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from any existing employment in the country?" To this Mr. Ricardo answered, "Impossible! an individual can purchase machinery, &c. with credit; he can never create them. If he purchase, it is always of some one else; and, consequently, he displaces some other from the employment of capital."

"Lord' Report," p. 192.

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CHAPTER IV.

Circumstances which led to the Introduction and Use of MoneyQualities which a Commodity used as Money should possess-Coinage —Variations in the Value of Money—Introduction and Use of Paper Money and Bills of Exchange.

WHEN the division of labour was first introduced, commodities were directly bartered for each other. Those, for example, who had a surplus of corn, and were in want of wine, endeavoured to find out those who were in the opposite circumstances, or who had a surplus of wine and wanted corn, and then exchanged the one for the other. It is obvious, however, that the power of exchanging, and, consequently, of dividing employments, must have been subjected to perpetual interruptions, so long as it was restricted to mere barter. A carries produce to market, and B is desirous to purchase it; but the produce belonging to B is not suitable for A. C, again, would like to buy B's produce, but B is already fully supplied with the equivalent C has to offer. In such cases, and they must be of constant occurrence wherever money is not introduced, no direct exchange could take place between the parties; and it might be very difficult to bring it about indirectly.1

The extreme inconvenience attending such situations must early have forced themselves on the attention of every one. Efforts would, in consequence, be made to avoid them; and it would speedily appear that the best, or rather the only way in which this could be effected, was to exchange either the whole or a part of one's surplus produce for some com

The difficulties that would arise on such occasions, and the devices that would be adopted to overcome them, have been very well illustrated by Colonel Torrens, in his work on the "Production of Wealth," p. 291.

modity of known value, and in general demand; and which, consequently, few persons would be disinclined to accept as an equivalent for whatever they had to dispose of. After this commodity had begun to be employed as a means of exchanging other commodities, individuals would become willing to purchase a greater quantity of it than might be required to pay for the products they were desirous of immediately obtaining; knowing that should they, at any future period, want a further supply, either of these or other articles, they would be able readily to procure them in exchange for this universally desirable commodity. Though at first circulating slowly and with difficulty, it would, as the advantages arising from its use were better appreciated, begin to pass freely from hand to hand. Its value, as compared with other things, would thus come to be universally known; and it would at last be used, not only as the common equivalent for other things, but as a standard by which to measure their value.

Now this commodity, whatever it may be, is money.

An infinite variety of commodities have been used as money in different countries and periods. But none can be advantageously used as such, unless it possess several very peculiar qualities. The slightest reflection, on the purposes to which it is applied, must, indeed, be sufficient to convince every one that it is indispensable, or, at least, exceedingly desirable, that the commodity selected to serve as money should (1.) be divisible into the smallest portions; (2.) that it should admit of being kept for an indefinite period without deteriorating; (3.) that it should, by possessing great value in small bulk, be capable of being easily transported from place to place; (4.) that one piece of money of a certain denomination, should always be equal, in magnitude and quality, to every other piece of money of the same denomination; and (5.) that its value should be comparatively steady, or as little subject to variation as possible. Without the first of these qualities, or the capacity of being divided into portions of every different magnitude and value, money,

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it is evident, would be of almost no use, and could only be exchanged for the few commodities that might happen to be of the same value as its indivisible portions, or as whole multiples of them without the second, or the capacity of being kept or hoarded without deteriorating, no one would choose to exchange commodities for money, except only when he expected to be able speedily to re-exchange that money for something else: without the third, or facility of transportation, money could not be conveniently used in transactions between places at any considerable distance: without the fourth, or perfect sameness, it would be extremely difficult to appreciate the value of different pieces of money and without the fifth quality, or comparative steadiness of value, money could not serve as a standard by which to measure the value of other commodities; and no one would be disposed to exchange the produce of his industry for an article that might shortly decline considerably in its power of purchasing.

The union of the different qualities of comparative steadiness of value, divisibility, durability, facility of transportation, and perfect sameness, in the precious metals, doubtless formed the irresistible reason that has made every civilized community employ them as money. The value of gold and silver is certainly not invariable, but, generally speaking, it changes only by slow degrees: they are divisible into any number of parts, and have the singular property of being easily reunited, by means of fusion, without loss; they do not deteriorate by being kept; their firm and compact texture makes them difficult to wear; their cost of production, especially that of gold, is so considerable, that they possess great value in small bulk, and can, of course, be transported with comparative facility; and an ounce of pure gold or silver, taken from the mines of Mexico or Peru, is precisely equal, in point of quality, to an ounce dug from the mines in any other part of the world. No wonder, therefore, when the principal qualities necessary to constitute money are possessed in so eminent a degree by the

precious metals, that they have been used as such in civilized societies, from a very remote era. "They became universal money," as M. Turgot has observed, "not in consequence of any arbitrary agreement among men, or of the intervention of any law, but by the nature and force of things."

When first used as money, the precious metals were in an unfashioned state, in bars or ingots. The parties having agreed about the quantity of metal to be given for a commodity, that quantity was then weighed off. But this, it is plain, must have been a tedious and troublesome process. Undoubtedly, however, the difficulty of determining the degree of their purity with sufficient precision, must have formed, in early ages, the greatest obstacle to the use of gold and silver as money; and the discovery of some means by which their weight and fineness might be readily and correctly ascertained, would be felt to be indispensable to their extensive use as media of exchange. Fortunately, these means were not long in being discovered. The fabrication of coins, or the practice of impressing pieces of the precious metals with a public stamp indicating their weight and purity, belongs to the remotest antiquity. And it may safely be affirmed, that there have been few inventions of greater utility, or that have done more to promote improvement.

It is material, however, to observe, that the introduction and use of coins does not affect the principle on which exchanges were previously conducted. The coinage saves the trouble of weighing and assaying gold and silver, but it does nothing more. It declares the weight and purity of the metal in a coin; but the value of that metal or coin depends, in all cases, on the same principles that determine the value of other cominodities; and would be as little affected by being recoined with a new denomination, as the burden of a ship by a change of her name.

Inaccurate notions with respect to the influence of coinage

! Goguet, "De l'Origine des Loix," &c. tom. i. p. 269

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