“Indeed! In all money bargains, one party buys goods with money, and the other buys money with goods. How should countries that have no gold and silver mines procure their money in any other way? England buys gold and silver from South America with cotton goods; and the Americans get cotton goods by paying gold and silver, sometimes in coin, and sometimes in lumps of metal. These metals are sometimes, as you see, a commodity, and some times a medium of exchange, like our skins. It there happens to be plenty to be had, either of the one or the other, their value rises and falls, like the value of all other commodities,—according to the cost and trouble of procuring them, and a few other circumstances. If there happens to be a scarcity, their exchangeable value may be raised to any height, in proportion to the scarcity, and they cease to be commodities.”
“And just the same, I suppose, whether they are in good condition or in bad? My mouse-skin bought as many things to-day, worn and jagged as it was, as it would have bought if it had been new, and sleek, and soft.”
“Yes; but as a commodity it would now bear little value. If there were a hundred new ones in the market to-morrow, the old ones would scarcely sell for anything as mitten materials.”
“To be sure. They would make very shabby, rotten mittens. But it is a good thing that we have not always this rich merchant here, unless indeed we could always get what skins we want. He might play all kinds of tricks with us.”
“Like some foolish kings with their people, my dear; but kings are more sure to be punished for such tricks than this merchant. When he has ruined us all, he can travel away, and enjoy his profits elsewhere; but kings who have put bad money into the market under the name of good, or thought they could vary the quantity as they pleased for their own purposes, have found themselves in a terrible scrape at last. When there was too much coined money among the people, some of it was sure to disappear——”
“Where did it go to?”
“If the people could manage to send it abroad to where money prices were not so high, they did so. If not permitted to do this, it was easy to melt it down at home, and make cups and dishes, and chains and watches of it.”
“And then, if there was too little, I suppose they made their plate and chains into coins again. But could they do this without the king’s leave?”
“The kings are not sorry to give leave, because the people pay governments something for having their metals coined. But whenever governments meddle to injure the coin, or to prevent its circulating naturally, they are sure to suffer; for violent changes of price make many poor, while they make a few rich; and the consequence of this is that the government is not well supported. The people are not only angry, but they become unable to pay their taxes.”
“Do people know directly when more money is sent out, or some drawn in?”