In the above columns it appears that the exchange between London and the three first places is nearly at par. But Hamburgh, Frankfort, and Paris, give more than the par to the pound sterling, and hence the exchange is in favor of London; while Madrid, Gibraltar, and Genoa, receive less than par from London for their monies respectively. It should also be observed that when the exchange is favorable to a place, it is only so to the buyer and remitter of foreign bills; but unfavorable to the drawer and seller. Thus the interest of each party is identified with that of the place where his funds are: and hence an un favorable rate of exchange in any place operates as a premium for the exportation of goods, and is, so far, an advantage to that place. The rule for reducing foreign, money into English, and vice versâ, may be thus instanced: Dutch money is reduced to English by saying; As the given rate of exchange to £1 sterling, so the given Dutch to the sterling sought: and sterling is reduced to Dutch by reversing this rule. This rule will apply in all cases by merely substituting the money of other counties with the rate of exchange. See our article COINS for copious tables of these monies. EXAMPLE. Reduce 8,132 guilders or florins, sixteen stivers, into sterling; exchange at ten current florins, eight stivers per pound sterling. These subjects have of late years received that large share of public attention which their importance to a country so essentially commercial as our own would seem to demand. I. In respect to nominal exchange. In the civilised part of the commercial world bullion is now every where recognised as the standard currency, and the comparative value of the currency of each country must depend (1st.) On the relative value of bullion there. (2dly.) On the quantity of bullion contained in the coins of that country, or on the quantity of bullion for which the papermoney, or other circulating media, will exchange. It has, therefore, been well argued, That the real price of commodities being always proportionable, not merely to their actual cost of production, but also to the expense incurred in conveying them to where they are consumed, it follows that, if the trade in the precious metals were perfectly free, and if the commodities produced in different countries were nearly all qually well fitted for exportation, the value of ullion in different countries would be chiefly egulated by their respective distances from 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 expense of sending so bulky a commodity as corn, the more distant voyage, and because of the greater expense 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 expense 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). After nations therefore have attained to different degrees of excellence in manufacturing industry, the value of bullion in different countries will no longer depend 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 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 the value of sugar, for instance, approaches nearly to a level in the great trading cities of Europe, it cannot be maintained that its value in the West Indies is the same with its value in Bourdeaux 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, labor, &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 labor. 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 nearly 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 expense 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 Brasil exceed the effectual demand of those countries, and sink the price of these metals below their pr ce 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 Gottenburgh East India Companies, because somewhat cheaper than those of the British Company. A pound of tea, however, is about 100 times the bulk of one of the highest prices, 16s., that is commonly paid for it in silver, and more than 2000 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. It is 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 ascertaining the comparative quantity of bullion contained in the currencies of different countries, a particular coin of one country, such as the British pound sterling, must be taken 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, schillings, &c. Hence, the higher the exchange between any two countries, the more it is in favor of that which gives the certain, and the lower, the more is it in favor of that which gives the uncertain. On the supposition, which is very near the truth, that twenty-five francs contain the same quantity of standard bullion as a pound sterling (twenty-five francs twenty centimes is the exact par); and supposing also, that 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 £100 or £1000, and vice versâ. 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 twenty-five 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 favor 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, more pro These subjects have of late years received that large share of public attention which their importance to a country so essentially commercial as our own would seem to demand. I. In respect to nominal exchange. In the civilised part of the commercial world bullion is now every where recognised as the standard currency, and the comparative value of the currency of each country must depend (1st.) On the relative value of bullion there. (2dly.) On the quantity tity of bullion contained in the coins of that country, as or on the quantity of bullion for which the paper- c money, or other circulating media, will exchange. t It has, therefore, been well argued, That the real price of commodities being always proportionable, not merely to their actual cost of production, but also to the expense incurred in conveying them to where they are consumed, it follows that, if the trade in the precious metal were perfectly free, and if the commodities pro duced in different countries were nearly qually well fitted for exportation, the value sullion in different countries would be chi egulated by their respective distances from m Thus, on the supposition that neither En nor Poland had any other commodities e corn to exchange with the South Americ bullion, it is evident that the precious would possess a greater value in Poland England, because of the greater expense ing so bulky a commodity as corn, distant voyage, and because of the expense of conveying the gold to Po Poland, however, had succeeded in ca manufactures to a higher pitch of im than England, her merchants migh able, notwithstanding the disadvar tance, by exporting commodities great value in small bulk, and expense of freight would have } tively trifling, to have sold bull terms than those of England. ally the case, the advantages of s1 me possessed by England1 ided to that deriv the mines, why valuable in Er he money pri in the form Political nations th s of excel value.. ›nger de But, wh •he artsTM B lior . wich the unde drawn on his cute o'd do no more 145 anced price of the Cinta operations are, in preely as they would was te div at par; that is, by real rices of commodities 1. meaning, by real prices, the 1 y would be sold, provided reciation of the currency. If Such as to admit of exportation with a profit, the circumstance ! exchange being favorable or l make no difference whatever n. Suppose,' says Mr. Blake, of Hamburgh and London being nortions, and therefore the no at par, that sugar, which from its London sold at £50 per hogshead, arcity at Hamburgh would sell at merchant in this case would immeport. Upon the sale of this sugar, he a bill upon his correspondent abroad which he could at once convert into ng it in the bill market at home, rom this transaction a profit of £50 estuction of the expenses of freight, in- Commission, &c. Now, suppose no an the scarcity or abundance of sugar 2.on and Hamburgh, and that the same Sazon were to take place, after the currency and had been so much increased, that res were doubled, and, consequently, the rxchange 100 per cent. in favor of the hogshead of sugar would then eaving apparently no profit whatever : a sporter. He would, however, as before, nil on his correspondent for £100; soren bills would bear a premium of erent.. he would sell this bill in the Engmarket for £200, and thus derive a profit Tansaction of £100 depreciated pounds, sumated in undepreciated currency, deis in the former instance, the expense nsurance, commission, &c. ease would be precisely similar, mutatis TLS with the importing merchant. The e nominal exchange would appear • acasan a loss, amounting to the premium Jereign bill, which he must give in order correspondent abroad. But, if the ee, in bills drawn on a country engaged in hostilities is, from various causes which we shall afterwards liable to be suddenly increased; though rtain, that whatever may be the amount bills thus thrown into the market, the ssion of the exchange cannot, for any length re, exceed the expense of conveying bulfrom the debtor to the creditor country. during war this expense is increased; the CLiges 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 21 per cent., had, in the latter part of 1809, increased to about 7 per cent.; showing, that the limits within which fluctuations of the real exchange were confined in 1809, were about three times as great as those within which they were confined in 1793. This 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. ing Pense to take rcity or London, s been so if its value, 100 per cent. will not be for less than modities here oportion as the he will sell his for £200, and will, ounting to the differted, or £50 estimated and the expenses atsame instances might vorable exchange; and same manner, that nonominal exchange being depreciation of currency, dartage might be derived ould be counterbalanced by a and vice versa.' Observations, t + change. The expense of the on from country to country, conit within which the rise and fall Grange between them must be conthis respect, as in most others, between foreign countries are regue very same principles which regulate veen different parts of the same counprinciple holds universally. Whatay be the expense of transmitting bullion, money of the commercial world, between and Paris, Hamburgh, New York, &c., possible that the real exchange of the one the other should, for any considerable period, - depressed to a greater extent. For no merwill ever pay a greater premium for a bill harge a debt abroad, than what would to cover the expense of transmitting to his creditor. Hence it appears, that er has a tendency to obstruct or fetter the ourse between different countries, must ave a tendency to widen the limits within fluctuations in the real exchange may exIt is this principle which enables us to unt for its varying so much more in time of than in time of peace. The amount of the We may here briefly investigate the circumstances which give rise to a favorable or an unfavorable balance of payments, and endeavour to appreciate their effects on the real exchange, and on the trade of a country in general. A great object of the whole 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 favorable balance of payments, and consequently, a favorable 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 show, in opposition to some popular 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 unfavorable the real exchange. The proper business of the merchant, it has been well observed, 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 wa greater value. No merchant ever did will export but with the view of im greater value in return. And so far |