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 sum 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 of exchange, or a note of hand: these are looked upon as payment. See BILL, and Mercantile Laws.
The punctuality of acquitting these obligations is essential to commerce; and no sooner is a merchant's accepted bill protested, than he is considered as 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 accepter, (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 Exchange, 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 expense, and paid for his risk and trouble.
Or it may be paid without a bill, if the London debtor lends 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 communication 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 no where 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 dissemble what they fear; that of the last, to exaggerate what they Exchange. 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 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 fear 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 transferred 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.
I. Exchange with Holland.
MONEY-TABLE.
| Par in Sterling | s. d. | |----------------|------| | 1 groat or penny = 0 0.54 | | 1 florin = 0 1.09 | | 1 schilling = 0 6.56 | | 1 pound Flemish = 10 11.18 | | 1 gilder or florin = 1 9.86 | | 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 Amsterdam, Rotterdam, Middleburgh, &c., books Exchange, and accounts are kept by some in guilders, florins, and pennings, and by others in pounds, shillings, and pence Flemish.
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 called up by practice.
Dutch money, whether pounds, shillings, pence Flemish, or guilders, florins, pennings, may be changed into Sterling, by saying,
As the given rate to 1l. Sterling, So the given Dutch to the Sterling sought.
Example. I. 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?
Decimally.
| L. s. d. | L. s. d. | |----------|----------| | If 1 : 34 8 :: 782 | If 1 : 34.8 :: 782 | | 12 | 782 | | 416 | 693 | | 782 | 27733 | | 832 | 242666 | | 3328 | 21027109.3 | | 2912 | L.1355 9 4 Flem. |
Or thus:
Multiply the Flemish pounds and shillings by 6, and the product will be guilders and florins; and if there be any pence, multiply them by 8 for pennings; or, divide the Flemish pence by 40, and the quotient will be guilders, and the half of the remainder, if there be any, will be florins, and one penny odd will be half a florin, or 8 pennings, as follows:
| L. s. d. | Flem. pence. | |----------|--------------| | 1355 9 4 | 40)325312(32 rem. |
Guild 8132 16 florins. Guild 8132 16 florins.
2. Change 591l. 5s. Flemish into Sterling money, exchange at 37s. 6d. Flemish per l. Sterling. Exchange.
Flem. Ster. Flem. s. d. L. L. s. If 37 6 : 1 :: 591 5
2 20 5) 75 11025 2 4) 15 23650 3 5) 4730 3) 946
L. s. d. 315 8 Ster.
Ans. 315 5 8 Ster.
Decimally.
5) L. L. 5) L. If 1.875 : 1 :: 591.25
5) .375 5) 118.25 5) .075 5) 23.65 .015 .015) 4.73(313.3
45 23 15 80 75 50 45
*5
Holland exchanges with other nations as follows, viz. with
Flem. d. Hamburg, on the dollar, = 66 1/2 France, on the crown, = 54 Spain, on the ducat, = 109 1/2 Portugal, on the crusade, = 50 Venice, on the ducat, = 93 Genoa, on the pezzo, = 100 Leghorn, on the piaftra, = 100 Florence, on the crown, = 120 Naples, on the ducat, = 74 1/2 Rome, on the crown, = 136 Milan, on the ducat, = 102 Bologna, on the dollar, = 94 1/2
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.
II. Exchange with Hamburg.
Money Table.
Par in Sterling. 12 Phennings make 1 schilling-lub = 0 1 1/2 16 Schilling-lubs 1 mark = 1 6 2 Marks 1 dollar = 3 0 3 Marks 1 rixdollar = 4 6 7 1/2 Marks 1 ducat = 9 4 1/2
Books and accounts are kept at the bank, and by most people in the city, in marks, schilling-lubs, 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 1/4 of a penny Sterling; and something better than in Holland, where it is only 1/5 d. Sterling.
Flemish. 6 Phennings = 1 groot or penny 6 Schilling-lubs = 1 schilling 1 Schilling-lub = 2 pence or groots 1 Mark = 32 pence or groots 7 1/2 Marks = 1 pound.
The par with Hamburgh, and also with Antwerp, is 35s. 6 1/2 d. Flemish for 1l. Sterling.
Examples. 1. How many marks must be received at Hamburgh for 300l. Sterling, exchange at 35s. 3 d. Flemish per l. Sterling?
L. s. d. L. If 1 : 35 3 :: 300
423 300 32) 126900 (3965 10 96... 300 288 210 192 180 160
(20) 16 320 32
(o)
Decimally.
Flem. s. Marks. Flem. s. If 20 : 7.5 :: 35.25 4 : 1.5 :: 35.25
17625 3525 4) 52875
Marks in 1l. Sterling 13.21875 300
Marks in 300l. Sterling 3965.62500 16
3750 625
Schilling-lubs 10,000 Exchange.
2. How much Sterling money will a bill of 3965 mark 10 schilling-lubs amount to, exchange at 35s. 3d. Flemish per pound Sterling?
\[ \begin{align*} \text{Fl.} & : \text{d.} : \text{L.Si.} : \text{Mks} : \text{f.h.} \\ \text{If } 35 & : 3 : 1 :: 3965 : 10 \\ & 12 : 32 : 2 \\ & 423 : 7930 : 20d. \\ & 11897 \\ & 423)126900(300l. fler. \\ & 1269 \\ \text{Decimally.} & \\ & 4 : 1.5 :: 35.25 \\ & 1.5 \\ & 17625 \\ & 2225 \\ & 4)52.875(13.21875 \\ & 13.21875)3965.62500(300l. fler. \\ & 3965625 \end{align*} \]
III. Exchange with France.
**Money-table.**
| Par in Ster. | s. d. | |--------------|------| | 12 Deniers | 1 sol = 0 0 3/5 | | 20 Sols | make 1 livre = 0 9 1/2 | | 3 Livres | 1 crown = 2 5 1/4 |
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 1/2 d.
**Example.** 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?
\[ \begin{align*} \text{Sols.} & : \text{d.} : \text{Cr.} : \text{sols.} \\ \text{If } 60 & : 31\frac{1}{2} :: 1978 : 25 \\ & 253 : 118705 \\ & 253 \\ & 356115 \\ & 593525 \\ & 237410 \\ & 6(0)300236\frac{1}{5} \text{ Rem.} \\ & 8)500539 3 \\ & 12)62567 11 \\ & 2(0)5213 13 \\ & L. 260 13 11\frac{1}{2} \text{ Ans.} \end{align*} \]
By Practice.
\[ \begin{align*} \text{Cr.} & : \text{Sols.} \\ 1978 & 25, at 31\frac{1}{2} d. \\ \end{align*} \]
If you work decimally, say,
\[ \begin{align*} \text{Cr.} & : \text{d. Ster.} : \text{Cr.} : \text{d. Ster.} \\ \text{As } 1 : 31.625 :: 1978.416 : 62567.427083 \\ 2. How many French livres will L 12 : 18 : 6 Sterling amount to, exchange at 32\frac{3}{4} d. per crown?
\[ \begin{align*} \text{d. Liv.} & : \text{L.} : \text{s. d.} \\ \text{If } 32\frac{3}{4} & : 3 :: 121 : 18 : 6 \\ & 8 : 20 \\ & 263 : 2438 \\ & 24 \\ & 29262 \\ & 24 \\ & 117048 \\ & 58524 \\ & Liv. fols. den. \\ & 263)702288(2670 5 11 Ans. \\ & Rem. (78=5 fols 11 deniers. \end{align*} \]
IV. Exchange with Portugal.
**Money-table.**
| Par in Ster. | s. d. f. | |--------------|---------| | 1 ree | = 0 0 0.27 | | 400 rees | make 1 cruade = 2 3 | | 1000 rees | 1 milree = 5 7\(\frac{1}{2}\) |
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 67\(\frac{1}{2}\) d. Sterling. The course with Britain runs from 63d. to 68d. Sterling per millree.
**Example.** 1. How much Sterling money will pay a bill of 827 \(¥\) 160 rees, exchange at 63\(\frac{1}{2}\) d. Sterling per millree?
\[ \begin{align*} \text{Rees.} & : \text{d.} : \text{Rees.} \\ \text{If } 1000 & : 63\frac{1}{2} :: 827.160. \\ & 8 : 507 \\ & 8000 : 507 : 579012 \\ & 413580 \\ & 8000)419370.120 2 \\ & 12)52421 — 5d. \\ & 20)4368 — 8s. \\ & L. 218 8 5\(\frac{1}{2}\) \text{ Ans.} \end{align*} \]
By Practice.
\[ \begin{align*} \text{Rees.} & : \text{d.} \\ 827.160, & at 63\(\frac{1}{2}\) d. \\ \end{align*} \] Exchange. 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 5s. 4½d. per millree?
| d. | Rees. | L. | |----|------|---| | If 64½ : 1000 :: 500 | 8 | 20 | | 517 | 8000 | 10000 | | 12 | 120000 | 8000 |
Rees. 517)96000000(1856.866 Ans.
V. Exchange with Spain.
MONEY-TABLE.
| Par in Ster. | s. | d. | |--------------|---|---| | 35 mervadies | 1 rial | = 0 5¾ | | 8 rials | make 1 piaftr | = 3 7 | | 375 mervadies | 1 ducat | = 4 11¼ |
In Madrid, Bilboa, Cadiz, Malaga, Seville, and most of the principal places, books and accounts are kept in piafres, called also dollars, rials, and mervadies; and they exchange with Britain generally on the piafre, and sometimes on the ducat. The course runs from 35d. to 45d. Sterling for a piafre or dollar of 8 rials.
Examp. 1. London imports from Cadiz goods to the value of 2163 piafres and 4 rials: How much Sterling will this amount to, exchange at 38½d. Sterling per piafre?
| Piaf. Rials. | 2163 4 at 38½d. | |--------------|------------------| | d. | Rials. 38½ each. | | 24 = 1/10 | 216 6 | | 12 = 1/6 | 108 3 | | 2 = 1/3 | 18 0 6 | | 1 = 1/6 | 2 5 0 3 | | 1/2 = 1/12 | 1 2 6 3 | | 1/8 = 1/24 | 345 17 1 3 | | 1/16 = 1/48 | 1 7 1/6 | | L. 345 18 8 1/6 Ans. |
2. London remits to Cadiz 345l. 18s. 8½d. How much Spanish money will this amount to, exchange at 38½d. Sterling per piafre?
VI. Exchange with Venice.
MONEY-TABLE.
5½ Soldi make 1 gros 24 Gros make 1 ducat = 50½d. 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 negociated 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 fol 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 folis 1 denier, bank-money of Venice, exchange at 52½d. Sterling per ducat?
Duc. d. Duc. fol. den. d. If 1 : 52½ :: 1459 18 1 52½ rate. | Sols. | 52½ | |-------|-----| | 10 = 1/2 | 26½ | | 5 = 1/4 | 13½ | | 2 = 1/6 | 5½ | | 1 = 1/12 | 2½ | | d. 75868 den. 1 = 1/24 0 3 | | 1/4 = 729 4 | | 1/8 = 304 8 | | 7696 2 3 | | 47½ Rem. | | 12 770 10 (6d. | | 20 641 7 (17s. |
L. 320 17 6 Sterling. Ans. Exchange.
2. How many ducats at Venice are equal to 385 l. Sterling, exchange at 4s. 4d. per ducat?
\[ L. \quad Duc. \quad L. \]
If \( \frac{1}{2} : \frac{1}{2} :: 385.625 \)
\[ \frac{1}{2} \times 385.625 = 192.8125 \]
\[ 192.8125 \times 4 = 771.25 \]
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 reverting the operation. And in like manner may picolimoney be reduced to current or to bank money, and the contrary.
100 ducats banco of Venice.
In Leghorn = 73 pezzos
In Rome = 68½ crowns
In Lucca = 77 crowns
In Francfort = 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 \( \frac{5}{4} \) lires; and consequently, exchange-money is \( \frac{5}{4} \) times better than the lire money. The course of exchange runs from 47 d. to 58 d. Sterling per pezzo.
Example. How much Sterling money is equivalent to 3390 pezzos 16 soldi of Genoa, exchange at 51½ d. Sterling per pezzo?
\[ \text{Soldi.} \quad d. \quad \text{Pez. soldi.} \]
If \( \frac{20}{51\frac{1}{2}} :: 3390 \quad 16 \)
\[ \frac{20}{51\frac{1}{2}} = 415 \]
\[ 160 \times 415 = 67816 \]
\[ 3390 \times 16 = 54240 \]
\[ 67816 + 54240 = 122056 \]
If Sterling money be given, it may be reduced or changed into pezzos of Genoa, by reverting the former operation.
Exchange money is reduced to lire-money, by being multiplied by \( \frac{5}{4} \), as follows:
\[ \text{Pez. soldi.} \quad \text{Decimally.} \]
\[ 3390 \quad 16 \quad 3390.8 \]
\[ \frac{5}{4} \quad 5.75 \]
\[ 16954 \quad 0 \quad 169540 \]
\[ \frac{1}{2} = 1695 \quad 8 \quad 237350 \]
\[ \frac{1}{4} = 847 \quad 14 \quad 169540 \]
Lires 19497 2 Lires 19497.100
And lire-money is reduced to exchange-money by dividing it by \( \frac{5}{4} \).
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 piaftra = 4 6 Ster.
Books and accounts are kept in piaftras, soldi, and denari. The piaftra 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 piaftra.
Example. What is the Sterling value of 731 piaftras, at 55½ d. each?
\[ \text{s. d.} \quad 731 \text{ piaftras, at } 55\frac{1}{2} \text{ d.} \]
\[ 4 \text{ or } 48 = 146 \quad 4 \]
\[ 6 = 18 \quad 5 \quad 6 \]
\[ 1\frac{1}{2} = 4 \quad 11 \quad 4\frac{1}{2} \]
L. 169 0 10½ Anf.
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 piaftras 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 Hamburgh, Holland, or Venice. We shall here, however, subjoin the par of exchange betwixt Britain and most of the other places in Europe with which she has any commercial intercourse.
Par in Sterling L.s.d.
Rome, 1 crown = 6 1½
Naples, 1 ducat = 3 4½
Florence, 1 crown = 5 4½
Milan, 1 ducat = 4 7
Bologna, 1 dollar = 4 3
Sicily, 1 crown = 5 0
Vienna, 1 rixdollar = 4 8
Augburgh, 1 florin = 3 1½
Francfort, 1 florin = 3 0
Bremen, 1 rixdollar = 3 6
Breslau, 1 rixdollar = 3 3 Berlin, Exchange.
Par in Sterling L. s. d.
Berlin, 1 rixdollar = 4 0 Stettin, 1 mark = 1 6 Emden, 1 rixdollar = 3 6 Bolzenau, 1 rixdollar = 3 8 Dantzig, 1 florins = 1 0 0 Stockholm, 3 4 5 dollars = 1 0 0 Ruffia, 1 ruble = 4 5 Turkey, 1 asper = 4 6
The following places, viz. Switzerland, Nuremberg, Leipzig, Dresden, Osnaburg, Brunswick, Cologne, Leige, Strasbourg, Cracow, Denmark, Norway, Riga, Reval, Narva, exchange with Britain, when direct exchange is made, upon the rixdollar, the par being 4 s. 6 d. 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 845 l. 17 s. 6 d. 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
5 9)4229 7 6
L. 469 18 7 ½ Ster. Ans.
2. Boston remits to Britain a bill of 469 l. 18 s. 7 ½ d. Sterling: How much currency was paid for the bill at Boston, exchange at 80 per cent.?
If 100 : 180 L. s. d. 5 : 9 :: 469 18 7 ½
9 5)4229 7 6
845 17 6 currency. Ans.
3. How much Sterling-money will 1780 l. Jamaica currency amount to, exchange at 40 per cent.?
If 140 : 100 14 : 10 L. 7 : 5 :: 1780
5 7)8900 s. d.
1271 8 6 ½ 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 100 l. Sterling.
The par of one shilling Sterling is one shilling and one penny Irish; and so the par of 100 l. Sterling is 108 l. 6 s. 8 d. Irish. The course of exchange runs from 6 to 15 per cent.
Examp. 1. London remits to Dublin 586 l. 10 s. Sterling: How much Irish money will that amount to, exchange at 9½ per cent.?
If 100 : 109½ :: 586.5 8 877
800 : 877 41055 41055 46920
800)514360.5
642.950625
Ans. 642 l. 19 s. Irish.
By practice.
p. cent. 586.5 10 = 1/10 58.65 2 = 1/5 11.73 sub.
8 = 1/8 46.92 1 = 1/1 5.865 4/5 = 4/5 2.9325 1/5 = 1/5 .733125
9½ 56.450625 add.
642.950625
2. How much Sterling will 625 l. Irish amount to, exchange at 10½ per cent.?
If 110½ : 100 :: 625 8 800
883 800 883)500000(566 5 0½ Ster. Ans.
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, 1/2, &c. per cent. The premium is more or less, according to the demand for bills.
Examp. Edinburgh draws on London for 860 l. exchange at 1½ per cent.: How much money must be paid at Edinburgh for the bill?
L. 860
per cent. 8 12 1 = 1/10 2 3 1/2 = 1/2 1 1 6
11 16 6 premium.
871 16 6 paid for the bill. Exchange. 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.
Examp. 1. If exchange from London to Amsterdam be 33 s. 9 d. per pound Sterling; and if exchange from London to Paris be 32 d. per crown; what must be the rate of exchange from Amsterdam to Paris, in order to be put on a par with the other two?
Ster. Flem. Ster. s. s. d. d. If 20 : 33 9 :: 32 12 12 240 405 32 810 1215
240)12960(54 d. Flem. per crown. Ans.
2. If exchange from Paris to London be 32 d. Sterling per crown; and if exchange from Paris to Amsterdam be 54 d. 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?
Ster. Flem. Ster. d. d. d. If 32 : 54 :: 240 240 216 108 12) s. d. 32)12960(405 (39 Flem. per l. Ster. Ans.
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 for 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 pound Sterling; and if, by advice from Holland to 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.
d. St. Cr. L. St. Cr. If 32 : 1 :: 100 : 750 debit at Paris Cr. d.Fl. C. d.Fl. If 1 : 52 :: 750 : 39000 credit at Amsterdam. d.Fl. L.St. d.Fl. L. s. d.Ster. If 405 : 1 :: 39000 : 96 5 11/12 to be remitted.
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.
L.St. d.Fl. L.St. d.Fl. If 1 : 405 :: 100 : 40500 debit at Amsterdam. d.Fl. Cr. d.F. Cr. If 56 : 1 :: 40500 : 723 3/4 credit at Paris. Cr. d.St. Cr. L. s. d. Ster. If 1 : 32 :: 723 3/4 : 96 8 6/7 to be remitted.
3 11 5 1/2 gained per cent.
In negotiations of this sort, a sum for remittance is afforded out of the sum you receive for the draught; and your credit at the one foreign place pays your debt 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 quotient will be the answer or antecedent required.
Example. If London remit 100l. Sterling to Spain, by way of Holland, at 3s. Flemish per pound Sterling; thence to France, at 5d. 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 100l. Sterling amount to in Spain?
| Antecedents | Consequents | Abridged | |-------------|-------------|----------| | 1l. Sterling | = 5s. or 420d Fl. | = 210 | | 58d. Flemish | = 1 crown France | = 29 | | 100 crowns France | = 60 ducats Venice | = 30 | | 1 ducat Venice | = 360 mervadies Spain | = 45 | | 272 mervadies | = 1 piafre | = 17 | | How many piafres = 100l. Sterling | = 10 |
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 ciphers in 100 and 1000; divide 29 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, \(493)2835000(5750\)
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:
\[ \frac{420 \times 60 \times 360 \times 10}{58 \times 100 \times 272} = \frac{210 \times 60 \times 60 \times 10}{29 \times 34} \]
And, \(493)2835000(5750\)
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.
| L. St. d.Fl. | L. St. d.Fl. | |--------------|--------------| | If 1 : 420 :: 1000 : 420000. | | d.Fl. Cr. d.Fl. Cr. | | If 58 : 1 :: 420000 : 7241\(\frac{1}{3}\) | | Cr. Duc. Cr. Duc. | | If 100 : 60 :: 7241\(\frac{1}{3}\) : 4344\(\frac{4}{5}\) | | Duc. Mer. Duc. Mer. | | If 1 : 360 :: 4344\(\frac{4}{5}\) : 1564137\(\frac{3}{7}\) | | Mer. Piaf. Mer. Piaf. | | If 272 : 1 :: 564137\(\frac{3}{7}\) : 5750\(\frac{5}{9}\) |
If we suppose the course of direct exchange to Spain to be 42\(\frac{1}{2}\)d. Sterling per piafre, the 100l. remitted would only amount to 5647\(\frac{3}{7}\) piafres; and, consequently, 103 piafres are gained by the negociation; that is, about 2 per cent.
2. A banker in Amsterdam remits to London 400l. Flemish; from France to Venice, at 100 crowns per 60 ducats; from Venice to Hamburg, at 100d. Flemish per ducat; from Hamburg to Lisbon, at 50d. Flemish per crusade of 400 rees; and, lastly, from Lisbon to London at 64d. Sterling per millree: 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 pound Sterling?
Antecedents. Consequents. 56d. Flem. = 1 crown 100 crowns = 60 ducats. 1 ducat = 100d. Flem. 50d. Flem. = 400 rees. 1000 rees = 64d. Sterling.
How many d. Ster. = 400l. or 96000d. Flemish? This, in the fractional form, will stand as follows.
\[ \frac{60 \times 100 \times 400 \times 64 \times 96000}{65 \times 100 \times 50 \times 1000} = \frac{36 \times 40}{7} = 368640(52662\frac{4}{5}d. Ster. = 219l. 8s. 6\(\frac{4}{5}\)d. St. Ans.)
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. s. d. St. | |------|---------------------|-------------| | 36 10 | If 442 :: 96000 : 217 3 10\(\frac{1}{2}\) | | 12 | | 219 8 6\(\frac{4}{5}\) |
Gained or saved, 2 4 8\(\frac{4}{5}\)
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 64d. Sterling, the price of the millree, 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.
Antecedents. Consequents. 64d. Ster. = 1000 rees. 400 rees = 50d. Flem. 100d. Flem. = 1 ducat. 60 ducats = 100 crowns. 1 crown = 56d. Flem.
How many d. Flem. = 240d. Ster.?
\[ \frac{1000 \times 50 \times 100 \times 56 \times 240}{64 \times 400 \times 100 \times 60} = 875, \text{and} \]
\(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. | |---------|----------|-------| | If 368640 : 96000 :: 240 |
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\(\frac{4}{5}\)d. Sterling to 400l. Flemish.
Theo. Exchange. 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 11. Sterling for 36s 5½d. 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 negotiations, both by sea and land.
In Flanders, Holland, and several cities of France, these places are called burges; at Paris and Lyons, places de change; and in the Hanle towns, colleges of merchants. These assemblies are held with so much exactness, and merchants and negociants are so indispensably required to attend at them, that a person's absence alone makes him be suspected of a failure or bankruptcy. The most considerable exchanges in Europe, are that of Amsterdam; and that of London, called the Royal Exchange.
Even in the time of the ancient Romans, there were places for the merchants to meet, in most of the considerable cities of the empire. That said by some to have been built at Rome in the year of the city 259, 493 years before our Saviour, under the consulate of Appius Claudius and Publius Servilius, was called collegium mercatorum; whereof it is pretended there are still some remains, called by the modern Romans loggia, the lodge; and now, usually, the Place of St George. This notion of a Roman exchange is supposed to be founded on the authority of Livy, whose words are as follow; viz. Certamen confultibus incidet, uter dedicaret Mercuriu adem. Senatus a se rem ad populum rejecti autri corum dedicatio jufu populi data est, eum praefe annone, mercatorium collegium infitire jufuit. Liv. lib. ii.
But it must be here remarked, that collegium never signified a building for a society in the purer ages of the Latin tongue; so that collegium nercatorum infitire must not be rendered to build an exchange for the merchants, but to incorporate the merchants into a company. As Mercury was the God of traffick, this edes Mercuri seems to have been chiefly designed for the devotions of this company or corporation.