responsible for the payment of the notes in gold on demand, just as the Government is responsible for the gold and silver coin, of standard weight and purity.

This view of the case, though very important in its bearing and consequences, seems to have been generally overlooked; but it must be admitted by Lord Overstone to be consistent with all that he has ever written or declared in evidence before Committees of both Houses of Parliament on the subject.

Lord Overstone is a very eminent authority on the subject, but this admission made by him will go a long way to prove the fallacy of his reasoning and conclusions.

It will be convenient to notice, presently, some of his fallacies, which are so many obstructions to a right view of this question.

That the great capitalists will be the last to be brought to look at this question in the right point of view is only what is to be expected, but that will be of little consequence when it is clearly seen and understood by the community. The Land-owners were the last to see the impolicy of the Corn-laws, but, when understood by the People, those foolish and unjust laws were soon repealed.

6

CHAPTER II.

FALLACIES EXPOSED.

LORD OVERSTONE says:-"A paper circulation is the substitution of paper, with a view to economy and convenience, in the place of the precious metals.

"The amount of it ought, therefore, to be equal to what would have been the amount of a metallic circulation; and of this, the best measure is the influx, or efflux, of bullion.

On this ground I must assume that fluctuations of the bullion constitute the correct standard by which to measure a paper-currency.

”米

If this maxim were strictly carried out, it would lead to universal ruin.

Lord Overstone says; Eight millions are a satisfactory minimum reserve in gold; but for this opinion he gives no reason, and it is impossible to see how this is consistent with his opinion, before quoted, on a paper circulation.

*Metallic and Paper-currency, p. 191.

The object of a paper circulation is simply to economise the coin, and, to that extent, the capital of the country.

The greater the extent to which that economy can be carried with perfect safety to the community, the greater will be the advantage to the country from the adoption of a mixed circulation of gold and paper.

Paper is used to take the place of coin because paper costs nothing, and gold costs much, and both perform exactly the same work.

The only question, therefore, is, to what extent paper can be substituted for gold with perfect safety to the community.

According to Lord Overstone, Eight millions are a satisfactory minimum reserve in gold. He would, therefore, admit that less would be a more satisfactory minimum reserve in gold, if equally safe. But that is the question.

Now, the reasoning which will show the minimum reserve of eight millions in gold to be perfectly safe, will also show the minimum reserve of two millions in gold to be equally safe; or, if it fail to show that, it will show that neither the one nor the other of these reserves would be safe. But, according to Lord Overstone,-" a paper circulation should vary in amount exactly as the circulation would have varied had it been metallic;'

"and that," he says, "is the only sound principle of currency.

This, as will be presently shown, is the great fallacy of the Act of 1844.

Again, Lord Overstone says:-" Management of the Currency means regulating the paper issues by the fluctuations of the bullion, and mismanagement consists either in putting out large quantities of paper-money and rapidly calling them in again, when there is a corresponding increase or decrease of the bullion: or, in taking in large quantities of bullion, and not putting forth notes against it. By this rule I contend that all issues of paper-money, whether Bank of England or Country issues, ought to be judged, and that their measures must, in every instance, be condemned, or approved, in proportion as they conform to, or violate it."*

Now, it is a fact, as will be presently shown, that the Issue Department does not produce such a correspondence between the paper-money and the bullion, and that there never can be, and never ought to be, any such correspondence between them."

Gold, although used for money, is also an article of merchandise, and is subject to the same * Ivid. p. 202.

natural laws which regulate all other articles of merchandise.

A free trade in gold must always exist, and to say that the convertibility of bank-notes, payable in gold on demand, can be endangered, so long as the issuers of the notes possess the means of purchasing gold, and gold is to be purchased, is an unintelligible proposition.

If the supply of gold be equal to the demand, and the means of obtaining gold be equal to the occasion for it, it must be as unnecessary to keep in hand a stock of gold more than sufficient to meet the ordinary demand, as to keep in hand a stock of any other goods more than sufficient to meet the ordinary demand.

In the case of cotton, it is considered sufficient to keep in hand a stock enough to meet the ordinary demand.

Why should the rule for gold be different from the rule for cotton, when both are dealt with as commodities?

A small stock of gold has always proved sufficient to meet the ordinary demand for gold as money.

Who ever wanted to convert his bank-notes into gold to any large amount, unless he wanted the gold to send abroad in payment for goods, or to export as merchandise?