before the grower of a quarter of corn could have obtained a dozen of stockings or a pair of boots, or before the corn-merchant could have exchanged his stock of wheat for the commodities he wanted! What toils, what trouble must they have undergone, how much time must they have lost, before they could accomplish an operation so simple and so easy! How was this operation discovered? how was the material or actual exchange of produce avoided, and yet its reciprocal value fixed, as if the exchange had been effected with material produce? Adam Smith supposes, that after the first establishment of the division of labour, every prudent man, in every period of society, must naturally have endeavoured to manage his affairs in such a manner as to have at all times by him, besides the peculiar produce of his own industry, a certain quantity of some one commodity or other, such as he imagined few people would be likely to refuse in exchange for the produce of their industry; that many different commodities were at different times employed for this purpose. In the first ages of Greece, cattle was thus employed; in Abyssinia, salt; in some parts of the coast of India, a species of shells; dried cod, at Newfoundland; tobacco, in Virginia; sugar, in some of the West-India islands; and hides, or dressed leather, in some other countries.* It evidently follows from these facts, that, in the very first stages of civilization, men determined the exchangeable value of the produce of their labour, * Wealth of Nations, vol. i. bock i. chap. iv. page 36. not by comparing it with the commodities offered to them in exchange, but by comparing it with a preferred produce. Thus the owner of a quarter of corn did not say My quarter of ccrn is worth the dozen of stockings, or the pair of boots that I am offered for it; but it is worth so much of the preferred commodity, as will get me a dozen of stockings, or a pair of boots.-This new mode of exchanging simplifies the operation, and yet leads to the same results! Had matters continued in this primitive simplicity, the nature of the preferred commodity and its functions in exchanges would never have been mistaken, and the numberless and fatal errors of the monetary system would have been avoided. But merchants having succeeded in making all civilized nations receive gold and silver as the preferred produce, it became necessary to fix the exchangeable value of the precious metals, to divide them in portions proportioned to the wants of commerce, and tó assign to each portion a value strictly proportioned to the totality of the value assigned to a certain mass of gold and silver. This operation appeared impossible, not only on account of the exchangeable value of gold and silver, being liable to fluctuate like all other values, but also from the difficulty of giving to the coined metals a numeric value and an invariable fineness always equivalent to their intrinsic value. This second impossibility has been officially and solemnly recognised at a period not very remote from our time. In 1788, the French government consulted the Royal Academy of Sciences, to know whether it was possible to give to coined metals a monetary value and an invariable fineness always equivalent to their intrinsic value. Five academicians,* who were named commissioners for this purpose, demonstrated by different experiences, that it was not possible to fix with strict accuracy the relation of two representative and intrinsic values, both because it is impossible to determine the quantity of alloy to be added to the precious metals for the purpose of giving the coin that resistance and incorruptibility which form one of its essential properties, and because it is extremely difficult to render perfectly homogeneous a mixture of metals which prevents the precise quantity of each being ascertained, as the alteration which the action of the fire may produce upon them cannot be foreseen.ተ This defect, peculiar to the converting of gold and silver into money, was, however, neither the most disagreeable nor the most prejudicial to the general circulation of commodities. An enlightened government might wish to make it disappear, and to give its coin the highest attainable degree of perfection: but this praiseworthy attempt could not remedy the original defect inherent in metallic money; that is, it could not confer upon gold and silver coin a positive and absolute exchangeable value, when that value is and can be but relative to the demand for coin and to the quantity in circulation. It is this defect which + Borde, Condorcet, La Grange, Lavoisier, and Tillet. Histoire de l'Académie des Sciences, année 1788. has given rise to the frequent alterations of the monetary system, to the numerous errors with which these alterations have been attended, and the countless systems invented to correct or prevent them. The first difficulty on this subject is to know what is meant by money, what is its nature, and wherein it consists. Several writers, and among them the celebrated Montesquieu, consider money as an ideal and arbitrary sign of value; and it will easily be credited that a doctrine, so favourable to the supreme authority, was immediately adopted by all governments. They have alternately raised or sunk the nominal value of money according to their wants and temporary interests; and what is not less strange is, that when this injury was done to public and private property, governments were ignorant of the nature and extent of the evil which they brought upon individuals and nations. The most intelligent men of all nations have been obliged to devote their studies to elucidate this important part of the science; and it is now demonstrated that the value of money can only be rais ed or sunk in three different ways: Either by altering its fineness and standard; Or by giving it a value superior to the exchangeable value of the metals of which it is composed. When governments alter the fineness or standard of money, and yet retain its nominal value; if the alteration amounts to 1-20th, the state loses 1-20th of what is due to it from abroad; or, if the state is indebted to foreign countries, it pays 1-20th more; because the foreigner is paid in merchandize, and gets 1-20th more than he would have got had not the standard of money been altered. Foreigners even do not confine themselves to this benefit; they introduce counterfeit money into the country, and gain the difference between the nominal value of the new and the real value of the ancient coin. The advantages which foreigners derive from the altered standard of money, influence the exchange, turn it against the state, and in a short time exhaust the country of its wealth. An alteration in the weight of coin, without meddling with its standard and its nominal value, is liable to less inconveniencies, because the nation immediately perceives this alteration, and guards against it by raising the price of the produce of labour. But this raising of prices in proportion to the diminution in the weight of money, does not either prevent or stop the evil. The heavy coin is exported or melted; the active debts which the state has outstanding abroad, are reduced by the whole amount of this diminution in the weight of the coin; which reduction occasions incalculable losses in trade. Finally, the raising the value of money without altering either its standard or its weight, furnishes foreigners with the means of liquidating their debts with a smaller quantity of the precious metals, or getting paid for what is due to them by requiring a more considerable value; of purchasing the national produce cheaper, and selling their own at the same price as before; of introducing counterfeit money into the state, and of profiting by the difference |