the banks do not increase their loans, unless the same difficulties should reduce the currency of England below ours in relation to commodities. Indeed, it is there already on undoubted securities, and we may soon have all securities undoubted, if we will, and make an end of future bad debts. These details respecting California, apply also to Australia, with the exception that Australia was a cultivated country possessing capital, when California was a wilderness, and has greatly the advantage of California in this respect. They are necessary to show the fallacy of the argument against a specie currency drawn from the instability of credits in California, and the high rate of interest prevailing there. The truth is, an expanded and consequently cheap currency is the most costly and wasteful machinery a nation can possess; the history of the world shows it to be uniformly unprofitable or disastrous. It is evil whether formed of the precious metals or of bank debt, for a cheap currency and high prices of commodities are synonymous terms. It must encourage imports, check exports-excepting the precious metals which must be exported-and involve the community in debt; and bankruptcy follows in its train. This cannot fail to be obvious to every reflecting mind; nevertheless it has been unaccountably ignored by writers and talkers upon the subject of the currency.

A cheap currency is Adam Smith's great heresy, and here is his famous announcement:-"The substitution of paper in the room of gold and silver money, replaces a very expensive instrument of commerce with one much less costly and sometimes equally convenient. Circulation comes to be carried on by a new wheel, which it costs less both to erect and maintain than the old one."

This celebrated economist is as unfortunate in his illustration as in his argument with respect to paper money. A paper wheel would not seem to be very efficacious or valuable in a powerful machine. On the application of power, it is quite certain the machine would stop or run to destruction, and such, to my mind, is the effect of the paper substitute for money in the currency. It has thrown out of gear, repeatedly, all the machinery of commerce in every nation that ever adopted it, and the wild work we are having now is precisely owing to this nuisance in the center of our system.

I have no quarrel with the bankers, and those who administer the system. They are with us and of us, and are no more responsible for its evils than others. The unquestionably lose as merchants and citizens, by its general evil effects, more than they gain as bankers. The reader, therefore, will comprehend the distinction between the system, which I condemn, and those who are engaged in its direction and details.

Dr. Smith understood perfectly well that every pound note, or every bank credit, added to the currency, expels its amount of gold and silver; but it never seems to have occurred to his mind that the additional currency must degrade the value of the whole, before the precious metals can be displaced-that they must be sold at the degraded value, and that the excess, which causes the degradation, must be thrown off in the inflated price of commodities; so that the metals are utterly lost to the community that substitutes the bank currency.

No man is more eloquent than he in praise of the policy which spreads the most widely a thorough cultivation of the soil, as the true means to secure the greatest wealth and prosperity to the nation; yet he did not

discover that, if the nation exports its gold and silver, it must retain the products, or stop the labor which renders that cultivation necessary-his argument thus defeating itself-and that debt must take the place of money, not merely in the currency, but in the repeated transactions that would otherwise be made for money.

This is a most important mistake of Dr. Smith's, that has exercised a wide influence in retaining debt in the currencies, and in disturbing the commerce of Europe and America. As a pioneer in the science of political economy, when few facts had been elaborated, upon which to form sound conclusions, it is not very surprising that this, which appears to be the only important error in his system, should have escaped his observation; but it is unaccountably strange that Ricardo, Fullerton, Mill, and others, who have written at a comparatively recent period, should have followed him in this specious, but false and destructive, doctrine.

What argument is there for a cheap currency, that does not apply, with equal force, to cheap houses, cheap furniture, cheap ships, cheap apparel, cheap food, cheap learning, and cheap everything? If this is true economy, how are we to have any wealth at all-in what can it be invested, and how are the people to be employed? Shall we return to barbarism, and put a stop to the employment and gains of our merchants, to promote economy? The argument is perfectly absurd; it would reduce the city to a group of shanties, and carry us back to the destitution of mother Eve and her apron of fig-leaves.

Everything of utility is wealth. It is the same to us whether we produce or import it. In the former case, it is the direct product of our labor; in the latter, the product of our labor supplies returns. Therefore wealth, obtained in gold and silver, is the sure means of disposing of an equivalent amount of our products for cash. To object to this as a dear currency, and complain of the loss of interest thereon, is as futile as to object to the fine warehouses and dwellings, or to anything else that constitutes the wealth of New York, and say that Irish shanties would be a great saving, and answer every purpose.

If there is anything in the world we want dear and valuable, it is the currency; for while we can keep it more valuable than that of other communities, we cannot fail to sell commodities, buy money, and keep out of debt among ourselves and with the world. A valuable currency may be

obtained in two ways, either by reducing its volume or by increasing commodities. The former, however, insures the latter, and is in direct opposition to our banking system; for just in proportion as we cheapen money, by increasing the currency, we sell our money, stop our exports, and of course limit the employment of our navigation, and limit cultivation, production, and wealth; and just in proportion as we pursue the opposite course, we thrive. Value, and therefore wealth, are the same at any price. A barrel of flour at $5, is of the same value, with a given amount of currency, as at $10, with double the amount.

We cannot stop the gold producing in California. Under Providence, it is settling that country-that is all the good we can say of it; but if the same amount of labor were employed in any other production, it would be vastly better for the whole country, and would result in more wealth, and in securing a better population. It is only cheapening money, by raising the price of everything not made of gold; the only advantage being that we obtain gold leaf, plate, and trinkets in exchange, for less of

other things. But we cannot stop it. What, then, should we do? Certainly use the gold-all we can of it. Give it the most extended use, and thereby the greatest possible value. Away with the debt banking! Let us have room for the gold. We have room, by withdrawing the debt from the currency, for $400,000,000 of gold, before the rest of the world can take any of it, unless more is returned than taken away. By retiring the bank currency we can keep a constant balance of gold in our favor, with a constant increase of business, and decrease of debt. While we are obtaining it we shall pay for all the imports in flour, wheat, corn, fish, beef, pork, ashes, and everything else that we can send out of our ports, not to Europe only, but, in every direction, to all the world. But, to do this, we must quit tampering with theories—we must use, and not neglect, the thing we promise to pay.

The quality, not the quantity, of the currency should be our constant care. If the quality is pure and unadulterated, the quantity will take care of itself. No foreign tariff, no foreign or domestic policy-short of war-no power on earth can prevent us from obtaining and retaining more gold, as we have relatively more productive labor, in proportion to population, than any other nation; except the abnormal power exercised, but not, in my opinion, constitutionally possessed, by the State Legislatures, of adulterating the currency in such manner that the mixture can be separated at will, the pure taken off at the adulterated value, and the dross left with us.

A constant effort is being made to place those who are satisfied with a pure curreney in a false position. It is attempted to place us on the defense when we are plaintiffs in the cause. We are required to show cause why bank-notes, issued upon real estate, imaginary estate, and no estate at all, are not as good as gold; why notes issued upon the security of State stock are not perfect; why the whole real property of a kingdom or a nation may not be coined into money by the transmuting power of legislation, and why a promise to pay is not pay itself. To all this we reply, that gold is gold, and silver, silver. We are perfectly satisfied with them for currency. We are no theorists, and have no theory to propose-none to defend. We have nothing to do with negations in the case. We state the positive fact that gold and silver are money, possessing value; and that a promise to pay them is debt, and not value. By what rule of common sense we are called theorists it is difficult to comprehend. They are theorists who utter a promise to pay an ounce or a dollar of gold, and propose to pay it with anything else. Whenever and wherever such promises have been substituted for gold and silver, the result has been embarrassment and loss to many, and ultimate ruin to more or less of the community. Dispel the mischievous theory! Cease tinkering the currency with a paper wheel, and let us depend upon the solid material of gold and silver!

The paramount law in commercial finance, I conceive to be, that the currency should never for a moment exceed its natural volume. However little this may have been understood by the economists, or however much nelected, it will infallibly become a settled conclusion of Political Economy. Nothing can prevent a commercial country from obtaining and retaining its due share of the precious metals to form the natural volume of its currency; but that neglect of their use, and substitution of debt in their place, which degrades their exchange value. Because they

form the medium of exchange, and a given weight of gold therefore becomes the price of other exchangeable things, people do not discover that, in parting with gold for something else, they are merely exchanging one commodity for another-that there is reciprocal value in the exchange, and that the parting with any additional sum of gold, in making the exchange, is quite as likely to be owing to a fall in its value, as to a rise in the value of the thing purchased; but it is so. The recent high prices have been caused by the swollen and unnatural volume of the currency; they have been a degradation of the value of money, and not a rise in the value, but only in the price of commodities and property.

There is a surprising fallacy in the public mind respecting the quantity of currency required to circulate the products of the country. If the principle of debt is not in the carrency, any quantity will be sufficient to transact any extent of business. If commodities increase and the currency does not, prices yield until the export trade takes off the commodities and returns specie. Prices conform to any volume of currency, more or less, with equal facility. If expansion were not permitted, contraction, with the present increase of gold in the world, would be wholly impossible.

Debt in the currency is therefore a fatal principle. It cannot be introduced without being, in the first place, an addition to the natural volume of the currency, which, if not tampered with by legislation, would always be regulated by the labor and commodities offered in exchange therefor. The addition cannot remain. It must be lost in the inflated price of other things which cannot be sold, and thereby virtually cost us their equivalent in the gold exported, or it is paid away in the added price of imported commodities. If, with a natural currency, corn could be exported at $1 per bushel, and, by an artificial increase of its volume, the export of corn is stopped by a rise of price to $1 10 per bushel, and $1 10 of specie goes in its place, it is clear that the retention of the bushel of corn has cost us $1 10 in gold. This is one form of the evil. Another is, that the foreign imports have the benefit of this rise of price, and the foreign commoditya yard of silk for example-which, with a natural currency, could be bought for the price of $1, and paid for in a bushel of corn, will rise to $1 10, and must then be paid for in $1 10 of gold, because the foreigner can take the gold to another corn-producing country and buy there 10 per cent more corn with that amount of gold than here. In either case we lose 10 per cent in standard gold, and shall continue to lose until the excess, which is mere disease in the currency, is thrown off. I am perfectly satisfied that, in this manner, our artificial money costs the country its whole sum in gold, and restricts our business to the same extent, instead of increasing it as many have supposed.

But there is another evil, of still greater magnitude, which is the prime cause of our present financial difficulties, and of all the financial difficulties we from time to time experience-namely, the dollar of debt, created without value and placed in the currency, creates an obligation, or is of itself an obligation, that never can be paid. If the bank should lend gold to its customer, it would be one thing-value-and there would be value in the hands of the customer to repay it. Nothing would be added to the currency thereby; no depreciation of the value of money and consequent rise of prices would result therefrom. But the bank lends quite another thing-it lends debt and no value. Nothing goes into the hands

of the customer, or the community, to repay it. It is the difference between something and nothing-between value and no value; and yet this thing of no value becomes currency, in addition to the currency existing before, and necessarily adds itself to the prices of all things--labor and commodities. In other words, it depreciates the value of money for its whole amount.

Suppose the volume of the currency to be doubled in this manner, then a commodity that sold before for $5, and probably for cash, would rise to $10; and as this artificial money is obtained only by creating a debt in exchange, the commodity will almost certainly be sold on credit, for the debt banking system must be supported by debt, of course. The reciprocal debt of the people and the bank becomes $10, which was only $5, or nothing before. Probably the article will be sold three times over on credit, at the average price of $10, creating $30 of debt. When the liabilities of the banks return upon them in a demand for coin, they demand the same sum from their debtors; they demand a value which never existed; one-half the sum was mere price-it cannot be paid. The banks attempt to collect $10, five of which they never loaned and never possessed. The people possess nothing for it but the debt of the banks, and the banks possess nothing for it but the debt of the people. It is a reciprocal demand for coin that is nowhere, or for an equivalent value that is nowhere that never existed. It is reciprocal destruction-the fight of the Kilkenny cats. Payment is impossible, and the $5 of artificial currency thus created, inevitably creates in this transaction $15 of bankruptcy.

I am making a very moderate assumption in this illustration, for the capital of the bank is not value. It consists mainly of credits checked out of other banks, continued in an endless chain of debt, and when the demand comes for coin, it is not merely dollar for dollar they call back, but frequently five for one, depending upon the extent of their expansion. Moreover, the removes of a commodity between the producer and consumer probably average five, all of which, by this system, must be made on credit; but the number and extent of these credits, whether longer or shorter, obviously depend upon the expansion or contraction of the bank loans. If five, then every bank contraction compels the settlement of five times its amount in bankruptcy. There are three most important points or doctrines, herein presented, to which I ask the especial attention of the reader :

1. Interest must be dear, and debt plenty, when and where the currency is extended and cheap.

2. Every dollar of currency, created without value, costs the nation its whole sum in standard gold, and restricts the business of the country. Europe adds her supply to the stream of the precious metals, flowing to the eastern nations from this country, upon the same unprofitable terms.

3. The dollar of bank money creates an obligation that never can be paid, and repeats the defalcation for every obligation based upon it. History and experienc demonstrate this fact in every bank contraction, great or small.

These may be my discoveries. I do not find them mentioned in the writings of the economists, but to my mind they are self-evident truth. Such are the evils of our system of banking, resting as it does upon the competition of more than 1,400 banks, whose profit and whose exist