EXCHANGES, arbitration of, are calcula tions, made to find through what inter mediate place it will be most advanta geous to draw or remit.
The person who draws a bill of ex change, is called the drawer; he upon whom it is drawn, the drawee; and if he undertake to pay the amount, he is then called the acceptor. The person to whose order it is to be paid, is called the payee, and if he appoint another to receive the money, that other is called the indomee, as the payee is, with respect to him, the indorser ; and any one who happens for the time to be in possession of the bill, is called the holder of it.
It was above stated, that the real ex change between two countries never can exceed the expense and risk of trans porting gold and silver from one place to the other ; and yet, notwithstanding the correctness of this position, most commer cial people in the United States were led into erroneous opinions from the mere ap pearances of things. In the year 1812, the nominal exchange in Philadelphia upon London was as low as 25 per cent. below par ; and in 1815, as high as 20 per cent. above par. The cause of it was, that, in the former case, the currency of America was sound, whilst that of Lon don was greatly depreciated ; and in the latter case, the currency of Philadelphia, by the stoppage of specie payments by the banks, was depreciated vastly below that of London. From an examination into this subject, and from comparing the relative value of paper money, in both countries, with the standard, and also taking the rate of exchange upon London at Boston, where the currency continued sound, it resulted, that, during the whole of this period of nominal fluctuation, the real exchange at no time was higher or lower than the expenses, &c. of transmit ting bullion.
It very often happens that bill pay ments take place by indirect channels. A Bristol merchant, purchasing grain in _Holland, makes the Dutch merchant reim burse himself by drawing on a mercan tile house in London or Amsterdam ; or if the Dutch merchant draw on the Bristol merchant himself, he makes it a condi tion that the bill shall be accepted pay able in London. The object of this is to
give an easy currency in negotiation to the bill. The Dutch merchant sells his bill on the Amsterdam exchange; where, for one man who wishes to buy a bill on Bristol, he will find twenty who wish to purchase on London. Hence, the ten dency of all exchange transactions to certain central points. That point is al ways the principal trading city in the country. Throughout Great Britain, a bill on London is preferred to a bill on any other place ; and what London is to this country, Amsterdam, in its better days, was to Europe.
Every country town in Great Britainis said to have its par of exchange on Lon don. By this is meant the term or num ber of days at which the country bank will give a bill on London in exchange for cash. This term is greater or less, according to the distance from London. In Bristol it is twenty-five days, in Liver pool thirty, in Glasgow forty-five, and in the more remote parts of Scotland fifty days.
It is important to know, that a very small matter will amount to an accept ance. If the person upon whom a bill is drawn say, verbally, that he will accept the bill, he is not at liberty afterwards to change his mind ; or if his clerk say that the bill will be accepted, it is an accept ance. But the most usual mode of ac ceptance is, for the acceptor to put his name upon the face of the bill, accompa nied by the date of presentment, when the bill is payable at such a period after sight. The validity of an acceptance, however, being founded in different countries upon the custom of merchants, reference must be had to them for a mi nute detail.