The representative., 1894-04-11
FOR FOREIGN TRADE,
THE GOLDBUG BUGABOO OF INTER-
NATIONAL EXCHANGE.

Have Gold Currency to Do Business
With Other Countries-Some Interesting
Thoughts on "the Balance of Trade.
How easy it is to conduct trade with
out money, as we generally understand
money, may be seen when we consider
international trade.
There is no universal currency that is
good the world over, and yet trade to
the extent of thousands of millions of
dollars annually is conducted between
the people of different nations.
All this vast commerce is carried on
all these vast exchanges are made-by
refined and perfected processes of barter.
OF course it must be plain to all that
whatever goods are brought into coun-
try must be paid for by sending ont
goods to an equal value. Indeed this is
true of all trade. No individual can i'm
port unless he exports. In other words,
no man can buy unless he sells. If 1 buy
a coat, it is because have the means with
which to buy, but how do 1 get the means
to buy? Plainly, must have sold some
thing to get the means. We usually pay
for things with money, but how do we
get the money? Why, we bry money
with the things we sold when we got the
money. Money then is, in this case at
least, only a medium of exchange.
Sometimes, however, better medium
is found in book accounts. Sometimes
these book accounts are transferred from
one to another by means of written Or
ders. Such orders when passed between
individuals are called checks. If they
pass between persons in distant places,
they are called drafts or bills of ex-
change, and if the persons are in differ
ent countries these written orders are al
ways called bills of exchange.
A bill of exchange is in its real es-
sence simply an order on the person to
whom the goods were sent to pay the
bill for the goods.
Now, as the goods sent into country
must be equaled by the goods sent out,
it follows that the bills of exchange
drawn and sent into any country must
be equaled by the bills drawn and sent
out. These bills find their way into the
banks and clearing houses and are made
to offset each other just as checks are
made to offset each other in bank or
clearing house-just as the grocer in
country town makes the debit and credit
sides of the farmers account on his books
offset each other.
Now, the farmers account ON the gro
GERS books may not balance. He may
have bought more from the grocer than
he sold to him. In this case there will
be "balance of trade" against the farm
er, and he will have to give the grocer
something to make up that balance. He
might bring the grocer some wheat or
pork, or he might pay him some money.
When different banks balance their
accounts at the clearing house, there is
generally balance of trade" against
some of the banks and in favor Of Others
These balances can be paid at the close
of each day, and usually are, or they can
be carried over from day to day for
month or year or many years if need be.
Just so with the trade between the
people of different nations. At the end
of any day or week or month there might
be balance due one way or the other.
More goods may have been brought into
country than were shipped out to pay
for them, and it would seem that there
is "balance of trade" that would have
to be paid.
Suppose the state of the clearing
houses should show that there had been
imported into the United States $50, ,OOO,-
900 worth of goods and only $1S,0OO,00O
worth had been sent out There seems
to be balance of trade that has to be
met. How will it be met? Money can't
be sent-that is, United States money
can't be sent, for it would be of no use
when it got there but to send back here
again. The only way the balance could
really be met would be to send out
$1,000, 900 worth of goods of some kind
to pay it. just as the farmer took wheat
or pork to the grocer to pay his "bal-
ance of trade
"But," you say, "gold could be sent"
Of course, but the gold wouldn't be
money when it got there. 1t would be
just gold; that is all. But gold would
not be sent unless it were the thing least
wanted here and most wanted there.
1t may seem very paradOxical, but the
following statements are literally true:
First-There is really no such thing as
"balance of trade" between nations.
Second-"Balances of trade" between
nations are never paid.
Third-When balances of trade be-
tween nations are paid, they are more
often paid in something else than with
gold.
Perhaps these statements may be made
more clear. These SO called balances of
trade are not between nations" as such,
but between individuals. Nations" do
not trade. Individual citizens trade.
Where there appears to be balance of
trade today it may disappear tomorrow,
Just as the farmers account on the gro
GERS book may show a balance due the
grocer today, but due the farmer tomor
row. Goods are going both ways all the
while, and any balances that appear are
not permanent, but only temporary.
AS to the second statement, there be-
ing no international money, of course
there can be no payment of international
balances in the sense that the farmer
pays the grocer the balance he owes him
by giving him some money.