bankers. Their clerks meet every day after the hours of business to exchange the draughts made on each other for the preceding day. If, for instance, the banking-house A. has draughts to the amount of 20,000Z. on the banking-house B., the latter has also, in all probability, draughts upon the former, though they may not be to the same amount; the two houses exchange these draughts as far as they will balance each other, and the necessity of providing money for the payment of the whole is thus obviated. By this economical expedient, which is carried on amongst all the bankers in London east of St. Paul's, I understand that about 200,000l. performs the function of four or five millions. CAROLINE. And what do you suppose to be the proportion of the money to the value of the commodities to be circulated by it? MRS. B. That, I believe, it would be impossible to ascertain. Mr. Sismondi, in his valuable Treatise on Commercial Wealth, compares these respective quantities to mechanical powers, which, though of different weights, balance each other from the equality of their momentum; and, to follow up the comparison, he observes, that though commodities are by far the most considerable in quantity, yet that the velocity with which currency circulates compensates for its deficiency. CAROLINE. This is an extremely ingenious comparison, and I should suppose the analogy to be perfectly correct; for the less money there is in circulation, the more frequently it will be transferred from one to another in exchange for goods. MRS. B. The analogy will, however, bear only to a certain extent; otherwise, whatever were the proportions of currency and of commodities, they would always balance each other, and the price of commodities would never be affected by the increase or diminution of the quantity of currency. 318 CONVERSATION XVIII. ON INCOME FROM COMMERCE. DIFFERENCE OF WHOLESALE AND RETAIL TRADE.-GENERAL ADVANTAGES OF TRADE.-HOW IT ENRICHES A COUNTRY. ADVANTAGES OF RETAIL TRADE.— - GREAT PROFITS OF SMALL CAPITALS EXPLAINED. ADVANTAGES OF QUICK RETURN OF CAPITAL TO FARMERS AND MANUFACTURERS. ADVANTAGES OF ROADS, CANALS, ETC. DIFFERENCE OF THE HOME TRADE, FOREIGN TRADE, AND CARRYING TRADE. OF THE HOME TRADE: IT RETURNS CAPITAL QUICKER. MRS. B. WE mentioned commerce as one of the modes of employing capital to produce an income; but deferred investigating its effects until you had acquired some knowledge of the nature and use of money. We may now, therefore, proceed to examine in what manner commerce enriches individuals, and augments the wealth of a country. Those who engage their capitals in commerce or trade act as agents or middle-men between the producers and the consumers of the fruits of the earth; they purchase them of the former, and sell them to the latter; and it is by the profits on the sale that capital so employed yields an income. There are two distinct sets of men engaged in trade-merchants, who purchase commodities (either in a rude or a manufactured state) of those who produce them,-this is called wholesale trade; and shopkeepers, who purchase goods in smaller quantities of the merchants, and distribute them to the public according to the demand,-this constitutes the retail trade. CAROLINE. Trade will no doubt bring an income to those who employ their capital in it; but I do not conceive how it contributes to the wealth of the country manufacturers, for neither merchants nor shopkeepers produce any thing new; they add nothing to the general stock of wealth, but merely distribute that which is produced by others. It is true, that mercantile men form a considerable part of the community; but if their profits are taken out of the pockets of their countrymen, they may make fortunes without enriching their country. MRS. B. Trade increases the wealth of a nation, not immediately by raising produce, like agriculture, nor by working up raw materials, like manufactures; but it gives an additional value to commodities by bringing them from places where they are plentiful to those where they are scarce; it enables us to procure what we want more, in exchange for what we want less; and, by providing the means of a more extended distribution of commodities, it gives a spur to the industry both of the agricultural and manufacturing classes. It would be impossible, you know, for every town or district to produce the several kinds of commodities required for its consumption; different soil and climates, and various species of skill and industry, are requisite for that purpose. Some lands are best calculated for corn, others for pasture; some towns are celebrated for their cotton manufactures, others for their woollen cloths. Every place has, therefore, an excess of some kind of commodities, and a defi ciency of others; which renders a system of exchanges necessary, not only between individuals (as we observed in treating of the origin of barter), but between towns and countries to the most distant regions of the earth. Now merchants exchange the surplus produce of one place for that of another. A man who deals in any particular commodity makes it his business to find out in what parts that commodity is most abundant, and will be sold at the lowest price; and in what parts it is most scarce, and will fetch the highest price, and then to ascertain the least expensive mode of conveying it from the one to the other market. CAROLINE. In this they consult their own interest; since to purchase at the cheapest and sell at the dearest market will give them the greatest profits. MRS. B. No doubt; but it is wisely and beneficially ordained by Providence, that in consulting their own interest they are at the same time favouring that of the community. When merchants hasten to send their goods to a market where they will sell at a high price, they supply those who are in want of such goods: the higher the price the more urgent is the demand: it is a deficiency that has rendered them dear, and by |