tion of the precious metals under heavy penalties, or by attempting to encourage their importation by protective or prohibitory duties on merchandise, or, by resorting to any other expedient, have proved utterly futile. Money, as has been said, like water, will find its level, and although the former like the latter, may for a period be forced into unnatural channels, the deviation cannot long continue.

And here, I will take occasion to remark, that in forming an estimate of the comparative value of the exports and imports of the United States, the custom house returns, as they appear in their aggregates, are but imperfect guides to determine the balance of trade. The value of the exports given is their value at the time and place of shipment, as furnished by the shippers under oath, in the form of manifests. The value of the imports, is their cost abroad, as ascertained by the invoices, also furnished under oath, subject to such revision by the custom house appraisers as may, in case of suspected fraud in the valuation of goods chargeable with ad valorem duties, be deemed right and just. These foreign invoices embrace the cost of the articles, and what are called the shipping charges, that is, the charges without the payment of which they could not be put on shipboard, but include no frieght, or insurance; and where they are made out in Brazil, Buenos Ayres or other countries, where a depreciated paper currency exists, due allowance is made for the depreciation.

Now, as cargoes shipped abroad from the United States, are burthened with the expenses of freight and insurance, their value at foreign ports must generally be augmented by the amount of these expenses and the profits on the voyage, and consequently the nett proceeds of their sales must always furnish a fund adequate to the purchase of foreign commodities to a greater value than their cost at home. On this account it necessarily follows, that where the trade of a country is profitable, its imports will always exceed its exports, and this too, just in the degree that it is profi

table, and nothing is clearer than that if the voyage out and home does not give a greater amount of imports than of exports, the trade would be abandoned. Of this proposition there can be no dispute, and it is quite probable that an export of a hundred millions of dollars would purchase abroad as many commodities as would show an import on the custom house books of a hundred and twenty or more millions of dollars, thus overthrowing the theory of that class of reasoners who maintain that the balance of trade is against a country when it imports more than it exports, and who consequently believe that a nation is growing poor when she is in reality growing rich.

But to make this matter perfectly plain, I will illustrate it by a practical case that every body can understand.

A merchant in Philadelphia purchases one thousand barrels of flour at eight dollars per barrel, and ships it to the West Indies. The custom house books in this case would show an export of eight thousand dollars. On the arrival of the cargo abroad it sells for twelve dollars per barrel, and after paying freight, duties, commissions, and all other charges, leaves the nett proceeds ten thousand dollars. This sum is invested in coffee, and brought home, where it is entered upon the custom house books as an import of that amount. Here, then, we would have an export of eight thousand dollars and an import of ten thousand dollars, showing a clear gain of two thousand dollars, without leaving any balance due one way or the other. A stronger illustration than this even, is to be found in the operation of our whaling ships. A vessel with a cargo consisting of nothing but provisions sufficient to feed a crew for a voyage, and as many staves, hoops, and headings, as will make casks enough to hold a cargo of oil, clears out at New Bedford for the South seas. The custom house books show an export of ten thousand dollars, perhaps, and when the ship returns with a cargo of oil, they give us an import of fifty thousand dollars, thus showing

what the superficial reasoners above referred to would call a balance of trade against the country of forty thousand dollars, but which is a clear evidence of a gain to the owners and crew, and consequently to the country.

But even if the custom house books were to furnish accurate statements of the nett proceeds of the sales of the cargoes exported, as well as of the foreign cost of the homeward cargoes, they would not be sufficient to enable us to form a correct estimate of the real balance of trade. Debits and credits are created in the foreign trade of every country, which never appear on the custom house books. Specie is imported and exported by emigrants and passengers in their trunks, or secretly shipped by merchants to avoid penalties or odium, or, exposure of their operations. Goods are smuggled, and others are purchased with funds earned by vessels abroad, engaged in the carrying trade, and thereby augment the imports, whilst ships are frequently sold abroad, and thereby augment the exports. Large amounts of property are also exported from some countries for which no proceeds are to return, or at least, to return at an early day, such as happens in the case of foreign subsidies, the maintenance of troops and navies abroad, the transmission of revenues to non-resident capitalists, and funds for the expenses of travellers in foreign countries. To these may be added losses at sea, or by fires abroad, the bankruptcy of the persons to whom the exported commodities are sold, and investments in foreign loans and joint-stock companies. In most of these cases property of some kind or other is sent abroad which appears on the custom house books amongst the exports; and, although in many of them the actual transmission for these specific objects may be in the form of bills of exchange, yet it is manifest, that these bills could only be drawn upon shipments of property.

In the foregoing remarks it has been laid down as an axiom, that the price of bills of exchange is deter

mined by the balance of trade. Strictly speaking, however, this is not always the case, for this balance is liable to be modified by what is called the balance of payments; and in truth this latter principle it is which regulates the daily rate of the exchanges. If all the merchandise exported and imported was to be immediately paid for at the time of its changing hands, the balance of trade and the balance of payments would be identical. But, in the intercourse between nations we know that this is not always the case, and that circumstances occur to prevent the immediate influence of the balance between imports and exports from acting directly upon the exchanges. Amongst these circumstances are the following:

1. Where the imported articles are bought on a credit, and are to be paid for at a distant time, whilst the exported articles are sold for cash, or vice versa.

2. Where in the case of both imports and exports the sale is on credit, but the credits are not of the same length.

3. Where the articles shipped abroad from one of the countries should not meet with a ready sale, and should be kept on hand for a length of time without being drawn upon, whilst on the other side a prompt sale is made, and bills drawn for the proceeds.

In either of these cases, the operation of the balance of payments on the exchanges might be such as not only to neutralise for a time the operation of the balance of trade, but to turn the exchanges against the country which had the balance of trade in its favor. A case in point can readily be referred to.

If an account current were to be made out of the past state of debits and credits between the United States and Great Britain, it would no doubt be found, that from the date of planting the first British colony in this hemisphere, we have owed a balance of trade that has never been discharged, and which at times may have amounted to a hundred millions of dollars or more; and yet, owing to the credit that has been extended to us, by which the pay-day has been de

ferred, the exchange has not always been against us, but has, on the contrary, been so controlled by the balance of payments as frequently to have been in our favor.*

CHAPTER V.

ON THE PRINCIPLES OF EXCHANGE.

BILLS of exchange are those commercial instruments by which a merchant in one country or place directs money which is subject to his control in another country or place to be paid over to a third party. In the commercial transactions of every nation, some of the merchants become indebted to other merchants in foreign countries for commodities purchased there upon credit, whilst some others have funds in those foreign countries arising from the sale of cargoes disposed of there. If bills of exchange did not exist, the debtor class of these merchants would be obliged to incur the expense and risk of transporting coin or bullion to foreign countries in discharge of their debts, and the creditor class would also be obliged to incur the same expense and risk in importing coin or bullion in payment of their cargoes sold abroad. By this double transmission, the merchants, and consequently the nations to which they belonged, would be losers to an amount equal to all the expenses and risks so incurred, together with interest on their capitals for the time they were out of their reach. Nor could this be avoided unless the importers and exporters were always the same identical individuals, in which case the merchandise purchased

* For a table of Imports and Exports of the United States from 1789 to 1839, see Appendix F.