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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

of a primitive community. The sum total of the paying power must be considered as the money of England. It consists, as has been said, of gold, bank-notes, and transferable bank credits, because all these, by general consent, operate as a perfect payment, and there is nothing else that does so in that large and governing class of transactions which take place between dealers and consumers. It must, of course, be assumed that a banker never opens a credit upon himself in order to purchase, but only in order to lend. This being assumed, bank credit is at once separated as a paying power, always definite in amount from private credit, which when used to purchase does not pay or close the transaction, and in amount is perfectly indefinite. The latter is, as Mr. Fullarton says, an illimitable element of purchasing power. No man who has credit knows how much goods it will enable him to obtain, but every one knows how much he can on the instant pay for.

Bullion, bank-notes, and bank credits, then, in a certain important aspect, may be regarded as a uniform mass; but the mass is, in reality, like the crust of the earth, composed of different layers or strata, which differ from each other in stability and texture, even more than the oldest rocks do from the light sand which is tossed in interminable billows by the blasts of the desert. At the bottom is the bullion, the primeval granite, out of which all the others have been formed, and upon which they repose. Then comes the first layer of credit, the bank-note, to the eye a much lighter formation, and yet so solidified by its contact with the bullion, as to be fairly comparable to those crystalline slates and marbles which the central heat has assimilated to the subjacent rock. At the top, not like to any part of the solid earth so much as to the stormvexed ocean, or to the still more stormy atmosphere, floats the third portion of the aggregate, itself a succession of layers, and liable, especially in its upper regions, to changes swift as light, from the most profound calm to the wildest fluctuations.

Bullion Receipts and Bank Notes.

The conception of a currency as a definite measurable purchase power, separate from commodities, and yet received as a full equivalent in exchange for them, is attended with no difficulties. If no form of credit had been superadded, money capital would have been created by laying by not only definite but tangible portions of the currency. Its amount would have been the amount of the hoards. Two men could not possibly seem to possess the same piece of money capital. If any man deposited his gold with another, that other would have it, and not he. But one of the most extraordinary inventions of civilization was that which gave to credit in certain forms-not the power of purchase, for that it must possess wherever man is not so degraded as to have no confidence in his fellows--but the power of effecting payment. One of the simplest forms in which the power arose was that of the ancient banks of deposit, described by Adam Smith in his account of the bank of Amsterdam'. When any one placed gold and silver in the bank, the bank would pay the amount as he ordered. He could thus transfer his right over the bullion to another, and the mere right came to be accepted as equal to the reality. Sometimes bank-receipts were given for the deposits, and the transferable bullion receipt was the parent of the bank-note. It was a mere piece of paper, but it conferred a legal right, which was not exercised, because, while gold awaited it, it served every purpose that the gold could serve, and was more convenient. A pure purchasing and paying power was thus nearly disengaged from the last material fetters, and there remained but one step more to perfect the instrument, by enabling it to circulate and operate with full power over labour and goods after the disappearance of the gold. We may conceive, for the better explanation of the subject, though not historically, that in this case the bankers were struck with finding the same hoard of

The order of the facts here is artificial, and chosen only for the purpose of exposition. The historical order is highly complex.

treasure remaining year after year in their vaults. in their vaults. Now and then a little was wanted for special purposes; but the bulk of it was invisible, for no eye had penetrated far beneath the surface. At length the thought occurs that, if honesty would permit it, this bullion may as well be made use of, for it never will be asked for; and the next thought is, that it may be allowable to lend some of it out on good security, so that if the owners do demand it, they will have either it or its equivalent. Some of the stock is accordingly lent, but still, by way of additional precaution, it is taken out of the bottom of the hoard, the top remaining visibly unaltered, and then all things go on as before, since no demand will ever dip deep enough to find out the vacuum. The bullion receipt retains all its efficacy.

The disengaged Paying Power now rises altogether into the region of spiritual things. It is real-nothing more so, though existing only in the mind, and as a law to which the general will is obedient. It floats over the whole mass of men's hardwon possessions-over their well-stocked warehouses, their goodly ships, their mills and mines, their flocks and herds and golden harvests, their villas and pleasure grounds, their labour itself, from that of the rudest kind to that of him whose genius inspires life into the canvas or the marble—and all own the spell. This new power is no longer a mere representative of wealth. It is an addition to what previously existed, and wants only the open sanction instead of the unconscious submission of the public. That sanction is not withheld. According to common apprehensions the community would be served and not injured by having the use of the dormant hoards. It has now the paper and the gold together; both alike having the force of money, and both alike money capital or money income, according to the design of the holders. Something like this is the present position of the Bank of England. Fourteen millions sterling are, as it were, taken out of the bottom of the hoards and replaced by Government securities; the Bank, indeed, being still liable to pay, as if every note had gold behind it; but the severance of the two to the extent named being complete.

The first stratum of credit being thus formed, as a clear addition to the previous aggregate of paying power, other layers are successively superimposed upon it. With the consent of society bankers issue their promissory notes payable on demand, with the expectation that, like the bullion receipts, the greater part will always keep out, continually moving goods and services between one person and another, and leave the equivalent given for the notes at the disposal of the bankers. There is no need to dwell on differences between notes, all giving the legal right to bullion; we may pass up to a still more delicate creation of banking ingenuity, namely, the transferable bank credit.

Bank Credits from Deposits.

Coin and notes being as yet the only paying power, when a man makes a saving, we must suppose it to be laid by in one or other or both of these forms. By himself, or by some one else, he intends to employ that saving with a view to profit, but does not instantly see in what way. Meanwhile he places it for safe custody with a banker, understanding that at any moment it will be forthcoming at his command. The form by which he makes the claim upon it is a cheque, or draft; and sellers, knowing how the matter stands, take the cheque as a full equivalent; but, as soon as possible afterwards, present it for the gold or notes to which it corresponds. At first it might seem that we have here a new element in the aggregate of paying power; but, as yet, this is not the case. The cheque, during its short currency, is a pure substitute for the notes and gold dormant, and dies, so to speak, the moment they revive. The two, as powers of payment, do not yet co-exist; because we have not yet supposed the banker to be at liberty to do more than give the use of his strong box to the depositor. But now behold a new development. As the gold in the original deposit banks accumulated in hoards, which promised to remain as immovable as the ground on which they stood, so do both

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