438

T1IK NATURE AND CAUSES OK

When the exchange between two places, such as London and Paris , is at par, it is said to be a sign that the debts duefrom London to Paris are compensated by those due fromParis to London . On the contrary, when a premium is paidat London for a bill upon Paris , it is said to be a sign thatthe debts due from London to Paris are not compensated bythose due from Paris to London , but that a balance in moneymust be sent out from the latter place; for the risk, trouble,and expense of exporting which, the premium is both de-manded and given. But the ordinary state of debt and creditbetween those two cities must necessarily be regulated, it issaid, by the ordinary course of their dealings with one an-other. When neither of them imports from the other to agreater amount than it exports to that other, the debts andcredits of each may compensate one another. But when oneof them imports from the other to a greater value than it ex-ports to that other, the former necessarily becomes indebtedto the latter in a greater sum than the latter becomes indebtedto it: the debts and credits of each do not compensate oneanother, and money must be sent out from that place of whichthe debts over-balance the credits. The ordinary course ofexchange, therefore, being an indication of the ordinary stateof debt and credit between two places, must likewise be anindication of the ordinary course of exports and imports, asthese necessarily regulate that state.

But though the ordinary course of exchange shall be al-lowed to be a sufficient indication of the ordinary state ofdebt and credit between any two places, it would not fromthence follow, that the balance of trade was in favour of thatplace which had the ordinary state of debt and credit in itsfavour. The ordinary state of debt and credit between anytwo places is not always entirely regulated by the ordinarycourse of their dealings with one another; but is often influ-enced by that of the dealings of either with many other places.If it is usual, for example, for the merchants of England to payfor the goods which they buy of Hamburgh, Dantzic, Riga ,&c. by bills upon Holland, the ordinary state of debt andcredit between England and Holland will not be regulatedentirely by the ordinary course of the dealings of those twocountries with one another, but will be influenced by that ofthe dealings in England with those other places. Englandmay be obliged to send out every year money to Holland,though its annual exports to that country may exceed very