party consenting to accept a debt due from another person in full discharge of the debt due to himself.

96. Mr. Herries-"Is not that a very common proceeding in trade?—I am not aware of that. If I am asked whether parties accept Bills of Exchange for debts, that is a fact, but whether they accept them in full discharge of a debt contracted, I am not

aware.

97. Mr. Gisborne-"Do you consider a £10 note of a country bank, a joint stock bank, to rank under Currency, or to rank under Bills of Exchange?-Under Currency.

98. Mr. Grote "Suppose there was a seven-day post bill issued by a banker, would you consider that a part of the Currency?—No.

99. Mr. Labouchere-" Suppose it was a seven-day post bill issued by the Bank of England?-No, not until discharged.

100. Mr. O'Connell "A cheque on the Bank is Currency in London, is it not?-It performs the function of Currency; it is a transfer of Currency from one to another.

118. Mr. Wood-" Will you define what you mean as constituting the entire Currency of the country?-I should define Currency to be gold and silver, or the promises of bankers to pay on demand, which either constitute a legal tender, or which the public are willing to accept in lieu of coin in discharge of debts. I consider the Currency in this country to consist first of coin in circulation; secondly, of Bank of England notes issued against bullion, and of Bank of England notes issued against securities; thirdly, of deposits in the Bank of England, payable on demand, the same as bank notes; fourthly, of notes issued by the country banks; and fifthly, of deposits in country banks in their own notes, which are of the same character as deposits in the Bank of England."

As to the meaning of deposits, and the general confusion as to the way in which they arise, we may refer to the exposition of the Mechanism of Banking given in a former chapter. The witness was further examined at immense length, but the above gives the substance of his opinions.

11. Mr. COBDEN was of opinion that no inflation of the Currency would arise from Bills of Exchange, provided the

money of the country were not previously inflated. There is a great distinction between a Bill of Exchange and a bank note. A Bill of Exchange follows the trading transaction, and is merely a voucher for the transaction, in the shape of a transfer of the debt, or an acknowledgment of the debt; but a bank note put into circulation either in the purchase of public securities or in a loan, or in any other way, goes to the artificial creation of commercial transactions, and is not itself necessarily originated by the transaction. Bills of Exchange can multiply only in proportion to commercial transactions, provided the Currency be kept as a metallic currency.

Mr. Cobden said that, with a metallic Currency, there would be no risk of any great extent of accommodation bills; an opinion which we think is scarcely warranted by the reality.

572. Mr. Smith—"Inasmuch as Bills of Exchange are used at Manchester as an instrument of exchange, do they not form part of the Currency?-No; I have defined Currency to be money. I cannot call a Bill of Exchange money. It is a promise to pay money at a certain time, and it is a security only for a certain time, after which all securities are forfeited."

Mr. W. R. WARD (674) considered Currency to be coined gold. silver, and copper, and notes payable on demand, issued by the Bank of England and country banks.

Mr. RICHARD PAGE understood Currency to mean the current money of a country, in which debts are discharged and commodities purchased and sold, and consisting of Bank of England notes and gold and silver. Country bank notes he considered only to be money by courtesy. He included deposits in the Bank of England; but, as he gave to the word "deposit" an inaccurate meaning, we do not know what he would have done if he had understood the real meaning.

12. Mr. GEORGE WARDE NORMAN, a Director of the Bank of England, was asked:

1691. "Are there any grounds for considering the deposits of the Bank of England as Currency?—No, I think not.

1692. "Do you consider that any deposits, merely in their character of deposits, can be considered as Currency?—No, I do not.

1693. "Will you state what, in your opinion, forms the

distinction between Currency and deposits?-I consider that, looking broadly at deposits and Currency, they are quite distinct; they have little to do with each other. But I conceive that the use of deposits is one of the banking expedients, which is available for economising Currency, along with a great many others. I do not consider them as Currency or money. I ought to observe, perhaps, to the Committee, that I employ the words 'money' and and currency' as synonymous. Deposits are used by means of transfers made in the books of bankers; and these afford the means of adjusting and settling transactions, and pro tanto dispense with a certain quantity of money; or they may be set off against each other, from one banker to another, to a certain extent, and thus produce the same effect. Still they possess the essential qualities of money in a very low degree.

1694. "Do you entertain a similar opinion as to Bills of Exchange?—Yes, exactly; I think they are also used to economise Currency. I look upon them as banking expedients for that purpose; but they do not possess fully the qualities which I consider money to possess.

1695. "Will you explain the difference between the functions which money will perform and those which Bills of Exchange or deposits will perform?-To answer that question fully, one must, I am afraid, take rather a wide view; but I look upon it that the three most essential qualities money should possess are, that it should be in universal demand by everybody, in all times and all places; that it should possess fixed value; and that it should be a perfect numerator. There are other qualities; but I think these are the most essential. Now, when I look at all banking expedients, I find they do not possess these qualities fully. They possess them in a very low degree; and, therefore, as we see took place in the autumn of 1835, with a very large increase of the deposits of the Bank, the circulation diminished, and there are every appearance of the effects of contraction: there was an increased influx of treasure; and I conceive from that there were lower prices. By a numerator I mean that which measures the value of other commodities with the greatest possible facility. If we look at all these banking expedients, we see that they possess the three qualities which I have mentioned in a very much lower degree.

1696. "Will you state in what respect?-I can only take them one by one. A Bill of Exchange is an instrument commonly payable at some future time, at a certain place, and to some particular individual; it is of no use to any other individual, except it is indorsed to him. A man cannot go into a shop with a Bill of Exchange and buy what he wants; he could not pay his labourers with a Bill of Exchange. The same with a banker's deposit, he can do nothing of that sort with that; he can do with less money than he would otherwise employ, if he has Bills of Exchange, or bankers' deposits; but he cannot, with Bills of Exchange or bankers' deposits, do whatever he could. with sovereigns and shillings. By a banker's deposit, I mean a credit in a banker's books; nothing more nor less than that."

13. Mr. SAMUEL JONES LOYD, now Lord OVERSTONE, was asked:

2655. "What is it that you include in the term circulation ?— I include in the term circulation, metallic coin, and paper notes promising to pay the metallic coin to bearer on demand.

2661. "In your definition, then, of the word circulation, you do not include deposits?-No, I do not.

2662. "Do you include Bills of Exchange?—No, I do

not.

2663. "Why do you not include deposits in your definition of circulation?-To answer that question, I believe I must be allowed to revert to first principles. The precious metals are distributed to the different countries of the world by the operation of particular laws, which have been investigated and are now well recognised. These laws allot to each country a certain portion of the precious metals, which, while other things remain unchanged, remains itself unchanged. The precious metals, converted into coin, constitute the money of each country. That coin circulates sometimes in kind; but, in highly advanced countries, it is represented to a certain extent by paper notes, promising to pay the coin to bearer on demand; these notes being of such a nature in principle that the increase of them supplants coin to an equal amount. Where those notes are in use, the metallic coin, together with those notes, constitute the money or Currency of that country. Now, this money is marked

by certain distinguishing characteristics; first of all, that its amount is determined by the laws which apportion the precious metals to the different countries of the world; secondly, that it is in every country the common measure of the value of all other commodities, the standard, by reference to which the value of every other commodity is ascertained, and every contract fulfilled; and, thirdly, it becomes the common medium of exchange for the adjustment of all transactions equally at all times, between all persons, and in all places. It has, further, the quality of discharging these functions in endless succession. Now, I conceive that neither deposits nor Bills of Exchange, in any way whatever, possess these qualities. In the first place, the amount of them is not determined by the laws which determine the amount of the precious metals in each country; in the second place, they will in no respect serve as a common measure of value, or a standard, by reference to which we can measure the relative value of all other commodities; and, in the next place, they do not possess that power of universal exchangeability which belongs to the money of the country.

2664. "Why do you not include Bills of Exchange in circulation?-I exclude Bills of Exchange for precisely the same reasons that I have stated in my former answer for excluding deposits. There is another passage in the same report which appears to me to shew very clearly that the French Chamber have fully appreciated the distinction between Bills of Exchange and money-Every written obligation to pay a sum due may become a sign of the money: the sign has acquired some of the advantages of circulating money; because, like bills of exchange, it may be transmitted by the easy and prompt method of indorsement. But what obstacles there are! It does not represent at every instant to its holder the sum inscribed on it; it can only be paid at a distant time: to realise it at once, it must be parted with. If one finds any one sufficiently trustful to accept it, it can only be transferred by guaranteeing it by indorsement. It is an eventful obligation which one contracts one self, and under the weight of which, until it is paid, one's credit suffers. One is not always disposed to reveal the nature of one's business by the signatures one puts in circulation. These inconveniences led people to find out a sign of money still more active and more convenient, which shares, like the Bill of Exchange, the qualities of metallic