Cyclopædia of Political Science, Political Economy, and the Political History of the United States
By John J. Lalor
NEITHER American nor English literature has hitherto possessed a Cyclopædia of Political Science and Political Economy. The want of a work of reference on these important branches of knowledge has long been felt, especially by lawyers, journalists, members of our state and national legislatures, and the large and intelligent class of capitalists and business men who give serious thought to the political and social questions of the day. The present work, which will be completed in three volumes, is the first to supply that want. It is also the first Political History of the United States in encyclopædic form—the first to which the reader can refer for an account of the important events or facts in our political history, as he would to a dictionary for the precise meaning of a word. The French, the Germans and even the Italians are richer in works of reference on political science and political economy than the Americans or the English. The Germans have Rotteck and Welcker’s
Staatslexikon, and Bluntschli and Brater’s
Staatswörterbuch; the French, Block’s
Dictionnaire Général de la Politique, and the celebrated
Dictionnaire de l’Economie Politique, edited by Guillaumin and Coquelin.The “Cyclopædia of Political Science, Political Economy, and of the Political History of the United States” is intended to be to the American and English reader what the above-named works are to French and German students of political science and political economy. The articles by foreigners in our work are largely translations from the
Dictionnaire de l’Economie Politique, the
Dictionnaire Général de la Politique, the
Staatswörterbuch, and original articles by Mr. T. E. Cliffe Leslie, the eminent English economist; while the American articles are by the best American and Canadian writers on political economy and political science. The task of writing the articles on the political history of the United States was confided to one person, Mr. Alexander Johnston, of Norwalk, Connecticut, thoroughness, conciseness and the absence of repetition and of redundancy being thus secured…. [From the Preface]
First Pub. Date
New York: Maynard, Merrill, and Co.
Originally printed in 3 volumes. Includes articles by Frédéric Bastiat, Gustave de Molinari, Henry George, J. B. Say, Francis A. Walker, and more.
The text of this edition is in the public domain.
- V.1, Entry 1, ABDICATION
- V.1, Entry 2, ABOLITION AND ABOLITIONISTS
- V.1, Entry 3, ABSENTEEISM
- V.1, Entry 4, ABSOLUTE POWER
- V.1, Entry 5, ABSOLUTISM
- V.1, Entry 6, ABSTENTION
- V.1, Entry 7, ABUSES IN POLITICS
- V.1, Entry 8, ABYSSINIA
- V.1, Entry 9, ACADEMIES
- V.1, Entry 10, ACADEMIES
- V.1, Entry 11, ACCLAMATION
- V.1, Entry 12, ACCUMULATION OF WEALTH
- V.1, Entry 13, ACT
- V.1, Entry 14, ADAMS
- V.1, Entry 15, ADAMS
- V.1, Entry 16, ADAMS
- V.1, Entry 17, ADAMS
- V.1, Entry 18, ADJOURNMENT
- V.1, Entry 19, ADMINISTRATION
- V.1, Entry 20, ADMINISTRATIONS
- V.1, Entry 21, AFRICA
- V.1, Entry 22, AGE
- V.1, Entry 23, AGENT
- V.1, Entry 24, AGENTS
- V.1, Entry 25, AGIO
- V.1, Entry 26, AGIOTAGE
- V.1, Entry 27, AGRICULTURE
- V.1, Entry 28, ALABAMA
- V.1, Entry 29, ALABAMA CLAIMS
- V.1, Entry 30, ALASKA
- V.1, Entry 31, ALBANY PLAN OF UNION
- V.1, Entry 32, ALBANY REGENCY
- V.1, Entry 33, ALCALDE
- V.1, Entry 34, ALCOHOL
- V.1, Entry 35, ALGERIA
- V.1, Entry 36, ALGERINE WAR
- V.1, Entry 37, ALIEN AND SEDITION LAWS
- V.1, Entry 38, ALIENS
- V.1, Entry 39, ALLEGIANCE
- V.1, Entry 40, ALLEGIANCE
- V.1, Entry 41, ALLIANCE
- V.1, Entry 42, ALLIANCE
- V.1, Entry 43, ALLOYAGE
- V.1, Entry 44, ALMANACH DE GOTHA
- V.1, Entry 45, ALSACE-LORRAINE
- V.1, Entry 46, AMBASSADOR
- V.1, Entry 47, AMBITION
- V.1, Entry 48, AMENDMENTS TO THE CONSTITUTION
- V.1, Entry 49, AMERICA
- V.1, Entry 50, AMERICAN MERCHANT MARINE
- V.1, Entry 51, AMERICAN PARTY
- V.1, Entry 52, AMERICAN WHIGS
- V.1, Entry 53, AMES
- V.1, Entry 54, AMISTAD CASE
- V.1, Entry 55, AMNESTY
- V.1, Entry 56, AMNESTY
- V.1, Entry 57, ANAM
- V.1, Entry 58, ANARCHY
- V.1, Entry 59, ANCIEN RÉGIME
- V.1, Entry 60, ANDORRA
- V.1, Entry 61, ANHALT
- V.1, Entry 62, ANNEXATION
- V.1, Entry 63, ANNEXATIONS
- V.1, Entry 64, ANTI-FEDERAL PARTY
- V.1, Entry 65, ANTI-MASONRY
- V.1, Entry 66, ANTI-NEBRASKA MEN
- V.1, Entry 67, ANTI-RENTERS
- V.1, Entry 68, ANTI-SLAVERY.
- V.1, Entry 69, APPORTIONMENT
- V.1, Entry 70, APPROPRIATION.
- V.1, Entry 71, APPROPRIATIONS
- V.1, Entry 72, ARBITRAGE
- V.1, Entry 73, ARBITRARY ARRESTS
- V.1, Entry 74, ARBITRARY POWER
- V.1, Entry 75, ARBITRATION
- V.1, Entry 76, ARCHONS
- V.1, Entry 77, AREOPAGUS.
- V.1, Entry 78, ARGENTINE CONFEDERATION
- V.1, Entry 79, ARISTOCRACY.
- V.1, Entry 80, ARISTOCRATIC AND DEMOCRATIC IDEAS.
- V.1, Entry 81, ARITHMETIC
- V.1, Entry 82, ARIZONA
- V.1, Entry 83, ARKANSAS
- V.1, Entry 84, ARMISTICE
- V.1, Entry 85, ARMIES
- V.1, Entry 86, ARMY
- V.1, Entry 87, ARTHUR
- V.1, Entry 88, ARTISANS
- V.1, Entry 89, ARYAN RACES.
- V.1, Entry 90, ASIA
- V.1, Entry 91, ASSEMBLY (IN U. S. HISTORY)
- V.1, Entry 92, ASSESSMENTS
- V.1, Entry 93, ASSIGNATS
- V.1, Entry 94, ASSOCIATION AND ASSOCIATIONS
- V.1, Entry 95, ASYLUM
- V.1, Entry 96, ATELIERS NATIONAUX
- V.1, Entry 97, ATTAINDER
- V.1, Entry 98, ATTORNEYS GENERAL
- V.1, Entry 99, AUSTRALIA
- V.1, Entry 100, AUSTRIA-HUNGARY
- V.1, Entry 101, AUTHORITY
- V.1, Entry 102, AUTHORS
- V.1, Entry 103, AUTOCRAT
- V.1, Entry 104, AUTONOMY.
- V.1, Entry 105, AYES AND NOES
- V.1, Entry 106, BADEN
- V.1, Entry 107, BALANCE OF POWER
- V.1, Entry 108, BALANCE OF TRADE
- V.1, Entry 109, BALLOT
- V.1, Entry 110, BANK CONTROVERSIES
- V.1, Entry 111, BANKING
- V.1, Entry 112, BANK NOTES.
- V.1, Entry 113, BANKRUPTCY.
- V.1, Entry 114, BANKRUPTCY, National.
- V.1, Entry 115, BANKS.
- V.1, Entry 116, BANKS, Functions of.
- V.1, Entry 117, BANKS OF ISSUE
- V.1, Entry 118, BANKS, Advantages of Savings.
- V.1, Entry 119, BANKS, History and Management of Savings,
- V.1, Entry 120, BAR
- V.1, Entry 121, BARNBURNERS
- V.1, Entry 122, BARRICADE
- V.1, Entry 123, BARTER.
- V.1, Entry 124, BASTILLE
- V.1, Entry 125, BAVARIA
- V.1, Entry 126, BELGIUM
- V.1, Entry 127, BELL
- V.1, Entry 128, BELLIGERENTS
- V.1, Entry 129, BENTON
- V.1, Entry 130, BERLIN DECREE
- V.1, Entry 131, BILL
- V.1, Entry 132, BILL OF EXCHANGE
- V.1, Entry 133, BILL OF RIGHTS
- V.1, Entry 134, BILLION
- V.1, Entry 135, BILLS
- V.1, Entry 136, BI-METALLISM.
- V.1, Entry 137, BIRNEY
- V.1, Entry 138, BLACK COCKADE
- V.1, Entry 139, BLACK CODE.
- V.1, Entry 140, BLACK REPUBLICAN.
- V.1, Entry 141, BLAINE
- V.1, Entry 142, BLAIR
- V.1, Entry 143, BLOCKADE
- V.1, Entry 144, BLOODY BILL
- V.1, Entry 145, BLUE LAWS
- V.1, Entry 146, BLUE LIGHT
- V.1, Entry 147, BOARD OF TRADE.
- V.1, Entry 148, BOLIVIA
- V.1, Entry 149, BOOTY
- V.1, Entry 150, BORDER RUFFIANS
- V.1, Entry 151, BORDER STATES
- V.1, Entry 152, BOURGEOISIE
- V.1, Entry 153, BOUTWELL
- V.1, Entry 154, BRAHMANISM.
- V.1, Entry 155, BRAZIL
- V.1, Entry 156, BRECKENRIDGE
- V.1, Entry 157, BROAD SEAL WAR
- V.1, Entry 158, BROKERS
- V.1, Entry 159, BROOKS
- V.1, Entry 160, BROWN
- V.1, Entry 161, BUCHANAN
- V.1, Entry 162, BUCKSHOT WAR
- V.1, Entry 163, BUCKTAILS
- V.1, Entry 164, BUDDHISM
- V.1, Entry 165, BUDGET
- V.1, Entry 166, BULL
- V.1, Entry 167, BUNDESRATH
- V.1, Entry 168, BUREAUCRACY
- V.1, Entry 169, BURGESSES
- V.1, Entry 170, BURLINGAME
- V.1, Entry 171, BURR
- V.1, Entry 172, BUTLER, Benj. F.
- V.1, Entry 173, BUTLER, William Orlando
- V.1, Entry 174, CACHET
- V.1, Entry 175, CÆSARISM
- V.1, Entry 176, CALENDAR
- V.1, Entry 177, CALHOUN
- V.1, Entry 178, CALIFORNIA
- V.1, Entry 179, CANADA
- V.1, Entry 180, CANALS
- V.1, Entry 181, CANON LAW
- V.1, Entry 182, CAPITAL
- V.1, Entry 183, CAPITAL
- V.1, Entry 184, CAPITULATION
- V.1, Entry 185, CARICATURE
- V.1, Entry 186, CARPET BAGGERS
- V.1, Entry 187, CARTEL
- V.1, Entry 188, CASS
- V.1, Entry 189, CASUS BELLI
- V.1, Entry 190, CAUCUS
- V.1, Entry 191, CAUCUS SYSTEM
- V.1, Entry 192, CAUSE AND EFFECT IN POLITICS.
- V.1, Entry 193, CELIBACY, Clerical
- V.1, Entry 194, CELIBACY, Political Aspects of.
- V.1, Entry 195, CELTS.
- V.1, Entry 196, CENSURE.
- V.1, Entry 197, CENSURE OF MORALS.
- V.1, Entry 198, CENSURES
- V.1, Entry 199, CENSUS.
- V.1, Entry 200, CENTRALIZATION and DECENTRALIZATION.
- V.1, Entry 201, CEREMONIAL
- V.1, Entry 202, CHAMBER OF COMMERCE.
- V.1, Entry 203, CHARGÉ D'AFFAIRES.
- V.1, Entry 204, CHARITY, Private.
- V.1, Entry 205, CHARITY, Public.
- V.1, Entry 206, CHARITY, State.
- V.1, Entry 207, CHASE
- V.1, Entry 208, CHECKS AND BALANCES.
- V.1, Entry 209, CHEROKEE CASE
- V.1, Entry 210, CHESAPEAKE CASE.
- V.1, Entry 211, CHILI.
- V.1, Entry 212, CHINA
- V.1, Entry 213, CHINESE IMMIGRATION.
- V.1, Entry 214, CHIVALRY.
- V.1, Entry 215, CHRISTIANITY.
- V.1, Entry 216, CHURCH AND STATE
- V.1, Entry 217, CHURCH
- V.1, Entry 218, CHURCH
- V.1, Entry 219, CHURCH
- V.1, Entry 220, CHURCHES AND RELIGIONS
- V.1, Entry 221, CHURCHES
- V.1, Entry 222, CINCINNATI
- V.1, Entry 223, CIPHER DISPATCHES AND DECIPHERMENT
- V.1, Entry 224, CIRCULATION OF WEALTH.
- V.1, Entry 225, CITIES
- V.1, Entry 226, CITIES AND TOWNS.
- V.1, Entry 227, CIVIL ADMINISTRATION
- V.1, Entry 228, CIVIL LIST.
- V.1, Entry 229, CIVIL RIGHTS BILL
- V.1, Entry 230, CIVIL SERVICE REFORM
- V.1, Entry 231, CIVILIZATION
- V.1, Entry 232, CLAY
- V.1, Entry 233, CLEARING, AND CLEARING HOUSES
- V.1, Entry 234, CLERICALISM
- V.1, Entry 235, CLIENTÈLE AND CUSTOM
- V.1, Entry 236, CLIMATE
- V.1, Entry 237, CLIMATE
- V.1, Entry 238, CLINTON
- V.1, Entry 239, CLINTON, George
- V.1, Entry 240, CL�TURE
- V.1, Entry 241, COASTING TRADE
- V.1, Entry 242, COCHIN CHINA
- V.1, Entry 243, COINAGE
- V.1, Entry 244, COLFAX
- V.1, Entry 245, COLONIZATION SOCIETY
- V.1, Entry 246, COLORADO
- V.1, Entry 247, COLOMBIA
- V.1, Entry 248, COMMERCE.
- V.1, Entry 249, COMMERCIAL CRISES
- V.1, Entry 250, COMMISSION
- V.1, Entry 251, COMMITTEES
- V.1, Entry 252, COMMON LAW
- V.1, Entry 253, COMMONS
- V.1, Entry 254, COMMUNE
- V.1, Entry 255, COMMUNISM
- V.1, Entry 256, COMPETITION.
- V.1, Entry 257, COMPROMISES
- V.1, Entry 258, COMPULSORY CIRCULATION
- V.1, Entry 259, COMPULSORY EDUCATION
- V.1, Entry 260, CONCESSION
- V.1, Entry 261, CONCLAVE.
- V.1, Entry 262, CONCLUSUM
- V.1, Entry 284, CONSTITUTION OF THE UNITED STATES
- V.1, Entry 301, CONVENTION
- V.1, Entry 375, DISTILLED SPIRITS
- V.1, Entry 384, DOMINION OF CANADA
- V.2, Entry 7, EDUCATION
- V.2, Entry 18, EMBARGO
- V.2, Entry 33, EXCHANGE
- V.2, Entry 35, EXCHANGE OF PRISONERS
- V.2, Entry 37, EXCHANGE OF WEALTH
- V.2, Entry 121, GREAT BRITAIN
- V.2, Entry 130, HABEAS CORPUS
- V.2, Entry 180, INDUSTRIAL ARBITRATION AND CONCILIATION
- V.2, Entry 225, JUSTICE, Department of
- V.2, Entry 246, LAW
- V.2, Entry 364, NEW GRANADA
- V.2, Entry 379, NULLIFICATION
- V.3, Entry 4, OCEANICA
- V.3, Entry 29, PARIS MONETARY CONFERENCE
- V.3, Entry 32, PARLIAMENTARY LAW.
- V.3, Entry 116, RACES OF MANKIND
- V.3, Entry 137, REPUBLICAN PARTY
- V.3, Entry 155, ROMAN CATHOLIC CHURCH.
- V.3, Entry 195, SLAVERY
- V.3, Entry 278, UNITED STATES OF AMERICA
- V. 2, List of Writers
- V. 3, List of Writers
- V. 3, List of American Writers
BILL OF EXCHANGE
BILL OF EXCHANGE. In commerce this term is generally used to designate that species of mercantile transactions by which the debts of individuals residing at a distance from their creditors are canceled without the transmission of money.
—Among cities or countries having any considerable intercourse together, the debts mutually due by each other approach, for the most part, near to an equality. There are at all times, for example, a considerable number of persons in London indebted to Hamburg; but, speaking generally, there are about an equal number of persons in London to whom Hamburg is indebted. And hence, when A of London has a payment to make to B of Hamburg, he does not remit an equivalent sum of money to the latter, but he goes into the market and buys a
bill upon Hamburg; that is, he buys an order from C of London addressed to his debtor D of Hamburg, requesting him to pay the amount to A or his order. A, having indorsed this bill or order, sends it to B, who receives payment from his neighbor D. The convenience of all parties is consulted by a transaction of this sort. The debts due by A to B, and by D to C, are extinguished without the intervention of any money. A of London pays C of ditto, and D of Hamburg pays B of ditto. The debtor in one place is substituted for the debtor in another; and a postage or two, and the stamp for the bill, form the whole expenses. All risk of loss is obviated.
—A bill of exchange may, therefore, be defined to be an order addressed to some person residing at a distance, directing him to pay a certain specified sum to the person in whose favor the bill is drawn, or his order. In mercantile phraseology, the person who draws a bill is termed the
drawer; the person in whose favor it is drawn, the
remitter; the person on whom it is drawn, the
drawer; and after he has accepted the
acceptor. Those person into whose hands the bill may have passed previously to its being paid, are, from their writing their names on the back, termed
indorsers; and the person in whose possession the bill is at any given period, is termed the
—The negotiation of
inland bills of exchange, or of those drawn in one part of Great Britain and Ireland on another, is entirely in the hands of bankers, and is conducted in the manner already explained. Bills drawn by the merchants of one country upon another are termed
foreign bills of exchange, and it is to their negotiation that the following remarks principally apply.
Par of exchange. The
par of the currency of any two countries means, among merchants, the equivalency of a certain amount of the currency of the one in the currency of the other,
supposing the currencies of both to be of the precise weight and purity fixed by their respective mints. Thus, according to the mint regulations of Great Britain and France, £1 sterling is equal to 25 fr. 20 cent. which is said to be the par between London and Paris. And the exchange between the two countries is said to be at par when bill are negotiated on this footing; that is, for example, when a bill for £100 drawn in London is worth 2,520 fr. in Paris, and conversely. When £1 in London buys a bill on Paris for more than 25 ft. 20 cent., the exchange is said to be in favor of London and against Paris; and when, on the other hand, £1 in London will not buy a bill on Paris for 25 fr. 20 cent., the exchange is against London and in favour of Paris.
—The foregoing statements explain what is usually meant by the
par of exchange; but its exact determination, or the ascertaining of the precise equivalency of a certain amount of the currency of one country in the currency of another, is exceedingly difficult. If the standard of one be gold and that of another silver, the par must necessarily vary with every variation in the relative values of these metals. This, however, is not all: even where two countries use the same metal for a standard, its value may be greater in one than in the other, and in estimating the par of exchange between them this difference
must be taken into account. In illustration of this we may take the case of France and Mexico: they both, let us suppose, use silver for a standard; but silver being largely produced in Mexico, is always cheaper there than in France, and is extensively imported into the latter; and taking the cost of this importation at 2 or 3 per cent., it is plain that the exchange would be really at par when it appeared to be 2 or 3 per cent. Against Mexico. But the value of the precious metals, even in contiguous countries, is always exposed to fluctuations from the over-issue or withdrawal of paper, from circumstances affecting the balance of payments, etc., as shown above. It is obvious, therefore, that it is all but impossible to say, by merely looking at the mint regulations of any two or more countries, and the prices of bullion in each, what is the par of exchange between them. And, luckily, this is not necessary. The importation and expiration of bullion is the real test of the exchange. If bullion be stationary, neither flowing into nor out of a country, its exchanges may be truly said to be at par; and, on the other hand, if there be an efflux of bullion from a country, it is a proof that the exchange is against it, and conversely if there be an influx of bullion into a country.
Circumstances which Determine the Course of ‘Exchange. The exchange is effected, or made to diverge from par, by two classes of circumstances:
first, by any discrepancy between the actual weight or finances of the coins, or of the bullion for which the substitutes used in their place will exchange, and their weight or fineness as fixed by the mint regulations; and
secondly, by any sudden increase or diminution of the bills drawn in one country upon another.
—1. It is but seldom that the coins of any country correspond exactly with their mint standard; and when they diverse from it, an allowance corresponding to the difference between the actual value of the coins and their mint value must be made in determining the
real par. Thus, if, while the coins of Great Britain correspond with the mind standard in weight and purity, those of Finance were either 10 per cent. worse or debased below the standard of her mint, the exchange, it is obvious, would be at
real par when it was
nominally 10 per cent. against Paris, or when a bill payable in London for £100 was worth in Paris 2,772 fr. instead of 2,520 fr. In estimating the real course of exchange between any two or more places, it is always necessary to attend carefully to this circumstance; that is, to examine whether their currencies be all of the standard weight and purity, and if not, how much they differ from it. When the coins circulating in a country are either so worn or rubbed as to have sunk considerably below their mint standard or when paper money is depreciated from excess or want of credit, the exchange is at real par only when it is against such country to the extent to which its coins are worn or its paper depreciated.
—2. Variations in the actual course of exchange, in the price of bills, arising from circumstances affecting the currency of either of two countries trading together, are
nominal only: such as are
real grow out of circumstances affecting their trade.
—When two countries trade together, and each buys of the other commodities of precisely the same value, their debts and credits will be equal, and, of course, the
real exchange will be at par. The
bills drawn by the one will be exactly equivalent to those drawn by the other, and their respective claims will be adjusted without requiring the transfer of bullion or any other valuable produce. But it very rarely happens that the debts reciprocally due by any two countries are equal. There is almost always a balance owing on the one side or the other; and this balance must affect the exchange. If the debts due by London to Paris exceeded those due by Paris to London, the competition in the London market for bills on Paris would, because of the comparatively great amount of payments our merchants had to make in Paris, be greater than the competition in Paris for bills on London; and, consequently, the real exchange would be in favor of Paris and against London.
—The cost of conveying bullion from one country to another forms the limit within which the rise and fall of the
real exchange between them must be confined. If 1 per cent. sufficed to cover the expense and risk attending the transmission of money from London to Paris, it would be indifferent to a London merchant whether he paid 1 per cent. premium for a bill of exchange on Paris, or remitted money direct to that city. If the premium were less than 1 per cent., it would clearly be his interest to make his payments by bills in preference to remittances; and that it could not exceed 1 per cent. is obvious; for every one would prefer remitting money to buying a bill at a greater premium than sufficed to cover the expense of a money remittance. If, owing to the breaking out of hostilities between the two countries, or to any other cause, the cost of remitting money from London to Paris were increased, the fluctuations of the
real exchange between them
might also be increased; for the limits within which such fluctuations
may range correspond in all cases with the cost of making remittances in cash.
—Fluctuation in the
nominal exchange, that is, in the value of the currencies of countries trading together, have no effect on foreign trade. When the currency is depreciated, the premium which the exporter of commodities derives from the sale of the bill drawn on his correspondent abroad is only equivalent to the increase in the price of the goods exported, occasioned by this depreciation. But when a premium on a foreign bill is a consequence, not of a fall in the value of money, but of deficiency in the supply of bills, there is no rise of prices; and in these circumstances the unfavorable exchange operates as a stimulus to exportation. As soon as the
real exchange diverges from
par, the mere inspection of a price current is no longer sufficient to regulate the operations of the merchant. If it be unfavorable,
the premium which the exporter will receive on the sale of his bill must be included in the estimate of the profit he is likely to derive from the transaction. The greater that premium, the less will be the difference of prices necessary to induce him to export. And hence an unfavorable
real exchange has an effect exactly the same with what would be produced by granting a bounty on exportation equal to the premium on foreign bills.
—But for the same reason that an unfavorable
real exchange increases exportation, it proportionally diminishes importation. When the exchange is really unfavorable, the price of commodities imported from abroad must be so much lower than their price at home as not merely to afford, exclusive of expenses, the ordinary profit of stock on their sale, but also to compensate for the premium which the importer must pay for a foreign bill if he remit one to his correspondent, or for the discount, added to the invoice price, if his correspondent draw upon him. A less quantity of foreign goods will, therefore, suit our market when the
real exchange is unfavorable; and fewer payments having to be made abroad, he competition for foreign bills will be diminished, and the
real exchange rendered proportionally favorable. In the same way it is easy to see that a favorable
real exchange must operate as a
duty on exportation, and as a
bounty on importation.
—It is thus that fluctuations in the
real exchange have a necessary tendency to correct themselves. They can never, for any considerable period,
exceed the expense of transmitting bullion from the debtor to the creditor country. But the exchange can not continue either permanently favorable or unfavorable to this extent. When favorable, it corrects itself by restricting exportation and facilitating importation; and when unfavorable, it produces the same effect by giving an unusual stimulus to exportation, and by throwing obstacles in the way of importation. The true PAR forms the center of these oscillations; and although the thousand circumstances which are daily and hourly affecting the state of debt and credit prevent the ordinary course of exchange from being almost ever precisely at
par, its fluctuations, whether on the one side or the other, are confined within certain limits, and have a constant tendency to disappear.
—This natural tendency which the exchange has to correct itself is powerfully assisted by the operations of the bill-merchants.
—England, for example, might owe a large excess of debt to Amsterdam; yet, as the aggregate amount of the debts
due by a commercial country is generally balanced by the amount of those which it has to receive. The deficiency of bills on Amsterdam in London would most probably be compensated by a proportional redundancy of those on some other place. Now, it is the business of the merchants who deal in bills, in the same way as of those who deal in bullion or any other commodity, to buy them where they are cheapest, and to sell them where they are dearest. They would, therefore, buy up the bills drawn by other countries on Amsterdam, and dispose of them in London; and by so doing, would prevent any great fall in the price of bills on Amsterdam in those countries in which the supply exceeded the demand, and any great rise in Great Britain and those countries in which the supply happened to be deficient. In the trade between Italy and Great Britain the bills drawn on the latter country amount almost invariably to a greater sum than those drawn on Italy. The bill-merchants, however, by buying up the excess of the Italian bills on London, and selling them in Holand and other countries indebted to England, prevent the
real exchange from ever becoming very much depressed.
Negotiation of Bill of Exchange. Bills of exchange may be made payable on
demand (the invariable term of payment in the case of checks), at
sight, at a certain specified time
after sight or
after date, or at
usance, which is the usual term allowed by the custom or law of the place where the bill is payable. In most countries, though not in all, a few days are allowed for payment beyond the term when the bill becomes due. These are denominated
days of grace, and vary in different parts. In Great Britain and Ireland, and the United States, there days’ grace are allowed on all bills except those payable on demand, which must be paid as soon as presented.
J. R. M’CULLOCH and HUGH G. R.EID