Wealth of Nations
In the first book of The Wealth of Nations, Adam Smith discusses the "Variations in the Proportion between the respective Values of Gold and Silver." Throughout history, these two metals have been regarded as mints of significant value. Before mines were found in America, the difference in value between silver and gold was usually seen as proportionate, where one ounce of fine gold was considered equivalent to anywhere from ten to twelve ounces of fine silver. More recently, the values have changed as much as one ounce of fine gold to be equal to as much as fourteen or fifteen ounces of fine silver. Over the years, it is said that both silver and gold have dropped in value, but the drop of silver has come more rapidly, therefore leading to the reason why gold has become proportionately even more valuable than in the past. Smith does claim, however, that "both the gold and silver mines of America exceeded in fertility all those which had ever been known before, the fertility of the silver mines had, it seems, been proportionally still greater than that of the gold ones." As a result of silver being more plentiful in comparison to gold, though it is considered less valuable it is certainly more important in many cases.
In the European market silver has raised in value a bit because decline in the amount found. " Silver is a very important part of European monetary system during these times. Adam Smith felt that silver was a very useful precious metal indeed. As gold rose in its price in proportion to silver, notwithstanding a great diminution of the tax upon gold, so silver might rise in its price in proportion to labour and commodities, notwithstanding an equal diminution of the tax upon silver. He explains this by saying:The increase of expense must either, first, be compensated altogether by a proportionable increase in the price of the metal; or, secondly, it must be compensated altogether by a proportionable diminution of the tax upon silver; or, thirdly, it must be compensated partly by the one, and partly by the other of those two expedients. A rare gem is evidently going to be worth a lot, but silver would be much more handy in comparison. Though he does admit that gold will always be more expensive, he feels that it is also cheaper in certain senses. " In Spain during this time, gold is closer to its lowest price than silver is because the tax put upon gold is five percent, whereas the tax put on silver is ten percent. because an ounce of gold will commonly purchase from fourteen to fifteen ounces silver, that there are commonly in the market only fourteen or fifteen ounces of silver for one ounce of gold.
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