Liberty advocate. [volume] (Liberty, Miss.) 1835-1866, 1838-05-19
EXCHANGE.

we hear a great deal said :,
change, and much perfectly unip,s,r
Exchange on Europe is usually oro'ss a'
beng at a premium of, say ten D.,
A merchant in the United STATE, 'rNl'
fl,OOO to pay in England, to save 4 ps
OF transporting specie thither, vo'','
Bill of Exchange on the latte, o.'
Were the merchant a keen, shrs,1
enterprising man, he would only ~. u
opay a premium, that would eo,a'
costs of transporting specie. In s.t.
ting exchange we should always h,s
calculations upon this cost, and il will
us the real state of Exchange. NJ y w
mercial people would consent to paw NJ.
for a Bill on Europe, than what A. y
on its face calls for, together with 4,
cost of transporting specie to that o..
emporium. As the cost of trausDo't,
specie to England would not amorO,
more than two per cent, the merch,,
would not consent to give higher prsn
um than two per cent, for the pain =,
son that it would be, in effect, tb,ova.
his money into the sea. The cost, !,
transporting specie to the country !,
which the Bill is payable, will alway,o,,
stitute the real par of exchange, and VII
seldom be neglected by an Arguseya
people, such as compose the merchants
this Union.
How happens it, then, that foreign e,.
change is quoted at q higher premiun,b,D
two per cent. to wit: at 7, 10, per cent,
&C.? In this enquiry, we must reColes
that the currency of England is gold, an
that silver above two pounds is not lea
tender. The contrary is the case with III
silver, as well as gold, constituting the cu|
rency of the country. Formerly, a silver
dollar bore the same exchangeable value
for gold in America, as in England, that
is, silver dollar was worth A,&. b
English currency. OF late years, how
ever, silver has changed its relatiwu.
ue to gold, in England, and lost pand
its value as exchangeable for gold. 4
silver dollar, now, is not worth as mpo
in British currency as formerly, AMI, IS
nearly as can be ascertained, is equivalent
only to As. Cd. Upon this exchangesbe
value of silver for gold, all our cacp;
lations must rest. A merchant then,
buys in London fl00 sterling in goods
When he brings them to America, he calls
for American currency. In buying bill
on London to the amount of flOO ster.
ling, he enquiries if a silver dollar in Eng.
land is worth as much in England as
He will find that silver
iollar, in America, is worth As. Cd,
md in England As. Cd. A British pound
sterling will be equal only to $4 80 in Sill.
yer, An American pound sterling will be
equal only to 81 A in silver or American
The debt is contracted in Lon
Ion, and we must allow for the difference
n value between an American and English
'ound. Upon calculation, then, he find,
hat he must pay for every pound sterling
81 80 in American currency, instead d
81 "a, the value that a pound sterling
or bears in America. To dis
harge the debt of E1O0 sterling wihs
nil on London, he must pay $3.50 fort
thus the merchant has, with $3.50, par
hased a bill on London, convertible, in
england, into 480 silver dollars. From
his analysis we will perceive that ex
hange on London is actually in favor Of
ne American merchant, though quoted at
per cent. premium, in the above case;
or with 40 silver dollars he has dischar
ed debt in England to the amount oil
80 silver dollars, without even paying
he costs of transportation. What We
sually style Exchange is nothing disc
nan an allowance for the difference ~F
0 between the currencies of the No
ountries; the relative value of golda 40
liver varying in the two countries.
G.