Money and trade considered

by John Law

Goods given as a value, ought for their other uses to be valuable, equal to what they are given for. silver was bartered as it was valued for its uses as a metal, and was at first given as money, according to the value it had in barter. silver has acquired an additional value since, that additional use it was applyed to occasioning a greater demand for it; which value people have not been sensible of, the greater quantity making it fall more: but it has kept it from falling so low it would have fallen, if it had not been used as money, and the same quantity had come into Europe.

’Tis uncertain how long silver may keep that additional value: if England set up a money of another kind, silver will not fall to one third, because used in other places as money; but the lesser demand, besides the ordinary fall from the greater quantity coming into Europe, would occasion an extraordinary fall perhaps of 10 per cent: if the new money then in England did not encrease beyond the demand for it, it would keep its value, and be equal to so much more silver at home or abroad than it was coined for; as silver would be of less value, from the ordinary and extraordinary fall.

If England changed their money, other countries may do the same. if Holland alone kept to silver money, the price of silver may be supposed to fall immediately 50 per cent, from the lesser demand for it as money. and a 100 lib. in Holland be worth no more than 50 lib. new money in England, whether sent in specie or remitted by exchange; and as more silver came into Europe, it would fall yet lower, because of its greater quantity.

It may be objected, that in Scotland the quantity of goods are proportioned to the demand as they have been some years ago; and money scarcer, the demand for it the same or greater. so if goods and money are higher or lower in value, from their greater or lesser quantity in proportion to the demand for them; money should by its great scarcity be more valuable, and equal to a greater quantity of goods. yet goods differ little in price, from what they were when money was in greater quantity.

To this it’s answered, the value of goods or money differs, as the quantity of them or demand for them changes in Europe; not as they change in any particular country. goods in Scotland are at or near the same value with goods in England, being near the same in quantity in proportion to the demand as there: money in Scotland is not above one 40th part of the money in England, proportioned to the people, land, or product; nor above a 10th part proportioned to the demand. if Scotland was incapable of any commerce with other countries, and in the state it is now, money here would buy 10 times the quantity of goods it does in England, or more: but as Scotland has commerce with other countries, tho’ money were much scarcer than now, or in much greater quantity than in England; if there were but 10000 lib. in Scotland, or a million, the value of goods would not differ above 30 per cent, from what they were abroad, because for that difference goods may be exported, or imported. prohibitions may raise the difference higher.

Brittannia languens and others on trade and money, are of opinion that goods in any country fall in value, as money in that particular country grows scarcer. that, if there was no more than 500 lib. in England, the yearly rent of England would not exceed 500 lib. and an ox would be sold for a penny. which opinion is wrong, for as the ox might be exported to Holland, it would give a price in England equal or near to that it would give in Holland: if money were supposed to be equally scarce in Holland, and other places as in England, the ox might give no more than a penny, but that penny would have a value then equal to 5 lib. now; because it would purchase the same quantity of goods in England or other places, that 5 lib. does now.

The same answer may be given to these who think an addition to the money of any particular country would undervalue it so, that the same quantity of goods would cost double the money as before.

If the money and credit current in England be 15 millions, Scotland reckoned as 1 to 10, the money in Scotland encreased to a million and a half, the demand in proportion to the demand in England; that addition to the money of Scotland, would not make money of less value here, than it is now in England. goods in Scotland would sell as they sell in England, the product of the country would perhaps be 10 or 20 per cent dearer, to bring it equal to what it sells in England; but all sorts of manufacture would be cheaper, because in greater quantity: and all goods imported would be cheaper, money being easier borrowed, merchants would deal for a greater value, and men of estates would be capacitate to trade, and able to sell at less profit. nor would land rise higher than in England, the buyer having in his choice to buy elsewhere; the better security of a register may be supposed to add a year’s purchase or two to the value.

If the money of any particular country should encrease beyond the proportion that country bears to Europe; it would undervalue money there, or, according to the way of speaking, it would raise goods: but as money would be undervalued every where the same, or near to what it were there; it would be of great advantage to that country, tho’ thereby money were less valuable: for that country would have the whole benefit of the greater quantity, and only bear a share of the lesser value, according to the proportion its money had to the money of Europe. when the Spaniards bring money or bullion into Europe, they lessen its value, but gain by bringing it; because they have the whole benefit of the greater quantity, and only bear a share of the lesser value.

What has been said, proves, 1st. that silver money is an uncertain value; because lyable to be altered in the fineness or denomination by the prince. A crown has no more silver in it than half a crown or 15 pence had a 150 or 200 years ago.