worth fo many pounds weight of gold or filver. Thus the matter ftands in regard to contiguous places and times. With refpect to very diftant times, the difficulty, is much greater; and there is no ftandard of comparison which enables us to do more than approxi mate to accuracy. It is evident that money, or gold and filver, changing its value remarkably in diftant times, is altogether unfit for this purpose. Corn, though it varies greatly in value from year to year, Dr Smith thinks, continues more nearly on a level, through long tracts of years, in its power of commanding the objects ufeful and agreeable to man, than any other commodity; and he is probably right; but still, the varieties to which it is fubject render it a very inaccurate medium of comparison. It thus appears, that in the fenfe in which writers ufually conceive it, there is no standard or measure of value; that gold and filver afford a standard of comparison, which may be metaphorically denominated a measure, accurate enough for the common business of life within a moderate diftance of time and place; but that, for times very remote, we have no measure or ftandard of comparison which affords us more than the means of approximation.

2. As, from the difcuffion which precedes, the nature of coine fufficiently appears, and as the notion of Mr Smith, that they are only fymbols of an ideal ftandard, falls to the ground when this ideal ftandard is removed, we may, without ceremony, pafs over his remarks on this part of the subject, and proceed directly to another very important inquiry,-the nature and properties of paper money.

There are two kinds of paper money, which are so remarkably different, that it is furprifing any occafion fhould remain to point out the diftinction between them; yet fuch confufion has prevailed on this fubject, that fome great errors owe their origin to the mifapprehenfion of one for the other. Of thefe, one fpecies is the paper money iffued by government, and which it is rendered obligatory upon the people to receive. Of this nature were the affignats, and the mandats, iffued by the revolutionary government of France; of this nature, too, was a paper money iffued by the government of the United States in the crifis of revo lution, and by the Dutch in their celebrated war for the independence of the republic. The fecond fpecies of paper money confifts in the notes of bankers, payable to bearer on demand, and which pass current for the fums there fpecified. Bills of exchange and other obligations, payable only at a ftated time, and bearing intereft, are fometimes denominated paper currency; but it will contribute to distinctness, if we exclude them from the appellation. of paper money.

We are difpofed to give Mr Smith very confiderable praise, whether

whether he discovered the distinction, or learned it elsewhere, for having very clearly perceived the difference between the paper money which a government may force upon the people, and the paper money circulated from banks, which nobody receives but at his pleasure. He has feen, too, that many errors may be traced to the ftrange inaccuracy of confounding together thefe two fpecies of paper money. It is very extraordinary,' he fays, that many erroneous doctrines are still kept up, the writers on this fubject continuing to perfevere in fupport of many maxims, which, in practice, have been long ago abolished. One great cause of this appears to be, that there have exifted two fpecies of paper money, perfectly separate and diftinct in their nature, properties and effects, but which have been hitherto confounded together by all these writers. It is unfortunate, after making this falutary diftinction, that he should have been mifled, by his own notion of an imaginary standard, into an unprofitable train of speculation; otherwise it is probable that fome useful truths would have been the confequence of fo hopeful a commencement.

Fortunately, it is the free and voluntary species of paper money, almost exclusively, with which we have been experimentally acquainted in this country; and as the other is abundantly simple in its nature, and moreover very circumscribed in its use (for it necessarily very soon destroys itself), it is only the paper money consisting in the notes of bankers, which calls on us for consideration on the present occasion. The notion which we have en deavoured to establish of the nature of coined money, will speedily enable us to discover the principle and laws of paper currency. As coins are neither more nor less than commodities which are bought and sold for their value, like other commodities, so bank notes are obviously obligations upon the issuers to pay a certain. quantity of those commodities; and these obligations also are bought and sold for their value, or for that quantity of the valu→ able commodity, coin, which they can command. They are usually denominated the representatives or symbols of coin. It is very evident, however, that this is not only a vague but an inaccurate expression. They are no more representatives or symbols of coin than bills of exchange, or any other transferable bonds for the payment of money. They are actual obligations for the receipt of a certain quantity of specie; and they are received in payment as readily as the specie itself,-only when it is well known that specie can be received for them, without delay, and without inconvenience, or when it is known, that they will be as readily received in the market as the coin which they specify. If bills of exchange, therefore, and other transferable bonds, are regarded in the market as mere commodities,-as goods or chat

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tels, and are bought and sold as such, bank notes differ in no o ther respect than as being payable on demand, and, from that circumstance, being more conveniently received in all common purchases and sales. If the term, representative of money, is clearly understood to be a metaphorical expression, and to mean nothing more, than that an obligation for money, when a people are pleased with it, may perform the business of currency, as well as money itself, we have no objection to it. But if it give occasion, as it certainly does among authors, to vague and mystical apprehensions respecting paper money, which serve to involve this subject in obscurity and confusion, it ought to be discarded. In fact, when we endeavour to assign an accurate idea to the term, representative of money, as applied to bank notes, we find it impossible. A bank note is a mere contract, of a known party, to pay to the bearer a certain quantity of gold and silver in the shape of coin. When a man takes this bank note in payment, it is not as a representative of coin; for how does it represent coin? or what advantage to him would it be, though it represented it ever so exactly? The most accurate representative of coin, are well fabricated counterfeits; yet every man, when he knows them, refuses these in payment. It is not, therefore, because the bank note represents coin, but because it is a satisfactory obligation to receive coin, that it is accepted in payments; and because it is often more convenient to receive the obligation than to receive the coin. A common cheque upon a banker, which nobody ever dreamed of calling a representative of money, is just as much a representative of it as bank notes; nay, in fact, the order which a manufacturer on the Saturday night puts into the hand of one of his workmen, to get from his clerk the wages of the week, is a representative exactly of the same description. The only real difference in practice is, that the one obligation generally passes but through one, or a few hands, till it comes upon the obligee; the other commonly passes through many hands, each accepting it as a satisfactory security for the valuable commodity which it is an order to receive.

Having satisfied ourselves with regard to the nature of paper currency, it will be no difficult matter to comprehend the phenomena which it exhibits; although these have given rise to some questions and speculations which well deserve a short considera

tion.

The doctrine of depreciation, on which some other conclusions depend, is that which we shall first consider. When bank paper becomes depreciated in consequence of diminished credit, the nature of this event is sufficiently understood; and no misapprehension prevails in regard to it. When a man foresees any

risk or difficulty attending the payment of a bank note offered to him in exchange, he naturally refuses to accept it, unless with such a deduction as appears to him sufficient to cover the risk or difficulty which he apprehends.

There is, however, another species of depreciation, to which, it has been imagined, that paper currency may give occasion; a depreciation arising from a superabundance of the circulating me dium. To those who are not acquainted with the subject, some explanation is necessary to understand the tenor of the assertion. As the price of any article, or its value in exchange, is determined by the proportion which the supply bears to the demand, it necessarily happens, if the supply is enlarged while the demand continues the same, that the price of the article diminishes. It is imagined, therefore, by the analogy of this case,, that banks may cause the value of paper money to descend. Suppose, that the country is at any particular moment supplied with that quan tity of currency which its occasions demand, it is concluded that the banks, by an overissue of their paper, may increase this quantity, and so produce a depreciation. Dr Smith, indeed, maintained, that a certain quantity of currency was necessary to fill the channel of circulation; that as soon, however, as it was full, any thing more thrown into it, by necessity overflowed. But this doctrine has been lately derided. Mr Henry Thornton, in his Inquiry into the Nature and Effects of the Paper Credit of Great Britain,' brought forward a speculation, which has been followed by almost all the writers who have succeeded him, to prove that, after the channel of circulation is full, banks mav increase by their notes the quantity of currency; because every addition depreciates their value, or, in other words, raises the price of commodities in proportion to the increase. He thinks, therefore, that he may turn the metaphor of Dr Smith against himself, by remarking, that the channel of circulation, whatever currency may be thrown into it, can never overflow, as it immediately enlarges itself in proportion to the quantity received. No proposition seems to be more certainly established than this, that the precious metals, in all countries which are not exceedingly distant from one another, approach very nearly to an equality of price. We have no occasion, here, to enter into the explanation of the particular kind of traffic, by which they circu→ late from country to country; it is enough to know that they do circulate, and that so easily, that the smallest rise of their value, in any particular country, is sure to draw them speedily from other countries, or a fall in their value to send them out of any country, till the usual level or balance is established. Let us now see how this fact operates upon the question of depreciation.

It is evident that Mr Thornton, by that depreciation which he describes as consisting in a rise of prices, does not mean a depreciation of bank notes, compared with gold and silver, such a depreciation, for example, as would take place, if a pound note should only pass in circulation for eighteen shillings; he means that kind of depreciation which takes place when a pound note is still received for the full amount of twenty shillings, but when neither the note nor the twenty shillings can purchase more of any commodity than eighteen shillings would do before. It is evident that such a depreciation as this, if it any where exists, does not confine itself to the paper currency, but communicates itself equally to the specie of the country. It is a depreciation of the gold and silver, in the same degree as of the bank notes. But the price of gold and silver must remain the same, or very nearly the same, in this country, for example, and all the other countries in the world. If the docrine of Mr Thornton, then, be just, our banks are powerful instruments indeed; not only can they depreciate our own currency; they necessarily depreciate, by the same operation, the currency of nearly all the nations on the face of the earth. If, however, the currency of all nations be so immense a quantity, compared with ours, that any possible fluctuations which it can undergo, resemble the addition or subtraction of a drop in the waters of the ocean, then, no such depreciation as Mr Thornton supposes can take place; and Dr Smith, little as Mr Henry Thornton appears to respect him, was probably right in asserting, that when the channel of circulation is full, if any thing more is thrown in, it overflows.

It is a remarkable proof of the confufion and obfcurity which have reigned on this fubject, that many of the writers appear to have loft fight of the broad diftinction between the paper money which a government compels the people to receive, and the notes of bankers, which no man receives but at his pleasure. In the first place, no man ever takes from a bank but the smallest quantity of notes he poffibly can. Every man defires to have in his hands no more currency than what is abfolutely neceffary for his immediate payments, that he may continue to make a profit with the larger portion of his funds. This, however, is not the cafe with thofe to whom the compulfory paper of government is tendered. It is offered to them in payment of the debts which the government has contracted; and whether they want fo large a quantity of currency or not, they must receive it. In the next place, the paper which is iffued by a bank is perpetually returning to it; every man into whofe hands a greater quantity of it comes than he has immediate occafion for, carrying it to the bank for payment. The paper, on the other hand, which is iffued by go

vernment,