INTRODUCTION.
In an inquiry like this, where, at almost every step, we find it branching out into new relations, which lead to different chains of consequences, it is of use to have recourse to every expedient for connecting the whole together.
For this purpose, an introductory chapter at the beginning of a new subject seems necessary.
The reader will have observed that the last chapters of the preceding book (those I mean which treat of the vibration of the balance of wealth and of circulation) have been writ with a view to introduce the subject of money.
I thought it better to anticipate some principles by connecting them directly with those of trade, than to introduce this part of my subject as a new treatise.
The assistance our memory receives from such a distribution must compensate the inconvenience of a few repetitions.
I have, in the last chapters of the second book here referred to, had occasion to mention, and slightly to point out some essential differences between coin and paper money. I have shewn the great usefulness of the latter in supporting circulation.
Although, in giving the definition of paper money in the twenty-sixth chapter of the second book, I mentioned credit as being a term synonimous with it; yet this was done only for the sake of simplifying our ideas: one of the best expedients for casting light upon an intricate subject. It is now requisite to point out the difference between them.
Symbolical or paper money is but a species of credit: it is no more than the measure by which credit is reckoned. Credit is the basis of all contracts between men: few can be so simultaneous as not to leave some performance, or prestation, as the civilians call it, on one side or other, at least for a short time, in suspence. He therefore who fulfils his part, gives credit to the party who only promises to fulfil, and according to the variety of contracts, the nature of the prestations, or performances, therein stipulated, and the security given for fulfilling what is not performed, credit assumes different forms, and communicates to us different ideas. Paper credit or symbolical money, on the other hand, is more simple. It is an obligation to pay the intrinsic value of certain denominations of money contained in the paper. Here then lies the difference between a payment made in intrinsic value, and another made in paper. He who pays in intrinsic value, puts the person to whom he pays in the real possession of what he owed; and this done, there is no more place for credit. He who pays in paper puts his creditor only in possession of another person’s obligation to make that value good to him: here credit is necessary even after the payment is made.
Some intrinsic value or other, therefore, must be found out to form the basis of paper money: for without that it is impossible to fix any determinate standard-worth for the denominations contained in the paper.