In rich countries these three metals of gold, silver, and copper are very con venient substances for the manufacture of coins, on account of the differences in their relative value. Gold coins contain ing a high value in small compass, are convenient for large payments, silver coins for smaller payments, and copper coins for those of the lowest value ; while all the larger coins are multiples of the smaller. These several descriptions of coin serve the ordinary purposes of trade sufficiently well : they are universally re ceived as money within the country in which they circulate, and the principal part of all payments of moderate amount are made in them. But payments of large amounts cannot conveniently be made in coins of any metal ; and in this and other countries paper money and various forms of credit have been used as substitutes. Of these we shall speak presently ; but it will first be necessary to consider the suitableness of gold and silver coins as standards of value.
Coins made of these metals are not exempt from the laws which govern the prices of other commodities. They have accordingly varied in their own value, in successive periods, and are at no time secure from variation. In the sixteenth century new mines of extraordinary rich ness were opened in America which were worked with such ease, and were so un usually productive, that the value of the precious metals, as representatives of so much labour expended in their produc tion, was lowered all over Europe to about a third of their previous value. And thus a revolution, so to speak, was effected in the gold and silver coins of that period, as standards of value. Similar causes have produced the same effect, at other times, though not in the same de gree; and we cannot be secured against their recurrence.
If the production of gold and silver be free, like that of other commodities, the only circumstance which can permanently diminish their value, in relation to them selves at different periods, is a reduction in the quantity of labour required for their production. But they are also liable to fluctuations in their value by reason of variations in the demand for them in par ticular countries. Though fashioned into coins, they retain all their properties as articles of commerce : they are readily fused into other forms, and reudered available for all purposes of use and orna ment; and the occasions of commerce often withdraw them from one country and attract them elsewhere. From these
causes their value, instead of being always the same, is liable to permanent alters lions, and also to occasional fluctuation.
Both gold and silver are alike subject to these general laws, and are therefore imperfect standards of value. If one be the standard independently of the other, it is liable to change in itself, and also iu its relation to other commodities : if both be adopted as standards at the same time, they will not only each vary in them selves, and in relation to other commo dities, but they will vary also in regard to each other. And thus another element of uncertainty is introduced into the coinage, which becomes still more imper fect as a standard.
But it is not customary for the state to allow coins to fluctuate in their legal value according to the circumstances which determine the market prices of gold and silver. Coinage does not merely authenticate the weight and fineness of a piece of metal, leaving it to find its own level in exchange for other commodities ; but it attaches to it a definite value, by fixing the standard price of the metal as well as the weight and fineness of the coin. The object of this regulation is to maintain a greater equality in the stan dard ; and as regards small fluctuations in the value of the precious metals, it will generally have that effect. But if any considerable disproportion should arise between the standard price of bullion and the market price, no such regulation can a practical change in the ptan If the market price should be come considerably higher than the stan dard price, the coins would he melted down for the sake of the profit arising from the difference. If it should become considerably lower for any length of time, the value of the coins, though no minally unchanged, would in fact be de preciated; for they would exchange for a less quantity of other commodities than they exchanged for before. And thus a currency composed exclusively of metals cannot be made an accurate standard of value by any expedients of law.
We may here remark, however, that a seiguorage, or charge by government to cover the expenses of coinage, acts as a protection, within certain limits, against the melting of coins, because unless their value he depreciated by over-issue, the whole charge will be added to their value as coins, and will be lost when they are melted. For this amongst other rea sons a seignorage should always be charged by the state.