It must be observed however that the example of the product which we have taken, wine, is not a very good one to illustrate the principle, because wine is an article which may be kept for several years before it is used: and the merchant might import the wine, even though it would not pay at existing prices, in the expectation that in process of time the price of it would rise in consequence of the scarcity. An example of a product which required immediate consumption, would have been a better illustration.

If we suppose that Bordeaux had but one native product -wine - the chances of finding the markets, both at Bordeaux and London, in a favourable state for importing produce instead of specie, would be limited to that single article. But if it had other products, such as olive oil, the chances would be increased of finding articles to suit the market; and the chances would evidently be multiplied according to the number and variety of its products. Hence we see the great importance of having as great a variety as possible in a market, because the more articles there are, the more chances there are that commercial indebtedness may be settled by products rather than by specie.

Whether the transaction was profitable or not to the London merchant would entirely depend on the amount of specie he received after deducting all charges: and if he had purchased the goods he sent out from England cheap, and there was a scarcity of them at Bordeaux, he might realise high prices there, which might leave him a good profit. It would be very improbable that he could realise so much profit on that single operation as in the double one of exporting goods and importing wine. So that the import of the specie would be less profitable to him and the nation at large, than the import of the wine.

The reasons which caused the export of specie from Bordeaux, and the import of it into England, in this case, are very plain; they were the scarcity and dearness of the native products at Bordeaux, and the abundant supply of them already in the London market. Hence we gather that the scarcity and dearness OF NATIVE PRODUCTS IS AN INFALLIBLE CAUSE OF THE EXPORT

of specie from a country: on the contrary, an already existing abundant supply of products both domestic and foreign is a certain cause of its import into a country; just as people flock to buy in a well stocked and cheap market.

The exchange being in favour of a country means nothing more than that bullion has to be remitted to it. In the case above described, the exchange at Bordeaux would be in favour of London: but this simple case is as good as a thousand to shew the extreme and dangerous fallacy of drawing any conelusion as to the advantage of the trade to England, from the simple fact of the exchange being favourable to her, and an inflow of bullion taking place.

The example given above is of the simplest description, and a merchant of eminence, who has correspondents in several different parts of the world, might easily multiply these operations so as to trade with many markets before the returns of his cargo were brought home. Thus instead of having the wine sent home from Bordeaux, his correspondent might find it more profitable to send it to Buenos Ayres, and dispose of it there. The chief native product of that place is hides, and we may suppose that his correspondent there might invest the proceeds of the cargo of wine in hides, which there might be a favourable opportunity of selling in the West Indies. When the cargo arrived in the West Indies, instead of remitting the proceeds directly home, it might very well happen that, owing to a scarcity of corn at home, it might be very high there and cheap in Canada, so he would invest the proceeds of the hides in sugar, and despatch that to Canada, where the merchant's correspondent there would dispose of it, and purchase corn, which he would send to England.

In the case just described, we observe that there are five distinct operations, and, as we may suppose that there is a profit upon each of them, by the time the returns for the goods, which originally cost £1000, are brought to England, it may very well be, that the corn, which forms the ultimate payment of them, may be several times as valuable as the original cargo: and as the charges on each operation are deducted before investing the proceeds in other articles, it is clear that the merchant's profit upon the whole is exactly the difference in value between the articles last purchased and sent home and the original cargo, after deducting all the expenses of sending home the last cargo: and it is also seen that no specie has been sent from one country to the other in the whole course of the extended operation.

There will be no difficulty in considering the reverse case in which the operation is commenced from the foreign country. Suppose the starting point is New York. The staple products of America are breadstuff's and provisions. A merchant of New York sends a cargo of corn to Liverpool, and his correspondent there will endeavour to invest the proceeds of that in British goods, if he finds the state of the markets in England and New York will make such an operation profitable. Suppose the price of corn is very high here, and British goods are also very high here, and very low in America, it is clear that nothing but specie will be sent. In cases where a great and unexpected dearth of corn occurs in England, and its price rises enormously high, the infallible result is to cause a great drain of specie for the time being, because our necessity for food is much more pressing and immediate than their necessity or capability of consuming our cotton or woollen goods. And the only way to arrest such a drain is to effect such a reduction in the price of British goods as to make it more profitable to export goods than specie. And we shall see in the next chapter that it was this precise object which the Bank Act of 1844 was intended to effect.

The varieties of trading described are sufficient to suggest the following rules regarding the inflow or outflow of bullion.

I. The cause of bullion being imported is either when the price of goods is so low in England and so high in the foreign market that foreigners are tempted to send here to buy, or English merchants are tempted to export.

II. The cause of bullion being exported from England is that there is some great and pressing demand for some article in this country, and other commodities are so scarce and dear that they cannot be exported with a profit: or that the article is required in such great quantities that the foreigner cannot consume our goods, which we would prefer to send in payment, fast enough: and so specie must be sent; and the greater the difference in price the greater will be the drain of bullion: or that other markets are already overstocked with our products, which are depressed below their usual market value there. This is what is meant by overtrading: and from this circumstance we see that overtrading is a sure precursor of a drain of bullion from the country. When there has been a great failure of the crops in this country, so as to cause a famine price, the demand for corn is so immediate and urgent that it necessarily causes a drain of specie; and it is then of the greatest possible consequence that the prices of other commodities should be as low as possible, to enable them to be sent in payment of the necessary supplies of food, and prevent such a drain of bullion as may disturb the whole monetary system of the country.

Overtrading, and a failure of the cereal crops of this country are each of them sure causes of a drain of bullion. The most disastrous event for the commerce of this country is when both these circumstances happen concurrently. It is like a spring tide of disaster. The monetary crisis of 1847 was brought on by several years of overtrading followed by successive failures in the staple support of the people of England and Ireland.