other imported commodities, be of the lowest value in the countries for whose exports there is the greatest foreign demand, and which have themselves the least demand for foreign commodities. To these two circumstances, it is, however, necessary to add two others, which produce their effect through cost of carriage. The cost of obtaining bullion is compounded of two elements; the goods given to purchase it, and the expense of transport; of which last, the bullion countries will bear a part (though an uncertain part in the adjustment of international values. The expense of transport is partly that of carrying the goods to the bullion countries, and partly that of bringing back the bullion; both these items are influenced by the distance from the mines; and the former is also much affected by the bulkiness of the goods. Countries whose exportable produce consists of the finer manufactures, obtain bullion, as well as all other foreign articles, cæteris paribus, at less expense, than countries which export nothing but bulky raw produce.

To be quite accurate, therefore, we must say-The countries whose exportable productions are most in demand abroad, and contain greatest value in smallest bulk, which are nearest the mines, and which have least demand for foreign productions, are those in which money will be of lowest value, or in other words, in which prices will habitually range the highest. If we are speaking not of the value of money, but of its cost, (that is, the quantity of the country's labor which must be expended to obtain it,) we must add to these four conditions of cheapness a fifth condition, namely, "whose productive industry is the most efficient." This, however, does not at all affect the value of money, estimated in commodities; it affects the general abundance and facility with which all things, money and commodities together, can be obtained.

Although, therefore, Mr. Senior is right in pointing out the great efficiency of English labor as the chief cause

why the precious metals are obtained at less cost by England than by most other countries, I cannot admit that it at all accounts for their being of less value; for their going less far in the purchase of commodities. This, in so far as it is a fact, and not an illusion, must be occasioned by the great demand in foreign countries for the staple commodities of England, and the generally unbulky character of those commodities compared with the corn, wine, timber, sugar, wool, hides, tallow, hemp, flax, tobacco, raw cotton, &c., which form the exports of other commercial countries. These two causes will account for a somewhat higher range of general prices in England than elsewhere, notwithstanding the counteracting influence of her own great demand for foreign commodities. I am, however, strongly of opinion, that the high prices of commodities, and low purchasing power of money in England, are more apparent than real. Food, indeed, is somewhat dearer; and food composes so large a portion of the expenditure when the income is small and the family large, that to such families England is a dear country. Services, also, of most descriptions, are dearer than on the continent, from the less costly manner in which the poorer classes on the continent are contented to live. But almost all sorts of manufactured commodities are decidedly cheaper; or would be so, if buyers would be content with the same quality of material and of workmanship. What is called the dearness of living in England, is mainly an affair not of necessity but of foolish custom; it being thought imperative by all classes in England above the condition of a day-laborer, that the things they consume should either be of the same quality with those used by much richer people, or at least should be as nearly as possible undistinguishable from them in outward appearance.

$ 3. From the preceding considerations, it appears that those are greatly in error who contend (as has been done

in the controversies called forth by the recent publications. of Colonel Torrens) that the value of money, in countries where it is an imported commodity, must be entirely regulated by its value in the countries which produce it; and cannot be raised or lowered in any permanent manner unless some change has taken place in the cost of production at the mines. On the contrary, any circumstance which disturbs the equation of international demand with respect to a particular country, not only may, but must, affect the value of money in that country-its value at the mines remaining the same. The opening of a new branch of export trade from England; an increase in the foreign demand for English products, either by the natural course of events or by the abrogation of duties; a check to the demand in England for foreign commodities, by the laying on of import duties in England or of export duties elsewhere; these, and all other events of similar tendency, would make the imports of England (bullion and other things taken together) no longer an equivalent for her exports; and the countries which take her exports would be obliged to offer their commodities, and bullion among the rest, on cheaper terms, in order to reëstablish the equation of demand; and thus England would obtain money cheaper, and would acquire a generally higher range of prices. Incidents the reverse of these would produce effects the reverse-would reduce prices; or, in other words, raise the value of the precious metals. It must be observed, however, that money would be thus raised in value only with respect to home commodities; in relation to all imported articles it would remain as before, since their values would be affected in the same way and in the same degree with its own. A country which, from any of the causes mentioned, gets money cheaper, obtains all its other imports cheaper likewise.

It is by no means necessary that the increased demand 13*

VOL. II.

for English commodities, which enables England to supply herself with bullion at a cheaper rate, should be a demand in the mining countries. England might export nothing whatever to those countries, and yet might be the country which obtained bullion from them on the lowest terms, provided there were a sufficient intensity of demand in other foreign countries for English goods, which would be paid for circuitously with gold and silver from the mining countries. The whole of its exports are what a country exchanges against the whole of its imports, and not its exports and imports to and from any one country; and the general foreign demand for its productions will determine what equivalent it must give for imported goods, in order to establish an equilibrium between its sales and purchases generally, without regard to the maintenance of a similar equilibrium between it and any country singly.

CHAPTER XX.

OF THE FOREIGN EXCHANGES.

$ 1. We have thus far considered the precious metals as a commodity, imported like other commodities in the common course of trade, and have examined what are the circumstances which would in that case determine their value.

But those metals are also imported in another character, that which belongs to them as a medium of exchange; not as an article of commerce, to be sold for money, but as themselves money, to pay a debt, or effect a transfer of property. It remains to consider whether the liability of gold and silver to be transported from country

to country for such purposes, in any way modifies the conclusions we have already arrived at, or places those metals under a different law of value from that to which, in common with all other imported commodities, they would be subject if international trade were an affair of direct barter.

Money is sent from one country to another for various purposes, such as the payment of tributes or subsidies; remittances of revenue to or from dependencies, or of rents or other incomes to their absent owners; emigration of capital, or transmission of it for foreign investment. The most usual purpose, however, is that of payment for goods. To show in what circumstances money actually passes from country to country for this or any of the other purposes mentioned, it is necessary briefly to state the nature of the mechanism by which international trade is carried on, when it takes place not by barter but through the medium of money.

2. In practice, the exports and imports of a country not only are not exchanged directly against each other, but often do not pass through the same hands. Each is separately bought and paid for with money. We have seen, however, that, in the same country, money does not actually pass from hand to hand each time that purchases are made with it, and still less does this happen between different countries. The habitual mode of paying and receiving payment for commodities, between country and country, is by bills of exchange.

A merchant in England, A, has exported English commodities, consigning them to his correspondent B in France. Another merchant in France, C, has exported French commodities, suppose of equivalent value, to a merchant D in England. It is evidently unnecessary that B in France should send money to A in England, and that D in England should send an equal sum of money to C in France.