greater contraction of the national currency. The sup- CHAP.

X. plies of specie for the Old World became inadequate to

1819. the increasing wants of its population, when the power of the emperors had given lasting internal peace to its hundred and twenty millions of inhabitants. The mines of Spain and Greece, from which the chief supplies were obtained at that period, were worked out, or became upworkable, from the exactions of the emperors ; and so great was the dearth of the precious metals which thence ensued, that the treasure in circulation in the Empire, which in the time of Augustus amounted to £380,000,000, had sunk in that of Justinian to £80,000,000 sterling ; and the golden aureus, which in the days of the Antonines weighed 118 grains, had come, in the fifth century, to weigh only 68,1 though it was 1 Greaves

on Ancient only taken in discharge of debts and taxes at its original Coins, i. and standard value. As a necessary consequence of so 023

F 329, 331. prodigious a contraction of the currency, without any proportional diminution in the numbers or transactions of mankind, debts and taxes, which were all measured in the old standard, became so overwhelming that the national industry was ruined ; agriculture disappeared, and was succeeded by pasturage in the fields ; the great cities were all fed from Egypt and Libya ; the revenue became , Gibbon's irrecoverable; the legions dwindled into cohorts, the Rome, s;

ne iv. 42, 71, cohorts into companies ; and the six hundred thousand Milman's

edit.; Alimen, who guarded the frontiers of the Empire in the time son's' Esof Augustus, had sunk to one hundred and fifty thousand in 442. that of Justinian—a force wholly inadequate to its defence.2


on the banking commissioners, or triumvirs mensarii. It is probable that these bills were actually a paper currency, and that they circulated as money, on the security of the public faith. In the same way, the government contracts were also paid in paper ; for the contractors came forward in a body to the censors, and begged them to make their contracts as usual, promising not to demand payment till the end of the war. This must, I conceive, mean that they were to be paid in orders upon the treasury, which orders were to be converted into cash when the present difficulties of the government should be at an end." -ARNOLD, ii. 207. This was just an inconvertible paper currency, and its issue, after the battle of Cannæ, saved the Roman empire.


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of a paper currency.

CHAP. What rendered this great contraction of the circulating X,

medium so crushing in the ancient world was, that they

were wholly unacquainted, except for a brief period during Discovery the necessities of the second Punic War, with that marful effects vellous substitute for it—a paper currency. It was the

Jews who first discovered this admirable system, to facilitate the transmission of their wealth amidst the violence and extortions of the middle ages; and it is, perhaps, not going too far to assert that, if it had been found out, and brought into general use, at an earlier period, it might have averted the fall of the Roman Empire. The effects of a scarcity of the precious metals, therefore, were immediately felt in the diminished wages of labour and price of produce, and increasing weight of debts and taxes. A paper currency, adequately secured and duly limited, obviates all these evils, because it provides a REPRESENTATIVE of the metallic currency, which, when the latter becomes scarce, may, without risk, be rendered a SUBSTITUTE for them. Thus the ruinous effects of a contraction of the circulating medium, even when most violent, may be entirely prevented, and the industry, revenue, and prosperity of a country completely sustained during the utmost scarcity, or even entire absence, of the precious metals. It was thus that the alarming crisis of 1797, which threatened to induce a national bankruptcy, was surmounted with ease, by the simple device of declaring the Bank of England notes, like the treasury bonds in the second Punic War, a legal tender, not convertible into cash till the close of the war; and that the year 1810, when, from the demand for gold on the Continent, there was scarcely a guinea left in this country, was one of general prosperity and the greatest national efforts recorded in its annals.

As paper may with ease be issued to any extent, either by Government or private establishments authorised to circulate it, it becomes an engine of as great danger, and attended with as destructive effects, when it is


nly limit

unduly multiplied as when it is unduly contracted. It CHAP. is like the blood in the human body, whose circulation _* sustains and is essential to animal life : drained away, or 1819 not adequately fed, it leads to death by atrophy; unduly Advantages increased, it proves fatal by inducing apoplexy.


of a paper

To circulation, preserve a proper medium, and promote the circulation daly lim equally and healthfully through all parts of the system, is the great object of regimen alike in the natural frame and the body politic. Issued in overwhelming quantities, as it was in France during the Revolution, it induces such a rise of prices as destroys all realised capital, by permitting it to be discharged by a mere fraction of its real amount; contracted to an excessive degree, either by the mutations of commerce or the policy of Government, it proves equally fatal to industry, by lowering the money price of its produce, and augmenting the weight of the debts and taxes with which it is oppressed.

A paper currency, when perfectly secure, and hindered by the regulations under which it is issued from becoming redundant, may not only, in the absence of gold and silver, supply its place, but in its presence almost supersede its use. “If," says Adam Smith, “the gold and silver in a country should at any time fall short, in a country which has wherewithal to purchase them, there are more expedients for supplying their place than almost any other commodity. If provisions are wanted, the people must starve ; if the materials for manufacture are awanting, industry must stop ; but if money is wanted, barter will supply its place, though with a good deal of inconvenience. Buying and selling upon credit, and the different dealers compensating one another once a month or year, will supply it with less inconveniency. A wellregulated paper money will supply it, not only without inconveniency, but in some cases with some advantage.1 1 Wealth of Experience may soon convince any one that this latter b. 4, c. i. observation of Mr Smith is well founded, and that a duly regulated paper is often more convenient and serviceable




CHAP. than one entirely of specie. Let him go into any bank X.

at a distance from London, and he will find that they 1819.

will give him sovereigns to any extent without any charge ; but that for Bank of England notes, or a bill on London, they will, in one form or other, charge a premium : and if he has any doubt of the superior convenience of bank-notes over specie for the transactions of life, he is recommended to compare travelling in England with £500, in five English notes, in his waistcoat pocket, with doing so in France with the same sum in napoleons in his portmanteau.

The question is often asked, “What is a pound ?" and What is the Sir Robert Peel, after mentioning how Mr Locke and Sir standard of

N. ' Isaac Newton had failed, with all their abilities, in an

swering it, said that he could by no possible effort of intellect conceive it to be anything but a certain determinate weight of gold metal. Perhaps if his valuable life had been spared, and he had seen the ounce of gold selling in Australia at £3 to £3, 10s. instead of £3, 17s. 10 d., the mint price, he would have modified his opinion. In truth, a pound is an abstract measure of value, just as a foot or a yard is of length ; and different things have at different periods been taken to denote that measure according as the conveniency of men suggested. It was originally a pound weight of silver ; and that metal was till the present century the standard in England, as it still is in most other countries. When gold was made the standard, by the Bank being compelled by the Act of 1819 to pay in that metal, the old word, denoting its original signification of the less valuable metal, was still retained. During the war, when the metallic currency disappeared, the pound was a Bank of England poundnote: the standard was thus paper,--for gold was worth 28s. the pound, from the demand for it on the Continent. Since California and Australia bave begun to pour forth their golden treasures, the standard has practically come again to be silver, as the precious metal




of variations

which is least changing in value at this time. The proof CHAP. of this is decisive ;—the ounce of gold is selling for £3 to £3,10s. at Melbourne; gold is measured by silver, not silver

1819. by gold. In truth, different things at different times are taken to express the much-coveted abstract standard ; and what is always taken is that article in general circulation which is most steady in value and most generally received.

None but those practically acquainted with the subject can conceive how powerfully, and often rapidly, an Vast effect extension or contraction of the currency acts upon the in the cura general industry and fortunes of the country. All other rency. causes, in a commercial state, sink into insignificance in comparison. “The judicious operations of banking,” says Mr Smith, "enable the trader to convert his dead stock into active and productive stock. The first forms a very valuable part of the capital of the country, which produces nothing to the country. The operation of banking, by substituting paper in room of a great part of the gold and silver, enables the country to convert a great, part of dead stock into active and productive stock-into stock which produces something to the country. The gold and silver money which circulates in any country may very properly be compared to a highway, which, while it circulates and carries to market all the grass and corn of the country, does not itself produce a single pile of either. The judicious operations of banking enable the country to convert, as it were, a great part of its highways into good pastures and corn-fields, and thereby increase considerably the annual produce of its land and labours.”1 To this it may be added, that so great is the 1 Wealth of effect of an increase of the paper circulation, and conse- quently of the expansion of the credit, industry, and enterprise of a commercial state, that a country which has dead stock, as Mr Smith says, of the value of twenty thousand millions, may find the value of all its articles of merchandise enhanced or diminished fifty per cent by the expansion or contraction of the currency to the VOL. II.

2 B

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