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CHAPTER VIII.

MONEY AND PRICE.

WE have thus far treated of Exchange, so far as it was possible to do so, as if it were conducted by simple barter. There are, however, many inconveniences in such a method. The man who has a quarter of beef to dispose of, may desire to procure bread, knives, calico, and shirtings, tea, books, and a variety of other articles. It would occasion him a great deal of trouble to go round to the various persons who possess the commodities he desires, and to apportion to each the share that, upon discussion, should be fixed as the equivalent of his merchandise. The man who owned calico, which he was ready to barter, might happen to be already supplied with a stock of beef. From the earliest period at which men established any considerable association with each other, they have endeavoured to obviate the inconveniences of direct barter by the adoption of some general medium, in which the values of other commodities are expressed, and which is generally accepted in exchange for products and services, in the first instance, with a view to its being subsequently bartered for other products or services. There are several properties belonging to the precious metals, gold and silver, which render them peculiarly fit for this purpose, and indicate that their general adoption is by no means accidental or arbitrary. One of these is their absolute uniformity in quality. Being simple substances they are everywhere alike; the gold of California and that of Australia are identical; the silver of Mexico and that of Russia are precisely the same substance. Another is, their capacity of minute division, and of being converted back into large masses by fusion. They are extremely durable, sustaining little injury from the action of fire, and none from rust, and enduring a great deal of handling without sensible loss from abrasion. They are very ductile, not liable to break, mix readily with the alloys of other metals, by which their hardness can be increased, and from which they can be separated again with very little loss, and they receive and retain an impression, which denotes the weight and purity of metal. The

qualities which have been enumerated give them a high value for use in the arts, independent of the service that they render as coin; a very material circumstance, inasmuch as it puts and keeps them upon the same footing as other useful products.

Another circumstance, specially adapting them for use as a medium of exchange, is that they include a large value in a small bulk. This has been due, in part, to the comparative rarity of the known deposits from which the precious metals could be extracted; in part, to the inferiority of machinery which has been employed, and of the workmen who have pursued the business of mining. The employment has always presented dazzling temptations, and has always been attended with great hazards and insecurity. It has almost universally been the occupation of barbarians, or barbarized those who yielded to its allurements. It has, consequently, been a costly and unprofitable trade. Two advantages result from this circumstance, in respect to the use of precious metals as the general intermediary of exchange. The one is, that a small quantity of them suffices to facilitate the transfer of a large quantity of other useful wares. The second is, that it has tended to maintain the uniformity of their value, by limiting the additions which, in any given time, have been made to the existing stock. Considering their great durability, and that the quantity in use suffers less diminution than almost any of the things which it aids in transferring from hand to hand, it is plain that a trifling annual addition to the stock of coin-though inferior to the yearly augmentation of the general mass of commodities-would rapidly reduce its purchasing power, and deprive it of that stability of value which is the chief recommendation of a circulating medium. The circumstance is important, also, in regard to the degree of uniformity of value existing between gold and silver at different places. Like everything else, their value is limited by the quantity of labour necessary to produce them at the market where it is estimated, and this necessarily includes the labour of transportation from the place of their origin. Silver was cheaper in Mexico, in the immediate vicinity of the mines, than in New York, to which it was carried; and cheaper there than in London, which is still more remote. Gold is cheaper at San Francisco than at New Orleans, by the cost of carriage. The difference, however, is less than it would be in

the case of silver, because the latter, in the same bulk, represents but about one-fourteenth as much labour, and the addition caused by the cost of transportation must constitute a larger proportion of its value. In regard to both of the metals, the expense of transportation is so light as to make but an insignificant variation in their value at places within any moderate distance from each other, as between the sea-board and the interior towns of an island like Great Britain.

It is very evident from the preceding considerations, that gold and silver are signally adapted to serve as the common measure of value in comparing commodities, and as convenient instruments for effecting their barter. It is equally clear, however, that at any given time and place, wheat is as much the measure of the value of gold, as gold is of wheat, or of any other desirable object. While gold may vary less at different places, and at different times, it nevertheless is subject to variation, not only in respect to a particular commodity like wheat, but in respect to silver and to all other commodities. A change of this kind has been going on since the discovery of the Californian and Australian diggings, which we may express at pleasure, by saying that gold has fallen and is falling in value; or, that the mass of commodities has risen in value when compared with that metal. This necessity results from the fact, that the quantity of gold now added annually to the stock in circulation in the world, is about four times as much as the annual increase previous to 1848. Gold being obtained with less labour directly devoted to that object, must be obtained with less of the labour which obtains it indirectly, by producing articles, which gold is only valuable as the means of purchasing.

The precious metals, when offered in the market as an article of merchandise, in the shape of dust, nuggets, or bullion, are readily perceived to conform to the general laws which regulate the traffic in other wares. It may be supposed, however, that when they have passed through the Mint, and are issued by government in the form of coins, bearing the denomination of dollars, francs, or sovereigns, they have assumed a new character, and become in some degree exempt from the incidents which attach to the ordinary products of industry. It is obvious, however, that coin differs from its material

only in the circumstance that it has been refined to a certain degree of purity, mixed with a certain quantity of base metal, and issued in masses of an established form and weight, which is indicated by its name. The good faith of the government is pledged for the accuracy and honesty with which the assaying and other necessary operations have been performed; and the name which is stamped upon the coin is but a brief method of stating the facts. The service which the mint performs, is that of ascertaining and certifying, for the benefit of every individual to whom the coin may be offered, what, at some trouble and expense, he might ascertain for himself. To the extent of the cost of this important service, coin should be worth more than the value due simply to the weight of its constituents. The charge for this service of the Mint, where any is imposed, is called a seignorage. From the fact that the operation, being conducted by government upon the largest scale, is susceptible of greater economy than could be attained by individuals doing it upon a smaller scale, it may be a trifle more than is absolutely necessary to cover expenses, without leading to private coinage. If, however, the government attempts to secure anything more than the minutest profit, it creates an inducement to export bullion to the nearest country where coinage is done upon cheaper terms. The very great facility with which it may be transported and concealed, effectually defeats any regulation designed to prevent exportation; and if legislation for such a purpose could be successful, its effect would be to repel the importation of bullion, and deflect some portion of the natural current to the territory of more liberal States. Where, however, as is the case with the gold coinage of Great Britain, the government makes no charge for its services, the difference between the value of coin and the metal of which it is composed, sinks to the amount of interest lost in waiting the few days that may be required for assay.

*

The extreme sensitiveness with which coin feels and obeys the

* This was true of the United States; but a law has just been passed, subjecting gold made into bars to a seignorage of one-half of one per cent., and reducing the weight of silver in the half-dollar and smaller coins nearly seven per cent. It has been generally stated that gold coin is subjected to a seignorage, but I do not so construe the law.

general laws of commerce has been shown, wherever the attempt has been made to maintain both gold and silver as standards. It is possible at any one day to adjust the double coinage in accordance with the value of the metals. There is no difficulty in ascertaining what weight should be given to-day to the eagle, in order that it may be currently accepted as the exact equivalent of ten silver dollars. But before the next session of Congress their relative values may change. The eagle, which is here a legal tender for but ten dollars, may purchase a quantity of silver in England or France, for which the Mint will give ten dollars and sixty-six cents. Such was the case previous to the alteration of the gold coinage in 1834. The consequence was, every eagle coined for years was sent abroad as an article of merchandise. On the other hand, the value of gold may decline, so that ten silver dollars, which the owner can tender in payment only as the equivalent of an eagle, will actually buy as much gold as will procure at the Mint an eagle and thirty cents. Such has been the case recently, and the result has been the disappearance of our silver change; an inconvenience for which Congress has, within the last few days, sought a remedy in the debasement of the silver coin. It may or may not be effectual for a short time it is clear that there can be no warrant for believing that it will permanently adjust things, which in their nature are subject to continual fluctuation.

Whoever is honestly in possession of a portion of the precious metals, can have obtained it only in requital of labour directly expended in procuring it, as by mining, or of services rendered by his labour or by his capital, which is but the accumulation of past labour. He holds it, ad interim, as the means of procuring other services when he shall need them. It can neither be eaten, drunk, nor made to minister to any other want, until it shall be exchanged. If, in the shape of coin, it is a token issued by public authority that the bearer has rendered a certain amount of service, for which he has not yet been remunerated. In one of those admirable pamphlets by which Bastiat sought to communicate fundamental notions of Political Economy to the people of France, after the Revolution of 1848, when so much inquiry was directed to its problems, he writes int at length what he truly remarks is the substantial import of the

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