CURRENCY. 



515 



Currency, from an over-issue of them, than from their being in- 

 **— -v~~' applicable to the purposes of foreign expenditure. In 

 all cases of embarrassment, it is a main point to ascer- 

 tain the source of the evil; an explanation of which 

 paves the way for the adoption of the measures, fre- 

 quently unpopular, which are requisite to effect a re- 

 medy. 



The approximation, on this plan, to uniformity in 

 price, would not be impeded by the plan of adding al- 

 loy to the coin. Gold or silver in bullion are not neces- 

 sarily pure ; on the contrary, these metals are, in every 

 situation, more durable in consequence of the admix- 

 ture of alloy. 

 Paper cur- Paper currency seems the last refinement which it is 

 rency. possible to make in saving the expence of a circulating 



medium. It is, in fact, the exchanging the use of a 

 commodity of great value for one of almost no value 

 whatever. In the case of so decided a transformation, 

 nothing, it is clear, can support credit except a thorough 

 confidence that the article of value will be forthcoming 

 on the presentation of its representative. It is, how- 

 ever, remarkable, that popular ardour, in certain cir- 

 cumstances, has given currency much longer than 

 might have been expected to paper issues of a doubt- 

 ful description. The grand period for obtaining circu- 

 lation in this way, is the era of some remarkable revo- 

 lution. The minds of men are then too much agita- 

 ted by favourite anticipations, to dwell with coolness 

 on the fate which must overtake the unchecked issue 

 of paper. The war of 1775, on the part of the United 

 States of America, and still more the French revolu- 

 tionary war, are memorable instances of the length to 

 which such fallacious emissions may be carried. Though 

 used in the most lavish manner, their credit, in either 

 case, lasted long enough to enable the respective go- 

 vernments to baffle all the efforts of their opponents. 



In reverting to the memorable bubble of the Missis- 

 sippi, it is due to the character of Law to mention, 

 that he was not responsible for the monstrous abuse 

 which was made of his views and projects. His ideas, 

 as developed in his publication entitled Considerations 

 ore Money and Trade, imply a very different course 

 from that which the French government thought pro- 

 per to take. The bank founded by him in France 

 in 1716, issued notes expressed in the following terms : 



" The Bank promises to pay the Bearer at sight 

 ■i livres, in money of the same weight and deno- 



mination as the current money of the present dale." 



Such continued the form of the bank notes until 

 171& and so far all went on well. But in that year 

 the government of the Duke of Orleans thought proper 

 to buy up the bank shares, and to give to this esta- 

 blishment the character of a government concern. It 

 now received the name of Banque Royale, and the notes 

 were expressed as follows : 



" The Royal Bank promises to pay the Bearer at 

 sight, — — — livres in silver." 



This change, slight as it apparently was, became a 

 very serious matter in a country where government 

 assumed the power of debasing the coin. It made the 

 bank responsible, not for the coin current at the time 

 of issue, but for its reduced value at a subsequent date. 

 It was in vain that Law raised his' voice against this 

 innovation. Power got the better of argument, and, 

 by a singular perversity, the faults resulting from an 

 arbitrary exercise of authority were laid to the charge 

 of erroneous principles. We have already expressed, 

 under the head Bullion, our conviction, that the pre- 

 sent depreciation of our bank paper exists chiefly in re- 



gard to foreign transactions. At home, the degree of Currency, 

 depreciation appears to us comparatively small, and *— V""' 

 confined in its course to the operation of the enhance- 

 ment of foreign articles. The wonder is, that, invol- 

 ved as we have been in a contest requiring such an 

 amount of foreign expenditure, and with a bank re- 

 strained by no direct enactments in regard to its issues, 

 the amount of our bank notes, and the consequent fall 

 in their value, should not have been greater. The re- 

 sult is sufficient to shew, both the moderate views of 

 the managers of the bank concerns, and the latent 

 checks which exist in regard to a power of circulation 

 apparently unbounded. The Bank of Ireland increased 

 its issues with much more rapidity, after the exemption 

 from cash payments, than her sister establishment. In 

 France, on the other hand, the distrust attached to pa- 

 per money since the ruinous days of the assignats, has 

 put it out of the power of government, or of the Bank 

 of Paris, to exceed a circulation of three or four mil- 

 lions sterling. Had it been otherwise, there can be 

 no doubt that the French government, so far from imi- 

 tating the prudence of ours, would have gone still far- 

 ther in the course of over-issue and depreciation than 

 the comparatively moderate cabinets of Austria and 

 Sweden. 



In the late discussions on the bullion question, the 

 mercantile interest were almost unanimous in favour of 

 the bank and of ministers. This arose, in a great mea- 

 sure, from an apprehension that the obligation to re- 

 sume cash payments would necessitate a great reduc- 

 tion of the circulating medium, and would bring down 

 on trading people all the evils attendant on scarcity of 

 money. In the actual circumstances of the country, 

 there can be no doubt that a sudden diminution of our 

 circulating medium would have formed a severe aggra- 

 vation of our previous embarrassments. But, speak- 

 ing in a general way, there can be nothing less neces- 

 sary or less politic, than to provide, by enactments of 

 government ; for the introduction of a circulating medi- 

 um currency, we may take for granted, will never fail 

 to provide for itself. The necessity of interchanging 

 commodities calls for a circulating medium, and the 

 money at hand will be made, one way or other, to an- 

 swer the purpose. The chief difference arising from 

 its scarcity or abundance, will consist in its higher or 

 lower value. 



With the view of ascertaining the limit to which a 

 government should permit the currency of bsnk notes, 

 Dr Smith enters at some length into the principles of 

 the circulation of money. He divides it into two dis- 

 tinct branches ; — the circulation in the wholesale trade 

 between dealer and dealer, and the retail circulation be- 

 tween dealer and consumer. The latter being carried 

 on in small sums, ought, he thinks, to be confined to 

 metallic currency ; while the former may, without ha- 

 zard to the public security, be managed by bank notes. 

 It would be highly impolitic for a country to divest it- 

 self wholly of the precious metals. For an advantage 

 of no great consequence, it would thus become stripped 

 of that circulating medium, which forms the currency 

 of all the rest of the civilized world. Remove the check 

 of cash payments, and there is no saying to what length 

 the overissue of paper may be carried. Recent experi- 

 ence has shewn, that without any intention of imposing 

 paper currency on the people, we have brought our- 

 selves into a situation in which our notes bear a redu- 

 ced value in comparison with coin. The exchange is 

 consequently adverse to us in all directions ; an evil 

 which, whether we view it as obstructing our supplies 



