78. These two valuations are independent of each other, and
are governed by quite different principles.
These two different methods of fixing a value, have much less
connection, and depend much less on each other than we should be
tempted to believe at first sight. Money may be very common in
ordinary commerce, may hold a very low value, answer to a very
small quantity of commodities, and the interest of money may at
the same time be very high.
I will suppose there are one million ounces of silver in
actual circulation in commerce, and that an ounce of silver is
given in the market for a bushel of corn. I will suppose that
there is brought into the country in some manner or other,
another million of ounces of silver, and this augmentation is
distributed to every one in the same proportion as the first
million, so that he who had before two ounces, has now four. The
silver considered as a quantity of metal, will certainly diminish
in price, or which is the same thing, commodities will be
purchased dearer, and it becomes necessary, in order to procure
the same measure of corn which he had before with one ounce of
silver, to give more silver, perhaps two ounces instead of one.
But it does not by any means follow from thence, that the
interest of money falls, if all this money is carried to market,
and employed in the current expences of those who possess it, as
it is supposed the first million of ounces of silver was; for the
interest of money falls only when there is a greater quantity of
money to be lent, in proportion to the wants of the borrowers,
than there was before. Now the silver which is carried to market
is not to be lent; it is money which is hoarded up, which forms
the accumulated capital for lending; and the augmentation of the
money in the market, or the diminution of its price in comparison
with commodities in the ordinary course of trade, are very far
from causing infallibly, or by a necessary consequence, a
decrease of the interest of money; on the contrary, it may happen
that the cause which augments the quantity of money in the
market, and which consequently increases the price of other
commodities by lowering the value of silver, is precisely the
same cause which augments the hire of money, or the rate of
interest.
In effect, I will suppose for a moment, that all the rich
people in a country, instead of saving from their revenue, or
from their annual profits, shall expend the whole; that, not
satisfied with expending their whole revenue, they dissipate a
part of their capital; that a man who has 100,000 livres in
money, instead of employing them in a profitable manner, or
lending them, consumes them by degrees in foolish expences; it is
apparent that on one side there will be more silver employed in
common circulation, to satisfy the wants and humours of each
individual, and that consequently its value will be lowered; on
the other hand there will certainly be less money to be lent; and
as many people will in this situation of things ruin themselves,
there will clearly be more borrowers. The interest of money will
consequently augment, while the money itself will become more
plenty in circulation, and the value of it will fall, precisely
by the same cause.
We shall no longer be surprised at this apparent
inconsistency, if we consider that the money brought into the
market for the purchase of corn, is that which is daily
circulated to procure the necessaries of life; but that which is
offered to be lent on interest, is what is actually drawn out of
that circulation to be laid by and accumulated into a capital.
