CAROLINE.

This, then, seems to decide the point of depreciation.

MRS. B.

I think it does; but it is yet a disputed question, and the principle becomes every day more generally acknowledged; but you must recollect, that when I undertook to assist you in acquiring a knowledge of the principles of political economy, we agreed to confine our enquiries to such points as were well established. We will, therefore, refrain from deciding a question upon which there still exists a difference of opinion.

It is very easy to acquire some knowledge of the principles of a science, but extremely difficult to know how to apply them. I would particularly caution you against hasty conclusions or inferences; the errors arising from the misapplication of sound principles are scarcely less dangerous than those which proceed from ignorance.

Let us now conclude our observations on currency, which we may henceforth consider as consisting not merely of specie, but of coined and of paper-money.

CAROLINE.

It is not, I suppose, necessary that the value of the currency of a country should be equal to the value of the commodities to be circulated by it?

MRS. B.

By no means. The same guinea or bank-note will serve the purpose of transferring from one individual to another several hundred pounds' worth of goods in the course of a short time. There are besides many expedients for economising money, the most remarkable of which is an arrangement made amongst bankers. Their clerks meet every day after the hours of business to exchange the draughts made on each other for the preceding day. If, for instance, the banking-house A. has draughts to the amount of 20,000l. on the banking-house B., the latter has also, in all probability, draughts upon the former, though they may not be to the same amount; the two houses exchange these draughts as far as they will balance each other, and the necessity of providing money for the payment of the whole is thus obviated. By this economical expedient, which is carried on amongst all the bankers in London east of St. Paul's, I understand that about 200,000l. performs the function of four or five millions.

CAROLINE.

And what do you suppose to be the proportion of the money to the value of the commodities to be circulated by it?

MRS. B.

That, I believe, it would be impossible to ascer

tain. Mr. Sismondi, in his valuable Treatise on Commercial Wealth, compares these respective quantities to mechanical powers, which, though of different weights, balance each other from the equality of their momentum; and, to follow up the comparison, he observes that though commodities are by far the most considerable in quantity, yet that the velocity with which currency circulates, compensates for its deficiency.

CAROLINE.

This is an extremely ingenious comparison, and I should suppose the analogy to be perfectly correct; for the less money there is in circulation the more frequently it will be transferred from one to another in exchange for goods.

MRS. B.

Perfectly correct is rather too strong a term. The analogy will only bear to a certain extent, otherwise, whatever were the proportions of currency and of commodities, they would always balance each other, and the price of commodities would never be affected by the increase or diminution of the quantity of currency.

CONVERSATION XVIII.

ON COMMERCE.

DIFFERENCE OF WHOLESALE AND RETAIL TRADE.

GENERAL ADVANTAGES OF TRADE.

-

HOW IT

EXPLAINED.

ADVANTAGES OF QUICK RETURN

OF CAPITAL TO FARMERS AND MANUFACTURERS. -ADVANTAGES OF ROADS, CANALS, &c.— DIFFERENCE OF THE HOME TRADE, FOREIGN TRADE, AND CARRYING TRADE. -OF THE HOME TRADE:

IT RETURNS CAPITAL QUICKER.

MRS. B.

WE mentioned commerce as one of the modes of employing capital to produce a revenue; but deferred investigating its effects until you had acquired some knowledge of the nature and use of money. We may now, therefore, proceed to ex

amine in what manner commerce enriches individuals, and augments the wealth of a country.

Those who engage their capitals in commerce or trade, act as agents or middle-men between the producers and the consumers of the fruits of the earth; they purchase them of the former, and sell them to the latter; and it is by the profits on the sale that capital so employed yields a revenue.

There are two distinct sets of men engaged in trade: merchants, who purchase commodities (either in a rude or a manufactured state) of those who produce them, this is called wholesale trade; and shopkeepers, who purchase goods in smaller quantities of the merchants, and distribute them to the public according to the demand, — this constitutes the retail trade.

CAROLINE.

Trade will no doubt bring a revenue to those who employ their capital in it; but I do not conceive how it contributes to the wealth of the country for neither merchants nor shopkeepers produce any thing new; they add nothing to the general stock of wealth, but merely distribute that which is produced by others. It is true, that mercantile men form a considerable part of the community; but if their profits are taken out of the pockets of their countrymen, they may make