an examination or an attempted examination of his works, that Mr. Gladstone declared the study of money to be a fruitful cause of insanity.

An authority far greater than Tooke, and whose works may, indeed, be said to epitomize all that is known or held at the present time upon this subject, is Mr. J. R. McCulloch, late Professor of Political Economy in the University of London, author of the "Cyclopædia of Commerce," of a "Statistical Account of the British Empire," of the "Principles of Political Economy," and of numerous other works on kindred subjects. He also edited the works of his great master, Adam Smith, to which he added elaborate notes of his own; the works of Lord Overstone, of David Ricardo, and of other lesser lights of the modern school. No one in his particular province ever covered so broad a field; no one was ever so familiar with the Economists; and no one ever so completely epitomized their speculations and views. He was, among them, eminently omnium hominum facile princeps. Fully accepting the doctrines of Smith, and the wide distinction which he made between the qualities of the precious metals which fit them for money and those which determine their value in exchange, he proceeds to consider the laws by which their value is determined when their movement is perfectly free; and those by which they are affected when artificial restraint is imposed upon it:

"It appears that when gold and silver are produced under a sys tem of free competition, their value depends, like that of all other commodities, on the cost of their production. While they form the currency of the commercial world, the price of commodities, or their value estimated in money, will consequently vary not only according to the variation in the cost, demand, and supply of commodities, but also according to the variations in the cost of the gold and silver with which they are compared.

"We now come to the second branch of our inquiry, or that which has for its object to discover the laws which regulate the value of gold and silver, when the power to supply them is placed under a restraint. It is obvious, supposing competition were not allowed to operate in the production of the precious metals, that their value would no longer depend on the principles previously laid down. Whenever the supply of money is limited, its value varies in inverse ratio to its quantity as compared with the quantity of commodities brought to market, or with the business it has to perform. If, on one hand, double the usual supply of commodities

were brought to market with a limited currency, their money price would be reduced a half; and if, on the other hand, only half the usual supply of commodities were brought to market, their price would be doubled; and this, whether the cost of their production was increased or diminished. Sovereigns, shillings, livres, dollars, &c., would then really constitute mere tickets or counters, to be used in computing the value of property, and in transferring it from one individual to another. And, as small tickets or counters would serve for that purpose quite as well as large ones, it is unquestionably true that a debased currency may, by first reducing, and then limiting its quantity, be made to circulate at the value it would bear were the power to supply it unrestricted, and were it of the legal weight and fineness; and, by still further limiting its quantity, it may be made to pass at any higher value. It appears, therefore, that whatever be the matter of which money is made, and however destitute of intrinsic value, it is yet possible, by sufficiently limiting its quantity, to raise its value to any conceivable extent. . . . Assume the currency of Great Britain to consist of fifty or sixty millions of sovereigns; suppose now that government withdraws them, and supplies their place with fifty or sixty millions of half sovereigns, and that the issue of additional coins and of paper money is effectually prevented; in this case it is plain, should the same quantity of commodities be brought to market, there would be the same number of coins to exchange against them. There would not, therefore, unless the supply of commodities varied, be any change in their price. The hat that had previously sold for a gold coin would still sell for one. It is true that the coin for which it now sells is only half the intrinsic value of the one previously in circulation; but this deficiency has been fully compensated by the artificial value given to it by the monopoly. The country has a certain number of exchanges to perform; and it is quite obvious, that, were the currency which is to perform them sufficiently limited, a shilling or a sixpence might be made to do the business, or to pass at the value of a sovereign.

"These are principles of the greatest importance to a right understanding of the real nature of money. În inquiring into the circumstances on which its value depends, we must always ascertain, in the first place, whether it be free or monopolized. Down to a recent period, it was universally maintained that the value of money depended entirely on the relation between its amount and the demand. But this is true only of a gold and silver currency when its quantity is limited; and of a currency formed of materials having little intrinsic worth, when its quantity is limited, and it is not convertible, at the pleasure of the holder, into some more valuable commodity. It is obvious, indeed, without any reasoning on the subject, that the value of a currency consisting of inconvertible paper, or of any other very cheap material, must depend on the proportion which its amount bears to the commodities brought to market, or to the demand; and wherever a currency of this kind, or a limited gold currency, is in circulation, the common opinion that the price of commodities depends wholly on the proportion

between them and the supply of money is quite correct. But it is altogether different with a freely supplied currency consisting of gold and silver, or of any article possessed of considerable value. The fluctuations in the supply and demand of such currency have no permanent influence over its value. This is determined by the cost of its production. If a sovereign commonly exchange for a couple of bushels of wheat or a hat, it is because its production has cost as much as either of these commodities; while, if with a limited and inconvertible paper money, the latter is exchanged for a one pound note, it is because such is the proportion which, as a part of the mass of commodities offered for sale, they bear to the supply of paper or money in the market. This proportion would, it is evident, be not only immediately, but permanently, affected by an increase or diminution of the supply of paper or of commodities; but the relations which commodities bear to a freely supplied metallic currency cannot be changed, except by a change in the cost of producing the commodities. Such are the circumstances which determine the value of money, both when the power to supply it is not subjected to any species of control, and when it is controlled and limited. In the former case, its value depends, like that of most other things, on the cost of its production; while, in the latter case, its value is totally unaffected by that circumstance, and depends on the extent to which it has been issued compared with the demand." 1

Mr. McCulloch might as well have assumed a particular county of. England to be fenced off by a wall so high that only a small amount of vital air could get into it; and that, in such case, the right to breathe would sell at an enormous price; and have inferred, therefrom, that, should the amount of money be limited, its price would rise in like ratio. One illustration is as pertinent, or rather as impertinent, as the other. Whoever gets gold, gets it to spend. There may be quarrels between those who dig and those who rule as to who shall enjoy the product; but, whatever the result, it would immediately go into circulation. Such will be the law so long as mankind must be fed and clothed, or will waste its means in pageants and wars. In his "Political Economy" and other works his great theme always was the impossibility that government should control the movement of the precious metals, and consequently, the utter folly of attempting to do so. They obey a law far higher than that of human provision. His illustrations, however, are in keeping with those of the school to which he belonged, which is always assuming impossible instances as a

means of setting forth its conclusions and beliefs. It is the way of children, not the method of men of full stature. Neither the production nor possession of the precious metals can be monopolized. Their value everywhere, under all conditions (allowing for the influence of accidental circumstances), is measured by their cost. Every one can, at all times, possess himself of them to any extent, on the condition only of paying their price. No rule or law is more universally recognized than this; yet, from conditions declared by Mr. McCulloch himself to be utterly impossible, he, with the Economists, deduces an inexorable law, and attempts to prove that, if a sixpence could be cut into a sufficient number of pieces, it would suffice for the exchanges of the world,-not from its intrinsic value, for Mr. McCulloch assumes that this would not be affected by the restraint to be imposed upon it; and that, consequently, the most worthless thing serving as money might, by a similar restraint or limitation upon its quantity, be raised to the highest possible pitch of value.

All this is but the repetition of the argument of Lowndes at the period of recoinage in 1696; which Locke, at the request of the government, was at such pains to refute. Such repetition is all the more wonderful for the reason, that the experience of 1696 conveyed a lesson as conclusive as Locke's demonstration. All the conditions assumed by Mr. McCulloch and the Economists for raising debased money to any conceivable pitch of value, then met, from causes which far transcended human power. The proof, if ever to be made, was to be made then. For a time, the amount of coin in circulation, or currency of all kinds, equalled hardly a tithe of that required for the exchanges of the country. These, for a considerable period, had to be made by means of credit or barter. Yet the necessity which then existed for a "circulating medium" did not exert the slightest influence in raising the value of the debased coins. The value of each was measured by the cost of the metal that each contained. Had their value risen greatly above their cost, supplies would immediately have flowed in from other countries. If tickets or counters were all that were wanted, these could easily have been provided, as McCulloch suggests, by cutting the pieces in circulation into a sufficient number of parts. It was capital, not counters, that was wanted, and relief came only when that was supplied.

But even admitting that, by reducing the amount of metal in coins, their value might be maintained from the necessity of their use, there was still an important link wanting to connect his premise with his conclusion. Gold gets into circulation by means of its value. It circulates at its value. If its amount were permanently decreased, its value would increase. This is palpable enough; but how is that which is valueless in itself to get into the category of values? It is easy to see that the value of a handful of sand circulating as money would increase as its quantity was decreased. But how was it, in the first place, to get into circulation? From the necessity, says McCulloch, of some medium of exchange, and from the agreement of mankind that sand should be such medium. After what has preceded, it is useless to reply to such assumptions as these. They are the dreams or vagaries of persons bereft of all sense in reference to the subjects to which they relate, and who, unfortunately, are wholly impervious to

reason.

Again:

"In the first part of this note we endeavored to show, in the first place, that, when the power to supply money is not restricted, its value depends, like that of most other commodities, entirely on the cost of its production; and that, in the second place, or when the power to supply money is monopolized, its value does not depend on the cost of its production; but on the quantity in circulation compared with the demand.

"It may be worth while, perhaps, to observe that neither the existence nor the want of confidence in the solvency of the issuers exercises the smallest influence over the value of paper money, properly so called. Notes not legal tender, and payable on demand, or at some stipulated period, are not paper money, though they serve the same purposes during the time they continue to circulate. The value of such notes is wholly derived from the confidence placed in the ability of the issuers to retire them when presented for payment, or when they become due. Whenever, therefore, this confidence ceases, their circulation necessarily ceases also. But no such circumstances affect paper money; meaning by paper money, paper made legal tender, and not legally convertible into gold, or any thing else, at the pleasure of the holders, or at any given period. No part, whatever, of the value of paper money is derived from such confidence. Ít circulates because it is made legal tender, and because the use of a circulating medium is indis pensable; and its value, supposing the demand to be constant, is, in all cases, precisely as the quantity in circulation. . . .

"It would not be difficult for the issuers of inconvertible paper,