Instead of discharging debts to foreigners in the manner taken for granted by Christian,--viz., by transmitting money to a foreign land, as they would to the grocer's or the wine-merchant's in the next street, exporters and importers were early obliged, by an absurd enactment against the exportation of money, to devise some expedient for paying each other without using gold and silver. The most obvious way was to set against one another the values of things bought and sold, so that the balance was all that remained to be discharged. When it did not happen that the same firm at home had bought of the same firm abroad to whom it had sold, it was only necessary to find another firm at home which had bought in the same market abroad, and to exchange acknowledgments of debt, up to the amount at which the respective debts balanced one another; and these acknowledgments of debt served as money, in the same way as the promissory notes of bankers. In 1190, (which is the earliest recorded date of the practice of exchanging debts,) if an English merchant sold 100l. worth of cider into Holland, and his Dutch connexion had sold to another London merchant 90l. worth of fat cattle, the readiest way of paying the greater part of the debt was for the Dutchman to refer his cider-selling correspondent to his neighbour, the importer of cattle, for 90l.: 10l. would still remain due; and as the Dutchman was prohibited from sending it in gold and silver, he would look about for some neighbour who had 10l. owing to him from England, and would say, "I will pay you 10l., if you will desire your debtor to pay the same sum to my correspondent on the other side the water." By this simple mutual accommodation, the expense and risk of sending large sums of money are avoided; the postage, and the stamp charged by government upon such transactions, are the only cost incurred; and the whole process of buying and selling is simplified to all parties.
The convenience of this method being found great, it was improved as commerce increased, till a market was established where merchants might meet and make their exchanges without loss of time, instead of having to run after one another in search of what each wanted. The next thing was to institute a class of persons whose express business should be to manage these transactions. These persons, the bill-brokers, can tell how nearly the debts of different countries balance each other; and it is they who first purchase, and then provide merchants with these acknowledgments of debt, which circulate instead of money. These disposable acknowledgments, called bills of exchange, bear a very small proportion to the bargains between any two trading countries; because, where there is considerable intercourse, the sales of one party generally nearly balance those of the other. The nearness of their approach to a balance determines the price of those bills which remain to be sold, or which are desired to be bought. When bills are scarce, and merchants have difficulty in procuring these ready means of discharging their debts, they are anxious to pay a price for them, in order to be spared the inconvenience of transmitting money. A competition ensues, and it becomes generally known that the country where the bills are scarce has bought more than it has sold; that it owes more money than it has to receive; that (to use the technical term) the exchange is unfavourable to that country. The reverse is known to be the case when there is a superabundance of bills in the market; so that the merchants of a great trading country anxiously watch the exchange-market, not only to get their own debts settled, but to learn the general condition of commerce.
In order to the immediate detection of an alteration in the course of exchange, it was desirable to have a certain fixed point of calculation to which all variations might be referred. This fixed point was called the par of the exchange, and denoted, when it was first instituted, a perfect equality of exchange, both of goods and money, between the trading parties. The exchange between Holland and Great Britain was at par when the two countries sent exactly the same amount of wealth to each other. Supposing ten guilders to go to a pound, the exchange would be at par when the Dutch exported to England one thousand guilders' worth of commodities, and imported from England one hundred pounds' worth of commodities. So that, so long as ten guilders go to a pound, and Holland and England exchange the same quantity of goods, the exchange will not vary, really or seemingly, from the fixed point of calculation. It is only the one country exporting more goods than the other which can really make the amount of value due greater from one than the other: but, because ten guilders have not always gone to a pound, more money has sometimes appeared to be due from one than the other, even while the quantity of goods exchanged has been precisely the same, as computed in anything but the altered money. When eleven guilders go to the pound, while the par of exchange is still called ten, more money will appear to be due from Holland to England for the same quantity of goods as before; and consequently, while the actual state of trade will be exactly the same as before, it will be declared on 'Change that the exchange has turned against Holland; i. e., that Holland owes more money to England than she has to receive. However, merchants whose interest it is to watch the course of exchange, easily distinguish the real from the nominal variation, and learn to make use of the fixed point of calculation with due allowance for the difference caused by the alterations in the value of money. They can ascertain what they want to know of the general state of commerce, in the midst of what would be, to an inexperienced person, a deception; and a merchant who has, by any rare accident, been prevented from going on 'Change, only wants to know the nominal variation from par, and to compare it with his knowledge of the respective currencies of the two countries, to satisfy himself as to which ought to push its exports, and which its imports.
The first question asked by one Dutch merchant of another, in Heins's time, usually related to the exchange. It was that which his old friend Jakob greeted him with this evening, as, punctual to the appointed moment, he entered the apartment where Francesca and supper were waiting to honour and be honoured by him.--Heins saw at a glance that better entertainment was provided for him than his wealthy parents had ever thought fit to indulge him with. It had been their method to surround themselves with whatever was essential to comfort, and whatever served as a good investment for their money; but, in all articles of mere consumption, they had been frugal in a way which Slyk and his daughter seemed little disposed to imitate. While the Snoeks' cellars were full of choice French wines and brandies, they drank beer only. While preparing the richest butter and cheese which their fat meadows could produce, their servants and children must be content with an inferior kind, imported salt. Not thus was Jakob's table furnished by his fair daughter. On the present occasion, it looked very tempting. Placed between the windows, so that the eaters might enjoy the amusement of observing the passers by, without the table itself being seen from without, one source of entertainment, always acceptable to a Dutchman, was secure. There was no lack of odoriferous foreign fruits, of flasks whose aspect was not to be mistaken, or of more substantial delicacies from the native pastures and decoys. This array was reflected from each corner of the apartment by mirrors, so placed as to exhibit every object within ken, from the train of passengers on the bridge at the bottom of the street, and the slow-moving barge advancing in an opposite direction, to the beau-pots filled with tulips which stood on the floor in corresponding angles of the apartment. What made the aspect of the place the most dazzling to Heins was, that there were four Francescas, each differing from the other according to the direction in which the gazer looked. Here, the profile of the pretty face and the jewelled arm were most conspicuous; there, the closely fitting jacket, and the knot of hair fastened behind with a silver pin. Now, the bright eyes looked out from between the two ringlets which curled exactly to the same turn on the foreheads of all Dutchwomen; and again, the yellow slipper was seen to rest on the chauffe-pied, whose constant use must infallibly spoil the form of the most beautiful foot that ever trod the quays of Amsterdam. At the further end of this radiant apartment leaned old Jakob, prepared with questions about how matters looked on 'Change: in the middle sat Francesca, deeming it no affront that such affairs were considered of the first importance, even in her presence; and between them stood Heins, commercial con amore one moment, and awkwardly gallant the next, till the familiarity of the evening meal enabled him to make his attentions to the father and the daughter more compatible than it had at first appeared possible to render them.
"They may talk of our commerce having declined," said Slyk, "but there is no nation like the Dutch, after all. Our refugee divines preach to more purpose to us than they did in France, about the wisdom of Solomon in his traffic with Hiram, king of Tyre, and all the riches that he gained thereby. We are a people obedient to the Divine word, Mr. Heins; and it pleases Heaven to prosper our industry, in spite of seeming obstacles. Even Solomon's wisdom was not taxed to procure cedar and shittim wood in the face of king Hiram's prohibitions; but we have done as much in getting the exchange with England turned in our favour, notwithstanding her late jealous enactments."
Francesca was of opinion that Holland was now under a special divine blessing for having received and cherished the Huguenots who had been driven from France. Heins thought that this opinion was countenanced by the fact that a considerable part of the prosperity of the States was derived from the industry of these very refugees. On the other hand, England was also open to the Huguenots, and it was against England that the exchange had turned.
This was a difficulty easily answered, Jakob said. England was punished for her jealousy; for her unneighbourly conduct towards the States. Was it not Heins's belief that a vast importation of brandies, velvets, and jewellery from Dutch vessels had been going on in England of late?
"Certainly," replied Heins. "While we can gain no more than two, or, at most, three per cent. on our capital at home, we must invest it abroad, even at some risk; and this has been done in England to such an extent that the government there must be a little surprised at the present course of the exchange. Visscher has put but a small per centage in his pocket to-day, I rather think; for there is such an abundance of bills on England in the market, and so few are present to buy, that the business has been very languid."
"There will soon be an end of that," replied Slyk. "A flood of this kind of money is presently absorbed. It is not like our hard gold, or our bank money, which rests at the disposal of one nation instead of two."
Heins suggested that bank money was like a ball sent up by a solitary player, which might return or be lost according to the skill or awkwardness with which it was thrown; whereas exchange money was a shuttlecock played between two nations, which was sure to visit each in turn, as long as both were interested in keeping up the game. This flight of fancy, so much more French than Dutch, enhanced Francesca's admiration of the accomplishments of the young merchant. She was not aware, however, that bills of exchange could be exactly called money. She knew that they might, in one sense, be so considered, as they discharged debts; but debts might also be discharged by barter, where no money was present.--Heins explained that bills of exchange form an actual currency, temporary in its nature, like bank paper, but possessing all the requisites of a medium of exchange.