two countries lies, or which of them exports
to the greatest value. National prejudice and
animosity, prompted always by the private interest
of particular traders, are the principles
which generally direct our judgment upon all
questions concerning it. There are two criterions,
however, which have frequently been
appealed to upon such occasions, the custom-house
books and the course of exchange. The custom-house
books, I think, it is now generally
acknowledged, are a very uncertain criterion,
on account of the inaccuracy of the
valuation at which the greater part of goods
are rated in them. The course of exchange
is, perhaps, almost equally so.
When the exchange between two places,
such as London and Paris, is at par, it is said
to be a sign that the debts due from London
to Paris are compensated by those due from
Paris to London. On the contrary, when a
premium is paid at London for a bill upon
Paris, it is said to be a sign that the debts
due from London to Paris are not compensated
by those due from Paris to London, but
that a balance in money must be sent out
from the latter place; for the risk, trouble,
and expense, of exporting which, the premium
is both demanded and given. But the ordinary
state of debt and credit between those
two cities must necessarily be regulated, it is
said, by the ordinary course of their dealings
with one another. When neither of them imports
from the other to a greater amount than
it exports to that other, the debts and credits
of each may compensate one another. But
when one of them imports from the other to
a greater value than it exports to that other,
the former necessarily becomes indebted to
the latter in a greater sum than the latter becomes
indebted to it: the debts and credits
of each do not compensate one another, and
money must be sent out from that place of
which the debts overbalance the credits. The
ordinary course of exchange, therefore, being
an indication of the ordinary state of debt and
credit between two places, must likewise be
an indication of the ordinary course of their
exports and imports, as these necessarily regulate
that state.
But though the ordinary course of exchange
shall be allowed to be a sufficient indication
of the ordinary state of debt and credit between
any two places, it would not from thence
follow, that the balance of trade was
in favour of that place which had the ordinary
state of debt and credit in its favour.
The ordinary state of debt and credit between
any two places is not always entirely regulated
by the ordinary course of their dealings
with one another, but is often influenced by
that of the dealings of either with many other
places. If it is usual, for example, for the
merchants of England to pay for the goods
which they buy of Hamburg, Dantzic, Riga,
&c. by bills upon Holland, the ordinary state
of debt and credit between England and Holland
will not be regulated entirely by the ordinary
course of the dealings of those two
countries with one another, but will be influenced
by that of the dealings in England with
those other places. England may he obliged
to send out every year money to Holland,
though its annual exports to that country may
exceed very much the annual value of its imports
from thence, and though what is called
the balance of trade may be very much in
favour of England.
In the way, besides, in which the par of exchange
has hitherto been computed, the ordinary
course of exchange can afford no sufficient
indication that the ordinary state of debt
and credit is in favour of that country which
seems to have, or which is supposed to have,
the ordinary course of exchange in its favour;
or, in other words, the real exchange may be,
and in fact often is, so very different from the
computed one, that, from the course of the
latter, no certain conclusion can, upon many
occasions, be drawn concerning that of the
former.
When for a sum of money paid in England,
containing, according to the standard of
the English mint, a certain number of ounces
of pure silver, you receive a bill for a sum of
money to be paid in France, containing,
according to the standard of the French mint,
an equal number of ounces of pure silver,
exchange is said to be at par between England
and France. When you pay more, you are
supposed to given premium, and exchange is
said to be against England, and in favour of
France. When you pay less, you are supposed
to get a premium, and exchange is said
to be against France, and in favour of England.
But, first, We cannot always judge of the
value of the current money of different countries
by the standard of their respective mints.
In some it is more, in others it in less worn,
clipt, and otherwise degenerated from that
standard. But the value of the current coin
of every country, compared with that of any
other country, is in proportion, not to the
quantity of pure silver which it ought to contain,
but to that which it actually does contain.
Before the reformation of the silver
coin in King William's time, exchange between
England and Holland, computed in the
usual manner, according to the standard of
their respective mints, was five-and-twenty per
cent. against England. But the value of the
current coin of England, as we learn from
Mr Lowndes, was at that time rather more
than five-and-twenty per cent. below its standard
value. The real exchange, therefore, may
even at that time have been in favour of England,
notwithstanding the computed exchange
so much against it; a smaller number of
ounces of pure silver, actually paid in England,
may have purchased a bill for a greater