Secondly, in some countries, the expense of coinage is defrayed by the government; in others, it is defrayed by the private people who carry their bullion to the mint, and the government even derives some revenue from the coinage.In England, it is defrayed by the government, and if you carry a pound weight of standard silver to the mint, you get back sixty-two shillings, containing a pound weight of the like standard silver.In France, a duty of eight per cent is deducted for the coinage, which not only defrays the expense of it, but affords a small revenue to the government.In England, as the coinage costs nothing; the current coin can never be much more valuable than the quantity of bullion which it actually contains.
In France, the workmanship, as you pay for it, adds to the value in the same manner as to that of wrought plate.A sum of French money, therefore, containing a certain weight of pure silver, is more valuable than a sum of English money containing an equal weight of pure silver, and must require more bullion, or other commodities, to purchase it.Though the current coin of the two countries, therefore, were equally near the standards of their respective mints, a sum of English money could not well purchase a sum of French money containing an equal number of ounces of pure silver, nor consequently a bill upon France for such a sum.
If for such a bill no more additional money was paid than what was sufficient to compensate the expense of the French coinage, the real exchange might be at par between the two countries, their debts and credits might mutually compensate one another, while the computed exchange was considerably in favour of France.
If less than this was paid, the real exchange might be in favour of England, while the computed was in favour of France.
Thirdly, and lastly, in some places, as at Amsterdam, Hamburg, Venice, etc., foreign bills of exchange are paid in what they call bank money; while in others, as at London, Lisbon, Antwerp, Leghorn, etc., they are paid in the common currency of the country.What is called bank money is always of more value than the same nominal sum of common currency.A thousand guilders in the Bank of Amsterdam, for example, are of more value than a thousand guilders of Amsterdam currency.The difference between them is called the agio of the bank, which, at Amsterdam, is generally about five per cent.Supposing the current money of the two countries equally near to the standard of their respective mints, and that the one pays foreign bills in this common currency, while the other pays them in bank money, it is evident that the computed exchange may be in favour of that which pays in bank money, though the real exchange should be in favour of that which pays in current money; for the same reason that the computed exchange may be in favour of that which pays in better money, or in money nearer to its own standard, though the real exchange should be in favour of that which pays in worse.The computed exchange, before the late reformation of the gold coin, was generally against London with Amsterdam, Hamburg, Venice, and, I believe, with all other places which pay in what is called bank money.It will by no means follow, however, that the real exchange was against it.Since the reformation of the gold coin, it has been in favour of London even with those places.The computed exchange has generally been in favour of London with Lisbon, Antwerp, Leghorn, and, if you except France, I believe, with most other parts of Europe that pay in common currency; and it is not improbable that the real exchange was so too.
DIGRESSION CONCERNING BANKS OF DEPOSIT, PARTICULARLY CONCERNINGTHAT OF AMSTERDAM
The currency of a great state, such as France or England, generally consists almost entirely of its own coin.Should this currency, therefore, be at any time worn, clipt, or otherwise degraded below its standard value, the state by a reformation of its coin can effectually re-establish its currency.But the currency of a small state, such as Genoa or Hamburg, can seldom consist altogether in its own coin, but must be made up, in a great measure, of the coins of all the neighbouring states with which its inhabitants have a continual intercourse.Such a state, therefore, by reforming its coin, will not always be able to reform its currency.If foreign bills of exchange are paid in this currency, the uncertain value of any sum, of what is in its own nature so uncertain, must render the exchange always very much against such a state, its currency being, in all foreign states, necessarily valued even below what it is worth.
In order to remedy the inconvenience to which this disadvantageous exchange must have subjected their merchants, such small states, when they began to attend to the interest of trade, have frequently enacted, that foreign bills of exchange of a certain value should be paid not in common currency, but by an order upon, or by a transfer in the books of a certain bank, established upon the credit, and under the protection of the state; this bank being always obliged to pay, in good and true money, exactly according to the standard of the state.The banks of Venice, Genoa, Amsterdam, Hamburg, and Nuremberg, seem to have been all originally established with this view, though some of them may have afterwards been made subservient to other purposes.
The money of such banks being better than the common currency of the country, necessarily bore an agio, which was greater or smaller according as the currency was supposed to be more or less degraded below the standard of the state.The agio of the Bank of Hamburg, for example, which is said to be commonly about fourteen per cent is the supposed difference between the good standard money of the state, and the clipt, worn, and diminished currency poured into it from all the neighbouring states.