From this it follows, that since the value of coin must rise in proportion to every commodity, it must also rise with respect to the metals it is made of, just as wool manufactured rises with respect to wool which is not manufactured.
Now let us suppose that a Prince finding that he has the exclusive privilege of making coin, shall raise his price of coinage to 8 per cent. what will the consequence be?
The first consequence of this will be to destroy, or at least to perplex the ideas of his subjects with regard to coin, and to make them believe, that it is the stamp, and not the metal which constitutes the value of it.
The next consequence will be, to reduce the price of the yard of cloth, which was worth 100 grains of metal before the invention of coinage, from 98, where it stood, to 92. Now let us suppose that this country, which we shall call (F), is in the neighbourhood of another which we shall call (E), where there is both cloth of the same quality, and coin of the same weight and fineness, which costs nothing for the coinage. In the country (E), cæteris paribus, the yard of cloth must be sold for 100 grains, as it sold formerly in the country (F) before the coinage was imposed. If the country (F) wants the cloth of the country (E), the cloth they demand must cost (F) 100 grains the yard. If the country (E) wants the cloth of the country (F), this cloth will also cost 100 grains; because to procure a coin of 92 grains of the country (F), (E) must pay 8 grains for the coinage, which raises the price of the cloth to 100 grains.
A wrong balance of trade raises the price of bullion to the value of coin,
Let us now suppose, that for a certain time the country (F) has absolute occasion for the cloth of the country (E). The merchants of (F) who carry on this trade, must send bullion to (E) to pay for this cloth. But the merchants of the country (F) who deal in bullion, perceiving the usefulness of it for this trade, will then raise the price of the 100 grains of it above the 92 grains in coin (the common market price of bullion before this trade was known) and according to the demand made for the foreign cloth, the bullion will rise in the country (F), until 100 grains of it become exactly worth 100 grains in coin. The bullion can never rise higher; because at that period, the coin itself will be exported for bullion; and the country of (E) will accept of 100 grains in their coin as willingly as in any other form. Nor will it ever fall lower than 92 grains; because the mint in the country (F) is always ready to give that price for all the bullion which is brought to be coined.
Here then is a case, where the coin is made to lose all its advanced price as a manufacture, and this is owing entirely to its being a metal as well as a money of accompt.
Now as the coin has lost this additional value, by a circumstance purely relative to itself as a metal, there is no reason why other merchandize should sink in value along with it.
and ought to raise proportionally the price of commodities.
The consequence, therefore, of this revolution ought to be, that as the merchandize, bullion, has got up 8 per cent. with regard to the coin, and as the price of all merchandize ought to be in proportion to the grains of bullion to which that price amounts, the revolution having annihilated the 8 per cent. advance upon the coin, ought to have the same effect with respect to prices as if coinage were given gratis, as in the country of (E); that is, the yard of cloth ought at this time to cost, in the country of (F), 100 grains, either of coin or bullion, since they are of the same value.