pose I put my money into a bank, and take out a bill for the value; if this bill at the time of my receiving it, would purchase me the labor of one hundred men for twenty days, but some time after will only purchase the labor of the same number of men for fifteen days, it is plain the bill has sunk in value one fourth part. Now, silver and gold being of no permanent value, and as this bill is founded on money, and therefore to be esteemed as such, it may be that the occasion of this fall is the increasing plenty of gold and silver, by which money is one fourth part less valuable than before, and therefore one fourth more is given of it for the same quantity of labor; and, if land is not become more plentiful by some proportionate decrease of the people, one fourth part more of money is given for the same quantity of land; whereby it appears, that it would have been more profitable to me to have laid that money out in land which I put into the bank, than to place it there and take a bill for it. And it is certain that the value of money has been continually sinking in England for several ages past, because it has been continually increasing in quantity. But, if bills could be taken out of a bank in Europe on a land security, it is probable the value of such bills would be more certain and steady, because the number of inhabitants continues to be near the same in those countries from age to age. For, as bills issued upon money security are money, so bills issued upon land, are in effect coined land. Therefore, (to apply the above to our own circumstances) if land in this province was falling, or any way likely to fall, it would behove the legislature most carefully to contrive how to prevent the bills issued upon land from falling with it. But, as our people increase exceedingly, and will be further increased, as I have before shown, by the help of a large addition to our currency, and as land in consequence is continually rising, so, in case no bills are emitted but what are upon land security, the money-acts in every part punctually enforced and executed, the payments of principal and interest being duly and strictly required, and the principal bonâ fide sunk according to law, it is absolutely impossible such bills should ever sink below their first value, or below the value of the land on which they are founded. In short, there is so little danger of their sinking, that they would certainly rise as the land rises, if they were not emitted in a proper manner for preventing it. That is, by providing in the act, that payment may be made, either in those bills, or in any other bills made current by any act of the legislature of this province; and that the interest, as it is received, may be again emitted in discharge of public debts; whereby circulating, it returns again into the hands of the borrowers, and becomes part of their future payments; and thus, as it is likely there will not be any difficulty for want of bills to pay the office, they are hereby kept from rising above their first value. For else, supposing there should be emitted upon mortgaged land its full present value in bills, as in the banks in Europe the full value of the money deposited is given out in bills; and supposing the office would take nothing but the same sum in those bills in discharge of the land, as, in the banks aforesaid, the same sum in their bills must be brought in, in order to receive out the money; in such case the bills would most surely rise in value as the land rises; as certainly as the bank bills founded on money would fall, if that money was falling. Thus, if I were to mortgage to a loan-office, or bank, a parcel of land now valued at one hundred pounds in silver, and receive for it the like sum in bills, to be paid in again at the expiration of a certain term of years, before which my land, rising in value, becomes worth one hundred and fifty pounds in silver; it is plain, that if I have not these bills in possession, and the office will take nothing but these bills, or else what it is now become worth in silver, in discharge of my land; I say it appears plain, that those bills will now be worth one hundred and fifty pounds in silver to the possessor; and if I can purchase them for less, in order to redeem my land, I shall by so much be a gainer. I need not say any thing to convince the judicious that our bills have not yet sunk, though there is and has been some difference between them and silver; because it is evident, that that difference is occasioned by the scarcity of the latter, which is now become a merchandise, rising and falling, like other commodities, as there is a greater or less demand for it, or as it is more or less plenty. Yet farther, in order to make a true estimate of the value of money, we must distinguish between money as it is bullion, which is merchandise, and as by being coined it is made a currency. For its value as a merchandise, and its value as a currency, are two distinct things; and each may possibly rise and fall in some degree independent of the other. Thus, if the quantity of bullion increases in a country, it will proportionably decrease in value; but if at the same time the quantity of current coin should decrease, (supposing payments may not be made in bullion) what coin there is will rise in value as a currency; that is, people will give more labor in manufactures for a certain sum of ready money. In the same manner must we consider a paper currency founded on land; as it is land, and as it is a cur rency. Money as bullion, or as land, is valuable by so much labor as it costs to procure that bullion or land. Money, as a currency, has an additional value by so much time and labor as it saves in the exchange of commodities. If, as a currency, it saves one fourth part of the time and labor of a country; it has, on that account, one fourth added to its original value. When there is no money in a country, all commerce must be by exchange.* Now, if it takes one fourth part of the time and labor of a country, to exchange or get their commodities exchanged; then, in computing their value, that labor of exchanging must be added to the labor of manufacturing those commodities. But if that time or labor is saved by introducing money sufficient, then the additional value on account of the labor of exchanging may be abated, and things sold for only the value of the labor in making them; because the people may now in the same time make one fourth more in quantity of manufactures than they could before. From these considerations it may be gathered, that in all the degrees between having no money in a country, and money sufficient for the trade, it will rise and fall in value as a currency, in proportion to the decrease or increase of its quantity. And if there may be at some time more than enough, the overplus will have no effect towards making the currency, as a currency, of less value than when there was but enough; because such overplus will not be used in trade, but be some other way disposed of. If we inquire, how much per cent interest ought to be required upon the loan of these bills, we must consider * All commerce is by exchange, or rather is exchange, whether a trade involves money or not. The kind of trade intended by the author is in technical as well as in common language known by the name of barter. - W. PHILLIPS. what is the natural standard of usury. And this appears to be, where the security is undoubted, at least the rent of so much land as the money lent will buy. For it canno be expected, that any man will lend his money for less than it would fetch him in as rent if he laid it out in land, which is the most secure property in the world. But if the security is casual, then a kind of insurance must be interwoven with the simple natural interest, which may advance the usury very conscionably to any height below the principal itself. Now, among us, if the value of land is twenty years' purchase, five per cent is the just rate of interest for money lent on undoubted security. Yet, if money grows scarce in a country, it becomes more difficult for people to make punctual payments of what they borrow, money being hard to be raised; likewise, trade being discouraged and business impeded for want of a currency, abundance of people must be in declining circumstances, and by these means security is more precarious than where money is plenty. On such accounts it is no wonder if people ask a greater interest for their money than the natural interest; and what is above is to be looked upon as a kind of premium for the insurance of those uncertainties, as they are greater or less. Thus we always see, that where money is scarce, interest is high, and low where it is plenty.* * Here is the error mentioned in a previous note; the author confounds circulating medium with loanable capital. Thus, by the common phrase scarcity of money, we always mean scarcity of money or capital to be loaned, which is quite a different thing from insufficiency of the quantity of the circulating medium for the purposes of trade. The two may be contemporaneous, but they are different things. It may readily be imagined that trade, and production, and investments generally, may be so profitable, that people would prefer to invest or employ their capital themselves, rather than loan it to others to be invested or employed. This state of things has no necessary connexion with the sufficiency of the quantity of circulating medium. Money in this sense may be plenty, when in the other it is scarce. This is a state of things, which does in fact often happen. · W. PHILLIPS. |