Nomistakecanbegreaterthantosupposethatanationcaneverbewithoutwantsforcommoditiesofsomesort。Itmaypossesstoomuchofoneormorecommoditiesforwhichitmaynotfindamarketathome。Itmayhavemoresugar，coffee，tallow，thanitcaneitherconsumeordisposeof，butnocountyeverpossessedageneralglutofallcommodities。Itisevidentlyimpossible。Ifacountypossesseseverythingnecessaryforthemaintenanceandcomfortofman，andthesearticlesbedividedintheproportionsinwhichtheyareusuallyconsumed，theyaresure，howeverabundant，tofindamarkettotakethemoff。Itfollowstherefore，thatwhilstacountyisinpossessionofacommodityforwhichthereisnodemandathome，itwillbedesirousofexchangingitforothercommoditiesintheproportioninwhichtheyareconsumed。
Nonationgrowscorn，oranyothercommodity，withaviewtorealiseitsvalueinmoney，（thecasesupposed，orinvolvedinthecasesupposed，bytheReviewers），asthiswouldbethemostunprofitableobjecttowhichthelabourofmancouldbedevoted。
Moneyispreciselythatarticlewhichtillitisre-exchangedneveraddstothewealthofacounty:accordinglywefind，thattoincreaseitsamountisneverthevoluntaryactofanycountyanymorethanitisthatofanyindividual。Moneyisforceduponthemonlyinconsequenceoftherelativelylessvaluewhichitpossessesinthosecountieswithwhichtheyhaveintercourse。
Whilstacountryemploysthepreciousmetalsformoney，andhasnominesofitsown，itisaconceivablecasethatitmaygreatlyaugmenttheamountoftheproductionsofitslandandlabourwithoutaddingtoitswealth，becauseatthesametimethosecountieswhichareinpossessIonoftheminesmaypossiblyhaveobtainedsoenormousasupplyofthepreciousmetalsastohaveforcedanincreaseofcurrencyontheindustiouscounty，equalinvaluetothewholeofitsincreasedproductions。Butbysodoingtheaugmentedcurrency，addedtothatwhichwasbeforeemployed，willbeofnomorerealvaluethantheoriginalamountofcurrency。Thusthenwillthisindustriousnationbecometributarytothosenationswhichareinpossessionofthemines，andwillcarryonatradeinwhichitgainsnothingandloseseverything。
ThattheexchangeisinaconstantstateoffluctuationwithallcountiesIamnotdisposedtodeny，butitdoesnotgenerallyvarytothoselimitsatwhichremittancescanbemoreadvantageouslymadebymeansofbullionthanbythepurchaseofbills。Whilstthisisthecase，itcannotbedisputedthatimportsarebalancedbyexports。Thevaryingdemandsofallcountriesmaybesupplied，andtheexchangesofalldeviateinsomedegreefrompar，ifthecurrencyofanyoneofthemiseitherredundantordeficient，ascomparedwiththerest。SupposeEnglandtosendgoodstoHolland，andnottofindthereanycommoditieswhichsuittheEnglishmarket；or，whichisthesamething，supposethatwecanpurchasethosecommoditiescheaperinFrance。InthiscaseweconfineouroperationtothesaleofgoodsinHolland，andthepurchaseofothergoodsinFrance。ThecurrencyofEnglandisnotdisturbedbyeithertransaction，asweshallpayFrancebyabillonHolland，andtherewillneitherbeanexcessofimportsnorofexports。Theexchangemay，however，befavourabletouswithHolland，andunfavourablewithFrance；
andwillbeso，iftheaccountbenotbalancedbytheimportationintoFranceofgoodsfromHolland，orfromsomecountryindebtedtoHolland。Iftherebenosuchimportation，itcanariseonlyfromarelativeredundancyofthecirculationofHolland，ascomparedwiththatofFrance，andinpaymentofthebillitwillsuitboththosecountiesthatbullionshouldbetransmitted。Ifthebalancebesettledbythetransmissionofgoods，theexchangebetweenallthethreecountrieswillbeatpar。Ifbybullion，theexchangebetweenHollandandEnglandwillbeasmuchabovepar，asthatbetweenFranceandEnglandwillbebelowthepar，andthedifferencewillbeequaltotheexpensesattendingthepassageofbullionfromHollandtoFrance。Itwillmakenodifferenceintheresult，ifeverynationoftheworldwereconcernedinthetransaction。EnglandhavingboughtgoodsfromFranceandsoldgoodstoHolland，FrancemighthavepurchasedtothesameamountfromItaly；ItalymayhavedonethesamefromRussia，RussiafromGermany，andGermanywithin100，000l。ofthesameamountfromHolland；Germanymightrequirethisamountofbullioneithertosupplyadeficientcurrency，orforthefabricationofplate。Allthesevarioustansactionswouldbesettledbybillsofexchange，withtheexceptionofthe100，000
l。whichwouldbeeithertransmittedfromanexistingredundancyofcoinorbullioninHolland，oritwouldbecollectedbyHollandfromthedifferentcurrenciesofEurope。Itisnotcontended，astheReviewersinfer，\"thatabadharvest，orthenecessityofpayingasubsidyinonecounty，shouldbeimmediatelyandinvariablyaccompaniedbyanunusualdemandformuslins，hardware，andcolonialproduce，\"asthesameeffectswouldbeproducedifthecountrypayingthesubsidy，orsufferingfromabadharvest，weretoimportlessofothercommoditiesthanithadbeforebeenaccustomedtodo。
TheReviewersobserve，page345，\"ThesamekindoferrorwhichwehaveherenoticedpervadesotherpartsofMrRicardo\'spamphlet，particularlytheopeningofhissubject。Heseemstothinkthatwhenoncethepreciousmetalshavebeendividedamongthedifferentcountriesoftheearth，accordingtotheirrelativewealthandcommerce，thateachhavinganequalnecessityforthequantityactuallyinuse，notemptationwouldbeofferedfortheirimportationorexportation，tilleitheranewmineoranewbankwasopened；ortillsomemarkedchangehadtakenplaceintheirrelativeprosperity。\"Andafterwardsatpage361，\"Wehavealreadyadvertedtotheerror（confined，however，principallytoMrRicardo，andfromwhichtheReportisentirelyfree）ofdenyingtheexistenceofabalanceoftradeorofpaymentsnotconnectedwithsomeoriginalredundancyordeficiencyofcurrency。\"\"Butthereisanotherpointinwhichalmostallthewritersonthissideofthequestionconcur，where，notwithstanding，wecannotagreewiththem，andfeelmoreinclinedtothemercantileviewofthesubject。Thoughtheyacknowledgethatbullionoccasionallypassesfromonecountytoanotherfromcausesconnectedwiththeexchange，yettheyrepresentthesetransactionsasquiteinconsiderableindegree。
MrHuskissonobserves\'thattheoperationsinthetradeofbullionoriginatealmostentirelyinthefreshsupplieswhichareyearlypouredinfromtheminesoftheNewWorld，andarechieflyconfinedtothedistributionofthosesuppliesthroughthedifferentpartsofEurope。Ifthissupplyweretoceasealtogether，thedealingsingoldandsilver，asobjectsofforeigntrade，wouldbeveryfew，andthoseofshortduration。\'\"
\"MrRicardo，inhisreplytoMrBosanquet，referstothispassagewithparticularapprobation。\"NowIamatalosstodiscoverinwhatthisopinionofMrHuskissondiffersfromthatwhichIhadbeforegiven，andonwhichtheReviewershadbeencommenting。
Thepassagesareinsubstancepreciselythesame，andmuststandorfalltogether。If\"weacknowledgethatbullionoccasionallypassesfromonecountytoanother，fromcausesconnectedwiththeexchange，\"wedonotacknowledgethatitwouldsopasstilltheexchangehadfallentosuchlimitsaswouldmaketheexportationofbullionprofitable，andIamofopinionthatifitshouldsofall，itisinconsequenceofthecheapnessandredundanceofcurrency，which\"wouldoriginatealmostentirelyinthefreshsupplieswhichareyearlypouredinfromtheminesoftheNewWorld。\"This，then，isnotanotherpointinwhichtheReviewersdifferwithme，butthesame。
If\"itiswellknownthatmoststates，intheirusualrelationsofcommercialintercourse，haveanalmostconstantlyfavourableexchangewithsomecountries，andanalmostconstantlyunfavourableonewiththeothers，\"towhatcausecanitbeascribedbuttothatmentionedbyMrHuskisson？\"Thefreshsuppliesofbullionwhichareyewlypouredin，（andinnewlythesamedirection）fromtheminesoftheNewWorld。\"DrA。Smithdoesnotseemtohavebeensufficientlyawareofthepowerfulanduniformeffectswhichthisstreamofbullionhadontheforeignexchanges，andhewasinclinedmuchtooverratetheusesofbullionincarryingonthevariousroundaboutforeigntadeswhichacountyfindsitnecessarytoengagein。Intheewlyandrudetransactionsofcommercebetweennations，asintheearlyandrudetransactionsbetweenindividuals，thereislittleeconomyintheuseofmoneyandbullion；itisonlyinconsequenceofcivilizationandrefinementthatpaperismadetoperformthesameofficebetweenthecommonwealthofnations，asitsoadvantageouslyperformsbetweenindividualsofthesamecountry。
TheReviewersdonotappeartometobesufficientlyawareoftheextenttowhichtheprincipleofeconomyintheuseofthepreciousmetalsisextendedbetweennations，indeedtheydonotseemtoacknowledgeitsforceevenwhenconfinedtoasinglenation，asfromapassageinpage346，theirreaderswouldbeinducedtosupposetheiropiniontobe，thattherearefrequenttransfersofcurrencybetweenthedistantprovincesofthesamecountry，fortheytellusthat\"therehavebeenandeverwillbeaquantityofthepreciousmetalsinusedestinedtoperformthesamepartwithregardtothedifferentnationsconnectedwitheachotherbycommerce，whichthecurrencyofaparticularcountryperformswithregardtoitsdistantprovinces。\"Nowwhatpartdoesthecurrencyofacountryperformwithregardtothedistantprovinces？
Iamwellpersuadedthatinallthemultiplicityofcommercialtransactionswhichtakeplacebetweenthedistantprovincesofthiskingdom，thecurrencyperformsaveryinferiorpart，importsbeingalmostalwaysbalancedbyexports*，andtheproofis，thatthelocalcurrencyoftheprovinces（andtheyhavenoother）isseldomcirculatedatanyconsiderabledistancefromtheplacewhereitisissued。
ItappearstomethattheReviewerswereinducedtoadmittheerroneousdoctrineofthemerchants，thatmoneymightbeexportedinexchangeforcommodities，althoughmoneywerenocheaperintheexportingcountry，becausetheycouldinnootherwayaccountfortheriseoftheexchangehaving，onsomeoccasions，accompaniedtheincreasedamountofBanknotes，asstatedbyMrPearse，thelatedeputy-governorandnowgovernoroftheBank，inapaperdeliveredbyhimtotheBullionCommittee。Theysay，\"accordingtothisviewofthesubject，itcertainlyisnoteasytoexplainanimprovingexchangeunderanobviouslyincreasingissueofnotes:aneventthatnotunfrequentlyhappens，andwasmuchinsisteduponbythedeputy-governoroftheBank，asaproofthatourforeignexchangeshadnoconnexionwiththestateofourcurrency。\"
Thesearecircumstances，however，whicharenotabsolutelyirreconcileable。MrPearse，aswellastheEdinburghReviewer，appearstohavewhollymistakentheprincipleadvancedbythosewhoaredesirousoftherepealoftherestrictionbill。Theydonotcontend，astheyareunderstoodtodo，thattheincreaseofbanknoteswillpermanentlylowertheexchange，butthatsuchaneffectwillproceedfromaredundantcurrency。Itremains，therefore，tobeconsideredwhetheranincreaseofbanknotesisnecessarily，atalltimes，accompaniedwithapermanentlyincreasedcurrency，asifIcanmakeitappearthatitisnot，therewillbenodifficultyinaccountingforariseintheexchange，withanincreasedamountofbank-notes。
Itwillbereadilyadmitted，thatwhilstthereisanygreatportionofcoinincirculation，everyincreaseofbank-notes，thoughitwillforashorttimelowerthevalueofthewholecurrency，paperaswellasgold，yetthatsuchdepressionwillnotbepermanent，becausetheredundantandcheapcurrencywilllowertheexchangeandwilloccasiontheexportationofaportionofthecoin，whichwillceaseassoonastheremainderofthecurrencyshallhaveregaineditsvalue，andrestoredtheexchangetopar。Theincreaseofsmallnotes，then，willultimatelybeasubstitutionofonecurrencyforanother，ofapaperforametalliccurrency，andwillnotoperateinthesamewayasanactualandpermanentincreaseofcirculation*。Wearenot，however，withoutacriterionbywhichwemaydeterminetherelativeamountofcurrencyatdifferentperiods，asdistinguishedfrombank-notes，onwhichthoughwecannotinfalliblyrely，itwillprobablybeasufficientlyaccuratetesttodeterminethequestionwhichwearenowdiscussing。Thiscriterionistheamountofnotesof5l。andupwardsincirculation，whichwemayreasonablycalculatealwaysbearsometolerablyregularproportiontothewholecirculation。Thus，ifsince1797thebank-notesofthisdescriptionhaveincreasedfromtwelvetosixteenmillions，wemayinferthatthewholecirculationhasincreasedone-third，ifthedistrictsinwhichbank-notescirculatehaveneitherbeenenlargednorcontracted。
Thenotesunder5l。willbeissuedinproportionasthemetalliccurrencyiswithdrawnfromcirculation，andwillbefurtheraugmented，iftherebealsoanaugmentationofnotesofahigherdenomination。
IfIamcorrectinthisviewofthesubject，thattheincreaseintheamountofourcurrencyistobeinferredfromtheincreasedamountofbank-notesof5l。andupwards，andcanbynomeansbeprovedbyanincreaseof1l。and2l。noteswhichhavebeensubstitutedintheplaceoftheexportedorhoardedguineas，ImustwhollyrejectthecalculationsofMrPearse，becausetheyaremadeonthesuppositionthateveryincreaseofthisdescriptionofnotesisanincreaseofcurrencytothatamount。
Whenitisconsideredthatin1797therewerenonotesof1l。
and2l。incirculation，butthattheirplacewaswhollyfilledwithguineas；andthatsincethatperiodtherehavebeennolessthansevenmillionsissued，partlytosupplytheplaceofourexportedandhoardedguineas，andpartlytokeepuptheproportionbetweenthecirculationforthelargerandforthesmallerpayments，weshallobservetowhaterrorssuchreasoningmaylead。IcanconsiderthepaperinquestionofnoauthoritywhateverasopposedtotheopinionwhichIhaveventuredtogive，namely，thatanunfavourablebalanceoftrade，andaconsequentlylowexchange，mayinallcasesbetracedtoarelativelyredundantandcheapcurrency。*ButifthereasoningofMrPearsewerenotincorrectashisfactsare，heisnowaywarrantedintheconclusionswhichhehasdrawnfromthem。
MrPearsestatestheincreaseofbank-notesfromJanuary，1808，toChristmas，1809，tohavebeenfrom171/2to18
millions，or500，000l。，theexchangewithHamburghduringthesameperiodhavingfallenfrom34s。9g。to28s。6g。anincreaseintheamountofnotesoflessthanthreepercent，andafallintheexchangeofmorethaneighteenpercent。ButfromwhencedidMrPearseobtainthisinformation，of18millionsofbank-notesonlybeingincirculationatChristmasin1809？Afterlookingateveryreturn，withwhichIhavebeenabletomeet，oftheamountofbank-notesincirculationattheendof1809，IcannotbutconcludethatMrPearse\'sstatementisincorrect。MrMushetinhistablesgivesfourreturnsofbank-notesintheyear。Inthelast，fortheyear1809，hehasstatedtheamountofbank-notesincirculationat19，742，998
IntheAppendixtotheBullionReport，andinreturnslatelymadetotheHouseofCommons，theamountofbank-notesincirculationappearstohavebeenonDecember12，1809
19，727，520
Onthe1stJanuary，18102，669，320
Onthe7thJanuary，181019，528，030
FormanymonthspreviouslytoDecemberitwasnotlower。WhenIfirstdiscoveredthisinaccuracyIthoughtMrPearsemighthaveomittedthebankpostbillsinbothestimates，althoughtheydidnotinDecember，1809，exceed880，880l。；butonlookingatthereturnofbank-notesincirculation，includingbankpostbills，inJanuary，1808，IfindMrPearsehasstateditlargerthanI
cananywherefindit:indeedhisestimateexceedsthereturnmadebytheBankforthe1stofJanuary，1808，bynearly900，000
l。，sothatfromthe1stofJanuary，1808，tothe12thofDecember，1809，theincreasewasfrom16，619，240to19，727，520，adifferenceofmorethanthreemillions，insteadof500，000，asstatedbyMrPearse，andoftwomillionsifMrPearse\'sstatementforanytimeinJanuary，1808，becorrect。
MrPearse\'sstatementtoo，thatfromJanuary1803，totheendof1807，theamountofbank-noteshadincreasedfrom16andahalftoeighteenmillions，anincreaseofamillionandahalfappearstometoexceedthefactbyhalfamillion。Theincreaseofnotesof5l。andupwards，includingbankpostbills，didnot，duringthatperiod，exceed150，000l。Itismaterialthattheseerrorsshouldbepointedout，thatthosewhomay，inspiteofwhatIhaveurged，agreeinprinciplewithMrPearse，mayseethatthefactsofthecasedonotwarranttheconclusionswhichthatgentlemanhasdrawnfromthem，and，indeed，thatallcalculationsfoundedontheparticularamountofbanknotesforaday，orforaweek，whenthegeneralaveragehasbeenforsometimebefore，orsometimeafter，greaterorless，willbeoflittleavailinoverturningatheorywhichhaseveryotherproofofitstuth。SuchIconsiderthetheorywhichassertsthattheunlimitedmultiplicationofacurrencywhichisreferribletonofixedstandardmayandmustproduceapermanentdepressionoftheexchange，estimatedwithacountrywhosecurrencyisfoundedonsuchstandard。
HavingconsideredtheweightwhichoughttobeattachedtoMrPearse\'spaper，Ibegthereader\'sattentiontothetablewhichI
havedrawnoutfromthestatementsintbeBullionReport，andfromthepaperswhichhavesincebeenpresentedtotheHouseofCommons。Irequesthimtocomparetheamountofthecirculationofthelargernoteswiththevariationsintheexchange，andI
trusthewillfindnodifficultyinreconcilingtheprinciplemaintainedbymewiththeactualfactsofthecase，particularlyifheconsidersthattheoperationsofanincreasedcurrencyarenotinstantaneous，butrequiresomeintervaloftimetoproducetheirfulleffect，-thatariseorfal1inthepriceofsilver，ascomparedwithgold，alterstherelativevalueofthecurrenciesofEnglandandHamburgh，andthereforemakesthecurrencyofoneorotherrelativelyredundantandcheap；-thatthesameeffectisproduced，asIhavealreadystated，byanabundantordeficientharvest，eitherinthiscountryorinthosecountrieswithwhichwetrade，orbyanyotheradditionordiminutiontotheirrealwealth，whichbyalteringtherelativeproportionbetweencommoditiesandmoneyaltersthevalueofthecirculatingmedium。Withthesecorrections，IhavenofearbutthatitwillbefoundthatMrPearse\'sobjectionsmayberefutedwithouthavingrecoursetotheabandonmentofaprinciple，which，ifyielded，willestablishthemercantiletheoryofexchange，andmaybemadetoaccountforadrainofcirculatingmedium，sogreat，thatitcanonlybecounteractedbylockingupourmoneyinthebank，andabsolvingthedirectorsfromtheobligationofpayingtheirnotesinspecie。
MrPearse\'sstatement，aspresentedtotheBullionCommittee:
TotalofBankNotes，Millions；RateofHambro\'
Exchange17thFebruary，1797；81/2；35s6gRoseGraduallyin1797and1798to；13；38s0gMarch1799；131/2；37s7gAfterthisperiod，greatcommercialdistress，largeimportationofcorn，heavysubsidies，andtheHambro\'Exchangecontinuedfalling，andonthe2dJanuary，1801wasaslowas；——；29s8gBetweentheendoftheyear1799totheendof1802，anincreasedquantityof1l。and2l。noteswereissued，swellingthesumtotaltoallnotesto；131/2to161/2；Fluctuationfrom33s3gto29s8gFromJanuary，1803，totheendof1807；161/2to18；Fluctuationfrom32s10gto35s10gFromJanuary，1808，toChristmas1809；171/2to18；Fallfrom34s9gto28s6gTherateoftheHambro\'ExchangeistakenfromLloyd\'slist。