Chapter 6: Why Interest was lowered one half after the Conquest of the Indies
GARCILASSO informs us, that in Spain, after the conquest of the Indies, the interest, which was at 10% fell 5%.
- This was a necessary consequence.
- A lot of specie was suddenly brought into Europe.
- Fewer persons had need of money.
- The price of all things increased, while the value of money diminished.
- The proportion was then broken, and all the old debts were discharged.
- We may recollect the time of the system when every thing was at a high price except specie.
- Those who had money after the conquest of the Indies, were obliged to lower the price or hire of their merchandize; that is, in other words, their interest.
From this time they were unable to bring interest to its ancient standard, because the quantity of specie brought to Europe has been annually increasing.
- The public funds of some states were founded on riches procured by commerce.
- These gave a very small interest.
- It became necessary for the contracts of individuals to be regulated by these.
- In short, the course of exchange rendered the conveying of specie from one country to another remarkably easy.
- Money cannot be scarce in a place where they may be so readily supplied with it, by those who have it in plenty.
Chapter 7-8: How the Price of Things is fixed in the Variation of the Sign of Riches
MONEY is the price of merchandizes or manufactures.
- But how shall we fix this price?
- By what piece of money is every thing to be represented?
If we compare the mass of gold and silver in the whole world, with the quantity of merchandizes therein contained, every commodity or merchandize in particular, may be compared to a certain portion of the entire mass of gold and silver.
- As he total of the one is to the total of the other, so part of the one will be to part of the other.
- Let us suppose that there is only one commodity in the world but is divisible like money.
- A part of this commodity will answer to a part of the mass of gold and silver.
- The half of it will answer to the half of the total of the gold and silver.
- 10%, 1%, and 0.1% of the one will answer to 10%, 1%, and 0.1% of the other.
- property is not all at once in trade amongst mankind
- money, which is the sign of property, is not all in trade at the same time.
- the price is fixed in the compound ratio of the total of things with the total of signs, and
- the price of the total of things in trade is fixed with the total of signs in trade also
- The things which are not in trade today may be in trade tomorrow.
- The signs not now in trade may enter into trade at the same time.
- The establishment of the price of things fundamentally depends on the proportion of the total of things to the total of signs.
Thus, the prince can no more ascertain the value of merchandizes, that he can establish by a decree, that the ratio of 1:10, is equal to 1:20.
THE negroes on the coast of Africa have a sign of value without money.
- It is a sign merely ideal, founded on the degree of esteem which they fix in their minds for every merchandize, in proportion to the need they have of it.
- A certain commodity is worth three macoutes.
- Another is six macoutes.
- Another is ten macoutes.
- As if they said simply 3, 6, and 10.
- The price is formed by a comparison of all merchandizes with each other.
- They have therefore no particular money; but each kind of merchandize is money to the other.
Let us for a moment transfer to ourselves this manner of valuing things, and join it with ours.
- All the goods in the world, particularly considered as separate from all others, would be worth a certain number of macoutes.
- Dividing the money of this state into as many parts as there are macoutes, one part of this division of money will be the sign of a macoute.
- If we suppose the quantity of specie in a state doubled, it will be necessary to double the specie in the macoute.
- But if, in doubling the specie, you double also the macoute, the proportion will remain the same as before the doubling of either.
- If since the discovery of the Indies, gold and silver have increased in Europe 1:20, the price of provisions and merchandizes must have been enhanced 1:20.
- But if, on the other hand, the number of merchandizes has increased as 1:2, it follows, that the price of these merchandizes and provisions, having been raised in proportion of 1:20, have fallen in proportion of 1:2.
- It follows that the proportion is only as 1:10.
The quantity of goods increases by an augmentation of commerce.
- The augmentation of commerce increases by:
- an augmentation of the specie which successively arrives, and
- new communications with fresh-discovered countries and seas, which furnish us with new commodities and new merchandizes.
Chapter 9: The relative Scarcity of Gold and Silver
BESIDES the positive plenty and scarcity of gold and silver, there is still a relative abundance and a relative scarcity of one of these metals compared to the other.
The avaricious hoard up their gold and silver.
- They do not care to spend.
- They are fond of signs that are not subject to decay.
- They prefer gold to silver, because as they are always afraid of losing, they can best conceal that which takes up the least room.
- Gold therefore disappears when there is plenty of silver, by reason that every one has some to conceal.
- It appears again when silver is scarce, because they are obliged to draw it from its confinement.
It is then a rule: that gold is common when silver is scarce, and gold is scarce when silver is common.
- This lets us see the difference between their relative and their real abundance and scarcity: of which I shall presently speak more at large.
Next Chapter 10