III.

the mint, you get back fixty-two fhillings, con- CHA P. taining a pound weight of the like ftandard filver. In France, a duty of eight per cent. is deducted for the coinage, which not only defrays the expence of it, but affords a fmall revenue to the government. In England, as the coinage cofts 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 fame manner as to that of wrought plate. A fum of French money, therefore, containing a certain weight of pure filver, is more valuable than a fum of English money containing an equal weight of pure filver, and muft require more bullion, or other commodities, to purchase it. Though the current coin of the two countries, therefore, were equally near the ftandards of their respective mints, a fum of English money could not well purchase a fum of French money, containing an equal number of ounces of pure filver, nor confequently a bill upon France for fuch a fum. If for fuch a bill no more additional money was paid than what was fufficient to compenfate the expence of the French coinage, the real exchange might be at par between the two countries, their debts and credits might mutually compenfate one another, while the computed exchange was confiderably 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,

BOOK
IV.

THIRDLY, and laftly, in fome places, as at Amfterdam, Hamburgh, Venice, &c. foreign bills of exchange are paid in what they call bank money; while in others, as at London, Lifbon, Antwerp, Leghorn, &c. they are paid in the common currency of the country. What is called bank money is always of more value than the fame nominal fum of common currency. A thoufand guilders in the bank of Amfterdam, for example, are of more value than a thousand guilders of Amfterdam currency. The difference between them is called the agio of the bank, which, at Amsterdam, is generally about five per cent. Suppofing 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 fhould be in favour of that which pays in current money; for the fame reason that the computed exchange may be in favour of that which pays in better money, or in money nearer to its own ftandard, though the real exchange fhould 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 Amfterdam, Hamburgh, 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 C H A P. thofe 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 fo too.

Digreffion concerning Banks of Depofit, particularly concerning that of Amfterdam.

THE currency of a great state, such as France
or England, generally confifts almost en-
Should this currency,

tirely of its own coin.
therefore, be at any time worn, clipt, or other-
wife degraded below its ftandard value, the state
by a reformation of its coin can effectually re-
establish its currency. But the currency of a
fmall state, such as Genoa or Hamburgh, can
feldom confist altogether in its own coin, but
must be made up, in a great measure, of the
coins of all the neighbouring ftates 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 cur-
rency, the uncertain value of any fum, of what
is in its own nature fo uncertain, must render the
exchange always very much against such a state,
its currency being, in all foreign ftates, neceffa-
rily valued even below what it is worth.

IN

BOOK IN order to remedy the inconvenience to which IV. this disadvantageous exchange must have sub

The

jected their merchants, fuch small states, when
they began to attend to the interest of trade,
have frequently enacted, that foreign bills of
exchange of a certain value fhould 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 pro-
tection of the ftate; this bank being always
obliged to pay, in good and true money, exactly
according to the ftandard of the state.
banks of Venice, Genoa, Amfterdam, Ham-
burgh, and Nuremberg, feem to have been all
originally established with this view, though
fome of them may have afterwards been made
fubfervient to other purposes. The money of
fuch banks being better than the common cur-
rency of the country, neceffarily bore an agio,
which was greater or fmaller, according as the
currency was fuppofed to be more or lefs de-
graded below the standard of the state. The
agio of the bank of Hamburgh, for example,
which is faid to be commonly about fourteen
per cent. is the fuppofed difference between the
good standard money of the ftate, and the clipt,
worn, and diminished currency poured into it
from all the neighbouring states.

BEFORE 1609 the great quantity of clipt and worn foreign coin, which the extenfive trade of Amfterdam brought from all parts of Europe, reduced the value of its currency about nine per cent. below that of good money fresh from

the

the mint. Such money no fooner appeared than CHA P. it was melted down or carried away, as it always is in fuch circumftances. The merchants, with plenty of currency, could not always find a fufficient quantity of good money to pay their bills of exchange; and the value of those bills, in fpite of feveral regulations which were made to prevent it, became in a great measure uncertain.

In order to remedy these inconveniencies, a bank was established in 1609 under the guarantee of the city. This bank received both foreign coin, and the light and worn coin of the country at its real intrinfic value in the good ftandard money of the country, deducting only fo much as was neceffary for defraying the expence of coinage, and the other neceffary expence of management. For the value which remained, after this fmall deduction was made, it gave a credit in its books. This credit was called bank money, which, as it reprefented money exactly according to the standard of the mint, was always of the fame real value, and intrinfically worth more than current money. It was at the fame time enacted, that all bills drawn upon or negotiated at Amsterdam of the value of fix hundred guilders and upwards fhould be paid in bank money, which at once took away all uncertainty in the value of those bills. Every merchant, in confequence of this regulation, was obliged to keep an account with the bank in order to pay his foreign bills of exchange, which neceffarily occafioned a certain demand for bank money.

BANK