Section II. Problems and Principles of Money

Philip III had adulterated the Spanish copper coinage to solve his financial difficulties. Thereupon general in dignation followed but scarcely anybody had the courage to come out in public and criticize the king. Mariana, know ing from numberless instances of history that each debasing of coinage had always been followed by great civic hard ships, considered it his duty to warn the king of the dangers to which he had exposed his country. In De Monetae Muta tione he shows the fallacy of a procedure which attempts 119 MARIANA:-POLITICAL ECONOMY to heal one evil with a greater evil, or rather with a clear injustice. What the king seems to gain, the people will lose, and in the end hoth king and people will face many hard ships. There is only one way of escaping these evil effects, and that is to restore the coinage to its former state. De Monetae Mutatione is one of the early treatises on money, and it may be of interest to present a detailed synopsis of this extremely interesting hooklet. At the out set the author gives a short summary of the whole work.

To help the royal treasury many devices (he says) have recently heen tried. One of them was dehasing the copper coinage. This was done in two ways: the face value of each coin was douhled, and half of it went as profit to the royal treasury; or the silver alloy was taken out and the coins were struck of pure copper, their weight moreover having heen decreased. In this case the profit for the king was even two thirds. This apparent gain is, however, a mere fallacy, because great evils will follow. For this reason, many have criticized the king's device, and subse quent events have shown the correctness of their views. To heal the evil effects of a ~ehased coinage, some have pro posed adulteration 'of silver money also, hoping thus to compensate for the loss to individuals by an increase in the face value of money. Fortunately this has not as yet heen done. Indeed, it has been ordained by law that the new coin should be suppressed and the holders indemnified from the royal taxes.

On the occasion of the late adulteration, Mariana had already written a short treatise which he inserted in the new edition of De Rege. Now he comes out with a more com plete discussion of the same subject to show his and all later generations that the coinage can never be debased with out doing great harm to the country. 120 DE MONETAE MUTATIONE In the foreword the author apologizes for taking a step which some will call inconsiderate and others bold. How can he, a non-expert, know much about things outside his sphere, and venture to criticize the king's counsellors who must know better? But Mariana justifies himself on the ground that he has the most sincere intention of helping the country, and that he can base his arguments on the experience of the past. All are groaning under the hard ships imposed by the new change in the copper coinage but none has the courage to appear with his criticism. There fore it seems only just that one at least should venture to say openly what everybody thinks for himself, and what is being discussed in all places where the people gather.

When Athens was beleaguered by the Macedonians and all citizens were engaged in saving their city, Diogenes came out of his barrel and rolled it along the streets to the great surprise of everybody. When some accused him of making fun of the general calamity, ht1 answered: "It is not right that while all are busy I alone should be idle." In the same way Mariana wishes to do all he can, at a time when others are prevented from speaking freely, some by fear, others by bribes. All should know that there is at least one man in the country who espouses the truth and dares to point out the evils that threaten the community. Perhaps his endeavor will meet with success, since all are desirous of hearing the truth; but at all events no one should ques tion the honesty of his intention or condemn him before carefully reading his paper. In the first three chapters, the author tries to show that the royal power is not ahsolute and that consequently the king cannot dispose of the private property of his subjects.

The king must not, therefore, impose taxes without the con sent of the people, or do anything hurdensome to them 121 MARIANA:-POLITICAL ECONOMY without their approval. Debasing the coinage is only an other way of getting the people's property, and thus is in reality a very heavy tax. Now, if the king cannot impose taxes without consulting the people, whence does he derive permission to adulterate the coinage without their consent? Many exalt the royal prerogative unduly, saying that it is without limitation. Some do this in order to flatter the king and to enrich themselves; others do it because they identify the king's majesty with the security and welfare of the nation. The first are hypocrits and really pestifer ous, the others have judged erroneously. Obviously, if power hecomes excessive it degenerates into weakness just as virtues become vices when they exceed the bounds of dis cretion. Power is not like money, the more of which you have the richer you are, hut rather like food which must he neither scanty nor excessive if the individual is not to suffer harm. Excessive power degenerates into tyranny, which is not only a had form of government hut also a weak rule and of short duration, hecause it will arouse the wrath of the people whom no armies nor weapons can resist for a long time.

The king has no property rights over the private goods of his subjects, nor can he take anything from them accord ing to his whim and will. For the royal power, if it be legitimate, had originated with the people. According to Aristotle, kings were instituted to lead the people to hattIe and to defend them against their enemies. This power was later extended to the administration of law. To sustain the king's authority and to support the royal household, the people assigned to him certain revenues and also fixed the manner in which these were to he raised. Over these revenues and over those goods which he possessed hefore his election to the throne, the sovereign has property rights; 122 DE MON~TAE MUTATIONE but he has no such right over anything the people have re served to themselves or to the State as private or public property. If it were otherwise, we could not understand why Jezabel was blamed by the Prophet Elias for taking away the vineyard of Nahoth. For if Jezabel had property rights over all land, she did not commit an injustice in claiming Naboth's vineyard.

This being so, the jurists in common hold that the king cannot decide anything to the detriment of the people against their will, e.g., take away the property of the citizens in full or in part. How could the monarch be called to account or charged with injustice if all goods were his property, or why would he pay for land or houses of he could simply take them? It is tyrannical for a king to claim unlimited power or to consider everything as his own. A legitimate king imposes limitations on his power, checks his passions and exercises justice and equity. He looks at private prop erty as something entrusted to his protection and takes nothing of it, except in a manner prescribed by law. Some maintain that if the king needs the consent of the people in imposing new taxes, the people are sovereign and not the ruler. They say that he is not bound by the will of the representatives of the people, but can act in dependently according to his will and the needs of the royal treasury. If the Cortes have anything to say about taxation, it is only by reason of royal grant. Kings like this kind of reasoning and have often been deluded by it.

When Charles VII of; France was pressed hard by the English, he bribed the nobles by annual pensions to grant him the right of taxing the people at will. The absolutists, therefore, say, that the kings of France have entered into their rights, being freed from the tutelage of the people. But the truth is that the king has taken unjustly from the 123 MARIANA:-POLITICAL ECONOMY people that to which they had a right. This disorder is, Mariana helieves, the real reason for the many civil wars in France. The people, exhausted by excessive taxation, have lost their property and, as a result, risk their lives in a desperate struggle, hoping either to hetter their con dition or to end their miserable lives. Religion is used only as a pious cloak. In Castille taxes are granted by the representatives of the cities, but this representation of the people is worse than none at all. It is composed of careless and incapable men who have only the one desire, to win the king's favor and to become rich as a consequence. Moreover, they are strongly influenced by the urgings, heggings, threats and promises of the courtiers,-a test that not even the cedars of Lebanon could withstand. These are the actual facts.

The next step in Mariana's discussion will show how taxes ought to be imposed. He maintains that the pe~ple should freely grant them. They should not deal churlishly with the king, hut should listen patiently when he points out the need of the treasury. The king, on the other hand, should listen to what the people have to say and should consider whether they can bear a new hurden or whether there might not he another way of getting out of the financial difficulty, even though it should involve a personal sacrifice. He might possibly be ohliged to save, and to avoid superfluous expenditures. Whatever may be the case in other countries, Castille has a clear law which forbids taxation without the consent of the people. In confirmation of his assertion Mariana quotes the law of Alphonsus XI of the year 1329. 1 1 Adhaec quoniam supplices postularunt, ne insolutum tributum imperetur, neque publice, neque privatim nisi gente in conventum prius vocata, concessoque ab omnibus· procuratori bus eivitatum qui aderunt: ad hoc respond emus placet id nobis, atque ut ita fiat statuo, D, MOffetae Mutatione, Cap. II, p. 194.

124 DE MONETAE ll:1UTATIONE A king who imposes taxes without the consent of the people not only acts in a spirit of violence and tyranny, hut also incurs the excommunication threatened hy the Bull Coena Domini. 1 In this document the Pope declares all those excommunicated who impose new taxes. In some copies is added the clause: Unless (greater) power has heen granted to them, or permission vouchsafed by right or law. Comineus, from whose writings Mariana quotes, maintains that kings who impose new taxes without the consent of the people incur this censure, and our author adds that this was the common opinion of the theologians of the sixteenth century. Mariana extends this penalty also to monopolies if introduced against the will of the people, holding that under them the State sells various articles to the public for more than they are worth. This is nothing else but a real tax. Our author does not intend to criticize the already existing monopolies on salt, sublimate and lotteries, as he assumes that they are wise and that the king has acted ac cording to the law, hut in principle he holds that monopolies do not differ in substance from taxes, and hence need the people's consent. This he proves from history. In Castille there had been for a long time a strong opposition to a flour tax. If the king could lawfully buy up all grain and resell it for more than what it is worth, he would surely not beg the people to grant him a tax on grain. A monopoly would give him the same results. Therefore, a monopoly also needs the consent of the people.

The same principle is to be applied to the adulteration of the coinage. Jurists give the king the right to change the coin, but this permission refers only to a change of form 1 The section of the bull referred to reads: Item excommunicamus et anathematizamus omnes, qui in terris suis nova pedagia seu gabellas, praeterquam in casibus sibi a jure, seu ex speciali Sedis Apostolicae licentia, permissis, imponunt vel augent, seu imponi vel augeri prohibita exigunt. Bullarum et Diplomatltm et Privilegiorum Sanctorum Romanorum Ponti/icum Taurinensis Editio. . . . Tom. XIII, pp. 531·32. 125 MARIANA:-POLITICALECONOMY or stamp, and not to a debasing of the metal or a decreasing of the weight. In case of urgent need the king might also dehase the coinage without the explicit consent of the people hut would he under ohligation to restore the old coinage as soon as normal conditions returned and to make good any loss sustained hy those concerned. This was done hy Em peror Frederick II when he found himself in financial stress at the heleaguering of the city of Faventia. - He issued leather money and redeemed it i~ gold after the conquest of the city. In another instance paper money was made at Leyden, in Holland, in 1574.

The question is whether the king can dehase the coinage at will to help his treasury. The common opinion of jurists is that he cannot do so without the consent of the people, since he is not the owner but only the protector of the people's private property. He takes from them a part of their goods when he assigns to metal a higher value than it has by nature or common opinion. This is only another way of getting at the people's purse, differing little from a tax or a monopoly. Mariana, therefore, does not see how the king can escape the excommunication threatened hy Coena Domini. Nor can the king say that the people have consented, hecause the coinage laws of Ferdinand the Cath olic and Philip II say nothing about this point. Hence the conclusion is that it is unlawful for the king to debase the coinage without the consent of his suhjects. The fourth and fifth chapters are devoted to a discus sion of the nature of money, and the sixth deals with the frequent (unlawful) changes which have occurred in the history of Spain. Mariana distinguishes a twofold value of money: the natural or intrinsic value, and the legal or extrinsic value. The natural value is equivalent to the metal content of the coin, and the legal value is fixed by 126 DE MONETAE MUTATIONE royal law as in the case of other commodities. In a well conducted commonwealth care will he taken that the legal price agrees with the natural value, because it would be unfair to ask a price of ten for what is worth only five.

Precisely this happens when the legal value of money ex ceeds its metal content. If these two values may lawfully disagree, why not issue money made of leather, paper or lead, which would cheapen the cost of lahor and material? Mariana does not object to making a slight charge for the labor of coining or even to a small profit to enrich the king and signify his sovereignty. It would be unfair to expect gratuitous coinage and to compel the king to coin money at his own expense. But it is absolutely necessary that the metal value plus seigniorage agrees as nearly as possible with the face or legal value of the coin. In the rest of the fourth chapter, the author gives us the substance of the Aristotelian theory of the origin of money and a short review of Spain's monetary system. The great philosopher tells us that men first exchanged commodities by barter. This involved transportation of all commodities to he exchanged, and so metal was substi tuted for an exchange of goods. Coins were introduced to save repeated weighing of these metals and to safeguard a correct weight. This, accorJing to Mariana, is the first and the only legitimate use of money; all other uses have heen invented by the malice of men and are foreign and hostile to the salutary purpose of money.

A short review of Spain's monetary system shows that the natural and legal values of the various coins agree almost exactly. One mark of silver (eight ounces) was coined into sixty-seven silver pieces (argentei), the natural value heing sixty-five; and one silver piece was worthy thirty-four mara vedis, which is only one maravedi more than its natural 127 MARIANA:-POLITICAL ECONOMY value. Eight ounces of gold were coined into sixty-eight crowns, which was almost exactly their metal value. In the case of copper coin, the facts are much more complicated. From the year 1497 on, one mark of copper (eight ounces) plus seven grains of silver yielded ninety six maravedis, the silver heing worth fifty-one maravedis and the eight ounces of copper plus lahor cost ahout forty maravedis, which makes in all approximately ninety-one mara vedis or a little less than their face value (of ninety six maravedis). In 1566, Philip II made the following change: To one mark of copper only four instead of seven grains of silver were to be added, and the whole was to yield 110 maravedis. As the cost of lahor was ahout twice as much as hefore, this new coin was still very near to its natural value. But copper coin issued hy the recent order of Philip III contains no silver at all and is valued at 1280 maravedis, though the natural value is only ahout eighty maravedis. Thus the profit for the royal treasury amounts to 200 maravedis for each silver mark. This means that the face value exceeds the metal value hy five-sevenths. It follows, then, that the late change is greatly at variance with a sound monetary policy.

Many, attracted hy the enormous profit to he derived from it, will falsify money. People will also demand higher prices for their goods, so as to make up the difference he tween the face value and the metal content of the new coin. If the king should step in and ordain that they must sell for the legal price, he will not succeed, as the experience of the past proves. When the French silver coin was debased, the result was that Spanish silver pieces sold for seven as compared to four, which was. the price of the new French coin. Whenever the legal value of debased coin is not equal128 DE MONETAE MUTATIONE ized with its natural value, prices will be high and financial chaos will ensue. In the fifth chapter, Mariana shows how the bases of exchange must he kept stahle if commerce is not to suffer. Most articles sell by weight and measure, and all sell for money. Accordingly these standards must be guarded most carefully. In olden times standard measures were kept in temples, so as to make possible at any time a comparison with the measures used in business transactions. The Old Testament prescribed that "all ... 'estimations shall be ac cording to the shekel of the sanctuary," 1 and similar cus toms prevailed among nations other than the Hebrews.

When the Castilian measures for oil and wine were changed for the purpose of a new tax, the people severely critici:led the step, which resulted in widespread confusion. Changes of money have always caused so many hardships that, as will be shown later, they could be remedied only by still greater ones. In spite of the precaution exercised of keep ing standards of the various measures, weights and coins in temples, they almost everywhere deteriorated in the course of time. The Romans debased their coinage during the first Punic war and once more when Hannibal threatened the very existence of their commonwealth. Their poet Piau tus derides the new "poetical products," in his humorous way: "Those who use old wine I consider wise, for the new comedies which come to light are much worse than the new coins." 2 Various adulterations also took place in the course of the history of Spain. Under Alphonsus XI eight ounces of silver were worth 250 maravedis; but in 1388 the 1 Levit, 27, 25, 2 Qui utuntur vino veteri sapientes puto.

Nam nunc novae, quae prodeunt comediae. Multo sunt nequiores quam Nummi novi. De Monetae Mutatione, Cap. 6, p. 199. 129 MARIANA:-POUTICAL ECONOMY number rose to 400 and later went as high as 2,500. Ma riana believes that this rise was not due to the use of a variety of metals in the Spanish silver coin, which always had a slight alloy of copper, but to the adulteration of the mara vedis and other small coins. This he knows from his sources and his opinion is confirmed by the base quality of surviving coins and by what we know of the licentiousness of the respective Spanish rulers. To put an end to the abuse of further adulteration ll Fer dinand the Catholic and Isabella ordained that the metal value of one mark of silver should be 2,210 maravedis and its legal value 2,278. This regulation was observed up to the time of the adulteration discussed by Mariana excepting for a slight change made by Philip II, which did not, how ever, materially affect the value of silver in regard to cop per coin. But the new change had resulted in one mark of silver selling at more than 4,000 mara vedis as over against 2,278.

After developing the principles of a sound coinage, Ma riana discusses the advantages and disadvantages of a de based coinage. Having given the reasons for adulteration, he shows with much historical sagacity and an enormous amount of learning that we must exercise care in interpret ing historical figures. Figures apparently the same do not always mean the same but must be taken in their historical meaning and context. History, then, will yield to Mariana his principal arguments against adulteration of the coinage. He first enumerates everything that might be said in favor of adulterated coinage in order to weigh against these af firmations the many disadvantages, and to find the truth which alone is the point at issue. The patrons of the new coinage advance the following arguments: A great deal of silver is being saved, which 130 DE MONETAE MUTATIONE formerly was mixed with copper to no advantage what ever. The decreased weight of the new coin will facilitate its transportation. There will be plenty of money in the country to pay debts and to encourage commerce. Foreign ers will be less eager to trade with Spain, and so will not remove precious metal from the country. Everybody will gladly spend his cheap money, which will mean better loan facilities, as opposed to usurious interest formerly paid.

This in turn will mean the prosperity of agriculture and the trades which have suffered from lack of money. The result will be a plenty of grain, cattle, linen and woolen cloths, and various kinds of other commodities, and a consequent decreased demand for foreign goods as well as a smaller ex port of silver and gold. If less foreign goods are imported, native customs will avoid infection by foreign vices and the warlike Spanish nation will not be enervated and become unfit for war. Foreigners will have less occasion to come to Spain because the country itself will produce almost all it needs. Those who do come will not wish to carry cheap money home with them but will rather exchange it for native products. This again will be of great advantage to Spain. Finally, the king will be able to pay his debts by the simple device of debasing the coinage without harming the people. Mariana admits that the king has beyond all question derived great profit from his device and that he has satisfied all the creditors to whom his tax revenues were mortgaged -in itself a great calamity. It was a hope for similar gain which induced the Romans to adulterate their coin; and they were relieved from their financial trouble, as Pliny tells us. Adulteration of the coinage has also many times wiped out the debts of the Spanish kings. No one can deny that these advantages deserve consideration. To realize 131 MARIANA:-POLITICAL ECONOMY their importance, one must for the moment overlook the disadvantages which might be enumerated on the other side.

This method is not unreasonable. There is nothing in this world altogether free from harm or blame. Therefore, it is a sign of a wise man to choose what has greater advan tages, and fewer disadvantages, so much the more so because human nature is wrongly inclined to find fault with every thing new and to stubbornly adhere to old customs as if nothing could be added to the old wisdom. Having been told all this, nobody can say that Mariana does not give his opponent fair treatment. In the following chapter our author warns us, as said before, against accepting historical data without precaution, for what they seem to mean. They must be taken in the meaning prevalent in their time and in their historical set ting. The differing valuations of silver coin in Spanish his tory did not arise from a different fineness of silver, which, as Mariana concludes from the grade used for Church ves sels, was always the same. Moreover, the old maravedis which very often circulated along with new ones and had a different valuation. They were sometimes called "old"

maravedis and then again "good" maravedis. But the term "good" maravedis was also sometimes applied to gold mara vedis, so that we must first study the respective periods before we can judge which of the two meanings is the correct one. In this discussion the author shows a great deal of historical sense and a remarkable ability to interpret ap parently contradictory records. After doing full justice to the reasons for an adulteration of the coinage, Mariana treats in two chapters of its many disadvantages. He arranges these disadvantages into two groups. The first consists of arguments which seem to carry much weight, hut might almost as well he used to prove the , 132 DE MONET AE MDTAT/ONE opposite. They are, in part, nothing but the reverse aspects of the arguments produced in favor of debased money. Mariana does not care to argue with subtle theoretical rea sons; he wishes to deal with historical facts. This seems to him the better method, because the present is very much like the past and what has happened once will happen again.

Consequently, from methods used at present similar to those used in the past we can forecast the future. In the first class of arguments are the following: It is a novelty to debase the coinage, and novelties are always bad because it is a sign of boldness and insolence to change old customs. The answer to this assertion is not difficult be cause, as Mariana has shown in many chapters of his treatise, the practice of adulteration is by no means new but was used many times in the history of the country. The farmer will not cultivate his land if his reward is to be nothing but adulterated money. As was shown before, others will prove that the reverse will happen,-that agri culture will flourish by reason of loan facilities. Thus this reason also seems to carry very little weight. It is said that commerce will suffer if the coinage is bad. Foreigners will he discouraged from coming to Spain if they no longer receive silver in exchange for their goods, and this will injure Spain's trade with the Indies since Spain exports to her colonies what foreigners bring to Spain. The first answer is, that Spain cannot be harmed by obedience to her laws, which forbid the exportation of precious metal.

Moreover, of what advantage can it be to the country to lose its silver? On the other hand, Spain will benefit if adul terated coinage keeps out foreigners. If they should come nevertheless, they will prefer to exchange their goods for Spanish products, since they will be unwilling to take cop per coins home. This again will result in a great advan133 MARIANA:-POLITICAL ECONOMY tage for Spain since it is just the thing which all desire. Nor will the Indian trade suffer much. Most articles ex ported to the Indies are native products, such as wine, oil, woolen and silk cloths. If there should be need of other goods, Spanish merchants can easily purchase with silver such articles as linen, paper, books, various nicknacks and so on. It must he remembered that debased copper money will not prevent the simultaneous coinage of silver. The king, it is said, cannot borrow money from abroad for the upkeep of the army and navy, if Spain has an adul terated coinage. The reverse seems actually to he the case.

The king can pay his domestic debts in copper and save all silver to satisfy his foreign creditors. Nor is the copper coin so had as to drive all silver out of circulation. As a matter of fact, however, silver is disappearing, and this seems to be one of the greatest disadvantages accruing to debased copper coin. Taxes must he paid in silver, so that only silver flows to the treasury and never appears again. The king pays out nothing but copper, of which there is plenty, and all silver accumulated hy the treasury is sent abroad. Even the silver which remains among the people disappears, as everyone first wishes to spend his copper and will hide his silver until compelled to deliver it. Consequently, an enormous amount of copper is necessary. Mariana does not deny these facts, hut the reasoning seems unconvincing to him. It is said that genuine money cannot he distinguished from counterfeit hecause there is no longer any silver in the new copper coin. The hope of profit tempts many to falsify money, for the legal value is now nearly three times greater than before, when it came very near to its metal content.

Mariana admits that the hope of gain is a strong incentive to counterfeiters,-for people will risk anything if they 134 DE MONET AE MUTATlONE can swell 200 units into 700 and become rich over night, but points out that it is an erroneous assumption that cop per was mixed with silver in order to make genuine coin distinguishable from falsified money. The true explanation is, that originally, the maravedi was made of pure silver. Then it was more and more deprived of silver hut in such a way that some silver remained always. At last the Catholic Kings ordained by law how much silver was to be mixed with copper so as to prevent further adultera tion. The point at issue here is not that copper coin ought to contain a certain percentage of silver, which would only involve an unnecessary expense, but that the stamp used should be very intricate so as to baffle falsification. A much more important remedial action, however, would be to give more copper coins for a silver coin, so that the natural value of the copper, together with the mint cost, would equal the natural value of silver. Thus, all hope for profit would disappear and an end would be set to all counter feiting.

Other objections are more apparent than real. For ex ample, it is alleged that if the money were not debased rich people could not pile up treasures that would serve the poor. Mariana answers that many waste a great deal of money on vain and even harmful things, and that, conse quently, it would do no great harm if adulterated money were to render this prodigality impossible. Moreover, silver comes every year from the Indies and those who wish to do so can hoard as much as they please. The difficulty of transportation is likewise advanced as an argument against debasing the coinage, as is also the trouble involved in counting large sums. Mariana has heard from experts that the transportation cost to the most distant 1.35 MARIANA:-POLITICAL ECONOMY parts of the country does not amount to more than one per cent, which means only a slight expense. He admits that it is difficult and laborious to count large sums of copper coin, but this disadvantage disappears when the many ad vantages are borne in mind.

The last objection is the rise of the price of copper, which now costs forty-six mara vedis an ounce in Spain, whereas it can be bought for eighteen maravedis in France and for even less in Germany. This is doubtless a great disadvan tage, but there are other greater ones which convincingly condemn every adulteration of the copper coin as harmful for the country. Adultera~ion of the coinage is against the country's laws. The law of 1497 allowed any amount of gold or silver to he coined but limited the copper coinage to 10,000,000 maravedis. In 1566 Philip II forbade the coining of copper altogether excepting in cases where his special permission had heen granted, in order that there would be just as much in circulation as was necessary for the common use. Ma riana is of the opinion that copper should be employed only for small payments and for change, and he helieves all sur plus over and above this demand is harmful. For in Aris totle's opinion money was invented to facilitate exchange; and hence such money is the best which serves this purpose best. What, then, is the virtue of an adulterated copper coin age? It takes at least a whole day to count one thousand ounces of copper and the difficulty and cost of transporta tion are considerahle. The Spanish law, therefore, rightly forbids an excessive amount of copper coin. This does not mean that there should be only a silver coinage, as is the case in England and in various parts of Germany. There is real need for small units of money for small payments, making change, and giving small alms to the poor. Yet it 136 DE MONETAE MUTATIOlVE is douhtless hetter to have only silver coin than to he del uged with a flood of copper pieces.

Another and even more important consideration is the fact that adulterated coinage is against reason and natural law. The king cannot lawfully take private property from his subjects. If he were to claim half the crop of the farm ers as his own, giving them permission to sell the rest for douhle its value, everyone would condemn this action as unjust. Yet this is exactly what happens in case the coinage is adulterated. Nor would anyone approve of the king if he should fix the price of woolen and silk cloths three times as high as heretofore. Precisely this, however, has been done with copper coin at the latest dehasing: owners receive less than one-third, and the king takes the rest for himself, with evident injustice. As a result of a dehased coinage, prices will rise as much as money falls in metal value. This can easily be proved from the history of Alphonsus the Wise. Whenever prices rose, the king would fix a new legal price; hut merchants would not sell, and the law could not he enforced. Finally the king was expelled by the nobles. The same will happen again at present. Mariana's conclusion is, therefore, that money is never debased without a general rise of prICes.

Those who have dehased coin will he eager to spend it hut merchants will not accept it without demanding a higher price. Thus commerce will be upset, which is a fourth dis advantage. The king will compel them to sell for the legal price, hut to no avail, and high prices will prevail. The consequence will he that the new money must he with drawn or lowered in its face value, as has happened many times in the history of almost all European nations. The king himself will also suffer from an adulteration 137 MARIANA:-POLITICAL ECONOMY of the coinage, for how can he draw profit from the people's necessity? If commerce is interfered with, the people will not he ahle to pay taxes as high as those levied hefore, and the tax farmers will not pay the same amount to the sover eign as in former times. Finally, the people will hate the king and hlame him for the whole trouhle hecause every one ascrihes the good things to himself hut attrihutes all hardships and misfortunes to the nation's leaders.

Convinced of the evil effects of coinage adulteration, the Aragonians at the inauguration of a new king make him declare under oath that he will never tamper with their coinage. This is a wise and salutary precaution. Mariana wonders why those in high places do not know of the evil effects of inflation or why, if they do know, they neverthe less fail to learn the lesson of ahstaining from practices which involve numherless hardships. Thus far Mariana has dealt only with the adulteration of the copper coinage. He now questions whether the same rule holds good for silver and gold. The answer to this question is even more important, because silver is the standard coin. Gold will always be scarce and copper coin must he made scarce in a well-organized commonwealth. Silver coin is the nerve of commerce hecause it is hest fitted to make all kinds of exchange and to pay all kinds of debts. If, then, silver were to he debased as some have suggested, every thing in the State would necessarily he turned topsy-turvy.

The patrons of this scheme say that if silver were adul terated foreigners would no longer wish to export Spanish silver. Now they do export it despite the prohihition of the law. Moreover, this device will remove the financial difficulties of the king, for if he gained an enormous amount hy dehasing copper, how great would he his profit if he were to manipulate silver? Nor would Spain have to huy 138 DE MONETAE MUTATlONE silver abroad as is the case with copper. She receives plenty of silver every year from her colonies. Mariana cannot deny that it would be very profitable for the king to follow the advice of these counsellors, but he sees many difficulties connected with it and many reasons against it. If silver coin is to be debased, what about the silver to be used for industrial purposes? If this were de based in the same way, the price of silver would necessarily fall and great confusion would result. Moreover, silver smiths will maintain that low grade silver cannot be worked as well as pure metal. If only silver in coins is debased, bullion will sell higher than coin. Should old coin be ex changed at par for the new? That would be unfair. If it is sold at a premium no injustice will be involved, but con fusion and complication will ensue. If old coins were to be suppressed, the king would do the same as in the case of copper coin, i.e., rob the people. And if silver were to he adulterated, should the same happen with gold coin? If so, the same confusion would result as in the case of copper and silver. If not, the proportion between silver and gold could not be maintained, with the result that it would not sell as at present in the ratio of 12 :1, but rather of 14 or 15 :1, according to the degree of adulteration. The same rise of prices would ensue. Price fixing would he of no avail, not to mention that not everything can possibly be priced by the government.

The same disturbance of commerce would result, so much the more because silver is the soul of all business, which is so delicate a thing that it is greatly affected by the least disturbance. If all the disastrous results of the adultera tion of copper have not as yet appeared, this is because sil ver has not been touched. Even at present a silver piece is exchanged for thirty-four mara vedis. But if silver he adul139 MARIANA:-POLITICAL ECONOMY terated, rents and annuities will shrink and many people will lose a part of their revenues. This would he equiva lent to a new and heavy tax falling upon churches, monas teries, poor and orphans, in short upon all exempted per sons. If, then, it is harmful to change copper, how much more evil is involved in attempts to debase silver! The king should not wish to make profit out of the sacrifices of his suhjects and it is a fallacy to helieve that an adulteration of Spanish silver would prevent its being exported abroad.

At present the French silver is a little finer than that of Spain, and yet there is plenty of Spanish coin in France. The reasons are obvious. Spain has more imports than ex ports, and the royal pensions and payments to foreign cred itorsdraw the silver out of the country. If some one insists that the fineness of the Spanish silver attracts foreigners, Mariana will not quarrel with him hut will content himself with remarking that no one can prevent them (foreigners) from keeping the fineness of their silver below that of Spain in order to draw the latter to themselves. They cannot do without Spanish silver since they need it as much as they need life and blood. The general conclusion, then, is that one evil is not to he healed hy another and greater one. The only remedy against the flood of had money is the lesson of deflation which is taught by history. This means lowering the value of the new coin by one-half or two thirds. Should such a readjustment not suffice, the new coin might be suppressed altogether and replaced by genu ine money. In either case the loss should be borne hy him who has profited by adulteration-that is, the king. Ma riana dares not hope that this will happen, because it has never happened hefore and would he most extraordinary.

Even so, it would he less evil to suffer the loss than obsti140 DE MONET AE MDTAT/ONE nately to persevere in the old error and let the illness grow worse. Another method, of course, would he to debase silver, but this would mean general disaster. The gist of the whole discussion is, as Mariana tells us, that the two values of money must balance each other as nearly as possible, and that whenever they are disturbed the whole country will be exposed to numberless hardships and disorders. The people of Spain would act wisely if they made the king promise never to touch their coinage whenever he asked for new subsidies. If this assurance had heen exacted in time, Spain would long since have obtained a stable coinage. There have also been, Mariana notes, several changes in gold coin within the last hundred years. Originally, Spain's neighbors used the same fineness of gold; hut when Spain received new and rich supplies from the Indies, the other nations adulterated their gold coin to attract Spanish gold to their countries. Thereupon the Spaniards raised their gold exchange and finally debased their coinage, both of which amount to exactly the same thing. But their greedy neighhors went on debasing their gold more and more. If Spain should follow their example it might easily happen that Spanish gold would be rejected abroad or evaluated at a lower rate. The one could hardly redound to the credit of the Spanish nation and the other would not he of any advantage whatever.

Nevertheless Mariana looking at the history of the last hundred years during which four changes were made with out grievous results believes that it would do little harm to adulterate gold. The reason is the fact that gold will always he scarce, so that its adulteration will not greatly interfere with business. But no change ought to be made without the consent of the people. As to silver and copper, it is abso141 MARIANA:-POLITICAL ECONOMY lutely necessary that their face values agree as nearly as possihle with their metal content. The proportion hetween gold and silver should also be regulated. Gold ·of twenty four grades corresponds in fineness to silver of eleven grades. This is their natural relationship unless demand and supply change, as is the case with all commodities. At present the proportion hetween the two metals is about 12 :1, and it has almost always heen the same. If some writers give a different proportion, it is hecause the gold and silver supply varied at times. If this ratio were changed for ex ample to 16:1 or 18:1; it would mean fraud and injustice unless the gold grade were higher and that of silver lower.

In his final chapter Mariana makes a number of sugges tions calculated to help the needs of the king without hur dening the people. It is said (he remarks) that statesmen very often act according to the principle that necessity knows no law. But it is always wrong to change the coinage without consulting the people. It would he far better if the royal expenditures were decreased, for royal majesty gains hy moderation rather than hy luxurious extravagance. History tells us that formerly the Spanish kings spent very little; and if some will say that times have changed, the example of the late Philip II will show that this assertion does not hold good. The great prohlem is to ascertain how the royal expendi tures may be diminished. Our author admits that he does not know how this could he done hut that prudent men in the royal palace are in a position to know. At all events it is whispered among the people that the stewards of the royal household waste a great deal of valuable food. It might also he possihle to diminish the numher of large dona tions, or to make them less liheral. This does not mean that the king ought to he niggardly in rewarding his friends.

142 DE MONETAE MUTATIONE But the number of high offices is so great that a reasonable distribution of them would make extraordinary presents superfluous. Nor is it advisable to be too generous in mak ing rewards. A better practice would be to give small re wards at different times. If favorites of the king receive all their emolument at once~ they will expect no more and lose all interest in serving the king. They will~ indeed~ be tempted to withdraw from the Court to enjoy in leisure and idleness what was given them for their services. It is unlawful for the king to dispose of tax revenues at will, because the people pay them to defray public expendi tures. Only after all common wants have been satisfied may the king use the rest for other purposes. As the sove reign is not the owner of the private property of his sub jects~ he must avoid unnecessary expenditures and unnec essary wars. If a province can be maintained only at the cost of continuous war, it ought to be given up just as a sick member which causes disease to the whole body is amputated. Philip II acted wisely in giving up the Nether lands. The same policy was followed by the Roman Em peror Adrian~ who destroyed the bridges across the Danube and across the Euphrates which had been built by his prede cessor Trajan. As a wise ruler he saw that a further exten sion of the Roman Empire would be harmful to the general good of the people.

It is essential to a wise administration that a strict account be demanded of all officers, and that offices be distributed according to merit and not through the use of bribes and in other dishonest ways. It is a pity to hear people say com monly that all royal offices are for sale, bishoprics not ex cepted, and that they never are conferred according to merit or worthiness. Many officials start their careers as beggars and within a short time emerge rich. Whence do they get 143 MARIANA:-POLITICAL ECONOMY their spoil? From the blood of the poor, from the bribes of candidates for governorships. 'To remedy this abuse it would be a good thing if all officers were to render an ac count from time to time and be deprived of all for which they cannot definitely account. It is said that tax administrators make agreements with the tax farmers in such a way as to get for themselves by far the greater share of the amount paid for the royal revenues.

Governors of cities use various dishonest means to enrich themselves, granting in public privileges for which they receive payment in private. There is, indeed, no end of corruption by which the people are oppressed and robbed in various ways. Royal treasurers do not meet bills in time, but invest the king's money in business, thus enriching themselves and defraading the sovereign. It is also charged that some of them have friends and protectors in the royal courts with whom they divide their spoils. To stop these abuses and to relieve the king from financial stress, the royal taxes and rents must be carefully administered. As things are now, not even half of the proceeds find their way to the king's treasury. They go through a great many hands and, like a liquid poured from one vessel into another, leave a residue in every palm. Finally, luxuries ought to be burdened with a high tariff to discourage their importation, which is so harmful to the country; or at all events to yield a revenue to the king. If the king were to follow Mariana's advice, he would gain much more than by the late adulteration of the copper coin age. No hardship to anyone would be involved but rather the wholehearted approval of the people would be gained.

Some will say that it is quite natural for the government to resort to the same device that was used by former kings -the adulteration of the coinage. That is true, hut the 144 DE MONETAE MUTATIONE times are not the same as they were before but have changed for the better. At present, Spain has many nlOre sources of revenue, controls a much greater territory, is verily a world power and has had great success in war. The whole trouble lies in the fact that the expenditures are not bal anced against the revenues, with the result that all public finance is disorderly. Ferdinand the Catholic, one of the most powerful Spanish kings, once declared hinlself unable to pay to Emperor Maximilian the comparatively small sum of 100,000 gold pieces, in spite of the great flow of gold and silver from the new colonies. This wise ruler knew what his finances could afford because he kept a very careful account and budget. Nothing of the kind is done at pres ent, and this is the root of the whole trouble.

In conclusion ~1ariana once more pronounces sentence on the damnable custom of adulterating the coinage: "If it is done without consulting the people it is unjust; if with their consent, it is fatal in many respects." If this opinion is right, thanks be to God, writes Mariana. If not, let the readers forgive the author out of regard for his good inten tion. His experience as an historian has put the pen into his hand. If he should have offended anybody, it ought to be borne in mind that salutary medicines are sometimes hitter. He (Mariana) wrote this treatise because he be lieved that in matters concerning all, everyone should have freedom to say what he thinks best, be it right or wrong. 145 Chapter II Mariana's Theory of Money T HE whole of Mariana's treatise on money might be called an historical refutation of inflation, although naturally he never used the word inflation in its modern significance.

By inflation we now mean a supply of paper money far in excess of the demand and consequently having less purchas ing power than the old currency. The enormous. advance of prices during and shortly after the world war was due in the main to a vastly increased supply of paper money. Exactly the same thing happened in Spain when Mariana wrote his treatise. The king had wiped out his domestic debt by adulterating the copper coinage, i.e., by increasing its supply nearly three-fold. This again was made possible only by decreasing the amount of metal used in minting the coins. The silver alloy was extracted, the face value raised and the weight reduced. One old maravedi was thus changed into nearly three. 1 The chief difference between modern inflation and the adulteration criticized in our text is the fact that in those times everybody adhered to the metallic theory of money whereas at present the chartal theory 2 is partly accepted.

1 Quo tempore magna pecuniae inopia in Hispania erat, bella multis locis ac diuturna multaeque aliae difficultates aerarium penitus exhauserant. Ejus supplendae inopiae multae rationes sunt excogitatae at1ue tentatae. Inter alia visum est aeream monetam viti are idque bifariam. Duplicato primum veteris monetae valore, unde ad Regem rediret quod adjiciebatur, nimirum totius summae (quae ingens erat) dimidium. Deinde nova ex aere puro moneta est conflata, nullo argenta admixto, uti ante a moris erat, ac potius de pond ere semi sse detracto. Unde amplius duabus tertiis lucri Regi accessit. De M01~etae Mutatione, Argumentum, p. 190. 2 The expressions "chartel theory," "chartel money," "chartalism" and "chartalist" are 147 MARIANA:-POUTICAL ECONOMY According to Mariana, money is an exchange commodity and not simply a means of exchange. He holds that the face value of the coin must exactly or, at all events, as nearly as possible coincide with its bullion value. Otherwise, the king would charge an unjust price for the respective metals.

Here we confront the mediaeval idea that business trans actions must he carried through with a regard for the just price. The price fixed by law for almost all commodities was held hinding in conscience. The royal stamp on the various coins was nothing more than a special case of legal price fixing. Consequently, if the face value was higher than the hullion value, the king charged too high a price for the precious metal and so acted unjustly. But since everyone received for his old coin nominally the same amount in new money, the royal adulteration of the money appeared to he harmless. Only the diminished purchasing power of the new coin made it evident to the people that they had heen robbed. . Mariana invokes historical facts to prove that every adul teration of the coinage necessarily results in a rise of prices for all commodities l or, to use a modern expression in a diminished purchasing power of the monetary unit. It is true that in the case under consideration these harmful effects have not as yet worked themselves out to their full extent. There is only a question of time. 2 People know taken from G. F. Knapp's The State Theory of Money. Knapp holds that the value of all modern money is derivative from the law of the State. Accordingly to him notes and coins, gold coins not excepted, are merely tokens of a claim of the holder guaranteed by law. He coins the word chartal means of payment (derived from the Latin word charta to which he gives the meaning of mark or token) in opposition to metallic or rather "autometallic"

money. The chartalist considers the legal (face) value as the more important element; the metallist insists upon the intrinsic or bullion value. d. G. F. Knapp, The State Theory of Money, translated by H. M. Lucas and J. Bonar, pp. 25sq. 1 Ut credam ac pro certo ponam, nunquam non moneta mutata subsecutam caritatem. De Monetae Mutatione, cap. 10, p. 210. 9 Ad tertium incommodum procedamus mercium caritatem omnium non minorem brevi futuram, quam quae est de pecuniae bonitate et pondere detractum. An id ex nostro capite fingimus? et non potius quae majores experti sunt mala, quoties eo ventum in provincia est, ut pecunia detereretur. (Then follow a number of instances from Spanish history) • • • Quo loco considerandum mercium caritatem non continuo et manifesto ex 148 MARIANA'S THEORY OF MONEY very well that the bullion value of the new coin is five sevenths less than before and will, therefore, demand a price correspondingly higher. In vain will the king fix a legal price at which the merchants have to sell, for such a price will he unjust. Moreover, it is impossible to fix all prices in detail.

1 The result will be that no one will be willing to sell for an unfair price, that commerce will be disturbed, and that the people will suffer from the resulting high cost of living. General business depression having set in, people will he unable to pay high taxes and consequently the king will suffer in the end. Thus the specious gain will turn out to be a delusion. It is evident that Mariana as an extreme metallist was absolutely right in his reasoning. According to him credit money was an unsound medium of exchange, and indeed is not even today altogether free from danger. If we had free coinage of silver and copper we should face the same prob lem as our Spanish Jesuit. Had the Spanish king kept the new coinage at the same amount as before, there would have been no fatal effects. But since this limitation would not have served the king's purpose, he would not have made the change. He wanted primarily to payoff his domestic debts, and this was possible only through an increase, i.e., an inflation o£ the coinage. It is apparent that from his standpoint and in view of the monetary policy of the time, Mariana was absolutely right in condemning the king for having robbed the people.

Though an extreme metallist, our author is not ignorant of some of the advantages of a chartal means of payment. He says in one place that if it be advantageous to dehase nostra .mutatione subsecutam. . . . Verum ex iis quae sunt dicenda constabit, diu hoc non posse constare, quin rerum perturbatio consequatur. Ibid., p. 209. 1 Quod si taxam mercium minantur, quid ex eo remedio consequetur superius est explicatum: neque vero vaenalia omnia taxari possunt. Ibid., cap. 11, p. 214. 149 MARIANA:-POLITICAL ECONOMY the coinage, the proper thing to do is to make money of paper, leather or lead and so diminish the cost of produc tion. 1 He mentions two examples of paper and leather cur rency, hut it is understood that recourse to either should he only a temporary measure. Among the advantages of suclJ. adulterated coinage, he enumerates the salvage of precious metal and the facility of transportation.

2 These are exactly the reasons why in modern times credit money is preferred to coin. But Mariana does not at all approve of chartal money. He was unable to see how the interests of the people would he protected under such a monetary system. He had good reason to distrust his government, which did not aim to facilitate exchange hut to rob the people under various pretexts. Mariana, it is true, knows some of the advantages of the chartal theory, although he could not prevision a time when governments would utilize this sys tem for the common good and without detriment to the peo ple. As a matter of fact, the monetary history of the war and the post-war period has shown clearly enough that even today governments may impoverish their people in using the right to issue credit money. When the cur rency hecomes inconvertihle the chartal theory breaks down. One of the results of adulteration of the coinage (he says) is the fact that good coin will disappear and cheap money become the standard or as Gresham puts it, "Bad money will drive out good money." Mariana also knows this law, though his suppositions are a little different.

1 Et alioqui si valores hos (i.e., bullion value and face value) disjungere Hcet, cudant monetam e corio, cudant e papyro, cudant e plumbo, quod aliquando in rerum angustia factum scimus: eadem enim recidet ratio, minorque operarurn sumptus erit, quam si ex aere conflabitur. De Mon,etae Mutatione, cap. 4, p. 196. 2 Ac primum hac facta mutatione argenti sumptu liberamur, cujus magnum pondus multaque talenta antea aeri miscebantur quotannis nullo prorsus fructu, id praestat bonitatis imminutio. Ex minore pandere consequenter vecturae major facultas expeditae, quocumque mercatores earn voluerint pecuniarn deferre, eaque in commerciis uti, quod maino antea constabat. Ibid., cap. 7, p. 200. 150 MARIANA~S TIIEOlty OF :MONEY Gresham supposes that good and depreciated coins of the same denomination are circulating at par, or that either gold or silver are over-valued. Mariana contends that cheap money will have less purchasing power than good coin, and that consequently both may circulate simultaneously, not at their face values hut according to their bullion content.

The reason for the necessity with which Gresham's law will operate is the chance to make a profit hy selling good coin as hullion. This reason does not apply directly in Ma riana's case. If copper was over-valued in his time, it was to no advantage to melt down old coins and sell them as hullion ahroad hecause copper was already much dearer in Spain than elsewhere. Nor would the king pay a higher price than the face value of the new coin for genuine money. In this case Gresham's law worked in a somewhat different way. Since copper was five-sevenths over-valued, many were tempted to falsify coin, that is, to coin money of their own and make an enormous profit. This is exactly what happened, as Mariana tells us. People will (he says) risk anything if they have a chance to hecome rich over night. The danger of falsification is, therefore, one of the greatest evils attendant upon an adulterated coinage. Another re sult of the same law is the fact that the adulterated coin will become the standard. The king wants to have his taxes paid in silver, although he never pays out anything hut cop per. All silver that flows into the treasury never reappears but is shipped abroad to pay the roy~l foreign debts. Even private individuals wish first to spend all copper coin and then to hide their silver. Thus there is a flood of cheap money, and silver is disappearing from circulation.

Normally it is impossible to replace one coin with an other; and so there is a limit to the operation of Gresham's law. The Spanish king seems to have guarded himself 151 MARIANA:-POUTICAL ECONOMY even against this natural limitation. In order to make cop per coin the only domestic money, he bought copper abroad in enormous quantities, paying an excessive price. In Spain one mark (eight ounces) of copper cost forty-six maravedis, whereas it sold in France for eighteen and in Germany for even less.! Thus it is not surprising that the king succeeded in withdrawing all precious metal from circulation, to the great detriment of the national resources. He sent almost all silver and gold ahroad to pay his foreign dehts, thus hreaking the laws of the country in the most grievous man ner. He made all domestic payments in copper so that this clumsy coin hecame the national standard. No wonder that people took fright and refused to deliver what little silver was left to them.

The danger of counterfeit money was, as we have seen, one of the worst effects of debased coinage. As copper was greatly over-valued, many would take great risks, in order to enrich themselves by changing genuine old money into new coin. 2 The adversaries of inflation maintained that the extraction of silver from the old coin had made counter feiting possihle. Mariana does not agree. He helieves that it is not only not harmful to coin small units without silver alloy, hut that it involves a saving of precious metal and a diminution of production costs. It does not appear how Mariana conceives of this saving, for, if the small coin is to contain no silver alloy and yet to have full metal value, 1 Postremo aeris caritatem accusant tanta ejus copia signata ..•. Ante paucos quid em annos in Gallia centenarius aeris emebatur decem et octo francis. Ita octo unciae (quod nos pondus Marcum dicimus) tredecim Maravedinis constabat, in Germania etiam minoris erato Nunc in Castella idem pondus quadraginta sex stat nihilominus: quod pretium in dies crescet cudendi monetam aeream sine fine necessitate, aut potius aviditate. De M onetae Mutah'one, cap. 9, p. 207.

1I Deinde quod spes lucri multos alliciet triplo majoris quam antea, uti superius est dictum, quoniam a naturali valore parum discrepabat, legalis nunc multum. Ex his rationibus non negabo, qui enim possim? posteriorem magnam vim, quae ab spe lucri sumitur, quando ducenti aurei in septingentos excrescunt ea pecunia adulterata, quod multos haud dubium alliciet ut se et sua, quo id assequantur, cui vis discrimini offerant? quis enim fraenet incensam cupiditatem ex inopia repente per hunc modum emergendi. De Monetae Mutatione, cap. 9, p. 206. 152 MARIANA'S THEORY OF MONEY the coins must be heavier than if they were mixed with silver. Consequently the difficulty of transportation will increase and a rise in the price of copper bullion will fol low. To set a limit to falsification, two remedies should be applied: The stamp must he very intricate so as to make imitation practically impossible, and the hope for gain must be eliminated by not over-valuing copper. If it is no longer advantageous or easy to coin false money, the abuse will disappear/ Among the so-called advantages of inflation, Mariana men tions the abundance of money. If there is plenty of money, borrowing will be easy and interest low, so that agriculture and all trades will flourish. The adversaries of adultera tion maintain, on the contrary, that the trade and agriculture will suffer if the remuneration be nothing but cheap coin.

The history of our present post-war period may throw some light on these contradictory viewpoints. It would seem that both assertions are partly true. When the mark was low there was, for instance, a temporary apparent prosperity in Germany. German industry was producing all kinds of commodities at high speed, because everybody was eager to buy in Germany at the ridiculously low prices. It was, how ever, very doubtful whether the country profited on the whole and in the long run. Since foreigners eould easily outbid natives, the result was that prices went up to such an extent that the German people could no longer buy their own products. Although the prices paid by foreigners seemed to be high, they were really not half of what the goods were worth. Therefore the German people living from hand to mouth practically worked gratuitously for the 1 Si mea tamen ratio valeret aliquid, cuperem ut nota monetae elegantior esset, qualis Segobiae signatur ad mol as monetarias, praeterea monetis pluribus aereis mutaretur argenteus regalis .... Quae eo pertinent omnia, ut cum metallo et sumptu signandi valor argentei exaequetur, quod est legalem valorem naturali adaptare. Sic enim minori lucro paud aggrederentur earn monetam adulterare. Dc JU01wtae Mutatione, cap. 9, p. 207.

153 MARIANA:-POLITICAL ECONOMY rest of the world. The government, aware of the danger, placed high tariffs on goods going abroad, but even so, the country suffered severely. The other negative assertion that inflation discourages production because it renders remuneration very precarious has also been verified by the experience of the post-war period. People found out that it was useless to save because time would wipe out all their savings. If, for example, a German farmer sold a horse for 50,000 marks, the only thing he could do was to buy something else on that very same day, because the next morning his 50,000 marks might have no more than one-half their purchasing power. A week later they would perhaps amount to scarcely their paper value. The result was that everyone who had money spent it at once, either buying something useful or disbursing what he had for pleasure. Nor could anyone be blamed.

Saving was equivalent to losing everything. The only ad vantage a man could derive from his money was contingent upon spending it immediately. Needless to say, this was a very unhealthy condition and it demoralized the people It was perhaps the greatest evil brought on by inflation. Exactly the same thing seems to have happened at the time of Mariana, for he tells us that everyone was most eager to spend his copper money first, l because its purchasing power was obviously destined to fall. If the evil effects of inflation are so numerous, it is of the greatest importance to stabilize the monetary unit. This is still a great problem in our own day when even the gold standard has proved imperfect. Various schemes have been proposed to stabilize the purchasing power of the monetary unit with the help of a new device known as Index Num1 Sed et quod argentum inter cives rnanet, disparet, CUNCTIS PRIUS AEREAM MONETAM EXPENDENTIBUS, recondentibus argenteam, nisi re necessaria co~antur Warn proferre, [Je Manetae MutIJtione, cap. 9, p. 206.

154 MARIANA'S THEORY OF MONEY hers. Weare still far from a satisfactory solution of the vexing prohlem. Mariana had, of course, to face an alto gether different situation. Nominally Spain then had a silver standard, hut the adulteration of the small coin had created a copper standard that was very unstahle and also very clumsy. It was unstable because the depreciation of the new coin took place gradually, until at length it could no longer he exchanged for its face, hut only for its hullion value. Meanwhile the country was suffering all the hard ships of progressive inflation. To safeguard the units of exchange, men of earlier his torical periods had kept standard examples of them in their temples, so that at all times those in use might be verified or checked hy those of the sanctuary. Despite this precau tion, no unit escaped diminution, and in the end the ideal standards were actual multiples of reality.l Amidst all the confusion of the late adulteration of the copper coinage the question naturally arose, Mariana ob served, as to how to get back to normal conditions. He re plied that the only way, is deflation. Either the face value of the new coin must he lowered, or the new coin must he withdrawn and replaced with genuine money. This will nat urally involve a heavy loss for the holders of copper coin.

The proper thing to do would he to indemnify them. But who should do this? Mariana fearlessly maintains that the one who has derived advantage from the adulteration ought to make good the losses resulting from it. And since the king alone has gained, he should sustain the loss. This is the right solution, hut our author does not dare to hope that 1 Commercii haud dubium fundamenta, quibus universa mercaturae moles incumbit, pondera et mensurae sunt at que pecunia. Pleraque enim pondere et mensura vaeneunt, cuncta pecunia. Quae eo pertinent, ut sit omnibus persuasum uti in structuris fundamenta immota manent et intacta, nen secus pondera, mensuras, pecuniam, sine periculo non moved et commercii detrimento. Id intelligebant antiqui, cum quo major cautio esset, specimen harum omnium rerum in sanctissimis templis reponebant, ne a quopiam temere vitiarentur. J]e M01li!tae Mlttatione, cap. 5, p. 198. .

155 MARIANA:-POLITICAL ECONOMY the king will ever act upon it. No, such a course has never been taken in the past, and it would be an unheard-of thing. Therefore it will he necessary that the actual possessors of the new coin stand the losses resulting from deflation. 1 This will no douht mean a great sacrifice, hut it is hetter to apply even a bitter medicine in time rather than to let the disease grow steadily worse until it causes destruction. It has been said repeatedly that Mariana was aware of a vacillation of gold and silver according to their respective abundance or scarcity. During the whole Middle Ages the ratio between these two metals had almost always been as 12 :1, and many writers, of whom Bodin was one, thought that this was a fixed ratio. Mariana says that this is the ordinary proportion, but adds that it may change according to the abundance or scarcity of the respective metals, 2 and that it can be preserved only if both gold and silver maintain the same fineness. Should one of them be debased, the ratio would naturally change. As this had happened re peatedly in the past it is not surprising that various writers disagree in their estimates of the valuation of gold and sil ver.

Another proof that Mariana knew the quantity theory of money is his observation that an increase of the gold and silver supply will raise prices. The fact that in the time of Philip II not only single crowns but also multiples of them 1 Quae ergo ratio institui poterit, dicat aliquis ad resarciandum incommoda ex mutatione aereae monetae et copia nata? Ego sane nunquam ea mentesim, ut incommodum factum majori incommodo resarciatur, peccatum peccato, Sunt enim remedia quaedam ipso morbo pejora. Deinde addo, me mali medicinam ignorare praeterquam majores ab omni memoria sunt usi in simili angltstia, nimirum ut valor novae monetae minuatur dimidium aut duas terti as. Deinde si id satis non erit sanando vulneri, penitus prava moneta abrogetur, substituatur proba. Utrumque damno ejus qui fecit ex communi calamitate lucrum, praestari aequum profecto videbatur. Sed quoniam id parum usitatum video, imo nunquam usurpatum rpraestiterit eorum qui possident fieri rletrimento, quam ut in errore diutius perstandl obstinati morbi causas augcamus; aut vero eo recurratur ut argenti bonitas minuatur, quod sine exitio communi omnium non contingat. De Monetae Mutatione, cap. 11, p. 215.

2 Atque haec pro portio (12: 1) fere servatur inter haec metaIla, nisi alterius inopia copiave ea mutetur ratio. ut in aliis mercibus copia detrahit de pretio penuria addit. De MonetlU Mutatione, Cap. 12, p. 217. 156 MARIANA'S THEORY OF MONEY were coined was due, as we learn, to a vastly increased gold supply, and, so it would seem, to a greater demand for cur rency in high denominations as a result of rising prices. 1 This latter reason is indicated hy the greater gold content of these new coins. The metallic theory of money does not imply that face and hullion values should exactly agree. The mint cost and a slight seigniorage may take the place of a fraction of the hullion value. Mariana knows that some advocate gratuitous coinage-that is, no charge for mint cost or seigniorage, hut he helieves that it is unfair to oblige the king to coin money at his own expense. The king would, however, act unjustly i:£ he made the hrassage charge so enormous that it decreased greatly the divergence hetween face value and metal cost.

2 Our author is convinced that good coinage must create lower units for small transactions and change. He therefore finds fault with the English system, which had no coins of haser metal than silver. Small coin must not, however, exceed the need. Otherwise it will become the standard, as has always happened when copper coin was dehased and at the same time inflated. 3 1 Atque propter mag-nam copiam auri non simplices (coronae) cuduntur modo, sed duplices, quadruplices, majorique pondere. De Ponderibus et Mensuris, cap. 22. 2 Non equidem in ea sum sententia, ut Prineipem statuam suo sumptu debere monetam conflare: ac potius aequum arbitror ut pro cudendi labore, universoque monetali ministerio addatur valoris aliquid ad metalli aestimationem, ac ne fore quidem absonum, si in signum dominii et praerogativam pars aliqua exigua lucri Principi ex ea administratione accedat. . . . Idem tamen contendo has duos valores diligenter et accurate exaequandos.

De Monetae Mutatione, cap. 4, p. 196. 3 Atque in usum communem aerea moneta soum minutis emptionibus servire debet, et ad permutandas monetas majores auri argentive. Quidauid hos fines excedit, id vero non sine publico damno, et rerum perturbatione continget. Pecunia enim ad commercii facilitatem inventa, haud dubium ea commodior existat, quae id melius et opportunius praestabit. Sic Aristoteles testatur primo Politicorum libro cap. VI. Quod in aerea moneta contra accidit. si multa sit. Gravis molestia numerandi, vix integro die un us homo mille aureos in ea moneta numeret. Quid de vectura dicam? non sine lahore et sumptu deferatur in remota! regiones, uncle merces comparantur. Sic illuvies hujus monetae nostris legibus adversatur. Non equidem proharim, ut solum cudatur argentea moneta, quod fit in Anglia jussu Isabellae Reginae non ita pridem defunctae, et in quihusdam Germaniae civitatibus. Quan tumvis enim in minutas partes tribuatur ... non erit ad manum, uncle min uta et vitia scruta emantur, et quod egenis tribuatur. Verum multo magis est noxium, si in alteram partem peccetur, moneta aerea provinciam si inundet, instar fluvii hibernis inflati imbribus.

Ibid., cap. 10, p. 208. 157 MARIANA:-POLITICAL ECONOMY Though Mariana strongly opposes any kind of adultera tion, he attributes less importance to a debasing of gold. Gold, he believes, will always be scarce; hence its inflation would not greatly interfere with business. He surely did not surmise that 300 years later all great nations of the world would have adopted the gold standard. In his day Spain, like most other European countries, had a silver standard; and so he strongly insisted that silver should never he dehased, hecause it is the nerve of business. Silver and copper must have par value because they are the most im portant coins. But though gold should be adulterated, it would he impossihle to suhstitute a dehased gold standard for silver and copper, as the gold supply would not suffice. Thus he states one of the limitations of Gresham's law. 1 Mariana, like all orthodox bullionists of his age, was opposed to the export of gold and silver, as forbidden at that time by the laws of Spain. The fact that the law for bade it was sufficient to induce him to uphold this prohibi tion; for it can he to no disadvantage for the country that its laws be observed. At the same time he knew very well that Spanish gold and silver would How ahroad anyway.

And why? Because foreigners needed Spain's silver "like life and hlood" and would get it under any circumstances. 2 Unfortunately he does not tell us why foreigners needed Spanish silver. But he does explain why they ohtained it: because Spain had more imports than exports. Prior to the discovery of America, all of Europe was suffering from a 1 Credam ta:,men noxium magnopere haudquaquam futurum, si aurum mutatur parte bonita tis detrqcta auctove pretio. Hoc maxi me argumento, quod intra non muItos annos toties repetitamutatio incommoda insignia non attulit. Auri copia prae argenta exigua semper existit, \minor ejus monetae frequentia et usus. Sic non credebam fore magnopere incommodum, si contingat mutationem fieri. De Monetae Mutatione, cap. 12, p. 216-17. l! Quod si quis obstinate contendat argenti bonitatem id etiam praestare, (viz., that precious metal goes abro~d) non equidem negabo, modo adversarius cogitet nulla arte posse retineri externos, quin .continuo nostra moneta suam deteriorem faciant, ut nostrum argentum avert ant ad se, quo carere sane non possunt magis quam vita et sanguine. Ibid., cap. 11, p. 214-15.

158 MARIANA'S THEORY OF MONEY shortage of precious metal. For this reason laws which forbade the export of gold and silver were enacted. Ma· riana does not seem to have noticed that this reason no longer held good for Spain, which obtained enormous stocks of gold and silver from the mines in the new world. The other nations, seeing Spain's abundance of precious metal, were eager to share her riches and to trade with her in order to receive gold and silver in return. Consequently Spain's imports exceeded her exports. She had, to put it in modern language, an unfavorable balance of trade, and was perforce obliged to pay the excess of import over export in precious metal. This was one of the reasons why foreigners would get Spain's silver under all circumstances. Moreover, the Spanish king had to meet large payments abroad in silver and gold, and thus personally violated the laws of the coun try in the most flagrant fashion.! It is clear, at all events, that Mariana saw the impossibility of enforcing the law; and the only reason why he does not advocate its abolition seems to be his inertia in adhering to old customs, although such conservatism was at variance with some of his other most progressive views.

1 Praecipuae causae duae sunt, altera mercium externarum invectio quibus· Hispani e'Yent neque possunt compensare terrae .oPibus tantam copiam, ut necess~ sit pecunia suppleri: quod ~eest.. . . qu~s merces gratis dare externi non debent, sed aliis mercibus quarum suppet~t mUlOr copla, et argento mutare. Regis deinde expensae et pensiones annuae e~t7rms fact.~e ad ter millies sextertium perveniunt, milliones septem quotannis, quae summa niSI mensarlls numeretur cum facultate eo deferendi pecuniam, ubi ea Rex opus habet nullo modo expediatur. De Monetae Mutatione, cap. 11, p. 214. • 159 Chapter III Contributions to the Theory of Money W E may now find it profitable to compare Mariana's treatise on money with the works of earlier writers on the same subject. Is this treatise as outlined in the last two chapters a real contribution or merely a repetition of what had been discovered by earlier writers? Pascal Duprat in the article to which reference has been made 1 maintains that De Monetae Mutatione was an independent work. "Such is Mariana's book on money," he writes. "It is written in that beautiful Spanish of the sixteenth and seventeenth centuries which is the classic speech of the pe ninsula and which reminds the reader more than once of the firm and vigorous tone of Latin.

2 According to the usage of his age the author has been lavish with his erudi tion. He refers on every occasion to the Greek and Roman antiquities. The historians of the following periods also furnish him with numberless arguments, and each one of his propositions is, as it were, based upon some testimony af forded by the past. "But what is doubtless the most remarkable feature of this work is the idea which inspired it from beginning to end. The theory of money returns, so to speak, on each page in all its scientific rigor. We must not forget that this treatise on money dates back to the last years of the six1 Page 1. liP. Duprat has used the Spanish version for his article on the Spanish Jesuit economist. 161 MARIANA:-POLITICAL ECONOMY teenth century. Our 'Oresme had doubtless discovered the true principles of money two centuries earlier; Copernicus, ,who also preceded Mariana by a few years, remained in obscurity until recently. Bodin, Scaruffi and Davanzati, who are of the same epoch, could have been known to the Span ish Jesuit, but apparently he did not know them despite his extended visits to France and Italy. England did not contribute anything of value to the discussion of the sub ject until the seventeenth century; and only in the eight eenth century was the theory of money definitely fixed by the very founders of the (new) science (of' Political Econ omy).

"Mariana's work can therefore he considered an original book. Until now it has escaped the attention of writers who in France and elsewhere have essayed the history of eco nomic thought under various aspects. This is an omission which must be rectified in the future for science, justice and truth demand it." 1 Although we should like to subscribe to this eulogy of our hero, we must in the interest of truth demand consid erable modification of it. One need not wonder that Pascal Duprat was somewhat inaccurate in his statements. His 1 Tel est Ie livre de Mariana sur 130 monnaie. II est ecrit dans cette belle langue espagnole les XVI· et XVII· siecles, qui est celle des classiques de 130 Peninsule et qui rappelle plus d'une fois Ie ton ferme et vigoreux de 130 langue, Iatine. L'auteur, suivant l'usa~e du temps, y a seme l'erudition a pleines mains. II invoque a chaque instant l'antiquite grecque et romaine. Les historiens des temps qui ont suivi lui fournissent aussi de nombreux argu ments. Chacune de ses propositions s'appuie, pour ainsi dire, sur quelque temoignage du passe ..•• Mais ce qu'il y a sans contredit de plus remarquable dans cet ecrit, c'est 130 pensee qui I'inspire d'un bout a l'autre. La theorie de la monnaie s'y retrouve, pour ainsi dire, a chaque page dans toute sa rigueur scientifique.

I1 ne faut pas oubHer que Ie traite de Mariana dates des dernieres annees du XVI-siecle. Notre Oresme avait sans doute decouvert deux siecles auparavant les vrais principes de la. monnaie. Copernic, qui devanl;a aussi Mariana de quelques annees, est reste dans l'ombre jusqu'a ces derniers temps. Bodin, Scaruffi et Davanzati, qui sont de la meme epoque, auraient pu etre connus du jesuit espagnol; mais il parait les avoir ignores, malgre son double sejour en France et en Italie. L'Angleterre n'a donne sur Ie meme sujet des ecrits de quelque valuer qu'au XVII· siecIe, et ce n'est qu'au XVIII· siecle que 130 theorie de 130 monnaie a ete definitivement fixee par les fondateurs memes de la. science. L'ouvrage de Mariana peut done etre considere comme un livre original. II a echappe jusqu'ici aux regards des ecrivains qui, en France ou ailleurs, ont aborde, sous differentes formes I'histoire des doctrines economiques. C'est un oubli qui doit etre repare desormais: 130 science, 130 justice et 130 verite l'exigent. Journal des Economistes, Paris, V. 17, pp. 90-91.

162 THEORY OF MONEY article was the first of tht1 kind and of a summary character. Mariana's treatise does not "date hack to the last years of the sixteenth century" hut to the early seventeenth cen tury, as can easily be proved. The first edition of De Rege which appeared in 1599 did not contain that eighth chap ter of the third book which summarizes De Monetae Muta tione. This chapter is found in the edition of 1605, which has heen used in writing the present monograph. Since there appeared no second edition of De Rege hefore 1600, it is clear that Mariana did not publish his treatise on money before that year, so that it cannot he considered a sixteenth century puhlication. The question whether Mariana knew some of the early treatises on money must also he answered in a way dif ferent from Duprat's opinion. He certainly had read some of them, as he tells us himself. There are no clear indica tions that Oresme's and Copernicus' works were at his dis posal. Nor can we say with certainty that he used Davan zati's or Scaruffi's treatises. But he certainly did know Bodin's reflections on money. He tells us that he used Budelius, l De Monetis which means that he did know also a great many other similar puhlications, at least in sub stance, for Budelius had compiled in his voluminous work all the early writings on money which he could find, that is, twenty-nine treatises. Two of the more important among them are Bodin's third chapter of the third book of De Republica and his De Augmento et Decremento Auri et Argenti. We must therefore conclude that our author did not formulate an entirely independent theory of money.

How much did Mariana horrow from Budelius, and in how far did he supersede all earlier writings on money? 1 De qua re tum alii, tum Budelius disputat lib. I..De Monetis nu. VII ..• Tum Lugduno in Batavis obsessa e papyro monetam factam memarat, anna salutis 1574. Budelius Ii. I, de monetis c.I.nu. XXIV. De Monetae Mutatione, cap. 3, p. 195. 163 MARIANA:-POUTICAL ECONOMY Budelius treats the theory of money in a very laconic fash ion. In the first book of his work he discusses very briefly the metallic view and the abuses of adulteration and falsi fication, and then attempts an exposition of how money may be coined in the most practical way. The second book deals with the problem of how a debtor will meet his obligation if the coinage has been debased since the time the debt was contracted or the loan received. Budelius vigorously main tains that the same bullion value must be repaid, though the medium may be a depreciated coin-a view.then com monly held. At the same time, he criticizes Molinaeus for holding the opposite view, that the debtor need pay only the face value of his debt, even though the coin contain less precious metal than he received at the time of the loan.

1 Even when a country is on a gold basis problems of fluctuat ing purchasing power may arise. Irving Fisher and others have suggested to remedy this evil by a modification of the gold standard. The third book of Budelius' work is, as we have noted, a compilation of almost every earlier treatise on the subject. In nearly all of them, the central problem is the same as the one discussed in the second book of Budelius' work. We may say, then, that Mariana took over from Budelius the principal idea of his work that care must be ex~rcised to bring the legal and the natural values of money in as close agreement as possible. This is, he tells us himself, the point he wants to make. 2 But the way in which he treats his 1 Budelius, Renerus (Ruremundanus), De Monetis et re numaria libri duo quorum primus artem cudendae monetae: secundus vero quaestionum monetariarum decisiones continet. His accesserunt tractatus varii atque utiles, necnon consilia, singularumque additiones, tam veterum, quam Neotericorum Authorum, qui de Monetis, earundemque ~!alore, liga, pondere, potestate, mutatione, variatione, falsitate ac similibus scripserunt. (Title page) 2 Omnino cardinis quibus vertitur universa haec moles duo illi valores pecuniae sunt in ca. IV. (chapter IV) explicati, quos componere inter se opus est, si res salvas volumus; quod perinde est ac si dlcam, monetam debere esse legalem. Quodsi sejungantur (quoa futurum videtur si argentum deteratur) nullum erit genus mali quod in rempublicam non incurrat. Finis esto hoc addito. De Monetae Mutatione, cap. 11, p. 215.

164 THEORY OF MONEY problem is unique and constitutes a contribution of his own. He bases his arguments upon history, ancient and modern. His vast knowledge of the past furnished him with the material to establish his thesis, that every time the coinage has heen adulterated, the result has heen a rise in prices and a serious unsettlement of husiness. This point has not been emphasized nearly so strongly by any of the early writers, nor had anyone of them used the historical method. Here we may repeat what Duprat pointed out, "that the theory of money returns, so to speak, in all its scientific rigor on each page" and that "the most remark able feature of this work is the idea which inspires it from beginning to end." 1 Nicholas Oresme's2 main idea is that adulteration of the coinage does not so much bring gain to the king as enrich the kind of people who take advantage of the situation. He also discusses the phenomenon which is now (~aUed Gres ham's law but mentions only incidentally that inflation of the coinage will cause a rise in prices. Copernicus caUs 3 atten tion of the Polish king to the fact that bad money will drive out good money, an idea which was developed a little later by Gresham, who alone received credit for it from the econ omists. Gabriel Biel, 4 who wrote about a century before Copernicus, seems to have used Oresme's work, because he cites one of his examples by way of illustration. He was content with "treating the problem of coinage adulteration from the viewpoint of a moralist. Nor did Aquila goII farther than this in the development of monetary principles.

His work is incorporated into Budelius' volume. Bodin gives full attention to the evil effects of adulteration saying 1 See page 164. 2 De Origine, nat~tra, jure et mutationibus M onetarum. 8 De M onetal' cudl'ndae ratione. 'De Monetarum Potestate simul et Utilitate libellus aureus. fi Libellus de Potestate et Utilitate manetarum. 165 MARIANA:-POUTICAL ECONOMY that it causes universal uncertainty "so that nobody can make out how much he has." 1 He suggests coining gold and silver of the purest grade, and reducing the number of mints to one single central office, and compelling silver smiths to use the same grade of precious metal as the minters. He believes that the ratio between gold and silver is ab solutely stable,-that is, 12 :l-and does not realize that it has changed and may change again according to the supply and demand of the respective metals. He advocates the abolition of all coin of baser metal than silver and gold in order to avoid adulteration. Bodin's greatest contribution consists, however, in assigning the increase of gold and silver as the main cause of rising prices.

Budelius refutes Bodin, saying that it makes no differ ence whether coin is struck of pure or adulterated metal, because it will always circulate at its gold or silver bullion value. Nor is it advisable to use pure gold and silver, which are badly affected by abrasion. Indeed, it is prac tically impossible to have absolutely pure gold or silver. He advises making an end of the abuse of debasing the coinage, since it is impossible to heal the evils already arisen. The only lesson to be drawn is to avoid a repetition of these evils in the future. Budelius even goes so far as to say that a coin containing an alloy is in one way prefer able to pure gold and silver, because it exchanges for its content of precious metal, the alloy being a gift to the re ceiver. Nor will it be advantageous or feasible, he avers, to require hy law that the same grade of precious metal be used for artistic purposes. This would involve an enormous expenditure for recasting gold and silver plate already in existence. Silversmiths are also likely to work upon gold 1 "Quo fit ut nemo quantum in bonis habeat, constituere possit." Joannes Bodinus, D.

Republica Libri ses, Lib. VI, cap. 3. 166 • THEORY OF MONEY and silver only when these have been mixed with an alloy. Budelius maintains furthermore that the confusion attend ant on debased coinage does not arise from the fact that the circulating medium contains an alloy, but from the cir cumstance that its composition is being changed by adulter ation and falsification. 1 Budelius devotes a great part of his second book to a refutation of Molinaeus, 2 a very subtle French jurist, who held that in the sight of the law a debtor has discharged his duty when he has paid his creditor the nominal amount of what he owes, regardless of whether the metal content be more or less than what he received. He holds that money is merely a creature of the State, that it is entirely the prpduct of law, and that what it consists of makes no differ ence. This is in substance the chartal theory of money, which has heen followed to its logical consequences by G.

F. Knapp.s Scaruffi endeavored to establish an international means of exchange. The Bologna pound, he says, should serve as the standard of weight for gold and silver; on the face of each coin there should be stamped its metal weight and bullion value; the international ratio of exchange between gold and silver should he as 12: 1; bullion may also be used for payments if it hears the stamp of the mint, declaring its weight and grade; and finally, gold and silver plate may be used as media of exchange according to their hullion value. By such international stahilization of the coinage, Scaruffi would root out the ahuses of clipping and falsifying money.' 1 De manetis et re numaria, Lib. I, cap. 21. 2 CaroIi MoIinaei, De Mutatiane monetarum quaestines II. II Cf. p. 147, footnote 2. 'The very title of Scaruffi's work indicates its purpose. It reads: L.'ALIT! NONFO di Gasparo Scaruffi Regiano per fare ragione, et concordanza d'oro, e d'argento, che servira in universale; tanto per provedere a uri infiniti abusi del tosare, et guastare monete; quanto per regolare ogni sorte di pagamenti, et ,.idurre anco il mondo ad una sola moneta.

167 MARIANA:-POUTICAL ECONOMY Davanzati pays more attention to the effect of adultera tion upon prices and suggests that the suppression of adul terated coin or its redemption at bullion value might be the remedy. Like Molinaeus he advocates free and gratuitous coinage. Mariana follo:ws Budelius in so far as he adheres faith fully to the metallic theory of money. He has -practically all the ~deas of the earlier writers on the subject and a few more. He gives a much more exhaustive treatment of the evil effects of inflation and proves his assertions from nu merous references to history, a method not previously em ployed. As remedies he suggests deflation and a strictly metallic standard. The holders of debased coin should be indemnified by the king, who has derived advantage from adulter3:tion; or, if this be a hopeless ideal, it should be considered the lesser evil to suffer a temporary loss in order to restore a sound standard.

Our author does full justice to the champions of a de based coinage by discussing the pros and cons of their position, hut he finds that on the whole a metallic standard is preferable. The advantages of inflation are more ap parent than real and will in the long run turn out to he mere fallacies. Though Mariana will not admit the reason ing of Molinaeus who is an extreme chartaHst, he is aware of the advantages of chartal money. But he does not see how the interests of the people can be safeguarded under such a system. Adulteration is an injustice on the part of the king be cause it imposes upon his subjects a heavy tax to which they have never consented. If, then, the king cannot tax his people without their consent he cannot lawfully debase the coinage of the country without their consent. Adultera tion of the coinage causes inflation and plays havoc with 168 THEORY OF MONEY business. Business depression in turn means decreased taxability of the people, and so the whole mistaken policy will ultimately react against the king. To debase the coinage is harmful to both the people and the sovereign. Mariana surely deserves credit for pointing out the effects of inflation, and perhaps ev~n more credit for his fearlessness and cour age. He was the only man in Spain who dared expose him self to great danger and come out openly in defense of the rights of the people. Love of truth and justice made hinI the advocate of the poor and the oppressed.

Mariana knows the substance of principles underlying Gresham's law, shows how this law works in various ways and is also aware of its limitations. He does not believe, with many writers of the time, that the prices of gold and silver are stable and that their ratio never undergoes a change. He shows from history that there have been changes and that they are necessarily contingent upon fluctuations in the demand and supply of the metals, and upon altera tions of their respective fineness. Although our author repeatedly emphasizes the fact that prices will adjust themselves to the metallic value of the coinage, he knows that the abundance of the circulating medium and the rapidity of its circulation are not less im portant factors. Modern students of Economics enumerate three factors that affect the general price level: the bulk of trade, the amount of currency and the rapidity with which money changes hands. Of these the last: two were known to Mariana, l but he considered them less important 1 Neque est dllbium in novam mcnetam conspirare: quae singula mercium caritatem afferunt. nempe multitudo ejus immensa earn reddere viIem, uti in aliis mercibus contingit copia vilescere. De Monetae Mutatione, cap. 10, p. 210.

Verum ut fateamur quod res est, aeris quando copia nimia est, argentum certe inter dyes evanescit et perit, quod in praecipuis incommodis debet numerari. . . . Sed et quod argentum inter cives manet, disparet. cunctis prius aeream monetam expendentibus, recondentibus argenteam nisi re necessaria cogantur illam proferre. De M I)netae M utatione, cap. 9, p. 206. 169 MARIANA:-POUTICAL ECONOMY than the quality of the coinage. This consideration no longer applies, provided a country is on a gold hasis, making it possible to redeem both silver coin and paper money in gold. As soon as the belligerent nations of Europe stopped paYment in specie, their currency went helow par-a phe nomenon which is exactly the same as that observed hy our author. Mariana knew, too, that an increase of precious metal would raise prices, hecause it added to the quantity of money.l Consequently he adhered to the quantity theory of money.

Summing up the whole discussion, it must he said that De Monetae Mutatione is a most remarkahle puhlication hy reason of the originality and ahundance of its ideas, its historical treatment, the vigor of its style and the fearless ness of its author. But it was demanding too much of a Spanish king of the seventeenth century to expect him to accept without resentment so sharp and fearless 'a criticism as that made hy the author of De Monetae Mutatione. Not even the fact that Mariana had rendered very valuahle services to his sovereign could shield him from royal ven geance. Both himself and his work fell foul of seventeenth century ahsolutism. 1 After quoting the law of 1368 which fixed the prices of almost everything our author calls attention to the fact that many of these prices seem low compared to those paid in his days and then gives his explanation for the rise. He writes: Vides ex hac lege, quantopere rerum pretia mutata sint ab antiquo. Cujus mutationis duplex causa extitit. pecuniae oHm probitas majorque valor, uti proximo capite dictum est. Praeterea argenti aurique multo rpinor copia quam nostra ~etate. De Ponderibus et Mensuris, cap, 24.

170 Section III FISCAL PROBLEMS Chapter I General Theory of Taxation. Definitions I T is essential that a commonwealth have a sound fiscal policy. We may therefore expect Mariana to give this phase of political science special consideration. But, as his object is to remedy abuses rather than to present a thorough philosophic treatment of political theory, he does not enter very deeply into a theoretical discussion of the principles of Public Finance. He is content rather with making a number of suggestions designed to help establish a sound fiscal policy in his country. Other Spanish Jesuits treated the theory of taxation more thoroughly than did Mariana; and we shall therefore draw upon their writings to supplement his scanty theoretical treatment. 1 We shall first discuss the general theory of taxation so as to see how much of the modern science of Public Finance was known to these Spanish Jesuits, and how they met the vexing fiscal problems which even today still await a definite solution. In a second chapter, we shall 1 A similar examination of scholastic opinion concerning taxation has been conducted with great skill and learning by R. Amberg:-Die Steuer in der Rechtsphilosophie der Scholastiker-to his work the present writer is indebted for helpful sug!~estions.