James Madison

“ If the circulating medium be of universal value, as specie, a local increase or decrease of its quantity will not, whilst a communication subsists with other countries, produce a correspondent rise or fall in its value. The reason is obvious. When a redundancy of universal money prevails in any one country, the holders of it know their interest too well to waste it in extravagant prices, when it would be worth so much more to them else where. When a deficiency happens, those who hold commodities, rather than part with them at an undervalue in one country, would carry them to another. ”

“ Hume, in his discourse on the balance of trade, supposes "that if four-fifths of all the money in Britain were annihilated in one night, and the nation reduced to the same condition in this particular as in the reigns of the Harrys and Edwards, that the price of all labour and commodities would sink in proportion, and everything be sold as cheap as in those ages. ”

“ It has been taken for an axiom in all our reasonings on the subject of finance, that supposing the quantity and demand of things vendible in a country to remain the same, their price will vary according to the variation in the quantity of the circulating medinm; in other words, that the value of money will be regulated by its quantity. ”

“ If they had been exchangeable on demand for specie, they would have been equivalent to it; as they were not exchangeable on demand, they were inferior to it. The degree of their inferiority must consequently be estimated by the time of their becoming exchangeable for specie— that is, the time of their redemption. To make it still more palpable that the value of our currency does not depend on its quantity, let us put the case that Congress had, during the first year of the war, emitted five millions of dollars to be redeemed at the end of ten years ”

“ As the depreciation of our money has been ascribed to a wrong cause, So, it may be remarked, have effects been ascribed to the depreciation, which result from other causes. Money is the instrument by which mens' wants are supplied, and many how possess it will part with it for that purpose, who would not gratify themselves at the expense of their visible property. Many, also, may acquire it who have no visible property, By increasing the quantity of money, therefore, you both increase the means of spending, and stimulate tho desire to spend ”

“ He considers the money in every country as the representative of the whole circulating property and industry in the country, and thence concludes that every variation in its quantity must increase or lessen the portion which represents the same portion of property and labor. The error lies in supposing that, because money serves to measure the value of all things, it represents and is equal in value to all things. The circulating property in every country, according to its market rate, far exceeds tho amount of its money. ”

“ Great Britain, in which there is such an immensity of circulating paper, shews that the value of paper depends as little on its quantity as that of specie, when the paper represents specie payable on demand. ”

“ Every one must have taken notice that, in the emissions of Congress, no precise time has been stipulated for their redemption, nor any specific provision made for that purpose. A general promise entitling the bearer to so many dollars of metal as the paper bills express, has been the only basis of their credit. Every one, therefore, has been left to his own conjectures as to the time the redemption would be fulfilled ”

“ The situation of a country connected by commercial intercourse with other countries, may be compared to a single town or province whose intercourse with other towns and provinces results from political connexion. Will it be pretended that if the national currency were to be accumulated in a single town or province, so as to exceed its due proportion five or tenfold, a correspondent depreciation would ensue, and everything be sold five or ten times as dear as in a neighboring town or province? ”

“ A loan office certificate differs in nothing from a common bill of credit, except in its higher denomination, and in the interest allowed on it; and the interest is allowed merely as a compensation to the lender for exchanging a number of small bills, which, being easily transferable, are most convenient, for a single one so large as not to be transferable in ordinary transactions. ”

“ Trade is at present carried on between Britain and the rest of Europe, at a profit of 15 or 20 per cent. Were that profit raised to 400 per cent., would not their home market, in case of such a fall of prices, be so exhausted by exportation, and in case of such a rise of prices, be so overstocked with foreign commodities, as immediately to restore the general equilibrium? ”

“ Being engaged in a necessary war without specie to defray the expense, or to support paper emissions for that purpose redeemable on demand, and being, at the same time, unable to borrow, no resource was left but to emit bills of credit to be redeemed in future. ”

“ To augment it so rapidly that tho domestic market may prove inadequate, whilst tho taste for distinction, natural to wealth, inspires, at the same time, a preference for foreign luxuries. The first case can seldom happen. Were it to happen, no change in prices nor any efflux of money would ensue, unless, indeed, it should be employed or loaned abroad. ”

“ The second case can occur only where tho augmentation of money advances with a very slow and equable pace, and would be attended neither with a rise of prices, nor with a superfluity of money. The third is the only case in which the plenty of money would occasion it to overflow into other countries. The insufficiency of the homo market to satisfy the demand would be supplied from such countries as might afford the articles in demand ”