PAPER 
for which it is exchanged : if this proportion is altered or 
deranged, the value of the money will be altered : if, 
while the quantity of money remains the lame, the quan¬ 
tity of the commodities is diminifhed, the money mull 
neceflarily bear a larger proportion to them than it pre- 
vioully did; and, confequently, its power to purchafe them 
will be diminilhed : ftriftly fpeaking, however, this can¬ 
not, with propriety and precifion of language, be deno¬ 
minated a depreciation of the currency, as the variation 
in its value or power of purchafe, arifes entirely from a 
change in the quantity of commodities, and not, in the 
imalleft degree, from any alteration in the quantity of 
the currency. But if, while the quantity of commodities 
continues ftationary, the amount of the circulating medi¬ 
um is increafed, the confequence already pointed out will 
equally enfue ; that is, the power of the currency to pur¬ 
chafe commodities will be diminilhed ; and the currency, 
therefore, fo far as it is confidered in relation to commo¬ 
dities, will be depreciated. But in all countries where a 
compulfory government-paper is illued, the metals, even 
when coined, loon are regarded folely as commodities, 
and are aflFefted, equally with all other commodities, by 
the increafed ifl'ue of the paper-currency. As, therefore, 
there is no check to the ilfne of government-paper, and 
extravagant or carelefs expenditure calls for increafed 
ilTue, a depreciation of fuch paper neceflarily enfues ; and 
each ftage in the depreciation occafions a further ilTue, 
which in its turn increafes the depreciation ; for, when 
the government perceives that one thoufand pounds in 
paper-money, for inftance, will no longer command the 
lame quantity of the commodities which it needs that it 
would formerly do, but that one thoufand and fifty pounds 
are requifite for this purpofe, it is compelled to increafe 
its ifl'ue of paper-money in this proportion ; and this in¬ 
creafed ifl'ue, again railing the price of commodities, re¬ 
quires a Hill larger ifl'ue, the next time that the govern¬ 
ment has occafion to make a purchafe. 
On the firft ifl'ue of compulfory government-paper, it is 
received with reluftance: metallic money is preferred to 
it; and, where it can be procured, a premium is willingly 
given for it; or, in other words, the compulfory government- 
paper is at a difeount. But, if this is the cafe at the firft 
illue ol it, ar.d when the amount is comparatively fmall, 
we may eafily conceive what will be the confequence, if a 
larger and conftantly-increafing quantity is forced on the 
people : this increafingquantity mull aft, not only in the 
manner which w j e have already deferibed, towards its own 
depreciation, by the fan-^procefs in which all commodi¬ 
ties are depreciated by increafe, but it will alfo operate to¬ 
wards its own depreciation in another manner. The very 
firft ifl'ue of a compulfory government-paper is a fufficJent 
proof of an impoverilhed and embarrafl'ed government; 
and every future ifl'ue, efpecialiy if the amount of the 
ifl'ue be increafed, is a proof that the poverty and embar- 
rafl'ment of the government are increafing : but it is utterly 
impoflible, that, while the poverty and embarraffment of 
a government are increafing, the confidence which the 
people repofe in it can remain ftationary: it mull dimi- 
nifti, and a diminution of public confidence in a govern¬ 
ment difplays itfelf in no refpeft fo unequivocally and 
materially, as in the eftimate which is formed of the value 
of the paper-currency. Here, then, we perceive the real 
and full liate of the cafe, whenever a government increafes 
the^ifl'ue of its compulfory paper : a larger quantity of a 
currency, on its firft circulation received with reluftance, 
and only becaufe no other mode of payment could be ob¬ 
tained, is illued ; the increafed ifl'ue, of itfelf, would ne- 
cefl'arily diminilh the value of the currency, but this con¬ 
fequence is increafed by the fufpicion which luch a mea- 
l'ure on the part of government creates, that the finances 
of government are on the decline ; hence, from the ope¬ 
ration of both thefecaufes, viz. an increafed ifl'ue, and di- 
niinilhed confidence, a depreciation of the compulfory 
government-paper mull neceflarily enfue. 
There is ftili another fubjeft incidentally connefted 
Vol. XVIII. No. 1250. 
M O N E Y. 881 
with paper-currency, on which it may be proper to fay a 
few words, before we proceed to the fecond divifion of 
this article. By many, bills of exchange, or exchequer- 
bills, payable only at a certain time, and bearing intereft, 
are confidered as paper-currency ; and it is contended that 
an increafe in the ilfue of them has exaftly the fameefteft 
as an increafe in the ilfue of government or bank paper. 
This notion, though certainly plaufible, and maintained 
by writers of conliderable acutenefs and knowledge on 
the fubjeft of political economy, a little refleftion will 
ferve to convince us is erroneous and unfounded. We 
have only to refleft on the nature and operations of cur¬ 
rency, to be convinced that bills of exchange and exche¬ 
quer-bills do not form a part of it; and, indeed, that notes 
bearing intereft , are by that very circumftance excluded 
from the charafter and operations of currency; and that 
the increafed ilfue of thefe, fo far from tending to depre¬ 
ciate the value of money, muft rather operate to raife it. 
Bills of exchange, and exchequer-bills, are brought into 
the market, not for the purpofe of employing them in the 
purchafe of commodities, but for the purpofe of lale; and 
they are generally bought by thofe who wilh to put out 
their money to intereft : hence they may operate on the 
rate of intereft, but they cannot operate on the price of 
commodities, unlei’s it be, as has been already Mated, to 
lower the price of commodities, or, in other words, to 
raife the value of money. That they may have this effeft 
will appearfrom the followingconfiderations: Let us fup- 
pofe that the money and commodities in any market bear 
a certain proportion to one another, and that this pro¬ 
portion is difturbed, by the introduftion, either of a 
greater quantity of fome of the commodities formerly in 
the market, or by the introduftion of fome new commodity; 
it is plain that in either cafe, if the quantity of money 
continue the fame, its value or power of purchafe 
will be increafed, fince it will now exchange, not merely 
for the commodities formerly in the market, but alfo, in 
addition, for the increafed quantity of the old commodi¬ 
ties, or for the new commodities. If, inftend of a new 
commodity properly fo called, we fuppofe that a perfon 
comes into the market, wifhing to borrow money, and of¬ 
fering fuch a rate of intereft as fecures to him part of 
that money which ufed to be expended in the purchafe of 
commodities; in this cafe, alfo, the value of the money, 
or its power to purchafe, muft be increafed, fince it will 
now command, not only the commodities it formerly did, 
but alfo the intereft offered for the fum wifhed to be bor¬ 
rowed. Butin this queftion, it is a matter of mere indif¬ 
ference in what manner the intereft to be paid is promifed 
or fecured ; whether in the ufual way, or by bills of ex¬ 
change, or by exchequer-bills. The general faft and 
confequence are precifely the fame in all cafes : if bills of 
exchange or exchequer-bills are brought into the market, 
they are brought, not to purchafe commodities with, but 
for fale ; and, if they are fold for part of that money 
which ufed to be expended in the purchafe of commodi-- 
ties, it is evident that the price of thefe commodities muft 
be lowered, not raifed, by the introduftion of thefe bills 
of exchange, or exchequer-bills; and confequently, that 
as their nature and operation is that of commodities, not 
of circulating medium, their ifl'ue cannot lower the value 
of money, but muft, in fome degree, tend to raife it. 
II. Of Paper-money payaele on Demand. 
Bank-notes have very generally, but very erroneoufly 
and improperly, been denominated the reprefentatives or 
fymbols of coin. This is one, among many other inftances 
of vaguenefsand confufion of ideas, arifingfrom the inju¬ 
dicious and carelefs ufe of metaphorical language, which 
has fo much retarded the advance of the fcience of politi¬ 
cal economy. What precife or clear idea can we attach 
to the term reprefentative of coin ? or how can bank¬ 
notes be fo denominated? It has been juftly remarked, 
“ that the moft accurate reprefentatives of coin are well- 
fabricated counterfeits; yet every man, when he knows 
5 E them. 
