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pocket, but by the command he possesses over the products of labor. In like manner the wealth of a nation does not consist in its circulating medium, but in that which the circulating medium represents-the products of labor. If all the precious metals in England were at once destroyed, she would still be a wealthy nation; for she would still possess her fertile soil, her roads and canals and bridges, her buildings and manufactories, her ships and merchandise. So far from the quantity of money being the standard of wealth, it is found that money is always scarce in enterprising and thriving communities when it can be profitably employed; and is always plenty, when from any cause, it will not pay the usual rate of interest.

We should feel almost ashamed of stating anew and defending such plain principles, if every week did not bring us papers, in which they are misunderstood or perverted. Jan. 18, 1823.

No. II.

THE remarks which we made in the Journal a few weeks ago, on the balance of trade, have had the fortune to attract some attention in different parts of the Union. In general, they appear to have produced conviction; though we claim for them no other merit than that of stating plain principles in plain language. As the subject is important, and as several answers to our arguments have been attempted, we shall be pardoned for offering a few additional remarks.

What is called the balance of trade is the difference between the value of the imports and exports of a country. We attempted to show, that when the balance of trade is said to be against the country, that is, when she imports more than she exports, so far from its being a sign of decay and ruin, it is rather a mark of prosperity. When a fisherman carries out with him fifty hogsheads of salt, worth two hundred dollars, and brings home four hundred and fifty quintals of fish, worth eleven hundred dollars, he would smile to hear us say that he was ruining either himself or his country. He would reply, that he had made a profitable voyage ;—his imports exceeded his exports. When a farmer goes to market with a load of pork, which cost him fifty dollars to raise, and returns with a load of salt and iron worth seventyfive dollars, which he has purchased with the proceeds, besides paying his expenses, he would wonder a little at that political arithmetic, which would teach him that he had made a losing journey.

The principal difficulty attending this subject has arisen from the high rate of exchange. It has been said, that when merchants have to give, for many successive months, ten or twelve per cent. advance for bills of exchange, it is conclusive evidence that the country is getting in debt; that there are not goods enough sent to Europe to pay for those which we bring home, and of course that a high rate of interest is paid for money there. We hope to show, by a plain example, that the whole of this reasoning is fallacious.

Exchange, in its technical sense, is the sum given in one country for the transfer of a debt due in another. When

the price given is the same sum as that which is to be received, exchange is said to be at par; when it is more than that which is to be received, exchange is in advance, or at a premium. Now, as the design of the purchaser of exchange is to employ the money in the foreign country, where the debt is due, it is obvious that he will never give more advance for exchange, than the sum it would cost him to transport specie to the same place. That is, exchange can never be higher than the freight, insurance, and commission charged upon the transportation of mony. For why should A give B ten per cent. for one hundred dollars, payable in England, when he can send one hundred silver dollars to England for about one and a half per cent.

But it may be said that exchange is at present actually at ten per cent. advance; and yet there are dollars in the country! The apparent difficulty may be removed by a single example.

A owes a debt in England of four hundred and eightytwo dollars, which he wishes to pay. He purchases of B a bill of exchange for one hundred pounds sterling, for which he give a premium of ten per cent. When he remits it, his

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He therefore has paid here four hundred and eighty-eight dollars and eighty-eight cents for one hundred pounds sterling in London. Now what is the value of these one hun

dred pounds in London? How much of his debt will be paid by it?

By the last advices dollars were worth, in England, 4s. 1d. 1q. per oz. or 4s. 1d. 3q. apiece. A therefore receives, in England, four hundred and eighty-two dollars and fortyone cents, in the place of four hundred and eighty-eight dollars and eighty-eight cents paid here. He has really given then only six dollars and forty-seven cents, or one per cent. and forty-one hundredths for exchange, instead of ten per cent.

Now what would have been the result, if he had shipped specie, instead of buying a bill of exchange? He owes four hundred and eighty-two dollars in England; he would therefore ship that sum:

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It would have cost him, then, twelve dollars and five cents, or more than two and a half per cent. to ship specie. Even if we deduct the premium given for dollars, there will remain seven dollars and twenty-three cents, or one and a half per cent., as the cost of remittance; or nine cents in the hundred dollars more than the price of exchange. Bills of exchange, therefore, are, at this moment, sold for less than their true value! And if they are any criterion of the state of the trade, England is in debt to the United States, instead of the United States being in debt to England.

This result will doubtless surprise those, who consider the rate of exchange as a sure standard by which to ascertain the balance of trade. But we have other facts equally conclusive. For many years past, exchange has been from fifteen to twenty per cent. in favor of England and Spain, and from eight to twelve per cent. in favor of the United States, against the island of Cuba. Is that island, with all its great and valuable exports, on the verge of ruin? Is she getting in debt from ten to twenty per cent. a year to Spain, to England, to the United States? We believe there will scarcely be found an advocate for the old doctrine of the balance of trade, that will venture to assert it.


The truth is, the rate of exchange with any particular country depends more upon the actual valuation of money, than upon any supposed balance of trade. In the United States, dollars have, by law, a fixed value. In England, the price of them fluctuates like that of any other article of If instead of being worth in England, as they now are, only 4s. 6d. 3q. each, they should rise, as in 1816, to 4s. 7d., it is evident that four hundred and fortyfour dollars here would again purchase one hundred pounds sterling in England. But would such a rise in the value of dollars alter the balance of trade? Would it make our imports less or exports greater? Would it be, in itself, any evidence that this country was more or less indebted to England?

In Cuba, doubloons pass for seventeen dollars; while here they are worth but fifteen. Spanish dollars are therefore always worth in Cuba from six to eight per cent. ad

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