stated as follows: given the sum of the values of commodities, and the average rapidity of their metamorphoses, the quantity of precious metal current as money depends on the value of that precious metal. The erroneous opinion that it is, on the contrary, prices that are determined by the quantity of the circulating medium, and that the latter depends on the quantity of the precious metals in a country;1 this opinion was based by those who first beheld it, on the absurd hypothesis that commodities are without a price, and money without a value, when they first enter into circulation, and that, once in the circulation, an aliquot part of the medley of commodities is exchanged for an aliquot part of the heap of precious metals." exchanges: as also, and principally, from the value of the smallest silver pieces of money; so in like manner, the proportion of money [gold and silver specie] requis ite in our trade, is to be likewise taken from the frequency of commutations, and from the bigness of the payments." (William Petty. "A Treatise on Taxes and Contributions." Lond. 1662, p. 17.) The Theory of Hume was defended against the attacks of J. Steuart and others, by A. Young, in his "Political Arithmetic," Lond. 1774, in which work there is a special chapter entitled "Prices depend on quantity of money," at p. 112, sqq. I have stated in "Critique, &c.," p. 232: "He (Adam Smith) passes over without remark the question as to the quantity of coin in circulation, and treats money quite wrongly as a mere commodity." This statement applies only in so far as Adam Smith, ex officio, treats of money. Now and then, however, as in his criticism of the earlier systems of political economy, he takes the right view. "The quantity of coin in every country is regulated by the value of the commodities which are to be circulated by it. The value of the goods annually bought and sold in any country requires a certain quantity of money to circulate and distribute them to their proper consumers, and can give employment to no more. The channel of circulation necessarily draws to itself a sum sufficient to fill it, and never admits any more." (" Wealth of Nations." Bk. IV., ch. I.) In like manner, ex officio, he opens his work with an apotheosis on the division of labour. Afterwards, in the last book which treats of the sources of public revenue, he occasionally repeats the denunciations of the division of labour made by his teacher, A. Ferguson.

"The prices of things will certainly rise in every nation, as the gold and silver increase amongst the people; and consequently, where the gold and silver decrease in any nation, the prices of all things must fall proportionably to such decrease of money." (Jacob Vanderlint: "Money answers all Things." Lond. 1734, p. 5.) A careful comparison of this book with Hume's "Essays," prover to my mind without doubt that Hume was acquainted with and made use of Vanderlint's work, which is certainly an important one. The opinion that prices are determined by the quantity of the circulating medium, was also held by Barbon and other much earlier writers. "No inconvenience," says Vanderlint, can arise by an unrestrained trade, but very great advantage; since, if the cash of the na tion be decreased by it, which prohibitions are designed to prevent, those nations that get the cash will certainly find everything advance in price, as the cash increases amongst them. And our manufactures, and everything else, will soon become so moderate as to turn the balance of trade in our favour, and thereby fetch the money back again." (1. c., pp. 43, 44.)

That the price of each single kind of commodity forms part of the sum of the

c. Coin and symbols of value.

That money takes the shape of coin, springs from its function as the circulating medium. The weight of gold represented in imagination by the prices or money-names of commodities, must confront those commodities, within the circulation, in the shape of coins or pieces of gold of a given denomination. Coining, like the establishment of a standard of prices, is the business of the State. The different national uniforms worn at home by gold and silver as coins, and doffed again in the market of the world, indicate the separation between the internal or national spheres of the circulation of commodities, and their universal sphere.

The only difference, therefore, between coin and bullion, is one of shape, and gold can at any time pass from one form to

prices of all the commodities in circulation, is a self-evident proposition. But how use-values, which are incommensurable with regard to each other, are to be exchanged, en masse, for the total sum of gold and silver in a country, is quite incomprehensible. If we start from the notion that all commodities together form one single commodity, of which each is but an aliquot part, we get the following beautiful result: The total commodity = x cwt. of gold; commodity Aan aliquot part of the total commodity the same aliquot part of x ewt. of gold. This is stated in all seriousness by Montesquieu: Si l'on compare la masse de l'or et de l'argent qui est dans le monde avec la somme des marchandises qui y sont, il est certain que chaque denrée ou marchandise, en particulier, pourra étre comparée â une certaine portion de le masse entière. Supposons qu'il n'y ait qu'une seule denrée ou marchandise dans le monde, ou qu'il n'y ait qu'une seule qui s'achète, et qu'elle se divise comme l'argent: Cette partie de cette marchandise repondra à une partie de la masse de l'argent; la moitié du total de l'une à la moitié du total de l'autre, &c. l'établissement du prix des choses dépend toujours fondamentalement de la raison du total des choses au total des signes." (Montesquieu 1. c. t III., pp. 122, 13.) As to the further development of this theory by Ricardo and his disciples, James Mill, Lord Overstone, and others, see "Critique of Political Economy," pp. 235, ff. John Stuart Mill, with his usual eclectic logic, understands how to hold at the same time the view of his father, James Mill, and the opposite view. On a comparison of the text of his compendium, "Principles of Pol. Econ.," with his preface to the first edition, in which preface he announces himself as the Adam Smith of his day we do not know whether to admire more the simplicity of the man, or that of the public, who took him, in good faith, for the Adam Smith he announced himself to be, although he bears about as much resemblance to Adam Smith as say General Williams, of Kars, to the Duke of Wellington. The original researches of Mr. J. S. Mill, which are neither extensive nor profound, in the domain of political economy, will be found mustered in rank and file in his little work, "Some Unsettled Questions of Political Economy," which appeared in 1844. Locke asserts point blank the connexion between the absence of value in gold and silver, and the determination of their values by quantity alone, "Mankind having consented to put an imaginary value upon gold and silver . . . the intrinsik value, regarded in these metals, is nothing but the quantity." ("Some considerations," &c., 1691, Works Ed. 1777, vol. II., p. 15.)

the other. But no sooner does coin leave the mint, than it immediately finds itself on the high-road to the melting pot. During their currency, coins wear away, some more, others less. Name and substance, nominal weight and real weight, begin their process of separation. Coins of the same denomination become different in value, because they are different in weight. The weight of gold fixed upon as the standard of prices, deviates from the weight that serves as the circulating medium, and the latter thereby ceases any longer to be a real equivalent of the commodities whose prices it realises. The history of coinage during the middle ages and down into the 18th century, records the ever renewed confusion arising from this cause. The natural tendency of circulation to convert coins into a mere semblance of what they profess to be, into a symbol of the weight of metal they are officially supposed to contain, is recognised by modern legislation, which fixes the loss of weight sufficient to demonetise a gold coin, or to make it no longer legal tender.

The fact that the currency of coins itself effects a separation between their nominal and their real weight, creating a dis tinction between them as mere pieces of metal on the one hand, and as coins with a definite function on the other-this fact implies the latent possibility of replacing metallic coins by tokens of some other material, by symbols serving the same purposes as coins. The practical difficulties in the way of coining extremely minute quantities of gold or silver, and the circumstance that at first the less precious metal is used as a measure of value instead of the more precious, copper instead

"

It lies, of course, entirely beyond my purpose to take into consideration such details as the seigniorage on minting. I wil, however, cite for the benefit of the romantic sycophant, Adam Müller, who admires the generous liberality" with which the English Government coins gratuitously, the following opinion of Sir Dudley North: "Silver and gold, like other commodities, have their ebbings and Bowings. Upon the arrival of quantities from Spain it is carried into the Tower, and coined. Not long after there will come a demand for bullion to be exported again. If there is none, but all happens to be in coin, what then? Melt down again; there's no loss in it, for the coining costs the owner nothing. Thus the nation has been abused, and made to pay for the twisting of straw for asses to eat. If the merchant were made to pay the price of the coinage, he would not have sent his silver to the Tower without consideration; and coined money would always keep a value above uncoined silver." (North, 1. c., p. 18.) North was himself one of the foremost merchants in the reign of Charles II.

of silver, silver instead of gold, and that the less precious circulates as money until dethroned by the more precious-all these facts explain the parts historically played by silver and copper tokens as substitutes for gold coins. Silver and copper tokens take the place of gold in those regions of the circulation where coins pass from hand to hand most rapidly, and are subject to the maximum amount of wear and tear. This occurs where sales and purchases on a very small scale are continually happening. In order to prevent these satellites from establishing themselves permanently in the place f gold, positive enactments determine the extent to which they must be compulsorily received as payment instead of gold. The particular tracks pursued by the different species of coin in currency, run naturally into each other. The tokens keep company with gold, to pay fractional parts of the smallest gold coin; gold is, on the one hand, constantly pouring into retail circulation, and on the other hand is as constantly being thrown out again by being changed into tokens.1

The weight of metal in the silver and copper tokens is arbitrarily fixed by law. When in currency, they wear away even more rapidly than gold coins. Hence their functions are totally independent of their weight, and consequently of all value. The function of gold as coin becomes completely inde pendent of the metallic value of that gold. Therefore things that are relatively without value, such as paper notes, can serve as coins in its place. This purely symbolic character is to a certain extent masked in metal tokens. In paper money it stands out plainly. In fact, ce n'est. oue le premier pas qui coûte.

We allude here only to inconvertible paper money issued by

1 If silver never exceed what is wanted for the smaller payments, it cannot be collected in sufficient quantities for the larger payments the use of gold in the main payments necessarily implies also its use in the retail trade: those who have gold coin offering them for small purchases, and receiving with the commodity purchased a balance of silver in return; by which means the surplus of silver that would otherwise encumber the retail dealer, is drawn off and dispersed into general circulation. Eut if there is as much silver as will transact the small payments independent of gold, the retail trader must then receive silver for small purchases; and it must of necessity accumulate in his hands." (David Buchanan. "Inquiry into the Taxation and Commercial Policy of Great Britain." Edinburgh, 1844, pp. 248, 249.)

the State and having compulsory circulation. It has its immediate origin in the metallic currency. Money based upon credit implies on the other hand conditions, which from our standpoint of the simple circulation of commodities, are as yet totally unknown to us. But we may affirm this much, that just as true paper money takes its rise in the function of money as the circulating medium, so money based upon credit takes root spontaneously in the function of money as the means of payment.1

The State puts in circulation bits of paper on which their various denominations, say £1, £5, &c., are printed. In so far as they actually take the place of gold to the same amount, their movement is subject to the laws that regulate the currency of money itself. A law peculiar to the circulation of paper money can spring up only from the proportion in which that paper money represents gold. Such a law exists; stated simply, it is as follows: the issue of paper money must not exceed in amount the gold (or silver as the case may be) which would actually circulate if not replaced by symbols. Now the quantity of gold which the circulation can absorb, constantly fluctuates about a given level. Still, the mass of the circulating medium in a given country never sinks below a certain minimum easily ascertained by actual experience. The fact that this minimum mass continually undergoes changes in its constituent parts, or that the pieces of gold of which it consists are being constantly replaced by fresh ones, causes of course no change either in its amount or in the continuity of its circula

The mandarin Wan-mao-in, the Chinese Chancellor of the Exchequer, took it into his head one day to lay before the Son of Heaven a proposal that secretly aimed at converting the assignats of the empire into convertible bank notes. The assignats Committee, in its report of April, 1854, gives him a severe snubbing. Whether he also received the traditional drubbing with bamboos is not stated. The concluding part of the report is as follows: -"The Committee has carefully examined his proposal and finds that it is entirely in favour of the merchants, and that no advantage will result to the crown." (Arbeiten der Kaiserlich Russischen Gesandtschaft zu Peking über China. Aus dem Russischen von Dr. K. Abel und F. A. Mecklenburg. Erster Band. Berlin, 1858, pp. 47, 59.) In his evidence before the Committee of the House of Lords on the Bank Acts, a governor of the Bank of England says with regard to the abrasion of gold coins during currency: "Every year a fresh class of sovereigns becomes too light. The class which one year passes with full weight, loses enough by wear and tear to draw the scales next year against it." (House of Lords' Committee, 1848, n. 429.)