The Circulation of Money
in is the "general opinion" that a farmer must produce enough to cover three "rents": the first is the rent paid to the owner of the land, the second is to cover his costs of production, and the third is profit nu which he sustains his household.
There are states in which the rent charged by landlords is higher than a third, and the result is the impoverishment of the farming class and a general disinterest in the profession, where there are more profitable endeavors to which a man might apply himself.
The third of produce that is the profit of the farmer is disposed of in a similar manner to the wages of any worker: some part of it must pay for his basic necessities, and some part of it may be used to purchase comfort or saved for the future. The general observation is that it is more often spent than saved.
Given that all product comes from the land, the three rents of the farmer must be considered the principle sources of value delivered to all residents within a state. The three things necessary to life are food, clothing, and shelter, and anything beyond is convenience or luxury.
In particular, farmers have the means to produce for their own consumption: he may use some part of his crop directly to bake his own bread, brew his own beer, feed his own livestock, and from the livestock other goods may be had (milk, butter, cheese, eggs, meat, and the like). For other goods he must trade in money, and even for those goods he might make for himself, he might opt to trade instead if the cost is lower.
Thus considered the only need for money in the country is for the exchange of goods that a person cannot make for himself. There is considerably greater need for it in towns and cities, in which barter for goods is uncommon, landlords demand rent in ash rather than produce, and many people make goods that are not necessities but must be traded for them.
By various calculations, the author reckons that the need for money is equal to about half of the product of the land in each year, as this is the amount of goods and services that will be traded to others rather than consumed by their producer.
It is also reckoned that trades of significant size are rare, and that there is a greater need for "small money" to purchase goods in relatively small quantities. That is, the tanner may sell thirty hides to the cobbler, but the cobbler will sell shoes one pair at a time.
The figure of "half the product" does not consider that money is reused as it is passed from hand to hand. That is, the townsman pays for shoes, the cobbler for leather, and the tanner for hides with the very same coin, passed hand-to-hand from customer to herdsman. As such the quantity of money needed at any given time is likely significantly less. In a province where 10,000 ounces of silver are needed for the transactions of a year, 5,000 or even 500 might suffice to cover needs as they arise. Much depends on the volume and frequency of transactions.
Cantillon proposes that a state needs ready cash that is one-ninth of the annual produce of the soil. He cites other sources that have suggested one-tenth, which is not very far removed. However, it seems a trivial matter to anyone but the mints that create money to have enough to support the need for commerce.
There is a need of cash for foreign trade, but it is no greater than that which is required domestically when the balance of trade is equal: the cash spent on foreign goods is brought back in equal measure buy the cash paid by foreign consumers for domestic goods. It is essentially no different than were the goods traded by direct barter when 1,000 ounces are paid by France to Holland for a some quantity of cloth and the same 1,000 ounces are exchanged, among two different merchants, for Holland to purchase some quantity of wine from France.
The same is true in domestic markets as coin is passed from hand to hand in a sequence of transactions. Rent paid by farmers to their landlords is spent on goods from craftsmen in the city who return the money to farmers when they buy produce.
Ultimately, the amount of money in circulation of a state is not indicative of the wealth of a state, but merely reflects the consequence of customary behavior. It can well be found in two territories of equal size, population, and the amount of money that one people enjoy far more of the necessities and conveniences of life.