essay3 [14]
adjust silver coin to the market price. Only the market price can find the ratio of the value of gold and silver as of all other values. Newton's reduction of the guinea to 21s was devised only to prevent the disappearance of the light and worn coins which remain in circulation, and not to fix in gold and silver coins the true ratio of their price, I mean by their true ratio that which is fixed by market prices. This price is always the touchstone in these matters. Its variations are slow enough to allow time to regulate the mints and prevent disorders in the circulation. In some centuries the value of silver rises slowly against gold, in others the value of gold rises against silver. This was the case in the age of Constantine who reduced all values to that of gold as the more permanent; but the value of silver is generally the more permanent and gold is more subject to variation.
Chapter V
Of the augmentation and diminution of coin in denomination
According to the principles we have established the quantity of money circulating in exchange fixes and determines the price of everything in a State taking into account the rapidity or sluggishness of circulation. We often see however in the increases and decreases practised in France such strange variations that it might be supposed that market prices correspond rather to the nominal value of coin than to its quantity in exchange, the quantity of livres tournois in money of account rather than the quantity of marks and ounces, which seems directly opposed to our principles. Suppose, as happened in 1714, ecu is current for 5 livres and the King Arret which orders the lowering of the ecu for 20 months, viz 1 per cent per month to nominal value to 4 livres instead of 5. Let us see will be naturally the consequences of this having regard to the spirit of the Nation. All those who owe money will make haste to pay it during the diminutions so as not to lose by them. Undertakers and Merchants find it easy to borrow which decides the least able and the least increase their enterprise. They borrow money, as fancy, without interest and load themselves with violence of their demands. Vendors have getting rid of their merchandise for money which diminish in their hands in nominal value. They towards foreign merchandise and import considerable quantities of it for the consumption of several years. All this causes money to circulate more rapidly and raises the price of everything. Then high prices prevent the foreigner from taking merchandise from France as usual. France keeps her own merchandise and at the same time imports great quantities. This double operation is the reason why considerable amounts of specie must be sent abroad to pay the balance. The rate of exchange never fails to show this disadvantage. Exchange is commonly seen at 6 and 10 per cent against France during these diminutions. Enlightened people in France hoard their money in these times. The King finds means to borrow much money on which he willingly loses the diminution, proposing to compensate himself by an augmentation at the end of the diminution. With this object after several diminutions they begin to hoard money in the King's Treasury, to postpone the payments, pensions, and army pay. In these circumstances money becomes extremely rare at the end of the diminutions both by reason of the sums hoarded by the King and various individuals and by reason of the nominal value of the coin, which value is diminished. The amounts sent abroad also contribute greatly to the scarcity of money, and this scarcity gradually brings it about that the merchandise with which the undertakers are loaded up is offered at 50 or 60 per cent below the prices prevailing at the time of the first diminutions. Circulation falls into convulsions. Hardly enough money can be found to send to market. Many Undertakers and Merchants go bankrupt and their merchandise is sold at bargain prices. Then the King augments anew the coinage, settles the new ecu or ounce of silver of the new issue at 5 livres,
Chapter V
Of the augmentation and diminution of coin in denomination
According to the principles we have established the quantity of money circulating in exchange fixes and determines the price of everything in a State taking into account the rapidity or sluggishness of circulation. We often see however in the increases and decreases practised in France such strange variations that it might be supposed that market prices correspond rather to the nominal value of coin than to its quantity in exchange, the quantity of livres tournois in money of account rather than the quantity of marks and ounces, which seems directly opposed to our principles. Suppose, as happened in 1714, ecu is current for 5 livres and the King Arret which orders the lowering of the ecu for 20 months, viz 1 per cent per month to nominal value to 4 livres instead of 5. Let us see will be naturally the consequences of this having regard to the spirit of the Nation. All those who owe money will make haste to pay it during the diminutions so as not to lose by them. Undertakers and Merchants find it easy to borrow which decides the least able and the least increase their enterprise. They borrow money, as fancy, without interest and load themselves with violence of their demands. Vendors have getting rid of their merchandise for money which diminish in their hands in nominal value. They towards foreign merchandise and import considerable quantities of it for the consumption of several years. All this causes money to circulate more rapidly and raises the price of everything. Then high prices prevent the foreigner from taking merchandise from France as usual. France keeps her own merchandise and at the same time imports great quantities. This double operation is the reason why considerable amounts of specie must be sent abroad to pay the balance. The rate of exchange never fails to show this disadvantage. Exchange is commonly seen at 6 and 10 per cent against France during these diminutions. Enlightened people in France hoard their money in these times. The King finds means to borrow much money on which he willingly loses the diminution, proposing to compensate himself by an augmentation at the end of the diminution. With this object after several diminutions they begin to hoard money in the King's Treasury, to postpone the payments, pensions, and army pay. In these circumstances money becomes extremely rare at the end of the diminutions both by reason of the sums hoarded by the King and various individuals and by reason of the nominal value of the coin, which value is diminished. The amounts sent abroad also contribute greatly to the scarcity of money, and this scarcity gradually brings it about that the merchandise with which the undertakers are loaded up is offered at 50 or 60 per cent below the prices prevailing at the time of the first diminutions. Circulation falls into convulsions. Hardly enough money can be found to send to market. Many Undertakers and Merchants go bankrupt and their merchandise is sold at bargain prices. Then the King augments anew the coinage, settles the new ecu or ounce of silver of the new issue at 5 livres,