commodity, which gives them currency as money, which causes individuals to receive them with confidence that their value will not be depreciated while in their hands. And it is important to observe, that their adoption to serve as money considerably augments their intrinsic value, or their worth as an article of commerce. It is equivalent to the discovery of a new utility of these metals, and a consequent enlargement of the demand for them, while the supply is left as it was before. The employment of a great part, the half, or perhaps three fourths, of the whole stock of them on hand, as money, necessarily renders the whole more scarce and dear. In a word, the employment of the precious metals in manufacture makes them scarcer and dearer as money; and in like manner, their employment as money makes them scarcer and dearer in manufacture. I dwell upon this point, because, when we once see that the precious metals derive a part of the value with which they are invested solely from their use as money, we shall be better prepared to admit, what I shall afterwards have occasion to prove, that other articles, of little or no intrinsic value, may be used as money, and, in consequence solely of such use, may receive a very high value.

There is a larger demand for silver in the arts and for purposes of ornament, than for gold; and this larger consumption of silver makes its value higher in comparison with gold than it would be if their respective values were determined solely by the comparative quantity of each which is produced or can be obtained. Silver plate, in greater or less quantity, is in almost universal use; gold plate, from its greater expensiveness, is hardly at all in use, except by crowned heads, or persons of immense fortunes. Silver-plated ware is also manufactured in great quantities, while comparatively few articles are coated with gold, except in the form of gold-leaf, which is very cheap on account of its marvellous tenuity and fragility. Silver spoons are to be found in almost every house; and the consumption of this metal for watches and trinkets is also very great. The consequence is, that, though 45 times more silver than gold existed, and was annually produced from the mines, the value of silver was to that of gold, not as 45 to 1, but as 16 to 1. Its cheapness enlarged its use; and the extensiveness of its use, on the other hand, counteracted its cheapness, or rendered it dearer.

If we apply this principle to the depreciation of the value of gold, which is now taking place on account of the recently enlarged supplies of that metal, we see at once a new limit to that depreciation, or a reason why it cannot go so far as it otherwise would. To double the present amount of gold bullion in the market would not be to sink gold coin to half of its present value. As its value fell, the use or consumption of it would be greatly increased. Gold plate would become fashionable, gold trinkets would be far more common, and gold would even be applied to certain purposes in the arts, for which it is admirably fitted by its ductility, great specific gravity, and power of resisting oxidation or corrosion,- uses from which it is now excluded by its high cost. The discovery of America increased the supply of gold and silver tenfold; but they were thereby reduced, not to one tenth, but only to one fourth, of their former value.

The most important quality of money, when considered as an engine of commerce, and even as a means of civilization, is its stability of value. If money is depreciated in value, every creditor in the community, during the time of its depreciation, suffers loss and wrong to the full extent of the fall in value; he has lent, we will suppose, a thousand dollars, at a time when that sum was equivalent to two hundred barrels of flour, or a proportionate amount of any other commodity; and he is paid when the sum will no longer purchase more than one hundred and fifty barrels: and what he unjustly loses, his debtor, of course, unjustly gains. If the value of money rises, this process is reversed; the creditor now gains, and the debtor loses, both in proportion to the enhancement of value. In former centuries, governments, when heavily in debt, often had recourse to a depreciation of the coin, as a means of relieving themselves from their embarrassments. It was beyond their power to effect an actual change in the market value of gold and silver bullion, such as would result from an enlarged or diminished supply of these metals from the mines. But their debts were contracted under a certain denomination, just as a debtor at the present day is bound to pay a certain number of dollars, under an implied, but not an express agreement, that the dollar shall retain its present, or rather its former, amount of metal, — that is, 3714 grains of silver, or 23.2 grains of

gold.* If the government should decree that the dollar in future should contain only 186 grains, he might nominally release himself from his debt by paying only half of what he had really contracted to pay. This is a very rude expedient, an actual license of universal bankruptcy, all claims being released on a payment of 50 per cent. It has not been tried in modern times, for even the courts of law would afford a remedy against so gross a fraud. But it was frequently resorted to in the Middle Ages, and a curious monument of the fact is preserved to us in the names of certain coins. The English pound sterling, in the time of Edward I. contained a poundweight of silver of known fineness; and the English penny was then a real pennyweight of silver, the twentieth part of an ounce, or the two hundred and fortieth part of a pound. Even the word shilling seems to have been originally a denomination of weight, or another name for an ounce. By successive depreciations of the coin, the pound, shilling or ounce, and pennyweight of money have come to contain only a third part of the silver which their names indicate. A pound sterling contains less than four ounces of silver. The Scotch pound has only a thirty-sixth part, and the French livre, or pound, only a sixty-sixth part, of their original weight of silver.

This mode of depreciating the metallic currency was called, by a singular abuse of language, "raising the standard." It has not been tried in modern times, as I have said, because it is so palpable a fraud that the courts of law would probably afford a remedy against it. But these courts give no redress, as we all know, against a depreciation of paper currency precisely similar in its character and effects. In May, 1837, all the banks in the United States suspended specie payments; and the immediate consequence was a depreciation of their paper, or a rise of specie to a premium, differing in amount in the various States according to the various degrees of solvency of their respective banks; but of which the average for the whole country was at least as high as 12 per cent. The natural consequence followed, that all specie disappeared from the circulation, and all obligations were discharged in paper,

*The silver in the dollar was diminished in 1853 to 345.6 grains, for reasons to be explained hereafter.

that is, by the payment of 88 cents on the dollar. If a person lent $1,000 in April of that year, to be repaid in June, he lent what was in fact 1,000 silver dollars, each worth 100 cents, and he received back only 1,000 paper dollars, each worth 88 cents. This event, of course, was an act of national and universal bankruptcy; every creditor received only about seven eighths of what was due to him, for an entire discharge of his debt. The government of the United States alone, in the exercise of its prerogatives as the sovereign, refused to submit to this loss, and obliged all its debtors to pay specie;- an act of strict justice, it is true, but one which caused it a greater loss by bad debts than it would have suffered by consenting to share the misfortune equally with the community; and which was farther so unpopular, that it was the chief cause of the overthrow of the then existing administration.

This general bankruptcy was not the only evil, or the only injustice, caused by the suspension of the banks. The community had to undergo another shock when specie payments were resumed, though the burden was reversed in reference to the class of sufferers. The debtors now suffered wrong, the creditors were unjustly benefited. If, for instance, a man obtained a loan of $1,000 while the depreciation was at its height, he received only what was equivalent to one thousand times 88 cents in specie; and if the day of payment came after the resumption, he was obliged to pay 1,000 times 100 cents. But the 88 cents in one case, and the 100 cents in the other, being both called a dollar,—so great is the deceptive power of mere names, most persons probably were not sensible of the wrong they actually suffered. Yet to suppose that the dollar was the same thing in the two cases, would be as great an error as to imagine that the pound troy weight of silver was the same thing as the pound sterling of modern times.

26*

CHAPTER XIX.

THE DISTRIBUTION OF THE PRECIOUS METALS THROUGHOUT THE WORLD: SUBSTITUTES FOR MONEY: BILLS OF EXCHANGE: THE COURSE OF INTERNATIONAL TRADE.

METALLIC currency, or money properly so called, it was shown in the last chapter, is a safe, but a costly, means of effecting exchanges. It is safe, because it is not subject to such ruinous fluctuations of value as took place in the paper currency of this country between 1836 and 1843. It is costly, because the expense of keeping it in repair, and the loss of profits on so large an amount of what may be called "dead capital," amount, in this country, to at least eleven per cent. It then becomes important to know what are the substitutes for its use, substitutes which we may expect to find less safe, but also far less expensive, than metallic money. And as a preliminary to this inquiry, we wish to know how much currency is needed in each country, or rather, since its numerical amount cannot be ascertained with any precision, how the quantity needed is affected by the growth of the population, the extension of commerce, the progress of opulence, and the general state of civilization; and also, by what law the whole quantity now in existence is distributed among the various nations of the earth, and in what way it preserves its equilibrium among them. To these inquiries the present chapter will be devoted.

In every exchange, the two values which are exchanged for each other are supposed to be equal. Every exchange is a barter of a quantity of merchandise for a certain sum of money which is its equivalent. But it does not follow that there must be in the community as much money as there is merchandise; for as the money is not consumed by effecting this exchange, it is ready immediately to effect another purchase. The same piece of money may be exchanged successively for any number of articles of merchandise of the same value; or, in other words, any sum of money can purchase