If their
circulation, for instance, were of a million of dollars, and the annual
produce of their industry equivalent to ten millions of bushels of
wheat, the price of a bushel of wheat might be one dollar. If, then, by
a progressive coinage, their medium should be doubled, the price of a
bushel of wheat might become progressively two dollars, and without,
inconvenience. Whatever be the proportion of the circulating medium to
the value of the annual produce of industry, it may be considered as the
representative of that industry. In the first case, a bushel of wheat
will be represented by one dollar; in the second, by two dollars. This
is well explained by Hume, and seems admitted by Adam Smith, (B. 2. c.
2. 436, 441, 490.) But where a nation is in a full course of interchange
of wants and supplies with all others, the proportion of its medium
to its produce is no longer indifferent, (lb. 441.) 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.
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