CHAPTER XIII.

MONEY.

Barter, its Nature -Origin of the Phrase, "Precious Metals."-How Gold and Silver came to be used as Money-Gold not used as Money in all Parts of the World.—Relative Proportions of the Precious Metals employed as Money and for other Purposes.-Foundation of the Value of Gold and Silver, when used as Money.-Turgot, Say, M-Culloch, and others, on this Point-The Foundation of the Value of Money lies in the Demand of the Precious Metals for other Uses-It is a Foundation in Nature, not the Result of Convention-Defiuition and Functions of Money.

BARTER, or the exchange of one commodity, unrepresented, for another, is the natural, and was the original mode of trade. That is, one man, being in possession of a thing, no matter what, which another wants more than he does; and the other being in possession of a thing, no matter what, which the first wants more than the second does; they agree to exchange, and do exchange, on such terms as may be arranged between them. This is barter. It is true, that this definition includes money, or its material, as a commodity. It is impossible to give a definition of barter, without a comprehension of this, as a possible result. But money, with its present attributes and functions, was not originally in use, and is the result of social improvement, or of the convenience and necessities of society.

In process of time, of which the memory of man and history give no advice, certain metals, commonly called gold and silver, having been discovered, aud found to possess excellent and unrivalled qualities for certain uses, and for ornament, became "precious." This may be supposed to be the origin of the name, "precious metals." For certain purposes of use and ornament, other things have been held much more valuable even than gold and silver, and for which ten, twenty, a hundred, and even a thousand to one, in weight, of the "precious metals" have been and are given, as an equivalent. Nevertheless, partly on account of their scarcity, and especially on account of their adaptation to so many useful and ornamental purposes, no other substances, original, or however formed, have ever acquired the position of being held so universally "precious," as gold and silver.

And it is to be observed, that this view does not bring us to their

position and use as money. Gold and silver are not valuable, simply because they are money. This was not the original ground of their being held in such high esteem; but they have been adopted, and have obtained universal consent, to be used as money, or a common medium of exchange, because of their value for other uses, and because they are always in demand for such a vast variety of appropriations, other than money. Money is but one of their uses, later in the order of things; and it is only a fraction of their value that is created by their use as money, in the same manner as anything else is increased in value, in proportion as its uses are multiplied. The real foundation of the value of gold and silver, may be said to be, was in fact, prior to their having been viewed in the light of money, and appropriated to that use; and the cause of their being thus appropriated, was doubtless the discovery, by experience and observation, of their unrivalled qualities for other uses and in other applications. Time and immemorial usage, therefore, have assigned to them the functions of money, apparently for ever, without the remotest probability of change. Nevertheless, this was not an accident, was not arbitrary; but there were substantial, fundamental reasons, of the nature of value, lying somewhere back, beyond. Gold and silver could not even now retain their value as money, but for the foundation on which they fall back and rest, as being greatly valuable for an almost infinite variety of other purposes, which are always ready to take up and absorb them, whenever they can be spared from trade, and which, as a part of trade, is constantly being done; and as a part of trade also, they are as constantly going back into the forms or into the uses of money, though not in so great amount. The natural current from the bowels of the earth, is to the other uses of gold and silver; and only so much of them, is arrested, on the passage, for money, as the necessities of trade require. It is only in distress, that people will surrender their plate, trinkets, or any other "precious" things, composed of gold or silver, for money.

Although the high value of gold and silver appears to have been appreciated, in the earliest stages of society of which we have any account, the world was slow in adopting them to discharge the functions of money, or of a common currency, as they now do, throughout the civilized world; and even down to this day, Jacobs* says: "Gold has been rarely used in Asia, as money, either

William Jacobs, Esq., F.R.S., "An Inquiry into the Production and Consumption of the Precious Metals," 2 vols., London, 1831.

coined or uncoined." He also says: "Silver is said to have been first coined in Rome, in the year of its building 485, or 266 years before our era [Christian]. The first gold coin of Rome followed that of silver, after an interval of 62 years."

When the Hebrew nation became rich, they displayed, under Solomon, great accumulations of gold and silver. But silver only was used in commercial exchanges; gold for ornamental purposes, as also silver. Solomon used gold profusely in decorating the royal residence, and the temple.

In the empire of Japan, to this day, gold is apparently used as plentifully as in the days of Solomon, 'according to Jacobs, for the decoration of public and other buildings, and is prodigally laid on their furniture; but it is not used as money, either there, or in China, comprehending, in this particular, other parts of the East.

All parts of the world have produced the precious metals, more or less; and when the richest sources have been discovered, they seem always to have been worked, till so much exhausted as not to pay cost. They once abounded in different parts of the Roman empire. All know somewhat of the mines of Mexico and South America. At the present time, Russia is producing gold in considerable abundance, reported at an average of $12,000,000 annually for six years previous to 1846, and $17,000,000 for that year.

It would be impossible even to conjecture, with any tolerable reliance, the number of uses to which gold and silver are applied, other than of money. Jacobs says: "One of the greatest causes of the consumption of gold, is the use of it in smaller personal ornaments, and in the variety of trinkets, whose basis is gold. It is supposed that, in both England and France, the quantity of the precious metals applied to these minor purposes, by far exceed that which is converted into larger objects. Silver teaspoons in England, may be counted by millions, perhaps by hundreds of millions." Jacobs estimates that ths of the silver, brought to Europe from 1700 to 1810, was manufactured in similar articles of household furniture. Who can count the gold in watches, finger-rings, bracelets, and other ornaments of the head, neck, bosom, and person. In the courts of Europe, some men might be said to be encumbered with the mere weight of gold displayed on their persons. The gold and silver absorbed by churches, found upon and around the altars, have not been small in amount, and are always deemed the richest prey of spoilers.

One

Adam Smith seems to have thought, that the gold and silver, used up by manufacturers, in his time, were equal to the whole annual product. He rates the gold and silver plating and gilding at Birmingham, in that time, at £50,000 a year. Jacobs says: "A degree of destruction of gold and silver, which was scarcely felt in the ancient world, has, in modern times, been steadily and rapidly advancing, and must at length produce a sensible effect on the value of all commodities." He also says, that, when America was discovered, Europe produced the precious metals as fast as it consumed them; that, in 63 years after that event, 50 per cent. was added to the general stock; and 150 per cent. from 1599 to 1699. The amount he allows for Europe, at the discovery of America, is £35,000,000; and in 1599, £155,000,000. hundred and fifty per cent. on this, for the next hundred years, would raise the stock in Europe, for 1699, to £487,500,000, which has been increasing ever since, though not very sensibly for the last half century, till the gold of Russia seems to have revived the impetus. The highest amount of gold and silver coin which Jacobs allows for Europe and America, is £380,000,000, for 1809, since which it has declined, at the rate of £40,000,000 in twenty years, which is doubtless owing, partly to the decreased product of the mines, partly to the use of paper-money, and partly to the great demand for these metals in other applications, and to the multiplication of those uses. The increasing product of the Russian gold may be regarded as opportune for the commercial world, to sustain the body of the currency in that material, which is most convenient of the two.

Some economists pretend, that the amount of currency is not of material importance, as the prices of commodities are regulated accordingly. It is at least desirable that there should not be sudden and great fluctuations in this amount, as such changes affect the value of the income of different classes of society very unequally. For example, when the great abundance of the precious metals derived from the American mines had raised the general price of the necessaries and comforts of life as 4 to 1 of what they were before, it was a hard case for nonproducers of such commodities, whose position, though occupied in other industrial and useful pursuits, obliged them to live on the same amount of money as before.

The relative proportion of the precious metals converted into money, as compared with that absorbed by all other uses, seems to

have increased, from the early ages, with the growing demands of commerce. Jacobs says: "Taking the amount of coined money at thirty millions [sterling], we should calculate the remainder of the two metals [in England] at sixty millions," or two of the latter to one of the former. He also applies this rule to France. M'Culloch, in an article in Brande's Dictionary, says the coin of Great Britain "is at least sixty millions." But for Europe and America together, Jacobs makes the proportion three for money to four for other uses. In another place, however, he allows that the value of "three or four" is found in England, in other forms, to one of money; and that, from 1810 to 1830, the other uses, throughout the world, absorbed more than what came from the mines. He also says: "Current coin in Europe and America diminished, between 1809 and 1829, from £380,000,000 to £320,000,000." It may, perhaps, be concluded, that the proportion now existing in other forms, in Europe and America, is as three to one of money. But the comparative amount of the precious metals employed in the world as money, is an accident of history, arising from the extent and demands of commerce, since they have been so appropriated; and does not at all affect the question of the foundation of their value in the form of money.

Assuming that nothing is money but gold and silver, or that which will command them at the will of the holder, it may be remarked, that the universal credit of these substances, when used as money, must have a foundation. That foundation is usually called intrinsic value. But a little reflection will show that the value, thus asserted, lies farther back than the use of these metals as money, not denying that this use is a fraction of their value. But how came they to be used as money? Davanzati, an Italian economist of high repute, says: "Gold and silver, being found to be of no use in supporting human life, have been adopted," &c., that is, appropriated to the use of money. This, we should think too puerile to be noticed, except for the gravity with which it has been cited by others. M. Turgot answers this question: "By the nature and force of things." But this answer, as must be seen, has no more point in it than the surface and materials of creation, inasmuch as it has all this range. Others answer: By reason of their qualities. This is not denied, so far as those qualities determine their intrinsic value, which brings us back to where we started from. But it is said, they mean the adaptation of their qualities to this specific use; which has some reason in it, but