Finance and commerce are so intimately connected that one cannot be
treated without the other being, at least, indirectly alluded to. If
these terms are analyzed, their relations will be perfectly understood.
Commerce is the simple exchange of something one individual possesses
for something another individual is possessed of. This exchange may be
between neighbors, or between nations; it is all commerce. In ancient
times, articles of merchandise were exchanged for articles of
merchandise, but as commerce increased in amount, and its limits became
extended, it became necessary to make use of something that should
represent value, so that there need not, in all cases, be an actual
transfer of property for property. The medium used to facilitate these
exchanges was money in its first phases, and out of this necessity have
grown all the different monetary devices made use of, at various times,
in the history of civilization.
To demonstrate that money is only a convenience and not an absolute
necessity, any one has only to observe that frequent purchases, sales
and payments are made without the use of money or any other
representative of value, but by the direct transfer of value for value.
It is plain, then, that money, be it gold, silver or what else it may,
if not intrinsically of the value set upon it, but that it represents
something that has intrinsic value. If this is questioned, let any one
who doubts it procure some gold in its original state and endeavor to
make exchanges with it. He will find that no one will receive it, even
at its value by weight. Were he to apply to a dozen places where gold,
in mass, is dealt in, he would be offered a dozen different prices for
his article. It is only after gold has passed through the hands of the
government, and has received its impress as an indorsement, that it
becomes current as money.
It is further to be observed that the time came when even coin became
too burdensome to be directly transferred in making exchanges, and
something representing it was brought into use. This consisted of bits
of paper, containing upon them promises to pay so much in coin, &c.,
&c.; and under this practice banks of issue sprung into existence, their
issues being supposed to represent a gold or coin basis of value. But a
full representation alone of coin deposited was found not to supply a
sufficient circulating medium to accommodate the movement of produce,
and for other uses, and it became customary for the banks to expand
their issues beyond the amount of coin on hand, upon the supposition
that these promises to pay would never be presented in sufficient
quantities to consume their actual specie. But suppositions are only
true _generally_, and hence it came that promises to pay often exhausted
the ability to pay, and here began the ills that must necessarily attend
a false standard of values.
In all seasons of financial distress, gold, as a standard, has failed.
The necessities of our late war demonstrated and represented the fallacy
of an absolute standard in gold, and happily suggested a better
standard. No sooner did the supply of gold at the command of the
government fail, than the latter was compelled to resort to its credit,
or to a direct representation of the true value and wealth of the
country. The credit of the government was the ability and intention of
the country to meet the promises of its government, and this ability
determined its currency. It was not the amount of gold, absolutely, that
the country was supposed capable of acquiring that thus entered into
consideration, but the ability of the country to produce certain
quantities of merchandise, which should, in time, be sufficient, above
consumption, to balance these promises to pay. It was the productive
capacity of this country that gave value to its currency and bonds
irrespective of gold. The productive capacity of a country is then the
virtual standard of the value of its currency, and as gold can only be
obtained by the products of the country, its necessity as a medium may
be dispensed with. It is now predicted that the sooner gold, as the
money god, is dethroned in the hearts and customs of the people, the
sooner a sound and perfect system of finance will be inaugurated.
That there is a true standard of value, and one that can never fail in
time of need, nor be made use of for speculative purposes as gold is,
must be apparent to every thinking mind. How many of the people of this
country, during the last eight years, have received gold or silver for
what they have disposed of, or have used it to purchase their
necessities? And yet the talk of a return to specie payment is
everywhere heard. When will the idol worship of the god of gold be
completely abolished?
NEW YORK, August 31, 1870.