instead of being a facility in the transfers of business, it would cost in time and toil more than any other tax imposed upon property. All that it does not, and in the nature of things cannot do, is accomplished without its intervention by that other agency which we have called money of account, and which for the most. part is settled by set-off, in which nothing is used but the name of money as a system of notation.

P. I understand you to mean that if a dollar is transferred ten times, its purchasing power is not multiplied ten times by counting it over and over again, as against the principal or prime value of the things purchased by it, because they are multiplied just as often, and, therefore, the innate power of three thousand millions of it cannot be made to meet the innate cost-power of thirty thousand millions worth of commodities; and I infer that it is a medium only in the exchanges which it is actually used to effect, and that all the other twenty-seven thousand millions are negotiated without any agency of the money represented by coins and circulating notes. The drafts, cheques, and book accounts which do this large business, are a sort of mediums or sub-mediums, or ancilliaries in the common service, and are equally effective, though not warranted by any public or corporate guaranty. Moreover, I infer that the true idea of a medium is not in its substance, but in its service.

P. Experts have estimated the amount of the gold and silver coin in the country in 1860 at 200 millions. In the 20 years since the production of above 1270 millions worth of these metals. from our American mines is reported. This sounds like an overflow. What has become of it? How has the demand met the supply? It has not raised prices-they have fallen; and the paper money substitutes have risen from 207 millions in 1860, to, you say, 694 millions. I have been ciphering till I am tired and out of patience with its results.

T. So far as your data go, the influx is easily disposed of. The principal or fund amounts to 1470 millions. Of this, 910 millions excess of exportations to foreign countries over imports from them leaves but 560 millions. Take from this the 481 millions on hand and you have but 79 millions for consumption in the arts and manufactures,-not quite four millions averaged per year,

which is not nearly half enough; but the deficiency may be supplied by the money brought in by immigrants and travellers, which is not reported at the custom-house. None of these items, official or estimated, are accurate enough, or can be so, to render cipherings about them into certainties.

P. The specie circulation is certainly more abundant than at any date before resumption. The silver dollars are complained of in the banks and in the Treasury as a burden; it is spoken of, not in thousands or millions, but in tons, and you cannot get greenbacks or national bank notes in large quantities for gold coins. Does not this state of things indicate an overplus in the supply of coins?

T. Not of itself. The notes are now at the par of gold, and the convenience of the paper in use explains its preference.

P. I thought the paper dollar only served to make up for the deficiency of the metal dollar in the equalization of the current exchanges of business; but it seems now, that it supplants the weightier medium in use, naturally enough, to be sure, for the bank note at the par of gold is in fact an order for the gold whereever you may want it; and this, I suppose, is the meaning of the gold and silver certificates of deposit given in the Treasury reports, and I observe that the sum in silver certificates is usually nearly twice as great as of those of gold-the silver is so much more inconvenient than the gold,-still, the supply of paper money has fallen off quite 90 millions in the last six years. What does that mean?

T. The number of national banks is now above 2000, and there are more than 4000 State banks, private bankers, and savings banks besides. All these money institutions are clearing houses for their respective districts, and the larger ones for the whole country in effect. In them, and on their books, debts and credits are set off against each other without the intervention of either coins or notes, and thus tend constantly more and more to displace the common medium of payment. All advancing improvement in the order of business is marked by a proportionately diminished cash circulation in the transaction of equal amounts in commercial exchanges.

P. Haunted by the commonly-received doctrine of "supply and

demand" as a regulator of prices, the wonderful yield of the mines of California and Australia threatened, upon our theory, such an overflow of the precious metals upon the commodity market of the world, that we feared the precious would soon sink into the rank of the useful, and be "nothing accounted of" except for their qualities of texture and resistance to wear and tear in implements, utensils, and ornaments. The facts developed and suggested by such inquiries as these drive one upon estimates of amounts as a way of getting comparative quantities. The present yield of the mines of the United States, Russia, and Australia may be put at 180 millions. The director of the mint thinks the consumption in Europe and America in the arts and manufactures is from 45 to 55 millions of gold, and from 25 to 35 millions of silver, together 70 to 90 millions, or nearly the half of the annual product. And there are, besides, the vast populations of India and China, which for a century have absorbed from 20 to 40 millions of dollars worth of silver per annum. I suppose that the expansion of commercial exchanges which the influx of money induces will provide for it.

T. Adam Smith observed the fact that the importation of 120 to 140 millions of francs per annum for more than a century, helped by a vast amount of paper money in that time, had not depreciated the exchange value of the precious metals in Europe. On the contrary, the prices of commodities had fallen very considerably, as measured by the stock of the medium in use.

I do not think it at all probable that any yield of the mines yet to be opened will so diminish the exchange value of these metals as to carry their ratio below the decline in the prices of products that shall in future be confronted with them.

Among the apparent mysteries of metallic money is this one: its exchange value is not governed by its quantity. Its scarcity and its abundance are not subjectively operative, but are only relative to the supply of its substitutes, or the means of payment that may be made to replace it. The fluctuations in its currency effectiveness depend upon the credit-money, or upon the credit of the credit-money in the business market. Lessen the stock of coins in circulation within any reasonable or probable limits, you only call into use so much more credit-money, which in all its kinds works in commerce by way of set-off, and so far diminishes

the demand for coined money. Increase the stock of coin as much as possible, and so far as it is conveniently available, it merely substitutes cash for deferred payments. The digging for the precious ores is not ever among the positive and independent causes of expansions and contractions of market values. Its results cannot over-match those of the thousand and one industries that are working the other way, and cheapening the things for sale faster than the mines can cheapen their output. The standard, as it is called, does not more affect the weight which it is supposed to lift than the weight affects it. That "engineer is hoisted by its own petard."

D. I thought you would make the money of the country nonexportable; that you would even debase the metallic required for domestic use rather than risk the effect of its certain departure from its duty as a medium of exchange. If so, a rise or fall in the tide of its influx cannot be insignificant.

T. The paper money in circulation is in itself non-exportable, and the coins, if need be, should be protected from the meltingpot and from exportation. Bullion is a commodity of commerce, and all the precious metals in that form, and all excess of coins made from them, may go abroad as freely as cotton or corn. But I would have enough money active at home to support its industries and enterprise; and I would have that money stable and pliable to the exigencies of commerce. I would protect business from the ups and downs of a fluctuating fund of current money, that, among other good results, debts may be paid in the values at which they were contracted. I would not have profits and losses on a perpetual see-saw of chances. I prefer the regular rule of law to the happening of a lottery in the issues on which men depend for their welfare. It is one of the chiefest of the equities which civil government is bound to secure to its subjects, to maintain the validity of contracts. And this can be done only by maintaining the nominal at the exchange value of the money of the people.

If money shall become cheaper in exchange for labor, as it must when the world grows more wealthy, the change or the depreciation is just what happens to all other property; and government is not under any exceptional obligation to keep old

debts unimpaired amid the decline of all other things of value. The fixed property in land and labor-power must, and should, by the expense of their improvements, and through those improvements made more and more effective in service, rise relatively to the prices of the things which they produce; among which are money and money claims. But such change is gradual, and does not affect the current credit values in which ordinary business is conducted. "The mills of the gods grind slow," and the world has time to be ready for the grist. Let there be steadiness in change, growth without shock, in the provident arrangements of societary life.

CHAPTER XVIII.

BANKING.

T. Of course we do not intend in our discussion of this subject to treat it as if we were producing a system such as might be a directory for the conduct of bank officers. We are neither required, nor are we competent, to perform such a task.

Money banks are of several kinds. Observe, however, that we do not give the name of bankers to the mere custodians of cash, who keep and return the identical sum or substance in bulk without use. This is only another way of hoarding, and has nothing of the function of banking in it. The institutions that fall properly within the name may be classed as of two kinds only, though neither of these has an invariable character. They are sufficiently distinguished for consideration as Banks of discount. and deposit, and Banks of issue.

One of the earliest banks of deposit (which must also have loaned its funds at a discount for the use) of easy reference is that mentioned in the gospel of Luke (chap. xix. 23), in which money was deposited so that the owner, after an interval, could receive it again with usury. Such banks, doubtless, existed long before the Christian era, for the very earliest organization of commerce required a money-exchange corresponding to the co