document for goods, the national exchange is at fault.
If they cannot give goods for document, the national credit is at fault.
The nature and power of the document are therefore to be examined under the three relations it bears to Place, Time, and Kind.
71. (1.) It gives claim to the return of equivalent wealth in any Place. Its use in this function is to save carriage, so that parting with a bushel of corn in London, we may receive an order for a bushel of corn at the Antipodes, or elsewhere. To be perfect in this use, the substance of currency must be to the maximum portable, credible, and intelligible. Its non-acceptance or discredit results always from some form of ignorance or dishonour: so far as such interruptions rise out of differences in denomination, there is no ground for their continuance among civilized nations. It may be convenient in one country to use chiefly copper for coinage, in another silver, and in another gold,—reckoning accordingly in centimes, francs, or zecchins: but that a franc should be different in weight and value from a shilling, and a zwanziger vary from both, is wanton loss of commercial power.
72. (2.) It gives claim to the return of equivalent wealth at any Time. In this second use, currency is the exponent of accumulation: it renders the laying-up of store at the command of individuals unlimitedly possible;—whereas, but for its intervention, all gathering would be confined within certain limits by the bulk of property, or by its decay, or the difficulty of its guardianship. "I will pull down my barns and build greater," cannot be a daily saying; and all material investment is enlargement of care. The national currency transfers the guardianship of the store to many; and preserves to the original producer the right of re-entering on its possession at any future period.
73. (3.) It gives claim (practical, though not legal) to the return of equivalent wealth in any Kind. It is a transferable right, not merely to this or that, but to anything; and its power in this function is proportioned to the range of choice. If you give a child an apple or a toy, you give him a determinate pleasure, but if you give him a penny, an indeterminate one, proportioned to the range of selection offered by the shops in the village. The power of the world's currency is similarly in proportion to the openness of the world's fair, and, commonly, enhanced by the brilliancy of external aspect, rather than solidity of its wares.
74. We have said that the currency consists of orders for equivalent goods. If equivalent, their quality must be guaranteed. The kinds of goods chosen for specific claim must, therefore, be capable of test, while, also, that a store may be kept in hand to meet the call of the currency, smallness of bulk, with great relative value, is desirable; and indestructibility, over at least a certain period, essential.
Such indestructibility, and facility of being tested, are united in gold; its intrinsic value is great, and its imaginary value greater; so that, partly through indolence, partly through necessity and want of organization, most nations have agreed to take gold for the only basis of their currencies;—with this grave disadvantage, that its portability enabling the metal to become an active part of the medium of exchange, the stream of the currency itself becomes opaque with gold—half currency and half commodity, in unison of functions which partly neutralize, partly enhance each other's force.
75. They partly neutralize, since in so far as the gold is commodity, it is bad currency, because liable to sale; and in so far as it is currency, it is bad commodity, because its exchange value interferes with its practical use. Especially its employment in the higher branches of the arts becomes unsafe on account of its liability to be melted down for exchange.
Again. They partly enhance, since in so far as the gold has acknowledged intrinsic value, it is good currency, because everywhere acceptable; and in so far as it has legal exchangeable value, its worth as a commodity is increased. We want no gold in the form of dust or crystal; but we seek for it coined, because in that form it will pay baker and butcher. And this worth in exchange not only absorbs a large quantity in that use,35 but greatly increases the effect on the imagination of the quantity used in the arts. Thus, in brief, the force of the functions is increased, but their precision blunted, by their unison.
76. These inconveniences, however, attach to gold as a basis of currency on account of its portability and preciousness. But a far greater inconvenience attaches to it as the only legal basis of currency. Imagine gold to be only attainable in masses weighing several pounds each, and its value, like that of malachite or marble, proportioned to its largeness of bulk;—it could not then get itself confused with the currency in daily use, but it might still remain as its basis; and this second inconvenience would still affect it, namely, that its significance as an expression of debt varies, as that of every other article would, with the popular estimate of its desirableness, and with the quantity offered in the market. My power of obtaining other goods for gold depends always on the strength of public passion for gold, and on the limitation of its quantity, so that when either of two things happen—that the world esteems gold less, or finds it more easily—my right of claim is in that degree effaced; and it has been even gravely maintained that a discovery of a mountain of gold would cancel the National Debt; in other words, that men may be paid for what costs much in what costs nothing. Now, it is true that there is little chance of sudden convulsion in this respect; the world will not so rapidly increase in wisdom as to despise gold on a sudden; and perhaps may [for a little time] desire it more eagerly the more easily it is obtained; nevertheless, the right of debt ought not to rest on a basis of imagination; nor should the frame of a national currency vibrate with every miser's panic, and every merchant's imprudence.
77. There are two methods of avoiding this insecurity, which would have been fallen upon long ago, if, instead of calculating the conditions of the supply of gold, men had only considered how the world might live and manage its affairs without gold at all.36 One is, to base the currency on substances of truer intrinsic value; the other, to base it on several substances instead of one. If I can only claim gold, the discovery of a golden mountain starves me; but if I can claim bread, the discovery of a continent of corn-fields need not trouble me. If, however, I wish to exchange my bread for other things, a good harvest will for the time limit my power in this respect; but if I can claim either bread, iron, or silk at pleasure, the standard of value has three feet instead of one, and will be proportionately firm. Thus, ultimately, the steadiness of currency depends upon the breadth of its base; but the difficulty of organization increasing with this breadth, the discovery of the condition at once safest and most convenient37 can only be by long analysis, which must for the present be deferred. Gold or silver38 may always be retained in limited use, as a luxury of coinage and questionless standard, of one weight and alloy among all nations, varying only in the die. The purity of coinage, when metallic, is closely indicative of the honesty of the system of revenue, and even of the general dignity of the State.39
78. Whatever the article or articles may be which the national currency promises to pay, a premium on that article indicates bankruptcy of the government in that proportion, the division of its assets being restrained only by the remaining confidence of the holders of notes in the return of prosperity to the firm. Currencies of forced acceptance, or of unlimited issue, are merely various modes of disguising taxation, and delaying its pressure, until it is too late to interfere with the cause of pressure. To do away with the possibility of such disguise would have been among the first results of a true economical science, had any such existed; but there have been too many motives for the concealment, so long as it could by any artifices be maintained, to permit hitherto even the founding of such a science.
79. And indeed, it is only through evil conduct, wilfully persisted in, that there is any embarrassment, either in the theory or working of currency. No exchequer is ever embarrassed, nor is any financial question difficult of solution, when people keep their practice honest, and their heads cool. But when governments lose all office of pilotage, protection, or scrutiny; and live only in magnificence of authorized larceny, and polished mendacity; or when the people, choosing Speculation (the s usually redundant in the spelling) instead of Toil, visit no dishonesty with chastisement, that each may with impunity take his dishonest turn;—there are no tricks of financial terminology that will