A Select Collection of Scarce and Valuable Tracts on Money
Foreign exchanges further explained.
19th Century John Ramsay McCulloch (ed.) English- The above example taken between two English towns, explains the theory of exchanges very distinctly. And from hence it may be easily conceived, how the business of exchange may be carried on between any number of foreign towns. As, suppose that London is indebted to Paris in a sum of 100,000 ounces; Paris in a like sum to Hamborough; Hamborough in the same sum to Leghorn; Leghorn to Amsterdam; Amsterdam in the like sum to London. All these several debts may be cancelled and discharged by bills of exchange, without the transportation of one ounce of bullion or one penny of money. For instance, London discharges its debt at Paris, by a bill drawn upon Amsterdam; Amsterdam pays this bill by another drawn upon Leghorn; Leghorn again draws upon Hamborough; and lastly, by this rotation the debt from Paris to Hamborough becomes likewise discharged; and all the above named towns respectively are cleared of all accounts with each other. And the several debts above supposed being equal, the debts of the respective places will be discharged with the exchange at par, or without loss or gain to either. But as all the above towns may have mutual accounts, each with all the rest, and with many others; the real practice of exchange branches out into an immense labyrinth, not easily unfolded without much experience and application.