men called "exchange brokers." If the customer of a country banker pays in a foreign bill, or a parcel of foreign bills, to his account, they are not immediately passed to his credit, but are handed to the exchange broker, who disposes of them to the best advantage and pays over the proceeds to the banker, which are then passed to the account of the customer.

The manner in which the buying and selling of foreign bills is conducted, is thus described by Waterston, in his Cyclopedia of Commerce :— In this country the buying and selling of bills on foreign countries is conducted by brokers, all such transactions centering in the metropolis. In London the days for the negotiation of foreign bills are Tuesdays and Fridays-the foreign post days. The brokers go round to the principal merchants and discover whether they are buyers or sellers; and a few of the more influential, after ascertaining the state of the market, suggest a price at which the greater part of the transactions are settled, with such deviations as particular bills may be subject to from their high or low credit: For the bills they buy on one post day, houses of established credit pay on the following post day when they receive the second and third bills of the set; foreign bills being usually drawn in sets of three. On the evenings of Tuesdays and Fridays the market rates for bills on all the principal foreign cities, with the current prices of bullion, are published in Wetenhall's Course of the Exchange."

The late Mr. Rothschild stated, before the parliamentary committee of 1832-“I purchase regularly, week by week, from 80,000l. to 100,0007. worth of bills, which are drawn for goods shipped from Liverpool, Manchester, Newcastle, and other places; and I send them to the Continent to my houses. My houses purchase against them bills upon Great Britain, which are drawn for wine, wool, and other commodities. But if there be not a sufficient supply of bills abroad on Great Britain, we are obliged to get gold from Paris, Hamburgh, and elsewhere."

It being the fact that English bankers, as such, are not in the practice of buying and selling foreign bills or dealing in the exchanges, although foreign and continental bankers make this more or less a part of their profession, it has long been a moot point whether, in the conducting of their ordinary business bankers ought to pay any regard to the fluctuations of the exchanges. The subject has been argued over and over again, and various opinions were advanced before different committees of the House of Commons. The question applies chiefly to country bankers who issue their own notes; and, generally, to all bankers who are supposed to have a proper regard for the safe management of their business.

The condition of the foreign exchanges is the result of the operations of trade; and the bank that would undertake to regulate the foreign exchanges, undertakes of necessity to regulate also the operations of trade, both at home and abroad. It will be remembered that the Bank of England considered it to be an important part of its duty to regulate the foreign exchanges, and it was held to be the duty of the country banks of issue to conform in every respect to the action of the Bank of England. Certain writers on the currency considered that, by attending to the exchanges and lessening the supply of currency when they began to fall, and increasing it when they began to rise, the value of paper money might be kept very nearly on a level with the value of the metallic money that would circulate in its stead, were it withdrawn; and that this ought to be the conduct of every prudent banker obliged to pay his notes on demand. The country

bankers, on the other hand, repudiated the idea of being under any obligation to regulate their issues by the foreign exchanges, or that the foreign exchanges were in any degree influenced by the issues of country banks. Their issues of notes, they alleged, were regulated, and could alone be regulated by the demands of trade. It is not my intention to offer any opinion of my own on the present occasion on this subject, having already done so in some of my published writings; but even supposing it to have been the duty, as was insisted on, of the country bankers to regulate their issues by the foreign exchanges, it may now be worthy of consideration whether the act of 1844, passed by Sir Robert Peel, fixing the amount of notes to be issued by each bank of issue, did not thenceforward completely relieve them from any implied obligation to regulate their issues by the foreign exchanges, and whether, indeed, the Bank of England is not also entirely relieved from the necessity of attempting to regulate her issues by the influx and efflux of bullion. Whether or not that act has had any beneficial effect in regulating the conduct of bankers, moderating the fluctuations of the foreign exchanges, and improving the commercial condition of the country, are questions fairly open to discussion.

Now, although the English bankers do not deal in the foreign exchanges, they are supposed, as men of business, to have a general idea of the nature of these operations, and to know also something of the principles which regulate the rates of exchange upon different countries. The moneys of different countries vary in denomination and amount; and in comparing the money of one place with that of another, it is usual to reckon one as fixed and the other as variable. It may be observed, however, that no perfect par of exchange can possibly exist, as between two countries which have not the same standard metal for their respective currencies. The country whose money is calculated at a fixed price is said to receive the variable price, while the other country is said to give the variable price. The higher the exchange, therefore, between any two places, the more will it be in favor of the one that receives the variable price. Thus, in the case of London and Paris, London receives from Paris a variable an ount of francs and centimes for 17. sterling; and if you take the par at 25 francs 34 centimes for 17., the exchange will be 5 per cent in favor of London when it rises to 26 franes 62 centimes, and about as much against London when it falls to 24 francs 7 centimes. According to the evidence given by Mr. Rothschild, when we say that a par of exchange exists between this country and France, we mean that we can then obtain 25 francs and 20 centimes in Paris for a sovereign. When for the sovereign we can get only 25 francs and 15 or 10 centimes, we then consider the exchanges as so much below par. The sterling value of the sovereign is thus far reduced; and it is evidence of the fact, that we are sending gold abroad upon which we receive no premium. In this state of things the exchanges are unfavorable to us. If we calculate the value of the currency here against that of the currency of France, we may, at any time, ascertain the par pretty correctly, by adding to that value the preinium then payable for gold. The exchanges are against the country which pays the higher premium, and the amount of the excess is the measure of its loss.

The custom of merchants has established the principle of drawing foreign bills at a "usance" after date. A usance from Amsterdam, Rotterdam, Hamburg, or any place in Germany, is one month; from France, thirty days; from Spain and Portugal, two months; from Sweden, seventy-five

days; from Italy three months. Foreign bills are usually drawn in sets of three bills, for the same amount, so that, in the event of the first remitted being lost or stolen, the second or third may be made available. When one of the bills has been accepted, the others of course are of no service.

Next to bills of exchange, the precious metals, and especially gold, form an important element in the fluctuations and regulations of the foreign. exchanges. They are the medium by which all the differences in the exchanges are ultimately arranged. When the exchanges are against England, the result is an exportation of the precious metals to adjust the balance. The first intimation which the country bankers, and, indeed, the commercial classes generally, receive of an unfavorable state of the exchanges, is by observing a large or continued diminution of the bullion in the returns of the bank of England. It was customary on former occasions to consider the Bank of England as chiefly instrumental in producing great fluctuations in the foreign exchanges-first, by issuing notes to excess, and afterwards by suddenly restricting their issues. By issuing notes to excess, the Bank of England is said to stimulate prices, and create great speculation in trade, thereby rendering the exchanges unfavorable, and causing a demand for gold for exportation. When this takes place the Bank, by again restricting its issues, depresses prices, and produces often great commercial distress, in its endeavor to turn the exchanges and get back the gold. There are writers who maintain that a depression of the exchanges for any considerable period, accompanied by an exportation of gold, is infallible evidence, independent of all other considerations, that the currency is relatively redundant. According to M'Culloch, "If the exchange be generally on the advantage, it is a proof that the currency of the country is becoming deficient, and that it may be slowly and cautiously enlarged; and conversely, when it is falling." This is the principle of regulating the currency by the foreign exchanges; and whether or not this is a sound principle is a matter of opinion. But under any circumstances, an unfavorable state of the exchanges will occasion an exportation of gold; and a continuous drain of gold will be an indication that the exchanges are unfavorable.

Now, this exportation and importation of gold, in reference to the exchanges, is not carried on by the bankers, but by merchants, and parties who deal in exchanges-such houses, for instance, as that of Messrs. Rothschild. These gentlemen deal in exchanges; they may be said to be the great regulators of the foreign exchanges. You have seen that in the case of foreign bills, the exchange brokers are in the habit of going round to the different merchants and buying them up at a regulated price; and you have heard to what a large extent these operations are conducted by the house of Rothschild. So in the case of the exportation and importation of gold, this is managed by such houses as I have mentioned, by constant observation of the fluctuations of the exchanges at home and abroad. Gold is an article of merchandise, and its supply in any one place is regulated by the demand. Since 1819, the trade in gold and silver in England has been perfectly free. Any one has full liberty to engage with foreigners in this traffic; and such is the facility with which bullion may be conveyed from one country to another, that its value in Hamburgh or Amsterdam will hardly vary one-eighth per cent from its value in London, without causing its immediate transmission from one country to the other.

In the ordinary course of things there is a regular payment of gold to England from the whole world, affording undoubted evidence that the bills drawn in foreign countries are not equal to those drawn there. England seems to be the loadstone which attracts gold from all parts of the globe.

I may farther observe on this part of my subject, that under the general head of foreign exchange, are comprised nominal exchange, real exchange, and computed exchange. The first has reference to the comparative value of the currencies of different countries, which depend upon the relative value of bullion in those countries, and on the quantity for which their coin or paper money will exchange. If the bullion, coin, or paper money of two countries are so adjusted, that a given quantity of the one will exchange for a proportionate equal amount of the other, the nominal exchange between those countries will be at par or equal. In whatever respects the currency of either country fails to measure an equal value of the currency of the other, the nominal exchange will accordingly be so much above or below par; so much in favor of or against the one or the other. Real exchange is that which relates to the interchange of commodities without reference to the precious metals. When two nations trading together purchase the one from the other, commodities of exactly the same value, their claims upon each other are of course equal, and the real exchange is said to be at par. If, however, the amount purchased by the one nation is greater than that purchased by the other, the real exchange will be in favor of the one and against the other to the extent of the difierence between their mutual purchases. The balance is then settled by a remittance of bills, or an adequate amount of commodities or of bullion, whichever of these means the debtor finds most advantageous or economical, in order to discharge his liabilities. It may happen that the nominal exchange may be against a country, while the real exchange is in its favor. This is adjusted in the computed exchange, which makes allowance for the one and takes credit for the other, and thus shows the actual state or position of the exchange between any two or more countries, and is, in fact, the ultimate condition into which all differences must be resolved. It is the object of the mercantile system to create a favorable balance of payments, or in other words, a favorable real exchange, by giving every facility to our exports and restricting our imports. But, according to M'Culloch, so far from an excess of exports over imports being any criterion of an advantageous Commerce, it is quite the reverse; and the truth is, notwithstanding all that has been said to the contrary, that unless the value of the imports exceeded that of the exports, foreign trade could not be carried on.

The foreign exchanges have always a tendency to correct themselves, and their fluctuations can never for any lengthened period exceed the expense of transmitting bullion from one country to another. The transactions of the exchange brokers facilitate this tendency of the exchanges to correct themselves. They buy bills where they are cheapest, and sell them where they are dearest. Similar operations are carried on by merchants and dealers in bullion. So that while there are always circumstances which produce more or less an oscillation of the exchanges, there are at the same time operations going on to adjust and equalize them.

Art. V.-COMMERCE OF THE OTTOMAN EMPIRE.

TRADE OF SMYRNA IN 1853.

By the following statistics, it will be seen that the trade of Smyrna in 1853 amounted to piasters of the Grand Sequin, 335,858,000; that is to say, the imports to 131,168,890 piasters, and the exports to 204,689,770 -thus leaving a balance in favor of the Province of Smyrna.

The following tables will show, also, the navigation of the port of Smyrna during 1853: