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 immedi ately 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.

CHAPTER XXII.

THE DECLINE IN THE VALUE OF MONEY.

It is now generally admitted that a great revolution is taking place in the commercial and monetary world, caused by a considerable decline in the value of money, - a revolution the like of which has not occurred for more than two centuries, and of which there is but one parallel in all history. The two precious metals, after maintaining a nearly uniform value for a very long period, are now, owing to a sudden and immense increase in the supply of gold, undergoing a great change, not only in their relation to each other, but in their value as compared with that of all other commodities in the world. This change is not to be a merely nominal one. It might seem, indeed, that, as the precious metals are a universal measure of value, any depreciation of them would amount only to a general rise of prices, all commodities being affected in precisely the same ratio, so that their relation to each other would remain unaltered. This is true; such a change would not benefit or injure any one. But all stipulations for the payment of money at a future day will be really affected to the full extent of the change which the precious metals may undergo while the contract is outstanding. A single instance will enable us to see the vast importance, in this respect, of a depreciation in the value of money. The national debt of Great Britain, that great incubus which has been supposed to be immovably fixed upon the shoulders of the nation, and which has been properly regarded as putting the English people under very heavy bonds to keep the peace, as any considerable enlargement of it by other wars would make the burden of paying its annual interest well-nigh intolerable, this mountain of debt must shrink comparatively into a mole-hill. It may all be paid off in a few years, with as little effort as it now costs to pay merely the interest. A revolution which will have this effect, and a proportional one on all other contracts to deliver money at a future day, may well be deemed a momentous one.

The first points to be considered are, the probable extent of the depreciation, and the time within which it may be expected. Fortunately, there is one example on record of a perfectly similar change, the study of which will enable us to see the true nature and probable limits of the present revolution. I refer, of course, to the effect produced in Europe by the great supplies obtained from the American mines in the sixteenth and seventeenth centuries.

We do not need to know the whole amount of gold and silver actually in use in the world, either as coin or plate, before the discovery of America. It is a well-ascertained principle, that the permanent or average value of a commodity depends, not on the larger or smaller stock of it already in being, but on the average cost of its production. If a pound of iron is worth only one-thousandth part as much as a pound of silver, it is not because there are a thousand times as much iron now in use as silver, but because it requires a thousand times as much labor to raise an additional pound of silver from the mines, as it does a pound of iron. If the stock already in use be ever so large, the value of it cannot permanently fall below the cost of production; for as the labor of obtaining more would not be remunerated, no more would be produced; and the constant consumption would steadily diminish the stock, till the value of what remained would rise high enough to pay the laborer for the effort of procuring a fresh supply. On the other hand, if the stock is ever so small, no one will pay more for any portion of it than it would cost him to raise or manufacture the article for himself. The steady average value, then, the point about which the price oscillates, never departing from it far in either direction, is the cost of production; and a tolerably accurate measure of this cost, so long as the demand remains the same, is the quantity annually produced.

It is important to recollect this, as many persons have been led to believe, because the very great addition made by the Californian and Australian washings to the stock of gold did not immediately and sensibly affect the value of that metal, that no future depreciation of it is to be expected. But till it is ascertained that this is a permanent increase of supply, and that the newly discovered auriferous districts will continue for many years to yield, not probably as much as they have done,

but enough to make the former sources of supply appear comparatively insignificant, and thus to diminish the average cost of production, the change of value will be too small to be generally appreciated.

Down to the time of Columbus, the average annual supply of the two precious metals certainly did not exceed three millions of dollars. How much was this increased by the supplies from America during the sixteenth and seventeenth centuries? Humboldt is here the only authority generally relied upon; and as he made very extensive and laborious investigations, was well acquainted with all that had been written upon the subject, had ready access to official sources of information. unknown to former writers, was well versed in the theory and practice of mining, and critically examined some of the most celebrated mines, it is probable that his statements are a very near approximation to the truth. He tells us that the annual supplies of the precious metals obtained from America were as follows.

Hence it appears, if we suppose the Old World continued to furnish as much as before, that in the first half of the sixteenth century the supplies from America had doubled the annual product. In the latter half of this century, they rendered it nearly five times as large. In the seventeenth century, it became over six times, and in the eighteenth, over eleven times, larger than it was before 1500. The great increase in the latter half of the sixteenth century was owing to the discovery of the mines of Potosi, which were first systematically worked in 1545.

How great and how rapid a depreciation of the value of money was caused by this vast increase of supply? Here,

* Humboldt estimates that all the European and Asiatic mines, as late as 1800, did not yield annually more than five millions of dollars.

again, the means for forming an opinion are very imperfect, being chiefly an extensive and laborious comparison of the prices, at different periods, of certain leading commodities, which are in uniform and perpetual demand. The staple articles of food, such as grain and meat, are the best for this purpose, as it may be presumed that they are not often produced in larger quantities than are wanted, and as nearly the same amount of labor is required for the production of a given quantity of them in one century as in another. If a genuine record can be obtained of the prices actually paid, at one place, for such articles, for a long series of years, the variations, if any, in the value of the precious metals during those years may be deduced from it, allowance being made, of course, for any alterations of the quantity of pure metal passing under the same denomination of coin, and for the state of the coinage, whether worn and clipped, or fresh and perfect. Such a record is found in the accounts of Eton College, and in the lists of prices collected by Bishop Fleetwood and M. Dupré de St. Maur. The conclusions deduced by various writers from these accounts do not agree very well; but the variations do not materially affect the result for the purpose which we now have in view. We select the computations made by Adam Smith, as they were made with great care and knowledge of the subject, and have been generally accepted by later writers on Political Economy.

Adam Smith says the American mines do not seem to have produced any effect upon prices till after 1570, though the mines of Potosi had then been actively worked for a quarter of a century. Between 1595 and 1620, silver fell to about one third of its former value; and about 1636, it had fallen to one fourth part of that value, where it has remained with little variation almost to the present day. Before 1570, a quarter (eight bushels) of wheat of middle quality was sold in England, on an average of a long period of years, for about two ounces of pure silver; about 1600, (still taking an average of many years, so that the very good and very bad crops may offset each other,) the price had advanced to a little over six ounces; about 1636, it had risen to nearly eight ounces. The average value of a quarter of wheat in England, from the repeal of the Corn Laws up to 1852, did not vary much from