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necessity of paying a subsidy in one county； should be
immediately and invariably accompanied by an unusual demand for
muslins； hardware； and colonial produce；〃 as the same effects
would be produced if the country paying the subsidy； or suffering
from a bad harvest； were to import less of other commodities than
it had before been accustomed to do。
The Reviewers observe； page 345； 〃The same kind of error
which we have here noticed pervades other parts of Mr Ricardo's
pamphlet； particularly the opening of his subject。 He seems to
think that when once the precious metals have been divided among
the different countries of the earth； according to their relative
wealth and commerce； that each having an equal necessity for the
quantity actually in use； no temptation would be offered for
their importation or exportation； till either a new mine or a new
bank was opened； or till some marked change had taken place in
their relative prosperity。〃 And afterwards at page 361； 〃We have
already adverted to the error （confined； however； principally to
Mr Ricardo； and from which the Report is entirely free） of
denying the existence of a balance of trade or of payments not
connected with some original redundancy or deficiency of
currency。〃 〃But there is another point in which almost all the
writers on this side of the question concur； where；
notwithstanding； we cannot agree with them； and feel more
inclined to the mercantile view of the subject。 Though they
acknowledge that bullion occasionally passes from one county to
another from causes connected with the exchange； yet they
represent these transactions as quite inconsiderable in degree。
Mr Huskisson observes 'that the operations in the trade of
bullion originate almost entirely in the fresh supplies which are
yearly poured in from the mines of the New World； and are chiefly
confined to the distribution of those supplies through the
different parts of Europe。 If this supply were to cease
altogether； the dealings in gold and silver； as objects of
foreign trade； would be very few； and those of short duration。'〃
〃Mr Ricardo； in his reply to Mr Bosanquet； refers to this
passage with particular approbation。〃 Now I am at a loss to
discover in what this opinion of Mr Huskisson differs from that
which I had before given； and on which the Reviewers had been
commenting。
The passages are in substance precisely the same； and must
stand or fall together。 If 〃we acknowledge that bullion
occasionally passes from one county to another； from causes
connected with the exchange；〃 we do not acknowledge that it would
so pass till the exchange had fallen to such limits as would make
the exportation of bullion profitable； and I am of opinion that
if it should so fall； it is in consequence of the cheapness and
redundance of currency； which 〃would originate almost entirely in
the fresh supplies which are yearly poured in from the mines of
the New World。〃 This； then； is not another point in which the
Reviewers differ with me； but the same。
If 〃it is well known that most states； in their usual
relations of commercial intercourse； have an almost constantly
favourable exchange with some countries； and an almost constantly
unfavourable one with the others；〃 to what cause can it be
ascribed but to that mentioned by Mr Huskisson？ 〃The fresh
supplies of bullion which are yewly poured in； （and in newly the
same direction） from the mines of the New World。〃 Dr A。 Smith
does not seem to have been sufficiently aware of the powerful and
uniform effects which this stream of bullion had on the foreign
exchanges； and he was inclined much to overrate the uses of
bullion in carrying on the various roundabout foreign tades which
a county finds it necessary to engage in。 In the ewly and rude
transactions of commerce between nations； as in the early and
rude transactions between individuals； there is little economy in
the use of money and bullion； it is only in consequence of
civilization and refinement that paper is made to perform the
same office between the commonwealth of nations； as it so
advantageously performs between individuals of the same country。
The Reviewers do not appear to me to be sufficiently aware of the
extent to which the principle of economy in the use of the
precious metals is extended between nations； indeed they do not
seem to acknowledge its force even when confined to a single
nation； as from a passage in page 346； their readers would be
induced to suppose their opinion to be； that there are frequent
transfers of currency between the distant provinces of the same
country； for they tell us that 〃there have been and ever will be
a quantity of the precious metals in use destined to perform the
same part with regard to the different nations connected with
each other by commerce； which the currency of a particular
country performs with regard to its distant provinces。〃 Now what
part does the currency of a country perform with regard to the
distant provinces？
I am well persuaded that in all the multiplicity of
commercial transactions which take place between the distant
provinces of this kingdom； the currency performs a very inferior
part； imports being almost always balanced by exports*； and the
proof is； that the local currency of the provinces （and they have
no other） is seldom circulated at any considerable distance from
the place where it is issued。
It appears to me that the Reviewers were induced to admit the
erroneous doctrine of the merchants； that money might be exported
in exchange for commodities； although money were no cheaper in
the exporting country； because they could in no other way account
for the rise of the exchange having； on some occasions；
accompanied the increased amount of Bank notes； as stated by Mr
Pearse； the late deputy…governor and now governor of the Bank； in
a paper delivered by him to the Bullion Committee。 They say；
〃according to this view of the subject； it certainly is not easy
to explain an improving exchange under an obviously increasing
issue of notes： an event that not unfrequently happens； and was
much insisted upon by the deputy…governor of the Bank； as a proof
that our foreign exchanges had no connexion with the state of our
currency。〃
These are circumstances； however； which are not absolutely
irreconcileable。 Mr Pearse； as well as the Edinburgh Reviewer；
appears to have wholly mistaken the principle advanced by those
who are desirous of the repeal of the restriction bill。 They do
not contend； as they are understood to do； that the increase of
bank notes will permanently lower the exchange； but that such an
effect will proceed from a redundant currency。 It remains；
therefore； to be considered whether an increase of bank notes is
necessarily； at all times； accompanied with a permanently
increased currency； as if I can make it appear that it is not；
there will be no difficulty in accounting for a rise in the
exchange； with an increased amount of bank…notes。
It will be readily admitted； that whilst there is any great
portion of coin in circulation； every increase of bank…notes；
though it will for a short time lower the value of the whole
currency； paper as well as gold； yet that such depression will
not be permanent； because the redundant and cheap currency will
lower the exchange and will occasion the exportation of a portion
of the coin； which will cease as soon as the remainder of the
currency shall have regained its value； and restored the exchange
to par。 The increase of small notes； then； will ultimately be a
substitution of one currency for another； of a paper for a
metallic currency； and will not operate in the same way as an
actual and permanent increase of circulation*。 We are not；
however； without a criterion by which we may determine the
relative amount of currency at different periods； as
distinguished from bank…notes； on which though we cannot
infallibly rely； it will probably be a sufficiently accurate test
to determine the question which we are now discussing。 This
criterion is the amount of notes of 5l。 and upwards in
circulation； which we may reasonably calculate always bear some
tolerably regular proportion to the whole circulation。 Thus； if
since 1797 the bank…notes of this description have increased from
twelve to sixteen millions； we may infer that the whole
circulation has increased one…third；