enacting of a free-coinage law, the number of farmer A's that could possibly reap a benefit from the law will be very small. Mortgagees may be trusted to take care of themselves, if given a reasonable time to do so.

Failure to notice that most debtors can as properly be classed with creditors, has led nations into adopting measures for the benefit of the former at the expense of the latter. Trade has been checked, borrowers have been prevented from obtaining new loans, and the uniform result of such unwise measures has been injury to nearly everybody. And to-day, in so far as the danger of our slipping off the gold basis is thought to be real, both European and American capitalists are avoiding longtime American loans or are insisting upon. the "gold-clause" in long-time contracts. The industries of the country have already suffered enormously, because investors fear financial disturbance and because moneylenders and capitalists do not feel sure that borrowers will be able to return as good money as they wish to borrow; and, I

have no doubt that farmer A's farm is worth, to-day, somewhat less than it would be worth if farm-buyers were fully assured that the valuable kind of money, which must now be used in purchasing a farm, could be obtained, when selling a farm, some years hence.

Undoubtedly there are individuals who stand ready to profit by the unlimited issue of silver money, or paper money, but of these individuals few are debtors and the total number is small. The mass of the people are always in position to be injured by any governmental folly, and have already been greatly injured by the mere talk or prospect of free coinage.

I do not consider it necessary to say that only dishonest people would favor the benefiting of debtors at the expense of creditors. Those people may have never considered the real composition of the socalled "debtor class," and may never think of debtors excepting as down-trodden individuals, although naturally debtors must be, as a rule, persons who are so fortunate so to possess standing or credit in the com

munity. Then there are people who be lieve that "demonetization" took place; that the government thereby put prices down; that the fall in prices was more harmful than beneficial; and therefore that the government is able and ought to put prices up again. Lack of familiarity with the facts and with the actual workings and actual conditions of trade and finance does not imply lack of honesty.

Governmental action to advance prices— that is, to reduce the value of money-is unfair to all creditors who are not debtors, or are not to so great an amount. Wageearners, salary-earners, pensioners, savingsbank depositors, the beneficiaries of lifeinsurance companies, and nearly all persons who receive fixed sums, or who are to receive money, the sum of which is already named, would be injured by an advance in the prices of commodities for the purchase of which that money must be used.

8

1896. During the past three years, unhappily, debtors and wouldbe borrowers have felt the evils of financial disturbance, and the very reverse of amelioration, coming from free-coinage talk. Debtpaying and debt-rearranging are always with us. Debt-scaling opportunity, through free-coinage of silver, is the dream of the politician, unrealizable at present, probably unrealizable in time for present debtors.

CHAPTER VII.

66 THE BALANCE OF TRADE.".

EXCHANGE.

-FOREIGN

TRADE is said to be "favorable when the country's exports of merchandise exceed the imports. Trade is said to be "unfavorable" when the country's imports of merchandise exceed the exports. In the former case the balance of trade, socalled, is "favorable," and in the latter "unfavorable"; and so strongly is speculation affected either way by the knowledge of a "favorable" or "unfavorable" balance, that the market value of stocks often moves in obedience to this knowledge, so far that millions and millions of dollars are transferred from some pockets to others. We shall see, however, that this great power of "the balance of trade " is unwar ranted, is due, in fact, to a misunderstanding of the subject. It appears to be com

monly supposed that a favorable balance of trade must be offset by importations of gold, and that for an unfavorable balance we must necessarily send gold out of the country. But the gold-movement itself, whether governed by trade conditions or not, generally attracts more attention than it deserves; at least so the writer hopes to prove.

The par of exchange1 between America and England, therefore between America and the world, because of the world's custom of settling in London accounts between the traders of different countries, is 4.867, which means that £1 sterling is equivalent to $4.867 in gold; and whenever the market rate of exchange is at or close to this figure, no important quantity of gold can move between England and America either way, for the simple reason that it costs something to move the metal, say for freight, insurance, and to cover the

1

The reader who would like to acquaint himself fully with the theory and practice of foreign exchanges should obtain The Theory of the Foreign Exchanges, by the Right Hon. George J. Goschen, M.P., although the book was written before the present par of exchange was established.