Chap。XXXVI
OfBanksofDepositandTransferInowdismissthesubjectofbanksofcirculation。Theunspeakableadvantagesdrawnfromthisinstitution，whenproperlyregulated，insupplyingmoneyatalltimestothosewhohavepropertyfortheencouragementofindustry，andforimprovementsofallsorts，andthebadconsequenceswhichresulttosociety，fromtheabusetheyareexposedto，hasengagedme，perhaps，intoolongadiscussionofvariouscircumstancesrelatingtothem。
Inowcometotreatofbanksofdepositoroftransferofcredit:aninstitutionofthegreatestutilityforcommerce。
Thesetwospeciesofbanksdifferessentiallyintwoparticulars。
First，Thatthoseofcirculationservethepurposeofmeltingdownunwieldypropertyintomoney；andofpreservingthequantityofitattheproportionoftheusesfoundforit。Thoseofdeposit，arecalculatedtopreserveasumofcoin，oraquantityofpreciousmoveables，asafundforcarryingonthecirculationofpayments，withaproportionalvalueofcreditorpapermoneysecureduponthem。
Secondly，Inthebanksofcirculation，thefunduponwhichthecreditisbuilt，isnotcorporeallyinthecustodyofthebank；intheotheritis。
Thefundamentalprinciple，then，ofbanksofdeposit，isthefaithfulpreservationofthefunddeliveredtothebank，uponwhichcredit，inmoney，isgivenforthevalue。
Ifatanytimeabankofdepositshouldlend，orshouldinanywisedisposeofanypartofthisfund，whichmayconsistincoin，bullion，oranyotherpreciousmoveable，oncedeliveredtothem，totheendthatacreditinmoneymaybewrittendownforitintheirbooksoftransfer，infavourofthedepositor，andhisassigns；bythisact，thebankdepartsfromtheprinciplesuponwhichitisestablished。Andifanybankbeestablishedwhich，byitsregulations，maysodisposeofthefundofitscredit，thensuchabankbecomesofamixednature，andparticipatesofthatofabankofcirculation。
Thesethingswillbebetterunderstoodbyreasoningfromanexampleofatruebankofdeposit。
Chap。XXXVII
OftheBankofAmsterdamManyauthorshavewrittenconcerningthisgreatbankofdeposit:particularly，Davenant，SirWilliamTemple，Ricard，inhisTrait*deCommercerevuparStruyk，theauthoroftheEssaisurleCommerce，andMrMegens，inhisbook，whichhasbeentranslatedintoEnglish，underthetitleofTheUniversalMerchant。
Intheseauthorswefindanumberoffacts，whichIshallcombinewithmyowninformations，andhereapplyprinciplestothem；inordertocommunicateadistinctideaofthisestablishment。Adetailofitsparticularoperationsregardspractice，andfallsnotwithinmysubject。
TheoriginalintentionoftheStatesofHolland，inestablishingthebankofAmsterdam，wastocollectalargecapitalincoinwithinthatcity，whichmightthereperpetuallyremain，buriedinasaferepositoryforthepurposeswhichwearenowtoexplain。
Inordertoaccomplishthisplantheyestablishedthebankuponthe31stdayofJanuary1609。
Themethodtheyfellupontocollectthecoin，wastoorder，thatallbillsofexchange，foranysumexceeding300florins，shouldbepaidinspecietothebank；andthattheholderofsuchbillsshould，insteadofreceivingthecoin，havethevalueofitwrittendowninthebooksofthebanktohiscredit，athiscommand，tobetransferredtoanypersonheshouldappoint；butnevermoretobedemandablefromthebankinspecie。
Bythisoperation，themassofcoincirculatingconstantlyfromhandtohand，betweenthemerchantsofAmsterdam，began，bydegrees，tobeheapedupinthebank；andastheheapaugmented，sodidthesumofcreditaugmentuponthebooksofthebank。
Itisevident，fromthischangeinthemodeofcirculation，thatnolosscouldbeincurredfromthelockingupofthecoin。
Aslongascoinisinastateofconstantcirculation，itcanproducenointeresttoanyperson。Interestcommencesfromthemomentthecoinbeginstostagnate；thatistosay，sosoonasitcomesintothehandsofonewhohasnoreadymoneydemanduponhim。Whenthishappens，theproprietorlendsitatinterest。
Nowthecreditinthebooksofthebank，whichiseverydaytransferableatthebank，answerseverypurposeofcoin，eitherforpaymentorloan:andtheproprietorhasneitherthetroubleofreceivingthespecies，noranyriskfromrobbery，orfalsecoin。
Thefirstadvantagethecityreapedfromthisinstitution，was，tosecuretheresidenceoftradeinthatplace。
Capitalstransferableonlyatthebank，laidtheproprietorsunderanecessityoffixingtheirdwellingwheretheirfundswere，andwhereonlytheycouldbeturnedtoaccompt。
Ithadanotherexcellenteffectincommerce:itpointedoutthemenofsubstance。Acreditinbankisnowiseequivocal:itisafundofundoubtedsecurity。
Fromtheconstitutionofthisbankwemayformanestimateoftheextentofthedeposit。
ItcanonlyswallowupasumequaltowhatisnecessaryforcirculatingthepaymentsofthecityofAmsterdam。Wereasumexceedingthistobeshutupinthebank，andwerethecreditswritteninthebooksofthebanktoexceedthisproportion，itisplain，thatthevalueofthebankmoneywouldsinkimmediately。
Thereasonisobvious:thecreditstransferableareofnousetothosewhohavenooccasiontotransfer；thatis，topay，lend，orexchangeatAmsterdam。Sosoon，then，asallthedemandofAmsterdamissatisfied，theproprietorsoftheoverpluswillseektorealizetheirsuperfluouscredit，inordertoinvestthevaluearisingfromit，insomeotherplacewhereademandmayarise。
Inordertorealize，theymustselltheirbankcreditforcoin；becausethebankpaysintransferonly。Cointhenwouldbedemandedpreferablytocreditinbank；consequently，coinwouldriseinitsproportionalvaluetobankmoney，orbankmoneywouldlose，whichisthesamething。Thisfluctuationbetweenbankmoneyandcoin，leadsmetoexplainwhatiscalledtheagioofthebank。
NOTES:
1。Solidproperty，here，isnottakeninthestrictestacceptation。Incountriesofcommerce，wherebanksaregenerallyestablished，everydenominationofgoodpersonalsecuritymaybeconsideredassolidproperty。Thosewhohavepersonalestates，mayobtaincreditfrombanksaswellaslandedmen；becausethesepersonalestatesaresecuredeitheronlands，orinthefunds，orineffectswhichcontainasrealavalueaslands，andthesebeingaffectedbythesecuritieswhichtheproprietorsgranttothebank，maywithasmuchproprietybesaidtobemelteddown，asiftheyconsistedinlands。Insubjectsofthisnature，itisnecessarytoextendthemeaningofourterms，inproportiontothecircumstancesconcerningwhichwereason。
2。Letitberemarkedinthisplace，thatalthoughallpersonsobtainingcreditfromabankforadeterminatesum，beobligedtograntapropersecurityforthewholesum；yetbythenatureoftheobligation，nointerestbecomesduetothebankinconsequenceofit，exceptinproportiontothesumsadvanced，andtothetimeofsuchadvancebythebank。Example:A。Obtainsacreditfromabankforonethousandpounds。Afteronemonthhemikesacallforonehundredpounds；theinterestofthishundredpoundscommencesfromthedayonlyonwhichthebankpaysit；andwereA。toreplacethissumtothebankoneweekafter，hewillbeliableforoneweek’sinterestonly，ofonehundredpoundsnotwithstandingthathisobligationliesinthehandofthebankforonethousandpounds。When，therefore，inthecourseofthissubject，weshallmikementionoftheinterestduetothebankuponthesecuritiesintheirhand，forthecreditstheyhavegiven；thisisalwaysunderstoodtoberestrictedtothesumsactuallyadvancedbythebankuponsuchcredits。
3。Atthistimetherewasanothercircumstance，besidesthedemandofabalancetobepaidabroad，whichdistressedthebank，viz。asuspicionwhichtookplace，thatiftherebellionhadsucceeded，thecreditofthebankwouldhavetotallyfailed。
Thisverycasepointsoutthegreatadvantageofbanksuponmortgageofprivatecredit。
Wehavesaid，thatthecreditofsuchbanksoughttobeestablishedupontheprinciplesofprivatesecuritiesonly。Iftheirnotesbeissueduponsolidproperty，thennorebellioncaninfluencethem:butofthismorehereafter。
4。Wearenottosupposethatthisyearlybalanceof200，000l。
isalwaystocontinue。Wehaveseenhowithasbeenoccasionedbyacourseofunfavourablecircumstances，whichhaverunScotlandindebt；wehaveseenhowthebanksmayinterposetheircredit，inordertoassistthecountryinpayingit；andweshallsee，beforewedismissthissubject，howtheywillbeenabledtorepayit，andsetScotlandfree，byareturnofafavourablebalanceupontheircommerce。Letitthenberemembered，thatallthosecontractsinEnglandareproperlythedebtsofScotland，notofthebanks。Scotland，therefore，andnotthebanks，mustbeatalltheexpencetherebyincurred。Thesepointsshallbeexplainedaswegoalong。
5。Herethebankdepartedfromtheprinciplesofprivateandmercantilecredit，uponwhichLawhadformedit，andproceededuponthoseofpubliccredit。PubliccreditinFranceisthecreditoftheSovereign；thesolidityofwhichdependsuponthemaximswhichhefollowsinthecourseofhisadministration。
6。Dutot，speakingofthegreatvalueofpaperinnotesandactions，throwsoutseveralreflections，inthepassageIamnowtotranscribefromhim，which，atthesametimethattheyprovethegreatadvantagesresultingtoFrancefromtheestablishmentofcreditamongthem，abundantlyevincehowlamethisauthor’sideaswereconcerningtheprinciplesofpapercredit，andofcirculation。Hesays，vol。iip。200’Thispaperwasindeedjustsomuchrealvalue，whichcreditandconfidencehadcreatedinfavourofthestate:andbythissumwascirculationaugmented，independentlyofallthecoinwhichwastheninFrance。
Uponthisrevolution，Plentyimmediatelydisplayedherselfthroughallthetowns，andallthecountry。Shethererelievedourcitizensandlabourersfromtheoppressionofdebts，whichindigencehadobligedthemtocontract:sherevivedindustry:sherestoredthatvaluetoeveryfund，whichhadbeensuspendedbythosedebts:sheenabledtheKingtofreehimself，andtomakeovertohissubjects，formorethanfifty-twomillionsoftaxes，whichhadbeenimposedintheyearspreceding1719；andformorethanthirty-fivemillionsofotherduties，extinguishedduringtheregency。Thisplentysunktherateofinterest；crushedtheusurer；carriedthevalueoflandstoeightyandahundredyears’
purchase；raisedupstatelyedificesbothintownandcountry；
repairedtheold，whichwerefallingtoruin，improvedthesoil；
gaveavaluetoeveryfruitproducedbytheearth，whichbeforethattimehadnoneatall。Plentyrecalledthosecitizens，whommiseryhadforcedtoseektheirlivelihoodabroad。Inaword，richesflowedinfromeveryquarter。Gold，silver，preciousstones，ornamentsofallkinds，whichcontributetoluxuryandmagnificence，cametousfromeverycountryinEurope。Whethertheseprodigies，ormarvellouseffects，wereproducedbyart，byconfidence，byfear，orbywhimifyouplease，onemustagree，thatthatart，thatconfidence，thatfear，orthatwhim，hadoperatedalltheserealitieswhichtheancientadministrationnevercouldhaveproduced。
WhatadifferenceinthesituationofFranceatthebeginningoftheregency，andthesituationinwhichshewasinNovember1719！
Thusfarthesystemhadproducednothingbutgood:everythingwascommendable，andworthyofadmiration。’ThesearethesentimentsofDutotconcerningthissystemofpapercredit。
PartIII
OfExchangeChap。I
OfthefirstPrinciplesofExchangeHavingendedwhatIhadtosayofbanks，inwhichmostoftheprinciplesofprivatecreditanddomesticcirculation，havebeensufficientlydeduced，Inowproceedtothedoctrineofexchange，whichistheprincipaloperationofmercantilecredit，forthecarryingonofforeigncirculation。
Thesecuritywhichmerchantscommonlytakefromoneanotherwhentheycirculatetheirbusiness，isabillofexchange，oranoteofhand:thesearelookeduponaspayment。Whentheygivecredittooneanotherinaccount，orotherwise，thecauseofconfidenceisofamixednature；establishedpartlyuponthesecurityoftheireffects，partlyonthecapacity，integrity，andgoodfortune，ofthepersontowhomthecreditisgiven。
Nomanbutamerchanthasanyideaoftheextentandnatureofthiskindofcredit。Itisathingtobefelt，butcannotbereducedtoprinciples；andmerchantsthemselvescanlaydownnocertainrulesconcerningit。Itisanoperationwhichtotallydependsupontheirownsagacity。
Butwhentheydealbybillsofexchange，thecaseisverydifferent。Thepunctualityofacquittingtheseobligationsisessentialtocommerce；andnosoonerisamerchant’sacceptedbillprotested，thanheisconsideredtobeabankrupt。Forthisreason，thelawsofmostnationshavegivenveryextraordinaryprivilegestobillsofexchange。Thesecurityoftradeisessentialtoeverysociety；andweretheclaimsofmerchantstolingerundertheformalitiesofcourtsoflaw，whenliquidatedbybillsofexchange，faith，confidence，andpunctuality，wouldquicklydisappear；andthegreatengineofcommercewouldbetotallydestroyed。
Aregularbillofexchangeisamercantilecontract，inwhichfourpersonsareconcerned，viz。First，Thedrawer，whoreceivesthevalue:Secondly，Hisdebtorinadistantplace，uponwhomthebillisdrawn，andwhomustacceptandpayit:Thirdly，Thepersonwhogivesvalueforthebill，towhoseorderitistobepaid:and，Fourthly，Thepersontowhomitisorderedtobepaid，creditortothethird。
Bythisoperation，reciprocaldebts，dueintwodistantparts，arepaidbyasortoftransfer，orpermutationofdebtorsandcreditors。
AinLondon，iscreditortoBinParis，value1OOl。C
againinLondon，isdebtortoDinParisforalikesum。Bytheoperationofthebillofexchange，theLondoncreditorispaidbytheLondondebtor，andthePariscreditorispaidbytheParisdebtor；consequently，thetwodebtsarepaid，andnomoneyissentfromLondontoParis，norfromParistoLondon。
Inthisexample，Aisthedrawer，Bistheacceptor，C
isthepurchaserofthebill，andDreceivesthemoney。Twopersonsherereceivethemoney，AandD，andtwopaythemoney，BandC；whichisjustwhatmustbedonewhentwodebtorsandtwocreditorsclearaccounts。
Thisistheplainprincipleofabillofexchange。Fromwhichitappears，thatreciprocalandequaldebtsonlycanbeacquittedbythem。
Whenitthereforehappens，thatthereciprocaldebtsofLondonandParistousethesameexamplearenotequal，therearisesabalanceononeside。SupposeLondontooweParisabalance，value100l。Howcanthisbepaid？Ianswer，thatitmayeitherbedonewithorwithouttheinterventionofahill。
Withabill，ifanexchanger，findingademandforabilluponParis，forthevalueof100l。whenParisowesnomoretoLondon，shallsend100l。tohiscorrespondentatParisincoin，attheexpence，Isuppose，of1l。andthen，havingbecomecreditoronParis，hecangiveabillforthevalueof100l。
uponhisbeingrepaidhisexpence，andpaidforhisriskandtrouble。
Oritmaybepaidwithoutabill，iftheLondondebtorshallsendthecoinhimselftohisPariscreditor，withoutemployinganexchanger。
Thislastexampleshewsofwhatlittleusebillsareinthepaymentofbalances。Asfarasthedebtsareequal，nothingcanbemoreusefulthanbillsofexchange，butthemoretheyareusefulinthiseasywayofbusiness，thelessprofitthereistoanypersontomakeatradeofexchange，whenheisnothimselfconcerned，eitherasdebtororcreditor。
Whenmerchantshaveoccasiontodrawandremitbillsfortheliquidationoftheirowndebts，activeandpassive，indistantparts，theymeetuponChange；where，topursuetheformerexample，thecreditorsuponParis，whentheywantmoneyforbills，lookoutforthosewhoaredebtorstoit。ThedebtorstoParisagain，whentheywantbillsformoney，seekforthosewhoarecreditorsuponit。Thisisarepresentationofwhatwehavefrequentlycalledthemoneymarket，inwhichthedemandisformoney，orforbills。
Thismarketisconstantlyattendedbybrokers，whorelievethemerchantofthetroubleofsearchingforthosehewants。Tothebrokereveryonecommunicateshiswants，asfarashefindsitprudent；andbygoingaboutamongallthemerchants，thebrokerdiscoversthesideuponwhichthegreaterdemandlies，formoney，orforbills。
Wehaveoftenobserved，thathewhoisthedemanderinanybargain，hasconstantlythedisadvantageindealingwithhimofwhomhedemands。Thisisnowheresomuchthecaseasinexchange，andrenderssecrecyveryessentialtoindividualsamongthemerchants。IftheLondonmerchantswanttopaytheirdebtstoParis，whenthereisabalanceagainstLondon，itistheirinteresttoconcealtheirdebts，andespeciallythenecessitytheymaybeundertopaythem；fromthefearlestthosewhoarecreditorsuponParisshoulddemandtoohighapricefortheexchangeoverandabovepar。
Ontheotherhand，thosewhoarecreditorsuponParis，whenParisowesabalancetoLondon，areascarefulinconcealingwhatisowingtothembyParis，fromthefearlestthosewhoaredebtorstoParisshouldavailthemselvesofthecompetitionamongthePariscreditors，inordertoobtainbillsfortheirmoney，belowthevalueofthem，whenatpar。AcreditoruponParis，whoisgreatlypressedformoneyatLondon，willwillinglyabatesomethingofhisdebt，inordertogetonewhowillgivehimmoneyforit。
Itisnotmyintentiontodipintotheintricaciesofexchange:allintricaciesmustherebebanished；andinsteadoftechnicalterms，whichareverywelladaptedforexpressingthem，recoursemustbehadtoplainlanguage，forpointingoutthesimpleoperationsofthistrade。Itisbythismethodthatprinciplesmustbededuced，andfromprinciplesweshalldrawtheconsequenceswhichmaybederivedfromthem。
FromtheoperationcarriedonamongmerchantsuponChange，whichwehavebeendescribing，wemaydiscovertheconsequenceoftheirseparateandjarringinterests。Theyareconstantlyinterestedinthestateofthebalance。ThosewhoarecreditorsonParis，fearabalanceduetoLondon；thosewhoaredebtorstoParis，dreadabalanceduetoParis。Theinterestofthefirstistodissemblewhattheyfear；thatofthelast，toexaggeratewhattheywish。Thebrokersarethosewhodeterminethecourseoftheday:andthemostintelligentmerchantsarethosewhodispatchtheirbusinessbeforethefactbeknown。
NowIask，howtrade，ingeneral，canbeinterestedinthequestion，whoshalloutwit，andwhoshallbeoutwitted，inthiscomplicatedoperationofexchangeamongmerchants？
Theinterestoftradeandofthenationisprincipallyconcernedinthepropermethodofpayingandreceivingthebalances。Itisalsoconcernedinpreservingajustequalityofprofitandlossamongallthemerchants，relativelytotherealstateofthebalance。Unequalcompetitionamongmenengagedinthesamepursuit，constantlydrawsalongwithitbadconsequencestothegeneralundertaking，ashasbeenoftenobserved；andsecrecyintradewillbefound，uponexamination，tobemuchmoreusefultomerchantsintheirprivatecapacity，thantothetradetheyarecarryingon。
Merchants，wehavesaid，inspeakingofthebankofEngland，endeavourtosimplifytheirbusinessasmuchaspossible；andcommittobrokersmanyoperationswhichrequirenopeculiartalentstoexecute。Thisofexchangeisofsuchanaturethatitishardlypossibleforamerchanttocarryonthebusinessofhisbills，withouttheirassistance，uponmanyoccasions。WhenmerchantscomeuponChange，theyaresofulloffearsandjealousies，thattheywillnotopenthemselvestooneanother，lesttheyshoulddiscoverwhattheywanttoconceal。Thebrokerisaconfidentialman，insomedegree，betweenparties，andbringsthemtogether。
Besidesthemerchants，whocirculateamongthemselvestheirreciprocaldebtsandcredits，arisingfromtheirimportationandexportationofgoods，thereisanothersetofmerchantswhodealinexchange；whichistheimportationandexportationofmoneyandbills。
Werethereneveranybalanceonthetradeofnations，exchangersandbrokerswouldfindlittleemployment:reciprocalandequaldebtswouldeasilybetransactedopenlybetweenthepartiesthemselves。Nomanfeignsordissembles，exceptwhenhethinkshehasaninterestinsodoing。
Butwhenbalancescometobepaid，exchangebecomesintricate；andmerchantsaresomuchemployedinparticularbranchesofbusiness，thattheyareobligedtoleavetheliquidationoftheirdebtstoaparticularsetofmen，whomakeitturnouttothebestadvantageforthemselves。
Wheneverabalancecomestobepaid，thatpaymentcosts，aswehaveseen，anadditionalexpencetothoseoftheplacewhooweit，overandabovethevalueofthedebt。
If，therefore，thisexpencebealosstothetradingman，hemusteitherberepaidthislossbythosewhomheserves，thatis，bythenation；orthetradehecarriesonwillbecomelessprofitabletohim。
Everyonewillagree，Ibelieve，thattheexpenceofhighexchangeuponpayingabalance，isalosstoapeople，nowaytobecompensatedbytheadvantagestheyreapfromenrichingthefewindividualsamongthem，whogainbycontrivingmethodstopayitoff:andifanargumentbenecessarytoprovethisproposition，itmaybedrawnfromthisprinciple，towit，whateverrenderstheprofitupontradeprecariousoruncertain，isalosstotradeingeneral:thislossisaconsequenceofhighexchange；andalthoughaprofitdoresultfromitupononebranchoftrade，namely，theexchangebusiness，yetthisprofitcannotcompensatethelossuponeveryother。
Wemay，therefore，hererepeatwhatwehavesaidabove，thatthemoredifficulty，therebefoundinpayingabalance，thegreaterwillbethelosstothenation。
Thisbeingadmitted，Ishallhereenumerateallthedifficultieswhichoccurinthepayingofbalances。Mostofthemhavebeenalreadymentionedfromtheirrelationtosubjectsalreadydiscussed；andcoulditbesupposed，thateveryreaderhadretainedthewholechainofreasoningalreadygonethrough，arepetitioninthisplacewouldbesuperfluous:butasthiscannotbeexpected，Ishall，inasshortanddistinctamanneraspossible，recapitulate，underfourarticles，whatIhopewillbesufficienttorefreshthememoryuponeachofthem。
Thefirstdifficultywhichoccursinpayingabalance，istodetermineexactlythetrueandintrinsicvalueofthemetalsorcoininwhichitistobepaid；thatistosay，therealpar。
Thesecond，Howtoremovethedomesticinconvenienceswhichoccurinpayingwiththemetalsorcoin。
Thethird，Howtopreventthepriceofexchangefromoperatinguponthewholemassofreciprocalpayments，insteadofaffectingthebalanceonly。
Theremediesandpalliativesforthesethreeinconveniencesoncediscovered，comesthelastquestion，viz。How，whenotherexpedientsproveineffectualforthepaymentofabalance，thesamemaybepaidbythemeansofcredit，withouttheinterventionofcoin；andwhoarethosewhoshouldconductthisoperation。
Chap。II
HowtodetermineexactlythetrueandintrinsicvalueoftheMetals，Coin，orMoney，inwhichaBalancetoforeignNationsistobepaidThisfirstquestionregardsthewholemassofreciprocalpayments，aswellasthatofthebalance。
Everypaymenttobemadeofadeterminateandfixedvalue，thatistosay，ofaliquidateddebt，mustbepaidinavalueequallydeterminateinitsnature。
ThisIsupposetobethecase，whetherpaymentbemadeinthepreciousmetalsunmanufactured，thatisbullion，orinanation’scoin，orindenominationsofmoneyofaccount。Allpaymentsinmerchandize，exceptbullion，mustsufferconversionsofvaluebeforethedebtscanbeliquidated。
Moneyofaccompt，whichiswhatweunderstandbydenominations，wehavedefinedtobeascaleofequalparts，calculatedtodeterminethevalueofthings，relativelytooneanother。Itmust，therefore，bebythemoneyofaccomptofdifferentnations，thatthevalueofbullionandofcoincanbeascertained。
Whencoinisintroduced，thedenominationsofmoneyarerealizedinadeterminatequantityofthepreciousmetals，andthefabricationofthebullionintocoin，raisesthevalueofthiscommodity，bullion，likethemanufacturingofeveryothernaturalproduction。
Whencoin，therefore，isemployedinpayingsumsaccordingtothelegaldenominationwhichitcarries，itismoney，notmerchandize；butwhenitisgivenatanyotherratethanitsdenomination，itismerchandize，notmoney。
Inthethirdbook，wehaveshewnhowutterlyimpossibleitistorealizewithexactness，thedenominationsofmoneyofaccompt，inthemetalswhichareconstantlyvaryingintheirvalue，andexposedtowasteincirculation。
Wehaveshewn，bymanyexamples，how，infact，thevalueofthepoundsterlinghasbeensubjecttogreatvicissitudesoflate，fromthegreatdisorderofthecoin。
ThecoinofFrance，is，indeed，uponabetterfootinginpointofuniformityofweight，thanours；andtheproportionofthemetalsinitcomesnearertheirpresentvalueinthemarket:
butthenasoftasthebalanceturnsagainstFrance，thehighimpositionuponhercoinage，exposesthecointogreatfluctuationsofvalue，whencomparedwithbullionintheParismarket。Thisisalsotobeascribedtotheimperfectionofthemetalswhenusedasmoney，whiletheyaremerchandizeatthesametime。
Thisbeingthecase，thewaytocalculatetherealparofexchangebetweennations，whohaveincommonnodeterminateandinvariablemoney，exclusiveofcoin，istoconsiderfinegoldandsilverasthenextbeststandard。
Thisisamerchandizewhichnevervariesinitsquality。Finegoldisalwaysthesameineverymass；andweightforweight，thereisnodifferenceinitsvalueorqualityanywhere。
Thisstandardbeingonceadopted，thecalculationoftherealparbecomesaneasyoperationtothosewhoknowthecourseofthebullionmarketinthetwoplacesexchanging。
If，bytheexportationofalltheheavycoinofLondon，billsmustbepaidinawornoutcurrency，theriseinthepriceofgoldintheirmarket，abovemintprice，willmarkprettynearlyhowfaritislight。
If，ontheotherhand，thewarsofFrance，oranunfavourablebalanceuponhertrade，shallobligehertoexporthercoin，thisoperationwillsinkthevalueofit，orraisethepriceofbullion，whicheverwayyouchoosetoexpressit。
Itisnothereaproperplacetoresumethequestion，whichofthetwoexpressionsisthemostproper:wearehereconsideringthevalueofthebulliontobethethingfixed，becauseitanswersthepurpose。ButwhetherwesaythatbullionrisesinthemarketsofParisandLondon；orthatthevalueoftheircurrenciessink，thoughfromverydifferentcauses，thecalculationoftherealparwillproceedwithequalaccuracy。Anexamplewillillustratethis。
WhenfinegoldisatthelowestpricetowhichitcaneverfallatParis，thatistosay，atthemintprice，itisworth740
livres9sols，or740。45livrespermark，indecimals，fortheeaseofcalculation。ThemarkcontainseightouncesParisweight。
WeretheouncesofParisequaltothoseoftroyweight，1/8
ofthissum，or92。5562livres，wouldbethevalueofthatouncebywhichgoldissoldatLondon。
ButtheParisounceisabout11/2percentlighterthanthetroyounce；andtheexactproportionbetweenthemisunknown，fromtheconfusionofweights，andthewantofafixedstandardinEngland。BythebestcalculationIhavebeenabletomake，aParisounceshouldcontain473grainstroy，whichmakestheproportionbetweenthetwoouncestobeas473isto480，whichlastisthenumberofgrinsinthetroyounce。
GoldbullionatParisisregulatedbythemarkfine，atLondonbytheouncestandard。
WhenstandardgoldbullionisatthelowestpriceitcanbeatLondon，itisworththemintprice，or3l。17s。101/2d。pertroyounce，which，expressedindecimals，is3。8937l。sterling。
Standardistofine，as11isto12；consequently，theouncefineis4。2476l。sterling:andiftheParisounceoffinebullionbeworthatthemint，ashasbeensaid，92。5562livres；theouncetroy，accordingtotheaboveproportion，willbeworth93。926
livres。Dividethenthelivresbythesterlingmoney，andthequotientwillgiveyoutherealparofexchangeofthepoundsterling，whilebullionremainsatthemintpriceinParisandinLondon，viz。93/42920/476=22。112livresforthepound，or32。56d。sterlingfortheFrenchcrownof3livres。
GoldbullionnevercanriseintheParismarket，atleastallthelastwaritneverdidrise，abovethevalueofthecoin；thatis，to801。6livresthemarkfine，or100。2livresperounceParis，and101。7livresthetroyounce。
HowhighthepriceofgoldbullionmayriseatLondonnomancansay；butthehighestitroseto，duringthelastwar，was，I
believe，4l。0s。8d。perouncestandard，orto4。3999l。
sterlingperouncefine。BythisdividethevalueoftheouncetroyfineinFrenchlivres，therealparatthisrateofthemetalsinbothcitieswillbe101。7/4。3999=23。11livresforthepoundsterling，or31。155pencesterlingfortheFrenchcrownof3livres。Butsupposetwocaseswhichmayhappen，viz。1。ThatgoldbullionatParisshouldbeatthepriceofcoin，whileatLondonitmaybeatmintprice:or，2。ThatatParisitmaybeatmintprice，whenatLondonitisat4l。0s。8d。whatwillthentherealparofexchangebe？
Ianswer，thatonthefirstsupposition，itwillbeonepoundsterling，equalto23。939livres，andthecrownof3livresequalto30。076pencesterling。Intheother，equalto21。34livresforthepoundsterling，andforthecrownof3livres33。728。A
differenceofnolessthan8。9percent。
IsitnotevidentthatthesevariationsmustoccurintheexchangebetweenLondonandParis？Andisitnotalsoplain，thattheyproceedfromthefluctuationofthepriceofbullion，notfromexchange？
Wehave，Ithink，demonstrated，inthethirdbook，thatawrongbalanceupontheFrenchtrademayraisebullionintheParismarkettothepriceofcoin；andthatarightbalancemaybringitdowntomintprice。Thepriceofcoinageisabove8percent。Sothat8percentoffluctuationinthepriceofbullioniseasilyaccountedforintheParismarket，withouttakingintotheaccountthevariationsintheEnglishmarket。
InLondon，wherenocoinageispaid，wereallthecoinoffullweight，andexportationfree，coinandstandardbullionwouldconstantlystandatthesameprice:butwhentheheavycoinisexported，andthecurrencybecomeslightbytheoldcoinremainingincirculation，thepriceofbullionrisesinproportion。
Isitsurprisingthat，atLondon，goldinbullionshouldbeworthasmuchasgoldofthesamestandardinguineas，weightforweight？Isitnotworthasmuchatthemint？Whyshoulditnotbeworthasmuchatthemarket？IaffirmthatanymanmayoffertopayfortheounceofalltheguineascoinedbyCharlesII，JamesII，andWilliamIII，nowincirculation，thehighestmarketpricethateverwasgivenforstandardgoldbullioninLondon，andgainbythebargain。
This，Ihope，willbesufficienttosatisfyanybodythatthereisamistakeinascribingthehighpricepaidfortheFrenchcrownintheLondonexchangetoawrongbalanceuponthetradeofEnglandwithFrance。
FromthisnewlightinwhichIhaveplacedthequestion，I
hopetheargumentsusedinthe16thchapterofthefirstpartofthethirdbook，willacquireanadditionalforce；andthattherebytheeyesofthisnationmaybeopenedwithregardtotheinterestsoftheFrenchtrade；apoint，Ishouldthink，ofthehighestconcern。
Tocalculate，aseverybodydoes，theparoftheFrenchcrown，eitherbythegoldorthesilverintheEnglishstandardcoin，whennosuchstandardcoinexists；andtostateallthatisgivenforthecrownabove291/2d。ifyoureckonbythesilver，or303/4d。ifyoureckonbythegold，forthepriceofawrongbalance，isanerrorwhichmayleadtothemostfatalconsequences。
Ifgovernmentshouldthinkfittoimpose，intheirownmint，acoinage，equaltothatofFrance，andmakealltheircoinofequalweight，andatthedueproportion，itwilltakeoffallthelosswesufferbypayingcoinagetoFrancewhichweatpresentimputetotheexchangewhileshepaysnonetous。Butthenitwilloccasionnearlythesamefluctuationsupontherealparofexchangeasatpresent；onlyfromanothercauseonthesideofGreatBritain。Atpresentourexchangebecomesfavourablefromtheweightofourowncurrency，andthebalanceagainstFranceuponhertrade；which，inParis，raisesthepriceofthebullionwithwhichwepayourFrenchdebts。Ontheotherhand，ourexchangebecomesunfavourablefromthelightnessofourowncurrency，fromthecoinagewepaytoFrance，andbalanceagainstus；whichlastcarriesoffallournewguineas；andintheParismarket，sinksthevalueofthatbullioninwhichwepayourFrenchdebts。
Weremattersputuponarightfooting，weshouldgainfromFrancethepriceofourcoinage，whenourbalanceisfavourable，andpaycoinagetoFrancewhentheirbalanceisfavourable；
insteadofseeingourexchangeturnmoreinourfavour，fromtheadditionalweightonlyofthecoininwhichwepay。
IfFrenchcoinageshouldappeartoohighapricefortheinterestofotherbranchesofBritishtrade，aquestionIshallnotheredetermine，letusimposeatleastasmuchastokeepourguineasoutofthemeltingpot，andbanishalltheoldcoinwhichthrowsusintosuchconfusion。
Whathasbeensaidisundoubtedlytoomuchuponthissubjectforthegeneralityofreaders。Thenumberofthosewhocangothroughachapterlikethiswithpleasureisverysmall。ButiftheideaIhavebeenendeavouringtocommunicate，befoundjustbyonemanofcapacity，whoseopinionshallhaveweightinthedeliberationsofGreatBritain，theconsequencesmaybeofgreatadvantagetothisnation；andthisconsiderationwill，Ihope，pleadmyexcuse。
Ishallnowsetthisquestioninanotherpointofview，fromwhichthestressofmyargumentswillbefelt，andallintricatereasoningswillbelaidaside。
Doesnotthepriceofexchange，orwhatisgivenabovethepar，proceedfromtheexpenceofsendingthemetalsfromtheoneplacetotheother，theinsuranceofthem，andtheexchanger’sprofit？Ifthisbetrue，whichIbelievenobodywilldeny，mustnotwhatispaidforthebill，overandabovethesethreearticles，beconsideredastherealpar，relativelytoexchange？
Nowdoesthepriceofthebullionwhichtheexchangerpaysinhisownmarket，orthepricehegetsforthatbullioninthemarkettowhichhesendsit，atallenterintotheaccountofthetransportation，risk，andprofit，whichtheexchangerhasontheoperation？Certainlynot。Maytherenotbeaverygreatdifferencebetweenthebuyingandsellingtheverysamebullionindifferentmarketsatonetimeandanother？Oughtwenottochargethistosomeotheraccomptthantothepriceofexchange，whichisconfinedtotheexpenceoftransportingthebalanceonly，andwhentwoobjectstotallydifferentareincludedunderthesameterm，doesitnottendtoperplexournotionsconcerningthem？
ThegreatvariationinthepriceofbullioninFrance，forexample，andtheexpenceofprocuringit，proceedsfromthreecauses。Thefirstis，thecoinageimposedinFrance，whilenoneisimposedinEngland。What，therefore，ispaiduponthisaccount，isprofittoFrance，andlosstoEngland。
Thesecondcauseofvariation，isthedebasementofthevalueofthepoundsterling，whentheheavygoldhasbeensentabroad。
Thislossaffectsthenation，andeverymaninEngland，inthequalityofcreditorforsumsspecifiedinpoundssterling，totheprofitofalldebtors。
Thethirdcauseofvariation，isfromthegreatexpenceexchangersareputto，inprocuringthemetalsfromothercountries，whentheycannotbegotathome:theconsequenceofthisshallbeexplainedinasucceedingchapter。
Asallthesecausesarecombinedintheexchangeuponbillswhentheycometomarket，Ithinkitispropertoanalizethem，beforethedoctrineweareuponcanbedistinctlyunderstood。
Ishallthereforeconcludemychapterwiththisproposition。
Thatthebestmethodofdeterminingexactlythetrueandintrinsicvalueofthemetals，coin，ormoney，inwhichthebalanceduetoorfromaforeignnationistobepaid，istocomparetherespectivevalueoffinebullionwiththerespectivedenominationsofthecoinintheoneandtheother；andtostatethedifferenceasthepricepaidfortheexchange。
Chap。III
HowtoremovetheInconvenienceswhichoccurinpayingBalanceswiththeMetalsorCoinofaNationTheinconvenienceswhichoccurwhenbalancesaretobepaidinbullionorcoinarethese:
First，thewantofsecureandreadytransportation，fromtheobstructionsgovernmentthrowsinthewaytopreventit。
Secondly，Thedifficultyofprocuringthemetalsabroadwhentheyarenottobefoundathome。
Whenwespeakhereofbalancestobepaidfromonecountrytoanother，weunderstandthatthegeneralamountofthewholepaymentstobemadetotheworld，exceedsthesumofallthatisreciprocallyduefromit。Sofarasabalanceduetoonecountryiscompensatedwithabalanceduebyanother，theymaybemutuallydischargedbybillsofexchange，accordingtotheprinciplesalreadylaiddown。Allcompensationsbeingmadebybillsdrawnforreciprocaldebts，wemustheresupposeabalanceduebythecountrywhoseinterestweareconsidering。This，likedebtsbetweenprivatepeople，musteitherbepaidinintrinsicvalue，orbysecurityforit；thatis，bycontractingapermanentdebtbearinginterest。Thefirstisthequestionherebeforeus；
thesecondwillbeexaminedinthesucceedingchapter。
Thefirstdifficultymentioned，towit，thewantofsecureandreadytransportationofthemetals，proceedsinagreatmeasurefromtheobstructiongovernmentthrowsintheway，topreventtheexportationofthem。Toremovewhichdifficulty，itispropertoshewhowfaritistheinterestofgovernmenttoobstruct，howfartoacceleratethetransportationofthemetals。
Wehavesaidthatitistheadvantageofeverystate，inpointoftrade，tohavebalancespaidwiththeleastexpence。Ifthenwesupposethatitiseithernecessaryorexpedientthatthisbalanceshouldbepaidinthemetals，government，inthiscase，shouldfacilitatebyeverymethodthesendingthemoffinthecheapestandsecurestway。
Butsincegovernmentsdonotgenerallyfollowthisrule，wemustexaminethereasonswhichengagethemtopreferacontraryconduct。
Theprincipal，themostgeneral，andmostrationalobjectionagainsttheexportationofthemetals，is，thatwhenitispermittedwithoutrestriction，itengagesthepeople，whentheygotoforeignmarketsforarticlesofimportation，toruntothecoin，insteadofcarryingthithertheproductandmanufacturesofthecountry。Fromwhichaconsequenceisdrawn，thataslongascoinandbullionarefairlyallowedtobeexported，therichinhabitantswillemploythemforthepurchaseofforeigncommodities，tothehurtofdomesticindustry。
Thisisanobjectionofgreatweight，relativelytothesituationofmanynations。TheSpaniardsandPortuguesefeelitseverely。Manyindividualsthereareveryrich；thenumerousclassesofthepeopleareeitherlazyornotproperlybredtoindustry。Inthissituationthealternativetogovernmentisverydisagreeable。Eithertherichmustbedeprivedofmanyenjoymentswithwhichtheirindustriousneighboursalonecansupplythem，until，byveryslowdegrees，thelowestclassesoftheircountrymencanbeengagedtochangetheirwayofliving，andbeinspiredwithaspiritofindustry；ortheymustbeallowedtogratifythedesireswhichrichescreate，attheexpenceofthenation’streasure，andtheimprovementoftheircountry。
Fromthisalternativewediscovertheprinciplewhichmustdirecttheconductofastatesmanundersuchcircumstances，viz。
Toforbidtheimportationofeveryforeignmanufacturewhatsoever；tosubmittothehardshipsnecessarilyimpliedinthecircumstancesofthenation；andtopayfreelywhatbalancemaybeowinguponnaturalproduceimportedfortheusesofsubsistenceormanufacture。
Thisisaplanmorerationalandmoreeasilyexecuted，thanageneralprohibitiontoexportthemetals；becausebygoodregulations，youmaypreventtheimportationofmanufactures；butitishardlypossibletopreventtheexportationofthemetalsnecessarytopayforwhatyouhaveboughtfromstrangers，bythepermissionofgovernment:andontheotherhand，supposeyoudoeffectuallypreventtheexportationofthemetals，theconsequencewillbe，toputanendtoallforeigntradeeveninnaturalproduce，whichonmanyoccasionsmaybenecessaryforthesubsistenceofthepeople。Whatnationwilltradewithanotherwhocanpayonlybybarter？Allcreditwilllikewisebecutoff；
forwhowillexchangebybills，withaplacewhichcannotpay，eitherintheirowncurrency，orwiththemetals，thedebtswhichtheyreciprocallyowe？
Themaximtherefore，here，istopreventasmuchaspossiblethecontractingofdebtswithstrangers；butwhentheymustbecontracted，tofacilitatethepaymentofthem。
Thisreasoningiscalculatedtodirectastatesmanwhofindshimselfattheheadofarichluxuriousnobility，andanidleorill-instructedcommonpeople，surroundedbyindustriousneighbours，whoseassistancemaybenecessaryuponmanyoccasions，toprovidesubsistence，orthematerialsofmanufacture，forhispeople；andthiswhileheisformingaschemeforintroducingindustryathome，asabasisforestablishingafterwardsaproperforeigncommerce。
Butinthissubjectcombinationsarefinite，andthesmallestchangeofcircumstancesthrowsthedecisionofaquestiononadifferentprinciple。
Iwillnotthereforesay，thatineverycasewhichcanbesupposed，certainrestrictionsupontheexportationofbullionorcoinarecontrarytogoodpolicy。ThispropositionIconfinetotheflourishingtradingnationsofourowntime。
Tosetthismatterinafairlight，andasanexerciseuponprinciples，Ishallborrowtwoexamples，onefromhistory，andanotherfromarecentexperimentmadeinFrance，inwhichaclogupontheexportationofthemetalsandcoinwasverypoliticallylaidon。
WelearnfromthehistoryofHenryVIIofEngland，asagaciousPrince，thatheestablishedveryseverelawsagainsttheexportationofbullion；andobligedthemerchantswhoimportedforeigncommoditiesintohisdominions，toinvesttheirreturnsinthenaturalproduceofEngland，whichatthattimeconsistedprincipallyinwoolandingrain。
ThecircumstancesofthetimesinwhichthatPrincelived，mustthereforebeexamined，beforewecanjustlyfindfaultwiththisstepofhispoliticaloeconomy。
InHenrytheVIIth’stime，theforeigntradeofEnglandwasentirelyinthehandsofforeigners，andeveryelegantmanufacturealmostcamefromabroad。
Undersuchcircumstances，isitnotplain，thattheprohibitiontoexportbullionandcoin，wasacompulsiononlyconcomitantwithotherregulations，toobligetheforeignmerchants，residinginhiskingdom，tobuyupthesuperfluityoftheEnglishnaturalproduceofwoolandgrain？HadnottheKingtakenthesemeasures，thewholemoneyofthenationwouldhavebeenexported；thesuperfluousnaturalproduceofEnglandwouldhavelainuponhand；theredundancyofwhichwouldhavebroughtthepriceofthembelowthevalueofthesubsistenceofthosewhoproducedthem；agriculturewouldhavebeenabandoned；andthenationwouldhavebeenundone。
Iallowthatnothingissoabsurdastopermittheconsumptionofforeignproductions，andtoforbidtheexportationofthepriceofthem。Ialsoallowthateveryrestraintlaiduponexportingsilverandgold，affectstheconsumerofforeigngoods，andobligeshimtopaythedearerforthem；butthisadditionalexpencetotheconsumer，doesnotaugmentthemassofforeigndebts。Thedebtdueabroadwillconstantlybepaidwiththesamequantityofcoin，whethertheexportationofitbeallowedornot；becausethelossofthosewhopaythebalancearisesfromtheriskofconfiscationofthemoneytheywanttoexportagainstlaw；orfromthehighexchangetheyareobligedtopaytothosewhotakethisriskuponthemselves。Inbothcases，theadditionalexpencetheyareputtoremainsinthecountry，andisrepaidthembytheconsumers；consequently，canneveroccasiononefarthingmoretobeexported。Prohibitions，therefore，upontheexportationofspecie，arenotineverycasesoabsurdastheyappearatfirstsight。Itisverycertainthatnobodyevergivesmoneyfornothing；consequently，astatemayrestassuredthattheproprietorsofthespecie，theirsubjects，willtakesufficientcarenottomakeapresentofittoforeigners。Theintention，therefore，ofsuchprohibitionsisnotsomuchtopreventthepaymentofwhatpeopleowe，astopreventthatpaymentfrombeingmadeincoinorbullion；andalsotodiscouragethebuyingofsuchforeigncommoditiesasmustbepaidinspecie，preferablytootherswhichmaybepaidforwiththereturnsofhomeproduce。
Whenastatesman，therefore，findsthebalanceoftrade，uponthemain，favourabletothecountryhegoverns，heneedgivehimselfnotroubleabouttheexportationofthespecie，fromthissingleprinciple，towit，thatheissurethatwhatisexportedisnotgivenfornothing；andthatthefavourablebalancecannotfailtobringitbackagain，togetherwithanadditionalsupplyButwhenthebalanceturnsagainsthimintheregularcourseofbusiness，notfromatemporarycause，thenhemaylayrestraintsupontheexportationofspecie，asaconcomitantrestriction，togetherwithothers，inordertodiminishthegeneralmassofimportations，andtherebytosetthebalanceeven。
Inatradingnation，Iallowthatnorestrictionofthiskindoughttobemadegeneral；becauseitthenaffectstheusefulaswellasthehurtfulbranchesofimportation:butinHenry’sdays，thesaleofcornandwoolwassufficienttoprocureforEnglandallitwantedfromabroad；andtheinterestsoftradewerenotsufficientlyunderstood，toenablethestatetoactbyanyotherthanthemostgeneralrules。ForbiddingtheexportationofcoinwasfoundtopromotetheexportationofEnglishproductions，andthiswasasufficientreasonformakingtheprohibitionperemptory。Inthisviewofthematter，didnotHenryjudgewell，whenheobligedthemerchantswhoimportedforeigngoods，toinvestthepricetheyreceivedfortheminEnglishcommodities？
OncemoreImustsayit，hewasnotsomuchafraidoftheconsequencesofthemoneygoingout，asofthecornandwoolremainingathome:hadhebeensureoftheexportationofthesearticlestoasgoodpurposeanotherway，theprohibitionwouldhavebeenabsurd；butIampersuadedthiswasnotthecase。
TheexampletakenfromFranceisthis。
Afterthefatalbankruptcyin1720，bytheblowingupoftheMissisippi，thetradeofFrancelanguishedfromtheeffectsoftheinstabilityoftheircoin，untiltheyear1726，whenitwassetuponthatfootingonwhichithasremainedeversince。
Uponthatlastgeneralcoinage，thesameprinciplesofenrichingtheKingbytheoperationdirectedtheconductoftheminister。
Theoldspeciewascrieddown，andproscribedincirculation:
butitwasthought，thatasitwastheKing’scoin，hehadalibertytosetapriceuponit，atadifferentratefromanyotherbullionofthesamefineness:andthathehadalsoarighttocommandtheproprietorsofittobringittothemintathisownprice。
Theconsequencewas，thatthosewhocouldwereverydesiroustosendittoHolland，inordertodrawbackthefullvalueofit，inbillsuponParis。
Undersuchcircumstances，werenotprohibitionsupontheexportationofthiscoinmostconsistentwiththeplanlaiddown？
Weshall，inthenextchapter，examinetheconsequencesofthisoperationupontheexchangeofFrance。
Whathasbeensaid，will，Ihope，sufficetoexplainsomeoftheprincipalmotiveswhichstatesmenmayhave，whentheylayrestrictionsontheexportationofthemetals，withaviewtofavourthetradeoftheirnation，ortheinterestoftheexchequer。
Butbesidestheinterestoftrade，thereareotherreasonsforlayingprohibitionsontheexportationofthenationalcoin，althoughthatofbullionbeleftfreeundercertainrestrictions。
Asoftenasithappens，thatthevalueofanation’scoinremainsatparwithbullionofthesameweightandfineness，thiscoin，ifexported，maybemelteddown。Thisisaloss；becauseitputsthenationtotheexpenceofcoiningmorefortheuseofcirculation。
Whennationsgivecoinagegratis，orwhentheyallowthecoinofothernationstheprivilegeofpassingcurrentunderdenominationsexactlyproportionedtoitsintrinsicvalue，thencoinnevercanbeworthmorethananyotherbullionofthesamestandard；consequently，willbeexportedorsmuggledoutwheneverthereisademandforitabroad。
If，therefore，anationdoreallydesiretoavoidanexpenceatthemint，theymustmakeittheinterestofmerchantstoexporteveryotherthingpreferablytotheirowncoin。Thisisdonebyimposingadutyuponthecoinage；andthiswilleitherpreventthecoinsgoingoutunnecessarily，orifitbenecessarytoexportit，thecoinwillreturninthepaymentsmadetothenation；becauseofitsadvancedvalueaboveanyotherbullionwhichcanbesent。
Theforbiddingoftheexportationofcoin，impliesarestrictionupontheexportationofbullion；because，unlessthebullionbeexaminedatthecustomhouse，andthestampsuponitlookedat，itmayhappentobenothingbutthenation’scoinmelteddown，withanintentiontoavoidthelaw。Forthisreason，whoeverbringsbulliontobestamped，whetheritbeforexportationornot，mustdeclarethatithasnotbeenmadeofthenation’scoin。Howslenderacheckareallsuchdeclarations！Theonlyoneeffectualisprivateinterest；andasnomanwilltakehiswigtostuffhischair，whenhecangetcheapermaterialsequallygood，sonomanwillmeltdowncoinwhichbearsanadvancedvalue，whenhecanprocureanyotherbullion。
Onthewhole，wemaydetermine，thataflourishingcommercialstate，whichhas，ontheaverageofitstrade，abalancecominginfromothercountries，shouldlayitdownasageneralrule，tofacilitatetheexportationofitscoin，aswellasofbullion:
andifaveryparticularcircumstanceshouldoccur，whichmaycontinueforashorttime，itmaythenputatemporarystoptoit，andfacilitatethepaymentofthebalancebythemeansofcredit。
Ihaveenlargedsomuchuponthemethodsofremovingthefirstdifficultyofpayingabalance，withthecoinorbullionfoundinanation，thatwhatremainstobesaidupontheseconddifficulty，towit，theprocuringthemfromothernations，neednotbelong。
Werethemintweightsofallcountriessufficientlydeterminate；weretheregulationsconcerningthestandardofbullionexactlycompliedwith；andwerethecurrentmarketpricesofthisimportantcommodity，consideredasavaluablepieceofintelligenceeverywhere，thebulliontradewouldbemucheasierthanitis。
Wehavesaid，thatwhenthereciprocaldebtsoftwonationsareequal，thereisnooccasionforbulliontodischargethem。
Buttradingnationsaremany；andfromthisitmayhappen，thatonewho，uponthewhole，iscreditortotheworld，maybedebtortoaplacewhichisalsocreditortotheworld；andinthiscasebullionisnecessarytopaythedebt。
Ifamanowemoneytoapersonwhohasmanycreditors，thepersonowing，maybuyupaclaimagainsthim，andpaywhatheowesinthatway:butifthepersontowhomheowesthemoneybeindebtedtonobody，thenthedebtmustbepaidwithreadymoney。
Justsoofnations。Forinstance，whenbullionisdemandedtobeexportedtoHolland，theEnglishmerchants，whoarecreditorsonSpainandPortugal，takefromthencetheirreturnsinbullion，forthesakeofpayingthebalancetoHolland，whichis，uponthewhole，creditortotheworld。
Butasitseldomhappens，thathewhodealswithHollandisthepersonwhohascreditinSpainorPortugal，heisobligedtoapplytoPortugalmerchantsinordertoprocurebullion。Theyagainwhotradethither，havingprofitonthereturnsofthecommoditiestheybringfromthence，willexpectthesameprofitsuponthebillstheygivetothemanwhowantstotakehisreturninbullion。ThisplainlyraisesthepriceofbullionintheEnglishmarket；becauseitisbroughthomeinconsequenceofademandfromEngland。Ontheotherhand，whenthedemandsofEnglandforPortuguesecommoditiesislessthanthevalueofwhatPortugalowesher，thePortugalmerchantsinLondonareobligedtotakethebalanceinthemetals。ThesecometotheLondonmarket，andareofferedtosaletothosewhowantthem:thenthepriceofbullionfalls；becausethedemandcomesfromtheotherside。
TogothroughalltheoperationswhichmerchantsemploytoabbreviatetheprocessIhavebeendescribing，would，indeed，betterexplainthepracticalpartofexchange，thanwhatIhavesaid；butIwritenottoinstructmerchants，buttoextractfromtheircomplicatedoperations，theprinciplesuponwhichtheyarefounded。
Chap。IV
HowthePriceofExchange，inaprosperoustradingNation，maybepreventedfromoperatinguponthewholeMassofreciprocalPayments，insteadofaffectingtheBalanceonlyWehavetakenforgranted，thatthepriceofexchangeisahurttotradeingeneral。
Inthischapter，weshallinquiremoreparticularlythanwehavedone，inwhatthishurtconsists。Thepointofviewofeveryman，whetherhebeamerchantornot，isfirsthonestly，andasfaraslawandfairdealingdopermit，toconsulthisownprivateinterest；andinthesecondplace，topromotethatinterestwithwhichhisownismostcloselyconnected。
Accordingtothisrule，everymerchantwillendeavourtomanagehisexchangebusinesstothebestadvantagetohimself。Ifthebalancebeagainsthiscountry，hewillsellhisbillsonthecountrycreditorasdearashecan；thatis，hewillendeavourtoraisethepriceofexchangeashighashecanagainsthiscountry，whateverhurtmaytherebyresulttothegeneraltradeofit；andinsodoing，hedoesonlywhatdutytohimselfrequires；
becauseitisbymindinghisbusinessonly，thathecantradeuponequaltermswithhisneighbours，everyoneofwhomwillavailthemselvesofthelikefluctuations，whentheyhappentobeintheirfavour。
FromthisIconclude，thatsincethelossuponhighexchangeagainstacountry，affectsprincipallythecumulativeinterestofthewhole，relativelytoothertradingnations；itisthebusinessofthestatesman，notofthemerchants，toprovidearemedyagainstit。
Thewholeclassofmerchants，nodoubt，exchangersexcepted，wouldbeverygladtofindthecourseofexchangeconstantlyatpar。Thisisalsogreatlytheinterestofthestatebecauseitisfromthebalanceinitsfavour，notfromtheprofitmadeindrawingthatbalancefromthedebtor，thatthestateisagainer。
Thismustbeexplained。
Iamtoshewhowithappens，thatanationisbenefitedorhurtbythenetbalanceonly，whichitreceivesfrom，orpaystoherneighbours:andthatthewholeexpenceofpayingorreceivingthisbalance，isnotnational，butparticulartoindividualsathome。consequently，itwouldbetheinterestofallstates，thatbalancesbothfavourableandunfavourable，werepaidbythenation-debtor，attheleastexpencepossible。
Thegreatdifficultyincommunicatingone’sthoughtsuponthissubjectwithdistinctness，proceedsfromtheambiguityofthetermsnecessarytoexpressthem。Thismaybeavoidedbyadoptingthetechnicaltermsofmerchants；butthesearestillmoredifficulttobecomprehendedbyanyonewhoisnotconversantincommerce。IshallacquitmyselfofthisdifficulttaskthebestwayIcan。
Whenwespeakofabalancebetweentwonations，weshallcallthenationwhoowesthebalancethenation-debtor；theothertowhomitisowing，thenation-creditor。
Balancesimplyreciprocaldebts；consequently，reciprocaldebtorsandcreditors。Toavoid，therefore，confusioninthisparticular，weshallusefourexpressions，viz。thedebtorstothenation-creditor；thedebtorstothenation-debtor；thecreditorsofthenation-creditor；thecreditorsofthenation-debtor。
LetmesupposethatParisowesabalancetoLondon，nomatterforwhatsum。ThereciprocaldebtsbetweenParisandLondonareallaffectedbytheconsequenceofthisbalance:thatistosay，somepayorreceivemorethantherealpar；somepayorreceiveless。Todiscoverwheretheprofitcenters，wearenowtoinquirewhoarethosewhoreceivemore，whoarethosewhoreceiveless。
Andasprofitandlossarehereonlyrelative，thatistosay，theprofitoftheoneiscompensatedbythelossoftheother；wemustseewhetheruponthewhole，thepriceoftheexchangeinthiscasebefavourabletoEngland，towhich，bythesupposition，thebalanceisdue，andunfavourabletoFrance，whichisthedebtor。
Thequestionthusstated，letusexaminetheoperationsofexchangeatLondonandParis，andthestateofdemandinboth，formoneyorbills。
IntheLondonmarketthedemandwillbeformoneyinLondonforbillsonParis；andhewhodemands，mustpaytheexchange；
consequently，theLondonmerchants，creditorsofthenation-debtor，willpaytheexchange；thatistosaytheywillselltheirbillsonParisbelowpar；andtheLondonmerchants，debtorstothenation-debtor，willbuythem，andgaintheexchange；thatis，theywillbuybillsuponParisbelowpar。
NowasthisnegotiationiscarriedonatLondon，ImustsupposeittotakeplaceamongstEnglishmen；onepartofwhomwillgainexactlywhattheotherloses；consequentlyEngland，inthisrespect，neithergainsorlosesbytheexchangepaidinLondon。
Letusnextexaminetheinterestofthemerchants，andtheinterestofthenation’strade。
Thecreditorsofthenation-debtor，whohavelostbytheexchange，arethosewhohaveexportedEnglishcommoditiestoFrance。Uponthisprofitablebranchofcommercetheexchangeoccasionsaloss，theconsequenceofwhichis，todiscourageexportation。
Thedebtorstothenation-debtor，whohavegainedbytheexchange，arethosewhohaveimportedFrenchcommoditiestoEngland。Uponthishurtfulbranchofcommerce，theexchangeoccasionsaprofit；theconsequenceofwhichis，toencourageimportation。
Thisisnotall。TheEnglishmerchantsexporters，whohavelost，cannotdrawbacktheirlossuponthereturnoftheirtrade；
becausethereturnoftheirtradeisthemoneyduebyFrance，thebalanceincluded。WhereastheEnglishmerchantsimportersmaydrawbacktheirlossuponthereturnoftheirtrade；becausethatreturnismerchandize，whichtheycansellsomuchthedearertotheirowncountrymen。
IfthebalancebeinfavourofLondon，importersgain，aswehaveseen；whenitisotherwise，andwhentheyareobligedtopaytheexchange，theyindemnifythemselves，bythesaleoftheirgoodssomuchthedearer。Highexchange，therefore，mayhurtexporters，butnevercanhurtimporters。
LetusnextexaminetheoperationofexchangeatParis。
IntheParismarket，thedemandwillbeforbillsuponLondonformoneyinParis；andhewhodemandsmustpaytheexchange。Thedebtors，therefore，tothenation-creditor，mustpaytheexchange，andthecreditorsofthenation-creditorwillreceiveit；andasbothareFrenchmen，theprofitandlosstoParisexactlybalanceoneanother。
Butthedebtorsofthenation-creditorareheretheimportersofEnglishgoods；consequently，thistrade，hurtfultoFrance，wouldbehurtfultotheimporter，couldhenotindemnifyhimselfbysellingthemsomuchthedearertohiscountrymen。
Thecreditors，again，ofthenation-creditor，whogaintheexchange，aretheexportersofFrenchgoodstoEngland；sothatheretheexportationmeetswithanencouragementfromabalanceagainstthecountry。
Fromtheadvantagefounduponexchangeinfavourofexporters，andthelossuponittotheprejudiceofimporters，inthecaseofawrongbalance，ithasbeenbelieved，thatawrongbalanceproduced，uponimportationsandexportations，effectsequalandcontrary，whichdestroyoneanother，andtherebybringthebalanceeven。
Inanswertothis，Ihavetwoshortargumentstooffer。
Thefirstis，thatweretheargumentconclusive，itwouldholdgoodinreversingtheproposition；towit，thattheconsequenceofafavourablebalancewouldbetodestroythedifferencealso，andbringthebalanceeven。ThisIneverheardalleged。
Mysecondargumentisthestronger:thattheenhancingofthepricesofimportationswillnotsoeffectuallydiscouragethesaleofthemathome，astheenhancingthepricesofexportationswilldiscouragethesaleofthemabroad；forthereasonsIshallgivepresently。Butinthemeantime，Ifthecompensationbeconsideredinrelationonlytothemerchantsimportersandexporters，there，indeed，Iagree，thattheirprofitandlossupontheexchangeismostexactlybalanced；
becausewhattheonepartygainstheotherloses；andthecountrylosesthebalanceonly，ashasbeensaid。
Thereciprocaldebtsthustransactedbybillsofexchange，weseethatnoprofitcanbemade，norlossincurred，eithertoLondon，orParis，bythisoperation。
TheprofittoFrenchmeniscompensatedbythelosstoFrenchmen；thesamemaybesaidoftheEnglishmerchants:butthebalancedueaftertheseoperationsareover，andthemoreremoteconsequencesofhighexchange，affecttherelativeinterestofthetwonations。
Thisbalanceisgenerallysentbythecountry-debtor，eithertothecountry-creditor，ortotheirorderinathirdcountry，towhichthecountry-creditorisindebted。
Thetransportationandinsuranceofthisbalanceisanexpencetothosewhooweit，andtheprofit，ifanytherebeonthisoperation，naturallybelongstotheexchangersofthesamenation，whoconductit。Sowhetherexchangebepaiduponbillsdrawn，orexpencebeincurredinthesendingawaythebalances，noprofitcanaccrueuponthistothenation-creditor，tothedetrimentofthedebtor:itmust，therefore，dohurttoboth，relativelytonationswhere，upontheaverageoftrade，exchangeislower。
Icomenowtothemethodoftransportingbalancesinthemetals。
Wehaveseenhowthecreditorsofthenation-debtorpayexchangeuponthesaleoftheirbillsonParis，whichowesthebalance。Ifbytheoperationsofexchangers，thisexchangeshouldrise，totheirdetriment，higherthantheexpence，trouble，andinsurance，uponbringingthisbalancefromParis，thentheywillappointsomefactoratParis，towhoseordertheywilldrawbillsupontheirdebtorsinthatcity；andaswhattheParis-debtorsowetoLondonisstatedinpoundssterling，theLondon-creditorswillvaluethepoundsterling，accordingtotherateofexchange，intheirfavour；andintheirbillsupontheirParis-debtor，theywillconvertthesumintolivres，includingtheexchange。