5389. MONEY, Standard.—[further continued].
To trade on equal terms,
the common measure of values should be as
nearly as possible on a par with that of its
corresponding nations, whose medium is in a
sound state; that is to say, not in an accidental
state of excess or deficiency. Now, one
of the great advantages of specie as a medium
is, that being of universal value, it will keep
itself at a general level, flowing out from
where it is too high into parts where it is
lower. Whereas, if the medium be of local
value only, as paper money, if too little, indeed,
gold and silver will flow in to supply
the deficiency; but if too much, it accumulates,
banishes the gold and silver not locked
up in vaults and hoards, and depreciates
itself; that is to say, its proportion to the
annual produce of industry being raised,
more of it is required to represent any particular
article of produce than in the other
countries. This is agreed by [Adam] Smith,
(B. 2. c. 2. 437,) the principal advocate for a
paper circulation; but advocating it on the
sole condition that it be strictly regulated.
He admits, nevertheless, that “the commerce
and industry of a country cannot be so secure
when suspended on the Dædalian wings of
paper money, as on the solid ground of gold
and silver; and that in time of war, the insecurity
is greatly increased, and great confusion
possible where the circulation is for
the greater part in paper”. (B. 2. c. 2. 484.)
But in a country where loans are uncertain,
and a specie circulation the only sure re
source for them, the preference of that circulation
assumes a far different degree of
importance.—
To J. W. Eppes. Washington ed. vi, 233.
Ford ed., ix, 407.
(M.
Nov. 1813)
