seem to have given rise to the opinion, so long entertained, that coins were merely the signs of values! But they have really no more claim to this designation than bars of iron or copper, sacks of wheat, or any other commodity. They exchange for other things, because they are desirable articles, and are possessed of real intrinsic value. A draft, check, or bill, may not improperly, perhaps, be regarded as the sign of the money to be given for it. But that money is itself a commodity; it is not a sign, it is the thing signified.'

Money, however, is not merely the universal equivalent, or marchandise bannale, used by the society: it is also the standard used to compare the values of all sorts of products; and the stipulations in the great bulk of contracts and deeds, as to the delivery and disposal of property, have all reference to, and are commonly expressed in quantities of money. It is plainly, therefore, of the utmost importance that its value should be as invariable as possible. Owing, however, to improvements in the arts, and to the exhaustion of old and the discovery of new mines, the value of the precious metals is necessarily inconstant; though, if we except the effects produced in the sixteenth century by the discovery of the American mines, it does not appear to have varied so much at other times as might have been anticipated. Great mischief has, however, been repeatedly occasioned by the changes that have been made in most countries in the weight, and sometimes also in the purity of coins; and since the impolicy of these changes has been recognised, similar, and still more extensive, disorders have sprung from the improper use of substitutes for coins. It is, indeed, quite obvious, that no change can take place in the value of money, without proportionally affecting the pecuniary conditions in all contracts and agreements. Much, however, of the influence of a change depends on its direction.

An

The Count di Verri was one of the first who showed clearly what money is, and what it is not.-See "Meditazioni sulla Economia Politica," § 2.

increase in the value of money is, for reasons that will afterwards be stated, uniformly more prejudicial in a public point of view than its diminution: the latter, though injurious to individuals, may sometimes be productive of national advantage; but such can never be the case with the former.'

But notwithstanding the precious metals are in many respects admirably fitted to serve as a medium of exchange, they have two very serious drawbacks—their cost, and the difficulty and expense of carrying them from place to place. If the currency of Great Britain consisted of gold only, it would amount to at least sixty millions of sovereigns; and the expense attending such a currency, allowing only per cent for wear and tear and loss of coins, could not be reckoned at less than £3,250,000 a-year. It is obvious, too, were there nothing but coins in circulation, that the conveyance of large sums from place to place to discharge accounts, would be a very laborious process, and that even small sums could not be conveyed without considerable difficulty; and hence it is that most civilized nations have endeavoured to fabricate a portion of their money of less costly materials, and have resorted to various devices for economizing the use of coin. Of the substitutes for coin hitherto suggested, paper is by far the most generally used, and is in all respects the least objectionable. Instead of discharging their debts by a payment of the precious metals, individuals, on whose solvency the public may rely, pay them by giving a bill or draft for the sum, payable in coin at sight, or at so many days after date; and as this bill or draft passes currently from hand to hand as cash, it performs all the functions of coin, while it saves its expense to the public. A sense of the advantages that might be derived from the circulation of such bills or drafts led to the institution of banks for their regular issue. A banker, on being applied to for a loan, does not make the advance

See Chapter on Profits.

in gold or silver, but in his own notes; and while these serve equally well as cash to the borrower, the issuer derives the same rate of interest from them that he would have derived from an advance of cash; his profits consisting of the excess of interest derived from the notes he has issued, over the interest of the cash or unproductive stock he is obliged to keep in his coffers to meet the demands of the public for payment of his notes, and the expenses of his establishment. Besides this sort of banks, there are also banks of deposit, or banks for keeping the money of individuals. A merchant using a bank of this sort makes all his considerable payments by drafts upon his bankers, and sends all the bills due to him to them to be presented, and noted if not duly paid. By this means he saves the expense of keeping money at home, while he, also, avoids the risk of receiving coins or notes that are not genuine, and of making mistakes with respect to the presentation of due bills; and in consequence of the saving that is thus effected, a much less quantity of money serves for the demand of the public.

But the great advantage of banks, in a commercial point of view, consists in the facility they afford for making payments at distant places, and for the negotiation of bills of exchange. Many of the banking companies, established in different districts, have a direct intercourse with each other; and they all have correspondents in London. Hence, an individual residing in any part of the country, who may wish to make a payment in any other part, however distant, may effect his object by applying to the bank nearest to him. Thus, suppose A of Penzance, has a payment to make to B of Inverness. To send the money by post would be hazardous; and if there were fractional parts of a pound in the sum, it would hardly be practicable to make use of the post. How then will A manage? He will pay the sum to a banker in Penzance, and his creditor in Inverness will receive it from a banker there. The transaction is very simple the Penzance banker orders his correspondent in

London to pay to the correspondent of the Inverness banker the sum in question on account of B; and the Inverness banker, being advised in course of post of what has been done, pays B. A small commission, charged by the Penzance banker, and the postages, constitute the whole expense. There is no risk whatever; and the affair is transacted in the most commodious and cheapest manner.

Bills of exchange are most commonly used in the settlement of transactions between merchants residing in different countries; but they are also frequently used among merchants of the same country. They are merely orders addressed by a creditor to a debtor, directing the latter to pay his debt to some specified party in his vicinity. It is generally found, that the debts mutually due by cities or countries trading together, approach, for the most part, near an equality. There are at all times, for example, a considerable number of persons in London indebted to Hamburg; but, speaking generally, there are about an equal number of persons in London to whom Hamburg is indebted; and hence, when A of London has a payment to make to B of Hamburg, he does not remit an equivalent sum of money to the latter; but goes into the market and buys a bill on Hamburg for an equal amount,-that is, he buys an order from C of London, addressed to his debtor D of Hamburg, directing him to pay the amount to A or his order. A having endorsed this bill or order, sends it to B, who receives payment from his neighbour D. The convenience of all parties is consulted by a transaction of this sort. The debts due by A to B, and by D to C, are extinguished without the intervention of any money. A of London pays C of do., and D of Hamburg pays B of do. The debtor in one place is substituted for the debtor in the other; and a postage or two, and the stamp for the bill or order, are the only expenses.1

1 For an account of the measures necessary to ensure the ready conversion of paper into the precious metals, see Chapter on the Interference of Government.

CHAPTER V.

Division of Employments among different Countries, or CommerceWholesale and Retai! Dealers-Influence of improved Means of Communication-Mode in which Commerce contributes to increase Wealth—Restrictions on Commerce, for the Promotion of Domestic Industry and National Security-Influence of these Restrictions— Duties on Imports.

THE division of labour is not necessarily confined to limited societies, but is of universal application; and may be extended so as to enable the inhabitants of entire districts, and even nations, to addict themselves, in preference, to certain branches of industry. On this, which has been appropriately termed by Colonel Torrens, the territorial division of labour, is founded the commerce carried on between different districts of the same country, and between different countries. The different soils, climates, and capacities of production, possessed by the different provinces of an extensive country, fit them for being appropriated, in preference, to different species of industry. A district abounding in coal, having an easy access to the ocean, and a considerable command of internal navigation, is the natural seat of manufactures. Wheat and other species of grain are the proper products of rich arable soils; and cattle, after being reared in mountainous districts, may be most advantageously fattened in meadows and low grounds. It is clearly as little for the advantage of the inhabitants of different districts, as it would be for that of an individual, to engage indiscriminately in every possible employment. Who can doubt that vastly more manufactured goods, corn, cattle, and fish, are produced by the people of Lancashire confining their principal attention to manufactures, those of Kent to agriculture, those of Argyle to the raising of