that under a given balance of trade, the loss from the failure of speculative consignments is likely to be thrown on the two nations in proportion to the freedom or tightness of circulation. This principle may be illustrated by the case of two merchants, of whom one has plenty of money and is therefore inclined to extend his transactions, and the other is pressed for money and unwilling to enlarge his dealings or assume any new risk. The first wants to buy and sell more than he has hitherto done; the second will not buy on his own credit but will sell for another as agent or factor without risk. The first, then, buys from the second, but the second will not buy from him; and accordingly the first sends him goods to sell on the account of the remitter. Now, previously to this new transaction there would have been entered on the books of both, we will suppose, an exact equality of goods which each has bought on his own account, and this balance of trade indicates a similar balance of debt, and nothing will be due either way. But as concerns this new extension, the balance of goods entered as received, on the books of both, will be equal as before, but if any of the consignments fail to be sold at the entered price, the loss falls exclusively on the first merchant, and the balance of payments differs from the balance of trade. Each speculates according to his facility of commanding money, and according to the extent of speculation will be the sustentation of those losses from not realising prices, which make the balance of debt differ from the balance of trade. This supposition has contemplated the case of two nations trading exclusively together, and in that casc it is manifest that the trading enterprises will be in exact proportion to the freedom of the two circulations. But as nations trade beside with a great many other nations, there are other channels to absorb redundance and prevent this currency from acting directly and uncovered, on this trade. Still, as all will absorb in the same proportion, the increase of each will be proportionate to the whole. Furthermore, if money be freer in one nation than in another, the credit allowed on foreign purchases will be longer on the side of the former, and thus tend to project one side of the balance of payments into future years. In looking further at the effect of the circulation on the balance of trade and payments, we will drop this consideration of varying risk, and enquire merely what increases and diminishes the exports and imports. For, certainly, until minuter enquiries detect a divergence, the balance of trade indicates the course of debt, and in general the most expeditious method of having a favourable exchange, is to enlarge the exports and lessen the imports. One of the effects, then, of an enlarged circulation is, after enlarging domestic trade, to increase prices at home; although this result will not take place as soon as Ricardo has supposed, and, I am inclined to think, will never follow directly from an increased currency, but will not occur till after trade has been extended by the issues. As goods, therefore, command a higher price here than abroad, more are imported and fewer exported, and the profits on the former are greater, as between the nations, on account of this increase of price, and on the latter, less. When the circulation is curtailed, sales are forced, prices fall, and imports are stopped. A circulation, also, constantly narrow, will make commodities cheap: imports then are less because less profitable, and exports greater because more So. Generally, all this effect of the currency on trade is not immediate; the enlargement or diminution must be extended through many months and cause a general and notorious rise or fall of prices before the exports or imports will be impressed, or a permanent abundance of money, before speculation begins its work. A sudden contraction of bank issues may, in one way, save exchanges; for, if prices fall considerably, it will be more profitable to send commodities abroad to pay debts or meet bills, than to send gold. But the bank exerts no influence of this kind, save through the medium of wide-spread and terrible commercial ruin. The direct effect of extended issues on the price of gold is more immediate in its action that that which is produced through the medium of trade. The money in any country must be in proportion to the value of the trade of that country: the relation of the two must always be the same. If the proportion of the circulation to the payments in one country be greater than in another, the exportable money of the former will go to the latter until the ratio is the same in both. Hence, if you increase the payments in one country, those in the other remaining fixed, and the circulation in both unchanged, money must leave the second for the first; and so, if the circulation of one be increased, but not its trade, while the trade and circulation of the other is the same, gold will flow out of the former. Or, to take another view of the subject.-Gold is a thing of value; it is used for, 1, currency, 2, other purposes in life. The amount in any one country depends on the demand of trade for currency, and the demand for other uses in that country, as compared with similar demands in the rest of the world; now, if the demand for currency by trade in one country is diminished by the increase of notes, the demand for gold by the whole country is lessened, because one element of that demand is partially supplied, and as the amount in the country depends on the whole demand, that amount will diminish,—that is, gold will go off. It is important to observe at what point of time this direct effect of pushing gold out is produced. After a little time, trade, which increases with its facilities, will be large enough to absorb the money, and if, from any cause, trade should not increase, prices will rise, which amounts to the same thing. But, before either of these things takes place,-and some time must elapse before the first is effected, and a large time before the second,-money will simply be more easy to obtain; it is at that intermediary period, and that alone, that any direct action on the price of gold, or its tendency to leave the country, takes place. All the subsequent effect falls under what we have just treated. This distinction escaped the acute mind of Ricardo, who seems to have thought that that influence would be prolonged after the effect on prices and trade, and even through the medium of that cffect; yet it is clear that if prices rise or trade extends, all the gold will be wanted at home. We proceed to consider the action of the currency on the price of gold, under a rather different form. The market value of gold in any place, depends on the ratio of supply to demand; the trade and prices conjointly make up that demand: if they are not increased, but the supply of money convertible into gold is increased, the market value of gold falls. It is cheaper here than it is abroad, and it naturally goes off to where it finds a better market and sells dearer. Or, again, the rate of interest, which depends on the rate of profit, and that on the supply of money, is lessened by an increase of the currency, and so money is sent where it will bring a better interest. Or, in a third point of view, when we speak of the market value of gold as what influences exchanges, we treat gold as a commodity which is bought and sold, and of which the (against a country and yet gold will not go off. On the price as of all other commodities is influenced by the other hand, certain circumstances may make gold fulness of the currency. Hence, when the issues are leave a country, even when the price of bills or rate of enlarged, although the circulating value of gold is not exchange indicated that it was not expedient to send altered, its market value is: its value as coin does not gold, and that gold was not going. As, for example, rise, but its value as bullion does. When there are no where remittances are wanted to be made rapidly and laws against the melting and exportation of gold, this secretly, or when in sums so large as would turn the difference, though existing, will not be apparent other-exchanges, or raise the price of bills above the exportwise than by the disappearing of gold coin from circu- ing point. Furthermore, the general risk of taking lation, and its assuming exclusively the character of bills is to be considered as amounting to a certain fracbullion but in countries where the coin is not con- tional per centage in favour of the transmission of gold; vertible into bullion and not exportable, a difference in and, in times of great and extensive commercial insecuriprice will display itself, and a bar of gold bought pub-rity, that amounts to a great deal. These circumstances licly before the suspension of the bank in England render the price of bills, even where the expense of sendhas shown a difference of 15 or 20 per cent. between ing gold is known and the market value is at par, an the market value and the coin value of gold. In fact, gold has always one character as currency, and another as a commodity, and the current values of these two are inverse, because their current value is their value in exchange for one another. If, from causes not connected with the value of the other, one of them rises in value, the other will fall. The market value of bullion is its value in terms of money; hence, if money lessen in value in consequence of enlarged issues, bullion will rise; the article in which its price before was estimated has lessened in value,-more of that article must be given, and the quantity of that article (money) given, is the price. An increase of paper is one of the causes here referred to as affecting the value of one, and not the other, primarily; it lessens the independent value of gold as monéy, and not its value as bullion, and when bullion comes to be exchanged for this money, its price in terms of the money, is higher. imperfect indication of whether gold is going off or no. A cause of difference between the price of bills and of gold, in favour of the former, arises from gold being sold according to its value in the present, and from bills being payable some time after date. A buyer of bills gives gold to-day to receive gold at the termina. tion of the usance; the seller having the use of the money during this time, sells it as much cheaper as the interest of the money amounts to. It will be scen, that we have spoken of exchange, without any reference to what is called the par. In the actual transactions of commerce, no regard is had to par; nor is it of the slightest importance to trade, that the par should ever be calculated. Still, for the convenience of stating the market price of gold, it is well that the par should be understood, and it may be of some service in telling us, when that price is ascertained, what course gold is taking. The par of exchange, or, more properly, the par of It may be difficult for a reader to conceive how a fall money, is the comparative value of the coins of two in the value of gold should cause a rise in its value; countries, as ascertained by the assayed purity and but coin must be distinguished from bullion. When weight of the gold or silver which they contain. Mr. gold becomes, through large issues, even when the J. Q. Greffulhe defines it to be "an equality of the renotes are fully convertible, lessened in value at home, spective currencies of two countries, compared with it is bought up to go abroad, and of course, in the price reference to their fineness and weight." And Mr. Husgiven for it, the price that may be had abroad for it kisson describes it as "the equality of either of the is considered. Its coin value is its domestic value, or precious metals measured in the respective currencies value in the currency; its market value is its foreign of the two countries." "The par of exchange between value, or value in the currency of other countries. And two countries," says the report of the bullion commitif the coin could not possibly be changed into bullion, tee," is that sum of the currency of either of the two and yet was of bullion purity, this difference would be which, in point of intrinsic value, is precisely equal to seen between a coin and a lump; but if convertible, a given sum of the currency of the other; that is, conthe coin, as I said before, will disappear from the curtains precisely an equal weight of gold or silver of the rency and be melted, because its potential value as bul- same fineness." lion is higher than its actual value as coin. It is usually said, that when exchanges are a certain amount above par, gold leaves the country, and persons accordingly look at exchanges and conclude from them whether or not gold is going off. All such indications as furnished by the high price of bills or high rate of exchange, are to be looked at with extreme caution. We have stated, that a variation in the expense of sending gold, will vary the point at which gold leaves a country, and that it is always necessary to enquire if any change has occurred in the price of freight, insurance, or commission, since the time to which this fixed par had reference, before we can be sure that that index is correct. We have said, that the price of bills or rate of exchange depended on the relative market value of gold abroad and at home, and the expense of sending it abroad. The causes which influence the market value of gold we have treated, and it is to be understood that the value in both countries is to be estimated at the time that the rate of exchange is sought. The expense of transmitting gold is the freight, insurance, and commission and this expense being generally constant, it is usually said that when bills rise to a certain height, gold goes abroad, and so the price of bills is looked at to know whether gold goes abroad. But, if the expense of transmission varies, this point also will vary. In time But, there is popularly committed another error in of war, the increased risk of carrying gold will raise this matter of par, arising from changes which take the rate of insurance. In time of war also, the break-place, unobserved, in the actual par, and which are not ing up of the business of sending gold and selling bills, always adverted to by even those who regulate importcauses a want of middle men whose competition and ant interests by the indications of the foreign exchanges. speculative drawings bring exchanges down to their It has frequently happened, that extensive financial value, and prevent sudden and brief accidents from disturbing exchange too much. Hence, in time of war, bills may be expected to rise without a disposition of gold to go abroad, and of course, without a rise in its market value, and so exchanges will appear to be action has been taken, on the supposition that gold was leaving a country, which supposition was founded on the high rate of exchange, whereas, that high rate arose from the par having really been changed, and the calculations based upon the obsolete par. BANK STATISTICS. 4 Any circumstances which cause the same amount of gold in coin, and silver in bullion, to differ in value, will not alter the par of money, (or, as it is wrongly called, the par of exchange,) from what it would have been, if that higher value of coin had not existed. A. B. J. Mr. Fox said in the house of commons, while speak- coins of another, and then the market value in gold of ing of the Bank of Ireland restriction bill in 1804, that amount of silver, (or, the same process with gold :) "that he was convinced that the currency of a country-or, by assay, the amount of silver in one country's had some effect on the exchanges, though he could not coins, and then the market value of that much silver exactly tell how; for at a certain period, (I presume at the time given, in the gold coins of the other, or he had reference to a particular time in the reign of vice versâ,-or, the actual value of a certain amount of William the Third,) the guineas of this country were gold or silver in either's coins. very much debased, and the exchange with Hamburgh was up to two or three per cent.; but on a new coinage being issued, the exchange fell to par." It is manifest, that during the time of this debased coin being in circulation, the par of exchange, which is the ratio of the coins of two countries to pure gold, had risen; for the intrinsic and not the nominal worth of coins is to be regarded in fixing the par. That debased coin was, for the time being, the guineas of England; and by consequence, the guinea of England had changed its value in reference to pure gold. Had this debasement of the coin corresponded exactly with the increased rate of exchange, two or three per cent., then exchange at this time was really at par; if the debasement was greater, as I believe it was, exchange was really in favour of England; and if gold crossed the water, it was from Hamburg. The former and the actual rate were compared with different things, viz. the amount of pure gold in the two guineas. It is clear, that this rise of exchange was no token of gold going from England. Whenever the current coin is debased, or the amount for which it shall pass, compared with the intrinsic value of the gold it contains, is altered by law, the par of exchange with all other countries is permanently changed; and if this alteration be a diminution of the amount of gold in the coin, exchange will rise above the former gold-exporting point by the full amount of this debasement, before this gold will go off. Coins abroad, pass for their bullion value; the debased coin is worth less abroad than the old coin, and at home costs just as much. Such a variation of the value of coins, may also, for a short time, affect the rate of exchange. This habit of referring to a par, may conduce to error in those cases in which, though there is at any given time a par, there is no fixed par; and it may not be easy to discover at once, what is the actual par. This is the case between those countries whose standard metal, or basis of circulation, is different. When in one, the standard of the currency is in gold, and in the other in silver, there is no fixed par, or invariable relation in the values of one's coin and another's, but that relation, or the par, changes with the market value of the metals. Between England and America there is no fixed par; and the market value of gold as expressed in silver, or of silver in terms of gold, must be discovered, before the temporary par can be known. There is no fixed par, or par of money, but there is a present par, or par of exchange. The circumstance of one metal being the standard in one place, and another in another place; as of gold being the standard in England, and silver here, depends not on the greater quantity of one metal in a country, but upon the mint value of that metal being higher in proportion to the mint value of the other than are the respective market values of the two. If the true, or market, proportion of gold to silver be as fifteen to one, and the mint in coining, fixes the proportion at sixteen to one, of course, gold only will be carried to be coined. If a man had a lump of silver, he would exchange it for gold, and take it to the mint; for it, when coined, will pay more debts than the silver would have done. In these cases, the par at any time may be known by ascertaining by assay, the relation between the general silver coins of one nation, and some silver BANK STATISTICS. MASSACHUSETTS. An abstract of the returns made by the banks of Massachusetts, showing their condition on the 10th of February, has been published under the direction of the secretary of the commonwealth. Two of the suspended banks in Boston, the Fulton and Lafayette, and the three Nantucket banks, (the latter in consequence of the interruption of the communication by ice,) have made no return. The aggregate of the amounts re-. turned by the remaining one hundred and twenty three banks, as shown by the present statement, and by that of October, was as follows: Circulation, Balances to other banks, Do. Specie, Oct. 1. Feb. 10. $9,964,110 $9,100,776 5,498,012 4,534,813 8,231,580 5,436,530 5,318,484 3,650,832 1,474,743 1,701,460 2,954,804 2,700,275 5,662,780 4,037,618 56,398,121 52,799,967 Bills of other banks, Nett profits on hand, 1,474,487 2,442,578 1,038,850 1,041,350 Capital paid in. MARYLAND.-Tabular Statement of the Banks in the State of Maryland, according to a Return made to the Legislature in February, 1838. 1,199,350 327,520 00 2,177,479 00 601,205 00 168,168 00 216,823 44,532 67,616 43,792 287,721 52,563 28,991 5,813 150,000 46,500 100,000 15,000 12,452 6,060 14,972 3,190 2,325 2,000 27,168 7,880 24,022 4,600 10,075 7,100 84,394 15 47,504 97 19,379 6,189 271,645 94,610 19 19,037 17 21,470 9,707 19,190 00 don't stat. 13,780 40,729 63 26,605 11,340 50,494 99 16,415 6,490 almost the same proportion of the bills of exchange, when matured. Of the suspended debt, there are "notes and bills in the hands of attorneys to the amount of $164,622 17: the sum of $123,518 89, a small part of it past due, is amply secured by mortgage upon valuable real estate; the sum of $115,834 76 is secured by 1333 shares of Commercial Bank stock, which stock was paid in part, by stock notes; and the sum of $35,555 79|| is secured by 500 shares of the stock of the Natchez Insurance Company." It having been stated in this Commissioner's Report, that more than $100,000 of the exchange then maturing, (January 29,) consisted of bills drawn in Philadelphia, and that the names of some of the most wealthy men in Mississippi were affixed to a letter of credit to secure the payment, the cashier of the Agricultural Bank states in a note, that the bills have since been settled, and the letter of credit canceled. A most rigid and careful committee, appointed to examine the institution, have assured the governor that the whole aggregate loss from its suspended debt can. not exceed $50,000. Many erroneous statements are corrected by the cashier; and on the whole, the exposition demanded has been such as to set forth clearly the state of the bank, and materially to decrease a suspense, and impressions which may have been hurtful to her interest and credit, as well as that of Mississippi at large. "A Planter," in a communication written for a prominent business Gazette of the state, estimates its banking funds thusWe then have capital paid in, Circulation, $2,401,194 34 1,006,631 87 1,131,757 09 $19,229,723 00 6,500,000 00 Cotton purchases, Advances on cotton, Bank stock, Real estate, Notes of other banks, Specie, 674.910 89 Individual and government deposites, 3,513,872 00 243,274 00 Due from other banks, 1,016,269 35 99,285 14 63,938 14 $6,763,665 53 $2,000,000 00 806,306 21 304,189 34 1,511,027 74 1,601,879 36 $6,223,402 65 $540,252 88 2,540,252 88 About half a million of dollars of the notes and bills of the bank mature in each of the months of February, March and April; at least one third of this is made up of long loans, which are to be renewed either in whole or part. Almost every dollar of the exchange matures in the coming four months, over half a million of which is payable in New Orleans.-One fifth of all the notes and bills will not mature until after January, 1839; two thirds of the suspended debt that can be arranged, will assume the character of long loans, and probably * Unclaimed dividend included in this item. † Deposite certificates and post notes included. No dividend has been declared since 1st July, 1837, and the surplus, after the dividend has been made, was :376,935 35. Making in the aggregate, "The capital of a bank which is available for dis. counts, consists of its actual capital paid in ; its average permanent circulation; and its average permanent deposites. "At the present period, the aggregate amount of these three items in all the banks of the state, is $29,243,595, and if the line of discounts does not exceed this amount, our banks have not over-traded." The aggregate amount of discounts in all the banks, is $28,500,000,-so that the line of discounts is contended to be $743,595 below the capital available for the purpose. The author of the piece above alluded to, concludes thus:-"Let every planter resolve that he will pay one third of his bank debt, out of the next crop, and the banks of Mississippi will be able to resume a higher stand in point of credit, than those of any other state in the union. Their notes will then command a premium in other states. The ability of the banks to resume specie payments, depends not on themselves, but on the people. The people have only to will it-and the result will be inevitable. The next crop will furnish them with the means." If it shall be desired by our business friends, we will publish at length the statements from which the foregoing facts are drawn, and which we have gathered with no small trouble, amidst constant and perplexing interruptions, to which must be chargeable any want of fulness in the information conveyed, if want there be. The cashier states this to be an error. No part of the stock held by the bank, has been paid by stock notes. With respect to this amount, the same officer records that it has been reduced one third since the report, by a cash pay ment. |