ticular commodities, but even render them cheaper notwithstanding. You must recollect that there are other causes which affect the price of goods.

Caroline. True, the proportion of the supply to the demand; but we have just been observing, that during a war there is a deficiency of supply, which increases instead of counteracting the effect of the depreciation of currency, as it would make commodities still dearer.

Mrs B. During a war there is generally a deficiency of foreign commodities, and there may also be of agricultural produce for our own consumption; but of English manufactures intended for exportation, there must, as we have before observed, be a redundancy, owing to the difficulty of exporting them. Supposing, therefore, that a depreciation of the value of money should produce a general rise in the value of commodities of 10 per cent, whilst on the other hand the excess of the supply occasioned a reduction of value of English manufactures of 20 per cent, at what rate would such goods sell?

Caroline. Ten per cent must be added on account of the depreciation of money, and 20 per cent deducted on account of the excess of supply; the goods would therefore sell 10 per cent lower than before. The cheapness of our own manufactures, then, affords no proof against a depreciation of the currency. This makes me again waver in my opinion, Mrs B. and I feel at a loss which side of the question to adopt.

Mrs B. The strongest argument in favor of a depreciation of the currency is, that guineas no longer

967. Of what in England must there be a deficiency in the time of war? -968. And of what is there a redundancy?-969. What question does Mrs B. ask in relation to the effects from a general depreciation in the value of money?-970. How is this question answered?--971. What is the strongest argument in favor of a depreciation of currency?

passed for the same value as gold bullion, which is the natural standard of the value of coined money.

Caroline. Was the gold then adulterated, and an ounce of gold coined into more than 37. 17s. 10d. ?

Mrs B. No; but gold bullion partook of the general rise of commodities, and instead of selling for 37. 17s. 104d., it sold for four, and even once as high as 57. an

ounce.

Caroline. But why did not guineas rise in the same proportion? I cannot conceive how they can be less valuable than a similar weight of the gold of which they are made.

Mrs B. The coined and uncoined gold remain in reality of the same value, but as it is not lawful for a guinea to pass for more than a pound-note and a shilling, the guineas are compelled to share the fate of the paper currency; and if that be depreciated, all the coined money of the country, whether gold or silver, must be so likewise.

Caroline. Then if it were not illegal, every one would melt his depreciated guineas and shillings, and convert them into gold and silver bullion?

Mrs B. Certainly. It is this which causes our specie to disappear, and transports it to foreign countries, where it is freed from the shackles of a depreciated paper currency, and enabled to fetch its real value in exchange for goods; it is this also which, as we before observed, brings foreign goods to be sold at our market, because it is dear; and sends our money to purchase goods at foreign markets, because they are cheap.

-973.

972. Why was this unless the guineas were adulterated?Why did not the guineas rise in the same proportion?974. What does Caroline suppose would be done if it were lawful?—————975. What becomes of this gold and silver currency which in England cannot be melted down?

Caroline. But if an ounce of gold rises in price from 3l. 17s. 10 d. to 5l., is it not rather the value of the bullion that has risen, than the currency that has fallen?

Mrs B. Gold bullion, like every other commodity, rises in price only, not in value; and that rise is owing to the depreciation of the currency in which its price is estimated; were there no depreciation, bullion and guineas would both be worth 37. 17s. 103d. an ounce.

Caroline. This then I think seems to decide the point of depreciation.

Mrs B. You must recollect that when I undertook to assist you in acquiring a knowledge of the principles of political economy, we agreed to confine our inquiries to such points as were well established. We cannot, therefore, venture to decide upon questions which are yet in dispute.

It is very easy to acquire some knowledge of the principles of a science, but extremely difficult to know how to apply them. I would particularly caution against hasty conclusions or inferences; the errors arising from the misapplication of sound principles, are scarcely less dangerous than those that proceed from total ignorance.

Let us now conclude our observations on currency, which we may henceforth consider as consisting not merely of specie, but of coined and of paper money.

Caroline. Pray is it necessary that the value of the + currency of a country should be equal to the value of the commodities to be circulated by it?

Mrs B. By no means. The same guinea or banknote will serve the purpose of transferring from one in

976. What question does Caroline propose concerning an ounce of gold which rises in price from 31. 17s. 10 1-2d. to 57.?- -977. How is this question answered?-978. What does Mrs B. tell Caroline she must recollect?- -979. What does she say is easy and what extremely difficult in political economy?-980. Is it necessary that the value of the currency of a country should be equal to the value of the commodities to be circulated by it?

dividual to another several hundred pounds worth of goods in the course of a short time. There are besides many expedients for economizing money, the most remarkable of which is an arrangement made amongst bankers. Their clerks meet every day after the hours of business to exchange the draughts made on each other for the preceding day. If for instance, the banking-house A. has draughts to the amount of 20,000l. on the banking-house B., the latter has also, in all probability, draughts upon the former, though they may not be to the same amount; the two houses exchange these draughts as far as they will balance each other, and are thus prevented the necessity of providing money for the payment of the whole. By this economical expedient, which is carried on amongst all the bankers in London east of St Paul's, I understand that about 200,000l. performs the function of four or five millions.

Caroline. And what do you suppose to be the proportion of the money to the value of the commodities to be circulated by it?

Mrs B. That, I believe, it would be impossible to ascertain. Mr Sismondi, in his valuable Treatise on Commercial Wealth, compares these respective quantities to mechanical powers, which though of different weights, balance each other from the quantity of their momentum; and, to follow up the comparison, he observes that though commodities are by far the most considerable in quantity, yet that the velocity with which currency circulates compensates for its deficiency.

Caroline. This is an extremely ingenious comparison, and I should suppose the analogy to be perfectly

981. Why not?--982. What is mentioned as one of the best expedients for economising in the use of money?— -983. What amount of money is used by the bankers in London, east of St Paul's?

-984. What does Sismondi say of the proportion of the money to the value of the commodities to be circulated by it?

correct; for the less money there is in circulation, the more frequently it will be transferred from one to another in exchange for goods.

Perfectly correct is rather too strong a term. The analogy will only bear to a certain extent; otherwise, whatever were the proportions of currency and of commodities, they would always balance each other, and the price of commodities would never be affected by the increase or diminution of the quantity of currency.

CONVERSATION XVIII.

ON COMMERCE.

Difference of wholesale and retail trade.-General advantages of trade.-How it enriches a country.— Advantages of retail trade.-Great profits of small capitals explained.—Advantages of quick return of capital to farmers and manufacturers.-Advantages of roads, canals, &c.-Difference of the home trade, foreign trade, and carrying trade.-Of the hometrade, it employs two capitals at home, and puts in motion double the quantity of home industry.—It returns capital quicker.

MRS B.

WE mentioned commerce as one of the modes of employing capital to produce a revenue; but deferred investigating its effects until you had acquired some knowledge of the nature and use of money. We may now, therefore, proceed to examine in what manner

985. What qualification does Mrs B. make to the ingenious comparison of Sismondi?-986. What is to be examined in the eighteenth conversation?