This change will be universal. It is a mistake to suppose that it will be limited to the countries, such as England, in which gold is the established standard of value. It will affect equally, certainly, though perhaps somewhat more indirectly, the nations, such as France, where silver is the standard and great medium of exchange. The reason is, that by adding considerably to the general circulating medium of the globe, it brings a larger quantity to be balanced against every article which forms the subject of commerce, and consequently raises its price when measured by any part of that circulating medium. This effect may be seen every day in ordinary life. A plentiful crop of wheat, especially if it continues for several years in succession, lowers the price not only of wheat, _but of every other grain crop in the country_, and consequently raises the price of every article of commerce when measured by the amount given for it in any of these grain crops. And the same effect took place on a great scale, over the whole world, for centuries together, when the mines of Mexico and Peru were discovered, which, although chiefly productive of silver only, yet, by the large quantity of that metal which they yielded, raised prices to a very great degree universally, and that equally whether those prices were paid in gold, silver, or copper.
The effects hitherto considered are those on the value of the precious metals themselves from a considerable and continued increase in their supply in any part of the world. But in a commercial and opulent community such as Great Britain, where the greater part of its undertakings are carried on by means of money advanced by banks in their own notes or those of the Bank of England, on the security of bills or other obligations, the effect of a considerable increase in the supply of gold or silver is far more extensive. Such an increase diminishes the great weakness of a paper circulation, that of being dependent on the supply of the precious metals, and liable to be contracted when they are withdrawn. An inconvertible paper, issued in reasonable and not excessive quantities, and adequately guaranteed, would answer the purpose just as well in a particular country, and effectually secure it against the terrible disasters consequent on the alternate expansion and contraction of the currency; the former inducing the commencement of undertakings of which the latter disabled the performance. But the world is not wise enough yet to perceive how easy and effectual a remedy this simple expedient would provide against the greatest and most extensive calamities which now afflict humanity; and so great is the power of vested capital which such calamities benefit, that it is probable several generations must descend to their graves, or become insolvent, before it is generally adopted. But the extension of the metallic currency of the globe, though it cannot altogether remove, materially lessens this dreadful danger. _It inspires confidence among moneyed men._ It diminishes the terror of the withdrawal of the precious metals, which, when it once seizes them, is productive of such unbounded calamities; and thus renders the granting of accommodation on their part both more abundant and more regular. Paper becomes more plentiful, because gold, on which it is based, has flowed into the coffers of the banks in larger quantities, and thus at once augmented their own treasures, and diminished the risk of their being drained away by the necessities of other men. The effect of this change in a commercial and manufacturing community is incalculable. We can form a clear idea from woeful experience, of what it is. It is precisely the converse of Sir R. Peel's measure.