tation of the resumption of cash payments, together with the option of obtaining bank tokens of intrinsic value for bank notes, that bank paper is indebted for the preservation of its value, but still not without suffering some depreciation. Consequently, long experience has not yet proved" that the holders of bank paper have not cared whether they could convert it into hard cash or otherwise." In truth the very reverse happens at the present moment, although the resumption of cash payments is confessedly so near taking place. For even now a pound note, which is an engagement to pay a pound sterling, can be obtained, together with some additional money, in exchange for a sovereign, which is itself a pound sterling. The difference given at present indeed is not great; but that does not alter the nature of the fact. That men prefer coin to bank notes, is then demonstrated by a proof of all others the most convincing; that is, by their willingness to give more for the one than the other. But this could not possibly happen if they could at any time, by taking a bank note to the bank, procure for it the quantity of coin which it is an engagement to pay; since they could in that case procure the required quantity merely for the bank note, without paying any difference. The position, therefore, is not true, that men " do not care whether they can convert bank paper into hard cash or otherwise." But the existence of the opposite disposition is perfectly clear; and its practical effects were becoming at one time so powerful, that an act of parliament was found necessary to make bank notes a legal tender, as an additional means to keep them of the same value with coin. For when the resumption of cash payments seemed to be more doubtful, or at a greater distance, than at present, the difference between the value of bank paper and the standard coin was such, that a guinea was worth seven or eight shillings more than a pound note. If a bank note by being taken to the bank could at any time be exchanged into a given quantity of coin, or a given quantity of any thing else of intrinsic value, the value of the bank note would be exactly equal to the value of the given quantity of coin, or other commodity of value, into which it might be so exchanged: and in that case the public would, I have no doubt, be better pleased in general, to have the circulating medium or commodity called money in paper than in coin, because in many respects it is more convenient. But should this expectation of converting bank notes at the bank into coin or something else of intrinsic value entirely cease, the value of a bank note would in time be no more than that of the paper of which it consisted. In every adulteration or diminution of the current coin in this or any other country, it has been invariably found that although the same denomination and the same stamp have been continued to such coin, yet its value has constantly in a very short

period decreased exactly in proportion to its deterioration either as to fineness or quantity. I am then at a loss to conceive what peculiar property either paper or leather possesses which shall make it capable, in consequence of being stamped, of obtaining a certain given value independent of its mere intrinsic value, so as to purchase a certain quantity of goods of more intrinsic value than itself, when experience has universally shown that the precious metals, notwithstanding any stamp or denomination that may have been applied to them, have constantly fallen exactly to the level of their intrinsic value. Bank paper is at present undoubtedly capable of commanding a certain quantity of goods and labor beyond its intrinsic value as paper; but this only in reference to the quantity of the precious metals for the payment of which it is an engagement, and which engagement, although not at present, it is expected will at some future time be fulfilled. It is therefore the precious metals, and not the stamped paper, which in this case command the goods and labor. For nothing will answer the purpose of money which does not possess intrinsic value; and the quantity of goods or labor which a given quantity of money can procure, will be exactly equal in value to the intrinsic value of such quantity of money. And if paper sometimes seems to perform this office, it is merely from the faith that now or at some future time such paper will be convertible into the precious metals. Any other commodity of intrinsic value, salt for instance, might by general consent or from a concurrence of circumstances have been selected as the circulating medium but it would not have been so convenient as the precious metals for many reasons, such as its want of durability; its little intrinsic or exchangeable value compared with other commodities would also have been an objection to it as a circulating medium, since large masses of it would have been necessary to exchange against or purchase the ordinary marketable commodities; because no stamp that could have been affixed to it, any more than to paper, would have made it pass for more than its intrinsic value.

It may seem almost superfluous in the present day to advert to the origin of money; but now that its first principles are controvert, ed, the digression may perhaps be pardonable."Traffic by mere barter must have been soon found inconvenient: in the first place, on account of the difficulty of proportioning payments for the commodity purchased; for if a man wants to purchase a hatchet, and has only a sheep to dispose of which is worth six hatchets, he knows not how to accomplish his purpose. But another and indeed the principal difficulty consists in adapting to one another the objects of sale and purchase. The man who has the hatchet to

Edinburgh Review for October, 1808.

sell, wants not to purchase a sheep, but a cloak; while the man who has the cloak to dispose of, has no occasion for a hatchet, but for some other commodity. In these circumstances it becomes a matter of expediency for every man to provide himself, if possible, with more or less of that commodity which most people will be willing to purchase, and with which he can therefore most readily procure the different articles for which he may have occasion. After the trial of various commodities, the course of affairs has every where sooner or later recommended the precious metals, for which most people would be willing to exchange the articles of which they had to dispose. At first they are merely used in the unfashioned state, and bought and sold in the different exchanges by weight, like any other commodity: and in this case, selling a sheep for a piece of gold or a piece of silver of a certain weight, is the same species of transaction as selling it for a certain weight of salt or of corn. The gold is the commodity purchased with the sheep in the one case; the salt or corn is the commodity purchased with it in the other. All this is very clear: and what is the difference after the precious metals have been coined? Nothing more than that now a stamp is set upon certain convenient portions of them, declaring authoritatively the weight and fineness of the piece upon which the stamp is impressed; thereby saving those by whom it is purchased and sold, the trouble of weighing it or proving its quality." But in this there is no pretence or attempt to make it pass except as a marketable commodity, according to its own intrinsic value. Indeed the very circumstance which produced the necessity of stamping it, is the consideration of its value, which is of course in proportion to its quantity and fineness, and which quantity and fineness are indicated by the stamp. "As coins then are neither more nor less than commodities which are bought and sold for their value like other commodities, so bank notes are obviously obligations upon the issuers to pay a certain quantity of those commodities; and these obligations also are bought and sold for their value, or for that quantity of the valuable commodity, coin, which they can command." The cause of any delusion on this subject seems in a great measure to arise from receiving the commodity called money (whatever that commodity may consist of, whether of precious metals, salt, or otherwise) on account of its value, and not on account of the peculiar use to which as a mere commodity it might be applied. Thus if salt were made the circulating medium, or medium of exchange, it would be received by every body not on account of its use as salt, but for its value. A man might indeed sometimes receive it in order to use it for culinary or other purposes for which salt is employed; but whether he wanted it for such purposes or not, he would be ready to receive it at its market price

merely on account of its value independently of its use, because, from its being the instrument of commerce or circulating medium, he would know that he could readily exchange it against or purchase with it other commodities of intrinsic value equal to itself. Therefore the circulating medium or commodity called money, being received independently of its use, does not require to be literally and on all occasions transferred or paid in its own proper form and substance; but an engagement upon paper duly authenticated to pay the required quantity of the circulating medium will be sufficient, provided there exists a belief strong enough to prevent its depreciating, that such quantity of the circulating medium either can at present, or will at some future time be procurable at the bank in exchange for a piece of paper so authenticated. For as the person who receives it, regards in general the value, not the use as a mere commodity, of the circulating medium, he will be satisfied if he can be sure of obtaining for his piece of paper, a quantity of commodities equal in value to the quantity specified in it, either of the precious metals, or other circulating medium. And this circumstance has given rise to the fallacious idea, that it is of no consequence whether the circulating medium bears any intrinsic value or not. Whereas its use is the only quality that is dispensed with; its value is the very essence on which it depends, and according to which it acts as the instrument of commerce. any adulteration or diminution of the currency is always followed by a corresponding diminution in its exchangeable value, and no stamp applied to it with the intention of attaching to it an exchangeable value superior to its exhangeable value as a commodity, ever has had, nor ever will have any effect, unless there be at the same time an engagement that such commodity so stamped shall either immediately or at some future time be convertible into a specified quantity of some other commodity of higher exchangeable value; in which case it will assume à value, either quite equal to the value of the commodity into which it is so convertible, or else not entirely equal to it, but in proportion to the doubt there may be that the engagement to convert it into such other commodity will not be fulfilled. I may now be told, that notwithstanding the suspension of cash payments, a guinea would not purchase more commodities than a one-pound note and a shilling, and that therefore the bank note was not depreciated. But the cause of this was, that a punishment was attached to the giving more for a guinea than a onepound note and a shilling. Therefore the guinea could not pass current for its value: but the value of the bank note being depreciated, brought down the value of the guinea along with it. However, the guinea, as soon as it became released from this legal

Hence

restraint by being too light, could then pass for its exchangeable value, and became worth more than a heavy guinea although it contained less gold.

A suspension of cash payments at the period it took place, might perhaps have been called for by the exigency of the times; but now that by a patient perseverance in an unusual system we have arisen superior to our difficulties, it becomes a desirable object to prevent any erroneous conclusions being drawn, even theoretically, from measures which were resorted to under the pressure only of necessity, and merely as temporary expedients, but which could not be permanently and universally adopted without the most tremendous convulsions of property. It is not indeed easy to conceive the extensive mischief and misery which must follow from the permanent adoption of paper currency, if there were not some article of intrinsic value to which it referred, and for which it might be voluntarily exchanged or expected to be voluntarily exchanged, and which therefore, and not the paper, would be the real standard of value. Persons whose fortunes now enable them to procure the comforts and luxuries of life, would soon find themselves unable to purchase even its necessaries; yet would their nominal income and the nominal amount of their property remain the same and in that would consist the deception. But fortunately the ministry as well as the bank directors are aware of this delusion, and will therefore preserve the country from its injurious effects.

If I have been supposed to reason " as though metal composing guineas or sovereigns, gold coin, was always of the same value in bullion, and as though currency of whatever kind always remained of the same value as a money," my meaning must have been misunderstood; since I am aware that the value of every commodity is liable to fluctuate when any change takes place in the proportion which the supply bears to the demand, and consequently that an increase of either bullion or currency without a corresponding increase in the different commodities circulated by the currency, will cause a depreciation in the value of the bullion and of the currency. But this depreciation, when there is no restriction, will equally affect the paper money and the money in coin: and persons whose property or income might suffer from a depreciation of this sort would have no right to complain, since it is an inconvenience incident to the nature of all property, as well as to the nature of that species of property which they possess. Not so, when this effect arises from a deterioration of the currency: for then it is a decided injustice, since it is an event which could not have been foreseen nor provided against, and there is at the same time no limit to which it might not be extended. Hence money would become.