it differs in its essence, or only in its mechanism.
Let the country which has the balance to pay be the United States,276 and the country which receives it, England. By this transmission of the precious metals, the quantity of the currency is diminished in the United States, and increased in England. This I am at liberty to assume. We are now supposing that there is an excess of imports over exports, arising from the fact that the equation of international demand is not yet established: that there is at the ordinary prices a permanent demand in the United States for more English goods than the American goods required in England at the ordinary prices will pay for. When this is the case, if a change were not made in the prices, there would be a perpetually renewed balance to be paid in money. The imports require to be permanently diminished, or the exports to be increased, which can only be accomplished through [pg 420] prices; and hence, even if the balances are at first paid from hoards, or by the exportation of bullion, they will reach the circulation at last, for, until they do, nothing can stop the drain.
When, therefore, the state of prices is such that the equation of international demand can not establish itself, the country requiring more imports than can be paid for by the exports, it is a sign that the country has more of the precious metals, or their substitutes, in circulation, than can permanently circulate, and must necessarily part with some of them before the balance can be restored. The currency is accordingly contracted: prices fall, and, among the rest, the prices of exportable articles; for which, accordingly, there arises, in foreign countries, a greater demand: while imported commodities have possibly risen in price, from the influx of money into foreign countries, and at all events have not participated in the general fall. But, until the increased cheapness of American goods induces foreign countries to