CAROLINE. When the exportation of specie was prohibited, the only use that could be made of a superfluous quantity of it, would be to melt it down and re-convert it into bullion. MRS. B. But melting the coin was, at the same time, equally illegal. A superfluous quantity of money, therefore, (were these laws never infringed,) was necessarily added to the circulation, and depreciated the value of the whole. How different is the situation of the country now that such prohibitory laws no longer exist! No sooner does money accumulate so as to occasion a depreciation of its value, or, in other words, an advance in the price of commodities, than our merchants export specie, to purchase foreign goods; while at the same time foreign merchants send their goods to this country where prices have risen, and exchange them, not for other goods, which are dear, but for money, which is cheap. CAROLINE. That is to say, they will sell, but not purchase? MRS. B. Precisely it is thus that a country is drained of its superfluous specie; as this traffic goes on, money rises in value, commodities fall in price, and foreign merchants again exchange their goods for commodities of the country, instead of receiving payment for it in specie. No apprehension need therefore be entertained of ill consequences arising either from the melting down or exporting the coin of the country. This exportation will take place secretly whenever there is a superfluity, however severe the law may be against it; the only difference is, that instead of being carried on in an open and regular manner by merchants of respectability, it is thrown into the hands of men of despicable character, who are tempted by extraordinary profits to engage in this illicit traffic. Could Spain and Portugal, countries which receive all the precious metals imported from America to Europe, have carried into effect the absurd restrictive laws by which they attempted to keep their gold and silver at home, those metals would eventually have become of little more value to them than lead and copper. If you have understood what I have said, you will now be able to tell me what effect will be produced in the mercantile transactions of a country, which is not shackled by restrictive laws, when a scarcity of money produces a fall in the price of commodities. CAROLINE. In that case the very reverse will happen of what we before observed. Foreign merchants will come and buy goods, and instead of offering merchandise in exchange, will bring money in payment; for they will be willing to make purchases, but not sales at a cheap market. MRS. B. It is thus that gold and silver are diffused throughout all parts of the civilised world; wherever there is a deficiency, it flows in from every quarter; and wherever there is a redundancy, the tide sets in an opposite direction. It is the regular diffusion of the precious metals, and their constant tendency to an equality of value, which renders them so peculiarly calculated for a general standard. Were money as liable to variation of value as the commodities for which it serves as a medium of exchange, it would be totally unfit for a standard. 299 CONVERSATION XVII. Subject of MONEY continued. OF THE DEPRECIATION OF GOLD AND SILVER. OF THE OF PAPER MONEY. 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 converted into plate and jewellery, yet the greater 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 pro portional 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 not only keep pace with, but 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 |