Here is evidently a balance of trade against England of 8 per cent. above the real par of the metals. Will any body say that the 8 per cent. is paid for the transportation of 80 pounds of bullion due? Certainly not.
Now if the English should declare that they, for the future, would coin neither gold or silver bullion for any person, but at the rate of 8 per cent. below the value of the coin; and if it be true, that this regulation would have the effect of linking the price of bullion, on many occasions, to 8 per cent. below the coin; in that case, would not the English and the French acquit their debts of the 1000 pounds weight of their respective coin upon the same conditions? In this case, would not the price of exchange vanish, since there would be no bullion to be sent by either party? But in the first case, would not England be obliged to send 8 per cent. above the quantity of gold bullion she received from France, and would not the transportation of this cost money, and would not this transportation be marked by a certain price of exchange, and consequently, would not the price of exchange rise against England?
But to this it is objected, that by the former example, the exchange marked 8 per cent. against England with great reason; because it is plain, that there is a balance of 8 per cent. against England, since she has sent that proportion over to France in bullion. Very true. But had England, instead of taking to the value of 1000 pounds weight of louis d’ors in claret, taken only for 100 pounds weight, the exchange would have still marked 8 per cent. loss; because the 100 pounds of louis d’ors must be paid with the 108 pounds of bullion, although England by this trade has evidently gained 892 pounds of bullion, which France must send her as a balance.
As matters of fact, when they can be procured, tend greatly to confirm theory, by forming a solid basis whereupon to reason, I shall here profit of one which has fallen into my hands, and by applying it to the present question, endeavour to give some additional force to this reasoning.
and at a medium 4 per cent. as is proved by a matter of fact.
Mr. Cantillon, in his Analysis of Trade, which I suppose he understood by practice as well as by theory, has the following passage in his 99th page.
“The course of exchange between Paris and London since the year 1726, has been at a medium price of 32 pence sterling for the crown of three livres; that is to say, we pay for this French crown of three livres, 32 pence sterling, when calculated on gold, when in fact it is worth but thirty pence and three farthings, which is giving four pounds in the hundred for this French money; and consequently, upon gold, the balance of trade is 4 per cent. against England in favour of France.”
In this place, Mr. Cantillon calculates the par of exchange according to the common rule, to wit, gold bullion against gold bullion in the coins of both nations, where both are of legal weight; and he finds that there has been, these thirty four years past, a balance of 4 per cent. against England.
Now according to my theory, this is exactly what the coinage in France ought to produce, supposing on an average that the trade had been at par. Here is the reason.
The coinage in France costs 8 per cent.