This six dollars worth of pleasure, then, or six dollars worth of gratified fancy, vanity, or pride, is the annual income from an investment of one hundred dollars in gold and silver plate, jewelry, &c.
This, be it noticed, is the only income, that gold and silver are capable of yielding; because plate, jewelry, &c., are the only forms, in which they can be used. So long as they remain in coin, they cannot be used, and therefore cannot yield an income.
It is, then, only this six per centum annual income—this six dollars worth of pleasure—which gold and silver yield, as investments, that is really the cause of all the demand for them, in the market, and consequently of their passing as a currency.
This fact may now be assumed to be established, viz.: that the origin of all the demand for gold and silver, as a currency—the essential reason why they have a market value, and sell so readily in exchange for other commodities—is because they are wanted, to be taken out of circulation, and converted into plate, jewelry, &c., in which form only they are capable of being used, or of yielding an income.
By this it is not meant that every man, who takes a gold or silver coin, as currency, takes it because he himself wants a piece of gold or silver plate, or jewelry; nor because he himself intends or wishes to work it into plate or jewelry; for such is not the case, probably, with one man in a thousand, or perhaps one man in ten thousand, of those who take the coin. Each man takes it, as currency, simply because he can sell it again. But he can sell it again solely because some other man wants it, or because some other man will want it, in order to convert it into articles for use. He can sell it, solely because the goldsmith, the silversmith, the dentist, &c., will sometime come along and buy it, take it out of circulation, and work it up into some article for consumption—that is, for use.
This final consumption, or use, then, is the mainspring that sets the coins in circulation, and keeps them in circulation, as a currency.
It is solely the consumption, or use, of them, in other articles than currency, that creates any demand for them, in the market, as currency.
It is, then, only the value, which gold and silver have, as productive investments, in articles of use, in plate, jewelry, &c., that creates any demand for them, and enables them to pass, as a currency.
This fact, then, being established, the following proposition is an inevitable deduction from it, viz.: that the activity of the demand for gold and silver coins, as a currency, depends wholly upon the activity of the demand for them, to be taken out of circulation, and converted into plate, jewelry, &c.
To illustrate this point, let us suppose a community of one million of people, shut out from the rest of the world, having among them one million dollars of gold and silver coins, and having no gold or silver among them, except in coins. If but one dollar of these coins were to be taken out of circulation each year, and converted into plate, jewelry, or other articles of use, the demand for all the remaining coins, as a currency, would wholly, or substantially, cease. And why? Solely because the stock of coins on hand, (or the stock of gold and silver on hand,) would be equal to a million years’ consumption. The consequence obviously would be that gold and silver would have no value in the market; any more than cotton or iron would have a value in the market, if there were a million years’ stock on hand.
But if, instead of one dollar, an hundred thousand dollars were annually taken out of circulation, and converted into plate, jewelry, or other articles of use, (even though their place were annually supplied by an equal amount taken from the mines,) this demand for the coins, to be taken out of circulation, would create a corresponding demand for them, as a currency. And why? Solely because the stock of gold and silver on hand, would be equivalent only to ten years’ consumption. This would give them a value, where before they had none; and enable them to circulate, as a currency, where before they could not.
Thus it is evident that the whole demand for gold and silver, as a currency, depends upon the demand for them for consumption, as plate, jewelry, &c. And consequently the activity of the demand for them, as a currency, depends upon the activity of the demand for them, for consumption. In other words, the activity of the demand for the coins, as a currency, depends upon the activity of the demand for them as investments, in articles of use.
And what is true of the coins, would be true also of the paper currency proposed. The activity of the demand for the Circulating Stock, as currency, would be just in proportion to the demand for the mortgages, or Productive Stock, as investments. As the coins would be in demand, as a currency, solely in proportion to the demand for them, to be invested in plate, jewelry, &c., so the paper currency would be in demand, as currency, solely in proportion to the demand for it, to be invested in mortgages, or Productive Stock. The demand for these two different kinds of investments, would govern the demand for the two different kinds of currency.
Now, in order to determine whether the paper currency proposed would be in as much demand, in the market, as the gold and silver coins circulating in competition with it, we have only to determine whether the community at large would wish to make annually as many investments, in the mortgages proposed, as they would in plate, jewelry, &c. Or, perhaps, rather, the true question is, whether as large a proportion of the whole stock of paper currency, in the market, would be annually taken out of circulation, and invested in the mortgages, as of the gold and silver coin in plate, jewelry, &c. If such would be the case, then one kind of currency would be just as much in demand as the other.
To illustrate this point, suppose that, in this country, one hundred millions of coin, and one hundred millions of the proposed paper currency, were in circulation, in competition with each other. And suppose that ten millions of the coin—that is, ten per centum of the whole stock of coin—were annually wanted to be taken out of circulation, and invested in plate, jewelry, &c.; and that ten millions also of the paper currency—that is, ten per centum of the whole stock of paper currency—were annually wanted, to be taken out of circulation, and invested in the mortgages, the market demand for these two kinds of currency would be precisely alike.
Or suppose that one hundred millions of coin, and five hundred millions of the paper currency, were in circulation, in competition with each other; and that ten millions of the coin (ten per centum of the whole stock of coin) were annually wanted, to be taken out of circulation, and invested in plate, jewelry, &c., and that fifty millions of the paper currency (ten per centum on the whole stock of paper currency) were annually wanted, to be taken out of circulation, and invested in mortgages, the demand, in the market, for each of the two kinds of currency would still be precisely equal, in point of activity. That is to say, one kind of currency would circulate just as readily as the other.
On this theory, it is very easy to settle the question of the comparative demand for the two different kinds of currency; for, although the amount of paper currency might perhaps be fifty or an hundred times greater than the amount of gold and silver, yet the demand for the mortgages (Productive Stock) as investments, would probably be fifty or an hundred times greater than the demand for plate, jewelry, &c., as investments.
The reason, why there would be this greater demand for the mortgages, as investments, is, that they would yield their income, in money, or currency, which could be appropriated to the supply of any and all the various necessaries, wants, comforts, and pleasures, which money can buy; while the plate, jewelry, &c., as investments, yield their income mostly in the shape of a luxurious pleasure, which most persons do not highly appreciate, and which few persons can indulge in, to any considerable extent, without being compelled to pinch themselves in the matter of common necessaries and comforts.
Mankind, therefore, desire to have the great bulk of their property invested so as to yield an income in money; and only a very small portion of it in such articles of fancy as plate, jewelry, &c.
Under these circumstances, it is probable that if the paper currency were in circulation in competition with the coin, in the proportion of fifty or an hundred to one, the paper would be just as acceptable a currency as the coin;