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AGIO (Ital. aggio, exchange, discount...

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Originally appearing in Volume V01, Page 376 of the 1911 Encyclopedia Britannica.
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AGIO (Ital. aggio, exchange, discount, premium), a term used in commerce in three slightly different connexions. (a) The variations from fixed pars or rates of exchange in the currencies of different countries. For example, in most of the gold-standard countries, the standard coin is kept up to a uniform point of fineness, so that an English sovereign fresh from the mint will bear the following constant relation to coins of other countries in a similar condition:—£t =fres. 25.221=mks. 20.429=$4.867, &c. This is what is known as the mint par of exchange. But the mint par of exchange, say, between France and England is not necessarily the market value of French currency in England, or English currency in France. The balance of trade between the various countries is the factor determining the rate of exchange. Should the balance of trade (q.v.) be against England, money must be remitted to France in payment of the indebtedness, but owing to the cost for,the transmission of specie there will be a demand for bills drawn on Paris as a cheaper and more expeditious method of sending money, and it therefore will be necessary, in order to procure the one of the higher current value, to pay a premium for it, called the agio. (b) The term is also used to denote the difference in exchange between two currencies in the same country; where silver coinage is the legal tender, agio is sometimes allowed for payment in the more convenient form of gold, or where the paper currency of a country is reduced below the bullion which it professes to represent, an agio is payable on the appreciated currency. (c) Lastly, in some states the coinage is so debased, owing to the wear of circulation, that the real is greatly reduced below the nominal value. Supposing that this reduction amounts to 5%, then if loo sovereigns were offered as payment of a debt in England while such sovereigns were current there at their nominal value, they would be received as just payment; but if they were offered as payment of the sameamount of debt in a foreign state, they would be received only at their intrinsic value of £95, the additional 5 constituting the agio. Where the state keeps its coinage up to a standard value no agio is required.
End of Article: AGIO (Ital. aggio, exchange, discount, premium)

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