6,400,000,000

Circulating Capital, comprising money and all value seeking to be exchanged....$6,400,000,000 Fixed Capital, comprising roperty employed for purposes of gain not seeking to be exchanged Unproductive Wealth, comprising money in hoards, houses, furniture, &c., in use by their owners, and pleasure property per se

3,200,000,000

But morey proportionate to other capital was absent to the amount of $440,000,000, the value of the circulating capital was, therefore, but $5,960,000,000, and of the total wealth but $15,560,000,000. There is a question of equivalence here that invites discussion, but which is not essential to our present argument. My belief is that because of the deficiency of $440,000,000 in the circulating capital there was a deficiency of the other two classes of wealth in the same proportion, because the equivalent of fiction can be nothing but fiction.

Let us now assume, for argument's sake, that this currency of $640, 000,000 consisted of gold and silver exclusively, there being no such thing as fictitious credit to circulate in either notes or checks. It is obvious, then, that the buying and selling of goods must have been for cash, otherwise the currency could not be employed; and the borrowing and lending of capital would have been done by and through the banks instead of by buying and selling goods on credit. At this point of pure money currency we will suppose that we begin the credit system of mak ing currency through banking on commercial notes. This requires the buying and selling of goods on credit to produce the notes for discount; and suppose we pursue this plan of running in debt to each other for existing capital, and getting notes discounted until we have an aggregate of $640,000,000 of " deposits to our credit in bank, over and above all the deposits existing before. This gives us $1,280,000,000 of "money," instead of $640,000,000, or double the "money" to circulate the same capital; and the price of the whole property necessarily rises from $16,000,000,000 to $32,000,000,000! Where does this additional $640,000,000 of money come from? and where does the additional $16,000, C00,000 of property come from? There is uo such thing as either. The whole addition is pure fiction. There is no value in the money or cur rency above $640,000,000, and no value in the whole property above $16,000,000,000; all the rest is price without value, the merest moonshine in the world. That which costs nothing to any one is like air and solar light, no value and no wealth.

n

But the effect of this spurious money, while it is interchangeable with real money, is to reduce the value of gold and silver, locally, one-half. Two dollars possess no more purchasing power than one possessed before, and of course the export demand of commerce is changed from our mer chandise to our money, because the local depreciation of its value here bas no effect upon its value abroad until the money gets there and enters into general circulation, when it becomes merged in the vast volume of cur rency in all other commercial countries, and has scarcely an appreciable effect on the general value of the money of the world. Not a particle of business can be done with the double volume of currency more than was done with half the amount before, only what is done will be at double the natural price, and people will run in debt at double the natural price, so long as the double volume of currency can be maintained, which is longer, under specie payment, than Adam Smith with his disciples have supposed. How long, depends upon the quantity of gold and silver in the country to begin

with, and support the drain, and upon the unreasoning confidence of the public in the "paper money." If people generally do not call upon the banks for payment, the banks will supply additional currency by new discounts as fast as the money can be exported, because it is for their interest to do so, as they get additional interest on every additional factitious dollar they make. I censure not them, but their system, for this.

The principle of this currency is that the bank lends you a contract to pay money and value that have no existence, and throws upon you the obligation to meet that contract, under bond and security, to provide the institution with funds to discharge the same when it shall be called upon to do so. Of course the loan is made upon some specified time, but that time is arranged upon the principle stated, that the bank shall be put in funds to meet the impossible contract, which in the end is inevitable bankruptcy somewhere; since, the moment the banks withdraw any por. tion of their currency, they contract the measure of price, leaving the debts made by the old measure to be discharged by the new, under which the assets fall in price and become insufficient to discharge the obligations resting upon them. The experience of England with the financial crisis, while I write, in May, is a practical illustration of this pernicious and preposterous principle. The Bank of England is the mother of it, and it is astonishing that the accomplished merchants and bankers of England do not see the impossibility of meeting the contracts she impose upon them. I think I have said enough to meet Mr. Sulley's remark, that "where paper money has value, it is just as good as gold." I hope he will see that it has no value under any circumstances. The effect of this spurious money upon the capital of the nation is the loss of every dollar of gold or silver shipped under the degradation of the value of money which it causes, because the imports are advanced in price by that degradation, in common with all other descriptions of capital, and it is the amount of the degradation that is sent abroad in gold and silver. Real money is thus paid to foreigners for a false price. This important practical result, which all the metaphysical economists have overlooked, I am happy to see that Mr. Sulley understands; but I do not see how so good a thinker can imagine that the same result follows the local increase of gold, or that a paper currency is even capital in the hands of an individual or of the community. "Out of nothing, nothing is generated. This," says De Quincey, "is pretty old ontology." And when nothing is substituted for capital in gold exported, it is very clear that the capital is lost, which would not be the case if the paper were capital.

The unsophisticated truth is that the individual who accepts a bank note for his goods parts with his capital for that which has no value, and is therefore no capital. He lends his capital on the note, and is no more paid for his goods than if he had accepted his customer's note for them. He cannot thus eat his cake and have it too. He cannot part with his capital and possess it at the same time. He it is who lends capital in this business, and not the bank; and he it is who pays the interest which is included in the price of whatever he purchases. When he wants to recover his capital, he parts with the paper promise and gets value for it; he is then paid in the value received for the value delivered, and not before, and the exchange which was only half way made before is then complete. Should the bank happen to burst while he holds its note, I think Mr.

Sulley will see that in holding the note he does not hold his capital, and is not paid. Hence the note is not and never was capital.

Mr. Sulley's error, or what I conceive to be his error on this point, lies in the following statement. I say, what I conceive to be his error, for I am open to conviction, and always intend to give heed to respectful witicism, such as I find in the writings of Mr. Sulley:

"Money, no doubt, whether of paper or the precious metals, is capital in the hands of individuals; but a larger or smaller quantity makes no difference in the capital of a nation; and if it be of gold, and is exported from excess, the nation will get nothing in return for it. If it increases in a greater ratio than other commodities, it must of necessity depreciate, as no condition of cheapness will induce an adequate consumption. This has been sufficiently shown by M. Chevalier, both from French and English statistics. It must therefore be exported in price without value; that is to say, without any return being made for it in the imports. Consequently to the nation that produces the precious metals, while at the same time it produces large quantities of other commodities for exportation, the production of the metals will be just so much loss. This is the evil of a fixed

standard of value."

In making these remarks, Mr. Sulley overlooks the fact that all values are reduced, specially, by an increase of supply. The wealth of the world accumulates in this manner. What if the crops of grain are doubled this year in this country? Will not the bushel of grain fall in value as well as in price? That is to say, will it not exchange for less of commodities in general as well as for less money than before? Obviously, any exported excess of grain commands desirable capital in exchange, which is just so much added to the wealth the nation possessed before that excess was produced. And why is not this principle applicable to gold and silver? The miner who digs gold improves his fortune like the miner who digs iron, and as much as he adds to his own wealth by his labor he adds to the wealth of his country. But, be it observed, the gold must be produced in excess to supply the quantity exported; it must not be merely degraded in value to the exporter's limit by adulteration with "paper money," since by such adulteration and degradation the quantity exported is drawn from the precreated stock and lost, because nothing but debt remains to balance the value thus degraded and sent abroad. In the one case, there is the same quantity of gold left after the shipment of the excess as the nation possessed prior to the increased production and the capital returned for the shipment beside; in the other, a less quantity of gold by the amount of the shipment and no more of other capital to compensate the loss.

The French economist, Frederic Bastiat, says: "Utility is increased as we succeed constraining nature to a more efficacious cooperation. So that we may say that mankind have as many more satisfactions, as much more wealth as they have less value." In other words, mankind, by availing themselves of natural forces more and more, continually have an increase of utility, satisfactions, and wealth, at diminished cost.

Where nature furnishes the most efficacious co-operation in the mining and transportation of gold, it can of course be supplied at the lowest value, and if we can produce gold and exchange it for iron and cloth, and other utilities, at less cost of labor and capital than we can directly

produce the utilities themselves, we have "as many more satisfactions, as much more wealth, as we have less value." In what respect, then, is it less advantageous to procure and possess cheap gold than cheap capital of any other description provided always we have the gold, and not an incubus upon capital in its place to cheapen it.

Jean Baptiste Say notes a striking example of the increase of wealth by the reduction of value in the invention of the art of printing. "So that where there was formerly one copy only of a literary work (manuscript) of the value of 60 francs of present money, there are now a hundred copies, the aggregate value of which is 300 franes, though that of each single copy be reduced to 1-20th." That is to say, the reduction of the money value, by the increase of supply from 60 francs to 3 franes per copy, produces in this commodity a five-fold sum of wealth. There has been an abundant increase of wealth of this description by cheapening production since Say wrote in 1820.

"Gold and silver," says Adam Smith, "whether in the shape of coin or of plate, are utensils, it must be remembered, as much as the furniture of the kitchen. Increase the use of them, increase the consumable commodities which are to be circulated, managed, and prepared by means of them, and you wil infallibly increase the quantity; but if you attempt by extraordinary means to increase the quantity you will as infallibly diminish the use, and even the quantity too, which in those metals can never be greater than what the use requires."

Money cheapened by mining is, therefore, a cheap utensil and cheap capital, as wheat cheapened by tillage is cheap capital, and any normal excess of either over the home demand is equally a gain of national wealth. But it is only in its function of capital, the subject or object of commerce, that the increase of money is of the least consequence. As the instrument of commerce, the measure of price, the most limited quantity consistent with convenience in the coin is even better than a greater quantity, because lower general prices are thereby secured, and, other things being equal, the nation or community having the lowest general prices, in other words, the most valuable money, will have the advantage in the commerce of the world. But the two functions of money cannot be separated, any more than the beauty of the diamond can be separated from its worth, and the proper and only profitable course is to treat it as we treat other capital, accumulate as much as possible, and exchange the surplus for pro ucts of greater value.

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In regard to Mr. Sulley's remark that a fixed standard of value is an evil, I suppose he refers to the adoption of an irregular quantity of metal for the unit of money, like our dollar, which is an unequal fraction of a Troy ounce of gold, the French franc, which is out of the line of the decimal notation of the Empire, the English sovereign, or pound sterling, and the various units in use in commercial countries, which are names indicative of nothing whatever," as to the established and ordinary weights employed in commerce. Unquestionably this is an evil. I have endeavored to expose it in your pages; but I do not see that it amounts to a fixed standard of value. I do not find, and cannot conceive of such a standard in money or in anything else. In the words of Mr. De Quincey: "An object to stand still when all other objects are moving, showing how much of the change has belonged to one object, how much to the others, or

whether either has been stationary: this is a thing we shall never have; because no such qualification can arise for any object-nor can be privileged from change affecting itself." Let money change as it may, it is the legitimate price of things. I prefer, therefore, to call it the measure of price. When price is not money value, when it is made by a measure which is notmoney, it is illegitimate and false. There is a ground of value in the equivalence of labor and capital, to which objects must be referred in money, however much it may change in itself. To that true price is the equivalent of money value.

It follows that the rise of general prices, which results from the actual increase of the precious metals, is not, as Mr. Sulley imagines, price without value, but price with value, which, relating to our foreign commerce, is returned in the imports. And the export of gold or silver under this normal condition of things is just as profitable to the nation as the export of wheat or tobacco, or any other of the hundred commodities annually sent abroad, whether they are the direct, or the indirect product of the industry of the country.

Twenty dollars is the price of a barrel of flour to day for my family use. What sort of dollars? Not such as are produced by labor and capitalnot dollars of value. If we had possessed twenty such dollars for such an exchange, probably twelve of them would have gone abroad long ago, and returned the value of a barrel and a half of flour of the same quality more than the nation possesses at present in its capital. The dollars of to-day are made by the scratch of a pen; these are inscribed as a deposit when no dollars are deposited. They are not dollars of value, because they cost nothing. They are dollars of price, and the strongest motive which actuates man in society-self-interest-is involved in their further and unlimited increase. Certain men in corporations are privileged to make and take interest on such dollars as money. Do you suppose they will be checked in this business by the limitation of the issue of bank notes to $300,000,000? Not in my opinion. When the barrel of flour costs $100, as it will in time if the present financial system continues, perhaps the folly of the system may be discovered, and suffering among the industrious classes lead to its suppression. Already the bank deposits amount to $670,000,000, including those due by banks to banks, while the notes are but $250,000,000.

It is an immense argument in favor of the natural resources of this country, and the untiring energy of the people, that the nation is not ruined by its political economy in raising prices against itself by tariff, and, especially, by creating prices without value.

REFORM IN ENGLAND.

Now, that the question of reform is being discussed with so much spirit in England, and the late action of Parliament indicates the probable success of the measure proposed by Government, any facts with regard to the condition of the elective franchise and the changes proposed become of interest to us. The key note of the present reform movement was struck on the last night of the great debate in April. When Mr. D'Isræli denounced the bill as an innovation of American principles, and Mr.