Money and trade considered

by John Law

Suppose the yearly export first cost 300000 lib. sold abroad 390000 lib. the import, and expence abroad 410000 lib. and 20000 lib. sent in money, to pay the ballance. the money raised one third, and goods to keep the prices they had before, 225000 l. sent to Scotland in foreign money, or goods, or by exchange, would buy what was sold abroad for 390000 lib. the export, import, and expence abroad continuing the same, Scotland would be due a ballance of 185000 lib. for, tho’ Scots goods were sold under the value, yet other nations would not sell their goods for less than before; or than they could have in other places.

It may be alledged, we have more product and manufacture, than is consumed, or exported; and selling cheaper, would occasion a greater demand for our goods abroad.

The product and manufacture might be much increased, if we had money to imploy the people: but, I’m of opinion we have not any great quantity of goods, more than what is consumed or exported. allow selling cheaper would occasion a greater demand; that the greater demand, would occasion an increase in the product, and manufacture, to the value of a 100000 lib. and allow that the extraordinary cheapness of goods, did not occasion a greater consumption in the country: yet, we would be in the same condition as before; 20000 l. would be still due of ballance, and the improvement would be given to foreigners for nothing. but this improvement is imaginary, for tho’ the demand increased, yet without more money more people could not be imployed, so no further improvement could be made: we would be forced to retrench near one half of the ordinary consumption of foreign goods, and expence abroad; not having money to pay the great ballance would be due.

Some think foreign money being raised, would bring in money to Scotland.

Tho’ the crown were rais’d to 10 s. yet if a ballance is due by Scotland, the exchange will be above the par, and, ’tis not to be supposed an English merchant will bring crowns to Scotland, when for a 100 payed in at London, he can have 105 or 6 of the same crowns payed him at Edinburgh.

If the ballance of trade was equal, foreign money raised, and Scots money not raised in proportion; foreign money would be brought in, and a greater value of Scots money would be carried out. ’tis the same loss to a country when money is raised, and goods do not rise in proportion: if foreigners send in money to buy goods, and this money when exported is not valued so high as here; the return in goods will be so much less, besides the want of the profit we would have had on the export of our goods.

If all import, and foreign expence were discharged, Scotland would then be so much richer, as there was bullion or money imported: but, if that prohibition be supposed, Scotland would be richer by keeping the money at the value it has; because, a greater quantity would be brought in, to buy the same quantity of goods.

If we could be supposed to be without any commerce with other nations, a 100 lib. may be allayed and raised to have the same effect in trade as a million: but, if a stranger were suffered to come to Scotland, he might purchase a great part of the land or goods with a small sum. and a rich man here would make a very small figure abroad.

Money is the measure by which all goods are valued; and unless goods rise to the full proportion the money is raised, the goods are undervalued. if the yearly value of Scotland in product and manufacture be 2 millions, at 20 years purchase 40 millions. the money a 100000 lib. raising the money 20 per cent, makes it pass for a 120000 lib. suppose the goods rise only 10 per cent, then that a 120000 l, is equal in Scotland to a 110000 l. of the money before it was raised; and buys the same quantity of goods. so, an addition is made of 20000 lib. to the tale and of 10000 lib. to the value of Scots or foreign money, compared with the value of Scots goods: but the measure by which goods are valued, being raised in the denomination 20 per cent; and the goods rising only 10 per cent: Scotland is near 4 million, or one tenth less valuable than before. and any man who sells his estate, will receive a tenth less silver, or of any other foreign goods for it, than if he had sold it before the money was raised.

France and Holland are given as examples of raising and allaying the money. in France the money is higher in the denomination than in other countries, but that does not hinder the money of France to be exported. when the lued’ore was at 12 livres, the ballance was against France, exchange 10 per cent above the par: and a 110 lued’ores at 12 livres were payed then at Paris, for a 100 lued’ores of the same weight and fineness at Amsterdam, and passing there for 9 guilders bank money; so 10 per cent was got by exporting money from France. when the lued’ore was raised to 14 livres, that did not make the ballance against France less; the exchange continued the same, 110 lued’ores tho’ at 14 livres were payed for a bill of a 100 at Amsterdam, and the same profit was made by exporting money. if the exchange happened to be lower, it was from the ballance of trade due by France being less, and that would have lowered the exchange whether the money had been raised or not. but the raising the money, so far from bringing the ballance to the French side, keeps the ballance against France: for, as their goods do not rise to the full proportion the money is raised, so French goods are sold cheaper, and foreign goods are sold dearer, which makes the ballance greater, occasions a greater export of money, sets idle so many of the people as that money employed, lessens the product or manufacture, the yearly value of the country, and the number of the people.