Chap。II
OfArtificialorMaterialMoneyFromtheinfancyoftheworld，atleastasfarbackasouraccountsofthetransactionsofmankindreach，wefindtheyhadadoptedthepreciousmetals，thatissilverandgold，asthecommonmeasureofvalue，andastheadequateequivalentforeverythingalienable。
Themetalsareadmirablyadaptedforthispurpose；theyareperfectlyhomogeneous:Whenpure，theirmasses，orbulks，areexactlyinproportiontotheirweights:Nophysicaldifferencecanbefoundbetweentwopoundsofgold，orsilver，letthembetheproductionoftheninesofEurope，Asia，Africa，orAmerica:
theyareperfectlymalleable，fusible，andsufferthemostexactdivisionwhichhumanartiscapabletogivethem:Theyarecapableofbeingmixedwithoneanother，aswellaswithmetalsofabaser，thatis，ofalesshomogeneousnature，suchascopper。Bythismixturetheyspreadthemselvesuniformlyitbethroughthewholeofthecompoundmass，sothateveryatomofcomesproportionallypossessedofashareofthisnoblemixture；
bywhichmeansthesubdivisionofthepreciousmetalsisrenderedveryextensive。
Theirphysicalqualitiesareinvariable；theylosenothingbykeeping；theyaresolidanddurable；andthoughtheirpartsareseparatedbyfriction，likeeveryotherthing，yetstilltheyareofthenumberofthosewhichsufferleastbyit。
Ifmoney，therefore，canbemadeofanything，thatis，iftheproportionalvalueofthingsvendiblecanbemeasuredbyanythingmaterial，itmaybemeasuredbythemetals。
II。Thetwometalsbeingpitcheduponasthemostpropersubstancesforrealizingtheidealscaleofmoney，thosewhoundertaketheoperationofadjustingastandardmustconstantlykeepintheireyethenatureandqualitiesofascale，aswellastheprinciplesuponwhichitisformed。
Theunitofthescalemustconstantlybethesame，althoughrealizedinthemetals，orthewholeoperationfailsinthemostessentialpart。Thisrealizingtheunitislikeadjustingapairofcompassestoageometricalscale，wherethesmallestdeviationfromtheexactopeningoncegivenmustoccasionanincorrectmeasure。Themetals，therefore，aretomoneywhatapairofcompassesistoageometricalscale。
Thisoperationofadjustingthemetalstothemoneyofaccount，impliesanexactanddeterminateproportionofbothmetalstothemoney-unit，realizedinallthespeciesanddenominationsofcoin，adjustedtothisstandard。
Thesmallestparticleofeithermetaladdedto，ortakenawayfromanycoin，whichrepresentscertaindeterminatepartsofthescale，overturnsthewholesystemofmaterialmoney。Andif，notwithstandingsuchvariation，thesecoinscontinuetobearthesamedenominationsasbefore，thiswillaseffectuallydestroytheirusefulnessinmeasuringthevalueofthings，asitwouldoverturntheusefulnessofapairofcompasses，tosuffertheopeningtovary，afteritisadjustedtothescalerepresentingfeet，toises，miles，orleagues，bywhichthedistancesupontheplanaretobemeasured。
III。Debasingthestandardisagoodterm；becauseitconveysaclearanddistinctidea。Itisdiminishingtheweightofthepuremetalcontainedinthatdenominationbywhichanationreckons，andwhichwehavecalledthemoney-unit。Raisingthestandardrequiresnofartherdefinition，beingthedirectcontrary。
IV。Alteringthestandardthatisraisingordebasingthevalueofthemoney-unitislikealteringthenationalmeasuresorweights。Thisisbestdiscoveredbycomparingthethingalteredwiththingsofthesamenaturewhichhavesufferednoalteration。ThusifthefootofmeasurewasalteredatonceoverallEngland，byaddingtoit，ortakingfromit，anyproportionalpartofitsstandardlength，thealterationwouldbebestdiscovered，bycomparingthenewfootwiththatofParis，orofanyothercountry，whichhadsufferednoalteration。Justso，ifthepoundsterlingwhichistheEnglishunit，shallbefoundanyhowchanged，andifthevariationithasmetwithbedifficulttoascertain，becauseofacomplicationofcircumstances，thebestwaytodiscoveritwillbetocomparetheformerandthepresentvalueofitwiththemoneyofothernationswhichhassufferednovariation。Thisthecourseofexchangewillperformwiththegreatestexactness。
V。Artistspretend，thatthepreciousmetals，whenabsolutelypurefromanymixture，arenotofsufficienthardnesstoconstituteasolidandlastingcoin。Theyarefoundalsointheminesmixedwithothermetalsofabasernature，andthebringingthemtoastateofperfectpurityoccasionsanunnecessaryexpence。Toavoid，therefore，theinconvenienceofemployingtheminalltheirpurity，peoplehaveadoptedtheexpedientofmixingthemwithadeterminateproportionofothermetals，whichhurtsneithertheirfusibility，malleability，beauty，orlustre。Thismetaliscalledalloy，andbeingconsideredmerelyasasupporttotheprincipalmetal，isaccountedofnovalueinitself。Sothatelevenouncesofgold，whenmixedwithoneounceofsilver，acquires，bythataddition，noaugmentationofvaluewhatever。
Thisbeingthecase，weshall，inspeakingofmoney，overlook，asmuchaspossible，theexistenceofalloy，inordertorenderlanguagelesssubjecttoambiguity。Imustexceptsuchcases，wheretheconsideringthemassofthecompoundmetal，accordingtoitsweight，canbeaccompaniedwithnoinconvenience。
Chap。III
IncapacitiesoftheMetalstoperformtheOfficeofaninvariableMeasureofValueWeretherebutonespeciesofsuchasubstanceaswehaverepresentedgoldandsilvertobe:weretherebutonemetalpossessingthequalitiesofpurity，divisibility，anddurability:
theinconveniencesintheuseofitformoneywouldbefewerbyfarthantheyarefoundtobeasmattersstand。
Suchametalmightthen，byanunlimiteddivisionintopartsexactlyequal，bemadetoserveasatolerablysteadyanduniversalmeasure。Buttherivalshipbetweenthemetals，andtheperfectequalitywhichisfoundbetweenalltheirphysicalqualities，sofarasregardspurity，anddivisibility，renderthemsoequallywelladaptedtoserveasthecommonmeasureofvalue，thattheyareuniversallyadmittedtopasscurrentasmoney。
Whatistheconsequenceofthis？Thattheonemeasuresthevalueoftheother，aswellasthatofeveryotherthing。Nowthemomentanymeasurebeginstobemeasuredbyanother，theproportionofwhichtoitisnotphysically，perpetually，andinvariablythesame，alltheusefulnessofsuchameasureislost。Anexamplewillmakethisplain。
Afootofmeasureisadeterminatelength。AnEnglishfootmaybecomparedwiththeParisfoot，orwiththatoftheRhine；
thatistosay，itmaybemeasuredbythem；andtheproportionbetweentheirlengthsmaybeexpressedinnumbers；whichproportionwillbethesameperpetually。Themeasuringtheonebytheotherwilloccasionnouncertainty；andwemayspeakoflengthsbyParisfeet，andbeperfectlywellunderstoodbyotherswhoareusedtomeasurebytheEnglishfoot，orbythefootoftheRhine。
Butsupposethatayouthoftwelveyearsoldshouldtakeitintohisheadtomeasurefromtimetotime，asheadvancesinage，bythelengthofhisownfoot，andthatheshoulddividethisgrowingfootintoinchesanddecimals:whatcouldbelearnedfromhisaccountofmeasures？Asheincreasesinyears，hisfoot，itsinches，andsubdivisions，willlengthengradually；andwereeverymantofollowhisexample，andmeasurebyhisownfoot，thenthefootofmeasurenowestablishedwouldtotallyceasetobeofanyutility。
Thisisjustthecasewiththetwometals。Thereisnodeterminateinvariableproportionbetweentheirvalue；andtheconsequenceofthisis，thatwhentheyarebothtakenformeasuringthevalueofotherthings，thethingstobemeasured，likethelengthstobemeasuredbytheyoungman’sfoot，withoutchangingtheirrelativeproportionbetweenthemselves，changehoweverwithrespecttothedenominationsofboththeirmeasures。
Anexamplewillmakethisplain。
Letussupposeanoxtobeworththreethousandpoundsweightofwheat，andtheoneandtheothertobeworthanounceofgold，andtheounceofgoldtobeworthexactlyfifteenouncesofsilver:ifthecaseshouldhappen，thattheproportionalvaluebetweengoldandsilvershouldcometobeas14isto1，wouldnottheox，andconsequentlythewheat，beestimatedatlessinsilver，andmoreingold，thanformerly？Iaskfarther，ifitwouldbeinthepowerofanystatetopreventthisvariationinthemeasureofthevalueofoxenandwheat，withoutputtingintotheunitoftheirmoneylesssilverandmoregoldthanformerly？
Ifthereforeanyparticularstateshouldfixthestandardoftheunitoftheirmoneytoonespeciesofthemetals，whileinfactboththeoneandtheotherareactuallyemployedinmeasuringvalue；wouldnotsuchastateresembletheyoungman，whomeasuresallbyhisgrowingfoot？For，ifsilver，forexample，beretainedasthestandard，whileitisgainingupongoldonefifteenthadditionalvalue；andifgoldcontinueallthewhiletodeterminethevalueofthingsaswellassilver，itisplainthat，toallintentsandpurposes，thissilvermeasureislengtheningdaily，liketheyoungman’sfoot，sincethesameweightofitmustbecomeeverydayequivalenttomoreandmoreofthesamecommodity；notwithstandingwesupposethesameproportiontosubsist，withouttheleastvariationbetweenthiscommodityandeveryotherspeciesofthingsalienable。
Afterhavingexposedthematterinthislight，Ithinkitcanhardly，withreason，beurged，thatnotwithstandingitbeadmittedthatgoldandsilvermaychangetheirproportionofvaluewithregardtooneanother，yetstillthisdoesnotpreventsilverfromremainingthestandard，withoutanyinconvenience；
forthefollowingreasons。
First，Because，whenitisconsideredasastandard，itneveroughttobelookeduponaschangingitsvaluewithregardtogold；butthatgoldoughttobeconsideredaschangingitsvaluewithregardtosilver。
Secondly，Becausebeingthemeasureitself，itisabsurdtoconsideritasthethingmeasured；thatthereforeitretainsalltherequisitesofaninvariablescale；sinceitmeasuresallthingsaccordingtotheproportiontheybeartoitself，whichphysicallycannevervary。And，Thirdly，Thatapersonwhohasborrowedacertainweightofsilverfromanother，isobligedtorepaythesameweightofsilverhehadborrowed；althoughatthattimesilvershouldbeofgreatervaluethanwhenheborrowedit。
Ianswertothefirstargument:Thatifinfactsilvershouldbecomeofmoreorlessvaluewithrespecttomerchandize，withrespecttogold，andwithrespecttobankmoney，bytherebeingagreaterorlessdemandforitthantherewasbefore；Icannotseehowcallingitastandard，canremovethisinconvenience，whichisinseparablefromthenatureofthething；norhowwecanchangeamatteroffact，bychangingourlanguage，andbysaying，thatmerchandize，gold，andbankmoney，becomeofmorevalue，oroflessvalue，withrespecttosilver，inproportionasthedemandforthemisgreaterorless。Thislanguagewemustuse，althoughweknowforcertainthatthesethingsremainintheexactrelativeproportionofquantityanddemandasbefore:Andalthoughitshouldevidentlyappear，thatademandforsilverhasraisedthepriceofit，withrespecttoeverythingitmeasuredthedaybefore。
Iftheyardinamercer’sshopshouldbesubjecttosuchrevolutions，inconsequenceofthewooditwasmadeof；andifinmeasuringapieceofstufftoacustomer，whichthemercerhadboughtbythisyardthedaybeforefor50yards，heshouldfindthepiecemeasurebut40，itwouldnotbeeasytopersuadehim，I
believe，thathispiecewasbecomeshorter；butsupposeheshouldhavethecuriositytomeasureoveragainallthepiecesinhisshop，andthatheshouldfindexactlyonefifthdiminutionuponthelengthofeveryone，wouldhenotveryrationallyconcludethathisyardwasgrownlonger，andwouldhenotrunimmediatelytohisneighbour’sshopandcompareit？
Astothesecondargument，Iagreethatsilvermayatalltimesveryexactlymeasurethevalueofthingswithrespecttoitself；butthisgivesusnoideaofanuniversalmeasure。
Icanmeasuretheproportionofthelengthofthings，withanyrodorwithanyline，thelengthofwhichIknownothingabout；butnobodycallsthismeasuring，becauseIcannotcomparethethingsmeasured，withanyotherthingwhichIhavenotmeasuredwiththesamerodorline，asImighteasilydo，hadI
measuredwithafoot，yard，ortoise；consequentlytheintentionofmeasuringinsuchacaseisalmostentirelylost。
Tothethirdargument，Ianswer，thatIsubscribeverywillinglytothetruthofthatproposition；providedthatbysilverisunderstoodthebaremeasure，withoutattendingtoitsadditionalqualityoftheuniversalstandardmeasureofvalue。
ButifIborrowthesilvernotasbullion，butascointhecommonmeasureofvalue，thenIsay，thatIoverpayingivingbackthesameweightIhadreceived。Isthereanythingmorefamiliarthansuchexamples？Iborrow100l。frommyneighbour，heproposestogivesomuchofthevalueingrain；Iaccept。Thepriceofgrainrisesaboutthetermofpayment；canIbeobligedtorepayanequalquantityofgraininpaymentofaproportionalpartofwhatIowe？Bynomeans；becauseIdidnotreceivethegrainasanythingbutasaspeciesofmoney。ButifIborrowsomequartersofgraintoberepaidinharvest，thenIamobligedtorestoregrainforgrain，becauseinthiscaseIdidnotreceivethegrainasmoney，butasacommodity。
Buyingandsellingarepurelyconventional，andnomanisobligedtogivehismerchandizeatwhatmaybesupposedtobetheproportionofitsworth。Theuse，therefore，ofanuniversalmeasure，is，tomark，notonlytherelativevalueofthethingstowhichitisappliedasameasure，buttodiscoverinaninstanttheproportionbetweenthevalueofthese，andofeveryothercommodityvaluedbyadeterminatemeasureinallthecountriesoftheworld。
Werepoundssterling，livres，florins，piastres，&c。whichareallmoneyofaccount，invariableintheirvalues，whatafacilitywoulditproduceinallconversions，whatanassistancetotrade！Butastheyarealllimitedorfixedtocoins，andconsequentlyvaryfromtimetotime，thisexampleshewstheutilityoftheinvariablemeasurewhichwehavedescribed。
Thereisanothercircumstancewhichincapacitatesthemetalsfromperformingtheofficeofmoney。thesubstanceofwhichthecoinismade，isacommodity，whichrisesandsinksinitsvaluewithrespecttoothercommodities，accordingtothewants，competition，andcapricesofmankind。Theadvantage，therefore，foundinputtingintrinsicvalueintothatsubstancewhichperformsthefunctionofmoneyofaccount，iscompensatedbytheinstabilityofthatintrinsicvalue；andtheadvantageobtainedbythestabilityofpaper，orsymbolicalmoney，iscompensatedbythedefectitcommonlyhasofnotbeingatalltimessusceptibleofrealizationintosolidproperty，orintrinsicvalue。
Inorder，therefore，torendermaterialmoneymoreperfect，thisqualityofmetal，thatisofacommodity，shouldbetakenfromit；andinordertorenderpapermoneymoreperfect，itoughttobemadetocirculateuponmetallicorlandsecurity。Theexpedientwithregardtothemetalsshallfindaplaceinthisinquiryinthechapterofmiscellaneousquestionsattheendofthisbook，article4th。Whatregardsthepaperisforeigntoourpurpose，andbelongstothedoctrineofcredit。
II。Thereareseveralsmallerinconveniencesaccompanyingtheuseofthemetals，whichweshallhereshortlyenumerate，reservingthediscussionofalltheconsequencestheydrawalongwiththem，untilwecometoconsidertheoperationsoftradeandmoney，uponthecomplicatedinterestsofmankind。
First，Nomoneymadeofgoldorsilvercancirculatelong，withoutlosingitsweight，althoughitallalongpreservesthesamedenomination。Thisrepresentsthecontractingapairofcompasseswhichhadbeenrightlyadjustedtothescale。Suchadefectmustappearstriking，whenwereflectupontheprinciplesalreadylaiddownwhichnecessarilyinfluencethefixingofastandard。
Secondly，Anotherinconvenienceproceedsfromthefabricationofmoney。SupposingthefaithofPrinceswhocoinmoneytobeinviolable，andtheprobity，aswellascapacity，ofthosetowhomtheycommittheinspectionofthefinenessofthemetalstobesufficient，itishardlypossibleforworkmentorendereverypieceexactlyofaproperweight，ortopreservethedueproportionbetweenpiecesofdifferentdenominations；thatistosay，tomakeeverytensix-pencesexactlyofthesameweightwitheverycrownpieceandwitheveryfiveshillingsstruckinacoinage。Inproportiontosuchinaccuracies，thepartsofthescalebecomeunequal。
Thirdly，Anotherinconvenience，andfarfrombeinginconsiderable，flowsfromtheexpencerequisiteforthecoiningofmoney。Thisexpenceaddstoitsvalueasamanufacture，withoutaddinganythingtoitsweight。Ishalltakenotice，intheproperplace，oftheconsequenceswhichattendthisinconvenience，eventonationswherecoinageisfree。
Fourthly，ThelastinconvenienceIshallmention，is，thatbyfixingthemoneyofaccountentirelytothecoin，withouthavinganyindependentcommonmeasuretomarkandcontrolthesedeviationsfrommathematicalexactness，whichareeitherinseparablefromthemetalsthemselves，orfromthefabricationofthemthewholemeasureofvalue，andalltherelativeinterestsofdebtorsandcreditors，becomeatthedisposalnotonlyofworkmeninthemint，ofJewswhodealinmoney，ofclippersandwashersofcoin，buttheyarealsoentirelyatthemercyofPrinces，whohavetherightofcoinage，andwhohavefrequentlyalsotherightofraisingordebasingthestandardofthecoin，accordingastheyfinditmostfortheirpresentandtemporaryinterest。
Severaloftheinconvenienceswehavehereenumerated，mayappeartrifling，andsotheyarefoundtobeincountrieswherecommerceislittleknown；buttheoperationsoftradesurpassinnicetytheconceptionsofanymanbutamerchant；andasaproofofthis，itmaybeaffirmedwithtruth，thatoneshillingcanhardlyloseagrainofitsweight，eitherbyfraudorcirculation，withoutcontributing，bythatcircumstance，towardsthediminutionofthestandardvalueofthemoney-unit，orpoundsterling，overallEngland，asIhopetobeabletoshewbothbyreasonandfacts。
Allandeveryoneoftheseinconveniencestowhichcoinisexposed，disappearincountieswheretheuseofpureidealmoneyofaccountisproperlyestablished。
Chap。IV
MethodswhichmaybeproposedforlesseningtheseveralinconveniencestowhichmaterialMoneyisliableInthischapter，Ishallpointoutthemethodswhichmaybeproposedforlesseningtheinconveniencestowhichallcoinisliable，inordertherebytomakeitresembleasmuchaspossibletheinvariablescaleofidealmoneyofaccompt。
Toproposethethrowingoutofcoinaltogether，becauseitisliabletoinconveniences，andthereducingalltoanidealstandard，isactinglikethetyrantwhoadjustedeveryman’slengthtothatofhisownbed，cuttingfromthelengthofthosewhoweretallerthanhimself，andrackingandstretchingthelimbsofsuchashefoundtobeofalowerstature。Theuseoftheoryinpoliticalmattersisnotmerelytodiscoverthemethodsofremovingallabuses，itmustalsolenditsaidtowardspalliatinginconvenienceswhicharenoteasilycured。
Theinconveniencesfromthevariationintherelativevalueofthemetalstooneanother，mayinsomemeasurebeobviatedbythefollowingexpedients。
First，Byconsideringoneonlyasthestandardandleavingtheothertoseekitsownvalue，likeanyothercommodity。
Secondly，Byconsideringoneonlyasthestandard，andfixingthevalueoftheotherfromtimetotimebyauthority，accordingasthemarketpriceofthemetalsshallvary。
Thirdly，Byfixingthestandardoftheunitaccordingtothemeanproportionofthemetals，attachingittoneither；
regulatingthecoinaccordingly；anduponeveryconsiderablevariationintheproportionbetweenthem，eithertomakeanewcoinage，ortoraisethedenominationofoneofthespecies，andloweritintheother，inordertopreservetheunitexactlyinthemeanproportionbetweenthegoldandsilver。
Inordertoexplainthisthought，letmeobserve，thattheconsequenceofeveryvariationintheproportionbetweenthevalueofgoldandsilver，hasthiseffect；namely，thatthesameweightofsilveracquiresuponeverychangeadifferentvalueingold，fromwhatithadbefore；andthesameweightofgoldacquires，uponthechange，adifferentvalueinsilverfromwhatithadbefore。Letmeillustratethisbyanexample。
Suppose，then，thevalueofgoldtobetothevalueofsilver，as1to14。Then100grainsofgoldwillbeworth1400
grainsofsilver。
Suppose，thatnextyear，theproportionshallchange，andthatitshallcometobeas1to15；then100grainsofgoldwillbeworth1500grainsofsilver。
Herethen，aretwodifferentvaluesinsilverforthesamequantityofgold，namelyatonetime100grainsgold=1400
grainssilver；atanothertime100ditto=1500ditto。Addthesetwoquantitiesofsilvertogether，theymake2900grains。Takeonehalfofthesum，or1450。ThisIcallthemeanproportionofthesilver。Ontheotherhand，astothegold；
1400grssilveratonetimeareworth……100grsofgold1400grsdittoatanothertimeareworth1400or……931/3
15
together1931/3
onehalfofwhichis962/3grs。orthemeanproportionofgold。
Supposing，therefore，theunittohavebeendeterminedat100
grsofgold，andat1400grainsofsilver，assoonastheproportioncomesto15itmustbechangedto935/6grsofgold，andto1450grsofsilver。
ThisshallbefullyexplainedandtheusefulnessofitpointedoutintheXIIIthandXVthChapters。
Fourthly，Tohavetwounits，andtwostandards，oneofgold，andoneofsilver，andtoalloweverybodytostipulateineither。
Fifthly，Orlastofall，toobligealldebtorstopay，whenrequired，onehalfingoldandonehalfinthesilverstandard。
Ihavehereproposedtheattachingthestandardtooneofthespecies，asaremedyagainsttheeffectsofvariationbetweenthemetals，becausewhenthisisdone，theconsequencesarenotsohurtfulaswhentheunitisaffixedtoboth，asIshallproveinitsproperplace。
Theregulatingtheproportionofthatmetal，whichisconsideredasmerchandize，totheotherwhichisconsideredasthestandard，uponeveryvariationinthemarketpriceofbullion，aswellastheotherexpedient，ofestablishingtwounits，theoneofgold，andtheotherofsilver，doesnotrendertheunitofmoneyanymoreinvariablethanbefore；allthatcanbesaidforthisexpedient，is，thatmoneybecomestherebymoredeterminate，andthatpeoplewhoenterintopermanentcontractsare，atleast，apprisedoftheconsequencesofthevaryingoftheproportionofthemetals，andmayregulatetheirinterestsaccordingly。
Fixingthestandardtothemeanproportionofthemetals，isacertainmethodofpreservingthevalueoftheunitinvariablyintimetocome；butuponsubsequentvariationsintheproportion，itimplieseitherthenecessityofarecoinage，orofchangingthedenominationsofthecoin，bywhichfractionsoffarthings，deniersandothersuchsmalldenominationswillbeincurred，unlesssuchadutyuponcoinagebeimposed，asmayraisethevalueofthecoinsabovethatofcommonbullion，beyondthevalueofsuchfractionsoffarthings，&c。，whichthenmaybethrownout。Exampleuponchangingthedenominationofashilling；
supposingtheexactproportionofitsnewdenominationshouldbe1228d。；thelegaldenominationmaybemade121/4whichis12
25d。andthethreeadditionalhundredthpartsofapennymaybeneglected；becausethedutyoncoinagewillgiveanadvancedvaluetotheshillingprice，beyondthethreehundredthpartofonepenny；which，asametal，itwillhavemorethaninproportiontoitsdenomination。
Thelastexpedientofmakingdebtorspayhalfingoldandhalfinsilver，wouldremoveeveryinconvenience，providedthatasimilarregulationweremadeatthemintandattheBankofEngland，appointingallbulliontobedeliveredinbothspeciesattheMint；andallpaymentstobemadeinbothspeciesattheBank:andalsoprovidedthatthesameregulationshouldbeobservedinallbargainsofsale，asoftenonlyasrequired。Thiswouldsoblendthevalueofthetwometalstogether，astomakethemvirtuallybutone。
II。Theotherimperfectionsofcoinhavebeenalreadyenumerated。Theyrelateeithertoitswear，tothewantofexactnessinthefabrication，tothepriceofcoinage，ortotheopportunitytherebyaffordedtoprincestoadulterateandchangethestandard。
First，Astothefirstthebestexpedientsare，tostrikethegreatestpartofthecoininlargesolidpieces，havingaslittlesurfaceaspossible，consistentlywithbeautyandeaseoffabrication。
Toorderlargesumsofsilveratleasttocirculateinbagsofdeterminatesums，anddeterminateweights，allinpiecesofthelargerdenominations。
Andtomakealllightcoinwhatsoevergobyweight，upontherequisitionofthepersonwhoistoreceiveit。
Secondly，Astotheinaccuracyofthefabrication，thereisnootherremedythanastrictattentioningovernmenttoamatterofsogreatconsequence。
Thirdly，Thepriceofcoinageprincipallyaffectstheinterestofnationswithregardtoforeigntrade；consequently，tradingstatesshouldendeavour，asnearlyaspossible，toobservethesameregulationswiththeirneighbours，ineverythingwhichregardsthecoin。Theconsequenceofthisinconveniencetothosewithinthesocietyisunavoidable，andthereforenoremedycanbeproposed。
Fourthly，Theestablishmentofpubliccreditisthebestsecurityagainstalladulterationsofthestandard。Nofundamentallawcanbindupaprince’shandssoeffectuallyashisowninterest。WhileaPrinceliveswithinhisincome，hewillhavenooccasiontoadulteratethecoin；whenheexceedsit，hewillinatradingnationhaverecoursetocredit，andifonceheestablishthis，hemustgiveovermeddlingwiththestandardofhiscoin，orhewillgetnobodytolendhimanymore。TheonlyPrincewhocangainbyadulteratingthestandard，ishewhoseeksforextraordinarysuppliesoutofatreasurealreadyformed。
Theseare，briefly，theexpedientstobeputinpracticebythosegovernmentswhichhavetheprosperityoftheirsubjectsatheart。Theinfinitevarietyofcircumstancesrelatingtoeverystatecanalonedecideastothosewhicharerespectivelypropertobeadoptedbyeach。Ourbusinessatpresentistopointoutthevariationstowhichthevalueofthemoney-unitisexposed，fromeverydisorderinthecoin；andtoshewthatasfarasthevalueoftheunitshallbeaffectedbythem，sofarmustmaterialmoneyinsuchacasebedefective。
Chap。V
VariationstowhichtheValueoftheMoney-unitisexposedfromeveryDisorderintheCoinLetussuppose，atpresent，theonlydisordertoconsistinawantofthedueproportionbetweenthegoldandsilverinthecoin。
Thisproportioncanbeestablishedbythemarketpriceofthemetalsonly。becauseanaugmentationandriseinthedemandforgoldorsilverhastheeffectofaugmentingthevalueofthemetaldemanded。Letussupposethatto-dayonepoundofgoldmaybuyfifteenpoundsofsilver；ifto-morrowtherebeahighdemandforsilver，acompetitionamongmerchants，tohavesilverforgold，willensue，theywillcontendwhoshallgetthesilverattherateoffifteenpoundsforoneofgold:thiswillrisethepriceofit，andinproportiontotheirviewsofprofit，somewillacceptoflessthanthefifteenpounds。Thisisplainlyariseinthesilver，moreproperlythanafallinthegold；
becauseitisthecompetitionforthesilverwhichhasoccasionedthevariationintheformerproportionbetweenthemetals。Hadthecompetitionforgoldcarriedtheproportionabove1to15，I
shouldthenhavesaidthatthegoldhadrisen。
Asitis，therefore，theactivedemandforeithergoldorsilver，whichmakesthepriceofthemetalstovary，Ithinklanguagewouldbemorecorrectinspeakingconcerningthemetalsonlynevertomentionthesinkingofthepriceofeithergoldorsilver。Astoeveryothermerchandize，theexpressionisveryproper；becausethediminishingofthepriceofonecommodity，doesnotsoessentiallyimplytheriseofanyother，asthesinkingofoneofthemetalsmustimplytherisingoftheother，sincetheyaretheonlymeasuresofoneanother’sworth。Iwouldnotbehereunderstoodtomeanthatthetermsinkingofthepriceofgoldorsilverisimproper；allIsayis，thattheotherbeingequallyproper，andconveyingwithitthecauseofthevariationtowit，thecompetitiontoacquireonemetalpreferablytotheother，maybepreferred，andthistherather，thatfromusingthesetermspromiscuouslygoldhasfallen，insteadofsilverhasrisenweareapttobelieve，thatthefallingofthepriceofthemetal，mustproceedfromsomeaugmentationofthequantityofit；whereasitcommonlyproceedsfromnoothercausethanahigherdemandthanformerlyfortheother。
Letusnowsupposethatastatehaving，withgreatexactness，examinedtheproportionofthemetalsinthemarket，andhavingdeterminedtheprecisequantityofeachforrealizingorrepresentingthemoney-unit，shouldexecuteamostexactcoinageofgoldandsilvercoin。Aslongasthisproportioncontinuesunvariedinthemarket，noinconveniencecanresultfromthatquarter，inmakinguseofthemetalsformoneyofaccount。
Butletussupposetheproportiontochange；thatthesilver，forexample，shouldriseinitsvaluewithregardtogold；willitnotfollow，fromthatmoment，thattheunitrealizedinthesilver，willbecomeofmorevaluethantheunitrealizedinthegoldcoin。
Butasthelawhasorderedthemtopassasequivalentsforoneanotherandasdebtorshavealwaystheoptionofpayinginwhatlegalcointheythinkfit，willtheynotallchoosetopayingold，andwillnotthenthesilvercoinbemelteddownorexported，inordertobesoldasbullion，abovethevalueitbearswhenitcirculatesincoin？Willnotthispayingingoldalsoreallydiminishthevalueofthemoney-unit，sinceuponthisvariationeverythingmustsellformoregoldthanbefore，aswehavealreadyobserved？
Consequently，merchandizewhichhasnotvariedinitsrelativevaluetoanyotherthingbuttogoldandsilver，mustbemeasuredbythemeanproportionofthemetals，andtheapplicationofanyothermeasuretoitisalteringthestandard。
Ifitismeasuredbythegold，thestandardisdebased；ifbysilver，itisraised，asshallpresentlybeproved。
If，topreventtheinconvenienceofmeltingdownthesilver，thestateshouldgiveupaffixingthevalueoftheirunittobothspeciesatonce，andshouldfixittoone，leavingtheothertoseekitspriceasanyothercommodity，inthiscasenodoubtthemeltingdownofthecoinwillbeprevented；butwillthiseverrestorethevalueofthemoney-unittoitsformerstandard？Wouldit，forexample，intheforegoingsupposition，raisethedebasedvalueofthemoney-unitinthegoldcoin，ifthisspeciesweredeclaredtobethestandard？Itwouldindeedrendersilvercoinpurelyamerchandise，andbyallowingittoseekitsvalue，wouldcertainlypreventitfrombeingmelteddownasbefore；becausethepieceswouldriseconventionallyintheirdenomination；oranagio，asitiscalled，wouldbetakeninpaymentsmadeinsilver；
butthegoldwouldnot，onthataccount，riseinitsvalue，orbegintopurchaseanymoremerchandisethanbefore。Werethereforethestandardfixedtothegold，wouldnotthisbeanarbitraryandaviolentchangeinthevalueofthemoney-unit，andadebasementofthestandard？
If，ontheotherhand，thestateshouldfixthestandardtothesilver，whichwesupposetohaveriseninitsvalue，wouldthiseversinktheadvancedvaluewhichthesilvercoinhadgainedabovetheworthoftheformerstandardunit，andwouldnotthisbeaviolentandanarbitrarychangeinthevalueofthemoney-unit，andaraisingofthestandard？
Theonlyexpedient，therefore，ashasbeensaid，isinsuchacasetofixthenumeraryunittoneitherofthemetals，buttocontriveawaytomakeitfluctuateinameanproportionbetweenthem；whichisineffecttheintroductionofapureidealmoneyofaccount。Thisshallbefartherexplainedaswegoalong。
Ihaveoneobservationonlytomakeinthisplace，towit，thattheregulationoffixingtheunitbythemeanproportion，oughttotakeplaceattheinstantthestandardunitisaffixedwithexactnessbothtothegoldandsilver。Ifitbeintroducedlongafterthemarketproportionbetweenthemetalshasdeviatedfromtheproportionestablishedinthecoin，andifthenewregulationismadetohavearetrospect，withregardtotheacquittingofpermanentcontractsenteredinto，whilethevalueofthemoneyunithadattacheditselftothelowercurrency，inconsequenceoftheprincipleabovelaiddown，thentherestoringthemoney-unittothatstandardwhereitoughttohaveremainedtowit，tothemeanproportionisaninjurytoalldebtorswhohavecontractedsincethetimetheproportionofthemetalsbegantovary。
Thisisclearfromtheformerreasoning。Themomentthemarketpriceofthemetalsdiffersfromthatinthecoin，everyonewhohaspaymentstomake，willpayinthatspecieswhichisratedhighestinthecoin；consequently，hewholends，lendsinthatspecies。If，afterthecontract，therefore，theunitbecarrieduptothemeanproportion，thismustbealosstohimwhohadborrowed。
Fromthiswemayperceivewhy，inthefirstarticleoftheprecedingchapter，itwassaid，thattherewaslessinconveniencefromthevaryingoftheproportionofthemetals，wherethestandardisfixedtooneofthem，thanwhenitisfixedtoboth。
Inthefirstcase，itisatleastuncertainwhetherthestandardorthemerchandize-speciesbetorise；consequentlyitisuncertainwhetherthedebtorsorthecreditorsbetogainbyavariation。Ifthestandardspeciesshouldrise，thecreditorswillgain；ifthemerchandize-speciesshouldrise，thedebtorswillgain；butwhentheunitisattachedtobothspecies，thenthecreditorsnevercangain，letthemetalsvaryastheywill:
ifsilverrise，thendebtorswillpayingold；ifgoldrise，debtorswillpayinsilver。Butwhethertheunitbeattachedtooneortobothspecies，theinfallibleconsequenceofavariationis，thatonehalfofthedifferenceiseithergainedorlostbydebtorsandcreditors。Theinvariableunitisconstantlythemeanproportionalbetweenthetwomeasures。
Iintendedtohavepostponedtheenteringuponwhatconcernstheinterestsofdebtorsandcreditorsinallvariationsofthecoin，untilIcametotreatparticularlyofthatmatter；butasitisathingofthegreatestconsequencetobeattendedto，ineveryproposalforalteringorregulatingthecoinofanation，itwill，perhaps，uponthisaccount，beararepetitioninanotherplace。
II。Torenderourideasasdistinctaspossible，wemustkeepthemsimple。Letusnowsupposethatthemetalsareperfectlywellproportionedinthecoin，butthatthecoiniswornbyuse。
Ifthisbethecase，wemusteithersupposeittobeallequallyworn，orunequallyworn。
Ifallbeequallyworn，Ithinkitneedsnodemonstrationtoprove，thatthemoney-unitwhichwasattachedtothecoin，whenweighty，drawingitsvaluefromthemetalscontainedinit，
mustnaturallydiminishinitsvalueinproportionasthemetalsarerubbedaway。
Ifthecoinbeunequallyworn，themoney-unitwillbevariouslyrealised，orrepresented；thatistosay，itwillbeofdifferentvalues，accordingtotheweightofthepieces。
Theconsequenceofthisisthesameasinthedisorderoftheproportionofthemetals:debtorswillchoosetopayinthelightpieces，andtheheavywillbemelteddown。Inproportion，therefore，tothisdisorder，willthevalueoftheunitgraduallydescend。ThiswasthegreatdisorderinEnglandin1695；whilethestandardofthepoundsterlingwasaffixedtothesilveronly，thegoldbeinglefttoseekitsownvalue。
III。Sincetheinventionofthemoneywheel，theinaccuracyinthefabricationisgreatlyprevented。Formerly，whenmoneywascoinedwiththehammer，themint-mastersweighedthecoindeliveredbytheworkmen，incumulo，bythepoundtroyweight，withoutattendingveryexactlytotheproportionofthepieces。
Atpresentexactnessismorenecessary，andeverypiecemustbeweighedbyitself。
Itisofverygreatconsequencethattheweightanddenominationsofcoinbeinexactproportiontothatoftheircurrentvalue，whichisalwaysrelativetothemoney-unitofaccount。Whenanyinequalityhappensthere，itiseasytoperceivehowallthepieceswhichareabovetheproportionoftheirjustweight，willbeimmediatelypickedup，andmelteddown，andnonebutthelightoneswillremainincirculation。
This，fromtheprinciplesalreadylaiddown，mustproportionallydiminishthevalueofthemoney-unit。
Fromwhathasbeenobservedconcerningthedeviationsinthecoinfromtheproportioninthemarketpriceofthemetals，andfromthelegalweight，wemaylaydownthisundoubtedprinciple，Thatthevalueofthemoney-unitofaccountisnottobesoughtforinthestatutesandregulationsofthemint，butintheactualintrinsicvalueofthatcurrencyinwhichallobligationsareacquitted，andallaccomptsarekept。
IV。AsIhaveatpresentprincipallyinviewtolaydowncertainprincipleswithregardtomoney，whichIintendafterwardstoapplytothestateoftheBritishcoin；andastheseprinciplesarehererestrainedtotheeffectswhicheveryvariationinthecoinhasuponthevalueoftheunitofmoneyinaccount，Ishallinthisplaceobserveonly，astotheimpositionofcoinage。
Thatcoinbeingnecessaryineverycountrywherethemoney-unitisattachedtothemetals，itmustbeprocuredbythosewhoareobligedtoacquittheirobligationsinmaterialmoney。
If，therefore，thestateshallobligeeveryonewhocarriesthemetalstotheminttopaythecoinage，thecointheyreceivemustbevalued，notonlyatthepricethemetalsbearinthemarket，whentheyaresoldasbullion，ormeremetal，ofnofarthervaluethanasaphysicalsubstance，butalsoattheadditionalvaluethesemetalsreceiveinbeingrenderedusefulforpurchasingcommodities，andacquittingobligations。Thisadditionalvalueisthepriceofcoinage。
If，therefore，inacountrywherecoinageisfree，asinEngland，thiscoinageshallcometobeimposed，themoney-unitcontinuingtobeaffixedasbeforetothesamequantityofthemetals，oughttoriseinitsvalue；thatis，oughttobecomeequaltoagreaterquantityofeverysortofmerchandizethanbefore；consequently，astheroughmetalsofwhichthecoinismadearemerchandize，likeeveryotherthing，thesamenumberofmoney-unitsrealized，orrepresentedinthecoin，oughttopurchasemoreoftheroughmetalsthanbefore:Thatistosay，thateverycountrywherecoinageisimposed，bullionmustbecheaperthancoin。
Thispropositionwouldbeliabletonoexception，wereittruethatnodebtcouldbeexactedbutinthenation’scoin；
becauseinthiscase，thecreditorwouldbeconstantlyobligedtoreceiveitatitsfullvalue。
Butwhennationsowetooneanother，thepartydebtormustpaythepartycreditorinhiscoin:thedebtor，therefore，isobligedtosellhisowncoinforwhathecangetforit，andwiththishemustbuyofthecoinofhiscreditor’scountry，inordertopayhimwithit。
Letus，toavoidabstractreasoning，takeanexample:andwecannotchooseabetterthanthatofEnglandandFrance。InEngland，coinageisfree，inFranceitcosts82/10percentasshallbemadeoutinitsproperplace。
FranceowesEngland1000l。sterling。InpayinginthemarketofLondon，thebullioncontainedinthissum，eitheringoldorsilver，thedebtispaid；becausethecoiningofitcostsnothing。HereFranceacquitsherdebtcheaperthanbysendingherowncoinasbullion；becausethebullionshesendsisnotworthanequalweightofhercoin。
EnglandowesFrance20，000livres。Inpayingthebullioncontainedinthissum，Englandisnotquit；shemustalsopayFrance82/10percentinordertoputitintocoin。
V。Theoperationofraising，anddebasingthecoinisperformedinthreeways。
First，Byaugmentingordiminishingtheweightofthecoin。
Secondly，Byaugmentingordiminishingtheproportionofalloyinthecoin。
Thirdly，Byaugmentingordiminishingtheproportionbetweenthemoneycoinandthemoneyofaccount，asifeverysixpencewerecalledashilling，andeverytwentysix-pencesapoundsterling。
TheFrenchcallthisincreasingordiminishingthenumeraryvalue:andasIthinkitisabettertermthanthatofraisingorsinkingthedenomination，Ishalltakethelibertynowandthentoemployit。
Thesethreeoperationsmaybereducedtoone，andexpressedbyoneterm:theyallimplytheaugmentingordiminishingoftheweightofthepuremetalsinthemoney-unitofaccount。
Itwouldrequireaseparatetreatise，toinvestigatealltheartificeswhichhavebeencontrived，tomakemankindlosesightoftheprinciplesofmoney，inordertopalliateandmakethispowerinthesovereigntochangethevalueofthecoin，appearreasonable。Buttheseartificesseemtobeatanend，andPrincesnowperceivethattheonlyschemetogetmoney，whenoccasionrequires，istopreservetheircredit，andtoallowthecoin，bywhichthiscreditisreckoned，toremaininastablecondition。
Therearestill，however，examplesofsuchoperationstobemetwith；forwhichreasonIshallsubjoin，towardstheendofthisbook，aparticularinquiryintotheinterestofPrinceswithregardtoalteringthevalueoftheircoin，whichisasynonimoustermwiththatofalteringthevalueoftheunitofmoney。
Chap。VI
HowthevariationsintheintrinsicvalueoftheunitofMoneymustaffectallthedomesticInterestofaNationWehavebrieflypointedouttheeffectsoftheimperfectionsofthemetalsinproducingavariationinthevalueoftheunitofaccount，wemustnowpointouttheconsequencesofthisvariation。
Ifthechangingthecontentofthebushelbywhichgrainismeasured，wouldaffecttheinterestofthosewhoareobligedtopay，orwhoareentitledtoreceive，acertainnumberofbushelsofgrainfortherentoflands；inthesamemannermusteveryvariationinthevalueoftheunitofaccountaffectallpersonswho，inpermanentcontracts，areobligedtomakepayments，orwhoareentitledtoreceivesumsofmoneystipulatedinmultiplesorinfractionsofthismoney-unit。
Everyvariation，therefore，upontheintrinsicvalueofthemoney-unithastheeffectofbenefitingtheclassofcreditors，attheexpenceofdebtors，orviceversa。
Thisconsequenceisdeducedfromanobviousprinciple。Moneyismoreorlessvaluableinproportionasitcanpurchasemoreorlessofeverykindofmerchandize。Now，withoutenteringanewintothecausesoftheriseandfallofprices，itisagreeduponallhands，Isuppose，thatwhetheranaugmentationofthegeneralmassofmoneyincirculationhastheeffectofraisingpricesingeneral，ornot，anyaugmentationofthequantityofthemetalsappointedtobeputintothemoney-unit，mustatleastaugmentthevalueofthatmoney-unit，andmakeitpurchasemoreofanycommoditythanbefore；thatistosay，if113grainsoffinegold，thepresentweightofapoundsterlingingold，canbuy113
poundsofflour；werethepoundsterlingraisedto114grainsofthesamemetal，itwouldbuy114poundsofflour；consequently，werethepoundsterlingaugmentedbyonegrainofgold，everymillerwhopaidarentoftenpoundsayearwouldbeobligedtosell1140poundsofhisflour，inordertoprocure10poundstopayhisrent，insteadof1130poundsofflourwhichhesoldformerlytoprocurethesamesum；consequentlybythisinnovation，themillermustloseyearlytenpoundsofflour，whichhislandlordconsequentlymustgain。Fromthisexample，I
thinkitisplain，thateveryaugmentationofthemetalsputintothepoundsterling，eitherofsilverorgold，mustimplyanadvantagetothewholeclassofcreditors，whobycontractarepaidinpoundssterling，andconsequentlymustbeaproportionallosstoalldebtorsinsuchcontracts，whomustpaybythesamedenomination。
Ishouldnothavebeensoparticularingivingaproofofsoplainaproposition，haditnotescapedthepenetrationofthegreatMrLocke。
In1695aproposalwasmadetothegovernmentofEngland，todiminishthevalueofthepoundsterlingby20percentbymakinganewcoinageofallthesilver，andbymakingeveryshilling1/5
lighterthanbefore。TheauthorofthisprojectMrLowndes
havinggivenhisschemetothepublic，wasansweredbyMrLocke，thatthisdebasingofthevalueofthemoney-unitwaseffectuallydefraudingallthelandedinterestof20percentoftheirrents。
Lowndesreplied，thatsilverwasaugmented20percentinitsvalue，andthatthereforethepoundsterling，thoughreduced20
percentinitsweightofpuresilver，wasstillasvaluableasbefore。ThispropositionMrLockeexplodedwiththemostsolidreasoning，andindeednothingcouldbemoreabsurd，thantoaffirm，thatsilverhadriseninvaluewithrespecttoitself。
ButthoughMrLockefeltthatallthelandedinterest，andallthosewhowerecreditorsinpermanentcontracts，mustlose20percentbyMrLowndes’sscheme，yethedidnotperceivewhichisverywonderfulthatthedebtorsinthesecontractsmustgain。
Thisledhimtoadvanceaveryextraordinaryproposition，whichabundantlyprovesthattheinterestsofdebtorsandcreditors，whicharenowbecomeoftheutmostconsequencetobeconsideredattentivelybymodernstatesmen，werethenbutlittleattendedto，andstilllessunderstood。
Wefindinthe46thpageofMrLocke’sFartherConsiderationsconcerningraisingthevalueofMoney，thatMrLowndeshadaffirmedinsupportofhisscheme，thatthisnewmoneywouldpayasmuchdebt，andbuyasmanycommoditiesasthethenmoneywhichwasonefifthheavier。Then，addsMrLocke，’Whathesaysofdebtsistrue；butyetIwouldhaveitwellconsideredbyourEnglishgentlemen，thatthoughcreditorswilllose1/5oftheirprincipalanduse，andlandlordswilllose1/5oftheirincome，yetthedebtorsandtenantswillnotgetit。Itmaybeasked，whowillgetit？Those，Isay，andthoseonly，whohavegreatsumsofweightymoneywhereofoneseesnotapiecenowinpayments
hoardedupbythem，willgetit。Tothese，bytheproposedchangeofourmoney，willbeanincreaseof1/5addedtotheirriches，’paidoutofthepocketsoftherestofthenation。’
Iftheauthorityofanymancouldprevail，wherereasonisdark，itwouldbethatofMrLocke；andhadanyotherthansuchapersonasLockeadvancedsuchadoctrine，Ishouldhavetakennonoticeofit。
Herethisgreatman，throughinadvertency，atoncegivesuptheargumentinfavourofhisantagonist，afterhavingrefutedhiminthemostsolidmanner:forifaman，whoatthattimehadhoardedheavy1/5uponitsbeingcoinedintopieces1/5lighter，Mrmoney，weretogainLockemustagreewithMrLowndes，thatalightpiecewasasmuchworthasaheavyone。
Thosewhohadheavymoneyatthattimelockedupintheircoffers，wouldgainnodoubt，providedtheyweredebtors；becausehaving，Ishallsuppose，borrowed4000l。sterlinginheavymoney，andhavingalikesumborrowedfromtheircoffers，augmentedto5000l。byMrLowndes’splan，theymightpaytheirdebtof4000l。andretainonethousandclearprofitforthemselves。Butsupposingthemtohavenodebts，whichwaycouldtheypossiblygainbyhavingheavymoney，sincethe5000l。afterthecoinage，wouldhaveboughtnomoreland，normoreofanycommodities，than4000l。wouldhavedonebeforethecoinage。
Wemaythereforesafelyconclude，thateverydiminutionofthemetalscontainedinthemoney-unit，mustimplyalosstoallcreditors；andthatinproportiontothisloss，thosewhoaredebtorsmustgain。
Thatonthecontrary，whateveraugmentationismadeofthemoney-unit，suchaugmentationmustbehurtfultodebtors，andproportionallyadvantageoustocreditors。
Intheprecedingchapters，Ihavelaiddown，withasmuchdistinctnessasIamcapableof，themostgeneralprincipleswhichinfluencethedoctrineofmoney，andtotheseIthinkeveryothermaybeapplied。
Thecombination，however，oftheseprincipleswithoneanother，occasionsasurprisingvarietyofproblems，relatingtomoney，coin，andbullion，whicharehardtosolve，bythedifficulty，merely，ofapplyingthemtotherule。
Inorderthereforetorenderthisinquirymoreuseful，I
shallnowapplytheprinciplesIhavelaiddown，tothepresentstateoftheBritishcoin，andtotheresolutionofeveryquestionwhichshalloccurduringtheexaminationofthedisorderintowhichithasfallen。
BookIV
OfCreditandDebtsPartI
OftheInterestofMoneyIntroductionIcomenowtoinquireintotheprinciplesofcredit；asubjectalreadyintroducedinthethe27thchapterofthesecondbook，whereIexaminednatureofcirculation，andpointedouttheprinciples，whichdirectastatesmanwhenandhowtoretardoraccelerateitsactivity，accordingasthepoliticalinterestsofhispeoplemayrequire。
Inthatchaptertheobjectwas，whenandhoweithertoextendorrestraintheuseofcredit，accordingtopoliticalcircumstances。Theinquirynowcomestobe，whatthiscreditis；
uponwhatitisfounded；whatthevariousspeciesofitare；whatarethemethodsofestablishingandextendingit，whileitisinitsinfancyandvigour；howtosustainitwhenitisoverstretched；andlastofall，howtoletitfallasgentlyaspossible，whenbynohumanprudenceitcanbelongersupported。
Manypoliticalwritersintreatingofcredit，representitasbeingofaverymysteriousnature；owingitsestablishmenttoaconfidencenoteasilyaccountedfor，anddisappearingfromtheslightestunfavourablecircumstances。
Thatcredit，initsfancy，isofaverydelicatenature，I
willinglyallow。asalsothatwehavemanyexampleswhichconfirmthesentiments，ofthosewhobelieveittocontain，initself，somethingverymysterious:butthisprovesnomore，thanthat，insuchcases，creditasIconsiderit，andasitwillappearreallytobehasnotbeenproperlyestablished。Thecauseofconfidencehashadnothinginitbutopinion，andwhenthisisthecase，creditisbutashadow；andlikeathinvapour，itmaybedissipatedbythesmallestbreathofwind。
Theyallagreethatcreditisnomorethanconfidence，buttheydonotexaminehowthisconfidenceistobeestablishedonasolidfoundation。
Theoperationsofcreditareincompatiblewiththeinvolvedcontractsofthelaw，andwiththespiritofintricateland-securities。Thepolicyofsuchcontractswasanalogoustothemannersofthetimeswhichgavethembirth。Tradeisalaterefinement，inmostnationsofEurope，andindustryisstillalater:thebeginningsofbothareslow，imperceptible，andobscure。Theinstrumentsbywhichtheyarepromoted，arethelowerclassesofapeople；theinterestoftheindividualswhocomposethem，mayappeartosome，tobebelowtheattentionofastatesman；andyetitisbytheaccumulationoftheirindustryonly，thatthishugefabriciserected。
Toestablishthatcredit，whichisnecessaryforcarryingonsogreatawork，astatesmanmustlendhishand。Hemustgiveavaliditytomercantileobligations，whichhavenonameinhislaw-books:hemustsupporttheweakagainstthestrong:hemustreformtheunwieldyprocedureofcourtsofjustice:hemustfacilitatethesaleofproperty:hemustestablishthecredibilityofmerchants’booksregularlykept:hemustdiscouragefrauds，andsupportfairdealing。
Whensuchaplanisonceestablished，confidencewillfindabasisinthepropertyofeveryindividualwhoprofitsbyit。Whenitisnotestablished，creditwillappearlikeameteor:
intelligentandcraftymenwillavailthemselvesofit，andtherebydazzletheeyesofthepublic，withgildedschemesofopulenceandprosperity:mankindwillflytoindustry，confidencewillbeestablished；butastherewillbenomethodofdeterminingtheboundsofthisconfidence，thepromotersoftheschemewillprofitofthedelusion:confidencewillvanish；andthewholewillappeartohavebeenamystery，adream。Isnotthisarepresentationofmanyprojectssetonfootsincethebeginningofthiscentury？WhatweretheSouthSea’sandMissisippi’s，butanabuseofconfidence？Hadeverthecauseofconfidencebeenexaminedinto，wouldeversuchextravagantideashavearrivedattheheighttheydid？
Creditthereforemusthaveareal，notanimaginaryobjecttosupportit；andalthoughIallowthatinalloperationsofmercantilecredit，theremustbesomethinglefttochanceandaccident；yetthischancemustbearadueproportiontotheextraordinaryprofitsreasonablytobeexpectedfromtheundertaking。
Fromthisitappears，whatanusefulspeculationitistoinquireproperlyintothenatureofcredit；todeducewithaccuracytheprinciplesuponwhichitisfounded；tobanishmysteryfromplainreason；toshewhoweverythemostsurprizingeffectofcredit，whethertendingtotheadvantage，ortothehurtofsociety，mayeasilybeaccountedfor；and，whichisthemostusefulofall，topointouthowsucheffectsmaybeforeseen，soaseithertobeimprovedorprevented。
Ingoingthroughsoextensiveasubject，asadeductionoftheprinciplesofcredit，methodisverynecessary；andwhenadetailislong，subdivisionsareveryconvenient。Ihave，uponthisaccount，dividedthisbookintofourparts。
Thefirstshallbesetapartfordeducingtheprincipleswhichregulatetherateofinterest；becausethisisthebasisofthewhole。
Thesecond，fortheprinciplesofbanking；underwhichI
shallhaveanopportunitytounfoldthewholedoctrineofdomesticcirculation。
Thethird，forthoseofexchange。whichisequallywellcalculatedforcarryingonforeigncirculation；andastowhatregardsdebts，andtheborrowingofmoney，withalltheconsequenceswhichtheydrawalongwiththem，theseimportantobjectswillfurnishamplematterforThefourthandlastpart，whichshalltreatoftheprinciplesofpubliccredit。
Thesethingspremised，Iproceedtothedefinitionofcredit。
Chap。I
WhatCreditis，andonwhatfoundedCreditisthereasonableexpectation；entertainedbyhimwhofulfilshissideofanycontract，thattheothercontractingpartywillreciprocallymakegoodhisengagements。
Toillustratethis，wemaysaywiththelawyers，thatasallcontractsmaybereducedunderoneofthefollowingheads，Doutdes，doutfacias；facioutdes，facioutfacias:sohewhoactuallygivesorperformshispart，isthecreditor，orthepersonwhogivescredit；andhewhopromisesonlytogiveortoperform，isthedebtor，orthepersonwhoreceivesit。
Credit，therefore，isnomorethanawellestablishedconfidencebetweenmen，inwhatrelatestothefulfillingoftheirengagements。Thisconfidencemustbesupportedbylaws，andestablishedbymanners。Bylaws，theexecutionofformalcontractsmaybeenforced:manners，alone，canintroducethatentireconfidencewhichisrequisitetoformthespiritofatradingnation。
Credit，initsfancy，mustbesupportedbystatutes，andenforcedbypenalties；butwhenitisoncewellestablished，everyrecoursehadtolaw，isfoundtowoundthedelicacyofitsconstitution。Forthisreasonwesee，thatincertainnations，1*thelegislatorwiselyexcludestheordinarycourtsofjusticefromextendingtheirrigidjurisdictionovermercantileengagements:theyleavetotheprudenceandgoodfaithofmenversedincommerce，tosolvethedifficultieswhichresultfromsuchtransactions；becausetheyaretobeinterpretedmoreaccordingtotheconstantfluctuationofmanners，thantothemorepermanentinstitutionsofpositivelaw。
Themorethejurisdictionofthestatesmanislimited；or，inotherwords，thelessthepowerofanysovereignisrestrained，bythelawsandconstitutionofthestatehegoverns，themoreitbehoveshimtoavoideverystepofadministrationwhichcanmakehisauthoritybefeltincaseswherecreditisconcerned。Ifheshouldhappen，forexample，tobeadebtorhimself，hemusttakegoodcarenevertoappearinanyotherlighttohiscreditor。Themomentheputsonthesovereign，thesamemomentallconfidenceislost。Forthesereasons，wehavehithertohadfewexamplesI
mightperhapshavesaidnoneatallwherecredithasbeenfoundpermanentlysolid，underapuremonarchy。
Butwemustobserve，atthesametime，thatthestabilityofcreditisnotincompatiblewiththisformofgovernment。Atcertaintimes，wehaveseencreditmakeasurprisingprogressinFrance；andithasneversufferedanycheckinthatstate，butfromactsofpower，whichIthinkhaveproceededmorefrominadvertency，andwantofknowledge，thanfromaformeddesignofdefraudingcreditors。Thesemaybelookedonasblundersinadministration；becausetheyhaveconstantlydisappointedthepurposeforwhichtheywereintended。Letmeprovethisbysomeexamples。
Thearretof21May1720，ofwhichweshallgiveanaccounthereafter，destroyedinonedaythewholefabricofcredit，whichhadbeenerectedinFranceduringthecourseofthreeyears；andwhichinsoshortatimehadmountedtoaheighthardlycredible。Isay，thatinonedaythisinadvertentstepfornorealinjurywasintendeddestroyedthecreditof2，697，048，000livresofbanknotes，above120millionssterling
andof624，000actionsoftheEastIndiacompany，whichreckonedat5000livresapiece，thepriceatwhichthecompanyhadlastsoldthemamountto3，120，000，000livres，orabove140millionssterling。Thusatoneblow，andinoneday，260millionssterlingofpapercurrency，payabletobearers，werestruckoutofthecirculationofFrance；byanuselessandinadvertentactofpower，whichruinedthenation，andwitheredthehandwhichstruckit:aneventtoolittleunderstood，andtoolittlerememberedinthatkingdom。
Thisplainlyappearsfromtheirlateconduct；forintheendof1759，atatimewhenthecreditofFrancewasinsoflourishingasituationastohaveenabledhertoborrow，thatveryyear，near200millionsoflivres；andwhentherewasaprospectofbeingabletoborrow，intheyearfollowing，afargreatersum，theshuttingupwhattheycalledtheircaissed’amortissement，forthesakeofwithholding32millionsoflivresinterestduetothecreditors，struckallcreditwithforeignersdeadinoneinstant。
Theseexamplesshewwhatfatalconsequencesfollowamisjudgedexerciseofpowerinmattersofcredit。
Ontheotherhand，therapidprogressofcreditinFrancebeforetheMissisippi，andthestabilityofitfrom1726totheyear1759，abundantlyproves，thatnotwothingsaremorecompatiblethanmonarchyandconfidence。Allthatiswantingistheestablishmentofonemaximingovernment；towit，thattheKing’spowerisnevertoextendsofar，astoalterthesmallestarticleofsuchcontractsashavebeenmadewiththosewhohavelentmoneyfortheserviceofthestate。
Maximsingovernmentbindthemonarchandthelegislature，aslawsbindsubjectsandsubordinatemagistrates:theoneandtheotheroughttobeheldinviolable，sofarastheyregardcredit；
orconfidencewillbeprecarious。
WhathassupportedthecreditofGreatBritain，butthemaximconstantlyadheredto，thatthepublicfaithpledgedtohercreditorsistobeinviolable？
Doesanyonedoubt，butthelegislatureofthisnationmayspungeoutthepublicdebts，withasmucheaseasaKingofFrance？Butintheonekingdom，thewholenationmustbeconsultedastotheproprietyofsuchastep；intheother，itmaybedoneattheinstigationofasingleperson，ignorantoftheconsequences:butIhopetomakeitappear，beforetheconclusionofthisbook，thatitisimpossibletoformasupposition，bywhichastatecanbebenefittedbydeliberatelydeparting，foronemoment，fromthefaithofherengagements。A
nationalbankruptcymaynodoubthappen，andbecomeirreparable；
butthismustbewhenthestateisemergingfromasignalcalamity，afterhavingbeeninvolvedinruinandconfusion。
Confidence，then，isthesoulandessenceofcredit；andineverymodificationofit，weshallconstantlyfinditbuiltonthisbasis:butthisconfidencemusthaveforitsobjectawillingnessandacapacityinthedebtortofulfilhisobligations。