trade articles are exchanged for gold where most gold can be got for them, and the gold taken to places where the articles it is desired to purchase can be obtained for least gold, and that without gold free trade would be impossible.

But after all his elaboration of the subject, he arrives at the conclusion, in the latter part of his chapter, that 'the only general law, then, which can be laid down is this. The values at which a country exchanges its produce with foreign countries depend on two things.'

But these two influencing circumstances are in reality reducible to one.' It still appears,' he says, 'that the countries which carry on their foreign trade on the most advantageous terms are those whose commodities are most in demand by foreign countries, and which have themselves the least demand for foreign commodities.' In other words, those countries which have the old-fashioned balance of trade in their favour. But this does not appear to be quite in accordance with the doctrine previously stated, that the only direct advantage of foreign commerce consists in the imports.'

In an article in the Westminster Review for last April, on Moral Philosophy, at Cambridge, the writer observes, that to obtain a firm grasp of Mill's Theory of International Values probably requires as great powers of mental concentration and as special an aptitude as to master Laplace's Co-efficients. So, no doubt, it does. probably would to understand the Planetary System of Tycho Brahe, which assumed that the earth is stationary,

And so it

and that all the other planets revolve round the sun, being carried with it round the earth. It is known that his system explains all appearances quite as well as that of Copernicus; and that in fact there is nothing but a comparatively recent discovery, the aberration of light, which is demonstrably conclusive in favour of the annual motion of the earth. As the pre-existing belief of Copernicus, with some additions and modifications, has been shown by Bradley's discovery to be correct, so by recalling our attention to the fact demonstrated by the history of California and Victoria, that gold-and therefore money-is an article of exchange, we may be enabled to perceive that the old mercantile system, now dismissed with contempt, is, with some limitations and explanations, not so wholly erroneous as is commonly supposed, and to arrive at a less hazy conception of the character of paper-money, and the nature of international exchanges.

157

ON FOREIGN EXCHANGES AND DISTRIBUTION OF THE PRECIOUS METALS.

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MR. FAWCETT, in his Manual of Political Economy' (2nd edition, p. 362), states that 'gold (and the same remark applies to silver) is devoted to two distinct purposes1st. Gold is employed as an ordinary article of commerce. 2nd. Gold is the substance from which a great portion of the money of every country is made. A very large proportion of all the gold that exists in the world. is devoted to the last of these two purposes.'

Mr. Mill, at the beginning of his chapter on Foreign Exchanges, says We have thus far considered the precious metals as a commodity imported like other commodities in the common course of trade, and have examined what are the circumstances which would, in that case, determine their value. But those metals are also imported in another character-that which belongs to them as a medium of exchange; not as an article of commerce to be sold for money, but as themselves money, to pay a debt, or effect a transfer of property.'

In these statements we have a concise expression of the

error against which I protest. The distinction which it is sought to establish has not, and cannot have any real existence. If gold is at all, and under any circumstances, an article of commerce, so must money be. The difference can only be of quantity, not of character or kind. There is no more distinction between an ingot of gold worth one thousand pounds and a bag of one thousand sovereigns than there is between a pipe of wine and that same wine put into bottles for more convenient division and transport in small quantities. There is no magic in coining, and the Government never, under any circumstances, can create money, though it may create public liabilities in the shape of paper currency, as has been done by the United States, and by some continental governments more recently. All that is effected by coining is to give a more authoritative certificate to the quantity and quality of a piece of gold, in a manner not unusual formerly with respect to other commodities. Some years ago the packages of fish taken in the North American fisheries were always subjected to inspection as to quantity and quality, and were stamped and certified accordingly, by the inspectors, as No. 1 or No. 2 mackerel, for instance, as the case might be.. The packages so certified had a sort of timbre and corresponding market value. The principle, and, indeed, the practice involved in coining is the same, and nothing more. The use and free circulation of true money arises only from the fact that all civilised nations have agreed to receive the precious metals in

exchange for other commodities in all cases where it is not necessary or desirable to take something else; because the metals are not subject to decay; as every one desires to have them they are always readily again exchangeable, and this of itself increases the desire for them.

The fact that the occasions are numerous when coin is melted down and transported to places distant from that to which the coinage belonged, to be there exchanged for other commodities, as Professor Fawcett mentions to have been the case with French silver sent to the East, ought alone to be sufficient to show that money does not cease to be a commodity. It is strange that the significance of these facts, and of the admission that gold and silver contain great value in small bulk, is not perceived, and the true inference not drawn from them, that money is an article of commerce, and must indeed be so before it can become a medium of exchange.

But all Mr. Mill's theory of foreign exchanges is vitiated by the failure to recognise the true character of money, and the effect which must be produced by the fact that it is a third article of substantive value, when, as he admits, in practice the imports and exports of a country are not only not exchanged directly against each other, but often do not even pass through the same hands.'

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He states that since things which are equal to the same thing are equal to one another, the exports and imports which are equal in money price, would, if money