State money issued as currency ever represented any thing else. Whoever issues it, however, or currency in any form, has nothing to fear, so long as they observe "fourteen series of methods "laid down and fully exploited by Mr. Jevons. We spare the reader their exploitation, in order not to inflict upon him the money-writer's malady. They should, however, be none the less studied. They should be placarded before the desk of every young man ambitious to rise and shine in the financial world. The heads or titles of Mr. Jevons's "fourteen series of methods" are as follows: 1. The Simple Deposit Method. 7. The Documentary Reserve Method. 10. The Free Issue Method. 11. The Gold Par Method. 12. The Revenue Payments Method. 13. The Deferred Convertibility Method. The following is Mr. Jevons's mode of maintaining the value of inconvertible paper money at the par value of gold : "Assuming an inconvertible paper currency to be issued, and to be entirely in the hands of government, many of the evils of such a system might be avoided, if the issue were limited or reduced the moment that the price of gold in paper rose above par. As long as the notes, and the gold coin which they pretend to represent, circulate on a footing of equality, they are as good as if convertible." 2 Admitted. But suppose that a person holding sovereigns will not exchange them for equal amounts of inconvertible paper, what then? We know of no other advice than that given 1 Several of the above methods have much to commend them to the people of the United States; especially the "Maximum Issue Method," the "Elastic Limit Method," the "Free Issue Method," and the "Deferred Convertibility Method." The last two, it is probable, would be the most popular. The others, however, would be received with more or less favor. It is to be regretted that space does not allow their further presentation here. 2 Money and the Mechanism of Exchange, p. 231. by Dogberry to the watch: "If he will not 'exchange,' let him go, and thank God you are rid of a knave"! "We now come to the undisguised paper money issued by government, and ordered to be received as legal tender. Such inconvertible paper notes have in all instances been put in circulation as convertible ones, or in the place of such; and they are always expressed in terms of money. The French mandats of one hundred francs, for instance, bear the ambiguous phrase, "Bon pour cent francs." The wretched scraps of paper which circulate in Buenos Ayres are marked "Un Peso Moneda Corriente," reminding one of the time when the peso was a heavy standard coin. After the promise of payment in coin is found to be illusory, the notes still circulate, partly from habit, partly because the people must have some currency, and have no coin to use for the purpose, or, if they have, carefully hoard it for profit or future use. There is plenty of evidence to prove that an inconvertible paper money, if carefully limited in quantity, can retain its full value. Such was the case with the Bank of England notes for several years after the suspension of specie payments in 1797; and such is the case with the present notes of the Bank of France." 1 After what has preceded, the above paragraph does not call for comment. "When prices are at a certain level," says Mr. Jevons, "and trade in a quiescent state, a single banker is, no doubt, unable to put into circulation more than a certain quantity of bank-notes. He cannot produce a greater effect upon the whole currency than a single purchaser can, by his sales or purchases, produce upon the market for corn or cotton. But a number of bankers, all trying to issue additional notes, resemble a number of merchants offering to sell corn for future delivery; and the value of gold will be affected, as the price of corn certainly is. We are too much accustomed to look upon the value of gold as a fixed datum line in commerce; but, in reality, it is a very variable thing. . . . Every one who promises to pay gold on a future day, thereby increases the anticipated supply of gold; and there is no limit to the amount of gold which can thus be thrown upon the market. Every one who draws a bill or issues a note, unconsciously acts as a "bear" upon the gold market. Every thing goes well, and apparent prosperity falls upon the whole community, so long as these promises to pay gold can be redeemed, or replaced by new promises. But the rise of prices thus produced turns the foreign exchanges against the country, and creates a balance of indebtedness which must be paid in gold. The basis of the whole fabric slips away, and produces that sudden collapse known as a commercial crisis." 2 1 Money and the Mechanism of Exchange, pp. 234, 235. We are afraid that gold cannot be thrown in any amount upon the market, simply by the issue of promises to pay it at a future day; and, also, that Mr. Jevons's illustrations borrowed from the stock market will hardly stand a critical examination. A "bear" sale is one in which the seller contracts to make future delivery of something, not money, - receiving its present price in money. When a banker issues his notes, promising to pay a certain amount of coin, he takes the obligations of those who receive them to repay at a future day an equal, and, in fact, a greater, amount of coin as compensation for standing in the gap for the time that his borrowers' obligations have to run. As he may be called upon to pay all his liabilities immediately in coin, he must make provision of coin in ratio to the amount of his notes. In other words, he "bulls " the gold market just in ratio to the extent of his operations. "What is true of credit generally," says Mr. Jevons, "is still more true of the special form of credit involved in Bank promissory notes. These purport to be payable in gold coin on demand, so that they are taken by every one as equivalent to the coin. Even bills of exchange can be paid in notes; and, as regards internal trade, no difficulty would be felt in maintaining credit so long as promises to pay gold circulate instead of gold. But foreigners will not hold such promises on the same footing; and, if the exchanges are against us, the metallic, not the paper, part of the currency will go abroad. It is at this moment that bankers will find no difficulty in expanding their issues; because many persons have claims to meet in gold, and the notes are regarded as gold. The notes will thus conveniently fill up the void occasioned by the exportation of specie; prices will be kept up; prosperity will continue; the balance of foreign trade will be still against us; and the game of replacing gold by promises will go on to an unlimited extent, until it becomes actually impossible to find more gold to make necessary payments abroad... "According to the view which I adopt, the issue of notes is more analogous to the royal function of coinage than to the ordinary commercial operation of drawing bills. We ought to talk of coining notes, as John Law did; for, though the design is impressed on paper instead of metal, the function of the note is exactly the same as that of a representative token. As to the right to issue promises, it no more exists than the right to establish private mints. For our present purposes, that alone is right which the legislature declares to be expedient to the community at large. As almost every one has long agreed to place the coinage of money in the hands of the executive government, so I believe that the issue of paper representative money should continue to be practically in the hands of the government, or its agents, acting under the strictest legislative con trol. M. Wolowski, in his admirable works on banking, has maintained that the issue of notes is a function distinct from the ordinary operations of a banker; and Mr. Gladstone has allowed that the distinction is a wholesome and vital one. Bankers enjoy the utmost degree of freedom in this country at present in every other point; so that it is wholly a confusion of ideas to speak of the unrestricted emission of paper representative money as a question of free banking." i The preceding paragraphs may serve as illustrations of the History of Monetary Theories. A striking illustration of the present condition of the science of Political Economy is furnished by Mr. Jevons in his Introductory Lecture at the opening of the session of 1876–77, at the University of London, to be found in the "Fortnightly Review" for November, 1876. The hundredth anniversary of the publication of the "Wealth of Nations" was celebrated by a dinner given in London by the "Political Economy Club," which was founded in 1821 by Ricardo, Malthus, Tooke, James Mill, Grote, and others. Mr. John Stuart Mill was afterwards among its most prominent members. At the dinner, Mr. Gladstone occupied the chair; Mr. Lowe, and M. Léon Say, the French Minister of Finance, holding the seats next in honor. Mr. Jevons, in giving an account of this dinner, in the address referred to, says: "I was much struck with the desponding tone in which Mr. Lowe spoke of the future of the science I have the honor to teach in this college. He seems to think that the work of the science is to a great extent finished. He said: "I do not feel myself very sanguine that there is a very large field at least, according to the present state of mental and commercial knowledge for Political Economy beyond what I have mentioned; but I think that very much depends upon the degree in which other sciences are developed. Should other sciences relating to mankind, which it is the barbarous jargon of the day to call "Sociology," take a spring and get forward in any degree towards the certainty attained by Political Economy, I do not doubt that their development would help in the development of this science; but, at present, so far as my own humble opinion goes, I am not very sanguine as to any very large or any very startling development of Political Economy. I observe that the triumphs which have been gained have been rather in demolishing that which has been found to be bad and erroneous, than in establishing new truth; 1 Money and the Mechanism of Exchange, pp. 316-318. and imagine that, before we can attain new results, we must be furnished from without with new truths to which our principles may be applied. The controversies which we now have in Political Economy, although they offer a capital exercise for the logical faculties, are not of the same thrilling importance as those of earlier days: the great work has been done.' "I am far from denying that there is much to support, or at any rate to suggest, this view of the matter. Some of the greatest reforms which Economists can point out the need of, have been accomplished, and there certainly is no single work to be done comparable to the establishment of free-trade. But this does not prevent the existence of an indefinitely great sphere of useful work which Economists could accomplish, if their science were adequate to its duties. To a certain extent, again, I agree with Mr. Lowe, that there is much in the present position of our science to cause despondency. A very general impression to this effect seems to exist. Some of the newspapers hinted, in reference to the centenary dinner, that the Political Economists had better be celebrating the obsequies of their science than its jubilee. The Pall Mall Gazette, especially, thought that Mr. Lowe's task was to explain the decline, not the consummation, of economical science. Perhaps with many people the wish was the father of the thought. I am aware that Political Economists have always been regarded as cold-blooded beings, devoid of the ordinary feelings of humanity, little better, in fact, than vivisectionists. I believe that the general public would be happier in their minds for a little time, if Political Economy could be shown up as imposture, like the greater part of what is called Spiritualism.' "It must be allowed, too, that there have been for some years back premonitory symptoms of disruption of the old orthodox school of Economists. Respect for the names of Ricardo and Mill seems no longer able to preserve unanimity. J. S. Mill himself, in the later years of his life, gave up one of the doctrines on which he had placed much importance in his works. One Economist after another-Thornton, Cairnes, Leslie, Macleod, Longe, Hearn, Musgrave - have protested against some one or other of the articles of the old Ricardian creed. "At the same time foreign Economists, such as De Laveleye, Courcelle-Seneuil, Cournot, Walras, and others, have taken a course almost entirely independent of the predominant English school. So far has this discontent gone, that Mr. Bagehot has been induced to re-examine the fundamental postulates of economy from their very foundation, in his most acute papers published in the Fortnightly Review. He remarks (p. 216, Feb. 1, 1876): — "Notwithstanding these triumphs, the position of our Political Economy is not altogether satisfactory. It lies rather dead in the public mind. Not only it does not excite the same interest as formerly, but there is not exactly the same confidence in it. Younger men either do not study it, or do not feel that it comes home to them, and that it matches with their most living ideas. They ask, often hardly knowing it, will this "science," as it . |