ciencies; still Consols are a fixed quantity. When a sale of them takes place, as much comes out as goes in, and the pressure on the rate of interest is not relieved. Then there is the money of the irresolute, who cannot forget that Consols have been at par and below 80 within a short period, and will not touch them. Their money falls, for the time, into the hands of the dealers, and its first effect is to stimulate trade. 'Mr. A.,' says the discount-broker, 'you were naming, a short time back, some longdated bills. The state of the market did not permit our touching them at that time, but we should be happy to see you now.' And so Mr. A., getting his long bills discounted at a rate which, when tested by the prices current, appears likely to leave a profit, enters into some adventure. which he would otherwise have let alone. But even to this there is a natural limit. Draw and discount as you will, you can but effect the exchange of all the goods which exist: and recent events in corn and cotton have shown us how nearly consumption treads on production. Meanwhile, the exaggerated prudence produced by the last crisis has lasted six or seven years. Accumulation has gone on; the earth has yielded its average produce; manufacturing and mercantile industry have provided for their own extension. There is no use in continuing to knock at the door of the discount-houses, or of Consols, Exchequer-bills, or mortgages. You may, indeed, drive up the price till you have little more than the honour of possessing the security; but, invest as much as you will in these securities, there is no less-unemployed money, there is no more interest to be paid. If more interest must be paid, more money must be employed in some way which will yield it. Willing or unwilling, directly or indirectly, you must-we should say speculate, if it had not pleased Chancellors of the Exchequer to make that word disreputable. We will say, as less offensive, that you must enterprise. You must drain morasses, or subdue wilds, or embank estuaries, or cut through isthmuses, or make some new work, or improve some old one, in a manner which will give a return on the money expended."

NOTE C.

Mr. Fullarton on the Process of Depreciation.

In the extract from Mr. Fullarton's work on currencies, given at page 66, the slowness of the early stages in the depreciation of the assignats in France, is contrasted with the rapidity with which the process ultimately proceeded. That rapidity was partly the result of the manner in which the paper was issued. It was not issued

as capital upon loan, but for Government payments; and each new portion, as it was created, being immediately employed as income, went as so much new demand, of the most active kind, against preexisting stocks and services. Further, the assignats had nothing to sustain them in public opinion but the arbitrary will of the Government; and in addition to these two causes, the depreciation was not resisted by the machinery of a monetary system, like that which exists in England, and which interposes the greatest possible obstacles to any considerable disturbance of the relations between the currency and the general mass of commodities. Mr. Fullarton has expressed the opinion, that with our present Bank and Mint regulations, that is to say, while every portion of new bullion that arrives may be exchanged for bank-notes and coin, with only a deduction of 1d. per ounce, there can be no rise whatever in the level of prices. This appears to me to be an error, for the reasons explained in the chapter on The New Gold;" because it is conceivable that a higher bullion value of English labour and its product may get established in foreign markets; but this will by no means prevent such an enormous accumulation as was anticipated by Mr. Fullarton when he wrote in 1844, and such as is now actually going on from week to week. In view of such a state of things Mr. Fullarton made the following remarkable observations:

66

"Were such a state of things to continue for a sufficient length of time, I certainly do not take upon me to say, that there could be no action on prices, though, barring any extraordinary contingency, my belief undoubtedly is, that long ere this action could be produced, the market would be partially relieved by the fall of the rate of interest inducing capitalists to send their capital abroad. Circumstances, however, political or financial, might not be propitious for this solution of the difficulty ; and it might become an important question how it could be most beneficially dealt with. It would be of no use to suspend the purchases of bullion by the Bank, unless the Mint were also to be shut against the reception of any more gold for coinage, and the importers of the metal thus driven at once to submit to a reduction of prices, or to send their commodity abroad in quest of a better market. I own I am inclined to think it might be more expedient to adopt this course, than to wait the tardy results of any remedial action through prices on the exchanges. But whatever might be the determination in this respect, no enterprise, as it seems to me, could be more Quixotic or absurd than for this country to engage in a struggle to sustain the value of the precious metals at a higher level than that warranted by the cost of their production."

From these remarks it would appear that Mr. Fullarton expected from the abandonment of the Bank and Mint regulations a much more rapid depreciation in the value of gold bullion than would otherwise take place, and I agree with him in thinking that that would be a speedy and effectual method of letting down the value of the metal, which would then fall rapidly under the influence of the new supplies. But Mr. Fullarton does not appear to have noticed the fact, that a change of this kind would leave the value of the English currency and the level of English prices unaltered. It would be the abandonment of the gold standard, and the preservation of the currency at its present value, by allowing the value of all new and uncoined gold to sink below it. This would be a change exactly the opposite of that which was made by the Bank Restriction Act. Under that Act the gold, which was then acted upon by a demand excessive in proportion to the supply, was allowed to rise above the ordinary value of the currency. If our present currency were artificially closed up, by shutting the Bank and the Mint against new gold, except at a market price, the currency, for reasons stated in the First Part of the present work, would remain as steady as it did under the Restriction Act, and the value of gold bullion would rapidly sink below the value of coin and Bank paper; but the adoption of any such measure would evidently alter the position in which the State stands with regard to the national creditor. The public might view it as an unfair change in the terms of all long contracts, which, according to the popular opinion, must become less onerous, on account of the gold influx, to those who have to make payments; and it is not easy to say what effects it might produce upon the operations of foreign commerce. Perhaps the most serious consequence of all would be a new kind of forgery against which there could be no protection. The bullion being once let down considerably below the value of the coin, it would be coined privately, and the sharpest eye in the Bank of England would not be able to detect a bad sovereign of pure standard gold.

G. Woodfall and Son, Printers, Angel Court, Skinner Street, London.