chandise as in the money paid for it, and the converse. Equivalents are exchanged. Their activity in the exchange, if such attribute can be predicated of either, is precisely the same. As the purchases a person makes equal the money he is possessed of, and the converse, so the purchases made by society equal the money it is possessed of. The money of society, therefore, and the merchandise fitted for or entering into consumption, necessarily equal the one the other. There must, therefore, be the same activity of its merchandise as of its money. It is true that the merchandise has been consumed while the money has not; but the merchandise has been productively consumed, to reappear in the same or other forms. When it reappears, it is then ready for exchange for the very money its antecedent was exchanged for, the place of which it has taken. If it do not reappear, the money has nothing to do, and will be exported as an article for which there is no domestic use. It is demonstrable, therefore, that the merchandise of society at any one time entering into consumption equals the money of society; and that the one possesses precisely the same degree of activity as the other. No assumption has been more dwelt upon by the Economists than the superior activity of money to merchandise, while there is none so utterly absurd.

"It is not, however," continues Mill," with ultimate or average, but with immediate and temporary, prices that we are now concerned. These, as we have seen, may deviate very widely from the standard or cost of production. Among other causes of fluctuation, one we have found to be the quantity of money in circulation. Other things being the same, an increase of the money in circulation raises prices; a diminution lowers them. If more money is thrown into circulation than the quantity which can circulate at a value conformable to its cost of production, the value of money, so long as the excess lasts, will remain below the standard or cost of production, and general prices will be sustained above the natural rate.

"But we have now found that there are other things, such as bank-notes, bills of exchange, and checks, which circulate as money, and perform all the functions of it; and the question arises, Do these various substitutes operate on prices in the same manner as money itself? Does an increase in the quantity of transferable paper tend to raise prices in the same manner and degree as an increase in the quantity of money? . . .

"I apprehend that bank-notes, bills, or checks, as such, do not act on prices at all. What does act on prices is credit, in whatever shape given; and whether it gives rise to any transferable instruments capable of passing into circulation, or not.

would have to pause till the place they now supply was made good by articles having similar attributes or functions in the new order of things. In the world constructed by the Economists, gold is almost wholly dethroned, without any other provision in its place. A world of their own creation would be the best commentary upon their absurd and incoherent theories.

"When a person lends," says Mill, in effect, "as well as when he pays money or wages to another, that which he lends is not the money, but capital. The money is the mere instrument of transfer. But as capital usually passes from lender to receiver through the means of money, it is in money that the amount of capital is computed and estimated. Hence, the borrowing of capital is universally, but very improperly, called the borrowing of money. The language is just as much misapplied as it would be to call the transaction by which a person borrowed a load of potatoes for consumption, and a cart for the purpose of bringing them home, the borrowing of a cart: it is not the cart that is borrowed, but the potatoes. So when a man borrows a sovereign: the sovereign is not the capital borrowed, but the means by which it is borrowed." With Mill, as with Smith, it is not money (gold and silver) which constitutes a man's capital or his income, but that which gold and silver buys. The absurdity of all such distinctions has been already sufficiently demonstrated.

"If we assume," continues Mill," the quantity of goods on sale, and the number of times these 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 in the average by each piece. Consequently, the amount of goods and of transactious 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, divided by the number which expresses the rapidity of circulation."1

After referring to the increased amount of money (banknotes) wanted for extraordinary payments at certain periods of the year, he goes on to say:

1 Political Economy, vol. ii. p. 16.

"If extra currency were not forthcoming to make these extra payments, one of three things must happen: Either the payments must be made without money, by a resort to some of those contrivances by which its use is dispensed with; or, there must be an increase in the rapidity of circulation, the same sum of money being made to perform more payments; or if neither of these things took place, money to make the extra payments must be withdrawn from the market for commodities, and prices, consequently must fall. An increase of the circulating medium, conformable in extent and duration to the temporary stress of business, does not raise prices, but merely prevents this fall.

"The sequel of our investigation will point out many other explanations and qualifications with which the proposition must be received, that the value of the circulating medium depends on the demand and supply, and is in the inverse ratio of the quantity."1

The value of money, says Mill, is in inverse ratio to its quantity multiplied by the rapidity of its circulation. He might as well have framed a similar formula in reference to the value of a loaf of bread: "a loaf sufficient for the breakfast of one man, moving at the rate of one foot per second, will be sufficient for the breakfast of ten men, and of equal value to ten loaves, by moving at the rate of ten feet per second." In the application of his doctrine, the choice of position might be considered of some consequence. So, "if more money be required to move the crops, one of three things must happen: either the payments must be made without money; or there must be an increase in the rapidity of the circulation, the same amount of money being made to do double duty; or money must be withdrawn from the market for other commodities." The better way would seem to be to make money do double duty. "A nimble sixpence is better than a slow shilling" may be quoted in proof. An objection to the forced activity, or, indeed, to any activity of money, is the attrition which is estimated to reduce its value at the rate of one per cent annually. If made to do double duty, its wear would equal two per cent. A piece would then last only fifty years. But if one could be made to do the duty of two, the relative gain would still be enormous. It would have been well for Mr. Mill to have detailed the process by which increased " rapidity of circulation" is to be secured. As by its use the ownership of money is always parted with, and as the propriety of its use depends

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1 Political Economy, vol. ii. p. 21.

upon the equivalent received, the holder might well object to part with it to help forward the operations of his impecunious and less fortunate neighbors. Where their wants were the greatest they would have the least to offer for it. The greater the demand, the greater the distrust, and the more tenaciously would it be held by its churlish and selfish owners. As the need of money is the imperative one the world over, and as it should be relieved once for all, Economists should set themselves to work, either to provide a sufficient quantity, or to show how, by "rapidity of circulation," an infinitesimal quantity, as it were, may do the work of a mass as big as the moon. If money could be made to revolve with sufficient rapidity, every one now having but one dollar in his pocket, in a given period, might have ten. But such a result would after all, according to Mill, be a very bootless one; for if every one had ten dollars in his pocket where he now has but one, the prices of every thing else would rise in like ratio; so that he would be no better off with ten than with one. The great problem, therefore, which the Economists should lose no time in solving is to secure a rapidity of the circulation ten times greater than its present rate, prices of all kinds remaining the same. This done, the financial and material millennium would for the first time dawn upon the race, and the Economists, for once, would have turned their labors to some account.

But may there not be some fallacy in Mr. Mill's assumption that money has, or may have, an activity greater than that of other kinds of merchandise? Suppose a person in his purchases not to part with his money; that as a yardstick, as a measure of extension, is always retained by its owner, whether he be purchaser or seller, so money serves as the measure of values without being parted with. In such case, a person whose expenditures were $100 a week would require only that amount of money, or only one-seventh of it, provided an equal amount of purchases was made daily. It is plain, in such case, that there would be no more activity of money than merchandise, no more than of the yardstick. The same would be the case if he used the money but once: he can use it only once. But the person who receives it from him can use it only once: it is then functus officio to him. So far as each is concerned, there is the same activity in the mer

From a convertible, Mill proceeds to the discussion of an inconvertible, currency.

"After experience had shown that pieces of paper of no intrinsic value, by merely bearing upon them the written profession of being equivalent to a certain number of francs, dollars, or pounds, could be made to circulate as such, and to produce all the benefit to the issuers which could have been produced by the coins they purported to represent, governments began to think that it would be a happy device if they could appropriate to themselves this benefit, free from the condition to which individuals issuing such paper substitutes for money were subject, of giving, when required, for the sign, the thing signified. They determined to try whether they could not emancipate themselves from this unpleasant obligation, and make a piece of paper issued by them pass for a pound, by merely calling it a pound, and consenting to receive it in payment of the taxes. And such is the influence of all established governments, that they have generally succeeded in attaining this object. I believe I might say they have always succeeded for a time; and the power has only been lost to them after they had compromised it by the most flagrant abuse.

"In the case supposed, the functions of money are performed by a thing which derives its power of performing them solely from convention. But convention is quite sufficient to confer the power; since nothing more is needful to make a person accept any thing as money, and even at any arbitrary value, than the persuasion that it will be taken from him on the same terms by others. The only question is: What determines the value of such a currency? since it cannot be, as in the case of gold and silver (or paper exchangeable for them at will), the cost of production.

"We have seen, however, that even in the case of a metallic currency, the immediate agency in determining its value is its quantity. If the quantity, instead of depending on the ordinary mercantile motives of profit and loss, could be arbitrarily fixed by authority, the value would depend on the fiat of that authority, not on cost of production. The quantity of a paper currency not convertible into the metals at the option of the holder can be arbitrarily fixed, especially if the issuer is the sovereign power of the State. The value, therefore, of such a currency is entirely arbitrary.

"Suppose that, in a country of which the currency is wholly metallic, a paper currency is suddenly issued to the amount of half the metallic circulation; not by a banking establishment, or in the form of loans, but by the government, in payment of salaries and purchase of commodities. The currency being suddenly increased by one-half, all prices will rise, and, among the rest, the prices of all things made of gold and silver; an ounce of manufactured gold will become more valuable than an ounce of gold coin by more than the customary difference which compensates for the value of the workmanship; and it will be profitable to melt the coin for the purpose of being manufactured, until as much has been taken from