■^ 
 
 University of California, 
 
 GUIfT OB- 
 
 Alexander Del Mar. 
 
 18T8. 
 
 Accessions /\/u./^yZ^p^^..- Shelf i^o. 
 
 ^— — 
 
Digitized by the Internet Archive 
 
 in 2007 with funding from 
 
 IVIicrosoft Corporation 
 
 http://www.archive.org/details/financialBConomyOOeadirich 
 
FINANCIAL ECONOII: 
 
 BEING AN ENQUIRY INTO 
 
 THE PRESENT STATE OF MONETARY SCIENCE; 
 
 IN CONNBCTION WITH 
 
 THE PRINCIPLES GOVERNING TRADE, COMMERCE, CURRENCY AND 
 
 banking; THE NATURAL LAWS OF THE DOMESTIC AND 
 
 FOREIGN exchanges; THE INTERESTS OF CAPITAL AND 
 
 labor; THE REVENUES OF STATES AND NATIONS;— 
 
 SYSTEMS OF NATIONAL TAXATION; THE FUND- 
 ING OF GOVERNMENT DEBTS; AND THE 
 
 MOST APPROVED METHODS OF REGU- 
 LATING THE PECUNIARY AFFAIRS 
 OF A BODY POLITIC, SO AS TO * 
 PROMOTE THE MATERIAL 
 INTERESTS OF THE 
 WHOLE PEOPLE. 
 
 VOLUME I, 
 
 NATURAL HISTORY OF MONEY. 
 
 By JOHN EADIE, A. M. 
 
 KEW YORK: 
 
 HOSFORD A KETCHAM, STATIONERS and PRINTERS 
 
 6T and 59 William Street. 
 
 18 5. 
 
 L I B R A 11 Y 
 
 UNIVERSITY <H' „ 
 
 CALIFORXL\ 
 
< 
 
 Entered according lo Act of Congress, in the year 1865, by 
 
 JOHN EADIE, A.M. 
 
 In the Clerk's Office of the District Court of the^nited States for the Southern 
 District of New York. 
 
 IIOSFORD 4 KETCHAM, 
 STATIONERS AND PRINTERS, 
 6- Rnd 59 William St., N. Y. 
 
ERRATA. 
 
 Page 89. — Second line tT(>m foot, for "systems," read: 
 sijmptomH. 
 
 Page 60. — Eleventh line M)m foot, for "the increase of 
 prices of commodities," vq/(\ : the prices of commodities. 
 
 Page 65. — Sixth line frcHji head, for "interest does,' 
 read: interest — do'^s. 
 
 Page 84. — Ninth line ^om foot, for "Russia, as well as 
 portions of," read : Austria and Russia, as well as poi'tions of. 
 
 Page 96. — Fourth line from foot, for "paper media are 
 controlled," read : pa/per mema hp controlled. 
 
 Page 11 9. — Tenth line fro^i head, for "correspond," 
 read : corresponds 
 
 («) 
 
and 59 WiUlam St., N. Y. 
 
 Pt 
 
TO 
 
 THK HONORABLE 
 
 JAMES GALLATIN 
 
 OF 
 
 NEW YORK, 
 
 :0 ENCOURAGED THE WRITING OF IT, 
 
 AND 
 
 WHO KINDLY REVISED IT IN MANUSCRIPT, 
 
 THIS WORK 
 
 IS 
 
 RESPECTFULLY DEDICATED 
 
 BY 
 
 THE AUTHOR. 
 
 (8) 
 
PREFACE. 
 
 It has been the object of the writer in this Volume to 
 make plain to the understanding of every person, the nature 
 of Money and the offices which it performs in economical 
 affairs. In the second Volume, the nature of the devices 
 employed for economizing the use of real Money, and the 
 relationship of these devices to financial economy, embracing 
 the credit system, banking, sources of wealth, national 
 debts, funding systems, taxation, tariffs, and duties, as well 
 as the phenomena of the Money market, will be the principal 
 topics. 
 
 Brooklyn, Decbmber 24th, 1864. 
 
 (6) 
 
CONTENTS. 
 
 VOLUME I. 
 
 CHAPTER I. 
 
 V 
 
 PAOB 
 
 1. Early Historical References to Money. 2. Usages of Thirty- 
 eight Centuries among Civilized Commanities. 3. The 
 Money of Civilized Nations circulates among them all 
 as the Common Property of all, 9 
 
 CHAPTER n. 
 
 1. Usefulness of Money. 2. Natural Discovery of Money 
 from the necessities of Mankind in Society. 8. Various 
 kinds of Money used in dijfferent ages and Countries, 23 
 
 CHAPTER in. 
 
 . Division of Labor facilitated by the Use of Money. 2. Ma- 
 \ terial Superiority of Nations proportioned to the 
 Superiority of their Monetary Systems. 8. Civilization 
 impossible without an equitable Monetary System, 29 
 
 CHAPTER IV. 
 
 The First Attribute of Money : A Commodity, and its Relation- 
 ships to other Commodities, 43 
 
 CHAPTER V. 
 
 The Second Attribute of Money : An Instrument of Commerce, 
 
 or Universal Medium of Exchange, or Circulating Medium, 63 
 
 cr) 
 
Vlll CONTENTS 
 
 CHAPTER VI. 
 
 PAQK 
 
 The Tliird Attribute of Money : A Measure of Prices, or Stan- 
 dard of Values, 63 
 
 CHAPTER VII. 
 
 The Fourth Attribute of Money : An Equivalent or Recom- 
 pense, t 93 
 
 CHAPTER VIII. 
 
 The Fifth Attribute of Money : A Sign or Representative of 
 
 Property or Commodities, 101 
 
 CHAPTER IX. 
 
 The Sixth Attribute of Money : Wealth, or the " Thing Signi- 
 fied" to the Extent of its Value in Exchange, 103 
 
 CHAPTER X. 
 
 1. Review of the Six Attributes of Money — Monetary Unit, or 
 True Measure of Prices. 2. Local and Universal Money 
 identical as Measures of Prices within their respective 
 Spheres, 115 
 
- -i i3i a A R \ 
 UNIVERSITY < 
 
 CHAPTER I. 
 
 1. Early Historical References to Money. 2. Usages of Thirty- 
 eight Centuries among Civilized Communities. 8. The Money 
 OF THE Civilized Nations circulates among them all as their 
 Common Property. 
 
 1. Money has been in use since the twentieth 
 century before our era. The honor of having dis- 
 covered or invented it, in the most remote antiquity, 
 has been claimed for several ancient nations. In 
 sacred history it is mentioned among objects familiar 
 to the people in Abraham's time, about thirty-eight 
 centuries ago; paying "current money with the 
 merchant " for a burial place, being recorded in the 
 book of Genesis. This is the most authentic histori- 
 cal reference to the early use of money. At that time 
 the largest centers of population were at Babylon, in 
 the lower valley of the Euphrates; at Nineveh, on 
 the upper Tigris ; at Sidon, on the eastern shore of 
 
 (9) 
 
10 NATURAL HISTOKT 
 
 the Mediterranean ; and at Memphis, in the lower 
 part of the valley of tlie Nile. Sidon was nearest the 
 geographical center of the infant world, and there the 
 depots of international trade ^vere first established. 
 It was in the vicinity of Sidon that "current money" 
 was paid by Abraham. He had emigrated from the 
 upper valley of the Euphrates into the settlements of 
 the Phenicians, or Philistines, the first great mer- 
 chants mentioned in history. The trade of Sidon and 
 Tyre, conducted by tliese mercliants, extended at the 
 dawn of history overland to Babylon and Nineveh, 
 on tlie east; and to Memphis, by way of the sea-coast 
 and the Nile, on the south. Tiie Egyptian hierogly- 
 phics, which Thomas Young and M. Champollion 
 have enabled us to read, make mention of the Philis- 
 tines among the people with whom the Egyptians 
 had intercourse as early as the time of Abraham, 
 and confirm the statements wliich Herodotus had 
 made to him by the Plienician Priests, as to the 
 founding of the first city of Tyre, on the mainland, 
 more than two thousand ^''ears before our era. 
 Sanchoniathon, the Phenician historian, is generally 
 supposed to have lived in the twelfth century before 
 our era, and in his time Tyre was a splendid city, 
 
OF MONEY. 11 
 
 although the greatest development of her commercial 
 enterprise. took place six or seven centuries subse- 
 quent to liis time. As Tjre was founded, by emi- 
 grants from the neighboring city of Sidon, the latter, 
 it may be inferred, was one of the very earliest places 
 in wliicli mankind assembled in large numbers for 
 purposes of trade; the country immediately adjoining 
 it being too barren to afford subsistence for a large 
 population, grain was procured from Egypt, in ex- 
 change for w^orks of art or manufactures, whicli the 
 Sidonians either made themselves or procured from 
 the populous countries around Nineveh and Babylon, 
 Money w^as from the earliest periods so familiar to 
 the Phenicians in their commercial dealings, that 
 they have been supposed to have invented it; and 
 their extraordinary enterprise proves them to have 
 possessed sufficient genius for making so great a 
 discovery. They w^ere tlie first to navigate the seas, 
 and they were also the pioneers of commerce over- 
 land. Their colonies lined the shores of the Mediter- 
 ranean, and extended along the Atlantic coast, into 
 Spain, France, Great Britain, Ireland, etc. Gades, 
 the modern Cadiz, in Spain, was founded by them, it 
 is supposed, in the twelfth century before the Christian 
 
12 NATUEALHI8T0EY 
 
 era. Whatever may liave been their systems of 
 government or religious opinions, the distinguished 
 place they held at the head of the commerce and 
 trade of the world, for so many centuries, would 
 doubtless have been lost to them had they not won 
 the confidence and respect of mankind by adherence 
 to those principles of fair dealing, flowing^ from a 
 sense of honor and justice, which have always distin- 
 guished the true merchant of every nation, from those 
 sea-rovers, or pirates, frequently called " merchants," 
 whom the ancient mythologies assigned to the guard- 
 ianship of deities presiding over the spiritual interests 
 of exceptional charactei's. 
 
 Although Abraham may have been accustomed to 
 the use of money in his native land, and it may have 
 been in use even before his time at Babylon, Nineveh 
 and Memphis, as well as at Sidon and Tyre, there is 
 no doubt that the use of it was in his time more 
 familiar to the Phenicians, from their position as the 
 merchants of the world, than to any other people; 
 and at the time Abraham sojourned in Egypt, there is 
 reason to believe that a large portion of the city of 
 Memphis was occupied exclusively by the Phenician 
 merchants as a sort of colony ; they were not permit- 
 
OFMONEY. 13 
 
 ted to establish colonies in Egypt, but a part of the 
 great city was assigned to them ; and the uses of gold 
 and silver, as well as the custom of w^eighing these 
 metals, were then as familiar in Egypt as they seem 
 to have been in the neighborhood of Sidon, where the 
 sacred record mentions the use of ''current money." 
 Silver appears to liave been the metal generally used 
 for purposes of money at that time; or it may have 
 been, as it is yet in China, the principal circulating 
 medium. Gold was more Inghly prized for mak- 
 ing ornaments, than for use as money; and the 
 Oriental nations have continued, in all ages, to set 
 this superior value upon gold,* making use of silver 
 for purposes of money and of gold for ornaments. 
 The use of both metals for ornaments has been found 
 so general among every aboriginal people, that it 
 may be supposed to have preceded the use of them 
 for purposes of money ; for these metals are always 
 discovered in new countries near the surface of the 
 earth. Being more beautiful than other metals, as 
 \vell as more easily worked and more durable, they 
 naturally become favorites for ornaments, and hence 
 
 * The British Government is now attempting to introduce gold coin, as a current 
 money, into its colonies in India. 
 
14 NATURAL HISTORY 
 
 the fact that in many newly discovered countries the 
 savage inhabitants have been found with gold and 
 silver ornaments and implements, although ignorant 
 of the use of iron. Indeed, it is generally considered 
 that the use of silver and gold preceded the use of 
 iron in the earliest stages of organized society. 
 
 In addition to the beauty and malleability of the 
 precious metals, their freedom from waste in working 
 them, and their comparative exemption from rust, 
 were doubtless discovered to be among their most 
 excellent qualities, as in our own time, in the estima- 
 tion of civilized as well as uncivilized communities ; 
 and having thus become precious for purposes of 
 ornament, descending from one generation to another 
 as keepsakes or as w^ealth, the way was naturally 
 prepared for their use as money. 
 
 2. That mercantile superiority, which the Pheni- 
 cians won by virtue of their preeminent genius for 
 discovery, adventure and enterprize, was rendered of 
 long duration, doubtless, by means of the knowledge 
 of the immense power which money exerts in promo- 
 ting trade and commerce ; and although it was cus- 
 tomary with them, as with nearly all men, to preserve 
 among themselves exclusively the knowledge by 
 
OF MONEY 
 
 15 
 
 wliicli tlieir great business enterprises were rendered 
 successful, enough has transpired to prove that the 
 keeping in hand quantities of the precious metals, 
 greater in proportion to the amount of their other 
 wealth than those kept by other merchants of antiq- 
 uity, was one of the chief sources of their long- 
 continued mercantile prosperity. Their stores of. 
 wealth and commodities were at first at Sidon ; but 
 Tyre eventually eclipsed the mother city. Manufac- 
 tories existed along the sea coast, near both cities, 
 and so dense was the population that for fifteen or 
 eighteen miles the shore presented the appearance of 
 one great city extending that distance. The extent 
 of the trade of Tyre, the glory of the cit}^, the valua- 
 ble productions found in her markets, and the high 
 degree of development which the arts had attained 
 among her people, are described in glowing language 
 by the prophet Ezekiel. 
 
 One fact is worthy of remark, as to the policy 
 which seems to have governed the Phenicians, and 
 that is the extraordinary perseverance which, through- 
 out their whole history, they displayed in extending 
 their commercial enterprises to new countries. JSTot 
 content with lininor the Mediterranean and the 
 
16 . NATURAL HI STOET 
 
 adjacent shores of the Atlantic with their trading 
 posts, they extended them along the shores of the 
 Red sea, the Persian gnlf, and even, it is asserted hy 
 some Avriters, around the whole of the African conti- 
 nent, before Eome had an existence. It was this 
 system of exploring, colonizing and developing the 
 •resources of new countries w^hicli enabled them to 
 procure large quantities of gold and silver, these 
 metals being found in new countries on or near the 
 surface of the earth. 
 
 The commercial enterprises of thirty-eight centuries 
 can be traced through successive changes, down to 
 our own time, from the hands of the people to whom 
 Abraham paid "current money," and in all that time 
 there has been no permanent alteration in the system 
 of valuing money in trade between civilized nations, 
 or between people of different civilized nations. It 
 has ever since, and is to-day, valued by w^eight and 
 fineness in international dealings. Other metals 
 beside silver have been used to make money; for 
 internal trade among their own people some nations 
 have used commodities other than metals, as well as 
 paper money, or credit, but in the settlement of 
 balances of trade, or in liquidating differences in the 
 
OFMONET. 17 
 
 prices of commodities exchanged between civilized 
 nations, no substance has been found to take the 
 place of money composed of the precious metals — 
 gold and silver — as a universal "current money." 
 It may be said that the usages of thirty-eight centu- 
 ries among civilized as well as semi-civilized nations 
 have made these metals the current money of the 
 world. 
 
 3. Gold or silver having been selected for the pur- 
 poses of money by the common consent of the more 
 civilized nations since the time of Abraham, the 
 value of that money having continued to be deter- 
 mined by w^eight and the purity of the metal, and 
 I nioney^omposed of these metals being the only kind 
 which can be denominated the currency of the world, 
 it follows that so far as money exerts any direct 
 influence upon international trade, it is only this kind , 
 of money, composed of these metals, which can be \ 
 considered as exerting that influence.! It is true that 
 some other kind of money — as shells, beads, paper, 
 etc. — nsed in the internal dealings of the people of 
 one nation, may exert an indirect influence upon the 
 trade between that nation and other nations, but such 
 money, not being acceptable to all nations, cannot be 
 1* 
 
18 NATURAL HISTORY 
 
 considered to enter into the international trade. Tlie 
 / time will doubtless come, wlien by mutual association 
 ' of the civilized peoples of the world, by the action of 
 tlieir governments, a circulating medium, based on 
 I the credit of all the nations, may be sup23lied for 
 1 facilitating international ti*ade. 
 
 That kind of money which is composed of the 
 precious metals, being acceptable to all the rich com- 
 m-ercial nations, flows like water seeking a levc^l, 
 from one nation to another, overcoming every device 
 which human ingenuity has been able to discover for 
 permanently restraining it: its movements may be 
 interrupted or impeded for a time by remarkable 
 events, national laws or customs, precisely as an 
 individual may hoard it while he lives, but with the 
 same certainty that eveiy man loses control of his 
 hoards when time ceases to measure the duration of 
 his existence, so every nation that makes or amasses 
 more than its average share of the money of the 
 world, sooner or later finds the undue accumulation 
 overflow all restraints of law and custom, until the 
 supply is reduced to the quantity which the business 
 systems of that nation may require to place the whole 
 volume of its money upon a level w^ith the average 
 
OF MONEY. 19' 
 
 required by the business systems of all other nations. 
 And the converse of this — that a deficiency of money 
 in any one nation, below that average, is supplied by 
 the flow of money from all other nations, to that one — 
 is equally true. These movements of the money of 
 the world result from, or are caused by the natural 
 laws of trade. These laws govern the currency of a 
 community of persons precisely in the same way that 
 they govern the currency of the nations: a person 
 who ^ will give for the money in his neighborhood a 
 larger amount of labor or a greater quantity of pro- 
 perty than any other person, commands or procures 
 tliat money, and hence it is that their money may be 
 considered the common property of all the people 
 residing in a civilized community, since no man 
 desires to be compelled to keep it all to himself; 
 it is useful to him only when he hires it out or ex- 
 changes it for property or commodities that procure 
 an income ; while he holds it, it produces no income. 
 All the money in a civilized community is usually 
 oiFering itself to whoever by industry or trade may 
 be able to purchase it with the most labor or property 
 or commodities; and the money of the whole world 
 is also offering itself in the markets of the nations to 
 
20 NATURAL HISTORY 
 
 whoever will give for it the greatest quantity of 
 commodities or property. Or, in other words, money 
 is the complete slave of a great law which compels it 
 always to seek those markets where it can obtain the 
 largest quantity of property and commodities, and 
 the most labor, at the lowest price, or for the smallest 
 quantity of itself. Money, therefore, is not the ex- 
 clusive property of any one nation nor of any one 
 individual, but on the contrary, the money of the 
 world is the common property of all the nations, 
 precisely as the money of a civilized community is 
 the common property of all the people in that com- 
 munity. Although a man may be so poor that he 
 cannot call any thing his own but the garments 
 which protect him from the wet and the cold, if he 
 be an honest man and possess the health and strength 
 of body and mind requisite for performing labor of 
 the hands or of the head, the money belonging to the 
 people around him offers itself to him, to reward his 
 labor and his toil, as readily in proportion, as it 
 would offer itself to him for lands and houses, had 
 he millions of them for sale; and in a country blessed 
 with lionorable peace, where the laws are just, and 
 wise, and good men govern, such a man, if young and 
 
OFMONEY. 21 
 
 strong, may "save and have" even to the extent of 
 becoming a millionaire. 
 
 In conclusion, it may be asserted that in a free 
 country, under good government and wise laws, 
 money is always offering itself to whoever will work 
 best, or give the most, for it; that it is an instrument 
 of trade belonging to the whole world, circulating 
 among the nations of the world, as their common 
 property ; and that if wars and misgovernment did 
 not ravage communities and destroy nations, there 
 would be in the lapse of time, through the influence 
 of the natural laws governing money, with the ex- 
 tension of civilization and religion, a complete 
 equalization of the wealth of the world among the 
 people of ail the civilized nations. 
 
caliporma. 
 
 CHAPTEE II. 
 
 1. Usefulness of Monet. 2. Natural Discovery of it from the 
 requirements of society. 3. various kinds of money used 
 
 IN DIFFERENT AgeS AND COUNTRIES. 
 
 1. The inventor of money is unknown, but that 
 does not detract from the importance of the discovery. 
 Many distinguished persons of ancient times — gods, 
 demi-gods, sages and magi — ^liave been named as the 
 inventors of it. The discovery was probably made 
 by several persons in different countries and at differ- 
 ent times, without a know^ledge of the discovery by 
 any one becoming known to any other, for with our 
 modern experience of its great usefulness, and of the 
 difficulty of attaining to an exalted civilization with- 
 out the employment of such a device for conducting 
 the exchange of property and commodities, it is easy 
 to comprehend the possibility of the spontaneous in- 
 vention of it by a community possessing sufficient 
 
 (28) 
 
254 KATUKALHISTORT 
 
 intelligence to make implements of luisbandiy, or 
 measures of capacity, time and length. The useful- 
 ness of money is illustrated with remarkable clearness 
 in the " Wealth of Nations^^ by Adam Smith, who 
 observes that without an instrument like money "the 
 man who wanted to buy salt, for example, and had 
 nothing but cattle to give in exchange for it, must 
 have been obliged to buy salt to tlie value of a whole 
 ox, or a whole sheep, at a time." By liaving an 
 exchangeable commodity w^hich can be divided into 
 very small portions without loss or waste, only a 
 small quantity of articles is needed to be kept on 
 hand for supplying the wants of a family, as we see 
 in this illustration, where, without money, an article 
 like salt would require the farmer to keep an ox or a 
 sheep on hand ready to be exchanged for, or to re- 
 plenish his supply of it. Hence it is obvious that 
 although communities, in common with individuals, 
 may in one sense lose something by having to keep a 
 portion of their w^ealth in ready money, without hav- 
 ing any income from it, if the instrument of money 
 did not exist there would be required a much larger 
 amount of unproductive capital to meet their current 
 wants. In fact, without money, people would all be 
 
OFMONEY. 25 
 
 compelled to deal at wholesale, by barter ; and retail 
 transactions as they are now known, would be almost, 
 if not altogether, impracticable. 
 
 2. Among an intelligent people having genius to 
 devise means for saving time and labor, any article 
 easily transferred from hand to hand, divisible into 
 small portions and capable of being reunited without 
 waste in the division and reiinion, of known worth 
 and universally acceptable at that worth to persons 
 in all kinds of trade, would naturally become money, 
 by common consent, in order to save the trouble, 
 delay and vexation of exchanging bulky commodities. 
 Devices of this character have been emj:)loyed in 
 almost every organized community where the use of 
 the precious metals, or real money, could not, from 
 ignorance or risks or scarcity, be resorted to. In 
 civilized communities, where high standards of 
 morality have prevailed, such devices have been 
 made to conform more nearly to the requirements of 
 justice, than among savage tribes. 
 
 3. A chief of the North American Indians is said 
 to have used his hand or foot as a weisrht for reculat- 
 ing the exchangeable value of commodities within his 
 jurisdiction; and among the same race pieces of 
 
86 NATURAL HISTORY 
 
 shells continue to be used as money, the making of 
 the shells into money called "wampum" being still 
 carried on near New York, by skilled work-people, 
 generally the descendants of those Hollanders who, 
 when they settled I^ew Amsterdam, found lucrative 
 employment in the manufacture of this shell money 
 for the trade with the aboriginal inhabitants of Korth 
 America. >Ye can boast that this one of our do- 
 mestic manufactures, now as old as the celebrated 
 settlement of Communijpaw^ on the west side of the 
 bay of Kew York, has been continued uninterrupted- 
 ly about two hundred years! 
 
 Glass beads, salt, soap, ivory, leather, brass, tin, 
 iron, pewter, cattle, tobacco, paper, the cereal grains, 
 as well as other articles and commodities, and even 
 men (slaves), have been used for purposes of money 
 in different countries and at different times. As late 
 as the middle of the eighteenth century, Adam Smith 
 8ays, there was a village in Scotland where wrought 
 iron nails were current money; and in California, 
 one hundred years later, pieces of soap were current 
 money among the native Indians, before the settle- 
 ment of the country and the discovery of the gold 
 mines by civilized people. 
 
OF MONEY. 27 
 
 It is customary in our own time, in secluded towns 
 throughout America and Europe^ to use book accounts, 
 kept by some person in whom the neighborhood has 
 confidence, for purposes of money; and it may be 
 said tbat book accounts, bills of exchange, orders, 
 drafts, notes, bills, cliecks, and even letters of credit, 
 as well as the public securities of every kind, perform 
 the functions of money in the largest portion of those 
 vast monetary transactions which now constitute the 
 business of banks and bankers in the leading marts 
 of commerce throughout the world, although these 
 devices for economizing the use of real money have 
 generally been classed by tlie economists under the 
 title of "credits," or "the credit system," and their 
 power as money is measured by the ratio of their 
 circulation or use, as compared with the ratio of cir- 
 culation or use of real as well as lawful money, in 
 any place. There may be a lawful money represent* 
 itig that which is a legal tender, and both paper 
 mone3\ 
 
 "Store-pay" has been resorted to as a substitute 
 for money — paying the wages of working people in 
 commodities at stipulated prices — but it is a j)ractice 
 fraught with vexation to both employer and employ- 
 
28 N A T U K A L II I S T O K Y. 
 
 ed, resulting often in lieart-biiniin£:s and strife: yet 
 it is a practice which cannot be condemned, because 
 it may be in some cases the only possible mode of 
 rewarding the toil of an industrious people in times 
 of great scarcity of ready money ; and it is far pre- 
 ferable to that deplorable system, too often resorted 
 to under such circumstances, of setting up a bank of 
 circulation without real capital, only to break and 
 leave a mass of worthless paper money in the hands 
 of poor working people. 
 
L 1 B U A li Y 
 
 UNIVKKSITY OF i 
 
 CALIFORNIA 
 
 CHAPTEE m. 
 
 1. Money Facilitates the Division of Labor. 2. Material Super- 
 iority OF Nations Employing Money — An Equitable Monetary 
 System Distinguishes the CivrLiZED from the Uxci\tlized. 
 8. A Civilization Controlled by Justice and Equity Impossible 
 WITHOUT AN Honest Monetary System. 
 
 1. Trade and commerce may be carried on by 
 barter, without the use of money : but barter ceases 
 from the moment people discover the importance of 
 that division of labor by which modern civilization 
 has accomplished its most wonderful achievements; 
 for it is by dividing industrial occupations, each 
 person applying himself to one particular branch, 
 that great excellence and proficiency are attained. 
 It is only when this division of labor is extended so 
 far as to stunt the mental growth or repress the phy- 
 sical development of the people, that it becomes at all 
 injurious to individual and national welfare. There 
 is undoubtedly a great hardship in being confined at 
 
 (29) 
 
30 NATURAL HISTORY 
 
 one single occupation tlirongliout a whole life time, 
 bnt the mastering of a single one of tlie sciences is 
 usually a life long work for the ablest minds, and tins 
 hardship is repressive of individual energy onlj^ when 
 the man does not enjo}^ the prerogatives of individual 
 sovereignty. That is to say, no honest occupation 
 is of itself grievous to any person in a community 
 where all the people enjoy perfect equality of politi- 
 cal rights. When all the avenues of industry and 
 politics are open to every person, there is neither 
 oppression nor slavery. 
 
 To understand the power of money in aiding the 
 division of labor, it is only requisite to consider the 
 case of skilled workmen in civilized communities 
 w^here this division has been carried to a high state 
 of development: were one of these men unable to 
 obtain the reward of ready money for his work, and 
 were he compelled to go around among his neighbors 
 to exchange the products of liis industry by barter, 
 for those articles needed to promote the comfort, 
 convenience and happiness of himself and family, he 
 would lose so much time that he would soon find 
 himself deprived of a livelihood by the competition 
 of w^orkmen who were paid in ready money. The 
 
OF MONEY. 31 
 
 time lost by liim in bartering, which is a very slow 
 process of trade, would be a gain to them. Suppos- 
 ing that he lost one-third of his time in bartering, he 
 could make half as many more productions under the 
 ready money system; and if he could find a person 
 having ready money to give him for his productions 
 as fast as he could make them, he could sell to that 
 person for ready money at lower prices than he could 
 afford to sell by barter; and it is in this way that the 
 man who has money, and the man who labors, be- 
 come partners, and employer and employed, to the 
 great advantage of each. And it is in this way that 
 money promotes the division of labor, and augments 
 the power of labor in an eminent degree, to the great 
 advantage of the laborer and the community in which 
 he resides. 
 
 2. If nations as well as individuals are so much 
 benefited by the employment of money, it follows 
 that every nation which neglects to maintain an 
 equitable monetary system, must be in a great degree 
 inferior in economical resources to those nations 
 which preserve such a system, exactly like those 
 semi-barbarous or half civilized nations which neor- 
 
 o 
 
 lect or refuse to adopt the inventions and improve- 
 
SI 
 
 NATURAL HISTORY 
 
 inents discovered by the more enlightened and 
 civilized. 
 
 Money having been found to promote the division 
 of labor, the moment it is employed for this purpose 
 there begins to be an accumulation of capital from 
 the savings which the increased efficiency of labor 
 renders practicable: and since it is only by labor that 
 the wealth which the Creator has placed in the earth 
 can be gathered, preserved and distributed, therefore 
 whatever increases the efficiency of labor increases 
 also the wealth of any people. Accumulated capital 
 consists of those items of wealth which labor did not 
 consume while collecting, or producing enough for 
 the supply of the immediate wants of the laborers, 
 as in the case of the surplus which a farmer has re- 
 maining after providing for the requirements of his 
 family and his farm: so, also, in the case of an indi 
 vidual who attains to great proficiency in any 
 occupation, his accumulation of wealth is the reward 
 of his ability to accomplish more than his neighbors, 
 and this accumulation of wealth is the surplus or 
 savings of his labor, wliich he may store away to 
 support his family and himself, during the infancy of 
 his children, or in the decrepitude of his own declin- 
 
OF MONEr. 33 
 
 ing years. Thus the feebleness of infancy, in 
 common witli the infirmity of old age, may be made 
 to pass through a scene of comfortable rest by means 
 of the savings of labor, or the accumulation of 
 wealth. Hence a great increase in the duration of 
 human life since the dark ages, in all the civilized 
 Christian nations. And what is true in this case of 
 an individual is true also of nations. A nation in 
 which the division of labor has attained to superiori- 
 ty over that in other nations, obtains increased 
 wealth, or more of the product of the labor of other 
 nations than was possible before that superiority was 
 attained; for example, that wonderful labor saving 
 contrivance, the sewing machine needle, recently 
 invented by Elias Howe, Jr., has enabled one person 
 to do the work that formerly required twenty-five 
 persons, or more. Some writers have estimated the 
 work of a single sewing machine as high as the labor 
 of one hundred persons. The labor saving machinery 
 of a single manufacturing city of modern times — 
 such as Lowell, in Massachusetts — is equal to the 
 manual labor of a whole nation, as productive in- 
 dustry was conducted in ancient times, with spinning 
 wheels, handlooms, etc. It has been asserted, and it 
 
34 NATURAL HISTORY 
 
 is generally believed, that Great Britain possesses 
 manufacturing machinery, for the making of textile 
 fabrics, which could supply material enough to clothe 
 the bodies of all mankind decently and comfortably. 
 Great Britain has attained to such productive power 
 by various means; but the division of labor, main- 
 tained through a monetary system of great efficiency, 
 has not been the least powerful of these means. 
 
 It may be said that in the results produced by 
 labor saving machinery, the century ending with the 
 first half of the nineteenth has witnessed a greater 
 material development among the civilized nations 
 than took place in any preceding ten centuries of the 
 historic era; for these results have rendered it no 
 longer possible, it may be supposed, that the barbar 
 ous populations should again menace with total 
 annihilation, in the manner they have so often 
 threatened, the nations most highly civilized. When 
 the hordes of the Asiatic hills and steppes can pro- 
 duce a five hundred pound rifled gun, and the 
 fanatical tribes of Arabia build an iron steam-ship of 
 ten thousand tons; when the South-sea Islands eclipse 
 the maritime skill of Christendom, and the savage 
 Indians of North America o^o to makins: rail roads 
 
OFMONEY. 35 
 
 and steam engines; when tlie cannibals of Africa can 
 manufacture minnie rifles for well-drilled armies nnra- 
 bering millions of their own race, and the blacks of 
 Kew Holland build steam ploughs; and when the 
 Cliinese have horse rail roads in the principal streets 
 of Canton and Pekin, and the Hindoos go to making 
 the richest cashmere shawls with a steam-machine 
 which shall be an ahglo American cross with East 
 Indian improvements — a kind of half New York 
 sewing machine, and half Manchester cotton-loom — 
 then indeed may Christianity and civilization quail 
 again, as they once did, before savage hordes threat- 
 ning the heart of the civilized world. 
 
 That extraordinary intellectual and physical de- 
 velopment, which western Europe experienced from 
 the discovery of America, is in a great degi'ee 
 traceable, so far as influences purely material are 
 concerned, to the superiority of the monetary systems 
 introduced by the augmented supplies of the precious 
 metals flowing from this new world. When we 
 reflect upon what we witness in our own day, in the 
 waning resources of those ancient communities which 
 adhere to systems of industry that have remained 
 without improvement during thirty centuries, as 
 
36 NATTJKALHISTOEY 
 
 compared witli the growing wealth of the younger 
 people who have adopted modern inventions and 
 improvements; and then consider that without an 
 equitable monetary system — which is a valuable 
 invention, having modern improvements — a nation 
 is in the same category, so far as financial economy is 
 concerned, with those having systems of industry 
 that remain to-day what they were three thousand 
 years ago, we must conclude that such a monetary 
 system gives vigt)r, strength and power to the great 
 masses of the people where it exists. 
 
 3. Without a monetary system founded upon those 
 principles of justice, wdiich recognize the right of 
 labor to an equitable reward for its toil, people are 
 unable to save and accumulate wealth, every man's 
 property becomes subject to the lottery of uncertain 
 barter, and if a society thus situated does not degen- 
 erate into a state of barbarism, and remain there, it 
 at least approaches to that state by periodical con- 
 vulsions. The fluctuations which take place in the 
 prices of property and commodities, as well as the 
 wages of labor, in a country having false monetary 
 systems — like the inequalities in the distribution of 
 wealth where slavery or a tyrannical despotism 
 
OF MONEY 
 
 37 
 
 prevails— tend to unsettle all ideas of justice and 
 equity in the minds of the large numbers of people 
 who are plunged into frightful calamities by the vices 
 inherent in those systems. The loss of property tends 
 to produce despair or recklessness ; the deprivations 
 of working people, arising from a falsification of the 
 standard of value, create wide-spread discontent; and 
 these influences, stimulating the public mind, at last 
 make themselves felt in popular commotions and 
 revolutions, which continue to agitate the body 
 politic sometimes for generations after the original 
 grievance is removed. Violent alterations in the 
 money of nations have often produced popular tu- 
 mults, changes in the administration, the overthrow of 
 a dynasty, modifications of the constitution, and the 
 destruction of the form of government. It is true 
 that such events have arisen from many other causes 
 than from alterations in money, but in most cases, in 
 modern times, revolutionary tendencies have been 
 evoked, or carried to completion, through influences 
 clearly traceable to the interference of governments 
 with the standard of value, or to an arbitary exercise 
 of power which has caused the wealth of the nation 
 to be accumulated by favored classes, to the injury 
 
88 KATTTKAL HISTORY 
 
 of the great body of the people. The domination of 
 a class, like the government of a rapacious uncivil- 
 ized despotism, naturally t.akes the form of governing 
 in the interest of the dominant class, caste, or party ; 
 and tampering with the currency, special laws to 
 benefit the governing class, discriminating taxation, 
 with efforts at the perpetuation of their power 
 through the distribution of government patronage 
 among all who will become their partizans, regardless 
 of the interests of the people, are the means usually 
 resorted to by the enlightened but unscrupulous, as 
 well as the uncivilized and despotic, for maintaining 
 their hold upon the direction of public affairs. If 
 suddenly turned out of office by the vote of the 
 people, in a nation governed by a free constitution, or 
 by the exercise of the power of the monarch in a 
 monarchial or despotic country, a class sometimes 
 rebels, or attempts revolution. It has often happened 
 that the constitution has been violated, or the form 
 of government changed, by a class, while in power, 
 the people having to submit, or to get the restoration 
 of their rights by prolonged struggles, in which 
 monarchs, as well as popular leaders have become 
 the champions of the people against unprincipled and 
 
OFMONEY. 39 
 
 rapacious tyrants ; an emperor, or a king, or a queen, 
 having in such circumstances been found capable, 
 more than once, of rescuing a people as efficiently as 
 a popular leader. 
 
 A civilization or government guided by justice is 
 as impossible without an equitable measure of ex- 
 changeable value, as it is without honest standards 
 of weight and uniform measures of capacity and 
 length. Were the pound weight, the yard-sticlc, 
 the quart measure, or the bushel and all other 
 weights and measures incessantly changing, as a 
 false monetary standard always is, there could not be 
 either settled industry nor civilized society, and if 
 such injustice could possibly be enacted by law in an 
 enlightened community, the people would speedily fall 
 into that state of savage life, in which the law of the 
 strongest is the supreme arbiter of right. Quiet 
 submission to such a calamity might arise from the 
 ignorance of a people whose subjugation would be 
 impossible in any other mode. But the subjugation 
 could be permanent only where ignorance had de- 
 throned reason or physical degenercy had unmanned 
 the people. The first syotom s of an effort among 
 savage tribes to convert themselves, or to become 
 
 / 
 I.- 
 
^. NATURAL HISTORY 
 
 converts to civilized life, usually appear in the making 
 of laws to preserve to every man bis right to the 
 wealth which he may accumulate in the rewards of 
 his own labor; and hence these laws always make 
 provision for standards of weight and capacity and 
 length, and the standard of value, or money. This is 
 one of the invariable evidences of advancing civiliza- 
 tion. So, on the other hand, the decay of civilization 
 is invariably indicated by a laxity of moral principle 
 in regard to property and financial economy, and 
 unjust changes in the policy of legislation regulating 
 the monetary system, and the creation, accumula- 
 tion and distribution of wealth. Sometimes this 
 decay appears in violations of the laws, as in 
 bribes to judges, bounties for permitting smuggling, 
 largesses to brigands, the toleration of organized 
 banditti, or the granting of special monopolies 
 through the exercise of partizan influence in the 
 government, regardless of the rights and interests of 
 the people governed. Eeligion and education are 
 usually subverted, or greatly corrupted, before these 
 last named outrages become possible; for it is only 
 by cherishing religion, and by the dissemination 
 of knowledge among all the people through liberal 
 
OFMONEY. 41 
 
 educational systems, that a community can be pre- 
 served from sucli destructive influences. Toleration 
 of religious opinions at variance with our own, is 
 indispensable to the tranquility of modern society in 
 all enlightened countries, and the toleration of differ- 
 ences of opinion as to party politics is no less 
 indispensable to the harmonious administration of 
 government among a free people ; for the proscrip- 
 tion of loyal individuals because of differences of 
 opinion upon non-essentials, 23repares the way for 
 those violent party strifes which too often terminate 
 in civil wars and revolutions. There is no grievance 
 so formidable that it cannot be remedied under a free 
 system of government by patient appeals to the 
 people, and by compromise : the case of negro 
 slavery, for example, might have been adjusted by 
 compromise, without civil war, by the creation of a 
 national debt to purchase and liberate the slaves, 
 which would have been infinitely preferable to the 
 calamity that fell upon this country through the 
 attack of the slave holding interest upon the national 
 life. Elihu Burritt, commonly known as the "Learn- 
 ed Blacksmith," proposed this mode of adjusting the 
 slavery question several years before the rebellion 
 
42 NATURAL HISTORY. 
 
 of the slave owners. It may be asserted of the 
 government of a free and enlightened people, that 
 there is no grievance which conciliation and com- 
 promise, with the aid of time and patience, cannot 
 remove. Conciliation and compromise are infinitely 
 preferable to "the last resort," since it sometimes 
 happens that even a good cause is lost for generations 
 by an untimely appeal to arms. Generally, however, 
 a bad cause brings swift destruction upon itself by 
 its own aggressions, against which a great and free 
 people may be forced to defend themselves, with all 
 that noble patriotic valor which has distinguished 
 this people in defending themselves against the war 
 commenced, in 1861, by the slave owning interest. 
 
 Having thus glanced at early historical references, 
 the usages of civilized countries, and the general 
 characteristics and influences of money, it is proposed 
 to enter upon a more minute investigation of its 
 characteristics, and for the purposes of this inquiry, 
 to divide these characteristics into six classes, termed 
 attributes, so as to embrace every distinct form in 
 which it performs its functions, or displays its 
 power. 
 
I Li B U A i ; i 
 
 UNiVEKSJTi' OF 
 
 'ALIFORNIA. 
 
 CHAPTEE IV, 
 
 Thk First Attribute of Money; a Commodity, and its Relation- 
 ship TO other Commodities. 
 
 Gold and silver were originally used as money 
 without being made into coins, passing by weight, 
 as commodities which man included among the 
 various articles that constituted his wealth. If by 
 common usage any useful article were made to per- 
 form the offices of a measure of the prices of all 
 other articles, it would not cease to be a commodity 
 by becoming money ; on the contrary, it would 
 remain a commodity, subject to the law of supply 
 and. demand, only all prices of property would be 
 represented by quantities of it. Indeed, it may be 
 said that any one valuable and exchangeable commo- 
 dity that man possesses in large quantities, is to a 
 certain extent the measure of the prices of all other 
 commodities and property, causing prices of other 
 things to rise or fall with the increase or decrease 
 
 (48) 
 
44 NATURAL HISTORY 
 
 of the quantity of itself. For example, any one 
 substance used for food, for clothing or for fuel, 
 ■when it becomes very abundant or very scarce, 
 exerts an immediate effect upon the prices of other 
 substances to which it has economical relationships, 
 and if this effect upon such prices were usually 
 stated in increased or diminished quantities of that 
 one substance, we would have in the prices thus 
 stated fluctuations analogous to those which take 
 place in the money prices of all commodities, wages 
 and property, from the increase or decrease of the 
 quantity of money. It is also true that any one 
 cojnmodity might be selected as the center of the 
 economy of the whole world, as well as of a nation, 
 and the fluctuations in quantity peculiar to that one 
 commodity, producing corresponding fluctuations in 
 prices of all the others, might be cited in proof of 
 the controlling power of that one over them all, 
 when in fact this illustration would only prove that 
 every commodity, precisely like that one, exerts an 
 influence upon all the rest, and is itself influenced 
 by all the rest, in its increase or decrease, its price, 
 its supply and consumption. Money is not an ex- 
 ception to this rule. It is also a commodity. But 
 
OF MONEY. 45, 
 
 there are differences between it and other commo- 
 dities which arise from the characteristics which it 
 possesses as an instrument of trade, an article of 
 wealth, a measure of value, an equivalent and a sign. 
 Without these characteristics it would cease to be 
 money. 
 
 Adam Smith says: "Money has become in all 
 civilized countries the universal instrument of com- 
 merce, by the intervention of which goods of all 
 kinds are bought and sold or exchanged. Iron was 
 the common instrument of commerce among the 
 ancient Spartans, copper among the ancient Romans, 
 and gold and silver among all rich and commercial 
 nations." Great injustice has been done to the views 
 of Adam Smith, and incalculable mischief has been 
 wrought, by considering this idea of an "instrument" 
 to be a true and complete definition of money, or by 
 misunderstanding this definition, because it apparent- 
 ly (not really) conceals those higher attributes of 
 money which are displayed in its performing the 
 functions of a measxire of value ^ an equivalent, &c. 
 Tliis definition also seems to ignore the characteristics 
 of money as a commodity. Considered only as an 
 "instrument," all that seems requisite to satisfy the 
 
46 NATURAL HIS TOKY 
 
 demands of justice is that the instrument be made by 
 the government, thus giving the people of a nation 
 the profit arising from the making of an article so 
 genei-ally used by all classes, and hence the custom, 
 in ancient and modern times, of conferring upon the 
 supreme government the sole power of making 
 money. It is a self-evident truth, that if no other 
 purpose were to be subserved by money, than that 
 of a useful instrument, the making of it in unlimited 
 quantities by the government, and of the least valu- 
 able materials, would be an advantage to all the 
 people, as well as a substitute for taxation, since, to 
 the extent to which it might be made, it would re- 
 duce the amount of taxes required from the people, 
 and governments under Presidents, Kings, Queens 
 and Emperors might be as rich as they pleased : there 
 would be no limit to the making of money, under 
 such circumstances, for if it were beneficial to make 
 it in this way, there could not be too much of so 
 desirable an " instrument "/ It was this idea which 
 caused money to be made of pieces of leather bearing 
 the government stamp in ancient times, and it is the 
 same idea which in modern times has caused money 
 to be made of materials nearly worthless, by or under 
 
OF MONEY. 4:7 
 
 authority of governments. It cannot be 8n23po8ed 
 that the great mind of Adam Smith really enter- 
 tained the false conception of money — that it is only 
 an instrument — which this definition has been made 
 to convey to the minds of so many people and 
 nations ; for the whole tenor of his writings upon the 
 nature and functions of money goes to prove, that he 
 was familiar with those practical operations of com- 
 merce which establish the fact, that while a civilized 
 nation may employ any substance or device it pleases 
 to perform the functions of money among its own 
 people, whenever it requires money to pay balances 
 of trade to other civilized nations, it can only employ 
 that kind of money which other nations will receive, 
 and this, instead of being "an instrument," must be 
 a commodity universally acceptable and valuable to 
 the other nations. It is therefore self-evident that 
 it is possible to use a money which answers the 
 purposes of "an instrument" of commerce in the 
 internal trade of a civilized nation, but which ceases 
 to be an "instrument of commerce" in the trade 
 with other civilized nations, and such money is 
 proved to be 2^ false "instrument" of international 
 commerce, whenever it is made of any thing that is 
 
48 NATURAL HISTORY 
 
 not a commodity universally acceptable and valuable 
 to all civilized nations ; yet, in conceding that such 
 falsemouey may perform the functions of an instru- 
 ment of commerce in the internal trade of a nation, 
 it is not intended to admit that such money, false as 
 regards the people of other nations, can be wholly 
 true to the people of the nation employing it. It 
 must be observed that Adam Smith applies the term 
 money to that which the ancient S])artans made of 
 iron, and the ancient Romans of copper, and to that 
 which "rich and commercial" nations make of gold 
 and silver, thus recognizing among rich and commer- 
 cial nations tliat kind which is composed of gold and 
 silver, the so called precious metals; in this sense the 
 political economists usually employ the term money, 
 and in this sense his definition of money is undoubt- 
 edly true, since money made of the precious metals 
 is now among all rich and commercial nations the 
 universal instrument of commerce, governing the 
 exchangeable value of all commodities. That kind 
 of money which is employed by one nation for local 
 purposes, when made of other substances than the 
 precious metals, and not convertible into these 
 metals on demand, may be termed local money: and, 
 
OFMONET. 49 
 
 when made so by law, "legal tender" or "lawful 
 money." Custom, alone, may be sufficient to confer 
 the attributes of local money upon substances or 
 commodities other than money made of the precious 
 metals: paper bills of credit, in the form of notes and 
 drafts, circulated even in defiance of law, and not 
 convertible into coined money, may become local 
 mone}^ by the common consent and usage of the 
 people, in great emergencies, when no better kind of 
 money can be obtained. 
 
 Any substance that custom or law permits to be 
 used for making money — whether gold, silver, cop- 
 per, iron, tin, paper, wheat, corn, cattle, — becomes 
 the ruling commodity, but because the quantities of 
 it are expressed in fixed numbers, our mind does not 
 readily comprehend the fact that such a substance 
 itself is sometimes dear and sometimes cheap. When 
 the money price of all commodities rises, they are 
 said to have become dearer, although the fact usually 
 is that money has become abundant and cheap, and 
 is the only commodity that has fluctuated. Upon 
 the great influx of gold from California, prices of 
 many commodities and several descriptions of 
 property rose in several parts of the United 
 
60 NATURAL HISTOET 
 
 States; and a similar increase of prices took place in 
 the years 1862, '3 and '4, in consequence of the 
 increase of paper money. In both these instances 
 the circulating money was a commodity; and al- 
 though in the first instance the rise of prices was 
 primarily caused by the increase of money made of 
 gold and silver, in whicli the prices were expressed, 
 and in the second instance it was caused by money 
 made of paper,* in which the prices were expressed, 
 the fact was very plain that the increase of the com- 
 modity called money produced in both instances the 
 same effect (in kind but not in degree), upon prices 
 of other commodities; the quantity of it in this 
 country, was greater than the sum of money required 
 to transact the business of the people, upon an exact 
 equality w^itli the sum of money in use among the 
 nations having commercial relations with this 
 country. Our lawful money was a commodity of 
 which we possessed a larger supply than we required 
 to conduct our economical affairs upon a par with 
 those of the rest of the world; it was, therefore, 
 cheaper (comparatively) than some other commodi- 
 ties, or it became cheaper at intervals, and the 
 merchants of other nations were thus enabled to 
 
OFMONEY. 61 
 
 \ 
 
 convey away our real money to those nations at a 
 profit, in exchange for their commodities sold to us. 
 "We spoke and wrote of tlie increased prices of other 
 commodities, not of the decline in the value of money; 
 but when the quantity of paper money became 
 great, and the premium on gold and silver, expressed 
 in this paper money, increased very much, then 
 the fact that paper money had become abundant and 
 cheap, was easily understood by reflecting minds. 
 If, for example, the government had passed a law 
 calling in the paper money, declaring that after a 
 certain date it would be lawful money only in pay- 
 ment of loans made to or debts due the government, 
 gold and silver coins to be thereafter restored as the 
 "legal tender," all of the paper money, whether 
 issued by government or by banks, circulating after 
 that date and not redeemed in lawful coined money, 
 would have become a commodity, dealt in at its 
 market price exactly as gold and silver coins had 
 been commodities, bought and sold at their market 
 price, while paper money was the ruling currency ; 
 that is, the coined money and the paper money 
 would have exchanged places as commodities. In 
 1857, when the augmented supplies of real money 
 
52 NATURAL HISTOKY. 
 
 from the California mines had greatly increased 
 prices, and turned the foreign exchanges against ns, 
 the banks of 'New York, by contracting, turned all 
 the exchanges in favor of the city, and although they 
 were forced to suspend, in consequence of fright and 
 panic among the people, they resumed again in a 
 few days, the real money flowing to them from all 
 quarters, and the export of commodities largely in- 
 creasing from the reduction in prices resulting from 
 tlie contraction of the volume of money in use. 
 Hence it is evident that the increase or decrease of 
 any money that circulates lawfully or by usage 
 makes prices of other commodities dear or clieap, 
 exactly as the abundance or scarcity of wheat or of 
 any other commodity makes it dear or cheap, because 
 money is the commodity which measures the price of 
 every other, that price being expressed in a quantity 
 of money. 
 
\ 
 
 L 1 ii Jl A U \ 
 
 UNIVERSITY OP 
 
 CALIFOKXTA. 
 
 CHAPTER V. 
 
 Second Attribute of Money: an Instrument of Commerce, <jb 
 Universal Medium of Exchange. 
 
 Instruments, measures, weights and money, are 
 to commerce and trade what roads are to farmers; 
 the quantity of land used for public roads being 
 an unproductive capital, exactly as the quantity 
 of wealth employed in making money, weights, 
 measures and instruments is unproductive. Al- 
 though roads do not produce any thing, they are 
 nevertheless valuable for use. So with money; it 
 does not itself produce any thing : but of all instru- 
 ments devised by man, it is one of the most useful, 
 because it measures the price of every thing else, 
 and is at the same time the instrument by which 
 any one commodity can be exchanged for every 
 other commodity: it is at once the mover of com- 
 modities and also the measure of their value as 
 
64: NATURAL HISTORY 
 
 comj)ared with each other. It is the medium which 
 exchanges every thing, attracting all things to itself, 
 and distributing them as rapidly as it attracts them : 
 it makes a market for every thing, and forces every 
 thing that is to be bought and sold to and from a 
 market ; through commerce it brings to every man, 
 so far as his means can procure them, commodities 
 from all parts of the earth. By the use of this 
 instrument the human mind is able to comprehend 
 quantities of wealth more readily than if the items 
 composing such quantities were stated separately. 
 Before money was the universal instrument of trade, 
 it was customary to measure the property of a man 
 by enumerating the various articles of which his 
 wealth consisted : the number of horses, sheep, oxen, 
 goats, garments, etc., is mentioned in ancient records 
 in the catalogue of commodities possessed by a per- 
 son, in order to convey a knowledge of the extent 
 of his riches, but such enumerations are not requisite 
 to convey such knowledge to minds familiar with the 
 use of money, the expression of the sum of money 
 for which a man's estate could be sold — as hundreds 
 or thousands of dollars, pounds, francs or reals — 
 being sufficient to convey that knowledge, precisely 
 
OFMONEY. 56 
 
 as distance is stated in miles ; time in hours, days, 
 years, etc. 
 
 Without the use of uniform measures of weight, 
 capacity and length, it would be difficult, if not 
 impossible, to conduct the present quantity of ex- 
 changes of commodities by barter; only in cases 
 where the Creator has made nearly uniform quan- 
 tities in nature, could the mind form a correct esti- 
 mate of such quantities without the use of weights 
 and measures. Time is measured by the motions 
 of the earth, and is perceptible to every mind in the 
 alternations of day and night, and the changes of the 
 seasons. Some animals grow nearly uniform in size 
 and weight in a particular locality. Fruits and 
 vegetable productions follow the same law. But in 
 that minute subdivision of commodities essential to 
 trade, it is only by means of uniform weights and 
 measures that man can determine exact quantities, 
 and the use of these instruments, of one unvarying 
 standard, has been found so highly favorable to 
 the rapid extehsion of commerce within particular 
 nations, that benevolent scientific persons earnestly 
 advocate the adoption of one uniform standard for 
 weights and measures by all civilized nations, in the 
 
56 NATURAL HISTORY 
 
 hope of thereby facilitating the extension of that 
 commerce which in every age has been a most 
 efficient means of spreading civilization. The making 
 of instruments for determining quantities, or the 
 regulation of them, is one of the objects for which 
 governments are instituted, and although very few 
 governments engage in the manufacture of them, it 
 is made the duty of government, in every civilized 
 nation, to see that they are made uniform, and to 
 punish any person who makes or uses a false measure 
 or weight. So it is with the instrument of com- 
 merce, money : government is always empowered to 
 determine the character of the money which shall 
 be used among its people, so as to preserve that 
 money from being falsified, and this power is a pre- 
 rogative of the supreme government of every nation 
 enjoying a knowledge of the blessings of civilized 
 life. The stamp of the government upon an instru- 
 ment for determining quantities or values, affords 
 presumptive evidence of genuineness, and in affixing 
 this stamp, or in protecting its people from the use 
 of false instruments, the government fulfills the trust 
 reposed in it. It is no more requisite that a govern- 
 ment should undertake to supply the materials of 
 
OFMONEY. * 5T 
 
 whicli instruments are made, than that it should 
 undertake to supply conveyances for its people to 
 ride to and from market. Whenever a government 
 undertakes to supply the material for making the 
 instrument called money, experience proves that 
 irresistible temptations to abuse their power are 
 presented to the persons in authority; as in the 
 middle ages, when the coined money, becoming a 
 plaything in the hands of governments, was adulter- 
 ated whenever "reasons of state" made it practica- 
 ble, the custom being termed, in the language of 
 those times, "raising the standard," meaning that the 
 standard value of the gold or silver in a piece of 
 money was increased ; so that from successive alter- 
 ations the pieces came to possess in some instances 
 only a fourth or fifth part of the pure metal which 
 they had formerly contained, although the sum of 
 money which they represented remained the same, 
 exactly as if the dollar, or the pound sterling, or the 
 franc of our own time were called in by government 
 and reissued of half, or a quarter, or a fifth its 
 present weight of pure metal. 
 
 The opinion that it is the duty of government to 
 provide the materials of which money is made, as 
 3^ 
 
68 NATURAL II ISTOEY 
 
 well as to impress the stamp upon it, arises from the 
 theory that money is nothing more than an instru- 
 ment, the stamp being ail that is requisite to give it 
 value. It has already been observed that if this 
 theory were true, all governments, whether presided 
 over by Presidents, Kings, Queens or Emperors, 
 might be as rich as they pleased. Taxes would not 
 be required, pecuniary distress would be unknown, 
 labor might cease, and all mankind could devote 
 themselves to perpetual amusement. The theory is 
 so ridiculously absurd, the practical illustrations of 
 its folly have been so numerous, and the disasters 
 resulting from every attempt that has been made to 
 carry it into practical effect have been so often repeat- 
 ed in one nation after another, that the whole com- 
 mercial world stands appalled at the frightful specta- 
 cle presented by any nation whose government 
 adopts the delusion. 
 
 Whenever this theory, that money is only an 
 instrument which receives its value wholly from the 
 stamp of the government, seizes upon the governing 
 mind in any nation, the adulteration of the currency, 
 in one form or another, becomes inevitable. Multi- 
 tudes of people sustain and advocate the theory 
 
OFMONEY. 69 
 
 without reflecting upon the consequences of the 
 violent fluctuations that are certain to be produced 
 in the prices or values of all property and commo- 
 dities ; and the voice of reason and humanity is 
 drowned by the admiring plaudits of those who think 
 they forsee vast riches to themselves or great benefits 
 to all classes in the approaching abundance of money. 
 Thomas Jeff'erson said that "paper money makes a 
 lottery of all private property," and excessive issues 
 of paper money not redeemable in coin, have very 
 frequently been the medium resorted to in such cases, 
 or for such purposes, but the adulteration of the 
 coined money, made to answer the same purposes, 
 before the use of paper money became general, 
 produces as much of a lottery of private property, to 
 the extent of the adulteration, as paper money. 
 
 In emergencies, when a government is forced to 
 expend more than its income from taxes and duties, 
 there arises a temptation to borrow money indirectly 
 from the people through the issue of a paper 
 medium. Such paper money, if issued in excessive 
 volume, without interest and not fundable must, as 
 "Washington has observed, be a legal tender "or 
 nothing." Public opinion, without any express law, 
 
60 NATURAL HISTORY 
 
 may make it a compulsory payment — as in tlie rebel 
 states, and that is the same as making it a tender by 
 law. Being made a compulsory or legal tender, it 
 takes the place of the coined money, and with the 
 increase or decrease of the quantity of it in use, as 
 explained in the chapter on money as a commodity, 
 the prices of coined money and commodities rise or 
 fall; if only a small quantity be used, as compared 
 with the quantity of coined money in the country, 
 only a small quantity of the coined money will be 
 exported to other countries; but if a quantity of such 
 paper money be suddenly issued, equal to the sum 
 of all the real money in tise before the paper issue, 
 then the i n c re as^-ef^ price s o f commodities will, by 
 slow degrees, tend upward toward double what they 
 had been under a currency regulated by real money — 
 these prices being expressed in the legal tender paper 
 money — until the whole of the coined money is 
 driven out of the country ; and then if the volume of 
 legal tender paper be maintained at this sum, prices 
 will gradually recede to what they were before the 
 issue of the legal tender paper — i. e. to par with the 
 prices that prevailed before the issue of legal tender 
 paper. That is to say, if it were possible to keep the 
 
OFMONEY. 61 
 
 people satisfied with a paper money exclusively, the 
 paper money might be maintained at so small a sum 
 that it would be as valuable as coined money. If 
 in any case, from an unforseen calamity, there arises 
 a necessity for the issue of bills of credit in the nature 
 of a circulating medium, making them with interest, 
 the rate of interest being subject to increase or 
 decrease by public notice from the treasury as the 
 state of the money market renders advisable, the 
 periodical funding of the bills remaining discretionary 
 with the government, is supposed to have the effect 
 of keeping them from ])erforming the functions of 
 real money to any great extent. Bearing interest^ 
 they are generally held as an investment, and thn» 
 their depreciation, to some extent, is prevented. If 
 issued without interest and not a legal tender, they 
 would go to a discount as compared with real money. 
 If made a legal tender, the utmost vigilance should 
 be exercised by those in authority to prevent the 
 volume in use from being so excessive as to cause the 
 quantity of money in the country to exceed that re- 
 quired to preserve the whole volume at par with the 
 currencies of other nations, as indicated in the state 
 of the foreign exchanges; for a lawful paper money 
 
62 NATURAL HISTOEY. 
 
 may become an inferior instrument of commerce in 
 proportion as it raises the foreign exchanges above 
 par, thus becoming itself depreciated; and in the 
 progress of the depreciation of the lawful money all 
 the industry of a nation is subject to an indirect tax, 
 amounting precisely to the sum of the depreciation, 
 and this sum is the premium on the foreign ex- 
 changes, or on real money, expressed in the legal 
 tender money. 
 
^NIYERSITY < 
 
 ^ CAUFORXI A 
 
 CHAPTER VI. 
 
 The Third Attribute of Money: a Measure of Prices; ob, 
 Standard of Value. 
 
 There are various applications of the term value, 
 as value in use, value in exchange, exchangeable 
 value, intrinsic value, ideal value, practical value, and 
 standard of value. Money is denominated the stand- 
 ard of value, because it is in quantities of money 
 that values are generally expressed, and the ex- 
 changeable values or prices of all commodities are 
 subject to rise or fall with the increase or decrease of 
 money. The term measure of prices seems most 
 appropriate to express this measuring power of 
 money, in preference to the term standard of value, 
 the latter being sometimes applied to the "monetary 
 standard," or quantity of pure metal constituting 
 the "monetary unit," that govei'nment puts into the 
 coin stamped at the mint, — and the only real 
 
 STANDARD OF VALUE is labor. 
 
 (63) 
 
64 NATURAL HISTORY 
 
 • 
 
 The quantity of money in use determines the 
 prices of commodities and property, tliroughont the 
 commercial world. It is the measure of tliose prices, 
 being one of tliose commodities itself, and also the 
 instrument by which they are sold, or exchanged, 
 or paid for. The measure of its own price is ex- 
 pressed in the rate of interest paid or received for the 
 use of it, in its character of an instrument of trade 
 and commerce. There may be said to be a measure 
 of the quantity of real money whicli it is possible for 
 mankind to possess, and that is the quantity of the 
 precious metals which the Creator has placed in the 
 earth accessible to human labor. Although silver 
 is found in larger quantities than gold, the labor 
 required to procure silver is more than to procure 
 gold, because silver is usually deposited at greater 
 depths, gold being near the surftice. Hence it was 
 that silver was until recently considered a more just 
 monetary standard, because the quantity of labor 
 expended in procuring it was more uniform than the 
 quantity of labor expended in procuring gold, but 
 mechanical ingenuity has now greatly increased the 
 efficiency of manual labor in silver mines. 
 
 Although it has by economists been denied that 
 
OFMONEY. 65 
 
 money is a true measure of the values of all other 
 commodities, there can be no doubt that it causes all 
 other commodities to rise or fall in price with the 
 increase or decrease of the quantity of it in use. 
 
 It is true that the price of money — the rate of 
 interest , does not apparently -always follow exactly 
 the law of supply and demand governing other 
 prices — the rate of interest being very low when a \ 
 great glut of money prevails in the market, but 
 rising rapidly as the increased supply of money gets 
 into circulation and produces an increase of prices, 
 the demand for money and the rate of interest in- 
 creasing with the supply of money. 
 
 As the high price, or rate of interest, paid for the 
 use of money prevails most generally when great 
 profits are made by the use of money, these profits 
 being the true measure of the rate of « interest, it 
 follows that the course of the rate of interest is also 
 a proof that money is a measure of prices. Prices 
 of commodities being expressed in money, how can 
 it be that money is not the measure of the prices of 
 commodities ? We may say that a day of twenty- 
 four hours is not the true measure of the diurnal 
 revolution of the earth, that the true measure of such 
 
6^' NATURAL HISTOEY 
 
 revolution is the earth's motion, and that a day 
 of twentj-fonr honrs of time, being made by the 
 motion, — the effect, not the cause, — lias notiiing to 
 do witli causing the motion : so it may in this sense 
 be said of money, and it has been said, that it is not 
 a true measure of the prices of commodities, because 
 the volume of these in the world so vastly exceeds 
 the volume of money that it cannot be used in every 
 purchase or sale ; and commodities increase and 
 decrease in quantity and in price from causes wholly 
 unconnected with money, and that the only true 
 measure of value and prices is the toil of a human 
 beine:. Admittinoj all that is claimed for abstract 
 theories of this nature, without acknowledging it 
 possible for the masses of mankind to understand 
 them, their promulgation being profitable and amus- 
 ing only to those possessing exalted metaphysical 
 genius, no one can deny that his own observation 
 convinces every man that twenty-four hours and a 
 fraction constitute what is termed the measure of the 
 time in which the earth makes its diurnal revolution, 
 tliat quantities of money constitute the measure by 
 which lie determines in commercial transactions the 
 prices of quantities of commodities, that money is a 
 
OF MONEY. 67 
 
 commodity, that commodities at commercial centers 
 rise and fall in money price with the increase and 
 decrease of the quantity of money, as well as from 
 supply of and demand for them, and that the rate 
 of interest given or received for the use of money 
 rises or falls with the increase or decrease of the 
 profits made by such use. 
 
 Throughout the principal European nations, the 
 increase of the quantity of money in use, from the 
 production of the mines discovered in America, 
 caused prices of many things to increase four hun- 
 dred per centum or more, being at the rate of five 
 dollars for what had previously been sold for only 
 one dollar. This rise of prices in Europe after the 
 discovery of America has recently been attributed 
 to causes other than the increase of money I That 
 discovery gave an impetus to commerce, industry, 
 art, education, and all other elements of progressive 
 civilization, and the development of that civilization, 
 not the increase of money, it has been contended, 
 caused the rise in prices; but Adam Smith, who 
 wrote about one hundred years ago, has stated the 
 contrary, remarking in his work on the *' Wealth of 
 Nations," (Book I, Chapter 2), of the rise in the price 
 
68 NATURAL HISTOEY 
 
 of corn, between 1570 and 1640 : "The discovery of 
 the abundant mines of America seems to have been 
 the sole cause of this diminution in the vahie of 
 silver, in proportion to that of corn. It is accounted 
 for, accordingly, in the same manner by everybody ; 
 and there never has been any dispute, either about 
 the fact, or about the cause of it." Although this 
 positive statement of fact, is sufficient to convince 
 any person as to the rise of prices caused by the 
 increase of money after the discovery of America, the 
 increase of the money being the cause, not the effect, 
 of the rise, it is only requisite to know what has 
 taken place at the gold mines in California and 
 Australia, to be convinced of the truth of the prin- 
 ciple that an increase of money causes a rise iu 
 prices. Commodities of every kind, useful to man, 
 command uniformly higher prices at the gold mines 
 than any where else ; these higher prices continuing 
 in the path of the gold, as it flows from the mines 
 into use as money all over the world, but decreasing 
 gradually as tlie influences of the increase of the 
 money are reduced. It would be quite as logical to 
 assert that the quantities of other commodities, then 
 in the world, were the cause of the accidental dis- 
 
OF MONEY. 69 
 
 coveiy of gold mines in California, as to say that the 
 liigh prices of commodities at those mines is the 
 cause, not the eifect, of the increase of gold. Pre- 
 cisely the same hind (not degree) of increase of prices 
 arises from an increase of paper money. 
 
 That the rise in prices of commodities, from the 
 increase of money, took place very slowly * after the 
 discovery of America, may be accounted for by the 
 state of civilization and commerce at that period. 
 Yoyages and adventures are now completed in as 
 many months as they then were in years ; it is so 
 difficult for the present age to understand the very 
 slow rate of progress made in every kind of enter- 
 prise two or three hundred years ago, in the com- 
 mercial nations, that we consider it impossible for 
 the increased supplies of money, produced in the 
 fifteenth and sixteenth centuries, to have been nearly 
 a century in use before exerting an influence on 
 prices throughout the commercial world ; but the 
 slowness of the circulation, the efforts of nations 
 to keep the money which they received, and the 
 
 * The rise of prices in this country, from the increase of paper money, in 
 1862-8, toolc place so slowly at first, that many persons were disposed to doubt 
 those principles of monetary science which had been generally accepted as 
 truths by the commercial world. 
 
7G| N A T U K A L II I S T O K Y 
 
 practice of hoarding by individuals, explain tlie 
 mystery. The great expansion of prices in the seven- 
 teenth century was caused mainly by the accumula- 
 tion of the metals bursting forth from the restraints 
 which had been placed upon them, the general intro- 
 duction of the business of banking by individuals or 
 corporations having afforded facilities in several 
 countries of Europe for giving them a more rapid 
 circulation. That the gold from California and 
 Australia has not produced a more marked effect 
 upon prices in our own time, is accounted for by the 
 demands of the commercial world, owing to the 
 augmented volume of commercial transactions,* for 
 an increased amount of money : within the sixteen 
 years since this discovery of gold, prices have not 
 advanced as rapidly as it had been generally expec' 
 ted they would, yet it is evident that the high prices 
 prevailing in the communities immediately connected 
 with the mines are gradually and irresistibly extend- 
 ing to other communities, and that the labor of the 
 whole civilized world is being gradually influenced 
 
 * There has also been an immense absorption of the metals by Oriental 
 nations,— in India and China,— during the two great rebellions ;— and in Egypt, 
 Ac, very recently, in exchange for cotton. 
 
OF MONET. 71 
 
 by these prices ; altliongh in our own case, because 
 the price of food is kept down by a most extraordi- 
 nary application of labor saving macliinery to agri- 
 cultural industry, we have not yet realized, even in 
 the midst of a calamitous rebellion that has required 
 a million of men to fly to arms, the full effect of 
 the increased reward which labor is reaping at our 
 gold mines. When we contemplate the stupendous 
 events of these years, with the heroic struggles of 
 nations to attain to a higher and purer social and 
 political life, how abundant is the cause for gratitude 
 to Ilim who has furnished the resources of material 
 and intellectual power in such profusion to those 
 who, on this continent, have sustained the rights of 
 man. As in the evolutions which have elevated 
 European civilization since the discovery of America, 
 the money of the American mines aided in the good 
 work of securing and maintaining those rights, so 
 now, the precious metals, the devolopment of labor 
 saving machinery and other resources of power and 
 wealth, have been bestowed upon us, at the moment 
 when most wanted to reassert the dignity of man, 
 and to vindicate the right of the nation to life and 
 liberty I 
 
7?. NATURAL HISTORY 
 
 I 
 
 Money being the original or primary cause of the 
 existence of the money prices of commodities, and 
 the measnre of these prices, wherever trade and 
 commerce are carried on in civilized communities, 
 it naturally follows that an increase of it in any 
 nation causes a rise of ]3 rices in that nation. That is 
 to say, an increase of money is an original or pri- 
 mary cause of tlie rise of prices. But from this rise 
 of prices there comes to be a demand for a greater 
 (quantity of money, and hence an expansion of the 
 volume of credits, as bills of exchange, book credits, 
 bank deposits, drafts, bank notes, checks, &c. These 
 media of exchange when performing the functions 
 of an instrument of commerce are "currency" in or 
 to the extent of tlie ratio of their circulation, and the 
 increase of them from a rise of prices is sometimes 
 cited as proof that it is the rise of prices which 
 increases the quantity of money. That the increase 
 of prices of commodities causes an increase of the 
 quantity of auxiliary money, may be and is un- 
 doubtedly true, but the true primary cause of the 
 increase of prices is obviously the increase of money. 
 There are cases in which credits themselves, in com- 
 mon with real money, perform all the offices of 
 
OF MONEY. 73 
 
 money, as an instrument, and in such cases an 
 increase of the credits, with increasing prices, may 
 be apparent witliout any increase of real money, 
 because the credits may go on increasing, as well as 
 prices, long after tlie increase of real money, which 
 originally produced the expansion of credits, has 
 terminated, and even while the stock of real money 
 is running low. 
 
 Credits alone, to a certain extent, perform the 
 functions of money, and increase of prices and 
 credits go hand in hand until stopped by high 
 prices, which cause an export of specie, or drain the 
 country of its wealth. In such cases panic and 
 revulsion become inevitable and prevail, sooner or 
 later until the equilibrium between the wliole volume 
 of money and prices is restored to a level with that 
 of all nations, the foreign exchanges returning to par, 
 or declining in proportion to the reduction of the 
 volume of credit. 
 
 The whole volume of money as a measure of prices 
 in any country, where credit is in a high state of de- 
 velopment, usually consists of: 
 
 1. Coined money circulating in the hands of the 
 people. 
 3 
 
T4 NATURAL HISTORY 
 
 2. Circulating notes and credit media, in use or in 
 the hands of the people. 
 
 3. Deposits in banks, or with bankers, payable on 
 .demand, including under this head all the specie and 
 
 bullion held by banks and bankers. 
 
 The second and third are the same in their effect 
 on prices as real money, to the extent of their use, 
 or in the ratio of their circulation. 
 
 "Where there are circulating bank notes, and a 
 government paper made a compulsory payment by 
 law or usage, the money measure of prices consists of: 
 
 1. Legal tender paper money. 
 
 2. Circulating notes of banks, and all other credit 
 media of exchange. 
 
 3. Deposits in bank, payable on demand, includ- 
 ing coin in bank at its premium price in paper. 
 
 4. Coined money in the hands of the people at ita 
 price in legal tender paper. 
 
 In this case the second, third and fourth, are 
 measures of prices in the ratio of their circulation. 
 
 In countries where (specie payments being sus- 
 pended) paper money circulates by common consent 
 and usage, with or without authority of law, it is the 
 same as legal tender money. 
 
OF MONEY. W 
 
 111 times of suspension of specie payments in any 
 country, the coined money is not demonetized : on 
 the contrary, the amount of the premium on it, cor- 
 responding with the discount on paper, is added to 
 the whole volume of the money in use, because the 
 coined money will pass for this premium, in addition 
 to the sum that it passed for before the suspension, 
 although at such times the circulation of coined 
 money may be very much slower than when specie 
 payments prevail — i. e. the ratio of its circulation 
 may be diminished, as compared with the ratio of 
 circulation of the paper money which takes its place 
 as current money in general use. 
 
 The sum total of all the property in any country, 
 when stated in money prices, gives a certain well 
 defined proportion to the quantity of money in use; 
 and the fluctuations which are always taking place 
 in the quantity of the money in any coimtry produce 
 corresponding fluctuations in the prices of property 
 in that country. 
 
 A certain interval of time,* elapses between the 
 
 * This was seen at the time of the expansion of paper money in this country in 
 1862 and 1868. Many persons believed that the prices of property would not 
 rise above two or three per cent. 
 
f6 NATURAL HISTOEY 
 
 increase or decrease of the quantity of money in nse 
 and the rise or fall of prices of property which it 
 causes. Tlie length of this time depends upon the 
 activity of trade, the state of "public confidence," 
 and the length of the credits granted or received in 
 business circles. Public securities, stocks and funds 
 are first afiected by the increase of money, then 
 commodities, fixed property next, and labor last of 
 all. In the case of commodities tlie complete eflfects 
 of an increase of money cannot be experienced until 
 the transfer from the wholesale dealer to the con- 
 sumer is accomplished, and debts contracted by all 
 the dealers in the transfer have been liquidated. In 
 the United States an expansion has usually completed 
 its circle of inflation in from ten to thirteen months, 
 at the expiration of w^hicli time, fixed property began 
 to be influenced, and labor to call for higher wages. 
 The contraction of the volume of money is much 
 more rapid in its effects than the expansion, being 
 hastened by panic ; although when government inter- 
 feres to legalize a suspension of specie payments the 
 high prices may be made to continue as long as the 
 suspension, or until, in the case of a young and 
 growing country, the increase of property and popu- 
 
OFMONET. 77 
 
 lation restores the volume of money and prices to an 
 equilibrium with those of other nations. In the case 
 of the great revulsion in the United States in 1837, 
 the suspension of the banks being generally legalized 
 by the states, the expansion of prices was prolonged 
 in parts of the country some years ; and when all the 
 banks had resumed in all parts of the country, in 
 1843, the contraction being then at its lowest point, 
 another inflation w^as immediately entered upon, 
 making very slow progress, however, for the ^ve or 
 six years next ensuing. The total bankruptcy of 
 estates from the revulsion of 1837, was estimated at 
 six hundred millions; but the reduction in prices of 
 property of all kinds, between the years 1837 and 
 1842, being the years of maximum and minimum 
 prices could not have been less than two thousand 
 millions, the circulation and deposits of the banks 
 having fallen from $276,583,075, in 1837, to 
 $114,732,236 in 1843. In 1837 the nation by its 
 excessive paper money, wrote itself down as worth 
 about eight thousand millions, but in 1843, the price 
 of the whole property was less than six thousand 
 millions. To illustrate the attribute of money as a 
 measure cf prices, it may be supposed that three 
 
78 NATURAL HISTORY 
 
 nations (A. B. and C.) have population, wealth and 
 money, their monetary systems being at par with 
 each other and the rest of the world, in the followino* 
 proportions, in millions; 
 
 A. B. C. 
 
 Population 20 30 40 
 
 Property $12,000 $24,000 $16,000 
 
 Coined money in hands of the people 
 
 and in bank 150 270 180 
 
 Circulating notes and bank deposits 
 
 excluding tlie coin in banks 350 630 420 
 
 Total money in use 500 900 600 
 
 Reducing the sums to minima, we have: 
 
 A. B. c. 
 
 Money in use to each person $25 $30 $15 
 
 Property to each person 600 800 400 
 
 Property to each dollar of money 24 26^ 26|- 
 
 Real money per centum of all the money. 30 30 80 
 
 A densely populated commercial and manufactur- 
 ing country requires less money in proportion to the 
 wealth of the people, but more in proportion to the 
 number of the people, than an agricultural country. 
 In proportion to the money prices of all property the 
 quantity of money in use in every civilized nation is 
 
OFMONEY. T9 
 
 found to be so uniform as to induce the opinion that a 
 natui'al law prevails to determine the relationships of 
 money to prices. In the case of the United States 
 and Great Britain and France there seems to be some 
 ground for believing that such a law exists. 
 
 But in estimating the quantity of money in any 
 nation, it is important to include those auxiliaries of 
 money which, entering into the grand volume of the 
 circulating medium, perform the functions of money 
 as instruments of trade and commerce and banking. 
 Demand deposits are often excluded from estimates 
 of the quantity of money in use, because their name 
 indicates a state of rest, in the nature of a hoard; on 
 the contrary, they are not money at rest, because a 
 sum equal to the whole amount of them is sometimes 
 exchanged every three or four days at the Bank 
 Clearing House, in a great city, at the present day. 
 A person generally holds circulating notes more than 
 three or four days before paying them out, and if it 
 may be assumed that the actual rapidity of circula- 
 tion of deposits in bank payable on demand, through 
 the use of checks, and drafts, is equal to that of bills 
 of circulation, then we may conclude that the 
 efficiency of such deposits, as part of the money in 
 
80 NATURAL HISTORY 
 
 use, is nearly equal to that of any other kind of 
 money. Deposits payable on demand may, there- 
 fore, have a ratio of circulation, or perform the 
 functions of a measure of prices, equal to, and in the 
 same manner that, the same amount of real money 
 would have or perform. And every other credit 
 medium of exchange, or auxiliary money, is a 
 measure of prices, equal to real money, to the extent 
 to which it is used, or in the ratio of its circulation 
 as compared with the ratio of circulation of real 
 money. It was formerly understood among econo- 
 mists that the only kind of money which influenced 
 prices was the real money circulating in the hands 
 of the people, but the general application and 
 extension of the banking system is gradually dispen- 
 sing with the use of real money in the hands of the 
 people of civilized and enlightened nations, and the 
 only method by which such nations can now secure 
 to themselves a sufficient stock of real money to 
 preserve their financial systems from periodical 
 collapse, is by requiring the public institutions of a 
 monetary character, as banks and public or govern- 
 ment treasuries, to hold reserves of real mone}^ 
 When from any cause the coined money passes in 
 
OFMONEY. 81 
 
 large sums from one nation to another, neither of 
 them being producers of precious metal, the one 
 receiving and retaining it for a sufficient length of 
 time, has the prices of its commodities increased, and 
 this increase attracts to that nation more commodities 
 from all other nations to be exchanged for the excess 
 of coined money, until through the laws of trade tliat 
 excess is withdrawn. For example, if the nation A, 
 in the illustration on a preceding page, should 
 suddenly expand its paper money in use above the 
 average of other nations, prices of commodities and 
 property would rise; B and C would send to A, 
 every thing they could spare to be sold and exchanged 
 for mone}^, but A's paper money being of no use to 
 them, they would convey away only the coined 
 money, until the stock of their coined money ex- 
 ceeded the average of other nations, when they would 
 find their own prices increased, and their surplus of 
 gold and silver coin drawn away from them, exactly 
 as they had drawn away A's. Hence the facility 
 wdth which a surplus of re^l money in any country 
 is drawn to others and distributed throughout the 
 world. When the quantity of paper money in a 
 nation is made to exceed the average of other nations 
 4* 
 
8S NATURAL HIS TORT 
 
 by the legalizing of a suspension of specie payments 
 by the banks, or by what is tbe same in principle, tlie 
 issne of government paper money, then the paper 
 prices of all commodities in that nation are increased 
 in the same way that real money prices would have 
 been had the increase of the circulating medium 
 taken place by means of an increase of real money 
 only; but with this difference, the increase of real 
 money could not have remained long in the country, 
 as before explained : it is undoubtedly possible for 
 the increase of the paper to be maintained at an 
 established maximum for many years, with corres- 
 pondingly high paper prices of commodities and 
 property, the real money of the country going away 
 to other countries, in the interval, as rapidly as the 
 activity of trade and commerce and the increase of 
 the paper ci-eate a demand for its export. Any kind 
 of money that is made of cheap materials, if sanc- 
 tioned by law or custom, invariably supplants that 
 which is made of more costly materials. 
 
 Although it is possible for the increase of a lawful 
 paper money to be maintained for years at an estab- 
 lished maximum, with correspondingly high prices 
 of property and commodities, very seldom indeed 
 
OFMONEY. 83 
 
 has a government that sanctioned the issue of such 
 paper been able to achieve such a main tain ance of 
 uniformity in the quantity of the j)aper issues. 
 Buenos Ayres is remarkable for having accomplished 
 this great feat in financial economy. It is usual 
 when a government permits excessive paper money 
 issues, to find distrust increase with the increase of 
 the issues; the anxiety of people to get rid of money 
 which is day by day growing less and less valuable, 
 causes a wild activity of trade in every thing of 
 intrinsic worth that can be bought or sold for it; and 
 if holders of valuable property refrain from bringing 
 it to market at such times, the most speculative 
 descriptions of property are seized upon at the very 
 highest prices by the holders of the sinking money, 
 in exchange for it; vice and immorality, more es- 
 pecially gambling, grow rapidly among the unfortu- 
 nate people who become the victims of a false 
 measure of prices; unlucky speculators, shorn of 
 their wealth, become desperate; and as society verges 
 toward the savage state, panic and fright seize upon 
 all the people. These phenomena have lately been 
 prevalent in the capital of the rebellious states. 
 Fright and panic are not peculiar to government 
 
§i: NATURAL HISTORY 
 
 paper money issues: tliey prevail in cases of excessive 
 issues of bank paper, convertible into coin, and even 
 in countries having banking systems based on real 
 money exclusively. Remarkable panics have oc- 
 curred since paper money came into general use; 
 in the case of John Law''8 paper money in France, in 
 the early part of the eighteenth century; in the 
 United States, during the revolutionary war, in the 
 case of the continental money ; and again in 1812, 
 1819, 1832, 1837, 1839, 1857, and 1860, the latter 
 being suddenly arrested at New York by the banks 
 making their specie a common fund and expanding 
 their credits, the first occurrence of a union of that 
 kind known in financial history; in England there 
 were panics in 1696, 1720, 1746, 1793, 1797, 1814-16, 
 1825, 1836, 1847, 1857 and 1864. ^Russia, as well as 
 portions of Germany, have encountered great fluctua- 
 tions in prices from excessive issues of paper money. 
 If it were possible for one of the nations, (A) in the 
 example already cited, to have its whole volume of 
 coined money withdrawn, the- currency increased to 
 eight hundred millions, exclusively in paper, the 
 relative condition of the three nations may be 
 supposed, for illustration, to be changed thus, the 
 
OF MONEY. 85 
 
 volume of the currency and prices of each being at 
 
 par with all the world : 
 
 A. B. C. 
 
 Population 20 30 40 
 
 Property $20,000 $32,880 $20,420 
 
 Coined money in use none 370 230 
 
 Credit money in use 800 863 536 
 
 Total money in use , 800 1,233 766 
 
 Money in use to each person 40 41 19 
 
 Property to each person 1,000 1,096 510 
 
 Property to each dollar of money. . .. 25 26|- 26J: 
 Real money, per centum of all the 
 
 money none 30 30 
 
 Two thirds of the coined money from A is assumed 
 to have gone to B, and one-third to C. This ideal 
 view illustrates the theory of Adam Smith, that the 
 quantity of paper money which a nation may use is 
 that quantity of real money which would circulate 
 if the currency were wholly metallic and there were 
 no paper; in other words, paper money may be the 
 exclusive currency so long as all the exchanges, 
 domestic and foreign, are at par. Could humanity 
 attain to this transcendant degree of self-denial in 
 the nation A, dispensing wholly with the precious 
 metals, then the currency of A, if regulated by the 
 
Bfi NATUKAL HISTORY 
 
 rate of the exclianges, would be exactly as uniform 
 as if it were wholly metalic. Unfortunately, how- 
 ever, all past experience proves that long before this 
 expanded state of the currency could be reached, 
 panic would seize the minds of the people in A, 
 revulsions would set in, and the paper money col- 
 lapse ; then the precious metals would flow back 
 again to A, restoring the equilibrium between 
 money and prices as before. In this case heavy 
 losses would fall upon the people of all three of the 
 nations from the reduction of prices, and from bank- 
 ruptcies, incident to the fluctuations originally set 
 in motion by the inflation of the paper money of A. 
 Were the illustration carried out fully in practice, 
 the losses of the three nations would be : 
 
 A. B. C. 
 
 Property in millions. 8,000 8,880 4,420 
 
 Property to each person 400 296 110 
 
 In addition to this loss of prices^ the people of A 
 would be compelled to send away their productions 
 in exchange for the supplies of the precious metals 
 required to restore their currency to a specie stand- 
 ard. Hence it is that every civilized nation endea- 
 
OFMONEY. 87 
 
 vors to keep a supply or reserve of real money with 
 wliicli to maintain uniformity in its foreign ex- 
 changes. Severe denunciations have been hurled at 
 systems of banking governed by the principle of 
 keeping in hand a supply of real money proportioned 
 to the liabilities of a bank, but those who have in- 
 dulged in them do not seem to have paid much 
 attention to the overwhelming control which the 
 foreign exchanges exert upon the financial economy 
 of every nation. If this reserve be proportioned to 
 the liabilities of a controlling bank or banks, when- 
 ever a rise or fall occurs in the reserve, the bankers 
 endeavor to restore the equilibrium more or less 
 gradually as the state of the exchanges may dictate, 
 and in this way the currency is kept at par with that 
 of other countries, and commercial and financial 
 affairs preserved frorfi excessive fluctuations. 
 
 The volume of the measure of prices in all civilized 
 nations may be expanded simultaneously, or nearly 
 so, without excessive fluctuations of a reactionary 
 nature being experienced in any one nation, exactly 
 as the banks of one city may all expand their issues 
 together, which they cannot do singly without great 
 embarrassment. There has been going on for nearly 
 
88 
 
 NATURAL HISTORY 
 
 a century past, a great expansion of the measure of 
 prices, both from the increase of the precious metals 
 and the extension of the credit system, among all the 
 civilized nations. Contraction of the banks of a city 
 as well as of those of a nation, necessarily produces 
 cancelments of debt, and to a greater or less extent, 
 of prices. A contraction simultaneously carried on 
 by banks in a city as well as banks in a nation, may 
 be so gradual as to enable parties in business to 
 exchange property and commodities for actual use 
 and consumption, and thus to cancel prices, or liquid- 
 ate debts, and dispense with part of the volume of 
 tlie measure of prices, without producing any serious 
 amount of bankruptcy; and, in a certain sense, it 
 may be said that there w^ould be a possibility of 
 avoiding the production of bankruptcy in such a case, 
 if credits were every where only, what they ought to 
 be, the representatives of property or goods actually 
 moving to a market, or of labor in productive 
 activity. 
 
 The production of bankruptcy is not an absolute 
 and inevitable consequence of a contraction of the 
 volume of the measui-e of price, although, unfort- 
 unately, it is, in practice, almost always. If at any 
 
OFMONEY. 89 
 
 stage of its progress tlie expansion of a credit 
 measure of prices could be permanently arrested, 
 without exciting popular tumult, as in the case of 
 Buenos Ayres, thereafter the whole volume, no 
 matter how large it might he, would move with 
 uniformity very nearly the same as if the currency 
 were metallic. A paper money gradually reduced, by 
 a yearly per centage, might be made even less 
 burthensome to the people than an equal amount of 
 national debt ; for it might be without interest, and 
 if the nation were industrious and energetic — all 
 nations are always young, and vigorous and strong, 
 while they cherish the principles of religion, the 
 virtues of private life, and an ardent love of country — 
 it could be reduced gradually from the profits realized 
 by the savings from labor, by taxation, to an equality 
 with a currency composed exclusively of the precious 
 metals, without heavy losses, without much bank- 
 ruptcy, without very serious revulsions. That is to 
 say, such an achievement is possible, not probable 
 under any government. It is usually done with 
 heavy losses, with great bankruptcies, with terrible 
 revulsions. 
 
 One of the most convincing proofs, that money is 
 
90 NATURAL HISTOET 
 
 a measure of prices, is found in the fact that when- 
 ever a paper money, sanctioned by law or custom 
 suddenly increases the sum of all the money required 
 in any countiy to maintain the exchanges at par, real 
 money at once commands a premium corresponding 
 exactly with and following the rate of premium on 
 the foreign exchanges, so that whatever may be the 
 extent of the increase of paper money, the premium 
 on the gold being taken off the volume of the paper 
 at a corresponding discount, leaves the value of the 
 paper money, expressed in real money, at the normal 
 sum. For example, if a nation has five hundred 
 millions of money in use [as the nation A, in the 
 first illustration], the exchanges being at par with all 
 the world, the increase of irredeemable paper money 
 will cause a corresponding premium on gold until all 
 corresponding nations increase their money in an 
 equal ratio, viz : 
 
 
 
 Premium 
 
 
 Discount 
 
 
 
 Normal 
 
 Increased 
 
 on gold 
 
 Total prem. 
 
 on the 
 
 Total 
 
 
 ■ Value 
 
 Volume 
 
 per cent. 
 
 on gold 
 
 paper, p. c 
 
 , discount 
 
 Paper Gold 
 
 600 
 
 800 
 
 60 
 
 300 
 
 sn 
 
 300 
 
 lyVforl 
 
 500 
 
 1,000 
 
 100 
 
 500 
 
 50 
 
 500 
 
 2 "1 
 
 600 
 
 2,000 
 
 300 
 
 1,500 
 
 75 
 
 1,500 
 
 4 « 1 
 
 500 
 
 8,000 
 
 1,500 
 
 7,500 
 
 93fjV 
 
 7,500 
 
 16 " 1 
 
OF MONEY. 91 
 
 The premium on gold corresponds with the sum of 
 paper money added to the normal volume of the whole 
 currency; and the discount on the paper currency is 
 the same in amount, one being equivalent to the 
 other, and either of them taken from the increased 
 volume leaves the sum of the normal volume. Thus 
 the value of the whole of the currency, expressed in 
 real money, always remains at exactly the normal 
 sum, there being, in real money values, no more than 
 there was before, no matter how great the paper 
 issues may become. History proves the accuracy of 
 this law, in every case. President John Adams 
 explained this law by comparing the normal quantity 
 of money to the milk in a vessel; the addition of 
 water (paper money) could make no increase of milk, 
 however much might be added. 
 
 The increase, whether it be by means of paper or 
 real money, of the measure of prices in any nation 
 above the normal sum required by the volume of that 
 measure in the other nations, makes the markets of 
 that nation the best of all tlie world to sell in, and 
 the worst of all the world to buy in. All other 
 nations sell their commodities there, taking pay in 
 its gold if they cannot procure any thing else, until 
 
92 NATURAL HISTORY. 
 
 from exlianstion its financial system experiences a 
 collapse, and the normal state of its currency is 
 restored throngli violent convulsions. "Wise states- 
 men endeavor to prevent such calamities, by a timely 
 exercise of forethought, and the application of skillful 
 measures. Happy is that nation which has statesmen 
 equal to such emergencies. 
 
CHAPTER YJl. 
 
 FouETH Attribute of Money : an Equivalent, or Recompense. 
 
 Money is the equivalent, or recompense of labor, 
 and labor is itself the only true measure of value, be- 
 cause it is the universal agent in creating and 
 collecting wealth. The labor of a human being calls 
 forth a uniform quantity of exertion of body or of 
 mind, requiring the constant support of food, raiment 
 and shelter, and facilities for rest and repose. The re- 
 compense of labor should ther.efore be as nearly 
 uniform as human ingenuity can make it. There is 
 required for tliis recompense, wherever justice prevails 
 among men, a substance which shall be to the laborer 
 a full equivalent, invariable in its exchangeable value 
 as his own labor. This substance is found in that kind 
 of money which is uniformly valuable at all times, in 
 all places, under all circumstances. Hence the prefer- 
 
 (93) 
 
^4 NATURAL HISTORY 
 
 ence sliown in every age for money composed of the 
 precious metals, because this kind of money bears 
 intrinsic worth, as a commodity, having been pro- 
 cured by an expenditure of hibor worth the price 
 stamped upon it by government, and being transfer- 
 able at that worth for use in the arts. The stamp of 
 government only designates the piece, the country, 
 the date, &c. : destroy the stamp, the intrinsic worth 
 remains unharmed. It does not rust, nor decay. 
 Fire cannot destroy it, nor water wash it out It may 
 be cut into small pieces, bruised, broken, pressed, 
 melted, pounded into power or dissolved in liquids; 
 yet it can be restored after passing through all these 
 transformations, more nearly to its original worth 
 than any other substance which man has been able 
 to procure in sufficient quantity for purposes of 
 money. It is valuable because of its use by all 
 nations for purposes of ornament. There is always a 
 demand for it, all over the world, which secures its 
 permanent value in exchange. It possesses intrinsic 
 worth, because it cannot be consumed by the 
 elements, and because of the labor employed in 
 getting it from the mine. It possesses exchangeable 
 value because all mankind prize it for tlie beautiful 
 
OF MONEY. 95 
 
 Appearance it presents when fasliioned into articles of 
 utility and ornament by artistic skill. It is more 
 valuable for purposes of money than more bulky 
 articles, because large sums of wealth in it can be 
 conveyed great distances in very small space, without 
 much expense, passing through nations, over mount- 
 ains, seas and oceans, and always retaining those 
 characteristics of money which procure the services 
 of our fellow men and the conveniences and comforts 
 of life. ]3y all these excellencies money composed of 
 the precious metals commands for itself the preemi- 
 nent distinction of being the most invai'iable equiva- 
 lent or recompense for that which is the only 
 irivariable standard of value known to man, his own 
 labor. 
 
 Real money alone possesses the universal charac- 
 teristic of an equivalent for labor. Paper money is 
 too easily destroyed, too limited in its circulation 
 among the nations, and too easily made of one of 
 the most worthless of commodities, rags, to be 
 entitled to rank as an nniversal equivalent for that 
 which is the most invariable standard of value. 
 Paper money may be made to represent real money, 
 but when it does so falsely, it is, in the language 
 
96 NATURAL HISTORY 
 
 of Washington, "the shadow in lieu of the sub- 
 stance." 
 
 The collecting of rags and making them into paper, 
 and the printing, engraving and signing of notes 
 involve so small an expenditure of labor, that every 
 government in the world might make and issue any 
 quantity of money, were it possible to make paper 
 money the universal equivalent or recompense. The 
 want of that intrinsic value which is peculiar to real 
 money, prevents every description of paper money, 
 not exchangeable for real money or its equivalent, 
 from being used as the universal recompense for 
 labor. Paper media do undoubtedly perform the 
 functions of money, but in the absence of the power 
 of procuring for themselves real money, or its 
 equivalent, they cease to be an universal equivalent 
 or recompense for labor, because their purchasing 
 ' power, which depends on their quantity, is under the 
 control of some other power than that of labor, the 
 only true standard of value; for if the quantity of 
 frC// the issues of such paper media are controlled by the 
 will of governments and individuals, then the stand- 
 ard of value, instead of being regulated, as in real 
 money, by quantities of his own labor, which is the 
 
OFMONEY. 97 
 
 most uniform measure of value known to man, be- 
 comes subject to the most uncertain of all things, the 
 will of individuals and governments. By the use of 
 a paper circulating medium, not convertible into 
 real money, nearly all the real money a country 
 possesses may be driven out of that country, and 
 sooner or later, if the issues of the paper be not 
 arrested and kept at a fixed sum, the money of 
 intrinsic worth thus driven away, or an equal amount 
 of it, must be brought back again in exchange for an 
 equal amount of commodities or property, at the 
 expense of the labor of the people of that country. 
 
 So long as a piece of paper termed a dollar will 
 procure commodities and property to the same extent 
 that a dollar of coined money would procure them, 
 it is a true representative of the equivalent of labor; 
 but it is so only when it is immediately convertible 
 into a dollar of coined money, or what is the same 
 thing, when the dollar of coined money will not sell 
 for any thing more than the dollar of paper money, 
 and this is the meaning of the currency within a 
 nation b'jing at par with the currencies of other 
 nations, because at such a time there is no premium 
 on gold and no premium on the foreign exchanges. 
 / 5 
 
9% NATIJEAL HISTORY 
 
 As to the foreign exchanges, however, it should 
 always be borne in mind that there may be false 
 rates quoted in mercantile transactions, as in the case 
 of exchange between New York and London. That 
 devotion to immemorial usage which causes the 
 customs of a people to be adhered to throughout all 
 their generations, has led to the continued valuation 
 of the English pound sterling in the United States at 
 four dollars and forty-four cents, which was establish- 
 ed while the country was subject to the government 
 of England ; and the exchange is rated at par only 
 when that ($4:yVo) is the price of the English sovereign 
 in the United States gold currency of the pre- 
 sent time. But this can hardly ever happen, 
 except when specie payments are suspended in 
 England and paper money is a legal tender in that 
 country, because the intrinsic value of the coined 
 money of the United States, as compared with the 
 intrinsic value of the coined money of the United 
 Kingdom, makes the pound sterling (or sovereign) 
 worth about four dollars and eighty-four cents of 
 United States coin. This is forty cents more than 
 what, (four dollars and forty -four cents) in commercial 
 transactions, is erroneously called the par value of the 
 
OFMONEY. 99 
 
 pound sterling at New York. Forty cents being 
 nine per cent of four dollars and forty-four cents, 
 exchange on London is quoted in New York at one 
 one hundred and nine (or nine per cent, premium) 
 when a bill for one pound sells for four dollars and 
 eighty-four cents of American coin, which is the real 
 par value of the English pound. Therefore, the true 
 par of exchange on London, expressed at New York 
 in the real money of both nations, is about what is 
 termed in the customary language of trade, one 
 hundred and nine per cent. These observations apply 
 to our present gold coins, and the silver coins under 
 one dollar. They do not apply to the silver dollar, 
 the intrinsic value of which remains as established in 
 the last century, but it is no longer coined at our 
 Mints. 
 
LIBRA If V 
 
 UNIVERSITY OF 
 
 CALIFOKNIA. 
 
 CHAPTEE Vin. 
 
 Fifth Atteibute of Money: a Sign or Representative of Labor, 
 OF Peopbrtt, and of Commodities. 
 
 Money of intrinsic value is the sign or representa- 
 tive of the labor expended in procuring it from the 
 mine and in fashioning it into coined money. It 
 procures that amount of labor always, with very 
 slight variations which can occur only by slow 
 degrees extending through long periods of time. 
 Whoever possesses it can obtain that amount of 
 labor, or the products of that amount of labor, for it. 
 It procures the comforts of life, as well as the requi- 
 sites to sustain life, to the extent to which that 
 amount of labor can furnish them, among all civilized 
 people. Whoever has such money has the sign or 
 representative of those products of labor which make 
 up the wealth of nations. Like the sign which a 
 person in any active occupation keeps over or outside 
 of the door leading to his place of business to inform 
 
 (101) 
 
102 NATURAL HISTOKT. 
 
 all passers by what he has to sell, or what he can 
 do for other people ; so a piece of real money is the 
 uniform sign of all the property and commodities 
 which the same amount of labor that was employed 
 in procuring it will always command. It is neither 
 food, nor raiment, nor a dwelling place. But it is 
 the sign of these, because by it these can all be 
 procured. We cannot cat it. It will not clothe us. 
 It is not shelter. But it is a sign, signifying all 
 these, wherever it is carried, among all civilized 
 people. Only in the desert, or among savages, where 
 human life is not worth a moment's purchase, does 
 it cease to be a sign of things useful to man. It 
 fails, only when civilized life fails to be able to 
 exist. 
 
CHAPTEE IX. 
 
 Sixth Attribute of Monet: "Wealth, or the Thing Signified, 
 
 TO THE EXTENT OF ITS ValUE IN EXCHANGE. 
 
 Money is wealth, or the thing signified, because 
 it is a marketable commodity, a universal instrument 
 of commerce, a measure of prices, the equivalent 
 of labor in intrinsic value, and a sign or represen- 
 tative of property, commodities and labor. Were 
 it abundant as water, it could not possess the value 
 in exchange which makes it so universally acceptable 
 to mankind. The Creator having so placed a com- 
 paratively small quantity of the precious metals in 
 the earth, that great labor is required to procure 
 them, their production is more limited and the 
 supply smaller, than of most other useful metals. 
 The latter exist in larger quantities and can be more 
 easily obtained. It is this limitation of their quantity 
 which confers on the precious metals much of the 
 value which they bear: it is an element of their 
 
 C108) 
 
104 NATURAL HISTORY 
 
 value, in addition to those arising from the imperish- 
 able and maleable nature of the substances com- 
 posing them ; and in addition, also, to the value for 
 ornamental purposes arising from their beautiful 
 appearance. Their scarcity enhances their value as 
 commodities, conferring upon them the power of 
 representing a large amount of wealth in small 
 bulk. 
 
 Money made of the precious metals constitutes 
 wealth — the thing signified — to the extent of its 
 value in exchange, because of the intrinsic value of 
 the metals for use in the arts, and because the whole 
 civilized world accepts it at almost uniform values 
 for every kind of property, commodities and services. 
 
 Money made of the precious metals is termed real 
 money, as distinguished from paper money that is 
 not a representative of real money, because it repre- 
 sents the labor which has been performed in getting 
 the metals from the mines, while such paper money 
 represents a debt to be paid by commodities and 
 property to be created by labor in the future. Hence 
 it is that real money is wealth to a nation, while 
 paper money, not convertible on demand into real 
 money, is a debt liable to be paid in the future to 
 
OF MONEY. 105 
 
 « 
 
 the extent that the quantity of it in use makes the whole 
 volume of money in use exceed the quantity of real 
 money that would be used if therewere no paper money. 
 
 Although lawful money made of paper, not con- 
 vertible into real money, may be debt to a nation in 
 the aggregate, to an individual living in that nation 
 it is wealth to the extent of its value in exchange, or 
 so far as he can procure properties and commodities 
 and labor in exchange for it : he may enrich himself 
 with it, although the whole nation may be getting 
 deeper in debt and growing poorer by the constant 
 use or increase of it; and it is therefore usual for the 
 rich to become richer and the poor to grow poorer in 
 every nation which resorts to the prolonged use of 
 an excessive inconvertible paper money. 
 
 A paper money or credit money of any kind, — 
 even credit^ in any form in which it can be express- 
 ed, — convertible into or at par with real money, is 
 wealth to a nation to the full sum of its volume, so 
 long as it remains at par with real money, because it 
 renders unnecessary the keeping of that sum of 
 wealth in real money, which is an unproductive 
 commodity. The extent to which such paper or 
 credit money may be used in any nation, as already 
 6* 
 
106 NATURAL HISTORY 
 
 stated in previous chapters, is indicated by the 
 foreign exchanges being at par with the paper money 
 of that nation, or by the unit of the real money of 
 the nation exchanging without any premium for the 
 unit of the paper — or credit money: that is, when 
 the dollar in coin is worth no more than the paper 
 credit dollar, and when one of them commands no 
 greater quantities of commodities and labor than the 
 other. And paper money may be made more 
 valuable than real money. The paper and credit 
 money of any one place may be so reduced in amount 
 as to be worth as much more than real money as the 
 expense of conveying the real money from other 
 places to that one. This frequently happens even 
 within one nation, when specie payments are not 
 suspended ; whenever the reduction of the quantity 
 of paper money in any one place makes the paper 
 money of that place worth more than the coined 
 money there, it is immediately indicated by the rate 
 of exchange at that place for bills on other places. 
 For example, during specie payments, when th*e 
 paper money and credit money of I^ew York became 
 very much reduced, as compared with those of 
 Boston and Philadelphia, the rate of exchange at 
 
OF MONKY. lOT 
 
 New York on those cities declined, and it became 
 profitable to draw specie from them to New York. 
 That is, bills of exchange on Kew York, and the 
 paper money of New York were at a premium in 
 real money in Boston and Philadelphia, while 
 bills and paper on Philadelphia and Boston were at a 
 discount in New York. And this is precisely what 
 takes place, only more extensively, between the 
 nations; when any one expands excessively the 
 volume of its money, by whatever means, it drives 
 away the real money to other nations. If the in- 
 crease of money in any place does not expand 
 prices — if money is not a measure of prices — then 
 the phenomena of the exchanges, as thus stated, are 
 all at variance with the truths of science. The fact 
 is, however, that these phenomena are the basis of 
 all true science, because they indicate the laws of 
 trade with unfailing certainty 
 
 When a nation increases its volume of money, 
 above the par of exchange with other nations, its 
 prices rise ; it is, in prices, richer than other nations ; 
 it counts itself more wealthy than the other nations; 
 its markets become the best to sell in, the worst to 
 buy in ; its real or supposed riches are consequently 
 
108 NATURAL HISTORY 
 
 reduced, as rapidly as other nations can sell to it, 
 and as rapidly as the increase of the volume of its 
 money stimulates its people to buy and consume. 
 
 Why the wealth of a nation should be reduced, or 
 why the people of a nation should be reduced in 
 wealth in the aggregate, by an undue accumulation 
 of money, which is one of the items of wealth in 
 every nation, seems to be a paradox. It is a paradox, 
 if it is not true that money is a measure of prices. 
 If it be true that money in every shape in which it 
 performs the functions of an instrument of com- 
 merce or a commodity — whether in coin, bank notes, 
 government paper money, demand deposits, checks, 
 drafts, bills of exchange, or evidences of debt — is a 
 measure of prices, then the paradox is explained. 
 Then it can be understood how a nation, even in the 
 midst of the destruction of vast volumes of its wealth, 
 may be made to appear to its own people to be 
 rapidly augmenting its riches, because large quanti- 
 ties of money of one kind or another increase prices, 
 draw multitudes from productive occupations, make 
 trade very active, and intoxicate numbers of people 
 in the large centers of population with the sudden 
 riches acquired in those occupations immediately 
 
OF MONEY. 109 
 
 within the circle of the influeiKje of the rapidly 
 increasing volumes of money, whether the money be 
 real, representative or fictitious. The money being 
 available, whetlier in coin or in any form of credit, it 
 calls for the exertions of labor and the movement of 
 commodities ; for it is a self evident proposition that 
 no laborious occupation can be undertaken, nor any 
 commodity moved, without the hope of payment. 
 The existence of the instrument of commerce, or a 
 supposition of the existence of that instrument, 
 precedes the performance of labor and the movement 
 of commodities. It is obvious, therefore, that money 
 in one form or other, or an expectation of procuring 
 it, is tlie cause of, or gives rise to the exertions of 
 labor and the purchase and sale of commodities. 
 Even bills of exchange, checks, notes, drafts and debt, 
 or credit, may be and are used to compensate 
 labor, to move commodities, to buy and sell property, 
 and thus create prices. In the absence of money of 
 an ordinary kind, book accounts or any of the more 
 valuable commodities may take the place of money, 
 in facilitating exchanges. To assert that the use of 
 such media of exchange does not create prices, ia-to 
 assert that a cause does not produce an effect. Yet 
 
110 KATTTEAL HISTOEY 
 
 it has been attempted to be proved, that the angmen- 
 tation of prices of commodities and property 
 primarily creates inflations in the ciirrcncy of those 
 media of exchange which in all commercial centers 
 now constitnte the great volume of what performs 
 the functions of current money. 
 
 The wealth of a nation having been increased 
 excessively by an undue accumulation of money, or 
 by the creation of an undue quantity of money, then 
 begin to be witnessed all those phenomena which, 
 as before observed, make its markets the best of all 
 the world to sell in and the worst to buy in: prices 
 rise, individuals become suddenly rich, labor is 
 abandoned for luxurious ease, luxuries are sought 
 for, and wealth is consumed as rapidly as the increase 
 of money creates prices. 
 
 A nation may have too much money, therefore, 
 and in one sense may be too rich : and too much real 
 money in such a sense is nearly as injurious as too 
 much irredeemable paper money; with this differ- 
 ence, the surplus stock of real money, during the 
 maintenance of specie payments by law, when sent 
 out of the country, exchanges for articles of wealth 
 and consumption ; the withdrawal of the real money 
 
OF MONEY 
 
 111 
 
 reduces the measure of prices, and thus prices are 
 more speedily restored to par with other nations than 
 in the case of lawful, or current, irredeemable, or 
 legal tender paper money. The latter does not leave 
 the country itself, but it drives out the real money, 
 or becomes its substitute, and by forcing the stock of 
 real money very low^, makes an undue deficiency of 
 wealth which must be filled up by the creation of 
 commodities by future labor. 
 
 To have a nation's markets made the best of all to 
 sell in and the worst to buy in, is not of itself a 
 calamity. Circumstances may rise in which that 
 occurrence would be advantageous to a nation. In 
 case of famine, the surplus of real money could be 
 exchanged for food ; and in time of war, for indispen- 
 sable supplies. And even in ordinary circumstances, 
 the restoration of the economical equilibrium be- 
 tween nations, or the maintenance of it, can only be 
 effected by an export of the surplus money from a 
 nation where there is not financial skill enough to 
 employ such surplus in strengthening or developing 
 the internal resources, or where the precious metals 
 are mineral productions. It is not altogether vision- 
 ary, to assume wliat might take place under control- 
 
112 NATURAL HISTORY . 
 
 ling circumstances among people having vast 
 treasures of silver and gold flowing into tlieir country 
 for centuries: the efforts they would make by means 
 of high protective tarifl:s to retain the precious metals 
 and to sustain their failing home industries; the 
 expensive naval armaments and coast guards main- 
 tained to suppress formidable organizations of 
 smugglers; wealth and power intoxicating the 
 governing classes to an extent w^hich w^ould make 
 them imagine themselves the rulers of the w^orld, at 
 whose fiat the power of any rival nation might be 
 destroyed; the slow but steady decay of home 
 manufactures giving rise to prolonged civil w\irs 
 maintained by powerful w^ell organized smuggler- 
 banditti; political convulsions exhausting the reven 
 lies and causing the government to borrow money 
 by the creation of an excessive national debt; the 
 continued failure of the revenues because of political 
 disturbances, compelling the government to violate 
 the national faith by ceasing to pay either the 
 principal or the interest of the national debt; — all 
 these calamities, wdth too many others equally 
 deplorable, might, under a despotic government, fall 
 upon a people, who, nevertheless, might be a 
 
OF MONET. 113 
 
 nation of tlie highest type, both in intellectual abilitj 
 and physical development, capable of an exalted 
 civilization and having a brilliant history. One may 
 suppose, on the other hand, the case of a nation 
 having a well organized industry by which wealth is 
 accumulated; where liberal institutions offer an 
 asylum for the greatest intellects escaping from 
 tyranny so often rampant in some part of the world ; 
 possessing an organized monetary interest and an 
 active mercantile public enjoying the confidence and 
 respect of the governing power; and these elements 
 of national vitality so efficient, under the direction of 
 a vigilant public morality, that the people would be 
 enabled to overcome all those destructive influences 
 of great wealth or unprincipled ambition which so 
 often draw nations into the most unjustifiable wars 
 or to the inciting of civil war or insurrection in other 
 nations; — the nation thus favored becoming great 
 and wealthy through the freedom of its trade and its 
 enlightened principles of self-government, and devot- 
 ing its surplus treasures to the development of the 
 internal resources of its own territories, or loaning 
 them to other nations for tlie same purpose, and tims 
 exhibiting to the world a way of life for nations, by 
 
114 NATURAL HISTORY. 
 
 pursuing which all mankiud , n^igjit be brought to 
 adopt and cultivate the arts of peace. 
 
L I B K A K 1 
 
 UNITKRSITY OF 
 
 V 
 
 CALIFORNIA 
 
 / 
 
 CHAPTER X. 
 
 1. Review of the Attributes of Money: the Monetary Standard, 
 Monetary Unit, or True Standard of Value. 2. Local and 
 Universal Money Identical within their Respective Spheres. 
 
 1. That the attributes of real money among all 
 civilized nations are : an instrument of commerce, a 
 commodity, a measure of prices, an equivalent for 
 labor, a sign or representative, and wealth to the 
 extent of its value in exchange, — is a truth estab- 
 lished by tlie facts of every day life. There is a 
 current money of the world, governing the prices of 
 the world. It is this money which alone possesses 
 ALL the attributes referred to. It is this that the 
 economists have generally considered the only kind 
 known in modern times deserving the name of real 
 money. If any thing called money does not possess 
 all these attributes, then it is not that real money 
 
 (116) 
 
116 NATTJEAL HISTORY 
 
 which constitutes the currency of the world. But 
 real money itself may be altered. It may be de- 
 based or adulterated. It may be made to undergo a 
 reduction in weight of the quantity of pure metal, 
 and the instances in which this change has taken 
 place have been very numerous. It has already 
 been observed that this custom was frequently re- 
 sorted to in the middle ages, and prevailed in almost 
 every country, whenever governments, in great emer- 
 gencies, desired to procure money. The right to 
 make this adulteration of money, being wantonly ex- 
 ercised, became at last one of the modes of getting 
 property by force, in times when the rapacity of 
 domineering races or classes, subjugating peoples by 
 the power of brute force, established the supremacy 
 of the law of the beasts, that ^'might makes right^'^ in 
 violation of every principle of justice known among 
 men. This injustice becoming apparent, revolutions 
 were resorted to, for the dethronement of Monarchs 
 addicted to the vice. Kevolutions have also been 
 preceded in many countries by the debasing of 
 the currency through the issue of undue quan- 
 tities of paper money. The great rebellion of the 
 Southern States is rapidly falling to pieces from the 
 
OF MONEY. 117 
 
 want of confidence inspired among its leaders by the 
 worthlessness of their paper money. They supposed 
 it possible to repeat, in support of slavery, that appro- 
 priation of capital tlirough the issue of paper money, 
 which our fathers accomplished, in support of liberty, 
 during -the war of Independance. In the beginning 
 of the application of a system of adulterating real 
 money, or of the debasing of the paper money from 
 excessive issues, the losers seem to be only the 
 holders of property having debts due to them. But 
 as people in debt become released from then- debts, 
 paying them off with the increased volume of 
 the depreciated paper or debased coin, the suffej-ings 
 of the working population become very great. At 
 last, in the case of a depreciated paper, every effort 
 is made to restore an equitable monetary system 
 which all classes, both rich and poor, become con- 
 vinced from experience, is for the best interests of 
 the nation. Then all paper tender laws are repealed, 
 or a real money standard is sought for and adopted, 
 or laws are passed declaring what the standard in 
 real money shall be, and that standard becomes the 
 measure of prices or values. For tliis standard, as 
 already observed in preceding chapters, the precious 
 
118 NATURAL II I S T O E T 
 
 metals liave been found to be the only suitable 
 material, and a certain quantity of these metals to 
 each piece of money is in all enlightened and civil- 
 ized countries the standard in the making of real 
 money. This quantity is called the monetary unit, 
 and is the true standard of value, or measure of 
 prices, which gives rise to all money values or prices 
 of property and commodities of every kind. If any 
 thing else be substituted for it by compulsory legisla- 
 tion, the natural law governing real money remains 
 in full force, over riding all human laws, and main- 
 taining its supremacy in the current prices at which 
 the coined money is bought and sold. Eeal money 
 is the supreme arbiter of all values or prices. It is 
 in the financial economy of a nation precisely what 
 the sun is to the planets ; as the sun is the central 
 governing body around which the planets all revolve, 
 so the monetary unit of a nation is the central gov- 
 erning principle which controls all kinds of prices or 
 values, as well as all the circulating mediums, cur- 
 rencies, or mediums of exchange, and public and 
 private credits in that nation. And as large planets 
 have their satellites, so precisely do large quantities 
 of real money have their financial satellites in media 
 
OF MONEY. 119 
 
 of exchange, circulating media, credits, bills and 
 diafts, payable on demand or running on time. 
 iN'ow, if it be true that there is one great central sun 
 in the universe, which all other solar systems revolve 
 around as a common center, that great sun may be 
 assumed to represent the monetary system of what- 
 ever nation at any time may be the central financial 
 depot for the adjustment of the exchanges of - the 
 w^orld. The final settling place for paying the 
 balances of trade between nations, correspond with 
 the Bank Clearing House of a city, the final sett- 
 ling place every morning for paying the balances 
 arisino: from the exchansres between the banks for 
 the preceding day. The diurnal motion of tlie earth, 
 on its own axis, may be com]3ared to the daily 
 evolutions of the currenc}^ in a city, as the revolutions 
 of planetary and solar bodies, each on its own axis, 
 and within its orbit, and all, around their primaries 
 or the common center, may be compared to the 
 evolutions of all kinds of currencies circulating in a 
 nation and the world. 
 
 Th^ monetary unit in every country having coined 
 money, is a certain weight of pure gold or pure silver 
 coined into a certain piece of money. All other 
 
 /^ 
 
120 NATURAL HISTORY 
 
 coins are usually made in the same way, or propor- 
 tion, and such monev is called the lei^al tender. 
 Some nations have what is called a double standard, 
 meaning thereby that a certain quantity of i)ure gold 
 put into the gold coin constitutes money; and that a 
 certain quantity of pure silver put into the silver 
 coin also constitutes money. Generally, however, 
 the nations have selected silver for the monetary 
 unit, because, as before observed, there is more 
 uniformity m the quantity of human labor required 
 to get silver out of the earth than in the case of gold. 
 There is always more or less difference between the 
 price or exchangeable value of gold when bought or 
 sold for silver, as the supply of one metal, compared 
 with that of the other, increases or diminishes; some- 
 times one ounce of gold has been worth only ten or 
 eleven of silver, and at other times fourteen or fifteen 
 of silver were required to buy one of gold, but these 
 extreme fluctuations have occurred almost imper- 
 ceptibly, and at a long distance of time from each 
 other. Oriental nations, from remote antiquity, have 
 shown a decided preference for silver money, which 
 has been sent to Asia from Europe in a steady stream. 
 America has also sent, through Europe, or directly, 
 
OF MONEY. ^ 121 
 
 to Asia, a large portion of the products of her mines 
 of silver. Gold, too, has found a grave in Asia. It 
 is supposed that the peoples of Asia have long been 
 in the habit of burying their treasures in the earth, 
 and that the secret of the place of deposit frequently 
 dies with the depositor. Mother earth is a safe but 
 not very profitable bank of deposit, in such cases. 
 This practice of hoarding has also prevailed in 
 Europe, in time of war, and prevails yet, whenever 
 apprehensions of a great war seize upon the minds of 
 the people. It is the offspring of fear, or panic. It 
 tends greatly to the impoverishment of a people, or 
 nation, addicted to the custom. 
 
 An excessive paper money may be issued and made 
 a lawful money, but the power of the unit of real 
 money is not thereby destroyed : funded stocks of 
 the nation, or government paper money, becoming 
 the monetary unit of prices expressed in the lawful 
 paper money, appear to maintain almost a uniform 
 value or price, while real money fluctuates in propor- 
 tion as the whole amount of the paper money or 
 credit money in use approaches or exceeds the nor- 
 mal volume of the measni*e of prices required by the 
 nation. The state of pnblij confidence is also 
 
122 NATURAL HISTORY 
 
 exhibited in the fluctuations in the price of real 
 money, when the latter is sold for paper money. 
 
 Even if tlie law creating a monetary unit of coined 
 money be repealed in any nation, the monetary units 
 of other nations at once take the place of the one 
 struck out of legal existence in that nation, and assert 
 their supremacy over all prices and values in that 
 nation. This natural law of the supremacy of the 
 monetary units of other nations exhibits its power in 
 defiance of all penal laws for tlie suppression of it. 
 In the midst of the most violent expansions of lawful 
 paper money in one nation, the monetary units of 
 coined money of other nations display tlieir govern- 
 ing power within that nation in the preniinin on 
 silver and gold, corresponding with a discount on the 
 paper money, the latter — the paper-— being measured 
 by the real monetary units; or in the premium on 
 the foreign exchanges, as determined by the monetary 
 units of the other nations. Wlien a lawful paper 
 money without limit is instituted in a nation, and 
 the unit for real money is repealed, there remains no 
 longer in that nation, for itself, any fixed measure of 
 real value; labor and propei-ty become subject to 
 the uncertainty of the paper money issues, this 
 
OF MONEY. 123 
 
 uncertainty being made lawful by the enactment 
 establishing lawful paper money. Yet, if the power 
 of the unit of coined money be recognized to any 
 extent in the fundamental principles of the financial 
 economy of a nation resorting to a lawful paper 
 money, — as paying in real money the duties on 
 imports and taxes and the interest on the public 
 debt— there cannot be in that nation so excessive an 
 emission of paper money (if government funds its 
 paper money issues) as takes place in a nation which 
 totally disregards the unit of real money by exclud- 
 ing it wholly from the financial system, because the 
 interest on the public debt, payable in real money, 
 increases with the premium on real money, and thus 
 the paper money issues may be controlled to a 
 certain extent by funding. 
 
 2. Money composed of the precious metals has 
 been said to be the currency of the world, or univer- 
 sal money, governing prices throughout the world. 
 A local money made for circulation within any 
 place, whatever be the material of which it is com- 
 posed, exerts upon prices in that place the same 
 influence that universal money exerts upon the prices 
 of the commercial w^orld. In performing the funct- 
 
124 NATURAL HISTORY. 
 
 ions of a medium of exchange, or an instrument of 
 commerce, both kinds of money are identical within 
 their respective spheres ; the local money becoming 
 depreciated, however, when the quantity of it is 
 maintained at an amount greater than the sum 
 required to maintain the exchanges at the real money 
 par between the locality peculiar to itself and all 
 other places throughout the world, exactly as real 
 money, when it accumulates in any nation to more 
 than that sum, becomes itself depreciated. 
 
 END OF THE FIRST VOLUME. 
 
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