Money and trade considered

by John Law

The objection may be made against silver money, and with good reason; for it falls faster in its value than other goods, and may soon be reduced to its value as a metal.

The paper money propos’d is equal to its self; but to continue equal to such a quantity of any other goods, is to have a quality that no goods can have: for that depends on the changes in these other goods. it has a better and more certain value than silver money, and all the other qualities necessary in money in a much greater degree, with other qualities that silver has not, and is more capable of being made money than any thing yet known. land is what is most valuable, and what encreases in value more than other goods; so the paper money issued from it, will in all appearance not only keep equal to other goods, but rise above them.

Because of the extraordinary scarcity of silver in Scotland, and the inclination people have to it, from its having been long used as money; it may be necessary to restrict its price to 5 sh. and 2 pence the ounce: but it will soon fall from that value of paper, if it come in greater quantity into Europe, than is exported or consum’d.

Suppose an island belonging to one man, the number of tenents a 100, each tenent 10 in family, in all a 1000; by these the island is labour’d, part to the product of corns, the rest for pasturage: besides the tenents and their families, there are 300 poor or idle, who live by charity. there is no money, but rents are paid in kind, and if one tenent has more of one product, and less of another than his family has occasion for, he barters with his neighbour.

The people of this island know nothing of manufacture; the island being plentiful, furnishes enough for their consumption, and an overplus which they exchange on the continent for cloaths, and what other goods they want: but as that overplus is only sufficient to make a return of such a quantity of goods as they consume yearly, so they have no magazines of their own or foreign goods to serve them in bad years, nor no magazines of arms, ammunition, &c. for their defence.

’Tis propos’d to the proprietor, that if a money were establish’d to pay the wages of labour, the 300 poor might be imployed in manufacturing such goods as before were exported in product; and as the 1000 that labour the ground were idle one half of their time, they might be imployed so as their additional labour would be equal to that of 500 more, which would lessen their import by providing them with a part of such goods as before they brought from the continent, and raise their export to 3 or 4 times the value it had: the return of which would furnish them with greater quantities of foreign goods than they wanted for consumption, which might be laid up in magazines.

The money propos’d is after this manner. the proprietor to coin pieces of paper figured number 1, number 2, and so on; number 4 to be equal to a certain measure of corn. the poor and other labourers would be satisfied to take number 4 for the wages of a day’s labour, providing it be so contriv’d that number 4 purchase them the measure of corn; for as that corn can be barter’d with other goods, so number 4 would purchase an equal value of any other goods.

To make number 4 equal to that measure of corn, the proprietor calls his tenents together; tells them for the future, he will have his rent payed in paper, so renews their leases, and where a 100 measures of corn was payed, they oblige themselves to pay him number 400. the other kinds the proprietor was payed in are valued, according to the value they had in barter with corn; and leases made for paper.

The proprietor coins paper to the value of a year’s rent, imploys such as are willing to work, and gives them paper-money as the price of their labour. the tenent gives corn or any other goods he has to the labourers for paper-money, and the proprietor receives it for his rent. but as the consumption of the labouring man may be suppos’d to be only equal to number 2; so the tenents cannot get the whole sum issued by the proprietor, and consequently not enough to pay their rent. if this were not remedied, the labouring men being masters of the remaining part of the paper, and having no occasion for more goods from the tenents, might raise the value of the paper. to prevent this, the proprietor coins a greater quantity, which brings a part of the poor and idle of the continent to the island, and occasions a greater consumption, whereby the tenents are able to pay their rent in paper as contracted for. the addition to the people is an advantage to the island; for it adds to the power of the island, and their labour is worth double what they consume.

This money tho’ it has no value but what the proprietor gives it, by receiving it in payments of his rent; yet it will be esteem’d equal to the product payed before.