ence; and if, as Dr. Smith has observed, it became necessary on any emergency to export coins, they would, most likely, be reimported. Abroad, they would be worth only so much bullion; while at home, they would be worth this much, and the expense of coinage besides. There would, therefore, be an obvious inducement to bring them back, and the supply of currency would be maintained at its proper level, without its being necessary for the mint to issue fresh coins.”

An alteration in the relative value of gold and silver, or, indeed, between any other two media of exchange which are united in one currency, produces immediately a marked effect. The one which is over-valued, or of which the nominal exceeds the real value, at once displaces or pushes out the other, and takes the whole circulation to itself. As fast, for instance, as gold becomes depreciated in consequence of the influx of that metal from the deposits recently discovered, silver will disappear, or cease to be used as currency, if measures are not taken to obviate this effect by putting a smaller amount of silver into a dollar. The reason is obvious. Suppose this depreciation to amount to only five per cent, or that silver in that ratio should become more valuable than gold. Then, every one who makes a purchase or pays a debt in silver, pays five per cent more than if he used gold. Silver would generally be sold, or exchanged, for gold, in order to obtain the premium, or difference in value; and because, if used as coin, it could only pass at par with gold, it would be melted up, and devoted to the other uses to which it is subservient, facture of plate,—or it would be sent out of the country.

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Hence the great inconvenience that is experienced, when, in a country where both specie and bank-notes are current, the latter become depreciated in consequence of the failure of the banks to redeem them in specie. The immediate effect is, that the smaller coins, which supply "change," as it is called, at once disappear, being gathered up by the money-changers, and either melted, or sent out of the country to some place where the depreciated notes will not pass current. The only mode of stemming this current is for the banks to restrict their issues, till the necessity for having a certain amount of value to fill the ordinary channels of circulation raises the value of the depreciated notes again to par. Another cause tends to increase

the drain of gold and silver under such circumstances. Money being the universal medium of exchange, its value operates reciprocally against prices; that is, as money rises in value, prices fall; and as money is depreciated, prices of all other commodities rise. Of course, in the latter case, goods are imported in large quantities, to take advantage of this rise in price. These goods must be paid for, and as they come from foreign countries, where the depreciated money will not pass, gold and silver must be collected to discharge the debt. In this manner, even the smaller coins are gathered and sent off, till it becomes impossible to obtain "change" for the smallest bank-note. The necessity of having some money of a small denomination then gives currency to some remarkable substitutes for coin. Omnibus tickets, pieces of bank-notes, and tokens, or "shin-plasters," as they are vulgarly termed, — certificates of value to a small amount, issued by municipal authority, and receivable in payment for taxes, all circulate as money, and supply the place of "change."

The principle, that money which is depreciated in real value, though to a very slight amount, always drives out, and takes the place of, the sounder portion of the currency, received a remarkable illustration from the operations of the banks in Massachusetts about thirty years ago. Up to that time, the bills of the country banks were redeemed only at their own counters, in various parts of the State. The operations of trade brought large amounts of their bills into Boston, where they circulated as currency. But the banks in Boston would not receive them, either on deposit or in payment of notes; for they could not afford to sort them into parcels, and send one little parcel into Berkshire, and another to Nantucket, bringing back from each place a corresponding amount of coin, with all the expense of transportation. These country bank bills, consequently, not being redeemable in the place where they circulated, were naturally depreciated, or became subject to discount, in comparison with the bills of the Boston banks, which were redeemed in specie on the spot. The discount was very small, varying from one to two per cent, according to the distance of the bank from Boston. What was the consequence? These depreciated and so far dishonored bills drove the good Boston bills almost wholly out of the market,

and, so to speak, took the circulation to themselves. The law which I have spoken of, that a depreciated or over-valued medium of exchange will drive away the sound currency, was fully exemplified. How this result was effected can be easily explained. Every merchant who had dealings with the Boston banks laid aside or reserved all the Boston bank-bills that he received, for the sake of making deposits or paying his obligations at the banks. The country bank-bills that came into his hands he paid out again, either in change to his customers, or in payment for articles purchased. Thus the depreciated country bank paper was maintained in circulation; the good bills, not subject to discount, were returned to the banks as soon as issued. Every one knows that the profits of a bank, other things being equal, depend on the amount of their paper which they can keep in circulation. The country banks, therefore, profited by the dishonor of their paper; the Boston banks suffered by keeping up the credit of their bills. This injustice and loss could not be tolerated. Most of the Boston banks entered into a combination, headed by the Suffolk Bank, to compel the banks in the country to make provision to redeem their bills, not only at their own counters, but also in the metropolis, where often they had a larger circulation than in the locality where they were issued. Each of these banks was to be compelled to maintain on deposit with one of the Allied Banks, a sum in specie large enough to redeem immediately any amount of their own notes which might be offered to any or all the banks in Boston. Then the Allied Banks could afford to receive country bank paper at par. They would no longer be subject to discount, and would consequently keep only their share of the circulation. If any country bank should refuse to enter into this arrangement, and refuse to make the specie deposit in Boston, the Allied Banks would still receive its paper at par, till, having accumulated a large amount of its notes, they would suddenly, without warning, cause the whole sum to be presented at once at its counter for payment, a measure which would infallibly break the recusant bank.

This was the famous Allied Bank, or Suffolk Bank system, the object of so much discussion and obloquy at the time, but now so fully vindicated, and still in successful operation. It was represented as a high-handed act of oppression, a warfare

of the strong against the weak, of the rich Boston corporations against their feeble but honest brethren in the country, an attempt to compel the country banks to redeem their paper in two places at once, and to lend large sums in specie without interest to their oppressors in the metropolis. But when the subject is fully understood, nothing can be clearer than the abstract justice and expediency of the course then adopted and still pursued. So great are its advantages even to the parties who at first fancied themselves oppressed by it, that other country banks, not within the range of the system as first proposed, have petitioned to be admitted into it. It is both the duty and the interest of every institution that issues bills to serve as currency, to preserve these bills from depreciation in every place where they circulate to any extent. If, by any strange chance in the course of trade, the bills of our Boston banks should come to circulate in London, strict justice and sound policy would require them to make provision to redeem their paper in that city.

But this is a digression, which I have entered into only for the purpose of explaining the manner in which two media of exchange, like gold and silver, united in the same currency, affect each other. The government at any time may cause either to predominate, or nearly crowd the other out of circulation, by causing the preferred metal to be a little overrated in its relation to the other. It is made legal tender at a rate a little above its market value as bullion; or what would amount to the same thing, the metal which the government desires to drive out of circulation is made legal tender at a rate a little below its market value. Till within five years, France, preferring silver, underrated gold coin a little, so that silver circulated almost exclusively in that country, and gold coin could be obtained there only by paying a little premium. In Great Britain, on the other hand, till 1816, silver was underrated in proportion to gold, so that the latter metal circulated by preference, except in change for small sums; and though, at the period spoken of, this state of things was reversed, yet in order to prevent the overvalued silver currency from driving the gold out of the country, it was enacted that silver should be legal tender to the extent of forty shillings only, and private persons were prohibited from coining it. Silver, consequently, in

Great Britain occupies merely a subordinate place in the currency, just as copper does in that country and elsewhere. In the United States, till the Gold Bill of 1834 was passed, gold was underrated, and therefore had disappeared from the circulation, the product even of our own gold mines in Carolina and Georgia being sent to England for coinage. To remedy this evil, the Gold Bill was passed, requiring the eagle, which was rated at ten silver dollars, to contain only 232 grains of pure gold, instead of 247, which were formerly put into it. Of course, 23.2 grains of gold, or 371.25 grains of silver, passed indifferently for one American dollar; these two numbers are in the relation to each other very nearly of one to sixteen, which was, up to 1850, about the true relation of the market values of the two metals; and they therefore circulated indifferently in this country, till the discoveries in California and Australia again changed their relation to each other.

Not many years ago, our small-coin currency was flooded with old Spanish pistareens, as they were termed, a much worn coin, worth about 18 cents. They had come into circulation as of the value of 20 cents; and in consequence of this over-valuation, amounting to nearly 8 per cent, nearly all of these coins which were in existence found their way hither. To drive them out, it was resolved at the post-offices and the banks, that they should be received only at the valuation of six to a dollar, or 163 cents, a point as much below their true value as the former estimate had been above it. The effect was almost instantaneous; the coins were either melted up or sent out of the country, and a pistareen is now rarely to be seen. Whenever it is judged expedient to drive out the old Spanish eighths and quarters of a dollar, most of which have lost from 6 to 8 per cent of their value by abrasion, a similar course must be adopted.

The precious metals have an inherent value of their own, wholly apart from their use as money. They are used in the arts, in fabricating plate and jewelry, and thus bear a price in the market like any other commodity, founded on the uses which they subserve, and the difficulty of obtaining them, or the amount of labor which must be expended for their production. It is a knowledge of this fact, that they have an independent value, less liable to fluctuation than that of any other