tive in the case of the substituted medium of exchange. The Bank of England, by occasionally disregarding a principle which they have always professed to reject, have given us opportunities of testing this theory, both with reference to a paper money, exchangeable at pleasure for gold, and to an inconvertible currency.

"By issuing," says Adam Smith, "too great a quantity of paper, of which the excess was continually returning, in order to be exchanged for gold and silver, the Bank of England was, for many years together, obliged to coin gold to the extent of between eight hundred thousand and a million a year." The bank "was frequently obliged to purchase gold bullion at the high price of four pounds an ounce, losing in this manner between two and a half and three per cent. upon the coinage of so very large a sum.” The consequence of an over-issue is the degradation of money as compared with bullion, and as this may be immediately procured, when the paper is convertible into specie, the effect is an exportation of bullion, and the bank is soon obliged to diminish its accommodations in order to avoid the danger of a continued drain of the metallic capital. This was particularly illustrated in the transactions of the last year. The change, from a state of war to that of universal peace, had left considerable capital to seek investment. This had a temporary effect on the market rate of interest-merchants could obtain accommodations from individuals on more favourable terms than those on which the bank was accustomed to discount. The Bank of England was induced to loan to landed proprietors, on mortgage, two millions of what had formerly contributed to supply the circulating capital of commerce-large amounts were remitted by capitalists, as loans to Greece and the states of South America -permanent improvements at home were carried into effectand joint stock companies of all descriptions were projected, and the capital of England scattered throughout every part of the globe. These circumstances, added to the incitement given to commerce in consequence of the independence of the Spanish American states, created a scarcity in the money market, and the bank was again called on for discounts. Anxious to avail themselves of the opportunity of profitably investing their means, the directors, proceeding on the principle that they might discount to any extent the paper of solvent

* We observed in one of our papers, a few months since, a list of foreign stocks, South American, Danish, Austrian, Greek, &c. raised in England during the preceding three years to the amount of £47,815,000. This did not include investments in the funds of France and the United States.

borrowers, extended their accommodations to such a degree as to degrade the currency below bullion. The exportation of gold in 1824 was 1,134,407 ounces, while in 1821 it was less than fourteen thousand ounces. The exportation of silver was also doubled between the two periods. The value of gold and silver sent out of England during the last year, is stated at £6,500,000; and as the direction of the export shows that no import of any extent was going on at the same time, it is clear that the egress of the metals is imputable to the depreciation of the currency, caused by the excessive issue of paper.

So connected are the money operations of the world, that it is impossible that any sensible alteration can take place in the price of money in one country, without its effects extending to every other part of the civilized world. A capitalist would rather make investments at home, but his preference has a limit. If greater profits, after calculating the increased risk and difficulty of recalling the principal, can be gained by sending capital abroad, it will leave the country. Between the money markets of this country and England, there is more than the ordinary relation. The recent rise in the interest of money in Great Britain, has produced correspondent effects in the United States. Besides, causes similar to those which have influenced the price of money in England, have been operative here. The rage for joint stock companies in our own country has been equal to that which has recently characterized the British metropolis. Institutions that never would have existed, but for the supposed advantages conferred by an act of incorporation, have converted a much larger portion of circulating capital into permanent and fixed investments, than would, uninfluenced by legislative enactments, have sought those channels. Canals and other public improvements in various parts of the union have absorbed much of the trading capital. The repayment of the war-loan, a large portion of which is held by foreigners, has also a tendency to draw the circulating capital from the country, and thus to produce a temporary rise in the market rate of money. That these increased demands for money have been attended with a rise of interest, is one of the strongest arguments in favour of the sound state of our currency. Had the banks issued their paper to all solvent applicants, to the extent of the augmented demand, the currency would have been degraded, and the exportation of specie, with the forced curtailments consequent thereon, must have taken place. The issues of our banks, it is true, as we shall hereafter show, can never be excessive, without such a combination as we can scarcely suppose possible. This fact, however, goes to

corroborate our opinion with regard to the principles which regulate the currency.

To the degradation of the inconvertible paper of the Bank of England, we have already referred. That the depreciation was in proportion to the excessive issues is proved, not only by a reference to the price of bullion in bank notes, but by the state of the exchange between England and other countries. The emission of notes by the Bank of Ireland was more inordinate than the issues of the Bank of England, after the suspension of specie payments, and the depreciation was proportionate to the excess.

"The nominal value of the Irish shillings having been raised from 12d. to 13d. or which is the same thing, £108 6 8 of Irish money having been rendered only equal to £100 of British money, it follows, that when the exchange between Great Britain and Ireland is at 8 1-3 per cent. against the latter, it is said to be at par. In the eight years previous to 1797, when the paper currency, both of England and Ireland, was convertible into gold, the exchange between London and Dublin fluctuated from 7 1-2 to 9 per cent.-that is, from 5 6 per cent in favour of Dublin, to 2-3 per cent against it. In September, 1797, it was so low as 6 per cent. or 2 1-3 per cent. in favour of Dublin. The amount of the notes of the Bank of Ireland in circulation in January, 1797, was only £621,917; but in April 1801, they had increased to £2, 286, 471, and the exchange was then at 14 per cent. or 5 2-3 per cent. against Dublin. In 1803, the Bank of Ireland notes in circulation averaged £2,707,956, and in October of that year the exchange rose to 17 per cent., that is, to 8 2-3 per cent. against Dublin."-(Supplement, &c. Exchange.)

In consequence of specie continuing the currency in the north of Ireland, in December, 1803, when the exchange of Dublin on London was at 161 per cent, that of Belfast on London was at 51, that is, when the exchange between Dublin and London was 8 per cent. against Ireland, the exchange between Belfast, which had a gold, and consequently a limited currency, was 3 per cent. in its favour.

At the time of the suspension of specie payments in the United States, the banks in the city of New-York came under an obligation not to extend the amount of their circulation. The different institutions served as checks upon one another, and the money of this part of our country, though degraded be low specie, was far from suffering the depreciation of the South and West.

When the bank of the United States went into operation, branches were established in several states, whose currency did not sustain an equality with gold and silver. In some of the western states, the depreciation of the local currency exceeded fifty per cent. In those parts of the union, few efforts were made to raise the value of the paper by diminishing its quantity. The notes issued by the national

bank were every where received in payment of duties and taxes to the government, without reference to the place of emission, and were redeemed in specie at the bank, or any of its branches. "Drafts were given without limit on the parent bank and northern offices by the western offices, at par or at a premium merely nominal." The national bank laboured under the disadvantage, not only of issuing notes at a time when the currency, in the specie paying districts, exceeded the coin which would have circulated, and of being, therefore, constantly called on for gold and silver; but they sustained the still greater inconvenience of circulating notes, payable at pleasure in gold or silver, at places where a large portion of the medium of exchange was composed of inconvertible paper. The consequence of this was, that the notes issued in the western states, were immediately returned to the offices on the sea-board, and specie was rapidly drawn from the bank. In speaking of the operations of this period, the late President, Mr. Cheves, observes, "the result was, that the bank and the great northern offices were drained of their capital, and on 20th July, 1818, only eighteen months after the institution began its operations, it was obliged to commence a rapid and heavy curtailment of the business of the bank." Though the bank enjoyed a government deposit of eight millions-though specie had been imported at an expense exceeding half a million of dollars--though curtailments were made to upwards of $3,600,000 between 30th July, 1818, and 1st April, 1819-though the bank sold between two and three millions of its public debt, and in various ways obtained the command of disposable means, by reductions of its productive capital, within eight months, of upwards of eight millions of dollars, yet, it was with the most extreme difficulty that the bank avoided the suspension of specie payments, an event generally anticipated at the period that Mr. Cheves assumed the chief place in the administration of that institution.

Most of the remarks, in reference to the debasement of the coin, are applicable to a depreciation of paper money arising from excessive issues. When the standard is not debased, and paper is convertible, at pleasure, into gold and silver, the interest of the bankers will generally prevent its fluctuations exceeding two or three per cent., and these variations will necessarily be of short duration.

The depreciation of inconvertible paper, on the other hand, has no assignable limit. In consequence of its variations in value, a creditor may be compelled to accept a hundredth part of his debt; or, if the fluctuation has been of an opposite charac

ter, a hundred times more value may be exacted from the debtor, than he ever received or expected to pay. The appreciation of Bank of England notes in 1815 and 1816, which, during the suspension of specie payments, were, to all intents, the legal currency of the country, was thus accounted for by Mr. Horner, in the House of Commons:

"He was convinced," he said, "that a greater and more sudden reduction of the circulating medium had never taken place in any country, than had taken place since the peace in this country, with the exception of those reductions which had happened in France, after the Mississippi scheme, and after the destruction of the assignats. The reduction of the currency had originated in the previous fall of the prices of agricultural produce. The fall had produced a destruction of country-bank paper, to an extent which would not have been thought possible, without more ruin than had actually ensued. The Bank of England had also reduced its issues. As appeared by the accounts recently presented, the average amount of its currency was not, during the last year, (1815-1816) more than between twenty-five and twenty-six millions; while two years ago, it had been nearer twenty-nine millions, and at one time even amounted to thirty-one millions. But without looking to the diminution of Bank of England paper, the reduction of the country paper was enough to account for the fall which had taken place."

In accordance with the principles which we have attempted to develope, Mr. Ricardo showed that it was not necessary that paper money, to retain its specie value and be free from all fluctuations not incident to the standard itself, should be exchangeable for coined money. Mr. Ricardo's plan consisted in subjecting the bank to the delivery of uncoined gold or silver, at the mint standard and price, in exchange for their notes, instead of the delivery of guineas; by which means paper would never fall below the value of bullion, without being followed by a restriction of its quantity. To prevent the rise of paper above the value of bullion, the bank should be also obliged to give their paper in exchange for standard gold, at the price of £3 17s. an ounce." £3 17s. 10 d. of paper, is the rate at which it was proposed that an ounce of gold might be demanded. The expense of the coinage, and the wear of the metal, which amounts to a large annual sum, would be in a great measure saved, while the amount of specie necessary to

*The failure of the English country banks, ninety-two of which stopped payment in the space of three years, is here ascribed to the true cause. We refer particularly to this circumstance, as the unfortunate fate of unincorporated banks in England was, last winter, used at Albany, as an argument to uphold our restrictions on private banking, and to continue a system, which, while it contravenes the privilege of every citizen to engagein the business best adapted to his interest, has tended, in a pre-eminent degree, to corrupt the morals of the people, and to degrade the character of the state.