upon the exchange (as is the case with all debts due from one country to mother, and payable by draft), and the above table shows what that amount would be as exchange varied. The higher the exchange, i.e. the more of the minted francs each pound sterling absorbed, the less would be the net proceeds. It is obvious, therefore, that the smallest rise in the exchange, unless balanced by special demand for the metal, should operate adversely on the London price of Silver. It was impossible, then, that while the law remained intact, my lessening of demand or increase of supply (from whatever source[1]) could cause my one to be willing to take less for his ounce of Silver than 60·232d. supposing him to count on exchange remaining at par.
While them was Gold in France and no impediment to its transmission, it would be impossible that exchange should rise above 'Gold point'[2] (which is normally 25·35); but if there were no Gold there, and none obtainable elsewhere by way of arbitrage there might be nothing for the moment to prevent the price of Silver here from falling in proportion as the exchange might happen to rise, supposing the balance of trade to continue increasingly adverse to France. It has been said that there were times when there was no Gold in France. This assertion is of course not to be taken literally, but only as a hyperbolical expression of the fact that Gold was not at such times in active circulation in the pockets of the people. But it is not the Gold so circulating and used in the daily purchase of necessaries of life which in that relation affects foreign exchanges, but the Gold which forms a part of the reserves of Banks, or others. That that was both existent in the country and easily obtainable, has been, I think, abundantly demonstrated; but whether the contrary was true or not at other times, it was certainly not true in 1873, for there was an agio on it,[3] and there could not be an agio on a nonexistent or non-available substance. Besides, oue cause of the alarm in France (evinced by that agio) is said to have been that her Gold was leaving and would continue to leave her. It could not leave her if it was not there. Certainly, therefore, it was there, and whether
- ↑ The first sale of Silver from Germany in London was in October, 1873.
- ↑ When the exchange reaches such a point that it is cheaper to remit gold than to buy bills, it is said to be at 'Gold point.' Thus, suppose it to cost less than fcs. 25·35 to send the equivalent in gold of one sovereign from Paris to London, it is obvious that no one will give 25·35 for a bill of exchange on London. If there were no gold to send there might be no limit to the rise of the exchange. If there were gold to send, but an agio on it, the rise of the exchange above 'Gold point' should be proportionate to that agio.
- ↑ The agio on Gold or Silver in a bimetallic country, where the measure of value is alternatively at the option of the payer a fixed weight of either Gold or Silver, merely represents the premium which the buyer may be willing to pay for a commodity which cannot be legally demanded in discharge of a debt.
The quotations of agio on gold and silver bullion and on gold coin for December, 1871 and 1872, and for February, 1873, are as under:—On Gold. On Silver. In Bar. In Coin. In Bar. Highest. Lowest. Highest. Lowest. Highest. Lowest. Dec. 1871 — 15 o/oo .. 15 o/oo .. 16 o/oo .. 8½ o/oo .. 36 o/oo .. 36 o/oo Dec. 1872 — 14 o/oo .. 11½ o/oo .. 9¾ o/oo .. 6⅜ o/oo .. 17½ o/oo .. 13½ o/oo Feb. 1873 — 11½ o/oo .. 10½ o/oo .. 6½ o/oo .. 2 o/oo .. 16 o/oo .. 10 o/oo When gold bullion is required for export the agio on bullion may exceed that on coin to the extent of 6·70 per mille, which is the Mint charge for coining gold.
The quotation of a considerable agio on both metals at the same time is probably accounted for by the fact that prices were reckoned in inconvertible paper, though it would appear that irrespective of the reckoning in paper there might be a simultaneous agio on both metals in the event of both being required for export to gold and silver using countries at the same moment.
It should be further noted that the quotations of silver bullion represent the 'nominal agio,' but as this metal is still quoted at a premium or discount on the basis of the old 'commercial tariff,' as it is called, the real agio should probably be about 7½ o/oo less in each instance.
