CONVERSATION XVII.

Subject of MONEY continued.

OF THE DEPRECIATION OF GOLD AND SILVER.

OF THE ADULTERATION AND DEPRECIATION OF COINED MONEY.

NEY.

OF BANKS.

OF PAPER MOEFFECTS OF PAPER MONEY WHEN NOT

PAYABLE IN SPECIE ON DEMAND.- OF THE PROPORTION OF CURRENCY TO THE COMMODITIES TO BE CIRCULATED BY IT.

CAROLINE.

I HAVE been reflecting much upon the subject of our last conversation, Mrs. B.; and it has occurred to me, that though there may be no permanent excess and depreciation of specie in any particular country, yet it must gradually decrease in value throughout the world: for money is very little liable to wear; a great quantity of the precious metals is annually extracted from the mines, and though a considerable portion of it may be con

part, I suppose, goes to the mint to be coined, and this additional quantity must produce a depreciation of value?

MRS. B.

An increase of supply will not occasion depreciation of value, if there should at the same time be a proportional increase of demand, and we must recollect that the consumable produce of the earth increases as well as that of the mines-the commodities to be circulated as well as the medium of circulation; and it is not the actual quantity of money, but the proportion which it bears to the quantity of commodities for which it is to serve as a medium of exchange, that regulates the price of those commodities.

Let us suppose the price of a loaf of bread to be one shilling; and say, if 1000 more loaves of bread be produced every year by agriculture, and such an additional number of shillings be obtained from the mines as will be necessary to circulate them, the price of a loaf will then remain the same, and the value of money will not, by this additional quantity of specie, be depreciated.

CAROLINE.

But, Mrs. B., you do not consider that when the thousand additional loaves are eaten, the additional shillings will remain.

MRS. B.

The greater part of these loaves will be eaten by those who will not only reproduce them, but probably increase the number the following year.

CAROLINE.

In that case it would be very possible that the progress of agriculture and manufactures should keep pace with, or even precede that of the mines.

MRS. B.

If the quantity of the precious metals annually extracted from the mines be exactly what is required for the arts, and for the additional specie necessary to circulate the increasing produce of the land, there will be no change in the value of money, and commodities will continue to be bought and sold at their former prices. If less gold and silver be extracted than is requisite for these purposes, goods will fall in price; and if, on the contrary, a greater quantity be produced, goods will rise in price, the fluctuations in the price of commodities gradually and constantly conforming to the variations of the scale by which their value is measured.

Dr. Adam Smith was of opinion that for many years past the supply of gold and silver did not exceed the demand; but several later writers conceive that he was mistaken on this point. I am

question, but I confess that I feel inclined to favour the opinion of a general depreciation.

Previous to the discovery of America the exchangeable value of money was certainly much greater than it has been since that period. Some notion may be formed of the difference of the value of money in ancient and in modern times from the amount of the revenue which Xerxes, King of Persia, derived from his wealthy and extensive empire, and which enabled him to maintain his mighty fleets and armies; it is said in history to have amounted to only three millions sterling.

CAROLINE.

The prodigality and extravagance of the Romans was then in fact still greater than it appears, since the immense sums they expended upon luxuries were then more valuable than they would be at the present times.

MRS. B.

As the wealth of the Romans arose in a great measure from the spoliation of the countries they conquered, gold and silver formed an essential part of their plunder; specie, therefore, might possibly be of less value there than in other parts of the world at the same period.

Independently, however, of the increase of quantity which produces a depreciation in the value of the precious metals themselves, there are causes quite foreign to this, which have considerable effect

on the value of the money into which they have been coined. One of these is the adulteration of the coin. A pound sterling, or twenty shillings, originally weighed a pound of silver; hence its denomination. But sovereigns, in making new coinages, frequently found it convenient to adulterate the metal by mixing it with alloy. It was a means of increasing the value of their treasures, by paying their debts with a much less quantity of the precious metals, and thus defrauding their creditorsubjects, who in the first instance were not aware of the change.

In the year 1351, Edward the Fourth, distressed by the debts he had incurred in his chimerical attempts to conquer France, adopted this mode of paying his creditors with less money than he borrowed of them. He ordered a pound of silver to be coined into 266, instead of 240 pennies. Having experienced the beneficial effects of this expedient, he soon after coined 270 pennies out of the same pound. By this imposition, not only the creditors of the crown, but all other creditors were defrauded of about a tenth of their property; being compelled to receive in payment money of less value than that they had lent. Considerable inconvenience was also experienced from the alteration in the standard of value; as soon as it was discovered, it produced a general rise in the price of commodities, and the poor were greatly distressed by the enhancement of