ually arise in which lords and laborers will be the only classes or gradations in the commercial and manufacturing, as in the landed, system. An approximation, a tendency towards this state, is going on in England. In many branches of industry, -for instance, in glass-making, iron-founding, soap-making, cotton-spinning, the great capitalists engaged in them have, by the natural effect of working with great capital, driven small capitals out of the field, and formed a kind of exclusive family property of some of these branches of manufacture. Government, by excessive taxation and excise regulation, — both of which have ultimately the effect, as in the glass and soap manufacture and the distillery business, of giving a monopoly to the great capitalist who can afford the delay and advance of money these impediments require, - has been hitherto aiding rather than counteracting this tendency of great capital to swallow all the employments in which small capital can act. It is not an imaginary, nor perhaps a very distant evil, that our middle classes with their small capitals may sink into nothing,

may become tradesmen or small dealers, supplying a few great manufacturing and commercial classes with the articles of their household consumpt, and rearing supernumerary candidates for unnecessary public functions, civil, military, or clerical; and that in trade, as in land, a noblesse of capitalists, and a population of serfs working for them, may come to be the two main constituent parts in our social structure."*

I shall afterwards have occasion to show, that it is the abundance of floating capital seeking investment, the competition of lenders with each other, and the consequent depression of the rate of interest, that is the great incentive to those wild and ruinous speculations which usually precede a commercial crisis, and are commonly, though improperly, attributed to some defective regulation of the currency. The state of the currency, it is true, is an index of this perilous condition of things. The currency feels the first whispers of the approaching storm ; and it is by a judicious management of the banking system of the country that the force of the tempest may be somewhat checked. But the real origin of the difficulty is situated farther back, and is attributable to the imprudence of capitalists

* Notes of a Traveller, ed. of 1854, p. 187.

rather than bankers, who are mere agents of those who have the real power to control the market.

But my present point is sufficiently illustrated, which is, that when a sufficient amount of wealth has taken the form of fixed capital to satisfy all the real wants of the country, — that is, when the whole establishment or fabric of agricultural, manufacturing, and commercial industry is completed, then, if savings from income continue to be made, they must be pushed into market as circulating capital seeking investment; and the rate of profits and interest must decline from the competition which ensues. This is already the state of affairs in England; and if we are still distant from it in the Atlantic States of our own Union, it is because the new settlements which are constantly forming in the West operate as a drain upon our capital as well as our population; and also because the field open for the productive investment of fixed capital in the gigantic improvements required in our immense territory is so vast, that centuries must elapse before it is fully occupied.

The stationary state of wealth, which we thus see at the end of a long vista of years, is not a consummation to be dreaded. When capital enough has been accumulated to afford an income sufficient for all our wants, the only requisite for general happiness is, that it should be distributed with some approach to equality; not the visionary and perfect equality which the brain-sick schemers of France are vainly endeavoring to realize; but the necessary approximation to it which is consistent with entire regard for the rights of property, and which must result from the mild and beneficent operation of laws which leave every man at liberty both to spend and to save, and which, at the decease of the first owner, distribute his inheritance equally among his natural heirs.

A HISTORY of the opinions of men respecting money, and the precious metals that are the material of which money is made, would be almost a complete history of the progress of Political Economy. The errors to which we are liable on a superficial consideration of the subject are so natural, so liable to be entertained by persons of ordinary judgment and ordinary means of information, that we cannot wonder at their having seriously affected the course of legislation in most countries and the general policy of nations. The true theory of money, when nakedly stated, seems like a string of paradoxes, which are contradicted by the common sense of mankind. Yet the truth of this theory is now so clearly established, and the course of events in the commercial world has contributed so largely to illustrate it, that its fundamental principles have come to be regarded as axioms, which no one thinks of contesting. A review of the mistakes which men committed in reasoning upon the subject in former times, of the causes which led to them, and of the very serious evils which were their inevitable consequences, would be a curious and instructive chapter in the philosophy of the human mind. I can notice but a few of these blunders, - those only, in fact, the confutation of which will help to establish and illustrate the doctrine that I wish to propound.

As money is the universal medium of exchange, and as wealth itself subsists, or is continued in existence, only through an interminable succession of exchanges, all wealth must, more or less frequently, appear as money, and be reckoned or estimated as such. Money is the universal form or garb which all the items or commodities that constitute wealth occasionally assume. At any one time and place, it is a universal measure of the comparative value of those commodities, and a common denomination, to which, when we wish to ascertain their aggregate or sum total, they are all reduced. If a man

is reduced to the necessity of borrowing, he borrows, not the particular articles that he actually wants, but the money wherewith he can purchase those articles. If he pays a debt, he does not return the very articles that he borrowed, or an equivalent amount of a perfectly similar kind, but he pays a proportionate amount of money. The children in the house of an opulent trader, (to use once more Mr. Senior's happy illustration,) having all the necessaries and comforts of life supplied to them with mechanical regularity, without any effort or sacrifice on their part, may never inquire into the machinery by which these effects are produced. But if their attention should be turned to the subject, finding that their father often talked of the difficulty of getting money, and seldom of the difficulty of spending it, — that he generally spoke of his fortune as consisting of the money he was worth, and that the motive which he generally assigned for refusing them any luxury was, that he had not money enough to afford it, they would conclude that money alone was wealth, or the solitary means of obtaining everything which is desirable; that their enjoyments depended on the money which their father received, and were lessened by every other occasion he had for expending money; and that their abundance, in truth, depended on the amount of money, for the time being, in his strong-box, and would be increased indefinitely, provided that this amount could be indefinitely augmented and retained.

This now seems to us as the reasoning of children; yet it was precisely thus that the legislatures and governments of the most civilized nations reasoned, down certainly to as late a period as the beginning of the last century. The most stringent, even sanguinary, laws were made to prevent the exportation of the precious metals; and bounties were held out to favor the exportation of other commodities, for which, it was supposed, these metals would be received in exchange. Even so distinguished and sensible a philosopher as Mr. Locke argues thus: "All other movable goods are of so consumable a nature, that the wealth which consists in them cannot be much depended on; and a nation which abounds in them one year may, without any exportation, but merely by their own waste and extravagance, be in great want of them the next. Money, on the contrary, is a steady friend, which,

though it may travel about from hand to hand, yet, if it can be kept from going out of the country, is not very liable to be wasted and consumed. Gold and silver, therefore, are the most solid and substantial part of the movable wealth of a nation"; and to multiply these metals ought, he thinks, upon that account, to be the great object of its political economy. Many worthy persons, even at the present day, though they do not reason quite so absurdly as this, are accustomed to deplore an unfavorable turn in our exchanges with foreign countries, not because it is an index of a real evil, that we have been overtrading, or buying foreign goods on credit to an extent beyond our wants and our means, but because it tends to drain the country of its precious metals, to lessen the specie basis on which our banks are trading, and thereby to diminish the security of our currency.

In attempting to refute these errors, I shall speak first only of money properly so called, and not of its substitutes. In other words, I shall consider the currency as if it consisted exclusively of specie, or of coined gold and silver, and shall speak of the circumstances which determine the value of such specie, of its utility as one of the bases of its value, and of the manner in which its use as money affects the value of the bullion from which it is made.

I say, then, that money is merely a contrivance for diminishing the friction of exchange; and though a safe and convenient, it is also a very costly, contrivance for this end. It is absolutely unproductive except for this purpose; it is a portion of the wealth of the country, it is true; but it is a portion of our unproductive wealth, not of our capital. We are the poorer by the loss of profit or interest on all of it which we are obliged to keep on hand. Money (paradoxical as the assertion may seem) yields neither profit nor interest. It is only the goods or commodities that are transferred or exchanged by means of money, which yield profit; and this profit or interest, as we have seen, depends on the mutations or changes of form that they undergo. The very reason which Locke adduces for the high estimate put upon money in comparison with other objects of wealth,-namely, its durability, or the fact that it cannot be consumed, is the cause why it is not productive. The specie which a merchant or a banker holds