trace the old weights, though curiously disguised in new combinations.

Happily in England, after an infinity of pedantic mystification, we attained to this simplicity in fact, though expressing it obscurely in a very complex fraction, but I may add that, assuming a metallic standard, we thus do no more than a court of law would be forced to do if there had never been any currency legislation at all.

Still some of the phrases associated with the old fallacy of "regulating value" stick to us; among others, that gold (or silver) in the currency and gold as a commodity are in some way essentially different. But how does the case really stand? Current money is coined or marked, and by this means is made locally more useful and is more extensively used, but it does not follow that more of it is used, for it thus does its work very much more rapidly; and if it did not flow practically with perfect freedom in and out of circulation, local currency would inevitably break away from the common standard of the world. Whether gold and silver are coined by a State mint or marked by a well-reputed banker, as in China, is only a question of the degree of facility afforded. The process is substantially the same in all countries. No one-banker, trader, or private individual-holds more than he sees his way to use for safety or advantage. If more than is immediately required comes into a country, it naturally finds its way into the hands of those who can afford to hold a reserve and wait for their opportunity. It yields them no profit for the time, but it is not subject to waste or decay, and there is no urgent desire to part with it, for all dealers know that a hasty buyer must raise prices against himself. In Asia, where banking is not very fully developed, such reserves are very generally distributed, though a large portion will be with bankers even there. In countries like this, banking organization very quickly and certainly throws out the excess to the Bank of England, as the common bank of bankers. Thus in 1877, and again last year, we had a large reserve of gold, and a similar increase was found in the corresponding balances of "other bankers." But this special commodity, gold, though it could at any time be coined, could not by that or any means be forced suddenly into circulation, though a very general rise in prices might cause us to use 11 or 12 sovereigns where ten had served our purpose before, and so absorb the increased quantity. But again, the use of this commodity is common to the world at large, so we deal with it on just the same principle as we would deal with any other which is or will be in the long run in very extensive request. We do not try to make a use on any terms within the comparatively narrow limits of our own country; but on the other hand, it is not enough to say "the surplus is thrown out of our circulation, and need no longer concern us," for if a like accumulation takes place in other monetary systems, we shall have

to take our share, even though the only effect may be a depreciation of value indicated by a general rise in nominal prices.

But when we speak of bullion "flowing in or out," we must not forget that this takes one side of the question for granted. When we have to consider fully the necessary conditions of interchange, we must have in view supply and demand on one side brought into connection conversely with demand and supply on the other. A must have corn, and want calico; and B must have calico, and want corn, or there is no chance of their dealing together. If we want such an exchange as this made in the terms of money, we require fourfold instead of twofold correlations; for though when A buys from B the transaction is complete as between themselves, still it is only A who gets some specific thing for his own profit or enjoyment. The money which B receives only enables him to purchase what will best serve his ends whenever he in turn chooses to part with it. Thus, from a more general point of view, the operation is not complete. B, in modern phrase, is on the look out for an investment.

It is a mere truism that men do not give money unless they get something they prefer to have in exchange for it, yet a vast amount of very ingenious writing on such subjects as free trade, international exchanges, and lately especially on the value of silver, totally ignores this simple truth, which therefore I shall proceed very briefly to apply to the present question of the movements of bullion. The fact that any one may send several million pounds worth of silver to India or China and there pass it into the circulation is only half the transaction. The other half is, what can he buy with his money which will serve his purposes? If he wants to get back all his money's worth to Europe he is restricted (1) to the imports which Europe will take, and (2) to the supply of them which these markets will afford to him at a suitable valuation, or (3) he may indirectly compete for the value of what others have bought for transmission to Europe by giving a high price for bills of exchange. This action was very noticeable in India in 1877, when large quantities of bullion were hastily forced upon that country. As a rule, exceptionally large transfers of bullion can only be made when an exceptionally large value of commodities or property are available as returns for it in excess of the ordinary adjustments of trade. Thus, for ten years, from 1856 to 1865, Europe exported an annual average of over £16,000,000 of bullion -£161,000,000 in all, but then the failure of our silk crop and the cotton famine induced Europe to take all the supply they could get of these two staples from Asia at very greatly enhanced prices. If Prince Bismark could have induced another such famine, the German currency operation would have been carried out with the greatest facility. No limit can be assigned to local and temporary perturbations brought about by transactions forced in disregard of

this fundamental condition of exchange; but the free flow of bullion will not the less surely and constantly tend to work out a mean average value, though it may never exactly attain to it.

The stability which gold or silver possesses depends solely on the fact that its exchange value is governed in the long run by a world-wide average of demand, while the supply of both is limited severally by their natural costliness. The supply of artificial money may theoretically be even more strictly regulated by authority, but all experience proves that no government could be trusted with a discretionary power of regulating it, and no local money will be supported by the demand of the world at large.

Without entering at length into the polemics of the silver question, I will briefly allude here to some points bearing upon it. (1.) If the mints of Europe and the United States were opened without limit to both gold and silver, this question of "returns" assumes a very different aspect. The owners receiving legal tender money could at once exchange it for (buy) stocks, shares, landed or other property in these countries, where they no doubt desire to possess them. They would in this case have, at most, to draw out an annual revenue of, perhaps, a twentieth or a thirtieth part only of the original cost, which would not in itself cause any great fluctuation in the rate of exchange or in the moveable commodities on which bills of exchange are based. But the task of ultimately finding appropriate use for this "money" is merely shifted from the mining interest to the State or other banks to whom the surplus not immediately required in the currency would accrue. The ordinary check upon production is this very difficulty of getting returns, or, in other words, of completing in some way the double operation of exchange. It is partially removed by the coinage of one metal without limit. It would be removed to a far greater extent if the mints were open to both, and the metal in the least, general demand at any arbitrary fixed ratio would certainly be sent forward with much urgency.

(2.) Both gold and silver have always been used as money, but the natural causes which govern their relative value have always been beyond any artificial control. A Government may, indeed, by a wise prevision, assume a ratio which the world at large will adopt, and the two metals may then work side by side just as long as the exigencies of world-wide commerce permit, and no longer.

(3.) The acceptance or rejection of either metal from a place which it has previously occupied in any of the large currencies of the world will have a marked effect on its relative value, but this may be shown either negatively or positively. Thus, France and the United States suffered silver to flow out without stint at the time when, as has just been noticed, there was an exceptional demand for it to pay for supplies drawn from Asia. This abundance was certainly not an unmixed advantage. For, though the

relative value of silver, as compared with gold, was little affected, the prices of the staples so urgently required were enhanced to an altogether extravagant degree, with a wide-spread disturbance to general trade which a more limited supply of silver would have tended to mitigate. The effect of the German operation has been positive. Its attempt to force off silver, without regard to the existing conditions of commerce, aggravated the change in its relative value, which was probably in any case inevitable. But while operations which change the metallic currency of a nation will obviously have a great effect on the metals received or rejected, and which place the country making them practically in the position of any other large buyer or seller (who must always raise or depress prices as against himself), it is not to be inferred that such effects can be continuous. Such operations are rather like the artificial draining and filling of large ponds or lakes. There is a great rush and flow of water for the time, but when once they are all filled again, we have only to make up for the waste caused by natural evaporation. The wildest notions prevail about the waste of the precious metals. I have seen it put as high as 2 per cent. per annum. Now there are few harder worked coins than our sovereign. Its original weight is a little over 1231 grains. It is current till reduced to 122. But the average time which it takes to wear away this difference of little more than ths of a grain, worth about 1d., is 18 years; that is per cent. in all, or 3 per cent. per annum. The waste on gold plate is hardly appreciable, and even that on silver is very small. There are, no doubt, other causes of loss, but they will not come to very much more. On the other hand, where prosperity is widely diffused among the industrial classes, a largely increased aggregate of coined money may be held in circulation. But we must look the truth in the face, that any large excess in quantity can only be absorbed by a decrease in relative value; but as this decrease will, in the long run, affect the whole stock of the world, both that in actual circulation and that held in reserve, we need not fear any violent change if only we do not attempt to thwart the operation of natural laws by artificial expedients, the failure of which, when the question is fairly worked out, will be found to be merely a matter of time. Thus far I have referred to gold and silver, which are the money common to all the world. Whatever forms of local currency may be used, these will be the money of international commerce and exchange, as long experience, ending with that of the United States during the late war, has amply demonstrated. But what are we to say of the different substitutes for them which are found in all local currencies? I reply that we must admit to be money all that which actually does the work of money. We can still not the less clearly discriminate between good and bad forms of money, and judge of them according to their fitness to do the

special work required of them. And we shall further see that neither gold nor silver nor any other form can best serve all the purposes of highly organised industry. Money, then, I would still define as that which is practically vested with the most general and absolute purchasing power. It is held for its own sake because of this property. It passes freely from one to another, but is ever a reserve in the hands of the owner which for the time being yields him no increase. It does not properly speaking convey a "right," for a "right" vested in one person implies a corresponding duty in some other person or persons. This applies to property generally, but in no special way to money. No one is under the slightest obligation to take a man's money: that is, to sell to him on any terms, though it may, of course, be the subject of obligations otherwise contracted. Money implies neither interest, rights, nor obligations; but conveys simply a purchasing power freely given and taken by the common consent of mankind.

Taking, then, the money actually used to carry on the work of a great industrial community. (1.) We must have bullion in preference to coin, so far as by this means we can best pay any balance that has to be paid to foreign countries. This balance only arises when the ordinary interchange of commodities leaves a deficiency which cannot be adjusted by any other export, direct or indirect, which promises the least margin of profit. Nothing can be sent more cheaply, i.e., at a less profit, than bullion. We must further, as regards the more advanced countries, include as commodities certain stocks, shares, &c.; that is the "capitalized value" of securities yielding an annual income, and it is easy to see how very ample such means may be as compared with the deficiency arising in any short period. Still these are not always available, and prudence requires that an ultimate reserve should be maintained. Some of our exports of merchandise are habitually paid for in bullion, and some other markets habitually take bullion in payment of imports sent to this country: so far it comes and goes in the ordinary course of Nevertheless, this form of money may be required in the exigencies of foreign trade to prevent an undue strain on any of our markets, and give time for the due adjustment of supply to demand.

commerce.

(2.) Coin is required for obvious reasons of local convenience, but although it is essential to keep it on a par with the bullion required to make it (token coins of course excepted) these two forms are severally best adapted to different purposes.

(3.) Notes are a further adaptation to the wants of the community. They do work which coin could not do with the same facility. When they are directly based on a deposit of gold which can be coined at will, it is hard to determine whether they increase or diminish the use of that metal, for they circulate and get through their extended amount of work very quickly. Legal tender notes