Book XXII. Of Laws in Relation to the Use of Money
1. The Reason of the Use of Money. People who
have little merchandise, as savages, and among civilised nations those who
have only two or three species, trade by exchange. Thus the caravans of
Moors that go to Timbuctoo, in the heart of Africa, have no need of money,
for they exchange their salt for gold. The Moor puts his salt in a heap,
and the Negro his dust in another; if there is not gold enough, the Moor
takes away some of his salt, or the Negro adds more gold, till both
parties are agreed.
But when a nation traffics with a great variety of merchandise, money
becomes necessary; because a metal easily carried from place to place
saves the great expenses which people would be obliged to be at if they
always proceeded by exchange.
As all nations have reciprocal wants, it frequently happens that one is
desirous of a large quantity of the other's merchandise, when the latter
will have very little of theirs, though with respect to another nation the
case is directly opposite. But when nations have money, and proceed by
buying and selling, those who take most merchandise pay the balance in
specie. And there is this difference, that, in the case of buying, the
trade carried on is in proportion to the wants of the nation that has the
greatest demands; while in bartering, the trade is only according to the
wants of the nation whose demands are the fewest; without which the latter
would be under an impossibility of balancing its accounts.
2. Of the Nature of Money. Money is a sign
which represents the value of all merchandise. Metal is taken for this
sign, as being durable,1 because it
is consumed but little by use; and because, without being destroyed, it is
capable of many divisions. A precious metal has been chosen as a sign, as
being most portable. A metal is most proper for a common measure, because
it can be easily reduced to the same standard. Every state fixes upon it a
particular impression, to the end that the form may correspond with the
standard and the weight, and that both may be known by inspection only.
The Athenians, not having the use of metals, made use of oxen,2
and the Romans of sheep; but one ox is not the same as another ox in the
manner that one piece of metal may be the same as another.
A specie is the sign of the value of merchandise, paper is the sign of
the value of specie; and when it is of the right sort, it represents this
value in such a manner that as to the effects produced by it there is not
the least difference.
In the same manner, as money is the sign and representative of a thing,
everything is a sign and representative of money; and the state is in a
prosperous condition when on the one hand money perfectly represents all
things, and on the other all things perfectly represent money, and are
reciprocally the sign of each other; that is, when they have such a
relative value that we may have the one as soon as we have the other. This
never happens in any other than a moderate government, nor does it always
happen there; for example, if the laws favour the dishonest debtor, his
effects are no longer a representative or sign of money. With regard to a
despotic government, it would be a prodigy did things there represent
their sign. Tyranny and distrust make every one bury their specie;3
things therefore are not there the representative of money.
Legislators have sometimes had the art not only to make things in their
own nature the representative of specie, but to convert them even into
specie, like the current coin. Cæsar, when he was dictator,
permitted debtors to give their lands in payment to their creditors, at
the price they were worth before the civil war.4
Tiberius ordered that those who desired specie should have it from the
public treasury on binding over their land to double the value5
Under Cæsar the lands were the money which paid all debts; under
Tiberius ten thousand sesterces in land became as current money equal to
five thousand sesterces in silver. The Magna Charta of England provides
against the seizing of the lands or revenues of a debtor, when his movable
or personal goods are sufficient to pay, and he is willing to give them up
to his creditors; thus all the goods of an Englishman represent money.
The laws of the Germans constituted money a satisfaction for the
injuries that were committed, and for the sufferings due to guilt. But as
there was but very little specie in the country, they again constituted
this money to be paid in goods or chattels. This we find appointed in a
Saxon law, with certain regulations suitable to the ease and convenience
of the several ranks of people. At first the law declared the value of a
sou in cattle;6 the sou of two
tremises answered to an ox of twelve months, or to a ewe with her lamb;
that of three tremises was worth an ox of sixteen months. With these
people money became cattle, goods, and merchandise, and these again became
Money is not only a sign of things; it is also a sign and representative
of money, as we shall see in the chapter on exchange.
3. Of ideal Money. There is both real and
ideal money. Civilised nations generally make use of ideal money only,
because they have converted their real money into ideal. At first their
real money was some metal of a certain weight and standard, but soon
dishonesty or want made them retrench a part of the metal from every piece
of money, to which they left the same name; for example, from a livre at a
pound weight they took half the silver, and still continued to call it a
livre; the piece which was the twentieth part of a pound of silver they
continued to call a sou, though it is no more the twentieth part of this
pound of silver. By this method the livre is an ideal livre, and the sou
an ideal sou. Thus of the other subdivisions; and so far may this be
carried that what we call a livre shall be only a small part of the
original livre or pound, which renders it still more ideal. It may even
happen that we have no piece of money of the precise value of a livre, nor
any piece exactly with a sou, then the livre and the sou will be purely
ideal. They may give to any piece of money the denomination of as many
livres and as many sous as they please, the variation may be continual,
because it is as easy to give another name to a thing as it is difficult
to change the thing itself.
To take away the source of this abuse, it would be an excellent law for
all countries who are desirous of making commerce flourish to ordain that
none but real money should be current, and to prevent any methods from
being taken to render it ideal.
Nothing ought to be so exempt from variation as that which is the common
measure of all. Trade is in its own nature extremely uncertain; and it is
a great evil to add a new uncertainty to that which is founded on the
nature of the thing.
4. Of the Quantity of Gold and Silver. While
civilised nations are the mistresses of the world, gold and silver,
whether they draw it from among themselves, or fetch it from the mines,
must increase every day. On the contrary, it diminishes when barbarous
nations prevail. We know how great was the scarcity of these metals when
the Goths and Vandals on the one side, and on the other the Saracens and
Tartars, broke in like a torrent on the civilised world.
5. The same Subject continued. The bullion
drawn from the American mines, imported into Europe, and thence sent to
the East, has greatly promoted the navigation of the European nations; for
it is merchandise which Europe receives in exchange from America, and
which she sends in exchange to the Indies. A prodigious quantity of gold
and silver is therefore an advantage, when we consider these metals as
merchandise; but it is otherwise when we consider them as a sign, because
their abundance gives an alloy to their quality as a sign, which is
chiefly founded on their scarcity.
Before the first Punic war,7
copper was to silver as 960 to 1;8
it is at present nearly as 731/2 to 1. When the proportion shall be as it
was formerly, silver will better perform its office as a sign.
6. The Reason why Interest was lowered one-half
after the Conquest of the Indies. Garcilasso informs us9
that in Spain after the conquest of the Indies the interest, which was at
ten per cent, fell to five. This was a necessary consequence. A great
quantity of specie being all of a sudden brought into Europe, much fewer
persons had need of money. The price of all things increased, while the
value of money diminished; the proportion was then broken, and all the old
debts were discharged. We may recollect the time of the System,10
when everything was at a high price except specie. Those who had money
after the conquest of the Indies were obliged to lower the price or hire
of their merchandise, that is, in other words, their interest.
From this time they were unable to bring interest to its ancient
standard, because the quantity of specie brought to Europe has been
annually increasing. Besides, as the public funds of some states, founded
on riches procured by commerce, gave but a very small interest, it became
necessary for the contracts of individuals to be regulated by these. In
short, the course of exchange having rendered the conveying of specie from
one country to another remarkably easy, money cannot be scarce in a place
where they may be so readily supplied with it by those who have it in
7. How the Price of Things is fixed in the
Variation of the Sign of Riches. Money is the price of merchandise or
manufactures. But how shall we fix this price? or, in other words, by what
piece of money is everything to be represented?
If we compare the mass of gold and silver in the whole world with the
quantity of merchandise therein contained, it is certain that every
commodity or merchandise in particular may be compared to a certain
portion of the entire mass of gold and silver. As the total of the one is
to the total of the other, so part of the one will be to part of the
other. Let us suppose that there is only one commodity or merchandise in
the world, or only one to be purchased, and that this is divisible like
money; a part of this merchandise will answer to a part of the mass of
gold and silver; the half of the total of the one to the half of the total
of the other; the tenth, the hundredth, the thousandth part of the one, to
the tenth, the hundredth, the thousandth part of the other. But as that
which constitutes property among mankind is not all at once in trade, and
as the metals or money which are the sign of property are not all in trade
at the same time, the price is fixed in the compound ratio of the total
of things with the total of signs, and that of the total of things in
trade with the total of signs in trade also; and as the things which are
not in trade to-day may be in trade to-morrow, and the signs not now in
trade may enter into trade at the same time, the establishment of the
price of things fundamentally depends on the proportion of the total of
things to the total of signs.
Thus the prince or the magistrate can no more ascertain the value of
merchandise than he can establish by a decree that the relation 1 has to
10 is equal to that of 1 to 20. Julian's lowering the price of provisions
at Antioch was the cause of a most terrible famine.11
8. The same Subject continued. The Negroes on
the coast of Africa have a sign of value without money. It is a sign
merely ideal, founded on the degree of esteem which they fix in their
minds for all merchandise, in proportion to the need they have of it. A
certain commodity or merchandise is worth three ma-coutes; another, six
macoutes; another, ten macoutes; that is, as if they said simply three,
six, and ten. The price is formed by a comparison of all merchandise with
each other. They have therefore no particular money; but each kind of
merchandise is money to the other.
Let us for a moment transfer to ourselves this manner of valuing things,
and join it with ours: all the merchandise and goods in the world, or else
all the merchandise or manufactures of a state, particularly considered as
separate from all others, would be worth a certain number of macoutes;
and, dividing the money of this state into as many parts as there are
macoutes, one part of this division of money will be the sign of a
If we suppose the quantity of specie in a state doubled, it will be
necessary to double the specie in the macoute; but if in doubling the
specie you double also the macoute, the proportion will remain the same as
before the doubling of either.
If, since the discovery of the Indies, gold and silver have increased in
Europe in the proportion of 1 to 20, the price of provisions and
merchandise must have been enhanced in the proportion of 1 to 20. But if,
on the other hand, the quantity of merchandise has increased as 1 to 2 —
it necessarily follows that the price of this merchandise and provisions,
having been raised in proportion of 1 to 20, and fallen in proportion of 1
to 2 — it necessarily follows, I say, that the proportion is only as
1 to 10.
The quantity of goods and merchandise increases by an augmentation of
commerce, the augmentation of commerce by an augmentation of the specie
which successively arrives, and by new communications with
freshly-discovered countries and seas, which furnish us with new
commodities and new merchandise.
9. Of the relative Scarcity of Gold and Silver.
Besides the positive plenty and scarcity of gold and silver, there is
still a relative abundance and a relative scarcity of one of these metals
compared with the other.
The avaricious hoard up their gold and silver, for as they do not care
to spend, they are fond of signs that are not subject to decay. They
prefer gold to silver, because as they are always afraid of losing, they
can best conceal that which takes up the least room. Gold therefore
disappears when there is plenty of silver, by reason that every one has
some to conceal; it appears again when silver is scarce, because they are
obliged to draw it from its confinement.
It is then a rule that gold is common when silver is scarce, and gold is
scarce when silver is common. This lets us see the difference between
their relative and their real abundance and scarcity, of which I shall
presently speak more at large.
10. Of Exchange. The relative abundance and
scarcity of specie in different countries forms what is called the course
Exchange is a fixing of the actual and momentary value of money.
Silver as a metal has value like all other merchandise, and an
additional value as it is capable of becoming the sign of other
merchandise. If it were no more than mere merchandise, it would lose much
of its value.
Silver, as money, has a value, which the prince in some respects can
fix, and in others cannot.
1. The prince establishes a proportion between a quantity of silver as
metal, and the same quantity as money, 2. He fixes the proportion between
the several metals made use of as money. 3. He establishes the weight and
standard of every piece of money. In fine, 4, he gives to every piece that
ideal value of which I have spoken. I shall call the value of money in
these four respects its positive value, because it may be fixed by law.
The coin of every state has, besides this, a relative value, as it is
compared with the money of other countries. This relative value is
established by the exchange, and greatly depends on its positive value. It
is fixed by the general opinion of the merchants, never by the decrees of
the prince; because it is subject to incessant variations, and depends on
a thousand accidents.
The several nations, in fixing this relative value, are chiefly guided
by that which has the greatest quantity of specie. If she has as much
specie as all the others together, it is then most proper for the others
to regulate theirs by her standard: and the regulation between all the
others will pretty nearly agree with the regulation made with this
In the actual state of the globe, Holland is the nation we are speaking
of. Let us examine the course of exchange with relation to her.
They have in Holland a piece of money called a florin, worth twenty
sous, or forty half-sous or gros. But, to render our ideas as simple as
possible, let us imagine that they have not any such piece of money in
Holland as a florin, and that they have no other but the gros: a man who
should have a thousand florins should have forty thousand gros; and so of
the rest. Now the exchange with Holland is determined by our knowing how
many gros every piece of money in other countries is worth; and as the
French commonly reckon by a crown of three livres, the exchange makes it
necessary for them to know how many gros are contained in a crown of three
livres. If the course of exchange is at fifty-four, a crown of three
livres will be worth fifty-four gros; if it is at sixty, it will be worth
sixty gros. If silver is scarce in France, a crown of three livres will be
worth more gros; if plentiful, it will be worth less.
This scarcity or plenty, whence results the mutability of the course of
exchange, is not the real, but a relative, scarcity or plenty. For
example, when France has greater occasion for funds in Holland than the
Dutch of having funds in France, specie is said to be common in France and
scarce in Holland: and vice versa.
Let us suppose that the course of exchange with Holland is at
fifty-four. If France and Holland composed only one city, they would act
as we do when we give change for a crown: the Frenchman would take three
livres out of his pocket, and the Dutchman fifty-four gros from his. But
as there is some distance between Paris and Amsterdam, it is necessary
that he who for a crown of three livres gives me fifty-four gros, which he
has in Holland, should give me a bill of exchange for fifty-four gros
payable in Holland. The fifty-four gros is not the thing in question, but
a bill for that sum. Thus, in order to judge of the scarcity or plenty of
specie,12 we must know if there are
in France more bills of fifty-four gros drawn upon Holland than there are
crowns drawn upon France. If there are more bills from Holland than there
are from France, specie is scarce in France, and common in Holland; it
then becomes necessary that the exchange should rise, and that they give
for my crown more than fifty-four gros; otherwise I will not part with it;
and vice versa.
Thus the various turns in the course of exchange form an account of
debtor and creditor, which must be frequently settled, and which the state
in debt can no more discharge by exchange than an individual can pay a
debt by giving change for a piece of silver.
We will suppose that there are but three states in the world, France,
Spain, and Holland; that several individuals in Spain are indebted to
France, to the value of one hundred thousand marks of silver; and that
several individuals of France owe in Spain one hundred and ten thousand
marks: now, if some circumstance both in Spain and France should cause
each to withdraw his specie, what will then be the course of exchange?
These two nations will reciprocally acquit each other of a hundred
thousand marks; but France will still owe ten thousand marks in Spain, and
the Spaniards will still have bills upon France, to the value of ten
thousand marks; while France will have none at all upon Spain.
But if Holland was in a contrary situation with respect to France, and
in order to balance the account must pay her ten thousand marks, the
French would have two ways of paying the Spaniards: either by giving their
creditors in Spain bills for ten thousand marks upon their debtors in
Holland, or else by sending specie to the value of ten thousand marks to
Hence it follows that when a state has occasion to remit a sum of money
to another country, it is indifferent, in the nature of the thing, whether
specie be conveyed thither or they take bills of exchange. The advantage
or disadvantage of these two methods solely depends on actual
circumstances. We must inquire which will yield most gros in Holland-money
carried thither in specie, or a bill upon Holland for the like sum.13
When money of the same standard and weight in France yields money of the
same standard and weight in Holland, we say that the exchange is at par.
In the actual state of specie14 the
par is nearly at fifty-four gros to the crown. When the exchange is above
fifty-four gros, we say it is high; when beneath, we say it is low.
In order to know the loss and gain of a state in a particular situation
of exchange, it must be considered as debtor and creditor, as buyer and
seller. When the exchange is below par, it loses as a debtor, and gains as
a creditor; it loses as a buyer and gains as a seller. It is obvious it
loses as debtor; suppose, for example, France owes Holland a certain
number of gros, the fewer gros there are in a crown the more crowns she
has to pay. On the contrary, if France is creditor for a certain number of
gros, the less number of gros there are in a crown the more crowns she
will receive. The state loses also as buyer, for there must be the same
number of gros to purchase the same quantity of merchandise; and while the
exchange is low, every French crown is worth fewer gros. For the same
reason the state gains as a seller. I sell my merchandise in Holland for a
certain number of gros; I receive then more crowns in France, when for
every fifty gros I receive a crown, than I should do if I received only
the same crown for every fifty-four. The contrary to this takes place in
the other state. If the Dutch are indebted a certain number of crowns to
France, they will gain; if this money is owing to them, they will lose; if
they sell, they lose; and if they buy, they gain.
It is proper to pursue this somewhat further. When the exchange is below
par; for example, if it be at fifty instead of fifty-four, it should
follow that France, on sending bills of exchange to Holland for fifty-four
thousand crowns, could buy merchandise only to the value of fifty
thousand; and that on the other hand, the Dutch sending the value of fifty
thousands crowns to France might buy fifty-four thousand, which makes a
difference of 8/54, that is, a loss to France of more than one-seventh; so
that France would be obliged to send to Holland one-seventh more in specie
or merchandise than she would do were the exchange at par. And as the
mischief must constantly increase, because a debt of this kind would bring
the exchange still lower, France would in the end be ruined. It seems, I
say, as if this should certainly follow; and yet it does not, because of
the principle which I have elsewhere established;15
which is that states constantly lean towards a balance, in order to
preserve their independency. Thus they borrow only in proportion to their
ability to pay, and measure their buying by what they sell; and taking the
example from above, if the exchange falls in France from fifty-four to
fifty, the Dutch who buy merchandise in France to the value of a thousand
crowns, for which they used to pay fifty-four thousand gros, would now pay
only fifty thousand, if the French would consent to it. But the
merchandise of France will rise insensibly, and the profit will be shared
between the French and the Dutch; for when a merchant can gain, he easily
shares his profit; there arises then a communication of profit between the
French and the Dutch. In the same manner the French, who bought
merchandise of Holland for fifty-four thousand gros, and who, when the
exchange was at fifty-four, paid for them a thousand crowns, will be
obliged to add one-seventh more in French crowns to buy the same
merchandise. But the French merchant, being sensible of the loss he
suffers, will take up less of the merchandise of Holland. The French and
the Dutch merchant will then both be losers, the state will insensibly
fall into a balance, and the lowering of the exchange will not be attended
with all those inconveniences which we had reason to fear.
A merchant may send his stock into a foreign country when the exchange
is below par without injuring his fortune, because, when it returns, he
recovers what he had lost; but a prince who sends only specie into a
foreign country which never can return, is always a loser.
When the merchants have great dealings in any country, the exchange
there infallibly rises. This proceeds from their entering into many
engagements, buying great quantities of merchandise, and drawing upon
foreign countries to pay for them.
A prince may amass great wealth in his dominions, and yet specie may be
really scarce, and relatively common; for instance, if the state is
indebted for much merchandise to a foreign country, the exchange will be
low, though specie be scarce.
The exchange of all places constantly tends to a certain proportion, and
that in the very nature of things. If the course of exchange from Ireland
to England is below par, and that of England to Holland is also under par,
that of Ireland to Holland will be still lower; that is, in the compound
ratio of that of Ireland to England, and that of England to Holland; for a
Dutch merchant who can have his specie indirectly from Ireland, by way of
England, will not choose to pay dearer by having it in the direct way.
This, I say, ought naturally to be the case; but, however, it is not
exactly so. There are always circumstances which vary these things; and
the different profit of drawing by one place, or of drawing by another,
constitutes the particular art and dexterity of the bankers, which does
not belong to the present subject.
When a state raises its specie, for instance, when it gives the name of
six livres, or two crowns, to what was before called three livres, or one
crown, this new denomination, which adds nothing real to the crown, ought
not to procure a single gros more by the exchange. We ought only to have
for the two new crowns the same number of gros which we before received
for the old one. If this does not happen, it must not be imputed as an
effect of the regulation itself, but to the novelty and suddenness of the
affair. The exchange adheres to what is already established, and is not
altered till after a certain time.
When a state, instead of only raising the specie by a law, calls it in,
in order to diminish its size, it frequently happens that during the time
taken up in passing again through the mint there are two kinds of money —
the large, which is the old, and the small, which is the new; and as the
large is cried down as not to be received as money, and bills of exchange
must consequently be paid in the new, one would imagine then that the
exchange should be regulated by the new. If, for example, in France, the
ancient crown of three livres, being worth in Holland sixty gros, was
reduced one-half, the new crown ought to be valued only at thirty. On the
other hand, it seems as if the exchange ought to be regulated by the old
coin; because the banker who has specie, and receives bills, is obliged to
carry the old coin to the mint in order to change it for the new, by which
he must be a loser. The exchange then ought to be fixed between the value
of the old coin and that of the new. The value of the old is decreased, if
we may call it so, both because there is already some of the new in trade,
and because the bankers cannot keep up to the rigour of the law, having an
interest in letting loose the old coin from their chests, and being
sometimes obliged to make payments with it. Again, the value of the new
specie must rise, because the banker having this finds himself in a
situation in which, as we shall immediately prove, he will reap great
advantage by procuring the old. The exchange should then be fixed, as I
have already said, between the new and the old coin. For then the bankers
find it to their interest to send the old out of the kingdom, because by
this method they procure the same advantage as they could receive from a
regular exchange of the old specie, that is, a great many gros in Holland;
and in return, a regular exchange a little lower, between the old and the
new specie, which would bring many crowns to France.
Suppose that three livres of the old coin yield by the actual exchange
forty-five gros, and that by sending this same crown to Holland they
receive sixty, but with a bill of forty-five gros, they procure a crown of
three livres in France, which being sent in the old specie to Holland,
still yields sixty gros; thus all the old specie would be sent out of the
kingdom, and the bankers would run away with the whole profit.
To remedy this, new measures must be taken. The state which coined the
new specie would itself be obliged to send great quantities of the old to
the nation which regulates the exchange, and, by thus gaining credit
there, raise the exchange pretty nearly to as many gros for a crown of
three livres out of the country. I say to nearly the same, for while the
profits are small the bankers will not be tempted to send it abroad,
because of the expense of carriage and the danger of confiscation.
It is fit that we should give a very clear idea of this. Mr. Bernard, or
any other banker employed by the state, proposes bills upon Holland, and
gives them at one, two, or three gros higher than the actual exchange; he
has made a provision in a foreign country, by means of the old specie,
which he has continually been sending thither; and thus he has raised the
exchange to the point we have just mentioned. In the meantime, by
disposing of his bills, he seizes on all the new specie, and obliges the
other bankers, who have payments to make, to carry their old specie to the
mint; and, as he insensibly obtains all the specie, he obliges the other
bankers to give him bills of exchange at a very high price. By this means
his profit in the end compensates in a great measure for the loss he
suffered at the beginning.
It is evident that during these transactions, the state must be in a
dangerous crisis. Specie must become extremely scarce — 1, because
much the greatest part is cried down; 2, because a part will be sent into
foreign countries; 3, because every one will lay it up, as not being
willing to give that profit to the prince which he hopes to receive
himself. It is dangerous to do it slowly; and dangerous also to do it in
too much haste. If the supposed gain be immoderate, the inconveniences
increase in proportion.
We see, from what has been already said, that when the exchange is lower
than the specie, a profit may be made by sending it abroad; for the same
reason, when it is higher than the specie, there is profit in causing it
But there is a case in which profit may be made by sending the specie
out of the kingdom, when the exchange is at par; that is, by sending it
into a foreign country to be coined over again. When it returns, an
advantage may be made of it, whether it be circulated in the country or
paid for foreign bills.
If a company has been erected in a state with an immense number of
shares, and these shares have in a few months risen twenty or twenty-five
times above the original purchase value; if, again, the same state
established a bank, whose bills were to perform the office of money, while
the legal value of these bills was prodigious, in order to answer to the
legal value of the shares (this is Mr. Law's System), it would follow,
from the nature of things, that these shares and these bills would vanish
in the same manner as they arose. Stocks cannot suddenly be raised twenty
or twenty-five times above their original value without giving a number of
people the means of procuring immense riches in paper: every one would
endeavour to make his fortune; and as the exchange offers the most easy
way of removing it from home, or conveying it whither one pleases, people
would incessantly remit a part of their effects to the nation that
regulates the exchange. A continual process of remittances into a foreign
country must lower the exchange. Let us suppose that at the time of the
System, in proportion to the standard and weight of the silver coin, the
exchange was fixed at forty gros to the crown; when a vast quantity of
paper became money, they were unwilling to give more than thirty-nine gros
for a crown, and afterwards thirty-eight, thirty-seven, &c. This
proceeded so far, that after a while they would give but eight gros, and
at last there was no exchange at all.
The exchange ought in this case to have regulated the proportion between
the specie and the paper of France. I suppose that, by the weight and
standard of the silver, the crown of three livres in silver was worth
forty gros, and that the exchange being made in paper, the crown of three
livres in paper was worth only eight gros, the difference was four-fifths.
The crown of three livres in paper was then worth four-fifths less than
the crown of three livres in silver.
11. Of the Proceedings of the Romans with respect
to Money. How great soever the exertion of authority had been in our
times, with respect to the specie of France, during the administration of
two successive ministers, still it was vastly exceeded by the Romans; not
at the time when corruption had crept into their republic, nor when they
were in a state of anarchy, but when they were as much by their wisdom as
their courage in the full vigour of the constitution, after having
conquered the cities of Italy, and at the very time that they disputed for
empire with the Carthaginians.
And here I am pleased that I have an opportunity of examining more
closely into this matter, that no example may be taken from what can never
justly be called one.
In the first Punic war the as,16
which ought to be twelve ounces of copper, weighed only two, and in the
second it was no more than one. This retrenchment answers to what we now
call the raising of coin. To take half the silver from a crown of six
livres, in order to make two crowns, or to raise it to the value of twelve
livres, is precisely the same thing.
They have left us no monument of the manner in which the Romans
conducted this affair in the first Punic war; but what they did in the
second is a proof of the most consummate wisdom. The republic found
herself under an impossibility of paying her debts: the as weighed two
ounces of copper, and the denarius, valued at ten ases, weighed twenty
ounces of copper. The republic, being willing to gain half on her
creditors, made the as of an ounce of copper,17
and by this means paid the value of a denarius with ten ounces. This
proceeding must have given a great shock to the state; they were obliged
therefore to break the force of it as well as they could. It was in itself
unjust, and it was necessary to render it as little so as possible. They
had in view the deliverance of the republic with respect to the citizens;
they were not therefore obliged to direct their view to the deliverance of
the citizens with respect to each other. This made a second step
necessary. It was ordained that the denarius, which hitherto contained but
ten ases, should contain sixteen. The result of this double operation was,
that while the creditors of the republic lost one-half,18
those of individuals lost only a fifth;19
the price of merchandise was increased only a fifth; the real change of
the money was only a fifth. The other consequences are obvious.
The Romans then conducted themselves with greater prudence than we, who
in our transactions involved both the public treasure and the fortunes of
individuals. But this is not all: their business was carried on amidst
more favourable circumstances than ours.
12. The Circumstances in which the Romans changed
the Value of the Specie. There was formerly very little gold and
silver in Italy. This country has few or no mines of gold or silver. When
Rome was taken by the Gauls, they found only a thousand-weight of gold20
And yet the Romans had sacked many powerful cities, and brought home their
wealth. For a long time they made use of none but copper money; and it was
not till after the peace with Pyrrhus that they had silver enough to coin
money:21 they made denarii of this
metal of the value of ten ases,22
or ten pounds of copper. At that time the proportion of silver was to that
of copper as 1 to 960. For as the Roman denarius was valued at ten ases,
or ten pounds of copper, it was worth one hundred and twenty ounces of
copper; and as the same denarius was valued only at one-eighth of an ounce
of silver,23 this produced the
When Rome became mistress of that part of Italy which is nearest to
Greece and Sicily, by degrees she found herself between two rich nations —
the Greeks and the Carthaginians. Silver increased at Rome; and as the
proportion of 1 to 960 between silver and copper could be no longer
supported, she made several regulations with respect to money, which to us
are unknown. However, at the beginning of the second Punic war, the Roman
denarius was worth no more than twenty ounces of copper;24
and thus the proportion between silver and copper was no longer but as 1
to 160. The reduction was very considerable, since the republic gained
five-sixths upon all copper money. But she did only what was necessary in
the nature of things, by establishing the proportion between the metals
made use of as money.
The peace which terminated the first Punic war left the Romans masters
of Sicily. They soon entered Sardinia; afterwards they began to know
Spain; and thus the quantity of silver increased at Rome. They took
measures to reduce the denarius from twenty ounces to sixteen,25
which had the effect of putting a nearer proportion between the silver and
copper; thus the proportion, which was before as 1 to 160, was now made as
1 to 128.
If we examine into the conduct of the Romans, we shall never find them
so great as in choosing a proper conjuncture for performing any
13. Proceedings with respect to Money in the Time
of the Emperors. In the changes made in the specie during the time of
the republic, they proceeded by diminishing it: in its wants, the state
entrusted the knowledge to the people, and did not pretend to deceive
them. Under the emperors, they proceeded by way of alloy. These princes,
reduced to despair even by their liberalities, found themselves obliged to
degrade the specie; an indirect method, which diminished the evil without
seeming to touch it. They withheld a part of the gift and yet concealed
the hand that did it; and, without speaking of the diminution of the pay,
or of the gratuity, it was found diminished.
We even still see in cabinets a kind of medals which are called plated,
and are only pieces of copper covered with a thin plate of silver.26
This money is mentioned in a fragment of the 77th book of Dio.27
Didius Julian first began to debase it. We find that the coin of
Caracalla28 had an alloy of more
than half; that of Alexander Severus of two-thirds;29
the debasing still increased, till in the time of Gallienus nothing was to
be seen but copper silvered over.30
It is evident that such violent proceedings could not take place in the
present age; a prince might deceive himself, but he could deceive nobody
else. The exchange has taught the banker to draw a comparison between all
the money in the world, and to establish its just value. The standard of
money can be no longer a secret. Were the prince to begin to alloy his
silver, everybody else would continue it, and do it for him; the specie of
the true standard would go abroad first, and nothing would be sent back
but base metal. If, like the Roman Emperors, he debased the silver without
debasing the gold, the gold would suddenly disappear, and he would be
reduced to his bad silver. The exchange, as I have said in the preceding
book,31 has deprived princes of the
opportunity of showing great exertions of authority, or at least has
rendered them ineffectual.
14. How the Exchange is a Constraint on despotic
Power. Russia would have descended from its despotic power, but could
not. The establishment of commerce depended on that of the exchange, and
the transactions were inconsistent with all its laws.
In 1745 the Czarina made a law to expel the Jews, because they remitted
into foreign countries the specie of those who were banished into Siberia,
as well as that of the foreigners entertained in her service. As all the
subjects of the empire are slaves, they can neither go abroad themselves
nor send away their effects without permission. The exchange which gives
them the means of remitting their specie from one country to another is
therefore entirely incompatible with the laws of Russia.
Commerce itself is inconsistent with the Russian laws. The people are
composed only of slaves employed in agriculture, and of slaves called
ecclesiastics or gentlemen, who are the lords of those slaves; there is
then nobody left for the third estate, which ought to be composed of
mechanics and merchants.
15. The Practice of some Countries in Italy.
They have made laws in some part of Italy to prevent subjects from selling
their lands in order to remove their specie into foreign countries. These
laws may be good, when the riches of a state are so connected with the
country itself that there would be great difficulty in transferring them
to another. But since, by the course of exchange, riches are in some
degree independent of any particular state, and since they may with so
much ease be conveyed from one country to another, that must be a bad law
which will not permit persons for their own interest to dispose of their
lands, while they can dispose of their money. It is a bad law, because it
gives an advantage to movable effects, in prejudice to the land; because
it deters strangers from settling in the country; and, in short, because
it may be eluded.
16. The Assistance a State may derive from
Bankers. The banker's business is to change, not to lend, money. If
the prince makes use of them to change his specie, as he never does it but
in great affairs, the least profit he can give for the remittance becomes
considerable; and if they demand large profits, we may be certain that
there is a fault in the administration. On the contrary, when they are
employed to advance specie, their art consists in procuring the greatest
profit for the use of it, without being liable to be charged with usury.
17. Of Public Debts. Some have imagined that
it was for the advantage of a state to be indebted to itself: they thought
that this multiplied riches by increasing the circulation.
Those who are of this opinion have, I believe, confounded a circulating
paper which represents money, or a circulating paper which is the sign of
the profits that a company has or will make by commerce, with a paper
which represents a debt. The first two are extremely advantageous to the
state: the last can never be so; and all that we can expect from it is
that individuals have a good security from the government for their money.
But let us see the inconveniences which result from it.
1. If foreigners possess much paper which represents a debt, they
annually draw out of the nation a considerable sum for interest.
2. In a nation that is thus perpetually in debt, the exchange must be
3. The taxes raised for the payment of the interest of the debt are an
injury to the manufactures, by raising the price of the artificer's
4. It takes the true revenue of the state from those who have activity
and industry, to convey it to the indolent; that is, it gives facilities
for labour to those who do not work, and clogs with difficulties those who
These are its inconveniences: I know of no advantages. Ten persons have
each a yearly income of a thousand crowns, either in land or trade; this
raises to the nation, at five per cent, a capital of two hundred thousand
crowns. If these ten persons employed one-half of their income, that is,
five thousand crowns, in paying the interest of a hundred thousand crowns,
which they had borrowed of others, that still would be only to the state
as two hundred thousand crowns; that is, in the language of the
algebraists, 200,000 crowns -100,000 crowns + 100,000 crowns = 200,000.
People are thrown perhaps into this error by reflecting that the paper
which represents the debt of a nation is the sign of riches; for none but
a rich state can support such paper without falling into decay. And if it
does not fall, it is a proof that the state has other riches besides. They
say that it is not an evil, because there are resources against it; and
that it is an advantage, since these resources surpass the evil.
18. Of the Payment of Public Debts. It is
necessary that there should be a proportion between the state as creditor
and the state as debtor. The state may be a creditor to infinity, but it
can only be a debtor to a certain degree, and when it surpasses that
degree the title of creditor vanishes.
If the credit of the state has never received the least blemish, it may
do what has been so happily practised in one of the kingdoms of Europe;32
that is, it may require a great quantity of specie, and offer to reimburse
every individual, at least if they will not reduce their interest. When
the state borrows, the individuals fix the interest; when it pays, the
interest for the future is fixed by the state.
It is not sufficient to reduce the interest: it is necessary to erect a
sinking-fund from the advantage of the reduction, in order to pay every
year a part of the capital: a proceeding so happy that its success
increases every day.
When the credit of the state is not entire, there is a new reason for
endeavouring to form a sinking-fund, because this fund being once
established will soon procure the public confidence.
1. If the state is a republic, the government of which is in its own
nature consistent with its entering into projects of a long duration, the
capital of the sinking-fund may be inconsiderable; but it is necessary in
a monarchy for the capital to be much greater.
2. The regulations ought to be so ordered that all the subjects of the
state may support the weight of the establishment of these funds, because
they have all the weight of the establishment of the debt; thus the
creditor of the state, by the sums he contributes, pays himself.
3. There are four classes of men who pay the debts of the state: the
proprietors of the land, those engaged in trade, the labourers and
artificers, and, in fine, the annuitants either of the state or of private
people. Of these four classes the last, in a case of necessity one would
imagine, ought least to be spared, because it is a class entirely passive,
while the state is supported by the active vigour of the other three. But
as it cannot be higher taxed, without destroying the public confidence, of
which the state in general and these three classes in particular have the
utmost need; as a breach in the public faith cannot be made on a certain
number of subjects without seeming to be made on all; as the class of
creditors is always the most exposed to the projects of ministers, and
always in their eye, and under their immediate inspection, the state is
obliged to give them a singular protection, that the part which is
indebted may never have the least advantage over that which is the
19. Of lending upon Interest. Specie is the
sign of value. It is evident that he who has occasion for this sign ought
to pay for the use of it, as well as for everything else that he has
occasion for. All the difference is that other things may be either hired
or bought; while money, which is the price of things, can only be hired,
and not bought.33
To lend money without interest is certainly an action laudable and
extremely good; but it is obvious that it is only a counsel of religion,
and not a civil law.
In order that trade may be successfully carried on, it is necessary that
a price be fixed on the use of specie; but this should be very
inconsiderable. If it be too high, the merchant who sees that it will cost
him more in interest than he can gain by commerce will undertake nothing;
if there is no consideration to be paid for the use of specie, nobody will
lend it; and here too the merchant will undertake nothing.
I am mistaken when I say nobody will lend; the affairs of society will
ever make it necessary. Usury will be established, but with all the
disorders with which it has been constantly attended.
The laws of Mahomet confound usury with lending upon interest. Usury
increases in Mahometan countries in proportion to the severity of the
prohibition. The lender indemnifies himself for the danger he undergoes of
suffering the penalty.
In those eastern countries, the greater part of the people are secure in
nothing; there is hardly any proportion between the actual possession of a
sum and the hopes of receiving it again after having lent it: usury, then,
must be raised in proportion to the danger of insolvency.
20. Of Maritime Usury. The greatness of
maritime usury is founded on two things: the danger of the sea, which
makes it proper that those who expose their specie should not do it
without considerable advantage, and the ease with which the borrower, by
means of commerce, speedily accomplishes a variety of great affairs. But
usury, with respect to landmen, not being founded on either of these two
reasons, is either prohibited by the legislators, or, what is more
rational, reduced to proper bounds.
21. Of Lending by Contract, and the State of
Usury among the Romans. Besides the loans made for the advantage of
commerce, there is still a kind of lending by a civil contract, whence
results interest or usury.
As the people of Rome increased every day in power, the magistrates
sought to insinuate themselves in their favour by enacting such laws as
were most agreeable to them. They retrenched capitals; they first lowered,
and at length prohibited, interest; they took away the power of confining
the debtor's body; in fine, the abolition of debts was contended for
whenever a tribune was disposed to render himself popular.
These continual changes, whether made by the laws or by the plebiscita,
naturalised usury at Rome; for the creditors, seeing the people their
debtor, their legislator, and their judge, had no longer any confidence in
their agreements: the people, like a debtor who has lost his credit, could
only tempt them to lend by allowing an exorbitant interest, especially as
the laws applied a remedy to the evil only from time to time, while the
complaints of the people were continual, and constantly intimidated the
creditors. This was the cause that all honest means of borrowing and
lending were abolished at Rome, and that the most monstrous usury
established itself in that city, notwithstanding the strict prohibition
and severity of the law.34 This
evil was a consequence of the severity of the laws against usury. Laws
excessively good are the source of excessive evil. The borrower found
himself under the necessity of paying for the interest of the money, and
for the danger the creditor underwent of suffering the penalty of the law.
22. The same Subject continued. The primitive
Romans had not any laws to regulate the rate of usury.35
In the contests which arose on this subject between the plebeians and the
patricians, even in the sedition on the Mons Sacer, nothing was alleged,
on the one hand, but justice, and on the other, the severity of contracts.36
They then only followed private agreements, which, I believe, were most
commonly at twelve per cent per annum. My reason is, that in the ancient
language of the Romans, interest at six per cent was called half-usury,
and interest at three per cent, quarter-usury.37
Total usury must, therefore, have been interest at twelve per cent.
But if it be asked how such great interest could be established among a
people almost without commerce, I answer that this people, being very
often obliged to go to war without pay, were under a frequent necessity of
borrowing: and as they incessantly made happy expeditions, they were
commonly well able to pay. This is visible from the recital of the
contests which arose on this subject; they did not then disagree
concerning the avarice of creditors, but said that those who complained
might have been able to pay, had they lived in a more regular manner.38
They then made laws which had only an influence on the present situation
of affairs: they ordained, for instance, that those who enrolled
themselves for the war they were engaged in should not be molested by
their creditors; that those who were in prison should be set at liberty;
that the most indigent should be sent into the colonies; and sometimes
they opened the public treasury. The people, being eased of their present
burdens, became appeased; and as they required nothing for the future, the
senate was far from providing against it.
At the time when the senate maintained the cause of usury with so much
constancy, the Romans were distinguished by an extreme love of frugality,
poverty, and moderation: but the constitution was such that the principal
citizens alone supported all the expenses of government, while the common
people paid nothing. How, then, was it possible to deprive the former of
the liberty of pursuing their debtors, and at the same time to oblige them
to execute their offices, and to support the republic amidst its most
Tacitus says that the law of the Twelve Tables fixed the interest at one
per cent.39 It is evident that he
was mistaken, and that he took another law, of which I am going to speak,
for the law of the Twelve Tables. If this had been regulated in the law of
the Twelve Tables, why did they not make use of its authority in the
disputes which afterwards arose between the creditors and debtors? We find
no vestige of this law upon lending at interest; and let us have ever so
little knowledge of the history of Rome, we shall see that a law like this
could not be the work of the decemvirs.
The Licinian law, made eighty-five years after that of the Twelve
Tables,40 was one of those
temporary regulations of which we have spoken. It ordained that what had
been paid for interest should be deducted from the principal, and the rest
discharged by three equal payments.
In the year of Rome 398, the tribunes Duellius and Menenius caused a law
to be passed which reduced the interest to one per cent per annum.41
it is this law which Tacitus confounds with that of the Twelve Tables,42
and this was the first ever made by the Romans to fix the rate of
interest. Ten years after,43 this
usury was reduced one-half,44 and
in the end entirely abolished;45
and if we may believe some authors whom Livy had read, this was under the
consulate of C. Martius Rutilius and Q. Servilius, in the year of Rome
It fared with this law as with all those in which the legislator carries
things to excess: an infinite number of ways were found to elude it. They
enacted, therefore, many others to confirm, correct, and temper it.
Sometimes they quitted the laws to follow the common practice; at others,
the common practice to follow the laws; but in this case, custom easily
prevailed.47 When a man wanted to
borrow, he found an obstacle in the very law made in his favour; this law
must be evaded by the person it was made to succour, and by the person
condemned. Sempronius Asellus, the prætor, having permitted the
debtors to act in conformity to the laws,48
was slain by the creditors for attempting to revive the memory of a
severity that could no longer be supported.49
I quit the city, in order to cast an eye on the provinces.
I have somewhere else observed that the Roman provinces were exhausted
by a severe and arbitrary government.50
But this is not all; they were also ruined by a most shocking usury.
Cicero takes notice that the inhabitants of Salamis wanted to borrow a
sum of money at Rome, but could not, because of the Gabinian law.51
We must, therefore, inquire into the nature of this law.
As soon as lending upon interest was forbidden at Rome, they contrived
all sort of means to elude the law;52
and as their allies,53 and the
Latins, were not subject to the civil laws of the Romans, they employed a
Latin, or an ally, to lend his name, and personate the creditor. The law,
therefore, had only subjected the creditors to a matter of form, and the
public were not relieved.
The people complained of this artifice; and Marius Sempronius, tribune
of the people, by the authority of the senate, caused a plebiscitum
to be enacted to this purport, that in regard to loans the laws
prohibiting usury between Roman citizens should equally take place between
a citizen and an ally, or a citizen and a Latin.54
At that time they gave the name of allies to the people of Italy
properly so called, which extended as far as the Arno and the Rubicon, and
was not governed in the form of a Roman province.
It is an observation of Tacitus55
that new frauds were constantly committed, whenever any laws were passed
for the preventing of usury. Finding themselves debarred from lending or
borrowing in the name of an ally, they soon contrived to borrow of some
inhabitant of the provinces.
To remedy this abuse they were obliged to enact a new law; and Gabinius56
upon the passing of that famous law, which was intended to prevent the
corruption of suffrages, must naturally have reflected that the best way
to attain his end was to discourage the lending upon interest: these were
two objects naturally connected; for usury always increased at the time of
elections,57 because they stood in
need of money to bribe the voters. It is plain that the Gabinian law had
extended the Senatus Consultum of Marcus Sempronius to the
provinces, since the people of Salamis could not borrow money at Rome
because of that very law. Brutus, under fictitious names, lent them some
money58 at four per cent a month,59
and obtained for that purpose two Senatus Consulta; in the former
of which it was expressly mentioned that this loan should not be
considered as an evasion of the law,60
and that the governor of Sicily should determine according to the
stipulations mentioned in the bond of the Salaminians.
As lending upon interest was forbidden by the Gabinian law between
provincials and Roman citizens, and the latter at that time had all the
money of the globe in their hands, there was a necessity for tempting them
with the bait of extravagant interest, to the end that the avaricious
might thus lose sight of the danger of losing their money. And as they
were men of great power in Rome, who awed the magistrates and overruled
the laws, they were emboldened to lend, and to extort great usury. Hence
the provinces were successively ravaged by every one who had any credit in
Rome: and as each governor, at entering upon his province, published his
edict61 wherein he fixed the rate
of interest in what manner he pleased, the legislature played into the
hands of avarice, and the latter served the mean purposes of the
But the public business must be carried on; and wherever a total
inaction obtains, the state is undone. On some occasions the towns, the
corporate bodies and societies, as well as private people, were under the
necessity of borrowing — a necessity but too urgent, were it only to
repair the ravages of armies, the rapacity of magistrates, the extortions
of collectors, and the corrupt practices daily introduced; for never was
there at one period so much poverty and opulence. The senate, being
possessed of the executive power, granted, through necessity, and
oftentimes through favour, a permission of borrowing from Roman citizens,
so as to enact decrees for that particular purpose. But even these decrees
were discredited by the law; for they might give occasion to the people's
insisting upon new rates of interest, which would augment the danger of
losing the capital, while they made a further extension of usury.62
I shall ever repeat it, that mankind are governed not by extremes, but by
principles of moderation.
He pays least, says Ulpian, who pays latest.63
This decides the question whether interest be lawful; that is, whether the
creditor can sell time, and the debtor buy it.
1. The salt made use of for this
purpose in Abyssinia has this defect, that it is continually wasting away.
2. Herodotus, Bk. i, tells us that
the Lydians found out the art of coining money; the Greeks learned it from
them: the Athenian coin had the impression of their ancient ox. I have
seen one of those pieces in the Earl of Pembroke's cabinet.
3. It is an ancient custom in Algiers
for the father of a family to have a treasure concealed in the earth. —
Laugier de Tassis, History of the Kingdom of Algiers.
59. Pompey having lent 600 talents to
King Ariobarzanes, made that prince pay him thirty Attic talents every
thirty days. — Ibid., v. 21, vi. 1.
60. Ut neque Salaminiis, neque
cui eis dedisset, fraudi esset. — Ibid.
61. Cicero's edict fixed it to one
per cent a month, with interest upon interest at the expiration of the
year. With regard to the farmers of the republic, he engaged them to grant
a respite to their debtors; if the latter did not pay at the time fixed,
he awarded the interestmentioned in the bond. — Ibid., vi. 1.
62. See what Lucretius says, in the
21st letter to Atticus, v. There was even a general Senatus Consultum,
to fix the rate of interest at one per cent per month. See the same