unfavorable balance in both cases caused great distress by the necessary exportation of specie.

Balance of trade how adjusted.

We have heretofore said that an unfavorable balance must be liquidated with specie. This is the general fact; but it is not always disposed of in that way. For example, the balance against the United States in 1853, as per Financial Report, was thirty-seven millions. Now, if this were in fact an actual balance, a part of this might have been extended to the next year, and paid in cotton or wheat; or, what is more probable, several millions of railroad or other stocks might have been sent abroad and sold, and the balance settled from the proceeds.

If the commerce of a country is in a really prosperous condition, the value of its imports will, in the long-run, exceed its actual exports, because its export trade should pay a profit. No country is enriched by trade, unless its aggregate imports do exceed in value its exports. It is no matter whether the excess of imports over exports is brought into the country in specie or any other desirable commodity, provided its own currency be a true standard of value.

The trade of the United States for 1863 showed the following results: Exports (Financial Report, 1864), $350,152,125; imports, $252,187,587; balance, $97,864,538. The returns also showed an export of gold to the amount of $82,364,482, an import of gold of $9,584,105, giving a balance of $72,780,377. A considerable part of this gold was, doubtless, sent abroad for safe keeping by timid capitalists, and not over-loyal citizens. The large balance of seventy-two millions in favor of the United States was no indication of a profitable trade that year; quite otherwise. The balance of gold exported in 1864 was ninety-one millions. Another fact, that throws additional conjecture upon the apparent balance of trade, is, that false invoices are used to an enormous extent at our American custom-houses.

Whenever duties are charged upon the cost of the commodities, it is an object to have them invoiced as low as possible. Fraudulent invoices are often made out abroad and sworn to by the importers here, and thus the actual value or amount paid for the foreign merchandise is not accurately exhibited. The Revenue Commissioners (see their Report to the Secretary of the Treasury, January 29, 1866, page 45) estimate that the frauds at the New-York Custom-House alone are from "twelve to twenty-five millions annually." The aggregate of these frauds throughout the country has been estimated as high as forty millions per annum; but, if they amount to only thirty millions, the "balance of trade" is seriously influenced by them.

There is still another consideration; viz., that the United States are much indebted abroad, and a large sum is required to pay the annual interest. This can only be paid by our exports of merchandise or specie; for both are alike. reckoned in our list of "exports." We owed $500,000,000 abroad in 1860 (see Foreign and Domestic Commerce, 1863, page 42, Treasury Report). The Comptroller of the Currency, in his Report for 1865, page 7, estimates the amount of our securities sent abroad the last five years at $713,000,000, in all, then, $1,213,000,000. The interest on this sum, at six per cent, will be $72,780,000; and this must be provided for in our exports.

Many considerations of this general character might be brought forward; but sufficient has already been said, we trust, to show what the real nature of a balance of trade is, and how difficult a matter it must always be to determine with accuracy upon which side it actually is, and what its

amount.

PART SECOND.- INSTRUMENTS OF EXCHANGE.

CHAPTER I.

BARTER AND THE DIFFERENT FORMS OF CURRENCY.

WE have discussed the principles upon which exchanges are made. We now come to consider the instruments by which they are effected.

2d, A common medium, or currency. 3d, Different forms of credit.

No person produces every thing he wishes to consume. Even in the savage state, men will obtain different products, as they have skill and opportunity. These they will exchange among themselves in kind.

As the civilized state appears, the necessity for interchange of commodities increases. Every mechanic must exchange his products with every other mechanic, and all these with the agriculturist and fisherman; so that exchange becomes one of the greatest departments of human industry. But, under these circumstances, barter, or exchange in kind, becomes a very inconvenient and clumsy mode of effecting the desired object. For example, the farmer may wish to exchange wheat for a hat; but the hatter is already supplied: what, then, will the hatter accept? A table. The farmer must then go to the cabinet-maker, and offer his wheat for a table. But the cabinet-maker is supplied with wheat. He would, however, accept a pair of boots. The farmer applies to the boot-maker, who happens to wish for wheat and accepts the offer. With the boots the farmer gets the table, and with the table gets the hat which he desired.

In such a state of things, this was the only process by which exchanges could be effected; circuitous, and expensive in time and labor, as it was.

We might have supposed a far more difficult case; but this is sufficient to illustrate the inconvenience of barter, or the direct exchange of commodities. But there is still another difficulty, of scarcely less magnitude. When articles to be exchanged became numerous, it would be found a very intricate matter to establish satisfactorily the relative value of each. For example, how many sheep shall be given for a cow? How many cows for a horse? How much corn for a bushel of wheat? How much butter for a gallon of molasses? How many eggs for a pound of tea, sugar, or coffee? How many of any or all of these for a cart, plough, spade, chair, table, &c., through an interminable series of exchanges?

Under such circumstances, there could be no such thing as price, because there would be no common standard, to which the value of all articles could be referred.

What, then, was wanted? Evidently, some article which all persons, either by common consent or the force of law, shall accept for whatever they have to sell, and by which they will measure the value of any thing sold.

That article would perform two important functions; viz., it would be an instrument of exchange, and a standard of value: in other words, it would be money.

We learn the true nature of money, then, from its origin and the functions it performs. These offices or functions we must examine in detail.

1st, As a medium of exchange. This may be wholly conventional. Any thing, which, by general consent or in obedience to law, all receive in exchange, will answer the purpose. So far as.this function is concerned, it is of no consequence whether the article has value or not: safety and convenience are the only considerations of importance.

Money, in this respect, is simply a counter, token, or universal equivalent.

2d, As a standard of value. Value is not conventional. It attaches to all objects which are desired, but cannot be had without effort or labor. Since the value of any thing is its power in exchange, we say that nothing is valuable which will not command labor, or that which costs labor.

"Value implies comparison, appropriation, estimation, measure. In order that two things should measure each other, it is necessary that they be commensurable; and, in order to that, they must be of the same kind.". BASTIAT.

Therefore, if we would measure value, we must use an article that has value in it. The measure must evidently have the same quality as the thing to be measured,weight to measure weight, length to measure length, volume to measure volume, value to measure value.

The standard must be as nearly invariable as possible. An absolutely invariable standard is unattainable, because the standard itself must be subject to the same laws as the objects to be measured; that is, cost of production, supply and demand, &c.

Hence we must take that for a standard, which, on the whole and in the long-run, is subject to the least fluctuation. Of all objects of this kind, we shall see that the precious metals are the least liable to great and violent changes in value.

In examining the principle of barter, we were forced, by its practical difficulties, to accept the resource of a universal. equivalent for all commodities. This, in its original form, is money. But the course of civilized industry has introduced several forms of such an equivalent, of which the money, by which men first escaped from the difficulties of barter, is only one. All these forms are classed as currency; and therefore, in discussing the instruments of exchange, next after barter we come to the subject of