two countries lies, or which of them exports 
to the greatest value. National prejudice and 
animosity, prompted always by the private interest 
of particular traders, are the principles 
which generally direct our judgment upon all 
questions concerning it. There are two criterions
however, which have frequently been 
appealed to upon such occasions, the custom-house 
books and the course of exchange. The custom-house 
books, I think, it is now generally 
acknowledged, are a very uncertain criterion
on account of the inaccuracy of the 
valuation at which the greater part of goods 
are rated in them. The course of exchange 
is, perhaps, almost equally so. 
When the exchange between two places
such as London and Paris, is at par, it is said 
to be a sign that the debts due from London 
to Paris are compensated by those due from 
Paris to London. On the contrary, when a 
premium is paid at London for a bill upon 
Paris, it is said to be a sign that the debts 
due from London to Paris are not compensated 
by those due from Paris to London, but 
that a balance in money must be sent out 
from the latter place; for the risk, trouble
and expense, of exporting which, the premium 
is both demanded and given. But the ordinary 
state of debt and credit between those 
two cities must necessarily be regulated, it is 
said, by the ordinary course of their dealings 
with one another. When neither of them imports 
from the other to a greater amount than 
it exports to that other, the debts and credits 
of each may compensate one another. But 
when one of them imports from the other to 
a greater value than it exports to that other, 
the former necessarily becomes indebted to 
the latter in a greater sum than the latter becomes 
indebted to it: the debts and credits 
of each do not compensate one another, and 
money must be sent out from that place of 
which the debts overbalance the credits. The 
ordinary course of exchange, therefore, being 
an indication of the ordinary state of debt and 
credit between two places, must likewise be 
an indication of the ordinary course of their 
exports and imports, as these necessarily regulate 
that state
But though the ordinary course of exchange 
shall be allowed to be a sufficient indication 
of the ordinary state of debt and credit between 
any two places, it would not from thence 
follow, that the balance of trade was 
in favour of that place which had the ordinary 
state of debt and credit in its favour
The ordinary state of debt and credit between 
any two places is not always entirely regulated 
by the ordinary course of their dealings 
with one another, but is often influenced by 
that of the dealings of either with many other 
places. If it is usual, for example, for the 
merchants of England to pay for the goods 
which they buy of Hamburg, Dantzic, Riga
&c. by bills upon Holland, the ordinary state 
of debt and credit between England and Holland 
will not be regulated entirely by the ordinary 
course of the dealings of those two 
countries with one another, but will be influenced 
by that of the dealings in England with 
those other places. England may he obliged 
to send out every year money to Holland, 
though its annual exports to that country may 
exceed very much the annual value of its imports 
from thence, and though what is called 
the balance of trade may be very much in 
favour of England
In the way, besides, in which the par of exchange 
has hitherto been computed, the ordinary 
course of exchange can afford no sufficient 
indication that the ordinary state of debt 
and credit is in favour of that country which 
seems to have, or which is supposed to have, 
the ordinary course of exchange in its favour
or, in other words, the real exchange may be, 
and in fact often is, so very different from the 
computed one, that, from the course of the 
latter, no certain conclusion can, upon many 
occasions, be drawn concerning that of the 
When for a sum of money paid in England
containing, according to the standard of 
the English mint, a certain number of ounces 
of pure silver, you receive a bill for a sum of 
money to be paid in France, containing, 
according to the standard of the French mint
an equal number of ounces of pure silver
exchange is said to be at par between England 
and France. When you pay more, you are 
supposed to given premium, and exchange is 
said to be against England, and in favour of 
France. When you pay less, you are supposed 
to get a premium, and exchange is said 
to be against France, and in favour of England
But, first, We cannot always judge of the 
value of the current money of different countries 
by the standard of their respective mints
In some it is more, in others it in less worn
clipt, and otherwise degenerated from that 
standard. But the value of the current coin 
of every country, compared with that of any 
other country, is in proportion, not to the 
quantity of pure silver which it ought to contain, 
but to that which it actually does contain. 
Before the reformation of the silver 
coin in King William's time, exchange between 
England and Holland, computed in the 
usual manner, according to the standard of 
their respective mints, was five-and-twenty per 
cent. against England. But the value of the 
current coin of England, as we learn from 
Mr Lowndes, was at that time rather more 
than five-and-twenty per cent. below its standard 
value. The real exchange, therefore, may 
even at that time have been in favour of England
notwithstanding the computed exchange 
so much against it; a smaller number of 
ounces of pure silver, actually paid in England
may have purchased a bill for a greater