II.: Par of exchange, what.

57. The exchange is said to be at par or even, between two places, when a given sum paid in the one, will purchase a bill for the like or a sum of the same intrinsic value, to be received in the other. To avoid all ambiguity, the several accounts in the preceding article were stated in ounces. But as all countries keep and state their accounts in their own money, and most places have pecuculiar coins of their own; this makes it necessary that merchants, who are citizens of the world in a stricter sense than any other, should know exactly the true proportional values of the monies of all countries in respect of one another; that is, how much fine silver, or fine gold, if the accompts are kept in gold, are contained in the respective standards or monies of the several countries to or with which they traffic. These proportions being known and stated, the monies of the world are thereby in effect reduced to one common standard; and it may be readily seen, how much of the money of one country is an equivalent to, or contains an equal quantity of silver with, a given sum in another country.

The equality of silver, expressed by different denominations of coins, constitutes what is usually called the par of exchange betwixt any two countries. In stating this par, some particular specie or sum of the money in one country, is usually made the unit or integer, which always remains fixed and unalterable; and the proportion or equality is expressed in specie of a smaller value of the other country; and it is in these specie that the price is expressed as the exchange varies: As if the exchange betwixt London and Paris be reckoned in pence and ecu’s, and a French ecu contains as much silver as there is in 29¼ pence sterling; then the ecu is the unit, and 29¼ is the par of exchange betwixt London and Paris. In the mercantile language of exchange, that country wherein the unit is established, as in the above instance Paris in respect of London, is said to give the certain for the uncertain; as London again gives to Paris the uncertain for the certain. London gives the certain for the uncertain, that is, the pound sterling for their schillings, to Holland, Flanders and Hamborough; and to France, Spain, Portugal and Italy, London gives an uncertain number of pence, as the exchange governs, for a certain sum in their money.

Those who are not accustomed to this business, are apt to be in doubt whether the exchange rising, for instance, be in our favour or against us. This doubt may be always cleared by this short rule: The higher the exchange between any two countries is, the more it is in favour of that wherein the unit or invariable sum is established; and the lower, the more in its disfavour. Thus, the higher is the exchange betwixt London and Amsterdam, the more is it in favour of London, as then the more Dutch schillings are given for the pound sterling. On the contrary, the higher is the exchange between London and Paris, the more is it against London, as then the French ecu exchanges for a greater number of pence sterling.