or two ninths in the price, must afford great room for speculation, and alter materially the course of exchange, making it unfavourable in proportion toward that country where bullion is scarce and dear: for every kind of paper money will be depreciated in the proportion. It is the business of the exchange broker to note these fluctuations of the market, and calculating their effect on the interchange of bills of exchange, to buy and sell his bills accordingly. Thus:

A factor in Charleston buys goods at Manchester at twelve months credit: they are invoiced to him at one thousand pounds sterling, par of exchange four and six pence per dollar. In a few months a dollar becomes worth four and eight pence in the English market: it is evident the English manufacturer loses the difference; for the cotton in payment is invoiced at the required number of dollars; and so therefore is a bill bought of the cotton factor to be remitted to Manchester. This is one of the inconveniencies of bullion having a market value as raw material, independent of its value in coiu. But we have no other material for coin upon the whole so good: and therefore gold and silver continue to be the currency of the civilized world.

Par of exchange, then, (equality of exchange) in relation to currency, is, when a bill for one thousand dollars drawn in £n-. gland will actually produce an equal amount of pure silver in the United States; and vice versa. If one hundred pound in England will buy a bill on Charleston that will entitle the holder to one hundred and one pound (or the bullion to that amount) in Charleston, to one hundred and two pound in Philadelphia, and one hundred and three pound in Baltimore, then the par of exchange is said to be one per cent against Charleston, two per Cent against Philadelphia, and three per cent against Baltimore.

Exchange therefore fluctuates according to the demand and supply of bills in the market, depending on the trade between the two countries, and according to the value of bullion respectively in the market where the drawer lives; and the foreign market where the payer or acceptor lives.

When a bill is drawn in New-York on Charleston, for one thousand dollars, the bill cannot be sold for its presumptive value, if when it arrives at Charleston it is paid in paper money that will not command one thousand dollars. The quantity of dollars in paper will be calculated at New York, that according

to the known course of exchange must be given at Charleston for siver dollars, and the difference will be the exchange between New-York and Charleston. Hence every depreciation of currency, whether it be by adding too much alloy to coin, and thereby debasing the standard, or issuing such an amount of paper money that the market is overstocked with it, injures commercial credit, and renders the course of exchange unfavourable. The risk of payment in silver dollars, is always a little more than compensated by the calculators who draw the bill; and the uncertainty attending the transaction always has an unfavorable effect on the par of exchange, and the credit of the country drawn upon. Toward the latter end of the year 1792 when assignats were in circulation at Paris, exchange in favour of London on Paris, amounted to seventy per cent.

Exchange is always calculated on the bullion price of the currency in which the bill is to be paid at the place of its destination, whatever denomination that currency may be; the question being in fact, what weight of pure silver or of gold is the drawer entitled to, and what weight will his bill fetch in the foreign country. A pound sterling ought to be considered as of equal value with one hundred and thirteen grains of fine gold at the mint; and a Hamburg merchant drawing on England during the time when a pound sterling in paper was depreciated one fifth in its value, would add to his bill of exchange a sum equal to the paper money that would buy so much gold; or he would draw a bill of the nominal value, and sell it at the market rate of discount, regulated by the real value in bullion of the currency in which it is to be paid in London. So that in the extended commerce of civilized nations with each other, there is no escaping the effect if the universal standard of metallic value, every where adopted for want of a better.

Depreciation of currency has always a temporary effect on the par of exchange in the way above explained; but it is by and by counteracted by a proportional rise in the goods sold, when they are to be paid for in depreciated currency. So that the price of goods like the price of bills is ultimately regulated by a bullion payment. But it requires an interval of time before this takes place: during which interval, the vibration is an evil. The difficulty of transmitting payments from one country to another, has an unfavourable effect on the rate of exchanges

for a bill of exchange is a substitute for the transmission of money. During a great part of the continental war after the peace of Amiens, Great Britain paid France yearly from five to seven millions sterling a year in guineas, for grain which was permitted by connivance, to be smuggled from Calais, Havre and Dieppe. The risk of transporting the coined money in direct disobedience of law, no doubt enhanced the price of grain. This source of expence in time of peace is not very great, but may be so in time of war: and as a bill of exchange is a substitute for the coin, its value is encreased, by the difference of risk and expence between transmitting a piece of paper, and a large sum of metallic money. Upon the same principle as the usury laws are a tax on the borrower.

it

The effect of the continental war on the course of exchange in Great Britain, was to lower it gradually from eight and ten to twenty and even thirty per cent in some instances in disfavour of that country.

A great quantity of paper in the market-a continued unfavourable course of exchange-and a continued increase of the price of bullion; so as to make the market price exceed the mint price, are sure signs of a depreciated currency when they occur together for any length of time. Either of them, alone, may be fallacious; but when concomitant, they amount to reasonable proof. The whole doctrine of exchange seems to point out, the absolute necessity of insisting on the convertible character of paper money: convertible into the universal standard of Europe, whatever that may be. All inconvertible paper, tends to raise the price of every commodity produced in the district of country that employs it, and to tax the consumer, and burthen the sale of produce unnecessarily and injudiciously. I greatly doubt whether governmental security, or even the pledge of real propriety, would be available in forcing the circulation of paper, which could not be exchanged for gold or silver on the common terms and principles of bills of exchange: for what foreign nation would take it? It might answer local purposes, but not the general purpose of the commercial world.

CHAPTER 17.

OF COMMERCE: HOME TRADE: FOREIGN TRADE:

CARRYING TRADE.

In a new country, like the United States, agriculture is necessarily the first employment. By degrees, surplus produce and surplus population compel the establishment of manufactures; first for home consumption, secondly for exportation. Surplus food and raw material of every kind, and surplus manufacture, compel the introduction of commerce. We must have something to sell abroad, or we cannot buy. Agriculture never approaches to perfection in a merely agricultural country: knowledge and exertion are stagnant in such a country: the stimulants to exertion, and the means of enjoying life to the utmost, are wanting in such a country: and although it may be overrun with its own surplus population, that population will not equal the one half of what can be maintained in a country where manufactures and foreign trade are combined with, and come in aid of agriculture. In proof of these positions examine the state of Poland, Hungary, Austria, Russia, of Sicily, of Egypt: of Ireland and Scotland, till the linen and cotton manufactures were introduced. It is obvious, that the more sources of wealth there are, the more means of enjoyment, the more and greater incentives to exertion and accumulation, the more varied and desirable the consumable produce-the greater will be the industry and the wealth of such a country; the greater its capital; the more effi cient will be the means of supporting a permanent and productive population. This is not all: the great improvement in all kind of knowledge, and almost in intellectual attainment of every kind we owe to the stimulus afforded to mental exertion by manufacture and commerce. Among the agricultural nations of the antients, there were poets, writers of heroic songs, and of love songs; a few dramatists, and some historians of battles and revolutions caused by the wars of nations who had scarce any other amusement or employment than war. But antient authors have done little to advance those arts of life, by which human existence is made more comfortable, prolonged, or secured from pain. Among the most polished nations, (as the Romans at the

commencement of the christian era) the apartments except of the first class in point of wealth, were small and inconvenient, they had no chimnies to their fire places, their persons were uncleanly from the continual wearing of the same woollen dress; they fed themselves with their fingers as the Bedouin Arabs do yet, their feasts were gluttinous, their food coarse; and wealth was every where distinguished by magnificence and profusion, without comfort.

All the stimulus to scientific attainment, has been the result of manufacture: the great sources of improvement in the comforts and enjoyments of life, have been manufacture and foreign commerce: and to foreign commerce we must ultimately look for the diminution of national hatred; even though we may despair of its extinction.

But these views of the subject lead to no theory of preference or legislative regulation: manufactures and commerce like agriculture to be successful, must depend on individual exertion guided by the strong motive of self-interest. Every step on the road which is made naturally, on the impulse of preceding circum-` stances subject to the general laws of human nature, is surely made, and permanently gained. All the forced steps made in consequence of governmental theories and encouragements, arc the result of short-sighted, inadequate, inaccurate knowledge, and will have to be retraced. Experience has settled these truths.

Whenever the period comes for the establishment of manufactures in an agricultural country, individuals with accumulated capital will look round to see how it can be otherwise employed if agriculture opens no further source of employment. The anxiety of individual self-interest, is far more sharp-sighted and calculating, than any legislature can be. If the governments of Russia, Poland, Sicily, Spain, Portugal, have not succeeded as manufacturing countries, the obstacles can easily be traced to their form of government, aud to the temptations in which despotism is so liable to indulge, of governing too much. This is the besetting sin of power.

Commerce is the barter and exchange, or the buying and selling of commodities desirable to persons who become the purchasers and consumers of them. It consists essentially in bringing such commodities from places where they are comparatively