palm them off as tickets or counters, at their nominal value, for the good things of others. How such wrong and injustice are to be prevented is not clear to ordinary understandings. It ought to be to the Economists, who make no ado of creating something out of nothing. One mode suggests itself: "As the value of money is inversely as its quantity multiplied by the rapidity of its circulation," its value might be reduced by reducing such rapidity; that is, if one ounce of gold moving at the rate-an excessive one, perhaps of ten feet per second, be worth ten ounces moving at the rate of only one foot per second, then if to the quantity ordinarily in circulation in England, and moving only at the rate of, say, five feet per second, an equal amount were added, and the movement of the whole be limited to two and a half feet per second, her money, though doubled in quantity, would be no more abundant, relatively, than before; and none could be spared to be sent abroad. There would be nothing to complain of in all this. England might have the misfortune to gather in too much of this unproductive superfluity; but she should have looked out for it. She might, in the same way, have improvidently accumulated too much cloth and too much iron. Political Economy is not to allow her to throw the loss upon unoffending, but less powerful, neighbors, who had steered clear of a similar folly. Mill admits that "this gain is first made by England at the expense of other countries, who have taken her superfluity of this costly and unproductive article off her hands, giving for it an equivalent value in other commodities;" but claims that "by degrees, however, the loss is made up to those countries by diminished influx from the mines, and, finally, the world has gained a virtual addition of £20,000,000 to its productive resources"! But the "other countries," having already their quota of the precious metals, have now a superfluity equal to the whole amount thrown upon them. If England be so much the richer, they are so much the poorer; while the aggregate wealth of all, the world over, is not, for the present, increased a single penny. We say for the present; for if, by the above process, the mines could be closed, then the labor of those who had been unproductively employed might be turned to some useful account. In time, too, by the loss and attrition of the coin in circulation, the superfluity England had luckily got rid of might be partly

required in her channels of circulation. Twenty or thirty, or, perhaps, fifty years, might be required to bring about such a result. In the mean time, the interest account running against this "unproductive superfluity" might equal twice or thrice its amount. Nothing, therefore, could be gained to the world at large, while great injustice might be done to some of the nations that compose it. This should not be allowed. It is submitted that the Economists should reconsider Mill's statement in this particular, to see if it cannot be placed upon broader and more equitable foundations.

So much for Mill's assumption that the wealth of England might be increased by the substitution of worthless paper to serve as currency in the place of coin, and an advantage secured in ratio thereto. But if the gold, demonetized as it were, could be made available for export, is it certain that it would be exchanged for an equal value of commodities to be made the basis of reproduction? The first effect of the issue of paper, even if it were legal tender, would not be to send abroad, immediately, a corresponding amount of gold. The rates of exchange might be such that it could not be exported without a loss. It would only be exported to discharge balances arising in foreign trade, to be created in consequence of the excessive issues of paper. As the effect of such issues would be to advance prices, an amount of the gold would still be required as currency, in addition to the paper, and in ratio to such advance. From increased consumption, increased importations would be made, and gold would be finally exported in ratio thereto. The movement, however, would always be gradual, and would be the direct, not the indirect, effect of the increase of the currency. Whatever was exported would be for articles ordinarily entering into consumption, which exceed tenfold such as are imported to serve as the basis of production. It might be that very little would be brought into the country which it could not do as well without as with. Useful articles, that is, those which can be made the basis of production, are not usually the kind imported under the stimulus of an issue of worthless paper. All such improvident measures are always followed by others equally or still more improvident. It is to be remembered that all such issues are made only as the last alternative; that they are always

tainted by the necessity of resorting to them. They inevitably first fall into the hands of the creatures of the government, who have no adequate personal interest in the result. Sellers of merchandise would, therefore, as a matter of precaution, always demand a much larger price in paper than in coin, and would always be in a position to exact their own terms. As it costs no more to engrave the word "two " than "one," there would be no lack of money so long as it had any exchangeable value whatever. The recklessness of government would soon beget a corresponding recklessness and extravagance on the part of the people. Thrift does not go hand in hand with such proceedings as these. The product of such industrial operations as were still carried on would be at an enormously high cost; so that, when the reverse came, as it would come sooner or later, either from an excessive decline in the value of the paper money or from its retirement, the most as well as the least deserving would be involved in a common ruin. If the currency were ever redeemed, then the gold driven out of the country by its issue would have to be brought back. If finally repudiated, the gold must still be brought back to provide a new, or the basis for a new, currency; so that, in either alternative, nothing but loss could be the result.

Again:

"When metallic money has been entirely superseded and expelled from circulation by the substitution of an equal amount of bank-notes, any attempt to keep a still further quantity of paper in circulation must, if the notes are convertible, be a complete failure. The new issue would again set in motion the same train of consequences by which the gold coin had already been expelled. The metals would, as before, be required for exportation, and would be for that purpose demanded from the Banks, to the full extent of the superfluous notes, which thus could not possibly be retained in circulation. If, indeed, the notes were inconvertible, there would be no such obstacle to the increase of their quantity. An inconvertible paper acts in the same way as a convertible, while there remains any coin for it to supersede; the difference begins to manifest itself when all the coin is driven from circulation (except what may be retained for the convenience of small change), and the issue still goes on increasing. When the paper begins to exceed in quantity the metallic currency which it superseded, prices, of course, rise; things which were worth £5 in metallic money become worth £6 in inconvertible paper, or more, as the case may be. But this rise of price will not, as in the cases before examined, stimulate import and discourage export. The imports and ex

ports are determined by the metallic prices of things, not by the paper prices; and it is only when the paper is exchangeable at pleasure for the metals that paper prices and metallic prices must correspond." 1

"When metallic money," says Mr. Mill, "has been entirely superseded and expelled from circulation by the substitution of an equal amount of bank-notes, any attempt to keep a still further quantity of paper in circulation, must, if the notes are convertible, be a complete failure." No further issue of convertible paper can be made, for the reason that nothing remains into which it can be converted. An inconvertible currency, he says, produces precisely the effects of a convertible one, so long as there is any coin in circulation to be supplanted or displaced by either. The difference between the two only begins to manifest itself when there is no more coin to be superseded. The issue of convertible currency must then cease, while that of an inconvertible one may still continue. This statement is additional proof of Mr. Mill's complete misconception of the nature of paper money. Although all convertible currencies are nominally payable in coin, they are seldom discharged in it. The provision made for their convertibility is not coin, but merchandise. They must all be taken in by their issuers within periods, say, of ninety days. Assuming the currency of all kinds afloat in Great Britain to be £450,000,000, the amount daily taken in, assuming the period of its circulation to be ninety days, is £5,000,000; or assuming (which is nearer the mark) that its circuit is performed in sixty days, the amount daily taken in, or converted, equals £7,500,000. The whole amount of coin or bank-notes actually interposing would not exceed £25,000 in the one case, or £37,500 in the other. All the rest is taken in by mutual offset of the instruments of which it is composed. The condition of the circulation of such a currency is not the displacement of a corresponding amount of coin. No matter what its amount, not a penny less of coin may be in circulation. It supplements the use of coin. If it cause any amount of the latter to be drawn from circulation, it is only that it may be collected into hoards as reserves, to discharge such currency as is not discharged by merchandise. The effect of such a currency is to reduce instead of advancing prices, tak

1 Political Economy, vol. ii. pp. 178, 179.

ing the whole range of articles upon the market. Now, an inconvertible currency, provided it be legal tender, — for no other could ever get into circulation, drives metallic money out of circulation, for the reason that it renders it in great measure superfluous in domestic exchanges. It supplants instead of supplementing coin; causes a rise in prices, in being an instrument in excess of the means of expenditure, or by being depreciated in value below that of coin. Mill asserts, that as inconvertible currency cannot be exported, it cannot stimulate import or discourage export, for the reason that "imports and exports are determined by the metallic prices of things, not by the paper prices." But as by means of an excessive issue of paper its holders can command any amount of coin, and whether the coin be expelled or not, can bring into the country an excessive amount of merchandise, the additional amounts of paper exert an influence over importations precisely as would corresponding additions of gold. It is the paper price, rather than the gold price, of values that determines the amount of imports and exports. If the paper price of a shawl be a thousand dollars, and the gold price five hundred, and if the paper at the time the order is given can be converted into gold at sixty per cent of its nominal value, the merchant will take the risk of importing it, from the apparent profit of the transaction, although, before it is received, the paper may have fallen to forty per cent of its nominal value, involving a large loss instead of a profit. Every transaction made with an inconvertible currency would always involve the risk of a loss; but there would always be plenty to assume the risk of its use. Mr. Mill's assertion, therefore, that it is the gold, not the paper, price by which exports and imports are determined, is exactly opposed to the fact.

66

From the following quotations from the chapter on the Regulation of the Currency," it will be seen that Mill fully agreed with Tooke, that a convertible currency could not be issued in excess. They are simply a reiteration of his assumption, that neither bank-notes nor checks exert any influence over prices or the rates of exchange:

"Before touching upon the practical provisions of Sir Robert Peel's Act of 1844, I shall briefly state the nature and examine the grounds of the theory on which it is founded.