A far more important illustration, however, of the meaning conveyed or intended to be conveyed by the Bullion Report, is to be found in an elaborate essay in its vindication by Mr. William Huskisson, a member of the Committee, and published almost simultaneously with the report. His essay opens with the following definition of the nature and laws of money :

"The various definitions of the word 'money,' and the different acceptations in which the word is used in the ordinary transactions of life, have contributed to produce much of the doubt and uncertainty which prevail at this moment respecting the state of our

currency.

"Money, in the popular sense, is frequently considered as having no other value than one purely arbitrary and conventional. It is sometimes defined to be the representative of all other commodities, and sometimes the common measure of them. These definitions are both incomplete as applied to money; because they are equally applicable to every description of currency, whether consisting of the precious metals, of paper, or of any other article. "It is of the essence of money to possess intrinsic value.

"The quality of representing commodities does not necessarily imply intrinsic value; because that quality may be given either by confidence or by authority. The quality of being a common measure does not necessarily imply intrinsic value, any more than the possession of a foot-rule entitles us to the power of acquiring whatever it enables us to measure. Money, or a given quantity of gold or silver, is not only the common measure and common representative of all other commodities, but also the common and universal equivalent.

"Paper currency has, obviously, no intrinsic value.

"A promissory note, under whatever form, or from whatever source it may issue, represents value. It does so, in as much as it is an undertaking to pay, in money, the sum for which it is issued. "The money, or coin of a country, is so much of its capital. Paper currency is no part of the capital of a country: it is so much circulating credit.

"Whoever buys, gives, whoever sells, receives, such a quantity of pure gold or silver as is equivalent to the article bought or sold; or, if he gives or receives paper instead of money, he gives or receives that which is valuable only as it stipulates the ing the same, they must in a certain degree be rendered cheap by every increase of paper currency. It must, however, be evident that the advantages which do result from the use of a paper currency depend upon its exactly supplying the place of the coin it represents. This quality can be only possessed by a currency which is immediately convertible into specie at the option of the holder." (pp. 2–5.)

This preface was followed by a temperate argument against the Restriction Act, wholly inconclusive, from the writer's ignorance of the laws upon which a convertible currency must rest. His protest, notwithstanding, had a value in helping to keep up a spirit of opposition to the Restriction Act, which finally ended in its repeal.

payment of a given quantity of gold or silver. So long as this engagement is punctually fulfilled, paper will, of course, pass current with the coin with which it is thus constantly interchangeable. Both money, therefore, and paper promissory of money, are common measures and representatives of the value of all commodities. But money alone is the universal equivalent; paper currency is the representative of that money.

"Of paper currency, however, there are two sorts: the one resting upon confidence, the other upon authority. Paper resting upon confidence is what I have described as circulating credit, and consists in engagements for the payment, upon demand, of any specific sums of money; which engagements, from a general trust in the issuers of such paper, they are enabled to substitute for money in the transactions of the community. Paper resting upon authority is what, in common language, is called paper money; and consists of engagements issued or circulated under the sanction, and by the immediate intervention, of the public power of the State."

" 1

The quality of representing commodities cannot be given either by confidence or authority. That a person believes that a note which he takes represents commodities does not make it the representative of them, any more than the belief of the Alchemists made the baser metals in combination the representatives of gold, into which they so long sought to convert them. If confidence would create values, the silliest dunce would be the Croesus of the race. "Why not authority?" it is asked. "Government can declare that a foot-rule shall have the capacity of measuring extension. Why may it not declare that a bank-note shall have the capacity of measuring value? Intrinsic value is no more necessary in one case than in the other." But would the owners of estates accept in their sale the instruments by which their areas were measured? They might receive the surveyor's chains at their value as scrap-iron," but in no other way. When men buy and sell, they exchange, or intend to exchange, articles possessing equal values. It is astonishing that Huskisson could have allowed himself to be taken captive by the theories or statements which he found in the books; which, upon the slightest examination, would have vanished in empty air. With all his acuteness, he did not get an inch beyond Smith's "instrument of commerce," - his "wheel" the value of which bore no relation whatever to the value of the articles moved by it.

66

1 Question Concerning the Depreciation of our Currency, pp. 1-3.

"If the circulation," continues Huskisson, "of any country were performed exclusively by gold, for instance, and the supply of that metal in any such country were, from any imaginable cause, doubled, whilst the quantity of gold and the demand for it should continue the same in all other markets of the world, the value of gold in such country would be diminished. This diminution in the value of gold would appear in the proportionate rise of all commodities; but gold, being so much cheaper in the country in which its quantity had been increased, it would be bought by other countries, and exported from that country till its value was restored again to a level in the different parts of the world.

"If the circulation of a country were supplied partly by gold and partly by paper, and the amount of that circulation were doubled by an augmentation of that paper, the effect upon prices at home would be the same as in the former case; but gold not becoming, by this augmentation of currency, more abundant in such country than in other parts of the world, as a commodity its relative value to other commodities would remain unaltered. As a commodity also, its price would rise in the same proportion as that of other commodities; although, in the state of coin of which the denomination is fixed by law, it could only pass current according to that denomination.

"When paper is thus augmented in any country, the exportation of the gold coin, therefore, will take place; not because gold, as a commodity, is become more abundant and less valuable with reference to other commodities in such country, but from the circumstance of its value as currency remaining the same, while its price in that currency is increased in common with the prices of all other commodities. So far as such exportation takes place, the diminution which it effects in the total amount of the currency has a tendency to support the value of the remainder, just as much, and for the same reason, as if, in the case of the circulation consisting wholly of gold, first an augmentation, and then an exportation to the same amount, had taken place, according to the first supposition. "An excess of paper has, in the first instance, the same effect upon prices as an excess of the precious metals, to the same amount, would have, in any particular country. But it does not admit of the same relief: it cannot right itself by exportation. "The currency of a country, then, is depreciated,

"1. If its standard coin contain less of gold or silver than it is certified to contain. In that case, the paper, as representing the coin, is also depreciated, and precisely in the same degree as the coin.

"2. If the standard coin being of full weight, and the paper which represents that standard coin, and is, or purports to be, exchangeable for it, is not exchangeable, at the same time, for so large a quantity of gold or silver as is contained in the coin which it represents. In that case, the coin, though undiminished in value, must, as part of the currency, partake of the depreciation of the whole.

"Consequently, if the coin be itself, as coin, depreciated, the paper which circulates with it cannot be otherwise than depreciated to the same degree. But if the coin be undepreciated as coin, and

there be, notwithstanding, a depreciation of the general currency, the cause of that depreciation can only be in the paper; and that cause can be no other than the excess in which that paper is issued."1

In the case supposed, where the currency was supplied partly by gold and partly by paper, and the two were of equal value, the latter must have been symbolic. If such a currency be doubled, the whole increase being, as Huskisson assumes, of the kind previously in circulation, there would be no inflation. Prices would, in reference to money, remain unchanged. So long as gold and paper possessed the same value, an increase, or, rather, an inflation, of the currency, would not inflate or increase the price of gold bullion, — gold as merchandise, while it might increase the value of all other kinds of merchandise, for the very good reason that gold cannot rise in value in reference to itself; that is, a sovereign after the inflation would purchase the same amount of bullion as before. Huskisson took precisely the ground of Lowndes, who would "raise the value of silver in the coins to the foot of 68. 3d. in every crown, because the price of standard silver in bullion had risen to 68. 5d. the ounce.' This was the very proposition that Locke was at such pains to refute, that the value of silver cannot rise in reference to silver. Huskisson's assertion was only the old impossibility over again.

So long as coin would purchase no more than an equal nominal amount of paper, gold would have no more tendency to go abroad than before such increase. Indeed, its tendency would be inward to provide adequate reserves for the increase of paper. If the currency were inflated, that is, if it did not to its full extent represent merchandise other than gold, it might still remain at par with gold, provided the parties who issued it possessed sufficient reserves. If adequate provision, either in merchandise or coin, were not made for its redemption, it would become depreciated: it would not be exchangeable for an equal quantity of gold, nor would it command an equal amount of merchandise with gold, no matter whether it rested upon confidence or authority. The value of gold would not be influenced in any degree by the amount or value of the paper outstanding. That of the former would still depend

1 Question Concerning the Depreciation of our Currency, pp. 26-29.

upon cost: that of the latter, upon cost and demand. If the latter rested upon confidence, its depreciation would tend to bring gold into the country; for it would be disused so soon as a currency that was not depreciated could be got to fill its place. Currency resting upon confidence that is depreciated always speedily goes out of circulation. If it rested upon authority, which was really the fact with regard to the Bank of England currency during the suspension, and was issued in very large amounts, it would, in great measure, drive the coin previously in circulation out of the country. But this fact would not tend, in any degree, to raise the value of the currency "resting on authority." Its value in exchange would be its estimated value. The exportation of coin would tend to reduce the value of such currency, instead of raising it, by rendering it all the more difficult to resume, from the impoverishment of the people, which would be measured by the amount of gold capital-that had been drawn from them. Huskisson's assumptions, therefore, in whatever light viewed, are exactly opposed to the fact. It is wholly beyond the power of government to create the values upon which a currency must rest, except in the manner already described. If it be competent for it to make its notes legal tender, then they may, for a time, have a value for those who can use them exceeding their intrinsic value. But such accidental value would be lost so soon as the contracts existing at the time of their issue were discharged.

As money resting upon confidence or authority was with Huskisson equally a measure of value with gold, the decline in the value of the former, from whatever cause, carried down, and equally, the price of the latter; for the reason that one competent measure of value must be equal in potency or effect to any other competent measure. This is the way he reasoned in an essay the whole scope and object of which was to prove the exact opposite, that the paper money of the country, though declared to have a value equal to that of an equal nominal amount of gold, did not possess such value; that the values of the two, though equally supported by authority, had no necessary relation the one to the other; and that their wide divergence was well calculated to excite the most profound alarm. He could not go into the market to make any purchase, without having thrust into his hand two scales of prices,