EXCHANGE. By Exchange is meant the bartering, or exchanging, the money of one place for that of another, by means of an instrument in writing, called a bill of exchange. Exchanges are carried on by merchants and bankers all over Europe, and are transacted on the Royal Exchange of London, the Royal Exchange of Dublin, the Exchange of Amsterdam, and those of the principal cities of the continent. When an exchange is mentioned between two places, one place gives a determined price, to receive an undetermined one. The determined price is called certain; thus, London gives a pound sterling, which is a certain price, to receive from Paris a number of francs, more or less, to be paid or received there. Again, London gives 1007., which is a certain price, to Dublin and other parts of Ireland, for an uncertain number of pounds, shillings, and pence Irish, to be paid or received there, viz. from 105/. to 115. Irish, as the exchange may be. The undetermined price is called uncertain, because it is always subject to variation; for instance, London pays an uncertain price to Spain, as a number of pence sterling, to receive a dollar which is certain in exchange. The real money of a state signifies one piece or more, of any kind of metal coined, and made current by public authority, as guineas, shillings, &c. of England. The imaginary money is chiefly used in keeping accounts, as pounds sterling, for which there is no coin to answer. The par of exchange is the quantity of the money, whether real or imaginary, of one country, which is equal in value to a certain quantity of the money of another; thus, £. 100 sterling is equal in value to 1087. 6s. sd. Irish: and 100l. sterling is worth 140. of the currency in the West Indies, and equal to 166l. 13s. 4d. currency of the United States.* NOTE. In the following note is subjoined the par of exchange between London and some of the principal commercial and other places in Europe. The course of exchange is the value agreed upon by merchants and others, and is continually fluctuating above or below the par of exchange, according as the demand for bills is greater or less.* In addition to the above, we may observe, that in Switzerland, at Nuremberg, Leipsic, Dresden, many parts of Poland, Denmark, and Norway; at Riga, Revel, &c. the rix-dollar is, at the par of exchange, 4s. 6d. ; and as it is worth more or less than this in exchange with other places, the course of exchange is said to be for or against these places. * The demand for bills depends upon what is called the balance of trade, which is for or against a country, according as more or less goods are exported or imported by that country, in comparison of some other. Thus, if London ships to Hamburgh goods to the amount of 500,000l., and Hamburgh in the same time sends to London goods only to the amount of 400,000l., the balance of trade is said to be in favour of London; and as Hamburgh can discharge only to the amount of 400,000l. by bills of exchange in the way of trade, that is, to the amount of the value of goods sent to London, there is a balance against her of 100,000l., which she must pay by bills of exchange procured elsewhere, and for these she must pay a premium. If, in this case, Hamburgh pays 17. per cent. for bills, she will, to liquidate the debt, have to pay 1000l. premium; in this way the balance of trade affects the fluctuation of exchanges. unfavourable state of exchange furnishes a motive for exportation. The merchant can, in such case, afford to sell his commodities as much cheaper, as the premium which he is obliged to pay for a bill of exchange amounts. Hence the course of exchange always tends to an equilibrium; and it can never exceed the expense of sending gold or silver bullion to the place upon which the bill is drawn, An Agio denotes the difference in Amsterdam and other places, between current money, and the exchange or bankmoney, the latter being finer than the former. Usance is a certain space of time allowed by one country to another for the payment of bills of exchange.* Bills are either payable at sight, or at a certain number of days after sight: at usance, double usance, or half usance. At one, two, &c. usance, means at one, two, &c. months' date. Half usance is 15 days, be the month what it may. Days of grace are a certain number of days allowed for the payment of bills of exchange, after the expiration of the term specified in such bills, and are variable in different countries. In England three days are allowed.† RULES for finding what quantity of the money of one country will be equal to a given quantity of the money of another, according to a given course of exchange. CASE I. When the course of exchange is given, how much money of one, country answers to a certain sum of another, as of Great Britain? NOTES. since this is the money of the commercial-world, and will every where be accepted in payment. The principal exchanges of Europe are governed by those of London, Amsterdam, and Venice; and the exchanges from foreign countries are to be only had from the merchants and bankers residing abroad., When England remits an uncertain price to any other kingdom, as Spain or Portugal, the lower the price of exchange, the more is it to the advantage of England, as giving 35 pence to Spain for a dollar, instead of 36 or 38 pence; or, giving 60 pence to Portugal for a milreis, instead of 65 pence. See page 230. When England remits the certain price, the higher the exchange is the better, as for instance, giving to France 17. for 26 francs, is better than for 24 or 25; or 100l. sterling, for 1127. Irish, is better than for 108i. 6s. 8d., which is the par of Exchange. See p. 23,5. *This space of time varies according to the custom of countries, and frequently in proportion to the distance of the places from each other. On the third day they must be paid; that is, a bill drawn at two months, on the 14th of July, must be paid on the 17th of September. Bills due on Sunday must be paid on Saturday; for those at sight no days of grace, are allowed. RULE. As the given course of exchange, is to one pound sterling, so is the given sum in foreign money, to its corresponding value in sterling money. Ex. 1. How much sterling money can I have for 2035 Flemish shillings, when the course of exchage is 37 shillings for 1.? Here I say, As 37 : 1 :: 2035: 55 pounds sterling. Ex. 2. How much sterling money can I get for 4086 florins, 4 stivers, 6 penings banco, supposing 17. is worth 38 schillings and 2 grotes 2* grotes 8 grotes 4 stivers 458) 1634492(356l. 17s. 6d. Answer. Ex. 3. What sterling money will 2937. 10s. 6d. Irish fetch, when the exchange is 1147. Irish for 1007. sterling? 114. 100l. :: 293l. 10s. 6d. : 2571. 9s. 6d. Ex. 4. Dublin remits to London 826l. 135., what must be received there, exchange being 110l. per cent. ? Ex. 5. Jamaica remits to London 2871. Os. 10d. currency, what must be received for it, exchange being 135l. per cent.? CASE II. Given the course of exchange, to bring any quantity of sterling money into the money of another country. RULE. As Il. sterling is to the course of exchange, so is the given sum, in sterling money, to its corresponding value in foreign money. Ex. 1. How much Flemish money will 2331. 6s. 8d. sterling be worth, when the exchange is 34s. per 17. sterling? 1. 845.: 233l. 6s. 8d. : 3931. 13s. 4d. Answer. Ex. 2. How much Flemish money must be given for 628l. 10s. sterling, when the exchange is 33s. 8d. per £. sterling. CASE III. To reduce the currency of any state into bank or exchange money. RULE. As 100, with the agio added to it, is to 100, so is any given sum current to its value in bank money. Ex. 1. How much bank money can a merchant in Amsterdam have for 5550 guilders, when the agio is 41⁄2 per cent.? 104: 100 :: 5550; 5311 5 104.5 Answer. Ex. 2. How many florins bank will 3000 currency purchase, agio being 6 per cent.? CASE IV. To reduce bank money into currency. RULE. AS 100 is to 100, with the agio added to it, so is the bank money to the currency. Ex. 1. How much currency can I have in Venice for 1500 ducats bank, when the agio is 15 per cent. ? 100 115: 1500: 1725. Ex. 2. How much currency can I have for 5000 bank florins, agio being 8 per cent. ? IRELAND. ACCOUNTS are kept in Ireland as in England, viz. in pounds, shillings, and pence. The par of exchange in Ireland is 1087.6s. 8d.; that is, 108/. 68. 8d. Irish, is equal in value to 1007. sterling; or Is. Id. Irish, is equal to one shilling English. The course of exchange varies from 1057. to 1157. according to the balance of trade. See p. 230. Ex. 1. London remits to Dublin 3007. sterling, what must be received for it, exchange being 1067. Irish per cent., and also when it is 112 per cent. ? Here I say, As 100: 106: 300: 3187. Answer. |