The position, that the value of a bank note depends on the value of the standard coin, into which it is convertible, has been denied ; since long experience, it is asserted, has proved that the holders of bank paper have not cared whether they could convert it into hard cash or otherwise, and in general have felt better pleased to have the symbol of commodities in paper than in coin. It is also contended, that it is important to consider, whether the bank note has for many years been valuable as depending on standard coin, or from the stamp affixed upon it, and representing in the way

of an instrument of traffic the value of a certain quantity of goods purchasable with the amount marked thereon : that on this point there can be little doubt, that, like the leather money of Lycurgus, it signifies not one iota for internal traffic, whether the

representative of the goods or symbol of commodities bear any intrinsic value : that where barter cannot be effected, it is only necessary to have the value of some one commodity stamped on leather, or paper, under the sanction of the state, in order to pass from hand to hand, in dealings where the object is to transfer goods from one person to another : that the only intent of a circulating medium is to act as a general commodity, on the transfer of goods from one person to another : that that being the object, how can it avail any thing, whether that circulating representative bears any intrinsic value or not? that if it does the business intended, that is all that is necessary : that as an instrument of traffic, as a mere symbol of the goods within the country, an article of no intrinsic value, which is liable to fluctuation only from quantity, (or in other words, a bank note) is in every respect much the best form of money : that the bank note in this country derives no value from a reference to standard coin, or the facility of exchanging it for metallic symbols : that the great body of the people do not wish for coin, further than small silver for the mere convenience (not on account of its intrinsic value) of change, where paper could not be so conveniently used : that I have reasoned 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 VOL. XII.


of the same value as a money ; and that in this I am completely mistaken, for that its real value is affected by its abundance or scarcity: that the value of money is depreciated by the increase which results from an increase of traffic; that, let the standard coin be of what intrinsic value it may to-day, to-morrow the currency will depreciate as an instrument of traffic, if the business with the quantity of that instrument be increased,—if the country is moving forwards, and vice versâ if the country is moving backwards : that at present things are in favor of fixed incomes and specific sums, as money is rising rapidly in value, and will continue to do so as long as the trade and business of the country are diminishing : that as the traffic of the country is now on the wane, and the quantity of the currency is diminished and diminishing, as well as likely to be very much more diminished, there does not appear in perspective any great cause to apprehend that the practice of buying up the gold coin will be worth while or practised: that the value of the bank note of 1l. is nominally 20s., and the representative value of the sovereign, as a money, is 21s. : that therefore a one-pound note and a shilling are of the same value as a guinea or sovereign, so long as the latter remains in a currency state : that as to private property being lessened by the size of an arbitrary standard coin, it is ridiculous; as, so long as it represents the sum intended, that is sufficient-nor any more will a bank note lessen property: but that that depreciation of a fixed sum, which arises from abundance of currency, will undoubtedly diminish that sum in point of real value.

In reply to these observations, it may be remarked in the first place, that had I asserted a bank note would not be valuable, unless it were immediately convertible into cash at the will of the holder, my position would indeed have been disproved by experience : but it must be evident from the very ground of my reasoning as to a depreciation in the value of bank paper, that I admit a bank note would be valuable although it were not at present convertible into standard coin at the will of the holder, provided there existed an expectation that it would be so at some future time. Now the expectation has continually existed, that the bank would, as soon as it might be prudent after the termination of the war, resume their cash payments. It is likewise to be recollected, that the bank during the suspension of cash payments has also issued silver tokens of a certain intrinsic value, which could at any time have been procured for bank notes ; so that, at all events, bank notes would not have fallen below the value of that portion of silver which could be obtained for them in the shape of tokens. There was at the same time an act of parliament which makes it criminal to pass money in coin, at a higher price than money in paper. It is then to this act of parliament and to the firm expec

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 collvertible 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 liave 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 diificulty 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 purposesor not, he would be ready to receive it at its market price

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