The Cecil Whig. [volume] (Elkton, Md.) 1841-current, 1861-01-12
The Mystery of Exchange Explained

subscriber writes to the Chicago Times
to say that not being business man, he does
not understand the mystery OF currency and
exchange, and is at a loss to know why it is
that, because exchange on New York ia worth
10 per cent premium, business should be
embarrassed, and every one complain of hard
times.
The Times considers the simplest manner
of explaining the mystery is as follows:
All over the United States there is one kind
of money that has the same intrinsic value
everywhere. That is gold. A dollar in gold
is dollar ip New York. dollar in New
Orleans is dollar in Chicago. If we had no
money but gold, the price of exchange would
simply be the cost Of carrying the gold from
one place to another, and this would, perhaps,
never be more than one fourth eff one per cent.
But we have other money. In Illinois we
have eleven or twelve millions of dollars in
the bills of our State banks. which are called
" currency Now owing to the depreciation
of the stocks on which this currency is Sc.
cured, a dollar of our cuirancy IS only worth
ninety cents in New York city. The people of
New York believe that if these stocks were
sold, they would only produce enough to pay
ninety cents OH the do liar Of the CURRENCY
pay the merchant in New York, of whom he
bought his stock of goods, he goes to his safe
and finds that he has got ten thousand dol
creditor nine thousand dollars, docs it up in
a package takes it to the express Office. and
scnds it to his New York creditor. In due
course Of time he receives the following letter:
0005 Brosdway New York.
AL, co
Illinois currency is just received. This cur.
rency is worth only 90 cents on the dollar,
and consequently falls just 5000 short of pay.
ing your note Please send US the balance
and oblige, Yours, truly.
TAGRAG. BoBIN & Co.
So Mr.. Drygoods mas to go to his safe again
take out his remaining 81 900, and sends It
on to New York, knowing that when it gets
there it will be worth only 5000, and be Just
enough with the $4,000 sent before his debt
of 80 OGU.
This 81 900 was all the profits Of the
business which Drygoods had been doing for
the last three months They all have to 60
to make up the amount he owes in New
York. So Drygoods finds he is short of a
sum he had looked upon as his own,
and his business is Just TO that extent
embarrassed and retarded. He can't pay his
butcher, his baker, his landlord and h is coal
merchant with his usual p,omptitude, and per-
haps half dozen individuals who depended
on him are put TO inconvenience and loss.
They in their turn cannot meet their obliga-
tions, and so the circle of disaster spreads
Thus it is seen how tho whole community
is interested in the price of eastern exchange.
When the newspapers say that exchange on
New York is worth ten per cent, it is only
another way Of saying that our money is
worth only ninety cents on the dollar, and
that he who fancies he has one hundred dol
lars of it in reality has only ninety dollars
Thus we see the value, and in fact the im-
perative necessity, of specie basis for our
currency. If our bank bills were redeemab.e at
any moment in gold, exchange would be
down to mere nominal sum. and we would
be prosperous.
All the mystery which banks and brokers
throw around the matter IS needless. 1t is
so simple that child can understand it.
There is no more mystery about the value OF
Gold than there is about the value of potatoes.
Gold here is worth ten per cent. more than
our currency. In New York it is worth just
as much as New York currency is, because
New York currency is rcdeemable in gold at
any moment.