(3.xii.43) If not, he gives no additional encouragement to production. The supposition,therefore, must be, that he does raise prices. But exactly in proportion as he raises prices, he sinks thevalue of money. He therefore gives no additional encouragement to production.
(3.xii.44) It will perhaps be said, by a persevering objector, that the man who first goes tomarket with the additional quantity of money, raises the price of the commodities which he immediatelypurchases : that the producers of those commodities are therefore encouraged to greater industry,because the price of other commodities, namely, of all those which they have occasion topurchase, has not risen. But this he is not allowed to say. The first man who came with anadditional quantity of money into the market to purchase the commodities of those producers,raised the price of those commodities. And why ? Because he came with an additional quantityof money. They go into the market to purchase another set of commodities, and go with anadditional quantity of money. They raise, therefore, the price of those commodities. And in thismanner the succession goes on. Of all those commodities with which no additional quantity ofmoney has yet come in contact the price remains unaltered. The moment an additional quantityof money comes in contact with them, the price is proportionally raised.
(3.xii.45) The whole of the business of any country may be considered as practically dividedinto a great number of little markets, some in one place, some in another, some of one sort ofcommodity, some of another: the money, of course, distributed proportionally among them. Intoeach of these markets, in the ordinary state of things, there comes, on the one side, a certainquantity of commodities; on the other side a certain quantity of money; and the one is exchangedagainst the other. Wherever any addition takes place in the quantity of goods, without anyaddition to the quantity of money, the price falls, and of necessity in the exact proportion of theaddition which has been made. If this is not clear to every apprehension already, it may berendered palpable by adducing a simple case. Suppose the market to be a very narrow one; ofbread solely, on the one side; and money on the other. Suppose that the ordinary state of themarket is 100 loaves on the one side, and 100 shillings on the other; the price of bread,accordingly, a shilling a loaf. Suppose, in these circumstances, that the quantity of loaves isincreased to 200, while the money remains the same: it is obvious that the price of the breadmust fall one half, or to sixpence per loaf. It would not be argument to say, that part of the breadwould not be sold. but taken away unsold. If it is taken away unsold, it is the same thing, withrespect to the market, as if it had never been brought. These conclusions, with respect to anincrease in the quantity of commodities, no man disputes. Is it not obvious that the someconclusions are true with respect to an increase in the quantity of the opposite commodity-themoney?
(3.xii.46) All the consequences, therefore, of altering the value of money, whether by raisingor depressing it, are injurious. There is no security, however, against it, as it is a deed ofgovernment, but that which is the sole security against the misdeeds of government; itsdependence upon the people. The obligation of paying the notes in the metal is a necessarysecurity, where they are issued at pleasure by private bankers. If they were issued by agovernment strictly responsible to the people, it would not be indispensible; for in that case theutility of keeping gold at the mint price, or, in other words, the currency of the same value as if itwas metallic, might be so distinctly understood, that it would not be the interest of thoseintrusted with the powers of government to allow it to vary.
