o V 
 
 
 
 
 
 4 o 
 
'b V 
 
 --^ .-i^g-- '^'-o'^ : 
 
 v> ^>' t"^ 
 
 
 ^^ 
 
 ^ 
 
 
 
 c 
 
 ^.A ^,^^^m?^.- ^^A>' -^'l^M^r.^ ^^^r^ O^xx-^^^ML^.- '^t 
 
 '^0> 
 
 4 O 
 
 o 
 
 'oK 
 
 
 c^ 
 
 '^0' 
 
 o 
 
 
 
 -; o 
 
 
 
 
 
 /.* ^^' "-^ 
 
 
AN INQUIRY 
 
 INTO 
 
 THE LAWS WHICH REGULATE 
 
 THK 
 
 CIRCULATI0I!T Al^D DISTRIBUTION 
 
 OF WEALTH. 
 
 BY JOHK MASOIf. 
 
 KEW YORK : 
 GEORGE P. PUTNAM & CO., 321 BROADWAY. 
 
 1856. 
 
Ij i ^ 
 
Entered according to Act of Congress, in the year 1856, by 
 
 JOHN MASON, 
 
 In the Clerk's Office of the District Court of the United States, for the 
 Southern District of New York. 
 
O ]^' T E K T S 
 
 CHAPTER I. 
 
 General principles which govern the production of wealth, "J 
 
 CHAPTER 11. 
 
 The power of money in stimulating or retarding the production 
 
 of wealth, . . ... . . 11 
 
 CHAPTER III. 
 
 Historical summary. Effects on the condition of society by an 
 increase of the precious metals, whether from incidental or 
 natural causes . . . . , .16 
 
 CHAPTER IV. 
 
 The natural incapacity of gold or silver^ — for exchange-*— greatly 
 
 increased by coining ..... S6 
 
 CHAPTER V. 
 
 Origin of money and debt. Their effect on the social conditioa 
 
 of man . . . . . , .35 
 
 CHAPTER VI. 
 
 Reduction of the weight of coin — a measure of necessity re- 
 sorted to by all nations, ancient and modern. Th« relief 
 only temporary ..... 46 
 
 CHAPTER VII. 
 
 Tke precious metals howerer abundantly produced, never ade- 
 quately fulfil th« functions of money . . .53 
 
ri 
 
 CHAPTER VIII. 
 
 Effects of raising the weight of coin — political and social con- 
 sequences ...... 6(^ 
 
 CHAPTER IX. 
 
 Distinction of money as an instrument of debt — and an instru- 
 ment of exchange . . . . . .68 
 
 CHAPTER X. 
 Circulation of money regulated by determinate laws . 74 
 
 CHAPTER XL 
 
 The origin of notes — their advantages to commerce diminished 
 
 by governmental interference. Progress of bank issues 91 
 
 CHAPTER XII. 
 
 A standard of value Its distinction from a denominator of 
 
 value ....... 102' 
 
 CHAPTER XIII. 
 
 Foreign commerce — lis principles distinct from domestic trade. 
 
 International standard of value . . . . HO 
 
 Conclusion . . . . , , .117 
 
TO THOMAS OARLYLE, ESQ., 
 
 SiK, 
 
 The eminent services which you have rendered to the 
 cause of human progress through your numerous works 
 induce me to inscribe this humble testimony of respect 
 to your fidelity as a historian. Whether investigating 
 the events of the past— or the character of men who have 
 influenced the course of history — or analyzing the pre- 
 sent condition of society, the high purposes and benignity 
 which direct your talents, equally inspire confidence 
 and moral admiration. It is naturally the hope and de- 
 sire of every well-constituted mind to witness the ame- 
 lioration of those extreme distinctions of riches and 
 dependence which militate against the great objects of 
 civilization. Largely and earnestly has your pen been 
 employed to inculcate these elevated and humanising 
 sentiments. ' 
 
 The triumphs of art — the munificence of Providence 
 — scatter their limitless abundance over this fair earth, 
 and invite the wisdom of man to administer them with 
 equity. To the advancement, therefore, of commerce — 
 the developement of the laws of finance — and the eleva- 
 tion of industry — is this humble effort directed. That 
 it will contribute to the elucidation of economical sci- 
 ence, by demonstrating principles which have hitherto 
 been resisted by eminent authorities, and rendering 
 practical others which are now merely speculative, has 
 been the paramount object of the writer. There is no 
 subject of higher importance can engage the human un- 
 derstanding, or which more deeply concerns the interests 
 of men in all conditions of life. 
 
 To you, Sir, with profound admiration of your inval- 
 uable services, these sentiments are addressed 
 
 Most respectfully by 
 
 'the authoe. 
 
AjN inquiry 
 
 IKTO THE LAWS WHICH EEGULATE THE 
 
 CIRCULATION^ AND DISTRIBUTION 
 
 OF WEALTH. 
 
 CHAPTER I. 
 
 GENERAL PlilNCIPLES WillCII &OVEKX THE PBODUCTION OF 
 
 WEALTH. 
 
 As man cannot exist without food, and food cannot 
 be produced without labor ; it is evident that the first 
 motive to human industry oi'iginates in necessity. Food 
 and all other kinds of wealth multiply, however, not 
 merely in proportion to the labor expended, but in much 
 greater ratio — every advance in skill adding to the capa- 
 bilities of production. 
 
 The motives to exertion are thus stimulated by the 
 prospects of increased reward. Abundance augments 
 the means of reproduction, and no limits can be placed 
 to the increase of wealth, except those which arise from 
 the ignorance, folly, or crime of man. 
 
 Every nation is therefore poor in its origin and rich in 
 its maturity. The opulence of a nation is, however, no 
 evidence that the individuals generally of Avhich it is 
 composed participate equitably in its riches, as the dis- 
 tribution of wealth has in no instance, progressively ad- 
 vanced, either vx'itli the capacities of production, or the 
 advantages of national development. 
 
 In the first stage of society the office of laborer and 
 capitalist is one. Nature bestows her bounties on all 
 without distinction. Her spontaneous productions are 
 
10 
 
 the gift of a prudent parent to lier children, enabling' 
 them snccessfully to pass through life, fulfilling the 
 high and inscrutable purposes of their destiny. 
 
 Civilization appropriates the soil, and classiiies men. 
 It economises both labor and capital, by numerous sub- 
 divisions. This multiplies production, but complicates 
 the social organization. The government of society 
 necessarily becomes a science which the mass do not un- 
 derstand, and v^diicli the rich, from their greater leisure, 
 learn, rather to preserve their own elevation than to pro- 
 mote the elevation of the community. 
 
 Economical science in advanced civilization deter- 
 mines the conditions of existence and progi'ess. Man can 
 no more progress without the advantages of wealtJi than 
 he can exist without air. Its acquisition stimulates his 
 energies and enterprise — its possession invests him with 
 a degree of independence, which no form of government 
 or civil law, how ever excellent, can bestow. 
 
 In a country governed by an absolute prince the rich 
 are the advisers and administrators of authority — in a 
 country governed by the general voice the affluent are 
 \\\Q rulers of the common wealth. The possession of sub- 
 stance not only endows its proprietors with the immuni- 
 ties of power, it also enhances the value of existence, by 
 conferring educational superiority and influence. These 
 ao^ain open the higher paths to its attainment. 
 
 Security is, however, only attainable through the gene- 
 ral prosperity of a people. Prosperity consolidates the 
 strength of government, and promotes both the enrich- 
 ment and power of a connnunity. It is, therefore, of the 
 most profound importance to every individual and nation, 
 that wealth ought to be distributed with great equity 
 amongst the various classes whose services contribute to 
 its production. A monoply of the means by which 
 property is acquired, or its production arrested, is a fraud 
 upon industry vv^hich a wise people will prevent, and if 
 they have not the wisdom, they must submit to a destiny 
 of irremmediable misfortune. 
 
 Yet, in no nation have the laws which regulate the 
 equitable distribution. of wealth been understood, either 
 by the people or their rulers. Both classes have suffered 
 immeasurably in all ages by their mutual ignorance. 
 The rich have pursued their apparent interests at the 
 
11 
 
 cost of their eventual ruin. The people have devoted 
 themselves to industry, when accessible, or afforded the 
 means of subsistence, and when these were denied, with- 
 out comprehending the cause of their distress, they have 
 in the agony of their condition revolted and overthrown 
 their rulers. 
 
 Revolution generally springs from organic causes, 
 wdiich are not understood, and invariably subsides in re- 
 action instead of remedy. It, however, overwhelms the 
 opulent with the misibrtunes of the poor. It is the 
 retribution of neglect or tyranny ; but it seldom makes 
 the rich more wise, or the poor less wretched. Insubor- 
 dination and anarchy aggravate the causes of insecurity 
 without rendering the means of redress more attain- 
 able. 
 
 Oppression arising from false principles in the economy 
 of Oj nation cannot be overthrown by violence. On this 
 account revolutions in old established countries, aiming 
 merely at a change of authority, or the destruction of a 
 class, effect a temporary distribution of property and 
 power, without establishing any permanent alleviation 
 of the public condition. A reorganization of society 
 takes place on the same principles, in some degree modi- 
 fied, to produce the same, or perhaps, worse results. 
 Regal and Democratic forms of government through 
 this cause have, in all ages, shared a similar fate, and 
 manifested an equal instability. 
 
 CHAP. 11. 
 
 THE POWER OF MOXEY IX STIMULATING OR RETARDING THE 
 PRODUCTION OF WEALTH. 
 
 It is not the abstruse definition of money ^ but its office 
 and functions which enforc3 the first consideration of 
 rational inquiry. The sole instrument, in every civilized 
 country, employed for the exchange and distribution of 
 w^ealth is — money. The laws which regulate the quan- 
 tity of money provided for circulation, regulate the de- 
 mand for goods. Distribution and demand are equiva- 
 lent terms. A manufacturer who employs workmen, 
 receives the product of their labor — the workmen re- 
 
ceire money in exchange — the money is de-mancl for 
 other proclnce. 
 
 Labor thus creates — money distributes. Every days 
 Mo/' adds to the fund of national wealth; qxuvx piece 
 of money is a demand upon that fund. Demand encou - 
 rages the expenditure of capital, and multiplies produc- 
 tion. Accuni Illation, bj this means, is accelerated by 
 expenditure — expenditure is enlarged and stimulated by 
 accumulation. 
 
 In a state of barter, these laws operate clumsily, but 
 without interruption. Every increased bushel of grain 
 is an additional demand for broad cloth, or other com- 
 modity. Every additional yard of broad cloth produced 
 is an increased demand for grain. Sup)j)ly is the means 
 of demand. The one is the natural cause of the other. 
 
 To render exchanges more convenient, every commu- 
 nity has chosen some suitable commodity, such as gold 
 or silver, to exchange all other commodities. Unfor- 
 tunately, however, products the most compact in value, 
 are the most scarce and, of course, the most inade- 
 quate in quantity to exchange all others — the abundance 
 of general production being unlimited. The best comi- 
 modity is, therefore, the worst money. 
 
 To excliange a ton of iron for an ou7iGe of gold, or a 
 sione of wool for an ounce of silver, would be most con- 
 venient, if all these commodities increased proportion- 
 ately to each other. But if the useful, or rather, indis- 
 pensable commodities cannot be readily and conveniently 
 exchanged for the scarce and less requisite metals, loss 
 ensues and arrests production. A diliiculty to vend dis- 
 courages the effort to produce. Impediments to industry 
 are injustice to the pr(.>ducer. This, in turn, becomes the 
 source of innumerable evils to the community. The de- 
 sign of society is subverted when the means to secure 
 life and acquire property are inadequate, either in pro- 
 vision or execution. 
 
 An error in the organic laws of tlie least important 
 of human pursuits, entails more or less mischief, but in 
 economical law it involves the destruction of entire com- 
 munities. Men labor but do not advance — they fabricate 
 wealth but ai*e not enriched. Science develops the 
 capacities to produce, but the reward of industry does 
 not maximise, nor the power of empU>yment expand 
 
IB 
 
 with the increase of labor. A thousand obstacles to 
 the industrial progress of each individual ensue, from 
 causes which are in their nature but consequences. 
 When the trader does not vend he does not employ labor 
 to reproduce. Tending is a conventional arrangement — 
 its interruption a public Avrong. It was an act of con- 
 vention between men to vend or exchauge with each 
 other for their mutual enrichment. The method has de- 
 feated and intercepted the 'purpose. 
 
 Industry preceded civilization and supplied the means 
 of subsistence. The civilized state, therefore, does not 
 yet guarantee what a state of nature did not deny. 
 Populousness being encouraged in the one case, without 
 an amplitude of provision to absorb the energies of indus- 
 try — while in the other it would not be extrava2:ant to 
 infer that the increase of the species was restrained by 
 innumerable causes within the limits of natural bounty. 
 ]^or does the opulence of a few indemnify justice for the 
 poverty of the more numerous and indispensable mem- 
 bers of the social body. 
 
 Sheep and oxen were the earliest accumulations of 
 property. Men's riches w^ere computed by the number 
 they possessed. The value of all things was estimated 
 by the number of sheep or oxen it required to exchange 
 for them. The value of a piece of cloth was expressed 
 by being worth a sheep or ten sheep, or an ox^ as we 
 now would express value by saying, that a piece of cloth 
 is worth a dollar, or ten dollars, or twenty, according 
 to its current price. It is evident that the first thing 
 used to d- nominate val--e performed the first fifice of 
 nwney. The earliest denominators of value were, there- 
 fore, the most abundant of all pi"oducts of value. Wluit- 
 ever was fabricated by skill would be readily vended ; 
 the agents to buy being so much more abundant than the 
 products to be sold. 
 
 In the progress of civilization men introduced new 
 agents of exchange, which reversed this condition. Sil- 
 ver and gold were substituted to denominate vcdue^ and 
 to perform the functions of money. Labor enlarged in 
 productiveness with the progress art, but the metallic 
 agents of exchange were neither equal to the products 
 to be vended, nor could labor increase these rare and 
 costly metals proportionately to the increase of wealili. 
 
14 
 
 Money, tlie instrument of yendiiig, was naturally scarce, 
 the products of labor and the capacity to produce aug- 
 mented the abundance of wealth beyond the capacity of 
 the metals to exchange. Men were driven to borrow, 
 when they could not vend, and debt became the means 
 at once of relief and bondage. 
 
 Sellers became invariably more numerous than buyers. 
 Few, comparatively, having money, and each of thof 
 limited in amount, while every one having labor or goodo 
 to vend, the difficulties to acquire property or to procure 
 ■subsistence multiplied with the power to produce the 
 one and to supply the other. Production^ from being 
 the cause and means of demand, became the subject of 
 an instrument, and the demand for all products offered 
 for sale, was limited to the amount of Metallic Money 
 held by each community. A thousand pieces of silver 
 would vend only a thousand products of their worth, 
 though ten or a hundred times the value was offered in 
 the market. jSTo more could be vended than was deter- 
 mined by the number of pieces of silver. A scarcity 
 of pieces thus made a scarcity of sales. In this matter 
 we are not more wise than were the Greeks and Eo 
 mans, though we have witnessed their fate. 
 
 The cpiantity of wealth produced is not, therefore, de- 
 termined by the capabilities of society, but by the quan- 
 tity which can be sold, and the cjuantity which can be 
 sold depends upon the quantity of money there are to 
 buy wnth. In a wealthy and highly civilized community 
 ^netallic money i^ h^Tier in its worst form. It prevents 
 the exchanges which would take place in a simple state 
 of traffic,- for in such a condition every commodity per- 
 forms the functions of money. One connnodity buys 
 another. Every one who produces goods to sell, employs 
 them to buy some other kind. The buyers are always 
 as niimerons as the sellers, and the number of exchanges 
 equal to the products to be exchanged. Every product 
 niav be used to edimate value, but no one product is 
 capable of eiiwnei-at'mg and exchanging all others. A 
 standard of value and an instrument of exchange are, 
 therefore, as distinct in their offices as the yard of 
 length is to the ^^alve of the cloth it measures. 
 
 Xo term is perhaps more common amongst men than 
 that 'money is the representative of wealth, yet the re- 
 
15 
 
 verse would appear to be the fact. Whenever money 
 multiplies, production rapidly increases. Whenever 
 money diminishes, industry is interrupted, trade lan- 
 guishes and wealth decreases. The instruments which cir- 
 culate, arouse or suspend the ca23acities which produce. 
 Under such conditions, wealth may certainly be said to 
 represent money rather than that money represents 
 wealth. A true principle is thus inverted by a false one. 
 
 When custom, and subsequently law, conspired to 
 stamp upon silver and gold — two costly and scarce pro- 
 ducts — the exclusive character of Money^ every other 
 value was reduced to a subjective progress equally in 
 production and exchange. A scarcity or abundance of 
 coin j)roduced a scarcity or abundance of every other 
 commodity. The proportion between any one product 
 and the aggregate of all others was neither ascertained, 
 nor could the consequences be comprehended in the rude 
 efforts of industry, of employing a special product as an 
 instrument to circulate and re23resent all others. 
 
 Superceding and seeking to avoid the inconvenience 
 of common barter, by subsituting an exceptional com- 
 modity, limited instead of facilitating aggregate circula- 
 tion. Still a temporary abundance of coin in a particular 
 country, has given, in all ages, an immense stimulus to 
 trade. On such occasions the rajDid increase of wealth 
 and extension of traffic have advanced with extraordinary 
 rapidity. The seductive gains of commerce and the indul- 
 gent prospects of accumulation invariably engage the 
 most energetic in the prosecution of mercantile enterprise. 
 Impulse instead of natural progress, has in this man- 
 ner excited, throughout all history, the vital elements 
 of commerce to fever and eventual decay. 
 
 Silver and gold, being by nature inadequate to the 
 wants of trade, are still further aggravated in their defi- 
 ciency by the inequality of their distribution. Acci- 
 dental causes have determined their course at j)eriocls 
 towards certain favored cities, or to a dominant nation. 
 Their accumulation at these points operating to debase 
 their value, again dispersed them to be reaccumulated 
 where similar circumstances occurred — to beredispersed 
 when the same causes have been re^^roduced. A* scar- 
 city enhances the value of all tilings^ so in the case of gold 
 and silver the degree oj value rises in j^ropoi^tion to the 
 
1^ 
 
 universality of tlhelr functions and their inadequacy t<y 
 perform them. Fixed in price hy statute^ these metals 
 operate upon aggregates and^ therefore^ the enhancement 
 of their value is not a subject of perception^ hut of com- 
 putation. 
 
 CHAPTER 11. 
 
 HISTORICAL SUMMARY. EFFECTS ON THE ©CONDITION OF SOCI- 
 ETY BY AN INCREASE OF THE PRECIOUS METALS, WHETHER 
 FROM INCIDENTAL OR NATURAL CAUSES, 
 
 It liolds as a rule that gold and silver are of the gi'eat- 
 est value in the jjoorest countries, and of the lowest ralue 
 in the richest. Tliey are hoarded in one case, they are 
 consumed for luxury in the other. Neither their value 
 nor circulation is uniform. The productive energies of 
 civilized nations are thus arrested and paralysed through 
 a cause which operates on every element of human so- 
 ciety. Any circumstance which arises to increase the 
 activity of circulation calls forth at once powers of pro- 
 duction which surpass all ordinary estimate. 
 
 Hence Pericles with great wisdom appropriated for the 
 embellishment of Athens, the treasures taken in the Per- 
 sian war. This remarkable statesman, it would seem, 
 had observed that the enlarged circulation of coin en- 
 riched the Athenians in a far greater degree than it 
 diminished the indolent treasures of the state. The ap- 
 parent extravagance, in the erection of temples and 
 works of art, was compensated manifold by the stimu- 
 lus given to industrial activity, and the great increase of 
 wealth consequent. How much so bold, and beneficial 
 a measure contributed to his influence over the furious 
 Greek democracy cannot be estimated at this remote 
 period. He held the reins of government for forty years 
 amid all the tumults of faction. We may judge, how- 
 ever, to what extent he estimated his influence over the 
 minds of his countr)'nien, from the circumstance tliat he 
 restored to his administration the most powerful of his an- 
 tagonists who, having failed in their opposition, had been, 
 according to custom, ostracised, and driven into exile. 
 
 He was exposed to a continual impeachment of wast- 
 
17 
 
 ing the public treasures. And though this was designed 
 to tell upon the vulgar prejudices of the multitude, the 
 prosperity and good sense of the populace sustained his 
 policy through every emergency. When the large cir- 
 culation of coin produced by the sagacity of Pericles, 
 had again dispersed itself, the industry of Athens lan- 
 guished and debt multiplied, while the declension of 
 public spirit, with the corruption of her statesmen, 
 paved the way to her ultimate subjection. 
 
 Nor had even the extraordinary measures of Solon, 
 though executed upwards of a hundred years anterior, 
 been capable of preventing the return of that condition 
 of social oppression which the intervention of a lalse 
 principle in economical law continued to inflict. It 
 did not, however, escape the observation of Solon, that 
 the great source of oppression amongst the Athenians 
 was ascribable to some false principle in the nature of 
 money. He was the first statesman of antiquity who re- 
 duced the weight of coin, to mitigate the evils it imposed 
 on the social condition of the people. 
 
 During the latter part of the Roman republic the ex- 
 tortions of the Roman Conquerors gave an immense 
 monopoly of gold and silver to the city of Rome. 
 Augustus Caesar added to the spoils of his predecessors 
 the enormous treasures which had been accumulated by 
 the Ptolemies for state purposes. The increase of money 
 was so great in Rome during his reign, that the rate of 
 interest, which had never been lower than one jper cent 
 per month, sunk to four per cent per annum. Thirty- 
 four per cent had been common amongst both Greeks 
 and Romans. Those who prosecuted industry would, at 
 the time of Augustus, be enabled honorably to cancel 
 their debts, instead of by revolutionary decree — a mea- 
 sure of necessity often resorted to by the Romans. 
 
 The oppression of private debts, which had multiplied 
 with the progress of population, during the republic, 
 prepared the Romans for any master which would pro- 
 vide them with bread. All provisions of a state to 
 meet social exigencies are of doubtful policy, and in- 
 variably accompanied with great abuses. When indus- 
 try does not find employment to secure doth subsistence 
 and the means of accumulation, the donations of the 
 state neither remedy nor compensate for the wrongs 
 
 G 
 
IS 
 
 inflicted. Labor being the source of wealth, and the 
 foundation of the civilized condition, whether it is the 
 property and pursuit of the individual, or the property 
 of a master in the persons of slaves, the community suft- 
 ers loss in proportion to the interruption of its exertions. 
 
 The safety of a community depends upon two special 
 circumstances — first, the means of amply providing for 
 its defence, and secondly, by so developing the pursuits 
 of labor and enlarging the channels of enterprise, that 
 profitable employment will engage the entire energies of 
 the multitude and command respect and submission to 
 authority. Government is responsible for the insecurity 
 of the commonwealth wdien it interposes and obstructs 
 by statutory law, the measures w^hich men would devise 
 to advance their social condition. 
 
 The difficulty to obtain honorable employment occa- 
 sions both defection and the decline of martial spirit 
 amongst a people. 350,000 Roman citizens were de- 
 pendent on the state for subsistence when the first Csesar 
 ascended to power. !Nor did the severity of his domes- 
 tic policy, or the propitious circumstances which attend- 
 ed the reign of his grand-nephew and successor, Augus- 
 tus, ever reduce this number below 200,000. Yet the 
 allowance given was not equal to that supplied to the 
 slaves of private citizens. Keither the repeated divi- 
 sion of the lands, nor the decrees canceling their debts, 
 were permanent or salutary. Augustus had even to 
 employ force to raise troops for the defence of the em- 
 pire, when its safety was threatened by the Gauls, though 
 the pay of a soldier had been advanced three times the 
 amount paid during the republic. Gibbon and other 
 eminent writers erroneously ascribe the fall of the Ro- 
 man empire to the vice of Inxury, while a state of de- 
 pendency and destitution, periodically threatened, not 
 merely the auti:iority of government, but the entire in- 
 stitutions of property. 
 
 A people who had thus achieved the mastery of the 
 civilized world, found themselves the, slaves of an inex- 
 orable condition of domestic suffering, from, a cause 
 which they could not comprehend, and wdiich seemed 
 to be ao'crravated bv the greatness of their destinv, and 
 the expansion of their power. Augustus, however, con- 
 tributed much to stimulate industry by the great in- 
 
19 
 
 ereaso of money whicli his spoils added to c"rcnlation. 
 Bat he could not invoke military ardor, nor inspire 
 lieroism amongst the humble and more numerous cit'zens 
 whose spirit had won, during the republic, all that was 
 now possessed by the empire. Yenerable soldiers were 
 ignominiously beaten and degraded in public by their 
 creditors, j^either official distinction nor srrvices in ac- 
 tion shielded the dignity of their persons or held them, 
 inviolable against the relentless penalties of debt, though 
 contracted in their industrial pursuits during retirement. 
 
 The temporary enlargement of circulation exhibited 
 the vast energies and skill of the Eoman people 
 to supply at once their natural and refined wants, and 
 to multiply the resources of the commonwealth. It is 
 said that Kome, during the reign of Augustus, was 
 changed trom rude edifices of brick, to a city of coUosal 
 grandeur, exeented in the costliest marble. In a short 
 period the interest of money again rose, indicating that 
 absorption in high prices, and dispersement were restor- 
 ing it to the provinces from whence it had been drawn 
 by the extortions of conquest, tlius reducing the capital 
 to the former depressed condition of trade and dimi- 
 nution of employment. Amelioration was impossible. 
 The dissolution of a power impregnable to arms and 
 the declension of institutions which no resistance could 
 destroy became inevitable Barbarism eventually tri- 
 umphed on the ruins of civilization, as the authority of 
 civilization had triumphed on the ruins ot industry and 
 personal freedom. 
 
 Amid the chaos of civilization arbitrary power be- 
 came necessary to the preservation of legal authority. 
 Constitutional provisions w^ere unequal to the exigencies 
 of the state. Extreme wealth and poverty were incom- 
 patible with civil tranquility, the more especially when 
 the unwieldy populousness of the capital and its insur- 
 rectionary history suggested so many well grounded 
 apprehensions. The possession of riches strengthens 
 the desire for security, while the privations of depend- 
 ence, augmented by numbers, aggravate the spirit of 
 insubordination. And though no one is more desirous 
 of ireedom than he who enjoys property, yet it is the 
 nature of man to relinquish many civil immunities, to 
 live less exposed to alarm, and commanding greater 
 
20 
 
 safety. The experiment of republican freedom was 
 abandoned after five hundred years, and with it, for a 
 time, the faith of men in the progress of humanity. 
 
 At this conjuncture, the advent of the disciples and 
 converts to Christianity interposed to change the current 
 of events. They proclaimed a new code of moral and. 
 economical doctrines, which were as attractive to the 
 multitude as they were alarming to authority and to the 
 interests of the opulent. Property was declared a con- 
 ditional gift which Providence had bestowed on the 
 rich for the benefit of the poor. Tlie civil law was, 
 therefore, held to be subversive of the divine law, where- 
 ever private right intervened antecedent to the wants of 
 the Becessitous. All things were to be held in common. 
 The rich were assured of future felicity as the condi- 
 tions of conversion and the righteous administration of 
 their substance. ISTon-belief was denounced, and penal- 
 ties invoked from a scource where human favor and 
 authority were impotent. 
 
 Privation and want rendered these doctrines accept- 
 able to the poor, while numbers of the rich, in an age of 
 such superstition, trembled at their anathemas, and relin- 
 quished their riches. Persecution also propagated 
 their views — excited sympathy for their sufierings, and 
 commanded admiration for their heroic martyrdom. 
 As conversion extended, these doctrines were modified. 
 The paralyzed empire reclined upon the lusty shoulders 
 of the Christian Pontificate — sl sovereignity which pro- 
 claimed its sceptre the emblem of immaculate favor and 
 authority. Charity became the agent of profitless dis- 
 tribution. It substituted the agency of money. The 
 destitute were fed at the cost of private and public 
 means, without equivalent industry to add to the general 
 stock. The reluctant donations of the rich replaced the 
 reluctant donations of the state, and augmented the 
 treasures of the churcli. Debasement of sentiment be- 
 came cemented to debasement of condition. Submission 
 and tranquility were restored with indolence and depen- 
 dency, until the advent of Columbus and Luther. 
 
 After the establishment of Christianity, the contribu- 
 tion of money from Christendom to the ecclesiastical 
 government threw an amount of circulation into the 
 lap of Italy, wliich, conducing to the revival of 
 
21 
 
 trade, gave rise to the medieval republics. So many com- 
 mercial cities could not have arisen into trading activity 
 without a special cause of this nature. 'J heir traflSc 
 gradually extended and re-opened the commerce with 
 India, which had been closed for centuries. Their 
 prosperity was on this account, to some extent, pro- 
 longed, but decay was not less inevitable. 
 
 Saving acquired more than their fair share of the 
 precious metals, prices would rise proportionately. 
 Wages profits, and the value of property being so much 
 higher than in other European communities, the metals 
 would naturally flow to make purchases were commodi- 
 ties were cheapest. Manufacturing industry would suffer 
 the first shocks of decline. The cost of living in Venice, 
 Lombardy, Genoa, and the other Italian republics would 
 prevent a reduction of wages commensurate to the preser- 
 vation of their trade. While the vast riches of the suc- 
 cessful merchants would demand the most costly indul- 
 gences, which all countries could produce. Thrift and 
 accumulation would be left to a second, third, or fourth 
 succession of traders. The first and second living in 
 opulent extravagance — would distribute in their expen- 
 diture, not only the gold and silver they had gained by 
 their own adventures, but also the revenues they would 
 derive out of the industry of their successors. The con- 
 dition of these states at this moment exhibit how com- 
 pletely their commercial ruin has been effected, not- 
 withstanding their great resources. 
 
 During the reign of Elizabeth, England received so 
 large an increase of gold and silver from the great pro- 
 duction of these metals consequent upon the discovery 
 of America, that the average price of grain rose nearly 
 six-fold. The general increase of wealth stimulated by 
 such additions to the current money, has given to the 
 reign of this princess a degree of historical importance 
 seldom accorded to a sovereign. Simultaneously com- 
 merce sprung into activity throughout Europe by this 
 sudden increase of Money. A few millions sterling of 
 gold and silver, added hundreds of millions sterling to 
 the annual productiveness of nations. While the in- 
 crease of the precious metals continued in some degree 
 to augment with the vast multiplication of commodilties, 
 the progress of industry opened its innumerable resour- 
 
99 
 
 ces to supply the wants of man. The conventional law 
 of civilized nations having bound down the operations 
 of exchange to the use of gold and silver, industry and 
 enterprise await the accidental supply of their product, 
 and multitudes languish in misery because these inade- 
 quate and excejptionahle metals bear alone the stamp of 
 authority and the blind approval of tradition. 
 
 It was even argued by the eminent Mr. Hume, at the 
 close of the last century, that a greater or less circulation 
 of money did not affect the increase ot national wealth. 
 Yet he concluded correctly that the increase of coin only 
 benefited trade and industry in the transition from a 
 lesser to a greater quantity thrown into circulation. It 
 is, however, remarkable that so acute an observer did not 
 perceive that transition is a law of inverse progress and 
 that the accidental and excessive increase, instead of the 
 increase itself occasioned a rise of prices. That when 
 money augments from a stationary minimum to a sta- 
 tionary maximum, the law" of progress ceases. A scarc- 
 ity of money and an excess of commodities are, there- 
 fore, inseparable and incident to both conditions. Modern 
 statesmen and princes have been guided by this and 
 similar economical writers, without augmenting their 
 claims to popular respect, or securing their authority 
 against the discontent of their unfortunate subjects. 
 Bankruptcy and pauperism have not diminished. While 
 the rude sentiments of the multitude are left to enforce 
 those changes which baffle the foresight of the most 
 distinguished legislators and economists 
 
 The mines of the l^ew World had no sooner reached 
 their maximum yield than depression returned. Trade 
 and employment declined in England so much during the 
 reign of Elizabeth's successor as to occasion great solici- 
 tude. The celebrated Raleigh, at the close of the 16th cen- 
 tury, argued forcibly the necessity of reducing the weight 
 of coin to revive trade, which was greatly depressed, and 
 to improve the condition of the people, who were in great 
 want of employment. Yet gold and silver were depre- 
 ciating at the time. Aggregate production bears such 
 vast and incomputable proportions to any one or two 
 products, but especially to the limited product of gold 
 and silver, that men, not comprehending these unfitted 
 relations, continue to suffer great wrong, with loss of 
 
property and inconvenience in business, from one gene- 
 ration to another. 
 
 Trade was, probably, worse on the continent of En- 
 rope. High prices were occasioned by the abundance 
 of the metals, and as commodities increased both in 
 quantity and price, money was absorbed beyond the 
 limits of its supply. Money became scarce because 
 commodities became abundant. An over-production of 
 goods was the index of an nnder-production of metal. 
 Every branch of industry ceased to be profitable from the 
 greater capacity of productiveness, while the oppression 
 of the community increased in a great degree with the 
 power to supply amply every requirement. A confusion 
 of results produced a confusion of ideas. Over-trading 
 and over-production were to be restrained, the one with 
 prudence, and the other by curtailing employment. 
 The merchant could not comjDrehend an advice which 
 arrested his enterprise, and the manufacturer did not 
 understand how his capital or interest could be promoted 
 by the non-employment of labor. 
 
 1^0 desire can be more reasonable or more honorable 
 than the acquirement of wealth in the pursuits of trade. 
 It is impossible and impolitic to restrain the spirit of 
 enterprise. JN^or would it modify the evil of financial 
 difficulties. Commercial prudence cannot remedy the 
 violation of organic laws. Every man engaged in trade, 
 therefore, pursues the course suggested by his own judg- 
 ment, and though the great majority of traders never 
 attain the means of retiring in independence, the num- 
 bers who do, are probably, much greater than if they 
 were to adopt the dangerous maxims of modern philosophy. 
 
 Upon the discovery of gold in California, we have 
 within a few years witnessed the extraordinary impetus 
 given to trade. Civilization in Europe had divided so- 
 ciety into two classes, the one who obtained revenues 
 from property, and the other who had neither property 
 nor the security of employment. Every branch of trade 
 had approached a crisis. Peace, science, and the in- 
 crease of population had multiplied all the agencies of 
 production, yet the condition of the people had become 
 worse. Tlie consumption of commodities in Great Brit- 
 ain which bore taxes had declined, though the population 
 liad augmented. Public revenue liad to be raised thi-onc;]'! 
 
2i 
 
 a tax on income, as well as by tax on articles of general 
 consumption. France was not less oppressed. 
 
 Amid tlie nniversal clamor tlie ablest statesmen stood 
 overwhelmed. 'No exj^lanation was given. A war tax 
 after a long and profound peace was the popular excla- 
 mation. There was an anomaly which no one apj)eared 
 to solve. The industrial energies of nations were cir- 
 cumscribed by a cause which seemed inscrutable. No 
 commodity could cancel debts^ or exchange the products 
 of labor^ but gold or silver. The product of gold and 
 silver was declining, while the population and produc- 
 tive powers of labor were augmenting. Ten millions 
 sterling annually at the close of the last century had de- 
 clined, in 1848, to less thsnjlve millions sterling annually. 
 Tlie law of general progress was arrested with the law 
 of retrogression in the product of gold. Respect to 
 authority relaxed with the insecurity of existence. The 
 material economy could not expand. ISTeither capital 
 nor labor could find adequate employment. 
 
 Goods could not be sold, and labor could not be em- 
 ployed. What could not be vended did not call forth 
 labor to replace them. Competition was even paralyzed 
 by the intensity of the causes which produced it. It 
 was prostrating enterprise instead of encouraging it. 
 l¥ages and profits could not descend lower. Money ^ the 
 indispensable instrument of commerce, did not increase, 
 and that which already existed would not circulate. 
 Without its proportionate increase men could not vend 
 what was produced, much less what could be produced. 
 
 Popular ignorance ascribed this condition of things to 
 their rulers. A struggle was impending, it was for ex- 
 istence. Revolution, incipient in Britain, broke out in 
 France, and advanced against authority, only to augment 
 tlie evils it sought to remedy, and to multij)ly the priva- 
 tions it contemplated to redress. 
 
 Europe entered a crisis, the termination of which no 
 man could foretell — to produce consequences which no 
 mind could estimate. Previous revolutions had swept 
 down all traditional rights. The lands had been divided 
 and sub-divided by experimental legislation, till pro- 
 prietors were rendered poorer than peasants, and agri- 
 cultural wealth could be no further abridged. What 
 was to be the next measure in the work of anarch v ? 
 
i;o 
 
 Property was declared robbery. Projects were devised 
 wliicli would have added public demoralization to social 
 ruin. ]^o sclieme was too extravagant — no visionary too 
 wild. Exhaustion and chaos, or nltimate despotism was 
 inevitable. The latter trimiiphed. The first instrnment 
 of ]30wer would have been the first victim to an office 
 created by the irresistible force of circnmstances, and 
 which conld not be abrogated withont the extinction of 
 every form of security to the life of the poor and the 
 property of society — but a great event in human history 
 suddenly interposed to restore men to the pursuits of 
 civilization and to a condition of order. Employment 
 diverted the attention of the multitude from contention 
 with authority, to the procurement of bread. 
 
 The discovery of gold in California in vast abundance, 
 rapidly supplied that essential element to trade, the 
 deficiency of which had produced so universal a spirit of 
 insubordination in all classes. It is probable that no 
 additions had been made to the current coin of nations 
 for many years. The records of the mints threw no light 
 on this subject. They were but the channels of transi- 
 tion. How much coin was annually re-melted and con- 
 verted into manufactures could not be ascertained. Ac- 
 cording to the best authorities twenty millions sterling is 
 the amiual gold product of California and Australia, 
 which, taken together with the old product will give 
 about twenty-five millions sterling. The free and rapid 
 intercourse between civilized countries have diffused 
 equably these additions of the precious metals, affording 
 no precedence in their use such as occurred with Sj)ain 
 when she usurped the treasures of the new v/orld. In- 
 dustrial enterprise, therefore, enjoys in every nation their 
 common immunity. 
 
 The immediate effect of tiiis new and advancing in- 
 crease to the stock of coin has not only extended the field 
 of employment throughout civilization, but it has added 
 an immense increase to the accumulations of wealth, and 
 to the productive resources of every trading community. 
 To the operative class it has enlarged the guarantees of 
 subsistence, though it does not and cannot raise them to 
 a condition of affluence. Labor is the most essential 
 and imperishable of all property, and its capacities so 
 different in their nature from every kind of chattel posses- 
 
 D 
 
26 
 
 sion, that no just equivalent of its value can take place 
 while ffold or silver are the les-al instruments enforced to 
 Imiit tlie operations of exchange. For in limiting ex- 
 change it circumscribes the energies of productive in- 
 dustry, and obstructs the enterprise of capital, thus 
 diminishing the resources of the nation, and the com- 
 pensation of its members. 
 
 CHxlP. IT. 
 
 THE NATUEAL rCs'CAPACITT OF GOLD AND SILVEK ^FOR EX- 
 
 CHAi^GE GEEATLT IIs^CEEASED BY COEs^ING. 
 
 It was no doubt considered a great improvement upon 
 common barter, when one product was selected as an in- 
 strument to exchange all others. Bars of copper being 
 less bulky than most other articles of value, were used 
 by the early Romans. On the authority of Pliny there 
 was no coinage amongst this people till the reign of See- 
 vrus TuLLnjs. Copper was then coined, but not sih^er till 
 the fifth century after the building of Rome. The difficulty 
 to exchange, in suitable quantities, one commodity for 
 another, in the earliest stages of civilization, would 
 naturally suggest the instrumentality of metal, on ac- 
 count of its compact and universal value. Silver was 
 probably possessed in very small quantities, and gold in 
 still less, if p.t all, by primitive communities. 
 
 Copper, silver and gold have been successively em- 
 ployed for money by all nations, as they have advanced 
 in industry and population. These metals suggest to 
 the mind qualities which seem to fit them for this impor- 
 tant purpose. Tlie Mina of silver was used by the GreekS;^ 
 the Shekel by the Hebrews, the As by the Romans, and the 
 Tcdent was common to all. Apart from their character 
 as money the precious metals were for many reasons es- 
 teemed by the ancients as the most valuable of all pos- 
 sessions. That condition of insecurity ever attendant 
 upon early civilization, must have enhanced the estimate 
 of their importance, amid the mutations of life, their re- 
 moval or concealment being so much more convenient 
 than any other sj)ecies of property. Besides they are 
 indestructible. 
 
:^^ 
 
 There is also an ap]3arent certainty in buying and sell- 
 ing when one obtains in exchange an article of e-cjnal 
 worth, and capable of re-exchanging for the valne given 
 to possess it. All these considerations hai^e combined 
 to render metallic money favorable in the opinions of 
 mankind. The precious metals as histruinents of ex- 
 change are, therefore, held now, not less than at the 
 most antiquated periods of history — in equally high esti- 
 mation by the most learned and the vulgar. J^o econo- 
 mical writer of eminence seems to have overcome this 
 common and undisturbed prejudice. K^ecessity has, how- 
 ever, superseded philosophy in this instance, as in many 
 others, and every civilized nation has added a denom- 
 inative currency of Paper to its Metallic circulation. 
 
 Gold and silver are produced like all other commodi- 
 ties, for consumption. Whatever is taken from this 
 natural purpose and converted to coin is subsequently 
 remelted and reclaimed to mauufactures. Gold and sil- 
 versmiths, jewelers, goldbeaters, and many other crafts- 
 men use coin as readily as ingots or bars of the precious 
 metals. Coin being the same price as bullion while its 
 standard and assay are warranted, there are some trades 
 who prefer and use nothing else. The melting-pot thus 
 restores these costly minerals to their proper destination. 
 That portion which is left in circulation is like the 
 last vessel of water in the well, which cannot be drawn 
 forth by oppressed pride or vanity because of the en- 
 feeblement and exhaustion of private means. 
 
 It may be urged with great force of argument, that 
 double or treble the total annual product of the precious 
 metals would not supply even the moderate consumption 
 of jewelry and plate, but for the general poverty occa- 
 sioned by their scarcity for commercial purposes, and 
 the limits which such poverty places to the incomes of 
 the middle and operative classes, both of which would 
 otherwise possess proportionately greater means to 
 gratify the refinements of taste. 
 
 I^or are there any products so subject to be accumu- 
 lated and monopolized as gold and silver. Being less 
 abundant than all others, they are still less capable of dif- 
 fusion. The least necessary of manufactures, they are how- 
 ever, the most profitable. They accumulate in immense 
 stocks with the least difficulty, and are preserved with the 
 
28 
 
 least sacrifice. Produced to gratify tlie most frivolous 
 passions, and consumed by the most opulent, they are 
 withdrawn by the goldsmiths from circulation at the 
 lowest price, though the sternest necessities of nature, 
 and the most imperative demands of industry are left 
 unanswered. Ministering to the luxury of the rich at 
 the highest cost, they minister only to trade at the most 
 oppressive rates of usury. ]^or can the consumption of 
 jewelry said plate ever diminish, unless the incomes of 
 the wealthy are diminished, and no diminution of their 
 private revenues can take place until the condition of the 
 industrious, from whom they draw their resources, is so 
 wretched as to render the progress of a community im- 
 possible, and its decline inevitable. 
 
 'No legislative provision can, therefore, preserve for the 
 accommodation of exchange^ what is more profitably em- 
 ployed in manufactures. Yet all nations have at one 
 time or other enacted severe penalties against the melt- 
 ing of coin, or conveying it out of their respective coun- 
 tries. An ounce of ma.aiifactured gold or silver sells for 
 three times its zoeigAt in coin. Three, four or five times 
 the price of the coin is realized, according to the work- 
 manship. It is to be presumed that there was no more 
 difliculty for the medieval knights-errantry or ladies of 
 degree procuring spurs or bracelets of gold during the 
 most rigid execution of the laws against melting of the 
 king's coin, than at present. Crowns of gold, torques and 
 chains were lavished on the Roman soldiery, when coin 
 commanded from thirty to forty per cent of usury. Con- 
 sumption and circulation thus conflict with most unequal 
 force. 
 
 A rich man can afi'ord to give fifty bushels of grain for 
 an ounce of jewelry, or three bushels of grain for an 
 ounce of silver plate, as mere ornament, when the entire 
 industrial community would find it ruin to exchange 
 more than one bushel of grain, or its equivalent in man- 
 ufactures, for an ounce of silver. An ounce of silver 
 coin represents so much outlay and so much profit. The 
 less silver the producer obtains, the less profit he realizes. 
 A rich man, on the contrary, the more he pays for an 
 ounce of silver or gold, the higher is the gratification, 
 as in such a case it must contain, besides the costliest 
 material, a greater and costlier expenditure of labor. 
 
29 
 
 It is from the amplitude of means that sentiments of 
 pride are indulged. Those who buy gold and silver-plate 
 purchase at the highest price they can afiord, for the 
 sake of disphiy. The producers have just the opposite 
 motive and interest, as the less quantity of gold or sil- 
 ver they obtain in exchange for their products the less 
 justly are they compensated. The competition arises 
 altogether from ditferent motives, and by no means for 
 equivalent purposes. 
 
 I^ot more than one part out of eight of the precious 
 metals is added to the current coin of nations. Such is 
 the estimate of the ablest authorities, and it must be ad- 
 mitted that the data is vague and the proportion very 
 doubtful upon v/hich the opinion is formed. Taking the 
 total product for 200 years preceding 1800, at six onil- 
 lions sterling per annum, this would allow one hundred 
 and fifty millions sterling for circulation. Yet the total 
 currency of gold and silver in Great Britain did not ex- 
 ceed thirty millions according to the estimates drawni 
 at that period. If double this amount w^as held by otlier 
 countries, say sixty m^illions sterling, a total of only 
 ninety millions sterling would be the whole. The allow- 
 ance here made is, probably, much too favorable, w^hile 
 the annual product, according to Jacobs, was not less 
 than ten millions sterling at the close of the last century. 
 One out of thirteen, or probably fifteen is a more ac- 
 curate calculation. 
 
 Statutory law having fixed the weight of gold and 
 silver required to cancel debt, has actually fixed the 
 weight which men must obtain in exchange for produce. 
 To sell for less than a determinate weight or price, for 
 these terms are the same, is to sell without profit, since 
 rents, taxes, and other charges on production, exact a 
 determinate weight of money out of the returns of 
 every man. Law has substituted weight for value. A 
 scarcity of gold and silver does not, therefore, raise their 
 price, as in the case of all other products, free from stat- 
 utory action. They are often depressed in value when 
 they would naturally ascend, and raised when they 
 would naturally cheapen. Tlieir relation to debt is cer- 
 tain and determinate — their relation to all the products 
 of industry is irregular and indeterminate. They fulfil 
 to the rich the absolute conditions of contract — thev 
 
violate to the struggling tradesman the essential condi- 
 tions of justice, feiiiiicient weight of gold or silver can- 
 not freqiientlj be obtained in exchange — yet the full 
 weight mnst be paid under legal compnlsion, in the can- 
 celment of all debts. 
 
 A special office throngh these means is imposed on 
 gold and silver by the state, over and above the natnral 
 purposes of production, while the law in fixing their 
 price, exceptionally debases their value and arrests their 
 increase. Productive economy is thus interrupted by 
 the intervention of authority, The increase, therefore, 
 is specially retarded of those certain commodities which 
 law has decreed the most essential of all, by rendering 
 them the instruments of justice^ the agents of industry, 
 and the functionaries of human progress. 
 
 If there was no interposition to affect their value, 
 eTiery addition to the current price would stimulate the 
 supply. Mines would yield up their treasures when 
 compensating prices were realized, which could not be 
 previously worked. The power of the metals would be 
 enlarged. Their instrumentality as money would be 
 improved. Both their quantity and value would be aug- 
 mented relatively to general production. Metallic money 
 would hecome a subject^ as well as an instrume7it of 
 commercial economy. 
 
 The means of trade to employ costly metals for its 
 operations would be greater than the means of individ- 
 uals to employ them for luxury. This would reserve 
 for the purposes of industry a determinate proportion 
 by discouraging their consumption with the increase of 
 cost. Their value would be more uniform relatively, 
 and more advantageous in highly commercial countries 
 since they would command the greatest value where 
 they were the most requisite, and where they absorbed 
 the greatest quantity of products in exchange. 
 
 All accumulated property in the civilized condition is 
 a debt borne by productive industry. The margin be- 
 betvreen the price of products and the incomes drawn 
 from the producer, determines the reward of labor and 
 the encouragement to enterprise. In fixing the price of 
 gold, the law guarantees the claims of the creditors, 
 while it prevents industry from fulfilling its contracts. 
 Credit, wliich ought to be the handmaid of enterprise, 
 
31 
 
 becomes its oppressor, since there is no adjusting power 
 to guard the thrifty accumulators against tlie ruinons 
 demands of the fortunate who have accnmnlated. 
 
 It cannot be doubted that the Y/aste of labor and 
 capital occasioned by rude barter would be materially 
 economized by the use of bars of metals, in suitable 
 weights, and so long as governments did not interfere to 
 coin the metals, no serious injury or injustice amongst 
 the exchangers would result. Debts arising from mutual 
 traihc and reciprocal accommodation would be contracted 
 upon such terms as experience judged the most suitable. 
 Had no interference of law disturbed the natural value 
 of any commodity — imposed conditions, or inflicted pen- 
 alties — men's wits would have devised remedies for any 
 defect in the methods of trading, which, in the hands of 
 government, have become the source of incalculable 
 wrong and national calamity. 
 
 The claims on industry would, there can be little rea- 
 son to doubt, have been regulated by competent adjust- 
 ers, whose business it would be to preserve a record, 
 and determine the market value of the metals. When 
 the metals were scarce, a less quantity would vend an 
 equal or greater quantity of produce, and cancel an 
 equivalent portion of debt. When they were in greater 
 plenty, vending would not be afiected, exchanges would 
 adjust themselves with the quantity of metals and pro- 
 ducts. Averages of jj^vice would detev'mine the equity of 
 obligations. 
 
 The rent of land in England and Scotland was former- 
 ly paid upon this principle. Whatever was the price 
 realized for grain on three or four market days at differ- 
 ent periods of the year was averaged, and the amount 
 so determined was paid. When rent was paid in this 
 manner it was called Con'cersion Price. Such contracts 
 were not only just, but they undoubtedly economized 
 the valuable labor of the farmer, who would be enabled 
 to sell when otherwise he must frequently have returned 
 from market v/ithout success or profit And though 
 coin was the instrument of liquidating the obligations 
 between tenant 2,"^^ ])ro])Tietor^ it was not employed as a 
 legal agent but in its true character, as a subject of com- 
 merce. 
 
 The individual, and ultimately national ruin, which 
 
32 
 
 has resulted from tlie use of metallic money never would 
 have occurred had the governments of communities not 
 interfered and coined the metals. Making and regulat- 
 ing money is strictly a function of trade, and, therefore, 
 a usurpation of the state. Had the metals remained 
 uncoined, the weight and assay of each piece being 
 simply alBxed by the traders, not by authority, and 
 valued by the exchangers in their dealings, the incon- 
 venience thus arising would have been the only loss sus- 
 tained. The worth of the metal and not its weight 
 would have prevailed — since the law of value^ not the 
 law of gramty^ can alone cancel with justice and equity, 
 the claims of debt. 
 
 Xor was the evil less that the first coinages of all na- 
 tions bore the inscription of their weight. The edges of 
 ancient coins as well as their obverses, were stamped, pro- 
 bably to guarantee their current use without the trouble 
 of weighing. Princes would, however, soon observe 
 that the wear of the coin did not reduce its current value. 
 On the contrary, the increase of commodities without a 
 corresponding increase of coin must have in most in- 
 stances, raised its value. A greater amount of product 
 would be obtained for the lighter coins. The weight 
 being reduced from constant use, while the current value 
 rose, would be a problem of some difficulty in the crude 
 condition of finance in early civilization. This, no 
 doubt, suggested to crafty princes the first idea of alloy- 
 ing and clipping the coin. Gold suffers from abrasion 
 a loss of one per cent in six years ; silver one per cent 
 in two years. 
 
 The distinction between i(?^'2^/iz^ and '^(2?'^^ in the nature 
 of money seems to have excited the consideration of the 
 profound Locke. He proposed the revival of stamping 
 the weight on the gold coins. Though such an advice 
 had been adopted by the British government, it would 
 not have served in any degree to modify its injurious 
 action on commerce, of which, there can be no doubt, 
 he was cognizant. Whenever weight superseded value, 
 the real character of the metals was set aside and a 
 legal capacity substituted. Though the scarcity of coin 
 caused by the scarcity of supply, or the increased con- 
 sumption of the metals rendered them naturally more 
 valuable, the quantit^^ of weight necessary to discharge 
 
S8 
 
 debt would not be relinquished by the creditor, and the 
 debtor could not, therefore, vend his produce witli- 
 out the obtainraent of the quantity of weight, wliich 
 would compensate outlay, besides transferring the weight 
 contracted to be paid. If one of silver wonld exchange 
 for a hundred times its weight, on average of general 
 produce, the amount which could be exchanged would 
 be determined by this relation. If the products to be 
 vended, either in a particular market or aggregately, 
 amongst a community exceeded these proportions, then 
 all in excess would remain unsold. Two alternatives 
 would alone remain, either tlie excess must be sold on 
 credit, or the whole be debased in value. If the quan- 
 tity of products were increased, or the silver decreased — 
 so that the proportions became one hundred and fifty 
 of produce to one of silver — then the value ot money 
 must rise one-third^ or the current price of products sink 
 in this degree, or the vendition be less than aujyply one- 
 third. These results follow as definitely as the law of 
 geometrical ratios. 
 
 The British pound sterling was current at fifty-four 
 pennyweights of silver, for twenty years preceding 1817. 
 All obligations of dcM^ public and private, all d^enomi- 
 nations of value, whether of estate or exchangeable 
 products averaged this standard. It was raised by statute 
 to eighty penny weig fits. This unwarrantable act of par- 
 liament, reducing the enumerative capacity of silver and 
 gold, continued to reduce the enumerative price current 
 of all merchandise and products for upwards of thirty 
 yeai'S after the alteration. Three jpennyweights and eight 
 grains of gold in the current pound sterling, was raised 
 to fioe pennyweights and three grains of legal liability. 
 The standa)cl weight of money heing raised one-third, 
 the price of all juoducts was reduced at least one-half 
 Many products sunk two-thirds in price current. The 
 current liabilities, public and private, of the nation, 
 were by that extraordinary measure doubled — probal)ly 
 augmented three-fold. A tradition was restoied — at the 
 co>t of general ruin and confiscation. 
 
 The great abundance of gold from the recent disc(')V' 
 
 eries began to opej-ate against this law and to arrest its 
 
 action ahout ls50. Since that period prices have risen 
 
 in a considerable degree, thus reversing the progress of 
 
 s 
 
decline, while the additional and numerical increase of 
 coin lias mnltiplied the number of exchanges to so great 
 an extent, that the production of wealth in Britain 
 cannot have augmented less than one hundred mil- 
 lions sterling annually. Public liabilities have declined 
 in the exact proportion of the rise of price. 
 
 Gold and silver are required as enumerators as well as 
 €sti?natoTS of value. But in neither character are they 
 capable of performing the progressive work of commer- 
 cial enumeration or sustaining equivalency. They cannot 
 multiply correspondingly with production, and therefore, 
 the energies of men are limited or arrested, so that they 
 may have time for the continual arrearages in this over- 
 work of their powers. If, however, gold should increase 
 for a time so largely as to accommodate the require- 
 ments of trade, it invariably depreciates. As it sinks 
 in value, it diminishes in capacity. Its relative and pro- 
 portional value recedes with its greater supply. An 
 abundance of gold does not, therefore, produce an 
 abundance of money, or mitigate its scarcity. Its tem- 
 porary increase causes depreciation, and depreciation 
 ultimately limits its production. It thus debases its own 
 value, and arrests its production by that debasement. 
 
 The quantity of supply of every commodity is the 
 universal law of value. Every community, therefore, 
 suffering from a natural deficiency of the precious metals 
 for industrial purposes, absorb them alternately from 
 each other, and disturb the equability of their respective 
 proportions. The nation from whence they are with- 
 drawn instantly finds its commerce reduced to stagna- 
 tion, and the equity of every obligation violated, conse- 
 quent upon the current value of money having risen in 
 exchange, without any adjusting provision in the current 
 and hourly maturing debt inseparable from commercial 
 enterprise. Wherever these metals accumulate, a fe- 
 verous activity is at once excited, and industrial pros- 
 tration, occasioned in one nation by their scarcity, is 
 produced in another by their excess. 0?i this account 
 the value of these metals is less eq%iahle than any other 
 products. A ton of bar iron will sell at one time for four 
 ounces of gold, (sixteen pounds sterling,) at another 
 for two ounces of gold, (eight pounds sterling) — no de- 
 ficiency in the supply of iron, nor alteration in the w^ants 
 
35 
 
 of the community may have taken place. It is, there- 
 fore^ demonstrable that the value of money, and not ttie 
 value of the commodity is disturbed by these extremes. 
 
 A measure of weight is as distinct in its nature from a 
 7neasure of value and enumeration as an element is dis- 
 tinct from a substance. Lowering or raising the weight 
 of money does not on this account ever operate in the 
 same degree relatively to the price of commodities. 
 Hence the institution of public economy being false in 
 its 23rocess of equity, is confused in all its results, and 
 labor, however great its capacities, having no immunity 
 but that which human experience defectively provides, 
 may be likened unto one who has great titles which are 
 disputed, and is from that circumstance no better in 
 condition than if it were without right, because it is with- 
 out justice. 
 
 CHAP. V. 
 
 OKIUIX OF MONEY AXD DEBT. THEIR EFFECT OX THE SOCIAL 
 GOXDITIOX OF MAN. 
 
 The invention of money is ascribed by Heeodotus to 
 the Lydians. Ancient writers, however, differ upon the 
 point. There is, moreover, an evident misap23lication of 
 language in speaking on this subject. Coining cannot 
 be regarded as an invention, since it made no alteration 
 in the naethod of using the metals, other than was the 
 common practise of barter. Stamping by public authority 
 to attest weight and purity, neither affected the value 
 of the products nor fulfilled any office wdiich could 
 not have been as safely exercised by the community. 
 ]^or could magistrates offer any greater security against 
 alloying or counterfeiting the precious metals, than if 
 the attesting had been performed by tradesmen whose 
 judgment and integrity would, at least, have guaranteed 
 the public against abuses which rulers in every age have 
 not scrupled to practise. 
 
 Governments having invariably exercised the office 
 of weighers and assctyers, also assumed the office of deter- 
 'mining by legal enactment valu§ and capacity, and her@- 
 
« 
 
 e 
 
 in commitied a violation of economioal law, involving 
 
 social calamities, 'erninable onlv in the eventual extinc- 
 tion of industrial progress and tlie dissolution of national 
 power. The Chinese government alone forms an histori- 
 cal exception in the hnancial policy of a great state. 
 Gold and silver coin was current amongst this people at 
 a very early period. These, however, have been for 
 many ages almost abandoned, in consequence of their 
 scarcity, and copper coin substituted, which now circu- 
 late as the common medium of exchange. They also 
 used sheets of silver for merchandising. A-Vlien a pur- 
 chase was made, the buyer dipt a piece from his sheets 
 which the seller, vdio was alw^ ays provided with a pair 
 of scales, ^veighed and accepted in payment. These 
 pieces were then used in current exchange. The causes 
 which arrest the progress and prevent the decline of that 
 singular community, are first, the paternal character of 
 its government ; secondly, their contempt for trading 
 pursuits and military spirit ; and thirdly, the destruc- 
 ii(»n of iheir infants, which restrains population to the 
 limit of tlieir resources. To what extent these politi- 
 cal circumstances are attributable to their inferiority 
 of race, it is properly for natural philosophy to deter- 
 mine. 
 
 The Romans used the temples of their gods for th|^ 
 manufacturing of coin. It was wdthin the sacred resi- 
 dence of Jrxo MoxKTA that the coinao:e of £fold and sil- 
 ver was conducted, and deposits of money kept. The 
 officers who superintended were called the Monetariij 
 hence the derivation of the X^yiw 7 noney. As the temples 
 of the gods, our modern coining-houses or mints will dis- 
 appear when men have become w^iser. The materials of 
 economical science are, however, only attaining definite 
 forms and qualities. Law^s cannot be deduced, much 
 less demonstrated, until an object, or series of objects 
 have perfected their distinctive properties. Combina- 
 tions of men into nations for economical or industrial 
 purposes necessarily precede a knowledge of the laws 
 upon which such organizations should be conducted. 
 Civilization may, therefore, be said still to be in an ex- 
 perimental condition. The labors of the most profound 
 thinkers who have contributed to this soiencej have thus 
 been attended with difliculties, wdiich could not be ob- 
 
37 
 
 viated, and which have only been partially surmounted 
 bv immense research. 
 
 When primitive industry had even so far progressed 
 as to have divided into several branches, exchange would 
 present few difficulties. The few and rude nature of the 
 products wonld be bartered without inconvenience. 
 Copper and silver, in the course of time, would enter 
 intt) the materials of maniifactnre. The high value of a 
 piece of copper or silver wonld render it available for 
 exchange as well as manufactures. He v,dio did not want 
 to barter a sheep for a spade, or a bale of wool for a 
 plough, would barter the sheep or the wool for a piece 
 of metal, and thus facilitate the exchange to the con- 
 venience of the mannfactnrer. 
 
 Money thus satisfies an immediate want, being simply 
 a deposit of equivalent security, to supply a futnre want. 
 It facilitates industry or supplies a necessity, when 
 direct barter would postpone the exchange until the 
 wants of both exchangers had matured. Money antici- 
 pates consumption. The demands of the more nrgent 
 precede and stimulate the operations of the less nrgent. 
 Each buyer depositing a piece of metal for the product 
 reqnired, if the quantity of pieces multiply definitely 
 and aggregately with commodities in a determinate ratio, 
 then every article produced w^ill be vended. Su23posing 
 one piece of silver will circulate live times its value, 
 then that proportion must be preserved, or the capacity 
 of exchange will be less than the capacity of produc- 
 tion. The ratio should proceed thus — silver 1 — pro- 
 ducts 5. 2-10, 4-20, 8-40, 16-80, 32-160. General 
 production, however, progresses at a ratio far exceeding- 
 this compntation, or inverse snpply of money, and, there- 
 fore, the condition of all nations have eventually dete- 
 riorated with the extension of their resources. 
 
 As barter is the earliest form of exchange, only a few 
 transactions would require the intervention of metal. 
 The impediments of transferring one value for another 
 would be overcome by the combined process of direct 
 barter and metallic barter. Every invention aiding the 
 productiveness of industr}' would, however, receive en- 
 couragement. Contrivances would multiply as handi- 
 craftsmen increased, and not till men had congregated 
 in considerable numbers would barter becouie less prac- 
 
3S 
 
 licaljle, and tlie inconvenience of a scarcity of money 
 produce injustice and oppression. 
 
 'No motive to the violation of morality could arise in 
 the earliest and simple condition of society. Artificers 
 would, therefore, mutually accommodate each other. 
 Whatever was necessary to prosecute their respective 
 trades would he promptly contrihuted hy those who held 
 the requisite materials. It would, however, soon be 
 found that more pieces of silver were necessary to pro- 
 duce a machine or piece of cloth than could be innne- 
 diately obtained for either in exchange. An ounce of 
 silver might buy the products of a week's labor, but the 
 artificer vrould require to outlay five, ten, or twenty 
 ounces to procure tools and proper quantities of material 
 for his simple enterprise. These could be obtained more 
 easily on credit, then pieces of silver could be obtained 
 to cancel the accommodation. At first the inconvenience 
 Avould scarcely be felt, as no defiiute time for payment 
 was probably exacted. 
 
 Such a condition of simplicity would disappear as the 
 different degrees of accumulation began to manifest the 
 ])rogress of wealth, correlatively with the enlarging 
 populousness of each city or community. Barter would 
 tjecome less and less practicable as cities increased. All 
 trades becomino^ divided and sub-divided to facilitate 
 production, the exchange of product for product would 
 become commercially impracticable. Jfoney, so essen- 
 tial in trade, yet so inadequate to its requirements, 
 necessitated the aid and multiplication of credit. Debt, 
 thtts became in the progress of society the only alterna- 
 tive against returning to a state of nature. 
 
 Credit commences with the civil state. It is the act 
 of one citizen extending his industrial aid and faith 
 to another. Without it civilization would have been 
 impracticable. Its destruction even at this moment 
 would dissolve any commonwealth. While its increase 
 facilitates industry, and adds to the income of the pro- 
 ducer, it essentially conduces to the wealth and advance- 
 ment of the nation. Whenever it exceeds the propor- 
 tion which money can properly cancel, then it becomes 
 a clog to industrial enterprise, and diminishes the wealth 
 of a community. One citizen becomes the oppressor of 
 another, and a universal tyranny pervades society. Debt 
 
89 
 
 and credit, evidently accelerate tlie enriclnnent or ruin 
 of a people. 
 
 Money alone cancels debt and, therefore, the current 
 quantity of money determines the limits to which the 
 profitable use of crcdH can be carried. The proportion 
 of credit, limited in its circle of extension by this law, 
 regulates the extent to which commerce can be safely 
 and profitably pursued or expanded. Whenever the 
 wealth and productive powers of a nation exceed these 
 limits, the unvended over-produce enters into forced 
 competition with the other produce in the progress of 
 circulation, and degrades the value of the whole circu- 
 lating in the marts of industry. Credit instantly becomes 
 less advantageous and more necessary. 
 
 Credit soon changes from the borrowing of a day's 
 labor to be repaid with a day's labor, or a bushel of grain 
 to be repaid with a bushel of grain, to merchandising 
 and borrowing money upon heavy usury. The medium 
 of exchange becomes j^'^ivate jjroperty^ which is neither 
 lent freely nor upon liberal terms. It is difficult to obtain 
 money on credit from the same cause that it is always 
 difficult to get it in exchange. Tlie scarcity of the quantity 
 in circulation renders it, therefore, ruinous at times to 
 borrow on interest, or to obtain in exchange for goods. 
 Yet the interruption to industry is still more ruinous. 
 Those who can borrow have, therefore, great difficulty to 
 repay, and impoverish themselves frequently to keep 
 their credit. Such has been the social condition of man 
 throughout the past as it is at the present. 
 
 The quantity of debt in all nations bears a definite 
 proportion to the current quantity of money. If the 
 aggregate silver and gold in circulation does not progress 
 with the progression of capital, the ratio of credit can- 
 not be safely augmented, whatever may be the require- 
 ments of trade. Debts can only be contracted benefi- 
 cially to aid commercial and domestic exchange con- 
 formable to the limits set by the instrument which can- 
 cels it. Thus we find current commercial credit in 
 England is fifteen to one of hanking discounts. It is 
 possible that it might be carried to twenty to one^ that is, 
 twenty millions sterling of current credit to one million 
 sterling of current bank circulation. But as credit en- 
 larges, the danger to commerce increases. The least ob- 
 
40 
 
 stniclioii to trcidiiig activity under such circumstances 
 involves consequences proportionately more rninons to 
 tliose who liave employed tlie greatest credit. The most 
 nsefnl and enterprising are, consequently, the most certain 
 victims to the interruptions and vicissitudes of linance. 
 
 Governments seem to have interposed in the operations 
 of trade, anterior to the earliest records of history. 
 Debts were reclaimed hy law amongst the Egyptians, 
 and inability to pay provoked the most severe penalties. 
 The debtor became the slave of the creditor, and civili- 
 zation was thus perverted, with all its powder over its in.- 
 dividual members, to an unlimited tyranny. Personal 
 liberty and inviolability, the most sacred condition of 
 the civil state, were thus revoked — without any moral 
 or adequate oifence against the community. 
 
 The insecurity of a state of nature, which men sought 
 to escape, was revived in the social combination by 
 laws founded on error. Property was not secured to in- 
 dustry, and when poverty ensued, debt became the al- 
 ternative, and enslavement the penalty. In this matter 
 the Greeks copied the Egyptians, the Romans copied the 
 Greeks, and modern nations have copied the Pomans. 
 We are becoming wiser than our predecessors, yet the 
 prevailing laws on debt and debtors are discreditable to 
 the age. Amongst the ancients, as with us, the state, 
 not the individual, is the oifender. The liberty of the 
 citizen, which is the foundation of the civil compact, 
 hitherto outraged from this special cause, has, through- 
 out the past eventually been expiated in national igno- 
 miny and destruction. 
 
 Moses witnessing this fearful oppression, with its insep- 
 arable and debasing consequences, occasioned amiongst 
 the Egyptians, provided, with great wisdom, in framing 
 the constitution for the Hebrews, that all debts should 
 be periodically canceled, and any forfeiture of rij^ht 
 intervening the seven years when this decree took 
 effect, was restored in its entirety to each individual. 
 The Hebrew law-giver also provided, that no interest 
 was to be taken for money amongst the Jewish people. 
 This law was an exception to all others, as it was not 
 clothed with the spiritual character which pervaded 
 nearly every legal injunction. It was not, therefore, on 
 moral but political grounds that usury was denied — as 
 
41 
 
 Moses expressly sanctions the right of usury being taken 
 in their dealings with other nations. 
 
 This will account for the adventurous and trading 
 character of the Jews, who, finding they could not make 
 j)rofit by usury in their own country, would naturally 
 carry the gold and silver they had acquired by their in- 
 dustry to the seats of traffic. We hnd the founder of 
 Christianity commending this spirit of enterprise in the 
 parable of the faithful servants who were severally 
 entrusted with so many talents of money. A premium 
 was thus oiFered under the Mosaic law for carrying 
 money out of the Jewish community for the purposes 
 of commerce and profit. 
 
 The Hebrews, however, enjoying the use of money 
 from each other without usury, secured ad^vantages of 
 manufacturing cheaply, possessed by no other contem- 
 poraneous people. In the manufacture of hne linen and 
 other fabrics which became the subjects of commerce, 
 they evidently commanded special facilities. The exces- 
 sive rates of interest which prevailed amongst the an- 
 cients, and which added largely to the cost both of pro- 
 duction and exchange gave to the Hebrew merchants a 
 most profitable commerce in their intercourse with the 
 Phenicians and Greeks. Thej^ thus exercised a two-fold 
 means of realizing riches, namely usury and comparative 
 cheapness of ]}Toducts. 
 
 The institutions and rural condition of the Jewish 
 people also gave them the means of being sellers rather 
 than buyers. On this account whatever their traders 
 realized in foreign lands would be remitted principally 
 in gold and silver, and not in the more cumbrous com- 
 modities. It was by traffic, but probably more by 
 usance, the Jews acquired their proverbial riches. And 
 what is not less remarkable, the monopoly of the precious 
 metals which they attained, was the result of the legal 
 restrictions which rendered them the least productive of 
 any class of property amongst themselves. The regal ex- 
 travagance of Solomon, which seemsneither to have been 
 oppressive to the nation, nor unsuited to the tastes of his 
 subjects, testify the great riches and prosperity to which 
 the Jewish community attained. Those salutary laws 
 which had mainly contributed to their v^'elfare, became 
 relaxed with their opulence, and eventually usury and 
 
42 
 
 monej changing Leeaiiie as conmion in Judea as in other 
 eonntries. 
 
 When Solon was raised by his oppressed countrjnuen 
 to the high office of law-giver, he found all the lands in 
 the state of Athens irrecoverably mortgaged and the 
 people overwhelmed vrith debt. The populace demand- 
 ed the abolition of debt and the distribution of the lands. 
 He conceded the former, and decreed the canceling of 
 all debts, but firmly repulsed the latter. This clamor 
 about the division of land is as common amongst the mul- 
 titudes which compose our modern cities. It was several 
 times effected by the Eomans. Insecurity of trade, fre- 
 quent interruption to employment, with periodical ruin, 
 combine to direct men's minds to the possession of land 
 as the only reliable guarantee for subsistence. 
 
 When land was mortgaged in the Athenian State, a 
 practise prevailed of putting up a post, with an inscrip- 
 tion, announcing the debt. The custom though necessary 
 for the interest of those who loaned money, when insti- ■ 
 tutions and lav/s were of the rudest and simplest charac- 
 ter, must have been most repugnant to the spirit 
 of a people whose personal and ^^olitical freedom 
 necessarily inspired the strongest impulses of pride. 
 Lacedemonia Avas overwhelmed with similar social 
 burdens. Lycurgus not only abrogated all claims of 
 debt, disburthening the numerous proprietors of land, 
 but he decreed that iron and not gold and silver should 
 be the future currency of the Lacedemonians. 
 
 So scarce were the precious metals, that the rate of 
 interest was generally about one-third of the amount 
 lent. Aristotle, who observed the rapid process of con- 
 fiscation which the high rate of interest inflicted, terms 
 usury '^ rajpine^'^^ and disputes the right of any man ob- 
 taining interest out of money as incompatible with its in- 
 vention and institution. The necessity of borrowing 
 arises from the scarcity of money — the incapacity of 
 paying ari&es from the necessity of borrowing. Since it 
 was not only that men borrowed because they could not 
 vend, but because of the high rate interest imposed — 
 exacting principal in the form of usury, and rendered 
 cancelment frequently impossible. 
 
 Over trading and over speculation are common charges- 
 made against the merchants as a class, whenever a crisis 
 
in finance reverses tlie progress of trade. Such argu- 
 ments seem invented to shelter ignorance by charging 
 the responsibility of social misfortnne upon its victims. 
 Bnt, were it asked, why have the holders of land, whose 
 frngality and cantion are proverbial, so generally become 
 overwhelmed with debt, it would be difficult to reply. 
 Not from over tradino- like the merchant. 'Not from 
 speculating like the enterprising capitalist. 
 
 Agriculture is subject to the same confiscatory laws, 
 though they operate in a diiferent manner and by a 
 slower process. Land is the most tangible of all prop- 
 erty, and therefore, the safest inv^estment. Land can- 
 not be multiplied like trading capital, and consequently 
 a family of four or five sons must, if they are to succeed 
 in the world, become professions or traders. Consider- 
 able expenses are necessary to give a fair start to each 
 one. Low prices for produce, or bad seasons from time 
 to time, demand a modification of rent, when probably 
 the demand upon the means of a parent is the heaviest. 
 Portions must be given to some, respectability upheld, 
 and debt is the alternative. 
 
 These causes combined, not less of antiquity than at the 
 present time, have subjected the classes who hold land 
 to the same dependency and oppression incident to com- 
 mercial undertakings. More than one-third of the pro- 
 duce of the soil of France is required to pay the annual 
 interest of the mortgages upon it. Debts multiply in- 
 versely with the scarcity of money and the high rate 
 of interest. According to the statistical estimates of 
 M. AuDiFRET and M. Raudot, both of whom mem- 
 bers of the French legislature in 1819, the total annual 
 product of the soil of France was eighty millions ster- 
 ling. These authorities have computed thirty millions 
 sterling to be the annnal interest of mortgages on the 
 land — twenty millions sterling the state and local taxa- 
 tion exacted, leaving only twenty m^illions sterling for 
 the subsistence of the cultivators and proprietors. Tliis 
 vast acumulation of debt had taken place since the revo- 
 lution of 1793. 
 
 On the authority of many professional men entrusted 
 with the execution and transfer of titles of land ceded 
 to railway companies, under acts of Parliament in Eng- 
 land, it has been stated that the value of one-thiTd of 
 
44 
 
 entire land tliroiiglioiit the lines siirvejed was mortgaged. 
 This would be equal, at least, to half the rental. Inte- 
 rest of money is subject to no vissicitudes, nor its ful- 
 iilment to anv delay. The law of entail howeyer, ex- 
 ceptionally shields the possessions of the British nobil- 
 ity against the general statutes on debt, and absolyes 
 each consecntiye generation of liabilities which other 
 wise would, in all probability, haye long since periled, if 
 not oyerthrown their political supremacy. 
 
 The first social reyokition of the Romans, which estab- 
 lished the tribunal magistrature, was occasioned by the 
 insupportable oppression of debt. This occurred within 
 fourteen years after the expulsion of the Tarqnins, and not 
 exceeding 26-1 years after the building of Kome. What 
 were the subsequent and repeated struggles of the Ro- 
 mans to disentangle themselyes of debt is a dark re- 
 cord of their political history. War and conquest 
 were but professions amongst this people like any -other 
 calling, honorable in the sentiments of the populace, 
 and profitable at times to all engaged in it. These contri- 
 buted, howeyer, less to the national wealth than a 
 proper disposition of their industrial energies would 
 haye done, and though it accelerated the ascent to na- 
 tional predominance, it was deyoid of stability and pre- 
 cipitated rather than retarded the progress of their poli- 
 litical declension. 
 
 Debt accumulated more rapidly amongst the ancients 
 than with us. The excessiye rate of thirty-four per 
 cent interest, common to those ages, manifested the great 
 scarcity of money compared to modern times. Interest 
 would then compound and equal the principal, if 
 paid half yearly, in less than two years and a-half. 
 Interest paid yearly now would not compound and 
 equal the principal in less than thirteen years. The 
 statute fixing the rate of interest in England at fiye per 
 cent was one of the most salutary laws for the interest of 
 trade eyer accorded by legislatiye justice. 
 
 The yalue of that measure cannot now be appreciated, 
 ^or can it be estimated how much it contributed to 
 facilitate and cheapen domestic production, and to aid 
 the merchant in successfully competing with the mer- 
 chants of other countries — extending the foreign trade 
 and giying to Britain a command oyer the precious met- 
 
45 
 
 als, greater than all other commiimties. A low rate of 
 interest evidently conduces to the increase of money, 
 while a high rate produces the opposite result. Products 
 buy gold and silver, and that people which can sell the 
 cheapest will obtain the most of these metals in ex- 
 change. The scarcity of metallic money does not, there- 
 fore, confine its oppressive eifects within the circle of 
 domestic industry, debasing the value of labor and com- 
 modities, it also enters into the economy of commerce, 
 and one nation becomes the oppressor of another, as one 
 man had become the oppressor of another — the stronger 
 competitor destroying the weaker, j^otwithstandins; the 
 comparative abundance of money amongst the British 
 traders, it has been computed that upwards of thirty mil- 
 lions of ])ounds sterling is annually lost by bankruptcies 
 and compositions. 
 
 The celebrated Lord Bxicox suggested the propriety of 
 making two rates of interest — one for large sums and 
 another for small. It is not necessary to examine this 
 opinion more than to exhibit the difficulties surrounding 
 the nature of money, and the innumerable remedies 
 which the most profound have sought to modify the 
 financial error urged throughout this work. Organic 
 laws operate irresistibly. The most ingenious devices 
 or judicious administration, cannot avert the evil conse- 
 quences of their violation. Undeserved misery, unmer- 
 ited bondage, unnecessary privations, have spread their 
 blighting influence throughout the area of civilization in 
 the past and the present, paralyzing industry and subvert- 
 ing justice, while thrones have tottered and fallen amid 
 the general wreck of national anarchy. Even the inex- 
 haustible beneficence of the Creator — the incomputable 
 powers of human genius — the limitless energies of hu- 
 manity have been dashed from their natural course, and 
 the magnificent purposes for which infinite wisdom be- 
 stowed them on man, lie like a broken vessel, with its 
 treasures spilt upon the earth. 
 
46 
 
 CHAP. VI. 
 
 EEDCCTIOX OF THE WEIGHT OF COrN" A MEASUEE OF NECES- 
 SITY EESORTED TO BY ALL NATIONS, ANCIENT AND 
 MODERN. THE RELIEF ONLY TEMPORARY. 
 
 With Yery little variation tlie pound troy of twelve 
 ounces in weiglit, has been the standard unit of account^ 
 first adopted by nearly all communities. The Mina of 
 the Greeks, the As of the Komans, the Livre of the 
 French, and the Pound sterling of i\iQ English were 
 orighially all of that weight. With the Hebrews the 
 Shekel did not much exceed nine onnces. The Mina 
 was coined into seventy-three drachmas, each drachma 
 containing abont seven pennyweights of silver. By a 
 pnblic decree it was coined into one hundred drachmas, 
 each containing less than five pennyweights of silver. 
 This measure added a fourth to the current money 
 in circulation. Plutarch says that it was remarkable 
 in its eifects — ^prices were not raised, and, therefore, the 
 creditors did not sufi'er by the change. 
 
 1^0 doubt the Greek economists would find some difii- 
 culty in solving this singular result in the laws of value. 
 A bar of silver one pound in weight, would not, it is 
 supposed, exchange for more than its worth, though 
 coined. Either the silver was exchanging previously 
 above its value — which is but reversing the difiiculty, or 
 silver when coined, circulates without an exact respect 
 to its value. Silver will certainly exchange above its 
 value when it becomes scarce. When products are sold 
 beneath a fair price, silver is commanding more than its 
 proper value. The scarcity of silver may, however, be 
 so great as to leave much produce unvended, even at 
 the lowest prices which could be accepted. A two-fold 
 loss is thus inflicted. Deficiency of demand is added to 
 deficiency of price. Under such circumstances a reduc- 
 tion of the weight of coin restores, in some measure, the 
 natural relations of value. Money being numerically 
 greater, multiplies demand without adding to price. 
 JProducts which were tbrmerly surplus, or the products 
 which could have been supplied at prices current, find- 
 ing a demand hitherto denied, compensates the grateful 
 
47 
 
 producer too amply for him to increase Lis demands for 
 higher prices. The capacity of the coin to discharge 
 debt not being diminished, though the weight had been 
 so, its capacity to buy the same quantity of products 
 would not be affected. This is conSrmed upon the best 
 authorities. 
 
 Other communities suffering from the same cause, can 
 little spare any portion of the silver which has fallen to 
 their share. A general debasement of prices and a high 
 rate of interest, which is a premium against exportation, 
 combine to prevent a great influx of silver to a nation 
 even where it may command a degree of higher value. 
 Whatever additions are thus gained, are so limited that 
 they may increase accommodation rather than price, 
 and thus by encouraging trade cheapen many products 
 instead of raising them. There is besides, a tendency 
 to raise the value of silver in other countries to the de- 
 nomination effected in a particular community. 
 
 ITuME in his " Essay on Money,'' quotes Du Tot, a 
 French writer, in support of this fact. The Mark of 
 thirty livres was coined in the last year of the reign of 
 Louis XIY, into fifty livres. Each livre passed current 
 for nearly the same quantity of produce. A century 
 had elapsed without material alteration. Mr Hume does 
 hot dis[>ute. neither does he explain, in what manner the 
 abstract value of silver does not change correspondingly 
 with the reduction of weight. 
 
 When a community can vend the products of labor 
 readily for current prices, the coin received being capa- 
 ble ot lawfully canceling the current debts between 
 man and man, no one is exact about the weight of silver 
 contained in the coin. Its lawful denomination is the 
 public guide. It depends upon the prudence and sagac- 
 ity of a government to what extent such alterations can 
 be safely effected. To multiply demand by enlarging 
 the numerary circulation, not only promotes "the increase 
 of national wealth by the activity of domestic industry^ 
 it also extends the foreign trade of a country, by en- 
 abling the merchant to export many articles previously 
 too dear — the weight of foreign coin bearing a greater 
 value. There is also a lendency to pull down the value 
 of money in the neighboring communities, and thus 
 prevent any change in the value so adopted. 
 
48 
 
 If a scarcity of money limits the operations of pro- 
 ductive industry, a reduction of tlie weight of coin in 
 the proportion to such impediment would occasion no 
 advance of price. Taking the margin of unemployed 
 labor at one-tenth, the deliciency of money is determi- 
 nate in that degree. One-tentli of the annual product 
 of wealth amongst a people is thus obstructed, because 
 it cannot be sold. A reduction of one-tenth of the 
 v/eiHit ot coin would acid a tenth to the numerical cir- 
 Gulation of money. Sequentially such an addition of 
 money would add to the demand of commodities instead 
 of to the price of them. Supposing silver capable of 
 this diffusive action, the productive powers of a com- 
 munity being yet capable of enlargement beyond the 
 new limits, competition also steps in to repress the ten- 
 dency of prices to rise. However, these measures have 
 generally been resorted to during war, for the purpose 
 of raising revenues, and not from any commercial con- 
 sideration. They have, therefore, contributed in a 
 small degree to the interests of trade. Excessive altera- 
 tions on the return of ^^eace might restore to the com- 
 mercial cities an influx of silver — which operating upon 
 the quantity of produce in the hands of the merchants, 
 raise prices and concurrently excite throughout the na- 
 tion a rise where no increase of money had taken place. 
 And hence, reduce in current exchange the value of sil- 
 ver in some measure to what the state had formerly 
 raised it. 
 
 Practically a reduction of the vreight of coin by an 
 indirect process makes it a subject of commerce and so 
 far as it accomplishes this end, it mitigates the evils in- 
 separable from its natural and institutional character. 
 !N"eccssity rather than wisdom generally urges princes to 
 the adoption of measures which modify or aggravate the 
 difficulties of the commonwealth. When, therefore, the 
 understanding of rulers is unequal to its ofiice, and cir- 
 cumstances instead of foresight, impose action, the safety 
 of a people must indeed be in the hands of feeble mas- 
 ters. We cannot feel surprise at the calamities through 
 which nations pass, if we bear in mind that statesmen 
 are men of education more than of experience. Born in 
 opulent circumstances and despising the pursuits of trade, 
 they cannot comprehend the innumerable evils incident 
 
to tlie exertions of those who supply the revenues and 
 riches they dissipate in ignorance or extravagance. 
 
 In the first Punic war the Romans reduced the weight 
 of the As from twelve ounces to two. It was reduced to 
 one ounce in the second Punic war, and to one-half 
 ouQce in the third. 'No complaint was made of these 
 extraordinary reductions by the creditors, probably be- 
 cause the current value of the coin was in a small de- 
 gree diminished. Dr. Adam Smith expresses some sur- 
 ])rise at so unaccountable a circumstance. During such 
 emergencies the scarcity of coin would compensate by 
 adding value correlatively with the dimunition of its 
 weight. These measures would adjust prices to the ex- 
 traordinary expenditure and debts inseparable from war, 
 giving elasticity and prosperity on the return of peace. 
 
 It is possible that in the wars with Carthage the trea- 
 sury would be often exhausted to supply the forces with 
 every possible means to sustain their contest and secure 
 success. Many years would elapse before the return of 
 the precious metals so dispersed, and the change of weight 
 would gradually have changed the nature and denomi- 
 nation of debts. As this measure was resorted to in each 
 successive war with Carthage for increasing the finances 
 of the state, and by consequence relieving industry, 
 we may feel assured that it was urged by that sagacity 
 and foresight which characterized the policy of the Ro- 
 mans in all great emergencies. 
 
 Debt had produced serious defection, and even 
 occasioned revolutions long before the first Punic war, 
 hence we may infer that no alternative was left but 
 the adoption of these measures to prosecute their sev- 
 eral wars with any chance of success. During such 
 crisis prudent statesmen will not scruple to adopt meas- 
 ures which in ordinary periods the powerful interests of 
 the wealthy would render dangerous for the most influ- 
 ential ministers to attempt. When the illustrious Wil- 
 liam Pitt, in 1797, signed the order in counGil suspending 
 the legal liability of the bank of England to convert its 
 notes on demand ; the act was promptly endorsed by the 
 rich, and his capacities to direct the policy of that criti- 
 cal epoch at one recognized. 
 
 James I. was urgently advised by the eminent 
 Raleigh to reduce the weight of coin that he might 
 a 
 
50 
 
 increase the money within liis realms. Commercial, 
 and not state exigencies, seem to have actuated the 
 views of the w^riter. He says : " touching the eoin^ 
 for the most part all monarchs and free states. Loth 
 Heathen and Christian-, as Turkey, Bai-bary, France^ 
 Poland, hold it a never-failing profit to keep their 
 coin at higher rates within their awn territories than 
 it is in other kingdoms. The King of Barhary find- 
 ing the gold coin leaving his kingdom by merchant 
 traders raised the go]d ducat, which was current tor 
 two ounces of silver, to lour, live, and even six 
 ounces. This caused gold to come into the country. 
 He then raised the silver coin to retain it." He also 
 adds^ "The King of Poland raised the Hungary ducat 
 from fifty to seventy-seven Polish groshes." 
 
 These measures could only afford temporary advan- 
 tage to the interests of industry and commerce. There 
 is no device of the state by which coin can be made per- 
 manently abundant. Its natural scarcity also produces 
 the collateral evils of hoarding and exportation. Many 
 accumulate coin as they would accumulate stocks of 
 goods, or houses, or any other property. K^ot because 
 they would not like to realize profit, but that they pre- 
 fer to forgo the chance, from the great danger of los- 
 ing what they have gained with so much labor, and 
 which they so much prize for its incomparable utility. 
 Hoarding is, therefore, a custom which prevails to the 
 greatest extent, where money is the most scarce — irreg- 
 ular in circulation, and hard to acquire. 
 
 Some communities sufi:er greatly from a constant 
 drain of their coin. Is^ations separated merely by a 
 geographical demarcation cannot by any possibility pre- 
 serve an exclusive and necessary amount of coin with- 
 in their jurisdiction. The Athenians stringently pre- 
 vented the coin Irom being carried out of the state. No 
 exceptions were made unless in case of war or apprehen- 
 sion of famine, when it might be exported for grain. Eng- 
 land executed not less strictly her laws against the car- 
 rying of coin out of the realm. Her insulated position 
 gave her abundant means of executing such provisions. 
 France on the contrary, with numerous nations lying 
 upon her line of frontiers had no means of preventing 
 the efflux of her coin. Her finances, both in peace and 
 
51 
 
 war, have, on this account been subject to great derange- 
 ment, compared with Great Britain, Irom a cause 
 which the insulation of the latter greatly diminished 
 
 France of necessity has reduced the standard weight 
 of her coin more frequently and to a greater extent 
 than England. The livre^ originially two huadred 
 and forty pennyweights of silver, contains now only 
 about three pennyweights^ while the pound sterling, 
 originally the same weight as the livre, still contains 
 eighty pennyweights of silver. France, being also the 
 leading and most wealthy community on the continent 
 of Europe, occasions, by her superior resources, a 
 tendency to better prices than prevail amongst the 
 poorer and inferior communities which rest on her con- 
 fines. This acts as an encouragement for the eifusion 
 of her coin without her dominions. Yfhat she could 
 sell cheaper than her neighbors they are too poor to 
 consume, while they can sell cheaper many products 
 which she requires for consumption. Cheapness is a 
 premium by which one country seduces another out of 
 its scarce and always requisite coin. 
 
 The wealth of France has been greatly retarded 
 through these circumstances. Whenever an abundance 
 of coin occurred, whether through the importation of 
 bullion or from the reduction of the legal weight, her 
 prosperity and augmented consumption offered a mar- 
 ket for the products of customers who sold but did not 
 buy. Her circulation thus diminished with the continu- 
 ance of her prosperity and thrifty progress. Credit 
 strengthening with her activity would accommodate the 
 requirements of trade, and thus supply, for a time, the 
 inconvenience arising from the growing scarcity of 
 money. Even the frugal and prudent of her own nu- 
 merous people, always apprehensive ol adversity, sick- 
 ness, and age, habitually reserve and hoard their sav- 
 ings and, therefore, contribute to the general causes of 
 decline. Recurring depression has thus gradually pre- 
 vailed throughout her innumerable branches of trade 
 and industry, l^ov can there can be a doubt that the 
 political instability of the French nation is specially 
 superinduced by the insecurity of its commercial and 
 industrial condition, arising from the irregularity and 
 scarcity of circulation. 
 
52 
 
 The middle classes in France having less means of 
 accumulation or security than the same class in Eng- 
 land, are less conservative of authority. Besides they 
 suffer more immediately from any interruption in trade. 
 Hence the sympathy of men distinguished both by edu- 
 cation and birth, with the most absurd and theoretical 
 schemes of social change. The abrogation of the ancient 
 rights of the nobility, and the division of the lands, has 
 diminished rather than augmented the resources of the 
 soil. But failure in economieo-political projects does 
 not, it would seem, discourage these disastrous jphiloso- 
 phies which prepare nations for ruin by the disorganiza- 
 tion of all sentiments of respect to established institutions 
 and rights. It is construction conformably to existing 
 interests, with the expansion and development of those 
 civil immunities yet imperfectly exercised even by the 
 more fortunate, and not through disorganization that 
 nations can realize the sacred purposes of civilized justice 
 and moral equality. A false principle in the economical 
 body, like a disease in the physical, operates under 
 different conditions with a greater or less degree of 
 severity. 
 
 CHAP. VII. 
 
 TUE PKECIOrS JIETALS, IIOWEA'ILR ABUXBASTLY PRODrCED, 
 
 NEVEK ADEQUATELY FELFU. THE FUNCTIONS OF 
 
 MOXEY. 
 
 An abnnclance of gold or silver, by sndden discovery, 
 relieves for a time the immense demands of trade. Most 
 of the new supply, when first thrown into the market, is 
 added to the coinage. The old consumers do not pur- 
 chase more jeweiery and plate than formerly. Trade is 
 stimulated for a period by the multiplication of coin. 
 Those classes who previonsly could consume such valu- 
 able manufactures soon participate in the augmented 
 profits of trade. Tlieir abilities to purchase enlarge 
 with the extension of enterprise, and the advanced prices 
 ttf products. A new and larger class of consumers is 
 also lifted up during the transition, to a condition of 
 
Oi5 
 
 affluence, who cau indulge in such luxuries. Consump- 
 tion ultimately increases in greater ratio than supply. 
 
 It holds as an in variable rule that the consumption of 
 certain luxuries is only limited by the means of the com- 
 munity to purchase, as there is no limit to such wants. 
 That portion of the precious metals left for circulation is 
 but the index of limitation of private means, and that 
 limitation is determined by the nature of the metal& 
 limiting the power to produce and, therefore, means to 
 purchase. Those who can only obtain the comforts of 
 life, and others, by far the most numerous class of old 
 communities, who can scarcely obtain bread enough for 
 their families, will contribute little to the trade of the 
 jeweller. To pre-suppose the continuation of this condi- 
 tion of things while the powers and resources of civiliza- 
 tion are hourly multiplying beyond estimate, is to ad- 
 mit the destiny of the species no longer a problem but a 
 failure. 
 
 J^otwithstanding the immense issue of gold coinage 
 within the last seven years, of upwards of one hundred 
 tnillions sterling from the mints of the United States, 
 Britain and France, the tradesmen of the former country 
 suffer, at this time, inconvenience in obtaining payment 
 from each other, which seems unaccountable. In Brit- 
 ain and France it is true, that wages being much lower, 
 manufacturers and trad<6smen suffer less from heavy 
 outlay, and have even the means of accumulating cash 
 beyond their business requirements, but the operatives 
 in these countries reap no further advantages by the 
 great increase of money than merely an additional 
 security for employment. 
 
 Universally raw materials have risen in price w^hile 
 labor^ being much more abundant than any product in 
 the market, has not advanced. Man is a product, sub- 
 ject to the laws of value, yet less subject to restraint 
 in the production than any other. His value is debased 
 proportionately to its excess. Tlie supply of money has 
 not yet equalled the supply of labor, while it has con- 
 siderably exceeded the supply of many products. Thus, 
 compensation to industry is really diminished, though 
 the immbers employed are greatly increased. 
 
 Every class in American society expect to realize pro- 
 perty. Fewer, hoAvever, are in a position to acquire 
 
54 
 
 possession of substance or estate at the present time than 
 there have been for many years. Rents and real 
 estate being much raised absorb the reward of labor, and 
 the returns of the tradesman, leaving both less powerful 
 to contend with those who got the start on the first influx 
 of the precious metals. The abundance of gold thus 
 confers a monopoly rather than a common immunity, 
 since before it has passed into the hands of the great 
 body of society, it is employed to purchase estate and 
 raw products in masses, to be re-sold at great cost. It 
 becomes absorbed in high prices by such means, and be- 
 fore it attains a general diffusion it is found to be inade- 
 quate even to absorb the available labor of nations, much 
 less compensate the laborer for the higher cost of living 
 or rent. 
 
 Tlie productive enterprise stimulated by the flood of 
 gold from California, conferred suddenly great riches 
 upon a few favored in their position, who now exercise 
 the immunities thus attained, to absorb, from their hum- 
 bler neighbors, the profits of labor and trade. Industry 
 is neither sustained in its reward, nor trade aided in its 
 progress by a uniform and necessary accommodation. 
 Rents do not correspond with business, because the har- 
 vest of business has been preceded with the lustier reap- 
 ers. Tlie channels of circulation are no sooner filled 
 than they are drained. A scarcity of gold is an oppres- 
 sion, an abundance a monopoly. 
 
 The condition of America differs widely from England. 
 Wages are higher, both really and nominally in the for- 
 mer. In the latter the largest class consume the least, 
 and are but humble customers to trade. On the contrary, 
 in America there are no retired rich class, Vv'ith large in- 
 comes derived from sources not immediately dependent 
 on trade. Xo one has large income but what arises from 
 the immediate employment of capital. The wages of 
 labor and its employment thus co-operate and participate 
 in the extending enterprises of the rich. It is a state of 
 transition. When it is established, wages will recede to 
 the level which prevail where competition increases 
 with population. 
 
 Goods are cheap in old countries because wages are 
 low, and trade is limited because goods are cheap. 
 Money is comparatively abundant in such communities 
 
because enterprises are few, absorbing neither the sav- 
 ings of the merchant nor the labors of the workmen. 
 Gold flows from this country to Enrope, leaving enter- 
 prises to stagnate from its absence, while it stagnates 
 in the banks of Britain and France, from the absence 
 of enterprises to employ it, or it has to be re-exported 
 for investment. 
 
 Every man who accumulates a few hundred dollars 
 in America, places it in business or property, in which 
 he secures probably four times as much more credit. 
 'No amount of gold which could be produced would sus- 
 tain these multiplying operations. The great majority 
 who venture, ho|)ing to share in the enjoyment of pro- 
 perty, find it impossible to prosecute their plans. They 
 ultimately relinquish with loss the projects which seemed 
 so propitious. Eventually the greater part passes into the 
 hands of the few, whose overwhelming opulence will yet 
 surpass^any thing history has recorded. 
 
 Commercially America is a buyer, Europe a seller. The 
 balance of imports annually require the entire product 
 of gold bullion, together with the sale of large amounts 
 of railway stock, to adjust them. Tliis vast and increas- 
 ing demand from so young a nation does not arise from 
 the quantity of gold held or circulated, but from the 
 immense banking accommodation in the respective states 
 of the Union. With less than one-tenth of the capital 
 of Great Britain, and mth scarcely one-half the foreign 
 trade, there is discounted to her trading population hank 
 notes, bearing a denomination to the amount of one-fourth 
 more value than the entire notes of Great Britain and 
 Ireland. She relieves, through this special immunity, the 
 glutted markets of Europe. Absorbing, without diffi- 
 culty, the glut^of its population, and by her numerous 
 enterprises, opens the most profitable and secure invest- 
 ment for the capital which otherwise accumulates and 
 gluts the channels of European finance. In round numbers, 
 
 Bank circulation in Great Britain and Ireland, JC30,000.000 
 Bank circulation in the United States, £40,000,000 
 
 Equal population in both countries. 
 
 To what extent the vacuum of money had been carried 
 throughout commerce previous to the recent discovery 
 
56 
 
 of gold, may be estimated from tlie additions which have 
 been made to general circulation, and which has been ab- 
 sorbed without an actual depression of its value. The 
 laws of nature are irreversable. K states repress and 
 circumscribe the value of a product which they have 
 made the special organ of interchange, of enumerating 
 value, and of discharging debt, the condition of their 
 people must be debased to a degree perilous to authority, 
 and requiring a severity in the exercise of power repug- 
 nant to the spirit of the age. 
 
 Such an abundance of gold as would cause its deprecia- 
 tion would reduce it to the same relative proportion it 
 naturally bears to the agregates of all other property. 
 Fixed property would bear higher rents, products of ex- 
 change a higher price, and therefore the metals di- 
 minished in value would sink in their capacity as 
 money in the same degree. A depreciation of one-half 
 the value of gold would be equal to the destruction of 
 one-half the quantity in circulation. While in raising 
 wages universally to a higher standard of denomination, 
 it would in the same degree reduce the value of the gold 
 mines, and thus limit its production. A mine now pro- 
 ducing one million pennyweights of gold, produces an 
 equivalent of one million bushels of wheat. Should the 
 gold depreciate so as to rais9 wheat to two pennyweights 
 of gold per bushel, the mines would lose half their value. 
 Wages would maximise in every other product, but in 
 the commodity of gold wages would minimise. Both 
 labor and capital will, in such event, abandon to a con- 
 siderable degree the enterprise of gold mining. The 
 product of gold will thus be arrested when it has become 
 the more necessary to sustain the enlarged prices which 
 its depreciation had produced, and the enlarged opera- 
 tions of industry which its comparative abundance had 
 superinduced in its transition from a high value to a 
 lower. 
 
 If an ounce weight of gold exchanged for a ton of Pig 
 iron, were to sink one-half in value, two ounces would 
 be required to exchange a ton of iron. The dispropor- 
 tion of gold to perform the office of money would not be 
 changed, nor the numerical caj)acity of the metal multi- 
 plied. Such an event would, however, reduce all debts 
 one-half as it would double the income of the producers, 
 
TV'lio are tlie debtors, and proportionately raiee prices to 
 tlie consumers. 
 
 TI18 flood of precious metal wliicli poured into the 
 channels of European trade, afler the intercourse with 
 America was opened, unlocked the eriergies of com- 
 merce in every civilized community. Obviously some 
 obtained a greater share than others, from their mari- 
 time position. Britain probably gained the most. Her 
 insulated and maratime advpmtages, combined vrith her 
 immemorial statute provisions against the exportation 
 or melting of coin, gave her equal means to acquire and 
 a greater security for the retainmeut of her coinage 
 than any other country. What was not sufficient for the 
 industry of all, gave to that nation which liad the greatest 
 share, proportionately greater facilities in her productive 
 efforts, and a larger expansion of trade. 
 
 The multiplying increase of gold and silver in England, 
 by stimulating labor, called forth her resources, and 
 thus augmented the power to retain their immunity for 
 longer periods than other nations. These temporary 
 advantages raised the commerce and gave to Britain 
 a degree of permanent superiority vvdiicli has rendered 
 her, as a state, the most powerful in financial resources, 
 though the condition of her people has not advanced wdth 
 the capabilities of the nation. 
 
 The maximum supply of metals from America had 
 however, not been attained in the early part of the 17th 
 century, v^^hen commercial difficulties again presented 
 themselves. Money became scarce. Men had entered 
 the pursuits of trade when it was profitable. Multitudes 
 left the rural districts where labor was over-abundant, 
 and congregated in cities where trade offered sufficient 
 employment, better vfages, and the ]3rospect of position. 
 Products multiplied — money did not. There vv^ere more 
 sellers than buyers. Underselling and cheapening com- 
 peted and subdivided the inadequate circulation. The 
 remedy aggravated the disease. Everything was reducovl 
 to stagnation and depression. There is no stationary 
 maximum for population or property. Hence, before the 
 precious metals have reached their maximum supply, 
 the irregularity in the circulation, and scarcity of coin 
 become manifest in trade, though the lowest point of 
 depreciation may not have been touched. 
 
 H 
 
58 
 
 We may judge what a state of depression followed im- 
 tnediately upon tlie great prosperity whicli prevailed 
 during the reign of Elizabeth, from the letters addressed 
 in 1610 to her successor, by the writer previously quoted. 
 " It being apparent," says Raleigh, ^' that no three 
 kingdomes in Christendome can compare v/ith your 
 Majesty for support of traffic and continual employment 
 of your people within themselves, having so many great 
 means, both by sea and land to enrich your coffers, 
 multiply your money, enlarge your traffic, make your 
 kingdome powerful, and your people rich. Yet, through 
 want of employment they are poor, many of your land 
 and coast towns are much ruinated, and your kingdome 
 in need of coyn." The highest average price of grain 
 was not reached till between 1630 and 1640. Gold and 
 silver were depreciating, therefore, at the period when 
 Sir Walter wrote. 
 
 Coin distributes itself into many millions of hands, 
 and is unavailable in large quantities for the purpose of 
 mercantile dealing. Tlie merchants were, therefore, 
 driven to employ extensively the use and aid of credit 
 to enable them to carry out their trading enterprise. 
 Their obligations frequently became due before they had 
 vended the goods thus purchased. The merchant was 
 then impeached with over-trading. Sir Walter in his 
 day thought the merchants blameable, and charged this 
 to their imprudence. It is impossible to describe the 
 thousand causes which are continually arising to defeat 
 the most judicious calculations in commercial life. We 
 cannot, however, be much astonished at such opinions, 
 when economical science was so little understood, and 
 especially when Dr. Smith falls into the same error. 
 
 1^0 one will give goods on credit when they can get 
 ready money. If ready money is not attainable, it is 
 the necessity, not the choice of the manufactm*er to urge 
 the merchant to take his products on credit. Should the 
 merchant refuse to accept them on credit, then the busi- 
 ness of production stops, or is greatly limited. Com- 
 merce is sustained by credit. The merchant in turn 
 sells on credit, and trading imperceptibly advances 
 from simple exchange to that of commercial record. 
 Or edit becomes the 'base as well as the super structicre. 
 .Society rests upon its strength, the subsistence of the 
 
59 
 
 community is drawn from its expansion — tlie progress 
 of civilization treads in its footsteps. 
 
 There is no relative supply of the precious metals to 
 the progressive capacity of general production. Credit 
 fills in some degree the vacuum. The metals are at all 
 times accidental in their supply, and never so abundant 
 as to facilitate the operations of industry for any great 
 period. The demand for them as articles of luxury aug- 
 ments with civilization — their supply on the contrary, 
 invariably decreases by the law of natural exhaustion. 
 Whenever the accidental supply of gold and silver has 
 increased temporally with the productive capabilities 
 of nations, the progress of wealth has advanced with 
 marvellous rapidity. 
 
 The only correct means to estimate the sufficiency or 
 insufficiency of gold and silver to exchange and distribute 
 national wealth, is the readiness or difficulty of com- 
 manding a market for commodities offered for sale. If 
 the wealth of a nation has multiplied to such an extent 
 that the deficiency of general demand is continually 
 causing reductions of price, it is then evident that the 
 ratio of wealth has exceeded the ratio of money. A 
 deficiency of money operates first by reducing demand, 
 reduced demand acts upon the value of commodities and 
 reduces prices to the lowest value at which they can be 
 produced. As, however, prices cannot be indefinitely 
 reduced, the fixed costs in production preventing a far- 
 mer or manufactui'er producing below a given point, 
 when prices have been reduced to that standard, the 
 definite quantity of money will be able only to exchange 
 the definite quantity of commodities. Production is then 
 limited to that quantity. TJie svjpreTrie law of mditstrial 
 'progress at this stage of cwilization is inverted^ demand 
 determines and regulates sv/pply^ instead of supply regu- 
 lating demand. The employment both of capital and 
 labor is necessarily reduced, to supply produce according 
 to this limited measure of trade. Aggregate produc- 
 tion is diminished to the aggregate of money. Employ- 
 ment is reduced to represent money instead of money 
 being increased to represent caj^ital and industry. Com- 
 petition commences with reduced demand, and increases 
 in intensity with the progress of population. 
 
60 
 
 CHAP. YIII. 
 
 EFFECTS OF EAISIiS^S THE WEIGHT OF COIN POLITICAI. AND 
 
 SOCIAL CONSEQUENCES. 
 
 History presents no instance in wliicli a great commu- 
 nity lias preserved tlie original weiglit of coin. The pro- 
 secution of an unavoidable war, or the bankruptcy of 
 the public exchequer, arising from the failure of taxes, 
 may have impelled the modifications. Financial obstacles 
 are not less incident to peace than war. There is no gov- 
 ernment in Europe which has not felt great difficulty in 
 raising revenue for the ordinary purposes of the state, 
 within the last forty years of ]ieace. Population has 
 largely multiplied during that period, from whose indus- 
 try reveime is derived, mechanical inventions have ren- 
 dered their capacities fifty -fold more productive — capital 
 has accumulated to facilitate re-production, yet with all 
 these additional elements, both of individual and of na- 
 tional resource, rulers have been driven to the last 
 alternatives of finance to meet the public expendi- 
 ture. In former times, when the means of commu- 
 nities v/ere comparatively scanty, we may easily infer 
 the difiiculty to collect revenue, and the urgency of such 
 measures as reducing the weight of coin to supply the 
 deficiency. 
 
 Till recent, the British government has frequently been 
 compelled to cover the annual deficit by the extensive 
 issue of exchequer bills. These bills are redeemable 
 debts, bearing three half-pence per day for one hundred 
 pounds sterling. It has also sought to reduce expendi- 
 ture by such impolitic measures as the abridgement of 
 the pensions of the common soldiers, and neglecting to 
 make the requisite expenditures to keep the army and 
 navy in that efficiency which would render the nation 
 safe'^either in a v/ar of defence or of urgent policy. France 
 has added largely to her national debt to m^eet the finan- 
 cial requirenients of the state. Austria has become 
 bankrupt. Russia had considerably increased her debt 
 previous to the late war- Spain has been incapable of 
 meeting; even the interest of her public liabilities. 
 
Gl 
 
 These financial embarrassments, however, lie deeper 
 than the necessiries of states. What the people have not 
 sufficiently for the ordinary purposes of trade it is diffi- 
 cult for government to extract for purposes of a more le- 
 m.ote nature, though not less essenlial to the security of 
 their industrial efforts. If men have not money to meet 
 their business wants — if borrowing — giving and receiv- 
 ing credit — ^hourly devising how to obtain or give ac- 
 commodation — how pavments of bills coming" due can be 
 made — how to raise money to pay wages, all of which 
 urgencies are immediate to their existence — if these 
 naturally precede even private expenditure, it is clear 
 that all articles bearing or sustainini^- taxation will be 
 evaded, and their consumption diminiBlied to the loAvest 
 point, equally from motives of prudence and necessity. 
 
 As modern enterprise and commerce has so little sup- 
 plied nations with the necessary gold and silver for the 
 requirements of industry and revenue, few will fail to un- 
 derstand what must have been the pecuniary difficulties of 
 trade, and the financial embarrassments of ancient Chris- 
 ian nations when these metals were so rare. Upwards 
 of thirty alterations had been made in the British coin- 
 age inclusive from the reign of Edward I. (1272) till the 
 reign of Elizabeth. The pound sterling having been re- 
 duced from twelve ounces troy, to iour ounces — the 
 weight at which it now circulates. 
 
 During the reign of Charles 11, government resorted 
 to the clumsy process of clipping the coin. This un- 
 statesmanlike practice was continued throughout the 
 reign of his successor, James II. According to Lowdnes, 
 the silver coin was reduced one-fourth in legal weight. 
 Prices had not advanced perceptibly. Grain averaged,. 
 from 1600 to 1650, 66 pence p>er bushel. From 1650 to 
 1700 it averaged 68 pence per bushel. So small an ad- 
 dition to the price might be ascribed with much reason 
 to the troubled condition of the country, rather than ta 
 the lightness of the current coin. A dynasty had been 
 twice displaced amid civil w^ar during the latter period. 
 The consequent interruption to industry probably ope- 
 rated on the price more than the coin. 
 
 The treasury accepting this clipped coin in payment 
 for revenue, rendered it legal money. One-fourth taken 
 from the statutory weight of coin would add numerically 
 
62 
 
 tbat amount to the current circulation. If sm millio'iis 
 sterling of silver was made current in eight millions 
 sterling^ without producing any additional price, the 
 quantity of value exchanged must have been increased 
 in this proportion. Industry would be encouraged in- 
 versely as trade was facilitated Abstract and positive 
 law evidently conflict. Intrinsic value in silver or gold 
 does not, it would seem, diminish with the reduction of 
 weight. These metals circulate above and below their 
 values, since they operate upon aggregates, reducing de- 
 mand instead of price in some cases, and in others mul- 
 tiplying demand instead ot })rices. 
 
 For instance, one thousand ounces of gold, at four 
 pounds sterling, may be current in exchange for one 
 thousand bales of wool. The cost of production may re- 
 quire one ounce of gold to compensate the producer. 
 ISTow the quantity might be increased to one thousand five 
 hundred bales of wool. The additional quantity offered 
 for sale would require an additional quantity of gold 
 to buy it. This additional quantity being the index of an 
 increase of rural population, would equally indicate an 
 increase of city population who are wool consumers. 
 If the gold is not forthcoming the wool producers pru- 
 dently regulate the stock and labor under their direction 
 to the law of demand. The quantity that can be sold is the 
 quantity produced. A surplus city population increases 
 inversely with the glut of rural population. The vacuum 
 of money to exchange produces a proportionate vacuum 
 of employment distributed through every branch. 
 
 LTnder such a condition ol trade, where the power to 
 produce is restrained, and the w^ants of men unsatis- 
 fied, if the ounce of gold was coined into six pounds 
 sterling^ money would be numerically increased to the 
 numerical capacity of production. Industry would be 
 called forth to multiply production to the demand. Coin 
 Avould exchange upon its denomination^ afibrding the 
 same compensation in each sale, and a much larger 
 compensation upon the aggregate. The intrinsic value 
 being determined by the relative value, it becomes a 
 matter of enquiry whether the natural value of any com- 
 modity can be ascertained which is under the action of 
 statute law. 
 
 The true value of gold is evidently subject- to great 
 
63 
 
 modification in its capacity of money. A judicious re- 
 duction of weight, when industry is interrupted by the 
 scarcity of coin, increases the riches of the common- 
 wealth, and enables the conirauDity to contribute, with- 
 out oppression, ample taxes to the state, either under 
 direct imposts or through a larger consumption of articles 
 bearing taxation. To pursue an opposite policy is not 
 less destructive of the public interest than it is of the 
 public revenues. 
 
 When William, Prince of Orange, undertook to re- 
 store the coinage to its traditional legal weight, the 
 accomplishment of this absurd measure was followed by 
 consequences which involved his government in tlie 
 most serious embarrassment throughout his reign. Rais- 
 ing the weight of the current and mutilated silver coin 
 from ninepence to twelvepence sterling practically re- 
 duced the current circulation one fourth. Assuming 
 the current money of the kingdom to be ten millions 
 sterling this measure would reduce the amount to eight 
 millions sterling. 
 
 The re-coinage was carried into execution about 1690. 
 Grain sunk to an average of 53 pence sterling per 
 bushel, from ITOO to 1750. It eontinued to suffer the 
 depression so severely that it sunk to 48 pence sterling 
 per bushel, on average, from 1Y30 to 1750. These re- 
 sults took place notwithstanding a large emission of 
 bank paper legalized concurrently, together with special 
 statutes to sustain the price of grain. 
 
 Certainly no man ever ascended to regal power under 
 more auspicious circumstances, or by more legitimate 
 means, and no prince ever conducted himself with more 
 prudence or deferential respect to the sentiments of a 
 great people than William of the House of Nassau. 
 This ill advised financial experiment, however, touch- 
 ing the coin almost cost him the prize of his ambition, 
 the throne of England. The throne shook beneath its 
 new occupant. His tremulous hand grasped a sceptre 
 no longer the instrument of power, but the emblem 
 of constitutional submission. The highest aspiration 
 of human instinct is the investiture of supreme power 
 for great services to a great people. Those principles 
 of religion, which gave an exalted renown to his valor, 
 clothed him, in a degree, with the merits of Crom- 
 
64 
 
 well, while liis rank arsd marriagG claimed especial con- 
 sideration amongst the established families of two 
 great nations, sustained wiih a puwerfui section of a 
 third. 
 
 Monarchy, in his person, became the type of na- 
 tional miiry and power. He recognized the great idea 
 of constitnti()nal government, and accepted the restraints 
 of lawful authority without the relinquishment of royal 
 dignity. The political and moral elements of the age 
 were settled in the public mind. His nieasures, as a 
 statesman, were a diiierent matter Every one was to 
 profit or suffer by his policy. In touching the currency 
 his advisers violated, what ought to have been con- 
 serverl. Eespeet to his sagacity, and gratitude to his 
 religious fidelity, combined with the vicissitudes through 
 which the country had passed suppressed the murmurs 
 of the people, and probably saved the nation from 
 another revolution. 
 
 To what extent the industry of the nation suffered by 
 the re-coinage and increased weight of money may le 
 judged from the circumstance, that year after year the 
 public revenue declined, notwithstanding the imposi- 
 tion of several additional taxes. A foreign prince was 
 loudly denounced. One measure alone could save the 
 new dynasty, which was to borrow money in such 
 amounts as would carry it through an indefinite financial 
 crisis. The goldsmiths of London had for a long period 
 circulated notes upon their personal credit, amounting, it 
 is said, to several millions sterling. This species of finan- 
 cial accommodation had attracted the attention of the 
 new sovereign, and negociations were opened with the 
 goldsmiths for aid to the treasury. These conferences 
 terminated in a loan and a hank charter incorporating 
 the goldsmiths. Such was the concurrent institution of 
 the Ba7ik of England and the national debt^ in 1694. 
 
 From 1695 to 1700 no less than seven ads of parlia- 
 ment were passed to secure the necessary revenues 
 without rasing the required amount. Some taxes were 
 increased, some modified and again re-enacted, new 
 taxes were added and abandoned. Personal estate was 
 raised from 24 shillings per £100 to 25 shillings, poll 
 and wages tax were added, other taxes retained at for- 
 mer rates. 
 
65 
 
 Revenue produced at 24 shillings per jClOO 
 on personal estate, and 4 shillings in the 
 
 rental of real estate per £l in 1692 Xl,923,712 
 
 do.... in 1693 1,913,488 
 
 do in 1694 J, 860,039 
 
 do.... in 1695 1,736,248 
 4 shillings in the jCI real estate — 25 
 shillings per jCIOO personal estate, 
 
 with poll and wages tax in 1696 1,663,434 
 
 Deficit in 1696 against 1692 ,,,,,, , jE:259,278 |^ 
 
 Deficit in five years revenue jC520,6i4 
 
 The effect upon excise and custom re- 
 turns was probably as great. 
 
 In 1697 the government found it necessary 
 to reduce the taxes, both on real and per- 
 sonal estate, notwithstanding the increas- 
 ing deficit. Revenue then sunk to .... jCl,484,015 
 
 The oppressed condition of the country 
 seems to have required a further modifi- 
 cation of taxes, and we find that the rev- 
 enue produced in 1699 from the sources 
 specified, was only £989,965 
 
 Anne^ who snceceded William in 1702, taxed tlie sa- 
 laries of public officers, and raised several taxes whicli 
 liad been greatly modified. Yet the amount raised in 
 1712, upwards of twenty years after raising the weight 
 of the coin, did not much exceed the revenue of 1692. 
 
 The decline in the price of wheat, taken as an index 
 of decline in the price of manufactures, must have 
 operated with corresponding severity upon the interest 
 of trade. To sustain tlie price of y;rain a bounty was 
 given to encourage exportation whenever it sunk to a 
 certain price. It did not, however, protect the interests 
 of agriculture against the operation of the new coinage — 
 as we find the price of grain continued to descend for 
 sixty years after the coin was raised. Between 11 SO 
 and 1750 grain sunk to an average of 4 shillings sterling 
 per bushel, against the average of 5s. 8d. in the preced- 
 ing century. Commerce profited ultimately by the 
 measure. After a series of years the pressure operating 
 to debase the land and its products, as also the products 
 of art, cheapened the means of living and gave to manu- 
 facturers a degree of power to produce at prices which 
 tended to increase the ioreign trade. 
 
 Low prices depressed the condition of the agri- 
 I 
 
cnltnrjil classos, hut it tended to compensate tlie de- 
 pressed nianiit'actiirers. The emission of biiidc paper 
 also contrihiited to facilitaie the enterprises of ti'ade, 
 and lience we iind, from 1710, a gradual increase of 
 puhlic revennes from customs and excise. Public 
 expenditure, liowever, seems still to have exceeded the 
 annual returns while the seductive facilities of borrow- 
 ing continued to multiply the public debt. The social 
 condition of the people, after a Ion <j; period of depression 
 and misery, resumed itsibrmer state of progress, through 
 that energy, enteipi'ise and genius in the national char- 
 acter, wliich evon the folly of her statesmen was in- 
 capable oi' destroying. 
 
 The disastrous effects of raisin i>: the wei^lit of coin 
 when public debt was unknown and public revenue did 
 not much exceed /'oy/r jnillums steHmg , would, however, 
 lead us to form but a faint estimate of the consequences 
 which accompanied a similar measure in 1817, when the 
 annual revenue required vmsjifty mdllions sterlwg^ and 
 the public debt amounted to nearly 07}e thousamd mil- 
 lionet i^icrling. The current pound sterUng^ was raised 
 one-third in value by statute— the measure being urged 
 upon the ground of sustaining faith with the national 
 creditors. 
 
 It is impossible to describe the ruin or compute the in- 
 justice inllicted upon the nation to accomplish so theoreti- 
 cal a measure. From 1797 to 1817 the public liabilities 
 of the country luid au<xmented five himdrcd ■niillio'ns ster- 
 ling^ while the private liabilities of the community must 
 have greatly exceeded this sum. I^rices sunk in a far 
 gi-eater proportion tlian money was raised. Wheat was 
 reduced from ten shillings per bushel to five shillings, 
 manufactures were reduced fifty, sixty and in some 
 articles seventy per cent upon the prices current during 
 the war. The nobility, in 1811), passed a law specially 
 to protect the price of grain, and to counteract the statute 
 they had passed raising the coin to its traditional weight — 
 the etlbcts of which they tlius blindly sought to remedy. 
 
 Political disorder, insurrection, and conspiracy ac- 
 companied the commercial depression consequent upon 
 the financial act Twelve years after the adoption of 
 this measure the throne and nobility were constrained 
 fo relinquish the sovereign power ot tlio realm, at tiie 
 
♦>7 
 
 demand ol' a ])()i)uhir comhiiialiou, uiiccjualled in iJic; 
 history of nations. The (iist,iii<;iiiHho(i leader of tbis' 
 movement, TliomaH Attwood, hail (unployed every meanK 
 to disHuade the l>ritisii uiinistcu's ag'aiiist inci'ea,sin_ij;' liie 
 value ot the money current, for so long and so critical 
 a ])eriod, but iindini;- his etlorts i'ruitless, he a])|)eahHi 
 to the nation. Neilliei* tlie aristocracy nor the mer- 
 cantile classes seemed to comprehend the nature and 
 elfect of tliese financial measures. 'Die political re- 
 volution did not, th(!refore, ameliorate the condition of 
 trade, nor mitigate tlie miseries of the ])eople. No one; 
 appeared, in the new Parliament, to deal with ho com- 
 plicated Jind important a subject. 
 
 (Jommercial convidsion, depression, and speculation 
 had alternately aroused aiul j)ro8trated the energies of 
 the nation. Two-thirds of the entii-e farmers of England 
 and Scotland were reduced to ruin and abandoned their 
 farms. From 1817 to iS50 thc^ liii'ming enterprise of 
 the country passed into the hands of one-third the nnrn- 
 ber of occupants. These were me?i of ca[jital who had 
 v/ithstood the shocks ot depression, to whom the land- 
 lords transferred the small farms at even lower ])rices 
 than were paid by the former tenants. The labor t)f the 
 ])easantry diminished ])ro|)ortiomitely, while the pro- 
 ductiveness of the soil must Inivc^ been rc^tjirded to an 
 extent now incomputable. Ii(^huid hjiving l(^ss capitid 
 to fall back u[)on, sujdc instantly under the prosti'ation 
 of prices and the depi'ivation of markets for her j)ro- 
 duce. Her oppressed jjopulation, thrown from employ- 
 ment consumed instead of multiplying their limited ac- 
 cumulations, l^'amine and in<lolence dominated the land. 
 
 In lujglaiid both trade and agriculture W(;re not less 
 sacrificed. Deficient employment rendered the poor- 
 rates a constantly augmenting tax u[)on the trad(3snien. 
 Private incotne was declining with the diminishing i)riceB 
 of goods. Taxes were changed and re[)ea]ed to silence the 
 murmurs of the people. A short exj)eriment necessi- 
 tated their re-imposition. The right of the destitute to 
 ])ul)lic relief was abrogated. The religious and civil, 
 polity of the country were revoked, and those who were 
 v\rithout em})loy merit or pro])erty were deprived all title 
 to life. Whenever a tax was raised consum[)tiou di- 
 minished proportiomitely. l^»|)ulation multiplied not- 
 
■withstanding-, and each experiment in legislation ap- 
 peared to urge the attempt at a new one. 
 
 Goods were thrown periodically into the markets of 
 the world in such masses, and at priees so ruinously 
 low, that bankruptcy at home, and ruin to the struggling- 
 manufacturers of foreign nations combined to render 
 the raising of the v/eight of money, in a nation exercis- 
 ing the first commercial power, a source of injustice and 
 depression tliroughout civilization, not less than amongst 
 her own people. 
 
 From this financial cause the British peerage have 
 frequently submitted to popular demands which fore- 
 shadowed their ruin. As a co- ordinate power in the 
 constitution their authority is gone. For a time the 
 complaints of the people have been suppressed by their 
 comparative prosperit3^ The influx of gold has repealed 
 the fatal statute which spread moral and physical de- 
 vastation throughout the British Isles. Economical 
 science will probably prevent the recurrence of that 
 special cause wljich has obstructed the progress of in- 
 dustry in all a^es, and which legislators have in &o many 
 instances greatly aggravated by their presumption snd 
 incapacity. 
 
 CHAP. IX. 
 
 DISTINCTION OF MONEY AS xVN INSTKt'MEST OF DEBT A:KD 
 
 AN INSTRUMENT OF EXCHANGE, 
 
 If it is correct that governments ought not to interfere 
 with trade by coining money ^ or fixi7ig the price of the 
 precious metals, then all laws relating to usury — penal- 
 "ties and personal degradation for debt — are equally un- 
 warranted. Even the reclamation of debts where the 
 means to satisfy the claims are abundant, would be 
 better left in the hands of the citizen, than in the au- 
 thority of law. Large sums of money or merchan- 
 dise Avould be advanced upon imdoubted securities, 
 while limited amounts of both would be advanced with 
 equal safety, where industry, character and ability w^ere 
 the only securities of the creditors. 
 
69 
 
 The borrowing of money, or the obtain nient of goods 
 on credit, are voluntary and mutual transactions. So 
 far from being wrong, either in themselves or sequen- 
 tially, they are the essential processes by which industry 
 replaces the exhausted resources of society. They are 
 not less the means of individual subsistence, than they 
 are the indispensable agency through which the existence 
 of nations are preserved, and civilization advanced. 
 How, therefore, states have erected such acts into crimes, 
 which have brought upon the most valuable members of 
 the community the severest penalties which human au- 
 thority could inflict, it would be difficiilt to find an 
 apology, much less a defence. 
 
 A man who has money to lend, and lives by such 
 business, contributes little to the general riches of the 
 commonwealth. On the contrary, liis income has gene- 
 rally been a tax upon the industry of others. The bor- 
 rower is never accommodated but upon ample security, 
 or strong confidence in his morality and means. If the 
 high rate of interest, or the depressed condition of trade, 
 or both, so diminish his resources that it should happen 
 he cannot pay, these misfortunes combined with his in- 
 ability to obtain further loans or credits, are penalties 
 greater than the most exact justice would impose, 
 
 Tlie lenders suffer nothing in the vicissitudes of civ- 
 ilized life compared with the losses of the merchants 
 and trading classes. Besides, the general security in 
 the transactions of money discounters, amply compen- 
 sate for the rare defalcations of their customers. Be- 
 tween the merchandisers there is relatively to the finan- 
 cial credit extended both by private and banking ac- 
 commodations, fifty-fold the credit exchanged, with no 
 other guarantee frequently, than reputation. The history 
 of debt is a record of legal violence against the subject, 
 which the moral calamities and political consequences of 
 war would scarcely parallel. 
 
 Law apparently ought not to interpose between the 
 debtor and creditor. Penalties and disabilities inflicted 
 by authority do not serve the ends of justice nor retrieve 
 loss, since restitution of property cannot be made when 
 the debtor has adventured without success, or may 
 have lost considerably what he had credited in the 
 common course of business. It mav irratifv re venire — 
 
TO 
 
 tlie passioii of all otliers which himiaii law is iDstituted 
 to repress. 
 
 In Britain, France and the United States, laws relat- 
 ing to debtors, are becoming less and less operative, if 
 not obsolete. Experience is teaching men engaged in 
 business, that a mntnal settlement of liabilities in all 
 cases is invariably the most advantageous to the cre- 
 ditors, while the usefulness of the debtor is preserved to 
 his family and society. Dishonesty may occasionally 
 be practised, but such a commodity is always in the 
 commercial market, and it behoves the sharp-witted 
 tradesman to avoid dealings in so unprofitable a pro- 
 duct. The vigilance of a prudent merchant is, how^ever, 
 more effective against fraud than the most cunningly de- 
 vised and stringently executed legislative provisions. 
 And those who set aside the power or interference of law 
 in the difficulties which arise to intercept their progress 
 in business are generally the most judicious. It is to be 
 presumed they incur the least loss of all others who prefer 
 compromise to reclamation, thus circumventing the 
 cupidity and and dispensing with the costly services of 
 lawyers. Unnecessary loss on the one hand, and oppres- 
 sion on the other, are equally avoided. 
 
 The amount of debt current among the members of a 
 community is great or limited according to the wealth 
 and rescources they possess. The larger the capital and 
 trade the greater the current debt. There is a greater 
 requirement for money and a greater means of com- 
 manding it by a wealthy people. The amount of money 
 actually required cannot, however be commanded, even 
 by the richest communities, under the present laws which 
 prevail in civilized nations. Extreme riches, the most 
 intense competition the lowest social condition, the 
 largest amount of bankruptcy, occur Avhere the accumu- 
 lation of capital and the productive capacity of a peo- 
 ple have attained the highest conditions. The dispro- 
 portion between the power to produce and the power to 
 exchange is wider, under such circumstances, since the re- 
 venues of property are debts which must be satisfi.ed be- 
 fore the wages of industry are distributed. 
 
 Thus the permanent debt of Gi*eat Britain cannot fall 
 short of 6,000 millifms derling. The annual interest, at 
 tliroe per cent would require 200 millions sterliiKj. If rent 
 
Tl 
 
 and taxes are payable quarterly, 50 millions sterling of 
 money is thus requisite to discliarge these obligations 
 before the incomes of the 23roductive classes are consi- 
 dered. Should the quantity of money current be defi- 
 cient to meet equitably and amply the reward of the 
 whole, then industry must suffer, as its employment and 
 wages are conditional, while the demand of the govern- 
 ment, the landholder, and the mortgagee are legal, im- 
 perative and unconditional. 
 
 It is probable that the annual value of the wealth 
 produced in the United Kingdom did not exceed 300 
 tnillions sterling from 1820 to 1850. Two-thirds of the 
 total product, therefore, is required to pay the fixed in- 
 terests of the nation. One-third only being distributed 
 amongst the millions for subsistence, comforts and refine- 
 ments. The bank circulation through that period had not 
 exceeded 30 millions sterling. Throwing gold out of the 
 calculation, as it wdll not alter the principle, the propor- 
 tion of bank money being to debt 30 to 6,000, is £1 to 
 £200 of debt. The proportion of bank money to annual 
 production being 30 millions to 300 millions sterling is £1 
 of money to £10 of exchangeable productions. Debt thus 
 absorbs two-thirds of the national resources. 
 
 In the process of production and exchange, should this 
 amount of wealth be transferred and circulated twenty 
 times it v/ould make the monetary and industrial trans- 
 actions of the country 6.000 millions sterling. The 
 disproportion of bank money to the circulative wants of 
 commerce would be £1 of money to £200 of transactions. 
 As this would not perform one exchange of the twenty 
 required, ^^7^5 (^Z" c/'<36^^^ are multiplied to make up the 
 the vast deficiency. The circulation of bills of credit 
 per annum from the stamp office returns, bear nearly 600 
 millions sterling. The transference of these bills cover 
 the entire volume of exchanges. On this calculation there 
 are 20 millions of transactions and payments per day for 
 three hundred days in each year. Twenty millions of 
 debt, therefore, originates and matures daily. 
 
 It is easy to contemplate from these calculations what 
 must be the effect of the slightest reverse action in this 
 vast machine. Twenty-eight millions of human beings 
 hang for subsistence upon its hourly motion onward. 
 So exact are all its parts, that the smallest additional 
 
weight placed upon the value of money, which is its 
 moving power, and every motion collapses. The strong 
 and the weak are crushed in one common ruin. 
 
 Money, it appears evident, bears a far greater dispro- 
 portion to the value of accumulated property than to 
 the value of annual production. Its legal requirements 
 as an instrument of debt, exceed in amount and precedes 
 its requirements as an instrument of trade and industry. 
 Rent and taxation must be met, thourrh half the popu- 
 lation of a country go unemployed. If tlie margin of 
 money beyond the fixed obligation of a nation can ab- 
 sorb the industry of the people they will be employed. 
 The number absorbed will depend upon the money 
 available for the discharge of debt and the work of pro- 
 duction. Money, in its capacity as an instrument of 
 distribution, inexorably transfers the lull denomination 
 of legal liability, thus revoking the claims of equity, and 
 becoming the source of indescribable wrong. 
 
 The annual production of Great Britain has within 
 a few years, greatly augmented by the influx of 
 specie. It is now, probably, increased 100 millions 
 sterling. The fixed claims upon the national resources 
 being still 200 millions sterling will leave a margin of 
 an equal amount for distribution amongst the pro- 
 ducing classes. According to the latest returns the ex- 
 port trade has risen from 50 millions sterling annually 
 to 100 millions sterling. This would make the foreign 
 trade absorb twice the former amount of labor, yielding 
 twice the wages and profits to the efi'orts of industry. 
 
 The immense revenue drawn from British industry, 
 and which ought to have been added to the producers 
 prices, has been extracted out of them. Prices have 
 been debased by statute, as well as cheapened by new 
 methods of production. Ten jper cent of cheapness in 
 the process of manufacture has been accompanied with 
 ten per cent ot statutory debasement or depreciation. 
 Every improvement of method, which multiplied j^ro- 
 duction, concurrently sufi'ered a proportionate depression 
 under the action of the law. With her vast pro- 
 ducts Great Britain now commands the largest partici- 
 pation of the precious metal circulating in the republic 
 of commerce. Her industrious people having sufi'ered 
 for many years the oppression of debts doubled by legis • 
 
73 
 
 lation — the change in the standard of value likelj to (^c- 
 €ur will reverse the effects so produced, and confer the 
 first advantages of such a revolution upon their interests. 
 
 The influx of gold now flov^dng into her channels of 
 trade will possibly operate against the interests of the 
 creditors. Her multiplying population, and the foreign 
 investments of her capitalists yet absorb the stream and 
 prevent such an internal suffusion as would act upon 
 the price of labor and thus raise the price of her 
 manufactures. Before long a depreciation of gold will, 
 in all probability take place. England, from her com- 
 mercial position, will naturally feel the first influence of 
 the change. The social condition of her people will be 
 temporarily relieved by raising the denomination of 
 prices and diminishing proportionately all revenues 
 drawn from their industry. That class of creditors whose 
 annuities are limited, providing only the means of mod- 
 erate respectability or subsistence will suffer in the same 
 dee^ree that the humbler manufacturers and operatives 
 suffered under the act^ cleprecia^ting products. 
 
 A contingency of even greater importance would 
 eventuate. Should the prices of British manufactureg 
 rise, other nations will compete with her more than suc- 
 cessfully, who have hitherto resorted to heavy tariffs to 
 protect their manufacturing eft'orts against her power of 
 capital, but especially against the debased prices of her 
 fabrics. These tariffs will operate, under such circum- 
 stances, almost as an exclusion, while it will strengthen 
 ih.Q domestic prices of France and America, giving to their 
 manufacturing capacities a greater power of accumula- 
 tion, and more exclusive control of markets which the 
 policy of England has rendered necessary to the employ- 
 ment of her people. 
 
 ISTo one, who has given consideration to the subject of 
 flnance but must contemplate, with some degree of appre- 
 hension, the consequences which may arise by the annual 
 addition of 20 m^7^tc>n5 sterling to the supply of gold. 
 At present it appears to be absorbed more rapidly than 
 it can be produced, if we are to judge from the embar- 
 rassments of the banks, both in Europe and America. 
 These are, however, no data on which an opinion can be 
 correctly formed. The improvement in the condition of 
 civilized coramunites has given to the great majority the 
 J 
 
74 
 
 means to reserve a few pieces of gold, snd the millions 
 thus absorbed from circulation cannot be computed. For 
 a series of years this will continue and conceal the actual 
 condition of finances. As communities acquire confi- 
 dence they will seek to use the gold now being absorbed, 
 to gain profit by investing it in such classes of property 
 as may seem most secure. It will then be thrown in 
 masses into circulation, and the depreciation will take 
 place with the same sudden effect, as inyariably occurs, 
 where an over investment of capital in a special enter- 
 prise augments the nominal value of the stock. 
 
 In this case the gold so held locked, will operate upon 
 aggregates, and once put into circulation it will not re- 
 turn to private hands until it has been absorbed in the 
 higher price of products and property. Capitalists will 
 obtain command and possession of the savings of the 
 multitudes and will employ it to sustain aggregate value 
 to the point it may ascend. What is not not now used 
 for the purposes of trade will pass, in such a case, into the 
 banks where it will become a glut, or if discounted ope- 
 rate inevitably upon produce, by its own depression. In 
 the reign of Elizabeth the standard value of produce and 
 estate was raised in this sudden manner. A quarter 
 (eight bushels) of grain rose from 25 pennyweights of 
 silver to 160 pennyweights. 
 
 -o- 
 
 CHAPTER X. 
 
 CIRCULATION OF MONEY REGULATED BY DETERMINATE LAWS. 
 
 Upon equal inclines the greater the volume of gravity 
 the more rapid the velocity. So in the case of money, 
 the larger the volume of quantity the more rapid the 
 circulation. Some have thought, like Lord Liverpool, 
 that if there were less money amongst a people it would 
 circulate with greater activity, and thus serve the re- 
 quirements of trade as well as a larger amount. On this 
 principle a ship laden with oranges could be as quickly 
 discharged with one basket as with ten. If there is 
 only one pound or one dollar amongst ten producers 
 who interchange with each other, nine must always 
 
76 
 
 be without money. The one who is the holder to- 
 day may not see a fair investment, or feel so much ur- 
 gency to expend as the nine others. His [ delay will 
 deprive some of profits, others of what is most requisite 
 to their wants. Each day, in such a case, will bring 
 its embarrasments, delays, and losses to the greater num- 
 ber. 
 
 This will apply to eveiy civilized community, how- 
 ever large or limited. In every condition of progress, 
 from the rudest efforts of agriculture to the highest 
 state of productive and commercial enterprise, the 
 same principle prevails. Facilities are gain, obstruc- 
 tions are loss. A scarcity of money reduces numerical 
 exchange, and obstructs circulation definitely to the de- 
 ficit. An ample accommodation of money facilitates 
 exchange, and indefinitely multiplies circulation. The 
 cost of exchange is rednced by the increased transac- 
 tions. Industry is stimulated by the increased demand. 
 The sources of public wealth are enlarged, cheaper ex- 
 change and additional production. 
 
 If one hundred merchants, each require one thousand 
 pounds or dollars of accommodation on the same day from 
 a bank, when only-half that amount is in its till^ then 
 each must accept only -half their requirements, or one- 
 half of the number go without, until deposits accumu- 
 late to supply their wants. K the deficiency of accom- 
 modation is permanent, then each merchant regulates his 
 business accordingly. Business thus limited restrains 
 enterprise. The loss of profits to the merchant repre- 
 sents tenfold the loss to the producers, whose industrv 
 is limited to the operations of the merchants. Manu- 
 facturers compete to share the inadequate discounts 
 made to the merchant. The merchants compete to obtain 
 retail customers, that reduced profits may be compen- 
 sated with increased business. The traders compete 
 to share the expenditure of the consumers. The in- 
 come of each class is reduced by the reduction of 
 prices, and the means to consume is thus generallv 
 and periodically diminished through that unhealthy com- 
 petition which multiplies production to force demand, 
 while it reduces compensation and destroys the power 
 to consume. 
 
 If the quantity of money current in a nation is 7iot 
 
Y6 
 
 equal to the wants of industry and the obligations which 
 industry has permanently to discharge, the oppression 
 upon the producer increases with the increase of num- 
 bers. For instance, if out of the thirty millions sterling 
 discounted in the United Kingdom of Britain it requiret* 
 tioenty millions to meet punctually the recurring de- 
 mands of rents and taxes, ten millions sterling is the 
 the whole marghi left for the payment of wages and the 
 profits of trade and commerce. As rent and taxes do 
 not diminish, on the contrary, additional accumulations 
 require additional money to meet their demand and sus- 
 tain their value, the limited proportion becomes less and 
 less adequate to the necessities of the producing multi- 
 tudes. The aggregate quantity of money remaining 
 stationary, while populousness is increasing, and the 
 capacity of production is multiplying, the circulation 
 becomes divided and subdivided, leaving each less to 
 expend, and numbers without either employment or 
 means. 
 
 Assuming that money has a circulative capacity of 100 
 times its denomination, 30 millions sterling will circulate 
 3000 millions of value per annum. If the distributive 
 capacity of 30 millions is 10 times its denominatory 
 value, then the distribution of wealth will be 300 mil- 
 lions sterling per annum. Should issues of bank money 
 be raised to 40 millions sterling, then the distributive 
 capacity would become 400 millions sterling. TTithout 
 deducting from the incomes which are derived from 
 rents, taxes and mortgages, it would double the income 
 of the producing classes. 
 
 Every million added to circulation would add one 
 hundred millions to commercial circulation, and ten mil- 
 lions to the income of national industry. The bank cir- 
 culation of Great Britain amounted to 43 millions ster- 
 ling in 1815, and the annual value of wealth was then com- 
 puted by CoLQUHouN, at 420 millions sterling. Raising 
 the standard, current at that time, from less than three 
 ounces of silver up to four ounces in th^ pound sterling, 
 operated to reduce the bank discounts from 43 millions 
 to 80 millions. The summary of these figures would 
 produce as follows : — 
 
 Annual production of wealth in 1815, X'420,000,000 
 
 Circulation of bank money, . . , , =...., 43,000,000 
 

 Public and private revenue dravrn from in- 
 dustry . gOO,000,00(? 
 
 Balance to the producers 220,000,000 
 
 Annual products in 1840, , jG300,000,000 
 
 Circulation of bank mone}'', , . 30,00t),00G 
 
 Public and private revenues drawn from in- 
 dustry 200,000,000 
 
 Balance to the trading and operative classes. . 100,000,000 
 
 Prices raised in 1856 by the operation of gold 
 10 per cent — increased production conse- 
 quent 15 per cent — has raised the annual 
 
 value to £400,000,000 
 
 Public and private revenue, 200,000. OC'O 
 
 Balance to the traders and operatives 200,000,000 
 
 Foreign exports in 1815, £50,000,000 
 
 being one-ninth of total production. 
 
 Foreign exports in 1840, , . . -£60,000,000 
 
 being one- sixth of total production. 
 
 Foreign exports in 1856, . . » £100,000,000 
 
 being one-fourth of total production, 
 
 Hence 43 millions of .bank issues reduced to 30 mil- 
 lions, making a reduction of issues and discounts to the 
 amount of 13 millions, arrested tlie circulation of 1300 
 millions of products per annum, and destroyed 130 mil- 
 lions sterling of tlie income of the producing classes. All 
 classes of industry feeling the destructive effects of de- 
 clining prices, sought to raise the value of manufactures 
 whenever the banks afforded a degree of relief by liberal 
 discountages. Operatives combined to raise wages, 
 manufacturers demanded better prices, the merchant 
 also found in these intermissions of severity, that he had 
 less difficulty to get better prices when the banks were- 
 liberal in their accommxodations, than to find a market 
 at any price in hard times, yielded to the advances, and 
 profited by the enlarging consumption. 
 
 In a currency, part hank notes and part specie circu- 
 lation is most irregalar, from the continual expansion 
 and contraction of accommodation. When the banks 
 discount freely business rapidly extends. Trade be- 
 comes more remunerative, and the means to meet obli- 
 gations more abundant. A few years of activity raise 
 large sections of men from a condition of poverty and 
 
■78 
 
 distress to a state of affluence and reliability- Circula- 
 tion of money and of products express co-relativ.,6 pro- 
 gress and numerical results. Every interchange of 
 produce occasions an equivalent interchange of money. 
 
 As the effusion of money spreads throughout the chan- 
 nels of trade, it seems to increase with the accumulation 
 of wealth. It is required to perform the work of ex- 
 change with greater rapidity as the demands becomes 
 more urgent and the transactions more numerous. 
 There are more products to circulate and more certainty 
 in the returns, and, therefore more promptitude in the 
 ■expenditure. Circulation substitutes quantity. Money 
 comes and goes quicker, but every time it returns it 
 bears profit and reward. Abundance of money produ- 
 ces activity in trade — -activity stimulates industry — in- 
 dustry multiplies the national riches. 
 
 Raise the discounts from three to four per cent., or 
 from four to live per cent., and all those branches of 
 trade where the profits are low become instantly profit- 
 less. Wholesale businesses, where the margin does not 
 exceed 2i or 3 per cent profit upon three month bills, and 
 who can only realise a paying profit with money at 3 
 per cent, will sufi'er an actual loss upon every transaction 
 at 4^ and 5 per cent. Orders for goods are im- 
 mediately reduced concurently with raising the rate of 
 interest. Manufacturers whose profits are also at the 
 lowest point cannot undergo a reduction of price to re- 
 lieve the wholesale business and to compensate for the 
 rise in the value of money, since it will have increased 
 in cost to them also, and thus add to the cost of produc- 
 tion. Wages being also at the lowest point, an at- 
 tempt to reduce this last element has, in the branches 
 most wanted, been exhausted in previous interruptions. 
 
 In the fabrics of cotton, profit and wages having 
 reached their minimum, while the immense production 
 and consumption of the article render it one of the 
 largest mercantile branches of business, both in domestic 
 and foreign trade, hence the first effect of hi^h rates 
 of interest operating with severity on all, depresses 
 in the highest degree those departments where the 
 widest range of manufacturing business is the least 
 capable of withstanding the addiuunal financial taxa- 
 tion. The first class of orders witlidi'awn by the 
 
79 
 
 wholesale merchants discourages the mannfactarers, 
 ^and labor is immediateiy reduced, to limit the work of 
 production- 
 
 Before the bank monej so discounted is withdrawn from 
 the hands of the community the circulation is, therefore, 
 arrested. Raw materials are not purchased in such 
 quantities, or with the usual alacrity. Another depart- 
 ment of industry is arrested. Wages having diminished 
 with reduced employment, acts directly and indirectly 
 upon every class of the retailers, who forthwith refuse 
 to make purchases from the wholesale merchants. 
 Whenever the merchants cease to be buyers they soon 
 cease, by the nature of commercial law, to be sellers. 
 Those who have no money cannot buy and those who 
 liave cannot employ it. 
 
 Every branch of trade sinks into inactivity upon the 
 collapse of one or two leading departments. If the cir- 
 culation of each unit of money in a healthy condition 
 of business, performs one hundred transactions — raising 
 the rate of interest will diminish its circulative action in- 
 versely with the rise. Thirty millions, at 3 per cent. 
 maxirrbum cirGulation^ will produce 3,000 millions ster- 
 ling of business. At 4 per cent a reduced circulation, 
 S,000 millions sterling of business. At 5 per cent, min- 
 imwm mrculation 1,100 millions of business. The busi- 
 ness transactions of Great Britain have been computed at 
 ten times the maximum assumed in these calculations, 
 if such is the case it would strengthen the principle here 
 propounded, since it is known positively the amount of 
 money which can be discounted for mercantile and man- 
 ufacturing industry. 
 
 The quantity of wealth producible in all civilized 
 communities, is the law of quantity purchasable by its 
 members. Art and labor have been divided through- 
 out the entire organization to supply each class of 
 wants according to the capacity of production. When 
 labor is interrupted, either from inadequate circulation, 
 or an inadequate quantity of money to circulate and 
 exchange the products in the hands of the several pro- 
 ducers, then aggregate demand is beneath supply in the 
 exact proportion that aggregate supply is above demand. 
 Every value produced by one trade will cancel an equal 
 value produced by another, it human wisdom will 
 
80 
 
 supply an instrument of capacity equal to the values 
 
 pro3ueible. 
 
 " Money," says " Mr. Geay, '' ie demand, labor is sup- 
 ply." It is because a hat is not bought tbat a pair of 
 shoes are not sold, or it is because a bat is not sold that 
 a pair of shoes are not bought. It matters not which of 
 the exchanges takes the precedence, the one would cause 
 the demand for the other either way. Multiply this to 
 any extent, the law is equally applicable. A million of 
 hats must be sold before a million pairs of shoes can be 
 bought, and a million yards of broad cloth must be sold 
 before a million bushels of grain can be bought, and so 
 on throughout the whole circle of exchanges. Should, 
 therefore, the quantity of money be equal only to pro- 
 duce as fifty to a hundred, then only fifty pounds worth 
 of goods can be exchanged or sold out of each hundred 
 produced. The quantity of wealth demanded is limited 
 to the quantity of money into which it must be ex- 
 changed before the producer can make a demand for 
 other produce. 
 
 Demand is, therefore, regulated by public law. What 
 the plough is to the husbandman, money is to the mer- 
 chant. The one is the instrument of production, the 
 other the instrument of exchange. Land may be abun- 
 dant, and the soil rich, but the fruits of both are mate- 
 rially denied to him who has no instrument to call forth 
 their riches. So it is with the trader, wealth may be 
 abundant, and the capacity to produce unlimited, but 
 without the instrument of exchange the wealth produced 
 cannot be transferred, distributed and reproduced. Des- 
 titution, misery and crime thus multiply amidst the 
 abundant elements of physical and moral wealth. 
 
 Without any addition to the current money of a coun- 
 try, business may be largely extended. Enterprises 
 of a new and useful nature, such as railways, frequently 
 call into employment large bodies of laborers. A new 
 demand is created for the consumption of goods, by the 
 expenditure in this new field of employ. The additioDal 
 demand and consumption of manufactures give a fresh 
 impetus to manufacturing industry. When the manu- 
 factories ?A^Q called into full action, new ones are erected 
 to share the profitable business thus opened. Operative 
 and mechanical labor is set in motion to an extent not 
 
81 
 
 previously equalled. Wages are earned and expended 
 hj large numbers who had hitherto been a tax on the 
 public resources. These new streams of trade acting 
 and re-acting upon the middle classes, increase their 
 means of accumulation. 
 
 The power to make investments is thus promptly placed 
 in the hands of great numbers, who previously were with- 
 out money for any purpose beyond their immediate and 
 limited necessities. Those who could formerly accumu- 
 late, double their accumulations. The projects which 
 were sufficiently encouraging to set the industrial 
 machine in motioo, when trade was in a state of languor 
 and depression, become valuable enterprises, as the 
 greater requirement for their use opens "with an enlarged 
 and expanding business. 
 
 The savings of the traders flow into the channels of 
 those projects which seem not only legitimate, but most 
 profitable investments. Every branch of industry re- 
 ciprocates encouragement to another. Activity of cir- 
 culation in such cases substitutes quantity. Credit 
 multiplies with the extending requirements. Money, 
 circulating with increasing rapidity, appears to augment 
 in abundance. Labor becomes less available than money. 
 The capitalists, realizing by every investment, offer ad- 
 ditional rewards to industry, and the operative re- 
 sponds by working over hours. Human energy seems 
 inexhaustible. Every class particij)ate in the riches 
 thus multiplied and multiplying by the swift and skil- 
 ful hands of national industry. 
 
 Enlarged consumption of home products is accom- 
 panied with a corresponding increase of foreign products. 
 The demand and consumption by a nation in this ad- 
 vancing condition of prosperity, augment in a greater de- 
 gree than other nations less active can reciprocate. The 
 greater importations throw the balance of trade against 
 the lusty consumer. Gold is required to adjust the 
 foreign exchanges. The banks cannot spare their 
 scanty supply at any time, but especially wheu their dis- 
 counts are circulating at the greatest tension. Statute 
 law demands they shall hold gold or withdraw their cir- 
 culation. The laws of commerce and nature demand 
 the relinquishment of the gold held by the banks. Dis- 
 counts are raised to discourage enterprise, that con- 
 
 K 
 
• 82 
 
 snrnptioii may be diminished to secure the re-adjast- 
 merit of foreign exchange. 
 
 The largest mercantile firms are the first sufferers 
 utidei* this financial operation. Orders are withdrawn. 
 Labor is suspended. The enterprises which set the 
 whole energies of the community in action, and which 
 were absorbing the legitimate savings of the capitalist 
 are the first undertakings to be abandoned. ^q\v 
 lines of railway, houses, manufactories, machinery, 
 ship-building, all in process of erection and construc- 
 tion are ^reliuquished for the want of those savings 
 which are curtailed by the curtailment of bank accom- 
 modation. The banks comply with the law, and 
 the law spreads in its operations general ruin, bank- 
 ruptcy, and demoralization throughout society. 
 
 Merchants wdio were commended lor their energy 
 and enterprise are suddenly reproached as speculators. 
 The manufacturer is admonished for his bad judgment 
 in having invested so much in the extension of his pre- 
 mises and increased machinery. The tradesmen are 
 generally reproved for having put their money into 
 buildings instead of preserving it in bank deposits. K^ow 
 one of two results w^ould take place if the accu- 
 mulations of business men, during prosperous times, 
 were hoarded in the banks instead of being used in the 
 various undertakings which absorb them in their own 
 business, or others which they judge equally legiti- 
 mate. 
 
 First the banks accumulating numerous deposits would 
 lend the money to large capitalists to carry out the enter- 
 prises in which the humbler capitalists would not invest. 
 By absorbing labor to execute the projects which pre- 
 sented the fairest prospect of returns they would mo- 
 nopolize all the great works of the country with the 
 use of capital sav^d by those who feai ed to adventure. 
 The general consumption superinduced would cause a 
 corresponding demand upon foreign products exactly 
 the same as if the labor was employed, to enrich a mil- 
 lion oi investors instead of a few thu)usands. 
 
 Whenever the balance of trade required the curtail- 
 ment of discount the collapse of business would drive 
 the numerous depositors to withdi-aw their savings from 
 the banks, which would be unable to meet their de- 
 
83 
 
 mands until the sums they had loaned could be returned. 
 This, it is obvious, could not be accomplished for some 
 time. The capitalists would also find their stocks de- 
 preciated with the decline of business and to sell 
 would be ruin. Both the borrowers and the banks would 
 collapse, and the same ruinous consequences would result, 
 with the difference, that the stocks^ huildings^ mcmufaG- 
 tories^ and machinery in which the savings of the inves- 
 tors had in the first case been absorbed, would, upon the 
 improvement of business, ultimately regain much of their 
 value, whereas the failure of the banks seldom afford to 
 their depositors, after legal expenses are deducted, a 
 per-centage worth consideration. 
 
 Circulation thus expands and contracts to preserve 
 an amount of gold in the ha/nJcs determined by and de- 
 termining their issues of bank notes. To preserve that 
 amount of gold, discount must be limited, and the limits 
 thus fixed limits trade, the limitation of trade determines 
 the limits of employment, and hence the action of the 
 law, which makes gold or silver the basis of national in- 
 dustry operates as if a permanent decree were enforced 
 to reduce the great majority of every civilized nation 
 to social vassalage, misery and demoralization. 
 
 Prudence will not conserve the accumulations and 
 riches which the merchant has attained, nor give to the 
 manufacturer affiuence, however skilful or Irugal, nor 
 secure bread to the operative, whatever may be his 
 character. The aggregate of one commodity, gold or 
 silver^ is the determinator of the aggregate of all other 
 commodities. Deficient in quantity — it is, from the 
 nature of commercial law incapable of relative augmen- 
 tation, while its circulative qualities are also diminished 
 by its natural scarcity. These extreme fluctuations 
 which are inseparable from the temporary scarcity of 
 any commodity, are multiplied beyond computation in 
 the case of money, since they operate not less destruc- 
 tively on the interests of production, than upon those of 
 consumption. 
 
 Moreover, gold is always added to the current medium 
 of exchange at great cost. As coin is also non-productive. 
 It is so much ca]3ital sunk, merely to circulate other 
 capital. Besides it will only circulate a quantity of 
 wealth proportionate to it own value. No increase to 
 
84 
 
 the numbers engaged in the mining of gold inversely 
 ever takes place. The laws of all nations discourage 
 this distribution of human industry, while the require- 
 ments of trade and society necessitate a proportionate 
 increase of gold. The quantity of 'vrdue in the product 
 of gold — is determinate and limited — the quantity of 
 lidlue in aggregate production is indeterminate and un- 
 limited — every day adding to the productiveness of all 
 civilized communities by innumerable causes. 
 
 A social condition producing so much unnecessary 
 and unnatural adversity cannot fail to confuse the cal- 
 culations of the most experienced. The standard of 
 morality, public and private, sinks in defiance of the 
 most heroic sacri rices to sustuin an honorable reputation 
 or to command a desirable position. For a consider- 
 able period a nation may progress without any additions 
 being made to its circulation. Accumulations will still 
 be made by some. Competition will, however, become 
 more and more intense, while pauperism and defection 
 will spread their blighting influence throughout the com- 
 monwealth. In such a state riches and property concen- 
 trate into fewer hands. The lower classes of the com- 
 munity arrested in their efforts to advance, or debased 
 by poverty, avoid marriage and thus, in some degree, 
 limit population to the limited dimensions of the declin- 
 ing industrial system. 
 
 Ancient communities, employing metallic money only, 
 moved in a circle of advance and decline with remark- 
 able precision. Modern nations, having practically 
 employed the agency of denominative Tnoney as w^ell as 
 intrinsic money have enlarged the area of industry and 
 trade — thus extending the period of decline. Population 
 increases rapidly in a nation during its ascent to power, 
 even though war, under such circumstances, imj»oses an 
 immense drain upon its members. On the contrary 
 population declines after it has passed the culminating 
 point, though it should become considerably relieved 
 from the sacrifices of war, or altogether treed from 
 such drain by becoming the province of a superior 
 power. 
 
 Population has continued to increase in Britain and 
 France amid misery and social declension. Yarious 
 causes contribute to encourage populousness in modern 
 
85 
 
 communities which did not exist in antiquity, Personal 
 freedom and equality in all the immunities of civil life, 
 prevail now throughout civilization. The humbler classes 
 iiaturally multiply faster than the wealthy. Those 
 whose destitiitive condition superinduce a decline in 
 their offspring are compensated by the increase amongst 
 those who have at least sufficient subsistence to sustain 
 their robust constitutions, strengthened by their robust 
 habits of industry. Social impediments to increase are 
 also mitigated by political provisions in some nations, 
 by economical eonsiderations in others. Sentiments of 
 humanity have become stronger than the arm of 
 govermental authority. Populousness cannot now be 
 diminished by the rude agency of war. Princes or sta- 
 tesmen who cannot substitute wisdom for policy will not 
 long retain their thrones or honors. If the oppressed 
 multitudes cannot construct they can destroy. The ele- 
 ments of revolution, therefore, increase with the pro- 
 gress of numbers under the defective arrangements of 
 the existing political system. 
 
 France provides for the reception of infants in public 
 institutions. In Britain a i>ractice has long prevailed 
 amongst the employers, when trade is depressed of plac- 
 ing their workmen upon half or quarter time. By this 
 process of distributing labor, multitudes are still pos- 
 sessed of some means to obtain bread, hence the j)ower of 
 increase remains undisturbed, while the oppressive in- 
 crease of poor-rates are considerably modified. Au- 
 thority seems impotent before the multiplying power of 
 the masses. Legislative and economical science unfold- 
 ing and widening the avenues of employment, can alone 
 command submission, and confer security upon the estab- 
 lished interests of society. 
 
 Participating in the present prosperity and enjoying 
 greater means of comfort, the people of Europe will be- 
 come more impatient of poverty upon the recurrence of 
 commercial depression. To rely on the enlarged circula- 
 tion of the precious metals for the extension of trade is 
 not less fatal to the safety of states, than if a navigator 
 trusted to the drift of a current in bringing his vessel to 
 the point of destination. Should a depreciation take 
 place, the proportional Aalue of the metals to the 
 requirements of trade will l)e suddenlv diminished. 
 
86 
 
 Cheapened in current exchange by their abundance, 
 they will become less profitable in production when 
 their requirement will have been augmented to a de- 
 gree hithero unknown. 
 
 First. — The advanced price of property and products 
 will require a greater quantity to sustain their new "odlue. 
 Secondly. — ^The enlarged mercantile operations, both 
 domestic and foreign v/ill require the continuance and en- 
 largement of the supply ; and, thirdly — the augmenting 
 and multiplying populations throughout the leading civil- 
 ized communities will require a proportionate increase of 
 coin to compensate their industry and sustain their 
 greater expense of living. Every fraction added to the . 
 average value of commodities is deducted from the value 
 of gold as a comm^odity. Every deduction made upon 
 the value of gold is a deduction made upon the value 
 of the mines from which it is produced. K the j)roduc- 
 tion is reduced, the deductions made upon the annual 
 supply will operate to paralyse the efforts of trade and 
 industry, raised upon the force of its abundance. 
 
 "When grain is cheap it affects only its own price. If 
 wheat, in an abundant year, caused the rise of all manu- 
 factures, the farmer would rise the price of grain in sub- 
 sequent years, even when the crops were comparatively 
 abundant since all that he consumed of clothing, furni- 
 ture, and implements of husbandry had risen relatively 
 to the price of his produce. On the contrary, the miner 
 cannot raise the price of his gold proportionately to 
 the advanced prices of commoditieSjSince the law of all 
 nations have determined the capacity of this metal in the 
 discharge of debt. In exchange, it may sink in capacity, 
 but cannot rise. A depreciation of its value, therefore, 
 operates to diminish the supply, and when depreciated 
 the denomination of all dehts^ obligations ^\\([ property hav- 
 ing been raised, no community can relinquish the new 
 standard of prices without relinquishing, in the same de- 
 gree, their property, augmenting their debts, and in- 
 creasing their obligations. 
 
 Circulative capacity and supply in the commodity of 
 gold are subject to irregularities which no legislation 
 can coiTect. In a semi-barbarous condition, where laws 
 are feeble and life not less insecure than property, me- 
 tallic money is indispensable to carry through tlie limit- 
 
ed transactions of trade. It is also nseful in tlie hands 
 of tlie merchants of the more civilized nations in their 
 dealings ^vith the less civilized, such as the extending 
 intercourse with the Asiatic and African races; also 
 with the Indian and Esquimaux tribes in various articles, 
 as furs, &c. Many simple articles of manufacture can be 
 employed with equal success. Even the former have 
 considerably supplied the commodity w^hich may be 
 used to traffic with them. But the use of gold amongst 
 a people where authority guarantees security, and where 
 intelligence hourly multiplies the agents of production, is 
 an error of modern statesmanship, which inverts the 
 civilized economy and renders the elements of human 
 felicity, frequently instrumental of wrong, and always 
 inequitable in their administration. 
 
 In every community the circulation of income is one of 
 the most determinate provisions of the social state. 
 Incomes from wages, profits, rents and public sal- 
 aries are paid at stated times. The custom which pre- 
 vails in this matter will, probably, not be disturbed for 
 centuries, hence the distribution of income, and its circu- 
 lation, in all established countries is not less definite than 
 the laws of exchange. Wages are paid weekly, and 
 therefore the income of the operative circulates fifty-two 
 times yearly. From the accommodation of credits the 
 complement of income amongst the trading class is only 
 made up every three months, hence their expenditure 
 circulates but four times yearly. Land proprietors, the 
 more wealthy capitalists, government annuitants and 
 others pay their bills only at the close of each year, and, 
 therefore, their expenditure circulates but once yearly. 
 Wages circulate with great activity. Profits circulate 
 tardily. Kents, dividends, and salaries more so. The 
 frequent expenditures of the working class enable the 
 tradesmen to reciprocate with each other quarterly cre- 
 dits. It is these intermediate spendings which sustain 
 the means of every order of business men to accommo- 
 date their richer customers with credits suitable both 
 in amount and extent of time. 
 
 Any measure which interrupts and diminishes the dis- 
 count of money operates only on two classes of income, 
 take any country, say Britain. Should national income 
 be divided as follows : 200 millions sterling for fixed an- 
 
88 
 
 tiuities from lands and funds — 100 millions the profits of 
 traders, and 100 millions wages. A curtailment of bank 
 disconntage, from whatever circumstance, abridges the 
 mercantile operations of the merchants and consequently 
 abridges the employment of labor. ]^o diminution can 
 take place of the incomes secured under legal contract 
 and provisions. The income of the middle and operative 
 classes alone suffer. Limiring discounts ten per cent., 
 and inferentially assuming that employment would only 
 be abridged in that degree, then ten per cent, of ag- 
 .o;regate production Avould be curtailed. This w^ould 
 amount to 40 millions sterling. Dividing the loss be- 
 tween those classes who would be affected, each would 
 sustain a loss of 20 millions in their aggregate income. 
 200 millions would be reduced to 160 millions of indus- 
 trial income, while the 200 millions sterling of income 
 of the others would remain undiminished. 
 
 In proportion as discounts are abridged, an abridgment 
 of industry and the income of the industrial classes 
 thus proceeds inversely. The continued recurrence of such 
 interruptions to trade, in all commercial nations, is a 
 reproach on civilization, and a wrong inflicted for which 
 no redress can ever be procured. Even the progress of 
 a nation and the means of accumulation depend more 
 upon the regularity of its industrial efforts than the 
 greatness of its productive agencies, ^ew colonies show 
 this vital progress. So long as barter can be practised 
 the interchanges of industry, almost unaided w4th ca- 
 pital or machinery, advances with such certainty that 
 there are scarcely a member of such a community but 
 accumulates property and acquires competency. M^h 
 fly from the seaboard cities of the United States to the 
 western confines, that they may realize a security of em.- 
 ployment which the instrumentality of c«j;/Y«/5, ^?i<^??c^ 
 and science have yet failed to produce. 
 
 Upon the principle tliat a reduction of discounts 
 abridge national wealth and the income of national in- 
 dustry, the opposite effects would be produced by an 
 enlargement of discount. The resources of a country 
 are determined by the industry and number of its in- 
 habitants. While any portion remain unemployed or 
 partially employed, the public resources are, in that de- 
 S"ree ami extent neplected. Those who are destitute of 
 
 glfC rtJlVi CM CIA U li^gi 
 
89 
 
 t 
 
 employ, not only contribute nothing to the national 
 wealth but they are a tax upon the means of others. An 
 increase of discounts to the amount required for the per- 
 manent employment of a multiplying people would an- 
 nually enlarge the income of every one engaged in a 
 productive capacity. The gains of the laborer invariably 
 carry with them an equivalent amount to the trading 
 class. Every pound sterling^ dollar cr franc earned in 
 wages contributes an equal amount, at least, to the pro 
 ■fits of those who direct the industrial energies of the 
 several communities. 
 
 An annual increase of population at tlie rate of one- 
 and-a-half per cent, as in the case of tlie British Isles, 
 or even at a greater ratio, as in some countries, requires 
 an additional discountage at least in this degree. To 
 depend upon the irregular circulation of coin is perilous 
 to the security of society. To restrain the discount of 
 notes upon any theory which conflicts with the multiply- 
 ing requirements of the people is equally fatal to the 
 public safety. If issues do not increase, credit w^ll mul- 
 tiply to facilitate the operations of capital, and hence the 
 slightest curtailment of bank discount will operate upon 
 the volume of commercial credit proportionately to its 
 magnitude. If 30 millions of bank circulation sustains 
 a circulation of Vdls of exchange to the extent of 1 mil- 
 lion to 50 millions, then the total instrumentality of 
 credit will be 1500 millions. Enlarge the volume of 
 credit as 1 to 100, and the bills of exchange drawn for 
 current trade will be 3000 millions. To withdraw 1 mil- 
 lion sterling of bank discounts in the first instance, would 
 destroy 50 millions sterling of commercial transactions — 
 2 millions withdrawn would destroy 100 millions of 
 commerce. In the second case, 1 million of circulation 
 withdrawn vv^ould reduce credit 100 millions — -2 millions 
 withdrawn would reduce it 200 millions, and so on in- 
 versely. 
 
 What is the capacity of Bills of Exchange in perform- 
 ing the functions of money is not easily defined. It is, 
 however, a principle of great importance. Credit ma- 
 tures, according to the term of these bills, generally in 
 three months. Assuming the commercial credit cur- 
 rent at 900 millions sterling — this amount in 90 day 
 bills would be totally canceled and an erjual credit dur- 
 
90 
 
 ing each 90 days in eacL year. An equal portion fall- 
 ing dne daily would require the use of 10 millions of 
 pounds sterling to cancel each day's liabilities. The 
 amount of current bank issues would thus be totally ab- 
 sorbed every three days, or in one-thirteenth of the pe- 
 riod of maturation. I'o dispense with domestic Bills of 
 Exchange altogether, by substituting bank notes of a 
 detenninate denomination w^ould probably require an is- 
 sue equal to one-tenth of current credit. Upon this cal- 
 culation 90 millions sterling would be required. Bills 
 of exchange are, therefore, now performing the office of 
 law^ful money equal to two-thirds the necessary circula- 
 tion. Thus 10 millions of current credit would be equal 
 to 1 million of bank issue. A standard of issue based 
 upon the laws of value would demonstrate the actual 
 capacity of credit in discharging the functions of money. 
 
 Where a system of credit so complex and vast has 
 been raised to sustain the enterprise and industry of a 
 people, it is easy to imagine the precaution which every 
 capitalist must exercise to secure himself against ruin. 
 The withdrawal, of the least amount of circulation by 
 the banks, or even the apprehensionof such, is a menace 
 of bankruptcy. Each merchant limits his business and 
 credit to the possibility of such an occurrence. The labor 
 in the market is demanded only in accordance with the 
 prudent limits of the merchant. Multitudes of unemploy- 
 ed laborers become dependent on charitable provisions. 
 Those wdio have means emigrate. Others sink into 
 habits of indolence and demoralization. The entire 
 number compete with each other by underselling — the 
 unsuccessful frequently resorting to fraud, and the crafty 
 to every species of debasement to procure bread. 
 
 The quantity of coin taken out of circulation by hoard- 
 ing at one time, may be added at another, as w^as the 
 case during the South Sea scheme in England, and the 
 Mlssissijypi scheme in France. The amount of m.oney 
 brought out of hoard w^as immense. Coin is withdrawn 
 from circulation slowly, and reaching o,ver a great series 
 of Years. It is tlien thrown into current use in large 
 Quantities, producing an extraordinary stimulus in com- 
 mercial enterprise and national industry. Legitimate 
 undertakings do not oifer sufiiciently extravagant gains 
 to the hoarders, who are generally not le»s avaricious 
 
91 
 
 f 
 
 than fragal. If, however, there is little wisdom or gain 
 in hoarding, there is less in the manner in which thev 
 make an adventure of their savings. 
 
 The prosperity of the French people during the reign 
 of Louis Phillippe, afforded largely the means of hoard- 
 ing. The concurrent evils to trade by a scarcity of coin, 
 contributed, in no small degree, to the depression of in- 
 dustry. Circulation thus limited, the means of employ- 
 ment and subsistence, especially in the cities, were con- 
 tracted to an extent which rendered discontent and 
 defection so universal, that a single act of indiscretion on 
 the part of the government became the signal of revolu- 
 tion. That event ensued, accompanied with calamities 
 which soon rendered the new form of government less 
 popular than the institution of monarchy. As the hoard- 
 ings of the people were expended from necessity and 
 thrown into circulation, a general subsidence of the so- 
 cial chaos began to manifest itself. The bank of France, 
 the great financial reservoir, which for a time was drain- 
 ed, gradually received from a million streams of private 
 expenditures the secret and indolent accumulations of 
 coin. Trade slowly resumed its ordinary course. Em- 
 ployment increased with circulation. The new resources 
 of California operated concurrently, inspired commercial 
 confidence, and has continued to sustain the activity of 
 circulation, although the practice of hoarding is carried 
 to an extent now, probably, greater than at any former 
 period. 
 
 CHAPTER XI. 
 
 THE ORIG-IN OF NOTES — THEIR ADVANTAGES TO COMMEEOE 
 DIMINISHED BY GOVERNMENTAL INTERFERENCE. PROGRESS 
 OF BANK ISSrES. 
 
 In the early part of the ITth century when inter- 
 course with the continents of America and of Asia was 
 opened the adventurers who returned from voyages to 
 these parts generally brought more or less gold. It wa^ 
 not convenient for the 2;oldsmiths always to purchase 
 the hullion thus offered for sale. The goldsmiths of 
 London in the same manner as the bank ot Amsterdam^ 
 
gave certificates to any one who preferred to deposit 
 treasure in their hands. Their well-known riches and 
 the great danger of transferring so valuable a commodity 
 at that period, naturally suggested a trusteeship so 
 safe and convenient. 
 
 These certificates or warrants of demand for 'calue thus 
 deposited, seems to have suggested the still more 
 important advantages of using them in commercial tran- 
 sactions. The convenience, safety and facility with 
 which they performed the functions and office of money 
 multiplied the demand for their accommodation. It 
 is said that several millions of these certificates^ or ra- 
 ther warrants^ were circulating in tlie English capital at 
 the time of the Commonvrealtli. One thing is evident, 
 that during all the political vicissitudes through which 
 the metropolis passed, there appeared no interruption to 
 its industrial and commercial progress. It seemed, in- 
 deed, to suffer less tlian the provincial cities. 
 
 Cromwell raised large revenues without public com- 
 plaint. ^0 popular disturbances periled his authority, 
 rlow much the operations of commerce were facilitated 
 with these new insti timents of exchange^ or to what ex- 
 tent employment w^as multiplied, there is no means of 
 estimating. Yet the increasing population of the capi- 
 tal w^ould indicate, that the inducements of labor were 
 encouraging. Certificates first issued upon deposits, soon 
 led to certificates issued upon the credit of the gold- 
 smiths^ whose well known riches were undoubted secu- 
 rity. The form was preserved on which they originated, 
 and is still preserved in the form of all bank notes, 
 
 A depositor who consigned one hundred ounces, troy, 
 of gold to any of these tradesmen, received a warranty 
 acknowledging the value, and authorising the payment 
 of the amount on the demand of the holder. 
 
 [foem.] 
 
 London^ May 1st. 1660. 
 
 I promise to jpay on demand the sum of FOUR HUN- 
 DRED POUNDS sterling, £400, to Alexander Wright, 
 01' hearer, 
 
 Mathcic Orton, 
 
 Goldsmith, 
 
 Lomlai'd street. 
 
, 93 
 
 If the deposit was iOUO ounces of silrer at 4s, lOicf, 
 per ounce, omitting fractions, which has been invariably 
 done throughout this work, where the principle could be 
 eliminated without — the order would be as follows : 
 
 City of London^ May 1st, 1660. 
 
 Ijpromise to pay on demand the sum of TWO HUK- 
 
 DEED and TWO POUNDS sterling, £202, to Alexa7ider 
 
 Wright or hearer, 
 
 Mathew Orton, 
 
 Goldsmith, 
 
 Lomnhard street. 
 « 
 
 Notes bearing denominations of this, or any other, 
 amount, would relieve the coin, both gold and silver, 
 from the business of exchange. Accumulations of specie 
 in large sums would cease. As these notes came into 
 more general use, all transactions of considerable mag- 
 nitude would be cancelled by their instrumentality. 
 The coin thus relieved from the w^ork of exchange would 
 flow down to the channels of distribution. There would 
 be less difficulty in obtaining coin for the payment of 
 wages and the performance of the innumerable transac- 
 tions of small denomination. Both the manufacturers 
 and retail tradesmen would thus immediately partici- 
 pate in the facilities acquired by the merchants. Money 
 would become more abundant concurrently with an in- 
 crease of orders for manufactures. Money multiplied 
 trade, and trade multiplied profit. 
 
 Aiding the progress of trade, and multiplying with its 
 requirements, the importance of this new financial ele- 
 ment attracted the attention of the British government. 
 To relieve the embarrassments of the public treasury, 
 the goldsmiths w^ere ofiered terms for a participation in 
 the privileges, which had contributed so much to the 
 interest of commerce. The charter of incorporation 
 granting the legal power to issue notes which had hith- 
 erto been exercised without interruption under the exist- 
 ing laws, accorded rights which had never been ques- 
 tioned. On the contrary, the charter abridged the pri- 
 vate right of issue, and thereby gave a species of gov- 
 ernmental securitv to the notes so issued, as if thev were 
 
\)4 
 
 vquivdlcni tu coin. Wlioii issued by a pi-ivato citizen, 
 llie solvency and probity oi' the issuer M'as a matter of 
 certainty. WlieneNcr the note waw ofiered in payment 
 and accepted, the cliaracter, resi)onsil)ility and substance 
 of the name it bore were understood. But issned by a 
 com]">any whose only guarantees were a charter, of en- 
 dorsement by the soverelgu that the bank was legal, 
 gave to such institutions the apparent importance of 
 wnunercial minfft. 
 
 Even the conditions upon which tlie first charter was 
 granted bearing the title of the Bank of England were 
 in absolute violation of the security of the notes issued. 
 A loan was contracted to be paid to the government from 
 the issue department, not from the deposits or accumu- 
 lations either of the company itself, or those of its 
 customers. Issues oi' private notes were discounted to 
 be repaid in three or six months They were advanced 
 to aid and multiply production. Every additional pound 
 note discounted, increased the denumd for labor, and 
 added to the ju'oductability of the mition. It represent- 
 ed an accumulation equal to or greater than its denom- 
 ination. 
 
 Notes issued to be loaned to governmont were not to 
 be repaid. They thus become a record oi funded deht. 
 Issues so advanced were employed entirely for expen- 
 diture and consumption. They were issued to con- 
 sume and diminish the accumulated wealth of the na- 
 tion instead of adding to ag^gregate capital. All is- 
 sues for mercantile pur})oses of necessity were borrow- 
 ed to be paid. What the merchant bought and sold re- 
 produced his investment with profit. Increase of cur- 
 rency was the index of the aggregation of capital. 
 Loans discounted to the government added to circula- 
 tion, but not to ihe wealth of the countiy. They added 
 to prices instead of to produce. 
 
 The nature of these notes i'ov commercial puiyoses was 
 entirely revoked by legislative interference. It restrict- 
 ed and abridged the individual rightof the most respect- 
 able citizens to exercise this immunity with protit to 
 themselves and advantage to the industry of their neigh- 
 borhood. Instead oi' a broad distributitui oi' the right to 
 accommodate, it invested a power in corj)orations whose 
 issues were a species o\' i)KMu>j>oly, and whose capital 
 
95 
 
 was beyond the public scrmtinj. It is the small and 
 nuraerous discounts made to tradesmen which renders the 
 large absorption of notes practicable without affecting 
 their value. Large discounts operate immediately upon 
 masses of products and occasion a rise of price. Small 
 discounts contribute to the means of production and 
 augments the stock of wealth instead of increasing the 
 price. They sweil the volume oi supply instead of inflat- 
 ing the volume of price. They operate to cheapen in- 
 stead of making dear. They multiply income amongst 
 the frugal instead of encouraging extravagance amongst 
 the fortunate gamblers of commerce. Fifty are accom- 
 modated with limited discounts in the United States for 
 one who can enjoy this privilege in Britain. A si- 
 milar practice prevailed in Scotland until the British 
 Parliament interfered and enforced that the Scotch banks 
 should hold bank of England notes against their issues. 
 Government interference was occasioned by the bank- 
 ruptcy of the Treasury. Discounts to the ' state were 
 employed to consume not to multiply, to deduct not to 
 augment the stock of national wealth. Notes issued and 
 advanced to the state bearing no intrinsic value, yet re- 
 presented legally a determinate quantity of gold. These 
 advances were not employed to produce any value or 
 to fabricate any articles by which gold could be pro- 
 cured, or to replaoe the gold which might flow out of 
 the country. Iheir denomination was added to circula- 
 tion. The current value of the notes separated from 
 the natural value of the coin. They would not circulate 
 together. The nature oi notes is to sustain current prices 
 and multiply unlimited exchange — the nature of gold or 
 silver coin is to degrade current prices and limit ex- 
 change. The conflict in the operations of these oppos- 
 ing laws is ruinous to commerce. Oscillation and con- 
 vulsion become a rule in trade. 
 
 Notes issued, therefore, under the tamperings and in- 
 dulgencies of governments have invariably depreciated. 
 So far Irom the mercantile classes in Europe causing 
 the debasement of the value ot bank issues, it may 
 be safely asserted that the competition, inseparable 
 from trade and the scru])ulous exactness upon which 
 discounts are made, tends always to reduce the price of 
 products rather than diminish the value ©f money. 
 
^)6 
 
 Such has been the pressure of government demands upon 
 the bank of England at vai ions periods, that a debt has 
 been contracted amounting to eleven millions sterling. 
 This is equal to one-half her present issue. A forced cir,- 
 culation thus made from the issue department would 
 seem to aggravate the injustice of parliamentary inter- 
 ference to raise the value of money — which its own ex- 
 cesses had, in a great measure, specially caused the de- 
 preciation. 
 
 The banks being compelled by law to give a definite 
 weight ot gold or silver on demand to the holder of their 
 notes, have found themselves involved from time to time 
 in responsibilities to the public which they could not meet. 
 Whenever the conventional price of products rose above 
 the natural price, the separation of the value of coin 
 from the notes caused a continuous drain of gold from 
 their vaults. Superinducing by their issues a higher 
 range of prices a premium was thus offered to the for- 
 eign merchant to bring the products of other countries 
 into the market where prices were high and the demand 
 encouraging. There was no difficulty for the importer to 
 pay, even when there were no bills on 'Change against 
 the nation from which he purchased, as he could carry 
 to hanh the money he had obtained for his goods, and 
 demand gold according to his requirements. 
 
 Every note of one hundred pounds sterling is a war- 
 rant of demand against the bank for 25 ounces 300 grains 
 of gold, or a note of one hundred dollars is a warrant of 
 demand against the bank for 85 ounces 450 grains of 
 silver. An advance of 5 per cent on the current price of 
 products by an increased issue of notes is a premium of 
 5 per cent upon the exportation of gold and silver, as it 
 can command this much greater value in all other coun- 
 tries where no alteration has taken place. 
 
 If a nation had no foreign trade the legal equivalency 
 of coin and notes would produce no inconvenience. 
 Either might discharge the same liabilities, and their 
 commercial equivalency could scarcely be disturbed. 
 But a nation with foreign trade, and especially nations 
 of extensive commerce, cannot indulge in a theory which 
 becomes destructive to their interests both domestic and 
 foreign. There are no legal equivalents between nations. 
 Commercial eg'tdvalents alone mile in the transactions 
 
97 
 
 between countries. The persistency of civilized states 
 enforcing a single standard for foreign and domestic 
 trade, subjects their respective communities to periodical 
 bankruptcy, and interruption of industry. Seasons of 
 unforeseen calamities recur, producing in the misgovern- 
 ment of human affairs, evils which prudence cannot re- 
 sist, nor frugality avert, contrasting the wisdom of the 
 Divine Lawgiver, whose blessings are multiplied by the 
 economy and distribution of the elements. Winter 
 comes to the fortunate, a period of repose The over- 
 flowing fulness of summer and autumn muniiicently 
 till the farm-yards and granaries with human food. The 
 emporiums of trade teem with clothing and luxury, 
 while the season of storms advances in her cycle, like a 
 lusty and capricious bride laden with the gifts of divine 
 benificence, and bearing the costly presents of thrifty 
 industry to make a jubilee in each returning year. Con- 
 vulsions in trade reverse the laws of order, and overwhelm 
 society with destitution and ruin amidst the means of 
 limitless abundance. 
 
 Although it has been allowed argumentatively that the 
 balance of foreign exchange is thrown from adjustment 
 by the increase of prices consequent upon bank issues, 
 such is not the practical cause. Prices may remain un- 
 affected and yet the balance will become adverse. An 
 enlargement of discounts generally takes place after a 
 season of interruption, multiplying transactions, rather 
 than increasing prices. As the demand for labor rises 
 the general means of consumption enlarge. Imports in- 
 crease to meet the demands of consumption. No rise in 
 domestic products may take place. The issues of notes 
 may be absorbed without any manifest alteration of 
 price. Consumption increasing in one nation more 
 rapidly than in another the balance of exchange is thrown 
 against the more prosperous community. Gold is then 
 required for adjustment. If imports increased in price 
 proportionately to the adverse rate of exchange, exports 
 would be encouraged and adjustment would take place 
 without the intervention of measures which operate 
 rather to limit consumption than operate upon prices. 
 
 To regulate foreign trade, and control the balance of 
 exchange, the industry of every civilized community is 
 from time to time prostrated, under the laws which now 
 
 M 
 
98 
 
 prevail. These laws seek to administer the principle that 
 coin is the hasis and medium of circulation. Coin^ on the 
 contrarj', became a subsidiary medium from the moment 
 that banking issues operated upon the interchanges of 
 foreign commerce. Ceasing to be a basis coin ought to 
 have been dealt with as Sl commodity and charged for ac- 
 cording to its price when required for the adjustment of 
 trade. Bank issues having become the basis w^ould thus 
 have remained undisturbed, facilitating and extending 
 domestic industry. The progress of issues according to 
 the returns of the Bank of Engla7id Qxhihit the impolicy 
 and tampering which has taken place in the regulation 
 and discounts of that institution. 
 
 Year. Circulation. Gold. 
 
 nT8 X7,440,000 jC2,000,000 
 
 1779 9,012,000 3,711,000 
 
 1780 8,410,000 13,581,000 
 
 First reduction of bank issues to regulate foreign exchange, 1784. 
 
 1785 5,923,090 2,740,820 
 
 1790 10,040,540 8,633,000 
 
 1795 14,017,510 6,127,120 
 
 Cash payments suspended in 1797, by order in council, and issue of 
 
 one pound notes. 
 
 1800 16,844,480 6,144,250 
 
 ISO,*} 17,871,170 5,883,800 
 
 1810 21,019,600 3,501,410 
 
 1815 27,261,050 2,036,910 
 
 Cash payments restored 1819 — notes of one pound sterling withdrawn. 
 
 1820 23.484,410 4,911,060 
 
 1823 18.392,240 10.384.230 
 
 1825 20,753,780 3,769,100 
 
 Re-issue of one pound notes in 1825, to save the nation from general 
 
 bankruptcy. 
 
 1830 20,050,730 9,161,000 
 
 1835 17,100,500 6,726,000 
 
 1840 15,797,000 3,244,000 
 
 Temporary suspension of the bank charter, by order in council 1847. 
 
 1850 18,825,904 15,944,813 
 
 1855 17,900,000 10,532,494 
 
 In 1784 the Bank of England reduced its circulation 
 from 9 millions sterling to 6 millions to restore the gold 
 flowing from her vaults. So insupportable was this mea- 
 sure on the productive interests of the country that 
 
99 
 
 the Diinisters were compelled to release tlie bank from the 
 strict administration of its charter. A second restric- 
 tion was found necessary to prevent the efflux of gold in 
 1793. Mercantile ruin and the suspension of employ- 
 ment throughout the manufacturing districts alarmed 
 the British Government — revolution in France and an 
 inevitable war were pending. Destitution and defection 
 were not the elements to carry the nation through a 
 crisis which threatened the subversion of immemorial 
 and established rights. The ministers in council 
 decided promptly that 5 7mUions sterling of Exchequer 
 Bills should be discounted to the merchants of Lon- 
 don to substitute the bank money which had been with- 
 drawn. Accommodation was to be advanced liberally 
 and without very strict inquiry into the security of the 
 applicants. Only S millions and a-half were applied for. 
 Every merchant and tradesman witnessed with satisfac- 
 tion the solicitude of the state. Confidence was con- 
 firmed and the operatives resumed employment. 
 
 A¥ithin a very short time the whole amount taken up 
 was honorably repaid. On the authority of Mr. Thorn- 
 ton, at the time a member of the British Parliament 
 the entire sum was collected. \ti 1797 it was found ne- 
 cessary again to curtail circulation to preserve the gold. 
 An order in council directed the suspension of the obli- 
 gation of the bank to discount gold on demand for its 
 notes. This order was judiciously accompanied with a 
 measure of moral importance that displayed the eminent 
 statesmanship which at that period guided the councils 
 of Great Britain. It was ordered that a document should 
 be submitted for signature to the merchants of London 
 for approval of the act. Ihousands appended their 
 names thus endorsing the sagacity of the measure and 
 the solvency of the bank of England. To prevent alarm 
 among the operatives, the middle classes circulated 
 at first, the one pound notes issued, only in their trans- 
 actions w^ith each other 
 
 An attempt was made in 1810 to restore the payment 
 of the notes on demand^ but the oppression on trade was 
 so severe that the government had again to relinquish 
 the measure and advance the use ot Exchequer Bills. 
 After the close of the I^apoleonic war the British Govern- 
 ment finally resolved on the restoration of the traditional 
 
too 
 
 standard of weight in the coin of the country. In ISW 
 the act was carried into effect. It had been hypotheti- 
 cally ur^-ed by Dr. Adam Smitli that iiotes hes^ring a de- 
 no77iination of not less than £5 sterling, might be circu- 
 lated without disturbing the value of the gold. Guineas 
 and half-guineas being the highest denomination of coin, 
 it was inferred that notes of five pounds bearing the de- 
 nomination of nearly five times the denomination of 
 the first, and ten times that of the second, would not 
 be affected. 
 
 The new statute altering the practice of issue and dis- 
 count which had prevailed in the Bank of England for 
 twenty years of war and of extraordinary financial expen- 
 diture, contained two organic provisions abrogating en- 
 tirely the the Banking management of that period. First 
 enforcing i^pon the bank tlie payment ©n demand of its 
 notes at 33 per cent, more gold than the value which 
 they bore in current and commercial use. Secondly the 
 extinction of all notes of less denomination than £5. An 
 act of national injustice was thus aggravated by the ac- 
 companiment of a financial experiment. To the reduc- 
 tion of prices from 50 to 60 per cent., was added the 
 difticulty of obtaining money of a denomination suitable 
 for the payment of wages and the innumerable transac- 
 tions ol one^ two^ three and four pounds sterling. 
 
 Instead of a well distributed discountage of notes by 
 citizens of substantial means, such as had originated 
 these invaluable accomodations to the interests of trade, 
 we find the incapacity of regulating beneficially their dis- 
 countage by legislative direction. Commercial enter- 
 prises, stimulated at one time by excessive issues to un- 
 dertake the most gigantic pj'ojects, are suddenly arrest- 
 ed by the curtailment of discounts and overw^helmed 
 with ruin. The accumulations which are invested and 
 the industry expended to render the investments profit- 
 able disappear in the convulsive execution of statutes 
 which have made economical theories j>aramount to hu- 
 man interest. 
 
 Taking the oscillations of bank issue as subjoined, 
 it is evident that corresponding revolutions in trade 
 must have })rostrated both individual and national Yfi- 
 sources to an extent beyond the power of statistical " =*- 
 search : — 
 
1(11 ^ 
 
 BANK OF ENGLAND CIRCULATION IN 
 1779 JE:9,013,610 
 
 1784 
 
 6,202,760 
 
 1795 
 
 14,017,510 
 
 1797 
 
 9,674,780 
 
 1800 
 
 16,844,470 
 
 1815 
 
 27,261,650 
 
 1825 
 
 19,092,095 
 
 1840 
 
 15,797,000 
 
 Circulation seems to have touched the lowest point in 
 1840. The enforcement of similar principles in the United 
 States have been attended with similar consequences. 
 Taxation not being over one-fifth of that of Britain, and 
 the public lands being open to the people, oscillations in 
 bank issues have not been attended with the same extent 
 of misery and interruption. There is besides, a progress 
 in the extensive discountage of money more conformable 
 to the interests and requirements of the people, than to 
 the theoretical basis embodied in the statutes upon which 
 the charters are conceded. 
 
 Year. 
 
 No. Banks U. States. 
 
 Circulation, 
 
 1790 
 
 4 
 
 $2,500,000 
 
 1800 
 
 28 
 
 10,500,000 
 
 1810 
 
 89 
 
 28,000,000 
 
 1820 
 
 308 
 
 44,800,000 
 
 1830 
 
 329 
 
 61,000,000 
 
 1840 
 
 907 
 
 107,000,000 
 
 1843 
 
 607 
 
 58,000,000 
 
 1846 
 
 720 
 
 90,000,000 
 
 1850 
 
 824 
 
 105,000,000 
 
 1854 
 
 1208 
 
 131,000,000 
 
 1855 
 
 1306 
 
 204,000,000' 
 
 It is computed by the latest returns, that the total 
 value of property in the States is 8000 miUio7is of dol- 
 lars. There is upon this estimate a cii'Giilation of 1 
 million of bank issue to 40 millions dollars of productive 
 property. ^ To conduct the operations of this immense 
 capital efficiently and profitably, a discountage of not 
 less than 1,000 millions of dollars of bank accommoda- 
 
102 
 
 tion would probably be requisite. Every transaction 
 might thus be done in cash, instead of the vast and 
 dangerous extent of credit which is required to render 
 this capital advantageous. Such an issue could not take 
 place under the existing statutes without an unlimited 
 depreciation, as the standard bears no natural or perma- 
 nent relation either to the value of products or national 
 resources. 
 
 CHAPTER XIL 
 
 A STANDARD OF VALUE. ITS DISTINCTION FEOM A DENOMINA- 
 
 TOK OF VALUE. 
 
 Every product bearing an established value or price — 
 is a standard of value. Standard implies something de- 
 terminate. Commodities the least subject to fluctuate 
 are, of course, the most suitable for this purpose. The 
 relative value of 3i product to itself at different periods, 
 and its relative value to other products being uniform 
 and determinate, render it a reliable measure to estimate 
 the value of all other commodities, and compute jnstly 
 the claims and obligations contracted amongst men in 
 their industrial relations. Yet a product, though capable 
 of fulfilling the functions of a denominator of value, and 
 a determinator of the equity of debt, it could not under 
 the nature of economical law, become a proper instru- 
 ment to exchange the multiplying products of labor, or 
 to cancel the increasing liabilities of civilized commu- 
 nities. 
 
 An ounce of silver and a bushel of wheat exchange 
 upon an average of years, and are, therefore, equivalents. 
 These commodities having an established and deter- 
 minate relation of exchangeable value, are standards by 
 which other commodities can be measured with accuracy. 
 A mortgage of one hundred years standing could equit- 
 ably be estimated and canceled by expressing the claim 
 in equal figures. Payment of one thousand ounces of 
 silver, or one thousand bushels of grain in an average 
 year would be equally just, and of full satisfaction. 
 It might be more convenient to receive silver than grain, 
 but not more equitable. If one thousand certificates, or 
 
103 
 
 one certificate denominating the numerical value were 
 given in payment, it might be more convenient to both 
 debtor and creditor, and not less equitable. 
 
 Silver is a more suitable standard than grain, as its 
 current value is more uniform, though not more deter- 
 minate. The price of grain rises and falls according to 
 the nature of the seasons. A bushel of grain when dear 
 has cost no more labor — nor a bushel when cheap has 
 cost no less labor than would be expended when the 
 production was an average. The same labor is bestowed 
 when the yield is bad, as when the yield is good. In grain 
 the result differs each year, though not on an average 
 of years. In silver the result does not differ. The same 
 expenditure of labor will produce the same yield of 
 metal, and the price, therefore, seldom, and in a small 
 degree, ever changes. 
 
 It is also costly to store grain when very cheap, so as 
 to preserve it for a subsequent year, and better prices. 
 There is no cost in the preservation of silver. The total 
 product of grain each year is the total consumption of 
 each year, either by the greater consumption in bread, 
 or by employing it in the feeding of cattle, and thereby 
 increasing the product of animal food. The extreme 
 fluctuation in the price of grain is, however, more inci- 
 dental than natural. Should the condition of society 
 ever afford a greater means of accumulation amongst 
 the farmers the cost of preserving the product of super- 
 abundant years, and thus carrying forward the balance 
 would give a uniformity to prices which their present 
 necessities render impossible. In such a case, instead 
 of diverting the surplus to the feeding of cattle, and, 
 thereby cheapening their animal stock probably in as 
 great a degree as they calculated, to compensate them- 
 selves for the low price of the grain, they would limit 
 their next year's investment in that article, and expend 
 proportionately more labor upon the production of those 
 articles which prospectively would command a better 
 return. 
 
 ]^otwithstanding these considerations, grain does not 
 appear to constitute so certain and equable a standard of 
 value as the useful and precious metals. To construct 
 a determinate and uniform standard of value, several 
 products must be employed. Taking gold, silver, copper 
 
5iiid iron each as a unitary value, and the others as rela- 
 tive values to them, the denominative capacities of such a 
 standard vvould render the operations of exchange as 
 definite in their laws as the most exact branches of sci- 
 ence. A properly authorized legal warrant or instrument 
 bearing the insoription of value of these commodities, 
 and expressing its own denomination would fulfil the 
 multiplying functions of money with a degree of accu- 
 racv and amplitude which no commodity conld perform. 
 Under statute authority the issues of such warrants by 
 banking corporations w^ould not afi'ect their value, as the 
 discountage w^ouid be regulated by the public require- 
 ments, and not by the decision of bank directors, or re- 
 straints of law. 
 
 Money is a legal and conventional capacity. The in- 
 strument may be copper, or gold, or silver ov pajper^ 
 as the law shall determine and direct. It may denomi- 
 native or intrinsic. It may be a tohen of value or an equi- 
 valent of value. The exigencies of the state and the re- 
 quirements of a community are the purposes for which 
 money is instituted, and that quality of money which is 
 the most convenient to the uses of a people is the most 
 politic and beneficial to their interests. To employ a 
 product of value as an instrument of exchange is not 
 buying and selling but bartering. The law in directing 
 that gold or silver should be specially and the only legal 
 instruments to cancel debt, shuts out a thousand means 
 by which men could employ the accommodation of a more 
 convenient and extended process of barter. The difiiculty 
 to obtain gold and silver for the enlarging operations of 
 business called forth the inventive skill of the trader. 
 Merchants introduced the use of hills bearing the denom- 
 ination and acknowledgement of a liability. Notes of 
 of exchange suggested a new principle of money which 
 performed ail the offices of circulation the same as coin. 
 
 The basis of charters imposed upon the banks, and 
 now impose, obligations which can not be discharged 
 without periodically destroying the innumerable inte- 
 rests that haverisen upon the foundation of their liabi- 
 lities and discounts. A review of the history of com- 
 merce since the introduction of hanhs is a continued se- 
 ries of speculative expansions and ruin-ous contractions, 
 in as much as it is the inherent quality of the charters 
 
105 
 
 wliicli regulate bank issues that sucli consequences must 
 follow. The art of modern statesmanship has been 
 employed with remarkable success in sheltering the 
 financial blunders of legislation on this subject hj ascri- 
 bing the organic defect of the law to the imprudence, 
 avarice, and dishonesty of commercial enterprise. The 
 victims of legislative error are charged upon each re- 
 curring financial catastrophe with the authorship of their 
 own misfortunes. Popular ignorance sustains the incul- 
 cations of this strange philosophy, and every man who 
 is dashed to the earth attributes his ruin to liis own mis- 
 adventures, or to his equally ruined and prostrate neigh- 
 bor, through whom he may have suffered some imme- 
 diate loss. 
 
 Notes issned under the existing law of circulation are 
 the representative of gold in Britain, or silver in the 
 United States^ France^ Germany^ and Russia. A scarc- 
 ity of gold or silver^ therefore^ occasions a scarcity of 
 notes. These notes are legal auxiliaries to the precious 
 metals widening the area of national and individual in- 
 dnstry by affording an amount of accommodation which 
 the commodities they represent could not. But they fail 
 in the essential quality of money npon the same principle 
 that gold and silver fail to fullfil the functions of money. 
 These notes do not reptresent the national capital. Gold 
 and silver coin represent their ovsai aggregate valne, but 
 bear no relative and requisite pi'oportion to the aggregate 
 capital of a community. Every addition to capital re- 
 quires the ample use of money to keep it in profitable 
 employment. 
 
 Limiting the price of gold and silver discourages its 
 production — limiting the issue of notes to represent the 
 limited product of these commodities, carries forward 
 the principle of insufiiciency — for which notes were in- 
 troduced to remedy. Bartering all commodities into 
 gold and silver obstructs trade and production. It is 
 a modification of common barter. Highly civilized com- 
 munities suffer loss to an extent indescribable by the em- 
 ployment of the two commodities specified for the limit- 
 less purposes of commercial exchange. To barter grain 
 for gold, iron for gold, wool for gold, copper, lead and tin 
 for gold, cattle for gold, houses for gold, ships for gold, 
 land for gold, and to decree by statute that no other 
 
 N 
 
10(] 
 
 conimoditT can cancel taxes, rents, interest, and debt, 
 is a tiat against linnian progress. The eftbrta of in- 
 dustry are discouraged and limited by the impossibil- 
 ity of exchanging into these most scarce products the in- 
 computable wealth and property which otherwise would 
 tlow from the fountains of science and labor — nniltiply- 
 ing indeiinitely by the irrestrainable increase of popu- 
 lousness in all nations. 
 
 The ingenuity of the trader in employing notes ^ ex- 
 hibited the resources of man to disenthral himself from 
 the impediments which arrest his onward destiny. Leg- 
 islative interference soon, however, diverted these salu- 
 tarv facilities into channels which have rendered them 
 ruinous to mercantile enterprise, and destructive of se- 
 curity in the pursuits of trade. Wotes should have mul- 
 tiplied with the accumulations of capital. Men of the 
 greatest probity and substance would have supplied to 
 the community an amount of accommodation suitable 
 to the wants of trade, and consistent with their safety 
 as discounting merchants. 
 
 Limiting bank discounts by statute, also gave a mon- 
 opolv to some in the exercise of accommodation, which 
 ougl'it to have been a common immunity. It has given 
 exceptional advantages to one class over another. It 
 has added to the opulence of one class by the impover- 
 ishment of a larger cluss. The most useful continue the 
 poorest. The richest exercise the most ample and ex- 
 clusive accommodation. Trading immunities are thus 
 usurped, and the fruits of industry absorbed, by legal 
 restrictions which increase the power of the strong in- 
 stead of facilitating the etforts of every class of capital- 
 ists. Employment has been enlarged, nations have be- 
 come more populous, and the rich more numerous, but 
 the condition of the multitude is less secure, and their life 
 not less miserable by the irregularities of employment, 
 and their aggregation in large cities. 
 
 To rendei-^ bank discountages equal to the wants of 
 trade, and the notes whicli might be issued secure in 
 their current value, a new basis is necessary upon which 
 money should be produced. A uniform quantity of la- 
 bor producing a determinate quantity of the metals — this 
 class of products appears to constitute the most certain 
 standard of vcdue. It is also the most easily understood. 
 
107 
 
 and as raw products the least subject of complication in 
 qualities. There are no first, second and third qualities 
 of gold and silver — very little in copper, and as nearly 
 all countries produce iron^ the quality and standard price 
 of that commodity are as definite in each nation as the 
 value of gold. 
 
 The legal price of gold in Britain is £46 148. 6d. Tak- 
 ing the round numbers. 
 
 Of gold, per pound, troy- - - £46 
 
 Of silver, " 3 
 
 Of copper, per ton, - - > - 100 
 
 Of pig iron, '' - - - - - 5 
 
 Bank notes hearing the inscription and issued to sustain 
 this table of current value, would constitute, in the 
 hand of the holder, a commercial warrant, the denom- 
 inative value of which, being as definite as if he held its 
 equivalent in gold or silver. E^o depreciation could, 
 by possibility, occur. Adding to the above security 
 that state, or public stock, to the entire amount of 
 issue granted by charter, be deposited in the public 
 treasury, guaranteeing the public against loss, should 
 the issuers suspend business — the value of the instrument 
 would not be affected, since its redemption would be 
 amply provided for. It would thus constitute a title- 
 deed, equal to a deed of any property. Mr. Anderson 
 in a pamphlet of considerable ability published, in 1849, 
 very correctly defines a well secured /i{?^6 as a '^circu- 
 lating title deed. 
 
 A change in the value of any one standard jpro- 
 ducty or even in two oi three would in no manner disturb 
 the definite nature of money. Such an extraordinary 
 occurrence could not simultaneously take place, yet the 
 provisions made to test and preserve the standard^ place 
 the current capacity of the hanfcwarroMts beyond danger. 
 Bank notes or warrants based upon full security de- 
 posited, and bearing the expression of current value in 
 four important products ought to be issued without legal 
 limit. Issues should be regulated by the amount which 
 the banks could discount, and the amounts discounted 
 would depend upon the amount of products to absorb 
 money at the definite and determinate prices. Trades- 
 men and merchants are the best judges how much money 
 
108 
 
 they can employ profitably. The security exacted from 
 the banks would cause the banks to exact ample secu- 
 rity from their customers. But to limit discountages 
 when abundant security is tendered and the require- 
 ments of business demand their accommodation is un- 
 warrantably detrimental to the welfare of a people. 
 
 The right and use of banking privileges cannot be too 
 broadly exercised. Inasmuch as large and overgrown 
 corporations do not afford those numerous accommoda- 
 tions which are the most serviceable to the interests of in- 
 dustry. This is manifest from the large increase of busi- 
 ness which has recently taken place in the discount banks 
 of London. It is the multiplicity of discounts and not the 
 largeness of the sums wliich constitute the advantages 
 of Banks. The number of tradesmen and merchants, 
 with moderate capacity, who have for some years been 
 doing a fair business, have employed the accommodation 
 afforded by these banks so usefully that the discount 
 business ot the Bank of England has for some time de- 
 clined though the trade of London has greatly increased. 
 In the United States there have been, for several years, 
 an annual increase of the number of banks, all of which 
 are banks of issue which distribute their discounts with 
 great advantage to the rising industry of every dis- 
 trict. 
 
 The following specimens of notes which have been 
 termed hanh warrants to express their security will 
 convey the views which have been here set forth. These 
 instruments, it is also implied, would be legal tenders 
 in satisfaction of private debt and public revenue. The 
 standard thus embracing foiir elements of current value 
 would guarrantee the public against all possible in- 
 convenience in the events of any of the products 
 specified declining. Supposing either gold or silver de- 
 clined in price, the copper andiron would sustain the de- 
 terminate character of a standard. If gold sunk from four 
 pounds sterling per ounce to three pounds, depreciation 
 would be estimated by the ^products which had under- 
 gone no change. Whenever gold and silver had re- 
 alized their lowest point the standard would be adapted 
 accordingly, the new prices being inserted. 
 
. / 
 
(m^W&IF'JL([M7D€(W 
 
 f Charfer qrani\ 
 
 ntmX^ <^ 
 
 (^ 
 
 L^WFW 
 
 
 WABiiANJT 
 
 OF ONE HUNDRED P 
 
 STAMMRD OF CURBENT VALUE 
 
 PiTice Cnmmt of Silrerjiej^ Found iroy _£ S 
 
 Gold 46 
 
 Iir>n per Ton avoirdupois 5 
 
 Ccppej^ _ 100 
 
 t^y t/'.^r^y.^^^^ 
 
 ^' 
 
 Sprri^/i 
 
 m 
 
 'dWMEWTdmM: 
 
 Chaiiejgjanted J 
 
 AirK©^€< 
 
 ^'^^kkm/^/i^M^t 
 
 7 
 
 waaRrant of one HU NDRI 
 
 standjLrd of current value 
 
 Price Currenl cf Silvcrpei^Poiindtroy 5 IS 
 
 Geld 25€ 
 
 Ironperion avcirdnpois '?/5^ 
 
 Ccfpper 3(W 
 
nen ^ JTJ. 
 
 annajyl^AniSST J 
 
 oMmmmrsm^MSi. 
 
 INDS STERLING £100 WABIANT 
 
 SECmiTY^avit ISSUE 
 Issue £ 250,000 
 
 OfVia^tl deposit 
 
 FVBLTC STOCKS £^50,000 
 
 '^X^^-^^fe-z. : 
 
 . ^ :^.^ 
 
 jmwwAMiriwmBi. 
 
 aryl?^A.l).1857.J 
 
 >MM]SB,CE. 
 
 '%^^^^' 
 
 y / %hM^ 
 
 mOLLARS $100 WAlRiANT 
 
 SECUBITl^A^D ISSUE 
 
 Issue $200,000 
 OfHcial dqwsif 
 
 of 
 
 STATE STOCKS $200,000 
 
 j^/i^ 
 
 '/■ 
 
 :>/:/:,j^/i^^i . 
 
' 109 
 
 There is not a village of a lew thonsand inhabitants hi 
 the United States, but have a bank of issue. Small suras 
 were at one period discounted generally by the Scotch 
 banks. They also made loans for agricultural improve- 
 ments covering a series of years hi their redemption. 
 Small tradesmen could obtain discounts of sums as low 
 as ten or twenty pounds sterling, upon the endorsement 
 of one of their own class. This form of security was 
 called 'cation,' probably from the word caution. The dis- 
 countages of the Scottish banks seem originally to have 
 been regulated by little regard to their reserves of gold. 
 Directors were men of well-known character. Substan- 
 tial in their means and of undoubted security. A due 
 consideration of the current price of products, and pru- 
 dence in the sums discounted, were evidently the rules 
 upon which their banking business was conducted. 
 
 During the suspension of cash payments, the Bank 
 of England seems to have been guided by similar prin- 
 ciples. One of the directors of the bank when examined 
 by a secret committee of the House of Lords said, in re- 
 ply to a question, requiring an explanation on what 
 principles the directors acted while the law was sus- 
 pended, replied — "we invariably advanced accommoda- 
 tion according to the security and requirement of the 
 commercial house." The guarded and prudent manage- 
 ment of the bank were certainly better guarantees 
 to the public interests and commerce of the country 
 than anything which has been witnessed under legisla- 
 tive control. There was, however, great danger in the- 
 rule which guided the bank, yet the administration of 
 this principle seems to have obviated any of the evils 
 which might have resulted. 
 
 Issues based upon the current price of products, and 
 discounted to any amount which may be required by 
 the community, secure the current value of the notes 
 against every possible cause oi dej/recicdion or apprecia- 
 tion. Issues based upon estate operate to enlarge the 
 market price of such property, and thereby the notes 
 represent a value which they themselves may have pro- 
 duced, as in the case of the assignats of France. Estate 
 under these circumstances represents the value of the 
 notes, instead of the notes representing the value of es- 
 tate. Laud is not a product of labor and, therefore, cannot 
 
110 
 
 express its own value. Its value is determined by the 
 quantity of value which labor can produce from it. 
 Issues based upon a commodity, as gold or silver, fluc- 
 tuate with their supply and demand, exciting or arresting 
 national industry according to the accidental increase or 
 decrease of such in the hands of the issuers. Notes 
 thus represent the quantity of a commodity and not the 
 value of it. Hence issues based upon current value as 
 proposed in this chapter, would represent the current 
 quantity and value of every product resulting from the 
 labor of a community and entered in the market of com- 
 mercial circulation. 
 
 CHAPTER XIII. 
 
 FOREIGN COMMEECE ITS PRINCIPLES DISTINCT FROM DOMES- 
 TIG TRADE. INTERNATIONAL STANDARD OF VALUE. 
 
 The interchange of products between nations arises 
 from the natural advantages which one country com- 
 mands to supply certain wants of another at less cost than 
 it can supply the required products itself. It is governed 
 by distinct laws and a distinct economy. One nation 
 buys commodities from another, and pays them with 
 other commodities. Money does not cancel the pur- 
 chases on either side. The coins of diflerent nations are 
 weighed and assayed, and thus reduced to metal. They 
 are used for computing value but in a very limited de- 
 gree for the caiicelment of transactions. Foreign com- 
 merce is international barter. 
 
 To facilitate exchange, all modern nations have two 
 classes of merchants — exporters and importei's. The first 
 sell but do not buy — the second buy but do not selL 
 The process of exchange is indirect, and, therefore, re- 
 quires the intervention of a standard of value^ to make 
 the language of commerce intelligible between nations. 
 The quantity of gold or silver which express the com- 
 modities exchanged is never exchanged — it is merely 
 the balances which are transferred. Even these are sel- 
 dom necessary, and never to a great amount, compared 
 to national wealth, as the cost of bills rises against the 
 
Ill 
 
 nation wliich claims, and discourages imports, while the 
 debtor nation obtaining cheaper bills to settle demands 
 are encouraged in exports. 
 
 Tavo laws, therefore, operate to adjust the balances of 
 exchange, without the actual exportatior^or employment 
 of gold or silver bullion. It is only when the balance 
 is important that raetals are required for adjustment, and 
 if the metals were left to find their market value under 
 such circumstances there would be no difiiculty and 
 less bullion required. If hullion rose according to de- 
 Tnand^ the hills of exchange would rise in a higher de- 
 gree. It is chea23er to transfer a hill than to export gold 
 or silver in payment of claim. If the price of gold or 
 silver cannot rise under the statutes of each nation, then 
 hills of exchange cannot rise over a definite rate. 
 
 Taking freightage, insurance, and incidental expenses 
 in transferring one hundred ounces of gold from E^ew 
 York to Liverpool, at 8 per cent., then a bill of its value, 
 with 8 per cent, added, would be as cheap to the im- 
 porter. It would also be much more convenient. When 
 he cannot obtain a bill on 'Change at something near 
 that value, say 108 or 109 it is cheaper to present the 
 notes he holds at the bank counter and demand gold. K 
 the drain of gold occasioned a rise in price whatever was 
 added to the gold or silver would be added to bills of ex- 
 change. Whenever the importers found the rate of ex- 
 change ascend to a point which virtually deprived them 
 of profit they would suspend importing. Exporters on 
 the contrary, the greater the premium tliej could obtain 
 on the bill which represented the opposite nation a 
 debtor, they could sell cheaper and, therefore'export with 
 more spirit. 
 
 During the period that the laws relating to the price 
 of gold were suspended in England, the adjustment of 
 foreign exchange was aftected upon this principle. The 
 balance of trade was permanently against Britain 
 throughout the long and critical term, in which she was 
 engaged in the French war. The increased expenditure 
 made to sustain the military operations of the British 
 army on the Continent, and to secure by subsidy the co- 
 operation of her allies, compelled the government 
 to enter the commercial market and buy up foreign bills. 
 As both the agents of the government and the importing 
 
112 
 
 merchants competed, the rate of exchange must have 
 ruled very high. Bills bought by the government were 
 forwarded to the commissariat of the army and cashed 
 by the Continental merchants who had made purchases 
 of British manufactures. The importing merchant, find- 
 ing he had to pay so high a rate for his bill would add 
 the amount to the articles he imported and exact it 
 from the consumer. Exporters on the other hand, could 
 frequently sell goods cheaper than they could be manu- 
 factured, since they were compensated by the price which 
 their bills would command on 'Change. 
 
 In 1800 exports exceeded imports 7 millions sterl- 
 ing. In 1803 10 millions. In 1814 20 7nillions sterling. 
 In 1815 they amounted to 24 millions sterling. High 
 prices in Britain did not interrupt the natural opera- 
 tion of foreign exchange in selling at low prices 
 to other nations. Every commodity v/ as left to find its 
 own value. The higher the value of gold and silver in 
 England the lower were the prices at which she could 
 sell in the foreign market. The high prices of the pre- 
 cious metals added to the extra demand for foreign bills 
 and gave encouragelnent to the export trade which en- 
 abled the British ministers to command the entire agency 
 of gold and silver on the continent. 
 
 To obviate the confusion incident to various coins cur- 
 rent in dift'erent nations a universal standai'd of value 
 might be introduced without changing either the habits 
 or language employed by the respective merchants. 
 
 The British pound sterling is 123 grains of gold. 
 The dollar of America is 412| grains of silver. 
 
 The Franc of France is 72 grains of silver. 
 
 These standards are necessarily fixed in the opera- 
 tions of domestic trade where they rule, and where 
 such an immense interest depends upon their inviolabi- 
 lity. There being no commercial debts between nations 
 except what arises from the consideration of distance or 
 accommodation, neither are there any permanent liabili- 
 ties. The institution of a universal standard appears ad- 
 visable. The livre of France is not well adapted, it is too 
 reduced. The dollar of the United States is better, as it 
 contains a greater degree of value. The pound of Britain 
 
113 
 
 is of large denomination, and ill adapted from its con- 
 ventionality. Simplicity in commercial calculation is 
 of high importance. Prospectively estimating the in- 
 crease of commerce between nations, it is probable that 
 a standard of unity, and of considerable value should 
 prevail. 
 
 Let us take 100 grains of gold as the mercantile stan- 
 dard of all nations. 
 
 For Britain divided as follows : 
 
 10 tenths - - 1 penny, 
 
 10 pennies - - 1 shilling, 
 
 10 bhillings - - 1 pound mercantile, 
 
 Por the United States : 
 
 10 tenths - - 1 cent, 
 
 10 cents - - - 1 dime, 
 
 10 dimes - - 1 dollar mercantile. 
 
 For France : 
 
 10 tenths - - 1 centime, 
 
 10 centimes - - 1 franc, 
 
 10 francs - - 1 livre mercantile. 
 
 The minute fraction of the mercantile pounds dollar 
 and livre would be the tenth part of one grain of gold, 
 or equivalent to one and a-half grains of silver. The 
 mill or thousandth of the United States is about one- 
 half grain, and \hQ farthing of Britain about 2 grains of 
 silver. For commercial computation the fraction of the 
 mercantile standard would, there can be little doubt, 
 sufficiently perform all transactions of buying, selling 
 and estimating the most minute values. This standard 
 might become the universal language of the merchants 
 of all nations. Instead of translating the coins of other 
 countries into the coins of each respective country, 
 the merchants would merely translate the universal 
 standard into the peculiar language of his own people. 
 The value of the mercantile standard would rise or fall 
 according to the rate of exchange — such would only 
 be th6 business of the merchant to understand. On 
 the contrary the standard of domestic value would re- 
 main fixed and determinate. 
 o 
 
114 
 
 Gold and silver when used for domestic exchange are 
 reqiiired^ in actual quantities to be exchanged into the 
 commodities transferred Ihese metals as they appreciate 
 or depreciate, wrong the debtor or creditor. With 
 the merchant they appreciate or depreciate without in- 
 cuning loss, for thougli he buys and sells by a metallic 
 measure he pays his debts in produce or bills, or when 
 he does pay in gold, he has previously been compen- 
 sated by the rate <»f exchange. He cannot therefore be 
 wronged. Xations can measure domestic value in notes 
 because the value of these notes can be regulated and 
 understood between the citizens. Between nations, 
 these notes, having no value in themselves, and their 
 exchangeable value being only current in the country 
 which issues them, they cannot be used for interna- 
 tional exchange, and it is this superiority in noteSj 
 which enables a nation to pursue its domestic indus- 
 try uninterrupted by the balance of foreign trade. It 
 is, however, important that the merchants of each 
 nation should have a fixed measure to estimate and 
 enable others to estimate the values which are to be 
 exchanged. 
 
 The two great departments of national exchange, home 
 and foreign, operating in harmony with the extension of 
 domestic production, would extend foreign trade in a 
 legitimate and beneficial ratio with national progress. 
 Foreign commerce properly separated from the domes- 
 tic would maintain a power of rectification in the inter- 
 exchanges with other nations, which cannot exist while 
 the measure of value in the two great divisions of trade 
 is of the same character. The accumulation of liabilities 
 is a social institution which does not belong to commerce. 
 Conventional money is therefore a measure of liability as 
 well as a measure of value, and the permanent and 
 multiplying liabilities between the citizens of a common- 
 wealth render any alteration of the value of money a 
 source of incalculable wrong and misery. Commercially 
 gold may fluctuate, and permanently rise or sink in 
 value — neither the merchant or the nation would be in- 
 jured by the result. Bullion might rise in current value 
 by a large exportation, but the demand of some com- 
 moidities must previously have increased, and occasioned 
 large imports. The importer would, therefore, have 
 
115 
 
 ample compensation for the advanced price he paid either 
 tor bullion or bills 
 
 Gold is, however, seldom exported for commercial 
 purposes, except in the event of an extensive failure of 
 the crops. It then ought to rise in value to every do- 
 mestic product. It should only operate upon consump- 
 tion, instead of, as now, operating specially upon pro- 
 duction by curtailing discounts correlatively with the 
 rise of the necessaries of life. Under the present laws 
 of commerce bread may rise while no increase of price 
 will take place upon articles of luxury. The price of 
 imports generally should rise in some degree so that the 
 cost of luxuries would equally sustain the effects on ac- 
 count of the adverse state of exchange. The rich would 
 thus in some measure have to diminish the consumption 
 of foreign luxuries because of the costliness of the ne- 
 cessaries consumed by the community. Under such 
 circumstances the nation who claims the balance would 
 seize upon the the temporary cheapness of bills, and 
 make larger demands. The export of bullion would, 
 by this new impulse, be proportionately limited. 
 
 In the event of war it is essential that a state should 
 have a pro23er command over the precious metals. But 
 to enforce a medium of exchans^e of ffold and silver dur- 
 mg peace, to retain a provisional supjDly against the ex- 
 igency of war materially diminishes the command dur- 
 ing war, as such a medium restrains both the circulation 
 and production of wealth. A community is therefore 
 less rich in these commodities which can at all times 
 command gold and silver in exchange. During war the 
 price of gold rises with the demand for it. This rise 
 makes goods comparatively cheaper than those of other 
 nations. In other words the internal riches of a common- 
 wealth would enable a state to raise larger revenues 
 than less wealthy nations and the sacriiice to obtain gold 
 would be made with less difficultv. 
 
 If a state wants gold to sustain its armies, its agents 
 can go into the commercial market and buy up the bills 
 due by the nation most convenient to the seat of war, 
 as in the instance previously cited. The price of bills 
 are raised, and a large profit is obtained by the exporter, 
 who offers goods at proportionably lower prices to, the 
 foreigner, when he knows he can get a good price for the 
 
11^ 
 
 bills he obtains in exchange. In proportion as the "bills 
 rise, he can afford to sell goods for less. Competition 
 also steps in to share the advantages^ and reduces prices 
 to the remunerating standard. Products may thus be 
 sold to other nations for less than the cost of productiouy 
 while the merchant and producer realise their usual 
 profits. By this process the loss necessarily incurred to 
 command gold from the foreigner is indirectly paid by 
 the nation. The state becoming a competitor in the 
 market for foreign bills, the importing merchant has to 
 pay an advanced price to liquidate his foreign debts. 
 The price of foreign products rise proportionately, so that 
 the consumer has to pay higher prices, and this indirectly 
 compensates the exporter and manufacturer for the low 
 price he sells products to the foreigner. The command 
 of gold is therefore regulated by the resources of com- 
 Tnerce and the industry of a people. Foreign trade under 
 any circumstances, when left to the operation of the 
 natural laws of value, adjusts the balance of exchange 
 with the utmost order and precision. 
 
 Loans are seldom made between nations in money, '^or 
 are investments in foreign projects made in money. 
 When a loan is made to a foreign government by a 
 financier in London, he proceeds to buy up the hills of 
 exchange due by the merchants of the borrowing state. 
 The terms of his bargain enable him to give a good 
 price for the bills. The importing merchant abridges- 
 his orders for the products of such a country, since he 
 has so much difficulty to procure hills for the settlement 
 of his liabilities, and the more especially is he discour- 
 aged in making further purchases as the hills have risen 
 in price whilst his stock remains at the same market 
 value. 
 
 The exporting merchant, on the contrary, can sell his 
 bills promptly and at higher prices. He urges his cor- 
 respondents to increase their orders, and exports with 
 greater spirit. A loan to a foreign state by a large 
 financier is merely an order given to his 'correspondents 
 to collect a commercial debt from its own people. 
 Investments in all public enterprises are made in the 
 same manner. Imports are aiTcsted and exports are 
 stimulated during tlie transfer of the order. If the 
 terms of the loan are to be executed within a period so 
 
117 
 
 circumscribed that hills cannot be multiplied as ra- 
 pidly as may be required, then the balance is forwarded 
 in specie. Whenever the loan is consummated, exchange 
 resumes its ordinary equability. Investment in the do- 
 mestic enterprises of a foreign nation is a civil contract. 
 The transfer of dividends are, however, subject to the 
 rate of exchange. It is certainly a matter of weighty 
 concern with all nations to execute their great works 
 without foreign aid or incumbrance. Rising colonies 
 may profit by such advances, but independent commu- 
 nities resorting to those methods of finance subject 
 their industry to impediments which a judicious course 
 of policy might greatly obviate. 
 
 The ministers of foreign governments have found of 
 late, that lenders really did not send specie in ful- 
 filment of their loans, and that the amount being collected 
 from their ow^n people paralyzed their own commerce. 
 The little treasuries of the merchants w^ere emptied into 
 the state treasury instead of being transferred to other 
 merchants in the regular course of trade. Recently, 
 state contracts have therefore provided that one-half, 
 or more or less, should be paid in actual transfer of 
 specie. If foreign princes really wished to increase cir- 
 culation as well as meet the exigencies of deficient rev- 
 enue, were to contract their loans in several limited 
 sums by first stimulating exports, each sum to be trans- 
 ferred upon the closing of negociations they might render 
 great service to the industry of their people, and there- 
 by increase the internal sources of public revenue. As, 
 however, those who make loans operate throngh nations 
 commercially the most powerful, their influence over the 
 balances of exchange is frequently paramount, even to 
 commerce itself, or to the most skilful policy of a state. 
 
 CONCLUSION. 
 
 The principles urged throughout this work profoundly 
 interest all men, and the more especially in an age 
 when organic laws become essential to the conserva- 
 tion of order and progress. Society contracts a lia- 
 bility with every member wliich it calls into life. 
 The multitude in all civilized communities, who are 
 without possession, are the most dangerous to tl^e 
 
lis 
 
 safety of the state. Whether there is a demand for 
 their" labor or otherwise, it must provide for their 
 wants. To the wisdom of the state, therefore, apper- 
 tains the responsibility of rendering them subservient 
 to the general interest by removing the incidental 
 obstructions which arrest enterprise and employment. 
 If populousness does not add to the strength of a 
 commonwealth it will contribute to its weakness. 
 Full of aspiration and of urgent necessities — man be- 
 comes a tax on the resources of society, or an enemy to 
 its authority when it does not execute the incontestible 
 claims of his nature. The injunction is mutual and in- 
 capable of revocation — the state demands obedience, the 
 subject demands the right to employ his faculties without 
 the obstruction of inequitable laws. Otherwise compacts 
 become conspiracies and force substitutes justice. 
 Neither does success or opulence compensate for equity, 
 since all men are exposed to misfortune, and require the 
 inviolable guarantee and provision of industrial right to 
 mitigate the calamities of human adversity. 
 
 47 75 iii "I 
 
EEKATA. 
 
 Page 13, line S9, read "progress of art" for " progress art." 
 " 43, line 35, reud " thirty millions" for " twenty millions.^'" 
 " 63, lines 18 and 19, read "eight and six millions" for " teia 
 and eight." 
 
 Page 111, line 35, read ^^ with Britain" for " against,'^ 
 
Q 
 
 N 
 
mm/ ^^' -%. \ 
 
 A 
 
 ,^^ "*. 
 
 <". 
 
 
 ^ 
 
 ^■^ 
 
 '^^ ^o" ''^ ^ 
 
 ^^rS 
 
 ^^ 
 
 H^^ 
 
 .V 
 
 
 C. vP 
 
 .^ 
 
 4 9^ 
 
 ^ 
 
 ^op^ 
 
 ,^ ^'^'^ -^^ ^^^.^ J" \ ^y, 
 
 •^ 
 
 O 
 
 ♦^ 
 
 
 
 
 "b V 
 
 ^°-;^. 
 
 .^ 
 
 H<^^ 
 
 .^ 
 
 
 
 .^ 
 
 .f^ 
 
 ^^ 
 
 .^ 
 
 1-^ 
 
 <^' 
 
 ^ 
 
 .^ 
 
 
 A 
 
 ,f^ 
 
 
 .0 
 
 V 
 
 
 
 f^ 
 
 1-^v 
 
 'Jy^ 
 
 
 
 v> 
 
 .V 
 
 
 ^^-;^. 
 
 .^^ 
 
 V 
 
 
 > 
 
 
 <?> 
 
 

 
 ^°-^*. 
 
 <^„ 
 
 .^^^ 
 
 
 a5 ^.*v . 
 
 A 
 
 c" * 
 
 -^0 
 
 
 
 
 
 <^ S • * » 'tn 
 
 ■S^r 
 
 * ^^ ^^. 
 
 
 
 
 
 XJCT 74 
 
 ^^j^T" N. MANCHESTER, 
 
 
 '"^^ 'Mim: .v-'i,