12. The preceding paragraphs shew upon what complicated causes those great movements of bullion depend which produce such important consequences. There are three great Economic Quantities, Products, Bullion and Debts, all seeking to be exchanged, all flowing from where they are cheaper to where they are dearer.

But all this vast superstructure of Credit - this mighty mass of exchangeable Property - is based upon Gold Bullion. Different methods of doing business require different quantities of bullion: but however perfect and refined the system may be, we must come at last to a basis of bullion, as its moderator and regulator. If, therefore, the bullion be suffered to ebb away too rapidly, the whole superstructure is endangered, and then ensues one of those dreadful calamities, a Monetary Crisis.

We have endeavoured to explain the different causes which produce an adverse exchange, so that if one takes place the proper corrective may be applied. If it be caused by a depredated Currency, there is no cure but a restoration of the Currency to its proper state.

When however it arises from a balance of indebtedness from commercial transactions there are but two methods of correcting it, an export of produce and a Rise in the Rate of Discount.

It used to be a doctrine often asserted that an adverse exchange was in itself an inducement to export, on account of the premium at which bills could be sold. What truth there was in this doctrine can only be known to those actually engaged in such operations. But a very much more certain means of producing an export of goods is a lowering of their price. We shall enter into this more fully in the next chapter.

We have observed that a difference in the Rate of Discount between any two countries more than sufficient to pay for the transmission of bullion, will produce a flow of bullion from one to the other. But as all the cost of transmission both ways falls on the operator, the difference requires to be more considerable than might appear at first sight. And if they are three months' bills, the profit reaped will be only one-fourth of the apparent difference. Thus Mr. Goschen says there must be a difference of 2 per cent, between London and Paris, before the operation of sending gold over from France, for the sake only of the higher interest, will pay. And between other continental cities, of course, the difference may be much greater.

But whatever the difference may be the method is absolutely certain. Directly the Rate of Discount rises here, people cease to export bullion from here, and the continental bankers and brokers increase their demand for English bills. And as the Rate rises, the demand will increase, until at last the price reaches the specie point, and gold begins to flow in: and as the Rate rises more, more powerful will be the attraction, until at last the necessary equilibrium is restored between bullion and Credit.