ps more clearly than anyone else, in his treatise on free
trade, that where a country imports more than she exports, it is
impossible that the excess should be paid in specie. Debts owed by one
country to another can be paid to but a limited extent in specie. The
French indemnity was paid largely in commodities. So have been paid the
great sums of money which England has from time to time lent foreign
countries. The French indemnity was paid largely in bills of exchange.
The excess of imports over exports must be paid by commodities, for
there is no other way in which to pay it. This excess in England is
yearly, we will say, L70,000,000. It is out of the question that such a
sum can be paid in specie, for there is not the specie to be had. The
amount of specie in a country never exceeds to any considerable extent
what is necessary for circulation. It is impossible that a country can
retain an amount of specie much greater than that. The specie which
remains after the demands of circulation have been satisfied lowers
interest and raises prices, and attracts merchandise from without; it
thus very quickly finds its way abroad. On the other hand, when specie
is sent abroad to such an extent as to trench upon the requirements of
circulation, this raises interest and lowers prices; the specie is thus
quickly recalled. The action of the Bank of England familiarly
illustrates this law. When it is wanted to attract gold, the rate of
interest is raised and the gold quickly appears; when there is too much
gold, the interest falls and the gold quickly disappears. It takes only
a small sum, say L4,000,000, to produce this effect. How then is it
possible that a yearly excess of L70,000,000 could be paid in specie?
The payment of such balances for two years would take out of the country
not only all the coin, but all the gold cups and silver pencil-cases and
earrings it contains. It is computed that all the circulation, taken
together with the articles of ornament and utility in Great Britain, the
plate, watches, and trinkets, barely comes to L140,000,000. And yet at
the end of a long period, in which there has been a steady yearly excess
of imports over exports, the country still has plenty of money.

If this excess is not paid for in specie, neither is it obtained on
credit. Merchants nowadays do not give and take the long credits that
were formerly the custom. There are certain imports, indeed, that are
paid for before the goods com