Front Page Titles (by Subject) CHAPTER XIX.: On Signs representing Money. - Letters to Mr. Malthus, and A Catechism of Political Economy
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CHAPTER XIX.: On Signs representing Money. - Jean Baptiste Say, Letters to Mr. Malthus, and A Catechism of Political Economy 
Letters to Mr. Malthus, on Several Subjects of Political Economy, and on the Cause of the Stagnation of Commerce. To Which is added, A Catechism of Political Economy, or Familiar Conversations on the Manner in which Wealth is Produced, Distributed, and Consumed in Society, trans. John Richter (London: Sherwood, Neely, and Jones, 1821).
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On Signs representing Money.
Why do you not call money a sign representative of merchandises?
Because it is no more a sign representative of merchandise, than any one merchandise is the sign of another. A cloth merchant might as well say, that the cloth in his warehouse is the sign which represents bread and meat, because, after an exchange or two, he might get bread and meat for his cloth.
What do you call signs representative of money?
Titles, documents, or vouchers, which have no intrinsic value, but which acquire one by the right which they give to a certain quantity of money; such as bills of exchange, bonds, bank notes, &c.
What do you observe respecting bills of exchange?
1. That they do not give the right to receive a sum of money till the end of a certain term, which diminishes their value by all the amount of the interest and of the risk which the bearer runs of not being paid when they become due. On this account they cannot be generally sold for the full amount that they give the right to receive. Commonly the discount on them is lost.
2. That they are sometimes payable abroad, and consequently in foreign money. In order to sell them, this foreign money must be valued in the national money: it is this valuation which is called the course of exchange. The exchange is at par when the quantity of fine gold or silver, paid for the purchase of a foreign bill of exchange, is precisely equal to the quantity of these metals, which the bill of exchange gives the right of receiving abroad.
What do you observe respecting bank notes?
That they circulate among the public for the entire value which they represent, when one is certain, by means of the note, to receive that value whenever one thinks proper.
What assurance has the public that the notes of a bank will be punctually paid?
A well administered bank never issues a note without receiving for it a value in exchange. This value is commonly money, or ingots, or bills of exchange. That part of the deposit, which is in money, is at all times ready to discharge them. That part which is in ingots requires only the time necessary to sell them. That part which is in bills of exchange only requires one to wait, at the worst, till they become due, before their value can be used to discharge the notes. So that, if the bills of exchange bear the names of many solvent persons, and if the times of payment are not at too great a distance, the bearers of the notes run no other risk than a trifling delay.
But if these bills of exchange are paid when due, by notes of the bank instead of money . . . . .
Then those notes are in fact discharged.
Bank notes can then supply the place of money?
Yes, to a certain point; but only in places where an office is constantly open to exchange them for money; for they are no longer worth the full sum of money, the instant they cease to be exchangeable for money at pleasure.
What is a paper money?
It is a title which give no right to any real reimbursement, but to which public authority attributes a certain value: a title which is received at that value in the payments which are made to the government, and which it authorizes individuals to give in payment for the discharge of engagements which they have contracted with each other.
What is it that keeps up the value of paper money?
Sometimes rigorous measures taken against those who refuse to sell for paper money; sometimes the uses to which the government admits it, such as the payment of taxes, and of debts previously contracted, sometimes, and almost always, it is the absence of all other money-merchandise, so that the public, who has nothing else to substitute for the ordinary use of money, is obliged to apply to it from the absolute necessity there is for this kind of merchandise. Often it is all these things united which gives any value to paper money. These means would even give it a very considerable value, if the facility which there is of multiplying it at will, did not always, sooner or later, bring it into disrepute.
One cannot then, by multiplying paper money, multiply at will the riches of a country?
Explain to me why.
Because the paper money can only replace a part of the riches of a country, that part which consists of coin; and the money itself, were it even gold or silver, forms but a small part of the riches of any country when compared with the value of all the things in it; land, houses, furniture, buildings of every kind, merchandise, and even industrious talents.
You say, were it even gold or silver. It appears to me, that in augmenting the mass of money of gold or silver, the real riches of a country are increased.
The quantity of sales and purchases in a country, require a certain monetary value devoted to that circulation. When the quantity of money is increased, without being necessary for the circulation of a country, the real value of the money declines, whatever may be its nominal value: and losing in value as much as it increases in quantity, the total riches is no greater. If the quantity of silver money were to be doubled, we should be obliged to pay two ounces of silver for what we before bought for one ounce; consequently, two millions of nominal money in silver would not be of more value than one million was formerly.
It is the same with paper money. If the quantity of this money had been increased tenfold, we could not obtain with ten notes of an hundred pounds more than had been before obtained with one note. Whatever name is given to this sum, it can never have in the whole more than a certain value; and this value, truly effective, whatever may be the material of which the money is made, is always determined by the wants of the circulation, and the state of civilization, of riches and of industry, in a country.