Suppose London to owe Paris a balance, value 100l. How can this be paid? Answer, It may either be done with or without the intervention of a bill.
With a bill, if an exchanger, finding a demand for a bill upon Paris for the value of 100l. when Paris owes no more to London, sends 100l. to his correspondent at Paris in coin, at the expense (suppose) of 1l. and then, having become creditor on Paris, he can give a bill for the value of 100l. upon his being repaid his expenses, and paid for his risk and trouble.
Or it may be paid without a bill, if the London debtor sends the coin himself to his Paris creditor, without employing an exchanger.
This last example shows of what little use bills are in the payment of balances. As far as the debts are equal, nothing can be more useful than bills of exchange; but the more they are useful in this easy way of business, the less profit there is to any person to make a trade of exchange, when he is not himself concerned either as debtor or creditor.
When merchants have occasion to draw and remit bills for the liquidation of their own debts, active and passive, in distant parts, they meet upon change; where, to pursue the former example, the creditors upon Paris, when they want money for bills, look out for those who are debtors to it. The debtors to Paris again, when they want bills for money, seek for those who are creditors upon it.
This market is constantly attended by brokers, who relieve the merchant of the trouble of searching for those he wants. To the broker every one communicates his wants, so far as he finds it prudent; and by going about among all the merchants, the broker discovers the side upon which the greater demand lies, for money, or for bills.
He who is the demander in any bargain, has constantly the disadvantage in dealing with him of whom he demands. This is nowhere so much the case as in exchange, and renders secrecy very essential to individuals among the merchants. If the London merchants want to pay their debts to Paris, when there is a balance against London, it is their interest to conceal their debts, and especially the necessity they may be under to pay them; from the fear that those who are creditors upon Paris would demand too high a price for the exchange over and above par.
On the other hand, those who are creditors upon Paris, when Paris owes a balance to London, are as careful in concealing what is owing to them by Paris, from the fear that those who are debtors to Paris would avail themselves of the competition among the Paris creditors, in order to obtain bills for their money, below the value of them, when at par. A creditor upon Paris, who is greatly pressed for money at London, will willingly abate something of his debt, in order to get one who will give him money for it.
From the operation carried on among merchants upon change, we may discover the consequence of their separate and jarring interests. They are constantly interested in the state of the balance. Those who are creditors on Paris, fear the balance due to London; those who are debtors to Paris, dread a balance due to Paris. The interest of the first is to dispel what they fear; that of the last, to exaggerate what they wish. The brokers are those who determine the course of the day; and the most intelligent merchants are those who dispatch their business before the fact is known.
Now, how is trade in general interested in the question, Who shall outwit, and who shall be outwitted, in this complicated operation of exchange among merchants?
The interest of trade and of the nation is principally concerned in the proper method of paying and receiving the balances. It is also concerned in preserving a just equality of profit and loss among all the merchants, relative to the real state of the balance. Unequal competition among men engaged in the same pursuit, constantly draws along with it bad consequences to the general undertaking; and secrecy in trade will be found, upon examination, to be much more useful to merchants in their private private capacity, than to the trade they are carrying on.
Merchants endeavour to simplify their business as much as possible; and commit to brokers many operations which require no peculiar talents to execute. This of exchange is of such a nature, that it is hardly possible for a merchant to carry on the business of his bills, without their assistance, upon many occasions. When merchants come upon change, they are so full of fears and jealousies, that they will not open themselves to one another, lest they should discover what they want to conceal. The broker is a confidential man, in some degree, between parties, and brings them together.
Besides the merchants who circulate among themselves their reciprocal debts and credits arising from their importation and exportation of goods, there is another set of merchants who deal in exchange; which is the importation and exportation of money and bills.
Were there never any balance on the trade of nations, exchangers and brokers would find little employment: reciprocal and equal debts would easily be transacted openly between the parties themselves. No man feigns and dissembles, except when he thinks he has an interest in so doing.
But when balances come to be paid, exchange becomes intricate; and merchants are so much employed in particular branches of business, that they are obliged to leave the liquidation of their debts to a particular set of men, who make it turn out to the best advantage to themselves.
Whenever a balance is to be paid, that payment costs, as we have seen, an additional expense to those of the place who owe it, over and above the value of the debt.
If, therefore, this expense be a loss to the trading man, he must either be repaid this loss by those whom he serves, that is, by the nation; or the trade he carries on will become less profitable.
Every one will agree, that the expense of high exchange upon paying a balance, is a loss to a people, no way to be compensated by the advantages they reap from enriching the few individuals among them who gain by contriving methods to pay it off: and if an argument is necessary to prove this proposition, it may be drawn from this principle, to wit, whatever renders the profit upon trade precarious or uncertain, is a loss to trade in general; this loss is the consequence of high exchange; and although a profit does result from it upon one branch of trade, the exchange-business, yet that cannot compensate the loss upon every other.
We may, therefore, here repeat what we have said above, that the more difficulty is found in paying a balance, the greater is the loss to the nation.
The course of Exchange.
The course of exchange is the current price betwixt two places, which is always fluctuating and unsettled, being sometimes above and sometimes below par, according to the circumstances of trade.
When the course of exchange rises above par, the country where it rises may conclude for certain, that the balance of trade runs against them. The truth of this will appear, if we suppose Britain to import from any foreign place goods to the value of 100,000l. at par, and export only to the value of 80,000l.; in this case, bills on the said foreign place will be scarce in Britain, and consequently will rise in value; and after the 80,000l. is paid, bills must be procured from other places at a high rate to pay the remainder, so that perhaps 120,000l. may be paid for bills to discharge a debt of 100,000l.
Though the course of exchange be in a perpetual flux, and rises or falls according to the circumstances of trade, yet the exchanges of London, Holland, Hamburg, and Venice, in a great measure regulate those of all other places in Europe.
I. Exchange with Holland.
MONEY-TABLE.
| Par in Sterling | s. d. | |----------------|------| | 1 groat or penny | 0 054 | | 1 shiver | 0 109 | | 1 schilling | 0 656 | | 1 pound Flemish | 10 11.18 | | 1 guilder or florin | 1 9.36 | | 1 pound Flemish | 10 11.18 | | 1 rixdollar | 4 6.66 |
In Holland there are two sorts of money, bank and current. The bank is reckoned good security; demands on the bank are readily answered; and hence bank-money is generally rated from 3 to 6 per cent. better than the current. The difference between the bank and current money is called the agio.
Bills on Holland are always drawn in bank-money; and if accounts be sent over from Holland to Britain in current money, the British merchant pays these accounts by bills, and in this case has the benefit of the agio.
PROB. I. To reduce bank money to current money.
RULE. As 100 to 100+agio, so the given guilders to the answer.
EXAMPLE. What will 2210 guilders in bank money amount to in Holland currency, the agio being 3\(\frac{1}{2}\) per cent.?
Guild. Britain gives 1l. Sterling for an uncertain number of shillings and pence Flemish. The par is 1l. Sterling for 36.59s. Flemish; that is, 1l. 16s. 7.08d. Flemish.
When the Flemish rate rises above par, Britain gains and Holland loses by the exchange, and vice versa.
Sterling money is changed into Flemish, by saying,
As 1l. Sterling to the given rate, So is the given Sterling to the Flemish sought. Or, the Flemish-money may be cast up by practice. Dutch money, whether pounds, shillings, pence Flemish, or guilders, slivers, pennings, may be changed into Sterling, by saying,
As the given rate to 1l. Sterling, So the given Dutch to the Sterling sought.
**Example.** 1. A merchant in Britain draws on Amsterdam for 782l. Sterling: How many pounds Flemish, and how many guilders will that amount to, exchange at 34s. 8d. per pound Sterling?
| L. s. d. | L. s. d. | |----------|----------| | If 1 : 34 8 :: 782 | If 1 : 34 6 :: 782 | | 12 | 782 | | 416 | 693 | | 782 | 27733 | | 832 | 242666 | | 3328 | 27109.8 | | 2912 | |
L. 1355 9 4 Flem.
If the agio only be required, make the agio the middle term, thus:
Guil. fl. pen.
As 100 : 3½ :: 2210 : 69 1 4 agio. Or, work by practice, as above.
**Prob. II.** To reduce current money to bank money.
**Rule.** As 100+agio to 100, so the given guilders to the answer.
**Example.** What will 2279 guilders 1 sliver 4 pennings, Holland currency, amount to in bank money, the agio being 3½ per cent.?
Guild. Guild. Guild. fl. pen.
As 103½ : 100 :: 2279 1 4
| 8 | 8 | 20 | |---|---|---| | 825 | 800 | 45581 | | 20 | 16 | | | 16500 | 273490 | | | 16 | 45581 | | | 990 | 729300 | | | 165 | 800 | |
8)2640000 8)583440000 3)33 3)72930 Guild. 11 11)24310(2210 bank.
In Amsterdam, Rotterdam, Middleburgh, &c. books and accounts are kept by some in guilders, slivers, and pennings, and by others in pounds, shillings, and pence, Flemish.
Multiply the Flemish pounds and shillings by 6, and the product will be guilders and slivers; and if there be any pence, multiply them by 8 for pennings; or, divide the Flemish pence by 40, and the quot will be guilders, and the half of the remainder, if there be any, will be slivers, and 1 penny odd will be half a sliver, or 8 pennings, as follows.
| L. s. d. | L. s. d. | |----------|----------| | 1355 9 4 | 1355 9 4Fl. |
Or thus:
| L. s. d. | L. s. d. | |----------|----------| | 782 | 782 | | 391 | 547 8 | | 156 8 | 26 1 4 | | 26 1 4 | |
1355 9 4Fl.
2. Change 591 l. 5s. Flemish into Sterling money, exchange at 37s. 6d. Flemish per l. Sterling?
5 P Flem. II. Exchange with Hamburgh.
MONEY-TABLE.
Par in Sterling.
12 Phennings = 1 schilling-lub = 0 1\(\frac{1}{3}\) 16 Schilling-lubs = 1 mark = 1 6 2 Marks = 1 dollar = 3 0 3 Marks = 1 rixdollar = 4 6 6\(\frac{1}{2}\) Marks = 1 ducat = 9 4\(\frac{1}{2}\)
Books and accounts are kept at the bank, and by most people in the city, in marks, schilling-lubs, and phennings; but some keep them in pounds, schillings, and groots Flemish.
The agio at Hamburgh runs between 20 and 40 per cent. All bills are paid in bank-money.
Hamburgh exchanges with Britain by giving an uncertain number of schillings and groots Flemish for the pound Sterling. The groot or penny Flemish here, as also at Antwerp, is worth \(\frac{5}{8}\) of a penny Sterling; and so something better than in Holland, where it is only \(\frac{5}{10}\) d. Sterling.
Flemish.
6 Phennings = 1 groot or penny 6 Schilling-lubs = 1 schilling 1 Schilling-lub = make 2 pence or groots 1 Mark = 32 pence or groots 7\(\frac{1}{2}\) Marks = 1 pound
The par with Hamburgh, and also with Antwerp, is 35 s. 6\(\frac{1}{2}\) d. Flemish for 1 l. Sterling.
Examples. 1. How many marks must be received at Hamburgh for 300l. Sterling, exchange at 35 s. 3 d. Flemish per l. Sterling?
L. s. d. L.
If 1 : 35 3 11 300
12
423
300
M. sch.
32)126000(3965 10
Exchange between Britain and Antwerp, as also the Austrian Netherlands, is negociated the same way as with Holland, only the par is somewhat different, as will be described in article 2d, following.
Holland exchanges with other nations as follows, viz. with
| Flem d. | |---------| | Hamburg, on the dollar, = 66\(\frac{1}{2}\) | | France, on the crown, = 54 | | Spain, on the ducat, = 109\(\frac{1}{2}\) | | Portugal on the crusade, = 50 | | Venice, on the ducat, = 93 | | Genoa, on the pezzo, = 100 | | Leghorn, on the piastre, = 100 | | Florence, on the crown, = 120 | | Naples, on the ducat, = 74\(\frac{1}{2}\) | | Rome, on the crown, = 136 | | Milan, on the ducat, = 102 | | Bologna, on the dollar, = 94\(\frac{1}{2}\) |
Decimally. Decimally.
Flem. s. Marks. Flem. s. If 20 : 7.5 :: 35.25 4 : 1.5 :: 35.25
1.5
17625 3525
4)52.875
Marks in 1 l. Sterling 13.21875 300
Marks in 300 l. Sterling 3965.62500
Schilling-lubs 10.000
2. How much Sterling money will a bill of 3965 marks 10 schilling-lubs amount to, exchange at 35 s. 3 d. Flemish per l. sterling?
Flem. s. d. L.St. Mkr. Sch. If 35 3 + 1 :: 3965 10 12 32 2
423 7930 20 d. 11897
423)126900(300 l. Ger.
Decimally.
4 : 1.5 :: 35.25
1.5
17625 3525
4)52.875(14.21875 13.21875)3965.62500(300 l. Ster. 3965625
III. Exchange with France.
MONEY-TABLE.
Par in Ster. s. d. 12 deniers (1 fol = 0 0 1/8 20 fols make 1 livre = 0 9 1/8 3 livres 1 crown = 2.5 1/8
At Paris, Rouen, Lyons, &c., books and accounts are kept in livres, fols, and deniers; and the exchange with Britain is on the crown, or ecu, of 3 livres, or 60 fols Tournois. Britain gives for the crown an uncertain number of pence, commonly between 30 and 34, the par, as mentioned above, being 29 1/4 d.
Examp. 1. What Sterling money must be paid in London to receive in Paris 1978 crowns 25 fols, exchange at 31 1/2 d. per crown?
Sols. d. Cr. fols. If 60 : 31 1/2 :: 1978 25 253 118705 253 356115 573525 237410
6|0)300323615 Rem. 8)500539 3 12)62567 11 2|0)52113 13
L. 260 13 11 1/4 Ans.
By Practice.
Cr. fols. 1978 25, at 31 1/2 d.
d. 30 = 1/8 247 5 0 1 1/2 = 1/2 12 7 3 1/8 = 1/2 1 0 7 1/2 Sols 20 = 1/2 0 0 10 1/2 5 = 1/4 0 0 2 1/2
260 13 11 1/4
If you work decimally, say,
Cr. d. Ster. Cr. d. Ster. As 1 : 31.625 :: 1978 416 : 62567.427083
2. How many French livres will L. 121 : 18 : 6 Sterling amount to, exchange at 32 1/2 d. per crown?
d. Liv. L. s. d. If 32 1/2 : 3 :: 121 18 6 263 24 2438 12 29262 24
117048 58524 Liv. fols den.
263)702283(2670 5 11 Ans. Rem. (78) = 5 fols 11 deniers. IV. Exchange with Portugal.
MONEY-TABLE.
| Par in Ster. | s. d. f. | |--------------|----------| | 1 ree | = 0 0 0.27 | | 400 rees | make 1 cruadie = 2 3 | | 1000 rees | make 1 millree = 5 7½ |
In Lisbon, Oporto, &c., books and accounts are generally kept in rees and millrees; and the millrees are distinguished from the rees by a mark set between them thus, 485 ¥ 372; that is, 485 millrees and 372 rees.
Britain, as well as other nations, exchanges with Portugal on the millree, the par, as in the table, being 67½ d. Sterling. The course with Britain runs from 63 d. to 68 d. Sterling per millree.
EXAMP. I. How much Sterling money will pay a bill of 827 ¥ 160 rees, exchange at 63½ d. Sterling per millree?
Rees. d. Rees. If 1000 : 68½ :: 827.160 8 507 8000 507 579012 413580
Rem. 8000)419370.120 2 12) 52421 — 5 d. 20) 4368 — 8 s.
L. 218 8 5½ Ans.
By Practice.
Rees. 827.160, at 63½ d. d. 60 = 1 ¼ 206 790 3 = 1 ¾ 10.3395 = ¼ .861625 = ½ .4308125
218.4219375
The rees being thousandth parts of the millrees, are annexed to the integer, and the operation proceeds exactly as in decimals.
2. How many rees of Portugal will 500 l. Sterling amount to, exchange at 5 s. 4½ d. per millree?
d. Rees. L. If 64½ : 1000 :: 500 8 20 517 10000 12 120000 8000
Rees. 517)96000000(1856.866 Ans.
V. Exchange with Spain.
MONEY-TABLE.
| Par in Ster. | s. d. | |--------------|------| | 34 mervadies | 1 rial = 0 5½ | | 8 rials | make 1 piaftr = 3 7 | | 375 mervadies| 1 ducat = 4 11½ |
In Madrid, Bilboa, Cadiz, Malaga, Seville, and most of the principal places, books and accounts are kept in piaftries, called also dollars, rials, and mervadies; and they exchange with Britain generally on the piaftr, and sometimes on the ducat. The course runs from 35 d. to 45 d. Sterling for a piaftr or dollar of 8 rials.
EXAMP. I. London imports from Cadiz, goods to the value of 2163 piaftries and 4 rials: How much Sterling will this amount to, exchange at 38½ d. Sterling per piaftr?
Piaftr. Rials. 2163 4, at 38½ d. d. 24 = 75 216 6 12 = ½ 108 3 2 = ¼ 18 0 6 ½ = ⅛ 2 5 0 3 ¼ = ⅜ 1 2 6 4
345 17 1½ I 7½
L. 345 18 8½ Ans.
2. London remits to Cadiz 345 l. 18 s. 8½ d. How much Spanish money will this amount to, exchange at 38½ d. Sterling per piaftr?
d. Piaftr. L. s. d. If 38½ : 1 :: 345 18 8½
20 307 2 6918 12 614 1003 83024 16 3808 498149 83024 2149 1328389 1842
614)1328389(2193 piaftries.
VI. Exchange with Venice.
MONEY-TABLE.
5½ Soldi make 1 gros 24 Gros make 1 ducat = 50½ d. Sterling. The money of Venice is of three sorts, viz., two of bank money, and the picoli money. One of the banks deals in banco money, and the other in banco current. The bank money is 20 per cent. better than the banco current, and the banco current 20 per cent. better than the picoli money. Exchanges are always negotiated by the ducat banco, the par being 4s. 2½d. Sterling, as in the table.
Though the ducat be commonly divided into 24 gros, yet bankers and negotiators, for facility of computation, usually divide it as follows, and keep their books and accounts accordingly:
12 Deniers d'or make 1 sol d'or 20 Sols d'or make 1 ducat = 50½d. Sterling.
The course of exchange is from 45d. to 55d. Sterling per ducat.
Examp. 1. How much Sterling money is equal to 1459 ducats 18 sols 1 denier, bank money of Venice, exchange at 52½d. Sterling per ducat?
Duc. d. Duc. sol. den.
If 1 : 52½ :: 1459 18 1
| 52½ rate. | |-----------| | 10 = 26½ | | 2918 5 = 13½ | | 7295 2 = 3½ | | 1 = ½ | | d. 75868 den. 1 = ¼ | | ½ = 364½ | | ¼ = 364½ | | 47½ |
Rem.
12)77010(6d.
20)6417(17s.
L. 320 17 6 Sterling. Ans.
2. How many ducats at Venice are equal to 385l. 12s. 6d. Sterling, exchange at 4s. 4d. per ducat?
L. Duc. L.
If .216 : 1 :: 385.625
.216)385.625
21 385625
Duc.
195)347062.5(1779.8 Ans.
Bank money is reduced to current money, by allowing for the agio, as was done in exchange with Holland; viz. say, As 100 to 120, or as 10 to 12, or as 5 to 6, so the given bank money to the current sought. And current money is reduced to bank money by reversing the operation. And in like manner may picoli money be reduced to current or to bank money, and the contrary.
100 ducats banco of Venice.
In Leghorn = 93 pezzos In Lucca = 77 crowns In Rome = 68½ crowns In Frankfort = 139½ florins
VII. Exchange with Genoa.
MONEY-TABLE.
12 Denari make 1 soldi s. d. 20 Soldi make 1 pezzo = 4 6 Sterling.
Books and accounts are generally kept in pezzos, soldi, and denari; but some keep them in lires, soldi, and denari; and 12 such denari make 1 soldi, and 20 soldi make 1 lire.
The pezzo of exchange is equal to 5½ lires; and, consequently, exchange money is 5½ times better than the lire money. The course of exchange runs from 47d. to 58d. Sterling per pezzo.
Examp. How much Sterling money is equivalent to 3390 pezzos 16 soldi, of Genoa, exchange at 51½d. Sterling per pezzo?
Soldi d. Pez. soldi.
If 20 : 51½ :: 3390 16
| 8 = 20 | | 415 | | 160 67816 | | 415 | | 339080 | | 67816 | | 271264 |
d. L. s. d.
160)28143640(175897¾=732 18 1¾
If Sterling money be given, it may be reduced or changed into pezzos of Genoa, by reversing the former operation.
Exchange money is reduced to lire money, by being multiplied by 5½, as follows:
Pez. soldi. Decimally.
3390 16 3390.8 5½ 5.75
16954 0 169550 ¼ = 1695 8 237356 ¼ = 847 14 169540
Lires 19497 2 Lires 19497.100
And lire money is reduced to exchange money by dividing it by 5½.
Soldi of Genoa.
In Milan, 1 crown = 80 In Naples, 1 ducat = 86 In Leghorn, 1 piaftra = 20 In Sicily, 1 crown = 127½ VIII. Exchange with Leghorn.
MONEY-TABLE.
12 Denari make 1 soldi s. d. 20 Soldi make 1 piafcre = 4 6 Ster.
Books and accounts are kept in piafres, soldi, and denari. The piafcre here consists of 6 lires, and the lire contains 20 soldi, and the soldi 12 denari, and consequently exchange money is 6 times better than lire money. The course of exchange is from 47 d. to 58 d. Sterling per piafcre.
Example. What is the Sterling value of 731 piafres, at 55½ d. each.
| s. d. | 731 piafres, at 55½ d. | |-------|----------------------| | 4 or 48 = 1 1/3 | 146 4 | | 7 = 1/8 | 18 5 6 | | 1 1/2 = 4 | 4 11 4 1/2 |
L. 169 0 10 1/2 Ans.
Sterling money is reduced to money of Leghorn, by reverting the former operation; and exchange money is reduced to lire money by multiplying by 6, and lire money to exchange money by dividing by 6.
100 piafres of Leghorn are
In Naples = 134 ducats. | In Geneva = 185½ crowns.
Soldi of Leghorn.
In Sicily, 1 crown = 133½ In Sardinia, 1 dollar = 95½
The above are the chief places in Europe with which Britain exchanges directly; the exchanges with other places are generally made by bills on Hamburg, Holland, or Venice. We shall here however subjoin the par of exchange betwixt Britain and most of the other places in Europe, with which we have any commercial intercourse.
Par in Sterling. L. s. d.
Rome 1 crown = 6 1/3 Naples, 1 ducat = 3 4 1/2 Florence, 1 crown = 5 4 3 Milan, 1 ducat = 4 7 Bologna, 1 dollar = 4 3 Sicily, 1 crown = 5 0 Vienna, 1 rixdollar = 4 8 Aufburgh, 1 florin = 3 1/3 Francfort, 1 florin = 3 0 Bremen, 1 rixdollar = 3 6 Breflau, 1 rixdollar = 3 3 Berlin, 1 rixdollar = 4 0 Stetin, 1 mark = 1 6 Emden, 1 rixdollar = 3 6 Boltenna, 1 rixdollar = 3 8 Dantzig, 13½ florins = 1 0 0 Stockholm, 34½ dollars = 1 0 0 Ruffia, 1 rubble = 4 5 Turkey, 1 asper = 4 6
The following places, viz. Switzerland, Noremburgh, Leipsc, Drefden, Oinaburgh, Brunswic, Cologn, Liege, Straburgh, Cracow, Denmark, Norway, Riga, Revil, Narva, exchange with Britain, when direct exchange is made, upon the rixdollar, the par being 4s. 6d. Sterling.
IX. Exchange with America and the West Indies.
In North America and the West Indies, accounts, as in Britain, are kept in pounds, shillings, and pence. In North America they have few coins circulating among them, and on that account have been obliged to substitute a paper-currency for a medium of their commerce; which having no intrinsic value, is subjected to many disadvantages, and generally suffers a great discount. In the West Indies coins are more frequent, owing to their commercial intercourse with the Spanish settlements.
Exchange betwixt Britain and America, or the West Indies, may be computed as in the following examples:
1. The neat proceeds of a cargo from Britain to Boston amount to 845l. 17s. 6d. currency: How much is that in Sterling money, exchange at 80 per cent.?
If 180 : 100
18 : 10 L. s. d. 9 : 5 :: 845 17 6
9)4229 7 6
L. 469 18 7 1/3 Ster. Ans.
2. Boston remits to Britain a bill of 469l. 18s. 7½d. Sterling: How much currency was paid for the bill at Bolton, exchange at 80 per cent.?
If 100 : 180
5 : 9 :: 469 18 7 1/3
5)4229 7 6
845 17 6 currency. Ans.
3. How much Sterling money will 1730l. Jamaica currency amount to, exchange at 40 per cent.?
If 140 : 100
14 : 10 L. 7 : 5 :: 1780
7)8900
s. d. 1271 8 6 1/3 Ster. Ans.
Bills of exchange from America, the rate being high, is an expensive way of remitting money to Britain; and therefore merchants in Britain generally choose to have the debts due to them remitted home in sugar, rum, or other produce.
X. Exchange with Ireland.
At Dublin, and all over Ireland, books and accounts are kept in pounds, shillings, and pence, as in Britain; and they exchange on the 100l. Sterling. The par of one shilling Sterling is one shilling and one penny Irish: and so the par of 100l. Sterling is 108l. 6s. 8d. Irish. The course of exchange runs from 6 to 15 per cent.
**Example 1.** London remits to Dublin 586l. 10s. Sterling: How much Irish money will that amount to, exchange at 9½ per cent.?
\[ \begin{align*} L. \\ \text{If } 100 : 109\frac{1}{2} & :: 586.5 \\ 8 & = 877 \\ 800 & = 877 \times 7.333333 = 6429.50625 \\ & = 542.950625 \end{align*} \]
**Answer:** 642l. 19s. Irish.
By practice.
\[ \begin{array}{c|c} \text{p. cent.} & L. \\ \hline 10 & 586.5 \\ 2 & 11.73 \text{ sub.} \\ 8 & 46.92 \\ 1 & 5.865 \\ \frac{4}{5} & 2.9325 \\ \frac{3}{5} & 7.33125 \\ 9\frac{1}{2} & 56.450625 \text{ add} \\ & 642.950625 \end{array} \]
2. How much Sterling will 625l. Irish amount to, exchange at 10\(\frac{1}{2}\) per cent.?
\[ \begin{align*} \text{If } 110\frac{1}{2} : 100 & :: 625 \\ 8 & = 800 \\ & = 883 \times 7.333333 = 6429.50625 \\ & = 542.950625 \end{align*} \]
**XI. Exchange betwixt London and other places in Britain.**
The several towns in Britain exchange with London for a small premium in favour of London; such as, 1, 1\(\frac{1}{2}\), &c. per cent. The premium is more or less according to the demand for bills.
**Example.** Edinburgh draws on London for 860l. exchange at 1\(\frac{1}{2}\) per cent.: How much money must be paid at Edinburgh for the bill?
\[ \begin{array}{c|c} \text{per cent.} & L. \\ \hline 1 & 860 \\ \frac{1}{2} & 812 \\ \frac{3}{4} & 23 \\ \frac{1}{2} & 116 \\ & 11166 \text{ premium.} \\ & 871166 \text{ paid for the bill.} \end{array} \]
To avoid paying the premium, it is an usual practice to take the bill payable at London a certain number of days after date; and in this way of doing, 73 days is equivalent to 1 per cent.
**XII. Arbitration of Exchanges.**
The course of exchange betwixt nation and nation naturally rises or falls according as the circumstances and balance of trade happen to vary. Now to draw upon and remit to foreign places, in this fluctuating state of exchange, in the way that will turn out most profitable, is the design of arbitration. Which is either simple or compound.
**I. Simple Arbitration.**
In simple arbitration the rates or prices of exchange from one place to other two are given; whereby is found the correspondent price between the said two places, called the arbitrated price, or par of arbitration: and hence is derived a method of drawing and remitting to the best advantage.
**Example 1.** If exchange from London to Amsterdam be 33s. 9d. per l. Sterling; and if exchange from London to Paris be 32d. per crown; what must be the rate of exchange from Amsterdam to Paris, in order to be on a par with the other two?
\[ \begin{array}{c|c|c} \text{Ster. Flem. Ster.} & s. & d. \\ \hline \text{If } 20 : 33 9 & :: 32 \\ 12 & 12 \\ & 240 \\ & 405 \\ & 32 \\ & 810 \\ & 1215 \\ & 24012560(54 \text{ d. Flem. per crown. Answer}) \end{array} \]
2. If exchange from Paris to London be 32d. Sterling per crown; and if exchange from Paris to Amsterdam be 54d. Flemish per crown; what must be the rate of exchange between London and Amsterdam, in order to be on a par with the other two?
\[ \begin{array}{c|c|c} \text{Ster. Flem. Ster.} & d. & d. \\ \hline \text{If } 32 : 54 & :: 240 \\ & 240 \\ & 216 \\ & 108 \\ & 12 \\ & 3212960(405 (33 9 Flem. per l. Ster. Answer) \end{array} \]
From these operations it appears, that if any sum of money be remitted, at the rates of exchange mentioned, from any one of the three places to the second, and from the second to the third, and again from the third to the first, the sum so remitted will come home entire, without increase or diminution. From the par of arbitration thus found, and the course of exchange given, is deduced a method of drawing and remitting to advantage, as in the following example.
3. If exchange from London to Paris be 32 d. Sterling per crown, and to Amsterdam 405 d. Flemish per l. Sterling; and if, by advice from Holland or France, the course of exchange between Paris and Amsterdam is fallen to 52 d Flemish per crown; what may be gained per cent. by drawing on Paris, and remitting to Amsterdam?
The par of arbitration between Paris and Amsterdam in this case, by Ex. 1, is 54 d. Flemish per crown. Work as under.
\[ \begin{align*} d.\text{St. Gr.} & \quad L.\text{St. Gr.} \\ \text{If } 32 : 1 & :: 100 : 750 \text{ debit at Paris} \\ \text{Cr. d. Fl. Gr.} & \quad d.\text{Fl. Gr.} \\ \text{If } 1 : 52 & :: 750 : 39000 \text{ credit at Amsterdam.} \\ d.\text{Fl. L. St.} & \quad d.\text{Fl. L. s. d. Ster.} \\ \text{If } 405 : 1 & :: 39000 : 96 5 11\frac{1}{2} \text{ to be remitted.} \\ & \quad 100 \\ & \quad 3 14 \frac{8}{9} \end{align*} \]
But if the course of exchange between Paris and Amsterdam, instead of falling below, rise above the par of arbitration, suppose to 56 d. Flemish per crown; in this case, if you propose to gain by the negotiation, you must draw on Amsterdam, and remit to Paris. The computation follows.
\[ \begin{align*} L.\text{St. d. Fl.} & \quad L.\text{St. d. Fl.} \\ \text{If } 1 : 405 & :: 100 : 40500 \text{ debit at Amsterdam.} \\ d.\text{Fl. Gr.} & \quad d.\text{F. Gr.} \\ \text{If } 56 : 1 & :: 40500 : 723\frac{3}{4} \text{ credit at Paris.} \\ \text{Cr. d. St. Gr.} & \quad L.\text{s. d. Ster.} \\ \text{If } 1 : 32 & :: 723\frac{3}{4} : 96 8 6\frac{6}{7} \text{ to be remitted.} \\ & \quad 100 \\ & \quad 3 11\frac{5}{7} \text{ gained per cent.} \end{align*} \]
In negotiations of this sort, a fund for remittance is afforded out of the sum you receive for the draught; and your credit at the one foreign place pays your debit at the other.
II. Compound Arbitration.
In compound arbitration the rate or price of exchange between three, four, or more places, is given, in order to find how much a remittance passing through them all will amount to at the last place; or to find the arbitrated price, or par of arbitration, between the first place and the last. And this may be done by the following
Rules. I. Distinguish the given rates or prices into antecedents and consequents; place the antecedents in one column, and the consequents in another on the right, fronting one another by way of equation.
II. The first antecedent, and the last consequent to which an antecedent is required, must always be of the same kind.
III. The second antecedent must be of the same kind with the first consequent, and the third antecedent of the same kind with the second consequent, &c.
IV. If to any of the numbers a fraction be annexed, both the antecedent and its consequent must be multiplied into the denominator.
V. To facilitate the operation, terms that happen to be equal or the same in both columns, may be dropped or rejected, and other terms may be abridged.
VI. Multiply the antecedents continually for a divisor, and the consequents continually for a dividend, and the quot will be the answer or antecedent required.
Example. 1. If London remit 1000 l. Sterling to Spa'n, by way of Holland, at 35 s. Flemish per l. Sterling; thence to France, at 58 d. Flemish per crown; thence to Venice, at 100 crowns per 60 ducats; and thence to Spain, at 360 mervadies per ducat; how many piafres, of 272 mervadies, will the 1000 l. Sterling amount to in Spain?
\[ \begin{array}{ccc} \text{Antecedents.} & \text{Consequents.} & \text{Abridged.} \\ 1 l. Sterling & = 35 s. or 420 d. Fl. & 1 = 210 \\ 58 d. Flemish & = 1 crown France & 29 = 1 \\ 100 crowns France & = 60 ducats Venice & 1 = 30 \\ 1 ducat Venice & = 360 mervadies Spain & 1 = 45 \\ 272 mervadies & = 1 piafre & 17 = 1 \\ \text{How many piafres?} & = 1000 l. Sterling & = 10 \end{array} \]
In order to abridge the terms, divide 58 and 420 by 2, and you have the new antecedent 29, and the new consequent 210; reject two cipher in 100 and 1000; divide 272 and 360 by 8, and you have 34 and 45; divide 34 and 60 by 2, and you have 17 and 30; and the whole will stand abridged as above.
Then, \(29 \times 17 = 493\) divisor; and, \(210 \times 30 \times 45 \times 10 = 2835000\) dividend; and, \(493)2835000(5750\frac{1}{2}\) piafres. Ans.
Or, the consequents may be connected with the sign of multiplication, and placed over a line by way of numerator; and the antecedents, connected in the same manner, may be placed under the line, by way of denominator; and then abridged, as follows:
\[ \frac{420 \times 60 \times 360 \times 100}{58 \times 100 \times 272} = \frac{210 \times 60 \times 360 \times 10}{29 \times 1 \times 272} = \frac{210 \times 60 \times 45 \times 100}{29 \times 34} = \frac{210 \times 30 \times 45 \times 10}{29 \times 17} = \frac{2835000}{493} \]
And, \(493)2835000(5750\frac{1}{2}\) piafres. Ans.
The placing the terms by way of antecedent and consequent, and working as the rules direct, save so many stating of the rule of three, and greatly shortens the operation. The proportions at large for the above question would stand as under.
\[ \begin{align*} L.\text{St. d. Fl.} & \quad L.\text{St. d. Fl.} \\ \text{If } 1 : 420 & :: 1000 : 420000 \\ d.\text{Fl. Gr.} & \quad d.\text{Fl. Gr.} \\ \text{If } 58 : 1 & :: 420000 : 7241\frac{3}{9} \end{align*} \] If we suppose the course of direct exchange to Spain to be 42½ d. Sterling per piaftr, the 1000l. remitted would only amount to 5647½ piaftries; and, consequently, 103 piaftries are gained by the negociation; that is, about 2 per cent.
2. A banker in Amsterdam remits to London 400l. Flemish; first to France at 56d. Flemish per crown; from France to Venice at 100 crowns per 60 ducats; from Venice to Hamburgh at 100 d. Flemish per ducat; from Hamburgh to Lisbon at 50 d. Flemish per crusade of 400 rees; and, lastly, from Lisbon to London at 64 d. Sterling per milree: How much Sterling money will the remittance amount to? and how much will be gained or saved, supposing the direct exchange from Holland to London at 36s. 10d. Flemish per l. Sterling?
Antecedents. Consequents. 56 d. Flem. = 1 crown 100 crowns = 60 ducats. 1 ducat = 100 d. Flem. 50 d. Flem. = 400 rees. 1000 rees = 64 d. Sterling.
How many d. Ster. = 400l. or 96000 d. Flemish?
This, in the fractional form, will stand as follows.
\[ \frac{60 \times 100 \times 400 \times 64 \times 96000}{50 \times 100 \times 50 \times 1000} = 368640, \]
and
\[ \frac{368640}{52662} = 7 \text{ d. Ster.} \]
To find how much the exchange from Amsterdam directly to London, at 36s. 10d. Flemish per l. Sterling, will amount to, say,
| s. d. | d. Fl. | L. St. | d. Fl. | L. | |-------|--------|--------|--------|---| | 36 10 | If 442 : 1 :: 96000 : 217 3 10½ | | 12 | | | 219 8 6½ |
Gained or saved, 2 4 8½
In the above example, the par of arbitration, or the arbitrated price, between London and Amsterdam, viz. the number of Flemish pence given for 1l. Sterling, may be found thus:
Make 64 d. Sterling, the price of the milree, the first antecedent; then all the former consequents will become antecedents, and all the antecedents will become consequents. Place 240, the pence in 1l. Sterling, as the last consequent, and then proceed as taught above, viz.
Vol. II. No 48.
Antecedents. Consequents. 64 d. Ster. = 1000 rees. 400 rees = 50 d. Flem. 100 d. Flem. = 1 ducat. 60 ducats = 100 crowns. 1 crown = 56 d. Flem.
How many d. Flem. = 240 d. Ster.?
\[ \frac{1000 \times 50 \times 100 \times 56 \times 240}{64 \times 400 \times 100 \times 60} = 875, \]
and
\[ 2)875(437\frac{1}{2}d. = 36s. 5\frac{1}{2}d. Flem. per l. Ster. Ans. \]
Or the arbitrated price may be found from the answer to the question, by saying,
| d. Ster. | d. Flem. | d. St. | |----------|----------|-------| | 368640 | 96000 | 240 |
\[ \frac{368640}{16128000}(437\frac{1}{2} = 36 5\frac{1}{2} \text{ as before.} \]
The work may be proved by the arbitrated price thus:
As 1l. Sterling to 36s. 5\(\frac{1}{2}\)d. Flemish, so 219l. 8s. 6\(\frac{1}{2}\)d. Sterling to 400l. Flemish.
The arbitrated price compared with the direct course shows whether the direct or circular remittance will be most advantageous, and how much. Thus the banker at Amsterdam will think it better exchange to receive 1l. Sterling for 36s. 5\(\frac{1}{2}\)d. Flemish, than for 36s. 10d. Flemish.
Exchange signifies also a place in most considerable trading cities, wherein the merchants, negociants, agents, bankers, brokers, interpreters, and other persons concerned in commerce, meet on certain days, and at certain times thereof, to confer and treat together of matters relating to exchanges, remittances, payments, adventures, assurances, freightments, and other mercantile negociations, both by sea and land.