issue," is an advance upon an unsuccessful operation, or the purchase of a bad debt. Every quantity of currency advanced to promote an unsuccessful operation, or which purchases a bad debt, alters the proportion between the currency and the debt, or the capital it represents. Each specific instance, then, of such an operation is an "over-issue," and the expression has no other meaning.

The foregoing considerations also show the complete fallacy of the theory of issuing notes on "good bills." In a Banker's sense, a "good bill" means simply a bill which is duly paid by the proper party at maturity. It is not the smallest consequence to the Banker, whether the transaction out of which the bill originated be a profit or a loss to the person who incurred the obligation, as long as he is paid. But if the expression, "good bill," be taken in a more extended and philosophical sense, to denote a bill upon which it is safe to issue currency, it is a very different matter indeed, for then a good bill" can only mean one generated by a successful operation.

Every consideration of sound reasoning and science, then, proves that, the only true foundation of a paper currency is that substance which is the legal, or the universally accepted,

representative of DEBT, i. e. of services due, or CAPITAL, whatever that substance be. Now, among all civilized nations, gold or silver bullion is the acknowledged representative of Debt, or Capital. Consequently, gold or silver bullion is the only true basis of a proper currency. Among all civilized nations, the weight of bullion is the acknowledged measure of value, and, consequently, bullion is the only true basis of the representative of value. Many unthinking persons declaim against the absurdity of founding a paper currency upon the commodity of gold bullion, rather than any other commodity, such as wheat, or silk, or sugar. But it is not as a commodity that bullion is the basis of a paper currency, but as the substance which is the accepted representative of Debt or Capital. It would be perfectly possible to make a yard of broadcloth, or a Dutch-cheese, the representative of Debt and the measure of value; then the yard of broadcloth or Dutch-cheese would be the only true basis of a paper currency, and to issue paper upon the basis of bullion would, in such a case, be as improper as to issue paper on the basis of broadcloth or Dutch-cheeses under existing circumstances. But all nations are agreed that bullion is better fitted by nature for such a purpose than any other commodity;

and, consequently, as it seems to be the substance pointed out by nature for representing debt, bullion is the substance which forms the only true basis of a paper currency.

Bullion, then, as the symbol of Capital, is not only the sole proper basis of a paper currency, but is the only true regulator of its amount. As all paper currency is a "promise to pay" gold or silver bullion at some definite time, it is quite evident that the "promises to pay," floating in a nation, must bear some proportion in quantity to the actual quantity of the bullion. It is quite impossible to fix any definite proportion, because that depends upon a multitude of peculiar circumstances. Experience is the only guide on the subject.

Capital and Credit, or money, and promises to pay money, then, form the only true circulating medium, or currency, and they are its limits. If the limits of Capital and Credit be once transgressed, we plunge at once into the fatal error of the notorious John Law, and there is no logical goal, till we arrive at the Assignats of 1796, or the Issues in America in 1837; and even these did not reach the full limits allowed by the theory. It is impossible to exceed the boundaries of Capital and Credit in the smallest degree, without involving this absurdity,—that

we can buy a thing, and keep the price of it as well.

Capital and Credit, then, must always increase and decrease together. If a man's real capital be reduced from £1000 to £100, it is quite clear that he cannot keep in circulation as many "promises to pay," as when he had £1000; and if his real capital be leaving him, he must reduce his liabilities in a similar proportion. If he choose to spend £500 in buying commodities, such as corn, flour, etc., it is quite clear that he cannot spend the money, buy the commodities, and have the price as well. What is true of a single individual, is equally true of a Bank, or of a Nation. When an ordinary Bank feels a drain upon its bullion, it must reduce its liabilities, its "promises to pay," or else the ruin of that Bank is certain. Now, although this be true as a general principle, and applicable to private banks, yet it is not applicable. to the Bank of England, invested with a monopoly in the issues of the legal tender money of the country, as will be shown in the future pages of this work, where it will be maintained that it is the reverse of true applied to the Bank of England, and that, as its bullion decreases, it ought to increase its issues, but under certain limitations.

The operation of reducing "Issues," or "Advances," is always one which will excite much complaint, and requires to be done with much delicacy; and, indeed, the grand problem, in regulating the paper currency, is to discover the true mode of acting upon it, so as, on the one hand, to maintain always its uniformity in value with the coin it represents, and on the other, not to contract it too suddenly and violently, and without giving the public sufficient warning to enable them to reduce their liabilities in proportion.

The plain and obvious method of controlling the paper-currency has almost entirely eluded observation. No person who apprehended the true nature of Banking, and expressed it in simple language, could fail to see the natural controller. The main business of commercial banking is discounting mercantile Bills, that is, buying debts. Discounting a Bill for a merchant, is not lending him money, but buying a debt due to him; and the price of such debt must follow exactly the same law as the price of corn, or any other article, if brought under the same law by exactly the like circumstances, but not otherwise. If money be very scarce and wheat very abundant, the price of wheat must fall; if money be very abundant, the