changed for a less weight of gold, and its price will be said to fall. Under opposite circumstances, more gold would be required for the same quantity, and its price will be said to rise. But let gold be produced in tenfold quantities, an equal weight will then be purchased by other nations, from those possessing mines, in exchange for less of their own commodities. The pound being still, however, coined into forty-four guineas and a half, or into fortysix pounds fourteen shillings and six-pence, its nominal value must be unaltered; but, coined or uncoined, the pound or ounce will now represent less than they were accustomed to do of other commodities, and all these articles will be said to rise, or to become dear. Reverse the supposition, and gold will not be bought from mining nations but for greater quantities of other articles: gold will still be coined as before, and remain at the same nominal price; but these commodities will be considered as cheap.

SECTION IV.

A custom has universally prevailed, in modern times, of dividing the commerce between different nations into two parts:-the first consisting of those substances which have been selected as the standards of value, and principally gold; the second including all other articles. Exporting more and importing less of the latter division, has been esteemed advantageous: precisely the contrary, respecting the former. Under this head is comprised the doctrine of exchanges, more complicated and involved than almost any other subject; but capable, it would seem, of being explained, in principle at least, as distinctly as those accounted the most plain. I shall continue to suppose the circulation of

corn.

All imports and exports would then be divided into other commodities, and into grain, with doubtless a similar theory of advantage and disadvantage, from a defect of one, and an excess of the other; at all events, the balance of every account must be paid in corn. The merchant in one country, rather than incur the risk, the expense, the delay requisite for transporting this standard of value to the other, where his debt is due, will naturally be led to inquire whether some one has not a demand for corn, on another individual there. If such a person can be found, he will purchase the right of demand, and transfer it to his creditor in liquidation of the debt: all others doing the same, it follows, that not the balance of each particular account, but the general balance on all the accounts with both nations, will be left for remittance. If the purchases and sales

on either side have amounted to an equal value, estimated in seals of corn, it is probable that the desire among individuals for procuring, and disposing of demands, will be the same; in that case, a given quantity of corn in either country, will purchase an order for delivering a like quantity in the other, and the exchange will be at par. If the sales have been unequal, individuals in that country which has most to pay, eager to avoid the expense and inconvenience of actual remittance, will be inclined to purchase demands for grain on the other country, at an advanced price: and the course of exchange will become unfavorable. Individuals in the country making the least purchases will readily find orders on the debtor country, will purchase them cheap, and thus establish a favorable exchange. This is the simple statement of exchange, to which all operations in that department may be reduced, when difficulties similar to the following are removed. The sealed bags of corn in different countries may vary in their contents; the corn may be of several sorts, or mixed with chaff. If the measures in one province of an empire should contain a twelfth part less than those circulated at the capital, an allowance of 83 per cent. will immediately take place in all transactions, to restore the equilibrium.

But at last some balance must remain due, after private accounts have been adjusted to their utmost limit: this certainly will be paid in part by corn; which, pro tanto, must go towards liquidating the debt: the operation produces, however silently and unobserved, effects much more important; the quantity of circulating medium being diminished in the exporting country, and rendered more abundant in that which receives. If seals are sent out, the circulating medium at once undergoes that change; if the export consists of unsealed corn, a temptation will be created, by the advance in relative value of what is left, to open bags, and thus convert the sealed grain into an article of common use; and either mode will be productive of the same effect. The circulating medium having become of more value in comparison with other articles, where its quantity has been diminished, these articles will appear to fall; in the other country they will appear to rise, from the standard of value really becoming more plentiful, and consequently more cheap. These variations encourage exportation from the debtor state, and check it from the creditor. Thus, a very small remittance of the article selected as a standard of value, may, and certainly does, indirectly operate the discharge of debts to many times its own amount, and frequently turns quite round the course of exchange: so that very little, in comparison with the aimount of balance, is ever likely to be actually transferred.

I surely need not repeat this section over again, substituting

gold for wheat, coin for seals, and alloy for chaff, to prove that every peculiar circumstance attached to the medium of circulation, applies equally to whatever substance may have been selected for that purpose. It clearly appears that gold and silver, divested of this character, would identify themselves with other articles of common merchandise.

Exchanges are at par, when a given quantity of the article representing value can be transferred from either country to the other, without any loss, beyond the necessary expenses of brokerage, &c. The coin of one country deficient in quantity, may bear an agio: the coin of another redundant, but guarded by laws, may to a small extent, be depressed; paper currency not convertible at will, may be depreciated to any extent. All these causes vary the nominal rate without affecting the reality. To be perfectly accurate, some small allowance should be made for nations possessed of mines, and for others contiguous to them; and when currencies are of different metals, their actual relative values must be taken into the account.

It must surely be established to your satisfaction, that the standard of value has properly no price-that gold in bars, and gold in coin, must always equal one the other, with the trifling variations already mentioned that the greater or less abundance of this article, affects the nominal value of all others, in directly the opposite way from their own excess or deficiency-and that its exportation, in payment of debts, liquidates indeed to the amount, but produces a much greater effect, by decreasing the nominal rates of all articles at home, and increasing those rates abroad; thus checking import, already too great, and forcing an export, sufficient to correct the balance.

SECTION V.

The inconvenience of actually paying each balance by remitting the standard substance of value, having induced individuals to purchase credits on the places where they had debts to discharge, a method was very early contrived for facilitating such transactions; which has proved eminently useful, and occurs in almost every transaction of trade.

The creditor addresses an open letter to his debtor, requiring him to pay a certain amount of the circulating medium to a third person, or to some other claiming under him; usually at the expiration of a given time. This letter is denominated a bill of exchange, which, being easily transferable from place to place, from one country to another, extends the system of balances, by

debts against credits without actual remittance, over an extent of surface, far greater than could otherwise be reached; and has given facilities, beyond what can readily be imagined, to all the parties concerned.

From bills of exchange seem to have arisen notes: these are engagements sometimes of an individual, more frequently of a company, to pay the bearer on demand, that particular quantity of the article representing value, which is mentioned in the note itself. These, equally with bills of exchange, possess the property of ready transmission; constitute to the issuer a capital advanced to him without interest; and, being applied to precisely the same purposes, as the commodity selected for measuring all others, they occupy its place, and cause a part of what had been gold in coin, to become an article of commerce: or, on the other supposition, they would convert corn in seals to the common uses of grain.

The value of these notes being always measured by the quantity of gold, or of corn, for which they may at any time be exchanged, if the quantity of corn in seals be supposed very great, and the substitution by bills extremely rapid, it will follow that so much corn may suddenly be returned to common use, as for some time at least, to reduce the value of any given portion in exchange for other commodities: but the annual production of grain being nearly equal to what can ever be in store, such a reduction of value would correct itself, by diminished tillage, and be of short duration. In the case of gold, it might extend to a great number of

years.

The extraordinary reduction in value of gold and silver, as compared with other commodities, in modern times, has been occasioned by the two causes, alone capable of producing such an effect-first, by a great increase of the supply; and secondly, by as great a diminution of the demand.

It is obvious that the quantity of gold, of silver, or of other metals produced from mines, cannot, for any considerable time, be much less than what will exchange for the materials used, and for the food, raiment, and general support of all persons employed in working them. Gold and silver had adjusted themselves to this standard in the Old World, when the discovery of America opened mines far more productive, with an equal expenditure of materials and with equal labor; they were consequently, at first, most advantageous. The mass of gold and silver actually existing in the world, being probably more than the produce of any century from mines, the reduction of value proceeded with a gentle pace: but after the lapse of a certain number of years, these metals exchanged for no greater quantities of other articles, than were sufficient to support

the mines of America, as they had previously done those, less productive, on the other continent. This point once attained, the relative value of gold or silver to other commodities, appeared likely to remain as little variable as in former times; and for some time very little alteration seems to have taken place; till the second cause came into operation, acting with much more rapidity, and capable of proceeding to an unknown extent. No sooner had governments acquired stability, and private credit established itself on a firm basis, than bills of exchange almost excluded metallic payments from large transactions; and the subsequent introduction of notes produced nearly the same effect on transactions of smaller magnitude.-Inventions, more or less analagous to notes, have been contrived in most countries; so that, notwithstanding the great increase of population and of commerce, a far less quantity of coin is now required for circulation than at former periods. The superfluous coin returning to the common stock of mercantile commodities, has of necessity reduced the value of these particular articles in comparison with others. More than the mines could yield in many years, has been rapidly poured on the civilised world, and, combining with the effects already produced by the discovery of a New Continent, they have rendered almost ridiculous the nominal values affixed by our ancestors.

Thus far, however, all mankind acquiesced :-the changes were considered as an inevitable consequence of the natural order of things, of which no one could complain. The mines of America might not have been discovered; they may be worked out: trade, industry, population, may hereafter increase at a greater rate than contrivances for diminishing metallic payments; and the value of gold and silver, in exchange for other articles, may again increase. Quit-rents, now become nominal, would then acquire value; and the creditor, receiving back the stipulated weight of gold, would find himself enabled to command a larger portion of labor, or of the products of labor.

SECTION VI.

We are now arrived at the last step in the progress of circulating media.-Notes, verbally promising to pay the bearer a certain quantity of gold or silver on demand, have been issued in different countries, under various forms, without really entitling the holder to receive, at his pleasure, the equivalent promised. A great variety of circumstances have accompanied these issues. Some govern