Let me suppose that Paris owes a balance to London, no matter for what sum. The reciprocal debts between Paris and London are all affected by the consequence of this balance: that is to say, some pay or receive more than the real par; some pay or receive less. To discover where the profit centers, we are now to inquire who are those who receive more, who are those who receive less. And as profit and loss are here only relative, that is to say, the profit of the one is compensated by the loss of the other; we must see whether or not, upon the whole, the price of the exchange in this case be favourable to London, to which, by the supposition, the balance is due, and unfavourable to Paris, which is the debtor. The question thus stated, let us examine the operations of exchange at London and Paris, and the state of demand in both, for money or bills. In the London market, the demand will be for money in London for bills on Paris; and he who demands, must pay the exchange; consequently, the London merchants, creditors to the _nation-debtor_, will pay the exchange; that is to say, they will sell their bills on Paris below par; and the London merchants, debtors to the nation-debtor, will buy them, and gain the exchange; that is, they will buy bills upon Paris below par. Now as this negotiation is carried on at London, I must suppose it to take place amongst Englishmen; one part of whom will gain exactly what the other loses; consequently England, in this respect, neither gains or loses by the exchange paid in London. Let us next examine the interest of the merchants, and the interest of the nation’s trade. The creditors to the nation-debtor, who have lost by the exchange, are those who have exported English commodities to France. Upon this profitable branch of commerce the exchange occasions a loss, the consequence of which is, to discourage exportation. The debtors to the nation-debtor, who have gained by the exchange, are those who have imported French commodities to England. Upon this hurtful branch of commerce, the exchange occasions a profit; the consequence of which is, to encourage importation. This is not all. The merchants exporters, who have lost, cannot draw back their loss upon the return of their trade; because the return of their trade is the _money_ due by France, the balance included. Whereas the merchants importers may draw back their loss upon the return of their trade; because that return is _merchandize_, which they can sell so much the dearer to their own countrymen. If the balance be in favour of London, importers gain, as we have seen; when it is otherwise, and when they are obliged to pay the exchange, they indemnify themselves, by the sale of their goods so much the dearer. High exchange, therefore, _may_ hurt exporters, but never _can_ hurt importers. Let us next examine the operation of exchange at Paris.