Exchange.

I SHALL now proceed to consider the Nature of Exchange.

The Intercourse and Dealings between the People of different Nations, having made it necessary to make frequent Payments of Money to one another for the Purchase of Commodities; the Method of Drawing and Remitting Money by Bills of Exchange was found out, to avoid the Hazard and Trouble of carrying Money from one Country to another.

Exchange is the paying or receiving Money in one Country, to receive or pay it in another, the Remitter is he, who pays Money in one Country, to receive its Value in another; the Banker or Exchanger is he, who receives the Money in one Country to pay it in another.

When the Remitter is to receive an equal Value, that is, an equal Quantity of Gold or Silver, in the Money of one Country, for what he paid in another, the Exchange is at Par, and he neither gains nor loses by it.

When the Money he is to receive is of less Value, than what he paid, the Exchange is high or above Par, and he loses by it.

And when the Money he is to receive is of greater Value, than the Money he paid, the Exchange is low or under Par, and he gains by it.

The Necessity that trading Nations were under to pay, and receive Money in different Countries, and the Hazard of sending Specie forward and backward, to answer those Demands, made them have Recourse to the Method of discharging their mutual Obligations by Bills of Exchange; for hereby People were mutually served, the one paying his Money to the Person who wanted it at Home, to receive from him the Value thereof abroad, where his Occasions required it. And to make this Affair of Exchange more convenient and easy, some Merchants have made it their Business to have Stocks of Money or Credit in different Countries, to answer the Demands of all People.

By this Means, while the Demands of the People of one Country, are equal to the Demands of those of another Country, these Demands can be mutually answered, without either Country’s sending any Money to the other: But when the Demands of one Nation exceed those of another, and cannot be paid by Commodities, then there arises a Necessity of sending out Specie to make good the Ballance; and this Necessity always raises the Exchange, in Proportion to the Ballance to be paid.

For the better Explanation of the Nature of Exchange, I shall suppose that a Banker of Ireland, has 20000l Stock in Dublin, and 20000 more in his Correspondent’s Hands in London; if the Remittances on both sides are equal, then the Exchange will be at Par, or within one per Cent. of it, which the Banker always has for his Trouble; in this Case the Banker’s Stock on both sides will still be the same, he and his Correspondent having received on each side as much as they pay’d.

But if the Remittances from Dublin to London should amount to 20000l. and the Remittances from London to Dublin in the same Time to 10000l. then the Banker will have 30000l. of his Stock in Dublin, and only 10000l. in London; and in that Case he will raise the Exchange upon the the Remitters for his Bills, in Regard a greater Number of Buyers always raise the Market. And if the Remittances should still increase in the same Proportion, the Banker will still raise his Exchange higher, and be under the Necessity, when most of his Stock is drawn to one Side, to send over Specie, that his Correspondent may be enabled to answer his Bills; and for the Charge and Hazard of doing this, the Banker will require 2, 3, or 4 per Cent. above his usual Profit; which Profit of Exchange can seldom rise higher, or even continue long at this Heighth, because in this Case, Gentlemen and Merchants generally choose to send over the Specie themselves, and thereby save all the high Exchange, excepting the Charge of sending it.

Whenever Exchange is at or near Par, then none of our Money is exported, because all Remittances are then negotiated cheaper, and with less Trouble by Bills of Exchange; but when Exchange runs high, on Account of great Demands upon us, either to pay for Foreign Commodities, or to maintain our Gentlemen Abroad, then Specie must be sent by one Hand or other: And in that Case we find by Experience, that not only Bankers send off Money to their Correspondents to support their Credit, but Merchants, private Gentlemen, and Agents, and perhaps these are the Persons who chiefly carry it off, to avoid the Loss of high Exchange, especially when the Sums to be remitted are large.

And if we have Cause to complain of the Loss of our Money by these Means; ’tis plain, since the Ballances of our Trade with most Countries are in our Favour, that this Loss is wholly owing to the Remittances made to support our Gentlemen Abroad.

Exchange runs high against a Country that becomes in Debt to another, and for the same Reason, when One Country has Occasion to buy up at certain Season of the Year great Quantities of the Commodities of another, and for the Purchase thereof must lay out larger Sums of Money than usual at those Times, the Exchange will rise in Disfavour of the Country that buys, and in Favour of that which sells those Commodities.

Thus in Ireland, between June and December, when the Demands from England and other Countries are great for our Linnen, Wooll, Beef, Butter, Tallow, and Hides, which then come to Market, the Exchange falls often to near Par, and sometimes below it: which at other Seasons of the Year is commonly above it considerably.

When a Nation is under a Necessity of sending out Specie to pay the Ballances in its Disfavour, the raising of its Coin will not prevent the sending out one Farthing less, for Foreigners will regard only the Quantity of Gold and Silver we pay them, and not any arbitrary Values we give them by Law.

Trading Nations make it their Business to settle the Par of their Coins, and in Order to this they Assay their Coins, and by their Assays and Weights know how many Pieces of the Money of one Country, are equal in Value to any certain Number of Pieces of another, and by that Means they fix the Par of Exchange among themselves. For Instance 37 Dutch Skillings nearly being equal to one Pound English, the Par between England and Holland is 37.

The Par continues constantly the same between two Nations, until one or other of those Nations alters the Value of their Coin, and then the Par changes, and will be adjusted again according to the intrinsick Values of their respective Coins. But this Alteration of the Par, has no Effect on Foreign Trade, since Foreigners regard only the real Value or Weight of Gold or Silver in Coin.

The Coins current in Ireland being raised above their Value in England 8l. 6s. 8d. in English Silver, and 11l. 2s. 2d. in Moydores. This Difference of their Values is commonly called Exchange. And when Silver was in great Plenty among us, and most Payments were made therein, the Par of Exchange was said to be 8l. 6s. 8d. per Cent; and for the same Reason, because we have but little Money current at present but Moydores, Par is now said to be at 11 per Cent, that is, 111l. Irish is equal to 100l. English Money.

The Rate of Exchange being the Sum or Præmium given on paying any certain Sum in the Coin of one Country, for receiving an equal intrinsick Value in the Coin of another, the Value of that Præmium above or under Par, determines the Rate of Exchange.

The Course of Exchange above or under Par, constantly attends the Ballance of Trade, so as to run high in a Country when the Ballance of Trade lies against it; and low, when it is for it.

Exchange is then only a Loss to any Person, when it is above Par, and when it is so, is attended with this Effect, that all Persons, who have Occasions to remit Money abroad by Bills of Exchange, will lose so much per Cent. as the Exchange is above Par; and all Foreign Commodities bought with such Bills, will in the same Proportion be imported the dearer.

HAVING premised thus much in General in Relation to Money, which I thought proper to lay down as a Foundation, for the better understanding of any Schemes, which may be proposed for the Regulation of our Coin;

I shall now proceed to consider the second Head. Under which I propose to shew the Inconveniences we suffer on Account of our Coin, and the Cause from whence those Inconveniences arise. And first as to the Copper Money current among us.

’Tis certain that at present we are far from having a sufficient Quantity of Halfpence, which we are very sensible of in all our Domestick Dealings, wherein we labour under great Difficulties for small Change in Copper Money. This Scarcity is a general Complaint all over the Kingdom, and throws poor People into Distress, disabling them in a great Measure from carrying on their small Dealings with one another; and their Grievance is much heightened by an absolute Want of Farthings, of which we have hardly any left in the Kingdom. There is not a Country in Europe, besides our own, but what has a sufficient Quantity of Copper Money current among them to answer all small Payments, whatsoever Want they may otherwise have of Gold and Silver; this Species being so useful, and every where easily procured from the Plenty and cheapness of this Metal.

About Twenty Years ago, we had too great a Stock of Half-pence and Farthings current among us, and suffered our Traders to carry them off in great Quantities to New-England, Pensilvania, and other Parts of the West-Indies, where they passed at a higher Value; this we did not think fit to oppose at the Beginning, when we were too much loaded with them at Home, but then we should have put a Stop to this pernicious Traffick in some reasonable Time, which might have prevented all the Inconveniences we now labour under on that Account; but no Care being then taken to prevent this Export, it did not cease till there was no more Halfpence to be got to send off: And thus we have been reduced to a total Loss of our Farthings, and to a great Scarcity of Halfpence, which has created a Temptation to coin a vile Sort of Halfpence, of little or no intrinsick Value, which could not have been obtruded upon us, or received by us, but for the great Want we lie under of small Change.

And as to the Value of our Halfpence, ’tis certain, we never had any coined in Ireland of a sufficient intrinsick Value. All Copper coined in a Nation should have no more Value put upon it than what arises from the Value of the Metal and the Charge of Coinage: If a Pound of Copper sells for 18d. and the Charge of Coinage amounts to 6d. it ought not to be coined into more than 48 Half-pennies, or 2 Shillings. Giving this Value to the Coins, is the only effectual Remedy to prevent other People coining upon us, because they will not find it turn to any Account to do so. Those who have hitherto obtained Patents for coining Halfpence and Farthings for the Use of this Kingdom, were not obliged to give a sufficient Quantity of Copper in the Pieces, and very rarely complied with the Rules prescribed to them, either as to the Quantity or Quality of the Copper: and they never ceased coining still on, till they glutted the Market, and loaded us so much beyond all our Demands, that great Quantities lay upon their Hands: Some of them entered into Covenants to give Gold or Silver for any Quantities of their Halfpence that should be returned to them: But these Covenants were easily eluded, by the Impossibility of proving that such Halfpence were of their Coinage, and not of the Coinage of others, who did not fail to be privately at the same Work, when a considerable Profit was to arise to them thereby: And sometimes when the Patentees had coined as much as they could dispose of, they disappeared, and left no Body to make good their Engagements to the Publick.

There is no safe and effectual Way to prevent our being incumbered with too great a Quantity of Halfpence, and abused by a vile Sort of them, but by making Irish Halfpence bear the same Proportion in their intrinsick Value to English Halfpence, as the Gold and Silver of Ireland does to that of England, English Halfpence have such a Quantity of Copper in them, that ’tis not worth any one’s While to coin privately any of that Sort.

2d. In like Manner the Inconveniences we labour under for want of a sufficient Quantity of Silver Species, for the common Occasions of buying and selling are extremely great, and universally felt. All Foreign Silver Coins, with which we formerly so much abounded, and also the greatest Part of the English Silver have been carried off, so that we are now reduced to a small Proportion of the latter; what the Quantity thereof still remaining among us may be, cannot easily be ascertained, perhaps it may be 30 or 40000l. but whatever the Quantity is, ’tis altogether insufficient for the Management of our Domestick Dealings, and for the making of small Payments with any tolerable Ease; it has been judged by those who have entered into Computations of the Proportion of Gold and Silver Species necessary for carrying on the Inland Commerce of any Country with Ease and Conveniency, that where a Million and a Half is wanted, the Silver should be about one Third, and the Gold two Thirds.

If we suppose the circulating Cash of the Kingdom to be 400,000l. and that our Silver makes but 40000l. then it will follow that our Silver is but a 10th Part of our present Coin; whereas by the above Rule it ought to be 133333l. 6s. 8d. which is a Third of our whole Species.

If the current Money of England amounts to 15 Millions, and 10 Millions thereof be Gold, and 5 Millions Silver; and if the Number of People be 7 Millions, then there are above 40 Shillings for every Head, 13s. 4d. in Silver, and the rest in Gold. And if the Cash of Ireland be 400,000l. and but 40000l. of it Silver, and the People of Ireland be in Number 1800,000, then it will follow, that there is but 4s. 5d. ¼ for each Head, 5d. in Silver, and the rest in Gold; this plainly shews that our present Stock of Money of all Sorts, especially Silver, is altogether insufficient for carrying on that Variety of Business, which must every Day be negotiated among so many People, which Business must of Consequence frequently stand still in some Branches, and move very slowly and heavily in all the rest. And were it not for Bankers Notes, which we have passing in good Plenty, it would be impossible to manage our Domestick Traffic half so well as we do.

This Want of Silver Coin is more sensibly observed in the North of Ireland, where the buying of Linnen-Yarn, and single Pieces of Cloth, requires Payments to be made in Sums, much below the Value of Moydores which are almost our only current Species of Gold: And the Difficulty to get Change to answer these Payments, throws the Buyers and Sellers into great Streights, and puts either one or other to the Necessity of paying four, or six Pence in the Pound or more, to get Change to answer the Sum agreed for on the Sale: In so much that it has been observed, that in the Space of one Day at a Fair, the same Moydore has been traced, and found to have been changed for Silver 5 or 6 Times, with a Loss of 6 Pence at each Time: This hinders the Sale of our Commodities, is the Occasion of spending many idle Hours, perhaps at Ale-Houses, makes our Linnen come dearer to Foreign Markets, and thereby prevents the Sale of it in so great a Quantity as it might otherwise be disposed of.

’Tis very easy to acconnt for the Loss of our Silver Coin, and to shew from what Cause this arises. Our Silver Coin being valued above 2½ per Cent below our Moydores, ’tis not to be wondered at, that when ever we were under a Necessity of exporting Specie to answer the Ballance of Trade, or Demands from Abroad, which for some Time past have amounted to great Sums; our Remitters or Exchangers, should always do it in that Species they lost least by: For this Reason our Silver went off first, and continued to be exported in great Quantities, till at last it was not possible to get any Quantity of it to send abroad; and our Traffickers in Money found it for their Advantage, even when there was no Necessity of sending out Species to answer Demands upon us, to send out Silver which was valued low, to buy up Moydores abroad, and import them to us at 2½ per Cent Profit; and by making several Returns in the Year, made perhaps 15 per Cent Profit by this Traffick in Money. And as the East-India Company frequently gave 3d. an Ounce for exportable Silver, above its Value in Coin, which is about 5 per Cent, this tempted our People to send all our Foreign Silver to London, to take the Benefit of such an advanced Price, and also to melt down all our weighty English Silver, and send it off as Bullion, or work it up at Home, when 2 or 3 Pence per Ounce extraordinary could thus be got or saved by it.

The English Silver current among us, is so much worn by the Quickness of its Circulation, that every Body must lose by melting it down; there is not perhaps any Country in the World, where so small a Quantity of Silver passes so swiftly from one to another, as in Ireland, by Reason of our Necessities; and this makes it wear faster than the Coin of any other Nation.

The English and Scotch Colliers also, as they carried off very little in Exchange for their Coal, but Specie, and that to the Value of 60000 Pounds yearly, they always did it in Silver, when that could be got; and even now when Silver is so scarce, that a Premium of 4 or 6 Pence is given for the Change of a Moydore; they choose to give this Discount, rather than carry off Moydores, which seldom pass for above 1l. 6s. 6d. with them at Home: For all the Reasons above mentioned, we may easily account for the Loss of our Silver, and that it is owing altogether to the Disproportionate Value given to it, in Respect to the Gold Species current among us.

3dly. As to our Gold Species, we find, that Moydores passing for 30s. are, as to their intrinsick Worth Valued about 2½ per Cent above our Silver, and about 1½ per Cent above our Guineas and Luidores; this Over-Value has been the Occasion that we have been deprived of our Silver, and most of all our other Species of Gold Coin, so that we have little left but Moydores, the most inconvenient sort of all others in our present Circumstances, since we have neither a sufficient Quantity of Halfpence, nor of Silver Coin, nor of the small Species of Gold Coins, to change Moydores with: if we had a due Proportion of Guineas and half-Guineas, Luidores and Pistoles, and half Luidores, and half Pistoles, or even of half and quarter Moydores, they would in some Measure supply the Want of Silver, and make Change easy: But all these being carried off also, we are greatly embarrassed in all our Dealings, and cannot with any tolerable Conveniency buy or sell in our Markets, for want of fit Species to pass in Exchange for Commodities. All this Disturbance in our Affairs is principally owing to the disproportionate Value set upon our several Coins, for not only the Value of Gold to Silver among us is different from the Proportion observed by other Countries we deal with, but also the Value of Gold is different in the several Species thereof current among us, which must needs create a Confusion in our Dealings, and give Foreigners, and our own Cunning People an Opportunity of taking an Advantage of these Disproportions in our Coin, to the great Loss of the Kingdom.

Having thus laid down the Inconveniencies we lie under with Respect to our Coin, and the Causes from whence they arise. I shall now,

IN the third Place, mention several Methods and Schemes for the Regulation thereof; and shew the Conveniencies and Inconveniencies of each.

In Order to this we must observe, that the greatest Part of all our Dealings is negotiated with England directly, and that the Business we have with other Countries is mostly transacted by the way of London; and for this Reason in all Regulations to be made in our Coin, particular Care should be taken, that our Gold and Silver Coins may bear the same Proportion to one another in Ireland, as they do in England.

If we had all along governed our selves by this Rule, on settling the Values of our Coins by Proclamation, we should have prevented all the Inconveniencies, we now labour under; and there would have been no Temptation to carry out, or bring in, one Specie more than another; but we should have had a due Mixture and Variety of each, to enable us to make all Payments with great Ease and Exactness.

A just Proportion in the Values of our several. Coins, may be settled either by raising the Silver, or lowering all the Gold Coins, or by lowering some of the Gold Coins, and raising others.

But we ought to take Notice, that whether we raise or lower our Coin, whether we make a Hundred Pounds English to pass in Ireland for 108, 110, 112, or 100l. whatever we make the Par to be, such Alteration will have no Manner of Effect upon our Trade with other Countries: For Foreigners in that Case will not sell their Commodities to us, one Farthing the cheaper, or give one Grain of Gold or Silver more for our Goods exported to them: The Values of all Commodities will still be governed by the Quantity of Gold and Silver paid or received for them, without any Regard had to any new Denomination we give to our Coin at Home.

But then such an Alteration of our Coin will have a great Effect on Payments and Contracts to be made good among our selves. For in the Case of raising our Specie, ’tis evident that Tenants, Debtors, and Others, who are under Obligations to pay any certain Legal Sums, will after such raising pay the said Sums in a less Quantity of Gold and Silver, and therefore Landlords and Creditors will be hurt by such a Change. For instance, if 66 Moydores and 20s. pay 100l. and those were raised and made to pass for 31s. each, then 64 Moydores and 16s. will discharge the said 100l. by which Landlords and Creditors will really receive 3l. 4s. less than they ought to receive in the Payment of an 100l. And on the contrary, if all our Species be lowered, all Tenants and Debtors after such lowering must pay greater Weights of Gold and Silver, in Order to discharge the said Sum. For Instance, 66 Moydores and 20s. now pay 100l. but if Moydores were reduc’d to 29s. each, then 69 Moydores, wanting one Shilling would be required to answer the said Sum of 100l. and the Tenant must part with a greater Quantity of his Commodities, to enable him to purchase so much more Gold as will make it up.

For it must always be remembered, that the Prices of Commodities, will be higher or lower in the altered Coin, as the Coin is raised or lowered; for in the Trade of Nations, or the buying and selling Commodities to one another, People have no Regard to the nominal Values put on the several Species of Coin, but consider only the Weights of pure Gold and pure Silver contained in them. For Instance, if a Crown Piece, which passes in England for Five Shillings, and contains near an Ounce of Silver, can now purchase a Bushel of Wheat there, and if the said Crown should be lowered to Four Shillings, it cannot be imagined, that a Foreigner will still give Five Shillings in the reduced Value for the same Bushel, by which he must pay a Fourth Part more than he did before the lowering: And in Case the said Crown should be raised to Six Shillings, the English wou’d be great Losers, if they should sell their Bushel of Wheat to a Foreigner for Five Shillings in the advanced Coin; for at that Rate the Foreigner wou’d purchase the same Commodity for a Fifth Part less in Bullion than he did before.

But tho’ the Rates of Commodities may not always immediately rise or fall in the same Degree, that Money is raised or lowered, in Time they will not fail to come to the same nominal Values of the Coins. In this Interval indeed the Cunning Men will be the first to sell their Goods, on the Reduction of the Coin, and the first to buy on the Raising of it. Of this we had a remarkable Instance in the Messisippi Times, when the French raised their Money to an extravagant Height, but did not advance the Rates of their Goods at first in the same Proportion; for the Dutch laid hold of the Opportunity, and by pouring a great deal of French Money at that Juncture into France, bought up its Commodities about a Third or Fourth Part below their true Value, and thereby were able for some Time to undersell the French in their own Goods 20 per Cent. in all Foreign Markets.

We find by Experience, that in all Trading Countries the Values of Commodities are always governed by the Rates which Foreigners give for them.

The Value of a Moydore in England compared with the Value of Gold in a Guinea at the Mint, is 27s. and the Value of a Luidore and Pistole at the Mint of England is 16s. 9d, .32.

The following Table shews, what Number of the several Species therein mentioned make 100l. in England, and what their Values amount to in Ireland, and at the same Time shews the Differences per Cent. of those Values.

It is to be observed, that Moydores being almost the only current Species of the Kingdom, the Par of Exchange, is at present regulated by them, and is about 11 per Cent.

In all Schemes for the Regulation of our Coin, these three Things ought to be principally in our View, and carefully observed.

I shall now mention several Schemes for the Regulation of our Coin.