Chapter I — On exchange, and its division and conditions

I. QUESTION I. What is exchange, and of how many kinds is it? ANSWER. It is a contract of the commutation of moneys for moneys, with gain to the exchanger. He who gives the moneys is called the exchanger; he who seeks the exchange, the exchangee; and the art itself is called exchanging.

II. It is divided into real and dry. Dry exchange is a mask of usury, or a palliated loan, namely the delivery of money without distance of place. You are in need of money here at Rome, and here it is to be restored, but according to the value of the exchanges at Naples, Genoa, Milan, and so forth. Real exchange is that in which money is truly commuted for money, whether present for present of a diverse quality, or present for absent and distant. It is divided into manual, or small, in which gold money is commuted for silver, or silver for gold, or the contrary; and into local, or by letters, in which present money is exchanged for money distant in another place, or money distant in another place for present money.

III. QUESTION II. By what title is manual exchange lawful? ANSWER. First, it is an advantage to the commonwealth. Second, there is the labour and inconvenience of gathering moneys of every kind, of preserving and distributing the same; for the performing of all which there are required ministers, houses, and no light expenses. Third, according to some, there is the intrinsic diversity of the coins themselves. The fixing of the gain is defined by common and public consent in the marketplaces. It is not lawful for the servants of exchangers to commute coins to their own advantage and gain: because, since they have let out their labours and industry to their masters, they cannot gain from their masters' moneys, whatever some may say to the contrary.

IV. QUESTION III. By what title is local exchange with gain lawful? ANSWER. All affirm that that exchange is lawful by which money is delivered in one place and paid elsewhere, or the contrary: because a just title of gaining is the carrying of moneys, exceedingly necessary to the commonwealth, and because it frees from the dangers of robbers, from labour, and from many other inconveniences, all of which are appraisable at a price.

V. QUESTION IV. What is to be thought of exchange with re-exchange? ANSWER. Exchange with re-exchange, commonly con la ricorsa, is a trading paradox involved in so many turns and circumlocutions that, lest I seem to jest and to mock my readers, I shall set it forth in the words of Fr. Tamburini, who in Book IX On Contracts, chapter 5, § 2, no. 1, thus sets forth that exchange: “The practice of this exchange (which is called Besançon or Piacenza in Lessius, Book II, chapter 23, no. 39) is in our age most frequent, and is of this kind. Titius an exchanger here at Palermo, for example, gives to Caius a hundred gold pieces, to be paid by that same Caius at the next fairs to be celebrated at Piacenza, or in some other place of Italy or of Sicily. But because Caius has no one at Piacenza, or in those other places, who may pay in his name what Caius himself owes, therefore Titius offers to the same Caius his own correspondent named Seius residing in those places. He offers him, I say, that, just as he is the correspondent of Titius with every power granted to Seius himself by the same Titius, so in this business also he may be the correspondent of Caius, and may pay the exchange, that is, the said hundred gold pieces with the gain there wont to be determined among the merchants, or in the market. Let this gain now be, for example, five gold pieces. The offer being accepted, Titius writes to Seius in the name of each — namely of Titius himself and of the said Caius — that Seius accept the credit of Titius and the debt of Caius, and, as now the correspondent of Caius, pay the exchange and its gain, that is, a hundred and five gold pieces; and, as the correspondent of Titius, receive those gold pieces, and thus the exchange be extinguished. But because Seius as the correspondent of Caius has no money, therefore the same Seius, as the correspondent of Titius, or in the name of Titius, offers and gives that money to himself as the correspondent or procurator of the aforesaid Caius: he gives it, I say, at an exchange which certainly will be a second exchange, or (as we speak) a re-exchange, to be paid by Caius at Palermo. With this money therefore Seius, as the correspondent of Caius, extinguishes or pays, as has been said, the aforesaid first exchange celebrated at Palermo, so that Caius owes nothing at all more for the said first exchange. Read Lessius, who rightly notes that if the said Seius should flee or become bankrupt, the exchanger Titius could not act in his own name against the exchangee Caius: for that Caius has already paid the exchange to the exchanger Titius himself. Second: but because the said second exchange ought to bring forth its own gain, which will be, for example, another five gold pieces, which are to be paid by Caius at Palermo, therefore Caius will have to pay at Palermo to Titius a hundred and ten gold pieces, that is, a hundred from the first capital, five from the gain of the first exchange extinguished at Piacenza with the money had from the procurator of Titius, and five from the gain of the exchange to be extinguished at Palermo by the same Caius. Third: I suppose, for the justice of the second exchange, that Caius or his procurator is not compelled to the said second exchange. For Caius, or his procurator, could extinguish the first exchange with present money, without the necessity of taking a re-exchange; or certainly he could take a re-exchange from another than the correspondent of Titius. Fourth: but it is wont to occur that Caius has not even at Palermo ready that sum which he owes to Titius, whence again he binds himself to pay that same whole sum, as if he had again received it from Titius at exchange, with its gain, again at Piacenza or elsewhere, where again will be done what we have just said in no. 1: and thus exchanges and re-exchanges are continued sometimes through many years, until Caius pays Titius the capital itself in truth with money counted down, together with all the intervening gains. For therefore the merchants call this also exchange with recurrence. For it recurs whence it had begun. And observe above all that the whole business, except the first delivery of those hundred gold pieces counted out and given to Caius by Titius, and except this last payment which at last will have to be made counted down, is transacted and despatched by mere written obligations, or by acceptances and givings of credit and debt, which are written down in the books of the giving and receiving.”

VI. Observe above all, says Fr. Tamburini, that this whole business, except the first delivery and the last restitution, is despatched by mere written obligations and by given and accepted credits, through that intermediary Seius, who counts out and pays the exchange to himself. Hence the same Fr. Tamburini in the place cited, § 3, testifies that many rightly disapprove this exchange, which otherwise, he says, is most frequent. Many nevertheless (he adds) — as Navarrus — report that a certain most learned man of the Society of Jesus, Boninsegni, so thought. But Sá, Diana, Lessius, de Lugo, and others, whom I follow, teach that this exchange is probably lawful, with the explanation to be given in § 4. It is proved. Because if Caius the exchangee had at Piacenza some friend who should there pay the exchange contracted at Palermo, it would be a just exchange, as we have seen. Therefore also, and so forth.

VII. The argumentation of those who make this exchange lawful comes back, unless I am mistaken, to this. If the exchange were real, it would be lawful. Therefore it will also be lawful, even though it be feigned. Since, they say, although money be not really and truly present at Piacenza, it is nevertheless present virtually and equivalently. Most happy would debtors be if they could pay their debts with this virtual money! That stone would be more precious than any philosopher's stone.

VIII. That you may perceive the iniquity of the usury: Caius, compelled by necessity, asks of Titius a hundred gold pieces, thinking nothing at all of exchange. Crafty Titius sees that he betrays himself as a usurer if he deliver the gold pieces with an accession above the principal; therefore, that he may feign to decline usury, he suggests to him the Piacenza exchange. And how can this be done? replies Caius. Most easily, replies crafty Titius. I have there my procurator Seius, who will transact all those things which have been narrated. Who does not touch with his hands the crafty circumlocution devised for palliating usury? Since indeed, the circumlocutions being removed, Titius in fact intends nothing else save gain from the loan which he delivers to Caius. And Caius intends nothing else save to receive money to be restored to Titius in that place where he receives it. All the rest are figments. How can Caius want an exchange, if he has no need of one, but has need of moneys there where he must restore the same?

IX. St. Pius V in the year 1571 published a constitution by which he condemned all such disguised exchanges, whose beginning is In eam pro, and so forth. Read it entire in our Vol. VII, Book 3, dissertation 4, chapter 5. They answer that the Pian constitution has been received in few places, almost nowhere. And so it must be seen what natural law prescribes. But who are the interpreters of that natural law? Are they not the Pontiffs? Did St. Pius V not see, did the theologians by whose study that usage stands not see, what the law of nature prescribes? Do the bulls of the Pontiffs oblige in matters of faith and not so in the precepts of morals? But why has the Pian constitution not been received in usage? Because it is not observed by very many merchants. Is not this an excellent reason! Many other things which St. Pius V condemns in this constitution are explained in the place cited.

X. QUESTION V. What is to be said of exchange at the fairs? ANSWER. Merchants celebrate fairs in certain places or cities three or four times in the year, where debts are paid. They count out money there, to be restored at the second or fourth fairs with so much the greater gain as the longer time flows between. Lessius, Layman, and others assert that this exchange is lawful, but nevertheless that it is not to be persuaded. Other graver theologians disapprove it as usurious, because gain is exacted on account of the delay of time alone. There are wont to be alleged the titles of ceasing gain and emerging loss; but, as Genet observes, merchants scarcely ever suffer loss from such an exchange. Because they scarcely exchange, payment being deferred, save when they abound in idle money; therefore this exchange, he says, is always usurious.

XI. QUESTION VI. What is to be said of civic exchange at Rome? ANSWER. Caius has need of a hundred gold pieces, which he asks of Titius an exchanger, to be restored in that same place with gain at a term — namely at the first, or second, or third fairs. There is no one who does not condemn that exchange as feigned and usurious. Since indeed the exchangee has money neither at Rome nor elsewhere to be exchanged. They are wont to disguise that exchange in this manner. Caius at Rome testifies to the exchanger that he receives the coins either for exercising exchange at Naples, Lyons, Milan, and so forth, or for entering upon other trading contracts. And this, if need be, he confirms by oath. All these things nevertheless are false. For Caius receives money at Rome to be spent either upon settling his daughter or upon relieving his own necessities. Titius refuses to entrust money to Caius unless either a pledge or a surety be accepted. And Caius must pay gain to the surety and at the same time to the exchanger. How many interests in one crime! Exchangers and brokers commonly have all these fictions thoroughly known. They answer: is there not some title governing this usury? Some say: since either Caius trades with the money received from Titius, or not. If the first, the exchange is real. If the second, it is through Caius's fault that the money does not become gainful. Further, Titius ought not to bear the loss from Caius's fault. But all these are mere figments, since the titles of contracts must be real, not feigned.

XII. By another agreement they are wont to exercise this exchange, which they call obligation. Sempronius the borrower says to Caius the lender: Do you deliver to me on loan a thousand gold pieces: I will destine an equal sum of money to trade, or will deliver it at exchange for your advantage and utility; and I will pay you every year as much as I shall gain from the trade or from the exchange, until I shall have restored the sum received. All these are chimerical, as Benedict XIV, Supreme Pontiff, declared, Book 7, chapter 48, no. 9, On the Synod, saying: For what more absurd, what more incredible, can be feigned than that Titius, in need of the thousand gold pieces which he receives on loan from Caius, should have just as many ready at once to be remitted to the fairs, and to be laid out in active exchanges, for the utility of Caius the lender?

XIII. This circumlocution is so puerile and inept that it needs no confutation. Nor does it matter that the decisions of the Rota are adduced in confirmation. Since in a tribunal the parties prove by lies and circumlocutions that a feigned exchange was real. For the rest, if in the forum it appeared that the exchange was a mere figment, the judges would never approve it. And in this sense is Cardinal de Luca to be understood, who On Exchanges, Book 5, title Exchange, says: No one seems to approve the exchange described. For no one master of his reason can approve such an exchange, if it be feigned, as in truth it is and is everywhere reduced to practice. If you desire more concerning exchanges, read Vol. VII, Book 3, dissertation 4.