Origin and Nature of Bills of Exchange. - William Stanley Jevons, Money and the Mechanism of Exchange [1875]
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Money and the Mechanism of Exchange (New York: D. Appleton and Co. 1876).
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Origin and Nature of Bills of Exchange.
Even the Romans appear to have been acquainted in a slight degree with the system of foreign bills of exchange; but it is to the early Italian, and especially the Jewish merchants, that we owe the development of the practice. The history of the subject is buried in much obscurity, but there is evidence that, as early as the fourteenth century, the use of bills of exchange was fully established. The forms of the bills, and the laws and customs relating to them, were then much the same as in the present day.
A bill is nothing but an order to pay money addressed by the drawer to the drawee, or person on whom it is drawn, specifying the amount to be paid, the time of payment, and the person to whom it is to be paid. Whenever a bill is drawn, it is to be presumed that a debt is due from the drawee to the drawer. When presented to the drawee and accepted by him, this acceptance is an acknowledgment of the existence of the debt. The bill, although drawn in favour of a particular person, is transferable by endorsement, and thus represents a negotiable claim to receive money at a future date in a distant country. Hence it is capable of being transmitted in discharge of another debt of equal amount.
England buys every year from America a great quantity of cotton, corn, pork, and many other articles. America at the same time buys from England iron, linen, silk, and other manufactured goods. It would be obviously absurd that a double current of specie should be passing across the Atlantic Ocean in payment for these goods, when the intervention of a few paper acknowledgments of debt will enable the goods passing in one direction to pay for those going in the opposite direction. The American merchant who has shipped cotton to England can draw a bill upon the consignee to an amount not exceeding the value of the cotton. Selling this bill in New York to a party who has imported iron from England to an equivalent amount, it will be transmitted by post to the English creditor, presented for acceptance to the English debtor, and one payment of cash on maturity will close the whole circle of transactions. Money intervenes twice over, indeed, once when the bill is sold in New York, once when it is finally cancelled in England; but it is evident that payment between two parties in one town is substituted for payment across the whole breadth of the Atlantic. Moreover, the payments may be effected by the use of cheques, or the bills when due may themselves be presented through the Clearing House, and balanced off against other bills and cheques. Thus the use of metallic money seems to be rendered almost superfluous, and, so long as there is no great disturbance in the balance of exports and imports, foreign trade is restored to a system of perfected barter.
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