is not found that prices vary according to the amount of notes in circulation. Currency, as will be presently shown, has nothing to do with prices, the real use of currency being to circulate commodities and transfer debt.

CHAPTER III.

THE FALSE CURRENCY PRINCIPLE.

"THAT when Bank Notes are permitted to be issued, the number in circulation should always be exactly equal to the Coin which would be in circulation if they did not exist."

This principle is contained in the Evidence of Mr. Samuel Jones Loyd, (now Lord Overstone) before the Committee on Banks of Issue, 1840. Question 2663-4.

The following are his words:

"The precious metals converted into Coin. constitute the money of each country. That Coin circulates sometimes in kind; but in highly advanced countries it is represented, to a certain extent, by paper notes, promising to pay the coin to bearer on demand, those notes being of such a nature in principle, that the increase of them supplants coin to an equal amount. When these notes are in use, the metallic coin, together with these notes, constitutes the money, or currency

of the country. Now, this money is marked by certain distinguishing characteristics; first of all, that its amount is determined by the laws which apportion the precious metals to the different countries of the world; secondly, that it is in every country the common measure of the value of all other commodities, the standard by reference to which the value of every other commodity is ascertained, and every contract fulfilled; and thirdly, it becomes the common medium of exchange for the adjustment of all transactions equally at all times, between all persons, and in all places. It has, further, the quality of discharging those functions in endless succession. Now, I conceive that neither deposits nor bills of exchange in any way possess these qualities. In the first place the amount of them is not determined by the laws which determine the amount of the precious metals in each country. In the second place, they will in no respect serve as a common measure of value, or a standard by reference to which we can measure the relative values of all other things; and, in the next place, they do not possess that power of universal exchangeability which belongs to the money of the country."

From the foregoing evidence it will be seen that the Witness used the words "Currency,"

с

and "

Circulating Medium," as synonymous. Several other high authorities, examined before the same Committee, confirmed that opinion.

In Lord Overstone's opinion, money and currency are identical, and include the coined metallic money, and the paper notes promising to pay the bearer coin on demand. He says that the characteristic of their being money is, that they are received equally at "all times, between all persons, and in all places." He excludes bills of exchange from the designation of currency, because "they do not possess that power of universal exchangeability which belongs to the money of the country."

It is impossible to imagine a definition more. fatal than this is, to the opinion so expressed; for, if this definition be the true one, then there is no such thing as money or currency at all. In the first place, it at once excludes the whole of the issues of bank notes. The notes of a bank in the remote district of Cumberland, would not be current in Cornwall, therefore, not being received equally at "all times, between all persons, and in all places," they are not currency.

Again, the notes of a bank in Cornwall would not be current in Cumberland, therefore, they are not currency. We may almost say that there are no country bank notes which have a

general currency throughout England, therefore no Country Bank Notes are received equally at "all times, between all persons, and in all places;" therefore, no Country Bank Notes are Currency.

Till within the last 45 years, the Notes of the Bank of England had scarcely any currency beyond London and Lancashire, a preference being then universally given to local notes in country districts, therefore Bank of England Notes had not a power of "universal exchangeability;" therefore they were not currency.

If this test is to be applied, the claims of all Bank Notes to be considered as Currency are annihilated at once.

The acceptance of a Baring, or a Rothschild, or of Lord Overstone himself, would be received in payment of a debt by a far larger circle of persons than the notes of an obscure and remote country bank. But Lord Overstone excludes Bills from the term, "Currency," because their amount is not determined by the laws which determine the amount of the precious metals in each country. But is the amount of Bank Notes determined by these laws?

He says that the increase of Bank Notes only supplants Coin to an equal amount; but this is a most extraordinary assertion for a Banker to