other commodities, cannot affect their exchangeable value. The capital devoted to the producing of gold and silver, must yield the common and ordinary rate of profit; for, if it yielded more than this rate, there would be an influx of capital to the mining business; and, if it yielded less, it would be withdrawn, and invested in some more lucrative employment. And hence, if the demand for gold and silver, from the commercial world gradually adopting any other commodity as an instrument of exchange, were diminished, the value of the precious metals would not, on that account, be reduced. A smaller supply would indeed be annually brought to market, and a portion of the capital formerly engaged in the mining, or refining and preparing the metals, would be disengaged; but, as the whole stock thus employed yielded only the average rate of profit, the portion which is not withdrawn must continue to do so,-or, what is the same thing, gold and silver must still continue to sell for the same price. It is indeed true, that where mines are of different degrees of productiveness, any great falling off in the demand for bullion might, by rendering it unnecessary to work the inferior mines, enable the proprietors of the richer mines to continue their work, and to obtain the ordinary rate of profit on their capitals, by selling their bullion at a reduced price. In this case the value of bullion would be really diminished; but it would be diminished, not because there was a falling off in the demand, but because there was a greater facility of production. On the other hand, an increased demand for bullion, whether it arose from the general suppression of paper money, or of a greater consumption of gold and silver in the arts, or from any other cause, would not-unless it was necessary, in order to procure the increased supply, to have recourse to mines of an inferior degree of productiveness-be accompanied by any rise of price. If the mines from which the additional supplies were to be drawn were less productive than those already wrought, more labour would be necessary to procure the same quantity of bullion, and of course its price would rise. But if no such increase of labour was required, its price would remain stationary, though a thousand times the quantity formerly required should be demanded.

After gold and silver have been brought into the market, whether they shall be converted into coin or into manufactured commodities, depends entirely on the fact, whether they will yield greater profits in the one way or the other. No person would take bullion to the mint, if he could realize a greater profit by disposing of it to a jeweller; and no jeweller would work

up bullion into plate, or expend it in gilding, &c., if he could turn it to greater account by converting it into coin. The value of bullion and coin must, therefore, in a country where the expenses of mintage are borne by the State, nearly correspond. When there is any unusual demand for bullion, coin will be melted down; and when, on the contrary, there is any unusual demand for coin, plate will be sent to the mint, and the equilibrium of value maintained.

While, therefore, competition is allowed to operate without restraint on the production of gold and silver, they will, like all other commodities, be valuable only in proportion to the quantity of labour necessarily expended in bringing them to market. And hence, while they constitute the currency of the commercial world, the price of commodities, or their value, compared with gold and silver, will vary, not only according to the variations in the real value of the commodities themselves, but also according to the variations in the real value of the gold and silver with which they are compared,

But if competition was not allowed to operate on the production of the precious metals,-if they could be monopolized, and limited in their quantity,-their exchangeable value would no longer be regulated by the same principles. If, after the limitation, they still continued to be used as a circulating medium; and if, in consequence of the improvement of society, manufactured commodities and valuable products of all kinds should be very much multiplied, the exchanges which this limited amount of currency would have to perform, would be proportionably increased; and, of course, a proportionably smaller sum would be devoted to each particular transaction; or, which is the same thing, money prices would be diminished. Whenever the supply of money becomes fixed, the amount of it to be given in exchange for any one commodity, varies inversely as the demand, and is altogether unaffected by any other circumstance. If double the usual supply of commodities were brought to market, in a country with a limited currency, their money price would be reduced one half; and if only half the usual supply were brought to market, it would be increased one half;-and this, whether the cost of their production was increased or diminished. In such a state of society, no person would exchange a bushel of wheat, or a yard of cloth, for money, on the ground that this money was a commodity possessed of equal intrinsic value, or because an equal quantity of labour had been expended on its production; but solely because it was necessary or expedient to have their value, relatively to other commodities,

ascertained, by a comparison with that particular commodity which had been set apart as a general standard or measure of exchangeable value. Guineas, sovereigns, livres, &c. would then really constitute mere tickets or counters, to be used in computing the relative value of property, and in transferring it from one person to another. And as a small quantity of such tickets or counters would serve for this purpose quite as well as a large quantity, it is unquestionably true, that a debased cùrrency might, by limiting its quantity, be made to circulate at the value it would bear if it were possessed of the legal weight and fineness; and by still further limiting its quantity, it might be made to pass at any higher value.

Whatever, therefore, may be the nature of the circulating medium of any country, whether it consist of gold, silver, copper, leather, salt, cowries, or paper, and however destitute it may be of all intrinsic value, it is yet possible, by sufficiently limiting its quantity, to raise its value in exchange to any conceivable extent.

Thus, supposing the circulating medium of this country to be limited to 50 or 60 millions of one pound notes, and that it was altogether impossible to increase or diminish that sum, either by issuing additional notes or coins, or by withdrawing. the notes already in circulation, then it is obvious, that the exchangeable value of such notes would thereafter increase or diminish according as the mass of circulating products, and consequently the business to be performed by this paper moncy, in-creased or diminished. If we suppose that ten times the amount of products that were in circulation when this limitation of the currency took place, are in circulation ten or twenty years afterwards, prices will have fallen to one-tenth of their former amount; or, what is the same thing, the exchangeable value of the paper money will have increased in a tenfold proportion ;and on the other hand, if the products in circulation had diminished in the same proportion, the value of the paper money would have been equally reduced.

It is not, therefore, necessary that paper money should, in order to sustain its value on a par with gold, be convertible at the pleasure of the holder into that metal. It is only necessary that its quantity should be regulated according to the value of the metal which is declared to be the standard. If the standard were gold of a given weight and fineness, paper might be increased with every fall in the value of gold, or, which is the same thing in its effects, with every rise in the price of goods. We have stated these principles somewhat at large, for they are of the utmost importance to a right understanding of the

real nature of money. Almost every writer, of authority, on Political Economy, has maintained, that the value of money depended entirely on the relation between the supply and the demand. But this is true only of a gold currency limited in its quantity, or of a paper currency also limited in its quantity, and not convertible into gold and silver. Such a currency not being possessed of any intrinsic value, its worth in exchange is necessarily regulated by the proportion which its total amount bears to the business which it has to perform, or to the demand; and the general opinion, that the prices of commodities depend on the proportion between them and money, and that any considerable increase or diminution of either, would have the effect of proportionably diminishing or increasing money prices, would, in such circumstances, be quite correct. It is altogether different, however, with a currency consisting of gold and silver, or of any other commodity whose cost of production is considerable, and the quantity of which may be increased to an unlimited extent by the operation of unrestricted competition.

It is not the ratio between the supply and demand for such money, which can operate any permanent effect on its value; but it is the comparative cost of its production, or, as Mr Ricardo has demonstrated, the comparative quantities of labour necessary to bring it to market. If a guinea ordinarily exchanges for a couple of bushels of wheat, or a hat, it is because the same labour has been expended on its production as on that of either of these commodities; while, if, with a limited paper currency, such commodities exchanged for a piece of engraved paper denominated a guinea note, it would only be because such was the proportion which, as a part of the general mass of circulating commodities, they bore to the supply of paper in the market. This proportion would be affected by an increase or a diminution of the supply either of paper or commodities. But the relation which commodities bear to a gold currency, can only be permanently affected by a change in the quantity of labour necessary to manufacture the commodities, or to produce the gold for which they are exchanged.

We must here caution our readers against supposing that we mean to insinuate that the value of gold and silver cannot be affected by the comparative state of the demand for, and the supply of, these metals. Certainly, however, they are infinitely less affected by such fluctuations than almost any other commodity with which we are acquainted. Their great durability, and the care universally taken to preserve them, preclude the possibility of any sudden diminution of their quantity, while the immense surface over which they are spread, and the various purposes to

which they are applied, prevent any unusual productiveness of the mines from speedily lowering their value. An extraordinary event, such as the discovery of America, or the establishment of an intercourse between a country where bullion bore a very high value, and one where its value, from the greater facility of its production, is comparatively low, might, by suddenly increasing the supply, sink its value considerably: But such events must necessarily be of very rare occurrence. And although the value of gold and silver must, because of the different qualities of the mines, to which, in the progress of society, recourse must be had,-and, because of the successive improvements in the art of mining and working metals, be very different at distant periods,—it is abundantly uniform to secure us against every risk of sudden and injurious fluctuations.

Such appear to us to be the distinguishing characteristics of a currency formed of a really valuable commodity, the supply of which is not subjected to any species of monopoly; and of one formed of a commodity possessed of no intrinsic worth, but limited in its amount. The value of the former depends, like that of every other commodity, on the cost of its production; while the value of the latter is totally unaffected by that circumstance, and depends entirely on the extent to which it has been issued, compared with the demand.

It is by this principle of limitation, and not from any idea that the notes would at some future period be paid in cash, that the value of the paper currency of this country has been sustained since the passing of the Restriction act in 1797. When the holder of a bill presents it for discount at the Bank of England, it is quite immaterial to him; and he never once considers, whether the notes which the Bank gives him in exchange for his bill, are payable in specie or not. This, to be sure, is, on other accounts, of the greatest importance; but the presenter of a bill for discount only wants to convert it into paper of equal value; which he may, with greater facility, exchange for any species of commodities, or which will be taken in payment of the debts he has contracted. He is altogether indifferent as to the fact, whether the Bank has issued such a quantity of paper as to depreciate its value comparatively to gold, or whether it has so limited its issues as to sustain its notes on a par with that metal. These are circumstances which affect every class of society whose incomes cannot easily be varied with the variations in the value of money: But, inasmuch as the money price of goods rise and fall with every increase or diminution of the supply of paper, merchants are but comparatively little affected by its fluctuations. The merchant who presents a bill for 500l. or 1000l. to a bank,