with which he had parted, to lend it to the state; and this acknowledgment every-where obtained the same value. Thus an acknowledgment, containing the very proof of part of the circulating capital having been consumed, was every-where received, like any other actual part of the circulating capital, or as if it had represented a still existing circulating capital. This appears inconceivable, and yet it is so.

To increase the delusion, the Bank provided the money for these acknowledgments, and, by throwing them in small shares or into general circulation, it has altered their nature even to the most clear-sighted eye. The present circulating capital of England is thus composed in part of her national debt, that is to say, of the acknowledgments which attest the actual consumption of part of the circulating capital. This is so true, that if it were possible for the English government to re-imburse the whole of the national debt, and receive from the hands of its creditors the acknowledgments which it has given them; if the public creditors in their turn paid their creditors and withdrew their notes; if, in short, a general and complete liquidation took place of the public and private debts in England, the circulating capital would only be altered in its nature, without being increased by one farthing. Instead of the public and private paper of which that circulating capital consists, it would contain its real value, and nothing more. There would be no alteration in its quantity, and consequently circulation would continue in its habitual state.

Hence it follows, that as the sinking fund effects only in fifty-two years what I have just supposed to

be effected in an instant, nothing can result from it but a gradual and successive diminution of the acknowledgments of the public debt, a return to the circulating capital of the funds that had been abstracted from it, and the re-establishment of circulation in real and effective values.

To say that the sinking fund increases the circulating capital at the expence of consumption and re-production, is tantamount to supposing that the circulating capital consists only of real values, and that the acknowledgments of the national debt do not form any part of it; which supposition is altogether inadmis sible; or it is like maintaining that a private individual, who is re-paid what had been borrowed of him, is twice as rich as he was before this re-payment; it betrays, in short, the most complete ignorance concerning the nature of loans, of a sinking fund, and of circulation.

2. The assertion, that extinction of the public debt by a sinking fund depreciates capitals and forces them abroad, is equally incorrect.

The circulating capital continues the same before and after the extinction of the debt: the difference is only in the objects of which the circulating capital consists. Before the extinction it consisted of paper, which after the extinction is replaced by the same sum in metallic currency. The circulating capital receives no increase; and hence it is difficult to understand how it can be depreciated, and have more or less value than it had before the paper was converted into a metallic currency.

But might it not be objected, that since the acknowledgments of the debt are sufficient for circulation,

and fill precisely the place of the values of which they are the mortgage, it is useless to redeem them and to collect for that purpose from the individual members of the nation values which would have been productive in their hands, and which, in the hands of the creditors of the state, produce only what the claim which they extinguish would have produced?

Could national debts keep their value without the aid of a sinking fund, the accumulation of such a fund might undoubtedly prove detrimental to public and private wealth; for, however advantageous a capital placed at compound interest may appear, it only extinguishes a debt which costs six per cent., while the capital applied to this extinction, if it had been left in the hands of the husbandman, the manufacturer and merchant, would have produced at least ten or twelve per cent. A sinking fund would therefore be a real loss to public and private wealth, if it could be dispensed with.

But can a public debt keep its full value without a sinking fund, particularly when it forms a fifth of the circulating capital of a country? This is a problem which experience has long ago solved. Let the debt of those nations that neglected to prop it by a sinking fund be compared with the debt of those countries which devoted a sinking fund to it; and it will easily be seen, that national debts have only ceased to be injurious, since they have been supported by a sinking fund; that to this fund they are indebted for the solidity and stability which are their safeguard, and which have entitled them to be the thermometer and regulator of all other values.

Thus, in whatever way Lord Lauderdale's criticism of the sinking fund be viewed, it appears to rest on erroneous notions, contrary to the true principles and essence of a sinking fund.

Finally, it has been observed by Adam Smith, that "the practice of funding has gradually enfeebled every state which has adopted it; and he adduces as instances Genoa and Venice, which seem to have begun it; Spain, which seems to have learned the practice from the Italian republics; and France, the United Provinces, and England, which followed the example."*

I may at least be allowed to doubt both the decline of most of these nations and the cause to which this decline is ascribed by Adam Smith. Were it necessary, it would be easy to prove that the wealth of these nations grew progressively with the system of public loans, particularly since it has been perfected by a sinking fund; and indeed it could not be otherwise. A nation cannot borrow, unless it is growing rich; its loans cease as soon as it gets poor. It is therefore unreasonable to impute the decline of a nation and the decay of its power to the system of public loans. The causes of their fall must be sought for in other circumstances; and were it either useful or proper to point out those which may have contributed to the decline of Genoa, Venice, Spain, and the United Provinces, they would be discovered in the ruinous wars which these states maintained, for such a length

* Adam Smith's Wealth of Nations; London, 1805; vol. iM. book v. chap. 3, page 450.

of time, against more powerful nations. The system of public loans, far from aggravating the distress of their situation, enabled them, on the contrary, to oppose a protracted and courageous resistance, while every other means would have hastened the decay and ruin of their power. As for France, and England in particular, if their prosperity has been maintained, if it has made immense progress in spite of the calamitous wars to which they have been a prey, they are indebted for this advantage to the system of public loans, the least distressing, I had almost said, the most advantageous way of providing for the incalculable wants of war.

Thus every thing concurs to demonstrate, that even under a supposition the most unfavourable to public loans, when they abstract capitals from productive labour to make it serve to an unproductive consumption, they are still preferable to excessive taxes which impair every capital and exhaust the powers of labour.

If, from the formation of capitals and their employment in divers branches of labour and public loans, we pass to their influence upon wealth, new considerations crowd in the mind, the science expands its views, and is enriched with new results.