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“ Unfavourable exchange,” too, with these philosophers of the Adam Smith school, is a “supposed evil.” What is its operation ?—I want to invest 20,000l. in English goods at London. Bills are at ten per cent. premium; which on that sum is 2000l. or 9000 dollars TAx upon that amount of commerce! ls it a fallacy, to pay 2000l. more than 1 receive value for 2 But this is the most favourable aspect of the operation; for this dif. ference of exchange proves our trade to Europe, to be in a languishing state; and that we receive from her much more than we supply. It proves that we have consumed a greater amount of European industry, than we have the means of paying for in our own industry, which compels us to send the money. Thus an unfavourable exchange is the very reverse of a supposed evil.
Nothing is more important to a country, after its relations of labour have become permanently established, than a proper regulation of its metallic currency, so as to preserve it uniform, invariable, and free from all fluctuation: for it is these properties that give it value in relation to industry. With this view, all measures ought to be avoided which will drain the country of the metals, either gold or silver; not because money is of consequence to the prosperity of a country; but because its disappearance shows that our industry, which it represents, is passing away from us too rapidly, like the fortunes of a prodigal, into the hands of more industrious people: for industry is the talisman which charms the precious metals to any given point; and when they leave us, we ought to be admonished of approaching poverty and want.
The relative proportions of gold and silver are of no possible importance to any country, so that their proportions be preserved with as little fluctuation as possible; nor is the number of ounces of pure silver that are made equivalent to one ounce of pure gold, of any consideration in the argument; for the increase of the one, or the other, or their diminution, will of course destroy their proportion. Where both, however, form the currency of a country, some proportion between them must be established by law; and that of the Act of Congress of 1791, was at that day the correct proportion; for gold continued to constitute a part of our currency up to the time of the War. It is an important subject of investigation, to endeavour to ascertain the cause of its disappearance as an instrument of eachange, to become one of the subjects of commerce, always condemned to monopoly and exportation. From 1791 up to the declaration of war, our exports exceeded our imports by an immense amount. The carrying trade for Europe alone, placed at our disposal,in that portion of the world, a mass of wealth, that no amount of our imports could bring home. Exchange on Europe was then as much below par, as it has been since above it. Hence, there existed no motive, or cause, to remit gold; but, on the contrary, such remittance would have produced a loss of ten or twelve per cent. Why gold, therefore, formed a part of our currency at that epoch, is sufficiently apparent: the balance of trade was in our favour, and our metallic currency remained in repose at home. We say the balance of trade was not against us; and however old fashioned the assertion may appear to new fangled theorists, we beg permission to say a word or two in its favour; notwithstanding the new lights of political economy pretend to say that there is a fallacy in the position, and the more the balance of trade is against us, the better for the country. But we maintain that the new lights are the heretics, and our creed is orthodowy. And thus we establish our doctrine:—Suppose we import annually 20,000,000 foreign fabrics, and export 10,000,000; how are we to pay for the overplus ten millions imported? We cannot draw bills, unless we remit stocks or specie to Europe to meet those bills, . Of stocks, we can send but a small amount, say two millions ! How must we pay the balance 2. In the only mode that can be resorted to between nations; we must remit the SPECIE | So that whenever the balance of trade is against this country, our precious metals flow out. Hence the policy of diminishing our IMPORTs of foreign goods, at a time when we find it impossible to increase the sum of our exports to an equality with that of our imports: hence, too, the sound policy and wisdom of our Tariff Laws, which go to promote the growth of American Manufactures, or home labour, in preference to foreign labour, and consequently to diminish the amount of our importations. Gold being more portable, and less liable to fluctuation in price, always leaves the country first when the balance of trade is against it:—but in the case of our .American eagles and half eagles, there existed an additional impulse to expatriation in the superior purity of our gold coin, so that in the same number of ounces, a greater quantity of pure gold, was contained. This is a radical defect in the gold coinage of the United States, which calls for congressional interference, and the remedy of law.” Still, if corrected, it would not be adequate to restrain the exportation of gold, for all gold has now become a subject of commerce, instead of an instrument of exchange, partly owing to the great trade in jewelry and partly to the substitution of paper credits, to answer all the purposes of gold. To keep a golden currency within the United States, two great causes must co-operate :-1st, A balance of trade in our favour, by the extension of domestic manufactures, and 2d, A diminution of our paper currency within the sound limits of a specie responsibility. lt will appear obvious after a little examination, that neither of these causes separately could produce the desired effect of restoring a gold currency; for, even if there existed no balance of trade to be paid in specie, the redundancy of a paper circulation would necessarily operate to make gold a subject of trade by the creation of an over abundance of money:* for as the increase of paper money tends to enhance prices beyond what they would be, if gold only circulated, the paper suffers a depreciation of value, which naturally causes gold to be sought after, and hoarded. Nor could the second cause, unassisted by the first, produce the effect; for the balance of trade must be paid in gold and silver, and gold will at all times receive the preference, for the reasons already stated. A combination of the two causes can be produced by the power of government and the patriotism of the community; but this event, at present does not appear likely to occur, at least not very soon. It is not, however, of so much importance that we should restore a gold currency, as that we should direct all our energies to preserve a silver one; whose abstraction from circulation seems to be gradually following our gold coin, and daily threatens to leave us without the conveniences of a small silver currency, throughout the union. In some states, indeed, there appears no danger of such a catastrophe, but far dif. ferent is the metallic condition of the republic. It is, however, greatly in the power of government to aid us in arresting this rapid exportation of silver, by an act of Congress, which shall comprise the following clauses. 1. All silver bullion, bars, or coin, upon its arrival from foreign ports, (not of the United States,) to be deposited in the Mint of the United States, or the branch banks, or custom houses, (at other ports) to be coined into quarters, tenths and twentieths of a dollar, at the expense of the United States. 2. Immediately upon such deposit, the United States to advance the price of the said specie, or bullion, to the importer, or proprietor, by drafts on the treasury or United States Bank. 3. All bullion, or specie, secretly introduced, or not included in the manifest, of the cargoes, to be forfeited to the United States. 4. The same law to extend to GoLD BULLion and coin, to be coined into two, three, four and five dollar pieces of the United States. The advantages of this law would be as follows: viz.1. It would prevent the Monopoly and TRADE in BULLION and For EIGN coins ; which now never enter into circulation, from the rapacity of brokers and others. 2. It would diminish the motives to their exportation, by reducing their value in foreign countries:
* What pity, observes the sagacious and logical David Hume, Lycurgus did not think of paper credits, when he wanted to banish gold and silver from Sparta . It would have served his purpose better than the lumps of iron he made use of as money; and would also have prevented more effectually all commerce with strangers, as being of so much less real and intrinsic value.