charitably hope so, that if, from any particular cause, buying and selling could not go on, trade and industry, production and distribution, must instantly come to a dead stop. Similarly, when buying and selling are very brisk, trade flourishes: when they are very slow, trade is depressed. But owing to this fatal error about money, they have fallen into the colossal mistake of supposing that in the operation of buying and selling any commodity will do, as under a system of barter, which they maintain to be the legitimate normal condition of tradem: because they have falsely identified buying and selling with the exchange of commodities. But IN FACT, it is not so. IN FACT, buying and selling are a totally different thing from the exchange of commodities. A purchase or sale

m I beg the reader to recollect that it is especially the Political Economy of classical' fame, on which our monetary system is based, which I am considering.

is only half an exchange: money is neither extreme, but a mean, or a mediator". IN FACT, there is only one thing that can buy, through which it is possible to express and effect demand for commodities: that is, the legally and customarily recognised money of the country in point. It is perfectly true, that, originally, money must have been merely a commodity, before it was money, far back in the night of the ages, before the dawn of civilisation; a point to which history does not reach back. But whenever and wherever, as in all civilised societies is and must be the case, money has become the

It is just for this very reason that people all try, instead of making or exchanging the extremes, commodities, to get hold of the mediator, money. Hence, gambling, betting, theft, 'bulling and bearing,' company floating, pawnbroking, and financial swindling generally. They all aim at the golden mean between the extremes.

• For without money, to measure values, and their fractions, there can be neither division of labour nor saving of time nor inducement to accumulate: consequently no wealth-creation worth speaking of.

customary and indispensable medium, then it stands alone, apart from and opposed to all commodities, as something essentially different from them all, sui generis, with a law to itself. It is not humble and supplicating, like commodities, but proud, insolent and domineering, because it knows its own power, and that no one can do without it, let it give itself what airs it likes. Here and there, some strange eccentric person is found who despises it, but he is a black swan : most people will grovel to money. Now it is, when money has won its way to a recognised position, that, barter being a thing of the past, plenty or scarcity of money essentially determines the prosperity or adversity of trade. For if trade is to flourish, commodities must be effectually demanded: that is, bought and to BUY, is to offer money. If there is no money, things cannot be bought; and conversely, when people have

money, they buy. It is a pure delusion to suppose, as Political Economy always does, that increase of money necessarily raises prices P. The argument is, that because money is a commodity, increase in its quantity lowers its value, and must do so. But IN FACT, it does nothing of the kind. This absurd nonsense comes from arguing from theory, and treating of the relations between money and commodities mechanically, i.e. without taking into consideration the MEN who stand behind and use them. It assumes, that the various demands of buyers, and the commodities they buy, remain exactly the same as they were, before the new increase of money. But this is just what they don't.

P It does so only in a few special cases, where supply is absolutely limited. The great mass of commodities do not come under this category. When more are demanded, more

come.

Adam Smith, who founded this error, actually says so in the locus classicus, (Wealth of Nations, p. 86, McCulloch's

Double a man's money: he does not only want what he did before. He wants more. He goes off and buys a number of things which previously he would have bought if he could, but could not, because he could not effect his demand: he had not the money. In every human being there are potentially infinite demands. They are limited actually by the money he possesses. Who has more, buys more: who has less, buys less. What

edition of 1863). When more abundant mines are discovered, a greater quantity of the precious metals is brought to market, and the quantity of the necessaries and conveniences of life for which they must be exchanged being the same as before, equal quantities of the metals must be exchanged for smaller quantities of commodities.'

This passage contains in embryo all the financial sophistries of this century. Its error lies in its false cardinal assumption, due to Smith's ignorance of the function of money, and the working of the productive labour machinery of society. His proposition is true only at the new mines, if they are far from the supply of commodities; or for those commodities of which the supply is absolutely limited.

The

The same fallacy is contained in the common phrase 'pouring more money into the channel of circulation. channel will expand when more is ‘poured in.'