"It is believed by many that Banks of issue universally, or the Bank of England in particular, have a power of throwing their notes into circulation, and thereby raising prices arbitrarily; that this power is only limited by the degree of moderation with which they think fit to exercise it; that, when they increase their issues beyond the usual amount, the rise of prices thus produced generates a spirit of speculation in commodities, which carries prices still higher, and ultimately causes a reaction and recoil, amounting in extreme cases to a commercial crisis; and that every such crisis which has occurred in this country within mercantile memory has been either originally produced by this cause, or greatly aggravated by it. To this extreme length the currency theory has not been carried by the eminent Political Economists who have given to a more moderate form of the same theory the sanction of their names. But I have not overstated the extravagance of the popular version, which is a remarkable instance to what lengths a favorite theory will hurry, not the closet students whose competency in such questions is often treated with so much contempt, but men of the world and of business, who pique themselves on the practical knowledge which they have, at least, had ample opportunities of acquiring. Not only has this fixed idea of the currency as the prime agent in the fluctuations of price made them shut their eyes to the multitude of circumstances which, by influencing the expectation of supply, are the true causes of almost all speculations and of almost all fluctuations of price; but, in order to bring about the chronological agreement required by their theory between the variations of Bank issue and those of prices, they have played such fantastic tricks with facts and dates as would be thought incredible, if an eminent practical authority had not taken the trouble of meeting them, on the ground of mere history, with an elaborate and systematic exposure. I refer, as all conversant with the subject must be aware, to Mr. Tooke's History of Prices.' The results of Mr. Tooke's investigations were thus stated by himself on his examination before the Commons Committee on the Bank charter question, in 1832, and the evidences of it stand recorded in his book. In point of fact and historically, as far as my researches have gone, in every signal instance of a rise or fall in prices, the rise or fall has preceded, and therefore could not be the effect of, an enlargement or contraction of the Bank circulation.'

"The extravagance of the currency theorists, in attributing almost every rise or fall of prices to an enlargement or contraction of the issues of bank-notes, has raised up, by reaction, a theory the extreme opposite of the former, of which, in scientific discussion, the most prominent representatives are Mr. Tooke and Mr. Fullarton. This counter theory denies to bank-notes, so long as their convertibility is maintained, any power whatever of raising prices, and to Banks any power of increasing their circulation, except as a consequence of, and in proportion to, an increase of the business to be done. This last statement is supported by the unanimous assurances of all the country bankers who have been examined be

fore successive Parliamentary Committees on the subject. They all bear testimony, that (in the words of Mr. Fullarton) the amount of their issues is exclusively regulated by the extent of local dealings and expenditures in their respective districts, fluctuating with the fluctuations of production and price; and that they neither can increase their issues beyond the limits which the range of such dealings and expenditures prescribes, without the certainty of having their notes immediately returned to them, nor diminish them, but at an almost equal certainty of the vacancy being filled up from some other source.' From these premises, it is argued by Mr. Tooke and Mr. Fullarton, that Bank issues, since they cannot be increased in amount, unless there be an increased demand, cannot possibly raise prices, cannot encourage speculation, nor occasion a commercial crisis; and that the attempt to guard against that evil by an artificial management of the issue of notes is of no effect for the intended purpose, and liable to produce other consequences extremely calamitous.

"As much of this doctrine as rests upon testimony, and not upon inference, appears to me incontrovertible, I give complete credence to the assertion of the country bankers, very clearly and correctly condensed into a small compass in the sentence just quoted from Mr. Fullarton. I am convinced that they cannot possibly increase their issue of notes in any other circumstances than those which are there stated. I believe, also, that the theory grounded by Mr. Fullarton upon this fact contains a large portion of truth, and is far nearer to being the expression of the whole truth than any form whatever of the currency theory." 1

After what has preceded, the following quotations require no comment. They relate to the question of "plurality of issue":

"There remain two questions respecting a bank-note currency, which have also been a subject of considerable discussion of late years whether the privilege of providing it should be confined to a single establishment, such as the Bank of England, or a plurality of issuers should be allowed; and, in the latter case, whether any peculiar precautions are requisite or advisable to protect the holders of notes against losses occasioned by the insolvency of the

issuers.

"The course of the preceding speculations has led us to attach so much less of peculiar importance to bank-notes, as compared with other forms of credit, than accords with the notions generally current, that questions respecting the regulation of so very small a part of the general mass of credit cannot appear to us of such momentous import as they are sometimes considered. Bank-notes, however, have so far a real peculiarity, that they are the only form of credit sufficiently convenient for all the purposes of circulation, to be able entirely to supersede the use of metallic money for internal

1 Political Economy, vol. ii. pp. 195–197.

purposes. Although the extension of the use of checks has a tendency more and more to diminish the number of bank-notes, as it would that of the sovereigns or other coins which would take their place if they were abolished, there is sure, for a long time to come, to be a considerable supply of them, wherever the necessary degree of commercial confidence exists and their free use is permitted. The exclusive privilege, therefore, of issuing them, if reserved to the government or to some one body, is a source of great pecuniary gain. That this gain should be obtained for the nation at large is both practicable and desirable; and, if the management of a banknote currency ought to be so completely mechanical, so entirely a thing of fixed rule, as it is made by the Act of 1844, there seems no reason why this mechanism should be worked for the profit of any private issuer rather than for the public treasury. If, however, a plan be preferred which leaves the variations in the amount of issues in any degree whatever to the discretion of the issuers, it is not desirable that to the ever-growing attributions of the government so delicate a function should be superadded; and that the attention of the heads of the State should be diverted from larger objects by their being besieged with the applications, and made a mark for all the attacks, which are never spared to those deemed responsible for any acts, however minute, connected with the regulation of the currency. It would be better that Treasury notes, exchangeable for gold on demand, should be issued to a fixed amount, not exceeding the minimum of a bank-note currency; the remainder of the notes which may be required being left to be supplied either by one or by a number of private banking establishments. Or an establishment like the Bank of England might supply the whole country, on condition of lending fifteen or twenty millions of its notes to the government, without interest; which would give the same pecuniary advantage to the State as if it issued that number of its own notes." "1

The preceding extracts present adequately the views of Mr. Mill and his method upon the subject of money. To quote and comment further would be to go over again the ground already many times retraced. It is doubtful whether modern literature presents a more striking example of unwarranted assumption on one side, and impotent conclusion on the other. He has all the vices of the Scotch school, without their excuse. The emancipation, however partial, of the English intellect preceded by a considerable period that of the Scotch. It was, however, inevitable that the English as well as Scotch Economists should make disastrous failure, from a total misconception of the principles upon which the science of Political Economy, if there be such, must rest, and of the

1 Political Economy, vol. ii. pp. 220, 221.

race.

methods by which every science is to be pursued. If it be the object of Political Economy to unfold the laws by which nations or communities are enriched, its first and obvious step would be a study of the most striking examples of the kind which history affords. A signal one is that of the Hebrew Their great Law-giver enjoined morality as the highest condition of material welfare. "Obey the law, and you shall have gold and silver and cattle and possessions as you do obey it." The result in their case established the value of morality as an essential condition of wealth; for this race has throughout history been alike conspicuous for its morality and wealth. But morality may be wholly wanting in that necessary for its own preservation. The lawfulness, and consequent morality, of slavery was recognized by all ancient codes, although it tended to the destruction of all virtue and all material welfare. Hence the need of a rule or principle by which morals themselves may be enlightened and guided, and conduct subjected to a sense of duty, — to a law higher than that of human enactment. Such a principle or sense abolishes slavery, and so becomes a far more potent force than morality itself. Without it, all the obligations that morality can impose can never maintain society at its proper level and bent. This proposition, then, being established, the next question arises, Where is the most perfect expression of this principle to be found? History points to the teachings of Christ. We must weigh and estimate all teachings by their results. If Christianity, as a principle, appear to have exerted a more powerful influence over the race than any other statement or revelation of the kind; if it attack more effectually than any other the wrongs and vices which afflict society, and if by its observance the greatest degree of material prosperity be secured, — then the record of its teachings should become, as it were, the primer of the Political Economist. The conclusion seems to be irresistible. Christianity is not a dogma nor a system: these are conditions imposed upon and foreign to it. It is secular at the same time that it is religious. It forbids an act like the expulsion of the Moors from Spain, and the revocation of the Edict of Nantes, as wrongs done as much to the material as to the moral welfare of the authors of those monstrous crimes. As ethnic religions have no proper sense of the infinite immorality and improvidence of such acts, the necessity for a

higher rule for their guidance and control is at once apparent. Moral and material prosperity must always go hand in hand but as the idea or intent must always precede the act, and as every act must be followed by its appropriate sequence or reward, the first thing always to be considered is the germ, the motive, that led to it. Political Economy, therefore, as a science, if it be such, must include in its range every motive and principle that can influence human action, as well as every method or law of human progress or acquisition. That "the meek shall inherit the earth" was not stated as a matter of sentiment, -as compensation for losses, sufferings endured, but as illustrating the power resulting from proper spiritual conditions, -conditions through which the best gifts of Providence, material as well as moral, come to the race. It may yet be seen that the injunction to give the coat where the cloak is taken expresses a principle most perfectly calculated for the protection of property, although its higher meaning may not yet have penetrated this "muddy vesture of decay." The Economists Have not even comprehended the grounds upon which the science, if there be such, must rest. They begin by erecting their petty postulates, which partake of their own weakness; and from these proceed to deduce the law of human life and progress, and even the nature of the Supreme Being himself. As the postulates of each necessarily express the peculiarities of each, the result is universal chaos of opinion and statement, without any possible means or stand-point for reconciliation. Mr. Mill, the great apostle of the modern school, expressed its condition when he declared that Adam Smith, the great apostle of the old, "is in many respects obsolete; in all, imperfect." Principles, certainly, cannot become obsolete; and, if Smith have become so, it is only because he was wanting in them. Each one has his own system; and if he borrow any thing from another, it is always with a qualification to show his own superiority. They have all moved so long in their little spheres, without once seeking wisdom from a source higher than their own, that the race has become effete, not a few of them being only a little removed from a condition of mental imbecility.

An illustration, perhaps still more striking and pertinent than that afforded by the Hebrews, of the dependence of