addition of one more commodity, of which the value is regulated by the same laws as that of all other commodities. We shall not be surprised, therefore, if we find that international values also are determined by the same causes under a money and bill system as they would be under a system of barter, and that money has little to do in the matter, except to furnish a convenient mode of comparing values.
All interchange is, in substance and effect, barter; whoever sells commodities for money, and with that money buys other goods, really buys those goods with his own commodities. And so of nations: their trade is a mere exchange of exports for imports; and, whether money is employed or not, things are only in their permanent state when the exports and imports exactly pay for each other. When this is the [pg 419] case, equal sums of money are due from each country to the other, the debts are settled by bills, and there is no balance to be paid in the precious metals. The trade is in a state like that which is called in mechanics a condition of stable equilibrium.
But the process by which things are brought back to this state when they happen to deviate from it is, at least outwardly, not the same in a barter system and in a money system. Under the first, the country which wants more imports than its exports will pay for must offer its exports at a cheaper rate, as the sole means of creating a demand for them sufficient to re-establish the equilibrium. When money is used, the country seems to do a thing totally different. She takes the additional imports at the same price as before, and, as she exports no equivalent, the balance of payments turns against her; the exchange becomes unfavorable, and the difference has to be paid in money. This is, in appearance, a very distinct operation from the former. Let us see if