Rechange: Part 1

Now that the bill of exchange has finally been redeemed where do we stand? As far as 'Me' and Salviati are concerned the transaction is over. 'Me' has received payment for goods shipped and Salviati has paid for goods received. But 'You' have negative equity and Tomasso has 1 gold marc that isn't really his. The gold marc that Tomasso has really belongs to 'You' and will have to pay it back somehow. So what is next for the exchange bankers? Some extra background will help to understand what is next.

At the central fairs already discussed, exchange rates have been decided and published in what is called the 'conto'. The conto announces what 1 gold marc (the bankers unit of exchange) is worth in different currencies. In Florence, a bill for 1 gold marc drawn in Lyons is worth 64 ecus. This amount is known because it is Lyons who announces how much the gold marc is worth in ecus. This is known as 'quoting certain.

However, the price of ecus in gold marcs is not known and depends on the state of the market. Other bankers in Lyons can bid for bills in ecus and pay the bearer in marcs. This is known as 'quoting moveable'. The city that quotes moveable is lower in the hierarchy than the city that quotes certain. This means that 1 gold marc drawn on Lyons could be 64 ecus but the other way round it could be more, say 65.5 ecus. A banker in Lyons then may buy a bill for 65.5 ecus for 1 gold marc. In our example, this price has already been decided. There will be a more complex board where multiple exchange bankers can quote different prices.

There are two new players on the board; a new importer from Florence, Federigo and a new exporter in Lyons, Piero. In this sense they are the mirror image of 'Me' and Salviati. They will make a transaction that amounts to 65.5 ecus/ 1 gold marc. In Davanzati's example Piero exports goods worth 65.5 ecus to Federigo and presents his bill to Tomasso receiving 1 gold marc in return. Quotes and exchange rates have been added for reference.