were they so disposed, to preserve its value on a par with that of gold or silver. Suppose, for example, that there are no gold coins in circulation in Great Britain, and that our currency consists wholly of inconvertible paper issued by government, or by a board acting under its orders; under these circumstances, it is quite plain that no gold would be imported, either to be used as money or to be kept as reserves in the coffers of the bankers. But the demand for it in the arts would, notwithstanding, cause it to be imported in large quantities; and it might still be made a standard by which to regulate the issues of paper. Thus, when the holders of £3143 (£3 178. 10d.) of paper could readily exchange it for one ounce of gold bullion of 22 carats fine, it would be a proof that it was exactly of the same value as gold, and that, consequently, its quantity should neither be increased nor diminished. But if more or fewer than £313 in paper were required to buy an ounce of bullion, it would show, in the one case, that the value of paper had fallen too low, and that its quantity should be lessened; and, in the other, that its value had risen too high, and that its quantity should be increased. By acting in this way, or, which is substantially the same thing, by attending to the exchanges, and lessening the supply of currency when they begin to fall, and increasing it when they begin to rise, the value of paper money might be kept very nearly on a level with the value of the metallic money that would circulate in its stead were it withdrawn. This conduct is that, in fact, of every prudent banker obliged to pay his notes on demand. He does not defer narrowing his issues until a heavy drain for bullion has set upon his coffers, but sets about their contraction the moment he observes the price of bullion rising, and the exchanges falling; enlarging them under the opposite circumstances. The obligation to pay in bullion compels attention to be paid to principles that might otherwise be contemned; but that is all, and hence it follows, that, if sufficient security could be obtained that the power to issue inconvertible paper would not be abused, and that its amount would be enlarged and diminished so as to preserve its value on a par with gold, the latter might be entirely dispensed with for all pecuniary purposes, except as a standard, though it might still be expedient to use a subsidiary silver and copper currency, as at present, for small payments."1 16 It is very true, that, if £3143 of paper would exchange for one ounce of gold, twenty-two carats fine, the value of one would equal that of the other. But was not Mr. McCulloch a little hasty in assuming an inconvertible government note of the nominal value of an ounce of gold, to be of equal value, and exchangeable therefor? It is to be remembered, that it was not necessary that any provision should be made for its payment, or even that it should ever become due. It 1 Notes to Smith's Wealth of Nations, pp. 489-491. circulated, not from any value it possessed, but from the necessity for its use as a ticket or counter of exchange. Neither was it necessary that it should be made legal tender. Suppose government to set up a board for the issue of inconvertible notes. How are these to be issued? Would any thing be paid to the board on their issue? If not, then there would be likely to be no little scramble for them; as they would be worth a struggle, so long as they would sell in the market at one-half per cent of their nominal value. If any thing were to be paid, how much? If fifty per cent of their nominal value, then those who received them would sell them at a trifling advance for the profit to be made. They would only, however, command their value; for no one would pay more when he could get them himself by application to the board. They would sell, therefore, only at their worth or cost. How was any excess issued to be taken in? By paying out, of course, a corresponding amount of coin. The board, then, must start with some provision therefor. Such provision, in order to secure that degree of confidence necessary to cause them to circulate as currency, must, in some form, equal their whole value. They would be subject to the same laws as all other kinds of currency. Who is to supply such provision? Those, of course, who receive the notes. Those who derive no advantage therefrom are not to stand in the gap. If those to whom the notes were paid could only get their value or cost in exchange, their nominal would be made to express their real value, if only as a matter of convenience. If the process be traced, it will be seen that notes can get into circulation as money, only in the manner in which they do get into circulation, and that the inconvertible ones of Mr. McCulloch (for the notes supposed by him were not to be legal tender) could not get into circulation at all. It is certainly useless to repeat his folly by replying to assertions which the briefest examination shows to be wholly gratuitous and false. Again: "But, notwithstanding the economy of money, and the saving of risk and trouble resulting from the use of bills of exchange and Banks of deposit, there is still a very heavy expense attendant upon the employment of the precious metals as currency. The impossibility of employing bills of exchange in the settlement of the great majority of transactions renders the employment of a large quantity of money indispensable; while the State loses the whole value of the bullion or capital that is locked up in the coffers of the deposit Banks. Should, therefore, means be devised for fabricating that portion of the currency required for the settlement of such transactions as cannot be adjusted by bills of exchange, of some material having little real value, the cost of its maintenance would be proportionally diminished; and the bullion in the coffers of the deposit Banks would be disengaged for other purposes. Of the materials suggested for this purpose, paper has been by far the most generally resorted to, and is in every respect the most eligible. By using paper instead of gold, we substitute the cheapest in room of the most expensive currency; and enable the society, without loss to any individual, to send abroad all the coins rendered superfluous by the use of paper, getting in return from the foreigner an equivalent in raw materials or manufactured goods." McCulloch objects to the use of coin as money, from its excessive cost. It is to be supplemented, in consequence, by paper. Still, to render this paper convertible into coin or its equivalent, considerable sums of the latter have to be maintained. Such a system, he says, is very imperfect. To render it perfect, the reserves of coin now held should be supplied by some material costing nothing. The whole amount of the precious metals in the country might then be sent out of it, in exchange for useful merchandise or machinery. The monetary millennium would then dawn on the world. But what does every one seek in exchanging that which he possesses? To better his condition; to get something which will be more valuable to him than that with which he parts; in order to have that which, when he wishes to use it, will bring to him the greatest possible amount of values in other forms. Gold and silver, therefore, are always demanded in exchange, for the reason that they are values in their highest forms. The whole effort of mankind is to convert its industries and products into such values, or into that which shall produce them; and which, till its possession be demanded, is drawing interest in kind for the benefit of the party entitled to it. The whole effort of nature is in the same direction, to convert lesser into greater valMcCulloch and the Economists would invert all this order, by converting whatever a person has to sell, not into the most valuable, but into the least valuable form. Could they have their way, six months would suffice for them to - 1 Notes to Smith's Wealth of Nations, pp. 487, 488. point out the last man;" for they are pests which seem Likely to survive to witness the final doom. McCulloch fully sustained the policy of Sir Robert Peel in the Act of 1844. on the ground that the whole currency shoulà vary in amount and value exactly as a metallic currency woul do were the paper currency withdrawn and coin substituted in its place. In order to a perfect currency, he would in aother place, have it consist of a material wholly costless in itself, the value of which was to be derived wholly from its use in the exchanges. He re-enforced his argument in favor of restriction upon the issues of paper by the following reference to the system of the United States: "If the reason of the thing, and the revulsion and bankruptcy it has repeatedly occasioned in England, had not been sufficient to convince the Parliament and the public of the propriety of restrict ing the issue of notes, the example of America would have supplied the deficiency. There are Banks of issue in all considerable towns throughout the Union; and the different State legislatures have exhausted their skill in devising schemes for the regulation of these Banks, by ordering that certain portions of their capital shall be paid up before they begin business, and that the amount of their issues and engagements of all sorts shall be governed by the amount of this paid-up capital. And, not satisfied with laying down rules for the guidance of the Banks, they make the Directors swear their observance, order returns of their affairs to be made public, and sometimes appoint inspectors to see that the regulations are complied with. The result of all this cumbrous quackery is precisely such as every man of sense would anticipate. The banking system of America is the bane of the country; it is, in fact, as bad as can well be imagined, and has been the means of alternately diffusing a spirit of improvident and wild speculation throughout the Union, and then of plunging it into all but universal bankruptcy. The rules devised for the regulation of the Banks are good for nothing, unless it be to delude or deceive. They restrain none but the opulent, honest, and conscientious bankers, who do not require to be placed under any sort of surveillance; and afford every one else an opportunity, by misleading the inspectors and making false and exaggerated statements of their affairs, to get their condition represented as most prosperous, when, perhaps, it is very much the reverse." In reference to the system of the United States, Mr. McCulloch only repeated, parrot-like, the lesson taught him, with no more understanding of the subject than of the configuration 1 Notes to Smith's Wealth of Nations, p. 502. of the opposite side of the moon. Nothing can be more disgraceful in a man like him, — Professor of Political Economy in the university of a city which, commercially, is the very eye of the world, and standing at the very apex of his school, -than the ignorance and assurance he displayed. Among the numerous systems in them, if the Banks erected by the several States are to be called systems, there were many bad enough, as there was at the time any amount of rottenness in the English system, or in the Banks of which it may said to be composed. Human nature is the same on both sides of the water. There are plenty of adventurers in both countries, who will, if they can, impose their issues upon the public to serve as money; who will either make no provision at all for their redemption, or only such as they can make after the issues are made. In the large towns of both countries, the systems were good; that is, those who issued notes were compelled to make adequate provision for their redemption, previous to their issue, as the necessary condition of getting them into circulation. Mr. McCulloch might just as well have said that the Americans were too dishonest to construct good roads or warehouses, as to create good Banks and properly administer them. There is always more of adventure, and a far feebler sense of the importance of what is called commercial integrity, among a pioneer than among a trading people; but, under similar circumstances, similar results are produced the world over; and, in the end, the best methods will always be made use of, or will always be sought. To assume otherwise is to adopt a conclusion far worse than the baldest pessimism, that soci ety itself is incapable of continued existence. In passing in review before us the arguments and conclusions upon the subject of money of Hume, Smith, Stewart and McCulloch, all Scotchmen, and among the most distinguished of their race,—nothing can excite greater wonder than the incapacity of all to conduct an argument upon it through even a single paragraph, without involving themselves in the grossest mistakes and contradictions; and that, too, upon a subject coming almost wholly within the range of the exact sciences. To what is this apparent feebleness of intellect this inability to make even ordinary distinctions, and this passion for finding them where no differences exist, due? No |