CHAPTER I. OF THE INTRINSIC VALUE OF THE PRECIOUS METALS, AND OF THEIR ADAPTATION TO THE PURPOSES OF A CIRCULATING MEDIUM.

GOLD and silver, it is well known, are produced in various parts of the globe, at the cost of labor and capital, precisely in the same manner that iron, lead, and other metals are produced; and with regard to all the mining countries, they constitute, if not the only, at least the most inviting product of industry to which a portion of the land, labor, and capital, of their inhabitants can be applied. As products, therefore, of industry, they possess an intrinsic value, like all other commodities, dependent upon the cost of producing them; that is, upon the amount of the rent paid to the owner of the land for the privilege of mining them, the amount paid for the wages of the laborers employed in digging and smelting the ore and in refining the metal, and the amount of the ordinary profits on capital invested in the enterprise. Were this not the case, it is evident that mines would not be worked, for no proprietor of land or capitalist would embark in an undertaking that would lead to certain loss, the object of mining not being to produce gold and silver, but to produce gold and silver of a value greater than that of the capital expended in its production. This much is premised, in order that the reader may have at the outset a clear view of this fundamental truth in political economy, that gold and silver being products of industry, possess a value as real and substantial as that which belongs to any other commodities; not indeed founded upon the basis of convention, as some people imagine, but upon their well known applicability to various purposes of utility and ornament for which no other materials possess equal qualities, and which renders them on that account universally sought for. They are therefore not mere representatives of wealth as many persons fancy, but real wealth itself to the full extent of their value.

What proportion of the actual value of gold and silver, as exchangeable for other commodities, is due to their applicability to objects of utility and ornament, and what proportion to their fitness for the purposes of a circulating medium, now that they are applied to that purpose, it would not be easy to determine; nor is it at all necessary to this investigation that it should be determined. It is sufficient for us to know, that almost every individual who can afford a silver spoon, or a gold watch, or a plated or gilt ornament, will have one; and that if gold and silver were to be wholly disused as money, they would retain a large share of their present value for the purpose of being converted into plate and other objects of manufacture, and in process of time, would again rise to the cost of their production, which would be an indispensable requisite to ensure a future fresh supply.

It will, perhaps, remain for a future day to develope all the reasons why gold and silver have become so universally adopted by all civilised people as the medial commodity, that is, the commodity in exchange for which any other commodity can almost always be readily had. Those with which we are already acquainted, are the following:—

1. Their uniformity of value, varying from one year to another, and from one period of years to another, less than any other known commodities, and therefore well adapted to be the commodities of contracts and obligations payable at a future day.

2. The universality of this uniformity of value, by which they serve not only as standards for comparing prices at different periods of time, but prices in different countries at the same time.

3. Their convenient portability, possessing a great value in a small bulk, and yet a bulk not too small for all practical purposes.

4. Their divisibility into pieces of any weight, and of the most exact quantities, and their convertibility by fusion back again into larger masses without loss.

5. Their malleability and toughness, which render them not liable to break.

6. Their susceptibility of receiving impressions as coins.

7. Their uniformity of physical quality, pure gold or silver being the same at all times and at all places, and thus unlike most other metals and commodities which have different degrees of excellence.

8. Their capacity of admixture with alloy which renders them as coins less destructible by wear and tear, and of their being again separated from it with very little loss.

9. Their durability, not being easily destroyed by fire, and not at all by rust.

10. Their clear sound when dropped upon a hard substance, by which they can be known from base metals, and be thus distinguished from counterfeits.

11. Their specific gravity, which differs from that of other metals of the same bulk, and thus renders the detection of counterfeits easy by a practised hand.

The beauty of the metals adds to their value for purposes of utility and ornament, but perhaps not to their value as money; and hence I have not embraced that quality in the foregoing enumeration.