of commerce, but only the instrument which men have agreed upon to facilitate the exchange of one commodity for another. It is none of the wheels of trade: it is the oil which renders the motion of the wheels more smooth and easy. If we consider any one kingdom by itself, it is evident that the greater or less plenty of money is of no consequence. . . . It is only the public (government) which draws any advantage from the greater plenty of money, and that only in its wars and negotiations with foreign States. . . . The greater the number of people, and their greater industry are serviceable in all cases at home and abroad, in private and in public. But the greater plenty of money is very limited in its use, and may even sometimes be a loss to the nation in its commerce with foreigners. . . . And, in general, we may observe that the dearness of every thing, from plenty of money, is a disadvantage which attends an established commerce, and sets bounds to it in every country by enabling the poorer States to undersell the richer in all foreign markets. This has made me to entertain a doubt concerning the benefit of Banks and paper credits. . . . That provisions and labor should become dear by an increase of trade and money, is in many respects an inconvenience, but an inconvenience that is unavoidable, and the effect of that public wealth and prosperity which are the end of all our wishes. It is compensated by the advantages which we reap from the possession of these precious metals, and the weight which they give the nation in all foreign wars and negotiations. But there appears to be no reason for increasing that inconvenience by a counterfeit money which foreigners will not accept of in any payment, and which any great disorder in the State will reduce to nothing. And in this view it must be allowed that no Bank could be more advantageous than such a one as locked up all the money it received (as was the case with the Bank of Amsterdam), and never augmented the circulating coin, as is usual, by returning a part of its treasure into commerce. A public Bank by this expedient might cut off much of the dealings of private bankers and money-jobbers; and though the State bore the charge of their salaries to directors and tellers of this Bank (for according to the preceding supposition it would have no profit from its dealings), the national advantage resulting from the lower price of labor and the destruction of paper credit would be a sufficient compensation." "It was a shrewd observation of Anacharsis, the Scythian, who had never seen money in his own country, that gold and silver seemed to him of no use to the Greeks but to assist them in numeration and arithmetic. It is, indeed, evident that money is nothing but the representation of labor and commodities, and serves only as a method of rating or estimating them. . . . It can have no effect, either good or bad, taking the nation within itself; any more than it would make an alteration upon the merchant's books 1 Essay on Money, vol. iii, 5 Ibid. p. 309. 2 Ibid. if, instead of the Arabian method of notation, which requires few characters, he should make use of the Roman, which requires a great many. Nay, the greater quantity of money, like the Roman characters, is rather inconvenient, and requires greater trouble to keep and transport it. But, notwithstanding this conclusion, which must be allowed just, it is certain that since the discovery of the mines of America industry has increased in all the countries of Europe, except in the possessors of those mines, and this may justly be ascribed, among other things, to the increase of gold and silver. . . . This is not easily accounted for if we consider only the influence which a greater abundance of coin has in the kingdom itself, by heightening the price of commodities, and obliging every one to pay a greater number of these little yellow or white pieces for every thing he has to purchase. And as to foreign trade it appears that a plenty of money is rather disadvantageous by raising the price of every kind of labor."1 Hume followed Law where the latter was wrong, and rejected him wherever he was right. The value of money, he tells us, is fictitious; its greater or less quantity, therefore, is of no consequence; nothing is to be gained by increasing the dimensions of a fiction; it is not valuable to a country in its commerce, for it is not the subject of commerce, only the oil which lubricates its wheels. Is not that a subject of commerce, the possession of which is the great object of commerce, and in which all the profits or balances arising in commerce are payable? According to Hume, its quantity becomes of importance only in negotiations and wars with other countries. But if it were a fiction in England when he wrote, why was it not a fiction in France, with which England was at war? Is it a law of human nature that that which is a pure fiction in one country should be solid reality in another? Is not that valuable which every people seek to obtain by exchanging therefor whatever they possess; and which will always, at its cost, command all other kinds of property? In all respects, except in wars and negotiations, the abundance of money, says Hume, may be, and often is, a disadvantage, as prices are raised thereby in ratio to its abundance. In this way, poor countries having no money are enabled to undersell the rich having a great deal of money, and drive them out of their accustomed markets. The exact reverse of all this is the truth. Prices are either low in ratio to the abundance of money, or, what is the same thing, the amount which a people 1 Essay on Money, pp. 313, 314. are able to consume is in ratio to such abundance. Cocoanuts are very cheap in the interior of Africa, and dates in the interior of Arabia; but the people of those countries may consume nothing but cocoa-nuts and dates. They have no means of purchasing other articles, because they have no means of transporting that which they possess to markets where it would have a high value. Had they plenty of money, merchants could afford to supply them at very low rates from the certainty of being paid. With such people, therefore, the price of all imported articles would be in inverse ratio to the amount of their money. So with a symbolic currency, with paper money. This is the representative of capital. If one be abundant the other must be; and, if abundant, prices must be low, for prices are high or low in ratio to the abundance or want of the articles to which they relate. Whatever the form of money or currency, therefore, the greater the abundance, the lower are prices. If merchandise that is made the basis of production be low, the price of the product must be low. Cheapness of production is always in ratio to the abundance of means applicable thereto. Rich nations can, and always do, undersell the poorer, by force of natural laws. Does Spain undersell England, or Mexico the United States, in the markets of the world? Paper credits — that is currencies issued by Banks are one of the most important conditions of low prices, as they serve as the cheapest possible means of distribution. There is some compensation, says Hume, for the inconvenience of too great an abundance of coin, that it can be used in foreign wars, but Bank paper can never be used out of the country in which it is issued. No reason, therefore, can be urged to palliate its issue. But does not the cost of articles used in foreign wars, other than coin, exceed tenfold that of the coin required? If they can be had by means of paper money, equally with coin, does not the former possess for the government the same value as coin? Hume would have all Banks like the Bank of Amsterdam, or an improvement upon that Bank. His Banks should collect every thing into their vaults, and let nothing out! But how, in such case, are exchanges to be effected? There must be either coin or symbols, or all commerce must speedily come to a dead stand. In such event, a people, in the course of a few months, would be reduced to the very brink of ruin. With Hume, gold and silver derive their importance to a nation solely from their use in its wars and negotiations. Considered by itself, their abundance is of no consequence whatever. Suppose all people constituted one nation, would not gold and silver be held in the same esteem and possess the same value that they do with the vast number of nationalities and races which exist? Would they not appeal in the same way to the sense of beauty in man? Would they not have the same value in the arts? Would they not still be the most valuable of all kinds of property? and by virtue of such value serve as reserves in which all accumulations are to be held, whether in possession, or in loans at interest? When the first lump of gold was exchanged for some other article of property, did the person who received it consider that the profit of the exchange would depend upon the value of his gold in countries other than his own? Hume might just as well have affirmed that the only importance and value of iron was in dealing with other nations; that to a nation considered by itself it was of no consequence whatever. Hume asserts the value of money to be imaginary, and at the same time that a great abundance of it is injurious by raising the price of commodities. But what constitutes the value of any article? The amount of demand that exists for it. There can be no other test or measure. We can form no idea of the value of any article but by comparing it with that of some other. If it have no exchangeable value, it has no value. It may have uses, without having values. The water that a person drinks from a river is useful in sustaining his life, but it has no value in the proper sense of the term. An imaginary value, therefore, is no value; so that the very foundation upon which Hume erected his argument has no existence whatever. Only that which possesses value can affect the value of other things. If money had no value, its greater or less abundance could exert no influence whatever on the value or price of other articles. A little thought and reflection would have shown all this, but this way was not Hume's way. Reflection and analysis are laborious and painful processes, to which he was by no means inclined. To truth he was wholly indifferent. His object was effect, provided that could be produced by very little labor and pains. "Were all our money, for instance, recoined," says Hume, "and a penny's worth of silver taken from every shilling, the new shilling would probably purchase every thing that could have been bought with the old; the prices of every thing would be insensibly diminished; foreign trade enlivened; and domestic industry, by the circulation of a greater number of pounds and shillings, would receive some increase and encouragement. In executing such a project, it would be better to make the new shilling pass for twenty-four half-pence, in order to preserve the illusion, and to make it be taken for the same. And as the recoinage of our silver begins to be requisite by the continual wearing of our shillings and sixpences, it may be doubtful whether we ought to imitate the example in King William's reign, when the clipped money was raised to the old standard."1 Never did a person draw a more graphic picture of himself than did Hume in the preceding paragraph. He would debase money, and at the same time maintain its value. He would maintain its value, and at the same time derive an advantage from its debasement in diminishing prices. In the same sentence, the value of money was to be both maintained and reduced. From diminished prices at home, foreign trade was to be enlivened, and domestic trade receive some increase and encouragement from the greater number of pounds and shillings in circulation. But how could more pounds and shillings be in circulation, if the debased coins would purchase as much as those of full weight and value? In executing the project it would be better, he says, to make the "new shilling pass for twenty-four half-pence, in order to preserve the illusion and make it be taken for the same;" and he suggests that at the next coinage his project should be carried out, naïvely remarking, that it was doubtful whether King William's example in restoring the coinage should be followed. With Hume, from the perversity or credulity of human nature, a falsehood plausibly told, and well stuck to, would have all the potency of truth. Of this, his own works afford a memorable illustration. He contrived by artful fabrications to falsify the whole course of English history, and to make the world believe, almost for a century, that slavery, not freedom, was the birthright of Englishmen. Any one, by taking the pains, might easily have shown that his history must have been wholly untrustworthy, from the careless and flippant manner in which he wrote upon other subjects. 1 Essay on Money, p. 316. |