CHAPTER XXVI.

OF THE INSTRUMENT OF ASSOCIATION-CONTINUED.

IV. Of the Trade in Money.

1. The precious metals the only commodities of universal acceptance, being the indispensable instruments of commerce.

2. Proportion borne by money to the amount of commerce increases in declining coun tries and decreases in advancing ones.

3. Centralization, retarding the societary motion, increases that proportion. Decentralization diminishes it. Man then becomes more valuable and more free.

24. Money being the one indispensable instrument of society, governments have always assumed to control its management, as supplying the most productive of all the machinery of taxation. Falsification of money by European sovereigns.

25. Banks established with a view to the emancipation of the currency from the control of governments. Deposit banks of Italy, Germany, and Holland. Institution of banks of discount.

26. Enlargement of the operations of discount banks.

27. Banks of circulation commence with the Bank of England.

28. How the expansions and contractions of banks affect the societary movement. 29. Great power of banks for good or evil. Banking monopolies, like those of France and England, give to a few individuals a power over the societary movement compared with which that exercised by the sovereigns of old sinks into insignificance.

§ 1. THE single commodity that is of universal demand is money. Go where we may, we find hosts of people seeking commodities required for the satisfaction of their wants, yet widely differing in the nature of their demands. One needs food; a second, clothing; a third, books, newspapers, silks, houses, cattle, horses, or ships. Many desire food, yet while one would have fish, another rejects the fish and seeks for meat. Offer clothing to him who sought for ships, and he would prove to have been supplied. Place before the secker after silks the finest lot of cattle, and he could not be induced to purchase. Among all of these, nevertheless, there would not be found even a single one unwilling to give labor, skill, bonds, lands, horses, or whatsoever other commodity might be within his reach, in exchange for money-provided, only, that the quantity offered in exchange were deemed sufficient. So, again, if we look throughout the world. African searches anxiously in the sands for gold, while the yet poorer Lapp and the wretched Patagonian-almost the antipodes of each other-are alike in the fact, that they are ready, at any moment, to exchange their labor and its products for either of the precious metals. So, too, has it been in every age, The Midianite merchants paid for Joseph with

The poor

so many pieces of silver. Rome was sold to Brennus for gold. That of Macedon bought the services of Demosthenes; and it was thirty pieces of silver that paid for the treason of Judas. Sovereigns in the East heap up gold as provision against future accidents, and finance ministers in the West rejoice when their accounts enable them to exhibit a full supply of the precious metals. When it is otherwise-when, because of war, or of other circumstances, the revenue proves deficient the highest dignitaries are seen paying obsequious court to the controllers of the supply of money. So, too, when roads are to be made, or steamers built. Farmers, contractors, and stock-holders, then go, cap in hand, to the Croesuses of the great cities, anxious to obtain a favorable hearing, and desiring to propitiate the men of power by mak ing whatsoever sacrifice may seem to be required.

Of all the materials of which the earth is composed, there are none so universally acceptable as gold and silver. Why should it be so? Because of their having distinctive qualities that bring them into direct connection with the distinctive qualities of man-facilitating the growth of association, and promoting the development of individuality. They are the indispensable instruments of society, or commerce. Therefore it is, that we see them to have been seized upon by the class that lives by virtue of the exercise of their powers of appropriation, as furnishing the most efficient of all the machinery of taxation.

§ 2. In the infancy of society, when poor and scattered men are compelled to limit themselves to the cultivation of the least fruitful soils, the quantity of money in use, trivial as it is, bears a large proportion to the commerce that is maintained. Among the Altai mountains, an ounce of silver purchases 250 pounds of beef, while on the Pampas of Buenos Ayres à pound of gold exchanges for horses that count by thousands. The recipients of these precious metals wrap them up with care, hoping never to have occasion to cause them again to see the light. In such cases, the utility of money is very small, but its value is very great. With increase in the power of association the former rises, but the latter falls; and with every stage of progress the quantity of money bears a diminishing proportion to the exchanges performed, as is proved by comparing the amount used in the great centres of trade for effecting operations that count by almost hundreds of millions daily, with that required in

India or Peru, where, society being torpid, each exchange must be accompanied by delivery of the coin needed for its accomplishment. Here, as everywhere throughout nature, increase in the rapidity of motion is attended by decline in the proportion borne by the material that is used to the effect that is produced.

§ 3. Centralization, whether political or trading, tends to retard motion and thus to increase the quantity of money required for carrying on any given amount of commerce. The heavier the taxation the larger will be the quantity of coin always on the road to the treasury, and the longer the time that must elapse before, if ever, it returns to the place whence it had been sent. The greater the distance between the farmer and the artisan the heavier are the charges, the slower are the exchanges, and the greater the need of the banker's services. Every increase of taxation, and every increase in the necessity for transportation, tends, therefore, to diminish the power to cultivate the richer soils, while increasing the proportion borne by money to the amount of

commerce.

Decentralization, or the establishment of local centres of action, tends, on the contrary, to increase the amount of commerce while diminishing the quantity of money required, and to diminish its value while increasing its utility. With every step in this direction there is an increasing tendency to steadiness in the value of the precious metals. The fluctuations of new settlements are, as is well known, exceedingly great. At one moment, money may be hired at 8 or 10 per cent.; at the next it commands 40, 50, or 60 per cent. the one, produce is high in price; at the other, it falls so low that the farmer and planter find themselves reduced to bankruptcy.

At

§ 4. The tendency of gold and silver towards steadiness in value constitutes their principal recommendation for use as standards with which other commodities may be compared ; and were the trade in money free from interference, they would be almost as perfect in that respect as are the yardstick and the bushel as measures of length and of capacity. The corn and sugar in market in any year being consumed within the year, a failure of crop may make a change of even a hundred per cent. in the price; whereas, the quantity of gold and silver always in market being hundreds of times

more than is required for a year's consumption. a total failure of the year's crop should not affect it even to the extent of one per cent. So numerous, however, have been the interferences with the commerce in money, that of all things it is the most subject to sudden variations. It is a yardstick of perpetually changing length-a gallon that contains sometimes three quarts, and at others, six or eight. Why this is so, we may now inquire.

Centralization giving power to the class that lives by appropriation, the soldier and the trader, every increase therein produces a demand for increased taxation, and the subjects selected are always those of positive necessity, such as salt and sugar. There being none, however, so indispensable as money, it is for that reason that we find its management to have been so universally assumed by governments, to be exercised for public or private profit.

With the growing centralization of power in the State of Athens we mark a constant increase in the rapacity of money dealers. In many of the subject cities the precious metals became so scarce as to compel recourse to coins of copper and of iron, circulated at rates far exceeding their real value. At a later period money almost disappeared, the land being then cultivated by slaves, to whom all use of the great instrument of association was utterly denied.

As centralization grew in Rome coins were diminished in weight, while the charge for the use of money as steadily increased. That Brutus received four per cent. per month is matter of history; but even this must have been thrice exceeded in the minor operations of the imperial city. The poorer a people the larger is always the rate of interest, and therefore it is that we see such colossal fortunes accumulated where pauperism most abounds.

It is, however, in history of a later date that we find this system carried to its highest point. Philip the Fair, of France, changed the coinage thirteen times in a year, and more than a hundred times in the course of his reign. His successors followed his example, calling in heavy pieces and issuing lighter ones in their stead, and to such extent that at the date of the Revolution it required 66 livres to give the quantity of silver that had formerly been contained in one. France has always been distinguished for the exactions of money-dealers; hence it is that credit has had so slight an existence, and that such squalid wretchedness has accompanied so great magnificence. That centralization, splendor,

poverty, and weakness, are close companions, is proved by every page of history; but nowhere is it more fully shown than in those which record the histories of France and Spain, in which latter fraudulent debasement of the coin was continued until so late as 1786.

Such, too, was the case in Scotland, the present Scottish pound representing but a thirty-sixth part of its original weight, owing to long continued falsification of the coin.

Down to the days of Edward III. the English pound contamed a full pound of silver, of a certain fineness. Incessant wars for the pursuit of glory, however, forced that monarch to the adoption of frauds similar to those then so common beyond the Channel, and the practice continued until the pound had lost two-thirds of its weight. The English monarchs, however, less warlike than those of France, were less frequently forced to plunder their subjects by tampering with the currency; while these latter, being more free, were less disposed to submit to such exactions.

§ 5. The state of things above described it was that led to the formation of the Bank of Amsterdam, the first institution of any importance established exclusively for the promotion of commerce, its predecessors of Venice and Genoa having been chiefly devoted to the management of affairs of state. It, on the contrary, looked wholly to the faithful guardianship of the moneys deposited with it for safe keeping, guaranteeing to its owners that equivalent amounts of coin should always be at their command. For the faithful performance of its duties the States-General of Holland became security, as a consequence of which the bank became at once the centre of the moneyed world, and the city in which it was established the chief European market for the precious metals. Hamburg, Nuremburg, and Rotterdam, speedily followed the good example, thus providing for the countries watered by the Rhine, the Weser, and the Elbe, places of secure deposit for money, and facilities for exchanging it free from the taxation of French or German sovereigns. The whole proceeding was a measure of resistance to arbitrary power; and for it the world is indebted to the action of small communities in which had been largely developed that spirit of association which always accompanies diversification of employments and increased demand for human service.

As yet, however, these being simple deposit banks, any augmentation of the currency thence resulting was merely