1. Balances due by one country to another are paid for in specie. Hence, if the balance of trade be against us, we shall be drained of our specie to pay for such balance.

Now, in the first place, there is practically no such thing as a "balance of trade." The trade between two countries entirely consists of a series of commercial dealings between a number of persons in one country and a number of persons in the other; and there can be no national balance of trade, because each dealing (of which the totality is formed) is settled for at the time, and balances itself.

We may, it is true, buy from some countries more than we directly sell to them, but the difference is not paid for in specie; it is paid for by bills on other countries to which we sell more than we buy from them. On the whole, the commercial dealings of a country with the world at large are self-adjusting, and leave no balance to be paid to or from either side. But although there is no such thing as a "balance of trade," most countries do either import more from the rest of the world than they export to it, or vice versâ; and it is this excess, on whichever side it may be, that is ordinarily, though wrongly, termed the balance of trade.

How such excess arises we shall shortly see; here the question is simply whether it be true, as alleged, that if we import more than we export "we shall be drained of our specie to pay" for such excess of imports. Past history and present experience conclusively show that it is not true. Amounts due (from whatever cause) by one country to others are not paid for in specie. In England, our imports have exceeded our exports, year after year, for more than a quarter of a century, by an average of about £50,000,000 a year; and yet throughout all those years, instead of our bullion having been drained from us, our import has largely page 10 exceeded our export of it. This fact is at once so undeniable and so conclusive, that we shall not waste time upon it. If anyone desires fuller details and statistics on the subject, we beg to refer him to Mr. G. W. Medley's recent pamphlet, where it is treated in a masterly manner. ^*

The ebb and flow of bullion between various countries has comparatively a very small range, and depends almost entirely on their respective circulation requirements. Even in wealthy England, the abstraction of a few millions' worth of gold so deranges the circulation as to raise the rate of interest to a point sufficient to bring it back again. How then can any one dream of our sending away 100 millions of it annually to pay for our annual excess of imports? The fact is, that every country possesses and retains as much specie as is required for circulation purposes—sometimes a little less, sometimes a little more, but never much less, nor much more. No country was ever drained of its specie by its foreign commerce. The only way in which it can ever be denuded of specie is by the adoption of an inconvertible paper currency. The circulation requirements being then supplied by paper, the specie becomes surplusage, and is sent abroad where its value is greater.

To sum up, the truth is that Balances Due (from whatever cause) by One Country to Another are not Paid for in Specie; and No Country has ever been Drained of its Specie through the Operation of Foreign Trade.