in the mode
(for it is no more) in which one commodity is exchanged against another.

We may at first make whatever supposition we will with respect to the
value of money. Let us suppose, therefore, that before the opening of
the trade, the price of cloth is the same in both countries, namely, six
shillings per yard [2]. As 10 yards of cloth were supposed to exchange in
England for 5 yards of linen, in Germany for 20, we must suppose that
linen is sold in England at four shillings per yard, in Germany at
three. Cost of carriage and importer's profit are left as before, out of
consideration.

In this state of prices, cloth, it is evident, cannot yet be exported
from England into Germany. But linen can be imported from Germany into
England. It will be so, and, in the first instance, the linen will be
paid for in money.

The efflux of money from England, and its influx into Germany, will
raise money prices in the latter country, and lower them in the former.
Linen will rise in Germany above three shillings per yard, and cloth
above six shillings. Linen in England being imported from Germany, will
(since cost of carriage is not reckoned) sink to the same price as in
that country, while cloth will fall below six shillings. As soon as the
price of cloth is lower in England than in Germany, it will begin to be
exported, and the price of cloth in Germany will fall to what it is in
England. As long As the cloth exported does not suffice to pay for the
linen imported, money will continue to flow from England into Germany,
and prices generally will continue to fall in England, and rise in
Germany. By the fall, however, of cloth in England, cloth will fall in
Germany also, and the demand for it will increase. By the rise of linen
in Germany, linen must rise in England also, and the demand for it will
diminish. Although the increased exportation of cloth takes place at a
lower price, and the diminished importation of linen at a higher, yet
the total money value of the exportation would probably increase, that
of the importation diminish. As cloth fell in price and linen rose,
there would be some particular price of both articles at-which the cloth
exported, and the linen imported, would exactly pay for each other. At
this point prices would remain, because money would then cease to move
out of England into Germany. What this point might be, would entirely
depend upon the circumstances and inclinations of the purchasers on both
s