"Meanwhile, strenuous exertions were making to hasten the recoinage. Since the Restoration, the Mint had, like every other public establishment in the kingdom, been a nest of idlers and jobbers. The important office of Warden, worth between six and seven hundred a year, had become a mere sinecure, and had been filled by a succession of fine gentlemen who were well known at the hazardtable at Whitehall, but who never condescended to come near the Tower. This office had just become vacant, and Montague had obtained it for Newton. The ability, the industry, and the strict uprightness of the great philosopher speedily produced a complete revolution throughout the department which was under his direction. He devoted himself to his task with an activity which left him no time to spare for those pursuits in which he had surpassed Archimedes and Galileo. Till the great work was completely done, he resisted firmly, and almost angrily, every attempt that was made by men of science, either here or on the Continent, to draw him away from his official duties. The old officers of the Mint had thought it a great feat to coin silver to the amount of fifteen thousand pounds a week. When Montague talked of thirty or forty thousand, these men of form and precedent pronounced the thing impracticable. But the energy of the young Chancellor of the Exchequer and of his friend the Warden accomplished far greater wonders. Soon nineteen mills were going at once in the Tower. As fast as men could be trained to the work in London, bands of them were sent off to other parts of the kingdom. Mints were established at Bristol, York, Exeter, Norwich, and Chester. This arrangement was in the highest degree popular. The machinery and the workmen were welcomed to the new stations with the ringing of bells and the firing of guns. The weekly issue increased to sixty thousand pounds, to eighty thousand, to a hundred thousand, and at length to a hundred and twenty thousand. Yet even this issue, though great, not only beyond precedent, but beyond hope, was scanty when compared with the demands of the nation. Nor did all the newly stamped silver pass into circulation; for during the summer and autumn those politicians who were for raising the denomination of the coin were active and clamorous; and it was generally expected that, as soon as Parliament should reassemble, the standard would be lowered. Of course, no person who thought it probable that he should, at a day not far distant, be able to pay a debt of a pound with three crown pieces instead of four, was willing to part with a crown piece till that day arrived. Most of the milled pieces were, therefore, hoarded. May, June, and July passed away without any perceptible increase in the quantity of good money. It was not till August that the keenest observer could discern the first faint signs of returning prosperity." Immediately following Locke, came the celebrated John Law, who, about the year 1700, published a treatise entitled "Money and Trade Considered," the object of which was to show that articles of property, other than silver, the money then chiefly in circulation, might be made into money, or might be made the basis for the issue of a paper money in place of one of silver, to the great advantage of the public, and particularly of Scotland, his own country, then one of the poorest in Europe. Law possessed an acute intellect, which, when not influenced by the purposes he had in view, was capable of mastering almost any subject toward which it might be directed. "The value of silver as money," he says, "is its value in barter." This statement covered the whole ground. In his familiarity with financial affairs, in the clearness and vigor of his style, and in his knowledge of the principles of metallic money, he has no superior but Locke. He is, in fact, the one who, next to Locke, can be studied with most interest and profit. Had he done no more than to write his "Money and Trade Considered," he would now be regarded as an oracle of wisdom, instead of being, as he is, an object of universal obloquy and contempt. He was a remarkable instance of the union of an idealist and a man of affairs. There is every reason to believe that he was prompted by a sincere desire to promote the welfare of his species. That he left France in a state of utter destitution, although he might have laid aside millions after seeing his ruin to be inevitable, a fact which he urged in vindication of his motives, however much his judgment might have been at fault, is at least proof of the disinterestedness of his nature. -- "It is reasonable to think," says Law, "silver was bartered as it was valued for its uses as a metal, and was given as money according to its value in barter. The additional use of money silver was applied to would add to its value, because as money it remedied the disadvantages and inconveniences of barter, and consequently, the demand for silver increasing, it received an additional value equal to the greatest demand its use as money occasioned. "And this additional value is no more imaginary than the value silver had in barter as a metal; for such value was because it served such uses, and was greater or lesser according to the demand for silver as a metal proportioned to its quantity. The additional value silver received from being used as money was because of its qualities which fitted it for that use, and that value was according to the additional demand its use as money occasioned. "If either of these values are imaginary, then all value is so; for no goods have any value but from the uses they are applied to, and according to the demand for them, in proportion to their quantity. . . "Money is not a pledge, as some call it; it is a value paid, or contracted to be paid, with which it is supposed the receiver may, as his occasions require, buy an equal quantity of the same goods he has sold, or other goods equal in value to them; and that money is the most secure value either to receive, to contract for, or to value goods by, which is least liable to change in its value. "Thus silver having a value and qualities fitting it for money, which other goods had not, was made money, and, for the greater use of the people, was coined." 1 Law was entirely right in assuming that the value of silver was its value in barter. He was mistaken, however, in asserting that it derives a value from its use as money, unless by its use as money he meant its use as reserves. The value of the precious metals in barter is made up of their value in the arts and their value as reserves. A person possessing perishable property seeks to convert it into that which has a more permanent value. If he can find something that is imperishable and at the same time in universal demand, he will pay for it a price greater than its value in the arts; in other words, the value of gold and silver, as determined by their value in the arts, would be less than it is, were it not for the demand for them as reserves. It is not their use as a medium of exchange that constitutes their value: it is their value in the arts and their capacity to serve as reserves that give them their value in exchange. They are simply used as money from their value for other purposes. To say that they are valuable because they are used as money, is only saying that they are valuable in barter because they are used in barter. Although silver was the money in use, and although its value as such was its value in barter, Law, to provide a way for his new money, proceeded to show that the former, though in use, was very poorly adapted to serve as money: "Silver money is more uncertain in its value than other goods, so less qualified to serve as money. "Goods of the same kind and quality differ in value from any change in their quality, or in the demand for them. In either of these cases goods are said to be dearer, or cheaper, being more or less valuable, and equal to a greater or lesser quantity of other goods, or of money. "Silver in bullion or money changes its value from any change in its quantity, or in the demand for it. In either of these cases goods are said to be dearer or cheaper; but 'tis silver or money is dearer 1 Money and Trade Considered, Chap. I. 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.” 1 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 manUnlike 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, 66 "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 uses. 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." 1 ... 1 Money and Trade Considered, Chap. VII. |