portance. It is the one in regard to which doctrines opposed to those of the Bullion Report are most frequently affirmed and most profoundly believed amongst us, and there is no hope of any exit from our circumstances until we get to understand the laws which govern the distribution of the precious metals, and those laws of currency which are connected therewith. It will be remembered, as stated above, that the question about the exchanges is really this question: If the exchanges are adverse to such a degree as to produce a serious and prolonged outflow of the precious metals, where must we look for the cause? Is it due to the balance of payments, or to some deterioration of the currency? Or, to put the same question in another form: If we desire to produce an influx of gold, to what force must we look to cause it? Must we look to the balance of trade,' or can we do any thing in the matter save sit still and wait for the balance of trade to turn? Can we bring it about by correcting some error in the currency?

"The answer to these questions given in the report, and by those who supported it, is, that the balance of imports and exports never can move the exchanges, either above or below par, more than just enough to start a movement of bullion. On a specie system, any outflow of bullion would bring down prices, and immediately make a remittance of goods more profitable than one of bullion; and, if the exportation of bullion was artificially continued (as, for instance, to pay the expenses of a foreign war), it would reduce prices until a counter current would set in and restore the former relative distribution all the world over. . . . If, therefore, there is an outflow of gold, serious and long continued, accompanied by an unfavorable exchange, it is a sign that there is an inferior currency behind the gold, which is displacing it. The surplus of imports of goods above the exports of goods is nothing but the return payment for this export of gold, and is not a cause, but a consequence. If, finally, we want to turn this tide and produce an influx, there is only one way to do it; and that is simply to remove the inferior currency. As for waiting for the balance of trade to turn and bring gold into a country which has a depreciated paper currency, one might as well take his stand at the foot of a hill, and wait for it to change into a declivity before climbing it.

"The authorities of the Bank strenuously denied that their issues, so long as they were made at five per cent on bills representing real transactions, at three months' date, could become excessive. The Committee and their supporters held that this rule would not be a guarantee against inflation, but that, if the exchanges were adverse, and bullion was being exported, it was a sign that the paper was excessive, and that the Bank should check its issues. The Bank maintained that it had nothing to do with the exchanges, and could not govern its issues by any reference to them. The bullionists maintained that while the paper was inconvertible, the adverse exchange and the premium on gold were the only signs by which the Bank could judge when its issues were excessive. Thus the real issue was, whether, in case of a drain of specie, we must look at the ratio of imports to exports, or at the ratio of paper cur

rency to requirement, for the explanation of it and the means of checking it."

1

"There is no such thing or condition," says Mr. Sumner, "as balance of trade. If it means equilibrium, it may be used correctly to denote the equality of exports and imports; but then it regulates itself, and no power can control it. If it means remainder, and suggests analogies of book-keeping, it is a mere myth, to which no fact corresponds, and is to be entirely rejected." If a country export gold, it receives, he says in common with the Economists, an equal value of merchandise. If it import it, it exports an equal value of merchandise. Where is the "balance of trade" in transactions that mutually balance the one the other? they triumphantly ask, as if that were an end of the whole question. But is it certain that countries, in parting with their gold, always receive an equivalent, and are no worse off therefor? Suppose an individual possessed of a thousand dollars in coin to expend it in the purchase of the necessaries of life even, his means are reduced in like ratio. If he would reinstate his former condition, he must forego future expenditures to an equal amount. So, if a person run into debt to his shopkeeper to the amount of a thousand dollars, if he would pay it, he must forego a like amount of his future earnings. His indebtedness until paid would very properly be termed a balance of trade against him. So with a nation. If it import more in value of ordinary merchandise than it exports, its specie will have to go to make up the deficit. Now, no nation not producing gold can part with any considerable amount of it without causing embarrassment to its industries and trade; for the reason that that which it possessed and exported was a part of the machinery by which these were carried on. The tendency of the precious metals the world over is to distribute themselves according to the means and needs of those using them. If there be no movement in any direction, it is assumed that they are in proper equilibrium. If this be disturbed in any country, it must be restored. If England, for example, from any cause, lose £10,000,000 in coin, she must bring the amount back again, in order to prosecute her industries on their wonted scale. Now the imports that are made by an export of gold

1 History of American Currency, pp. 262-266.

will always embrace a large number of articles which the nation might as well be without as with. The export of a large amount of coin is usually due to a vicious paper currency, and such a currency is always attended with wasteful expenditure. So far, the position of a nation is relatively weakened; for she has parted with that which is essential to her welfare, and must be reclaimed by future accumulations. Mr. Sumner admits that the condition of things described may exist, but says that no "balance of trade " has resulted: only that from an inferior currency an excess of a particular commodity has been exported, to be brought back by the re-exportation of that received for it, or its equivalent; and that, as soon as the inferior currency is removed, the equilibrium will restore itself. Admitting the cause, has not the export of coin resulted in a loss? and, if so, may not the loss as well be described as an "unfavorable balance of trade" as by any other term? Nor is there any want of scientific accuracy in that ordinarily used. The condition is something more than mere myth, Mr. Sumner's flippant assertions to the contrary. A nation that has parted with its coin, which has to be brought back again, would have been much better off had it never parted with it. That which has been received will never suffice to bring it back; and, if it would, the charges of transportation and interest would involve a large loss; so that, after all, "balance of trade" is a veritable fact, and always exists to a greater or less extent in commerce between nations, and must always exist until human affairs reach the accuracy and certainty of natural laws.

But what is an "inferior currency"? One kind is the inconvertible notes of government, issued not for the purpose of loaning capital, but to supply the lack of it. The demand for merchandise must increase in ratio to its amount; for it is always superadded to the existing currencies. As such notes are always made legal tender, they not only drive coin out of the country, but keep it out till they are retired. Such a currency admits of no corrective by the laws of trade. Another "inferior" currency is that issued by Banks, without a constituent. This exerts, in the outset and to the amount of its issue, precisely the same effects as the notes of government. Both equally tend to drive coin out of the country, from the

consumption of foreign fabrics to which they lead. But, as their paper is convertible into coin, the Banks must supply the gold to meet the expenditures that have been made. The remedy, therefore, is speedily applied by the laws of trade. They must pay for the excess of imports over exports from their reserves. It is impossible, however, for them to tell whether all the bills discounted by them have their proper constituent they can only determine the fact by the result. If they see gold beginning to move, they understand at once. that improper bills have been discounted; that the currency has been issued in excess, and must so far be taken in by a reduction of their line of discounts. The movement of gold, therefore, is an indication of the state of the currency, as infallible as is that of the mercury of meteoric conditions. It is the thing of all others upon which an issuer of currency, at the great centres of trade, must keep his eye steadily fixed, and by which he must daily adjust all his operations.

Mr. Sumner's test of an "inferior currency" is very different from that which has been described. With him, it is not a question of quality, but of quantity. It is never "inferior," so long as its amount does not exceed that required by a country in its exchanges, even if it be not backed by a single dollar of coin. The conclusion of the Bullion Committee was, to use his own words, "that the value of an inconvertible currency depends upon its amount, relatively to the needs of a country for a circulating medium; and only to a very subordinate degree upon the security on which it is based, or the credit of the issuer." Their conclusions, he tells us, that the value of money depends upon its quantity, not upon the provision made for its convertibility," are not matters of opinion, but of demonstration." If so, then it is a matter of demonstration that one and one make four. It has been shown over and over again, in this discussion, that the real or estimated value of articles, whether they be merchandise or money, is their exchangeable value. To assume otherwise, would be to say that the exchangeable value of a piece of silver having the weight and insignia of a sovereign equals the value of a sovereign. Humanity is not yet brought to so low a pitch as this. Even the Economists are by no means the simple race their theories would make them. In spite of the conclusions of the Bullion Committee, which, with Mr. Sum

ner, are the very acme of financial wisdom, he would be the last man to take a bank or government note without especial reference to the provision made for its discharge. If their creed were their law, a few days would suffice for the Economists to fool away whatever they possessed.

The following extracts from a work entitled "The Elements of Political Economy," by Mr. A. R. Perry, Professor of Political Economy in Williams College, are given as an additional evidence of the kind of pabulum which is dealt out to the young men in our colleges. He has all the incoherence of Bonamy Price, though somewhat less of his rant. The reader can make his own criticisms.

"There is no use in saying that money is such a mysterious and complicated agent that nobody can understand it. That is the language of indolence. Money is wholly a matter of man's device: it was invented, just as any other instrument is invented, to accomplish a certain purpose; and it would be strange if men cannot comprehend what men themselves have devised.

"The word 'money,' a medium of exchange, is to be taken in its etymological and strict sense, as something that comes between two extremes, and serves also to relate them to each other. Money is only a medium of exchange, and not a real subject of exchange : it is a very great help in exchanging all other things, but is never exchanged for itself in an ultimate transaction.

"Probably the ratio of one to forty is below, rather than above, the true ratio of the aggregate money of the commercial nations to the money value of their products, reckoned only once, which their money helps to exchange. Therefore we see that the hub and spokes and rim of the wheel of exchange consist of services and commodities of every description; while, to borrow the famous comparison of Hume, money is but the grease which makes the wheel turn easier. It is a vast mistake to suppose that the grease is the wheel itself."

"The difference between money as a medium and money as a measure is one that should be clearly delineated and perfectly apprehended, because there is no such thing as adequately understanding the subject of money, unless the two functions be kept distinct in the mind, as well in their single as in their commingled action. There is the same difference between money as a medium and money as a measure that there is between a bushel of wheat and that round vessel by which we determine that there is a bushel :

1 Elements of Political Economy, p. 188.

2 Ibid., p. 193.

Ibid., pp. 195, 196.