one for the other, would, provided they were of exactly equal extent,-provided, that is, that no notes were issued except against the checque of a depositor, whose account would be diminished exactly by the amount of the notes he introduced into circulation,-alter the total amount of the circulating medium, or its consequent influence on prices. With this condition, and to this extent, we may at once admit what Mr. Tooke calls the "helplessness" of the country bankers and the Bank of England, in controlling their issues and the real existence of which, up to a certain point, the evidence given by the country bankers before the Committees of 1840-41, clearly proved. In rural districts, for instance, it is quite intelligible, that, at certain periods, large stock fairs, times of payment of rents, &c., there may be a very considerable increase of the issues of notes-an increase perfectly legitimate-wholly beyond the power of the issuing banks to control, and having not the slightest influence on prices.

But, does this admission touch the question of whether it be or be not in the power of issuing banks to increase the whole circulating medium, and whether it be expedient to entrust them with that power? It may be shewn, I think, beyond contradiction, that it does not affect either of those questions in the very slightest degree. Mr. Tooke says, "It is not in the power of banks of issue to make any direct addition to the amount of notes in

circulation." This is not true as stated-nor were it so, is it the important question; the important question being, whether it be not in their power to increase the whole circulating medium of the countrynotes and deposits taken conjointly. The banks, it is said, are the passive instruments of extended issues; and that an increase of notes follows, and is occasioned by, and does not precede or cause a rise of prices. It may at once be admitted, that an increase of the circulating medium does not ordinarily (never, it might perhaps, be said,) originate with the banks, or arise out of any spontaneous action on their parts. It would be strange if it did: it is not easy to lend when no one wants to borrow. Again, it may be admitted, that a tendency to a general rise of prices will always precede an increased issue of paper money. But both admissions tend only to shew that it is mainly at periods of excitement and over-trading that the danger of over-issues is likely to arise-a proposition which no one, as far as I am aware, conversant with the subject, has ever denied. The question remains, “Is it in the power of banks of issue to add to the circulating medium; and will such addition re-act on prices?" I will confess that, but for the respect I entertain for a writer, from whose earlier publications I have-in common with all whose attention has been directed to questions of monetary science -derived much information, I should scarcely have thought it necessary to waste a single word on the

proof of the foregoing propositions. It is to me, indeed, matter of great surprise that, by Mr. Tooke especially, the power of banks of issue to add to the amount of the circulating medium should be denied. To those who will only admit that notes should be considered as money, the evidence which clearly proves the occasional difficulty of forcing them into, or retaining them in, circulation, might be embarrassing, but to Mr. Tooke, who contends, and justly, that deposits are equally to be considered as money, I cannot understand how the proposition that the power of issuing notes does confer on banks a direct and most effective means of adding to the circulating medium of the country can be denied. Let us among many that might be cited, refer but to one process by which this may be effected. We have seen that if a depositor draws out into circulation merely the amount of notes, by which he diminishes his deposit account, the whole circulating medium will not be increased; but suppose he draws out more? A has, on his account with an issuing bank, 10007., he wants 2000.-his own 1000l. and a loan of 10007.-the money is given to him in the notes of the bank, it remains for but a short time in circulation, we will suppose-it falls into the hands of B and C, who pay it into their respective accounts with the bank. It is clear that 1000l. will have been added to the deposits, and of course to the whole circulating medium, for the period that the 1000l. was lent to A. The 10007. of A being de

ducted from the deposits in the hands of the bank, but B and C having each 1000l. more to their credit respectively. If the money lent to A fall into the hands of D, who has an account with another bank, the first bank will be called on, no doubt, to liquidate the notes lent to A; but suppose a precisely similar train of circumstances to have occurred with respect to the second bank? The result will be, that the notes of the two banks will be exchanged, and the amount of bank notes in circulation will not have increased, but the whole circulating medium of the country will have been increased to the extent of the two additions of 10007. each to the amount of deposits in either bank, liable to be called for in notes at the will of the depositors.

And will it be said that these additions have no effect on prices? I can conceive no reason why they should not have the same effect on prices as would be produced by the addition of 2000l. in sovereigns brought into the country and paid into the respective banks by persons arriving from abroad. In the latter case, as in the former, the money would not at once enter into circulation, it would only be absorbed by the circulation, as prices rose under the influence of the greater command over the purchase of commodities which the possession of it conferred on one or more members of the community.

The effect, it is true, with respect to sums so small as those which, for the sake of the greater

clearness I have taken by way of illustration, would be infinitesimal, but increase the thousands to millions, and the effect would be sufficiently apparent. Supposing, for instance-the supposition is Mr. Tooke's-that the Bank of England should issue 5,000,000l. on the security of mortgage on landed property, I find it impossible to concur in the opinion of Mr. Gurney, quoted by Mr. Tooke, that such an addition to the circulating medium would have no effect on prices. Mr. Gurney, it seems, said in 1833, that "While the transactions of London are abundantly supplied with notes, the effect of an additional 5,000,000l. would be, that it would remain inoperative or idle in the tills of the bankers." Of course it would, so long as no employment were found for it, but it would, whether in the shape of notes or deposits, add to the whole circulating medium, precisely in the same degree as an importation of 5,000,000l. in sovereigns, and have a tendency to create the same train of phenomena. I cannot but fancy that it would not remain very long inactive, and that, if intrusted to Mr. Gurney, it might add to the increase of accommodation to country correspondents, to enlarged facilities of discount, to greater consequent command of the parties so accommodated over commodities, and to a consequent rise of general prices.

In further explanation of his proposition, that no issue of bank notes will affect prices, Mr. Tooke states that there is an essential difference of cha