2do, To remove domestic inconveniences in paying with the metals, or national coin, every unavoidable balance.
3tio, To hinder the expence of acquitting a small balance from occasioning a loss on the compensation of reciprocal debts.
And, 4to, When he finds an inconvenience in allowing the metals or coin to go out of the country, he must assist in having the balance paid in the way of credit.
Chap. II. The best method for determining exactly the true and intrinsic value of the metals, coin, or money, in which the balance due to or from a foreign nation, is to be paid, is to compare the respective value of fine bullion with the respective denominations of the coin in the two places exchanging; and to state the difference only, as the price paid for the exchange. To render this more practicable, a proposal for rendring all mint-weights more determinate is set forth in a note.
Chap. III. When upon the whole of a nation’s trade with the rest of the world, a balance is due, it must be paid, either in intrinsic value, which totally discharges it, or by giving security for it, and paying interest until the charge can be obtained. We consider in this chapter the methods of discharging it.
A statesman is the best judge when his people ought to pay with bullion, and when with credit. If he approves of their paying with bullion, that is, with gold and silver, he should render the exportation of the metals as easy as possible. If a duty be laid upon coinage, he need not be afraid that any one will send off the coin, as long as bullion can be found; and when this runs short, if he does not choose that his coin should go out, he must lend his assistance in paying with credit. If he finds it against his interest either to pay in one way or in the other, he must put a stop to the trade which creates the balance: for while such trade is permitted, he will find it beyond his power to prevent the payment of that balance in the most hurtful way possible to his country.
I here observe, that in countries unacquainted with trade, and in others where the whole external commerce is carried on by strangers, a good expedient for cutting off such hurtful branches of traffic is to lay all the restraints possible on the exportation of the metals, in order to promote the exportation of what the country can offer in return. But when trade and industry are established, these restrictions cease to be useful; because merchants then find a profit upon exporting domestic productions, which they never can have upon exporting an intrinsic value.
A statesman, therefore, should conduct his operations according to the situation of his country. If foreign trade be unprofitable, cut it off as much as possible, and lay every restraint upon the exportation of coin. If it be profitable, lay no restrictions on payments; because you are sure you will gain upon the whole. And if, in any particular case, you incline to keep your coin at home, mortgage your country, and pay with your credit.
If, when you are obliged to check foreign trade, and lay prohibitions on the exportation of coin, exchange is found to rise to a great height against you, yet will this exchange produce no national loss: it will be paid within the country by those who consume foreign commodities, to those who are at the trouble and expence of transacting the balance.
Chap. IV. Here I demonstrate what before I had in a manner taken for granted, viz. that the price of exchange is neither a national loss, or a national gain; but whether it be favourable or unfavourable, it produces an instability in the profits upon trade, and should therefore be kept at par by all possible methods. I also shew how exchange is favourable to exportation, when the balance is against a country, and how the exchange is unfavourable in that respect in proportion as the balance is for that country: and as whatever exchange is gained by exporters is lost by importers, and vice versa, some have concluded, that an unfavourable balance does of itself destroy its own pernicious effects, and sets the balance even. I endeavour to disprove this proposition, by shewing how the importers are indemnified, as to their loss by the exchange, from the additional price they get for their foreign commodities at home; whereas the exporters cannot raise their prices abroad; because foreign competition will not permit them. So that in one case the wrong balance hurts the rich consumer at home, who can bear the loss; and in the other, the right balance hurts the poor manufacturer, who cannot. Hence I conclude, that it is greatly for the interest of a trading state to keep exchange, at all times, as nearly at par as possible.