payment between guineas and bank-notes. This was passed by a large majority in both Houses. The act proved, as might have been expected, wholly inoperative; guineas continuing to sell at a high premium compared with notes. The Courts of law, to their credit, declared it to be no crime to sell guineas at a premium, and set aside the conviction of a party who had made such sales. Lord Stanhope's bill, however, remained on the Statute Book during the whole period of the Restriction Act.

There can be no doubt that the high price of coin and exchange was due to an excess of Bank of England notes. To restore their equilibrium, their amount, say the Committee, must be reduced. But no reduction in amount of paper improperly issued will bring up its value, except so far as such reduction indicates the means of the issuer. No amount of reduction of legal-tender notes will have the effect to bring their value to par, even if there be not a dollar of other kind of paper money in circulation. So far as the Bank of England notes resembled legal-tender notes, no amount of reduction would have brought them to par. Their price would equal their real value. The question of all others, therefore, — the manner in which the notes should be issued, in order to render them at all times the equivalent of coin, the Committee wholly overlooked. What their Report did prove or establish has been a riddle compared with which that of the Sphinx was of the easiest solution. That it established no truth, that it did not advance monetary science a single step, is proved by the fact, that, instead of reconciling, it only served to increase the confusion, and exasperate the differences which already prevailed. It divided England into two great camps,Bullionists and Anti-Bullionists, - separated by hardly any other than verbal distinctions; each waging a fierce and incessant war of words, in which the discussion of principles had no place whatever. The more consistent party were the AntiBullionists, who altogether ignored value as an attribute of money. On the other hand, the Bullionists held that value might or might not be an attribute of it. They held the test of the propriety of its issue to be its convertibility into coin; at the same time holding that it would have a value equal to that of coin, and consequently would be exchangeable at all

times for it, although no provision were made for its conversion, provided its amount did not exceed that required by a community for its exchanges. The only effect of the Report, therefore, was to establish on a still firmer basis that absurdest of all errors in monetary science, that value is no necessary attribute of money. It was claimed by the Bullionists that the Report proved the superiority of a metallic over a paper currency. It proved nothing of the kind, for the reason that nothing of the kind can be proved. The Committee might just as well have attempted to prove the superiority of iron over wood in the arts. Each is superior in its way. Paper money, properly issued, is, from its greater convenience, superior to gold in exchanges of property. It is far more convenient to use a thousand dollar bank-note than it is a thousand dollars in gold or silver. On the other hand, a metallic is superior to a paper currency, if it be necessary to send money to other countries, or if the object be to hold it as reserves, or to pay balances resulting after symbols are exhausted. The report, undoubtedly, contained much useful information as to the state of exchanges and the financial condition of the country at the time, and proved the depreciation in value of the bank-notes. It settled, however, not a single principle; while the sanction given to the errors which it contained, by the great names of those by whom it was prepared, has been one of the most formidable obstacles to the progress of monetary science.

The opinions of contemporaneous writers confirm in a striking manner the conclusions in the preceding paragraph as to the meaning and effect of the Bullion Report. In 1802, pending the Restriction Act, Mr. Henry Thornton, afterwards a member of the Bullion Committee, and an acknowledged authority in financial affairs, published "An Inquiry into the Nature and Effect of the Public Credit of Great Britain," in which he draws the following comparison between the nature of real and fictitious bills:

"They agree, inasmuch as each is a discountable article; each has also been created for the purpose of being discounted; and each is, perhaps, discounted in fact. Each, therefore, serves equally to supply means of speculation to the merchant. So far, moreover, as bills and notes constitute what is called the circulating medium, or paper currency, of the country (a topic which shall not be here anticipated), and prevent the use of guineas, the fictitious and the

real bills are upon an equality; and, if the price of commodities be raised in proportion to the quantity of paper currency, the one contributes to that rise exactly in the same manner as the other.... "In order to justify the supposition that a real bill (as it is called) represents actual property, there ought to be some power in the bill-holder to prevent the property which the bill represents from being turned to other purposes than that of paying the bill in question. No such power exists: neither the man who holds the real bill, nor the man who discounts it, has any property in the specific goods for which it was given; he as much trusts to the general ability to pay of the giver of the bill as the holder of any fictitious bill does. The fictitious bill may, in many cases, be a bill given by a person having a large and known capital, a part of which the fictitious bill may be said, in that case, to represent. The supposition that real bills represent property, and that fictitious bills do not, seems, therefore, to be one by which more than justice is done to one of these species of bills, and something less than justice to the other. . .

"A fictitious bill, or bill of accommodation, is evidently, in substance, the same as any common promissory note; and even better, in this respect, that there is but one security to the promissory note, whereas in the case of the bill of accommodation there are two."1

If Thornton had taken the pains to inquire into the effects produced by the use of a currency based upon fictitious bills, in comparison with one based upon bills representing merchandise, he would readily have discovered the wide difference between the two. He saw no necessity for this, for the reason that he held, with the Economists, that paper money was an "instrument of commerce" of which value was no necessary attribute. That which has preceded, however, shows the absurdity of his assumption, that fictitious bills as well as those representing transactions in merchandise are equally "discountable articles."2

1 Inquiry into the Nature and Effect of the Public Credit of Great Britain, Chap. ii.

2 It is hardly necessary to notice, at any length, Lord King's pamphlet, "Thoughts on the Restriction of Specie Payments by the Bank of England," published in 1803. Lord King, as is well known, acquired no little celebrity by refusing to receive the notes of the Bank from his tenants, except at their value in coin. This act, which was considered as in the highest degree disloyal, involved him at the time in great odium. His pamphlet opens with the following statement of the laws of money, taken from Adam Smith:

"The use of a paper currency in any particular country, so far as it displaces coin which would otherwise be employed, diminishes the demand for gold and silver for the purpose of coinage, and has precisely the same effect in reducing their general value as an actual increase of their quantity to the same amount. On the supposition, therefore, of the whole quantity of gold and silver remain

A far more important illustration, however, of the meaning conveyed or intended to be conveyed by the Bullion Report, is to be found in an elaborate essay in its vindication by Mr. William Huskisson, a member of the Committee, and published almost simultaneously with the report. His essay opens with the following definition of the nature and laws of money :

"The various definitions of the word 'money,' and the different acceptations in which the word is used in the ordinary transactions of life, have contributed to produce much of the doubt and uncertainty which prevail at this moment respecting the state of our currency.

"Money, in the popular sense, is frequently considered as having no other value than one purely arbitrary and conventional. It is sometimes defined to be the representative of all other commodities, and sometimes the common measure of them. These definitions are both incomplete as applied to money; because they are equally applicable to every description of currency, whether consisting of the precious metals, of paper, or of any other article. "It is of the essence of money to possess intrinsic value.

"The quality of representing commodities does not necessarily imply intrinsic value; because that quality may be given either by confidence or by authority. The quality of being a common measure does not necessarily imply intrinsic value, any more than the possession of a foot-rule entitles us to the power of acquiring whatever it enables us to measure. Money, or a given quantity of gold or silver, is not only the common measure and common representative of all other commodities, but also the common and universal equivalent.

"Paper currency has, obviously, no intrinsic value.

"A promissory note, under whatever form, or from whatever source it may issue, represents value. It does so, in as much as it is an undertaking to pay, in money, the sum for which it is issued.

"The money, or coin of a country, is so much of its capital. Paper currency is no part of the capital of a country: it is so much circulating credit.

"Whoever buys, gives, whoever sells, receives, such a quantity of pure gold or silver as is equivalent to the article bought or sold; or, if he gives or receives paper instead of money, he gives or receives that which is valuable only as it stipulates the ing the same, they must in a certain degree be rendered cheap by every increase of paper currency. It must, however, be evident that the advantages which do result from the use of a paper currency depend upon its exactly supplying the place of the coin it represents. This quality can be only possessed by a currency which is immediately convertible into specie at the option of the holder." (pp. 2-5.)

This preface was followed by a temperate argument against the Restriction Act, wholly inconclusive, from the writer's ignorance of the laws upon which a convertible currency must rest. His protest, notwithstanding, had a value in helping to keep up a spirit of opposition to the Restriction Act, which finally ended in its repeal.

payment of a given quantity of gold or silver. So long as this engagement is punctually fulfilled, paper will, of course, pass current with the coin with which it is thus constantly interchangeable. Both money, therefore, and paper promissory of money, are common measures and representatives of the value of all commodities. But money alone is the universal equivalent; paper currency is the representative of that money.

"Of paper currency, however, there are two sorts: the one resting upon confidence, the other upon authority. Paper resting upon confidence is what I have described as circulating credit, and consists in engagements for the payment, upon demand, of any specific sums of money; which engagements, from a general trust in the issuers of such paper, they are enabled to substitute for money in the transactions of the community. Paper resting upon authority is what, in common language, is called paper money; and consists of engagements issued or circulated under the sanction, and by the immediate intervention, of the public power of the State."

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The quality of representing commodities cannot be given either by confidence or authority. That a person believes that a note which he takes represents commodities does not make it the representative of them, any more than the belief of the Alchemists made the baser metals in combination the representatives of gold, into which they so long sought to convert them. If confidence would create values, the silliest dunce would be the Croesus of the race. 66 Why not authority?" it is asked. "Government can declare that a foot-rule shall have the capacity of measuring extension. Why may it not declare that a bank-note shall have the capacity of measuring value? Intrinsic value is no more necessary in one case than in the other." But would the owners of estates accept in their sale the instruments by which their areas were measured? They might receive the surveyor's chains at their value as "scrap-iron," but in no other way. When men buy and sell, they exchange, or intend to exchange, articles possessing equal values. It is astonishing that Huskisson could have allowed himself to be taken captive by the theories or statements which he found in the books; which, upon the slightest examination, would have vanished in empty air. With all his acuteness, he did not get an inch beyond Smith's "instrument of commerce," his "wheel" the value of which bore no relation whatever to the value of the articles moved by it.

1 Question Concerning the Depreciation of our Currency, pp. 1-3.