Abbildungen der Seite
PDF
EPUB

ever genuine mercantile superstitions. The great authority, the man of millions, who is supposed to understand the theory of business precisely because he has made millions, revives in every age. Uno avulso, non deficit alter, aureus. The mercantile theory may be consigned by philosophers to the limbo of nursery toys; but it lives on all the same, is master of the mind of the city, is supreme over city articles, and regulates the barometer of commercial weather, and, above all, is held to know the great secret of trade, and to be able to show men the way to get rich.

"The mercantile theory lives, and one of two inferences from this fact must be accepted. Either it is the true theory of trade, and Adam Smith is not the great benefactor of mankind which he is supposed to have been; or else, in the department of science which has for its object the wealth of the community, error possesses a vitality which is more than a match for the keenest logic and the strongest common sense.

"The mercantile theory has given birth to a child to which the whole literature of the world affords no parallel, the doctrine of currency as exhibited in the nineteenth century. I fear, almost, to utter its name; and yet it will form the subject of the following lectures. The very sound of the word 'currency' makes every man turn his back or shut his ears. His immediate instinct is to fly from a subject with which he associates every kind of jargon and unendurable phraseology. Yet it was the very repulsiveness of currency which induced me first to embark upon its study. It seemed to me a marvellous phenomenon, well worth investigation, that there should be at this period of the world's history an article of the most universal use in daily life which seemed to defy explanation in plain and intelligible language. Other subjects of the most recondite abstruseness had been mastered. Hieroglyphics had been read, mysterious inscriptions cleared up, the profoundest depths of physics sounded, and the most subtle problems in mathematics conquered. Few, indeed, might be the hearers that these successful investigators could attract; but those hearers listened with delight, and could feel that they had made an acquisition of real knowledge. What, then, was this so-called science, from which all men seemed to turn away in disgust, even those whose lives were spent in handling the objects of which it treats? How was so astonishing an event to be explained? What causes had rendered currency the reproach of our age? What was there in sovereigns and bank-notes so inscrutable as to baffle the sharpest intellect, and to be incapable of clear and simple exposition? The cause of this strange spectacle presently became evident. The philosophic spirit had been absent; the right method of investigation had been, I will not say neglected, but absolutely despised; the method of Bacon, to which modern science owes its strength, patient and accurate analysis, had been scorned, as if fit only for physical subjects, but too mechanical for such subtle substances as the instrument of finance. A priori assumptions prevail on every side, in the discussion of currency. Every one starts with some arbitrary hypothesis. Can we wonder, after that, to find universal con

[ocr errors]

fusion and obscurity? Currency has been the jumble that it is, authority contradicts authority, no first principles are recognized as the common basis from which reasoning may take its origin, and, when some practical measure has been discussed, the cry of salvation for commerce is met by the counter shriek of ruin, simply be cause no one will condescend to analyze facts, and to explore their meaning. The world has chosen to refer to great bankers and merchants, to men who have conducted vast businesses, and have realized gigantic fortunes. These men, the world said, have spent their lives in dealing with money. Must they not know the nature of money and its laws? Must we not take our theory at their hands? And so mankind did take the theory of money from commercial authority, and the result has been currency in the state in which we now find it.1

"We have learned what coin is; we have become acquainted with a metallic currency and its nature: but what are checks and bills, which make up the banking trade? Many would say they are papers which represent money; but I cannot accept the word represent' in currency, for I can never understand its meaning. It has no definite meaning for me; nor, as far as I can perceive, for any one else. Anyhow, checks and bills are not money. They may, in their respective spheres, do the same work as money; but in this place, where we are speaking of a purely metallic currency, they are not money. What are they, then? Orders to pay money, which can be legally enforced; title-deeds to money which lead directly to the obtaining of money. They are all warrants or evidences of debt. . . . A check on a banker implies a debt due by the banker as its basis: a bill is an admission of the acceptor that he owes money, and an undertaking to pay it on a particular day. Here, then, we have the things a banker deals in, - the resources of which he disposes. Bankers deal in debts, and a Bank is an institution for the transfer of debt. Bankers deal in orders to pay money in discharge of debts. . . . So far a banker's business is identical with that of a clerk sent around by a great shop to collect its bills. . . . So much for a banker's receipts: he does not obtain them in money; they come to him as checks and bills. These are his resources. . . . The all-important question is, how these checks and bills are born into the world, what is it that makes a banker have few or many of them at different times. People are ever saying that Banks have much or little money; that money is abundant or scarce. This is very erroneous and very misleading language. Money, cash, sovereigns, and bank-notes vary very little indeed. The language should be, bills and checks, or, if an abstract word is preferred, deposits are scarce or abundant: many checks have arrived at the Bank to-day: it will lend freely, and charge a low rate for its loans.' How, then, do these checks and bills come into existence? Omitting accommodation bills, which are foreign to this discussion, they denote goods bought and paid for, either by a transfer of debt or by a promise to pay later. Every man who

1 Principles of Currency, Inaugural Lecture.

gives a check has previously sold something, and charged his banker to get the payment for him. . . . If the customer buys more than he sells, if he makes losses in business, or lives beyond his income, the balance now falls the other way. The banker's power to lend to others, his resources, his means, depend entirely on his customer buying less than he sold. The banker finds that more checks are drawn upon him than are sent to him to collect payment for, his means are reduced; he is less able to lend: he makes difficulties about loans; the rate of discount rises, and the city, which has never investigated the matter, screams in astonishment or indignation. Money, coin and bank-notes have no part in this matter, except as small change. All the buying and selling, all the borrowing and lending, takes place by exchang ing debts: actual payment is so rare as not to be worth considering. 'Give me your oil-cake,' says the farmer, and I will tell my banker to pay you.' Does he make an actual payment? No: the cake-merchant gives the check to his own banker, and forthwith proceeds to buy linseed, and tells the Russian in turn, I will tell my banker to pay you.' And so it goes on in every trade.1

[ocr errors]

6

"The check has furnished us with a very natural introduction to the discussion of paper money. . . . The bill and the check in time generated the bank-note. .. And now let us watch the process by which the bank-notes issue forth into circulation. It is full of instruction on the fundamental points of a paper currency. We all know how an ordinary check makes its appearance in the world: goods are bought, a check is signed for the cash, and so it commences its short-lived existence. The birth of the bank-note takes place in a different manner. It is signed and made ready at the Bank; but how does it come forth? Through payments, few though they be, which the Bank makes in cash. It is the office of the banker to lend; and he lends the more freely in proportion as his borrowers carry away the loans in notes. I am speaking of the first establishment of its notes in public circulation at its origin. Observe the fact well: it is the root of most of the strange delusions afloat in the world about paper currency. It indissolubly associates in the commercial mind the issue of notes with perpetual ability to lend. The banker,' cries the world, 'most of all, the Bank of England, in the hour of panic, can issue notes which will do the work of money, and he can lend all the more to traders accordingly.' And then this fact is insisted on, that, by issuing notes the banker acquires additional means for lending. This fact is perfectly true; but there is an enormous fallacy lurking beneath it.

"And now we reach the most important question of all-in what numbers will these bank-notes circulate? It is the crucial question wherewith to test the soundness of every theory of currency. It is a question which every merchant, every banker, every chamber of commerce, every member of Parliament who speaks on currency, ought to push home to his mind, and not be content till he has attained to a clear, precise, and intelligible answer. It is the

Principles of Currency, Lec. iii.: "What is a Bank?"

centre of every theory of currency, whether metallic or of paper. Every doctrine which is mistaken on this central principle is worthless as an interpreter of the science of currency. Mr. Tooke discerned the true answer: Mr. Mill, with some little wavering, and a few others, have seen the light; but the general literature on money matters throughout the world profoundly ignores the fact. The answer is the same with that which has already been given to the parallel question respecting sovereigns. So many bank-notes as the public wants and can use will circulate, and no more. . . . This is the truth of truths in currency. An expanded or inflated circulation of bank-notes is an absurdity, nothing better than pure nonsense. It would be just as sensible to speak of an expanded or inflated circulation of hats."1

It is hardly necessary to comment upon all this. Indeed, an apology is due for encumbering this work by copying so largely. It may do some good, however, to show the incoherent buffoonery taught in the name of Political Economy in one of the first universities in Christendom. Where are her purists, that they tolerate within her sacred precincts a fustian rhetoric to be matched only by that of Pistol? which proclaims "merchants and bankers to have subdued the whole land, and to have almost put a stop to independent thought; that the more directly one is engaged in business, the more complicated, the more artificial, the more mysterious, are the rules laid down by him for the attainment of wealth." The present unsatisfactory position of the science is charged to "the ceaseless action of selfishness, the never-dying force of class and personal interests, to promote private gain at the cost of the whole community. Here," he continues, "is the Mercantile Theory. Read the city articles of every one of the newspapers. Look at the cast of thought, at the style of literature, at the principles proceeded upon, at the whole spirit of the language. What is thought most worthy or deserving of record? The vast sums of gold taken to the Bank of England, or taken away from it; the state of the exchanges, and the weekly returns of ingots buried out of sight in the cellars of the Bank. The doctrine that gold is wealth-the doctrine which Mr. Mill paints as an absurdity so palpable that the present age regards it as incredible, as a crude fancy of childhood-breathes in every line of the city articles of all our daily newspapers. What is this, I ask, but the Mer

1 Principles of Currency, Lec. iv.: "Paper Currency."

cantile Theory, pure and fresh, as you heard Mr. Mill describe it? What is it but the resurrection of the Practical Man, - the reassertion of himself, of his experience, his appeal to outward form, to what may be touched and handled. The world fondly imagined he was vanquished and gone; that Adam Smith had finally disposed of him; that boys and students had learned to pity him, and pride themselves on having been born after the great Scotch genius: never was there a greater mistake. The Mercantile Theory lives, and one of two inferences from this fact must be accepted: either it is the true theory of trade, and Adam Smith is not the great benefactor of mankind which he is supposed to have been; or else in the department of science which has for its object the wealth of the community, error possesses a vitality which is more than a match for the keenest logic and the strongest common sense."

A reader of the Economists cannot fail to be struck with the hostility, not to say hatred, which all of them display toward merchants. Adam Smith, when he called them "sneaking underlings," struck the key-note for all his followers. What is the reason of this hatred, with a sharper tooth even than that of the odium theologicum? - the practice of treating gold as wealth, and the highest form of wealth, in the very face of the teachings of the Economists that it is not wealth; or that it is the lowest form of wealth. It was a reflection not to be tolerated. Smith did his best to sustain his theory by sneers and flings at those who grew rich by its violation. He declared them to be a mean and selfish race, the abettors of the worst forms of monopoly, and the disturbers of the peace of the world. Price, in his grotesque way, attempts to paint them in still blacker colors. He admits that if the merchant, if the universal instinct of the race, is to be trusted, the teachings of Adam Smith, so far as they relate to money, are shams; that one of the two must go to the wall. The only refuge of the Economists is in crying that the science has been overborne by the selfishness of men of affairs. They cannot deny that these grow rich by pursuing methods precisely the opposite to those which they lay down. The man of millions vaunts his methods; and, in reply to criticism upon them, shakes his money-bags. The Economists fiercely reply that truth is sacrificed to mammon; but if it be the office of

« ZurückWeiter »