It is not my intention to detain the reader by any long dissertation on the subject of money. - nonfiction classiceconomicsbooks
So much has already been written on currency, that of those who give their attention to such subjects, none but the prejudiced are ignorant of its true principles. I shall therefore take only a brief survey of some of the general laws which regulate its quantity and value.
It is on this principle that paper money circulates: the whole charge for paper money may be considered as seignorage. Though it has no intrinsic value, yet, by limiting its quantity, its value in exchange is as great as an equal denomination of coin, or of bullion in that coin.
the standard were gold of a given weight and fineness, paper might be increased with every fall in the value of gold, or, which is the same thing in its effects, with every rise in the price of goods. To this drain of specie, the Bank must always be exposed while the currency is deficient in weight, as both an easy and a certain profit then arises from the constant interchange of paper for specie. It may be remarked, however, that to whatever inconvenience and expense the Bank was then exposed by the drain of its specie, it never was imagined necessary to rescind the obligation to pay money for its notes.
under some check and control; and none seems so proper for that purpose, as that of subjecting the issuers of paper money to the obligation of paying their notes, either in gold coin or bullion. Suppose that a million of money should be required to fit out an expedition. If the state issued a million of paper, and displaced a million of coin, the expedition would be fitted out without any charge to the people; but if a bank issued a million of paper, and lent it to Government at 7 per cent., thereby displacing a million of coin, the country would be charged with a continual tax of 70,000l.
The sinking fund is managed by commissioners, responsible only to parliament, and the investment of the money entrusted to their charge, proceeds with the utmost regularity; what reason can there be to doubt that the issues of paper money might be regulated with equal fidelity, if placed under similar management?
In another part of this work, I have endeavoured to shew, that the real value of a commodity is regulated, not by the accidental advantages which may be enjoyed by some of its producers, but by the real difficulties encountered by that producer who is least favoured. It is so with respect to the interest for money; it is not regulated by the rate at which the Bank will lend, whether it
The whole business, which the whole community can carry on, depends on the quantity of capital, that is, of its raw material, machinery, food, vessels, &c., employed in production. After a well regulated paper money is established, these can neither be increased nor diminished by the operations of It may perhaps be necessary to say a few words on the subject of the two metals, gold and silver, which are employed in currency, particularly as this question appears to perplex, in many people's minds, the plain and simple principles of currency. "In England," says Dr. Smith, "gold was not considered as a legal tender for a long time after it was coined into money.
of chance; it is not because gold is better fitted for carrying on the circulation of a rich country, that gold is ever preferred for the purpose of paying debts; but simply because it is the interest of the debtor so to pay them. This was an inconvenience which it was highly desirable should be remedied, but so slow is the progress of improvement, that although it had been unanswerably demonstrated by Mr. Locke, and had been noticed by all writers on the subject of money since his day, a better system was never adopted till the last session of Parliament, when it was enacted that gold only should be a legal tender for any sum exceeding forty-two shillings.
It appears to me, that the difficulty may be very simply solved, by referring this different state of the value of the guinea at the two periods mentioned, to the different quantities of debased silver currency in circulation. In King William's reign gold was not a legal tender, it passed only at a conventional value. All the large payments were probably made in silver, particularly as paper currency, and the operations of banking, were then little understood. .
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