"If the circulation," continues Huskisson, "of any country were performed exclusively by gold, for instance, and the supply of that metal in any such country were, from any imaginable cause, doubled, whilst the quantity of gold and the demand for it should continue the same in all other markets of the world, the value of gold in such country would be diminished. This diminution in the value of gold would appear in the proportionate rise of all commodities; but gold, being so much cheaper in the country in which its quantity had been increased, it would be bought by other countries, and exported from that country till its value was restored again to a level in the different parts of the world.

"If the circulation of a country were supplied partly by gold and partly by paper, and the amount of that circulation were doubled by an augmentation of that paper, the effect upon prices at home would be the same as in the former case; but gold not becoming, by this augmentation of currency, more abundant in such country than in other parts of the world, as a commodity its relative value to other commodities would remain unaltered. As a commodity also, its price would rise in the same proportion as that of other commodities; although, in the state of coin of which the denomination is fixed by law, it could only pass current according to that denomination.

"When paper is thus augmented in any country, the exportation of the gold coin, therefore, will take place; not because gold, as a commodity, is become more abundant and less valuable with reference to other commodities in such country, but from the circumstance of its value as currency remaining the same, while its price in that currency is increased in common with the prices of all other commodities. So far as such exportation takes place, the diminution which it effects in the total amount of the currency has a tendency to support the value of the remainder, just as much, and for the same reason, as if, in the case of the circulation consisting wholly of gold, first an augmentation, and then an exportation to the same amount, had taken place, according to the first supposition. "An excess of paper has, in the first instance, the same effect upon prices as an excess of the precious metals, to the same amount, would have, in any particular country. But it does not admit of the same relief: it cannot right itself by exportation. "The currency of a country, then, is depreciated,

"1. If its standard coin contain less of gold or silver than it is certified to contain. In that case, the paper, as representing the coin, is also depreciated, and precisely in the same degree as the coin.

2. If the standard coin being of full weight, and the paper which represents that standard coin, and is, or purports to be, exchangeable for it, is not exchangeable, at the same time, for so large a quantity of gold or silver as is contained in the coin which it represents. In that case, the coin, though undiminished in value, must, as part of the currency, partake of the depreciation of the whole.

“Consequently, if the coin be itself, as coin, depreciated, the paper which circulates with it cannot be otherwise than depreciated to the same degree. But if the coin be undepreciated as coin, and

there be, notwithstanding, a depreciation of the general currency, the cause of that depreciation can only be in the paper; and that cause can be no other than the excess in which that paper is issued."1

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In the case supposed, where the currency was supplied partly by gold and partly by paper, and the two were of equal value, the latter must have been symbolic. If such a currency be doubled, the whole increase being, as Huskisson assumes, of the kind previously in circulation, there would be no inflation. Prices would, in reference to money, remain unchanged. So long as gold and paper possessed the same value, an increase, or, rather, an inflation, of the currency, would not inflate or increase the price of gold bullion, - gold as merchandise, while it might increase the value of all other kinds of merchandise, for the very good reason that gold cannot rise in value in reference to itself; that is, a sovereign after the inflation would purchase the same amount of bullion as before. Huskisson took precisely the ground of Lowndes, who would "raise the value of silver in the coins to the foot of 68. 3d. in every crown, because the price of standard silver in bullion had risen to 6s. 5d. the ounce.' This was the very proposition that Locke was at such pains to refute, - that the value of silver cannot rise in reference to silver. Huskisson's assertion was only the old impossibility over again.

So long as coin would purchase no more than an equal nominal amount of paper, gold would have no more tendency to go abroad than before such increase. Indeed, its tendency would be inward to provide adequate reserves for the increase of paper. If the currency were inflated, that is, if it did not to its full extent represent merchandise other than gold, it might still remain at par with gold, provided the parties who issued it possessed sufficient reserves. If adequate provision, either in merchandise or coin, were not made for its redemption, it would become depreciated: it would not be exchangeable for an equal quantity of gold, nor would it command an equal amount of merchandise with gold, no matter whether it rested upon confidence or authority. The value of gold would not be influenced in any degree by the amount or value of the paper outstanding. That of the former would still depend

1 Question Concerning the Depreciation of our Currency, pp. 26-29.

upon cost that of the latter, upon cost and demand. If the latter rested upon confidence, its depreciation would tend to bring gold into the country; for it would be disused so soon as a currency that was not depreciated could be got to fill its place. Currency resting upon confidence that is depreciated. always speedily goes out of circulation. If it rested upon authority, which was really the fact with regard to the Bank of England currency during the suspension, and was issued in very large amounts, it would, in great measure, drive the coin previously in circulation out of the country. But this fact would not tend, in any degree, to raise the value of the currency "resting on authority." Its value in exchange would be its estimated value. The exportation of coin would tend to reduce the value of such currency, instead of raising it, by rendering it all the more difficult to resume, from the impoverishment of the people, which would be measured by the amount of gold — capital— that had been drawn from them. Huskisson's assumptions, therefore, in whatever light viewed, are exactly opposed to the fact. It is wholly beyond the power of government to create the values upon which a currency must rest, except in the manner already described. If it be competent for it to make its notes legal tender, then they may, for a time, have a value for those who can use them exceeding their intrinsic value. But such accidental value would be lost so soon as the contracts existing at the time of their issue were discharged.

As money resting upon confidence or authority was with Huskisson equally a measure of value with gold, the decline in the value of the former, from whatever cause, carried down, and equally, the price of the latter; for the reason that one competent measure of value must be equal in potency or effect to any other competent measure. This is the way he reasoned in an essay the whole scope and object of which was to prove the exact opposite, that the paper money of the country, though declared to have a value equal to that of an equal nominal amount of gold, did not possess such value; that the values of the two, though equally supported by authority, had no necessary relation the one to the other; and that their wide divergence was well calculated to excite the most profound alarm. He could not go into the market to make any purchase, without having thrust into his hand two scales of prices,

one in paper, the other in gold; yet, in the face of all this, he was so tied to tradition as to assert that money resting upon authority the assignats of France and the Revolutionary Currency of the United States was as competent a measure of values as gold and silver.

Immediately following Huskisson, but of much greater reputation and influence upon the subject of money, and whose writings reflected far more vividly the ideas of the Bullion Committee, was the celebrated David Ricardo, the author of several works upon money and kindred subjects, who has always been one of the great authorities in Political Economy. He was actively engaged in business as a banker during almost the whole period of the restriction. In 1809, he published a "Treatise on the Price of Bullion;" in 1816,"Proposals for an Economical and Secure Currency;" and, in 1817, his great work entitled "The Principles of Political Economy and Taxation," esteemed by the Economists to be the most important treatise on that science, with the single exception of Smith's "Wealth of Nations." As he was a member of Parliament, and took a leading part in the debates on the Restriction Act, his writings are of especial value as illustrating the opinions prevailing at the time. He is the central figure among the later school of Economists, as Smith is among the old. The latter lived almost wholly in an ideal world. The former was as wanting in ideas as the latter in knowledge of affairs. Accepting without reservation the theory of Smith, that value was not a necessary attribute of money, Ricardo was driven to explain the principle on which it circulated. He made short work of it, by declaring that money became such by virtue of the insignia of government; that its value was in ratio to its quantity, that the most worthless pieces of paper, or the most debased coin, might be raised to the highest pitch of value simply by limiting their amount. In the same way, as will be hereafter seen, when called upon to reconcile Smith's doctrines of Free-Trade with the apparent necessity for Protection, he invented a dogma, which, so far as the doctrine of rent is concerned, is now universally accepted, — that prices are regulated by the least and not by the most favored of producers; that the least favored is certain of a profit, although far below that of the most favored; and, consequently, that the value or price of merchandise depends upon cost alone.

"The quantity of money," he says, "that can be employed in any country must depend upon its value. . . . A circulation can never be so abundant as to overflow; for, by diminishing its value, you will in the same proportion increase its quantity, and, by increasing its value, diminish its quantity. . . .

"While the State coins money, and charges no seigniorage, money will be of the same value as any other piece of the same metal of equal weight and fineness; but, if the State charges a seigniorage for coinage, the coined piece of money will generally exceed the value of the uncoined piece of metal by the whole seigniorage charged, because it will require a greater quantity of labor, or, which is the same thing, the value of the produce of a greater quantity of labor, to procure it.

"While the State alone coins, there can be no limit to this charge of seigniorage; for, by limiting the quantity of coin, it can be raised to any conceivable value.

"It is on this principle that paper money circulates: the whole charge for paper money may be considered as seigniorage. Though it has no intrinsic value, yet, by limiting its quantity, its value in exchange is as great as an equal denomination of coin or of bullion in that coin. On the same principle, too, namely, by a limitation of the quantity, a debased coin would circulate at the value it should bear if it were of the legal weight and fineness, not at the value of the quantity of metal which it actually contained. .

"After the establishment of Banks, the State has not the sole power of coining or issuing money. The currency may as effectually be increased by paper as by coin: so that if a State were to debase its money, and diminish its quantity, it could not support its value; because the Banks would have an equal power of adding to the whole quantity of circulation.

"On these principles, it will be seen that it is not necessary that paper money should be payable in specie to secure its value it is only necessary that its quantity should be regulated according to the value of the metal which is declared to be its standard. If the standard were gold of a given weight and fineness, paper might be increased with every fall in the value of gold, or, which is the same thing in its effects, with every rise in the price of goods

"Dr. Smith appears to have forgotten his own principle in his argument on colony currency. Instead of ascribing the depreciation of that paper to its too great abundance, he asks whether, allowing the colony security to be perfectly good, a hundred pounds payable fifteen years hence would be equally valuable with a hundred pounds to be paid immediately. I answer, Yes, if it be not too abundant.

"Experience, however, shows that neither a State nor a Bank ever have had the unrestricted power of issuing paper money, without abusing that power. In all States, therefore, the issue of paper money ought to be under some check and control; and none seems so proper for that purpose as that of subjecting the issuers of paper money to the obligation of paying their notes, either in gold coin or bullion.

"A curren is in its most perfect state when it consists wholly