A fatal error had led to all these misfortunes. It was imagined that credit had the power of creating wealth; whilst, in fact, credit never creates any thing, but merely borrows with one hand to lend with the other, that wealth, which, to be of use, must have previously existed in the state. Paper money can be substituted only for the metallic money already in existence; it is the value of this which it borrows. The banker, who finds credit, acquires the power to dispose of a part of the currency equal to the paper he emits. If he in reality withdraw part of the currency from circulation, his paper will remain there; if he does not withdraw it, others will withdraw it for him, the instant it becomes superfluous. But, if this currency was not in circulation at the moment when his bank-notes were emitted, he could not borrow it. In that case, by giving forced circulation to his paper, he depreciates not only this paper, but all that was already in the hands of the public.
The money of a country has a determinate relation to the wealth of that country, and to the activity with which its wealth circulates. The same guineas serve, in the course of a year, for a great number of different bargains; yet still there is a necessary equation between the mass of values sold, and the sum of guineas which serves to pay them, multiplied by the rapidity of the circulation. If too many guineas exist in the country for the wants of the circulation, this is not a reason why the person holding them in his coffers should keep them longer than he has occasion so to do. All useless stagnation would be so much interest lost for him; and, therefore, he continues still to give them circulation, and some one is always at hand, who, not finding any profitable use to make of them in the country, takes them out of it. If exportation is forbidden, a greater mass of idle guineas will be kept within the country, till the loss of those unable to employ them be great enough to pay the risk of smuggling. If precautions are so well taken that exportation is entirely impossible, the whole money circulated in the country will fall in value till it be reduced to the equation which it cannot pass, that is, to the numerical value of all the sales and payments made within the year, divided by the rapidity of circulation.
In like manner, if the money of a country is not sufficient for its circulation, the country will purchase money in exchange for some one of the values it possesses, just as it would have purchased any other kind of goods. It is not the balance of trade which can make money enter or leave a country. This balance is completely illusory, for it is not true that nations settle their accounts with each other. On the contrary, indeed, it often happens that one is constantly a borrower, the other constantly a lender. And, the credit sales of the most commercial being renewed from year to year - before the first debt is extinguished, a second is already contracted, which is followed by a third; and though each is paid in its turn, the purchaser may nevertheless, perpetually remain debtor to his seller. Thus, sales on credit form a capital which may either increase, or be reimbursed in the inverse sense of other commercial speculations.
Abstracting all that concerns these credits, which modify more than three-fourths of its commercial speculations, the purchases of a nation would be exactly balanced by its sales; because it is as impossible for the one always to purchase, and find the source of a perpetual draining of money, unless it work at mines, as for the other to sell always, and find an employment for a perpetual importation of coined metal. Money is imported, and exported from one nation to another, not because it pays their accounts, but because the one having need of it, sells goods cheaper, till it has acquired enough; and, because the other, having more than enough for its circulation, buys dearer, or, gives a greater quantity of guineas for the same quantity of goods, till the equilibrium is reestablished.
But as the emission of any sum in bank notes, supplies the place of an equal sum of money, the latter is immediately withdrawn from circulation, and sold in foreign countries. So long as there remains any coin to be exported, credit may repeat its operation and create new bank notes; when there is no more coin to export, the paper money, will, of itself, diminishing in value, seek the proper equation; and to whatever nominal sum its fabrication may be carried, it will never sell, in the total amount, for any thing more than the pre-existing total amount of money which it replaces.
