date

16 March 1804 + Cd Institute
16 March 1804

+ Cd

Institute Polit. Economy

Ch.2. Leading Features

'.2.I. Wealth 2 Non Agenda

5

3

{ 2. Encreasing Money

1. Labour, not money, is the real source of wealth. All hands being employed,

and employed in the most advantageous manner wealth, real wealth could admitt of

no further increase: but money would be increasable ad infinitum.

2. The effect of every encrease of money (understand of the ratio of the

quantity of money employed in the purchase of things vendible to the quantity of

things vendible sold for money) is to impose an unprofitable Income-tax upon the

incomes of fixed-incomists.

3. If, on the first introduction of the additional money into the circulation,

it passes in the first instance into hands who employ it in the way of

unproductive expenditure,(a) the suffering from this tax remains uncompensated

altogether: if, before it comes into any hands of that description, it has come

into hands by which it has been employed in the shape of capital, the suffering

by the income-tax is partly reduced and partly compensated. It is reduced, by

the mass of things vendible produced by means of it: a mass, by the amount of

which, were it not for the correspondent increase in the mass of money, the

value of the mass of money would pro tanto have been encreased, and the prices

of things vendible decreased: it is in a certain degree, though in a very

inadequate degree, compensated for by the same means: viz: by the amount of the

addition made to the quantity of serviceable wealth - of wealth possessing a

value in the way of use.(b) Here[?], as in the abovementioned case of forced

frugality, national wealth is encreased at the expence of national comfort and

national justice.

4 No sooner however does it pass on from this its primary destination (that of

adding to real capital) to the other - viz: that of adding to unproductive

expenditure, than its operation, in the way of making an addition to real

wealth, at an end. No sooner does it go in to the money employed in the purchase

of articles for consumption, than its power of producing an addition to the mass

of the matter of real wealth is at an end: thenceforward and for ever it keeps

on contributing by its whole amount to the encrease of prices, in the same

manner as if, from the mines[?] it had come in the first instance into an

unproductive hand, without passing through any productive one.}

Note

(a) As if a proprietor of a mine of gold or silver, living solely on the income

yielded to him from his mine, and spending his whole income, as income is spent

by non-labouring hands, were to receive an encrease of such his rent in the

shape of gold or silver ready coined[?], and spend the whole of it as before.

(b) Money, while /inasmuch as/ it remains in the same hands, it possesses not of

any value in the way of physical use, has no other value than what at the

instant of its passing from hand to hand, it possesses in the way of

exchange.
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    Description: 24 Aug. 1801

    Polit. Economy

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    1 Money

    2

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    {individuals, each to double his money in the same time: neither the aggregate of

    real wealth, nor any man's share in it would thereby receive any encrease. Every

    encrease of money by paper money, produces a correspondent depretiation in the

    value of the pre-existing mass of money, and operates thereby as an indirect tax

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  • Title: [8 March 1804 Wealth I. 2 a]
    Description: 8 March 1804

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    to be employed as Capital.

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  • Title: [[Recapitulation] 11 Oct 1801]
    Description: [Recapitulation]

    11 Oct 1801

    Alarm

    Ballance Recapitulation

    Upon the whole, the truth of the following propositions, some old, some new, will, I am inclined to think be found pretty well established.

    1

    That the value of the mass of the pretious metals in the way of use of a /the/ mass of pretious metals possessed by a nation does encrease with the quantity.

    2

    That the value of it in the way of exchange as between individual and individual in /within/ the nation does not encrease with the quantity.

    3

    That the value in the way of exchange of the mass of the pretious

    4

    That in acquiring a fresh value in the way of exchange by being converted into money (into a form given it for the purpose of adapting it in a special manner to the business of exchange) a mass of the pretious metals loses for so long as it continues in the shape of money all value in the way of use.

    5

    That a nation /government/ which endeavours to perpetuate the existence of a mass of money in the shape of coin and to perpetuate its continuance within the country in that shape in proportion as it succeeds in such its endeavours, destroys utterly the value of so much of the pretious metals.

    6

    That in the case of an individual, true it is, that even in the shape of money, the value of the mass he possesses of the pretious metals does encrease with /in exact proportion with/ the quantity of an undiminished ratio with the quantity, because as the quantity of his particular share in the mass encreases, so does its proportion to the whole of the general or aggregate mass of money, the value of which or of so much as is employd in a given time in buying and selling things, is always exactly equal to the aggregate value of the things bought and sold within that time.

    7

    But that this equality as between encrease of quantity and encrease of value in exchange, depends upon the non-encrease in value on the part of the masses respectively possessed by other individuals members of the same community: for if the quantity of each man’s mass encreases in the same proportion in the same time, neither his mass nor theirs will experience any encrease in value

    8

    That the inference that because the share of the individual - each individual - encreases in value as it encreases in magnitude so must that of the nation is a natural but not a just one but a compleatly erroneous one because in the case of an individual, as his particular share encreases in magnitude, so it does in its proportion to the whole. This is not the case with the aggregate mass belonging to the whole nation (composed of the several particular masses belonging to the several individuals) because its proportion is at all times the whole, and can never be either less or greater.

    9

    Be the quantity of the whole mass of money employ’d in buying and selling things ever so small the value of it will always be equal to the value of all the things equal to the buying of all the things and be the quantity of it ever so large, it can never buy more than all.

    10

    The overplus could buy other things from other nations, if it could be reserved and exclusively appropriated to that use: but that can never be: as it spreads in the nation it spreads among the vendible things offered to sale within this nation, and employs itself in encreasing the powers of the national stock of things that are within reach: there is little or none of the overplus left for the purchase of foreign things. It is the care of governments by their taxes and prohibitions that it shall not be so employd.

    11

    That it is by the encrease in the mass of real capital, and not by an encrease in the mass of money that an encrease is produced in the mass of real serviceable wealth and that by the encrease of the mass of money taken together the mass of real capital does not receive any encrease.

    12

    That as far as money is encreased the encrease of real wealth depends upon the encrease of the proportion of the money employd in the shape of capital: but that the encrease of this proportion

    depends

    depends not upon the absolute quantity of money so employd but upon the proportion between the quantity of money employd in that shape, and the quantity employd in other shapes.

    13

    That a decrease in the quantity /national stock/ of money would if it were rapid enough to deprive in any sensible degree persons under pecuniary engagements for terms of years of the faculty /means/ of fulfilling those engagements, would in that respect be productive of inconvenience and a source of loss not compensated for by any attendant gain.

    14

    But that no such sudden decrease can obtain in the course of trade.

    15

    That if the quantity of money in a country were so fixed as to be prevented from encreases while the quantity of things vendible not being prevented from encrease would encrease of course, a decrease to a proportionable amount would take place in respect of the faculty of fulfilling pecuniary engagements for terms of years, but that no such decrease arising from such cause could be rapid enough to produce any sensible degree of inconvenience.