labor, by the increase of the funds which are destined for maintaining it, grows every day greater and greater. Laborers easily find employment, but the owners of capitals find it difficult to get laborers to employ. Their competition raises the wages of labor, and sinks the profits of stock. But when the profits which can be made by the use of a capital are in this manner diminished, as it were, at both ends, the price which can be paid for the use of it, that is, the rate of interest, must necessarily be diminished with them.
Mr. Locke, Mr. Law and Mr. Montesquieu, as well as many other writers, seem to have imagined that the increase of the quantity of gold and silver, in consequence of the discovery of the Spanish West Indies, was the real cause of the lowering of the rate of interest through the greater part of Europe. Those metals, they say, having become of less value themselves, the use of any particular portion of them necessarily became of less value, too, and consequently the price which could be paid for it. This notion, which at first sight seems so plausible, has been so fully exposed by Mr. Hume, that it is, perhaps, unnecessary to say anything more about it. The following very short and plain argument, however, may serve to explain more distinctly the fallacy which seems to have misled those gentlemen.
Before the discovery of the Spanish West Indies, ten per cent seems to have been the common rate of interest through the greater part of Europe. It has since that time in different countries sunk to six, five, four and three per cent. Let us suppose that in every particular country the value of silver has sunk precisely in the same proportion as the rate of interest and that in those countries, for ex-
