water, which in some places, in cases of great scarcity, has had a high exchangeable value, and then the possession of large quantities of it may have been wealth, but it is never thought such in common cases, because from its plenty it has no exchangeable value. It is said, however, that we are not to apply the term to notes, paper money, securities, &c. And why not? The owner of a warehouse full of raw produce, or of a chest of massive gold, or of coffers of metallic money, will find them of little service to him beyond their exchangeable value; and if the holder of a bank note, or bill of exchange, finds it possessed of the same extensive power, we know not why he may not give it as high a title. Let it be observed, that we are now insisting on what we take to be the common use of language. Perhaps it might have been more judiciously appropriated at first. But we have no right to limit it to suit our own ideas on the subject; and we cannot doubt that it is commonly, and, indeed, universally used, as we have explained it.

We have room to touch slightly upon one other theme suggested by our author, in the discussion of which he seems to have fallen into a singular mistake.

He represents a paper currency in all its forms, and with every convenient limit and restriction, as one of the greatest causes of national decline, wherever it is established. • We find that nations become more thriftless in proportion as they depart from the use of a medium of circulation possessed of intrinsic value.' That the use of a paper currency has been grossly abused, perverted to the purposes of fraud, made the instrument of bankruptcy, ruin, and distress to thousands, and that it ought, therefore, to be put under more severe legislative restrictions, than it has hitherto been, we presume no one acquainted with the history of it will deny. But the idea of abolishing it entirely is new to us. We know not indeed how this could be effected, whatever might be the expediency of such a measure. If it were possible to suppose a country, where it had never been particularly needed, and where the channel of circulation had always been conveniently filled with gold and silver coins, the holders of large portions of these might still find; or think it profitable to send them abroad; and then the deficiency would be felt at once. A system of credits must be established or extended throughout the community. It will, however, be very imperfect at first, because the facility of transfer is not understood, or not reduced to practice; the creditor, who has some

doubt about the ability of his debtor to pay, cannot easily dispose of the risk, while those to whom he is indebted, may feel the same doubts of him, have the same difficulty of transfer, and be also in their turn exposed to the same troubles in their transactions with others.

It is in this imperfect state of credit, and in order to relieve the embarrassments arising from it, that banks, or something in the nature of banking institutions, are introduced. They assume the responsibility of the debtor; they relieve the creditor of his anxiety and doubt; they enable him to divide into small portions, and transfer some of his risk to those with whom he deals, and so the system is carried among every class of people, as far as commerce of any kind extends. It is all an ingenious piece of machinery for establishing, dividing, regulating, and transferring credits, as substitutes in the place of money; for the holder of a bank note is a mere creditor of the bank to that amount. Now it is difficult to tell at what point Mr Cardozo would stop the progress of the natural course of things we have described. Would he prohibit the exportation of specie? Would he check credit, or the transfer of credit, or the evidence of this transfer, by paper or scrip? Would he order that no class of people in the community, however respectable and wealthy, should assume, for honest purposes, the debtor's responsibility, or the creditor's risk, although all the interested parties were desirous of their doing it? Every one of these measures must be taken, before a paper currency can be effectually prevented. But we know not how a government can take either of them, without such a gross infraction of private right, or such an improper interference with the fair bargains of individuals, as no free people of intelligence will voluntarily submit to. It has been thought by some very able writers, that the minute subdivision of these credits, or the issue of small notes by banks, ought to be prevented. We have our doubts about this however. In our own country we have experienced none of the inconveniences, which have been ascribed to them by the foreign journals.

It is now universally allowed, that a paper currency cannot be safe, unless it be convertible, at the pleasure of the holder, into gold and silver, either in the shape of coin or of bullion. And with this qualification it may be looked upon as decidedly the most important modern invention in the accumulation of wealth. It renders exchanges incomparably more rapid and easy. The wheels of commerce are rid of a superfluous load.

Tedious,

laborious processes in business are dispensed with. In short every step of the progress, from the first production of commodities to their ultimate distribution, is wonderfully facilitated; and if, according to the ingenious speculations of a late writer on the subject, the quantity, or amount of the circulating medium must be in an inverse proportion to the rapidity with which it moves, and effects exchanges, a far greater sum in coins will be necessary for the purpose than in paper money. This is a substitute, too, of the cheapest for the most expensive material. A large portion of the supply of the precious metals is rendered superfluous, and the wear, tear, waste, and unavoidable losses upon those in use are in a great measure saved. Were it necessary to fill up the circulating medium wholly with them, as our author, together with many others, seems to think, so much capital must be withdrawn from profitable employments, and suffered to remain unproductive, and upon the decline. To procure it at the first, and to keep it good continually, must be an immense tax, though an indirect one, upon the whole community; and its effects will be visible upon their wealth. Their real profits of stock will be less; their real wages of labor less, their real rents of land less; and such a people cannot bring their commodities to market on equal terms with those who are free from that unreasonable tax, and whose circulating medium is cheaper and better. In the natural course of things nations tend to throw off the incumbrance, and hitherto their governments generally have encouraged them in it. We believe they will still continue to do it, notwithstanding the popular clamor we often hear against paper money.

The great public evil, which writers on political economy have feared from banks, is the over issue of their notes, by which they say the value of money may be indefinitely reduced, and the value of all other commodities of course in the same proportion raised. But there is a natural limit to this not generally understood, which must check it at an early stage in its progress, if not entirely prevent it. That limit is the cost and the exchangeable value of the precious metals. A coin is worth no more than the bill, which promises to pay it, for by the supposition the one is convertible into the other at the pleasure of the holder. Whatever amount therefore of paper currency is pressed into circulation, as long as this convertibility remains, the value of it will be regulated by the labor and expense necessary for procuring gold and silver from the mines, and passing them

through the mint. It can never continue for any length of time materially below this. If there should be such an excessive quantity of it issued as to raise the price of all other commodities, bullion, as a commodity, would rise also, the coins be melted down in order to form it, drafts made upon the bank to procure them for that purpose, and thus the over issue will be immediately checked, and the amount of the currency lessened both by the return to the bank of its notes in exchange for specie, and by an absolute diminution in the number of coins. The consequence will be, that prices will everywhere be brought down to their proper level. It has been lately said, that Adam Smith had wrong or confused ideas on currency; that the channel of the circulating medium can nowhere overflow nor be perfectly full; that it will easily receive and dispose of any amount of money, which may be thrown into it, however valuable it may be; and that the only effect of a great sudden increase or diminution of it, is to diminish or increase in just the same proportion the prices of all other articles in the country. And in support of this, it is urged, that, on the discovery of the mines in America, the different nations of Europe absorbed into their circulation a much larger portion of gold and silver than had been found sufficient for their purposes before.

These statements may lead to very erroneous conclusions. The amount in the quantity of the circulating medium we allow may be almost indefinitely enlarged, and all easily appropriated and used. But the amount in its whole value must remain nearly the same, and can be increased only with the growing wealth of the country. Its traffic and exchanges will absorb only a certain amount of value. It was the depreciation of this, we believe, which, on the discovery of the American mines, made a larger portion of gold and silver necessary for European commerce. It was merely a greater quantity of these, and not a greater amount of wealth, which was poured into the channels of circulation. If these remarks be true, an unnecessary number of bank notes of undiminished value cannot be kept abroad to serve the purposes of money. But while they are exchangeable for coins, their value never will be diminished. We have no great or lasting evil to apprehend, therefore, from an over issue of such notes, nor from the injurious effects on prices which it is said to produce.

If there are more notes issued from the banks than the exchanges of the country require, and thus the value of money is VOL. XXIV.NO. 54.

24

lowered, and that of other things raised, yet not enough to lead to the melting of the coins, the evil will be remedied in other ways. A portion of the gold and silver will go abroad, and seek in foreign parts that profitable employment, which it cannot find at home. This will have a direct effect in lessening the sum in circulation, and an indirect effect also in doing it by limiting the issues of the banks. The high price of goods at home, too, may lead to the importation of goods that are cheaper, and the competition arising from these, together with the exportation of specie for various reasons, will all tend to bring about the same results; namely, to raise again the value of money, reduce that of commodities in general, and keep the circulating medium on its proper level. It is true, that banks have been often disposed thus to over issue; but, as Smith says, they are always much the greatest, if not the only sufferers by it, because they are obliged to have on hand a far greater amount of capital in proportion, and the returns of their notes to them in demand for specie, will be so rapid, that they are called upon at short intervals to replenish, in order to keep it constantly good. This is not the evil, however, in the administration of banking establishments, from which the public have to fear much, or long. It is one of a very different character. It is deception; artful mismanagement; sometimes deliberate fraud; discounts for personal favor; loaning notes on bad or insufficient security, and without enough metallic currency or bullion or capital of any sort to pay them off or redeem them when they are presented.

It is from these, and similar causes, and not from the indiscreet, unprofitable over issue of paper, that the great distresses and embarrassments connected with monied institutions have principally arisen. How they are effectually to be prevented, we are not prepared to say. In equable times, when business is regular and uniform, a large number of separate, independent banks have a great power in correcting it. It is the interest of each to check the others' issues; they, therefore, watch each other, often try each other; and their competition will have a powerful effect in regulating each other's transactions, and in making them all equal and fair. But business is not always regular and uniform; and the danger can never thus be entirely removed. It deserves consideration, whether some greater personal responsibility ought not to be thrown by law upon the managers or directors of these institutions.

In our remarks we have constantly observed a distinction between fraudulent issues, and fair over issues, of bank notes. They