actual values, to the negotiation and collection of notes and bills of exchange, and to the reception and transfer of money, they performed an immense service to the world.

But when they undertook, not only to loan money, but to make it, to issue credit in the form of notes promising value, their character was changed.

The Bank of Hamburg, which has existed since 1619, never promised a dollar which it did not hold in its vaults. It never expanded the currency, and therefore never had occasion to contract it. It has never suspended specie payments for an hour,* and, while so conducted, never will. It has created no panic, and has in no way disturbed the business of the city. It has conferred incalculable benefits on European commerce, while contributing steadily to the growth and prosperity of Hamburg.

Confining itself to the loan of its capital and of money actually left on deposit, to the transfer of surplus funds, and to the negotiation of commercial paper, a bank can, if honestly and ably conducted, make good dividends, and perform valuable services for the community, and furnish the public with all the notes their convenience and that of the banks require.

Fallacy 7th. That a mixed currency can be effectually regulated by law.

Many of the mischiefs arising from a mixed currency are so obvious that all persons desire their removal, and naturally resort to legal enactments for that purpose. The statute-books of every State in the American Union contain laws for the regulation of mixed-currency banks. Commissioners have been appointed in many States, and a Bureau of Currency established. Ingenuity has been burdened to devise regulations by which these evils may be removed or modified, with what success?

There is but one defect in a mixed currency; and that is, it wants the element of value. There is no sufficient rem

* Various reports in 1857 to the contrary notwithstanding

edy, but to supply this, by providing that banks shall issue no promises of their own for which they have not in possession the actual values they promise. But this would be to change the whole system, to make the currency mercantile, and to cut off all the profits arising from the issue of bank debt as currency. The only complete remedy, then, is restoration; that is, a return to the original design and purpose of banking.

Fallacy 8th. That it is for the interest of the public, that the banks, in times of panic or stringency, should be enabled to "stave off" suspension.

On the contrary, this can be obviated only to the misfortune of the business community. A severe pressure for money, as in the United States in 1847, 1851, and 1854, is experienced, and yet the banks do not suspend. But how do they avoid it? By throwing the strain upon the mercantile and business community. This they can always do to a limited extent, and thus maintain their own credit; but it is done at an enormous amount of embarrassment and loss to all engaged in business affairs.

The banks may not only escape damage, but may even profit very much by a pressure, if it does not come to be a panic; for it greatly enhances the rate of interest. The rate of interest in the Bank of England, from 1848 to 1856, did not average three and a half per cent. In 1857, when there was a severe pressure, the bank was able to obtain ten per cent. It had a harvest of profit.

The banks of the United States had a similar opportunity in 1847, when the price of money "in the street" (for we have no means of knowing what it was on an average in bank) was up to eighteen per cent; in 1851, when it went up to sixteen; and in 1854, when it rose to eighteen. In all these cases, the banks profited by the distress they had themselves created; but, in 1857, the pressure became overwhelming, and, after having run the street rate up to three per cent per month, they suspended payment.

If it were necessary, we might multiply instances from the history of the mixed currency of the United States and England of the same kind. A semi-revulsion is sure to take place, under such a currency, every three or four years, and a general break-down once in about nine or ten.

The greater strength of the British banks, together with the temporary suspension of the Bank Act of 1844, enables the Bank of England to throw the sacrifices incident to a great pressure more entirely upon the public than can be done in this country. Indeed, since the law of 1844 just referred to, the bank has increased its average rate of interest, as we have seen, very much.

Practically, mixed-currency banks expand as often and as much as possible; and, when the re-action comes, hold on to specie payments and a high rate of interest, until the bankruptcy of their debtors begins to be so alarming as to endanger their own securities.

They then suspend, allow their debtors to pay up in the notes they cannot redeem in specie, and thus settle the indebtedness of themselves and the public. There is no plan or design to do this; but such is the natural result, and, on the whole, a highly satisfactory one to the banking interest.

Fallacy 9th. That, whatever the effect upon other classes, bank stockholders at least are made richer by an expansion of the currency.

That this is not universally true will appear on examination.

An expansion of the currency raises prices: that we take to be indisputable. If so, the stockholder may be made richer or poorer by the cause that increases his bank dividends.

For example: suppose he has an income from various

In consequence of an increase of circulation by the banks, he gets an increase of $500, equal to fifty per cent on his bank dividends, making his whole income $6,500. But prices and commodities have advanced twenty-five per cent in consequence of the inflation. What he would have bought before for $6,000, now costs him $7,500. The result, then, is, that the bank stockholder has gained $500 in his dividends, and lost $1,500 in his purchases; so that he is actually $1,000 poorer, reckoning the real satisfactions or commodities, &c., which he obtains from his income.

There is nothing fictitious in this statement. The natural and certain operation of an inflation of currency affects in just this way all who hold bank stocks, but have the main part of their income from other sources. But we can suppose a case in which the stockholder would gain by expansion.

For example: he has an income from bank stock of

$4,000

Now, by expansion, his dividends are increased fifty per cent, as before; and his income stands:

Prices have advanced, as before, twenty-five per cent, so that what he could have bought for $5,000, now costs him $6,250; but, since his income has increased to $7,000, he is a gainer by $750.

These two cases present, it is believed, a fair illustration of the effects of an increase of dividends upon bank stocks occasioned by an inflation of the currency. It is seen, that, if a man's income is derived mainly from such sources, he may gain by an increase of his dividends, notwithstanding the rise in price. But few persons are so situated. Nearly

all capitalists have a variety of investments, bank stock being only one of them; so that, to the great mass of stockholders even, the gain by increased dividends is more than counterbalanced by the loss from enhanced prices. Who gains by fictitious currency?

But it may be asked, if stockholders do not gain by bank expansions, who does? There is an increase of dividends: who gets the advantage?

This inquiry brings us face to face with one of the prime mysteries of currency, and, indeed, of political economy. "Who gains by fictitious currency?" Before answering this, we will ask, WHAT is gained by a currency not consisting of actual value? We answer, nothing but price. Prices are changed by it. Values are not created: they remain the same. By the change in the standard or measure from a value to a mixed currency, prices no longer accurately determine values. Prices are increased. Those who hold commodities while prices are advancing, gain by such an advance. Debtors may discharge their obligations with less value. Speculators may make favorable operations. The value of every commodity has been interfered with; the integrity of every contract to pay value has been impaired. Some are constantly gaining; others, losing: both parties, it may be, unconscious of the cause of such prosperity or adversity. "Times" are said to be good or bad, as men gain without earning, or lose without a fault. Here we have the answers of the questions, gained by a mixed currency? Who gains by it?

What is

Such is the "consummation" of mixed currency. "It is a grand system of insidious swindling." So said "Hardcastle" (who was no other than Mr. Page of the Bank of England) forty years ago; and what that shrewd observer then discovered is apparent now to all who enter into a full examination of the subject.*

* Richard Cobden repeated this remark of Mr. Page to the author at Manchester, more than twenty years since, with his emphatic approval.