V Chapter. General Remedy for unfavourable Exchanges.

It has been said, that as 100l. British can now exchange for 118l. Irish instead of 108l. as formerly, it is a temptation of 10% to the British merchant to become a purchaser in Ireland; but if 118l. Irish can now purchase no more commodities in Ireland than 108l. formerly, what becomes of this temptation? It is the cheapness of  Hervorhebung in der Quelle.
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Irish commodities
alone which could tempt the British merchant; but in this instance he finds nothing cheap except the  Hervorhebung in der Quelle.
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Irish Banknotes
. (158)

Suppose 108l. 6s. 8d. Irish = 1200 yards of Irish linen, and that exchange is at par. 100l. English will then purchase 1200 yards Irish linen. Now if the Irish medium loses 1/10 of its value, 100l. English will exchange for 118l. Irish; but it will still exchange for 1200 Yds Irish linen, because the linen will be then no longer purchasable for 108l. 6s. 8d. Irish, nor for less than 118l. Irish. (159)

The fallacy originates from assuming that the Irish medium has retained its value, as compared with every commodity, except gold, silver, copper, and  Foster: English Bank Paper
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Irish banknotes
; whereas it is  Hervorhebung in der Quelle.
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because
it has lost its value, as compared with every other commodity, that it also loses its value, as compared with these. (159, 160)

If the exchange makes Irish commodities 10% cheaper to the English consumer, the depreciation of the Irish medium has first made them 10% dearer … the price remains what it was. (160)

Der unfavourable exchange operates as a bounty on exports when it is real … no such effect from a nominal exchange. (160)

 Zusammenfassung von Marx in eigenen Worten.
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Das beste Mittel wäre natürlich convertibility der Note herzustellen.
 (161)

Vor der restriction the Directors considered the run on them for gold as the criterion of the proper quantity of paper which they should keep in circulation; … when the demand on them for gold was great, they considered it as a proof that the quantity of their notes in circulation ought to be reduced; and they never failed immediately to contract their issues, and consequently to diminish the amount of the circulating medium of the country. (162)

This demand on them for gold they attributed to various causes, generally aber to the unfavourable state of foreign exchanges; and so much attention did they pay to this last cause of demand, that in all cases of unfavourable exchange, conceiving that the gold must be flowing out of the country, they lessened their issues as a measure of precaution. That such  Hervorhebung in der Quelle.
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was
the practice of the Banks … continually avowed in the examinations of the English Directors before the Secret Committees of the Lords and Commons in 1797, and still more distinctly by Mr. Colville, an Irish Bank Director, in his recent examination. It is further assumed in the Report of the Select Committee Report p. 4 , wo es heißt:

„Such has been the natural practice of banks previous to the restriction. Mr. Colville states it in very clear and forcible terms as to the Bk. o. Ireland. Prior to 1797 they limited the amount of their issues as exchange rose. If prudence has not dictated such a course, necessity would have compelled a diminution of their issues, by diminishing the stock of specie, which could only be replaced at a loss proportionate to the existing rate of exchange; and your Committee observe, that, in fact as well as in theory, the effect of such practice always was and must be the redress of the unfavourable exchange.“ (163, 164)

Daher sehen die Directors,  Hervorhebung in der Quelle.
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that in every commercial country the limitation of the circulating medium is the efficient remedy for redressing its unfavourable exchanges
. (164)

As the first effect of an unfavourable exchange, arising from a balance of debt, is to create a demand for circulating medium in the debtor country, and in many instances actually to export it … it tended to  Hervorhebung in der Quelle.
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limit the amount
of the circulating medium, by creating a demand for that medium which could not be supplied. … were there no bank, the principle by which the balance of debt, and consequent unfavourable exchange, are removed, is by the limitation of the circulating medium which they occasion. (164, 165)

A bank may entirely counteract this tendency  Hervorhebung in der Quelle.
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by increasing the circulating medium of the country in proportion as it is demanded
. Unmöglich vor der Restriction. Um nicht ihr Geld zu verliren, waren sie gezwungen, in case of unfavourable exchange, to diminish their issues, and create a scarcity or limitation of circulating medium much greater than the balance of debt, or unfavourable exchange, could otherwise have occasioned. (165) Ihre issues werden doppelt vermindert. (Report of the Select Committee 1797, p. 100 und 101). »First, to the amount of the gold paid; and, secondly, to an equal amount by the diminution of their loans or discounts which their prudence suggested to them to make.[«] (167) Durch die erste Ursache werden cancelled the notes brought in for cash, which was demanded and exported; durch die 2te weniger notes issued. (l.c.)

In dem Report of the Select Committee  Zusatz von Marx.
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(1803?)
heißt es p. 8: „When exchange is so unfavourable to a country as to draw gold out of it, it is obvious, that for every guinea drawn out of the bank an equal amount of paper must be drawn out of circulation to be paid for the guineas. The re-issue of paper to that amount must be prevented by the decrease of the stock of specie: the same cause will most probably induce the Directors to diminish their discounts;  Hervorhebung in der Quelle.
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so that the quantity of paper becomes diminished in a still greater amount
than the gold drawn out of the Bank in consequence of unfavourable exchanges.“ (167, Note)

Jezt handeln die Directors of the Bk. o. Ireland umgekehrt. Erstens fact: issues 5 × mit Exchange of 10% against Ireland. Zweitens vertheidigen sie dieß theoretisch.

Einer sagt: „as far as the guineas so drawn out went to pay the balance against the country, so far they operated to the reduction of the exchange against the country, by paying off so much of its debt, and  Hervorhebung in der Quelle.
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so far only
“.  Zusatz von Marx.
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Aber sagt Foster feierlich:
It appears then that they entirely exclude from consideration  Hervorhebung in der Quelle.
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the value which such reduction added to the circulating medium which remained
.  Kommentar von Marx.
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(Eselsfuß!)
 (168, 169)

Ferner sagen dieselben Directors: „As far as the circulation of paper has supplied the circulating medium,  Hervorhebung in der Quelle.
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it enabled the gold, which before stood in its place, to be exported out of the country, and, as far as it went in weight and measure, so far
it was a clear and decided cause of preventing the exchange from getting to a higher pitch than it has hitherto attained; and  Hervorhebung in der Quelle.
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so far
as the Bank extends its notes,  Hervorhebung in der Quelle.
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it further enables a greater drain of specie to take place
, and consequently to strengthen the cause which keeps down the rate of exchange.[“] (169)

Exchange = the comparison of value between two circulating media … when the circumstances attending a balance of debt, had added a superiority of relative value to the circulating medium of the creditor country, the limitation of the circulating medium of the debtor country, making it also more valuable in proportion as it made it more scarce, removed its relative depreciation. Or, to put it in another |50 light, when the superior demand for bills on the creditor country has added to its circulating medium an artificial value, the limitation of the circulating medium of the debtor country, by increasing the demand for it as well as for the other, operates a similar artificial increase of its value, until it finally becomes as valuable as the other; that is, until exchange is reduced to par. (171, 172)

 Kommentar von Marx.
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Die Beispiele die Foster immer giebt, wie reduction of currency by enhancing the cost of it (thereby sinking the price of commodities, and enforcing exports) zeigen nichts als wie vorgefaßte Theorie den Kopf umnebelt und die Thatsachen verdunkelt.

Erstes Beispiel. Schottland. Mr. Mansfield, banker of Edingburgh, sagt in seiner Evidence, that soon after the peace of Versailles, und bis 1770, der exchange between London und Edingburgh was 5 or 6% against Edingburgh.

At this time „the currency of Scotland was principally paper, and that to a greater extent than the natural trade of the country  Hervorhebung in der Quelle.
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required
. The chartered banks of Scotland finding that they had given imprudent credit to bankers and their agents, who issued notes, they  Hervorhebung in der Quelle.
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curtailed
them very much
; the overissue of paper was prior  Hervorhebung in der Quelle.
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to
the unfavourable state of the exchange
, and it was the cause of the system being altered; and he certainly thinks,  Hervorhebung in der Quelle.
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that the overissue of paper was the cause of the high exchange
“. (172, 173)

 Kommentar von Marx.
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Bis hierhin sagt der Mann Mansfield nur, daß die chartered Banks had given „imprudent credits“ to bankers, die dann natürlich ihrerseits wieder „imprudent credits“ ihren Kunden geben, welche imprudent credits zu imprudent imports von England führen und the exchanges gegen Schottland turn konnten. In welcher Form dieser Credit gegeben wurde und to bankers who issued notes or not hat absolut nichts mit der Sache zu thun. Was sie thaten, daß sie curtailed that credit. Dieß war schon ein modus to turn the unfavourable exchanges, wenn sie aus dem imprudent credit entsprangen. Daß aber die quantity des circulating mediums irgendetwas mit der Sache zu thun hat, beweist Mansfield 1) durch die Annahme, that their there existed an overissue of paper, was er beweisen soll. 2) durch den fact daß der von ihm imaginirte overissue of paper dem unfavourable state of the exchange vorherging. Wenn (was von der Art der Ausgabe abhing) ein overissue of paper existirte, also depreciirtes paper, wäre der nominelle Wechselkurs dadurch influirt worden. Aber der blose fact, daß, was Mansfield auch nicht beweist, mehr paper cirkulirte vor als nach einem turn of exchanges, beweist in keiner Weise, daß der unfavourable exchange Folge von overissue of paper, so wenig als daß spätre Reduction des paper Folge des günstigen Exchange. 3) he „thinks“ „that the overissue of paper was the cause of the high exchange“. Also die Einbildungen des Mansfield sind ein Beweis! Ebenso gut könnte Foster „think“ ohne die Autorität des Mansfield!

 Zusatz von Marx.
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Aber die Sache wird noch besser.
The chartered banks, finding the high exchange proceeded from artificial means, determined to put an end to it, for this reason, „they began to think of collecting  Hervorhebung in der Quelle.
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as much funds
as they could bring to London of their own; those funds they lodged partly with the Bk. o. England, and partly with their own bankers“; [»]and the banks then began to reduce the rate of exchange, by giving bills on London at a rate of 1/2% or 1% under that of the day: that in the course of years they reduced it to 1/2% against Edingburgh, at which rate it has continued invariably ever since; (the custom is to give bills on London, at 40 days date, or sight, which is about 1/2%); and that it never fluctuated even in the convulsion which credit experienced in 1793, nor at the time of the restriction in 1797: Hervorhebung in der Quelle.
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that the demand for bills on London, though great at first, gradually decreased as the exchange was reduced;
that this change of system was adopted in consequence of there being more paper in circulation than the situation of the country required, and that it had the  Hervorhebung in der Quelle.
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effect of diminishing the quantity of paper circulation
.« (172–174)

 Kommentar von Marx.
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Also zunächst schicken die Kerls funds nach London, vermindern pro tanto die debt an England und vermehren pro tanto Zufuhr von bills auf England. Der Wechselkurs fällt daher, ohne irgend eine Operation auf die circulating bank notes. Gradually fällt er auf 1/2% gegen Schottland, da sie zugleich ihr system of imprudent credits curtailed haben. Die demand on bills on England ist groß, aber sie nimmt ab „as the exchange was reduced“. Sollte heissen: the exchange was reduced, as the demand on bills on England declined, aber quid pro quo in Mansfield’s Kopf. Schließlich dann die Versichrung, that this [„]had the effect of diminishing the quantity of paper circulation“. Dieß ist eine Behauptung Mansfield’s. Er beweist nicht und sucht nicht einmal zu beweisen the fact that „the quantity of paper circulation“ was diminished. Gesezt es sei der Fall gewesen, so bleibt zu beweisen, was bewiesen werden soll. Er sollte dabei beweisen, daß der ungünstige Wechselkurs Effect des overissue. Jezt will er beweis, daß die contraction of issue effect des günstigen Wechselkurses! He proves neither the one nor the other.

 Zusatz und Kommentar von Marx.
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Zweites (von Foster im Sinn des currency Principle interpretirtes Beispiel):

Mr. Colville, an Irish Bank Director, giebt Evidence;

he remembers perfectly well „that, in 1753,  Hervorhebung in der Quelle.
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the circulation of paper in Dublin from the private bankers was so general and extensive
, that in receiving 1000l. there was not 10l. in gold at that time …  Hervorhebung in der Quelle.
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Exchange was near 3% above par;
the consequence was, that the bankers of Dublin, of whom there were as many as at present, if not more, were in competition with one another to send their specie over to London, and to get back bills at 4% above par, bringing in a clear profit to that extent. The consequence of this shewed itself in the succeeding year: all the banks failed except Messrs. Latouche’s house, and Sir W. Newcomen’s, and these 2 banks paid off their entire paper.  Hervorhebung in der Quelle.
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There followed a total annihilation of Bank paper in Ireland at that time
 … the consequences were,  Hervorhebung in der Quelle.
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that exchange fell 2 or 3% under par, and the whole circulation of Ireland was turned into gold;
but the result was, that multitudes of people were ruined: the convulsion was exceedingly severe; many tenants threw up their lands, and there was no person connected with the 3 Southern provinces of Ireland that did not suffer severely.“ (174, 175)

 Kommentar von Marx.
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Der Wechselkurs ist gegen Ireland um 3%. Die Bankers, die auf geringer Goldunterlage viele Notes ausgegeben, schicken ihr Ge(?)ld nach England, to deal in exchanges. Doch wahrscheinlich run on the Banks, die ihre Noten nicht in Gold zahlen konnten. Bankrott derselben. Papercirculation durch diese |51 Creditkrise weggefegt. Unterdeß exchange turned, 2% in favour of Ireland. Turned, theils in Folge der remittance of funds nach England, theils in Folge der Krise, indem die Bankers etc durch ihren Bankrutt wipe off their debt to England. Natürlich, da die Papercirkulation discreditirt, wird sie durch Goldcirculation ersetzt. Der günstige Wechselkurs mochte einiges Gold von England herüber bringen; die Masse desselben kam jedenfalls aus hoards, die während der Papiercirkulation „unsichtbar“ wurden.

 Kommentar von Marx.
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Aber Herr Foster schließt daraus, daß die contraction des circulating medium den Exchange turned! Und sehr schön die annihilation der paper currency eine contraction des circulating medium zu nennen!

 Hervorhebung in der Quelle.
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the limitation of the circulating medium
,  Zusatz von Marx.
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ruft er triumphierend,
 Hervorhebung in der Quelle.
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is the specific remedy for an unfavourable exchange
. (177)

Inhalt:

  • Inhaltsverzeichnis von Friedrich Engels
  • Heft II. 1869
  • The Daily News, 20. Mai 1869
    • Notiz
      • Kaufmannsrechnung. (Continuatio)
      • John Leslie Foster, (of Lincoln’s Inn): An Essay on the Principle of Commercial Exchanges. London. 1804.
      • Ch. Lyell. Principles of Geology. 7th ed. London 1847.
      • Otto Hausner: Vergleichende Statistik von Europa (Lemberg. 1865) II. Band.
      • Michael Thomas Sadler. M.P.: Ireland; its Evils and their Remedies. 2nd ed. London. 1829