As far therefore, as an increase of the metals and coin shall produce an increase of demand, and a greater competition than before, so far will that circumstance influence the rise of prices, and no farther.
But by the relative proportion between commodities and the wants of mankind.
The value of commodities therefore, depending upon a general combination of circumstances relative to themselves and to the fancies of men, their value ought to be considered as changing only with respect to one another; consequently, any thing which troubles or perplexes the ascertaining those changes of proportion by the means of a general, determinate and invariable scale, must be hurtful to trade and a clog upon alienation. This trouble and perplexity is the infallible consequence of every vice in the policy of money or of coin.
Necessity of distinguishing between money and price.
III. It may here be demanded what necessity there is to have recourse to such a metaphysical deduction upon so familiar a subject. Do we not see every where, that things are valued by silver and gold coin, and that there is no occasion to reject them at this time, in order to introduce an imaginary scale.
I answer, that nothing but necessity obliges me to introduce this imaginary scale, and that not with any intention to reject the service of the metals in performing the office of a measure, but as an assistance to our understanding for comprehending the doctrine of money, and for rightly distinguishing the ideas which are daily proposed to us by those who write and speak concerning its theory.
Could gold and silver coin exactly perform the office of money, it would be absurd to introduce any other measure of value; but there are moral and physical incapacities in the metals, which prevent their performing the function of a scale: and the common opinion being, that there are no such incapacities, makes it necessary to expose them in the clearest light, by shewing the exact difference between price (that is coin) considered as a measure, and price considered as an equivalent for value.
The inconsistencies which follow, when we depend blindly upon the infallibility of the metal’s discharging this double office, tend to confound the whole system of our ideas concerning those matters.
The moral as well as physical incapacities inherent in the metals, which prevent their performing exactly the office of money, shall be afterwards pointed out. I must at present explain a little farther the nature of this ideal money.
Money of account what and how contrived.