CATECHISM ON THE CURRENCY. By the Author of the « Catechism on the Corn Laws.” THIRD EDITION. CONTAINING ADDITIONS. ‘THE PRINCIPAL NOVEL PASSAGES GINCE THE FIRST EDITION, ARE DISTINGUISHED DY BRAtxETS [ ]. LONDON: PUBLISHED BY EFFINGHAM WILSON, 11, ROYAL EXCHANGE. Printed by W. Cuowss & Bow, Stamford Street. Price : Or sent post-free to any part of the United Kingdom, on Sixpence being inclosed to the Publisher in a letter containing the address, 1848,PREFACE. ‘Tua principles supported in’ the following pages have been before the public for four-and- twenty years ; but what has been taken from such sources hts been what may be called rewritten, bby which at all events its dimensions have been considerably reduced. If there sometimes appears an unnecessary minuteness oa points which everybody thinks he knows, the conclusions in other parts will be found dependent on the establishment of these pre Liminatios. "As an instance, the consequences of a Paper Currency are entirely inferred, from what 4s assumed to bave been established in the easler case of Coins. ‘There is decidedly no popular, any more than royal road to the subject of Currency. Not that {tis after all, more complicated than many others, But it requires patience, with a determina- tion to begin at the beginning, and not to expect in the firt five lines the solution of theques tion ‘whether the Act of 1844 ought to be broken in upon. T. Perronet Thompson. Blackheath, London, 21 Jan. 1848. om A CATECHISM ON THE CURRENCY. 1. Waar do you mean by Cur- Answer. Anything which the inhabitants of a country are reney} {in the habit of handing from one to another asthe instrument of purchase or exchange. 2, What isthe earliest mention 4, In the 23rd chapter of Genesis, v, 16, where Abraham of currency? {is recorded to have purchased a fleld fora burying-place, with silver by weight. ‘And Abraham weighed to Ephron the ailver, four hundred shekels of silver, current with the merchant.” the characteristic pro- A. That they are what everybody is known to covet, on ty of the substances employed the ground thet though be may not want to use or consume currency in the early stages of them himelf, the persons can never be far off who will be society? glad to give him in the way of trade anything he doce want in exchange for them, either with a view to using or con- suming them themselves, or to sending them as merchandise to be used or consumed in some other place or country. Hlnes in various times and placa slvr by weghtgold-dt, bars of top, webs of cloth slaves orem, ‘uth ids, cra ata gpa been ood see acre” ve 4, At what rate would any sub- 4. Any man may know, who will take a bushel of corn stance, as for instance corn, be re- with him and try what he will got for it from his Butcher oF ceived as currency? his grocer. He will not get as much of their wares as they would be willing to give for a bushel of com in the corn- market, if they took their wares there to buy for the wants of their families. He will get only at the'reduced rate, which may be described as being what would be given by a desler who Duys to sell again, with a further full deduction for the trouble, expense, or risk, which might attend on sending it to such « dealer. Hence {t would be a misao to think, that if a bushel of cor, taken int the market as currency, would ‘bay an ell of cloth, an ell of cloth, taken in the ame manner ino the market; would buy a bushel of cora- Trwould bay Les; cach commodity in tare, ping ed 5. Who would furnish the sub- 4, Every man who found it more convenient to part with stances to be thus passed ata re- a portion of his commodities at this reduced rate, to go duced rate? ‘without what he wanted to purchase. Tt may bobervd ha the ln at one wich st be perptaly repented bec, tr he ance suena eurnetnt tig rc cielo the areal thet Re an a See aes Tecate &REiiay els ental the rece rae ny Sty lig Fe oe lignes ree n r ey ee en ae eae Terie ofa avenge Bay tative pay oe ony . 6, How would the substances so 4. Ifany man had more than he wanted to use as currency, ‘sed as curreney, be prevented from it would be his interest to stand in the market with them ever being too many? tus goods for sale, or send them to somebody who would. 7. What was the first great im- 4, ‘The first step has universally been, the almost total provement in currency ? abandonment of other substances in favour of the precious ° ‘metala by weight,so soon as the access to them was suffejent for the puspose. . ns, are evidently thls curry a a the J iy alin, cna ont etc Sealing emeatati by nae ana Fetes winis he compan of modus aod cou Ailsa waa fom pet "Thero aay always have been localities where from. ar cause other mbtancescontinacd to be 10 evil erent ues uo Adam im (och of Novon, 5. Ip Ch 6) reais a fob own ioe Dale ‘wore used as currency in a village in Bootland, But the main tact has always boon as slated. ‘Tr rasa for petersng the weight tad comple th durA Catechism on the Currency. 3 8. What was the next great im- | 4. Sosoon any sted and extensive governments were provement ? formed, it could not fail to be observed that much expense and trouble would be saved by forming the precious metals into masses of which the weight and fineness should be authenticated by the outward appearance, ‘and that to do this with most effect, the insue must be undertaken by the governing power. Which in the invention of Coins. 9. How would the government A. If the taxes or other revenues were paid in the precious provide the frat coins metals, it would take a portion of what were so recetved, and cause them to be fabricated into coins. Or if received in other substances, it would exchange these for metal, to be treated as befor coins when made, it would take into the market to purchase what it might desire, or elec (ais ‘favourite way with modern governments) lend them at interest to those who would take them into the market instead of the government. 10, At what rate would the coins 4, It seems inevitable that the quantity of goods volunta- be voluntarily received in the mar ily given for them, would either at once oF as soon as there ket, at the outset of the jsnuest had been time for men to comparenotes together, be greater not only than what would be given for the metal contained in ‘them, but than the sum of this and of what would be a compensation for the expense and trouble of weighing and amzing. For ifthe expense and trouble of weighing and assaying each coln of for inutance, a quarter of an ounce of gold, be taken as equivalent to the thousandth part of an ounce of rade gold (or whaf'in modern language might be called a pennyworth), it is plain to begin with, that everybody would willingly receive the coin for as much as he would receive a quarter of an ounce of rude gold, and the pennyworth besides. But as soon as men were familiar with the fact that the coin when received at this rate would be paid away at thesame, it would be every man's interest as much as ever (so long aa there was any competition for being paid in coins instead of metal by weight) to bide pennyworth more; for he would as mucha ever save itby escaping the expense and trouble of weighing and assaying. And soon. Hence in the early stages of the issues, what would be voluntarily given for the coin in the market would rise and rise. And it would do 40 till one of two things happened ;—till either the istues were extended sufficiently to pot an end to any competition for being paid in coins in preference to other substances,—or the anxiety to procure coins by bidding the pennyworth more, was counterbalanced by the fear that from some cause or other the market rate of coins might be shaken before they were out of the receiver's hands, Hence there would be a height to which the power of a coin to purchase in market in the early stages would rise, and abeightto which it would not; and its conclusion thet it would rise higher in a country where considerable security and order were en- Joyed, and lesa in one of a contrary description. But as it must be a very Unstable and beggarly state of society indeed where it would not rise by enough to pay the expense ofcoining and a fair profit besides, it may be teken for granted the government would find its arly issues profitable, sand would increase its issues accordingly. he principle on which the power of purchasing of the coins i here aumed forse, should 0 dortea, willbe found on exatanaton to be thesaie wigh whieh the merontille worl a Seeof what a called sn pian ‘The beat boy of am Ay ie given by Adu Sith (OFealth of Nations, Be chs) in hn account of tha Bank of Amarin." Afartiuler hind of paper called" Bank pope," had firttagerlog scared nein! os by re and robbery, ania oer wayey andthe ermfitoe wat Skstitrose ta marketable power, sometince by nine pr cen. On which te Ba {he inces so ast keep it from cveriaing above jee, which mny be coueladed to be Aredia far ott for the Qouble of mstog und inanaging the concern. But ti unreasonable to ANCE le nad worth othe secarity agaist re, robberys Sey wan ever anything Ike aive pe eaaty the fzatrary {was probebly sever more than a halt per eet, or what may bo called a penny in the pound, EeStmuzhyNometet, tla pevayworth of advastage was équally tobe made by Wa cbalnr of te pepe, Fiver estes Hoorn Usha atest beh wus caper bere ag, hare for obiining the. paper by bidiug a penaywo ‘NastityIelgetatio was vot suicem forall who wanted i without, ‘NB. By * inves” of anything sre alwaye meant “new tren 0 cuncnce but not “relones” ofthat my be returned tp the gover ‘ecemary in ona way o oer lobe eler om tha pointy and ths ithe 11, How would the government 4. There could never be any difficulty in finding funds. find fands for rapidly increasing The government might take the whole of the taxes as they the number of coins? came in (whether paid in substances other than coins, a must be ‘the case before coins were in extensive use, oF partly in coins and party in other substances, an might be the case afterwards) and exchanging all of these which were not rade metal, for metal in the market, might fabricate this metal into i issue them with a profit as described, And if this was not fast enough, it might repeat of exchanging for metal and coining, as often os it pleased, with accumul pretis, before it applied the reslts to ita ordinary expenditure. So that ‘there is no positive imit to the rapidity with which the process might be gainfully carried on, if there is « sufflclent quantity of metal within reach of purchase. 12, What would be the conse- 4. For a time the rate at which the coins would be quetices of continuing the iseuesof voluntarily received, would go on at th coins? ‘which the circumstances formerly, described should have Allowed itto attain. But if the issues were persisted in, a when the coins in circulation, passing at this elevated rate, would make the be ealled complete, or enough to allow every man who wished it, to employ jum of exchange instead of other substances, time must cor supply what coins as his me4 A Catechism on the Currency. 13, In whom would be the pro- A. Clearly in the receivers, or those to whom they may erty of these coins after they were transfer them; in other words, in the holders. No man received? has received one from the government without at the time giving the government what it ehose to accept in return; the coin therefore is as much the property of the first receiver, as anything else he may have brought away from the market. He has pald for it and the government has not; for the government has never been st any expense at all about the matier, even the expense of coining having been returned to it with a profit, And if the coin was the property of the first receirer, equally that of the person to whom he transfers it. It is true that as fast as the coins are introduced into circulation, a corresponding portion of the subatagces formerly used as currency will be restored to their pristine uses, by the holders or on their account. But this does not alter the fact that the holders of the coins paid for them when they got them ; and they had paid for the other substances to0. All talk therefore about the coins being the government's, or the ‘king's, is only a fiction of Inw like that which calls the highways the king's; and means only that the king or the government is the organ for looking after them. 14, after the eupply of coin ds The paver of the cin fo pacha in the marke would hhad become what has been called decrease, and to such an extent as would render the total or ‘attheclerated rote, what number no more than was required to make the supply ‘would be the consequences of in- complete, , creasing the istues? For eximple, if when the supply was complete at the existing market rate, fneed what would be given Ta te ots a foe arhet would i i ke ‘one, of'iu olbet words the prices of thlage ih genera, paid fa coin ‘Seotty one to twenty, oF by 8 per cea 15, How would this reduction 4. By the agency of the same causes as make every other in the power of the coine to pure ariile exchange oF lees when the quantity in the torket chase, Be brought about? is incresrede Tithe mimber of coins in citeulation was increased in the proportion of twenty-one to twenty, it follows that in some way or other twenty-one teual" by brought. 10" market where" Uneke were. Bwenty before, for a0 other use, etn be made of the coins, innemuch ‘ar retorning them to the aes of rade metal would be at fended with palpable love on sccount of the elevation of the rate. But in auch s state of ‘lnin that the coins most exchange for Lees than they did, ax hat wheat moat Kem if through some adden eatne. twenty-one quarters were. brought. to arketiphere there used to be twenty. The moment the delle of commodities in. general, the precious metals among others, take note of the increased number of coins brought into the murket with a demand fo bay, thelr Sret thought will be to aak higher price. And they trill not only ask, but they wll obtain not perbape all at once, nor tothe extent on which they ight pomibly set thelr mibds, but they will ruceed in Tasing’ money Prices, One buyer ater hotter will consent to give more, to avoid the low and disappointment of going away empty- handed ; and as nothing can effect a cemation of the eause but the reduction of the twenty-one tons to the purchasing power of the twenty, the process will be. going on tll this reduction ix effected, ‘The holders of the caine mhy complain, us corn-deslers ry complain. when dis- pointed of their expected prices by an tinexpected influx of com Into the market; but whether they complain or not, they iost submit ts the coru-deslers do. And by the contrary procens the purchasing power of the eolms would go up, ifthe number in the masket were diminlabed, of the extent of the market increased. 16, What would be the conse- 4. A time must come when what will be given for the yuences if the issues of coins were coin in the market, will be no more then would be given for ther inerensed 1 the metal contained in it, and a compensation (including a fair profit) for the expense of coining. And at this point, ‘prudent government would cease from further isnues of coins, 17, What would determine the A. As noted before, the leading elements would be the number of coins which would bring extent of the community and of its commercial transactions, thelr market rato to this state "A large commanity would eaters poriba require larger number than a small one, and an industrious snd peaceful ‘community than a barbarous and disturbed one. Hence if any change took place in the elrcum- ances of the community in theve repect, a coresponding change would take place in. the ‘number of coins required to bring their market rate to the point described. If the extent or the ‘circumstances of the community improved, a demand for greater number of coins, showing itaelf in a fall of money prices, the price ‘of gold included, would be the result, And if they ‘should retrograde, the number of coins in circulation would be more than were wanted at that rate; the consequences of which may be referred to the next paragraph. 18. What would be the conse- A. If the government, moved for instance by some ides yuences of atill further increasing of estimulus to commerce to arise from inerensing the cireu- the inaee of coins? Iating mediom, should deterrine to throw away sod love the expense of coining, a time would soon come when what would be given in the market for the coins would be no more than would be given for the rude metal contained tn them, or foran equal quantity, “And if the government, through or obstinacy, should atll Increase the feeues, it i'plain that, on the same principles as before, what ‘would be given in the market for the coins would come’ to be less than would be given for the ‘metal coutained in them,—or there would be a premium upon restoring the coins tothe purporesA Catechism on the Currency. 5 for which rade metal is in request. ‘The consequence of which would be, that #0 soon as the difference was sensible, coins would begin to go into the melting-pot, in spite of all that anybody ‘ould do to hinder it; ‘and the plan of the government for stimulating commerce by multiplying coins, would fail like a plan for accumulating water in @ sieve, for the coins would run out as fast ‘as they ran in. athe: 5 for supposed to be made ofthe most valuable ml sent, whith i ardliany golds ‘For when Coli of droit metals tro ata, thos of thr cheaper melee ‘fies net aa Iie more fan counter for reckoning the fractional para ofthe oltre, and ia conrequence a8 ‘ot amenable in all repens tothe same ales. 19. Afterthe use of coins became A. The employment of paper documents ; of which there general, what was the next great have been various kinds, but it will be useful frst to con- Sheraion’ "introduced ‘into “curs ider euch as tre inued by a government with a vlew to rency? feing wed av ordinary currency or what in Ragland would be called Government Hank-oten. And it will further ‘conduce to clearness, ifthe issue of these is supposed to take place at the period when exehanges have come to be conducted by means of the precious ‘metals by weight, aud the effects of coins being also in use are calculated afterwards. 20, What would be the conse- 4. If the government's word was trusted, it would be quences if a government, at a plain that in the outset these billets might be safely taken in period when exchanges had come the market for at all events as much as the specified sub- to be mostly conducted by means stances would be taken; for there would always be somebody of the precious metals by weight, at hand who would receive them at tht rate to pey la taxee should begin to issue paper billets with, and at the worst it would only be to earry them for with a certain quantity of come payment upon demand, But it would soon be discovered, desirable substances specified in that the billets were an advantageous instrument for con- each, as for instance » quarter of ducting exchanges in general, aa well as for paying the fan ounce of gold of an assigned taxes with; us saving in all cases the expense and trouble of fineness, engaging to receive the weighing and assaying metals, and making further economies billets for the same in discharge of in point of transport and otherwise. ‘The government taxes, and farther to give the speci- therefore, on first taking them into the market or #0 soon - fied quantity of gold for the billet afterwards as there was time for their nature to be under- at any time upon demand t stood by the public, might reasonably expect the billets to be received, as in the parallel circumstances of coins, for some- thing more than the substances specified in them, or a mercantile men express it, bear an Agio. But as the government would make a clear gain ofall that it obtained in the market forthe issues of paper it may bo held certain that the lates would be rapidly increased, Ul by the same stepe ‘as in the case of coins, what would be given in the market for the billet was reduced to what ‘would be given for the substances specified in it if produced there as currency instead. But, if after this the government should go on increasing the issues of paper, what would be given for the billet in the market would, as in the parallel circumstances of coins, be made to fall below ‘what would be given for the substances specified in it, and which are engaged to be returned. upon demand, ‘The immediate consequence of which would be, that billets would begin to be brought in with a demand for payment; for the substances promised in payment will pur- chase more in the market than the billet will. Which would go on till the billets left in circulation ‘were reduced, as in the parallel circumstances of coins, to the number called for by the extent ‘and commercial condition of the community when each billet passes in the market for the same that would be given for the substances epecified in it. 21, What would be the conse- 4. What would be given for the billets in the market quence if the government at this would go on decreasing below what would be given for the stage should refuse to pay on de- substances specified in them; which is what is called mand as promised, and go on depreciation. ‘The depreciation’ might be temporarily in- increasing the issues of paper? —_oreased. by the effects of panic arising out of the refusal of Payment, in go far as the panic might work an actual reduc~ tion in the demand for the employment of the instrament of exchange. But it would be « mistake to think that the whole machine would go to pieces. People thought so when the Bank of England stopped payment in 1797 ; but they found they were wrong. Bank of England notes ‘were not sent to the trunk-maker, nor‘did the man who had one in his pocket go without a dinner, though the Bank had “repudiated” its engagement to pay in gold or in anything else. Nor was there even any remarkable depreciation, until the subsequent courses taken by the Bank gave cause for it which could not be resisted. ‘The issues made after such refusal to pay upon demand, may be called superfluous iseues ; and the amount of what is given for them to the government will be abstracted from all the holders of the billets in the country, by the diminution of what will be to be bought wit the billets in the pocket of each. 22. What would be the results 4. What would be given in the market for eacb in- of continuance in such a course? dividual billet, would be reduced in the same proportion as the number in existence was increased. The further resulty of which would be, that if there were auch things as fundholders, mortgagees, lessors, or an~ nuitants, these would be paid with what had been made to be of less worth to them than what they had contracted for. “The government therefore would begin to make a dishonest gain from the fundholders, by paying them with pieces of paper bearing on their faces words indicative of a certain quantity of substances contracted for, but which the government by ita refusal to keep ita promise and by its subsequent issues, has purposely made to be worth (ess than that quantity And while the government was doing this, it would only have to see that the taxes were lai‘6 A Catechism on the Currency. ad valorem instead of being fixed in nominal amount, to prevent any of its gains from the fund holders being balanced by loss upon the taxes. For example, ifthe duty one pipe of wine worth ‘0. without duty, was 101, the government would only have to secure the former form of words instead of the other, and then if through the depreciation the price without duty eame to be 60L, ‘the duty would be 121,, which is worth the same to the government as the 10/, was before, If itshonld he urged that the governments plan would be embarrassed by an oulery from the tax-payers to have their bilatareoeived by the gorerament for ihe present worls of dhe substancsa specited io them, fhe answer is that the goverasirat would dad ways of evading or puting down such ta outcry. ‘Fancy & taxpayer in 18/4, whan gold bought withthe forernmrets yever ee Of at cance, opponeg a demand fou the ux guerer for Sf and atomyting to op bis mouth with the aanrance, tht the bargala was Cnt the note shuld be received by {fe 104d. for the ounce of gol 23, What differences would have 4, 8o long as the coins aid billets together were not more been made, if coins bad been in use than were wanted for circulation at the rate at which the go- during these operations with the vernment had promised to pay the billets on demand, they billets? ‘would go on citculating quietly in company. But as soon as they were more, their numbers would begin to be reduced by the two ways at once, of coins going to the melting-pot and billets being brought in for pay- ment. But when peyment of the billets was refused, the coins only would go out of circulation, Decause the billets could not, And as the issues of billeta went on, the coins would be entirely driven out, with the exception of the hoarded. [There might arise the phenomenon known by the name of “two prices,” if the coins were there; but they would not be there. Any of the boarded which should appear, would be instantly bunted down for the melting-pot.] Tevevamect wt the ret of Utes poued-oou and the suil change of ‘Slretore the presut claim ought vo besataged by the ame 24, What would bo the other 4. Firat, a detriment to the working classes in the shape results of depreciation as descri- of a continually increasing reduction of their substantial bed, ifeontinually increased? wages, and a corresponding advantage to their employers, Just as if the movement was in the contrary direction, and ‘what would be given for the paper in the market was continually increasing, there would be a continual advantage to the working cl antage to thelr employers. For there must always be an advantage to theside which is gaining by the change in the substantial worth of the existing money wages, and a disadvantage to the side which has to contend against it, Depre- ciation means rising money prices of all a working man bas to buy. And aworking man does not like to heat of rising money prices, if he knows his money wages will not rise in proportion. ‘Secondly, while it is impossible to see how any substantial improvement to trade can a of increasing the number of the component parts of the currency und diminishing the purchasing power, nothing can be imagined more likely to lead to mistakes, tending to make men fin themselves in the condition of what is called over-trading. A tradesman receives 501. where he only expected 491.5 what then more natural than that he should conclude thet things are going well with bim, and that he is bound to take advantage of the favouring gale, and in some way oF other spread more sail? He therefore either spends his extra receipts on some pleasure which he would otherwise have denied himself, or on some increase to his ventures and his business which he would otherwise have thought imprudent. And when he has learned by hard ex- erience that his supposed prosperity was moonshine, and bis 60%, were only in truth worth 491,, eli ef to troggle with the consequences. 25, After the government had. Yor; if at the proper moment it could toa certain made o gain from the fundholders extent change the mode of laying the taxes, from taxes ad by refusing to pay upon demand ealorem to taxes fxed in uominal emoust, . ‘and increasing the issues of paper, Put what does not appear an unreasonable case. Suppose could it by any contrivance make the billets in circulation to be forty millions, the number pro- it a profiuble speculation to it- ey returned forthe annual axation the same, of which self to buy the billets up again, and half shall be required to pay the fundholders and others who finally return to cash payments or must continue to be paid with the same nominal amount ; paying the specified substances on and let the proposal be that the government, instead of re demand? issuing all the billets received for the taxes, shall at the beginning ofthe Gra year bum two millions of them. "And first, let It be supposed thet the whole of the taxes can be changed to taxes fixed in nominal ‘amount. The result of the suppoted diminution of the billets, will be to increase what will be got in the market for the billet in the proportion of 20to 19, or in round terms 6 percent. ‘The fund- holders, wil continue tobe paid with twenty millon of the billets as before to thelr great ati: faction at finding the billets worth more to them than they used to be. After which, what will remain applicable to the purposes of the government will be eighteen millions of billets, but in- creased in purchasing power by 6 per cent, or in round terme as good as nineteen millions of the original. The government therefore will at the beginning of the first year have given up and lost what could have been got in the market for about one million of the original billets, But in the course of that and every succeeding year, the forty millions of billets received for the taxes will be found increased in purchasing power by 5 per cent; of which billets half will goto the fundholders &, asbefore, and the other haf will give & gain to the government equal to what would have been got in the market for one million of the original billets. So that what the government will have done, wil be to have given up one million the Gre yer, with the reeult of reeiving cent per cent per annum for it for ever. And by following the samne track it will eppear, that if the government ‘was only able to cause eleven-twentieths of tho taxes to be changed to taxes fixed in nominal amount, its substantial loss at the beginning of the fst year by burning the two millions of billets, would be equal to what might have been got in the market for one million nine hundred thousand; in return for which it would in the course of that and every succeeding year make a gain equal to what could have been got in the market for one hundred thousand of the original Dillets, being in round terms 5 per cent for ever, which is ordinarily considered a good invest-A Catechism on the Currency. 4 ment, Hence the change of any portion greater than eleven-twentiths, would make not only ‘good investment buts tich one.” And if more ofthe billets were burned atthe beginning of the following year, new sat of results of ike Kind would ariag, and must be added to the other and 20.06.” Light therefore ia thrown on the possibility of the reduction aa well as the aug entation of # paper currency being « proftable operation to a goverament, I i hana It money to spare in advance, and can depend on the acquiescence of the tax-payers in seeing the tixes changed from texes ad valorem to taxes Sxed in nominal amount, which ia a thing vastly too eubtle for taxpayers in general to trouble their heads about, though nothing is clearer thad that the whole ia fo be finelly done at their expense, 26. Underanhonesteystem, who 4. For every billet issued by the government and not ‘would gain the difference in cost brought back for payment, the amount of what was received Between a gold and s paper cur- for it in the market must be in the hands of the goverment, reney? ani corresponding quantity ofthe metal former employed ts currency would be dropped from that employment by the holder who found the billet the preferable thing to go to market with, and would be restored to ita Pristine uses by himself or on his account. So that the phenomenon presented, is that of « Community doing through the organ of its government, what could not so well be done by every man for himself vis. substituting a cheap tool or instrument for a dear one as an individual might substitute glase drinking-vessels for his silver, and finding the difference of the cost lodged for its own use and benefit with its organ which is the government{;—e highly important edvan- tage, yet not to be confounded with expectations of infinite gain), ifthe community were aaked how it would like to have this diference employed, it is probable that ifthere was the interest of a public debt to be paid out of the taxes, there ia'no way it would prefer to having it employed in buying up a portion of the debt, and remitting to the community a corresponding portion of the taxes. But whatever might be’ fixed upon, it is as clear as in the case of the glass which should be substituted for silver, that the difference belongs to the owner of the dearer article, ‘which in the community, and ought to be applied to the use of the community and of nobody lee, as much as the proceeds of the taxes which may be lying in the Eachequer. ‘This ie clearly a things ought to be; and may therefore make « useful point of comparison for things as they ‘may happen to be. 21. Yo the promise to pay on do- A. Tt may be set down as being so. But the danger sand, « security againat deprecia- always is that it wil not be kept. “It will be kept when tHon a Long anit kept? thereto atzong Interest of anybody's othe contrary but it in not 4o certain it will be Rept when there in. In fact the evidence hitherto collected is, that in such circumstances it will not. 28, Is there any other method of A. There is the method of preventing the issues which Preventing depreciation and conse- would cause depreciation. A few years ago it might have quent fraud? bbeen dangerous to press thie point; because there was no possiblity of hindering men from erying out inconver- tibility,” and proceeding to confound a power which should prevent the mecemity for conver- sion, with a power of unlimited issue, But in consequence of the attention of late attracted to rubject, great numbers of intelligent persons have got possession of the fact that an incanver- tible paper currency is not identical with an unlimited paper currency, and that it is precisely Ddecause itis to be limited, that its convertibility is not wanted. It in wise therefore to go into the question, to prevent these persons from being claimed by the clamourers for an unlimited paper currency. The grand want is to keep the purchasing power of the note or billet to some given Standard; or as nearly so aa can be effected by human are; ‘which, aa far as hitherto known, is to ‘be done by making arrangements to secure its being always capable of purchasing in the market tus much a8 would be purchased by a given quantity of some assigned substance, for which purpose the choice of mankind baa generally fallen upon gold, though if anybody thinks anything else would make s better standard, he is at liberty to prove it. Payment on demand may bo one way to compass this result ; but itis evident there is another, which is to prevent the iseues from ever going to the point which would make the purchasing power of the note or Billet fall below the appointed. mark, ‘The public mind is not made up on this point ; but itis on its way towards it, 29. What would be the way to 4. [If the standard, for instance, were decided to be gold, Prevent the issues of paper from the way would be to authorize by Act of Parliament the issue Going to the length which would of new billets, only upon evidence laid before Parliament — cause it to be depreciated 1 or if such delegation is considered safe, the Privy Couneil,— the market price of gold, as paid for with the billets, was below a certain price, which muy for distinctness be called the standard price, and which as at pre- sent and in times past fixed, is 31. 17s. 10}d. per ounce. Upon which evidence, and in no other circumstances, authority should by the same Act be given, to issue new or additional billets,—to ‘the number indicated by multiplying the number previously in circulation, by the vulgar fraction, expressed by the fall below the standard price divided by the actual price,—and fo no greater.] tight on examination prove desirable thatthe fll of prico to be established by evidence should be fall ir of meso ath, wh ht foal be of nt feta ee ‘pipe. 30. What would bo the security A. It could mot be lesa; and might be more. A ministry for the maintenance of this plan, that on the idea of necessity, well or ill founded, would think compared with the plan for making of infringing the one; would probably think of infringing the payment on demand? other. ‘The strength of the security for either, must ulti- _toately depend upon the magnitude of the reasons why should not be infringed, and the puilie's familiarity with tose reesons.8 A Catechism on the Currency. 31. What are the visible advan- 4. 1.—In the ease of limitation by payment on demand, tages and disadvantages of the two it is necessary to have a reserve of gold, as the only way of of limitation t deing sare of making the promised payment if « crisis should suddenly arise. Thus in England in 1847, it appeared that by what is called the Act of 1844, the quantity of paper which might be expected to be retained {in circulation under all shocks to-be reasonably calculated upon, was stated by a sort of guess at fourteen millions sterling; and {t was enacted that for all the paper ever issued above fourteen millions, gold coined oruncoined to the same amount should be in the Benk cellars to pay it with if asked. If whet was substantially received for the fourteen millions of paper by the government ‘was honestly accounted for to the public, the public may so far be content; though there would remain the question why the fourteen millions were uot as many more as they might have been, if care had been always teken to give the public the benefit which might have been derived from tthe substitution of paper for metallic money. At all events the Act of 1844 appears to have been. intended to be on the side of caution ; for in 1847 the gold in the Bank cellars under the Act ‘was found to be in round terme eleven millions, But under the other mode of limitation (with reservation of all future inquiries as to what might be the consequences in times of crisis or otherwise) these eleven millions would not have been in the Bank cellars, and the paper would Ihave been issued by the government and in the hands of the public as much as ever. ‘The plain Bnglish of the whole therefore is, that the eleven millions of gold, instead of being something it ‘was found necessary to reserve out of the proceeds of the paper and lock up in a cellar, would have been millions applicable to the substantial service of the public, as for instance to buying up eleven millions of the public debt, and relieving the public (suppoting the fonds to be paying 34 per cent) of taxes to the amount of 385,000/. per annum, a rich prize either for those who can save it or those who can get it, and worth looking after by Chancellor of the Exchequer who has his wits about bim. A Manchester merchant would fook very oddly, if told ‘that it was & requisite to his trade thet the firm should reserve eleven thousand sovereigns and Jock up in a cellar; and if governments felt like Manchester merchants, they would find out the clumsiness of the proceeding too. It is evidently a rough, rude, and semi-barbarous notion of which cannot conduct @ peper currency without saying, “Take these eleven million Pounds worth of gold, and see them well casked and marked and lettered, and ther let them be cellar, and looked ‘and then, to see that nobody has run away with sve not gone to dei ‘On this head therefore, the limitation based on the market price of gold, appears to have the advantage to the amount of eleven millions. 2,—Deponits of gold of this kind, in addition to thelr cost, are impolitic in a country which desires to hold out no encouragement to political commotion. And no country can say that such danger shall not arise, England, for example, isin the habit of pluming itelf on being a settled country ; yet no more than ten yearv ago (in 1838) it was clear from evidence adduced before the House of Commons, thst there wes a system for forming Orange Lodges in the army, the visible object of which was to try the possibility of changing the Succession in favour of arbitrary principles. Tt came to nothing. But had such a change been attempted and with temporary success, the first object of the seizer of the throne must have been to ley his hands on money for current purposes; hence if eleven millions of gold had been found in the Bank cellars the Bre thinga senalbleusurper ‘would have thought of, would have been to put s stone into ita place and declare Bank of England notes inconvertible, ‘And if to this he had thought of adding an issue of twenty millions of ‘one-pound notes, he would have been a m make him, ‘There would hhave been a little panic, as there was when th inconvertible in 1797. But, as was the cese then, it would soon have been found out that the panic, as regarded the commercial consequences ofall that had as yet boen done, was needles and that ifthe usurpe had only the weave not further to increase his onus, the sone did Just af wel a anything ese, [tery mob too, when it gxine e certain height, calle out To the Bank!” |The columne ofan 3vading army would step out to the and it might be intereting to know, how many millions each of the reported millions in th cost the country in Increased necessity for defence.) On grounds of this kind therefore, the limitation based om the market Brice of gold appears also to have the advantage. 3.—It is not clear that, even in the extreme case of an unsuccessful war in which the enemy ‘got possession of the capital, a paper currency which had never been anything but inconvertible, ‘would not be the safest of the two. A high degree of panic would be among the attendants on ‘uch « mlefortune; and itis highly probable thet the check given to the employment of the circu lating medium would be made visible bya diminution ia what could be. got fori in the market ‘or in other words a rise of prices, the price of gold among others; which would continue till in fone way of other affairs became more settled and commerce returned to its ordinary course. But St does not appear thet anything would be mended by having in addition a run upon the Bank, arising out of an engagement to supply all the panic-stricken with gold upon demand. If men ‘want gold to help them to run away from an invasion, let them buy it at the shops which sell it Dut there seems no more reason why the government should engage to furnish them with gold for this parpose, than why it should engage to furnish them with great-coats. Take the instance of 1745, when the Pretender was at Derby. ‘The demand on the Bank for gold was a channel made snd provided, for the public pane to run in and ccumolat, It was by t mere torn ofthe acl that the Bank escaped stopping payment; and if t had stopped, nothing was more likely 1 havo given a turn to the counsels of the enemy, the consequences of which it is impomible to assign. Tt fe diffcalt to maintain, that at that critical moment the Hanoverian succession would not have been safer, with a currehey always known to be inconvertible. 4.—The disadvantages which may be alleged against an inconvertible currency of the kind described, may be admitted to be ‘That there is danger of its being confounded with an unlimited currency. ‘That there may be doubts about the practicability of maintaining the preséribed limitation,A Catechism on the Currency. 9 ‘That a successful invader might declare the paper currency null and void. Tualleiation of which may te represented, atthe hazard pezhap of some repetition :— ‘That the preservation of the distinction between an inconvertible and an unlimited currency, ‘must depend on the epread of information among the community who are to abide by the consequences, ‘That the principle of payment on demand has nothing to trust to but the same spread o mation; and what might secure one, might secure the other. ‘That's successfal invader would know & better thing then declaring the currency null and void; which would be to get as much of it into his possession as he was able. And in all evenis nothing would be gained by giving him the chance of what, deposite he might find in the Bank cellars, snd of declaring what he chose upon the subject of the currency besides, 32. If the issuing of paper was 4. The question is whether there would be any practi Limited to oceaatons when the mar. necessity for making provision for such a process. ‘We Dut kket price of gold peid in paper had tucks in children’s frocks to provide for letting out when fallen below a certain mark, would they grow taller, but we do not go to the trouble of making it not be proper to make provision any provision for their growing shorter. And the reason is, ‘to for the absorption of « quan- that children are in the habit of growing taller, and not of tity of paper when the price of growing shorter. It is the same with commercial com- ld should rise above it? munities. Even though there should be occasional periods when there was & tendency to retrograde, it seems certain that theso must be rapidly overridden by the general endency to inerease, and the use for cute rency increase along with it, Atthe same time, it would be easy to make the experiment with alldue caution, by reserving dhe cellared millions till it should be seen whether there was any practical necessity for making provision for buying up paper or not. 83. What wouldhave been the re- 4. If issued before the introduction of coined money, sults ifat the several stages alluded then to the extent that they continued fucirculation without to, billets with a promise to pay on being brought back with a demand for payment of the sub. demand had been issued by pri- stances specified, they would cause s corresponding portion vate individuals? of the substances in employment as currency to be returned to their pristine uses, and the issuers would make again of all that had been received for the paper atthe time of issue. If they were issued at a period when the circulation had come to be completely supplied with coins, the effects would be the same; coins to an amount corresponding with the peper retained in circulation being vent into the melting-pot. And these effects might by possibility go on {increasing till this kind of paper occupied the whole circulation ; but they could not be extended to the production of depreciation, because depreciation could not take place without exusing the paper to be carried back with a demand for payment, and if payment was refused, the paper ‘would no longer circulate, except as it might sometimes change hands as ia done when a bad debt i act up toaale. I they were inued after the introduction of coins, and when the government's issues of billets Ihad begun, the private billets would act as 6o many rivals of the public ones, each billet of either Kind equally driving a coin into the melting-pot ; with this marked consequence, that for every billet of the private paper, a gain to the amountof the coin driven outof circulation by it would bbe found in the hands cf the private issuer instead of the government. And this might go on till all the coins were driven into the melting-pot, with the exception of what might be hoarded as before leaving the fed entirely occupied by paper of one kind or other, Tf at this period the goverament should break its promise to pay, but leave the private ianuere ‘under legal obligation to pay in, gold, then as soon ab « depreciation became sensible, the notes of the private iasuers would be driven in with a demand for gold, and it would not be till they ‘wore entirely driven in, that the depreciation would increase, But if the government made one of its own billets legal ‘tender in payment of one of a private issuer's, then there would be no reason why the private papershould be driven in, and both kinds would go on together, increasing. the depreciation in proportion to the quantity jointly iseued. Onan estimate of the resulta of the proces of which the refusal of payment by the Bank of England in 1797 was the beginning, the conclusions arrived at. were, that between 1797 and 1, the government (on the eupponton tht the taxes were Iatd ed paren) ined from the fandholders the substantial amount of 97,251,5501, 11x, 24,,and from the holders of the circulating medium through what was received by the government for the superfluous issues of paper, 3,544,6521 16e, 11d making together 40,196,201, 6. 1d, and the private bankerarecelved for their share of the superduous “paper 8,085,8051. 19s, 74. making the whole loss of the public 45,882,091. 7s, 84, (See Westminster Review for January, 1824.) The calculations, like all ‘others, may be open to contest ; but they at all events point to large gains having been made, fand to there being no want of adfa on which calculation may be founded. If it is asked why the government allowed five millions to be carried off by the iseuers of private sper, when means might apparently have been contrived to bring them intoits own coffers, the Ankwer seems to be, that the bankers had strong means of resistance. ‘They rauat evidently ‘been of all men the best informed on the nature of the process going forward; and to have had them in opposition in their quality of bankers, would never have been got over. Faire and markets ‘would bave rung of the extracted millions, as they afterwards rang of the omnipotence of credit Und the blessings of an extended circulation ; and a tribune would have been erected in every country town, which no statutes could have silenced. And besides, to have left the private bankers bound to pay in god, would bare been lasing the axe to the declaration of Bank of England notes being legal tender, and raising a world of dangerous speculation how the promise of & pound on demand could mean one thing to one contractor, and another to another.10 A Catechism on the Currency. 34, In what then ought thebusl- 4, In lending his own money, as the London bankers nemof a private banker to consist? do including the deposits which people find it convenient to condide to him]. But not in lending money which he takes from the public, a ia done when private paper is isaued for the purpose of being lent. On ths polat there are slg of progress towards amendment, The Bank Act 1844, maalfsty treats ‘helbaiay of private popes what i would willingly muppran. 35. What are the inferences as 4. That it should have an Office for issuing and receiving tothe mode in which agovernment paper (it may call it « Bank if it will), in the same manner ‘ought to conduct the issuing of ite as it bas a Victualling Oflice for issuing and receiving beef paper? sid pork. There need be no more mystery or complication about one than the other; and all that is mystery or com- plication, may be looked on (to take the most favourable view)as the legacy of worse times which 8 wise government will mend when it is able, ‘The officers and directors of such an institution should be paid by distinct salaries, and nothing else, in one case as in the other, And as in the case of a Victualling Office the wotst of possible inventions would be to compose the Airectors of salesmen and provislon-detlers, who were to be partly paid by allowing them to take tions of the public beef and pork and sell or let them out at interest, 40 in the case of « suk for the issue of public paper the worst possible invention would be to allow the directors to take from time to time a handful of the paper they are to fabricate and issue, and apply it to their own use by lending it to such as are willing to pay them interest for it, Or if anything could add to the badness in these several cases, it would be that the government should borrow money from the directors of its Vietualling Office, or be found speaking of a “ Debt dus by the Public to the said Governor and Company” in the case of its paper-money arrangements, 36, How is the operation of lend- _ 4. Neither the lenders of public nor of private paper ing chiely carried on? find ‘it 40 convenient to lend it upon interest to be after- wards from time to time received and during extensive periods, (though this may be done in some instances), as to lend it for a short period, as for Instance three months, receiving in return a bill engaging to repay at the end of such period, which if not performed, involves the bankruptcy of the defaulter. And the interest for this ati ultted period is demanded atthe tine of lending instead of aferwarde, being in fact deducted from what is given to the borrower; which isthe reason why instead of being called interes called discount, and the operation of so advancing money of paper for bille ie called discounting them. So that in the ease where public paper is created for this purpove, the practice amounts to giving the favoured persons an order on the pockets of all the holders of the circulating mediam, fF else upon the deposite reserved for the purpose of peying the public paper on demand, the {interest going to the conductors of the process as part of thelr pay or perquisites of office, 87. What was the probable 4. It is very likely to have been partly done in imitation. origin of allowing the trade of & of the private bankers, who find the discounting of bills ‘money-lender to be united with the the readiest way of pushing their paper into circul direction of a public currency? But there can be no doubt that the main reason of its being as permitted and persevered in, has been tho ides that auch advances of paper were a proper method of assisting trade, Joined to notion of benefit to arise to trade from increasing the circulating medium. 38, How is the lending of public __. If a'trader in difficulties could obtain from the govern- aperto assist trade? ment permission to take a shilling a-plece from all the. tra- yellera on the Great Northern Railway, there could be no doubt of its tendency to relieve him from hie difficulties, and of the eager desire which nusaerous other traders would exhibit to be allowed the same privilege. But it is doubtful whether either government or public could be found to determine that this was increasing national wealth, or Assisting trade, "In the same way, if a single trader can persuade the government to create a quantity of new notes and give te him, the worth of them being at the same time taken, not from the travellers on the Great Northern, but fom all the holders of the circulating medium in the country by the depreciation of the portions of it in their respective pockets, or else out of the deposits formed out of the taxes, there is no doubt of the comfortableness to the individual, nor ofthe great number of other individuals who wil be enger wp come in for a share of the pri= ilege. | But the question of how this is increasing national wealth or assisting trade, is precisely where ft was in the cate of the rll 9. How is increasing the circu- 4. If were proposed fo reduce the yard.wand to thirty lating medium, aftgr depreciation inches, everybody would be conscious thet, putting out of will bethe revolt, to be productive the question the effets on Whose who might have yards of of benefit to trade? cloth to send away and none to receive, or vice verad, the effect on trade in general would be absolutely null.’ 80 plain is this, that in the eases where governments have interfered to introduce new measures of any kind by statute, nobody bus ever dreamed of supporting it on the ground of benefit toA Catechism on the Currency. u trade, to-arise from the measures being either greater or less than before. There might be some ‘uneasiness from the innovation on one side, and some contemplated advantage in the way of Axeduess or uniformity on the other; but nobody ever thought of predicting public prosperity from the measures being ley or from the apposite, Ifa man boys by a diminished mensue, be will receive more of them, and give more of them when be sells; and the contrary. So that in respect of any general effect on the proceedings of commerce, the result is null. Precisely of the same nature wil be the result with « currency, from increasing the number of its component parts while what each of them will buy is diminished in the same proportion. Setting aside the effects on those who are bound by old contracts, such es fundholders, mort sgagecs, lessors, and annuitants,—and the abstraction of every man's share of what was given for the ‘Superfiuous paper,—to the.ordinary operations of commerce the result will be as complete; las in the foppoved shortening of the yardcwand. If-a man in trade has money to recelvey hhe has also money to pay away ; and if he should be led into any exultation at seeing his receipts increased in nomiaal amount in consequence of a depreciation in the currency, his leuag error would be corrected bythe tight of the opposite side of hs ledger, where be would ‘ee himself obliged to pay away in precisely the same augmented proportion, So plain is this, that there ja no tredeaman In’ town or eouatry, who, if bis clerk brought him the informa tion that he had sold goods for twenty-one bank-notes instead of twenty, but it was in conse- quence of the notes being depreciated 5 per cent,—would not laugh in the face of any man ‘Who should congratulate him on his good fortune. "He would know that if he had book-debts which he could pay with the depreciated pounds, the odds were that he had also debts to receive Which would be paid him in the same. And beyond this he would know that the consequences to himself would be limited to his folding up twenty-one pieces of paper instead of tweuty, and writing 21 instead of @@ on both sides of his ledger. As the pretence of protection to domestic indusiry by excluding foreign produce, sinks into the earth through the simple fact that all which ie b ther, 80 the pretence of benefit ought and sold with each particular portion, falls in exact proportion to the increase of the whole. 40. What are the dangers which 4. It will at some time come to be a question, whether may arise from @ misteke on these the substantial cause of the continually recurring complaint points? of commercial distress, is not imprudent trading ; and whether the greatest. imaginable stimulus to imprudent {rading, is not created by holding, out recourse tothe public manufactory of paper, as refuge for the destitute or thoughtless, ‘There ean be no doubt that this would be voted true, if the request was to be allowed recourse to the passengers on the railway. And the question may come to be farther asked, whether the habit of coustant anticipation by means of borrowing on bill, ia not something like insisting on doing next quarter's business in this, and whether prudent commercial men ought not to see the seeds of constant danger in such a system. 41. What was the nature of the 4. The Act provided that, beyond a certain number, no Gispute on the maintenance of the notes should be issued by the Bank but in exchange for gold Bank Act of 1844, which led to coin, or gold or silver uncoined. But when the commercial Parliament being called together in distress came on, the Bank was besieged by individuals beg- ‘the winter of 18471 ging to be helped by giving them notes, which were in fact to be loans of the public money to help them through their difficulties, The government pressed by the outery, and actuated no doubt by a knowledge of the revalence of the belief that access to the public money was. legitimate source of relief to traders in distress, undertook the responsibility of bresking the Act, but at the same time clogging the execution by direction that the breach should only be extended to such persons as would pay a heavy discount (8 per cent), and that the interest should go to the public instead of the managers. But by the time the case came before Parliament, the government had arrived at the knowledge that the relaxation of the Act under the terms proposed had been inoperative, and ‘that in fact no breach of the Act bad taken place, Whereupon nobody purgued them further for their illegal intentions, 42, What isthe earliest mention 4. A passage in the treatise attributed to Plato under the of anything of the nature of paper eof Eryn,” seems sow that the Carthaginians had currency ‘leather currency. 7 “For example, toore Carthaginians wwe s currency ofthis ‘kind, In a litle bit of leather is tied up something generally ofthe size of «gold ounce; but what it a that is tied up, nobody knows except the doers. After which they put a seal upon it, and use ‘itasmoney. And he that has the most ofthese, isheld to have the most wealth and be the richeat ‘man. But if anybody among us had ever 40 many of this kind of thing, be would be no richer ‘than if he had « number of the pebbles from the hill™’. ‘The seal spoken of, to make the thing feasible, must have been the stamp of eithera public or private bank, which if was panishable to counterfeit, © sabcina yg obeu nagdinn muiquars xesrea case. iy hynariy wings desdidveny Scores ere 2 pinata pddvera, fy Mores ei headin elds otenty piv el wanirets, Wem nariegeupeping trobey rouigvoen. xa} sear bry hive ni puna nunretn, wat chur igi whsiera eoaira muxerire ti y paddar whatever tin, bu —lnvins, Plot did tepe ale aac