strictions, this of course would cease immediately with the cause which produced the depreciation.

Whether the average course of exchange at present be really or only nominally unfavorable, some idea may perhaps be formed by comparing the sum which must be paid beyond the mint price for the purchase of an ounce of gold in the bullion market at home, with the premium which must be paid upon an average, for the purchase of a foreign bill of exchange for 31. 17s. 104d. This average must of course be calculated from the value and amount of foreign bills of exchange taken collectively, and not from the price of a bill of exchange upon each separate country. If the premium to be paid for such bill be not equal to the sum which must be given beyond the mint price for the purchase of the ounce of gold, the course of exchange may be presumed to be really favorable, although nominally unfavorable. If, for instance, the average course of exchange should at present appear to be about 5 per cent. against this country, and the price of gold about 41.2s. 6d. an ounce; to purchase an ounce of gold it would be necessary to pay 4s. 7 d. beyond the mint price; and to purchase a foreign bill of exchange for 31. 17s. 10 d. it would be necessary to give only a premium of something less than 4s. It is reasonable in this case to conclude, that the real exchange is still in our favor, and that the increase in the price of bullion is occasioned by a depreciation in the value of bank notes; because if it were occasioned by a really unfavorable course of exchange, the price of a bill of exchange would be increased in a still greater proportion than the price of gold, since the former is exempt from the risk and expense attending the exportation of bullion; consequently gold would not be resorted to for that purpose, till the price of a bill of exchange exceeded the price of gold: therefore it could not be an unfavorable course of exchange and the consequent exportation of gold which had occasioned the increase in its price. When there are no bank restrictions, the value of a bank note is equal to the value of the standard coin for the payment of which it is an engagement; and the value of such standard coin is equal to the value in bullion of its own quantity of the precious metal of which it consists, except in case of a really unfavorable course of exchange: but if at present the general course of exchange be only nominally unfavor able, but really favorable, it must follow, that the present difference between the market and the mint price of gold is occasioned by a depreciation in the value of bank notes, on account of the bank restrictions. In that case the removal of the bank restrictions would immediately do away the difference between the market and the mint price of gold, as well as the apparently unfavorable course of exchange. But if it should appear that the real exchange is against us, and that the exportation of bullion in consequence has

occasioned the high price of gold, the resumption of cash payments, it has already appeared, would eventually lead to a favorable course of exchange, and consequently restore the equality in value between bullion and currency.

A mere nominally unfavorable course of exchange proceeding from a depreciation in the value of the bank paper, does not, like a really unfavorable course of exchange, cause an increase in the quantity of exports; because the premium for which the exporting merchant may sell his bill of exchange will be counterbalanced by the increased price of the goods he exports. A mere nominally unfavorable course of exchange also proceeding from a depreciation in the value of bank paper, does not occasion the exportation of bullion; because if the exchange be not really unfavorable, a bill of exchange can be procured for an equal or less price than gold, and will therefore be preferred, because it is exempt from the risk and expense attending the exportation of gold. The gold in coin will still, however, in such circumstances disappear, either by being melted down or exported; because as coin, it cannot pass for its real value, since it is criminal to sell gold in coin for more than its legally established price: it must therefore, as coin, partake of the degradation in value of bank notes.

As the quantity of the precious metals employed for the coinage of different nations, and making payments in the currency of the commercial world greatly exceeds the quantity used in manufactures, the amount of the precious metals sold for home con> sumption in manufactures is quite inconsiderable, compared with the quantity imported or exported by the bullion merchant. Though the intrinsic value of these metals was first founded, and is still supported, by their use for plate and ornaments, yet their much more general use, as a medium of exchange, has rendered the supply of the manufacturer a very subordinate branch of the bullion trade. But for whatever purpose they are wanted, they are imported or exported only accordingly as the exchange is sufficiently favorable or sufficiently unfavorable to afford an adequate profit in the transaction. For instance, the bullion merchant, upon importing bullion, must pay for it either by the purchase and transmittal of a bill of exchange payable in the country from which he imports the bullion, or else by ordering a bill to be drawn upon himself in the first case, if the exchange be unfavorable, he will be obliged to pay a premium upon the purchase of the bill; and whatever might be the amount of the premium would be so much loss to him; because in the purchase of the bill he will pay as much bullion as he imports, and in addition to to that the premium besides. If the importing merchant does not

Sce Edinburgh Review for Feb. 1811.

pay for the bullion by the purchase and remittance of a bill of exchange, he must do it by ordering a bill to be drawn upon himself; but it is obvious, that the loss to him in this case would be precisely the same as if he had paid for the bullion by the purchase of a bill of exchange. When the exchange is at par, the merchant who should import bullion would receive no more than the bullion he paid for it, consequently would lose the expense of the transport and insurance; and in addition to this, he would probably be obliged to pay a premium for a bill of exchange; because the very circumstance of his importing bullion at such a time would render the exchange unfavorable, although it had before been at par. He will consequently defer importing any bullion till the course of exchange is sufficiently in his favor to allow him an adequate profit, after deducting the expense of transport and insurance. Bullion therefore will never be imported except when the exchange is in favor of the importing merchant, and consequently when the exchange is unfavorable to the country from which it is exported; and as the quantity of bullion sold for home consumption in manufactures is quite inconsiderable, compared with the quantity imported and exported by the bullion merchant, it follows, that the only circumstance which can cause an increase in the value of bullion in any particular country, is a really unfavorable course of exchange. For this reason it has been assumed, that if the market price of bullion has risen beyond the mint price, on account of an increase in the value of bullion, such increase in the value of bullion cannot have happened without an unfavorable course of exchange.

If the preceding observations be correct, it is evident that the mere circumstance of the current price of gold being above the mint price is not a sufficient cause for deferring the resumption of cash payments, provided the bank is now prepared for the measure, by having limited the issue of its notes to that quantity which, compared with the gold it has in store, it would have thought it prudent to issue if the obligation to pay in cash had never been suspended.

As soon then as the bank may declare itself prepared to resume its cash payments, it follows, that from that time no sufficient reason can exist for not having recourse to the measure.

Whenever the resumption of cash payments takes place, should it happen that the course of exchange is really unfavorable to this country, either on account of an unfavorable balance of trade, loans to foreign countries, or any other cause, it might be necessary that the cash in the coffers of the bank should bear a greater proportion to the amount of its notes in circulation than would have been requisite if the exchange had been in our favor; because if the exchange be really unfavorable, so as to induce the exportation of bullion, a part of the current coin might perhaps be converted into

bullion and exported; and therefore a greater demand might for that purpose be made upon the bank for gold coin than in ordinary cases. Upon the resumption therefore of cash payments, the proportion which the coin in possession of the bank should bear to its notes in circulation, will in part depend on the course of exchange. If the course of exchange be favorable, the proportion may be less; if unfavorable, it must be greater. In preparing for the resumption of cash payments, should it be found necessary to increase the proportion which the gold in store bears to the notes in circulation, it may be a question, how this can be most conveniently effected? whether by the bank diminishing the issue of fresh notes, or increasing the quantity of gold in its possession; or whether by both these operations at once? Of the course to be pursued in this respect, the bank directors are perhaps the most competent judges. Therefore to them principally must be confided the means of preparing for the resumption of cash payments; but it is incumbent on them, at the same time to recollect, that the resumption of cash payments is a measure which justice and the national faith imperiously demand, and in which are involved the welfare and happiness of a great part of the community, since upon this will depend whether their property shall bear its just value, or be liable to depreciation, without any assignable limit.

OR,

A DISCUSSION

ON THE FOLLOWING QUESTION;

WHICH ARE THE BEST MEANS OF MAKING THEATRES VIE WITH EACH OTHER IN PROMOTING THE PERFECTION OF TASTE AND THE IMPROVEMENT OF MORALS?

A Publication rewarded with the Prize by the Society of Arts, Sciences, and Belles Lettres of Bordeaux, August 27, 1812.]

BY A. DELPLA,

"When it is dangerous to describe men as they are, we must represent them as they ought to be."