Of the Principles illustrated in this Volume.
In exchanging commodities for one another directly, i. e. in the way of barter, much time is lost, and trouble incurred before the respective wants of the exchanging parties can be supplied. This trouble and waste may be avoided by the adoption of a medium of exchange; that is, a commodity generally agreed upon, which, in order to effect an exchange between two other commodities, is first received in exchange for the one, and then given in exchange for the other.
This commodity is money. The great requisites in a medium of exchange are, that it should be—
... what all sellers are willing to receive;
... capable of division into convenient portions; portable, from including great value to small bulk;
... indestructible, and little liable to fluctuations of value.
Gold and silver unite these requisites in an unequalled degree, and have also the desirable quality of beauty. Gold and silver have there-tore formed the principal medium of exchange hitherto adopted: usually prepared, by an appointed authority, in the form most suitable for the purposes of exchange, in order to avoid the inconvenience of ascertaining; tlie value of the medium on every occasion of purchase.
Where the supply of money is left unrestricted, its exchangeable value will he ultimately determined, like that of all other commodities, by the cost of production.
Where the supply is restricted, its exchangeable value depends on the proportion of the demand to the supply.
In the former case, it retains its character of a commodity, serving as a standard of value in preference to other commodities only in virtue of its superior natural requisites to that object.
“In the latter case, it ceases to be a commodity, and becomes a mere ticket of transference, or arbitrary sign of value: and then, the natural requisites above described become of comparatively little importance.
The quality by which money passes from hand to hand with little injury enables it to compensate inequalities of supply by the slackened or accelerated speed of its circulation.
The rate of circulation serves as an index of the state of supply; and therefore tends, where no restriction exists, to an adjustment of the supply to the demand.
Where restriction exists, the rate of circulation indicates the degree of derangement introduced among the elements of exchangeable value, but Las no permanent influence in its rectification.
Clowes, Printer, Stamford-street.
printed by william clowes,
No one can be more sensible than I am myself of the slightness and small extent of the information conveyed in my Tales: yet I find myself compelled to ask from many friendly critics and correspondents the justice,—first, of remembering that my object is less to offer my opinion on the temporary questions m political economy which are now occupying the public mind, than, by exhibiting a few plain, permanent principles, to furnish others with the requisites to an opinion;—and, secondly, of waiting to see whether I have not something to say on subjects not yet arrived at, which, bearing a close relation to some already dismissed, my correspondents appear to suppose I mean to avoid.
I trust, for example, that some of my readers may not look altogether in vain for guidance from the story of Berkeley the Banker, though it contains no allusion to the Currency Controversy at Birmingham, and no decision as to the Renewal of the Bank Charter; and that others will give me time to show that I do not ascribe all our national distresses to over-population, but think as ill as they do of certain monopolies and modes of taxation.
My inability to reply by letter to all who favour me with suggestions must be my apology for offering this short answer to the two largest classes of my correspondents.
BERKELEY THE BANKER.