tribution of specie among all countries, in proportion to the wants of each, takes place through the inevitable tendencies of trade, all goods invariably seeking a market where they can be sold to the best advantage. The equalization of money is but another name for the equalization of prices. The general principle has been clearly stated by Mr. Ricardo, who has shown "that redundancy and deficiency of currency are only relative terms; and that, so long as the currency of a particular country consists exclusively of gold and silver coins, or of a paper immediately convertible into such coins, its value can neither rise above nor fall below the value of the currencies of other countries by a greater sum than will suffice to defray the expense of importing foreign coin or bullion, if the currency be deficient; or of exporting a portion of the existing supply, if it be redundant."

Regarding this principle as established, that the currency is of a fixed amount or value, I come now to consider the various practices and expedients by which the necessity of filling up the whole of this currency with so costly a material as gold and silver coin is obviated. Some of these may properly be viewed, not as substitutes for the precious metals, but as practices which have grown up in commercial countries, whereby commercial transactions are really completed without the intervention of any money. Such are what are termed accounts current, opened between merchants who have frequent dealings with each other. If, for instance, A has occasion, in the course of a year, to make a hundred different purchases of B, and B to buy as frequently and about as largely from A, were each transaction to be completed and settled by itself at the time, two hundred transfers of different sums of money from one to the other must be made in a twelvemonth. But if each party chose to allow the other credit till a fixed time for settlement, then the whole amount of purchases on one side might be deducted from the whole amount on the other, and only the balance be paid in money. If nine tenths of an account are thus settled by offsets, and only one tenth by cash, it is evident that nine tenths of the trade has been a direct barter of one kind of merchandise for another, just as if money, or a universal medium of exchange, had never been invented. It is by practices analogous to this, rather than by increased rapidity of cir

culation, as I believe, that a nation's want of currency does not increase in as rapid a ratio as its population and its opulence. Even when the sales are all made by one of the parties, a person who has credit with him may adjust by a single payment in cash several hundred different purchases made at various times since the former settlement. It is important to remember such familiar facts as these, when an attempt is made to attribute all the evil of over-trading to an undue expansion of paper currency, and a scarcity of specie. We see that over-trading may take place to any extent, without the intervention of any currency whatever, whether paper or me. tallic.

Another mode of avoiding the frequent transfer of specie is the transfer or sale of debts. If a merchant has a sum of money due to him by one person, A, while he owes an equivalent sum to another, B, he can cancel both obligations at once, without having the money pass through his own hands at all, by simply giving B an order upon A for the amount required. Here, one operation-one transfer of currencyevidently takes the place of two; instead of A paying the given sum to the merchant, and the merchant immediately paying it over to B, A pays it directly to B, and the account is squared all round. If the merchant does business in New York, while A and B are both resident in London, such an order is called a bill of exchange, and the saving of trouble and expense that is effected by it is very obvious; without such an order, A must pay his debt by shipping the required amount of specie from London to New York; and then the merchant, in order to pay his debt to B, must immediately ship the specie back again to London. There would then be a loss of time enough for making two voyages across the ocean, a loss of interest on the money during this time, and the cost of freight and insurance on the amount during two voyages. All this expense and inconvenience are saved by the simple expedient of a bill of exchange, or an order for the transfer of a debt.

It may happen that the merchant, though he has a debt due to him in London, does not himself owe any money in that city; still, he will not be obliged to have the specie sent to him by sea, if he can find another merchant in New York who

does owe a debt in London to precisely the same amount. The first merchant, C, will then sell his debt to the second merchant, D, or in other words, sell him a bill of exchange, which, when paid in London by A to B, at once cancels A's debt to C, and D's debt to B. Two payments of money, the one from A to B, who are both in London, and the other from D to C, who are both in New York, evidently cancel four obligations, two of which, one from A to C, and another from D to B, are eliminated, or set off against each other, their direct adjustment being inconvenient, because the respective parties to them reside in different cities.

We can now understand what is meant by the course and par of exchange. All the merchants in New York who have debts due to them in London, draw bills of exchange for the amount of these debts, and go into market to sell these bills to other New York merchants who have debts to pay in London. If the former set have a larger amount to sell than the latter have occasion to buy, — or, in other words, if a greater amount of debt is due from London to New York, than from New York to London, -the competition of the selling merchants with each other will lower the price of these bills a little, or subject them to a small discount. A bill of exchange for one hundred dollars may not bring in the market more than 98 dollars; the exchange is then said to be 1 per cent against London, or 1 per cent below par. It cannot fall much lower than this, for the merchant, rather than take 98 dollars for his bill, will cause the 100 dollars to be sent over to him by his London debtor in specie; the freight, insurance, and other charges, cannot amount to more than two dollars. Whenever, then, the exchange falls about 1 per cent below par, we may expect that shipments of specie from England to America will begin. On the other hand, if a greater amount of debt is due from New York to London than from London to New York, then there will be more buyers than sellers of such bills in New York market; and the competition of these buyers with each other may cause a bill for $100 to sell for $101.50. The difference cannot be much greater than this, or it would cause specie to be shipped from America to England. The exchange is then said to be against New York, or 1 per cent above par.

In order to simplify this explanation, I have supposed the

metallic currency of the two countries to consist of the same denomination of coin,—namely, of dollars. But this is not the case; the New York merchant who has a debt due to him in London, draws a bill of exchange, not for so many dollars, but for so many pounds sterling, or sovereigns. Now the American dollar, or the tenth part of an eagle, contains, as we have seen, 23.2 grains of pure gold, and the English sovereign has 113 grains and a small fraction. These two numbers are to each, very nearly, as 1 to 4.87. The exchange, then, is really at par when a bill on London for 100 pounds sterling sells in New York for 487 dollars. This, I say, is the real par; the nominal par, established in 1789, and ever since retained in exchange operations, made the dollar equal to 4s. 6d. sterling, and the pound sterling, therefore, worth only $4.44. The present value of the pound sterling, $4.87, is about 9 per cent more than this; and therefore the exchange is really at par, when, according to the prices current, it is 9 per cent above par. The expense of shipping specie either way being about 11 per cent, when the exchange nominally rises to about 11 per cent, specie will be shipped from New York to London; when it nominally falls below 8 per cent, specie will be shipped from London to New York. As the quoted price of exchange at New York is for bills on London at sixty days' sight, allowance must be made for interest for this time.

It is easy to see that the par of the currency of any two countries means, among merchants, the equivalence of a certain amount of the currency of the one in the currency of the other, supposing the currencies of both to be of the precise weight and purity fixed by their respective mints. Thus, according to the mint regulations of Great Britain and France, the same quantity of pure gold which in London is coined into one pound sterling, in Paris is coined into 25 francs and 20 centimes; and accordingly, this is said to be the par between the two countries. The exchange between the two countries is said to be at par when bills are negotiated on this footing; that is, when a bill for £ 100 drawn on London is worth 2,520 francs in Paris, and conversely. As we have already seen that $4.87 in New York equals one pound sterling in London, it follows that $4.87 also equals 25 francs 20 centimes in Paris; or, what is the same thing, one American dollar is worth 5

francs 17 centimes and a small fraction, which is the par of exchange between France and the United States.

From the explanation now given, it appears very clearly that bills of exchange represent the items in the account current between England and America; and the specie shipped either way is the cash balance that is struck on the adjustment of the account. Bills of exchange are not drawn against air; they represent real transactions. The New York merchant cannot draw bills on London unless he has debts due to him there, which debts have been contracted for cotton, flour, tobacco, and other American products, which he had sent thither to be sold. On the other hand, a New York merchant cannot have debts to pay in London, except in return for manufactured goods, whether of cotton, silk, woollen, or iron, which he has received from England, and consumed or sold in America. And in the long run, it is evident that our exported goods must exactly pay for our imported goods, or the two sides of the account must balance each other. If they did not balance, if our exports were not equivalent in value to our imports, the deficiency would have to be made up by sending specie abroad; and a continued drain of specie, according to what has already been demonstrated, would raise the value of the money left behind, and, in consequence of raising the value of money, would lower the prices of goods in America; and the influx of specie into England would lower the value of money there, and raise the prices of goods. Erelong, then, the tide would turn; more goods would be sent from America, where they are lower in price, to England, where they are higher in price; and in payment for these goods, the current of specie would set in the opposite direction, till the value of money in the two countries was equalized again.*

* There is a curious feature in the management of the trade between England and the United States, which is in marked contrast with the course of mercantile transactions between England and all other commercial nations. For some inexplicable reason, the bills of exchange are all drawn one way. In Boston and New York, bills can always be purchased on London or Liverpool; but neither London nor Liverpool is supplied with any bills on Boston or New York. When cotton or flour is purchased in America for the English market, the seller draws bills of exchange on the consignee of the goods for the proceeds of the sale, and disposes of these bills in the New York market. But when manufactured goods are bought in Great Britain for the American market, the seller, instead of drawing directly on the New