THE rarity of silver and its beautiful colour were sufficient before it became a medium of Trade, to procure it a price, even supposing it destitute of natural value; tho' such a kind of worth is merely fan­tastical, like that of diamonds, which is also derived from fancy.

Silver is still a commodity, as every thing bought and sold is; but then it is also money, which gives it a rank above other wares exchanged by it.

That commodity for which the rest in the country are generally bought and sold, is the currency or money of the country.

The nummary denominations, and by which accounts are kept, throughout Europe, do all stand for certain quantities of silver, and none of 'em for gold: Therefore as all contracts, in that part of the world are made for the first, and not any for the second, tho' they may be discharged by it, ac­cording to its varying rate; the former is the currency of Europe, and the latter is nothing more than a commodity.

In Virginia and Maryland, tobacco being that for which all other commodities are generally exchanged, is the currency of these Provinces, as rice is, for a like reason, in South-Carolina; yet they are not so by the sanction of law: It is there­fore probable that silver, being much better qualified than either of 'em for a medi­um of commerce, rose up to that dignity by its own proper force; for the im­pression that the several pieces, into which it is divided, receive at the mint, is of no other use than to ascertain their respective quantites and fineness, in order to save the trouble of weighing and trying 'em on every occasion.

But bits of paper, however denominated, could never become a currency without the compulsive aid of the legislature; for, if all had been left at liberty to refuse them, their nummary denominations could never have persuaded any bo­dy to give any thing for 'em.

In the year 1722 the government of Pennsylvania began to coin paper-money. The sum of 15,000 l. was then struck in bills of one shilling to twenty, which was lent out on land-security at five per cent. Those bill the legislature declared [Page 4] equal to as much silver-money of America as their respective denominations signified. Had the law stopt here their value could not have rose above waste paper. But as they were also made according to their declared rates, a legal tender in discharge of the silver-contracts then subsisting, they naturally became money:

For debtors were willingly led to sell their goods for 'em at the nominal value assigned by the legislature, knowing they could pass 'em on the same foot­ing to their creditors; whose interest it also became to support the credit of the new coin, while they had any debts remaining unpaid in the old. Other tra­ders, as may well be supposed, were at first fearful to contract for this new spe­cies of money; but finding it kept up its value, or (when they fancied it did not) that the advanced price on their goods ballanced the imaginary loss, they were as eager to bargain for it as they were before for silver.

Were it not for the confusion which an alteration in the nummary denominati­ons, that people have have been accustomed to count by, would produce in trade, those paper bills might as well have been called and distinguished by livres, sols and deniers, or by any other terms of value, as by pounds, shillings and pence. The power with which they were respectively indued were also arbitrary; for the law could as easily have made one of them mark­ed five shillings pass for five pounds, silver money of America, as it did for five shil­lings of that coin. But the retaining of names, and the annexing to them differ­ent ideas from what they usually convey, amounts to an actual alteration of the names: It was therefore as necessary that the bills should, at their first emission, be endued with such powers as generally accompanied their respective denomina­tions, as to give them the denominations by which the people generally counted.

To fix the idea of paper-money it may be proper to show wherein it differs from paper-credit. When credit is given for money, there is always a promise expressed or implied for the payment of it; if expressed, it is generally on paper; and from these circumstances the latter kind of engagements where they are transferable by law or custom, is called a paper-credit. But the paper-bills of Pennsylvania, as they do not promise money for any thing else, cannot be compre­hended under the notion of paper-credit. They are actually money, and may as properly be termed paper-money from the material of which they are made, as silver-coin is so denominated from the metal. All assignable notes promising paper-coin are paper-credit on the same reason that notes promising silver-coin are so.

Forasmuch as the law, by which the Maryland- bills were issued, insures to the possessors, at certain periods, the quantity of silver expressed by them, they could only be regarded as paper-credit at their first emission: But as they pass at a much higher rate than the [...] of discount allow, they are at present to be consider­ed as a mixture of paper-money and paper-credit. This last supplies the place of cash, and according to the extent of it, is of more or less advantage to a coun­try where silver is the established medium of commerce; that being a currency which [Page 5] costs extremely dear. But where paper-money is used, if there be a sufficiency, the cost of which is comparatively nothing, a paper-credit can be of little, if any service at all.

We return to the law whereby paper-bills were first introduced into Pennsyl­vania, and observe that it gradually lost its efficacy, as the silver-contracts sub­sisting at the time of passing it were paid off. The power of the bills would have sunk in the same degree, were not the people obliged, thro' the want of sil­ver, to use them as their medium of commerce. Now forasmuch as they contract for 'em every day as they did before for silver, their worth is on as good a foun­dation as it was at their first emission; for the present debtors are under as strong a necessity of purchasing 'em to disengage their promises for that coin, as the former debtors were to discharge their contracts for silver-coin; and therefore their worth cannot fall while trade continues to furnish 'em with an employment equal to what it now does, as it always will unless their quantity be rashly encreas­ed, or a better currency be introduced in their room, which seems morally im­possible: For even with respect to an independent government, which, by pru­dently prohibiting some and laying high duties on other kinds of foreign com­modities, may generally have such a quantity of silver as the trade of the country requires, for it may sometimes have too much as well as too little; silver is never­theless a currency, not to insist on the great cost of it, much inferior to paper-money on several other important accounts; as will be demonstrated in the sequel. Pennsylvania must, except in a few trifling instances, pay silver for all the goods imported from England, and cannot impose the least duty on any of them. To attempt then to introduce that metal into the Province, as a medium of commerce, which in a dependent government, as Pennsylvania is, will ever be a currency extremely precarious; and NEGLECT to improve and extend the pow­er of the paper-money, whose advantages have been experienced during a peri­od of more than twenty years; would be a proceeding which I should confess my self at an utter loss to account for.

The principles on which the value of the currency of Pennsylvania is supported, undeniably evince, that, were the duty for purchasing the silver promised to the possessors of the Maryland-bills, to be discontinued, their present value could not be lessened: For the people of that Province would be then under the same obligation of purchasing 'em to discharge their contracts as they are at pre­sent; and would as willingly bargain for 'em afterwards as the people of Pennsylvania do now for the bills current amongst them.

I would add farther, that if the silver-contracts at present subsisting among the former, were to be made payable in paper-bills, according to their varying worth in silver, which the course of exchange discovers, the employment and consequently the value of 'em would be increased (but I do not insinuate it ought to be above what it is) much more than it would by making them a legal tender at a certain fix'd rate in discharge of silver-contracts; for that is an ex­pedient [Page 6] which, after the bills have obtained a currency, cannot be introduced nor continued without danger; forasmuch as it has a direct tendency to force merchants into the truck-trade; which, in their own defence, they must all run into, when they see the currency pour'd upon 'em without bounds. In such a case none will fell their goods for it on credit, unless at a prodigious advance; and on the other side it will have but little employment in discharging silver-contracts, for no new ones of that kind will be made; so that under these circumstances the wonder is not why it should in some colonies have sunk so much in value, but rather how it could preserve any value at all.

The proprietary quit-rents in Pennsylvania, reserved since the use of paper-mo­ney, are made payable by the patents in silver, or the value in paper-coin, ac­cording to the course of exchange. Those reserved before paper-money was in­troduced, which are said to be small compared with the others, the law regu­lates the payment of during a certain term of Years, at the rate of eighteen pence for one shilling sterling. But to this the Honourable Proprietaries themselves assented in consideration of the sum of 1200l as appears by the publick proceed­ings.

The value of the paper-money of Pennsylvania notwithstanding the obvious manner of accounting for it, is attributed by many to the land-security on which it is lent; and, in support of this notion, the following argument, who­ever first broached it, has been printed; which I shall particularly examine [...] as it has been generally adopted, it cannot with defency be condemned in the [...]. It runs thus. As those who take bills out of the banks in Europe put in money for secu­rity, so here we engage our land. And as bills issued upon money-security are money, so bills issued upon land-security are, in effect, coined [...]. Now the Banks of Europe do ac­tually borrow the money lodged with them, and therefore give their notes as a se­curity for the repayment▪ But the paper-money-bank of Pennsylvania, to which the argument is applied, does not borrow but lend money, and therefore takes security from the borrowers for the repayment at the times stipulated. The two cases then, instead of having the least resemblance, being essentially opposite; it is impossible that any conclusion drawn from the one should be applicable to the other. Indeed the bills given by an European bank have the same power as the silver promised by 'em; because the possessors have a right to receive, and do also receive on demand the very firms expressed by such bills. But those of Penn­sylvania cannot, for a like reason, nor for any reason, be considered as land; for tho' they be lent upon land, yet the possessors have no right to demand from any man, or any body of men, any land for 'em.

Having shown that the value of the paper-money depends on the general em­ployment given it by trade; we from thence descend to prove that the employ­ment, and consequently the value of it, will, on a supposition of its quantity continuing the same, be more or less in proportion to the INTRINSIC WORTH of the moveable commodities exchanged by it.

[Page 7] When these encrease in quantity without diminishing in goodness or quality, or encrease in quality without diminishing in quantity; their intrinsic worth is encreased.

The more any particular sort of goods is wanted, the more hands will be em­ployed in raising, making and transporting 'em to market for sale and vice versa: From whence it follows, That the Intrinsic worth of moveable commodities will be always proportioned to the labour and skill expended on the several species, considered toge­ther, of which it is composed.

The value of the land belonging to a society may fall tho' the people encrease, if their diligence decreases in a greater proportion, as may sometimes happen. But the value of the land will infallibly rise with the intrinsic worth of the moveable commodities; which may be occasioned by an increase of industry in the people as well as by an increase in their number. Therefore it is plainly the interest of land-holders and the owners of houses who propose a rent by them, to desire, a­bove all others, a plenty of money; for, without it, a great part of society, who, with it, might be engaged to set their hands to useful work, will remain un­employed; while others whose livelihood depends on their manual labour, and who, on an offer of ready money would eagerly, constantly strive to earn it, will not work but as mere necessity compels them. Hence it clearly appears that land-holders are the natural guardians of the publick interest; since without advan­cing their own they cannot promote the other, nor suffer it to be lessened with­out suffering themselves in an equal degree: Whereas merchants (or Mr. Locke is mistaken) as well as usurers or money-jobbers, land-jobbers and super-nume­rary officers, with their tribe of retainers and dependents, may all very possibly grow rich, while the rest of the community are oppressed and kept poor. Yet because it is the immediate interest of land-holders in general, to promote the public good, that therefore it must always be the immediate interest of every one in particular; or, supposing it to be the case, that therefore none of 'em will sacrifice a real advantage to a lust of power, when an opportunity of gratifying it pre­sents; or to a desire of lording it over their brethren, tho' the prospect may seem remote; is a fallacious way of arguing; tho' it is a doctrine that has formerly been currently swallowed, to the great detriment of the patients, in a certain colony which I forbear to name.

And now craving pardon for this digression, I re-assume the principal argument and pursue it thus;

Paper-money is only wanted to exchange commodities, which it does, whe­ther they be sold absolutely for it or only for a time, or whether the payment be immediate or time be given for the payment. Commodities are never exchang­ed unless they be wanted: Therefore the demand for paper-money must rise and fall with the demand for the commodities (among which we must here in­clude the land) exchanged by it.

If the intrinsic worth of moveable commodities be not encreased, neither rents nor the value of land can rise, nor, consequently, the demand for money, to dis­charge the one or purchase the other:

[Page 8] Neither, on the same supposition, can the continual variations in the value of moveable commodities, with respect to one another, encrease the demand for money; for it is impossible that any of the sorts should rise unless the others fall. As then the demand and consequently the value of the paper-money cannot be encreased, so it cannot be lessened, but in proportion to the intrinsic worth of the moveable commodities exchanged by it. If the reader has not forgot, that when this inference was offered to be proved, it was on a supposi­tion that the quantity of money in trade remain'd the same, he'll more clearly perceive the truth of the position now laying down, to wit, That, could a me­thod be fallen upon to augment and diminish the quantity of the currency ac­cording to the demand for it; its value would remain▪ UNALTERABLE; for as the proportion between the money extant and the intrinsic worth of the moveable commodities exchanged by it, would be always alike; the same number of shillings or pounds would at all times purchase the same quantity of labour and art, or of the necessaries and conveniences of life, taking one article with another; as for instance, should domestic commodities rise in price, with respect to pa­per money, they would do so with respect to foreign goods, which must there­fore fall proportionably; so that when more money than usual is required for the one, less will serve for the other. Thus, in every case that can be put, the value of the money (supposing a constant proportion preserved between the quantity extant and the intrinsic worth of the commodities exchanged by it) will, as it stands in comparison not with one or a few, but with all the commodities purchaseable by it, be found unalterable; which is the highest pitch of perfection that money can arrive at; for beyond this point it is impossible to carry it, with­out rendering invariable the natural and constantly variable relations of commo­dities to one another.

Now in order to preserve a constant proportion between the quantity of money floating in trade, and the demand for it, there needs nothing more than to open a bank that shall lend on good real security for the natural interest, whatever sums may be applied for; and shall also receive back any sum, if not too tri­fling, from any person offering it, tho' not a borrower, allowing him the natu­ral interest or an equivalent to it, 'till he calls it out again.

An increase of trade will encrease the number of borrowers, and consequent­ly the hire of money: Therefore the bank continuing to lend it out at the same interest it let for before that increase, will at once be enabled to augment the quantity accordingly. On the other hand a decrease in trade will decrease the number of borrowers, and consequently the hire of money: Therefore the bank, continuing to give the same interest it let for before, must inevitably draw in the part, which on every decrease of commerce, will be left without em­ployment; and thus the quantity▪ of money floating in trade will be augmented and diminished, exactly with the demand for it.

Admitting, for argument's sake, the natural rate of interest to be five per cent ▪ a premium of four and a half will probably prove sufficient to draw in the su­perfluous [Page 9] cash at any time extant; for such an interest when with if the princi­pal may be had on demand, is at least as good as five per cent. on any private security, where besides the risque, the lender can never be sure of having his money again, as he would be at the bank, whenever an opportunity offers of laying it out to greater advantage. Therefore should the full natural interest be­tween man and man be allowed by the bank for the money returned upon it; the quantity extant, instead of ever exceeding, will rather fall short of the proportion required by trade; which must incline it to sink instead of rising in value. But this inconvenience may be easily avoided by lessening the premium; which, without leaving it to the discretion of the managers of the bank, may be regulated by a perpetual table, that the men of figures will easily form on the Data, furnished 'em by one year's experience. On the same Data, rules may be laid down for discovering at all times the hire of money at market; for, as that lessens, the interest paid and received at the bank must be lessened too. There can be no occasion to encrease it at any time for the natural interest between man and man (which, by the way, can never fall too low) will be always falling until every branch of trade be fully supplied with money. These last hints may seem superfluous to such as have duely re­flected on the nature of interest, as they really would be, were they added, on­ly on their account, to strengthen this conclusion, That the Scheme it as easy in practice, as it is true in theory.

The end of money is to facilitate the exchange of commodities, and therefore it is significantly called an instrument of commerce. It is the tool which mer­chants work with, and its deficiency in power does more immediately affect them than any other calling, because their business consists in exchanging and distri­buting goods; for which reason Mr. Locke throws them together, from the highest to the lowest class, under the general emphatical name of Brokers. Yet, however necessary money may be to traders, they either will not (and with good reason) contract for a paper-currency when they apprehend it likely to fall▪ or they'll raise the price of their goods according to the strength of that apprehensi­on; and in both cases the employment and value of the money will be lessened. While these jealousies exist its power cannot be extended; and unless they be removed, it will on every addition made to it, decrease faster in value than it can be encreased in quantity. But were this scheme to be carried into execution, as no doubt it will, if the arguments before offered be found conclusive; sellers, on the one hand, would be convinced the money could not fall in value, and buyers, on the other, that it could not prove deficient in quantity; which circumstances concurring would immediately cause it to circulate thro' every vein of commerce, and at once blow up the truck-trade; a manner of traffick, which, whether it be from the difficulties it is accompanied with, or the opportunities it furnishes artful, disho­nest traders in exchanging and distributing commodities to cheat the raisers, makers and consumers of 'em, or on both accounts; has always been reckoned by every polite nation, where trade flourished, a mark of BARBARISM.

Exchange fell lately in Pennsylvania from 145 l. to 125 l. and in a few months after rose to 165 l. which was owing to the sudden encrease and decrease of the [Page 10] trinsic worth of the commodities that gave employment to the currency. But if its quantity had been augmented and diminished accordingly, the price of sterling bills of exchange could not have risen or fallen but just half as much as it did. And had the sum and power of the whole currency extant been the treble of what it was, when exchange was at 145 l. it could not have risen high­er than 147 & a half nor fallen lower than 142 & a half. I omit the demon­stration here, for as much as the principles on which it is founded were descri­bed very particularly in one of the publick prints some months ago; and the consequences flowing from thence were proved so clearly, that several gentle­men, who think themselves knowing in the theory of money, because they can give themselves leave to practice any unjustifiable arts of getting it, were pleased to declare the writer gave himself an unnecessary trouble, since, as they affirmed the points he then undertook to demonstrate, were before his writing, as perspi­cuous to them as the meridian sun.

An exact judgment cannot be formed of the sum of money necessary for car­rying on the trade of any society, tho' we knew the number of the individuals▪ for people are not in all places equally industrious; neither can we arrive at any certainty in this matter, tho' we were acquainted with the annual quantity of their several kinds of labour; for when the members of a community are settled close together, each will apply himself to one single trade, which will cause a greater exchange of commodities than if they were scattered on a large surface [...] for then each would be obliged to follow several occupations at once, and so [...] much less quantity of commodities would be exchanged. The running cash [...] England is computed at twenty millions, to which if we add the bank-notes and other paper-pledges that pass as ready money, which are therefore in this case to be considered as part of the nation's cash, the whole cannot amount to [...] than forty millions. This sum divided among ten millions of souls for so many England is reckoned to contain, gives 4 l. for each. Now allowing there are in Pennsylvania 150,000 souls, their currency, if it was to be proportioned by that of England▪ should be equal in power to 600,000 l. sterling. But abating the one half, for the reasons just now offered, it follows that the 80,000 l. now ex­tant in Pennsylvania, as it has not a greater power than 50,000 l. sterling, is but the sixth part of what the trade of the province requires. But tho' this at the best is but probable if it be even that, yet it is certain that the currency of the co­lony is vastly short of what its domestic trade will bear, since it is too evident the greatest branches of it depend on barter only. Moreover as people cannot with­out great difficulty exchange their labour, if money which is the medium of ex­change be wanting, families are thereby drove to live independently of one a­nother, and to provide as much as possible within themselves whatever is ne­cessary for their support. The pleasures of society having by this means lost the chief place in their thoughts, they seek out land at the cheapest rate. To this it is in a great measure owing that his Majesty's subjects in America, including many who are born as well as others who annually arrive there, are daily re­tiring back in great numbers from the Sea, which renders 'em as useless to the colony as to their Mother-country, for such consume little or none of her manu­factures [Page 11] On the other side, forasmuch as people living close together and ready at hand to assist one another can, if money be not wanting, more easily ob­tain the necessaries and comforts of life than a like number more thinly settled; it is plain that a plentiful currency would render the subjects much more useful to Great-Britain and to one another than they now are, as they would thereby be spontaneously drawn into a narrower compass, to which in such a case, they would be farther allured by the rational pleasures that accompany a social life. On these considerations one can hardly forbear thinking, that the paper-money of Pennsylvania might in a few years attain a power equal to 300,000 l. sterling. And then supposing the exports and imports to be double of what they now are, and that the employment which they at present furnish the paper-money in exchanging them should be even trebled; yet its variation in value compa­red with silver (which, as was mentioned once before, may for the most part be exactly discovered by the price of sterling bills of exchange) would be trif­ling. In the mean while its worth in that metal would, on this scheme, taking one time with another, be invariable, or at least not perceptible 'till after many years; for tho' a vast quantity of silver and gold is daily dug out of the earth, and found on the surface of it, yet it is exceedingly small with respect to the sum of both in the trade of the world; and therefore their declining worth cannot be easily perceived on a short retrospect.

In the next number it will be shown, that the money cannot, consistent with justice and public honour, be lent out at less than the natural interest; nor that less than that interest, or an equivalent to it, can be refused to such as shall be dispo­sed to return any part of it on the bank. In discussing these points, not only the reasonableness of the scheme, but the nature and inestimable advantages of a pa­per-currency will be further illustrated.

Let liberty and property be secured ever so well, yet the labour and industry of the people, from which the riches of every community are wholly derived, can­not be drawn forth to the length they are capable of, without a plenty of money. This considered, it may not be thought an extravagant assertion, that a paper-currency must necessarily, in proportion to the number of the individuals, prove to every society using it in the manner set forth, a more valuable and a much more certain source of wealth, than the gold of Brazil is to Portugal, or than the inex­haustible silver-mines of Potosi are to Spain.