from the coinage. The money of the The money of the country which defrays the expence of coinage is therefore more valuable than that of the country which does not defray that expence, because the workmanship adds to the value; consequently the premium for a bill may be merely sufficient to compensate the expence of the coinage.

"S. In some places, as at Amsterdam, Hamburgh, Venice, &c. foreign bills of exchange are paid in what they call bank-money; while in others, as at London, Lisbon, Antwerp, Leghorn, &c. they are paid in the common currency of the country. What is called bank-money, is always of more value than the same nominal sum of common currency; therefore the premium paid by London and Lisbon for bills upon Hamburgh and Amsterdam may merely compensate the difference in the value of the currency in which the bills are to be paid.

4. 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 ot herplaces. If it is usual, for example, for the merchants of England to pay for the goods which they buy of Hamburgh, 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."**

* Wealth of Nations, vol. ii. pages 221, 222, 223, 224, 227.

In whatever light, therefore, the rate of exchanges may be viewed, it is evident that it gives but fallacious indications of the state of foreign commerce.

There is, then, at present no certain way of açquiring any positive information in that respect; all is conjecture, and of course uncertain. Perhaps it is even useless to attempt it, since it is undoubted that foreign commerce is constantly advantageous to all countries, and the question between them is only about the greater or less advantages they derive from it. But if the exact statement of its imports and exports be almost indifferent to a nation, it is not so with regard to its home-trade, which comprizes the annual produce of its labour and the consumption of that produce. "If the exchangeable value of the annual produce exceed that of the annual consumption, the capital of the society increases in proportion to this excess. The society, in this case, lives within its income, and what is annually saved out of its income, is naturally added to its capital and employed so as to increase still further the annual produce. If the exchangeable value of the annual produce, on the contrary, fall short of the annual consumption, the capital of the society must annually decay in proportion to this deficiency. The expence of the society in this case exceeds its income, and necessarily encroaches upon its capital. Its capital, therefore, must necessarily decay, and, together with it, the exchangeable value of the annual produce of its industry.

"This balance of produce and consumption is entirely different from what is called the balance of

*

trade, or balance of imports and exports. When the former is advantageous, the latter is always favourable; and when the balance of produce and consumption is unfavourable, it is not in the power of a beneficial balance of trade to check or ward off its pernicious influence."

Adam Smith advances in this respect an assertion which it is proper to investigate, in order to ascertain the nature and difference of the two balances.

He thinks that the balance of produce and consumption may be constantly in favour of a nation, though what is called the balance of trade be generally against it. "A nation," he says, "may import to a greater value than it exports for half a century, perhaps, together; the gold and silver which comes into it during all this time may be all immediately sent out of it; its circulating coin may gradually decay,` different sorts of paper-money being substituted in its place, and even the debts which it contracts in the principal nations with whom it deals may be gradually increasing; and yet its real wealth, the ex ́changeable value of the annual produce of its lands and labour, may, during the same period, have been increasing in a much greater proportion. The state of the North-American colonies and of the trade which they carried on with Great Britain before the American war, may serve as a proof that this is by no means an impossible supposition."t

This seems a strange phenomenon. How is it to

be credited, that a country which annually exports commodities inferior in value to what it imports, which we will suppose, purchases abroad goods to the amount of ten millions, and exports produce amounting only to five, millions, which of course contracts every year a debt of five millions; how is it to be credited, I say, that such a country should cover this excess of expenditure abroad with an equal or superior excess of its income at home?

The phenomonon is however explained in the simplest manner.

The excess of foreign commerce imported into a country above the productions exported is not always consumed in the country as part of the national income, but as part of the circulating capital destined to augment the fixed capital which produces a revenue. These five millions are consequently a loan borrowed from foreigners, to increase the annual labour, to embark in undertakings the abundent produce of which does more than cover the loan and the interest or profit due to the creditors. In this instance alone, it is true that an unfavourable balance of trade is not a proof of declining wealth, and may even prove not injurious to the progressive prosperity of a country.

Were the excess of imports above exports consumed as a revenue, there is no doubt but this excess of consumption would ultimately occasion the ruin of the country.

And this consideration enforces still more the necessity of endeavouring to find out a way to know the balance of annual income and annual consumption.

Is there any such way that can be relied upon as certain and positive ?

There is none. We must as yet be contented with mere conjectures built upon an augmented population, and particularly upon the increase of the industrious classes* and towns, upon the good condition of agricultural buildings, upon the number of acres cleared or inclosed, and upon the facility with which the public contributions are collected.

To those conjectures some add those resulting from the rate of interest of money: but this conjecture is, in my opinion, erroneous and delusive.

A high rate of interest is not always a proof of the declining wealth of a country; on the contrary, it is a proof of its prosperity when this prosperity is progressive. The interest of money must always be very high in countries whose prosperity is progressive, because its agriculture and manufactures, increasing with its population, are always requiring fresh capitals, the demand for which necessarily keeps the rate of interest very high.

A low rate of interest may likewise not be an infallible sign of the wealth of a country being progressive. "A low rate of interest," says Swift, "the usual sign of the wealth of a state, may also be a sign of misery, when no one, for instance, wants to

* In the mercantile system there is a very simple way for nations to judge at all times of their population and prosperity; they need only to ascertain from time to time the numbers of their manufactu rers.-Discours Fondamental sur la Population, par Herrenschwand.