suppose, for example, that the supply falls in one year one twelfth below the level of an average crop, (which we know frequently happens,) it would, if consumption were to go on at the ordinary rate, be consumed in the course of eleven months, leaving the last month wholly unprovided for. But this, we know, never happens, and it is only prevented by a rise of price, which measures the consumption by the deficiency of the crop; and whether, therefore, there is an abundant, middling, or scarce crop, a suitable allowance is sure to be measured out to the consumer by a low, a middling, or a high price. The corn-dealer, indeed, thinks nothing about all this; his object is to sell his commodity at the highest price; and in a scarcity, he takes his full advantage; but while he is thinking only of himself, while he is only playing his own paltry game, he is a mere instrument in the hands of Him who brings good out of evil, and who turns the little passions of man to the purposes of His own benevolence and wisdom. There is really nothing in nature more wonderful than that great law of society by which subsistence is measured out in due proportion to the supply of the year; and the more deeply it is considered, the more worthy will it appear of profound and rational admiration."

It is not denied, that in the corn-trade, as in other branches of commerce, prices are sometimes raised or lowered unnecessarily by the operations of speculators, who have been misled by wrong reports, or have erred in their estimates of the effects which would be produced on the market by political changes, the breaking out of a war, new inventions and discoveries, or the stoppage of some sources of supply. Merchants as well as other persons are sometimes mistaken in their calculations. But the mistakes thus committed soon correct themselves; they are usually of small extent and short duration, and they injure none so much as those who make them. When the error is discovered, the market experiences a revulsion, and prices for a time are depressed as much below their proper level as they were formerly, without due cause, elevated above it, so that the average result to the consumers is the same as if no disturbance had happened. When war was expected between England and China, in 1839, it was believed that the supply of tea would be almost entirely cut off; the

whole supply in the market was therefore eagerly bought up by dealers and speculators, and prices advanced 100 per cent and upwards. But in less than three months, it was ascertained that the supply, by means of indirect shipments, cargoes being transhipped from American and Dutch to English vessels, would probably be as large as ever, while the consump tion had been much diminished by the high price. There was, consequently, a violent reaction in the market, consumers obtained their tea cheaper than ever, and most of the speculators became bankrupts; they had injured nobody but themselves.

Such a speculative movement as this, affecting the price of only one commodity, can seldom be of much importance to the whole body of consumers, or the community at large. In fact, there is but one article, wheat and the flour which is made of it, the consumption of which is so vast, on account of its being in universal use, that any enhancement of its price, not connected with a general rise of prices, is a matter of national concern. But in this case, fortunately, the sources of supply are as numerous as the consumption is great; and owing to the differences of soil and climate, an unusually poor harvest in one district or country is usually offset by an unusually good one in another. In 1847, there was a more general failure of the crops in Western Europe than had been known for many years; but the harvest in the United States was abundant, and the unavoidable enhancement of price, as already explained, having limited the consumption, the aggregate supply for the whole world was sufficient for the aggregate demand. On account of the immense quantity of wheat and flour that is constantly in the market, speculation has a comparatively limited effect upon its price. "Not only its value," says Adam Smith, "far exceeds what the capitals of a few private men are capable of purchasing, but, supposing they were capable of purchasing it, the manner in which it is produced renders this purchase altogether impracticable." It is produced all over the country, and is necessarily divided at first among an immense number of owners, some of whom supply the consumption in their immediate neighborhood, while others send their produce to distant markets. "The inland dealers in corn, therefore, including the farmer and the baker, are necessarily more numerous than the dealers in any

other commodity, and their dispersed situation renders it altogether impossible for them to enter into any general combination. If in a year of scarcity, therefore, any of them should find that he had a good deal more of corn upon hand than, at the current price, he could hope to dispose of before the end of the season, he would never think of keeping up this price to his own loss, and to the sole benefit of his rivals and competitors, but would immediately lower it in order to get rid of his corn before the new crop began to come in. The same motives, the same interests, which would thus regulate the conduct of any one dealer, would regulate that of every other, and oblige them all in general to sell their corn at the price which, according to the best of their judgment, was most suitable to the scarcity or plenty of the season."

But apart from those mistakes of speculators which affect the price of only one or two articles, experience tells us that far more general errors are sometimes committed; that a fever of speculation appears at times to seize upon the whole mercantile community, producing for a while an unnatural inflation of the prices of nearly all commodities, and then, with a sudden reaction, carrying them back to a point much below their former average, and thus causing general distress, loss of confidence, and bankruptcy. These violent changes from a period of great activity and seeming prosperity of trade, to one of marked depression of prices, stagnation in business, and general inability to meet pecuniary engagements, are called commercial or monetary crises, and are among the most striking phenomena in the history of commerce. The state of trade, says Lord Overstone, (formerly Mr. Jones Loyd,) "revolves apparently in an established cycle. First, we find it in a state of quiescence, - next improvement,-growing confidence, prosperity, excitement, over-trading, - convulsion, pressure, stagnation, distress, ending again in quiescence." Experience does not seem to teach caution, or instruct merchants and speculators how to avoid a recurrence of the evil. These crises are not of infrequent occurrence. Both in England and the United States, they come round, on an average, about once in every seven or eight years. Sir

* Wealth of Nations, p. 234.

Robert Peel, speaking in 1844, says: "Within the last twenty years, there have been, I think, four such periods, in 1825, in 1832, in 1835-36, and in 1838-39." Since the date of

his speech, there have been two others, in 1847, and in 1855. In the United States, there was a very violent monetary crisis in 1837, when all the banks in the country suspended specie payments. Another followed in 1841, when there was a partial suspension by the banks, and a third in 1854.

When it is expected that circumstances will cause some commodity to rise in price, dealers in it enlarge their purchases, in order to profit by the alteration; and these additional purchases tend to increase the effect to which they have reference, or to raise the price still higher. Other speculators are then attracted into the business, and their operations cause a further advance. The price thus obtains an unnatural elevation, much above what would have been produced by the cir cumstances which first tended to raise it; and those who have accumulated a large stock of the commodity now become anxious to sell. This is the turning of the tide; the price ceases to advance, and even begins to decline. The holders rush into the market to avoid further loss, and their eagerness to sell carries down the price more rapidly than it rose. The lessons of experience are of little use under such circumstances; for though it be generally perceived that the rise is merely specu lative, and the reaction be foreseen, each dealer still wishes to hold back till the advance has reached its maximum, and to sell only when the decline is about to begin. A few succeed in choosing the right moment for disposing of their stock; but the sanguine wait for the tide to rise still higher, and are caught by the suddenness of the revulsion. A concurrence of circumstances may affect the price of several commodities at once; and then, partly from sympathy, partly from the excitement produced by seeing great fortunes quickly accumulated by the few who made large purchases at the right moment, the rise becomes general, and a fever for buying and selling almost any article appears to pervade the whole community. Many of those who press so eagerly into the market when any new channel of commerce is opened, or when any considerable rise of price is anticipated, are not merchants, but persons engaged in other business, or living perhaps on fixed incomes, who

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speculate in the hope of suddenly increasing their fortune. "In speculation, as in most other things," says McCulloch, one individual derives confidence from another. Such a one purchases or sells, not because he has any peculiar or accurate information in regard to the state of the demand and supply, but because some one else has done so before him." The interference of persons not experienced in business tends, of course, to fan the excitement, and, when the recoil comes, to render the catastrophe more general and more ruinous.

Two opposite theories prevail respecting the nature and causes of a commercial crisis. The first attributes nearly the whole evil to an unnecessary expansion of the currency, caused by the mismanagement of the banks, and undertakes to find a preventive or a remedy by placing very heavy restrictions upon the issue of bank-notes. The other regards the banks as necessarily passive in the matter, as they have nothing to do with buying or selling commodities, and finds the characteristic feature of the phenomenon in a great extension of the system of credit, which cannot be prevented by legislation, and which might take place, and, in fact, often has taken place, in countries where only a metallic currency was in use. The one party maintains that an expansion of the currency always precedes a commercial crisis, and that it is this expansion which produces the rise of prices; the other affirms that it is the rise of prices which produces what there is of an expansion, but that this increase of the currency, at the most, is inconsiderable; - that it is one of the attendant circumstances or consequences of the crisis, but is not its cause. Their doctrine is, that prices rise first, and that there is a slight increase of the circulation some time afterwards.

I have already endeavored at some length to prove, that a convertible paper currency cannot be issued in excess; that the whole amount of money needed by the country is a fixed quantity, and it is not in the power of the banks, however disposed they may be to do so, to make any direct addition to the aggregate of notes circulating in their respective districts. I shall now proceed to show that an expansion of the currency cannot produce the fever of speculation and the unnatural rise of prices which lead inevitably to a commercial crisis.