Fayetteville observer. [volume] (Fayetteville, Tenn.) 1850-1966, 1856-09-25

The Par Of Sterling Exchange,

We copy the following from tn
March number of Hunts Merchant
Magazine. It explains the reasol
why the sterling of exchange is said
to be at premium of s, 9 CT 10 pc
cent as the case may be:
When the first Spanish dollar be
came known in England, it required
four and forty four-one .hundredth'
only of these dollars to make {
pound sterling, according to the ther
value of silver and gold. Since that
time, the relative value of the two
metals have been slightly altered, but
what is of more importance in this
matter, neither of the Spanish dol,
lars Of more recent date, nor the
American dollar of any date, contains
nearly SO much silver as was contain
ed in he cary dollars coined by Spain.
The changes in the quantity Of pure
silver in the dollars of various gov
ernments have been numerous, but
the essential result is, that including
the minor changes in the relative
value of gold and silver, it now re-
quires four and eighty-four, hun
dredths of the present dollars, Amer
iean, Mexicanor Spanish. to be worth
one pound sterling in Liverpool
And as, during the last two centuries,
the actual-in silver--of the dollar
varied, from time to time. while the
pound sterling--in golG--was almost
unchangable. it became convenient
In England TO quote foreign exchange
sat an advance" when it began to
take more of these debasad or dinlin-
ished dollars to make a pound sterling.
In other words, the English very
properly took their uncha gable
pound sterling as a unit, and meas
ured the changable dollars by it.
The practice, begun long before
money was coined in the United
States. was continued when this coun-
try adopted, essentially, the Spanish
dollar for It's unit Of coinage. 1t pre-
walls, as is well known, to this day,
bat its origin is not generally un-
1erstood.
It is, simply, the English idea
Of the present value of dollars, as
With a par thst was the
true one a century ago. Should our
dollars become SO debased, at some
future time, that five would be requi-
red to make a pound sterling. it is
obvious that the real par sterling ex-
change, instead of standing at 8 per
cent premium, or thereabouts as at |
present quoted, would be called l21
per cent premium. And it is equally |
obvious, that if the silver in our dol
ars were increased to the quantity
found in the early Spanish dollars, it
would require but four and forty-one-
to make pound sterling. /
Thus sterling exchange would be /
quoted at par, and the real nominal
par would again correspond, as in for
ner times.
Those interested in the details Of
he subject are referred to the elabo-
,ate Congressional Reports Of 1884, |
hat resulted in an alteration Of our
,old coinage. The present manner
If quoting sterling exchange has long
custom in its favor Upon the whole /
We can see no better way Of stating
t, that shall be recognized and under
stood both here and in Europe. Were
he American idea to prevail, it would /
De easy and correct, Of course to say
hat sterling exchange was at par,
instead of 8 per cent advance. But
lfter so long a use Of the gold
system, the prevalence of the Amer
can view, on both sides of the At
antic, is hardly to be expected
And the present mode is, perhaps,
IS generally ineligible and easy
as that employed in calcu-
ating French exchange the only
'ther mode that suggests itself as
likely to be employed both here
Ind In Europe, if the present system
we're abolished.