or cheaper, being more or less valuable, and equal to a greater or lesser quantity of goods. "Perishable goods, as corns, &c., increase or decrease in quantity as the demand for them increases or decreases; so their value continues equal or near the same. "More durable goods, as metals, materials for shipping, &c., increase in quantity beyond the demand for them, so are less valuable." 991 The preceding paragraphs contain assumptions which are exactly opposed to the fact. The value of silver is uniform from the uniformity of its production and of the demand for it. Should there be some excess in production for one or more years, such excess would be taken up at previous prices to be held as reserves (so long as silver is legalized as money). A large increase of production will be absorbed in this manner. Unlike other merchandise, the market for silver is the world. Until the markets of the world are glutted, it cannot fall materially in value from increase of production. Corn is an indispensable article of food; but corn-consuming countries are corn-producing countries. The greater part of the excess in one country must be consumed within the country producing it. It cannot, from its perishable nature, be held as reserves. As the amount of product depends upon the seasons, and as it may be twice as great in one year as it was in the one preceding, its market value will be somewhat in ratio to its quantity; in other words will fluctuate violently from year to year. Metals and materials for ship-building are produced very slowly, and, as they can be held without injury for long periods, their prices are much more uniform than those of most articles of food, which must presently be consumed or become valueless to their holder. Although at the outset some of Law's propositions in reference to money were eminently sound, he was compelled to sacrifice them so soon as he began to unfold his scheme. Those who came after him were incapable of appreciating him where he was right, but were certain to follow him wherever he was wrong. It was from him that Adam Smith got the doctrine which he asserted with so much emphasis, that corn was a better measure of value than coin. Like Adam Smith, all the Economists have borrowed greatly from Law, from whom, from the disgrace at 1 Money and Trade Considered, Chap. V. tached to his name, they could copy without reference and with impunity. They constructed, in great measure, from the ruins he left behind, their grotesque and absurd edifices. Materials which he put together in a symmetrical manner were by them wholly misconceived and misapplied. The substitute for silver money proposed by Law was a paper money based upon lands. To provide for its issue Parliament was, "1. To authorize the Commission to lend notes on land security, the debt not exceeding one-half or two-thirds of the value, and at the ordinary interest. "2. To give out the full price of land, as it is valued, 20 years' purchase, more or less, according to what it would have given in silver money; the Commission entering into possession of such lands by wadset granted to the Commission or assignees, and redeemable betwixt, and the expiring of a term of years. "3. To give the full price of land upon sale made of such lands, and disposed to the Commission or assignees irredeemably.... "The paper money proposed will be equal in value to silver, for it will have a value of land-pledge equal to the same sum of silver money, that is given out for. If any losses should happen, onefourth of the revenue (interest on the notes) issued of the commission will, in all appearance, be more than sufficient to make them good. "This paper money will not fall in value as silver money has fallen, or may fall: goods or money fall in value if they increase in quantity, or if the demand lessens. But the Commission giving out what sums are demanded, and taking back what sums are offered to be returned, this paper money will keep its value, and there will always be as much money as there is occasion or employment for, and no more. "Land has a more certain value than other goods, for it does not increase in quantity, as all other goods may. The uses of goods may be discharged, or by custom be taken from them, and given to other goods: the use of bread may be taken from oats and wholly given to wheat; the use of money may be taken from silver and given to land; the use of plate, and the other uses of silver, as a metal, may be taken from silver and given to some other metal or some mixture that may be more fitted for these uses. In any of these cases these goods lose a part of their value, proportioned to the uses that are taken from them; but land cannot lose any of its For as every thing is produced by land, so the land must keep its value, because it can be turned to produce the goods that are in use. If wheat is more used, and oats less, as the land can produce both, it will be turned to produce what is most used, because most valuable." uses. ... 1 Money and Trade Considered, Chap. VII. What would be the object of borrowers in getting Law's land notes? Not land, for they could get that by direct purchase. Their object would be to obtain coin, or merchandise, the equivalent of coin, capital that could be used in their industries. Unless they could obtain one or the other of these, they would not receive the notes, giving their own obligations therefor. They could not come into the possession of the lands by which the notes were secured, as these would be held by the Commission issuing the notes. The latter, consequently, would be simply forms of debt, and to be realized upon would have to be sold in open market, and, certainly, at a very great discount. As the borrower would have to give his own bills equal in amount to the notes received, he might be giving that which might be valuable for that which might be almost wholly worthless. Whether, therefore, the notes were well secured or not, they could never get into circulation. To get out of this dilemma, Law was obliged to assume, to use his own words, that, "Money is not the value for which goods are exchanged, but the value by which they are exchanged. The use of money is to buy goods; and silver, while money, is of no other use." 1 In developing his scheme, Law had, undoubtedly, all the time, a sort of consciousness that his land money would not be received in exchange for other articles. As he could not give up his scheme, his principles had to give way to his necessities, and he was forced to assert the exact opposite to that which he had affirmed, and the truth of which he had conclusively demonstrated. Money, consequently, "was not the value for which goods were exchanged, but the value by which they were exchanged." It was the yardstick by which goods were measured off,a contrivance to assist in numeration, a tally or counter to register the delivery of certain quantities or values of merchandise; in other words, value was not a necessary attribute of money. Though silver were our product," says Law, "yet it is not so proper to be made money as land. Land is what produces every 1 Money and Trade Considered, Chap. VII. thing; silver is only the product. Land does not increase or decrease in quantity; silver or any other product may: so land is more certain in its value than silver or any other goods. "Land is capable of improvement, and the demand for it may be greater; so it may be more valuable. Silver cannot be supposed to be applied to any other uses than it is now applied to, or that the demand will increase more than the quantity. "Land cannot lose any of its uses, so will not be less valuable. Silver may lose the uses of money it is now applied to, and so be reduced to its value as a metal. "It may likewise lose a part of its uses as a metal, these uses being supplied by other goods; so loses a part of its value as a metal; but nothing can supply the uses of land. "Land may be conveyed by paper, and thereby has the other qualities necessary in money, in a greater degree than silver. "Land has other qualities fitting it for the use of money that silver has not. "Land applied to the use of money does not lose any other uses it is applied to; silver cannot serve the use of money and any of its other uses as a metal. . . . "When a nation establishes a money, if the money they set up have a value equal to what it is made money for, and all the other qualities necessary in money, they ought to have no regard what value it will have in other countries. On the contrary, as every country endeavors by laws to preserve their money, if that people can contrive a money that will not be valued abroad, they will do what other countries have by laws endeavored in vain. "No nation keeps to silver because it is used in other countries: it is because they can find nothing so safe and convenient. Trade betwixt nations is carried on by exchange of goods, and if one merchant sends out goods of a less value than he brings home, he has money furnished him abroad by another who brings home for a less value than he sent out. If there is no money due abroad, then the merchant who designed to import for a greater value than he exported is restricted, and can only import equal to his export; which is all the many laws to regulate trade have been endeavoring." 1 From what has been shown in that part of this work which treats of the Laws of Money, it would be superfluous here to controvert Law's assumption that whatever possesses value can be made into money; or that real property is the best basis of money because the least liable to fluctuate in value. A mortgage on real property may possess a high value, and yet have no other attributes fitting it to serve as money. The assertion that a nation should have no regard, in its money, to its trade with others, was undoubtedly wholly false to Law 1 Money and Trade Considered, Chap. VII. in his sober moments. He saw that his paper money would never pass abroad. He was driven consequently to assert that it was not necessary that it ever should pass abroad; that the domestic trade of a nation was alone to be considered. He took the short cut of throwing his principles overboard without the least compunction, whenever they came into conflict with his purposes. He was a man of action, who never stopped to explain, but pushed right forward to the object he had in view. For him to doubt and inquire would be to give up the contest altogether. His life was a mission to promote, in the first place, the welfare of his own country, by supplying it with money-capital; and every consideration was subordinate to this grand idea. Law found no one who would entertain his schemes for a Land Bank. He succeeded, however, in 1716, in establishing, in France, a Bank with a cash capital of 6,000,000 francs, which he appears to have conducted, so long as he was able to keep clear of government, in a safe and legitimate manner. The great want of France at the time was precisely the institution which Law succeeded in establishing. Her finances were in a most disorganized condition. The securities of government were hardly worth one-third their nominal value. Her metallic currency had been constantly tampered with, by reducing its value, in order to enable the government to pay its debts at one-half or one-third the value at which they were contracted. From the social disorder which prevailed, it was in the highest degree hazardous to forward coin from one province to another. Law undertook to make the notes he issued payable in coin at its value at the time they were issued, and as he promptly paid them on presentation, they soon began to be preferred to coin, which was liable at any moment to be debased in value by a royal edict. His notes soon attained circulation in the provinces, as they were received with coin in the payment of the revenues of government. His Bank had hardly been in operation a year before the most striking and beneficial consequences were everywhere apparent. Trade was greatly improved, the revenues of the government were increased, and were more promptly paid, and Law was hailed as the benefactor, if not the saviour, of the nation. Having found, at last, an adequate theatre for the exercise of the great abilities which he undoubtedly possessed, Law seems |