the affirmative side of the question: indeed, there are, at the present time, few, if any, who doubt that deposits are currency. The New-York Board of Currency has given its verdict unequivocally as follows: "They constitute at this time five-sixths of the active currency of this city." See the official report of that association for November, 1858. No array of authorities, however, but an examination of facts, should determine the question.

Deposits are an instrumentality by which by far the greatest amount of values are transferred in commercial centres. They discharge debts, purchase commodities, and perform all the functions of currency.

For example, A has a deposit in the Merchants' Bank. He purchases of B a bill of sugars, amounting to ten thousand dollars, and pays for the same with a check on that bank, with which B either draws the notes or specie of the bank, or has the check passed to his credit by the bank. This transaction has been equivalent to the transfer of ten thousand dollars in value from one party to the other.

If A owed B a note of ten thousand dollars, he might pay it in the same way.

Now, what difference did it make to A whether he had ten thousand dollars of bank-notes in his till, or an equal amount to his credit in the bank? Clearly, not the slightest. One was as truly currency as the other. If A was pondering the question whether he should purchase the sugar for cash (i.e., immediate payment), did not the consciousness that he had ten thousand dollars to his credit in bank operate on his decision precisely to the same extent as if he had ten thousand dollars of bank-notes in his pocket-book? Undoubtedly. Where, then, is the dif ference? And, if all this would be true in the case of A, then in the case of any one similarly situated; and therefore we must conclude, that deposits are, in their nature and influence, of the same character as bank-notes, and, of course, are currency.

All bankers and business men are well satisfied that deposits are even more active by far in transferring values than the bank circulation; that a much greater number of exchanges is made with deposits than with an equal amount of bank-notes.

A little reflection will satisfy any one that such is the fact. The sum of ten thousand dollars, for example, might easily pay in a single day, in ten different transfers by checks, a total of one hundred thousand dollars.

This would not be an extravagant supposition; but it would be quite improbable that bank-notes make ten payments in a single day.

The efficiency of money, or its substitutes, depends greatly upon the rapidity with which exchanges are made. John Stuart Mill recognizes this principle; and it is a very obvious one. It is on that principle that we see the propriety of admitting, that, although the active deposits in bank may be less than its notes, yet the greater rapidity with which they are used makes the whole amount equivalent in their effects to an equal amount of bank-notes.

The currency of any country is as its quantity multiplied by the rapidity of its circulation. This consideration will lead us to regard the whole amount of deposits as equal in effect to an equal amount of circulation.

STOCKS AS IMMEDIATE RESOURCES.

Here it may be proper to explain why we have not placed the item of "stocks" held by the banks amongst their immediate resources. Many persons seem disposed to regard them as such. But, so far as the quality and character of the currency are concerned, the stocks held by the banks do not essentially differ from any other securities. Suppose a severe pressure for specie comes on, what can they do with them? Force the sale, and realize the money for them? This cannot be done, of course, at such a

time, except at a great sacrifice; besides, if they do this, what will the banks receive for the stocks sold? Their own notes and deposits. There is nothing else in which the stocks can be paid for. But if, after having received their notes in this way, they refuse again to loan them, they contract the currency by so much, and increase the pecuniary distress by all that amount; if they do reloan the notes, they have gained no relief to themselves by the operation. The great object desired is to relieve the pressure for money: the sale of the stocks will have the opposite effect. Hence they cannot be regarded as the

immediate resources.

MIXED CURRENCY.

CHAPTER VI.

FLUCTUATIONS IN QUANTITY AND QUALITY.

We have explained the organization of mixed-currency institutions, the character of their operations, the quality and form of their issues. We pass now to consider this currency in its several relations to the public wealth. Such an inquiry will demand great carefulness and impartiality, and must necessarily be made in detail.

We have two grand questions which arise naturally at the start:

1st, Does it perform satisfactorily the functions of money? If we answer this inquiry favorably, we have still to ask,

2d, What, and how great, are its effects on public interests, beyond the proper effects of value currency?

These questions are so full of interest to all the departments of wealth, are so deeply obscured by prejudice and misapprehension, and are so especially important at the present time, that their discussion will be protracted through several chapters.

1st, DOES A MIXED CURRENCY SATISFACTORILY PERFORM THE FUNCTIONS OF MONEY?

Those functions are as already stated,

to act as a me

dium of exchange, and to be a standard of value.

no.

Does a mixed currency perform them well? We answer,

The essential quality of such a currency, which unfits it to act well as either a standard of value or a medium of exchange, is this:

IT IS NOT GOVERNED BY THE LAWS OF VALUE.

It is subject to quite other laws. It varies as to its volume and character; but we do not find that it does this out of respect for value. The great principle of value is, demand creates supply; supply satisfies demand. They are measured against each other, and are found equal. There is no supply which demand does not call for: there is no supply which is not enough for demand. And the reason for this perfect equality is that value cannot exist without labor. The same cause that increases supply, expands demand to the same proportions: the same cause that restricts supply, reduces demand correspondingly.

A mixed currency is not regulated in this way. In so far as it has not value, it is not controlled by the laws of value.

It is put out or taken in by bank managers at their pleasure, and for their profit. It is not produced by labor. This last fact removes the gravitation which alone can secure a currency. It makes it a thing to be blown about by every breeze, carried up or carried down with the currents, or whirled around in the eddies of trade. It should be stable, and not sport for the winds. There should be a reason for the putting-out or taking-in of every dollar of money; and that reason should be found in the laws of value.

Now, this law controls the expansion or contraction of money, or a value currency. If it is increased, as it may be in the natural course of commercial transactions, it is because actual money has been brought into the country by the balance of trade; but a mixed currency is increased by the voluntary and interested action of bank managers, without regard to the laws of value, and without the addition of a dollar to the real money, or wealth, of the country. The increase of money by importation takes place in obedience to causes that are gradual and appreciable; and any one who watches the course of commerce can anticipate its arrival. If it comes in excess, from any unusual source, it easily and naturally passes off to other countries, till the balance is restored. Real money is like the water of the globe, rising and falling by natural laws, and keeping its level by its own mobility. If a redundance exists in one spot, there is, for that reason, a deficiency somewhere else. Where it is, it is less valued; where it is not, it is the more desired; and the equilibrium is soon restored. No artificial appliances or legal enactments are needed to keep true money at a level the world over.

We have found that the quantity of a mixed currency is not governed by the laws of value. Do we, then, find that it is controlled by accident? It would be better so, for there would be more chances of its coming right. But, on the contrary, we find laws positively mischievous substituted for the wholesome operation of supply and demand.

issued of a

The supply Like an un

Firstly, Of expansion. The more that is mixed currency, the more will be wanted. does not satisfy the demand: it excites it. natural stimulus taken into the human system, it creates an increasing desire for more; and the more it is gratified, the more insatiable are its cravings.

There are two reasons for this: one, that, as the currency is expanded, prices are raised correspondingly, and more