Segar. — The Balance of Trade. 181 



imports will (compared with the great bulk) have yielded little 

 or no profit, and some of the importers will have little or no 

 credit. The fall in the exchange will tend to check these scarcely 

 profitable or marginal imports, and also to stimulate the exports 

 of a similar character. Some of the importers may be unable 

 to meet their engagements, others may be obliged to accept 

 onerous terms for postponement, and others will purchase the 

 bills drawn against the additional exports. In this way it is 

 seen that the balance of imports and exports will, in ordinary 

 cases of inequality, be restored by operating directly upon the 

 doubtful margins, and not by general operations on prices." 



If gold, though, has eventually to pass to settle international 

 transactions, a portion of it, of course, may be what is required 

 on account of the general requirements we before considered. 

 Gold must, apart from temporary fluctuations, be distributed 

 amongst the nations so as to be accommodated, in the words of 

 Ricardo, " to the natural traffic which would take place if no such 

 metals existed, and the trade between countries were purely a 

 trade of barter." New Zealand, for instance, must export the 

 main bulk of the gold she produces, and, this being a compara- 

 tively steady quantity, there is a relation between her average 

 prices and those of the rest of the world which brings this 

 about. Similarly, countries which do not produce gold must im- 

 port a certain average amount depending on their needs. But any 

 gold which passes in excess or defect of this amount, though it 

 may do so temporarily without affecting prices or credit, merely 

 diminishing in the one country and increasing in the other the 

 bankers' reserves, must, if it remains, increase credit and prices 

 in the receiving country and lower them in that which has lost 

 the gold. An addition of, say, £10,000,000 represents a con- 

 siderable proportionate increase in England's stock of gold. 

 Were such a sum to get into circulation it would be sufficient to 

 raise her average prices substantially, and so check her exports, 

 while the prices of foreign goods would be relatively low, and 

 this would give imports an impetus which, aided by the di- 

 minished exports, would tend to again withdraw the gold. Thus 

 prices change in a way which ultimately offers a decisive resist- 

 ance to the former tendency, and may promote a reaction. 



And so this abnormal stream of gold ebbs and flows, always 

 in relatively small quantities, according to fluctuations in business. 

 The direction of the flow at any moment does not depend on 

 relations of permanent indebtedness, but on the accounts that are 

 due at the time. Gold may flow into a country that is on the 

 point of becoming hopelessly insolvent ; it may be an outward 

 and visible sign of the payment of her last loan, which, however, 

 would mainly be received in the form of goods. 



