ous and less able to bear losses, must suffer harm and wrong, being required to pay more than they received, and to do this at a time when, from the depression of wages, the abandonment of industrial and commercial undertakings, and the fall of profits, they are least able to bear an additional burden. All these hardships are summarily attributed to one cause, more frequently spoken of than understood," a scarcity of money"; it means only a higher real value of money, the prostration of credit, the consequent inactivity of capital, and general despondency.

As the prosperity growing out of the earlier part of the experiment with paper money strengthened the hands of the revolutionary government, so the disasters and suffering attendant upon its close create a reaction, and weaken the cause of the insurgents. The popular discontent thus generated tends either to the reëstablishment of the old form of government, or to anarchy.

It was so at the close of the Revolutionary war in this country, when both the people and the army, exhausted by the efforts and sacrifices which they had made, bankrupt in fortune, and seeing no resources open to them, were for a while on the point of turning their arms against each other. Nothing but the moderation, wisdom, and firmness of their great Commander-in-chief saved the country from the horrors of a military usurpation. The establishment of peace seemed only to render matters worse. The courts then began in earnest to enforce the settlement of accounts and the payment of debts; and the property seized for this purpose being sold at a great sacrifice, its former owners found themselves homeless and penniless, and still burdened with the greater part of their pecuniary obligations. The unthinking multitude then began to clamor for "stop-laws," or enactments to delay process and execution after judgment had been obtained for debt; for "tender-laws," compelling the creditor to accept in satisfaction of his claim any property of the debtor at a fixed valuation or appraisement, instead of offering it at auction for cash, when it would bring but a trifle; and above all, for a new and large issue of paper money, the rapid depreciation of which would enable debtors to get rid of their obligations on very easy terms. Several States were weak enough to yield

to these demands, and thus only prolonged the period of uncertainty, confusion, and suffering, besides aggravating the evil by injustice. Massachusetts resisted, seeing that really the best and easiest mode of escaping present difficulties was to adhere resolutely to a specie currency, and to enforce a speedy settlement of all outstanding claims, so that industry and commerce might at last revive, without further impediment or drawback from the past. The consequence was, that a formidable rebellion broke out in this State in 1786, the avowed object of the insurgents being to close by violence the courts of law, thus putting a stop to legal measures for the collection of debts, and to compel the government to make a fresh issue of depreciating currency. The insurrection was suppressed with difficulty, and the terror which it inspired had this indirect good result, that it animated and strengthened the general effort which was then made to create a stable government for the whole Union. This effort led to the adoption of the Federal Constitution, one article of which, as already noticed, prohibits the emission of "bills of credit" and the enactment of "tender-laws."

In France, the final abandonment of the depreciated assignats and mandats, and the difficulties in which the government was thus involved, had consequences equally serious. The sufferings of the people exasperated them alike against the Revolution and the authors of it, whom they had so recently followed into the wildest excesses of Jatobinism. A reaction took place in favor of the ancient dynasty, which was so general, that the royalists obtained the command of the elections, and seemed likely to obtain their end by a peaceable vote of the two Councils or legislative assemblies. The Directory, indeed, aided by the army, which was still republican in sentiment, prevented this result through the coup d'état of the 18th Fructidor, 1797; they seized the leading royalist deputies, and sentenced them to deportation. But the triumph was dearly bought, as it marked the ascendency of military power, and foreshadowed the dominion of Napoleon.

It follows from this whole review of the subject of paper money, which I have intentionally based, as far as possible, upon historical facts rather than abstract reasoning, that the depreciation of it is attributable solely to excess in its issue.

If this excess could be prevented, that is, if the amount of paper currency could be kept precisely equal to what the amount of metallic currency would be in case there were no paper in circulation, then there would be no depreciation of the paper; nay, the paper might even command a premium over coin, if the aggregate value of it were made less than what the coin would amount to, and if it were also possible to prevent the importation of specie. Money acquires the power of exercising its functions, not from any intrinsic qualities that it possesses, but solely from convention. To adopt Mr. Mill's language, "convention is quite sufficient to confer the power, since nothing more is needful to make a person accept anything as money, and even at any arbitrary value, than the persuasion that it will be taken from him on the same terms by others." The value of paper money, not depending at all upon its cost of production, is regulated solely by its quantity. A certain determinable sum of money is needed in every nation to effect its current exchanges, and to maintain prices at an equilibrium with the average prices of commodities throughout the commercial world. Coin being banished, if the issue of paper money is less than this sum, the paper will command a premium; if greater, it will be at a discount.

The difficulty is, that this sum is a varying quantity, depending upon the state of trade, of public confidence, of the foreign exchanges as affected by the relative amounts of the exports and imports, and other circumstances which cannot easily be determined. The difference in value between the coin and the paper money is usually taken as a measure of the depreciation of the latter; and so it is, if the value of gold and silver be taken as the standard. But it should not be forgotten that this standard itself may vary, not only in accordance with the greater or less productiveness of the mines whence the precious metals are obtained, but also according to the varying demand for gold and silver in different localities. A general war in Europe, causing large sums of specie to be moved about in the military chests of great armies, and impeding the intercourse by sea which is the only means of equalizing prices; the consternation produced by revolutionary movements that tend to anarchy, or by the progress of invasion from abroad, causing large amounts of money to be hoarded; and

a great failure of the crops, making heavy importations of grain necessary, which must be paid for in specie,—these and other circumstances may raise the value of specie in different places much above its average, and retain it at the advanced valuation for a considerable time. It is the opinion of Mr. Tooke and other well-informed writers, that the difference between Bank of England notes and bullion from 1810 to 1817, amounting at times to 25 per cent, "was not greater than the enhancement in value of gold itself, and that the paper, though depreciated relatively to the then value of gold, did not sink below the ordinary value, at other times, either of gold or of a convertible paper." There was certainly no excessive issue of bank-notes at that epoch enough to account for their depreciation; the circulation of the Bank of England, indeed, was increased, but no more so than was necessary to fill up the gap in the currency caused by the destruction of a large amount of country bank paper, and to accommodate the rapidly increasing business of the country.

Reasoning upon these principles, Mr. Ricardo published, in 1816, his "Proposals for an Economical and Secure Currency." The plan was, to supersede the use of gold coin altogether, by requiring the Bank of England to redeem its notes by the payment, not of coin, but of gold bars, or bullion, of the standard purity, at the mint price of gold (£3 17s. 10žd. an ounce), or at such other price as Parliament should determine. These gold bars, or ingots, not being fitted for circulation as currency, would not be called for except when they were needed for exportation; but if the issue of bank-notes ever became excessive, so that they tended to depreciation, the gold would be then needed for export, and the issue would be checked, or the notes be poured back upon the Bank. Thus the heavy expense of a metallic currency would be saved, and full security would be given that the value of the paper currency would always correspond with that of gold.

Government adopted this scheme as a portion of its plan for the gradual resumption of specie payments. The act for this purpose, commonly known as Peel's Bill, was passed in 1819. It required the Bank, from the 1st of February, 1820, to the 1st of October in the same year, to pay its notes in bullion of standard fineness, at the rate of £4 1s. per ounce. From the

1st of October, 1820, to the 1st of May, 1821, it was to pay bullion at the rate of £ 3 19s. 6d. per ounce; and after this last date, it was to redeem its notes in bullion at the old mint price of £3 17s. 10d. an ounce. Two years afterwards, it was to pay coin at this price, the resumption being then complete. But as the Bank had abundance of coin in its vaults, and as the forgery of the one-pound notes, a large amount of which it was necessary by this scheme to keep in circulation as a substitute for guineas or sovereigns, caused much trouble and uncertainty, the Directors anticipated the operation of the act by beginning to redeem the notes in coin at the full price some time before the date specified.

The plan of gradual resumption by successive steps is a good one, as it relieves commerce from the violent shock which it would experience, if the currency were suddenly raised from a state of considerable depreciation to par. Should another suspension of specie payments by the banks of this country unhappily take place, the best policy for the legislature would be, to sanction the depreciation at its actual amount for the current month, on condition that the banks should immediately pay specie for their notes at this depreciated rate, and advance it two or three per cent each successive month, till it was brought again to par. Confidence would thus be immediately restored, further depreciation would be impossible, a time would at once be fixed for resumption, while the run upon the banks would cease almost entirely, as each holder of the notes would perceive that he would gain two or three per cent a month by delaying their presentation.