Money supply
Table of Contents
19 People say that:
Consumable commodities are soon destroyed, but gold and silver are more durable. If not continually exported, gold and silver could be accumulated for ages to increase the country’s real wealth.
It is most disadvantageous for any country to trade such lasting commodities for such perishable ones.
However, those people do not say that the exchange of English hardware for French wines is disadvantageous, even if hardware is also a very durable commodity .
If English hardware were not continually exported, it might accumulate for ages and incredibly increase England’s pots and pans.
In reality, the number of such pots in every country is limited by the need for them. It would be absurd to have more pots and pans than necessary for cooking food.
- If the quantity of food increased, the number of pots and pans would increase with it.
- The additional food would maintain more workers who made those additional pots and pans.
The quantity of gold and silver in every country is likewise limited by the need for those metals.
They are used:
- as coin money which circulate commodities
- as plates used as furniture
The quantity of coin in every country is regulated by the value of the commodities circulated by it.
- Increase the value of commodities and some of those commodities will be immediately be sent abroad to buy more coins to circulate them.
The quantity of plate is regulated by the number and wealth of those families who use them.
- Increase the number and wealth of such families, and this increased wealth will probably be used to buy more plates.
Increasing the wealth of any country by introducing or detaining an unnecessary amount of gold and silver is as absurd as increasing the happiness of private families by obliging them to keep unnecessary kitchen plates.
- The expence of buying those unnecessary plates would reduce the amount and goodness of the family’s food.
Likewise, the expence of buying an unnecessary quantity of gold and silver reduces the wealth which feeds, clothes, lodges, maintains, and employs the people in every country*.
Superphysics Note
It must be remembered that gold and silver, whether in coin or plate, are utensils like the utensils of the kitchen.
- Increase the consumable goods to be circulated, managed, and prepared by gold and silver, and you will infallibly increase the use and amout of gold and silver
- But if you unnaturally increase the amount of gold and silver, you will infallibly reduce the use and amout of gold and silver
If gold and silver were accumulated beyond the amount needed, no law could prevent them from being immediately sent out of the country because:
- their transportation is so easy
- the loss in their lying unemployed is so great
20 It is not always necessary to accumulate gold and silver to carry on foreign wars and maintain fleets and armies in distant countries.
- Fleets and armies are maintained with consumable goods, not with gold and silver*.
Superphysics Note
The nation which has more than sufficient domestic industry can maintain foreign wars in distant countries because it has the means to buy consumable goods in those distant countries.
21 A nation may purchase the pay and provisions of an army in a distant country by sending abroad, some of its:
- accumulated gold and silver
- manufactures
- raw produce
22 The gold and silver stored up in any country may be distinguished into 3 parts:
-
Circulating money
-
The plate of private families
-
The prince’s own treasury, collected by many years parsimony
The Circulating Money
23 Not much can be spared from the circulating money of the country because there is seldom much redundancy.
The value of goods bought and sold in any country requires a certain amount of money to circulate and distribute them to their consumers.
The channel of circulation draws to itself a sum sufficient to fill it and never admits any more.
In the case of foreign war, something is withdrawn from this channel. Much more people are maintained abroad than at home.
Fewer goods are circulated at home.
- Less money becomes necessary to circulate them.
An extraordinary amount of paper money, exchequer notes, navy bills, and bank bills in England, is generally issued during wartime. These replace the circulating gold and silver.
These allow more gold and silver to be sent abroad. All this is but a poor resource for maintaining an expensive and long foreign war.
24 The melting down of the plate of private families is a more insignificant resource in increasing the circulating money.
In the beginning of the last war, the circulating money of France was not increased enough to compensate the loss of plate.
25 In the past, the accumulated treasures of the prince was a more lasting resource.
Presently, no European prince accumulates treasure, except the king of Prussia.
26 The foreign wars of the present century are perhaps the most expensive wars ever recorded.
These wars depended little on:
- the exportation of the circulating money
- the plate of private families
- the treasure of the prince
The last French war cost Great Britain more than £90 million.
It included:
- £75 million of new debt
- an additional 10% land-tax
- what was annually borrowed of the sinking fund
More than 2/3 of this amount was spent in Germany, Portugal, America, the Mediterranean ports, and the East and West Indies. The English kings had no accumulated treasure. English plate was not melted down.
The circulating gold and silver of England did not exceed £18 million.
- Since the recent gold recoinage, it was much under-rated.
Let us suppose that the gold and silver was £30 million.
- Had the war been done with English money, all of it must have been sent out and returned at least twice between 7 years.
- It would be the most decisive argument on how unnecessary it is for government to watch over the preservation of money.
- The whole money of England must have left and returned two times in that short period without anybody knowing anything about it.
The channel of circulation was never empty during this period.
- The profits of foreign trade were greater than usual during the whole war.
- It was especially greater towards the end of it.
The great profits caused, what it always causes, an over-trading in all of Great Britain.
The overtrading caused the usual complaint of the scarcity of money, which always follows over-trading.
Many people who had no means to buy money nor credit to borrow money, wanted money
The creditors found it difficult to get payment because the debtors found it difficult to borrow.
Gold and silver can be obtained by people who had that value to give for them.
27 The enormous cost of the recent war must have been chiefly defrayed by the exportation of British commodities and not by the exportation of gold and silver.
When the government contracted with a merchant to remit money to a foreign country, the merchant tried to pay his foreign correspondent with commodities in exchange for a bill.
If the British commodities were not in demand in that country, the merchant would send them to another country and buy a bill on that country.
When properly suited to the market, the transportation of commodities always earns a big profit. The transportation of gold and silver rarely has any profit.
When those metals are sent abroad to buy foreign commodities, the merchant’s profit arises from the sale of those commodities at home.
It does not arise from the purchase of those goods.
When money is sent abroad merely to pay a debt, the merchant gets no returns nor profit.
He naturally finds a way to pay his foreign debts with commodities than with gold and silver.
According to the author of The Present State of the Nation, the huge amount of British goods exported during the recent war did not bring back any returns.