price of wheat will rise. The price of debts obeys the same rule, under the same circumstances. If capital become very scarce, the price of debts must fall, i. e. the discount must rise. If capital become abundant, the price of debts. will rise, i. e. the discount will fall. The price of debts, then, must follow the same great natural law that the price of wheat does, if that law be left uncontrolled in its operation. Now, does not every man of common sense know that, it is foolish to try to control the price of wheat? It is not the fluctuation of the price of wheat that is the evil, but it is only the sign of the evil. The real evil is the change in the proportion of the demand and supply, and the fluctuation of the price is the grand natural corrector of the evil. Does not every one know that a high price of corn is the way to attract corn where it is deficient, and a low price the way to repel it from where it is already too abundant? Does not every one know that it is the most fatal folly to force down the price of wheat when there is a real scarcity, and to sell it below the price it would naturally attain?

Now, apply all the arguments which suggest themselves so irresistibly in the case of wheat, to the case of credit, or the purchase of debts, and the same results will follow, under the same, or

the like circumstances. The same natural law operates to preserve the due proportion between capital and credit, and any interference with this law must necessarily be attended with the same evil consequences, as an interference with the natural price of wheat.

The variations in the rate of discount, therefore, are, in truth, only the sign of the evil. The real evil is the altered proportion between capital and credit, and a variation in the rate of discount is the corrector of the evil. To attempt to keep the rate of discount uniform, when the proportion between capital and credit is altered, without taking any means to restore the due proportion, is to thwart and contravene the natural law, just the same as an attempt to fix the price of wheat; but if the proportion between capital and credit can be restored without altering the rate of discount, then there is no reason why a uniform rate of discount should not be preserved, and quite consistently with the natural law, for although variations in the rate of discount correct the real evil, yet these variations are also a great evil. The simplicity, beauty, and perfection of action in this natural law, as in all the laws of nature, is marvellous, and produces a multitude of results which are not, perhaps, at first, very obvious. If capital beleaving the country and becoming scarce,

compared to credit, every principle of nature shows that the value of money must rise, i. e. the rate of discount must rise; and this has a tendency to prevent the outflow of bullion, and to attract it from abroad; on the other hand, if capital be flowing into the country, and likely to become too abundant, compared to credit, a fall in its value, or a fall in the rate of discount, repels it from the country. If a nation be visited with a great failure of the crops, it can buy such food from foreign countries only with its commodities or its money; it cannot send its credit in payment abroad. If commodities be too dear, it must pay with money, and credit in this country is the great producing power, and for a time is a great sustainer of prices, by enabling people to withhold their commodities from the market. Now, raising the rate of discount curtails credit, forces sales, and thereby lowers the prices of commodities, and makes it less profitable to export specie, and more profitable to export goods. Moreover, this rise in the value of money here, i. e. the low price of debts and commodities, tempts buyers from neighboring countries to bring their money here. It thus causes an influx of bullion, and restores our currency to a uniformity of value with that of neighboring countries. Again, if this nation have to spend a

great part of its money in buying foreign corn, it is quite clear that it has not got so much money to spend in purchasing goods; an overproduction of goods, therefore, can only end in a disastrous fall of prices. And here, too, the beautiful action of the natural law is manifest. So enormous a proportion of the commodities of this country are produced by the credit system, that a rise in the rate of discounts just hits profits between wind and water. Consequently, a rise in the rate of discount retards and curtails production in proportion to the diminished consuming powers of the nation, and so prevents such a ruinous fall in price as would necessarily follow an undiminished production, accompanied by a diminished power of consumption. But, this result is a great disturbance to trade and a great loss to the country, and still the question remains, whether, with a mixed metallic and paper-currency, the same result cannot be produced with less disturbance to trade than by raising the rate of discount beyond a certain. fixed maximum.

In fact, when a commercial crisis occurs in a country, it invariably means that more persons. are wishing to sell than there are persons to buy; or, at least, at remunerative prices. A commercial crisis invariably arises from a lack of

pur

chasers, which is, in fact, over-production. True prudence, therefore, shows that, in all commercial crises, production should be curbed. It is much better not to produce at all, than to produce and be obliged to sell at a loss. To produce and be obliged to sell below the cost of production is loss of capital. It is better, therefore, not to employ the capital at all, than to lose it. Raising the rate of discount, therefore, acts as a timely warning to producers to hold hard, but, in that case, especially with a paper-currency, it may be better still not to discount at all, than to disturb the uniform rate of discount.

Now, what is the necessary consequence of an attempt to thwart this great natural law? In time of scarcity of food and a necessary export of money to buy it, if the rate of discount be kept unnaturally low, nothing but money will go; commodities are too dear, they will not go. Again, money being kept at an unnaturally low rate here, no one will bring it here from neighboring countries, consequently, great quantities of money will go out, and none will come in, till at last, the circulating medium will be nothing but "promises to pay," and no money to pay them with. Then, at last, violent convulsions, total destruction of credit, every one wishing to sell, and no one wishing or able to buy.