Part 4: Metallic materials. - Change.


An Excerpt from Proudhon's Stock Exchange Speculator’s Manual

Submitted by vasily on June 15, 2024

The commercial brokers have the right, concurrently with stockbrokers, to sell gold and silver materials; but only stockbrokers can ascertain the price. The gamble is forbidden on these values, as on all the others.

Gold and silver have their price at par; they lose or gain on the market, depending on the circumstances. Major political crises cause a rise in the price of gold, because it allows the transport of large values under a small volume.

The agio, that's the profit, and the discount, the loss.

Gold bars, coins of 20 and 40 fr., agio, 2 fr. 50 for 1,000, means that gold earns 2 fr. 50 per 1,000 fr.

Instead of the word agio, there would be a discount, that is, gold would lose 2 fr. 50 per 1,000 fr.

Gold bars, coins of 20 and 40 fr. at par, means that there is neither agio nor discount.

Gold bar, at 1000/1000, it's the purest gold, it is worth 3,444 fr. 44 c. at par, per kilogram.

Gold bar, 900/1000, it's gold with a tenth of alloy. Price at par: 3,100 fr. per kilogram.

Silver bar, 1000/1000. Price per kilo: 222 fr. 22.

Ditto at 900/1000: 200 fr. 22

We could say that this process would be to the bill of exchange what, in terms of rapidity, the inland waterway is to the electric telegraphy.

The exchange implies reciprocal debts between countries.

A, from Marseille, sold B, from Lille, soaps for a sum of 10,000 francs; B supplied C, from Marseille as well, 10,000 francs worth of oils. It is not necessary to move a cent to settle such a deal. B wrote to his debtor C: "Pay your compatriot A the 10,000 fr. that you owe me and that I owe him myself. The three parties gain in this arrangement, time savings and security.

When the seller and buyer have an equal interest in the negotiation, the exchange is at par.

But it's not always so.

New Orleans ships 10 million worth of cottons to Rouen; Lyon sells 8 million worth of silks to New York. The Lyon merchant receives his payment on paper from Rouen; while the New Orleans merchant receives his from New York. If these cities only exchanged with each other, it would be necessary to transport the additional 2 million from Rouen to New Orleans in order to complete the accounts.

Commerce undoubtedly has more expeditious resources; the relations that we have assumed between four places are nowhere circumscribed in such a small circle. Each business centre is in correspondence with the main markets of the world. Only, between two places there may be an inequality of claims, as in the example above, and then the paper in such and such a place is more or less in demand, more or less expensive. Hence the difference in the price of exchange.

The exchange from a place to another is low, when that place has a large money of the other, that is to say, when it has more to pay than to receive. It is high in the opposite case, when it has more to receive than to pay. France owes 10 million to America, which only owes 8: the exchange is low for us and high for the Americans. In other words, the American will purchase the paper on France below its value, because it is abundant; the French will pay the paper on America above its nominal value, because it is scarce.

The abundance and scarcity are therefore, for commercial instruments as for products, causes of rise or fall, of high or low prices, of costliness or the inexpensiveness of the market.

These negotiations emerge, as you can see, from the domain of speculation; they essentially belong to commerce and the bank. How do they end up among the hands of stockbrokers? As we have said, the Stock Exchange is the market for capital condensed in the form of securities, and the law only allows stockbrokers to act as

intermediaries. They do not purchase or sell other than on commission. They have nothing to do with fixation of prices; the ascertainment alone is reserved for them. They are neither bankers nor merchants; they exploit banking and commerce. They enjoy an old privilege: it has always been so, and they hope it will remain so for a long time to come.

Meanwhile, in practice, always ahead of legislation, gradually freed itself from the monopoly: exchange transactions were de jure and de facto returned to public and private banks and discount banks.

It's not that our public officials care. We have already seen how they are good princes with the coulissiers and the courtiers-marrons. Their liberality does not fail in this instance. What, after all, are miserable commercial instruments to people who have their hands on annuities, railroads, canals, mines, factories, forges, banking, insurance, etc.?

The preceding is enough to give an idea of the nature of the contract of exchange, its necessity, the combinations of which it is susceptible, the causes of variation between the different places, and the rise and fall on the same place at different times. It remains for us to complete these general notions with a few technical details.

We distinguish between two types of currency: 1o Real currency, which exists materially in gold, silver or billon coins. - 2o Exchange money, which does not always exist in metal; this is the name sometimes given to a sum of cash or fractions of cash.

With us, the franc is both the effective currency and the currency of account or exchange. But this is not the case everywhere. In Holland, for example, the livre de gros, adopted for exchange negotiations, does not exist in metal; it represents 6 florins of actual money.

The price of exchange between two places is assessed by comparison of their actual or exchange currencies, the first serving as a type, the second as a monetary unit.

We say that a place gives the certainty when its currency serves as the fixed term in the comparison; the one that provides the moving term gives the uncertainty.

Thus, in the exchange between Paris and London, the fixed term of comparison is the pound sterling; the variable term is its value in francs, which may be, depending on circumstances, 25 fr., 24.95 fr., 25.10 fr. Between Paris and Lisbon the fixed term is 5 fr., which is worth 495, 500, 504 reis, more or less.

Between two places, there is necessarily a fixed term and a variable term. It is neither an advantage nor a disadvantage to give one or the other. As usage has established them, they are retained, they are never transposed: Paris always gives the uncertain to London and the certain to Lisbon.

METHOD OF EXCHANGE VALUATION between Paris and a few foreign locations.


Paris, 3 fr. Amsterdam, 53 to 58 denier de gros.

--5 fr. Lisbon, 500 reis, more or less

Hamburg, 100 lubs Paris 185 fr. more or less

London, 1 pound sterling --, 25 fr, --.

Berlin, 1 rixdale -- 3 fr. 70 --

Madrid, 1 pistole -- 15 fr.

Livorno, 1 piaster -- 5 fr. 15 --

Naples, 1 ducat -- 4 fr. 40 --

Vienna, 1 florin -- 2 fr. 50 --

St. Petersburg, 1 paper rouble -- 1 fr. 10 --

This usage allows only one term to be used in the price of exchange. Thus, these expressions: London 25 10, Amsterdam 57, mean that 1 pound sterling payable in London is bought in Paris for 25 fr. 10 c.; that for 3 fr. in Paris, one has 57 gros deniers payable in Amsterdam.

The exchange between French cities is valued in francs. It is the same with certain foreign places which have adopted our currencies. In this case, it is expressed in so much for 0/0 loss, together with the name of the city with the unfavourable exchange.

Thus Genoa 2 p. means that 100 fr. payable in Genoa lose 2 0/0 at X and are worth only 98 fr. there. Bordeaux 1/5 p. means that 100 fr. payable in Bordeaux costs 99 fr. 4/5 at Z.

The exchange transactions require from those who engage in them, not as intermediaries but as traders, an extensive knowledge of the commercial relations between the various markets of the globe, since the abundance or scarcity of paper on these markets determines the exchange rate. Bankers are in a better position than anyone else, because of the multitude of their relationships, to know the needs and resources of each place.

The exchange also presupposes knowledge of foreign currencies and their respective values at par; without it, it would be impossible to know if the exchange is favourable or not for a given city. For example, this formula, Naples 4 20, means that a Naples ducat is worth 4 fr. 20 c. in France; but which of the two currencies loses on exchange? You need to know the value of the Neapolitan ducat: it is 4 fr. 40 c..

The formula used between cities which use the same currency, x 0/0 loss, is infinitely simpler. What should we conclude from this? - That the monetary unit, applied to all civilised nations, of the same kind as the unit of weights and measures, would simplify commercial relations by 90 0/0, and would do away with a multitude of functions living at the expense of production, of imbroglio and complications of accounts.

- When will this reform occur?

- Well! questions of concert and equilibrium are far more important.