be an extent of currency resulting therefrom corresponding with each gradation, and there will be a corresponding equation in the prices of commodities according as the currency may be augmented or diminished thereby. (Nos. 6 and 7.)

20. If the quantity of circulating medium absorbed, and the quantity of currency required, depend upon these three operating causes, as stated in the foregoing proposition, then if any two of those causes remain stationary, the variation in the currency and circulating medium must depend upon the variation of the third cause. Thus, if the term and rate of discount remain stationary, the quantity of circulating medium absorbed, and the quantity of currency required, will entirely depend on the variations in the capital and commercial transactions, provided no other disturbing cause is brought into action, such as loans, dealings in funds, &c. by which the currency may be affected.

This is self-evident, for if the three operating causes regulate the amount of the whole circulating medium and currency-two of these causes being stationary, every variation must depend on the variation of the third.

21. If proposition 17 is true, then it follows that no currency or circulating medium can be a steady measure of value, excepting that which is regulated in its amount by the increase or diminution of capital and commercial transactions, consequently no perfect currency can be based upon any circulating medium which consists of an article possessing any intrinsic value of its own; because, in such case, this article must be an article of commerce, the value of which must change according to its own abundance or

scarcity, and not according to the abundance or scarcity of capital and commercial transactions. This would, therefore, unfit any such article for that part of the duty of a circulating medium, namely, that of being a steady measure of value, since what is changeable in its own value can never be an unchangeable measure of the value of other things.

If this be correct, the precious metals never can be the basis of a perfect currency, being of necessity, according to the foregoing, an uncertain measure of value, and the fact of the decreased value of the precious metals since the discovery of the Mexican mines proves this theory to be well founded, as they afford no just measure of the value of commodities now, compared with their value at a period antecedent to the date of that event. And even in our own times, Mr. Horsley Palmer, in his pamphlet in defence of the Bank of England, admits (page 23) that the prices of commodities were reduced 20 to 30 per cent. during the American panic, which he states to have been occasioned by the contraction of our mixed currency, which, therefore, proved it to be an incorrect measure of value, being formed on a metallic basis-the contraction of the currency having destroyed its previously existing proportion to capital and commercial transactions, and thereby raised the value of the currency in the same proportion that the market price. of commodities was reduced.

22. Although a currency based on the precious metals may be liable to the foregoing objection, when its value may be compared at distant intervals, yet their scarcity has hitherto been considered the most certain guarantee against the undue increase of a mixed currency, and thereby affording the best security for maintaining it a steady measure of

value: from which cause it may be conjectured that all existing mixed currencies have been made to rest upon the said precious metals as their basis. If then this safeguard be abandoned, and an inconvertible paper currency adopted, how is the danger of depreciation from over issue to be guarded against?

Although the convertibility into specie of mixed currencies affords, to a certain extent, a security against over issue, inasmuch as a drain for gold must inevitably take place, when the currency has become depreciated by such over issue, being continued for a length of time sufficient to affect the exchanges-yet this convertibility affords no guarantee against an over issue taking place to any extent, or for any length of time, short of that period, when the self-interest of the parties issuing prompts them to it, and their credit happens to be undoubted. Of the truth of this there have been repeated proofs in the over issues of the Bank of England, which have been persisted in until the drain for gold compelled the directors to contract.-As a safeguard, therefore, against over issue and its consequences, the convertibility of a mixed currency has been shown to be no effectual preservative, because the drain for gold, in such cases, is the consequence of over issue, and is, therefore, in itself, a proof of the over issue having taken place, instead of its being a safeguard against it. (No. 14.)

23. As these preliminary observations and propositions will be referred to hereafter as points admitted, it is necessary they should be separately and thoroughly examined before proceeding further, and the importance of thus having first principles established to refer to as tests of the correctness of the opinions advanced upon this interesting

and difficult subject is made abundantly manifest by applying them to the evidence given before the different committees which, from time to time, have been appointed for the investigation of the currency question, for example take the paragraphs No. 6 and 7.

The principles here inculcated would absolutely condemn Messrs. Loyd and Norman and Co. in their opinion of the absolute perfection of a metallic currency, because it is admitted by all that a drain for specie may take place from peculiar causes, without any reference to the state of trade or manufactures whatever; as, for instance, by reason of a foreign loan, and the proportion between the said metallic currency as compared with commodities being thus changed, it can no longer remain an equable measure of value if the principle contended for in the paragraphs quoted is correct. In like manner, this principle, if correct, will set aside Mr. Muntz's proposition to have a reserve in specie equal to the issue of notes, in order that the variation might correspond with a specie currency, unless he could prove that this specie currency would fluctuate according to the increase or diminution of commodities; his plan is also open to this further objection, that specie might be withdrawn by cheque without any corresponding issue of Bank notes at all.

It also follows, from the doctrine laid down, that the Bank rule of 1832 is erroneous, because, if it is right that the relative proportion of currency and commodities is to be maintained, it must be wrong to be guided by the Exchanges upon all occasions, when they may be sometimes low when mercantile transactions are high, and vice versa, and therefore afford no certain index whatever of the amount of commodities or commercial transactions.

But the inference which is by many degrees of the

greatest importance as bearing upon the conduct of the Bank Directors is this

It will, I have no doubt, be readily admitted, according to No. 20, that the amount of currency held in circulation, or I may say absorbed by the public when there are no issues except in the discount of commercial paper, will depend upon the rate of interest, and the length of discount. This being the case, and let any given rate and term of discount at any period be taken as a starting point, if the Directors, by any interference of theirs with the existing state of things, destroy the proportion between the currency and commercial transactions then established, the said interference directly destroys the correctness of the currency as an equable measure of value compared with

that scale.

If this reasoning is correct, then it most undeniably condemns the Bank Directors when they arbitrarily alter either the rate or the term of discount, whether it be to increase or lessen the amount of the currency,-for the latter, indeed, they may occasionally plead the necessity of the case (which, however, may have been the consequence of their own previous misconduct); but for the former, there can be no excuse whatever-it is plainly and clearly tampering with the currency for the benefit of the Bank, and the existence of the practice is proved to demonstration by their own returns, Appendix, No. 14, page 104 of the Report on Banks of Issue, where it appears the rate of discount had fluctuated from 3 to 6 per cent., and the sum the Bank Directors had advanced amounted to 17 millions, equal almost to their entire Bank note circulation.

24. It is unnecessary to multiply examples; the fore