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required a new labor before the coals could have procured him the meat, and drink, and lodging of which he had an instant want; and he therefore must have received a larger portion of coals to compensate for his new labor, or otherwise his labor must have been worse paid. There would have been unprofitable labor, whose loss must have fallen somewhere either upon the capitalist or the laborer in the first instance, but upon both ultimately, because there would have been less production. All the unprofitable labor employed in bringing the exchange of the first labor for capital to maturity would have been so much power withdrawn from the efficiency of the next labor to be performed; and therefore production would have been impeded to the extent of that unprofitable labor. The same thing would have happened if, advancing a step forward in the science of exchange, the laborer had received an entire payment in meat and drink, instead of a portion of the coals, which he could have exchanged for meat and drink. Wanting lodging, he would have had to seek a person who wanted meat and drink in exchange for lodging, before he could have obtained lodging. But he had a few pence-he had money. He had a commodity to exchange that he might divide and subdivide as long as he pleased, while he was carrying on an exchange-that is, he might obtain as much lodging as he required for an equivalent portion of his money. If he kept his money, it would not injure by keeping, as the food would. He might carry it from place to place more easily than he could carry the food. He would have a commodity to exchange, whose value could not be made matter of dispute, as the value of meat and drink would unquestionably have been. This commodity would represent the same value, with little variation, whether he kept it a day, or a week, or a month, or a year: and therefore would be the only commodity whose retention would advance his design of

accumulating capital with certainty and steadiness. It is evident that a commodity possessing all these advantages must have some intrinsic qualities which all exchangers would recognize that it must be a standard of value-at once a commodity possessing real value, and a measure of all other values. This commodity exists in all commercial or exchanging nations in the shape of coined metal. The offices and functions of money, the relations which it sustains to every civilized society, its immediate agency in increasing production and facilitating distribution, are subjects concerning which many erroneous ideas are entertained, and many absurd and unfounded statements promulgated. Upon these topics the most distinguished writers on political economy and finance disagree most widely. The true position, however, we believe, has been recently taken for the first time, by an eminent American writer,* who clearly shows, that money, considered simply as a machine-an instrument-for effecting changes in ownership, ranks first among the labor-saving inventions of man, and that as the producer of motion, and the instigator of industrial effort, it sustains to society the same relation which food sustains to the body. That this is really the case, we shall attempt to show in the succeeding chapter.

CHAPTER VII.*

MACHINERY OF EXCHANGE.-EXCHANGE LIMITED IN NEW COUNTRIES.-CHANGE IN PLACE. CHANGE IN FORM.-CHANGE IN OWNERSHIP.-ESSENTIAL QUALITIES OF A CIRCULATING MEDIUM.-ADVANTAGES POSSESSED BY GOLD AND SILVER FOR USE AS MONEY.-EXCHANGE IN KIND.-MONEY AN INSTRUMENT FOR SAVING LABOR. EFFECTS OF AN ABUNDANT SUPPLY OF GOLD AND SILVER. SIBERIA, PERU, AND CALIFORNIA POOR.-ENGLAND RICH.-TRUE OFFICES OF MONEY.

EXCHANGE, like every other industrial operation, can only be carried on by the use of certain instrumental agencies, or machinery, upon the completeness of which the perfection of the result depends. These instrumentalities are of three kinds, namely, those by which we effect change of placethose by which we effect change of form, and lastly, those by which we effect change of ownership. The machinery which we employ to effect change in place, is beasts of burden, ships, bridges, roads and canals, wagons, and cars; the machinery necessary to effect changes in form, is spades and axes, plows, wheels, steam-engines, mills, furnaces, etc. The machinery required to effect change in ownership, is money.

The progress by which these various instrumentalities have been perfected has been gradual-the result mainly of experience and necessity. The laws and principles upon which they depend are common to all, and united and

* The Editor is indebted in great part for the following chapter to Henry C. Carey, Esq., of Philadelphia, whose able pamphlet on "Money," published in 1855, has been used with the permission and sanction of the author.

co-operative they constitute the structure of all commercial and industrial transactions. As no combination of machinery moves perfectly unless its several parts are well fitted to each other, and proportioned to the whole, so the great system of exchange works imperfectly, and ceases to stimulate production, distribution, and consumption, to the highest degree, unless all its instrumentalities are well adapted to the operations which they are required to facilitate and discharge. This will appear obvious, by examining the three forms of machinery employed in exchange, and their intimate connection with each other, somewhat in detail.

Exchange among rude nations, or in the early settlements of any country, must necessarily be limited on account of the obstacles which restrict intercommunication among individuals, and oppose change of place among objects. A wide and rapid river, an arm of the sea, a desert, or a wilderness, have often proved a complete barrier, cutting off all intercourse between two contiguous tribes or nations. In Russia, at this present time, and the same was true in Western Europe during the middle ages, owing to the lack of facilities for intercommunication, the bulk of all exchanges for particular sections of country are made altogether and at one place, by means of fairs held at considerable intervals of time. During the time between the occurrence of these fairs, comparatively few exchanges are effected. In the early settlement of the United States, the roads were mere Indian trails, or bridle paths, and all transport of merchandise was made in packs, borne upon the shoulders of men, or loaded upon horses. When the Rev. Mr. Hooker and his little company journeyed from Massachusetts Bay to the valley of the Connecticut to found the settlement of Hartford, several weeks were consumed in traversing a section of country, which can now be passed over in half a day. When the settlement had been established and

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the culture of the earth commenced, it is obvious that but few exchanges could have taken place between the new colony of Connecticut and the people of Boston; since the time and labor expended in transporting the articles to be exchanged, would nearly equal, or exceed their value. If the people of Hartford proposed to exchange corn for axes, or nails, with the merchant at Boston, the owner of the grain would receive but a very small proportion of the value paid by the merchant, while the latter would receive but a small proportion of the value of the grain paid by the agriculturalists: the transporter in both instances coming between the producer and consumer to absorb the largest proportion of the value of the articles exchanged. In the fourteenth, fifteenth, and sixteenth centuries, the Venetians, the Florentines, the Genoese, and the Dutch, were the common carriers of the produce and merchandise of all the nations of Western Europe, and thereby gained immense wealth. We nowhere read, however, that the other nations, whose merchandise and productions were thus transported, attained to any high degree of prosperity during this period. On the contrary, they were poor, and so continued until the producers and consumers perceived the necessity of so perfecting the machinery of exchange that the bulk of the profit should not accrue to the intermediate agents-the transporters. When progress has once commenced in this direction, the Indian trail is converted into a road, the fordway gives place to a bridge, and the frail canoe to a commodious and gallant vessel. Goods are no longer transported upon the shoulders of men, or the backs of horses, but in wagons, and these in turn, at a later day, are succeeded by rail-roads and canals. With every facility thus afforded, the cost of transportation is diminished, the producer and consumer are brought nearer to each other; and the profits of both being increased, the amount of their ex