into which the original property is often converted, and the many hands through which it often passes before the ultimate exchange is completed, cause us frequently to lose sight of the transaction. The following example of the exchange of English cutlery for the teas of China, though by no means one of the most complicated, is still sufficiently so to bewilder those who do not trace commerce to its first principles :

A. sends English cutlery from London to Hamburgh, there sells it to B. for bills on London; but B., having no funds in London, applies to a banker C., who grants a draft on his correspondent D. in London. This draft C. is enabled to grant, because E. has recently sent a cargo of linens from Silesia to London; and at the time he sent them, he drew on his agent F. in London for their amount; which bill, after travelling from Silesia to Hamburgh, was discounted by C. the banker there, and by him transmitted to his correspondent D. in London. F. sells the linens in London to G. and their proceeds cancel E.'s draft on F., which being held by D. puts him in funds to answer C.'s draft on him in favor of B., but which was endorsed over by him to A. in payment of the cutlery. G. exports the linens to Cadiz, and there sells them for Spanish dollars, which dollars he carries to London, and there lends them on bond to the East-India Company, who again ship them to China for the purchase of teas, and with the produce of these teas discharge their bond to G. Now it is evident, when the whole of these transactions are considered, that the cutlery exported by A. is ultimately exchanged for the teas imported by the East-India Company, as much as if the transaction had taken place by direct barter at the company's warehouse,

When a merchant engages in a foreign adventure, his object is to attain a certain quantity of something for which there is an effectual demand in his own country, and he sets himself to consider in what way he can procure this something at the least expense of the land and labor of his own country, or in other words, at the smallest price to himself. Perhaps, for instance, (to use our previous example) he wishes to import teas from China, and considers that these can be purchased more advantageously with Spanish dollars than with the rude produce or manufactures of Britain; but as there are no silver mines in Britain, he, or (what is the same thing) some one else for him, must import these dollars; but as they cannot be procured at Cadiz but for an equivalent, he, or some one else for him, must send that equivalent; and if Silesian linens happen to be in much greater demand at Cadiz than British produce or manufactures, it may be more advantageous to send to Cadiz Silesian linens than British goods for the purpose of purchasing the necessary dollars. But as the Silesian lineus are not a manu

facture of Britain, and cannot be procured but for an equivalent, so he, or some one else for him, must send to Silesia such an equivalent in order to procure these linens; and if English cutlery be considered as the most advantageous means of procuring them, it may be sent directly from England to Germany.

In such a round-about trade of consumption, the whole of the intermediate exchanges, or sales and purchases, are seldom effected by the same person, and indeed seldom come under the view or knowledge of any single individual; but, by whomsoever they may be effected, the result is the same, the cutlery is ultimately the value paid by Britain for the teas so imported for the consumption of Britain.

In these transactions, it is not necessary to the profit of the merchants who carry them on, that the money price of the cutlery be higher in Germany than in England; it is sufficient for the interest of A., the exporter of the cutlery, that he can procure for it in Hamburgh, either bills or goods which will yield him in London the amount of the prime cost of the cutlery, together with the freight, insurance, and other charges on the voyage, as also a fair and reasonable profit on the capital employed. If A. sells his cutlery for bills on London, either the money price of the cutlery must be so much higher at Hamburgh than in London, as to compensate the expense, risk and profit of the voyage, or the course of exchange must be so much against London as to compensate any deficiency in such higher money price; otherwise A. will be a loser by the adventure, and consequently will be discouraged from continuing the trade.

In like manner it is not absolutely necessary to the prosperity of E.'s adventure of Silesian linens to London, that the money price of such linen be higher in London than in Silesia; but it is necessary that the prime cost and charges on the linens be compensated by the London money price of the linens together with the difference of exchange, otherwise E.'s agent F. would not be in fund's to answer his bill.

It is not absolutely necessary to the success of G.'s adventure to Cadiz that the money price of linen should be higher at Cadiz than in London; but it is necessary that the linen should sell for such a quantity of dollars in Cadiz as should be worth, when imported into England, the prime cost of the linen in London, together with the charges and profit on it to Cadiz and on the dollars back to London; otherwise G. would lose by his adventure. But it is of no consequence to G. whether the advance of price necessary to meet the expense and profit of the voyage accrue on the sale of the linens at Cadiz, or of the dollars at London, or partly on both these transactions.

It is of no importance to the East India Company whether (in

dependently of each other) the money price of dollars or that of teas be higher in China or in London; but it is absolutely necessary to the success of their adventure, that a given quantity of dollars should, in China, exchange for such a quantity of teas, as will again sell in London for a sum equal to the prime cost of the dollars in London together with the charges and profit on the adventure from London to China and back again. If they do not sell for so much, the company would evidently be losers by the trade, and consequently would not continue it.

It is evident that the ultimate result of this circuitous, commerce resolves itself into the simple barter of the cutlery for the teas; loaded however with the expenses and profits on three distinct voyages to Hamburgh, to Cadiz, and to China, with the commissions of agency and on granting and discounting the bills at Hamburgh. The higher, then, was the original price of the cutlery, the higher the money price of the labor employed in constructing and navigating the ships which performed these different voyages; the higher the rates of commission and of profit on the capitals employed in them, the dearer must consequently the teas be sold by the company to the consumers. It is the consumers of the teas therefore, and they only, who ultimately pay for the cutlery together with all the expenses of the intermediate traffic between its sale and that of the tea.

CHAPTER II.-The money price of foreign commodities is principally regulated by the money price of labor, and rate of profit in the home market.

If we continue to pursue the example adduced in the preceding chapter, it will appear that as the consumers of the teas ultimately pay for them the prime cost of the cutlery, together with all the charges and profits attending the intermediate traffic, so the price of teas in Britain will therefore be affected by the high or low price of labor, and the high or low rate of profit in Britain in nearly the same degree as if they were articles of the growth and manufacture of Britain. I say nearly, because as some foreign capital may have been employed in the interchanges between the cutlery and the teas, and as some foreign labor may have been employed in effecting these interchanges, so far as the teas are chargeable with that profit and with that labor, their prices will be enhanced in proportion to the price of labor and to the rate of profits in these foreign countries.

But the price of labor or the rate of profit in China, or in any of the other foreign countries in which the interchanges were effected, can only influence the price of the teas in Britain, in so far as they were employed in effecting these exchanges; but in no

respect will the price of teas in Britain be influenced by the bigh or low money price of the wages of the labor, or of the rate of profit on the capital, employed in the cultivation and manufacture of the teas, or in working the mines, or in refining the silver, or in cultivating the flax and manufacturing the, linen; because (as Dr. Smith has clearly proved) the true measure of the value of every article of consumption, is the quantity of labor which it will purchase; and the difficulty of procuring silver remaining in like proportion to that of procuring tea in China, an equal quantity of the one will continue to exchange for an equal quantity of the other, be the price of labor or the profits of stock what they may: In like manner while the quantity of labor required to procure linen and to procure dollars remain the same as before, in Spain a like quan tity of linen will there continue to exchange for a like quantity of dollars, be the price of labor or the profit on stock what they may and in like manner while the quantity of labor required to procure a certain quantity of linens, and a certain quantity of cutlery continue, in Germany, the same, a like quantity of the one will also continue to exchange for a like quantity of the other, let the wages of labor and the profits of stock, in that country, be what they may.

It also appears clearly that in the instance under discussion, nothing more was effected (as indeed in no instance any thing more can be effected) by means of the bills of exchange, than to facilitate general barter; for wherever a bill of exchange is granted, value must some how or other be sent to meet it, otherwise it must be protested, and remain a debt against the drawer.

As it appears, that in our adopted example, the high or low price of the wages of labor or of the rate of profit in foreign countries, have little or no influence on the prices of foreign articles in the home market, it therefore remains for us to examine by what the fluctuations in these prices are regulated. The vicissitudes of seasons, and the deficient, or too abundant supplies of the market certainly are the principal causes of the alterations which take place in the price of foreign commodities within any given short period of time; but in considerably extended periods of time these causes can produce no effect whatever in the general average prices; which must, so far as these causes are concerned, be regulated by the general average of the seasons and of the importation in proportion to the effectual demand. But as we have already seen that even the most circuitous commerce resolves itself ultimately into barter, and as the money price of home produce must necessarily rise or fall in proportion to the rise or fall in the money price of the labor and rate of profit which has been employed in procuring such home produce; so it follows that the money price of the foreign commodities for which that home pro

duce is exchanged, must also necessarily rise or fall, in the home market, in a ratio equal or nearly equal to the rise or fall in the produce which has been bartered for these commodities; and consequently in a ratio equal or nearly equal to the rise or fall of the money price of labor and rate of profit in the home market. evita

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CHAPTER III.-Of the Value of the 'Precious Metals. t Except in cases of foreign conquests, of colonies, or of persons drawing a revenue from one country which they spend in another, there are no means by which the people of one country can acquire a share of the produce of the land and labor of another but by parting with some part of the produce of the land and labor of their own. This is the fund from which all subsistence is derived whether native or foreign; and in proportion as it costs much or little money to produce a certain quantity of commodities in our own country, so in like proportion we must pay much or little money for such commodities as we consume, whether of the produce of our own country, or procured from foreign independent countries, by the only means which is within our power, viz. that of exchanging our own for them. But as gold and silver are not only articles of commerce whose values are regulated by the quantity of labor which they will respectively purchase in different countries, but have also become the standard circulating medium in most of these countries, and as they are very portable and durable commodities, they have in consequence attained, in most commercial countries, a more equal value than most other commodities. And between any two adjacent countries in which these metals form the circulating medium, and between which the commerce is perfectly free, the real value of these metals cannot greatly vary: Because if the real price of gold and silver were lower, or, what is the same thing, where these metals form the currency, if the money price of the greater part of commodities were higher in any one country than in some other one adjacent, with which the commerce was perfectly free, it would evidently be the interest of the merchants of the former country to export gold and silver in order to purchase in the latter country such commodities as they could again sell for much more gold and silver in their own and this traffic would continue until by a continual abstraction of these metals from the former country, and accumulation of them in the latter, the value of them in each would become so nearly equal that they could no longer be transported from the one to the other with any advantage.

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But this natural equality in the value of the precious metals in the neighbouring independent countries may be, and indeed generally is, greatly diminished by the regulations of commerce, by