[217-6] Let us suppose a country which has been used to effecting all its exchanges by means of $100,000,000. All prices have been fixed, or have regulated themselves accordingly. Let us now suppose that there has been a sudden exportation of $10,000,000, and under such circumstances as to delay the rapid filling up of the gap thus created. In the long run, the demand of a country for a circulation may be satisfied just as well with $90,000,000 as with $100,000,000; only it is necessary in the first instance that the circulation should be accelerated or that the price of money should rise 10 per cent. But neither of these accommodations is possible immediately. In the beginning, sellers will refuse to part with their goods 10 per cent. cheaper than they have been wont to. But so long as those engaged in commercial transactions have not become completely conscious of the revolution which has taken place in prices, and do not act accordingly, there is evidently a certain ebb in the channels of trade, and simultaneously in all. Demand and supply are kept apart from each other by the intervention of a generally prevailing error concerning the real price of the medium of circulation, and there must be, although only temporarily, buyers wanted by every seller, except the seller of money. In a country with a paper circulation, every great depreciation of the value of the paper money not produced by a corresponding increase of the same, may produce such results. Say is wrong when he says that a want of instruments of exchange may be always remedied immediately and without difficulty.
[217-7] Suppose a people, the country population of which produce annually $100,000,000 in corn over and above their own requirements, and thus open a market for those engaged in industrial pursuits to the extent of $100,000,000. And suppose that in consequence of three plentiful harvests, and because of an inability to export, the market should grow to be over-full, to such an extent that the much greater stores of corn have now (§ 5, 103) a much smaller value in exchange than usual. The latter may have declined to $70,000,000. Hence the country people now can buy from the cities only $70,000,000 of city wares. The cities, therefore, suffer from over-production. That people dispensing with the use of money should establish an immediate trade between wheat and manufactured articles, in which case the latter would exchange against a large quantity of the former, is not practicable, because no one can extend his consumption of corn beyond the capacity of his stomach, and the storage of wheat with the intention of selling it when the price advances is attended with the greatest difficulties.
[217-8] If, for instance, there are too many railroads in process of construction, all other commodities may in consequence lose in demand, and when the further construction begins to be arrested on account of a superfluity of roads, the new rail factories, etc. are involved in the crisis.
[217-9] On the special pathology and therapeutics of this economic disease, compare Roscher, Die Productionskrisen, mit besonderer Rücksicht auf die letzen Jahrzente in the Gegenwart, Brockhaus, 1849, Bd., III, 721 ff., and his Ansichten der Volkswirthschaft, 1861, 279 ff.
PRODIGALITY AND FRUGALITY.
Prodigality is less odious than avarice, less irreconcilable with certain virtues, but incomparably more detrimental to a nation's economy. The miser's treasures, even when they have been buried, may be employed productively, at least, after his death; but prodigality destroys resources. So, too, avarice is a repulsive vice, extravagance a seductive one. The practice of frugality[218-1] in every day life is as far removed from one extreme as the other. It is the "daughter of wisdom, the sister of temperance and the mother of freedom." Only with its assistance can liberality be true, lasting and successful. It is, in short, reason and virtue in their application to consumption.[218-2] ] [218-3]
[218-1] Negatively: the principle of sparing; positively: the principle of making the utmost use of things. (Schäffle, Kapitalismus und Socialismus, 27.)
[218-2] Admirable description of economy in B. Franklin's Pennsylvanian Almanac, How poor Rich. Saunders got rich; also in J. B. Say, Traité, III, ch. 5. Adam Smith, W. of N., II, ch. 3, endeavors to explain why it is that, on the whole and on a large scale, the principle of economy predominates over the seductions of extravagance. This, however, is true only of progressive nations.
[218-3] The Savior Himself in His miracles, the highest pattern of economy: Matth., 14, 20; Mark, 6, 43; 8, 8; Luke, 9, 17; John, 6, 12. That He did not intend to prohibit thereby all noble luxury is shown by passages such as Matth., 26, 6 ff.; John, 2, 10.