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

Political Economy to teach the method of wealth, why has not the man of millions the true method; and what need of going beyond his rules? As for the selfishness of the race, we fear that Political Economists have no prescription for its cure.1

In a history of monetary theories it will be necessary to refer only very briefly to American writers, as they simply echo, without one spark of originality or independence, but with an extravagance perhaps characteristic of the nation, what they have found in the books written on the other side

1 It is hardly necessary to take into account Continental writers upon the subject of money. None of them have treated, to any considerable extent, of symbolic currencies. When these are referred to, Adam Smith seems to have been implicitly followed. The most distinguished of them is Jean-Baptiste Say, whose first work, entitled "A Treatise on Political Economy," &c., was published in 1803. It was for a long time a text-book in the schools of this country. He held with Smith and English Economists, that the value of money depended, or might depend, upon the necessity that existed for a medium of exchange. "The intense demand for money," he says, "has sometimes been sufficient to make paper employed as money equal in value to gold of the same denomination; of which the money of Great Britain is a present example. It must not be imagined that the paper money of that country derives its value from the promise of payment in specie which it purports to convey. That promise has been held out ever since the suspension of cash payment by the Bank in 1797, without any attempt at performance, which many people consider impossible. ... Yet the paper, though depreciated, is invested with value far exceeding that of its flimsy material. Whence, then, is that value derived? From the urgent want, in a very advanced stage of society and industry, of some agent or medium of exchange. . . . Paper money is thus left in the exclusive possession of the business of circulation; and the absolute necessity of some agent of transfer in every civilized community will then operate to maintain its value. So urgent is this necessity that the paper money of England, consisting of the notes of the Bank, has been kept at par with specie simply by the limitation of the issue to the demands of circulation."2 In other words, so intense at times has been the demand for food, that people have been forced to eat their knives and forks to appease hunger and support life! Chevalier hardly touches upon the subject of paper-money. He confines himself almost exclusively to metallic money, its sources of supply, distribution, &c. His treatise upon the probable fall of gold, which was translated by Mr. Cobden, seems to be very inadequate, in not sufficiently taking into account, not only the increased amounts necessary to be held for the support of symbolic currencies, but also the vastly increased power of consumption due to the increased wealth of the leading European nations and the United States. Wolowski, whose work is of more recent date, appears to have been wholly ignorant of the nature and object of paper money, as he quotes approvingly Mr. Amasa Walker's dictum, that paper should symbolize nothing but gold.

1 Say's Political Economy, Book i. Chap. xxl.
Ibid., Chap. xxii.

of the water. Among the most conspicuous of them is Mr. Francis Bowen, lately Professor of Political Economy in Harvard University, who, pending his professorship, published a voluminous work facetiously entitled "American Political Economy," which was long used as a text-book in that institution. It is a feeble and garrulous restatement of Adam Smith, Stewart, Ricardo, Tooke, McCulloch, and Mill, to whose absurdities and errors an emphasis is given by no means to be found in the originals:

"I say, then, that money is merely a contrivance for diminishing the friction of exchange; and, though safe and convenient, it is also a very costly contrivance for this end. . . . It is a portion of the wealth of the country, it is true; but it is a portion of our unproductive wealth, not our capital. We are the poorer by the loss of profit or interest on all of it which we are obliged to keep on hand. Money (paradoxical as the assertion may seem) yields neither profit nor interest. It is only the goods or commodities that are transferred by means of money which yield profit; and this profit or interest, as we have seen, depends on the mutations or changes of form that they undergo. The very reason which Locke adduces for the high estimate put upon money in comparison with other objects of wealth, namely, its durability, or the fact that it cannot be consumed, is the cause why it is not productive. The specie which a merchant or a banker holds in store, to provide against daily calls or sudden emergencies, is the only unproductive portion of his capital: he is subject to a loss of interest on the whole amount thus retained. It has been already proved that it is only through the constant transformation of capital, through its repeated consumption and reproduction, that it is made to yield a profit. And even as an article of unproductive wealth, it may be said of money that it gratifies no taste, and in its capacity as money, apart from its character as a portion of wealth, it yields no enjoyment. The coin which a man keeps in his pocket does not, like his shoes or his hat, contribute to his comfort: it is a convenience to him only as it supplies immediate means for making small purchases or satisfying small demands." 1

We have already sufficiently dealt with all such statements as these. It is enough to reply here, that coin has a great many functions beside "diminishing the friction of exchange." It cannot be called unproductive so long as it can be loaned at interest, and is absolutely indispensable in the process of distribution, without which there can be no capital worthy the name. It would be just as proper to say that a wagon or

1 American Political Economy, pp. 281, 282.

railroad car was unproductive, for the reason that it did not produce the merchandise transported by it.

"In every exchange," be continues, "the two values which are exchanged are supposed to be equal. Every exchange is a barter of a quantity of merchandise for a certain sum of money which is its equivalent. But it does not follow that there must be in the community as much money as there is merchandise; for, as the money is not consumed by effecting this exchange, it is ready immediately to effect another purchase. The same piece of money may be exchanged successively for any number of articles of merchandise of the same value; or, in other words, any sum of money can purchase successively a quantity of merchandise worth an infinitely larger sum.

"The circulation of money and of merchandise bears some relation to the momentum spoken of in physical science, which is composed of the velocity multiplied by the mass; the momenta are equal, though the velocity should be increased tenfold, provided that the mass is but one tenth part as great. So, also, the momentum of wealth is its value multiplied by the rapidity of its circulation. As money circulates far more rapidly than merchandise, it is evident that (the number of exchanges on both sides being equal) there must necessarily be less value in the money than in the merchandise, and as much less as the circulation of the money is more rapid than that of the merchandise. If the value of the merchandise which changes hands in a country in the course of a year amounts to a thousand millions, and the circulation of the money is ten times as quick as that of the merchandise, a hundred mil lions of money will effect all the exchanges. Let the quickness of the money circulation be doubled, and fifty millions will suffice.

“Mr. J. S. Mill has stated this point very clearly: If we assume the quantity of goods in sale, and the number of times those goods are resold, to be fixed quantities, the value of money will depend upon its quantity, together with the average number of times that each piece changes hands in the process. The whole of the goods sold (counting each resale of the same goods as so much added to the goods) have been exchanged for the whole of the money, multiplied by the number of purchases made on the average by each piece. Consequently, the amount of goods and of transactions being the same, the value of money is inversely as its quantity multiplied by what is called the rapidity of circulation. And the quantity of money in circulation is equal to the money value of all the goods sold (including all the resales as additional goods) divided by the number which expresses the rapidity of circulation.'

"Stating the matter algebraically, we have

gs=mr;

where gquantity of goods on sale;

8=number of times the goods are resold;

m quantity of money in circulation;

r=number of purchases effected by each piece of money.