HKB
and Low Prices of the last Thirty years,' (1823).
XIII.
LONDON, 30th Dec., 1813.
MY DEAR SIR,
I have been amusing myself for one or two evenings in calculating the exchanges, price of gold, etc., at Amsterdam, and I enclose the result of my labour. I have every reason to believe that my calculations are correct,--though I am somewhat puzzled at the profit which there appears to be on the importation of gold from Amsterdam, if the prices there be quoted correct [sic]. If the difference were the other way, we might ascribe it to the money of Holland not being so good as it ought to be by the mint regulations; but in the present instance for guilders, as good as they are coined, gold can be bought 9-1/2 per cent. cheaper than in London. I am told that gold which cannot be exported has sunk considerably in price although gold that may be exported keeps its price. I fully expect that foreign gold will be lower.
We have had a continuance of foggy weather ever since Monday. We are obliged to burn candles during the day, and at night it is with the greatest difficulty we can find our way to our homes. I hope you are more fortunate and breathe a clearer atmosphere. We shall expect you in Brook Street on your next visit to London. Have the goodness to write the day before you come. With best wishes to Mrs. Malthus,
I am, dear Sir, Yours very truly, DAVID RICARDO.
[TABLES ENCLOSED IN LETTER XII.]
Columns 11 and 12 will show on inspection whether silver be passing from London to Amsterdam or from Amsterdam to London. Suppose the price of silver in London to be 6s. 7d. and the exchange with Amsterdam 28s. Against 6s. 7d. in column 11 the par of exchange is 29·41 in column 12; consequently being at 28 it is unfavourable to Amsterdam, and silver can be exported from Amsterdam to London with a profit of 5 per cent. If under the same circumstances the exchange had been 31, silver could have been exported to Amsterdam with a profit of 5 per cent.
Columns 8, 9 and 10 will show from which country gold may be profitably exported. Suppose the price of gold in Amsterdam to be 16 per cent. premium, the agio 3 per cent., the exchange with London 31, and the price of gold in London £5 10s., from which country would gold be exported and with what profit?
Against 16 per cent. in column 1 the par of exchange in column 8 is 39·64, and against £5 10s. the price of gold in London in column 9 the multiplier ·708 stands in column 10. 39·64 multiplied by ·708 gives 28·06 as the par for bank notes; therefore, when the exchange is at 31, it is unfavourable to Holland, and gold may be exported from thence with a profit of 10-1/2 per cent. nearly. Or thus: an oz. of standard gold, when the marc could be bought at 16 per cent. premium at Amsterdam, would cost 154·3 Flemish shillings banco, when the agio was 3 per cent., which reduced into English money at 31 [Flemish] shillings per £ sterling will give £4 19s. 6-3/4d. But it will sell in London for £5 10s. which is a profit of 10-1/2 per cent. nearly.
Table Key
1: Price of gold at Amsterdam. Premium on f. 355 per marc. 2: Value of a marc in current guilders. 3: Corresponding price of an oz. of standard gold in London. 4: Corresponding price of an oz. of standard silver in London. 5: Value of an oz. of standard gold in Flemish current shillings. 6: Value of an oz. of standard gold in Flemish Banco shillings. Agio 3 p.c.