EXCHANGE WITH OTHER COUNTRIES 1. Gold basis of excliange.—The facility with which exchanges are effected is due to the fact that, with few exceptions, the monetary systems of the world are on a gold basis, or at least a gold exchange basis. Where the contrary is the case the exchange situa tion causes much difficulty locally and hampers the growth of international relations. Whatever may be the local circulation gold has come to be the interna tional money; and relations of all nations with the great financial centers are based upon gold even tho they have not the gold standard.
It is natural therefore that the nations which early adopted the gold standard should have an ascendancy in foreign trade. We have already spoken of three principal centers, and it remains only to consider Am sterdam, which ranks among the chief exchange marts.
2. Dutch monetary unit of the Netherlands is the florin (guilder or gulden) 100 Dutch cents (40.2 cents) weighing .6048 grammes of fine gold.
Quotations on Holland are stated in cents per guilder or florin (the par value being 40.20 cents) advancing by .01 cent as in the other exchanges 40.20, 40.21, 40.22 cents, etc. The rate is also expressed cents, etc., and for large transactions the rates are supplemented by fractions as in German quotations.
The conversion is simple arithmetic. To convert dollars into florins, divide the dollars by the rate per florin. To convert florins into dollars, multiply the amount in florins by the rate per florin.
The bill stamp is %o of 1 per cent or two cents per $40.
Interest on Dutch long bills is based on $40 per 100 guilders or florins.' There are no days of grace and interest is reckoned by taking the exact number of days and the year at 360 days.
When fractional rates are used they should be dealt with in a manner similar to the method used in German calculations, and added to or deducted from the dollar value when converting florins into dollars, but when dollars arc converted into florins, the equiv alent of the fraction converted into florins must be added if minus, and deducted if plus.
The differences made by: (1) a fractional advance; (2) one-hundredth of a cent advance; (3) YIG of a cent advance, are illustrated,below: Florins Rate Dollars 2.499609 40 .4000625 2.499375 40.01 .4001 2.496099 .400625An advance of .01 cent in rate represents a profit of 25 cents per $1,000.
An advance of cent (or cent) represents a profit of $1.56 on $1,000.
When quoted rates are supplemented by fractional quotations it is necessary to take these fractions into consideration in calculating the rates to be paid for bills as follows: %4 .0062 Add for a plus percentage.
.0125 per $40 %4 .0187 .0250 Deduct for a minus percentage.
the value of a 60 day bill on Amsterdam, discount rate 3%, demand rate 40%6 — 732 40%6 = 40.0625 less of 1% .0125 40.0500 Less Interest 60 days at 3% 20 Stamps of 1% 02 39.8300 or 39.83 cents per fl.
3. Exchange with other gold standard countries.— Apart from variations in the money unit, the calcula tion of the mint par of exchange with other gold standard countries offers little difficulty. It is suffi cient to refer here to the tables at the end of this vol ume, in which full information concerning the coins of the nations of the world is given. The mint par between any two countries is always obtained by di viding the weight of fine gold in the unit of one coun try by the weight of the fine gold in the unit of the other.
Tho known by different names in various countries it will be noted that the coinage is in many cases iden tical. The chief monetary groups are those of the pound sterling, the franc, the dollar and the crown ( Scandinavian). This renders the calculation of the mint par comparatively easy, and this calculation is further facilitated by the fact that apart from the British and Indian currencies the monetary denomi nations of all countries follow the decimal basis.