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"The dearness of everything," says Hume, "from plenty of money, is a disadvantage, which attends an Pg 223established commerce, and sets bounds to it in every country, by enabling the poorer states to undersell the richer in all foreign markets."119 "Where coin is in greater plenty; as a greater quantity of it is required to represent the same quantity of goods; it can have no effect, either good or bad, taking a nation within itself; any more than it would make an alteration on a merchant's books, if, instead of the Arabian method of notation, which requires few characters, he should make use of the Roman, which requires a great many. Nay, the greater quantity of money, like the Roman characters, is rather inconvenient, and requires greater trouble both to keep and transport it."120 In order to prove anything, Hume should have shown that under a given system of notation the quantity of characters used does not depend on the magnitude of the numbers, but that on the contrary, the magnitude of the numbers depends on the quantity of the characters used. It is perfectly true that there is no advantage in estimating or "counting" values of commodities in depreciated gold and silver, and that is the reason why nations have always found it more convenient with the growth of the value of the commodities in circulation to count in silver in preference to copper, and in gold rather than in silver. In proportion as the nations became richer, they converted the less valuable metals into subsidiary coin and the more valuable ones into money. Furthermore, Hume forgets that in order to count values in gold and silver, Pg 224it is not necessary that either gold or silver should be "on hand." Money of account and the medium of circulation are identical with him and both are "coin." Hume concludes that a rise or fall of prices depends on the quantity of money in circulation, because a change in the value of the measure of value, i. e. of the precious metals which serve as money of account, causes a rise or fall of prices and, consequently, also a change in the amount of money in circulation, the rapidity of the latter remaining the same. That not only the quantity of gold and silver increased in the sixteenth and seventeenth centuries, but that the cost of their production had declined at the same time, Hume could know from the closing up of the European mines. In the sixteenth and seventeenth centuries the prices of commodities increased in Europe with the influx of the mass of American gold and silver; hence the prices of commodities in every land are determined by the mass of gold and silver to be found there. This was Hume's first "necessary consequence."121 In the sixteenth and seventeenth centuries prices had not risen uniformly with the increase of the quantity of precious metals; more than half a century passed before any change in prices became perceptible, and even then it took a long time before the exchange values of commodities came to be generally estimated according to the depreciated value of gold and silver, i. e. before the revolution affected the general price level. Hence, concludes Hume, who, quite contrary to the principles of his philosophy, genPg 225eralizes indiscriminately from imperfectly observed facts, prices of commodities or the value of money depend not on the total amount of money to be found in the country, but rather on the quantity of gold and silver which is actually in circulation; but in the long run all the gold and silver in the country must be absorbed by circulation in the form of coin.122 It is clear that if gold and silver have a value of their own, then, apart from all other laws of circulation, only a definite quantity of gold and silver can circulate as the equivalent of commodities of a given value. If, therefore, every quantity of gold and silver which happens to be in a country must enter the sphere of exchange of commodities as a medium of circulation without regard to the total value of the commodities, then gold and silver have no intrinsic value and are in fact no real commodities. That is Hume's third "necessary consequence." He makes commodities enter the process of circulation without price and gold and silver without value. That is the reason why he never speaks of the Pg 226value of commodities and of gold, but only of their relative quantities. Locke had already said that gold and silver had merely an imaginary or conventional value; the first brutal expression of opposition to the assertion of the monetary "system" that gold and silver alone have true value. That gold and silver owe their character of money to the function they perform in the social process of exchange is interpreted to the effect that they owe their own value and therefore the magnitude of their value to a social function.123 Gold and silver are thus worthless things, which, however, acquire a fictitious value within the sphere of circulation as representatives of commodities. They are converted by the process of circulation not into money, but into value. This value of theirs is determined by the proportion between their own volume and that of the commodities, since the two must balance each other. Thus, Hume makes gold and silver enter the world of commodities as non-commodities; but as soon as they appear in the form of coin, he turns them, on the contrary, into mere commodities, which must be exchanged for other commodities by simple barter. In that manner, if the world of commodities consisted of but one commodity, say one million quarters of grain, the idea would work itself out very simply; viz., one quarter of grain would be exchanged for two ounces of gold if there were altogether two million ounces of gold, and for twenty Pg 227ounces of gold, if there were a total of twenty million ounces, the price of the commodity and the value of money rising or falling in inverse ratio to the quantity of gold in existence.124 But the world of commodities consists of an endless variety of use-values, whose relative values are by no means determined by their relative quantities. How, then, does Hume conceive this exchange of the volume of commodities for the volume of gold? He contents himself with the meaningless, hollow idea that every commodity is exchanged as an aliquot part of the entire volume of commodities for a corresponding aliquot part of the volume of gold. The process of the movement of commodities due to the antagonism between exchange value and use-value which commodities bear within themselves, and which manifests itself in the circulation of money, becoming crystallized in different forms of the latter, is thus done away with, giving place to the imaginary mechanical equalization process between the quantity of precious metals to be found in a country and the volume of commodities existing there at the same time.

SIR JAMES STEUART opens his inquiry into the nature of coin and money with an elaborate criticism of Hume and Montesquieu.125 He is really the first to ask this question: is the quantity of current money deterPg 228mined by the prices of commodities, or are the prices of commodities determined by the quantity of current money? Although his analysis is obscured by his fantastic conception of the measure of value, his vacillating view of exchange value and by reminiscences of the mercantile system, he discovers the essential forms of money and the general laws of the circulation of money, because he makes no attempt at a mechanical separation of commodities from money, but proceeds to develop its different functions from the different aspects of the exchange of commodities. Money is used, he says, for two principal purposes: for the payment of debts and for the purchase of what one needs; the two together form "ready money demands." The state of trade and industry, the mode of living, the customary expenditures of the people, taken all together regulate and determine the volume of "ready money demands," i. e. the number of "alienations." In order to effect this multitude of payments, a certain proportion of money is required. This proportion may increase or decrease according to circumstances, even while the number of alienations remains the same. At any rate, the circulation of a country can absorb only a definite quantity of money.126 "It is the complicated operations of demand and competition which determines the standard price of everything"; the latter "does not in the least depend on the quantity of gold and silver Pg 229in the country."127 What then will become of the gold and silver that is not required as coin? They are hoarded or used in the manufacture of articles of luxury. If the quantity of gold and silver fall below the level required for circulation, symbolic money or other substitutes take its place. If a favorable rate of exchange brings about a surplus of money in the country and cuts off at the same time the demand for its shipment abroad, it will accumulate in strong-boxes, where the "riches will remain without producing more effect than if they had remained in the mine."