Page:The Economic Journal Volume 1.djvu/175

 Rh Certainly it did. Natural causes would affect it, as they would all other commodities, whether for rise or fall; but to the fall, inasmuch as the demand was perpetual and at a fixed price, there was a limit formed by that fixed mint price and the exchange at which it (or any larger price obtainable in the market if there was an agio on Silver) could be converted into sterling; and below that limit there could be no material fall.

I have said above that the rise and fall of the money price of Silver in the market must depend on natural causes. These can be stated in three words, 'Supply and Demand.' Nothing else can affect price, whether of commodities in general or of the precious metals in particular. No human laws can affect it except through the medium of those joint forces. Man can regulate supply, and man can check or foster demand. If the supply exceed the demand the price will fall. If the demand exceed the supply the price will rise. lf we may conceive the supply as constant but the demand variable, the price will fluctuate; as it will also do if the demand is constant but the supply variable. If, however, the demand is not only constant but constant at a fixed price, the variation in the price in the case of consumable commodities (supposing such constant demand to be possible) would be unlimited in an upward direction, and only limited in the case of the precious metals by the power of remelting coin into bar when bar is needed; but in a downward direction the price must be absolutely limited by that offered by the creator of a perpetual demand. It is Demand and Supply that govern the price, but in the case of an open Mint the demand is constant.

That word Demand has been a stumbling-block to some inquirers. They have imagined that it meant or implied a demand for Silver coin on the part of the people, who, as they rightly aver, have now, or can have, as much Silver coin as they desire and can pay for. But it is a demand not of the people for coins, but of the State for Silver to be coined. The State says to the people, 'Here is the Mint; its doors are always open. Bring all the Silver you will, it can never have enough.' That is a much more potent kind of demand than the fitful craving prompted by the needs of commerce.

It is not indeed a demand on the part of the public, for no man having a bar of Silver to sell sells it because he has a desire to possess more Silver coins. He sells it in order to convert his