ruling natural laws, in order to give consistency to his theories or schemes.

Suppose the government of the United States to undertake the issue of a currency by a commission having its office in the City of New York, as the commercial centre of the country, upon what principle or rule would it act? How would the right of a person to receive this currency be ascertained? If it were issued in the discount of bills, how could the sufficiency of their makers be determined? By evidence, of course, - by proof of their solvency. It might require a day to collect and weigh the evidence presented in any one case, so that the commission might be able to make only a few hundred loans each year; no more than could be made by any one of the twenty-two hundred Banks in the country. How would such a commission, having no capital, take in its notes when presented for payment? Large losses would inevitably be incurred. How would these be made good? If any doubt were thrown upon the ability of the commission to redeem its notes when presented, no one would receive them, or, if in circulation, they would speedily be returned for payment in coin. The moment the plan of a single office of issue is examined, its absurdity is so palpable as to transcend all argument. Government might with the same propriety undertake to supply its people with food and clothing as with money. Money is the equivalent of food and clothing.

"In another part of this work" says Ricardo, "I have endeavored to show that the real value of a commodity is regulated, not by the accidental advantages which may be enjoyed by some of its producers, but by the real difficulties encountered by that producer who is least favored. It is so with respect to the interest for money it is not regulated by the rate at which the Bank will lend, whether it be 5, 4, or 3 per cent, but by the rate of profits which can be made by the employment of capital, and which is totally independent of the quantity or of the value of money. Whether a Bank lost one million, ten millions, or a hundred millions, they would not permanently alter the market rate of interest: they would alter only the value of the money which they thus issued. In one case, ten or twenty times more money might be required to carry on the same business than what might be required in the other. The applications to the Bank for money, then, depend on the comparison between the rate of profits that may be made by the employment of it, and the rate at which they are willing to lend it. If they charge less than the market rate of interest, there is no amount of money which they might not lend. If they charge

more than that rate, only spendthrifts and prodigals would be found to borrow of them. We accordingly find, that, when the market rate of interest exceeds the rate of 5 per cent, at which the Bank uniformly lends, the discount office is besieged with applicants for money; and, on the contrary, when the market rate is even temporarily under 5 per cent, the clerks of that office have no employ

ment.

"The reason, then, why for the last twenty years the Bank is said to have given so much aid to commerce by assisting the merchants with money, is because they have, during that whole period, lent money below the market rate of interest; - below the rate at which the merchants could have borrowed elsewhere; but I confess, that to me this seems rather an objection to their establishment than an argument in favor of it.

"What should we say of an establishment which should regularly supply half the clothiers with their wool under the market price? Of what benefit would it be to the community? It would not extend our trade, because the wool would equally have been bought if they had charged the market price for it. It would not lower the price of cloth to the consumer; because the price, as I have said before, would be regulated by the cost of its production to those who were the least favored. Its sole effect, then, would be to swell the profits of a part of the clothiers beyond the general and common rate of profits. The establishment would be deprived of its fair profits, and another part of the community would be in the same degree benefited. Now this is precisely the effect of our banking establishments. A rate of interest is fixed by the law below that at which it can be borrowed in the market; and at this rate the Bank is required to lend, or not to lend at all. From the nature of their establishment, they have large funds which they can only deal with in this way; and a part of the traders of the country are unfairly, and for the country unprofitably, benefited, by being enabled to supply themselves with an instrument of trade at a less charge than those who must be influenced only by market price."1

It was upon the theory that the least favored, not the most favored, control prices, that Ricardo built his doctrine of rent, now universally accepted by the Economists. According to this, the cost at which a farmer can afford to sell a bushel of corn produced among the hills of New Hampshire regulates the price which one producing it upon the bottom lands of Illinois can obtain for it; or the cost at which cloth can be produced by the spinning-wheel and hand-loom regulates the price which can be obtained for that produced by the most approved machinery. The difference of cost of production between the two methods is profit to the most favored. This assumption was preceded by another, for which Ricardo has been 1 Principles of Political Economy and Taxation. Chap. xxv.

greatly praised, - that price is regulated by cost alone. The one is a proper sequence of the other. His doctrine, if true, is a most comforting one to all classes. By it the least favored are secured from loss, while the most favored are certain of enormous profits. None can be losers, all will be gainers, and mankind will at once enter upon a financial millennium. Poverty will be banished from the earth. Unfortunately, the very reverse of this picture is too often the rule. The most favored often find themselves in the greatest straits; and, if they can sustain themselves, may have to work for years without any profit whatever. What, in such case, becomes of the least favored? They are, as it were, swept out of existence. Ricardo's assumption, consequently, is exactly opposed to the universal experience of mankind. The Bank, in the case supposed, was enabled to loan below the market rate from being the most favored of lenders. It was intrusted with the custody of immense sums, upon which it paid no interest. The public were gainers in ratio to the lowness of the rates charged, as the capital loaned became the basis of production or distribution, the price of the product being in ratio to the price of capital. That the Bank favored one class more than another was unquestionably a pure fiction. The rates at which it loaned depended, as they will always depend, upon the goodness of the security offered. Those who offered the best fared the best. There was in all this no injustice, but the greatest justice. Reward followed desert. If, in the case supposed, an institution supplied one-half the clothiers with wool under the market price, what would be lost on one hand would be gained on the other, as the price of the product would be in ratio to the cost of the material. The illustration, however, goes for nothing; for there never was and never will be a case in which the arbitrary distinctions he supposed were made.

The following extract will show the manner in which Ricardo proposed to establish an Economical and Secure Currency:

"A well-regulated paper currency is so great an improvement in commerce, that I should greatly regret if prejudice should induce us to return to a system of less utility. The introduction of the precious metals for the purposes of money may, with truth, be

considered as one of the most important steps towards the improvement of commerce and the arts of civilized life; but it is no less true, that, with the advancement of knowledge and science, we discover that it would be another improvement to banish them again from the employment to which, during a less enlightened age, they had been so advantageously applied.

"If the Bank should be again called upon to pay their notes in specie, the effect would be to lessen greatly the profits of the Bank, without a corresponding gain to any other part of the community. If those who use one and two, and even five, pound notes should have their option of using guineas, there would be little doubt which they would prefer; and thus, to indulge a mere caprice, a most expensive medium would be substituted for one of little value.

"Besides the loss to the Bank, which must be considered as a loss to the community, general wealth being made up of individual riches, the State would be subjected to the useless expense of coinage; and, on every fall of the exchange, guineas would be melted and exported.

"To secure the public against any other variations in the value of the currency than those to which the standard itself is subject, and, at the same time, to carry on the circulation with a medium the least expensive, is to attain the most perfect state to which a currency can be brought; and we should possess all these advantages by subjecting the Bank to the delivery of uncoined gold or silver at the mint standard and price, in exchange for their notes, instead of the delivery of guineas; by which means paper would never fall below the value of bullion without being followed by a reduction of its quantity. To prevent the rise of paper above the value of bullion, the Bank should be also obliged to give their paper in exchange for standard gold at the price of £3 178. per ounce. Not to give too much trouble to the Bank, the quantity of gold to be demanded in exchange for paper at the mint price of £3 178. 10d., or the quantity to be sold at the Bank at £3 178., should never be less than twenty ounces. In other words, the Bank should be obliged to purchase any quantity of gold that was offered them, not less than twenty ounces, at £3 17s. per ounce, and to sell any quantity that might be demanded at £3 178. 10d. While they have the power of regulating the quantity of their paper, there is no possible inconvenience that could result to them from such a regulation.

"The most perfect liberty should be given, at the same time, to export or import every description of bullion. These transactions in bullion would be very few in number, if the Bank regulated their loans and issues of paper by the criterion which I have so often mentioned, namely, the price of standard bullion, without attending to the absolute quantity of paper in circulation." 1

Ricardo would maintain the value of paper money by having it represent gold, but would prevent a resort to gold by throw1 Proposals for an Economical and Secure Currency, Section iv.

ing inconveniences in the way of its use. He assumed, of course, that only a small amount of gold would be required to meet occasional calls; for nothing would be gained, provided the amount of gold to be held in reserve equalled the amount of notes issued. But, if it were optional with the public whether or not they would receive the notes of the Bank, they would not receive them, if they could get nothing for them but bullion. They would not subject themselves to the expense, delay, and annoyance of having the bullion that might be paid them coined. Ricardo proceeded upon the assumption, that what the public wanted was currency, a medium of exchange, not capital. If perfect freedom were allowed, the people, Ricardo says, from mere caprice, would indulge in a most expensive medium, in place of one of little or no value. Such caprice must not be submitted to. It must be corrected by the inconvenience of indulging it. This inconvenience must exceed the convenience of the use of coin over bullion. If no one would go after it, the Bank or mint would be under no necessity to maintain on hand any considerable quantity, while there would be no occasion to coin even such quantity. In this way, says Ricardo, a perfect currency would be realized; costing nothing in itself, yet always at the standard of coin! He would invite the whole world to a Barmecide feast, crowned with every thing but that necessary to gratify the appetite. One such feast would be enough for those invited to it; for, it is to be feared, that, had Ricardo received the treatment properly due to the giver of such an entertainment, his barren nature would hardly have imitated the generous and hospitable spirit of the inventor.

Whoever follows the Economists must make up his mind to be surprised by no folly or absurdity which he may meet: he is in the land of delusions and dreams. The moment one crosses the line between the world of affairs, and the world of theories which relate to money and subjects kindred to it, his whole nature seems changed. He has drunk of the cup of Circe till he is deprived alike of sense and reason. Ricardo pos

sessed in an eminent degree the gift of money-making, and undoubtedly ranked high as a man of affairs. He, however, no sooner took up his pen than he seemed instantly discharged of all reasoning faculty. In the same sentence, he could affirm propositions exactly opposed the one to the other, without the