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MODERN COINAGES.

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paid they are simply a substitute for coins, and have no influence on the foreign exchanges. In many instances notes have been issued beyond the power of the Government to redeem the promise to pay on demand in coin. Hence specie payment is suspended and a law is passed, making the notes legal tender, thus establishing an inconvertible paper currency, shown by a premium on metallic money and a rise in the foreign exchanges.

2. Weights and Measures.

The standards or models for legal weights and measures in each country are fixed by the Government. There is a bewildering variety of these, as the models are entirely arbitrary.

The French metrical system shows promise of superseding the present chaos, but old usages die hard. Great Britain, the United States, Russia and Denmark, have not yet adopted any decimal system of weights and measures, though the metric system is contemplated in the latter two. China and Japan have a decimal system of their own. The great difficulty, however, lies in the fact that in spite of the adoption of the metric system, the old systems more or less remain, and the main units are still quoted for commercial purposes.

3. Modern Coinages.

The principal modern coinages are these:

100 centimes
100 centimes
100 centimes
100 centesimi

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France
Belgium
Switzerland

Italy

Greece

Spain

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In Gt. Britain the standard is gold, the oz. of gold

= £3. 17s. 101d. (Mint value).

In India the standard is silver.

In the United States the standards are gold and silver (bi-metallic).

In France the standard is gold, but the silver 5-franc circulates at the double valuation, i.e. gold is reckoned as 15 × silver, hence the oz. of pure silver of £3. 178. 101d. 607d. = 5s. 1d. nearly.

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In Germany the standard is gold, but the old silver thaler circulates at 3 marks, and thus the double valuation is slightly in force.

France, Belgium, Switzerland, Italy, and Greece form the Latin Union with coins of the same weight

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and fineness. Spain, Servia, Bulgaria, and Roumania have adopted the same system of coins but they have not joined the Union.

The column of Mint values must be read with the caution that it gives the gold values. The silver values depend either on the 15:1 ratio or on the market price of silver. The Mint value of any silver coin on the 151 ratio, or when taken as a token, is very different from its market value.

This varies from day to day, and depends on the supply of coins and the price of silver. The market value is usually very near its intrinsic value, but supply and demand may raise or depress the price.

Gold is very stable in value, especially in countries with a purely gold valuation. In bi-metallic countries the fluctuations of silver derange the gold values a little.

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1°. An "Exchange" in commerce occurs when a person pays his creditor by transferring to him a debt due to himself from someone else.

The object of these "exchanges" is the avoidance of bullion-transmission, which is costly.

If A in London owes a debt to B in Paris, and C in Paris owes a debt of equal amount to D in London, it is obvious that if A were to pay D, and C were to pay B, the debts would be settled without any transfer of money.

B and C might be one and the same person and thus for an exchange four persons and two debts are usual, three and two debts are necessary. persons In practice bills of exchange are used as the medium of exchange.

2o. "Inland Exchange" is the remittance of bills to places in the same country by which means debts are discharged without cash transfers.

If one place owes more than another it requires bills on it, and this accounts for the demand for London bills-London always being a large creditor to the rest of the country. This demand causes a premium on London bills, generally commuted for time in the case of inland bills, e.g., the premium between Edinburgh and London is 1s. p.c. or 4 days' interest.

3. "Foreign Exchange" is the remittance of bills to foreign places in payment of debts, in order to avoid the transmission of money or specie abroad.

The condition of the coinages as well as the balance of trade influences the rate of exchange.

A rate of exchange is the value of the money of one country in that of another.

It is the custom to quote the rate between two countries by keeping one equivalent fixed and leaving the other to fluctuate.

Thus Paris gives to London a varying number of francs and centimes for £1 sterling. London gives to Lisbon so many pence per milreis.

The place with the fixed price is said to receive the fluctuating price.

In quotations the fixed price is usually omitted.

The equivalence between the currencies of two countries (ie. the rate of exchange arising out of the state of the coinage) is called the Mint par of exchange (nominal exchange).

The rate arising from the balance of trade is called the commercial par (real exchange).

The short rate of exchange will agree with the nominal par only as long as there is no balance of indebtedness between the two countries. If there is a balance of indebtedness the short exchanges will deviate from the par until the difference would cover the expense of shipping bullion. These limits of the

RATES OF EXCHANGE.

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exchanges are called specie points, and when one or other is reached bullion begins to flow in or out.

The long rate of exchange is based upon the short rate, and is equal to the short exchange plus or minus the interest for the long-bill's time, and the cost of stamps.

In the case of long bills the specie points may be temporarily exceeded from other considerations, viz. the position of the acceptor, the need to realise etc.

4. The course of exchange depends on the state of direct trade between two places.

Hence it may be advantageous to send money by a circuitous route.

The course of exchange is then said to be determined by the arbitration of exchange.

5°. The real exchange in London as centre is influenced by seven causes.

1. The balance of payments due or owing.

2. The state of foreign exchanges.

3. The state of the currency.

4.

Remittances to London as commercial centre of the world to meet payments due to other countries. 5. Political security.

6. The state of the money market (esp. the comparative rates of discount).

7. Free or prohibitive tariffs.

6°. The calculation of the pars of exchange involves two difficulties,

(1) Coins are only approximately of the weight and fineness laid down in the Mint regulations, and there is wear and tear besides. This difficulty is got over by assuming them to be in accordance with the statements of the various Mints.

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