American mines, in the sixteenth century, and the influx into the market of eleven times as much of the precious metals as before, did not reduce their value in the same proportion, but only in the ratio of 4 to 1; and why, when the ratio of the quantity of silver to that of gold was as 45 to 1, the ratio of their values was only as 1 to 15. It has already been observed, that in commerce and the arts, chiefly on account of its inferior cost, silver has been far more generally in use than gold. It has supplied much the larger portion of the currency of all nations. With some nations of the East, the Chinese for instance, gold is not used at all for this purpose. Even on the continent of Europe, silver is, in many cases, the only legal tender, gold being merely an article of merchandise, which is sold at an agio that fluctuates from week to week, though, of course, few people will refuse to receive it in payment. Silver must always be used for the smaller pieces of money, at least until gold has fallen much below its present value. Our gold one-dollar piece is inconveniently small, and will not probably come into general circulation, unless there should be some alteration in its form.

A

The general principle is, that the value of money falls in precisely the same ratio in which its quantity is increased. If the whole money in circulation should be doubled, prices would be doubled; if it was only increased one fourth, prices would rise one fourth. This is not the case with commodities generally, the value of which does not vary in the same ratio with the excess or deficiency of the supply; because the desire, being for the thing itself, may be stronger or weaker, and the amount of what people are willing to expend upon it, being always limited, may be very unequally affected by the difficulty or facility of attainment. But money is desired as the means of purchasing everything, and the demand for it, therefore, consists of everything which people have to sell.

The principle, however, even in the case of money, holds good only under the supposition that the quantity of commodities, the number of exchanges, and the number of people having occasion to effect exchanges, remain unaltered. Otherwise, if there be an increase in either of these respects, the quantity of money being unchanged, the value of that money will rise; or if money is increasing, the increase in these other respects may neutralize, wholly or in part, the depreciation of

that money. This was the case after the discovery of America. There was an immense enlargement of commerce and manufactures at that period, and a great improvement in the modes of living. The discovery of America itself, and of the passage round the Cape of Good Hope, and the colonization of the West by Europeans, greatly enlarged the demand for money. Before 1500, vastly the larger portion of the people were engaged in agriculture; they raised most of the articles which they needed by their own labor, and obtained many others by direct barter. Afterwards, many were diverted into commercial and manufacturing pursuits, and the consequent division of labor greatly increased the number of proper mercantile exchanges. The middle classes now first came into notice as a distinct power in the state. As wealth advanced, luxury grew apace. The actual consumption of the precious metals, by abrasion of the coin, the wear of plate, lace, and trinkets, by plating and gilding, and by losses through shipwreck or fire, became considerable.

It is easy to perceive why, under such circumstances, the supply having become eleven times as great, the value fell only to one fourth of what it had been. On the other hand, why the value did not advance again, in the century during which the supply was nearly stationary, though commerce, wealth, and luxury were still rapidly increasing, is a point which requires explanation. But as society advances, means are discovered for economizing the use of money. The vast extension of credit; the establishment of banks, and especially of Savings' Banks, which bring together and keep in active use a vast number of small sums, which would otherwise be hoarded or lie dormant in the hands of individuals; the circulation of bank-notes, checks, and bills of exchange, which perform nearly all the functions of money; and, more than all, perhaps, the introduction of accounts current among traders, by which purchases are set off against sales, and commodities are thus virtually bartered for commodities, money being needed only at the final settlement, and then only to a trifling amount, all are expedients for completing exchanges without the actual transfer of coin. Only the rapidly extended use of these expedients could have prevented a considerable rise in the value of money, and consequent fall of prices, between

1810 and 1830, when the annual supply of the precious metals was much diminished, and the operations of commerce greatly enlarged.

Is it probable that the effect of the present vastly increased supply of the precious metals will be, to any considerable extent, retarded or neutralized by an increased demand for money, through the growth of luxury and trade? We see no circumstances likely to produce this result, except the colonization of the gold-bearing regions themselves; and even this can have comparatively little influence. These countries, it is true, are very distant from the world's great centres of commerce and wealth, and their population grows with marvellous rapidity. In all distant colonies, and especially in those formed under the excitement of searching for gold, the various expedients for economizing the use of money are slowly introduced and imperfectly developed. Time is needed to import the machinery of banking and all the refinements of trade, and especially for the establishment of confidence in the community, so that large operations can be conducted upon credit. For many years, at least, California and Australia must use chiefly a hard-money currency, while large amounts of bullion, as I have already remarked, will be in transitu,— wandering about, as it were, from one country to another, to find where they will be of most value, before they pass into active circulation as currency. But these circumstances can impede the result only for a few years; they cannot materially lessen or weaken it. Perfect as the machinery of trade now is, and perfectly as it is understood, no country which is colonized by commercial nations can remain far behind the mother land in the use of money-saving expedients. In respect also to the use of the precious metals for articles of luxury and ostentation, M. Chevalier finds reason to believe that it is rather diminishing than increasing. The official returns, both in England and France, show that there was a larger manufacture of gold and silver plate in those countries before 1830 than there ever has been since, if we except the last three or four years, during which time, as might have been anticipated, there has been a moderate additional consumption of gold in the arts. "The luxury of our days," says Chevalier, "has democratic features; it is very calculating and economical. It is

lavish of gilding and silvering, but requires few massive articles in silver, and still fewer in gold." It seems most probable, then, that the general principle will hold, that the value of money will fall in the same ratio in which the average annual supply of it is increased.

Leaving all these preliminary considerations, then, we come to the main question, Is there anything in the prospect of a great decline in the value of money to create serious uneasiness and alarm? We suppose that the decline will be gradual, that it will be spread over many years, that at least a quarter of a century must elapse before it can be completed. There will be a rise in the prices of all commodities, with a corresponding increase in wages and salaries. Labor will be higher paid, both because it will be more productive, or, in other words, the articles it produces will have a greater nominal value, and because the cost of living will be greater, so that, if wages and salaries did not rise, the labor could not be had. The rise of prices being general, will consequently be only nominal; that is, one commodity may be bartered for another on just the same terms as before. If, when flour is five dollars a barrel, it takes five barrels of flour to buy one coat, after money has fallen to one half of its value, the coat can still be had for five barrels of flour; but it will then be said to be worth fifty dollars, and the flour to be ten dollars a barrel, instead of five. In this narrow view of the subject, therefore, or so far as this effect extends, no one will be directly benefited, and no one directly injured.

With respect to outstanding obligations, or contracts to deliver money at a future day, the case will be different. If I borrow one hundred dollars at a time when that sum will purchase twenty barrels of flour, or an equivalent amount of other commodities, and am not called upon to repay it till money has so far fallen in value that the sum will buy only ten barrels, the debt is really cancelled by returning only one half of the value which was borrowed. To this extent, therefore, every one will be benefited so far as he owes money, and will be injured so far as he has money to receive. But in either case, he will be affected only by the amount of the depreciation which takes place in the interval between the contraction of the debt and its payment. If twenty-five years elapse be

fore the depreciation is completed, and if it take place uniformly, or at the rate of two or three per cent a year, then all promises to pay, which have not more than a year to run, will not be affected to the extent of more than two or three per cent. Now, vastly the larger number of contracts that are made in the ordinary course of business are completed within the year; they will not be so much affected by the general decline in the value of money as they often have been by the common fluctuations of interest, and by changes in the price. of particular commodities. Often, within the last ten years, money has been borrowed when the current rate of interest did not exceed five per cent a year, and the time of repaying it has come when it could with difficulty be had at one per cent a month. We may say, generally, then, that all the common transactions of business will not be sensibly affected by the great change which is in prospect.

But all fixed money payments which are now contracted for, and have many years to run, will be seriously affected by the coming alteration; that portion of them which extends over a full quarter of a century, will experience the full effect of it. All government stocks, and other stocks yielding a fixed rate of interest, and not bearing any obligation to be paid off in a few years; all bank stock, and other permanent investments of money yielding income only under the form of interest; and all property let on long leases at a fixed annual rent, must decline in value with the money which they represent. Such stocks, and the property also, if the lease be a perpetual one, when the depreciation is complete, will possess only half their present relative value. The nominal income yielded by them will remain the same, but it will only purchase half as many commodities as before. There will be no actual loss to the community, for what one loses, another gains. The British tax-payer, for instance, will profit by the whole amount of the British fund-holders' loss. As the depreciation goes on, taxation may be extended pari passu, without throwing any additional burden upon the community; and a sinking-fund, formed out of the surplus thus obtained, would pay off the national debt in less than one generation. As such stocks, moreover, are transferable, and frequently pass from hand to hand, the total loss upon any portion of them will seldom fall on one