A Treatise on Political Economy, Or, the Production, Distribution, and Consumption of Wealth

By Jean-Baptiste Say; Clement C. Biddle et al. | Go to book overview

greater operations of commerce are effected through the medium of these securities.

Sometimes, the circumstance of a bill of exchange being payable at another place will increase, instead of diminishing its value; but this depends upon the state of commerce for the time being. If the merchants of Paris have large payments to make to those of London, they will readily give more money at Paris for a bill upon London, than it will produce to the holder at the latter place. Thus, although the pound sterling contain precisely as much silver as 24 fr. 74 cents, they will, perhaps, give at Paris 25 fr., more or less, for every pound sterling payable in London.*

This is what is called the course of exchange, being, in fact, a mere specification of the quantity of precious metal people will consent to give, for the transfer of a right to receive a given quantity of the same metal at any other specified place. The particular locality of the metal reduces or increases its value, in relation to the same metal situated elsewhere.

The exchange is said to be in favour of any country, France for example, whenever less of the precious metal is there given for, than will be produced by, a bill of exchange upon another country; or whenever in the foreign country more of the precious metal is given for a bill of exchange on France, than it will there produce to the holder. The difference is never very considerable, and can not exceed the charge of transporting the precious metal itself; for, if a foreigner, who wants to make a payment at Paris, can remit the sum in specie at less expense than he could be put to by the existing course of exchange, he would undoubtedly remit in specie.

It has been imagined by some people, that all debts to foreigners can be paid by bills of exchange; and measures have been frequently suggested, and sometimes adopted, for the encouragement of this fictitious mode of payment. But this is a mere delusion. A bill of exchange has no intrinsic value; it can only be drawn upon any place for a sum actually due at that place; and no sum can be there actually due, unless an equal value, in some shape or other, has been remitted thither: the imports of a nation can only be paid by the national export; and vice versâ. Bills of exchange are a mere representative of sums due; in other words, the merchants of one country can draw bills on those of another for no more, than the full amount of the

____________________
*
If the credit on London be payable in paper-money instead of specie, the course of exchange with Paris of the pound sterling, may, perhaps, fall to 21 fr. 18 fr.or even less, in proportion to the discredit of the paper of England.
In that expense I include the charge and riskof transport and of smuggling also, if the export of specie be prohibited; which latter is proportionate to the difficulty of the operation. The risks are estimated in the rate of insurance.

-215-

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