of the lenders with each other in the English and Dutch markets, --a competition which is strikingly shown when the government appears as a borrower, and puts up a large loan at what is virtually an auction, to be sold in shares to the highest bidder.

A diminished rate of Profit tends to throw the great branches of manufacture and commerce exclusively into the hands of large capitalists, and thus to increase that inequality in the distribution of wealth which was one of the original causes of a fall of Profits. Hence it is, that, in such countries as Holland and England, where a low rate of interest has prevailed for a long period, there is as great an inequality of fortune among manufacturers and merchants as among landowners. "It is in the nature of trade and manufacture," says Mr. Laing, "that great capital drives small capital out of the field; it can afford to work for smaller returns. There is a natural tendency in trade to monopoly, by the accumulation of great wealth in a few hands. It is not impossible, that, in every branch of trade and manufacture in Great Britain, the great capitalist will, in time, entirely occupy the field, and put down small capitalists in the same line of business; that a moneyed aristocracy, similar to that in Genoa, will gradually be formed, the middle class of small capitalists in trade and manufacture become gradually extinguished, and a structure of society gradually arise in which lords and laborers will be the only classes or gradations in the commercial and manufacturing, as in the landed, system. An approximation, a tendency, towards this state is going on in England. In many branches of industry- for instance, in glass-making, iron-founding, soap-making, cotton-spinning the great capitalists engaged in them have, by the natural effect of working with great capital, driven small capitals out of the field, and formed a kind of exclusive family property of some of these branches of manufacture. Government, by excessive taxation and excise regulation, both of which have ultimately the effect of giving a monopoly to the great capitalist, who can afford the delay and advance of money these impediments require, has been hitherto aiding, rather than counteracting, this tendency of great capital to swallow all the employments in which small capital can act.”

I shall soon have occasion to show, that it is the abundance of Floating Capital seeking investment, the competition of

lenders with each other, and the consequent depression of the rate of interest, that is the great incentive to those wild and ruinous speculations which usually precede a commercial crisis, and are commonly, though improperly, attributed to some defective regulation of the currency. But my present point is sufficiently illustrated, which is, that when a sufficient amount of wealth has taken the form of Fixed Capital to satisfy all the real wants of the country, that is, when the whole organism of agricultural, manufacturing, and commercial industry is completed,

then, if savings from income continue to be made, they must be pushed into market as Circulating Capital seeking investment; and the rate of Profits and interest must sink to a minimum from the competition which then ensues. This is already the state of affairs in England; and if we are still distant from it in the Atlantic States, it is because the new settlements which are constantly forming in the West operate as a drain upon our capital as well as our population; and also because the field open for the investment of Fixed Capital in the gigantic improvements required in our immense territory is so vast that centuries must elapse before it is fully occupied.

CHAPTER XII.

THE THEORY AND USES OF MONEY, AS ILLUSTRATED BY INCIDENTS IN THE WAR OF THE GREAT REBELLION.

THERE are three things which are so frequently confounded with each other, that I begin with an attempt to define them and ascertain their precise meaning. These are Money, Currency, and Floating Capital.

1. Money, in the strictest sense of the term, consists of stamped pieces of the precious metals, of a known weight and fineness, issued by government authority, adopted both by that authority and by common consent as the common medium of payment and exchange, and having a natural or intrinsic value equal, or nearly equal, to the value thus attributed to them by authority and use. In other words, Money is what we usually call Specie.

As Money, it is not a commodity, or an article of common purchase and sale; but it may readily be converted into a commodity at the wish of its holders, either through melting it up, or through selling it, in proportion to its weight and fineness, as so much bullion. On account of its intrinsic value and consequent universal acceptableness, it is not merely a legal, but a natural tender for the payment of debts.

As Money, moreover, it has two perfectly distinct functions: 1. As a standard or measure of value; and, 2. As a universal medium of exchange.

It is not a perfect standard, but it is the nearest approach to one, and the most convenient or available for use, that can be had. By common consent of all nations, the two precious metals, as they are called, have been selected, one or both, as the unit of measurement, or nearest practicable approach to a standard of value, because their Cost of Production has been more stable and uniform than that of any other commodity. They are obtained in small quantities, by nearly the same amount of labor in different years, in various parts of the world; and as the stock of them already on hand, accumulated by the labor of many previous years, is large, while the addition to this stock obtained in any one year is relatively very small, their value necessarily changes slowly, if at all. By law, the dollar contains 23.2 grains of pure gold, or 345.6 grains of pure silver; the values of the two metals, of course, are in the inverse ratio of these quantities, or as about 14.9 to 1. The English pound sterling, or sovereign, contains a small fraction over 113 grains of pure gold; the French franc contains 4.484 grains. As the real unit of value is one grain of pure gold, it is evident that the pound sterling is worth 4.87 dollars, or 25.2 francs. In other words, 113 grains of pure gold are coined in England into one pound sterling; in France, into 25.2 francs; in this country, into 4.87 dollars.

As a means of ascertaining the relative value of different commodities, money is akin to the yardstick or the peck basket. As the former is a measure of length, and the latter of capacity, so the dollar or the pound sterling is a measure of value. Great pains have been taken to determine with the utmost exactness the dimensions of the two former measures; otherwise, all contracts for the delivery of a quantity of cloth, grain, or any other com

modity would be so indeterminate as to give rise to endless disputes; in fact, their precise execution would be impossible. Far more important is it that the dollar, or the franc, which is the unit for measuring values, should itself be determinate and unalterable in its value. All bargains in trade, all mercantile or financial contracts to be executed at a future day, depend upon precise determinations of the values involved. As there could be no interchange of thought between man and man, if the words in the language used did not have their fixed meanings, known to all; so there could be no proper traffic, no satisfactory fulfilment of contracts, no precise determination of profit or loss, except the values in question could be easily ascertained by precise measurement. As a measure of value, then, money is an indispensable agent of commerce, and without it civilization itself would be impossible. All substitutes for it, all modes of economizing or facilitating its use, are legitimate and equitable only so far as they preserve its essential attributes of precision and unchangeableness. The Price of any commodity is its value reckoned in Money; and hence, as the unit of measurement, Money may be called the universal regulator of Prices. Thus, as the value of Money (i. e. of one grain of pure gold) rises, the Prices of all commodities fall in the same ratio; and vice versa, as the Money falls, the Prices rise. In fact, the word Price means value measured by Money.

In its second function, Money is a convenient, though not an indispensable, medium of exchange. Trade is really an interchange of commodities; we part with one commodity, or one parcel of commodities, only in order to obtain other commodities in exchange. But as it is often inconvenient to effect the desired exchange directly, we perform it indirectly, first selling for Money the articles that we wish to get rid of, and then purchasing with this Money the articles that we desire. This appears to be a needless complication of the process, as it is really making two exchanges, when but one would seem to be necessary. But we are compelled thus to act, because we can seldom find a person who not only wishes to buy the very commodity, and the exact quantity of it, which we wish to dispose of, but who also desires to sell the very articles, and the same quantity of them, which we need to obtain. Most frequently, therefore, we are obliged to sell to one

person, and to buy from another. Hence there needs to be some common medium of payment and exchange, some embodiment of value, which we can safely receive in exchange for the commodity that we part with, because we know it will be received from us, and at the same valuation at which we obtained it, in payment for whatever we wish to purchase. Money is such a common medium, and a very convenient one, because it is so divided into coins of different weight and value that we can easily make up from it the precise sum needed to adjust the payment or sale.

The essential qualities of a common medium of exchange are, 1. Fixity of value; 2. Universal acceptableness; and, 3. Divisibility into parts of such size as to furnish an exact equivalent of any required amount. No one desires Money for its own sake, but only for the sake of what it will purchase. No one will consent to receive it, then, if he is not sure that it will not lose value while in his hands, and that anybody else will gladly receive it from him in exchange for any commodity that he desires.

I have said that Money, though convenient, is not indispensable as a medium of exchange. Practically, as we shall see hereafter, in the complex operations of trade, purchases are frequently offset against sales, so that the transactions are completed without anyactual use of Money. This is the case generally in wholesale trade, and especially in the large transactions of international commerce, since it would be inconvenient and hazardous to transport large sums of Money over a great distance, and across sea.

But though such offsets actually reduce trade to direct barter of one set of commodities for another, they cannot be effected without a precise determination of the values which are thus interchanged; and such determination is possible only through reference to Money in the exercise of its first function, as an accurate measure of value. A tradesman may be willing to barter tea, sugar, and other groceries for grain and meat; but the two parties to such a trade can agree upon its terms only through a precise measurement, in dollars and cents, of the relative values of the articles which are exchanged for each other. A tradesman cannot safely conduct his business except by keeping accounts; and book-keeping is practicable only through computation and measurement of the values bought and sold. Hence, by the common metonymy of substituting the measure for the thing measured, we generally speak of