L82 Transactions. — Miscellaneous. 



A change in fiscal policy may cause a limited flow of gold for 

 a time which has no tendency to return, with the result that the 

 country permanently retains a greater or less amount of gold than 

 would otherwise have been retained. Suppose, for instance, that 

 the duties on imports were raised. If the change were sufficiently 

 considerable and extensive to diminish the volume of imports, 

 exports would be discouraged as a consequence in the manner 

 described above. If the effect on the exchanges were not suffi- 

 cient to reduce the exports from what they would have been in 

 the absence of the increases of duties by the same amount as the 

 duties diminished the imports, gold would have to pass, but only 

 to the extent necessary to raise prices to the level necessary to 

 diminish the exports by the necessary amount. The country 

 would then use more coins in carrying on her internal trade at 

 higher prices, and other nations would have the privilege of con- 

 suming the goods she produced in exchange for them. These 

 effects are, of course, those which would ensue other things being 

 the same, but in actual cases they are generally effective merely 

 in modifying those fluctuations, due to other causes, which are 

 always taking place in commerce, and the extent of which is 

 obvious from the changes taking place from year to year in the 

 balance of trade, as clearly indicated in figs. 1-5. Consequently 

 it is generally difficult to trace these effects of a change in tariff. 

 especially as such changes are generally more or less gradual, and 

 when severe are so only on a very limited number of articles and 

 not on the whole mass of imports. Increases in duties may, for 

 example, be made just about the time when a period of extensive 

 foreign investment is setting in, with the result that gold may be 

 exported instead of imported, though the latter is the effect 

 which the increase in duties would tend to bring about if operating 

 alone. 



Exports paying for Imports. 



We can now understand clearly what is meant by what we 

 often hear — that imports are paid for by exports. This would 

 obviously be untrue if by it were mean) thai imports and exports 

 are of equal value. But this is not in the least intended by this 

 ement. I' is, I imagine, by this time hardly necessary to say 

 ' it is used by way of brevity for a principle which cannot be 

 accurately stated in a Eew words. And this principle is sub- 

 stantially this -that, other things remaining the same, an increase 

 in imports, that has to be paid for, is paid Eor in the end by an 

 ed goods ; or, if foreign products are consumed, 

 the total home production is not ultimately lessened in value 

 thereby, though of course it will be changed in character. Gold 

 pass to a certain extent, which, however, is only trivial com- 

 1 with the total volume of trade; but any such pas- 



