ey, were to lay a considerable tax on gold, he would very
much raise its natural value; and as its market value in Europe is
ultimately regulated by its natural value in Spanish America, more
commodities would be given by Europe for a given quantity of gold. But
the same quantity of gold would not be produced in America, as its value
would only be increased in proportion to the diminution of quantity
consequent on its increased cost of production. No more goods then would
be obtained in America, in exchange for all their gold exported, than
before; and it may be asked, where then would be the benefit to Spain
and her colonies? The benefit would be this, that if less gold were
produced, less capital would be employed in producing it; the same value
of goods from Europe would be imported by the employment of the smaller
capital, that was before obtained by the employment of the larger; and
therefore all the productions obtained by the employment of the capital
withdrawn from the mines, would be a benefit which Spain would derive
from the imposition of the tax, and which she could not obtain in such
abundance, or with such certainty, by possessing the monopoly of any
other commodity whatever. From such a tax, as far as money was
concerned, the nations of Europe would suffer no injury whatever; they
would have the same quantity of goods, and consequently the same means
of enjoyment as before, but these goods would be circulated with a less
quantity of money.

If in consequence of the tax, only one tenth of the present quantity of
gold were obtained from the mines, that tenth would be of equal value
with the ten tenths now produced. But the King of Spain is not
exclusively in possession of the mines of the precious metals; and if he
were, his advantage from their possession, and the power of taxation,
would be very much reduced by the limitation of demand and consumption
in Europe, in consequence of the universal substitution, in a greater or
less degree, of paper money. The agreement of the market and natural
prices of all commodities, depends at all times on the facility with
which the supply can be increased or diminished. In the case of gold,
houses, and labour, as well as many other things, this effect cannot,
under some circumstances, be speedily produced. But it is different with
those commodities which are consumed and reproduced from year to year,
such as hats, shoes, corn, and cloth; they may be reduced if necessary