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is universally felt to have money in the same effectual sense as if he had the sum under lock and key. His transfer of that credit by cheque operates as an absolute payment, simply by two lines in the books of the banker. In the words of Colonel Torrens, it "closes transactions."

Bills of Exchange not Money.

It is itself

A bill of exchange never closes a transaction. only the evidence of one or more transactions, all of which are closed then only when the bill is paid by means of coin, notes, or bank transfer, that is to say, in money. Bills of exchange play a most important part' in effecting transfers of mercantile and banking capital, but they do not enter into income the amount of which determines prices. A bill of exchange is not used for wages or salaries, nor paid away to a butcher or a landlord. For the same reason Government securities, however nearly equivalent to money in many cases, and even acting as money amongst the Scotch bankers, who settle balances in exchequer bills, are yet not money in the popular and correct sense of the term. They will neither pay a bill of exchange nor a railway call, and they do not pass into incomes.

Further, with respect to bills of exchange, on those occasions when the light of monetary science is most needed, they not only cannot be considered in the same line with money as means of payment, but must be placed in direct opposition to it. In a crisis, bills of exchange constitute the precise difficulty that has to be met. Gold, notes, and transferable bank. credit, so far as it then exists, are the only means of meeting that difficulty.

Money Capital distinct from Commodities.

Of this aggregate stock of money, a portion is always in

1 See Mr. Newmarch's Paper in the "Journal of the Statistical Society," May, 1851.

the hands of those who intend to use it as income, another portion with those who use it as capital. In the latter case it is money capital. It may pass from one person to another by gift or bequest, but it is usually exchanged for some portion of visible property or personal services. It is wealth, but never to be confounded with the wealth which it commands. Real or specific capital, the capital necessary for production, consists, say the economists, of useful commodities, food, instruments, and materials; but money capital is only a power to procure these, and the two are always, as it were, on opposite sides. But they are two distinct capitals, and both when bequeathed have to pay the tax upon legacies. As soon as the monied capitalist chooses to have his property in the form of food, instruments, and materials for the purpose of production, his money capital is gone; either as capital or as income, it is in the hands of others.

It has been the custom of economists to assume, with some slight attempt at proof, that in a society possessing a currency, the business of exchanges takes place according to exactly the same laws which would prevail in a state of barter. This assumption appears to me to be an error, and to have prevented a true interpretation of many most important phenomena. The conception of money capital existing independently, as a legallyrecognised transferable purchase power, exchangeable for, but never identical with, that specific capital which alone could exist in a state of barter,-as a species of wealth capable of varying in amount, without any corresponding, or perhaps with opposite variations in that visible property which it commands, and, therefore, as having laws of its own,—is a clue without which a correct analysis of our complex and highlydeveloped credit system is utterly impossible.

Monied Capitalists.

In ordinary times great capitalists are estimated by the amount and not by the nature of their possessions; but when

one of those commercial hurricanes to which we are periodically exposed sweeps over the face of society, uprooting establishments of the oldest growth, and hurrying the fairest creations of human industry in ruin before it, who are then the strong men to stand unbowed beneath the storm? Not the man for whom thousands are working in a distant tropical plantation, and whose estates would outvalue many a principality; still less the manufacturer with his costly machinery, his warehouse full of goods, and his organized corps of labourers, whom it seems equal ruin to retain or to disperse. Not even the farmer is to be envied, with his barns and granaries filled to bursting, when rent, and taxes, and wages, are to go out, whilst, with the slack demand of an unemployed people, his market is falling away. While these possessors of the most valuable wealth are paralyzed and trembling, the men whose dominion is supreme are they who own neither plantations, nor factories, nor farms, nor ships, nor merchandise, but who, in dingy counting-houses, have a strong box full of short-dated bills of exchange, whose names are familiar words in the Transfer Office, and who can deliver the proudest from the jaws of ruin by a leaf from their chequebook. These are the men who, according to the great thought of De Quincy, have but to touch a spring in London, to produce a vibration throughout the world, to quicken or arrest the march of armies, to frustrate the ambition of kings and statesmen, or to perform the nobler exploits of modern civilization, those great ocean canals and railways which bind together the families of men.

The property which is the special possession of these potentates, who, whether in London, Paris, Frankfort, Berlin, Vienna, or New York, are all one body, closely knit together and mighty in their union-a true aristocracy and priesthood, commanding obedience is of a nature far too complex to be divested of its mystery by illustrations drawn from a state of barter.

Change from Barter to a Currency.

In an act of barter, each of the two parties makes both a sale and a purchase. Each, in parting with what he brings, acquires a power of purchase, which, however, is at the same instant extinguished by his receiving an equivalent. The introduction of a currency, or "medial commodity," divides the act of barter into two parts1. Thenceforth the seller exchanges his goods for a purchase power, which he can reserve and exercise, at his own time and with a different party. The essence of a "medial commodity" is, that it is taken not for its own sake, but because it gives this power. If it were not a commodity, it would not have become medial; but when the medial function is once well established, it becomes capable of existing by itself. The commodity drops, as it were, first out of sight, and then out of existence, leaving behind it the function, not as a shadow, but as a substantial addition to actual things. This, however, requires further explanation.

In history, there is no example, I believe, of the transition from a state of barter to the use of a currency. Every existing currency has flowed down to us out of that cloud which envelops the origin of nations. A currency being, in the happy phrase of Mr. Bailey, a medial commodity, it is natural to suppose that that commodity which was best known, which it cost nearly equal sacrifices to obtain, and which was itself often the subject of exchange, would become a familiar standard of comparison for settling exchanges, and then a generally acceptable substitute, where a seller wished to reserve the power of purchase accruing to him from the sale, for a future occasion. Thus cattle were used in the Homeric ages, tobacco amongst the early Virginian planters, salt still in Abyssinia, tea in Tartary.

A metallic currency was an immense step in civilization. In a country without mines such a currency must have been made

Essays on Unsettled Questions of Political Economy, by J. S. Mill.

piecemeal. Gold was obtained in exchange for domestic products. Each portion was a substitute for a portion of useful articles sent away. Coming to be used as a currency, its estimation as an ornament would soon be altogether lost in its estimation as a means of obtaining other things; strictly speaking, at this point its intrinsic worth becomes merged in that worth which is ideal or conventional. It practically ceases to be a commodity for use or consumption, except in an inferior degree; but it comes to be coveted more than any, nay sometimes more than all, commodities, for that peculiarity with which the consent of men invests it, namely, its assured power or command over goods and labour. This currency has been bought, as has been said, from foreigners, by a succession of private efforts, each individual thinking the convenience of the portion which he holds worth the abstinence from immediate consumption which his holding it involves. As the gold passes from hand to hand, the position of each successive holder becomes similar to the last: he has given something away, and received not so much an equivalent as the power of taking one when and where he likes best. The currency being obtained, the community, as a whole, has paid away a full equivalent for it out of the produce of its labour; but it has acquired an instrument of singular power in quickening industry, and developing not only material but moral resources. By a law of the human mind, we come in time to prize any habitual instrument of gratification, beyond the gratification itself. By early and multiplied associations, gold becomes attractive and stimulating to common minds, more than the things which it commands, and thus is instrumental in infusing a new energy into industry. So far its essential character appears to be that of a universal equivalent: a power of purchasing whatever is desired, the exercise of which effects a payment as well as a purchase.

Threefold Aggregate of Money.

The sum total of the medial commodity would be the money

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