Exchange. In the science of Political Economy, the term Exchange is commonly understood to designate exclusively that species of mercantile transactions, whereby the debts of individuals, residing at a distance from each other, may be either partially or wholly liquidated, without the intervention of money. The object of this article is to explain the nature of these transactions, and the principles on which they are founded.
This will be best effected, by treating, first, of the exchange between different parts of the same country; and, secondly, of that between different and independent countries.
INLAND EXCHANGE.
Inland Exchange. Suppose a merchant, residing in London, orders his agent in Glasgow to purchase a thousand pounds worth of cottons on his account; then, although it should not suit the Glasgow merchant to commission goods of equal value from his London correspondent, the latter may nevertheless be under no necessity of remitting cash to Glasgow to discharge his debt. Among cities, or countries, having a considerable intercourse together, the debts mutually due by each other are found, in ordinary cases, to be nearly equal. And, therefore, the Glasgow merchant, who has shipped the cottons for London, does not transmit the bill, drawn by him on his correspondent for their price, directly to London to be cashed, for that would subject him to the expense of conveying the money home from London to Glasgow, but he gets its value from some other merchant in Glasgow, who has payments to make in London, on account of teas, wines, &c., imported from that city, and who, unless he could procure such a bill, would be obliged to remit their price in money. The bill on account of the cottons is, therefore, either drawn in favour of the person to whom the money for the tea and wine is owing in London, or it is drawn in favour of the tea merchant in Glasgow, and indorsed to him; and this last person, by presenting the bill to the purchaser of the cottons, receives its value, and consequently the price of the cottons, and the price, or part of the price, of his tea and wine at the same moment. By this simple contrivance, therefore, the expense and risk attending the double transmission, first, of money from London to Glasgow to pay the cottons, and, second, of money from Glasgow to London to pay the teas and wines, is entirely avoided. The debtor in one place is changed for the debtor in the other; and both accounts are settled without the intervention of a single farthing.
The bill drawn and negociated in such a transaction as this, is termed an inland bill of exchange. If the transaction had taken place between London or Glasgow and a foreign city, it would have been termed a foreign bill of exchange.
A bill of exchange may, therefore, be defined to be, "An order addressed to some person residing at a distance, directing him to pay a certain specified sum to the person in whose favour the bill is drawn, or his order."*
The price of bills of exchange fluctuates according to the abundance or scarcity of them in the market, compared with the demand. Thus, to revert to our former example, if we suppose the debts reciprocally due by London and Glasgow to be of equal, whether they amount to L.10,000, L.100,000, or any other sum, they may all be discharged without the agency of money, and the price of bills of exchange will be at par; that is, a sum of L.100 or L.1000 in Glasgow will purchase a bill for L.100 or L.1000 payable in London, and vice versa. But if these two cities are not mutually indebted in equal sums, then the price of bills of exchange will be increased in the city which has the greatest number of payments to make, and will be proportionably reduced in that which has the fewest. If Glasgow owes London L.100,000, while the debts due by London to Glasgow only amount to L.90,000, it is clear, inasmuch as the merchants of Glasgow have a larger sum to remit to London, than the merchants of London have to remit to Glasgow, that the price of bills on London would rise in Glasgow, because of the increased competition; and that the price of bills on Glasgow would fall in London, because of the proportionably diminished competition. And hence a larger sum would be required to discharge any given amount of debt due by Glasgow, and a less sum would be required to discharge a corresponding amount of debt due by London; or, which is the same thing, the exchange would be in favour of London, and against Glasgow. Bills on London would sell in Glasgow for a premium, and bills on Glasgow would sell in London at a discount, the amount of the premium in the one case, and of the discount in the other, being obviously equal.
On the supposition, that the balance of L.10,000, due by Glasgow, depressed the exchange of that city on London one per cent., it would at first sight appear as if it would cost Glasgow L.101,000 to discharge its debt of L.100,000 due to London; and that, on the other hand, L.89,108 would be sufficient to discharge the debt of London to Glas-
* In mercantile phraseology, the person who draws a bill is termed the drawer; the person in whose favour it is drawn, the remitter; the person on whom it is drawn, the drawee, and after he has accepted, the acceptor. Those persons into whose hands the bill may have passed previous to its being paid, are, from their writing their names on the back, termed indorsers; and the person in whose possession the bill is at any given period, is termed the holder or possessor. gow. But a very little consideration will serve to show that this could not really be the case. No exchange transactions can take place between different cities, until there be both debtors and creditors of the one residing in the other. And hence, when the exchange became unfavourable to Glasgow, the premium paid by the Glasgow merchants for bills drawn on London would not go into the pockets of their creditors in that city, but into the pockets of their neighbours in Glasgow, to whom London was indebted, and from whom the bills had been purchased. The loss to Glasgow would, therefore, be limited to the premium paid on the balance of L. 10,000. Thus, supposing that A of Glasgow owes D of London L. 100,000, and that C of London owes B of Glasgow L. 90,000, A will pay to B L. 91,000 for a bill, or order, on C to pay D L. 90,000. In this way, the L. 90,000 London debt at Glasgow would be quite cleared off; the premium, which is lost by the debtor to London in Glasgow, being gained by its creditor in the same place. If the business had been transacted in London, C, with L. 89,108, would have purchased of D a bill for L. 90,000 payable by A, so that, in this case, the gain would have fallen to the share of the debtor C, and the loss to that of the creditor D, both of London. The complexity of real transactions does not affect the principles on which they are founded; and to whatever extent Glasgow might be indebted to London, or London to Glasgow, the only disadvantage under which either of them would in consequence be placed, would be the unavoidable one of paying the expence of remitting the balance of debt.
The expence of transmitting money from one place to another forms the natural limit to fluctuations in the exchange. If 20s. sufficed to cover the expence and risk attending the transmission of L. 100 from Glasgow to London, it would be indifferent to a Glasgow merchant, whether he paid one per cent. premium for a bill of exchange on London, or whether he remitted money direct to that city. If the premium was less than one per cent., it would be clearly his interest rather to make his payments by means of bills of exchange than by remittances; and that it could not exceed one per cent., is obvious, for every individual would rather directly remit money, than incur an unnecessary expence, by purchasing a bill on London at a greater premium than would be sufficient to cover the expence attending a money remittance. If, owing to the badness of the roads, to disturbances in the country, or to any other cause, the expence of remitting money from Glasgow to London should be increased, the difference in the rate of exchange between these two cities might also be proportionably increased. But in every case, the extent to which this difference could attain, would necessarily be limited by, and could not, for any considerable period, exceed the cost of making remittances in cash.
Exchange transactions become more complex, when one place, as is very often the case, discharges its debts to another by means of bills drawn on a third place. Thus, although London should owe nothing to Glasgow, if Glasgow is indebted to London, London to Manchester, and Manchester to Glasgow; Glasgow would either wholly or partially discharge its debt to London by a bill drawn on Manchester. It would wholly discharge it, provided the debt due to Glasgow in Manchester was equivalent to the debt due by Glasgow to London. But if this be not the case, Glasgow must either remit money to London to discharge the balance of debt, or bills drawn on some other place indebted to her.
Transactions in inland bills of exchange are almost entirely conducted by bankers, who charge a certain rate per cent. for their trouble, and who, by having a credit in those places to which they are in the habit of remitting bills, are enabled, on all occasions, to supply the demands of their customers. In Great Britain, London, because of its intimate connection with other parts of the country, occasioned partly by its immense commerce, partly by its being the seat of government, and the place to which the revenue is remitted, and partly by its currency consisting of Bank of England paper, for which the paper currency of the country banks is rendered exchangeable, has become the great focus in which all the money transactions of the empire center, and in which they are ultimately adjusted. In consequence of these various circumstances, but chiefly of the demand for bills on London to remit revenue, and of the superior value of Bank of England currency, the exchange between London and the other parts of the country is invariably in its favour. Bills on London drawn in Edinburgh and Glasgow were formerly made payable at 40 days' date, which is equivalent to a premium of about \( \frac{7}{2} \) per cent.; but, owing to the greater facility of communication, this premium is now reduced to 20 days' interest, or to about \( \frac{1}{2} \) per cent. Bills for remitting the revenue from Scotland are now drawn at 30 days; previously to summer 1819 they were drawn at 60 days.
What has been already stated is sufficient to show, that, however well fitted bills of exchange may be for facilitating the operations of commerce, and saving the trouble and expence attending the transportation of money, it is impossible to adjust mercantile transactions by their means, except in so far as the accounts mutually balance each other. A real bill of exchange is merely an order entitling the holder to receive payment of a debt previously contracted by the person on whom it is drawn. It is essential to the existence of such a bill that an equivalent amount of debt should first have been due. And hence, as the amount of the real bills of exchange drawn on any one merchant, or body of merchants, cannot exceed the amount of the debts due by them, if a greater sum is owing them than what they owe to others, the balance, it is obvious, must either be paid in money, or by the delivery of some sort of commodities possessed of real value. If, as in the example just given, Glasgow owes London L.100,000, while London only owes Glasgow L. 90,000, a reciprocal transfer of debts may be made to the extent of L. 90,000. But the Glasgow merchants cannot discharge the additional L. 10,000 by means of bills drawn on London; for, by the supposition, London only owed them L. 90,000, and they have already drawn for its amount. The balance, therefore, must either be discharged by an actual money payment, or by the delivery of some species of commodities, or by bills drawn on some third party who may be indebted to Glasgow.
We do not mean by this to insinuate that there are no fictitious bills of exchange, or bills drawn on persons who are not really indebted to the drawer in the market. In every commercial country bills of this description are always to be met with; but they are only a device for obtaining loans, and do not and cannot transfer real debts. A merchant in London may form a connection with a merchant in Glasgow, and draw bills of exchange upon him payable a certain number of days after date, which the latter may retire by selling in Glasgow an equal amount of bills drawn upon his correspondent in London. The merchants who purchase, or the bankers who discount these bills, really advance their value to the drawers, who, as long as they continue, by means of this system of drawing and redrawing, to provide funds for their payment, continue in fact to command a borrowed capital equal to the amount of the fictitious paper in circulation. It is clear, however, that the negotiation of such bills can have no effect in the way of transferring and settling the real bona fide debts reciprocally due between any two or more places. Fictitious bills mutually balance each other. Those drawn by London on Glasgow are exactly equal to those drawn by Glasgow on London, for the one set are drawn to pay the other—the second destroys the first, and the result is nothing.
The method of raising money by the discount, or, which is the same thing, by the sale of fictitious bills, has been severely censured by Dr Smith, as entailing a ruinous expense on those engaged in it, and as being resorted to only by projectors, or persons of suspicious credit. When fictitious bills are drawn at two months' date, there is, in addition to the ordinary interest of 5 per cent., a commission of about \( \frac{1}{2} \) per cent., which must be paid every time the bill is discounted, or, at least, six times in the year. The total expense of money raised in this way could not, therefore, supposing the transaction to be always on account of the same individual, be estimated at less than 8 per cent. per annum; and the payment of so high a rate of interest on borrowed capital, in a country where the ordinary rate of mercantile profit is only supposed to average from six to ten per cent., could not fail to be generally productive of ruin to the borrower. It seldom happens, however, that in transactions carried on by means of fictitious bills, the whole charge for commission falls on one individual. Loans obtained in this way are almost always on account of two or more persons. Thus, at one time a fictitious bill may be drawn by A of London on B of Glasgow; and, in this case, the Glasgow merchant will, before the bill becomes due, draw upon his London correspondent for the proceeds of the bill, including interest and commission. At another time, however, the transaction will be on account of B of Glasgow, who will then have to pay commission to his friend in London; so that each party may, on the whole, as Mr Thornton has observed, gain about as much as he pays in the shape of commission.
It is often extremely difficult to distinguish between a fictitious bill and one which has arisen out of a real mercantile transaction. Neither does it seem to be of any very material importance. The credit of the persons whose names are attached to the bills offered for discount, is the only real criterion by which either a private merchant or a banker can judge whether he ought to negotiate them. The circumstance of a merchant offering considerable quantities of accommodation paper for discount, ought, unquestionably, if discovered, to excite a suspicion of his credit. But unless in so far as the drawing of fictitious bills may be held to be indicative of over-trading, or of a deficiency of capital to carry on the business in which the party is engaged, there does not appear to be any good reason for refusing to discount them.
These few observations will, perhaps, suffice to explain the manner in which transactions between different parts of the same country are settled by means of bills of exchange. They are, in general, extremely simple. The uniform value of the currency of a particular country renders all comparison between the value of money at the place where the bill is drawn and negociated with its value where it is to be paid unnecessary; while the constant intercourse maintained between the different commercial cities of the same kingdom, by preventing those derangements to which the intercourse between distant and independent countries must always be subject, also prevents those sudden fluctuations which so frequently occur in the market price of foreign bills of exchange. We shall, therefore, leave this part of our subject, and proceed to investigate the circumstances which influence the course of exchange between different and independent countries.
FOREIGN EXCHANGE.
The price of foreign bills of exchange depends entirely on two circumstances; first, on the value of the currency at the place where they are made payable, compared with the value of the currency at the place where they are drawn; and, secondly, on the relation which the supply of bills in the market bears to the demand.
If the real and nominal value of the currencies of the different nations having an intercourse together remained invariable, such fluctuations in the price of bills of exchange as arise from the first of these circumstances would be altogether unknown. But, as the comparative value of the pound Sterling, dollar, franc, guilder, florin, &c. is subject to perpetual variation, the price of bills of exchange must vary accordingly. Such variations, however, as proceed from this cause, affect merely their nominal, or rather numerical value. It is those only which arise from variations in the supply and demand for bills, or, which is the same thing, in the payments a country has to make compared with those it has to receive, that can be considered as real; and hence the distinctions of nominal, real, and computed exchange. The first depends on alterations in the relative value of the currencies to be compared together; the second depends on the supply of bills in the market compared with the demand; and the third, or computed exchange, depends on the combined effects of the other two. For the sake of perspicuity, we shall treat of these separately.*
SECTION I.—Nominal Exchange.
Bullion being every where recognized as the standard currency of the commercial world, the comparative value of the currencies of particular countries must depend, 1st, On the relative value of bullion in those countries; and, 2dly, On the quantity of bullion contained in their coins, or on the quantity of bullion for which their paper-money, or other circulating media, will exchange.
I. The real price of commodities being always proportionable not merely to the actual cost of their production, but also to the cost necessarily incurred in conveying them from where they have been produced to where they are to be made use of, it follows that, if the trade in the precious metals were perfectly free, and if the commodities produced in different countries were nearly all equally well fitted for exportation, the value of bullion in different countries would be chiefly regulated by their respective distances from the mines. Thus, on the supposition that neither England nor Poland had any other commodities except corn to exchange with the South Americans for bullion, it is evident that the precious metals would possess a greater value in Poland than in England, because of the greater expence of sending so bulky a commodity as corn, the more distant voyage, and because of the greater expence of conveying the gold to Poland. If Poland, however, had succeeded in carrying her manufactures to a higher pitch of improvement than England, her merchants might have been able, notwithstanding the disadvantage of distance, by exporting commodities possessed of great value in small bulk, and on which the expence of freight would have been comparatively trifling, to have sold bullion on cheaper terms than those of England. But if, as is actually the case, the advantages of skill and machinery were possessed by England, another reason would be added to that derived from her less distance from the mines, why gold and silver should be less valuable in England than in Poland, and why the money price of commodities should be higher in the former country. (Ricardo, Principles of Political Economy, &c. 1st Ed. p. 175.)
Hence, after nations have attained to different degrees of excellence in manufacturing industry, the value of bullion in different countries will no longer depend entirely on their distance from the mines. But, whatever variations a different progress in the arts may occasion in the value of bullion, as compared with particular commodities in different countries, it is certain that it must always be less valuable in those countries into which it is imported than in those in which it is produced. Bullion, like every other commodity, is exported to find, not to destroy its level. And, unless its value in Europe exceeded its value in America by a sum sufficient to cover the expenses attending its importation, and to yield the ordinary rate of profit to the importer, we should not, although the mines of Mexico and Peru were a thousand times more productive than at this moment, be able to import a single ounce of bullion. It is obviously incorrect, therefore, to lay down as a general proposition, "that the par of exchange between two countries is that sum of the currency of either of the two, which, in point of intrinsic worth, is precisely equal to a given sum of the other, that is, contains precisely an equal weight of gold and silver of the same fineness." (Bullion Report, p. 22, 8vo edit.) For a given quantity of gold and silver is not always, as is here assumed, of the same intrinsic value in different countries. It may not, indeed, differ very materially among nations in the immediate vicinity of each other, and which are all destitute of mines. But although, to use a familiar illustration, the value of sugar approaches nearly to a level in the great trading cities of Europe, it cannot surely be maintained, that its value, in the West Indies, is the same with its value in Bordeaux or Liverpool, or that the exchange would be at true par, if a bill, which cost 100 hogsheads of sugar in London, only brought 100 in Jamaica. Now, this is precisely the case with bullion. Though the value of gold and silver, as compared with corn, labour, &c. may, and indeed must, vary very considerably among the different European nations, these variations are only the necessary result of their different progress in industry, and of the different quality of their cultivated lands, &c. Such a difference of prices is the natural order of things; and bullion has only found its proper level when a sufficient quantity has been introduced into those countries which excel in manufactures, so as to raise the price of their corn and labour. These variations have, therefore, no effect on the exchange. An ounce of bullion in one country, notwithstanding this difference of price, will, because of the facility of intercourse, be very near equivalent to an ounce of bullion in another; and, supposing the trade in the precious metals to be perfectly free, the exchange will be at true par when bills are negociated on this footing. But when we compare the value of the precious metals in very distant countries, and especially in those in which they are produced with those into which they are imported, it is obvious that, considered merely with reference to the exchange, it must differ considerably. Gold and silver, like coal, tin, &c. must always be really cheaper in countries possessed of extraordinarily productive mines, than in those possessed of mines of a secondary degree of fertility, or in which they are entirely imported from abroad. And the exchange between such places can only be at true par when adequate allowance has been made for this difference of value. Thus, if, because of the expence
* Supposing every country to be in possession of its proper supply of bullion, the exchange may be said to be nominally affected by the amount of the difference between the market and mint price of bullion, and to be really affected by any deviation from par exceeding or falling short of that difference. of carriage, the value of bullion in Great Britain is 5 per cent. greater than in Rio Janeiro, 100 ounces of pure gold in Rio Janeiro would not be worth 100 ounces of pure gold in London, but 5 per cent. less; and the exchange would be at true par when bills for 105 ounces of standard bullion payable in Rio Janeiro, sold in London for 100 ounces.
The differences in the value of the precious metals in different countries, have not been confined to those which depend on their respective distances from the mines, or on their different progress in the arts. The opinion formerly so very prevalent, that gold and silver alone constituted real wealth, induced almost every commercial nation to fetter and restrict their exportation, and to adopt a variety of measures intended to facilitate their importation. But these regulations, even when most rigorously enforced, have been singularly ineffectual; the great value and small bulk of the precious metals, rendering it not only extremely advantageous, but also comparatively easy to smuggle them abroad, whenever their relative value declined.
"When," says Dr Smith, "the quantity of gold and silver imported into any country exceeds the effectual demand, no vigilance of government can prevent their exportation. All the sanguinary laws of Spain and Portugal are not able to keep their gold and silver at home. The continual importations from Peru and Brazil exceed the effectual demand of those countries, and sink the price of these metals below their price in the neighbouring countries. If, on the contrary, in any particular country their quantity fell short of the effectual demand, so as to raise their price above that of the neighbouring countries, the government would have no occasion to take any pains to import them. If it were even to take pains to prevent their importation, it would not be able to effect it. Those metals, when the Spartans had got wherewithal to purchase them, broke through all the barriers which the laws of Lycurgus opposed to their entrance into Lacedemon. All the sanguinary laws of the customs are not able to prevent the importation of teas of the Dutch and Gottcneburgh East India Companies, because somewhat cheaper than those of the British Company. A pound of tea, however, is about an hundred times the bulk of one of the highest prices, 16s., that is commonly paid for it in silver, and more than two thousand times the bulk of the same price in gold, and is consequently just so many times more difficult to smuggle." (Wealth of Nations, Vol. II. p. 149.)
But, however ineffectual as a means of entirely preventing the egress of the precious metals, the restrictions on their exportation have nevertheless contributed to occasion some slight variations in their value in different countries. The risk incurred by the clandestine exporters of bullion from Spain is supposed to be equivalent to about 3 per cent.; or, which is the same thing, it is supposed, that the restrictions maintain such an excess of gold and silver in that country as to sink their value 3 per cent. below their value in those countries in which the trade in bullion is unrestricted. In calculating the true par of exchange between Spain and other countries, this circumstance must be taken into account. For, however much the value of bullion in one country may be reduced below its value in those with which it maintains an intercourse, the nominal exchange must necessarily be unfavourable to that extent.*
It results as a consequence of these principles, that whatever occasions a rise or fall in the relative value of the precious metals, in a particular country, must proportionably affect its nominal exchange with other countries. If more coin, or paper convertible into coin or bullion, circulated in Great Britain, compared with the business it had to perform than what circulated in other countries, its relative value would in consequence be diminished. Foreign bills would sell for a premium, the amount of which would be precisely equal to the excess of the value of the precious metals in the foreign market, caused by their redundancy in the home market; and, on the other hand, in the event of the currency becoming relatively deficient, its value would be proportionably increased,—bills drawn on foreign countries would sell at a discount, the amount of which would measure the excess of the relative value of the currency of this over that of other countries.
II. In estimating the comparative quantity of bullion contained in the currencies of different countries, a particular coin of one country, such as the British pound Sterling, is selected as an integer or standard of comparison, and the proportion between it and the coins of other countries of their mint standard weight and fineness is ascertained by experiment. A par of exchange is thus established; or rather it is ascertained, that a certain amount of the standard currency of any particular country contains precisely as much gold or silver of the same fineness, as is contained in the coin or integer with which it had been compared. This relation or par, as it is technically termed, is considered invariable; and allowance is made for the subsequent variations in the comparative quantity and purity of the bullion contained in the currencies of countries trading together, by rating the exchange at so much above or below par. In mercantile language, that country, by a comparison with one or other of whose coins the par of exchange has been established, is said to give the certain for the uncertain, and conversely. Thus, in the exchange between London and Paris, London and Hamburgh, &c., London gives the certain, or the pound Sterling, for an uncertain or variable number of francs, shillings, &c. Hence, the higher the exchange between any two countries, the more it is in favour of that which gives the certain, and the lower the more is it in favour of that which gives the uncertain.
On the supposition, which is very near the truth, that 25 francs contain the same quantity of standard bullion as a pound Sterling (25 francs, 20 cents, is the exact par); and supposing also, that
* All restraints on the exportation of the precious metals were abolished in Great Britain in 1819. Their effect, for many years previous, could not be estimated at above \( \frac{1}{4} \) per cent. the relative value of bullion is the same in both countries, the exchange between London and Paris will be at par, when a bill drawn by a merchant in the one, on his correspondent in the other, sells at that rate; that is, when a bill of exchange for 2500 or 25,000 francs payable in Paris, sells in London for L.100 or L.1000, and vice versa. It is but seldom, however, that the coins of any country correspond exactly with the mint standard; unless, when newly issued, they are all either more or less worn; and whenever this is the case, an allowance corresponding to the difference between the actual value of the coins and their mint value, must be made in estimating "the sum of the existing currency of either of two countries which contains precisely the same quantity of bullion as is contained in a given sum of the other." Thus, if the one pound Sterling was so worn, clipped, rubbed, &c. as not to contain so much bullion as 25 francs, but 10 per cent. less, the exchange between London and Paris would be at real par, when it was nominally 10 per cent. against London;* and if, on the other hand, the pound Sterling was equal to its mint standard, while the franc was 10 per cent. less, the exchange between London and Paris would be at real par, when it was nominally 10 per cent. against Paris, and in favour of London. If the currency of both countries was equally reduced below the standard of their respective mints, then it is obvious there would be no variation in the real par. But whenever the currency of countries trading together is depreciated in an unequal degree, the exchange will be nominally in favour of that country whose currency is least depreciated, and nominally against that whose currency is most depreciated.
It is almost unnecessary to refer to the history of the exchange to show the practical operation of this principle; and we shall content ourselves with selecting the following, from an infinite number of equally conclusive instances.
In a pamphlet printed in 1604, but written in 1564, it is mentioned, that when Henry VIII. degraded the several species of coin then current, there began to be "some disorder" in the price of all wares and commodities; which Edward VI., thinking to remedy by diminishing still farther the quantity of pure silver contained in each coin; the consequence was, that the English pound Sterling, which heretofore exchanged abroad for 26 Flemish schillings, became worth no more than 13 Flemish schillings; the price of English commodities being at the same time proportionably increased.—(Mr John Smith's Memoirs of Wool, Vol. I. p. 105. 8vo ed.)
Previous to the great recoinage in the reign of William III., silver being at that time the metal in which payments were legally made, the nominal exchange between England and Holland, calculated according to the standard of their respective mints, was 25 per cent. against England; but, inasmuch as the real value of the English coin was, at that epoch, depreciated more than 25 per cent. below its mint value, the real exchange may notwithstanding have been in favour of England. The circumstance of the nominal exchange having become favourable to this country as soon as the new coin had been issued, renders this conjecture extremely probable.—(Wealth of Nations, Vol. II. p. 215.)
Before the reformation of our gold coin in 1774, the guinea contained so much less than its standard weight, that it was degraded 2 or 3 per cent. when compared with the French coin at the same period; and the exchange between England and France was then computed to be 2 or 3 per cent. against this country. Upon the reformation of the gold coin, the exchange rose to par. The Turkish government, in the course of the last forty years, has made three great alterations in the value of its coin. Before these frauds were committed, the Turkish piastre contained nearly as much silver as the English half-crown; and hence, in exchange, the par was estimated at eight piastres to the pound Sterling. The consequence of these repeated adulterations has been, the reduction of the silver in the piastre to one half, and a fall in the exchange of 100 per cent. bills on London having been bought in Turkey, in 1803, at the rate of 16 piastres for every pound Sterling.† Now, although it is not absolutely certain that these fluctuations in the nominal exchange were entirely owing to the alterations in the value of the coin, because the real exchange, or that which depends on the abundance or scarcity of bills in the market compared with the demand, might not be constant; yet the exact correspondence of the fall of exchange with the acknowledged degradation of the coin, renders it more than probable that it proceeded almost entirely from that degradation.§
When one country uses gold as the standard of its currency, and another silver, the par of exchange between these countries is affected by every variation in the relative value of these metals. When gold rises in value comparatively to silver, the exchange becomes nominally favourable to that country which has the gold standard, and vice versa. And hence, in making a correct estimate of the state of the exchange between those countries which use different standards, it is always necessary to advert to the comparative value of the metals which are assumed as such.
"For example," to use the words of Mr Mushet,
* It is necessary to observe, that it is here supposed that the clipped or degraded money exists in such a degree of abundance, as only to pass current at its bullion value. If the quantity of clipped money were sufficiently limited, it might, notwithstanding the diminution of weight, pass current at its mint value; and then the par would have to be estimated, not by its relative weight to foreign money, but by the mint price of bullion. This is a principle which must be constantly kept in view.
† Il est impossible d'indiquer exactement le pair des monnaies Turques. On voit des pièces du même nom, et frappées la même année, qui diffèrent de 100 pour cent. dans leur valeur intrinseque. (Storch, Cours D'Economie Politique, Tom. VI. p. 336.)
‡ Observations on the Principles which regulate the Course of Exchange, by William Blake, Esq. p. 41. "If 34 schillings 11 grotes and \( \frac{1}{2} \) of Hamburgh currency be equal in value to a pound Sterling, or \( \frac{9}{10} \) of a guinea, when silver is at 5s. 2d. per oz., they can no longer be so when silver falls to 5s. 1d. or 5s. an oz. or when it rises to 5s. 3d. or 5s. 4d.; because a pound Sterling in gold being then worth more or less silver, is also worth more or less Hamburgh currency.
"To find the real par, therefore, we must ascertain what was the relative value of gold and silver when the par was fixed at 34s. 11\( \frac{1}{2} \)g. Hamburgh currency, and what is their relative value at the time we wish to calculate it.
"For example, if the price of standard gold was L. 2, 17s. 10\( \frac{1}{2} \)d. per oz. and silver 5s. 2d. an ounce of gold would then be worth 15.07 ounces of silver, and twenty of our standard shillings would then contain as much pure silver as 34s. 11 grotes, and \( \frac{1}{2} \) Hamburgh currency. But if the ounce of gold were L. 3, 17s. 10\( \frac{1}{2} \)d. and silver 5s. (which it was on 2d January 1798), the ounce of gold would then be worth 15.57 ounces of silver. If L. 1 Sterling at par, therefore, be worth 15.07 ounces of silver, then at 15.57 it would be at 3 per cent. premium; and 3 per cent. premium on 34s. 11\( \frac{1}{2} \) is 1 schilling 1 gote and \( \frac{1}{10} \), so that the par when gold is to silver as 15.57 to 1, will be 36 schillings 1 gote and \( \frac{1}{10} \). The above calculation will be more easily made by stating as "15.07:34-11\( \frac{1}{2} \):15.57:36-1\( \frac{1}{10} \)."*
In the Table of the Course of Exchange, &c. between London and Hamburgh from 1760 to 1819, annexed to this article, the fluctuations in the comparative value of gold and silver have been attended to throughout, and the true par calculated accordingly.
As it is by their intrinsic worth as bullion that the relative value of the coins of particular countries is estimated in exchange, two coins of equal weight and purity are reckoned equivalent to each other, although the one should have been coined at the expence of the state, and the other charged with a seignorage, or duty on its coinage. Coins on which a seignorage is charged may, if not issued in excess, pass current in the country where they are coined, at a value so much higher than their value in bullion; but they will not pass at any higher value in other countries.†
But the principal source of fluctuations in the nominal price of bills of exchange is to be found in the varying value of the paper currency of commercial countries. The disorders which universally arose in rude ages from the diminution of the quantity of standard bullion contained in the coins of different countries, are now reproduced in another form, and often to a still more ruinous extent, in the depreciation of their paper currency.
The impossibility of retaining a comparatively large quantity either of coin or bullion, or of paper convertible into coin, in a particular country, previously to the Restriction Act of 1797, effectually limited the issues of the Bank of England, and sustained the value of British currency on a par with the currency of other countries. When the Bank issued less paper than was necessary for this purpose, the value of the currency being relatively great, it became profitable to import bullion, and to send it to the mint to be coined: And, on the other hand, when the Bank issued too much paper, and thereby depressed its value relatively to gold, it became profitable to demand payment of its notes in specie, and, thereafter, to export this specie either in the shape of coin or as bullion. In this way the Bank was compelled to limit its issues when excessive, and, consequently, to put a stop to the demand for gold, by rendering its paper of equal value.
Had the Bank of England, subsequently to the restriction, continued to issue only such quantities of paper as might have been required to sustain its value on a par with the value of gold, the act of 1797 would not have occasioned any real difference in our monetary system. But after the Bank had been released from all obligation to pay its notes, it was not to be expected that it should be very careful about limiting their number. The restriction enabled the Directors to exchange bits of engraved paper worth perhaps not more than 5s. a quire, for as many, or the value of as many hundreds of thousands of pounds. And in such circumstances our only wonder is, not that paper money became depreciated, but that its value was not more degraded,—that a still greater quantity of bank-notes were not forced into circulation.
A country with an inconvertible paper currency, of which an undue proportion has been issued, is in a similar situation to what a country would be in if it were possessed of a relatively redundant gold and silver currency, and if the laws prohibiting the melting or exportation of the coin could be carried into full effect. Such a currency is necessarily confined to the country where it is issued; it cannot, when too abundant, diffuse itself generally amongst others. The level of circulation is destroyed; and the value of the currency becoming less than the value of the currency of other countries, the nominal exchange is rendered proportionably unfavourable.
Supposing that nothing but silver coin of the standard weight and purity (25 francs of which would exchange for a pound Sterling of the British
* An Inquiry into the Effects produced on the National Currency by the Bank Restriction Bill, &c. by Robert Mushet, Esq. second edit. p. 94. † Previous to 1817, no seignorage had for a very long period been deducted from either the gold or silver coins of Great Britain; but in the great recoining of that year, the value of silver was raised from 5s. 2d. to 5s. 6d. an ounce, or nearly in the proportion of 6\( \frac{1}{2} \) per cent. The gold coins, however, are still coined free of expence, and no variation has been made in their standard. The British mint proportion of silver to gold is now as 14\( \frac{987}{1000} \) to 1; that is, one ounce of standard gold bullion is rendered exchangeable for 14\( \frac{987}{1000} \) ounces of standard silver. In France, the mint proportion of the two metals is as 15\( \frac{1}{2} \) to 1; a seignorage being exacted of nearly \( \frac{1}{3} \) per cent. on gold, and 1\( \frac{1}{2} \) per cent. on silver. mint standard) circulates at Paris, and that the circulating medium of London is composed entirely of paper only worth half its nominal value, or which is depreciated 100 per cent.,—in that case the exchange between London and Paris would be at real par, when it was nominally cent. per cent. against London and in favour of Paris. Double the amount of this depreciated London currency would be required to purchase a bill of exchange on Paris where the currency retained its value, while half the former amount of Parisian currency would now suffice to purchase a bill payable in London. The effects of such a depreciation would be precisely the same with those which would follow from a similar reduction in the value of metallic money. While paper money, depreciated 100 per cent., constituted our legal currency, a pound note, instead of being worth 25 francs, would only be worth 12½; and the nominal or numerical value of the bills of exchange negotiated between this country and France would be regulated accordingly:—that is, a bill of exchange for L. 100 or L. 1000 payable in London, would sell in Paris for 1250 or 12,500 francs, and conversely. If, while the currency of London remained steady at 100 per cent. below its mint value, Parisian currency should, either from the coins becoming deficient in weight, or because of an inordinate issue of paper money, become also depreciated, the nominal exchange would be rendered proportionally less unfavourable to London. On the hypothesis that the currency of Paris is depreciated 50 and that of London 100 per cent., the nominal exchange would be 50 per cent. against the latter, and so on. Thus it appears, that the nominal exchange between any two or more places will always be adjusted in proportion to the relative value of their currencies: being most favourable to that country whose currency approaches nearest to its mint standard, and most unfavourable to that whose currency is most degraded.
The state of the exchange between Great Britain and Ireland subsequently to the restriction on cash payments in 1797, furnishes a striking proof of the effects which inordinate issues of paper have in depressing the exchange.
The nominal value of the Irish shilling having been raised from 12d. to 13d., or, which is the same thing, L. 108, 6s. 6d. of Irish money having been rendered only equal to L. 100 of British money, it follows, that when the exchange between Great Britain and Ireland is at 8½ per cent. against the latter, it is said to be at par. In the eight years previous to 1797, when the paper currency both of England and Ireland was convertible into gold, the exchange between London and Dublin fluctuated from 7½ to 9 per cent., that is, from ⅔ per cent. in favour of Dublin, to ⅓ per cent. against it. In September 1797, it was so low as 6 per cent., or 2½ per cent. in favour of Dublin. The amount of the notes of the Bank of Ireland in circulation in January 1797 was only L. 621,917; but in April 1801, they had increased to L. 2,286,471, and the exchange was then at 14 per cent., or 5½ per cent. against Dublin. In 1803, the Bank of Ireland notes in circulation averaged L. 2,707,956, and in October of that year the exchange rose to 17 per cent., that is, to 8½ per cent. against Dublin!
The fact of the exchange between London and Dublin having fluctuated so very little from real par for eight years previous to the restriction, shows that the circulating medium of Great Britain and Ireland had then been adjusted very nearly according to the relative wants of the two countries. But, in these circumstances, it was evidently impossible, supposing the value of British currency to have remained stationary, that the quantity of Irish bank paper could be nearly quintupled in the short space of six years, without rendering the currency of Ireland comparatively redundant, and sinking its value below that of England. Had the Bank of England increased its notes nearly in the same ratio as the Bank of Ireland, then, as the currency of both countries would have been equally depreciated, the exchange between London and Dublin would have continued at par. But while the notes of the Bank of Ireland were increased from L. 621,917 to L. 2,707,956, or in the proportion of 1 to 4.3, those of the Bank of England were only increased from L. 9,181,843 (their number on 7th January 1797), to L. 16,505,272, or in the proportion of 1 to 1.8. If the Bank of England had not made this addition to its issues, the exchange would obviously have been still more unfavourable to Dublin.
In the debates on the Bullion Report, it was contended that the increase of Bank of Ireland paper could not be the cause of the exchange becoming unfavourable to Dublin, inasmuch as it had again become favourable, after the issues of the Bank of Ireland had been still further increased. Nothing, however, can be more inconclusive than such reasoning. Before it can be brought to have the least incidence on the case in question, it must be shown that the value of the currency of Great Britain had, in the interim, remained stationary, or that it had not been depreciated to the same extent as that of Ireland. Unless this can be established, the circumstance of the exchange between London and Dublin coming to par, while as many notes of the Bank of Ireland circulated as in the period of its greatest depression, will not authorize us to conclude that the increase of Irish Bank paper previously to 1804 had not been the cause of the then fall in the exchange. For, it is obvious that the depreciation of Irish Bank paper might be going on subsequently to 1804: and yet, on the supposition that the depreciation of English Bank paper had gone on still more rapidly, the exchange must necessarily have become more favourable to Dublin. This is just supposing the circumstances which took place in the first six years of the restriction, to be reversed in the second six. Let us examine how the fact stands.
We have just seen that, in 1803, when the exchange was nominally 10 per cent. against Dublin, the issues of the Bank of England amounted to L.16,505,272, and those of the Bank of Ireland to L.2,707,956. And, by referring to the account of the issues of the Bank of Ireland from 1797 to 1819, annexed to this article, it will be seen that, in 1805, 1806, 1807, and 1808, they were rather diminished; and that, in 1810, they only amounted to L.3,251,750, being an increase of not more than L.543,794, in the space of seven years, or at the rate of 2⅔ per cent. per annum; but, in the same period (from 1803 to 1810), the issues of the Bank of England had increased from L16,505,272 to L22,541,523, or at the rate of 5 per cent. per annum. But this is not all: According to Mr Wakefield (Account of Ireland, Vol. II. 171), who has left no subject untouched which could throw light on the state of Ireland, there were fifty registered bankers in that country in 1804, and only thirty-three in 1810, of which fourteen were new houses, thirty-one of the old establishments having disappeared; "and I believe," says Mr Wakefield, "for the most part failed." This extraordinary diminution of the country paper of Ireland, for the reduction of the issues was at least proportionate to the reduction in the number of banks, must have greatly raised its value, and would have counteracted a very great increase in the issues of the National Bank. Now the very reverse of all this took place in Britain. In 1800, there were 386 country banks in this country; and, in 1810, this number, instead of being diminished, as in Ireland, had increased to 721, having at least twice the number of notes in circulation in the latter as in the former period!
It appears, therefore, that when, in the period between 1797 and 1804, the quantity of paper in circulation in Ireland was increased, and consequently its value depressed, faster than in England, the exchange between London and Dublin became proportionably unfavourable to the latter; and, on the other hand, it appears that when, in the six years subsequent to 1804, the paper currency of England was increased more rapidly than the paper currency of Ireland, its relative value was diminished, and the nominal exchange became more favourable to Dublin.
But, however conclusive this must appear, there is still stronger and more decisive evidence to show that the unfavourable exchange of Dublin upon London in 1802, 1803, 1804, &c. was entirely owing to the comparative redundancy, or depreciation, of Irish Bank paper. The linen manufacturers, weavers, &c. and the majority of the other inhabitants of a few counties in the north of Ireland, being, at the period of the restriction, strongly disaffected towards government, they almost unanimously refused to receive bank notes, either in payment of commodities or as wages. The landlords, having also stipulated for the payment of their rents in specie, the consequence was, that a gold currency was maintained in the north of Ireland long after it had been entirely banished from the southern part of the island. If, therefore, the depressed state of the exchange between London and Dublin had been occasioned, as was contended by the advocates of the restriction, either by an unfavourable balance of trade between Ireland and Great Britain, or by remittances from the former on account of absentee landlords, &c. it would have been equally depressed between London and the commercial towns in the northern countries. But, so far from this being the case, in December 1803, when the exchange of Dublin on London was at 16\( \frac{1}{2} \) per cent., that of Belfast on London was at 5\( \frac{1}{4} \). Or, in other words, at the same time that the exchange between Dublin and London was about 8 per cent. against Ireland, the exchange between Belfast, which had a gold currency, and London, was about 3 per cent. in its favour. Nor is this all. There was not only a difference of 11 per cent. in the rate of exchange between Dublin and London, and Belfast and London, but the inland exchange between Dublin and Belfast was, at the same time, about 10 per cent. in favour of the latter; that is, bills drawn in Dublin, and payable in the gold currency of Belfast, brought a premium of 10 per cent. while bills drawn in Belfast, and made payable in the paper currency of Dublin, sold at 10 per cent. discount.*
It is unnecessary, we conceive, to refer particularly to the history of the French assignats, or of the paper currency of the other continental powers, and of the United States, to corroborate what has been here advanced. Such of our readers as wish for more detailed information, may have recourse to the sixth volume of the Cours D'Economie Politique, of M. Storch, where they will find a very able, perspicuous, and instructive account of the effects produced by the issues of paper on the price of bullion and the exchange in almost every country in Europe. They are, in every case, precisely similar to those we have just stated.
It now only remains to determine the effects of fluctuations in the nominal exchange on the export and import trade of the country.'
When the exchange is at par, the operations of Inquiry in the merchant are regulated entirely by the difference between foreign prices and home prices. He imports those commodities which can be sold at home for so much more than their price abroad as will, after indemnifying him for the expence of freight, insurance, &c. yield an adequate remuneration for his trouble, and for the capital employed in importing them; and he exports those whose price abroad is so much greater than at home as will suffice to cover all expences, and to afford a similar profit. But when, because of a fall in the value of its currency, the nominal exchange becomes unfavourable to a particular country, the premium which its merchants receive on the sale of foreign bills, has been supposed capable of enabling them to export with profit in cases where the difference between the price of the exported commodities at home and abroad might not be such as would have permitted their exportation had the exchange been at par. Thus, if the nominal exchange was 20 per cent. against this country, a merchant who had consigned goods to his agent
* Farther information on this interesting subject may be obtained from the very able Report of the Committee of the House of Commons, appointed in 1804 to inquire into the state of the circulating paper in Ireland, its specie, &c. and the state of the exchange between it and Great Britain; in Mr Parnell's excellent pamphlet on the same subject; and in the pamphlets of Lord King, Mr Huskisson, &c. abroad, would receive a premium of 20 per cent. on the sale of the bill; and if we suppose freight, insurance, mercantile profit, &c. to amount to 12 or 15 per cent., it would at first sight appear as if our merchants might, in such circumstances, export commodities although their price at home should be 5 or 8 per cent. higher than in other countries. If, on the other hand, the nominal exchange was in our favour, or if bills on this country sold at a premium, it would appear as if foreigners would then be enabled to consign goods to our merchants, or our merchants to order goods from abroad, when the difference of real prices was not such as would of itself have led to an importation.
But a very little consideration will convince us that fluctuations in the nominal exchange can have no such effect. The same fall in the value of the currency which renders the exchange unfavourable, and causes foreign bills to sell at a premium, must equally increase the price of all commodities. And hence whatever might be the amount of the premium which the exporter gained by the sale of the bill drawn on his correspondent abroad, it would do no more than indemnify him for the enhanced price of the goods exported. Mercantile operations are in such cases, conducted precisely as they would be if the exchange was really at par; that is, by a comparison of the real prices of commodities at home and abroad, meaning, by real prices, the prices at which they would be sold, provided there was no depreciation of the currency. If those prices are such as to admit of exportation or importation with a profit, the circumstance of the nominal exchange being favourable or unfavourable will make no difference whatever on the transaction.
"Suppose," says Mr Blake, who has very successfully illustrated this part of the doctrine of exchange, "the currencies of Hamburgh and London being in their due proportions, and therefore the nominal exchange at par, that sugar, which, from its abundance in London, sold at L. 50 per hogshead, from its scarcity at Hamburgh, would sell at L. 100. The merchant in this case would immediately export. Upon the sale of his sugar, he would draw a bill upon his correspondent abroad for L.100, which he could at once convert into cash, by selling it in the bill market at home, deriving from this transaction a profit of L. 50, under deduction of the expenses of freight, insurance, commission, &c. Now, suppose no alteration in the scarcity or abundance of sugar in London and Hamburgh, and that the same transaction were to take place, after the currency in England had been so much increased, that the prices were doubled, and, consequently, the nominal exchange 100 per cent. in favour of Hamburgh, the hogshead of sugar would then cost L. 100, leaving apparently no profit whatever to the exporter. He would, however, as before, draw his bill on his correspondent for L.100; and, as foreign bills would bear a premium of 100 per cent., he would sell this bill in the English market for L. 200, and thus derive a profit from the transaction of L. 100 depreciated pounds, or L. 50 estimated in undepreciated currency, deducting, as in the former instance, the expence of freight, insurance, commission, &c.
"The case would be precisely similar, mutatis mutandis, with the importing merchant. The unfavourable nominal exchange would appear to occasion a loss, amounting to the premium on the foreign bill, which he must give in order to pay his correspondent abroad. But if the difference of real prices in the home and foreign markets were such, as to admit of a profit upon the importation of produce, the merchant would continue to import, notwithstanding the premium; for that would be repaid to him in the advanced nominal price at which the imported produce would be sold in the home market.
"Suppose, for instance, the currencies of Hamburgh and London being in their due proportions, and, therefore, the nominal exchange at par, that linen, which can be bought at Hamburgh for L. 50, will sell here at L. 100. The importer immediately orders his correspondent abroad to send the linen, for the payment of which he purchases at L. 50 a foreign bill in the English market, and on the sale of the consignment for L. 100 he will derive a profit, amounting to the difference between L. 50 and the expence attending the import.
"Now, suppose the same transaction to take place, without any alteration in the scarcity or abundance of linen at Hamburgh and London, but that the currency of England has been so augmented, as to be depreciated to half its value, the nominal exchange will then be 100 per cent. against England, and the importer will not be able to purchase a L.50 foreign bill for less than L. 100. But as the prices of commodities here will have risen in the same proportion as the money has been depreciated, he will sell his linen to the English consumer for L. 200, and will, as before, derive a profit amounting to the difference between L. 100 depreciated, or L. 50 estimated in undepreciated money, and the expences attending the import.
"The same instances might be put in the case of a favourable exchange; and it would be seen in the same manner, that nominal prices and the nominal exchange being alike dependant on the depreciation of currency, whatever apparent advantage might be derived from the former, would be counterbalanced by a loss on the latter, and vice versa."—(Observations, &c. p. 48.)
It appears, therefore, that fluctuations in the nominal exchange have no effect on export or import trade. A fall in the exchange obliges the country, to which it is unfavourable, to expend a larger nominal sum in discharging a foreign debt than would otherwise be necessary; but it does not oblige it to expend a greater real value. The depression of the nominal exchange can neither exceed nor fall short of the comparative depreciation of the currency. If the depreciation of British currency amounted to 100 or 1000 per cent., the nominal exchange would be 100 or 1000 per cent. against us; and we should be compelled in all our transactions with foreigners to give them L. 2, or L. 10, for what might otherwise have been procured for L. 1. But as neither L. 2, nor L. 10 of paper, depreciated to the extent of 100 or 1000 per cent., would be more valuable than one pound of undepreciated paper, payment of a foreign debt might, it is evident, be just as easily made in the one currency as in the other; and mercantile transactions would, in such circumstances, be conducted exactly as they would have been had the currency been undepreciated, and the nominal exchange at par.
It is necessary, however, before dismissing this part of our subject, particularly to examine the effects of fluctuations in the nominal exchange on the importation and exportation of bullion. In certain cases they form an exception to the general principle we have been endeavouring to elucidate.
If the nominal exchange were to become unfavourable to a country which had entirely discarded the precious metals from its circulation, Mr Blake's opinion that the fall of the exchange has no effect on the export and import of bullion, more than of any other commodity, would be perfectly well founded. In this case the price of all sorts of commodities, and of bullion among the rest, would be increased precisely according to the depreciation of the currency; and the merchants who should, in such circumstances, attempt to export bullion would find that its increased price in the home market would be exactly equivalent to whatever premium they might gain by the sale of the bills drawn on their agents abroad for its price. But when the nominal exchange becomes unfavourable to a country whose currency either consists entirely of the precious metals, or partly of them and partly of paper, a different effect would be produced.
In this case the depreciation would necessarily add to the stock of bullion in the country. For, as soon as the currency had been depreciated to such an extent, as to render the excess of the market above the mint price of bullion sufficient to cover the very trifling expences attending the melting of the coin, and to afford some little remuneration for the trouble of the melters, they would immediately set about converting it into bullion. If, indeed, it were possible to realize a greater profit by the exportation than by the fusion of the coins, they would not be converted into bullion, and, of course, its real price would continue stationary. But this is very seldom the case. The operation of melting is so extremely simple, and requires so very little apparatus, that it may, in almost every instance, be carried on at a much less expence than would be necessary to export the coins. The cost attending the conveyance of gold to France varies, in a season of peace, from 1 to 2 per cent.; while a profit of \( \frac{1}{4} \) or \( \frac{1}{2} \) per cent. is sufficient to indemnify the melters of guineas or sovereigns. It is obvious, therefore, that of the two modes of restoring the value of the currency when it becomes depreciated, or relatively redundant, that of fusion will be generally resorted to in preference to exportation. Should the redundancy of the currency be inconsiderable, all the addition which the operations of the melters could make to the supply of bullion, would most probably be insufficient to occasion any perceptible fall in its real price. But, in every case in which the redundancy or depreciation of the currency is considerable, the fusion of the coined money never fails to increase the quantity of bullion beyond the effectual demand, and, consequently, to occasion a fall in its real price, and to render it a profitable article of export. The demand for bullion, though it must always vary with the varying wealth and riches of the community, fluctuates very little in periods of limited duration; and no considerable addition can ever be made to the stock on hand in a particular country, without sinking its value and causing its egress.
Mr Blake contends, that this exportation of bullion is the effect of the melting of the coin, and not the cause of it; and in so far he is certainly right. But we do not see how this in the least strengthens his opinion, that fluctuations in the nominal exchange, even in those cases in which the currency consists either wholly or partially of the precious metals, have no influence on the export and import of bullion. Surely it is impossible to deny, that the fusion of the coin, of which Mr Blake admits the exportation of bullion is a necessary consequence, is occasioned by a redundancy of the currency, or by the same cause which occasions an unfavourable nominal exchange.
Bullion, therefore, forms an exception, and it is the only one, to the general principle that a fall in the value of the currency, or an unfavourable nominal exchange, has no effect on importation or exportation. But this exception does not take place, except in those cases in which the currency consists either in whole or in part of the precious metals. When the currency consists entirely of paper, or of any commodity other than gold or silver, its depreciation can have no influence whatever on the importation of bullion.
SECTION II.—Real Exchange.
Having thus endeavoured to trace the effects which variations in the value of the currencies of countries maintaining an intercourse together have on the exchange; we shall now proceed to consider how far it is influenced by fluctuations in the supply and demand for bills. To facilitate this inquiry, we shall exclude all consideration of changes in the value of money; or, which is the same thing, we shall suppose the currencies of the different countries having an intercourse together to be all fixed at their mint standards, and that each has its proper supply of bullion.
When two nations trade together, and each purchases from the other commodities of precisely the same value, their debts and credits will be equal, and, of course, the real exchange will be at par. The bills drawn by the one will be exactly equivalent to those drawn by the other, and their respective claims will be adjusted without requiring the transfer of bullion, or other valuable produce. But it very rarely happens that the debts reciprocally due by any two countries are equal. There is almost always a balance owing on one side or other; and this balance must affect the exchange. If the debts due by London to Paris exceeded those due by Paris to London, the competition in the London market for bills on Paris would, because of the comparatively large sum which our merchants had to remit to France, be greater than the competition in Paris for bills on London; and, consequently, the real ex- change would be in favour of Paris and against London.
The expense of the transfer of bullion from one country to another, constitutes the limit within which the rise and fall of the real exchange between them must be confined. In this respect, as in most others, transactions between foreign countries are regulated by the very same principles which regulate those between different parts of the same country. We have already shown how the fluctuations, in the real exchange between London and Glasgow, could never exceed the expense of transmitting money between those cities. The same principle holds universally. Whatever may be the expense of transmitting bullion, or the money of the commercial world, between London and Paris, Hamburg, New York, &c., it is impossible that the real exchange of the one on the other should, for any considerable period, be depressed to a greater extent. For no merchant will ever pay a greater premium for a bill to discharge a debt abroad, than what would suffice to cover the expense of transmitting bullion to his creditor.
Hence it appears, that whatever has a tendency to obstruct or fetter the intercourse between different countries, must also have a tendency to widen the limits within which fluctuations in the real exchange may extend. It is this principle which enables us to account for its varying so much more in time of war than in time of peace. The amount of the bills drawn on a country engaged in hostilities is, from various causes which we shall afterwards notice, liable to be suddenly increased; though it is certain, that whatever may be the amount of the bills thus thrown into the market, the depression of the exchange cannot, for any length of time, exceed the expense of conveying bullion from the debtor to the creditor country. But during war this expense is increased; the charges on account of freight, insurance, &c., being then necessarily augmented. It appears from the evidence annexed to the Report of the Bullion Committee, that the expense of conveying gold from London to Hamburgh, which, previously to the war, only amounted to \(2\) or \(2\frac{1}{2}\) per cent., had, in the latter part of 1809, increased to about \(7\) per cent.; showing, that the limits within which fluctuations in the real exchange were confined in 1809, were about three times as great as those within which they were confined in 1793.
This principle also enables us to account for the greater steadiness of the real exchange between countries in the immediate vicinity of each other. The expense of transmitting a given quantity of bullion from London to Dublin or Paris, is much less than the expense of transmitting the same quantity from London to New York or Petersburgh. And, as fluctuations in the real exchange can only be limited by the cost of transmitting bullion, they may consequently extend much farther between distant places, than between those that are contiguous.
It will now be proper to investigate the circumstances which gave rise to a favourable or an unfavourable balance of payments, and to appreciate their effects on the real exchange, and on the trade of the country in general. As this is one of the most important inquiries in the whole science of political economy, it will require to be discussed at some length.
A very great, if not the principal, source of the errors into which practical merchants and the majority of writers on the subject of exchange have been betrayed, appears to have originated in their confounding together the sum which imported commodities are worth in the home market, with the sum which they cost in the foreign market. It is obviously, however, by the amount of the latter only, that the balance of payments, and consequently the real exchange, is influenced. A cargo of iron, for example, which had been bought in Gottenburgh for L.1000, might be worth L.1400 or L.1500 when imported into England; but the foreign merchant would not be entitled to draw a bill on London for more than its original cost or L.1000. It is clear; therefore, even on the slightest consideration, that the circumstance of the value of the imports exceeding the value of the exports, does not authorize the conclusion that the balance of payments is unfavourable. A favourable or an unfavourable balance depends entirely on the fact whether the sum due to foreigners for commodities imported from abroad, is less or more than the sum due by them for the commodities they have purchased; but it has nothing to do with the prices which may eventually be obtained for the imported or exported commodities.
The great object of the mercantile system of commercial policy, a system which still continues to preserve the ascendancy in this and in every other country in Europe, is, to create a favourable balance of payments, and, consequently, a favourable real exchange, by facilitating exportation and restricting importation. It is foreign to the object of this article to enter into any examination of the principles of this system, except in so far as they are connected with the subject of exchange; but we hope to be able to show, in opposition to the commonly received opinions on the subject, that in every country carrying on an advantageous commerce, the value of the imports must always exceed the value of the exports; and that this excess of importation has not, in ordinary cases, the least tendency to render the real exchange unfavourable.
The proper business of the merchant consists in carrying the various products of the different countries of the world from those places where their exchangeable value is least to those where it is greatest; or, which is the same thing, in distributing them according to the effective demand. It is clear, however, that there could be no motive to export any commodity unless the commodity which it was designed to import in its stead was of greater value. When an English merchant commissions 100,000 quarters of Polish wheat, he calculates on its selling for so much more than its price in Poland, as will be sufficient to pay the expense of freight, insurance, &c.; and to yield, besides, the common and ordinary rate of profit on the capital employed in making the transfer. If the wheat did not sell for this sum, its importation would obviously occasion a loss to the importer. No merchant ever did or ever will export but with the view of importing a greater value in return. And so far from an excess of exports over imports being any criterion of an advantageous commerce, it is quite the reverse; and the truth is, notwithstanding all that has been said and written to the contrary, that unless the value of the imports exceeded the value of the exports, foreign trade could not be carried on. Were this not the case—were the value of the exports always greater than the value of the imports, merchants would lose on every transaction with foreigners, and the trade with them would either have no existence at all, or if begun, would have to be speedily relinquished.
In England, the rates at which exports and imports are valued, were fixed so far back as 1696. But the very great alteration that has since taken place, not only in the value of money, but also in the real price of most part of the commodities produced in this and other countries, has rendered this official valuation of no use whatever as a criterion of the true value of the exports and imports. In order to remedy this defect, an account of the real, or declared value of the exports is annually prepared and laid before Parliament; but even this is very far from accurate. It must always be the interest of the merchant to endeavour to conceal the real amount of the goods imported on which duties are charged; while, on the other hand, it is very frequently his interest to magnify the amount of those commodities on the export of which either a bounty or a drawback is allowed.
If perfectly accurate accounts could be obtained of the value of the exports and imports of a commercial country, there can be no manner of doubt that in ordinary years there would be always an excess of imports over exports. The value of an exported commodity is estimated at the moment of its being sent abroad, and before its value is increased by the expence incurred in transporting it to the place of its destination; but the value of the commodity imported in its stead is estimated after it has arrived at its destination, and, consequently, after its value has been enhanced by the cost of freight, insurance, importer's profit, &c.
It is of very little importance, in as far at least as the interests of commerce are concerned, whether a nation acts as the carrier of its own imports and exports, or employs others. A carrying nation will appear to derive a comparatively large profit from its commercial transactions; but this excess of profit is nothing more than a fair remuneration for the capital employed and the risk incurred in transporting commodities from one country to another. If the whole trade between this country and France was carried on in British bottoms, our merchants, in addition to the value of the goods exported, would also receive the expence of the carriage to France. This, however, would not occasion any loss to that country. The French merchants must pay the freight of the commodities they import; and if the English can afford it on cheaper terms than their own countrymen, there can be no good reason why they should not employ them in preference.
In the United States the value of the imports, as ascertained by the Customhouse returns, always exceeds the value of the exports. And although our practical politicians consider the excess of exports over imports as the only sure criterion of an advantageous commerce, "it is nevertheless true, that the real gain of the United States has been nearly in proportion as their imports have exceeded their exports."* This has in part been occasioned by the Americans generally exporting their own surplus produce, and consequently receiving from foreigners, not only an equivalent for their exports, but also for the cost of conveying them to the foreign market. In 1811, says the author just quoted, flour sold in America for nine dollars, 50 cents per barrel, and in Spain for 15 dollars. The value of the cargo of a vessel carrying 5000 barrels of flour would, therefore, be estimated at the period of its exportation at 47,500 dollars; but as this flour would, because of freight, insurance, exporter's profits, &c., sell in Spain for 75,000 dollars, the American merchant would be entitled to draw on his agent in Spain for 27,500 dollars more than the flour cost in America, or than the sum for which he could have drawn had the flour been exported on account of a Spanish merchant. If, as is most probable, the 75,000 dollars were invested in some species of Spanish or other European goods, the freight, insurance, &c., on account of the return cargo, would perhaps increase its value to 100,000 dollars, so that in all the American merchant might have imported commodities worth 52,500 dollars more than the flour originally sent to Spain. It is as impossible to deny that such a transaction as this is advantageous, as it is to deny that its advantage consists entirely in the excess of the value of the goods imported over those exported. And it is equally clear, that, although such transactions as the above had been multiplied to an inconceivable extent, America might notwithstanding have had the real balance of payments in her favour.
Instead, therefore, of endeavouring to fetter and restrict the trade with those countries from which we should otherwise import a greater value than we exported, we ought, on the contrary, to give it every possible facility. There is not a private merchant in the kingdom who does not consider that market as the best in which he is enabled to obtain the highest price, or the greatest value in exchange for his goods; why then should he be excluded from it? Why compel him to dispose of a cargo of muslin for L. 10,000 rather than L. 12,000? The wealth of a state is made up of the wealth of individuals; and it is impossible that any more effectual method of increasing individual wealth can be devised than to permit every person to make his purchases in the cheapest and his sales in the dearest market.
It would be difficult to estimate the mischief which absurd notions relative to the balance of trade have occasioned in almost every commercial country. In Great Britain, they have been particularly injurious. It is owing entirely to the prevalence of prejudices been the cause of the restrictions imposed on the trade between this country and France are to be ascribed. The great, and, indeed, the only argument insisted on by those who prevail-
* Pitkin on the Commerce of the United States, 2d Ed. p. 280. ed on the Legislature to declare the trade with France a nuisance (Prohibition Act, 1st William and Mary), was founded on the fact, that the value of the imports from that kingdom considerably exceeded the value of the commodities we had exported! This balance was termed a tribute paid by England to France; and it was sagaciously asked, what had we done that we should be obliged to pay so much money to our deadly enemy? It never occurred to these wise persons, that no merchant would import a single ounce of any commodity from France, unless it would bring a higher price in this country than the commodity with which it had been bought; and that the profit of the merchant, or, which is the same thing, the national gain, would be in exact proportion to this excess of price. The very reason assigned for prohibiting the trade affords the best possible proof of its having been a lucrative one. Nor can there be any doubt that an unrestricted freedom of intercourse between the two countries would still be of the greatest service to both. The peculiarities in the soil and climate, as well as in the national character of the people of Great Britain and France, will always enable the one to produce various species of raw and manufactured commodities at a cheaper rate than they could possibly be produced by the other. If we were allowed freely to purchase the silks, the wines, and the brandies of France, those commodities which we can produce at a cheaper rate than our ingenious neighbours would be taken in payment. An extensive market would thus be created for many species of our commodities, and a natural and powerful stimulus would be applied to the industry of both countries. Nobody will be hardy enough to deny that the trade with America, Portugal, and the Baltic is advantageous; and, if so, what possible reason can be given why the trade with France should be considered as prejudicial? Surely no person can be silly enough to suppose that our merchants would export or import any commodity to or from France, which they could either sell or buy on better terms anywhere else. If the restrictions on the French trade are not really injurious, that is, if the trade be either a losing or a less advantageous one than the trade with other countries, we may rest assured that the throwing it open would not induce a single merchant to engage in it.
As the real price of every species of commodities must always be proportionable not only to the expense of their production, but also to the expense necessarily incurred in conveying them from where they have been produced to where they are to be consumed, it is certain that a nation which prohibits trading with the countries in her immediate vicinity must pay a higher price for her imported commodities, and be obliged to exact a higher price for those which she exports, than would have been necessary had she been able to procure the one, or to dispose of the other, in her immediate neighbourhood. If wine of the same intrinsic worth could be bought at Bordeaux equally cheap as at Lisbon, the difference of freight would enable it to be sold cheaper in London. It is this principle, in fact, which renders the home trade so peculiarly advantageous. The parties who make the exchange live near each other, and, consequently, each obtains the commodity of which he stands in need at its cheapest rate, and without being obliged to pay any great additional sum on account of carriage. When, therefore, we restrict the trade with countries in our immediate vicinity, we act in the teeth of that very principle which is, in every other case, admitted to be advantageous. We compel the purchasers of foreign commodities to pay a higher price for them than would otherwise have been necessary; while, by raising the price of our own exported commodities, the market for them is unnaturally and injuriously contracted.
But the partisans of the exclusive or mercantile system will perhaps tell us, that they do not mean to contend, that it is profitable to export a greater actual value than is imported, but that, by exporting an excess of raw and manufactured commodities, the balance of payments is rendered favourable, and that this balance (which they consider as equivalent to the entire net profit made by the country in its transactions with foreigners) is always paid in bullion.
It will, however, be an extremely easy task to show that this statement is altogether erroneous; or unfavourable that an unfavourable balance is seldom or never discharged by means of bullion; and that this balance is not always received or is not a measure, and has, in fact, nothing to do with paid in Bullion.
Favourable actions.
1. As long as the premium on foreign bills is less than the expence attending the transit of bullion from a country which has an unfavourable real exchange, it is certain that no merchant will ever think of subjecting himself to an unnecessary 'expence, by exporting bullion to pay a foreign debt. But supposing the premium on foreign bills to have increased, so as to equal the cost of exporting the precious metals, for it cannot exceed this sum, it does not by any means follow that they will therefore be exported. That depends entirely on the fact, whether bullion is, at the time, the cheapest exportable commodity, or, in other words, whether a remittance of bullion is the most advantageous way in which it is possible to discharge a debt. If a London merchant owes a debt of L. 100 in Paris, it is his interest to find out the cheapest method of paying it. On the supposition, that the real exchange is 2 per cent. below par, and that the expence of remitting bullion, including the profit of the bullion merchant, is also 2 per cent., it will be indifferent to the London merchant, whether he pays L. 2 of premium for a bill of L. 100 payable in Paris, or incur an expence of L. 2, by remitting L. 100 worth of bullion directly to that city. If the relative prices of cloth in Paris and London are such, as would require L. 103 to purchase and pay the expence of sending as much cloth to Paris as would sell for L. 100, he would undoubtedly prefer buying a bill, or exporting bullion. But if, by incurring an expence of L. 101, the debtor is enabled to send as much hardware to Paris as would sell for L. 100, he would as certainly prefer paying his debt by an exportation of hardware. By doing so, he would save 1 per cent. more than if he had bought a foreign bill, or remitted bullion, and 2 per cent. more than if he had exported cloth. If there had been any other commodity whose exportation would have been more advantageous, he would have used it in preference.
It is obvious, therefore, that the exportation of bullion is regulated by precisely the same principles which regulate the export and import of other commodities. It is exported when its exportation is most advantageous; that is, when it is less valuable at home, and more valuable abroad, than any other commodity; and it cannot possibly be otherwise exported. The balance of payments might be a thousand millions against a particular country, without causing the exportation of a single ounce of bullion. No merchant would remit L.100 worth of gold or silver from England to discharge a debt in Paris, if he could invest L.99, L.98, or any smaller sum in any other species of merchandise which, exclusive of expences, would sell in France for L.100. The merchant who deals in the precious metals is, we may depend upon it, as much under the influence of self-interest, as the merchant who deals in coffee or indigo. But what merchant would attempt to discharge a foreign debt, by exporting coffee which cost L.100, when he might effect the same object by sending abroad indigo which cost only L.95? No person in his senses would export a hat to be sold for 20s., provided he could sell it at home for a guinea; nor would any person export an ounce of bullion, if its value was not less in the exporting than in the importing country, or if there was any other commodity, whatever that might be, exported with greater advantage.
2. It is in vain to contend, that, by permitting an unrestricted freedom of trade, a particular state might become indebted to another, which had no demand for any species of ordinary merchandise, and which would only accept of cash or bullion in exchange for its exports. Such a case never did, and never will occur. A nation which is in want of money, must also be in want of other commodities; for men only desire money, because of its being the readiest means of increasing their command over the necessaries and enjoyments of life. The extreme variety, too, in the soil and climate, in the powers and perfection of the machinery, and in the skill and industry of the artisans belonging to different countries, must always occasion a considerable difference in the real price of their commodities. But until the cost of production shall have been equalized, there must always be a demand in one country for those commodities which can be produced cheaper in another; and until the desire to accumulate shall be banished from the human breast, there must always be an inclination to import commodities from those countries, where their exchangeable value is least to where it is greatest.
3. In treating of the nominal exchange, we endeavoured to show, that it is impossible that any country should be able, for any length of time, to import or export a greater quantity of bullion, than would be necessary to preserve the value of bullion in that country, in its proper relation to the value of bullion in other countries; or, which is the same thing, to have the real exchange either highly favourable or unfavourable. But although this principle is strictly true in reference to its aggregate exchanges, it is incorrect when the state of its exchange with one country only is considered. Great Britain, for example, may constantly have the exchange in her favour with Portugal, provided she has it constantly, and to an equal extent, against her with the East Indies, or some other country. "She may," to use the words of Mr Ricardo, "be importing from the north the bullion which she is exporting to the south. She may be collecting it from countries, where it is relatively abundant for others, where it is relatively scarce, or where, from some particular causes, it is in great demand. Spain, who is the great importer of bullion from America, can never have an unfavourable exchange with her colonies; and as she must distribute the bullion she receives among the different nations of the world, she can seldom have a favourable exchange with the countries with which she trades."*
It was by this principle that Lord King ingeniously, and, we think, successfully accounted for the nearly continued favourable exchange between this country and Hamburgh, from 1770 to 1799. His Lordship showed that the importation of bullion from Hamburgh and other countries was only equivalent to the quantity exported to the East Indies, and consumed at home; that the demand corresponded to the supply, and consequently that its relative value remained stationary. The extraordinary influx of bullion into this country from the Continent at the era of the restriction, and the very favourable state of the exchange, was undoubtedly owing, in a very great degree, to the then reduction in the issues of Bank paper, and to the diminution of the gold currency caused by the hoarding of guineas, &c. In 1797 and 1798, above five millions of guineas were coined at the mint; and this extraordinary demand for gold is of itself abundantly sufficient to account for the very favourable exchange of that period, and for the length of time which it continued. But, at the same time that the demand for gold bullion for the mint had been thus increased, the demand for silver bullion, for the purpose of exportation by the East India Company, had also been proportionally augmented. In 1795, the quantity exported on account of the Company, and of private persons, amounted to only 1,617,955 ounces. In 1796, to 290,777 1797, 962,880 1798, 3,565,691 1799, 7,287,927
From this period, the exportation of silver to the East Indies was very much reduced; and, in the years in which the exchange was most unfavourable, it had almost entirely ceased.
Instead, therefore, of the extraordinary importation of bullion from Hamburgh in 1797 and 1798 affording, as Mr Bosanquet and others have sup-
* See Reply to Mr Bosanquet's Observations on the Report of the Bullion Committee, p. 17,—one of the best pamphlets that has ever been published on the subject of Exchange. posed, a practical proof of the fallacy of the opinion of those who contend that it is impossible, for any length of time, to destroy the natural equilibrium in the value of bullion in different countries, it is in itself a striking example of its truth. Without this influx of bullion, its value, in this country, could not have maintained its proper relation to its value in other countries. We imported bullion because, owing to the reduction of our paper currency, and the increased demand by the East India Company, its value was rendered higher here than in the Continent; and, consequently, because the Continental merchants found it advantageous to send bullion to this country, in the same manner as they would have sent corn, or any other commodity for which there was an unusual demand in Great Britain. For, however favourable the real exchange between Hamburg and London might have been to the latter, we should not have imported a single ounce of bullion had it not been, at the time, the most advantageous article with which Hamburg could discharge its debt to London.
4. In the absence of all other arguments, it would be sufficient to state, that it is physically impossible the excess of exports over imports, as indicated by the Customhouse Returns, can be paid in bullion. Every country in the world, with the single exception of the United States, has its favourable balance; and, of course, they must be paid by an annual influx of bullion from the mines correspondent to their aggregate amount. It is certain, however, that the entire produce of the mines, though it were increased in a tenfold proportion, would be insufficient for this purpose! This, of itself, is decisive of the degree of credit which ought to be attached to the commonly received opinions on this subject.
5. In the last place, the profit on our transactions with foreigners consists not in the quantity of bullion imported from abroad; but in "the excess of the value of the entire imports over the value of the entire exports." If in return for an exportation of commodities worth ten or twenty millions, we import commodities worth fifteen or thirty, we shall, provided money has not altered in value, gain 50 per cent. by the transaction, and that although the exports should have consisted entirely of bullion, and the imports of corn, sugar, coffee, &c. It is a ridiculous prejudice that would induce us to import bullion rather than any other commodity. But whatever the partisans of the exclusive system may say about its being a preferable product, a merchandise par excellence, we may be assured that it will never appear in the list of exports or imports, while there is any other commodity whatever with which to carry on trade that will yield a larger profit.
Thus it appears, that the excess of exports over imports, instead of being any proof of an advantageous commerce, is distinctly and completely the reverse;—that a commercial country may, and almost always does, import commodities of a greater value than it exports, without rendering itself indebted to foreigners:—And that, when a balance of debt has been contracted, that is, when the sum payable to foreigners for the commodities imported from abroad is greater than the sum receivable from them for the commodities they export, the balance will not be paid by an exportation of bullion from the debtor to the creditor country, unless bullion be the most profitable article of export.
We have, in the previous section, shown that fluctuations in the nominal exchange have no effect on foreign trade. When the currency is depreciated the premium which the exporter of commodities derives from the sale of the bill drawn on his correspondent abroad, is only equivalent to the increase in the price of the goods exported, occasioned by this depreciation. But when the premium on a foreign bill is a consequence not of a fall in the value of money, but of a deficiency in the supply of bills, there is no rise of prices; and in these circumstances the unfavourable exchange undoubtedly operates as a stimulus to exportation. As soon as the real exchange diverges from par, the mere inspection of a price current is no longer sufficient to regulate the operations of the merchant. If it is unfavourable, the premium which the exporter will receive on the sale of his bill must be included in the estimate of the profit he is likely to derive from the transaction. The greater that premium the less will be the difference of prices necessary to induce him to export. And hence an unfavourable real exchange has an effect exactly the same with what would be produced by granting a bounty on exportation equal to the premium on foreign bills.
But for the same reason that an unfavourable real exchange increases exportation, it must proportionably diminish importation. When the exchange is really unfavourable, the price of commodities imported from abroad must be so much lower than their price at home, as not merely to afford, exclusive of expences, the ordinary profit of stock on their sale, but also to compensate for the premium which the importer must pay for a foreign bill if he remits one to his correspondent, or for the discount, added to the invoice price, if his correspondent draws upon him. A much less quantity of foreign goods will, therefore, suit our market when the real exchange is unfavourable, and fewer payments having to be made abroad, the competition for foreign bills will be diminished, and the real exchange rendered proportionably favourable. In the same way, it is easy to see, that a favourable real exchange must operate as duty on exportation, and as a bounty on importation.
It is thus that fluctuations in the real exchange have a necessary tendency to correct themselves. They can never, for any considerable period, exceed the expence of transmitting bullion from the debtor to the creditor country. But the exchange cannot continue either permanently favourable or unfavourable to this extent. When favourable, it corrects itself by restricting exportation and facilitating importation, and when unfavourable, it produces the same effect by giving an unusual stimulus to exportation, and by throwing obstacles in the way of importation. The true par forms the centre of these oscillations, and although the thousand circumstances which are daily and hourly affecting the state of debt and credit, prevent the ordinary course of exchange from being almost ever precisely at par, its fluctuations, whether on the one side or the other, are confined within certain limits, and have a constant tendency to disappear.
This natural tendency which the exchange has to correct itself, is powerfully assisted by the operations of the bill-merchants.
England, for example, might owe a large excess of debt to Amsterdam, yet, as the aggregate amount of the debts due by a commercial country, is generally balanced by the amount of those which it has to receive, the deficiency of bills on Amsterdam in London would most probably be compensated by a proportionable redundancy of them in some other quarter. Now, it is the business of the merchants who deal in bills, in the same way as of those who deal in bullion or any other commodity, to buy them where they are cheapest, and to sell them where they are dearest. They would, therefore, buy up the bills drawn by other countries on Amsterdam, and dispose of them in London; and by so doing, would prevent any great fall in the price of bills on Amsterdam in those countries in which the supply exceeded the demand, and any great rise in Great Britain and those countries in which the supply happened to be deficient. In the trade between Italy and this country, the bills drawn on Great Britain amount almost invariably to a greater sum than those drawn on Italy. The bill-merchants, however, by buying up the excess of the Italian bills on London, and selling them in France, Holland, and other countries indebted to England, prevent the real exchange from ever becoming very much depressed.
An unusual deficiency in the supply of corn, or of any other article of prime necessity, the demand for which could not be immediately contracted, by causing a sudden augmentation of the imports from abroad, must always materially affect the state of debt and credit with foreign countries, and depress the exchange. In time of war the balance of payments is liable to be still further deranged; the amount of the bills drawn on a country carrying on foreign hostilities, being increased by the whole expense of the armaments abroad and of subsidies to foreign powers. But neither the conjoined nor separate influence of both or either of these causes, can exert any permanent influence on the exchange. A sudden increase in the accustomed supply of bills, must, in the first instance, by glutting the market, occasion their selling at a discount; but this effect can only be of a very temporary duration. The unusual facilities, which are then afforded for the exportation of manufactured produce to the foreign market, and the difficulties which are thrown in the way of importation, never fail speedily to bring the real exchange to par.
In a period of profound peace we may, by exporting an excess of raw or manufactured produce, overload the foreign market, and occasion such a decline in the price of British goods abroad, as to render the imported less valuable than the exported commodities with which they have been purchased. But such a state of things must speedily operate its own cure. The distress which it necessarily occasions would lead to an immediate diminution of exports; and the supply of British commodities in the foreign market being thus rendered more nearly commensurate with the demand, they would, of course, sell for an adequate profit, and, in consequence, the entire value of the imports would again exceed, as it always ought to do, the entire value of the exports. But whenever a country has a large foreign expenditure to sustain, its exports must be proportionably augmented. Such an expenditure can only be discharged either by the Government directly sending abroad an equivalent amount of commodities, or by means of bills of exchange drawn on account of produce exported by private individuals. Supposing the foreign expenditure of Great Britain during the late war to have amounted to ten or twenty millions a-year, it is evident we must have annually exported an equal amount of the produce of our land, capital, and labour, for which payment would be received, not, as in ordinary cases, by a corresponding importation of foreign commodities, but from the treasury at home. This is strictly true, even though it were admitted that the expenditure had, in the first instance, been entirely discharged by remittances of bullion; for the increased supply of bullion which would thus have been required, could only have been obtained by an equally increased exportation of other produce to the countries possessed of mines, or from which it could be advantageously imported. Foreign expenditure increases the amount of the exports precisely in proportion to its own amount, and is therefore incapable of exerting any permanent effect on the exchange.
Thus, it appears that a great excess of exports instead of being any criterion of increasing wealth at home, is only a certain indication of great expenditure abroad. "When," says Mr Wheatley, "the exports exceed the imports, as they must do when there is a large foreign expenditure, the equivalents for the excess are received abroad in as full and ample a manner as if the produce which they purchased were actually imported and entered in the customhouse books, and afterwards sent to the seat of war for consumption. But from the circumstance of its not being inserted in the customhouse entries as value received against the produce exported for its payment, the latter is deemed to constitute a favourable balance, when it is in reality exported to liquidate a balance against us." (Wheatley On the Theory of Money, p. 219.)
But however conclusive this reasoning may appear, Cause of it has, nevertheless, been strenuously contended that it is at variance with the fact; and that the rise of the exchange in autumn 1814, and its restoration to par in 1816, when the restriction on cash payments was in full operation, is a practical and convincing proof that its previous depression had been a consequence not of the depreciation of the currency, but of the excessive supply of bills on London in the foreign market, occasioned by the expensive contest in which we were then engaged. According to our view of the matter, however, this fact leads to a precisely opposite conclusion. It is of no use to tell us that the exchange came to par, while the restriction act was unrepealed. It was never contended, that the simple fact of such a law being in existence, could have any effect in depreciating the currency. The restriction was condemned, and justly condemned, because it enabled the Bank of England to deluge the country with paper. If the Bank had never abused that power,—if the proprietors had sacrificed their own direct, palpable, and individual interests to those of the public, and had constantly kept their paper on a level with bullion, the restriction act, though unwise, would, as to consequences, have been the same as if it had never existed. The question is not, therefore, whether the exchange came to par, while the restriction continued, but whether it came to par, while as many notes circulated as in the period of its greatest depression? If this could be shown, and if it could also be shown that the effective demand for paper had not, at the same time, been proportionably increased, the argument would be conclusive; and we should be compelled to admit that a great comparative increase of paper money has no tendency to diminish its value, or to render the nominal exchange unfavourable!
But it would be worse than idle to set about proving by argument a fact so notorious as the prodigious diminution of bank paper in 1814, 1815, and 1816. In that period above 240 country banks became altogether bankrupt, or at least stopped payments; and the issues of the remainder were very much diminished. The Board of Agriculture estimated, that, in the county of Lincoln alone, above three millions of bank paper had been withdrawn from circulation; and the total diminution of the currency during the three years in question has seldom been estimated at less than sixteen or twenty millions, though it probably amounted to a great deal more. Mr Horner, the accuracy and extent of whose information cannot be called in question, made the following statement on this subject, in his place in Parliament:
"From inquiries he had made, and from the accounts on the table, he was convinced that a greater and more sudden reduction of the circulating medium had never taken place in any country than had taken place since the peace in this country, with the exception of those reductions that had taken place in France after the Mississippi scheme, and after the destruction of the assignats. The reduction of the currency had originated in the previous fall of the prices of agricultural produce. That fall had produced a destruction of country-bank paper, to an extent which would not have been thought possible, without more ruin than had actually ensued. The Bank of England had also restricted its issues. As appeared by the accounts recently presented, the average amount of its currency was not, during the last year, more than between L. 25,000,000 and L. 26,000,000; while two years ago it had been nearer L. 29,000,000, and at one time even amounted to L. 31,000,000. But without looking to the diminution of Bank of England paper, the reduction of the country paper was enough to account for the rise which had taken place in the exchange."
Here, then, is the true cause of the exchange coming to par in 1815 and 1816. It had nothing to do with the cessation of hostilities, but was entirely a consequence of the increased value of our currency, caused by the sudden reduction of its quantity. Instead, therefore, of being at variance with the principles we have been endeavouring to elucidate, this fact affords the strongest possible confirmation of their perfect correctness. And having been sanctioned by the fullest experience, they may now be considered as placed beyond the reach of cavil and dispute.
An objection of a different sort has been made by a very able economist to another part of the theory maintained in this section, of which it will here be proper to take some notice.
When the exchange becomes unfavourable, the premium, procured by the sale of the bill drawn on a foreign merchant to whom bullion has been consigned, is no greater than would have been obtained by consigning to him a quantity of coffee, tea, sugar, indigo, &c., of equal value. An unfavourable real exchange will permit a merchant to export commodities which could not be exported were the real exchange at par, or favourable; but the advantage still remains of exporting those commodities in preference, whose price in the country from which they are exported, compared with their price in the country into which they are imported, is lowest. Suppose, for example, that the expence of transmitting bullion from this country to France is three per cent., that the real exchange is four per cent. against us, that the price of bullion is the same in both countries, and that coffee, exclusive of the expences of carriage, is really worth four per cent. more in France than in England. In such a case, it is obvious, the exporter of bullion would realize only a profit of one per cent., while the exporters of coffee would realize, inclusive of the premium on the sale of the foreign bill, a profit of seven per cent. And hence the opinion maintained by Colonel Torrens (Comparative Estimate, &c.), that when the exchange becomes unfavourable, those commodities which contain the greatest value in the smallest bulk, or on which the expence of carriage is least, would be exported in preference, appears to rest on no good foundation. The relative value of the commodities which nations trading together are in the habit of exporting and importing, is regulated not merely by the cost of their production, but also by the expence necessarily incurred in carrying them from where they are produced to where they are consumed. If Great Britain were in the constant habit of supplying France with corn and bullion the average price of corn in France, because of the expence required to convey it to this country, would plainly be from 10 to 15 per cent. higher than in Britain, while, because of the comparative facility with which bullion might be transported from the one to the other, its value in Paris would not exceed its value in London more than 2 or 3 per cent. Now, supposing, that when the prices of both corn and bullion in Great Britain and France are adjusted according to their natural proportions, the real exchange becomes unfavourable to this country, it is clear, that this fall in the exchange can give no advantage to the exporters of bullion more than it gives to the exporters of corn. The rise in the price of foreign bills does not increase the expence attending the exportation either of corn or bullion. It leaves the cost of production and of the transportation of those commodities between the two countries exactly where it found them. During the depression of the exchange, the exporter of bullion, equally with the exporter of corn, will derive a premium from the sale of the bill drawn on his correspondent abroad. But there can be no possible inducement to export bullion in preference to corn, unless the real price of bullion should increase more rapidly in France, or decline more rapidly in Great Britain, than the real price of corn.
Whatever, therefore, may be the depression of the exchange, the merchant, as in every other case, selects those commodities for exportation, which will, exclusive of the premium, yield the greatest profit on their sale. If bullion is one of these commodities it will, of course, be exported, if not, not. Bullion, however, is of all other commodities that of which the relative value approaches nearest to an equilibrium in different countries, and hence it is the least likely to be exported during an unfavourable exchange. The demand for bullion is comparatively steady, and no great surplus quantity could be imported into one country without reducing its value, or exported from another without raising its value, so as to unfit it either for exportation or importation. A very small part only of an unfavourable balance is ever paid in bullion. The operations of the bullion merchant are chiefly confined to the distribution of the fresh supplies which are annually dug from the mines proportionably to the effective demand of different countries. Its price is too invariable, or, which is the same thing, its supply and demand are too constant, to admit of its ever becoming an important article in the trade between any two countries neither of which are in possession of mines.
In corroboration of this argument, we may mention that, according to the official statement laid on the table of the House of Commons, it appears that the expences incurred by this country on account of the armies acting in Portugal and Spain during the following years, were as under:
<table> <tr> <th>In 1808,</th> <th></th> <th>L.</th> <th>2,903,540</th> </tr> <tr> <td>9,</td> <td>-</td> <td></td> <td>2,450,956</td> </tr> <tr> <td>10,</td> <td>-</td> <td></td> <td>6,066,021</td> </tr> <tr> <td>11,</td> <td>-</td> <td></td> <td>8,906,700</td> </tr> <tr> <td>12,</td> <td>-</td> <td></td> <td>31,767,794</td> </tr> <tr> <td>13,</td> <td>-</td> <td></td> <td>13, - , -</td> </tr> </table>
Of which, according to the same official statement, only the following sums were remitted in coin or bullion:
<table> <tr> <th>In 1808,</th> <th></th> <th>L.</th> <th>2,861,839</th> </tr> <tr> <td>9,</td> <td>-</td> <td></td> <td>461,926</td> </tr> <tr> <td>10,</td> <td>-</td> <td></td> <td>697,675</td> </tr> <tr> <td>11,</td> <td>-</td> <td></td> <td>748,053</td> </tr> <tr> <td>12,</td> <td>-</td> <td></td> <td>3,284,435</td> </tr> </table>
Of the sum of five millions voted to our allies in 1813 and 1814, not more than L. 300,000 was sent in bullion, the rest being made up by the exportation of manufactured goods and military stores. (Edinburgh Review, Vol. XXVI. p. 154.) The high market price of gold and silver in 1809, 1810, &c. could not, therefore, be owing to the purchases made by Government, for they were not greater than the sums exported by the East India Company in 1798 and 1799, and in 1803, 1804, and 1805, when there was scarcely any perceptible rise in the price of bullion. The immense additions made to the paper currency of the country in 1809, 1810, &c. sunk its value compared with bullion, and was the true cause of the unfavourable nominal exchange of that period.
SECTION III.—Computed Exchange.
Having thus endeavoured to point out the manner in which variations in the comparative value of the currencies of nations trading together, and in the supply and demand for bills, separately affect the exchange, it now only remains to ascertain their combined effect. It is on this that the computed, or actual course of exchange depends.
From what we have already stated, it must be obvious, that when the nominal and real exchange are both favourable or both unfavourable, the computed exchange will express their sum; and that when the one is favourable and the other unfavourable, it will express their difference.
When, for example, the currency of Great Britain is of the mint standard and purity, and the currency of France 5 per cent. degraded, the nominal exchange will be 5 per cent. in favour of this country. But the real exchange may, at the same time, be either favourable or unfavourable. If it be also favourable to the extent of 1, 2, 3, &c. per cent. the computed exchange will be 6, 7, 8, &c. per cent. in favour of this country. And, on the other hand, if it is unfavourable to the extent of 1, 2, 3, &c. per cent. the computed exchange will be only 4, 3, 2, &c. per cent. in our favour. When the real exchange is in favour of a particular country, provided the nominal exchange be equally against it, the computed exchange will be at par, and vice versa.
A comparison of the market with the mint price of bullion, affords the best criterion whereby to ascertain the state of the exchange at any particular period. When no restrictions are imposed on the trade in the precious metals, the excess of the market over the mint price of bullion, affords a pretty accurate measure of the depreciation of the currency. If the market and mint price of bullion at Paris and London exactly corresponded, and if the value of bullion was the same in both countries, the nominal exchange would be at par; and whatever fluctuations the computed exchange might exhibit, must be traced to fluctuations in the real exchange, or, which is the same thing, in the supply and demand for bills. If, when the market price of bullion in Paris is equal to its mint price, it exceeds it 10 per cent. in London, it is a proof that our currency is 10 per cent. depreciated, and consequently the nominal exchange between Paris and London must be 10 per cent. against the latter. Instead, however, of the computed, or actual course of exchange, being 10 per cent. against London, it may either be against it to a greater or less extent, or in its favour. It will be more against it provided the real exchange is also unfavourable,—it will be less against it provided the real exchange be in favour of London, though to a less extent than the adverse nominal exchange,—and it will be in favour of London, should the favourable real exceed the unfavourable nominal exchange. Thus, if while the value of British was 10 per cent. less than the value of French currency, the computed or actual course of exchange between Paris and London was 12 or 15 per cent. against the latter, it would show that the real exchange was also against this country to the extent of 2 or 3 per cent. And if, on the other hand, the computed exchange was only 5 or 6 per cent. against London, it would show that the real exchange was 4 or 5 per cent. in its favour, and so on.
It has already been shown, that, in so far, at least, as the question of exchange is involved, the differences between the value of bullion in different countries are limited by the expence of transit from the one to the other. And hence, by ascertaining whether a particular country is in the habit of exporting or importing bullion to or from other countries, we are enabled to determine its comparative value in these countries. Supposing, for example, that the expence of conveying bullion from this country to France, including the profits of the bullion dealer, is equivalent to 2 per cent., it is clear, inasmuch as bullion is only exported to find its level, that whenever our merchants begin to export bullion to France, its value there must be 2 per cent. greater than in England; and, on the contrary, when they import bullion from France, its value in this country must be 2 per cent. greater than its value in France. In judging of the state of the exchange between any two countries, this circumstance must always be attended to. If no bullion be passing from the one to the other, we may conclude that its value is nearly the same in both countries; at all events, it is certain that the difference of its value is less than the expence of transit. On the supposition, that the entire expence, including profit, &c. of conveying bullion from Rio Janeiro to London is 5 per cent., and that the London merchants are importing bullion, then it is clear, provided the real exchange is at par, and that the currency of both cities is at the Mint standard, that the nominal, or which, in this case, is the same thing, the computed exchange will be 5 per cent. in favour of London. But if the currency of London is 5 per cent. depreciated, or, in other words, if the market price of bullion at London is 5 per cent. above its mint price, the computed exchange between it and Rio Janeiro, supposing the real exchange to continue at par, will obviously also be at par. It may, therefore, be laid down as a general rule, that as soon as bullion begins to pass from one country to another, the expence of transit, provided the mint and market price of bullion in the exporting country correspond, will indicate how much the value of its bullion falls short of the value of bullion in the country into which it is imported; or, which is the same thing, will be equal to its unfavourable nominal exchange; and that, when the market exceeds the mint price of bullion in the exporting country, the expence of transit, added to this excess, will give the total comparative reduction of the value of the precious metals in that country. The converse of this takes place in the country importing bullion. When its currency is of the mint standard, the expence of transit measures the extent of its favourable nominal exchange; but when its currency is relatively redundant or degraded, the difference between the expence of transit and the excess of the market above the mint price of bullion, will measure the extent of the favourable or unfavourable nominal exchange.—It will be favourable when the depreciation is less than the expence of transit, and unfavourable when it is greater.
From 1809 to 1815 inclusive, Great Britain continued to export gold and silver to the Continent. During this period, therefore, we must add the expences attending its transit to the excess of the market over the mint price of bullion, in order to ascertain the true relative value of British currency, from 1809 and the state of the real exchange. Mr Goldsmid stated to the Bullion Committee that, during the last five or six months of the year 1809, the expence of transporting gold to Holland and Hamburg, inclusive of freight, insurance, exporter's profits, &c. varied from 4 to 7 per cent. But, at the same time that the relative value of bullion in Britain was at 5½ (medium of 4 and 7) per cent. below its value in Hamburg, the market price of gold bullion exceeded its mint price to the extent of 16 or 20 per cent. or 18 per cent. on a medium; so that the currency of this country, as compared with the currency of Hamburg, which differed very little from its mint standard, was really depreciated to the extent of 23½ per cent. Now, as it appears from the tables annexed to this article, that the computed or actual course of exchange varied, during the same period, from 19 to 21 per cent. against London, it is clear that the real exchange could not be very different from par. Had the computed exchange been less unfavourable, it would have shown that the real exchange was in favour of London; had it been more unfavourable, it would, on the contrary, have shown that the real exchange was decidedly against London.
Provided an accurate account could be obtained of the expence attending the transit of bullion from this country to the Continent during the subsequent years of the war, we have no doubt it would be found, notwithstanding the extraordinary depression of the nominal, that the real exchange fluctuated very little from par; and that the exportation of gold and silver was a consequence, not of the balance of payments being against this country, but of its being advantageous to export bullion, because of its being less valuable here than on the Continent. No person will contend that, in 1809, 1810, &c. there was such a redundancy of gold or silver currency in this country as to sink the relative value of these metals. Any such supposition is altogether out of the question. During the period referred to, the precious metals were sent out of the country, be- cause the depreciation of the paper currency exceeded the cost of the transit of bullion; and hence, because it was every body's interest to pay their debts in the depreciated currency, and to export that which was undepreciated to other countries where there was no law to prevent its passing at its full value as coin, or in which there was a greater demand for bullion. It is indisputably certain that, if our paper-currency had been sufficiently reduced, the supply of gold in the kingdom in 1809, 1810, &c. compared with the demand which must, in such circumstances, have been experienced, was so very small, that, instead of exporting, we should have imported the precious metals from every country in the world.
It has been very generally supposed, that the extraordinary exportation of British goods to the Continent during the latter years of the war, was in a great measure owing to the depression of the exchange. But, in so far as this depression was occasioned by the redundancy, or depreciation, of the currency, it could have no such effect. It is impossible, indeed, to form any opinion as to the influence of fluctuations in the computed exchange on export and import trade, without having previously ascertained whether they are a consequence of fluctuations in the real or nominal exchange. It is only by an unfavourable real exchange that exportation is facilitated; and it may be favourable at the very moment that the computed exchange is decidedly unfavourable. "Suppose," to use an example given by Mr Blake, "the computed exchange between Hamburgh and London, to be 1 per cent. against this country, and that this arises from a real exchange which is favourable to the amount of 4 per cent., and a nominal exchange unfavourable to the extent of 5 per cent.; let the real price of bullion at Hamburgh and London be precisely the same, and, consequently, the nominal prices different by the amount of the nominal exchange, or 5 per cent.; now, if the expences of freight, insurance, &c. on the transit of bullion from Hamburgh are 3 per cent., it is evident that a profit would be derived from the import of that article, notwithstanding the computed exchange was 1 per cent. against us. In this case, the merchant must give a premium of 1 per cent. for the foreign bill to pay for the bullion;—L. 100 worth of bullion at Hamburgh would therefore cost him L. 101, and the charges of importation would increase the sum to L. 104. Upon the subsequent sale, then, for L. 105 of depreciated currency in the home market, he would derive from the transaction a profit of L. 1. This sum is precisely the difference between the real exchange and the expenses of transit, that part of the computed exchange which depends on the nominal, producing no effect; since whatever is lost by its unfavourable state, is counterbalanced by a corresponding inequality of nominal prices." (Observations, &c. p. 91.) In the same manner, it may be shown, that, notwithstanding the computed being favourable, the real exchange may be unfavourable; and that, consequently, it might be really advantageous to export, when it was apparently advantageous to import. But it would be tedious to multiply instances, which, as the intelligent reader will readily conceive, may be infinitely varied, and which have been sufficiently explained in the foregoing sections.
The real cause of the extraordinary importation of British produce into the Continent in 1809, 1810, &c., notwithstanding the anticommercial system of Bonapartè, is to be found, not in the state of the exchange; for, inasmuch as that was occasioned by a fall in the value of the currency, it could have no effect whatever either in increasing or diminishing exportation; but in the annihilation of the neutral trade, and our monopoly of the commerce of the world. The entire produce of the East and of the West was placed at our sole disposal. The continental nations could neither procure colonial produce, nor raw cotton for the purposes of manufacturing, except directly from England. British merchandise was thus rendered almost indispensable; and to this, our immense exportation, in spite of all prohibitions to the contrary, is to be ascribed.—(See Edinburgh Review, No. LXIII. p. 50.)
Negociation of Bills of Exchange.
In conducting the business of exchange a direct Manner of remittance is not always preferred. When a merchant in London, for example, means to discharge a debt due by him in Paris, it is his business to ascertain, not only the state of the direct exchange between London and Paris, and, consequently, the sum which he must pay in London for a bill on Paris equivalent to his debt, but also the state of the exchange between London and Hamburgh, Hamburgh and Paris, &c.; for it frequently happens, that it will be more advantageous for him to buy a bill on Hamburgh, Amsterdam, or Lisbon, and to direct his agent to invest the proceeds in a bill on Paris, rather than remit directly to the latter. This is termed the arbitration of exchange. An example or two will suffice to show the principle on which it is conducted.
Thus, if the exchange between London and Amsterdam be 32s. Flemish per pound Sterling, and of Exchange between Paris and Amsterdam 1s. 6d. Flemish per franc, then, in order to ascertain whether a direct or indirect remittance to Paris would be most advantageous, we must calculate what would be the value of the franc in English money if the remittance were made through Holland; for if it be less than that resulting from the direct exchange, it will obviously be the preferable mode of remitting. This is determined by stating, as 35s. Flem. (the Amsterdam currency in a pound Sterling): 1s. 6d. Flem. (Amsterdam currency in a franc): : L. 1 : 10d. the proportional, or arbitrated value of the franc.—Hence if the English money, or bill of exchange, to pay a debt in Paris were remitted by Amsterdam, it would require 10d. to discharge a debt of a franc, or L. 1 to discharge a debt of 24 francs: And, therefore, if the exchange between London and Paris was at 24, it would be indifferent to the English merchant whether he remitted directly to Paris, or indirectly via Amsterdam; but if the exchange between London and Paris was above 24, then a direct remittance would be preferable; while, if, on the other hand, the direct exchange was less than 24, the indirect remittance ought as plainly to be preferred.
"Suppose," to borrow an example from Dr Kelly (Universal Cambist, Vol. II. p. 137), "the exchange of London and Lisbon to be at 68d. per milree, and that of Lisbon on Madrid 500 rees per dollar, the arbitrated price between London and Madrid is 34d. Sterling per dollar; for as 1000 rees : 68d. :: 500 rees to : 34d. But if the direct exchange of London on Madrid be 35d. Sterling per dollar, then London, by remitting directly to Madrid, must pay 35d. for every dollar; whereas, by remitting through Lisbon, he will pay only 34d.; it is, therefore, the interest of London to remit indirectly to Madrid through Lisbon. On the other hand, if London draws directly on Madrid, he will receive 35d. Sterling per dollar; whereas, by drawing indirectly through Lisbon, he would receive only 34d.; it is, therefore, the interest of London to draw directly on Madrid. Hence the following rules:
1. Where the certain price is given, draw through the place which produces the lowest arbitrated price, and remit through that which produces the highest.
2. Where the uncertain price is given, draw through that place which produces the highest arbitrated price, and remit through that which produces the lowest."
In COMPOUND ARBITRATION, or when more than three places are concerned, then, in order to find how much a remittance passing through them all will amount to in the last place, or, which is the same thing, to find the arbitrated price between the first and the last, we have only to repeat the different statements in the same manner as in the foregoing examples.
Thus, if the exchange between London and Amsterdam be 35s. Flem. for L. 1 Sterling; between Amsterdam and Lisbon 42d. Flem. for 1 old crusade; and between Lisbon and Paris 480 rees for 3 francs. What is the arbitrated price between London and Paris?
In the first place, as 35s. Flem. : L. 1 :: 42d. Flem. : 2s. Sterling, = 1 old Crusade.
Second as 1 old Crusade, or 400 rees : 2s. Sterling :: 480 rees : 2s. 43d. Sterling, = 3 francs.
Third, as 2s. 43d. Sterling : 3 francs :: L. 1 Sterling : 25 francs, the arbitrated price of the pound Sterling between London and Paris.
This operation may be abridged as follows:
<table> <tr> <th>L. 1 Sterling</th> <th>35s. Flemish.</th> </tr> <tr> <td>3 1/2 shillings Flem.</td> <td>1 old Crusade.</td> </tr> <tr> <td>1 old Crusade</td> <td>400 Rees.</td> </tr> <tr> <td>480 Rees</td> <td>3 Francs.</td> </tr> <tr> <td>Hence \( \frac{35 \times 400 \times 3}{480 \times 3 \frac{1}{2}} = \frac{4200}{168} = 25 \) francs.</td> <td></td> </tr> </table>
This abridged operation evidently consists in arranging the terms so that those which would form the divisors in continued statements in the Rule of Three are multiplied together for a common divisor, and the other terms for a common dividend. The ordinary arithmetical books abound with examples of such operations.
The following account of the manner in which a very large transaction was actually conducted, by indirect remittances, will sufficiently illustrate the principles we have been endeavouring to explain.
In 1804, Spain was bound to pay to France a large subsidy; and, in order to do this, three distinct methods presented themselves: 1. To send dollars to Paris by land. 2. To remit bills of exchange directly to Paris. 3. To authorise Paris to draw directly on Spain.
The first of these methods was tried; but it was found too slow and expensive; and the second and third plans were considered likely to turn the exchange against Spain. The following method by the indirect, or circular exchange was, therefore, adopted: A merchant, or banquier, at Paris, was appointed to manage the operation, which he thus conducted; He chose London, Amsterdam, Hamburgh, Cadiz, Madrid, and Paris, as the principal hinges on which the operation was to turn; and he engaged correspondents in each of these cities to support the circulation. Madrid and Cadiz were the places in Spain from whence remittances were to be made; and dollars were, of course, to be sent to where they bore the highest price, for which bills were to be procured on Paris, or on any other places that might be deemed more advantageous.
The principle being thus established, it only remained to regulate the extent of the operation, so as not to issue too much paper on Spain, and to give the circulation as much support as possible from real business. With this view, London was chosen as a place to which the operation might be chiefly directed, as the price of dollars was then high in England, a circumstance which rendered the proportional exchange advantageous to Spain.
The business was commenced at Paris, where the negotiation of drafts issued on Hamburgh and Amsterdam served to answer the immediate demands of the state; and orders were transmitted to these places to draw for the reimbursements on London, Madrid, or Cadiz, according as the course of exchange was most favourable. The proceedings were all conducted with judgment, and attended with complete success. At the commencement of the operation, the course of exchange of Cadiz on London was 36d.; but, by the plan adopted, Spain got 39 1/2d., or above 8 per cent. by the remittance of dollars to London, and considerable advantages were also gained by the circulation of bills through the several places on the Continent.*
Bills of exchange are either made payable at Usance sight;—at a certain specified time after sight, or Days of after date;—or at usance, which is the usual term allowed by the custom or law of the place where the bill is payable. Generally, however, a few days are allowed for payment beyond the term when the bill becomes due, which are denominated days of grace; and which vary in different countries. In Great Britain and Ireland, three days of grace are allowed for all bills except those payable at sight, which must be paid as soon as presented.
The following is a statement of the usance and
* Kelly's Cambist, Vol. II. p. 168; Dubost's Elements of Commerce, 2d edit. p. 218. days of grace for bills drawn by London on some of the principal commercial cities:
[mld. mls. dld. dis. dia. respectively denote months after date, months after sight, days after date, days after sight, days after acceptance.]
<table> <tr> <th>London on</th> <th>Usance.</th> <th>Days of Grace.</th> <th>London on</th> <th>Usance.</th> <th>Days of Grace.</th> </tr> <tr> <td>Amsterdam</td> <td>1 mld.</td> <td>6</td> <td>Gibraltar</td> <td>2 mls.</td> <td>14</td> </tr> <tr> <td>Rotterdam</td> <td>1 mld.</td> <td>6</td> <td>Leghorn</td> <td>3 mld.</td> <td>0</td> </tr> <tr> <td>Antwerp</td> <td>1 mld.</td> <td>6</td> <td>Leipsic</td> <td>14 dia.</td> <td>0</td> </tr> <tr> <td>Hamburgh</td> <td>1 mld.</td> <td>12</td> <td>Genoa</td> <td>3 mld.</td> <td>30</td> </tr> <tr> <td>Altona</td> <td>1 mld.</td> <td>12</td> <td>Venice</td> <td>3 mld.</td> <td>6</td> </tr> <tr> <td>Dantzic</td> <td>14 dia.</td> <td>10</td> <td>Vienna†</td> <td>14 dia.</td> <td>3</td> </tr> <tr> <td>Paris*</td> <td>30 dld.</td> <td>10</td> <td>Malta</td> <td>30 dld.</td> <td>18</td> </tr> <tr> <td>Bordeaux</td> <td>30 dld.</td> <td>10</td> <td>Naples</td> <td>3 mld.</td> <td>3</td> </tr> <tr> <td>Bremen</td> <td>1 mld.</td> <td>8</td> <td>Palermo</td> <td>3 mld.</td> <td>0</td> </tr> <tr> <td>Barcelona</td> <td>60 dld.</td> <td>14</td> <td>Lisbon</td> <td>30 dis.</td> <td>6</td> </tr> <tr> <td>Geneva</td> <td>30 dld.</td> <td>14</td> <td>Oporto</td> <td>30 dis.</td> <td>6</td> </tr> <tr> <td>Madrid</td> <td>2 mls.</td> <td>14</td> <td>Rio Janeiro</td> <td>30 dld.</td> <td>6</td> </tr> <tr> <td>Cadiz</td> <td>60 dld.</td> <td>6</td> <td>Dublin</td> <td>21 dis.</td> <td>3</td> </tr> <tr> <td>Bilboa</td> <td>2 mld.</td> <td>14</td> <td>Cork</td> <td>21 dis.</td> <td>3</td> </tr> </table>
In the dating of bills the new style is now used in every country in Europe, with the exception of Russia.
In London, bills of exchange are bought and sold by brokers, who go round to the principal merchants and discover whether they are buyers or sellers of bills. A few of the brokers of most influence, after ascertaining the state of the relative supply and demand for bills suggest a price at which the greater part of the transactions of the day are settled, with such deviations as particular bills from their being in very high or low credit, may be subject to. The price fixed by the brokers is that which is published in Wettenhall's list; but, it is stated by Mr Goldsmid, that the first houses generally negotiate their bills on \( \frac{1}{2} \), 1, 1\( \frac{1}{2} \) and 2 per cent. better terms than those quoted. In London and other great commercial cities, a class of middlemen speculate largely on the rise and fall of the exchange, buying bills when they expect a rise, and selling them when a fall is anticipated.
History and Advantages of Bills of Exchange.
It is not easy to discover the precise era when bills of exchange were first employed to transfer and adjust the mutual claims and obligations of merchants. Their invention has been ascribed to the Arabians and the Jews of the middle ages; but it seems certain that bills were in use in remote antiquity. Isocrates states that a stranger who had brought some cargoes of corn to Athens, furnished a merchant of the name of Stratocles with an order, or bill of exchange, on a town on the Pontus Euxinus, where money was owing to him; and, because the person who had drawn the bill had no fixed domicile, Stratocles was to have recourse on a merchant in Athens, in the event of its being protested. The merchant, says Isocrates, who procured this order found it extremely advantageous, inasmuch as it enabled him to avoid risking his fortune on seas covered with pirates and the hostile squadrons of the Lacedemonians. (De Pauw, Recherches sur les Grecs, I. 258.)
There is also unquestionable evidence to show, that the method of transferring and cancelling the debts of parties, residing at a distance, by means of letters of credit, or, which is the same thing in effect, by means of bills of exchange, was not unknown to the Romans. Cicero, in one of his epistles to Atticus (Epist. ad Atticum, XII. 24), inquires whether his son must carry cash to defray the expence of his studies along with him to Athens, or whether he might not save this trouble and expence by obtaining an assignment for an equivalent sum, from a creditor in Rome on his debtor there. It is evident, from a subsequent epistle of Cicero's, that the latter method had been preferred, and that the transference of the money had in consequence been rendered unnecessary. (Epist. ad Atticum, XII. 27.)†
Mr Macpherson states (Annals of Commerce, I. p. 405,) that the first mention of bills of exchange in modern history, occurs in 1255. The Pope having quarrelled with Manfred King of Sicily, engaged, on Henry III. of England agreeing to indemnify him for the expence, to depose Manfred and raise his second son Edmund to the Sicilian throne. The enterprise misgave. But the merchants of Sienna and Florence who had originally advanced the money to carry it into effect, or rather to gratify the Pope's rapacity, were repaid by bills of exchange drawn on the Prelates of England; who, although they protested they knew nothing at all about the transaction, were nevertheless compelled, under pain of excommunication, to pay the bills and interest!
Capmany, in his Memoirs respecting the Commerce, &c. of Barcelona, gives a copy of an ordinance of the magistracy, dated in 1394, enacting that bills should be accepted within twenty-four hours after their presentation;—a sufficient proof that they were in general use in the beginning of the fourteenth century.
But whatever may have been the era of the introduction of bills of exchange, it is certain that very few inventions have redounded more to the general advantage. Without this simple and ingenious contrivance, commerce could never have made any considerable progress. Had there been no means of settling and adjusting the mutual claims of debtors and creditors otherwise than by the intervention of
* In France no days of grace are allowed on bills payable à vue. † In Austria, bills payable at sight, or on demand, or at less than seven days after sight or date, are not allowed any days of grace. ‡ "De Cicerone, ut scribus, ita faciam : ipsi permittam de tempore : nummorum quantum opus erit ut permutetur tu videbis." In his notes on a parallel passage, Graevius remarks, Permutatio est quod nunc barbare cambium dicitur.—(Epist. ad Atticum, XI. 24.) metallic money, for bank paper is only another species of bills of exchange, a very great proportion,—many hundreds of millions,—of that capital which is now setting productive labour in motion in every quarter of the globe, and ministering to the comforts, the wants, and the enjoyments of mankind, must have been entirely devoted to the expediting those exchanges which are much better effected by the agency of a few quires of paper. Instead of a perpetual importation and exportation of gold and silver, necessarily attended by an immensity of trouble and expence, a few bills of exchange possessed of almost no intrinsic worth, and which may be transferred with the utmost facility, suffice to balance and adjust the most extensive and complicated transactions. But the mere setting free of an immense reproductive power, which must otherwise have been engaged in a comparatively disadvantageous employment, is only one of the many benefits which, in a commercial point of view, we owe to the use of bills of exchange. By cheapening the instruments with which commerce is carried on, they have materially reduced the price of almost every commodity; and have, in consequence, increased the command of all classes over the necessaries and luxuries of life, and accelerated the progress of civilization, by occasioning a much more extensive intercourse, and intimate connection between different and independent countries than could otherwise have taken place.
In a political point of view, their effects have been equally salutary. They have enabled every individual imperceptibly to transfer his fortune to other countries, and to preserve it safe alike from the rapacity of his own government, and the hostile attacks of others. The security of property has in this way been prodigiously augmented. And although we should concede to the satirist, that paper credit has "lent corruption lighter wings to fly,"* it is easy to show that it has powerfully contributed to render subjects less dependent on the policy, and less liable to be injuriously affected by the injudicious and impolitic measures of their rulers. In countries in a low stage of civilization, the inhabitants endeavour, by burying all the gold and silver they can collect, to preserve a part of their property from falling a prey to the extortion of the despots by whom they are alternately plundered and oppressed. This was universally the case in the middle ages; and in Turkey, China, and other Eastern countries, the practice is still carried on to a very great extent. Some political economists have endeavoured to account for the constant importation, and high value of the precious metals in India, from the loss which necessarily attends the practice of hoarding; and undoubtedly this locking up of capital is one of the main causes of the extreme poverty of these countries. But the security derived from bills of exchange is infinitely greater than any that can possibly be derived from the barbarous expedient of trusting property to the bosom of the earth. "Pregnant with thousands fits the scrap unseen," and in a moment places the largest fortune beyond the reach of danger! Mr Harris was, therefore, right in stating, "that the introduction of bills of exchange was the greatest security to merchants, both as to their persons and effects, and consequently the greatest encouragement to commerce, and the greatest blow to despotism, of any thing that ever was invented."—(Harris on Coins, Part I. p. 108.)
Previous to the peace of Paris in 1763, Amsterdam, because of its commerce, the wealth and punctuality of its merchants, and their intimate connection with all the other great trading cities of the world, was the chief place where the accounts of the different commercial countries were balanced and adjusted. But the entire loss of foreign trade, and the other vexations to which Holland was subjected during the ascendancy of the French, has nearly divested Amsterdam of all share in this business. London has now become the trading metropolis of Europe, and of the world. The vast extent of its commercial dealings has necessarily rendered it the great mart for bills of exchange. Its bill merchants, a class of men remarkable for their shrewdness, and generally possessed of large capitals, assist in trimming and adjusting the balance of debt and credit between the most remote countries. They buy up bills where they are cheap, and sell them where they are dear. And, in consequence of the extent of their correspondence, and the magnitude of their transactions, have given a steadiness to the exchange, to which it could not otherwise have attained.
LAWS AND CUSTOMS RESPECTING BILLS AND NOTES.
A Bill of Exchange may be defined to be an open letter of request or order from one person, the drawer, to another person, the drawee, who is thereby desired to pay a sum of money, therein specified, to a third person, the payee. When the drawee obeys the request or order, by subscribing the document,
* "Blest paper credit! last and best supply! That lends corruption lighter wings to fly! Gold imp'd by thee can compass hardest things, Can pocket states, can fetch or carry kings; A single leaf shall waft an army o'er, Or ship of senates to some distant shore; A leaf, like Sibyll's, scatter to and fro Our fates and fortunes, as the wind shall blow: Pregnant with thousands fits the scrap unseen, And silent sells a king, or buys a queen." Pope. he becomes acceptor. If the contrary do not appear on the face of the bill, it is presumed that the drawee has funds of the drawer's in his hands to the amount of the bill, and that the drawer is indebted to the payee to that extent. The bill thus operates as a transfer, or mercantile assignment to the payee, of the drawee's debt to the drawer. But a bill may also be drawn payable to the drawer or his order, in which case, when accepted, the document is not an assignment, but merely the acknowledgment or constitution of a debt. This is also accomplishable by promissory-note, which is a promise by one person, the maker (Scoticé Granter), to pay a certain sum to another person, the payee (Scoticé Grantee.) The bill and the promissory-note have now equally the privilege of being assignable, or transferable from one person to another by indorsement, that is, by the payee subscribing his name on the back of the document. In this case the payee becomes an indorser, and the person in whose favour the indorsement is made is called the indorsee, who may again indorse to another; and in this manner the bill or note may pass from hand to hand without limitation. Each indorsation may be made in full or in blank; in full, by filling up the name and description of the party in whose favour it is made, which is attended with several advantages if the document should be lost or stolen; in blank, by merely subscribing the indorser's name, which is equivalent to making it payable to the bearer. All the indorsements, or any one of them, may also be qualified by the words without recourse, and when this is done, neither the indorsee nor any subsequent holder of the bill or note can have recourse on the indorser who thus qualifies his indorsement. If none of the indorsations be so qualified, the last holder for value and in bona fide, has all the prior indorsers and other parties to the bill or note bound to him jointly and severally. He may select any one of them, or proceed against them all at the same time; and if all were to become bankrupt, he could claim on the estate of each for the whole debt, and be entitled to receive dividends from all the estates until he obtained full payment, but which he must not exceed. An indorser may also qualify his indorsement by the condition that his indorsee shall not have the power of making an indorsement from himself.
From the negotiability thus conferred upon them, bills have been compared to bags of money; but it should be remembered that, in the former case, we transfer only a right; in the latter, the property itself. The comparison is best supported in those transferences which are made without recourse, since, in those instances, the bill passes from hand to hand without any alteration in the rights and duties of those interested in it, and without any one acquiring an additional security. In the simplest case, however, the rights arising on a bill may be preserved or lost by the conduct of the holder, and where there has been even one unqualified indorsation, the duties of the holder are of a delicate and important nature. But these will be more readily understood after we have pointed out the requisites of a bill.
The general requisites of a bill are, that it must be payable at all events; that it must be for payment of money only; and that the money must not be payable from any particular fund.* Of the more special requisites the first is, that any bill or note drawn or made in Great Britain (though dated abroad*) or in its colonies, is, that it be written on paper stamped according to the law of the mother country or colony, as it happens to be drawn in the one or the other. The stamp-duty varies according to the sum in the bill, and the extension of the term of payment; but for these particulars, and the mode of complying with the provisions of the law, reference should be made to the statutes in force at the time. The present regulating statute is that of the 55th Geo. III. c. 184, both as to inland bills and notes, and bills of exchange drawn here on foreign countries. As to bills truly drawn in foreign states, not colonies of Great Britain, on traders in this country, our law takes no cognizance of them as to whether they are or are not stamped; but promissory-notes made out of Britain are declared not to be negotiable or payable unless stamped agreeably to our laws. Bills drawn at home must also be written on the stamp appropriated for bills. If on a stamp of another denomination, though of equal or superior value, they are invalid if not got re-stamped, which they may be for payment of the duty and a penalty of 40s. when carried to the stamp-office before they are due, but when after due, the penalty is L. 10. If written on a stamp below the proper value, a penalty is incurred of L. 50, and the bills besides are null (Bell's Com. on Bankrupt Law, Vol. II. p. 249); but it has been found with us in England, that if a bill is not properly stamped, a neglect to present for acceptance or payment will not relieve parties who were otherwise liable in the original debt in respect of which the bill was granted. The relief, in this case, is granted by a court of equity, but which relief is not extended to remote indorsers, not responsible for the original debt. Relief, however, is given when a party has bound himself to grant a valid note or bill, but gives one by mistake or design on a defective stamp. Negotiable bills under L. 5 must, by 87th Geo. III. c. 32, be payable within twenty-one days, and bear the name of the place where they are made, without which also checks on bankers are liable to stamp-duty. Penalties are likewise imposed on the post-dating of such checks, or of bills for the purpose of reducing the duty by apparently shortening the term of payment; and there are provisions in those laws respecting bills drawn in sets or otherwise, with which every trader should make himself acquainted. This, however, it is very difficult to do in all its bearings; since the penalties and provisions of the prior statutes are retained in every subsequent one, except as therein specially altered. This is one great evil in
* Chitty, 5th edit. p. 70, 7 T. R. 601. 4 Camp. Law, 269. our fiscal regulations. Where the law cannot be known, transactions are rendered uncertain, property insecure, and litigation is increased to a mischievous extent. But the worst evil is, that this state of the law increases in a prodigious degree the influence of the crown, by the power over traders which is thus placed in the hands of solicitors of stamps, excise, customs, and other crown officers.
The other requisites of a bill are, 2dly, That it should bear the name of the place at which it is made or drawn; and if the street and number of the house be added, it is easier to give and receive the notices that may be necessary in proper time. 3dly, The date should be distinctly marked, and, if written at length, a higher protection would be afforded against accidental or intentional alterations and vitiation. If a bill have no date, the date of issuing will be held as the date of the bill. 4thly, The time of payment should be clearly expressed; and a time certain is necessary to make the document negotiable; that is to say, the payment must not depend on an event that can never happen, such as the marriage of a person, though it may on the death. 5thly, The place at which a bill is made payable should also, for the sake of safe negociation, be distinctly stated; because at that place presentment must be made both for acceptance and payment. If no place be mentioned, the place of doing business, if the acceptor have one, or, otherwise, his dwelling-house becomes the place of presentment. 6thly, The sum payable should be clearly written in the body of the bill, and the superscription of the sum in figures will aid an omission in the body. This sum must in all cases be above 20s.; and if payable more than twenty-one days after date it must exceed L. 5. 7thly, It should contain an order or request to pay. 8thly, Of bills drawn in parts or sets, each part or copy should mention the number of copies used, and be made payable on condition that none of the others has been paid. The forgery of an indorsement on one of the parts passes no interest even to a bona fide holder, and will not prevent the payee from recovering on the other part. 9thly, Every bill should specify distinctly to whom the contents are to be paid; but a bona fide holder, or his executor, may fill up a blank, if one be left, for the name of the payee, and recover payment. (Chitty, 82; Bell, Vol. II. p. 251, &c.) 10thly, If it be intended that a bill is to be negotiable, it should contain the operative words of transfer "to order;" although, if the original intention be clear, these words may be inserted without a fresh stamp. (Chitty, 86.) 11thly, It is advisable in all cases to insert value received; since, without these words, the holder of an inland bill for upwards of L. 20 could not, in England, recover interest and damages against the drawer and indorser in default of acceptance or payment. Bills bearing for value received, and payable after date, seem also to possess advantages when lost, under the stat. 9th and 10th W. III. c. 17; but equity would probably extend these to indorsements; and 3d and 4th Anne, c. 9, it is thought extends the same to notes. (Chitty, p. 196.) 12thly, As to foreign bills, the drawee should attend to whether they are to be paid with or without further advice; since the propriety of his accepting or paying will, in the one case, depend on his having received advice. The more carefully all these requisites are attended to, the greater is the security of all concerned against accidents and litigation. But traders, we fear, have too generally a prejudice in favour of that brevity which approaches to looseness of expression, and against that precision which alone can keep them out of difficulties.
When a bill, check, or note, is payable on demand, or when no time of payment is expressed, it should be presented within a reasonable time after receipt, and is payable on presentment, without the allowance of any days of grace. It is yet unsettled (Chitty, 344, et seq.) whether bills drawn at sight are entitled to days of grace, though the weight of authority is rather in favour of them. If drawn at one or more days after sight, the days of grace must be allowed. The day on which a bill is dated is not reckoned one; but all bills having days of grace, become due, and must be presented and protested on the third day, and if that day be a Sunday or holiday, on the second. The rule for giving notice of non-acceptance or non-payment is different, since, if the day on which it should have been given be a day of rest, by the religion of the party, such as the Jews' Sabbath, the notices will be good if given on the next day. Calendar months are always understood with respect to bills; and if dated on the 29th, 30th, or 31st of January, payable one month after date, they will fall due on the last day of February, from which the days of grace are to be calculated. Presentments of bills should be made within business hours. These are generally considered to be in London from nine morning to six evening, but a protest has been held good against an ordinary trader when made at eight. This would not have been good in the case of bankers, whose hours (from nine to five in London) must be attended to. In Edinburgh, bankers' hours are from ten to three; traders' from ten to three, and from six to eight; but there are no Scotch instances holding these as the only business hours. A verbal notice of the dishonour of an inland bill is good; but as such notice is always matter of parole evidence, it is better in every case to give notice in writing; and the regular mode of doing so is by post. Such notice, if put into the general post-office, or an authorized receiving-house, is good giving Notice, though it miscarry, provided the letter be regularly booked, and reasonable proof be made of its having been put into the post-office. If given only to a bellman in the street, it would not in such a case be good. When there is no post the ordinary mode of conveyance, such as the first ship or carrier, is sufficient. As to foreign bills, notices of dishonour, with the respective protests, must be despatched by post on the day when the bills become due, or on which acceptance was refused, if any post or ordinary conveyance set out that day, and if not, by the next earliest conveyance. (Chitty, 291.) As to inland bills, notice should be made by the first post after the expiry of the day, when the parties reside at a distance; if in the same town, it is enough if the notice be made so as to be received within business hours of the following day; and this may be done by the twopenny or penny post, if receivable within the time mentioned. When a holder deposits his bill at his banker's, the number of persons entitled to notice is increased by one; and each party in succession is entitled to twenty-four hours for giving notice. (6 East 3. Bell, 263.) Such notice, as to inland bills, is necessary in England for preserving recourse as to the principal sum only. If protest be made and notice given within fourteen days, the recourse is preserved as to interest, damages, and expenses. In Scotland a protest is necessary in every case; and there is no distinction made as to the mode of recourse between principal and interest; but intimation to the drawer within fourteen days preserves recourse for the whole (Bell, Vol. II. p. 265); and it has been decided, that notice to an indorser may be good even after the fourteen days, if there has been no unnecessary delay, (Fac. Col. 2d June 1812.) But this applies only to inland bills, and a bill drawn from Scotland upon England is in Scotland held to be foreign. (Bell, Vol. II. p. 265.) Every bill should be presented for payment on the day upon which it falls due, unless that be rendered impossible by some unforeseen and inevitable accident, such as shipwreck, or sudden illness, or death. To preserve recourse, the accident, and the presentment of the bill as soon as possible afterwards, must be intimated without delay, and, if denied, proved by the party who seeks recourse. The same doctrine will hold as to presents for non-acceptance, and notices of dishonour. But the loss or destruction of a bill is no excuse for not demanding payment and protesting; the protest in that case being made upon a copy or statement of the bill, if the party who has right to hold the bill has it in his power to make such a statement. If the destruction of the bill can be proved, action will be sustained in a court of law; if not, the redress is got upon giving an indemnity in a court of equity; but as equity will not interfere where law can, it is of importance in such a case, and indeed in all cases of difficulty, to resort at once to the best professional advice. Inconsiderate attempts to remedy neglects, or cure what is defective, generally make the case worse, and often implicate character. Cases of great hardship and difficulty frequently arose on bills granted partly for usurious consideration. A mighty benefit, however, has now been conferred by the statute 58th Geo. III. c. 93, which enacts, "That no bill of exchange or promissory-note that shall be drawn or made after the passing of this act shall, though it may have been given for a usurious consideration, or upon a usurious contract, be void in the hands of an indorsee for valuable consideration, unless such an indorsee had, at the time of discounting or paying such consideration for the same, actual notice that such bill, &c. had been originally given for a usurious consideration, or upon a usurious contract." It is much to be regretted, that the same protection was not extended by this statute to the innocent holder of a bill granted for a game debt. Such bills are still void in the hands of a bona fide indorsee. In Scotland, it has been decided otherwise. (25th January 1740, Nielson; Bell, Vol. II. p. 210.) The rage for legislation has not yet extended itself to lawyers, who, as a body, can hardly be expected to display an anxiety to remedy defects which add to their emoluments and consequence. How much of the learning of this profession is wasted on niceties and difficulties that would readily yield to the spell of an act of Parliament! To the law, however, we owe this sound maxim, that, "unless it has been so expressly declared by the legislature, as it formerly was in the case of usury, and still is as to bills for game debts, illegality of consideration will be no defence in an action at the suit of a bona fide holder, without notice of the illegality, unless he obtained the bill after it became due." (Chitty, 105.) Thus forgery does not vitiate a bill. The forged document is good to and against all parties, but those whose names are forged. Against one whose name is forged, it is true, it will neither support an action nor ground a claim; "yet if he have given credit to acceptances or indorsements as binding on him, forged by the same hand, he will be liable." (3 Esp. N. P. 60. 2 Bell, 250.) Subsequent approbation also does away an objection on the head of forgery or fraud, and generally all sorts of objections otherwise competent. This doctrine holds as to vitiations when the stamp laws are not concerned; but without the consent of parties all vitiations or alterations of bills in material parts are fatal. (2 Bell, 252.) A clerk or servant may accept a bill for his master if authorized so to do; and authority will be inferred from a sanctioned practice. The law on this point is dangerous, and would require legislative revision. If the servant or agent do not explain the character in which he acts, but subscribes his own name simply, he will bind himself, not his employer. An acceptor may enlarge the term of payment, or accept for a part, or under any other condition not expressed in the bill; but in that case it is optional in the holder to take the acceptance as thus offered, or to proceed as if no such offer had been made; if rejected, the protest should bear the condition, and the rejection of it; it should also be kept in view, that a holder who accepts of a limited or conditional acceptance, liberates the drawer and prior indorser, unless he have their consent. Blank indorsements are held to be of the date of the bill until the contrary is proved. Indorsers after the term of payment, though for value, do not protect the indorsee like indorsements before maturity; very slight evidence is admitted as proof of knowledge of dishonour, and the holder in that case becomes liable to all exceptions which can be stated against the right of his immediate indorser, or the person who held the bill when it became due. When acceptance is refused, and the bill returned with protest, action may be raised immediately against the drawer, though the regular time of payment is not arrived. His debt, in such a case, is considered as contracted the moment the bill was drawn; if the date of the bill be prior to that of a commission of bankrupt, the debt, in such a case, may be claimed upon. As to current bills, and contingent claims, the case is unfortunately different; in these respects England might derive great help from the law of Scotland.
The drawee, who, having funds, refuses to accept, is responsible for the consequences to the drawee, and may also be sued for payment by the payee or holder, the presentment and protesting of the bill for non-acceptance, operating as an intimated assignment and complete transfer of the debt to the holder, who in Scotland is preferred to any subsequent arrester. The drawee who has no funds is not bound to accept; but, after protest for non-acceptance, he may accept supra-protest for the honour of the drawer and indorsers, or either of them. A third party may thus accept for honour supra-protest; and whoever does so, if he give immediate notice, and send off the protest, may have immediate recourse on the party or parties for whose honour he has interfered.
It is the duty of a payee, when directed by the drawer, and of every one who is merely an agent for the owner, though acting gratuitously, to present a bill for acceptance. The time thought reasonable for this purpose is twenty-four hours, or at least within business hours of the day following that on which the bill was received. It is prudent in all holders of a bill to present for acceptance within this period; and in all cases where a presentment is made, and acceptance refused, notice should be given to all against whom it is meant to preserve recourse. A draught may be left twenty-four hours with the drawee, if no post go out in the meantime; but if he intimate within that time that he will not accept, or ask more time to consider, notice should be given. (Chitty, 288, 289.) A verbal acceptance, if it can be proved, or one by a separate writing, binds the drawee; but in Scotland none but a written acceptance on the bill will authorize the usual summary diligence. (Chitty, 217–270; 2 Bell, 69–240.) If the drawee had no funds, notice to the drawer is not necessary; but as the not having funds is a matter of fact to be proved, it is safer in this, and indeed in all other cases, to give the usual and regular notice. When a bill is drawn at some certain time after sight, presentment is necessary to fix the term of payment. Respecting bills of this description, both foreign and inland, the general rule is, that due diligence must be used. Foreign bills, so drawn, may be put into the circulation without acceptance as long as the convenience of the successive holders requires; and it has been found not to be laches (in Scotland mora, or undue delay) to keep a bill (at three days' sight) out in the circulation for twelve months; but if, instead of circulating, a holder were to lock it up, this would be laches. An unaccepted inland bill may also be put into circulation, and any holder, who does not circulate it, has a reasonable time, such as the fourth day respecting a bill drawn within twenty miles of London, for presenting it there for acceptance. Despatch and attention, however, are always advisable. It is said that when a bill has been already protested for non-acceptance, and due notice thereof given, it is not necessary to protest or to give notice on account of non-payment; but it is usual to do so, and the safer practice. The same rules, and the same time, should be observed as to non-payment, that are observed as to protest and notice, in the case of non-acceptance. When inland bills are made payable on a day named and fixed in the bills, it is common to delay presenting them for acceptance, until they can also be presented for payment, and then, if necessary, to protest for both; but it is better to make a presentment for acceptance as soon as it can be done in the ordinary course of business. It has already been stated, that notice either of non-acceptance when a presentment has been made, or for non-payment, must be given to all the parties to whom the holder intends to resort for payment. Bankruptcy is no excuse for neglecting any step in the negotiation of a bill. If a party be bankrupt, notice of recourse should be given to him and his assignees; if dead, to his executor or administrator; if abroad, the notice should be left at his place of residence, if he have one, and a demand of acceptance or payment (when that is necessary) should be made of his wife or servant. Notice should also be made to one who merely guarantees payment; and a person who subscribes a bill not addressed to him, is held to be a collateral security. If notice be made to one indorser, he may give notice to prior indorsers, or to the drawer; and if done timely, it will be available to the holder; but notice by a party, not party to the bill, nor agent for a party, will not be available.
Accommodation-bills are subject to the same rules as other paper, except among those who agree to lend their names or credit. Among them, the rule is, that he for whose use the money is to be raised shall provide for the bill; but as all the others have an action of relief when forced to pay, they are entitled to notice. In Scotland this has been extended to the drawer when he is not the party for whom the credit was intended. With respect to cross-paper, it is held that mutual accommodations exchanged are good considerations for each other; that in case of bankruptcy, a dividend from any one estate is to be held as payment of all that can be demanded in respect of that debt; and that there can be no double ranking of the same debt. But questions often arise in such cases which require the utmost professional skill to comprehend and decide. In a short digest of this nature it is impossible to enter into the niceties of legal questions; and we can only observe generally, that parties should never act in cases of difficulty, without taking the best professional assistance.
The law respecting bills of exchange is less offensive to reason than almost any other branch of our law, since, where the law is silent here, recourse is had to the custom of merchants. Still there are many points which might easily be improved, if lawyers would set heartily about the work. Lawyers, however, are seldom innovators, though the innovations required be only for the better; and very few others are able to legislate in matters of jurisprudence.
The best authorities respecting the law of bills are the treatises of Chitty and of Bayley as to English law, and Mr Bell's valuable Commentaries on Mercantile Jurisprudence, as to Scotch law. TABLES RELATIVE TO THE EXCHANGE BETWEEN GREAT BRITAIN AND OTHER COUNTRIES.
I. ACCOUNT of the market prices of STANDARD GOLD AND SILVER BULLION, showing their relative proportions to each other;—the real par and course of exchange between London and Hamburgh, and the per centage in favour of and against London;—the per centage above and below the mint price of gold;—and the number of Bank of England notes in circulation from 1760 to 1819.*
<table> <tr> <th rowspan="2">Price of Standard Gold per oz.</th> <th rowspan="2">Price of Standard Silver per oz.</th> <th rowspan="2">Their relative proportions to each other.</th> <th colspan="3">Par of Exchange with Hambro.</th> <th colspan="2">Course of exchange with Hambro.</th> <th rowspan="2">Per cent. in favour of London.</th> <th rowspan="2">Per cent. against London.</th> <th rowspan="2">Per centage above the Mint price of Gold.</th> <th rowspan="2">Per centage below the Mint price of Gold.</th> <th rowspan="2">Bank of England Notes in Circulation.</th> </tr> <tr> <th>L. s. d.</th> <th>sch.</th> <th>gr.</th> <th>L. s. d.</th> <th>L. s. d.</th> </tr> <tr><td>1760</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr> <tr><td>Jan.</td><td>13 18</td><td>6 0</td><td>5 6 1/2</td><td>14.16 to 1</td><td>32</td><td>9.9</td><td>36</td><td>4</td><td>10.6</td><td>0 16 0 1/2</td><td></td><td></td></tr> <tr><td>May</td><td>23 19</td><td>1 0</td><td>5 6</td><td>14.37</td><td>1</td><td>33</td><td>3.7</td><td>35</td><td>6</td><td>6.5</td><td>1 11 0 1/2</td><td></td></tr> <tr><td>Sept.</td><td>24 0</td><td>1 0</td><td>5 7 1/4</td><td>14.45</td><td>1</td><td>33</td><td>6.0</td><td>32</td><td>2</td><td>4</td><td>2 16 8 1/2</td><td></td></tr> <tr><td>Jan.</td><td>23 18</td><td>10 0</td><td>5 8 1/2</td><td>13.81</td><td>1</td><td>32</td><td>0.1</td><td>32</td><td>0</td><td>0.1</td><td>1 4 7 1/2</td><td>6,001,810</td></tr> <tr><td>May</td><td>14 0</td><td>0 0</td><td>5 9</td><td>13.81</td><td>1</td><td>32</td><td>0.1</td><td>32</td><td>2</td><td>0.4</td><td>2 14 6 1/2</td><td></td></tr> <tr><td>Sept.</td><td>14 0</td><td>6 0</td><td>5 7 1/2</td><td>14.27</td><td>1</td><td>33</td><td>0.9</td><td>32</td><td>5</td><td>2</td><td>3 7 5</td><td></td></tr> <tr><td>Jan.</td><td>13 19</td><td>0 0</td><td>5 6</td><td>14.30</td><td>1</td><td>33</td><td>1.8</td><td>32</td><td>11</td><td>2.0</td><td>1 8 10 1/2</td><td>6,131,770</td></tr> <tr><td>May</td><td>43 19</td><td>3 0</td><td>5 7 1/2</td><td>14.09</td><td>1</td><td>32</td><td>7.9</td><td>34</td><td>3</td><td>4.8</td><td>1 15 3</td><td></td></tr> <tr><td>Sept.</td><td>33 19</td><td>4 0</td><td>5 14.64</td><td>13.83</td><td>1</td><td>33</td><td>11.2</td><td>35</td><td>0</td><td>8.6</td><td>1 17 5 1/2</td><td></td></tr> <tr><td>Jan.</td><td>44 0</td><td>0 0</td><td>5 5 1/2</td><td>14.60</td><td>1</td><td>33</td><td>10.1</td><td>34</td><td>2</td><td>0.9</td><td>2 14 6 1/2</td><td>6,889,680</td></tr> <tr><td>May</td><td>34 1</td><td>3 0</td><td>5 8</td><td>14.33</td><td>1</td><td>33</td><td>2.6</td><td>34</td><td>2</td><td>2.7</td><td>4 6 8</td><td></td></tr> <tr><td>Sept.</td><td>24 1</td><td>6 0</td><td>5 6</td><td>14.81</td><td>1</td><td>34</td><td>4.0</td><td>34</td><td>7</td><td>0.7</td><td>4 13 1</td><td></td></tr> <tr><td>Jan.</td><td>33 18</td><td>3 0</td><td>5 4 1/2</td><td>14.55</td><td>1</td><td>33</td><td>8.7</td><td>34</td><td>5</td><td>1.9</td><td>0 9 7 1/2</td><td></td></tr> <tr><td>May</td><td>13 18</td><td>3 0</td><td>5 3 1/2</td><td>14.78</td><td>1</td><td>34</td><td>3.1</td><td>34</td><td>11</td><td>1.1</td><td>0 9 7 1/2</td><td></td></tr> <tr><td>Sept.</td><td>43 18</td><td>0 0</td><td>5 3 1/2</td><td>14.74</td><td>1</td><td>34</td><td>2.0</td><td>35</td><td>0</td><td>2.4</td><td>0 3 2 1/2</td><td></td></tr> <tr><td>Jan.</td><td>13 18</td><td>0 0</td><td>5 3 1/2</td><td>14.74</td><td>1</td><td>34</td><td>2.0</td><td>35</td><td>1</td><td>2.6</td><td>0 3 2 1/2</td><td></td></tr> <tr><td>May</td><td>33 18</td><td>0 0</td><td>5 4 1/2</td><td>14.56</td><td>1</td><td>33</td><td>9.0</td><td>34</td><td>11</td><td>3.4</td><td>0 3 2 1/2</td><td></td></tr> <tr><td>Sept.</td><td>33 18</td><td>8 0</td><td>5 5 1/2</td><td>14.52</td><td>1</td><td>33</td><td>7.9</td><td>34</td><td>4</td><td>2.0</td><td>1 0 3 1/2</td><td></td></tr> <tr><td>Jan.</td><td>33 18</td><td>7 0</td><td>5 5 1/2</td><td>14.34</td><td>1</td><td>33</td><td>2.9</td><td>34</td><td>6</td><td>3.7</td><td>0 18 2 1/2</td><td></td></tr> <tr><td>May</td><td>23 19</td><td>2 0</td><td>5 6 1/2</td><td>14.28</td><td>1</td><td>33</td><td>1.2</td><td>34</td><td>11</td><td>5.4</td><td>1 13 2</td><td></td></tr> <tr><td>Sept.</td><td>23 19</td><td>0 0</td><td>5 7</td><td>14.15</td><td>1</td><td>32</td><td>9.6</td><td>35</td><td>3</td><td>8.2</td><td>1 8 10 1/2</td><td></td></tr> <tr><td>Jan.</td><td>23 19</td><td>3 0</td><td>5 7 1/2</td><td>14.14</td><td>1</td><td>32</td><td>9.3</td><td>35</td><td>6</td><td>8.3</td><td>1 15 3 1/2</td><td></td></tr> <tr><td>May</td><td>13 19</td><td>10 0</td><td>5 7 1/2</td><td>14.19</td><td>1</td><td>32</td><td>10.7</td><td>35</td><td>10</td><td>8.9</td><td>2 10 3 1/2</td><td></td></tr> <tr><td>Sept.</td><td>13 19</td><td>5 0</td><td>5 6 1/2</td><td>14.33</td><td>1</td><td>33</td><td>2.6</td><td>35</td><td>11</td><td>8.1</td><td>1 19 7</td><td></td></tr> <tr><td>Jan.</td><td>13 18</td><td>8 0</td><td>5 5 1/2</td><td>14.41</td><td>1</td><td>33</td><td>4.8</td><td>34</td><td>11</td><td>4.4</td><td>1 0 3 1/2</td><td></td></tr> <tr><td>May</td><td>33 19</td><td>1 0</td><td>5 6 1/2</td><td>14.27</td><td>1</td><td>33</td><td>0.9</td><td>34</td><td>8</td><td>4.8</td><td>1 11 0 1/2</td><td></td></tr> <tr><td>Sept.</td><td>23 19</td><td>6 0</td><td>5 6 1/2</td><td>14.40</td><td>1</td><td>33</td><td>4.6</td><td>34</td><td>5</td><td>3.0</td><td>2 1 8 1/2</td><td></td></tr> <tr><td>Jan.</td><td>33 19</td><td>7 0</td><td>5 7</td><td>14.37</td><td>1</td><td>33</td><td>3.7</td><td>33</td><td>2</td><td>0.5</td><td>2 3 10 1/2</td><td></td></tr> <tr><td>May</td><td>24 0</td><td>3 0</td><td>5 7</td><td>14.32</td><td>1</td><td>33</td><td>2.3</td><td>33</td><td>8</td><td>1.4</td><td>3 1 0 1/2</td><td></td></tr> <tr><td>Sept.</td><td>14 0</td><td>4 0</td><td>5 7 1/2</td><td>14.28</td><td>1</td><td>33</td><td>1.2</td><td>33</td><td>6</td><td>1.2</td><td>3 3 1 1/2</td><td></td></tr> <tr><td>Jan.</td><td>24 0</td><td>6 0</td><td>5 7 1/2</td><td>14.25</td><td>1</td><td>33</td><td>0.4</td><td>33</td><td>2</td><td>0.4</td><td>3 7 5</td><td></td></tr> <tr><td>May</td><td>14 0</td><td>4 0</td><td>5 8</td><td>14.17</td><td>1</td><td>33</td><td>10.1</td><td>33</td><td>3</td><td>1.3</td><td>3 3 1 1/2</td><td></td></tr> <tr><td>Sept.</td><td>44 0</td><td>0 0</td><td>5 6 1/2</td><td>14.43</td><td>1</td><td>33</td><td>5.4</td><td>33</td><td>2</td><td>0.1</td><td>2 14 6 1/2</td><td></td></tr> <tr><td>Jan.</td><td>13 18</td><td>9 0</td><td>5 7</td><td>14.10</td><td>1</td><td>32</td><td>8.2</td><td>33</td><td>8</td><td>.5</td><td>1 2 5 1/2</td><td></td></tr> <tr><td>May</td><td>33 19</td><td>2 0</td><td>5 7 1/2</td><td>14.2</td><td>1</td><td>32</td><td>6.0</td><td>33</td><td>6</td><td>.5</td><td>1 13 2</td><td></td></tr> <tr><td>Sept.</td><td>34 0</td><td>8 0</td><td>5 7 1/2</td><td>14.39</td><td>1</td><td>33</td><td>4.3</td><td>32</td><td>11</td><td>1.4</td><td>3 11 8 1/2</td><td></td></tr> <tr><td>Jan.</td><td>34 1</td><td>0 0</td><td>5 7 1/2</td><td>14.34</td><td>1</td><td>33</td><td>2.9</td><td>32</td><td>7</td><td>2.0</td><td>4 0 3</td><td>6,201,030</td></tr> <tr><td>May</td><td>14 0</td><td>9 0</td><td>5 8 1/2</td><td>14.19</td><td>1</td><td>32</td><td>10.7</td><td>32</td><td>10</td><td>0.2</td><td>3 13 10</td><td></td></tr> <tr><td>Sept.</td><td>13 19</td><td>0 0</td><td>5 14.58</td><td>13.83</td><td>1</td><td>33</td><td>9.6</td><td>33</td><td>5</td><td>1.2</td><td>1 8 10 1/2</td><td></td></tr> <tr><td>Jan.</td><td>53 18</td><td>0 0</td><td>5 4 1/2</td><td>14.51</td><td>1</td><td>33</td><td>7.5</td><td>34</td><td>1</td><td>1.1</td><td>0 3 2 1/2</td><td></td></tr> <tr><td>May</td><td>43 17</td><td>11 0</td><td>5 4 1/2</td><td>14.60</td><td>1</td><td>33</td><td>10.1</td><td>34</td><td>9</td><td>2.6</td><td>0 1 0 1/2</td><td></td></tr> <tr><td>Sept.</td><td>33 17</td><td>9 0</td><td>5 3 1/2</td><td>14.69</td><td>1</td><td>34</td><td>0.1</td><td>34</td><td>8</td><td>1.9</td><td>0 3 2 1/2</td><td></td></tr> <tr><td>Jan.</td><td>43 17</td><td>9 0</td><td>5 2 1/2</td><td>14.92</td><td>1</td><td>34</td><td>7</td><td>34</td><td>9</td><td>0.4</td><td>0 3 2 1/2</td><td></td></tr> </table>
* This table, with the exception of the column of Bank of England notes, from 1760 to 1809, is extracted from the second edition of Mr Mushet's pamphlet. The last ten years have been filled up from the accounts given in the Reports on the Expediency of the Bank resuming Cash Payments, laid before Parliament in 1819. The fixed par is taken at 34 schillings, 11 grotes, and 4, which is esteemed the true par by the merchants, though it differs about \( \frac{3}{4} \) per cent. from the par (35s. 1d. Hamburgh currency), as estimated by Dr Kelly from the mint regulations. The silver in the English pound sterling is valued throughout at 5s. 2d. an ounce. The bills on Hamburgh from the negociation of which this table has been formed, have been invariably drawn at 2\( \frac{1}{2} \) usances. <table> <tr> <th rowspan="2">Price of Standard Gold per oz.</th> <th colspan="2">Price of Standard Silver per oz.</th> <th colspan="2">Their relative Proportions to each other.</th> <th colspan="2">Par of Exchange with Hambro.</th> <th colspan="2">Course of exchange with Hambro.</th> <th colspan="2">Per cent. in favour of London.</th> <th colspan="2">Per cent. against London.</th> <th colspan="2">Per percentage above the Mint price of Gold.</th> <th colspan="2">Per percentage below the Mint price of Gold.</th> <th rowspan="2">Bank of England Notes in Circulation.</th> </tr> <tr> <th>L. s. d.</th> <th>L. s. d.</th> <th>Sch. gr.</th> <th>L. s. d.</th> <th>Sch. gr.</th> <th>L. s. d.</th> <th>Sch. gr.</th> <th>L. s. d.</th> <th>Sch. gr.</th> <th>L. s. d.</th> <th>Sch. gr.</th> <th>L. s. d.</th> <th>Sch. gr.</th> <th>L. s. d.</th> <th>Sch. gr.</th> </tr> <tr><td>1774 May</td><td>3 17 9</td><td>0 5 3 1/2</td><td>14.63 to 1</td><td>33 11.</td><td>34 7</td><td>1.9</td><td>0 3 2 1/2</td></tr> <tr><td>Sept.</td><td>3 17 7</td><td>0 5 3</td><td>14.77</td><td>34 2.8</td><td>34 5</td><td>0.5</td><td>0 7 5 1/2</td></tr> <tr><td>1775 Jan.</td><td>3 17 7</td><td>0 5 4</td><td>14.54</td><td>33 8.5</td><td>34 3</td><td>1.6</td><td>0 7 5 1/2</td></tr> <tr><td>May</td><td>3 17 7</td><td>0 5 5</td><td>14.32</td><td>33 2.3</td><td>34 4</td><td>3.4</td><td>0 7 5 1/2</td></tr> <tr><td>Sept.</td><td>3 17 7</td><td>0 5 3 1/2</td><td>14.66</td><td>34 0.6</td><td>34 4</td><td>0.8</td><td>0 7 5 1/2</td></tr> <tr><td>Jan.</td><td>5 17 7</td><td>0 5 4 1/2</td><td>14.37</td><td>33 3.7</td><td>34 1</td><td>4.8</td><td>0 7 5 1/2</td></tr> <tr><td>May</td><td>3 17 7</td><td>0 5 6</td><td>14.10</td><td>32 8.2</td><td>33 8</td><td>3.3</td><td>0 7 5 1/2</td></tr> <tr><td>Sept.</td><td>3 17 7</td><td>0 5 5 1/2</td><td>14.21</td><td>32 11.3</td><td>33 5</td><td>1.4</td><td>0 7 5 1/2</td></tr> <tr><td>Jan.</td><td>3 17 7</td><td>0 5 7 1/2</td><td>13.79</td><td>31 11.6</td><td>33 2</td><td>3.7</td><td>0 7 5 1/2</td></tr> <tr><td>May</td><td>2 17 7</td><td>0 5 6 1/2</td><td>13.91</td><td>32 2.0</td><td>32 10</td><td>1.8</td><td>0 7 5 1/2</td></tr> <tr><td>Sept.</td><td>2 17 7</td><td>0 5 6 1/2</td><td>14.05</td><td>32 7.5</td><td>32 2</td><td>1.4</td><td>0 7 5 1/2</td></tr> <tr><td>Jan.</td><td>2 17 7</td><td>0 5 9</td><td>13.49</td><td>31 3.2</td><td>32 4</td><td>3.4</td><td>0 7 5 1/2</td></tr> <tr><td>May</td><td>1 17 7</td><td>0 5 5 1/2</td><td>14.21</td><td>32 11.3</td><td>34 2</td><td>3.7</td><td>0 7 5 1/2</td></tr> <tr><td>Sept.</td><td>1 17 7</td><td>0 5 4 1/2</td><td>14.43</td><td>33 5.4</td><td>34 5</td><td>2.8</td><td>0 7 5 1/2</td></tr> <tr><td>Jan.</td><td>1 17 7</td><td>0 5 2</td><td>15.01</td><td>34 9.5</td><td>35 6</td><td>2.0</td><td>0 7 5 1/2</td></tr> <tr><td>May</td><td>4 17 6</td><td>0 5 2 1/2</td><td>14.88</td><td>34 5.9</td><td>36 2</td><td>4.8</td><td>0 9 7 1/2</td></tr> <tr><td>Sept.</td><td>3 17 6</td><td>0 5 4 1/2</td><td>14.41</td><td>33 4.8</td><td>33 9</td><td>1.1</td><td>0 9 7 1/2</td></tr> <tr><td>1780 Jan.</td><td>4 17 6</td><td>0 5 3</td><td>14.76</td><td>34 2.5</td><td>34 6</td><td>0.8</td><td>0 9 7 1/2</td></tr> <tr><td>May</td><td>2 17 6</td><td>0 5 6</td><td>14.09</td><td>32 7.9</td><td>35 2</td><td>7.6</td><td>0 0 7 1/2</td></tr> <tr><td>Sept.</td><td>1 17 6</td><td>0 5 5 1/2</td><td>14.25</td><td>33 0.4</td><td>34 1</td><td>3.2</td><td>0 9 7 1/2</td></tr> <tr><td>Jan.</td><td>2 17 6</td><td>0 5 5 1/2</td><td>14.19</td><td>32 10.7</td><td>34 1</td><td>3.6</td><td>0 9 7 1/2</td></tr> <tr><td>May</td><td>1 17 6</td><td>0 5 7 1/2</td><td>13.77</td><td>31 11</td><td>33 7</td><td>5.2</td><td>0 9 7 1/2</td></tr> <tr><td>Sept.</td><td>1 17 6</td><td>0 5 8 1/2</td><td>13.57</td><td>31 5.5</td><td>32 2</td><td>2.2</td><td>0 9 7 1/2</td></tr> <tr><td>Jan.</td><td>1 17 6</td><td>0 5 9</td><td>13.38</td><td>31 0.2</td><td>31 9</td><td>2.3</td><td>0 9 7 1/2</td></tr> <tr><td>May</td><td>3 17 6</td><td>0 5 10 1/2</td><td>13.14</td><td>30 4.7</td><td>32 11</td><td>8.3</td><td>0 9 7 1/2</td></tr> <tr><td>Sept.</td><td>3 17 9</td><td>0 5 9 1/2</td><td>13.42</td><td>31 1.3</td><td>32 6</td><td>4.4</td><td>0 3 2 1/2</td></tr> <tr><td>Jan.</td><td>3 17 9</td><td>0 5 8</td><td>13.72</td><td>31 9.6</td><td>32 7</td><td>2.4</td><td>0 3 2 1/2</td></tr> <tr><td>May</td><td>2 18 0</td><td>0 5 10</td><td>13.32</td><td>30 10.5</td><td>31 9</td><td>2.8</td><td>0.5</td><td>0 3 2 1/2</td></tr> <tr><td>Sept.</td><td>2 18 0</td><td>0 5 8 1/2</td><td>13.66</td><td>31 7.9</td><td>31 6</td><td>0.5</td><td>0 3 2 1/2</td></tr> <tr><td>Jan.</td><td>2 18 0</td><td>0 5 5</td><td>14.29</td><td>33 1.5</td><td>33 6</td><td>1.1</td><td>0 3 2 1/2</td></tr> <tr><td>May</td><td>4 17 10 1/2</td><td>0 5 3 1/2</td><td>14.77</td><td>34 2.8</td><td>34 4</td><td>0.2</td><td>0 9 7 1/2</td></tr> <tr><td>Sept.</td><td>3 17 10 1/2</td><td>0 5 3 1/2</td><td>14.77</td><td>34 2.8</td><td>34 7</td><td>1.0</td><td>0 9 7 1/2</td></tr> <tr><td>Jan.</td><td>7 17 10 1/2</td><td>0 5 2</td><td>14.89</td><td>34 6.2</td><td>35 0</td><td>1.4</td><td>0 9 7 1/2</td></tr> <tr><td>May</td><td>3 17 10 1/2</td><td>0 5 2</td><td>14.95</td><td>34 7.9</td><td>34 11</td><td>0.7</td><td>0 9 7 1/2</td></tr> <tr><td>Sept.</td><td>2 17 6</td><td>0 5 1 1/2</td><td>15.12</td><td>35 0.6</td><td>35 4</td><td>0.5</td><td>0 9 7 1/2</td></tr> <tr><td>Jan.</td><td>3 17 6</td><td>0 5 2 1/2</td><td>14.82</td><td>34 4.2</td><td>34 10</td><td>1.1</td><td>0 9 7 1/2</td></tr> <tr><td>May</td><td>2 17 6</td><td>0 5 3 1/2</td><td>14.64</td><td>33 11.2</td><td>34 5</td><td>1.4</td><td>0 9 7 1/2</td></tr> <tr><td>Sept.</td><td>1 17 6</td><td>0 5 3 1/2</td><td>14.76</td><td>34 2.5</td><td>34 8</td><td>0.1</td><td>0 9 7 1/2</td></tr> <tr><td>Jan.</td><td>2 17 6</td><td>0 5 2 1/2</td><td>14.89</td><td>34 6.2</td><td>34 5</td><td>0.1</td><td>0 9 7 1/2</td></tr> <tr><td>May</td><td>1 17 6</td><td>0 5 3 1/2</td><td>14.70</td><td>34 0.9</td><td>34 7</td><td>4.0</td><td>0 9 7 1/2</td></tr> <tr><td>Sept.</td><td>1 17 6</td><td>0 5 3 1/2</td><td>14.58</td><td>33 9.6</td><td>35 0</td><td>3.5</td><td>0 9 7 1/2</td></tr> <tr><td>Jan.</td><td>1 17 6</td><td>0 5 3 1/2</td><td>14.58</td><td>33 9.6</td><td>35 4</td><td>4.5</td><td>0 9 7 1/2</td></tr> <tr><td>May</td><td>2 17 6</td><td>0 5 3 1/2</td><td>14.58</td><td>33 9.6</td><td>35 0</td><td>3.5</td><td>0 9 7 1/2</td></tr> <tr><td>Sept.</td><td>2 17 6</td><td>0 5 3 1/2</td><td>14.58</td><td>33 9.6</td><td>34 10</td><td>3.0</td><td>0 9 7 1/2</td></tr> <tr><td>Jan.</td><td>1 17 6</td><td>0 5 3 1/2</td><td>14.70</td><td>34 0.9</td><td>35 6</td><td>4.1</td><td>0 9 7 1/2</td></tr> <tr><td>May</td><td>1 17 6</td><td>0 5 2 1/2</td><td>14.89</td><td>34 6.2</td><td>35 5</td><td>2.6</td><td>0 9 7 1/2</td></tr> <tr><td>Sept.</td><td>1 17 6</td><td>0 5 2 1/2</td><td>14.88</td><td>34 5.9</td><td>35 1</td><td>1.4</td><td>0 9 7 1/2</td></tr> <tr><td>Jan.</td><td>2 17 6</td><td>0 5 3 1/2</td><td>14.70</td><td>34 0.9</td><td>35 4</td><td>3.7</td><td>0 9 7 1/2</td></tr> <tr><td>May</td><td>3 17 6</td><td>0 5 2 1/2</td><td>14.88</td><td>34 5.9</td><td>35 6</td><td>2.9</td><td>0 9 7 1/2</td></tr> <tr><td>Sept.</td><td>3 17 6</td><td>0 5 3 1/2</td><td>14.76</td><td>34 2.5</td><td>35 6</td><td>3.7</td><td>0 9 7 1/2</td></tr> <tr><td>Jan.</td><td>4 17 6</td><td>0 5 3 1/2</td><td>14.70</td><td>34 0.9</td><td>35 11</td><td>5.4</td><td>0 9 7 1/2</td></tr> <tr><td>May</td><td>3 17 6</td><td>0 5 2 1/2</td><td>14.94</td><td>34 7.6</td><td>35 6</td><td>2.5</td><td>0 9 7 1/2</td></tr> <tr><td>Sept.</td><td>2 17 6</td><td>0 5 2 1/2</td><td>14.53</td><td>33 8.2</td><td>34 6</td><td>2.4</td><td>0 9 7 1/2</td></tr> <tr><td>Jan.</td><td>3 17 6</td><td>0 5 5 1/2</td><td>14.25</td><td>33 0.4</td><td>34 3</td><td>3.7</td><td>0 9 7 1/2</td></tr> <tr><td>Sept.</td><td>4 17 6</td><td>0 5 5</td><td>14.30</td><td>133 1.8</td><td>34 0</td><td>2.5</td><td>0 9 7 1/2</td></tr> </table>
* Lords' Report on the Bank's resuming Cash Payments, 1819, p. 75. † Amount in circulation on 25th February. ‡ Average of January and July.
VOL. IV. PART I. <table> <tr> <th rowspan="2">Price of Standard Gold per oz.</th> <th rowspan="2">Price of Standard Silver per oz.</th> <th colspan="2">Their relative Proportions to each other.</th> <th rowspan="2">Par of Exchange with Hambro.</th> <th colspan="2">Course of exchange with Hambro.</th> <th rowspan="2">Per cent. in favour of London.</th> <th rowspan="2">Per cent. against London.</th> <th rowspan="2">Per centage above the Mint price of Gold.</th> <th rowspan="2">Per centage below the Mint price of Gold.</th> <th rowspan="2">Bank of England Notes in Circulation.</th> </tr> <tr> <th>L. s. d.</th> <th>L. s. d.</th> <th>Sch. gr.</th> <th>L. s. d.</th> <th>L. s. d.</th> </tr> <tr><td>1793 Jan. 1</td><td>3 17 6</td><td>5</td><td>4 3/4</td><td>14.36 to 1</td><td>33 3/4</td><td>35 4</td><td>6.1</td><td></td><td>0 9 7</td><td>0 9 7</td><td>11,928,101</td></tr> <tr><td>May 3</td><td>3 17 6</td><td>5</td><td>2 1/2</td><td>14.88</td><td>1 34</td><td>5 9</td><td>37 6</td><td>8.7</td><td>0 9 7</td><td>0 9 7</td><td></td></tr> <tr><td>Sept. 3</td><td>3 17 6</td><td>5</td><td>1 1/2</td><td>15.12</td><td>1 35</td><td>0 6</td><td>36 0</td><td>2.7</td><td>0 9 7</td><td>0 9 7</td><td></td></tr> <tr><td>Jan. 4</td><td>3 17 6</td><td>5</td><td>1 1/2</td><td>15.12</td><td>1 35</td><td>0 6</td><td>35 9</td><td>2.0</td><td>0 9 7</td><td>0 9 7</td><td>10,246,586</td></tr> <tr><td>May 2</td><td>3 17 6</td><td>5</td><td>1 1/2</td><td>15.18</td><td>1 35</td><td>2 3</td><td>36 7</td><td>4.0</td><td>0 9 7</td><td>0 9 7</td><td></td></tr> <tr><td>Sept. 2</td><td>3 17 6</td><td>5</td><td>1</td><td>15.24</td><td>1 35</td><td>3 9</td><td>35 0</td><td>1.0</td><td>0 9 7</td><td>0 9 7</td><td></td></tr> <tr><td>Jan. 5</td><td>3 17 6</td><td>5</td><td>2 1/2</td><td>14.94</td><td>1 34</td><td>7 6</td><td>34 6</td><td>0.4</td><td>0 9 7</td><td>0 9 7</td><td>10,139,905</td></tr> <tr><td>May 1</td><td>3 17 6</td><td>5</td><td>1</td><td>15.24</td><td>1 35</td><td>3 9</td><td>34 4</td><td>2.8</td><td>0 9 7</td><td>0 9 7</td><td></td></tr> <tr><td>Sept. 1</td><td>5</td><td>5 1/2</td><td></td><td></td><td></td><td></td><td>32 6</td><td></td><td></td><td></td><td></td></tr> <tr><td>Jan. 6</td><td>5</td><td>5 1/2</td><td></td><td></td><td></td><td></td><td>32 7</td><td></td><td></td><td></td><td>10,106,165</td></tr> <tr><td>May 3</td><td>5</td><td>5</td><td></td><td></td><td></td><td></td><td>33 10</td><td></td><td></td><td></td><td></td></tr> <tr><td>Sept. 2</td><td>3 17 6</td><td>5</td><td>3 1/2</td><td>14.64</td><td>1 33</td><td>11.2</td><td>33 7</td><td>1.</td><td>0 9 7 1/2</td><td>0 9 7 1/2</td><td></td></tr> <tr><td>Jan. 7</td><td>3 17 6</td><td>5</td><td>5</td><td>14.80</td><td>1 33</td><td>1.8</td><td>35 6</td><td>7.</td><td>0 9 7 1/2</td><td>0 9 7 1/2</td><td>11,019,829</td></tr> <tr><td>May 2</td><td>3 17 6</td><td>5</td><td>6</td><td>14.09</td><td>1 32</td><td>7.9</td><td>36 10</td><td></td><td></td><td></td><td></td></tr> <tr><td>Sept. 1</td><td>3 17 10 1/2</td><td>5</td><td>1</td><td>15.31</td><td>1 35</td><td>5.9</td><td>38 7</td><td></td><td></td><td></td><td></td></tr> <tr><td>Jan. 8</td><td>3 17 10 1/2</td><td>5</td><td>0</td><td>15.57</td><td>1 36</td><td>1.1</td><td>38 2</td><td>5.7</td><td></td><td></td><td>12,579,616</td></tr> <tr><td>May 1</td><td>3 17 10 1/2</td><td>5</td><td>1 1/2</td><td>15.19</td><td>1 35</td><td>2.5</td><td>37 8</td><td>7.</td><td></td><td></td><td></td></tr> <tr><td>Sept. 4</td><td>3 17 10 1/2</td><td>5</td><td>1 1/2</td><td>15.31</td><td>1 35</td><td>5.9</td><td>37 6</td><td>5.6</td><td></td><td></td><td></td></tr> <tr><td>Jan. 9</td><td>3 17 9</td><td>5</td><td>2</td><td>15.05</td><td>1 34</td><td>10.5</td><td>37 7</td><td>7.7</td><td>0 3 2 1/2</td><td>0 3 2 1/2</td><td>13,450,294</td></tr> <tr><td>May 9</td><td>3 17 9</td><td>5</td><td>2</td><td>15.05</td><td>1 34</td><td>10.5</td><td>35 6</td><td>1.8</td><td>0 3 2 1/2</td><td>0 3 2 1/2</td><td></td></tr> <tr><td>Sept. 3</td><td>3 17 9</td><td></td><td></td><td></td><td></td><td></td><td>33 4</td><td></td><td></td><td></td><td></td></tr> <tr><td>1800 Jan.† 3</td><td>0</td><td>5</td><td>7</td><td></td><td></td><td></td><td>32</td><td></td><td></td><td></td><td></td></tr> <tr><td>May 2</td><td>4 5 0</td><td>0</td><td>5 9 1/2</td><td>14.68</td><td>1 34</td><td>0.4</td><td>32 5</td><td>5.3</td><td>9 2 11 3/4</td><td>8 7 7 3/4</td><td>15,160,635</td></tr> <tr><td>Sept. 2</td><td>4 5 0</td><td>0</td><td>5 9 1/2</td><td>14.68</td><td>1 34</td><td>0.4</td><td>32 2</td><td>5.5</td><td>9 2 11 3/4</td><td>8 7 7 3/4</td><td></td></tr> <tr><td>Jan. 1</td><td>4 6 0</td><td>0</td><td>5 10 1/2</td><td>14.64</td><td>1 33</td><td>11.2</td><td>29 8</td><td>12.6</td><td>10 8 8</td><td>9 8 11 1/2</td><td></td></tr> <tr><td>May 1</td><td>4 3 0</td><td>0</td><td>6 1/2</td><td>13.74</td><td>1 31</td><td>10.1</td><td>31 6</td><td>1.</td><td>6 11 7 3/4</td><td>6 3 7 3/4</td><td>15,810,902</td></tr> <tr><td>Sept. 1</td><td>0</td><td>6 1/2</td><td></td><td></td><td></td><td></td><td>31 7</td><td></td><td></td><td></td><td></td></tr> <tr><td>Jan. 2</td><td>4 3 6</td><td></td><td></td><td></td><td></td><td></td><td>32 2</td><td></td><td>7 4 5 1/2</td><td>6 14 8 3/4</td><td>16,427,889</td></tr> <tr><td>May 4</td><td>0</td><td>5 9 1/2</td><td></td><td></td><td></td><td></td><td>32 8</td><td></td><td></td><td></td><td></td></tr> <tr><td>Sept. 3</td><td>0</td><td>5 6</td><td></td><td></td><td></td><td></td><td>33 3</td><td></td><td></td><td></td><td></td></tr> <tr><td>Jan. 3</td><td>0</td><td>5 7</td><td></td><td></td><td></td><td></td><td>34</td><td></td><td></td><td></td><td></td></tr> <tr><td>May 3</td><td>0</td><td>5 8</td><td></td><td></td><td></td><td></td><td>34 4</td><td></td><td></td><td></td><td></td></tr> <tr><td>Sept. 2</td><td>0</td><td>5 6</td><td></td><td></td><td></td><td></td><td>32 10</td><td></td><td></td><td></td><td></td></tr> <tr><td>Jan. 4</td><td>0</td><td>5 8 1/2</td><td></td><td></td><td></td><td></td><td>34 10</td><td></td><td></td><td></td><td></td></tr> <tr><td>May 1</td><td></td><td></td><td></td><td></td><td></td><td></td><td>35 9</td><td></td><td></td><td></td><td>17,408,060</td></tr> <tr><td>Sept. 4</td><td>4 0 0</td><td>0</td><td>5 4</td><td>15.</td><td>1 34</td><td>9.3</td><td>35 10</td><td>3.</td><td>2 14 6 3/4</td><td>2 13 1 1/2</td><td></td></tr> <tr><td>Jan. 5</td><td>4 0 0</td><td>0</td><td>5 6 1/2</td><td>14.44</td><td>1 33</td><td>5.7</td><td>35 6</td><td>6.0</td><td>2 14 6 3/4</td><td>2 13 1 1/2</td><td></td></tr> <tr><td>May 3</td><td>4 0 0</td><td>0</td><td>5 4 1/2</td><td>14.88</td><td>1 34</td><td>5.9</td><td>35 5</td><td>2.6</td><td>2 14 6 3/4</td><td>2 13 1 1/2</td><td>16,826,071</td></tr> <tr><td>Sept. 3</td><td>4 0 0</td><td></td><td></td><td></td><td></td><td></td><td>35 5</td><td></td><td>2 14 6 3/4</td><td>2 13 1 1/2</td><td></td></tr> <tr><td>Jan. 6</td><td>3</td><td></td><td></td><td></td><td></td><td></td><td>33 3</td><td></td><td></td><td></td><td></td></tr> <tr><td>May 2</td><td>0</td><td>5 9</td><td></td><td></td><td></td><td></td><td>33 8</td><td></td><td></td><td></td><td></td></tr> <tr><td>Sept. 2</td><td>0</td><td>5 7 1/2</td><td></td><td></td><td></td><td></td><td>34 4</td><td></td><td></td><td></td><td></td></tr> <tr><td>Jan. 7</td><td>0</td><td>5 8</td><td></td><td></td><td></td><td></td><td>34 8</td><td></td><td></td><td></td><td></td></tr> <tr><td>May 1</td><td>0</td><td>5 7 1/2</td><td></td><td></td><td></td><td></td><td>34 10</td><td></td><td></td><td></td><td></td></tr> <tr><td>Sept. 4</td><td>0</td><td>5 7 1/2</td><td></td><td></td><td></td><td></td><td>34 3</td><td></td><td></td><td></td><td></td></tr> <tr><td>Jan. 8</td><td>34 4</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr> <tr><td>May 3</td><td>34 9</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr> <tr><td>Sept 2</td><td>34 8</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td>17,128,649</td></tr> </table>
* Average of January and July. § Wherever a blank space is left, it shows that no prices of bullion are quoted of that date, either at Lloyd's or at the Bullion Office in the Bank of England. † From 1797, the account of Bank of England notes in circulation is taken from the Table, in page 323 of the Appendix to the Lords' Report on the Expediency of the Bank's resuming Cash payments. On the 25th February 1797, the epoch of the restriction on cash payments, there were only L. 8,640,250 notes in circulation. ‡ From 1800 to 1810, standard gold and silver in bars are not regularly quoted. Portugal gold in coin, being nearly of the same standard, has in several instances been quoted as standard gold. In those instances where standard silver is not quoted, the deficiency has been supplied by adding 2 1/2d. to the ounce of new dollars, the computed difference in the value of the two standards. <table> <tr> <th> </th> <th>Price of Standard Gold per oz.</th> <th>Price of Standard Silver per oz.</th> <th>Their relative proportions to each other.</th> <th>Par of Exchange</th> <th>Course of exchange with Hambro.</th> <th>Per cent. in favour of London.</th> <th>Per cent. against London.</th> <th>Per centage above the Mint price of Gold.</th> <th>Per centage of Discount on Bank Notes.</th> <th>Bank of England Notes in Circulation.</th> </tr> <tr> <td></td> <td>L. s. d. L. s. d. at</td> <td>Sch. gr.</td> <td></td> </tr> <tr> <td>Jan.</td> <td>0 5</td> <td>17 32 9 1</td> <td>31 3</td> </tr> <tr> <td>May</td> <td>4 11 0</td> <td>60 14 2 1</td> <td>38 0 8 0</td> </tr> <tr> <td>Sept.</td> <td>5 4 10 9</td> <td>58 21 7 7</td> <td>36 10 9 1</td> </tr> <tr> <td>10 Jan.</td> <td>9 11 10 4</td> <td>57 15 4 1</td> <td>29 0 1 0</td> </tr> <tr> <td>May</td> <td>10 2 11 11 3</td> <td>10 16 13 4 1</td> <td>21 3 8</td> </tr> <tr> <td>Oct.</td> <td>10 5 9 1 0</td> <td></td> <td>21 4 8 1 8 2 4</td> </tr> <tr> <td>Jan.</td> <td>6 8 7</td> <td>5 11 1</td> <td>26 1 0 2</td> <td>24 3</td> </tr> <tr> <td>May</td> <td>1 6 2</td> <td></td> <td>32 0 0</td> <td>32 5 2 4</td> </tr> <tr> <td>Aug.</td> <td>6</td> <td>1 2</td> <td>25 0 8</td> <td>32 5 2 4</td> </tr> <tr> <td>11 Jan.</td> <td>14 8</td> <td>3</td> <td></td> <td>26 4 1 9 20 1 15 1</td> <td>23,282,671</td> </tr> <tr> <td>May</td> <td>1 1</td> <td>4</td> <td>6</td> <td>27 6</td> </tr> <tr> <td>Oct.</td> <td>5 0 7</td> <td>0</td> <td></td> <td>18 4 2 5 9 16 4 7 1</td> <td>23,287,318</td> </tr> <tr> <td>Jan.</td> <td>2 5 4</td> <td>2</td> <td></td> <td>37 8 0 7</td> </tr> <tr> <td>May</td> <td>3 6 7</td> <td>2 0 9</td> <td>0 6 7<br>15.07</td> <td>34 11 2 6<br>28 0</td> <td>24 6 3 2 14 8 4 8</td> <td>22,297,145</td> </tr> <tr> <td>Oct.</td> <td>5 6 8</td> <td>5 3 11<br>15.56</td> <td>21 2 8 8<br>23 8</td> <td>29.1<br>15.56</td> <td>26,872,859</td> </tr> <tr> <td>Jan.</td> <td>8 5 7<br>15 25 1 0</td> <td>8 0 6<br>0 6 14</td> <td>12 2 4 6</td> <td>14.5<br>8 13 7</td> <td>22,875,071</td> </tr> <tr> <td>May</td> <td>7 5 3 0<br>15.63</td> <td>1 1 4 18 // 8 0</td> <td>28 0</td> <td>14.5<br>3 18 7</td> <td>26,490,192</td> </tr> <tr> <td>Oct.</td> <td>8 0 5 18</td> <td>15.80</td> <td>1 0 45 2 5// 7 1 0 3 5 1 10<br>7 3.6 // 7 16</td> <td>2 1 34 9 9 33 2 15// 2 1 12 12 9 10 5 10</td> <td>26,574,840</td> </tr> <tr> <td>Jan.</td> <td>5 6 2</td> <td>7 0 9<br>15.56</td> <td>3 4 11 2 4 0</td> <td>7 3</td> <td>26,887,017</td> </tr> <tr> <td>May</td> <td>5 0 1 0</td> <td>7 5 4<br>15.52</td> <td>1 2 3</td> <td>8</td> <td>8</td> </tr> <tr> <td>12 Oct.</td> <td>8<br>7<br>6<br>5<br>0<br>0<br>5<br>3<br>19 6 3 5</td> <td>7<br>5<br>3<br>0<br>5// 0 10 8<br>2 15 4<br>5 19 6<br>7 5 4<br>15.52</td> <td>0 8<br>1 1<br>1 2<br>1 6</td> <td>3// 1 1 1<br>1 2 1<br>1 5 11 4 2 3// 1</td> <td>21,495,279</td> </tr> <tr> <td>17 Jan.</td> <td>13 9 6 0</td> <td>0 15.77</td> <td>6 7 3 6<br>1<br>7</td> <td>1 9// 1 11</td> <td>7</td> <td>28,274,901</td> </tr> <tr> <td>June</td> <td>19 1 0</td> <td>0 15.56</td> <td>3 10 9</td> <td>2 0</td> <td>28,274,901</td> </tr> <tr> <td>May</td> <td>6 5 2</td> <td>3 15.62</td> <td>5 3 8<br>3 1 Br 6<br>7 3.3// 11<br>7 3/ </td> <td>1 2 9 1 8 7 excerpt from the Table in page 149 of Mr Parnell's pamphlet; and the remaining seven years from the tables in the Appendix to the Bullion Report.)
<table> <tr> <th></th> <th>1790</th> <th>1791</th> <th>1792</th> <th>1793.</th> <th>1794.</th> <th>1795.</th> <th>1796.</th> <th>1797.</th> <th>1798.</th> <th>1799.</th> <th>1800.</th> <th>1801.</th> <th>1802.</th> <th>1803.</th> <th>1804.</th> <th>1805.</th> <th>1806.</th> <th>1807.</th> <th>1808.</th> <th>1809.</th> <th>1810.</th> </tr> <tr> <td>1</td> <td>8</td> <td>8 1</td> <td>8 2</td> <td>8 6</td> <td>8 1</td> <td>8 2</td> <td>8 9</td> <td>8 3</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> </tr> <tr> <td>1 1/2</td> <td>8</td> <td>8 1</td> <td>8 2</td> <td>8 6</td> <td>8 1</td> <td>8 2</td> <td>8 9</td> <td>8 3</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> </tr> <tr> <td>1 1/2</td> <td>8</td> <td>8 1</td> <td>8 2</td> <td>8 6</td> <td>8 1</td> <td>8 2</td> <td>8 9</td> <td>8 3</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> </tr> <tr> <td>1 1/2</td> <td>8</td> <td>8 1</td> <td>8 2</td> <td>8 6</td> <td>8 1</td> <td>8 2</td> <td>8 9</td> <td>8 3</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> </tr> <tr> <td>1</td> <td>8</td> <td>8 1</td> <td>8 2</td> <td>8 6</td> <td>8 1</td> <td>8 2</td> <td>8 9</td> <td>8 3</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> <td>8 1</td> </tr> </table>
It appeared from the evidence taken before the Committee on Irish Exchange in 1804, that the expense of issuing the £100 in cash from London to Dublin, and vice versa, varied from 1 to 1 \(\frac{1}{2}\) per cent.; and it is stated by Foster (<i>Essays on Commercial Exchange</i>, p. 175), that in the long interval from 1728 to 1797, the exchange never exceeded beyond the expense of sending gold from one country to another except in 1753, when the paper currency of Dublin had been very much depreciated. (See Mr Parnell's pamphlet <i>On the Principles of Currency and Exchange</i>, 4th edit. p. 168.) III.—ACCOUNT of the Number of Bank of Ireland Notes in circulation, including Bank Post Bills, in each half year, commencing with the half year ending 1st January 1797 to 1st January 1819, inclusive. (From an Account printed by order of the House of Commons.)
<table> <tr> <th></th> <th colspan="2">GOLD.</th> <th colspan="2">SILVER.</th> <th colspan="2">EXPLANATIONS.</th> </tr> <tr> <th></th> <th>Mint Regulations.</th> <th>Assays.</th> <th>Mint Regulations.</th> <th>Assays.</th> <th>Mint Regulations.</th> <th>Assays.</th> <th>Monies of Exchange.</th> </tr> <tr> <td>Amsterdam, Banco</td> <td>36 8</td> <td>36 6,837</td> <td>3 37 10,535</td> <td>0 35 6,5</td> <td colspan="2"></td> <td>Schillings and Pence Flemish per Pound Sterling. Agio 2 per cent. Florins and Stivers per Pound Sterling.</td> </tr> <tr> <td>do. Current</td> <td>11 4,511</td> <td>3,811 8,5</td> <td>11 11,8</td> <td>10 14,6</td> <td>10 17,6</td> <td></td> <td>Schillings and Pence Flemish Banco per Pound Sterling.</td> </tr> <tr> <td>Hamburgh</td> <td>34 3,534</td> <td>1,535 1</td> <td>35 1,332</td> <td>11 32 11,5</td> <td colspan="2"></td> <td>Francs and Cents per Pound Sterling.</td> </tr> <tr> <td>Paris</td> <td>25 20</td> <td>25 26</td> <td>24 73</td> <td>24 91</td> <td>23 23</td> <td>23 40</td> <td>Pence Sterling for the Piastre or Dollar of Exchange.</td> </tr> <tr> <td>Madrid</td> <td>37.3</td> <td>37.2</td> <td>39.2</td> <td>39.0</td> <td>41.7</td> <td>41.5</td> <td>Pence Sterling per Milree.</td> </tr> <tr> <td>Lisbon</td> <td>67.4</td> <td>67.5</td> <td>60.41</td> <td>58.33</td> <td>64.30</td> <td>62.09</td> <td>Pence Sterling per Pezza of Exchange.</td> </tr> <tr> <td>Leghorn</td> <td>49.1</td> <td>49.0</td> <td>46.46</td> <td>46.5</td> <td>49.60</td> <td>49.5</td> <td>Pence Sterling per Pezza Fuori Banco.</td> </tr> <tr> <td>Genoa</td> <td>45.5</td> <td>45.5</td> <td>46.46</td> <td>48.9</td> <td>49.4</td> <td>52.0</td> <td>Pence Sterling per Ducat (New Coinage of 1818).</td> </tr> <tr> <td>Naples</td> <td>41.22</td> <td>-</td> <td>41.22</td> <td>-</td> <td>43.9</td> <td>-</td> <td>Lire Piccole per Pound Sterling.</td> </tr> <tr> <td>Venice</td> <td>46.3</td> <td>46.0</td> <td>47.5</td> <td>49.0</td> <td>44.6</td> <td>46.1</td> <td></td> </tr> </table>
IV.—PAR of EXCHANGE between England and the following places, viz, Amsterdam, Hamburgh, Paris, Madrid, Lisbon, Leghorn, Genoa, Naples, and Venice, the same being computed from the intrinsic Value of their principal Coins, by comparing Gold with Gold, and Silver with Silver, according to their Mint Regulations, and to Assays made at the London and Paris Mints. (Given in by Dr Kelly to the Committee of the House of Lords, appointed to inquire into the expediency of the Bank's resuming Cash Payments.) V.—TABLE containing the Value of the MONIES of ACCOUNT of different Places (expressed in Pence and Decimals of Pence), according to the Mint Price both of Gold and Silver in England; that is, L.3, 17s. 10½d. per oz. for Gold, and 5s. 6d. (as fixed in the New Coinage) per oz. for Silver.
<table> <tr> <th></th> <th colspan="2">Value in Silver.</th> <th colspan="2">Value in Gold.</th> <th colspan="2">Value in Silver.</th> <th colspan="2">Value in Gold.</th> </tr> <tr> <th></th> <th>d.</th> <th>variable</th> <th>d.</th> <th>variable</th> <th>d.</th> <th>variable</th> <th>d.</th> <th>variable</th> </tr> <tr> <td>Aix la Chapelle,</td> <td>Rixdollar current,</td> <td>-</td> <td>33, 43</td> <td>31, 43</td> <td>Mark current,</td> <td>-</td> <td>15, 78</td> <td>variable</td> </tr> <tr> <td>Amsterdam,</td> <td>Rixdollar banco (agio at 4 per cent.),</td> <td>-</td> <td>58, 16</td> <td>variable</td> <td>Pound Flemish current,</td> <td>-</td> <td>118, 32</td> <td>ditto</td> </tr> <tr> <td></td> <td>Florin banco,</td> <td>-</td> <td>23, 26</td> <td>ditto</td> <td>Rixdollar, in cash,</td> <td>-</td> <td>44, 71</td> <td>42, 26</td> </tr> <tr> <td></td> <td>Pound Flemish banco,</td> <td>-</td> <td>139, 56</td> <td>ditto</td> <td>Rixdollar, gold value,</td> <td>-</td> <td>41, 51</td> <td>39, 24</td> </tr> <tr> <td></td> <td>Rixdollar current,</td> <td>-</td> <td>55, 93</td> <td>ditto</td> <td>Ireland,</td> <td>-</td> <td>221, 56</td> <td>221, 56</td> </tr> <tr> <td></td> <td>Florin current,</td> <td>-</td> <td>22, 35</td> <td>ditto</td> <td>Konigsberg,</td> <td>-</td> <td>12, 77</td> <td>variable</td> </tr> <tr> <td></td> <td>Pound Flemish current,</td> <td>-</td> <td>134, 13</td> <td>ditto</td> <td>Leghorn,</td> <td>-</td> <td>49, 70</td> <td>49, 16</td> </tr> <tr> <td>Antwerp,</td> <td>Pound Flemish (money of exchange),</td> <td>-</td> <td>131, 20</td> <td>123, 87</td> <td>Lira moneta buona,</td> <td>-</td> <td>8, 65</td> <td>8, 55</td> </tr> <tr> <td></td> <td>Florin (money of exchange),</td> <td>21, 87</td> <td>20, 64</td> <td>Lira moneta lunga,</td> <td>-</td> <td>8, 25</td> <td>8, 19</td> </tr> <tr> <td></td> <td>Pound Flemish current,</td> <td>112, 47</td> <td>106, 18</td> <td>Leipsic,</td> <td>-</td> <td>Rixdollar convention money, 40, 24</td> <td>variable</td> </tr> <tr> <td></td> <td>Florin current,</td> <td>18, 73</td> <td>17, 70</td> <td>Rixdollar in Louis d'ors or Fredericks,</td> <td>-</td> <td>-</td> <td>39, 68</td> </tr> <tr> <td>Barcelona,</td> <td>Libra Catalan,</td> <td>30, 28</td> <td>20, 70</td> <td>Malta,</td> <td>-</td> <td>Scudo or crown,</td> <td>22, 60</td> <td>23, 34</td> </tr> <tr> <td>Basil,</td> <td>Rixdollar, or ecu of exchange,</td> <td>50, 32</td> <td>47, 7</td> <td>Milan,</td> <td>-</td> <td>Lira Imperiale,</td> <td>11, 05</td> <td>10, 53</td> </tr> <tr> <td></td> <td>Rixdollar current,</td> <td>45, 19</td> <td>42, 20</td> <td></td> <td></td> <td>Lira corrente,</td> <td>7, 83</td> <td>7, 44</td> </tr> <tr> <td>Berlin,</td> <td>Pound banco,</td> <td>50, 29</td> <td>variable</td> <td></td> <td></td> <td>Scudo Imperiale,</td> <td>64, 83</td> <td>61, 60</td> </tr> <tr> <td></td> <td>Rixdollar current,</td> <td>38, 92</td> <td>ditto</td> <td></td> <td></td> <td>Scudo corrente,</td> <td>45, 05</td> <td>42, 78</td> </tr> <tr> <td>Bern,</td> <td>Ecu of 3 livres,</td> <td>45, 39</td> <td>42, 90</td> <td>Modena,</td> <td>-</td> <td>Lira,</td> <td>3, 35</td> <td>—</td> </tr> <tr> <td></td> <td>Crown of 25 batzen,</td> <td>37, 82</td> <td>35, 75</td> <td>Munich,</td> <td>-</td> <td>Gulden or florin,</td> <td>22, 36</td> <td>21, 28</td> </tr> <tr> <td>Bremen,</td> <td>Rixdollar current,</td> <td>40, 24</td> <td>variable</td> <td>Naples,</td> <td>-</td> <td>Ducat of 1818,</td> <td>43, 90</td> <td>41, 22</td> </tr> <tr> <td></td> <td>Rixdollar in Carls d'or,</td> <td>—</td> <td>39, 68</td> <td>Parma,</td> <td>-</td> <td>Lira,</td> <td>2, 60</td> <td>2, 40</td> </tr> <tr> <td>Cassel,</td> <td>Rixdollar current,</td> <td>40, 24</td> <td>variable</td> <td>Persia,</td> <td>-</td> <td>Toman of 100 mamoodis,</td> <td>306, 15</td> <td>—</td> </tr> <tr> <td>Cologne,</td> <td>Rixdollar specie of 80 al-buses,</td> <td>33, 40</td> <td>ditto</td> <td>Poland,</td> <td>-</td> <td>Gulden or florin,</td> <td>6, 42</td> <td>6, 27</td> </tr> <tr> <td></td> <td>Rixdollar current of 78 al-buses,</td> <td>32, 25</td> <td>ditto</td> <td>Portugal,</td> <td>-</td> <td>Milree,</td> <td>73, 18</td> <td>67, 34</td> </tr> <tr> <td></td> <td>Rixdollar specie of 80 al-buses,</td> <td>32, 25</td> <td>ditto</td> <td></td> <td></td> <td>Old Crusade,</td> <td>29, 27</td> <td>26, 94</td> </tr> <tr> <td></td> <td>Rixdollar specie of 80 al-buses,</td> <td>32, 25</td> <td>ditto</td> <td>Riga,</td> <td>-</td> <td>Rixdollar Alberts,</td> <td>55, 95</td> <td>variable</td> </tr> <tr> <td>Constantinople,</td> <td>Piastre, or dollar,</td> <td>13, 96</td> <td>uncer.</td> <td></td> <td></td> <td>Rixdollar currency (agio at 40 per cent.),</td> <td>39, 95</td> <td>ditto</td> </tr> <tr> <td>Dantzig,</td> <td>Gulden or Florin,</td> <td>9, 58</td> <td>9,</td> <td>Rome,</td> <td>-</td> <td>Scudo or crown,</td> <td>55, 40</td> <td>51, 63</td> </tr> <tr> <td>Denmark,</td> <td>Rixdollar specie,</td> <td>58, 25</td> <td>—</td> <td></td> <td></td> <td>Scudo di Stampa d'oro,</td> <td>84, 49</td> <td>78, 73</td> </tr> <tr> <td></td> <td>Rixdollar crown money,</td> <td>51, 49</td> <td>—</td> <td>Russia,</td> <td>-</td> <td>Ruble,</td> <td>40, 98</td> <td>39, 35</td> </tr> <tr> <td></td> <td>Rixdollar Danish currency,</td> <td>47, 13</td> <td>44, 88</td> <td>Sardinia,</td> <td>-</td> <td>Lira,</td> <td>19, 38</td> <td>18, 82</td> </tr> <tr> <td>England,</td> <td>Pound Sterling,</td> <td>240,</td> <td>240,</td> <td>Sicily,</td> <td>-</td> <td>Ounce,</td> <td>130, 44</td> <td>124, 80</td> </tr> <tr> <td>Florence,</td> <td>Lira,</td> <td>8, 62</td> <td>8, 53</td> <td></td> <td></td> <td>Scudo or crown,</td> <td>52, 18</td> <td>49, 92</td> </tr> <tr> <td></td> <td>Ducat, or crown current,</td> <td>60, 36</td> <td>59, 71</td> <td>Spain,</td> <td>-</td> <td>Real of old plate,</td> <td>5, 25</td> <td>4, 57</td> </tr> <tr> <td></td> <td>Scudo d'oro, or gold crown,</td> <td>—</td> <td>63, 97</td> <td></td> <td></td> <td>Real of new plate,</td> <td>5, 58</td> <td>4, 86</td> </tr> <tr> <td>France,</td> <td>Livre Tournois,</td> <td>10, 16</td> <td>9, 38</td> <td></td> <td></td> <td>Real of Mexican plate,</td> <td>6, 97</td> <td>6, 07</td> </tr> <tr> <td></td> <td>Franc (new system),</td> <td>10, 33</td> <td>9, 52</td> <td></td> <td></td> <td>Real Vellon,</td> <td>2, 79</td> <td>2, 43</td> </tr> <tr> <td>Francfort,</td> <td>Rixdollar convention money,</td> <td>40, 24</td> <td>37, 65</td> <td></td> <td></td> <td>Dollar of old plate or of exchange,</td> <td>41, 99</td> <td>36, 59</td> </tr> <tr> <td></td> <td>Rixdollar. Muntze, or in small coins,</td> <td>33, 53</td> <td>—</td> <td>Sweden,</td> <td>-</td> <td>Rixdollar,</td> <td>58, 95</td> <td>56, 43</td> </tr> <tr> <td>Germany,</td> <td>Rixdollar current,</td> <td>40, 24</td> <td>variable</td> <td>Switzerland,</td> <td>-</td> <td>Franc (new system),</td> <td>23, 57</td> <td>—</td> </tr> <tr> <td></td> <td>Rixdollar specie,</td> <td>53, 65</td> <td>ditto</td> <td>Trieste,</td> <td>-</td> <td>Florin, Austrian currency,</td> <td>26, 83</td> <td>25, 05</td> </tr> <tr> <td></td> <td>Florin of the Empire,</td> <td>26, 83</td> <td>ditto</td> <td></td> <td></td> <td>Lira, Trieste currency,</td> <td>5, 07</td> <td>4, 73</td> </tr> <tr> <td></td> <td>Rixdollar Muntze,</td> <td>33, 53</td> <td>ditto</td> <td>Turin,</td> <td>-</td> <td>Lira di piazza,</td> <td>4, 95</td> <td>4, 63</td> </tr> <tr> <td></td> <td>Florin Muntze,</td> <td>22, 36</td> <td>ditto</td> <td>Valencia,</td> <td>-</td> <td>Lira,</td> <td>12, 01</td> <td>11, 23</td> </tr> <tr> <td>Geneva,</td> <td>Livre current,</td> <td>17, 17</td> <td>16, 93</td> <td>Venice,</td> <td>-</td> <td>Lira piccola (in the old coins),</td> <td>5, 39</td> <td>variable</td> </tr> <tr> <td></td> <td>Florin,</td> <td>4, 89</td> <td>4, 84</td> <td></td> <td></td> <td>Lira piccola (in the coins introduced by the Austrians),</td> <td>4, 52</td> <td>ditto</td> </tr> <tr> <td>Genoa,</td> <td>Lira fuori Banco,</td> <td>8, 50</td> <td>7, 83</td> <td></td> <td></td> <td>Florin,</td> <td>26, 83</td> <td>25, 05</td> </tr> <tr> <td></td> <td>Pezza, or dollar of exchange, 48, 90</td> <td>45, 02</td> <td>—</td> <td>Zant,</td> <td>-</td> <td>Real,</td> <td>4, 32</td> <td>variable</td> </tr> <tr> <td></td> <td>Scudo di cambio, or crown of exchange,</td> <td>39, 12</td> <td>36, 02</td> <td>Zurich,</td> <td>-</td> <td>Florin, money of exchange, 27, 52</td> <td>ditto</td> <td></td> </tr> <tr> <td>Hamburgh,</td> <td>Mark Banco (at a medium),</td> <td>19, 39</td> <td>variable</td> <td></td> <td></td> <td>Florin current,</td> <td>25, 02</td> <td>ditto</td> </tr> <tr> <td></td> <td>Pound Flemish Banco,</td> <td>145, 46</td> <td>ditto</td> <td></td> <td></td> <td></td> <td>(s.s.)</td> <td></td> </tr> </table>