We may say that:-In the case of two countries exchanging goods under a system of Free Trade, but whose coins of equal face value do not exchange equally, the country of the depreciated currency must pay a premium in commodities, to obtain the gold to liquidate payments due to the other country for debt, interest, or investment; which premium will act as a bonus on certain products of the country of depreciated currency exported to the other country; which, either by themselves or by their exchange, will lower the price of certain staple articles of production there, to the ultimate advantage of the moneylender.

There is the point of view of the English merchant trading between India and China who wants to remit his profits or savings to England. He has to earn "30x," to be able to invest the value of "20x" in England; so, if he wants 15 per cent. for his capital, the Chinese or Hindoo merchant can trade for 10 per cent., and still be on equal terms with him. For further illustration let:

A be an English farmer, who has produced a sack of wheat at the cost, say, for illustration, of £1 sterling.

B a foreign farmer, who has produced a sack of wheat by the same amount of labour, but which, by the help of the premium, he will sell in England for 13s. 6d.

C a debtor, possibly a Hindoo, in a country of depreciated currency, owing E £1 for interest on debt.

Dan English operative, who wants a sack of wheat for his consumption, and who will give as little for it as possible.

E an English moneylender.

Silver is supposed to be at 40d. per oz.

A goes to D as a consumer, and offers him 1 sack of wheat for £1.

C pays E 1 sacks, to liquidate his debt of £1.

D buys of E 1 sack of wheat for 13s. 6d., and refuses the

offer of A; and E has still sack of wheat, value 6s. 8d., in his hands at the end of the transaction.

Money is subject to two separate sets of laws that determine its value-one when in a state of freedom, and the other when it is subject to restrictions. With our free mint the sovereign is worth its weight in bullion; but assume, to take MCCULLOCH's illustration,* that the number of sovereigns in this country is 60 millions, established at 4 sovereigns to the ounce of gold, and the Government stopped further minting. The quantity of commodities not varying, and credit paper absent, the relation of the sovereign to them would remain the same, and prices would be maintained at the previous level. Now, assume that the Government called in the 60 million sovereigns and issued 60 million halfsovereigns, prices would fall, and what was previously purchased for a sovereign could now be purchased for half a sovereign. The relation of the half-sovereign to other things would be the same as the sovereign's relation previously ; but when you wished to purchase 1 oz. of gold you would now have to give 8 (half-sovereigns) instead of 4 (sovereigns).

Now, assuming England† to limit her coins to 60 million sovereigns, as above, at a period when we can purchase silver at 60d. per ounce. Afterwards, there takes place a great economy either in the use or in the mining operations (and the former means the latter generally) of gold, so that, instead of 15 ounces of silver purchasing 1 ounce of gold, it can be purchased by 10 ounces; then it would require the value of 6 sovereigns to purchase 1 ounce of gold, instead of

*ADAM SMITH's "Wealth of Nations," McCULLOCH's 5th edition, 1861, note ix. § 4.

† A case of "arbitrary limitation " is assumed here, but a restriction of the relation of the dearer metal to commodities also occurs in the country of the cheaper metal when the metals are fugitive from their established ratio.

4, as formerly, or, to liquidate a debt of £4 in a free coining gold country, it would require the value of 6 English sovereigns.

Then, the sack of wheat of farmer A, which cost £1 before the fresh gold was mined, would still cost, to grow in England, £1; and the goods of the operative D that he was willing to give farmer A for the sack of wheat, that is, which were worth £1 before the fresh gold was mined, would still exchange for the sack of wheat of farmer A, that is, be still worth £1.

As farmer A cannot grow a sack of wheat for less than £1, he will not export wheat to the free coining country where he will only get value of 13s. 4d. in exchange; but he will grow for the consumption of E and D, who will pay him £1 per sack. sack. What will be the effect?

When moneylender E owes £1 to the other country, although he sends commodities worth £1 to him, it is only credited with 13s. 4d. Say it is the wheat of farmer A,* then this trade would grow until all the land in the free coining country not fertile enough to produce wheat at 13s. 4d. the sack, would have to go out of cultivation, when the expansion of wheat growing in England would cease, as the other country would want no more, as it could buy its own for 13s. 4d. Then, when E had to pay more money to the other country, D the operative could give £1 of manufactured goods wanted by the people of that country, but which could not compete in its market on account of its price; but when sent through the medium of the debt of E, as coin due from the country of the depreciated currency, it can sell for 13s. 4d., and all the other country's producers who could not produce that article for 13s. 4d. would have to stop producing it, but those who could produce it at less would go on; and when the other country wanted no more of that article, and * Considerations of freightage are omitted.

E had to pay more money, D would go with another article, and so on. Meanwhile, exchanges of goods would beunaffected, but continue to be computed according to the metallic par.*

This is precisely the case with countries where the sovereign is dearer than in England, with the result that the relation of gold to commodities in some countries is different from the relation of gold to commodities in others, and silver countries must obtain gold dearer than gold countries.†

Thus it will be seen that the debtor of the country of depreciated coinage, paying interest in gold, pays "tribute" to the moneylender E, who may well be termed the sovereign power. This benefit would not go to any particular moneylender, but to the general body of moneylenders.

Who benefits? The operative D does not, because, for the same amount of goods which have taken him the same amount of labour to produce, he only obtains a sack of wheat, whether his goods exchange with a sack of wheat from A at 20s. or from B at 13s. 4d.; rather he is hurt by it, for he ruins his neighbour A, who would, naturally, come to him to obtain everything he wants, rather than search for it in a far country, and B will only come to him for goods he cannot obtain in his own country.

Farmer B does not obtain the benefit except that he is enabled to extend his operations at the expense of A; in fact, he gets himself into a false position if the established par of exchange between silver and gold were restored, for then D would go again to A for his sack of wheat. It might happen, also, that the Hindoo operative extended his operations to supply all the requirements of his neighbour B, when

* MILL'S "Principles," book iii., chap. xxii.

+ Some conception of the working of this may be obtained by a study of some of the phenomena attending bimetallism, and MILL'S "Principles" in the chapters on "International Values "and" Money as an Imported Commodity."

D would have to disappear. It is the moneylender E who gains, for he is indifferent whence his supplies are drawn, and, indeed, would prefer them to come from a country of depreciated coinage instead of his own, since, by the power of the "tribute," he can obtain them under cost price.

The exchange of goods for goods, however, will be unaffected, but it will be computed according to the metallic par.

As the amount of coin invested, through the medium of the money market of gold countries, in countries of depreciated currency increases with the world's savings, so will the "tribute" and the amount available for the bonus increase, and so will home producers be affected. As other gold countries protect their producers, for military and sentimental reasons, the brunt of the storm is borne by our producers, since moneylenders will congregate more in this country and their power increase.

It is now sufficiently shewn that there is a "tribute " paid, and that moneylender E receives the benefit. The "tribute" paid by India may be quite easily exchanged to obtain wheat under cost price from America, &c., &c. The moneylender E, apparently only asking 3 or 4 per cent. for his money, is really extorting 30 or 40 per cent. from his debtors, and dispensing with free producers, who must either undergo the horrors of protection or be annihilated; artificial barriers are erected against free intercourse between countries; national well-being is contemned; the strained circumstances are provocative of war, and vast sums float about the world bonusing commodities, upsetting the calculations of honest traders, like loose ballast in a ship.

Perhaps the most serious cause of disturbance is, that payment of these debts from silver countries is generally made in paper, which is sold for gold. This paper represents silver; but where is the silver? The paper is exchanged for