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Business. Authorized American Edition, reprinted 
from the 75th English Edition. i6mo, pp. xiv. + 
249 75 cts. 

'* If I might give a short hint to an impartial writer, it would be 
to tell him his fate. If he resolves to venture upon the dangerous 
precipice of telling unvarnished truth, let him proclaim war with 
mankind — neither to give nor take quarter. If he tells the crimes 
of great men, they fall upon him with the iron hands of the law ; 
if he tells them of virtue, when they have any, then the mob 
attacks him with slander ; but, if he regards truth, let him expect 
martyrdom on both sides, and then he may go on fearless."— Ds 

Money. Authorized American Edition, reprinted from 
the 19th English Edition. x6mo, pp. 277, 75 cts. 

Life. Authorized American Edition, reprinted from 
the 2ist English Edition. i6mo. (In press,) 











C^t SnxcKtrbockrr fwu 


Ube ^nfcftctboclict l>re00 

Electrotyped and Printed by 
G. P. Putnam's Sons 


Preface v 

Money i 

The Origin of Money 13 

What is Money ? 29 

Currency 42 

Gold Money 53 

Silver Money 60 

Paper Money, Bank Notes, Checks ... 69 

Bills of Exchange 99 

Bank Shares 106 

Banking iii 

Exchange • . . 147 

Interest 153 

Wealth 168 

Capital 188 

Panics 196 

Individual Success 213 

National Prosperity 230 

Concluding Remarks 254 



Und es herrscht der Erde Gott, das Geld. — Schiller. 
( •* And it rules as God of the world, * Money.' " ) 

Money ! an attractive title — a subject every man is 
interested in ; and my object is to bring clearly before 
your mind how largely the success of English trade de- 
pends upon the currency laws in relation to our system 
of banking, that being the recognized medium for sup- 
plying borrowed capital, the life-blood upon which our 
large trade depends ; and I hope to awaken within you 
a desire to understand this subject better than hereto- 
fore. That it is no easy task to rouse men of business 
to thinky and that they cling most tenaciously to old 
customs, I am well aware ; but the present times will 
compel them to hesitate, and ponder as to how trade is 
to be got and business is to be done ; whereas hitherto 
they have let daily affairs float before them, content to 
seize hold of what they could as it passed them by, so 
long as they felt satisfied that the system in operation 
would last their time. It is this supineness, this igno- 
rance of the delicacy and refinement of our banking and 
monetary system, that the future of commerce has so 
much to dread. 

The power of money is immense, the benefit of our 
banking system to traders only known to those who use 
it ; but it must be remembered that in exact proportion 


to the power of the system is its delicacy. This extreme 
sensitiveness causes our periodical panics. The amount 
of money held by bankers on short notice or on demand 
is enormous ; money that the owners could all ask for, 
money that in a panic many do ask for ; and then it is 
perceived in what danger our industrial system, and the 
banking system upon which it depends, really are. 
Money will not manage itself. Our bankers have a 
large sum of money to manage ; the task is not an easy 
one. The principle of our currency law is right ; but in 
1844, when started, there was nothing like the commerce or 
the deposit and banking business that now exists, and the 
time has come when it is imperative upon us to examine the 
system on which the great masses of money are manipulat- 
ed, and we must have the will and courage to go to the root 
of the subject. No labor ought to daunt us, no prejudice 
should hinder us, no alarm at the convictions our in- 
quiries may draw us to should make us recoil from their 
conclusions, as upon our commercial system our exist- 
ence as a nation depends, and to maintain that com- 
mercial supremacy we must be sure that our currency 
system is not only safe and right, but the useful tool it 
should be, might be, would be, if we thoroughly grasped 
the subject. 

" Money," how few understand it ; and although all 
are so eager for it, yet how few know how to use it 
wisely, or understand what money is, its nature and 
qualities ; how powerful a small amount of it is if 
judiciously used ; how impotent, useless, worse than use- 
less, to its possessor, if he does not understand its nature, 
and how to use the power in his hand. Adam Smith 
clearly demonstrated that labor is the one and only 


original source of the wealth of nations ; but we still 
want a writer of equal calibre to clearly demonstrate to 
the people that the causes of, and remedies for, the dis- 
tress and misery we are subjected to as a commercial 
nation from periodical " panics," arise from the people's 
ignorance of " money," what it can and what it cannot 
do, and its function as a medium of exchange. 
" Money," in its various forms of credit, bank notes, 
bills, checks, is an enigma to the mass. To supply 
this information, so as to. enable the people to compre- 
hend business, and how to make money morally, would 
be one of the greatest and most beneficial reforms ever 

To men I say : Be more in earnest ; never let slip a 
golden moment ; for "Fortune, the one goddess we all 
so strive to catch, turns a bald head to those to whom 
she has once presented her locks in front, and who have 
hesitated, and not taken hold." 

*• "Why wilt thou defer thy good purpose from day to day? Arise, 
and begin in this very instant, and say, Now is the time for 
doing, now is the time for striving, now is the iit time to amend 

Thomas A Kempis. 

The essential point is to arouse greater earnestness, and 
a desire to begin at once; delay makes the danger. Now 
is the time for action. Be prompt ; whatever is impor- 
tant enough to be necessary to be done ought to be done 
at once, and so got out of hand with as much dispatch 
as possible. The success of nearly all great men, in 
every trade or profession, may be traced to a spirit of 
promptitude ; they put into practice the maxims, the in- 
stincts which earnest men have bequeathed to us : 


" Never put off till to-morrow what can be done to-day." 
" Strike while the iron is hot." " Make hay while the 
sun shines," " Hesitancy and loitering destroy earnest- 
ness." To succeed, you must have decision of character, 
be able to decide promptly, and be ever in advance of 
your opponents, comprehending and satisfying the wants 
of the times and age you live in. 

The importance of a knowledge of what " Money " is, 
is best illustrated by the case of Overend, Gumey, & Co. 
Within ten years, to descend from the highest pinnacle, 
standing next to the Bank of England in London — ^no 
English firm so well known abroad ; yet, by reckless mis- 
use of the immense wealth they had in their hands, in 
six years they lost all their own and other people's money 
— a result solely attributable and traceable to their inca- 
pacity for, and ignorance of, the duties of their position; 
a result inevitable again, as also in similar cases to the 
City of Glasgow Bank, unless the people generally better 
understand what money is. Do not be alarmed. I am 
no rash innovator, do not want to proceed too fast, the 
last man to urge any change in so delicate a subject as 
" currency," but quite satisfied that the time has come 
when ** business," "money," and kindred subjects must 
form part of every Englishman's education, and also 
convinced that if taken up at the right time, the subjects 
are of such interest that all would be eager to under- 
stand them. I ask for the earnest co-operation alike 
from the pulpit, platform, and school board, to urge 
upon the people the importance for the future well-being 
of the nation, that all English youths be taught such 
subjects, and so, step by step, we may make men more 
thoughtful, better men of business — ^their actions the re- 


suit of study and reflection. The end maybe a long way 
off, but it is of the greatest importance that a beginning 
should be made. Do not expect too much at first ; care- 
fully test every step as you advance, make every foothold 
sure ; sustained under all difficulties with the conviction 
that every step onward, upward, must be, will be, of 
benefit to mankind. 

It is surprising how few people in this commercial 
metropolis devote their leisure time to the study of works 
on money, banking, finance, etc.; to literature so calcu- 
lated to give them correct principles upon which to guide 
their actions and enlarge their mental views, by enabling 
them to get or take more comprehensive ideas on a mat- 
ter that comes under their daily notice ; such books be- 
ing useful not only from the information they impart, but 
from the impressions they produce and the suggestions 
they prompt to the mind from the recollections they 
awaken when one has to decide the acts of one's daily 
life. Decision is a most essential quality, and the want 
of it may be attributed to one's ignorance of the subject 
one has to give a decision upon. Every man needs to 
be reminded of the importance of a steady adherence to 
sound principles. Books upon the subject we are en- 
gaged upon, by men who have thought and written 
thereon, act as a safety valve, and keep more particularly 
those whose time is fully occupied, business men, from 
going astray ; such books strengthen, as it were, the im- 
pression in the mind of the necessity of firmness, and the 
wisdom of being guided in our conduct by a fixed line of 
action, and cause our life to be guided by knowledge in- 
stead of by caprice. It may be taken as an axiom that 
the more frequently the right path is pointed out to us 


the less likely are we to wander into those which are for- 
bidden. We all err, and deviate more or less from the 
laws alike of God and man. My object will be achieved 
if I can get you to think that for every such error we 
have to pay the penalty — that as we sow so shall we 
reap ; and to stimulate into activity your better resolves; 
by rousing your self-respect to be better men ; not to be 
disheartened by the past ; but, feeling that you have paid 
the penalties the laws of God and man exact, you will 
begin afresh and manifest your repentance by your 
higher aims and earnest strenuous efforts ; and to be- 
lieve that God will be satisfied by the motives that con- 
trol and guide your daily acts. There is good in the 
worst creature that ever lived, if the right means be 
adopted to bring it out ; no one is lost whilst there 
lingers within him any sense of shame. 

'' The little I have seen of the world teaches me to look upon the 
errors of others in sorrow, not in anger. When I take up the history 
of one heart that has sinned and suffered, and represent to myself the 
struggle and temptation it has passed through, the brief pulsations of 
joy, the feverish inquietude of hope and fear, the pressure of want, 
the desertion of friends, — I would fain leave the soul of my fellow- 
man with Him from whose hand it came." — Longfellow. 

When we think of men's conduct in the pursuit of 
wealth, we need have present to our mind the sublime 
charity embodied in the above words, and to ask our- 
selves : Was money made for man, or man to make 
money ? Can we sincerely believe that the lower was 
intended to rule over the higher (acuities of man's 
nature ? Is not the present life of the majority of us 
cursed by an abuse of the lower, instead of being blessed 
by the intelligent use of the higher faculties ? And can 


we believe seriously that it is not possible, by earnest 
effort, to attain a purer aim in life, by developing the 
better impulses of our nature, and using faithfully and 
truly the nobler part of us ; so that life might become to 
us a real wholesome pleasure — ^the substance, instead of 
the shadowy substitute supplied by a social position 
founded on wealth only, and the hollow happiness based 
upon external show and glitter ? 

I agree with Goethe : " But let a man thoroughly 
realize what he is, and he will soon rise to be what he 
should be." What is wanted is to make men more 
familiar with the best types of humanity ; and greater 
effort to be made to exalt their conception of human 
nature. If they cannot all be great, they may be better 
than they are, and at the very least it is open to all men 
to be good and truthful, and faithful to duty, doing their 
work here intelligently, honestly, and thoroughly. 

** The best of every man's performance here 
Is to discharge the duties of his sphere." 



Money is a commodity, of the same general nature as 
all other commodities, accepted as a representative sign 
of the value of all other things, to act as a medium of 
exchange, to get over the difficulties of direct barter. 
Thus a purchase for money involves two exchanges ; it 
is only half, not of a nenchange — as Mr. Macleod puts 
it in his useful book, " Economics for Beginners " — but 
of a transaction of procuring by two operations of the 
tool, money, the commodity desired. Aristotle says : 
" It was agreed to give and to receive in exchange a sub- 
stance which, useful in itself, was easily available for the 
common requirements of life ; iron or silver, for exam- 
ple, or some other analogous substance, of which the 
dimensions and the weight were first determined, and 
which subsequently, in order to save the trouble of per- 
petually weighing and measuring, was marked with a 
particular stamp in token of its value. With money, the 
outcome of the earliest indispensable exchanges, arose 
also another sale, another form of acquisition, exceed- 
ingly simple in its origin, but soon developed by expe- 
rience, as it was discovered that the circulation of arti- 
cles was the source and the means of considerable 
profit." The above contains the philosophical expe- 
rience of the soundest and most advanced theory of the 


true properties of, and the value to commerce of, money. 
Money must have a value of its own, corresponding to 
its conventional value as a circulating medium ; money 
is a commodity, a species of wealth, with an enhanced 
value owing to its being the best medium of exchange, 
as it is the most convenient representative thing, the 
most general and convenient measure of all other com- 
modities or things. But it is essential that people gener- 
ally should understand better that although a wealth in 
itself, its chief power consists in its power to secure all 
other wealth ; its utility consists in its ready convertibil- 
ity, its ready adaptability, nearly everywhere, in exchan- 
ging itself for any other article needed. As Aristotle 
puts it : " Might not the moneyed man be lacking in 
some thing of primary necessity ; and is not that an 
ironical kind of wealth which does not prevent a man 
from dying of hunger, like the Midas of mythology, 
whose avaricious desire changed into gold all the viands 
on his table ? " Money should be used, not hoarded ; 
its utility consists in its effecting exchange, not in being 
kept idle. 

Very few men have the true theory of money in their 
minds, and the importance of the coin being an article 
of wealth as well as of its mercantile value as a circulat- 
ing medium should be brought more prominently before 
their notice. No government should be allowed to de- 
base the coinage ; the coin in circulation should be 
always really the value it represents, and not a fictitious 
value put upon it by the government stamp. Incon- 
vertible paper money is of the same nature as debased 
money, issued under the false plea that money is only a 
sign, that any thing will dp if passable ; like accommo- 


dation bills, they do not represent value received, and 
deplorable consequences follow from their adoption by 
the individual or nation. Common-sense, as well as the 
true commercial instinct, warns us to adhere strictly to 
the true monetary principles — notes issued against secur- 
ity and convertible into coin, or value, based upon the 
honest utterance of a genuine metallic coinage. As a 
rule, free people never have bad money ; whereas the 
temptation is constant to a despotic power to defraud its 
subjects, and so to realize at their expense unlawful 
gain, by imposing on them as genuine, money, which 
has neither the purity nor the weight necessary in order 
that its real value should correspond to the nominal 
value for which it is issued. But when the ilation itself 
takes part in the administration of its affairs, although 
the principles of political economy may not be fully 
known or understood, natural good-sense and the prac- 
tical use of money will suffice to prevent recourse to 
operations, the inevitable result of which is the ruin of 
the state and of individuals. Thus, until the introduc- 
tion of the system of representative government in Eng- 
land, republics were, by the very principle of their con- 
stitution, far better secured than monarchies against the 
curse of the adulteration of money. When this evil was 
rife throughout Europe, in the Middle Ages, it was the 
merchant republics, like Venice and Florence, that had 
the surest guaranties against it. When the spirit of 
liberty prevailed, even in states which had a monarchical 
constitution, like those of the successors of Alexander, 
the money remained good, and the true principles of a 
sound currency were maintained. Wherever liberty was 
lost, these principles were lost sight of, and the coinage 


was tampered with. For example, at Syracuse (the sil- 
ver coins being elsewhere of good quality), complete 
bankruptcy was brought about by a change in the intrin- 
sic value of the money which formed the basis of all 
reckoning; as a rule in the history of nations, bad 
money will be found to bear the stamp of a king or 
tyrant. The kings of Persia were among the earliest to 
begin an extensive and systematic adulteration of specie. 
In the last century of its existence, the Persian mon- 
archy, which had endeavored to realize the chimera of 
the double standard, persisted in seeking to maintain a 
legal value for gold 13^^ times greater than that of silver, 
although the commercial value of that metal had fallen 
everywhere at least 1 1 per cent. Necessarily, in spite of 
royal ordinances, there followed an export of silver to 
the Hellenic mart in such quantities that at the time of 
the conquest by Alexander it had disappeared almost 
entirely from the interior provinces of the empire, where 
there remained only gold, greatly depreciated by that 
fact, though still retaining its nominal value. In mat- 
ters of finance and political economy one mistake leads 
to another by an almost fatal sequence, and there are 
few greater errors than when the people accept unresist- 
ingly the idea that the royal will was enough to give to 
a piece of metal, bearing his signature, a value which it 
could never have commanded commercially in the form 
of a mere ingot. Coined money in circulation should 
be equal in real value as metal to its nominal value ; the 
coining and stamping are only a service, that the people 
may be sure, without the trouble of weighing, that, in a 
piece of money bearing the official stamp, they have the 
same quantity of fine metal as in a piece of the same 


weight as the usual commercial ingot. Money, briefly, 
should be a real marketable article, and not a mere con- 
ventional sign of arbitrary and uncertain value. 

Money superseded barter, because by barter it was not 
always possible to dispense with that which was usless, 
and by barter we had to buy at the time of selling. 
Money fixed a price to merchandise, and could, possess- 
ing a real value, purchase, at any time and anywhere, 
corresponding value in other commodities to those given 
for it. The official stamp, the substance being of intrin- 
sic value, is an outward sign of this intrinsic value — ^hence 
its utility ; and it is only by giving this guaranty that 
the government earns the right to enforce by law the ac- 
ceptance of the coinage for the sum it represents ; a right 
which can only be lawfully maintained when the govern- 
ment has acted with perfect fairness. No government 
has a right to adulterate the public money, justifying 
their conduct by the sophism that the value of the coin 
is derived from their own sacred impress affixed to it, or 
to restrict the operation of the Currency Act. After the 
suspension of cash payments, 1797, until Peel's Act of 
1844, the directors of the Bank of England could issue 
what notes they liked ; and the same power was given 
by the government when they suspended the act in 1847, 
1857, 1866. The principles of the act are sound or un- 
sound ; if sound, it must not be tampered with ; if un- 
sound, let it be altered. No government has the right to 
assign temporarily or otherwise an arbitrary or conven- 
tional value to money. Nothing is more dangerous to a 
nation than to begin to tamper with money. It is a 
course in which, after the first step is taken, it becomes 
impossible to stop. You may argue that the deterior»* 


tion of the coinage or suspending the Bank Act is 
adopted as a last resource, and that in such times of 
pressure any means are lawful to avert the catastrophe. 
An action may be lawful, yet neither be wise nor right, 
and all such actions are, in my opinion, alike wrong and 
unnecessary. The proper action is to find the cause of 
the mischief, and remove it ; and not extend and 
strengthen the belief in the theory of the money-sign 
doctrine, that a legislative decision is sufficient to attach 
to metallic specie, or bank notes, an arbitrary and ficti- 
tious value ; and so carry forward the dangerous doctrine 
that the state has a right to seek relief from financial 
pressure by that robbery, or forced loan, implied in every 
depreciation of the coinage. The right of the state to 
fix arbitrarily the value of money, is to affirm the right of 
a government to adulterate at pleasure. That the stamp 
alone of a government is to give the value to coinage is 
equivalent to stating that the value of money is arbitrary, 
and depends on the will of the sovereign who issues it : 
a most dangerous doctrine, intended to guarantee the in- 
tegrity of the coinage, but calculated to encourage and 
foster the temptations to abuse it. It is a false principle, 
similar to that of a man deeply in debt being enabled by 
permission of the law to pay his liabilities nominally in 
full, but actually only a composition upon the amount he 

Cicero tells us that in the time of Cinna the value of 
the Roman coinage had become so dubious that no one 
knew precisely what it was worth ; and so in the year of 
Rome, 670 (B.C. 84), the tribunes of the people and the 
praetors deliberated on the measures to be taken in order 
to remedy this depressing state of things. An edict of 

the praetor, M. Majius Gratidianus, instituted officers for 
the verification of the coinage, suppressed the enforced 
circulation of the plated denarii, ordered that they should 
be withdrawn from the public coffers, and that denarii of 
a true standard should be given in exchange. The popu- 
lar enthusiasm with which this act was received gives 
some idea of the gravity of the evil to which it brought 
redress. Statues were raised in all the public places to 
the praetor who had taken the initiative in so beneficent 
a reform, and almost divine honors were paid to these 
statues by burning incense and wax tapers before them. 
The Romans were right ; no man is more worthy of a 
people's homage than he who dares brave the selfish 
interests of the few, that right may be done to the many. 
In reading ancient history, there is no better test of the 
character of the emperor than the more or less sound 
ring of the coins struck, during his reign ; and at all 
times it is an infallible test of a man's character, this 
money-test ; there is no surer indication, whether the in- 
'dividual worships God or Mammon. The man who of- 
fends his God by not being equal to adhering strictly to 
right, and allows the temptation of a pecuniary gain to 
make him swerve from the dictates of his conscience, 
has given proof by the most unmistakable sign that he is 
a slave of Mammon, and will barter his soul, sell his 
manhood, for a mess of pottage. There is no more 
infallible sign of the weakness, the insignificance, of the 
individual than this degrading servility to greed, as it in- 
dicates a man who will barter his soul, sell himself, for 
money ; and his gradual descent from high resolves may 
be traced as this desire, this one vice of avarice, gets 
possession of his soul. So also there is no more infallible 


symptom of the decay of a state than the corruption of 
the coinage^ and the steps of this decline are marked by 
the successive depreciation of the money. Such action 
indicates a low morality, as in modern times relying for 
relief on the " suspension " of the acts upon which the 
nation's currency, " money," is based, indicates a want of 
education, a want of intelligence. 

You will best realize the value of "honest " money by 
considering the following picture, drawn by Francois 
Lenormant, in the Contemporary Review for February, 
1879. After proving that the false theory of the essence 
and origin of money had become embodied in the laws 
and firmly rooted in the minds of men, he says : 

" The reigning princes made more or less use of it in 
proportion to their unscrupulousness and cupidity. The 
true and sound theory, always known and practised 
among the Greeks, had fallen into a complete oblivion 
through a long course of ages, and the fatal error, which 
was the economic course of the Roman Empire, was 
transmitted to the Middle Ages, and became the source * 
of widespread misery. Let us call to mind the disastrous 
consequences, in the young Christian societies of the 
west, of the doctrine borrowed from the empire of the 
Caesars, that money was simply a sign, owing all its value 
to its official impress. The infinite diversity of petty 
powers during the feudal period added to the confusion 
which had prevailed even under the empire. Each feudal 
lord struck some coin, and every monarch made some 
change, greater or less, in the currency, in order to 
disguise his actual bankruptcy. It was required that 
payment to government should be made quarterly or 
monthly in the current coin, and according as the prince 


was debtor or creditor he lowered or raised the monetary 
standard. These nefarious proceedings failed in their 
end ; the bad money, following an inexorable law, drove 
out the good, and, after perplexing and mischievously 
oscillating, the value of things was adjusted to the de- 
pressed money standard. Hence ensued the disappear- 
ance of the good money and the rise of prices — evils 
which it was sought to remedy by prohibiting exporta- 
tion, and fixing a maximum for prices — measures as 
unavailing as they were obnoxious. 

" Errors, frauds, and deeds of violence followed each 
other in fatal succession, always leaving behind the same 
result — corrupted morals and commercial panic. The 
periodical depreciation of the money caused universal 
confusion ; the morbus numericus, which was described as 
no less fatal than the plague itself, visited every country. 
Spain, Portugal, England, the Empire of Hungary, Bo- 
hemia, Naples, Savoy, suffered from it no less than 
France. Everywhere the old imperial idea of the ar- 
bitrary value of money depending on the will of the 
sovereign was hailed by unscrupulous governments, 
anxious to use it for their own advantage. 

*' It was vain for religion to thunder against these 
abuses through the popes and bishops, who were not 
always themselves exempt from the same fault ; it was 
vain for poetry to borrow the pen of Dante to brand 
Philippe le Bel as a forger : 

** * Li si vedrA il duol che sopra Senna, 
Induce, fals^[giando la moneUi.' 

" The world continued to suffer from an evil, the true 
nature of which it failed to recognize. The angel of 


the school, the great Thomas Aquinas himself, although, 
following in the footsteps of Aristotle, he enunciated the 
true principles of money, contented himself with coun- 
selling the sovereigns to make * a moderate use ' of the 
monopoly of the money, * Sive in mutando, sive in dimin- 
uendo pondus.' " 

Throughout the whole of the Middle Ages we find 
only one man who, by an effort of good sense, amounting 
to genius, and peculiarly admirable in the midst of the 
prevailing errors of the time, perceived the true bases of 
the monetary theory. This was Nicholas Oresme, Bishop 
of Lisieux, whose name was rescued a few years ago by 
M. Wolowski and Roscher from the unjust oblivion of 
five hundred years, and whom they have rightly declared 
to be a great economist and the precursor of the deepest 
researches of modern science in this department. But 
the wise teachings and the efforts of Nicholas Oresme 
had no result beyond the reign of his friend, Charles V., 
to whom popular gratitude has awarded the surname of 
" The Wise." After the death of this prince, the truths 
which the prelate economist had brought again into the 
light were soon forgotten. The tampering with the 
money was resumed, practised perhaps with a little less 
folly and at rarer intervals than in the fourteenth century, 
but still practised. 

It was not till the sixteenth and seventeenth centuries 
that thoughtful and courageous men, in Italy and in 
England, began to demonstrate again the fallacy of the 
doctrine which attributed the value of money to the 
sovereign power ; and in France it was not till the Con- 
stitutional Assembly of 1789, and the renaissance of 
economic science, that this doctrine disappeared from 


theory and practice, and a monetary system was estab- 
lished based upon true principles, upon the notion that a 
sound coinage ought to have a real value as merchandise, 
corresponding to the nominal value for which it is current. 

Such has been the fatal heritage of calamity and con- 
fusion handed down to the world for many ages by an 
error of political economy, the direct offspring of despot- 
ism. In casting a rapid glance over the monetary history 
of antiquity, we see this great truth brought out on every 
page, that in order to have sound finances, true money, 
and a good government, the first conditions arc liberty, 
the right of control and of discussion ; that despotism, if 
it seems sometimes a reparative agent, and holds out fair 
promises to material interests which may have been im- 
perilled in the storms of liberty, never brings more than 
a temporary relief, and inevitably drags a nation down 
to ruin, by working on false economic principles. All 
human science ought to have its moral teaching. If 
the study of numismatics should have no other results 
than to confirm by irrefragable evidence this important 
lesson, it would deserve a high place in the category of 
those erudite labors by which we recover the archive of 
man's mental and moral history. M. Wolowski, an 
eminent French economist, has briefly said : " The per- 
manent hostility of nations, commercial crises, the depre- 
ciation of specie, covert bankruptcies, assignats, paper 
money, hatred of capital, chimerical schemes of financial 
renovation, such are the dire consequences of false views 
on the subject of money." 

Money is a potent power in the hands of the wise. It 
is not plenty of the " circulating medium " that enriches 
a people, but the use they make of it. It is our duty, as 

12 MONEY. 

it is for our interest, to study and understand " what is 
money," so as to derive from it all the benefit that can be 
obtained by its use. Not to think of it in the sense that 
Hesiod wrote, that " money is life to us wretched mor- 
tals " ; but to recognize, with Carlyle, that it is " the 
pineal flame of the body social." Money is the great 
wheel of circulation and distribution, — the great instru- 
ment of commerce, — the medium through which the 
debts, the wages, the incomes of the different members 
of the community are distributed to them, exchanges are 
effected by them, and the measure by which they esti- 
mate their possessions. 

" He who knows, like St. Paul, both how to spare and 
how to abound, has a great knowledge ; for if we take 
account of all the virtues with which money is mixed 
up — honesty, justice, generosity, charity, frugality, fore- 
thought, self-sacrifice — and of their correlative vices, it 
is a knowledge which goes near to cover the length and 
breadth of humanity ; and a right measure and manner 
of getting, saving, spending, giving, taking, lending, bor- 
rowing, and bequeathing would almost argue a perfect 
man. ... It behoves him who is getting money, even 
more than him who has it by inheritance, to bear in mind 
what are the uses of money, and what are the proportions 
and properties to be observed in saving, giving, and spend- 
ing ; for rectitude in the management of money consists 
in the symmetry of these three " (Sir Henry Taylor). 

'* Can gold calm passion, or make reason thine ? 
Can we dig peace or wisdom from the mine ? 
Wisdom to gold prefer, for 't is much less 
To make our fortune than our happiness. 
Nay, more than this, I can most truly state, 
The happy only are the truly great." 



To the Greeks we owe, if not the invention, at all 
events the very general extension of a circulating me- 
dium in the form of coin, and on their coins of the 
very earliest period we find records of the migrations, 
the mythology, and the manners and state of civilization 
of this great and interesting people. At a later period, 
it became customary in Greece to place the name of the 
chief magistrate for the time being on the public money, 
and this is still the general practice. The coins of the 
Greek colonies of Italy, Sicily, Spain, and Gaul also 
offer an endless variety of interesting illustrations of 
history, biography, and the progress of the arts ; but the 
Roman series which rose, as it were, on the ruins of that 
of Greece, are of the highest historical importance and 
interest. Addison, in his entertaining dialogues on coins, 
on which Pope wrote his well-known poem, calls the 
Roman coinage a sort of " State Gazette," on which all 
the truly great events of the empire were periodically 
published ; and when we find such announcements as 
Egypta Capta on coins of Augustus, struck on the con- 
quest of Egypt, yudea Capta on those of Vespasian, 
issued when Judea was finally subjugated to the Roman 
yoke, or "Rex parthis datus " on the coins of Trajan, 
when the Roman emperor gave a king to the Parthians, 
we must allow the aptness of the term. 

The modern series consists of Anglo-Saxon, Anglo- 
Norman, and English coins, and is perhaps more perfect 
and complete than that of any other state ; and exhibits 
every stage of development, from the rude Saxon penny 
of Elizabeth to the great coinage of gold nobles in the 
flourishing part of the reign of Edward the Third, as 

14 MONEY. 

well as the links of all subsequent progress. The event- 
ful reign of Charles the First might be exhibited very 
graphically in a small cabinet of his coins — the rude 
" siege pieces," struck without coining apparatus in dif- 
ferent parts of the kingdom whither fluctuating fortunes 
drove the unfortunate prince, serving as monuments of 
almost each disaster or temporary triumph ; among 
which not the least remarkable are the great twenty- 
shilling pieces of silver coined at Oxford, from the plate 
given up by the heads of colleges to be melted down and 
coined for the royal cause ; in which processes perished 
some of the noblest specimens of the exquisite skill of 
our early silversmiths and goldsmiths, the loss of which 
will never cease to be regretted by all true lovers of art. 
(*^ Humphrey's Coin Collectors' Manual.") The Assy- 
rians invented letters of credit The Hebrews had no 
coins until the time of Simon the Maccabee, 144 to 145 
B. c. The earlier mention of pieces of silver should be 
shekels in the sense of a weight, not a coin ; and the 
earliest mention of true coins in the Bible refers to Per- 
sian money, the word drachm being a mistake for " daric." 
Throughout the early part of Scripture, as well as 
through the poems of Homer, not a single passage occurs 
from which we can infer either the use or the existence 
of stamped money. Metals, however, being close and 
compact in form, universal as to use, and admitting of 
division into larger and smaller parts, must soon have 
become the representative of value. Herodotus (i. 94), 
speaking of the Lydians, says they were the first people 
on record who coined gold and silver into money, which 
only means the first people that he had heard of. The 
Parian Chronicle ascribes the origin of money to the 


^ginetans, under Pheidon, King of Argos, 895 years 
before Christ. The best numismatic antiquaries agree in 
considering the coins of ^gina, from their archaic form 
and appearance, as the most ancient known. They are 
of silver, and bear on the upper side the figure of a 
turtle, and on the other an indented mark, as if the 
metal, at the time of striking, had been fixed upon a 
puncheon, and from the weight of the blow had received 
a deep cleft. In later coins of iEgina the turtle has been 
changed to a tortoise, and the fissure on the other side 
converted into a device. The coins of Lydia probably 
come next in point of antiquity, and then the early 
darics of the Persian king, which occur both in gold and 
silver, and bear a strong resemblance to the coins of 
iEgina in the mode of striking ; these, if they are to be 
referred to Darius the First, must have been coined be- 
tween B.C. 522 and 486. There are coins in gold of the 
early kings of Persia, similar in type to the silver darics, 
and of very minute size. (" National Cyclopaedia.") 

English coins, pennies, halfpennies, and farthings, 
in silver and brass, coined by the Anglo-Saxon and 
Anglo-Danish kings, are very numerously possessed. 
Similar coins, struck by the Norman and fearly Plan- 
tagenet kings, and by the nobles, bishops, and other 
authorities, still exist. In the reigns of the later Plan- 
tagenets groats and half-groats were coined ; and gold 
coins, in value equal to 18 groats, called florins, with 
half and quarter florins. Before this time gold had been 
but little used for English coin, and had borne no dis- 
tinct name. The noble, whose value is yet preserved in 
the well-known legal fee of 6x. 8</., supplanted the florin, 
and was displaced in the time of the Yorkists by the 

l6 MOtTEY. 

angels (equal to it in value), the half-angels, and the 
vials, equal in value to 30 groats. The accession of the 
Tudors introduced new coins ; in silver came the crown, 
half-crown, shilling, sixpence, and its half, quarter, and 
eighth parts ; in gold, the sovereign, and double sovereign, 
crown, half-crown, and noble. With the Stuarts were in- 
troduced guineas, half -guineas, and two- and five-guinea 
pieces in gold, with halfpence and farthings in tin and 
copper. Quarter-guineas in gold were struck in the ear- 
lier reign of the present house. Copper pence and two- 
penny pieces, and seven-shilling gold pieces, were issued 
by George III. At the end of the war our present coin- 
age was introduced, excepting four-penny pieces, which 
were struck by William IV. in silver, and threepenny 
pieces, in silver, and the farthing, in copper, by our 
present monarch. Double sovereigns and five-sovereign 
pieces were struck in gold, but are not in general circu- 
lation, and twopenny, penny, halfpenny, and penny pieces 
in silver also, which are usually called Maunday-pence, 
from an ancient custom of giving these and other small 
silver coins as alms on Maunday Thursday at the Royal 
Palace. It must not be supposed that the value of these 
coins continued the same, as the sameness of the name 
would seem to imply. The worth of metallic money 
always depends upon circumstances which no legislature 
can control, and as it can always be converted into bul- 
lion, no laws can keep it at a fictitious value. (" Bar- 
clay's Dictionary.") 

Abraham's purchase for four hundred shekels of silver, 
"current money with the merchant," of the field and 
cave of Machpelah as a burial-place for Sara, is almost 
the earliest instance on record of a money transaction. 


In the s^cme Book of Genesis we read that Joseph's 
brethren, when they went into Egypt to buy corn, found 
their money returned to them in their sacks, " each man's 
money in the mouth of his sack in full weight." This is 
worthy of remark, as indicating that in that early age it 
was not only the habit to count money, as to the number 
of pieces, but to take cognizance of its weight. The fact 
of their counting as well as weighing is apparent from 
another chapter, where we are told that Joseph, when he 
sent his brethren for their father, made presents to them 
of changes of raiment, "but to Benjamin he gave three 
hundred pieces of silver." Thus early in the history of 
the patriarchal dispensation we find that a silver cur- 
rency, guarded both by tale and by weight, was in ordi- 
nary use ; so it is probable that trade, as we now under- 
stand the term, was even then — nearly two thousand 
years before the time of Christ — an old institution. Mere 
barter of one commodity for another, which marks the 
transition of each nation or group of men from barbarism 
and theft to civilization and commerce, had been super- 
seded in those earliest communities that arose in the 
garden land of the world. While Abraham's ancestors 
were leading a pastoral life in Ur of the Chaldees, their 
neighbors of the Aryan stock were building cities and 
developing commerce in Persia and India, and the patient 
settlers on the banks of the Nile were making Egypt a 
granary for all the nations. Abraham, " very rich in 
cattle, in silver, and in gold," going down to sojourn in 
Egypt, with his flocks and herds and tents, because there 
was a grievous famine in Canaan, only did what other 
fathers of nations often had to do in times when it was 
easier for men to travel hundreds of miles in search of 

l8 MONEY. 

food than to wait until the food was brought to them. It 
was so two centuries later, when Jacob and his family 
went to settle in the land of Goshen ; and the histor of 
Jacob's son — ^Joseph, first a slave, then Potiphar's cltrk, 
then Pharaoh's prime-minister — is the earliest biography 
extant of a great merchant prince. The industry and 
shrewdness, the skill in turning all things to his profit, 
and the fidelity to his own race which Joseph displayed, 
have been the inheritance of the Jews, and the main 
source of their commercial success during the past five 
and thirty centuries. ("The Romance of Trade," by 
H. R. Fox Bourne.) 

The value of money consists in its utility as the best 
medium of exchange to be had. It is by labor that all 
things valuable to mankind are produced, and it is by 
exchange alone that individuals are enabled to partake 
of a great variety of commodities which their own labor 
could never, by any possibility, have commanded with- 
out it. In an advanced state of society, the food, cloth- 
ing, habitations, in ordinary use amongst all classes of 
men, are composed of immense numbers of ingredients^ 
the result of the industry of individuals scattered over 
the face of half the globe. It is evident, therefore, that 
if each person could obtain nothing but what was pro- 
duced by the labor of his own hands, or be exchanged 
by the old system of barter, mankind never could have 
emerged from a state of the rudest ignorance and bar- 
barism ; and by its system of "currency" we have a 
sure indication of a nation's intelligence. The first use 
of money marks an epoch in the history of commerce, 
was indeed the beginning of commerce, as in all its sub- 
sequent stages it has served as its pivot or fulcrum. The 


banker's calling began almost with the beginning of 
society. No sooner had men learnt to adopt a portable 
an ^^. -artificial equivalent for their commodities, and thus 
to Duy and sell and get gain more easily, than the more 
careful of them began to gather up their money in little 
heaps, and great heaps, if they were fortunate enough. 
These heaps were by the Romans called montes — mounds, 
or banks — and henceforth every money-maker was a 
primitive banker. When and in what precise way the 
great advantage of joint-stock heaping up of money was 
discovered antiquaries have yet to decide. It is enough 
for us to know that everywhere, as soon as commerce 
and patriotism had engendered enough fellow-feeling 
and community of interest among groups of men and 
sections of society, banking began to pass out of its first 
rude stage and to advance towards the condition in 
which we now find it ; and by giving the subject the 
necessary thought, our banking system, with the prin- 
ciple of the Currency Act judiciously enlarged, is quite 
able to meet the needs of an increasing commerce. 
Bankers or money-changers' tables were famous institu- 
tions all over the civilized world of the ancients. Livy 
tells how, in 308 B.C., if not before, they were to be 
found in the Roman forum, and later Latin authors 
make frequent allusions to banking transactions of all 
sorts. They talk of deposits and securities, bills of ex- 
change and drafts to order, cheques and bankers* books, 
as glibly as a modern merchant. But these things were 
nearly forgotten during the dark ages, until the Jews, 
true to the money-making propensities that character- 
ized them while they still had a country of their own, 
set the fashion of money-making and of banking in all 

20 MONEY. 

the countries of Europe through which they were dis- 
persed. Their first customers and their first disciples 
were the Italian merchants who made Venice, Florence, 
and Genoa great during the Middle Ages. In England, 
under the Plantagenets — it was the same in all the 
mediaeval states of continental Europe, — Jews and 
Italians settled themselves as traders in every thing, but 
especially in money, wherever any sort of fruitful com- 
merce was carried on. The kings of England used 
them as cashiers, pawnbrokers, and the like, until their 
own subjects were sufficiently trained in monetary arts 
to take their place ; and the royal examples were fol- 
lowed by all manner of folk who had need of gold, and 
credit enough to obtain it. Old Jewry and Lombard 
Street marked the districts in London that were fre- 
quented by these foreigners between the twelfth and 
fifteenth centuries. 

The Jews and Lombards in England, however, were 
only bankers in the sense of money-lenders ; and the 
Englishmen who succeeded them were of the same 
character down to the seventeenth century. What Sir 
William de la Pole was to Edward III. Sir Richard 
Whittington was to Henry IV. and Henry. V., and 
Sir Thomas Gresham to Edward VI. and Queen 
Elizabeth ; and these famous men were only represen- 
tatives of an irregular class of bankers, who enriched 
themselves and added greatly to the wealth and welfare 
of England during a dozen generations. All merchants 
were then to some extent bankers, but the trade of 
banking in its primitive condition was especially a part of 
the goldsmith's calling. This was only natural when gold 
was money much more exclusively than it is now. The 


banking occupation of the goldsmith was unintentionally 
introduced by Charles I., who, when sorely in need of 
funds with which to raise an army against the rebellious 
Scots, took possession of about ;^2oo,ooo, lodged by the 
merchapts of London in the Royal Mint as a place of 
safe custody. From that time the Mint ceased to be 
employed as a bank of deposit ; but the troubled state 
of the country, just entered upon civil war, rendered 
something of the sort more necessary than ever. The 
example of one or two who entrusted their savings to the 
goldsmiths, accustomed to the guardianship of large 
amounts of treasure, was quickly followed by others. 
This new arrangement found favor more rapidly through 
the willingness of the goldsmiths to pay interest for the 
money placed in their hands ; and long before the time 
of the Restoration they found themselves placed in a 
position very similar to that of a private banker of the 
present day ; some of them, indeed, were actually 
founders of banking houses that now exist. William 
Wheeler, one of the number, left his shop in Fleet Street, 
next door to Temple Bar, to his son-in-law, Francis 
Child, known — probably because he was the first to 
throw aside the goldsmith's trade, and make banking 
his only business — as " the father of the profession," and 
the same site was occupied till recently by the establish- 
ment which he made famous. James Hore, or Hoare, 
who settled first in Cheapside, and afterwards in Fleet 
Street, was, in like manner, the builder-up of the business 
that yet bears his name. (For further details of bank- 
ing, etc., the reader is referred to "The Romance of 
Trade," by H. R. Fox Bourne.) Tl\e goldsmiths gave 
paper bonds for the vast sums of money that they re- 

22 MONEY. 

ceived, just as they had been in the habit of receiving 
paper bonds for the money that they lent ; and they 
soon had half of the actual coins of the land in their 
keeping ; and the paper equivalents for it, issued by 
them, came to be used everywhere as money. Thereby 
inordinate power was placed in their hands, and great 
risk was incurred by those who made them their cash- 
keepers. The money intrusted to them was often lent 
out by them at high rates of interest, and if they failed 
through their own speculations, their clients were the 
chief sufferers. 

To lessen this danger, and provide a means for mer- 
chants to lend and borrow money, the Bank of England 
was started in 1694. The earliest bank was that of 
Barcelona, founded in 1401 ; the Bank of Venice did 
not receive money on deposit before 1587 ; the Bank of 
Genoa did not perform genuine banking business until 
1675. Banks were opened in Amsterdam, Hamburg, 
and Rotterdam, early in the seventeenth century, in 
each of which private speculators, in return for special 
services rendered to the state, in lending it money and 
collecting its revenues, received from it special privi- 
leges and protection in their financial relations with their 
fellow-citizens. The Bank at Amsterdam was prosper- 
ous when William III. became King of England, and 
from it William Paterson to a great extent derived the 
suggestions which he offered to Parliament in 1691. To 
appreciate at its proper worth the wise methods of bank- 
ing and finance Paterson advocated, we must recollect 
the systems of public borrowing then in vogue. " When 
the Treasury was epipty,'* as Macaulay says, " when the 
taxes came in slowly, and when the pay of soldiers and 


sailors was in arrear, it was necessary for the Chancellor 
of the Exchequer to go, hat in hand, up and down 
Cheapside and Cornhill, attended by the Lord Mayor 
and by the Aldermen, to make up a sum by borrowing 
;^ioo from this hosier, ;^2oo from that ironmonger ; 
and for these paltry loans he had to pay such interest as 
spendthrifts now pay to extortionate Jews upon accom- 
modation bills." In 1 69 1 the National Debt being then 
a new thing, Paterson was examined before . the House 
of Commons as to the best way of collecting and man- 
aging public loans, the public debt, then ;^ 3,000,000, 
being apparently an overwhelming burden to the coun- 
try. He suggested that a fixed sum of ;^ 1,000,000 at 
six per cent, should be subscribed by a corporation of 
merchants, and converted into a permanent fund, to be 
employed partly in meeting the pressing claims upon 
the State, and partly in forming a public bank, "to 
exchange such current bills as should be brought to be 
exchanged, the better to give credit thereunto, and make 
the said bills the better to circulate." The suggestion 
was demurred to by Parliament, the old struggling ways 
of borrowing were continued, and by 1694 the debt was 
thus raised from ;^3,ooo,ooo to ^6,000,000, and the 
government found itself in such embarrassment that it 
was forced to adopt Paterson's project substantially, 
though not quite as he planned it, for a bank of Eng- 

In 1693 " Mr. Paterson " is mentioned in the journals 
of the House of Commons as appearing before a com- 
mittee on behalf of capitalists of London, to offer 
money for the public service upon parliamentary secu- 
rity, with the new condition^ that their bills, payable in 

24 MONEY. 

coin on demand, should be made transferable without 
endorsement Herein you will perceive the origin of the 
Bank of England note — paper-money representation of 
gold, paper money based on the value of gold ; being 
payable on demand in coin, transferable, and payable to 
bearer. At the present day we can judge, by the spe- 
cious arguments of those who advocate paper money, the 
difficulty Paterson had in answering by his tracts the 
specious writings of the numerous projectors of the 
many wild schemes then so rampant, who, to further 
their own ends, boldly advocated a government paper 
money, or transferable bills not payable in coin on demand, 
Paterson in 1691 proposed means for restoring the coin- 
age to its proper standard ; but his advice was not 
taken, and ultimately the measures adopted on that 
head with great ability by Mr. Montague, afterward Earl 
of Halifax, were far less economical, and even less 
effectual, than the plan proposed by Paterson. On that 
occasion, in 1696, the Bank of England, the direction of 
which he had quitted, was compelled by mismanage- 
ment to stop. The stopage was the more serious, as it 
took place pending the difficulty respecting the coin ; 
and the value of the bank notes sustained a great fall, 
since the credit of the bank itself was weakened. From 
two letters (attributed to Paterson) sent to Mr. Locke 
against lowering the standard of the coin, as proposed 
to the Treasury by Mr. Lowndes, I extract the following, 
as being of universal application ; and as they also 
clearly demonstrate the value of credit, and how alone 
credit is to be obtained and maintained, the lesson con- 
veyed is no less applicable in 1880 than it was in 1696 : 
" The discredit of the coin, from its being clipped or 


worn, and the discredit of the bank notes, in conse- 
quence of the refusal of payment by the bank in gold 
coin on demand, are the same thing, and he insists that 
the proprietors of the bank, and the dir,ectors, have only 
one course open if they would be safe. They must pay 
the amount of their notes in coin on demand, what- 
ever it might cost them." 

It is only by understanding our monetary system that 
we can realize the power of " credit." Our commercial 
system is based upon faith ; cheques, bills, notes, are 
mere bits of paper, and only promises to pay ; yet so great 
is the power of " credit," that transactions to the extent 
of " over a hundred millions " weekly are transacted 
through the Clearing House. Go/d is a mere pigmy, as a 
medium of exchange, to this giant, " paper," based upon 
" credit." * Simply by system and faith, in conjunction 
with banking, this institution settles the exchanges, the 
buying and selling, to this enormous amount, without the 
aid of a single metallic coin, — merely by book-keeping, 
or transfer of cheques^ the debiting or crediting of A or 
B. Credit — few know its power, how strong it is ; as the 
air, to buoy you up ; how slight it is, as a mere vapor ; 
when roughly touched, can do an amount of mischief of 
which it is impossible to foretell the extent. Mr. Harvey 
says : " Paper money is the money of civilization." He 
is right ; but I contend we hav^ already in operation a 
paper money; " cheques," doing its work well, and 
a monetary system, based on reality^ that, with an intelli- 
gent expansion, is quite capable to meet the needs 
of 1880. There must be no tampering with this princi- 
ple ; it must be a paper binding its issuers to their last 
penny to honor it on demand with gold, or with securi- 

26 MONEY. 

ties or produce calculated upon the value of gold. It is 
this belief that has made bank notes so useful to us, and 
enables "cheques " to take the place of coin. Paper 
money, unless based on real money, is like a bill of 
exchange from a doubtful trader, or an order from a man 
in bad credit. Prudent men leave both alone ; the gain 
is doubtful, the certainty of a loss at some period is inev- 
itable. For paper money to have a legal security, to 
have the value of x^iX money, it is essential that the 
belief exists that the law compels that it shall not be 
issued except upon a money basis redeemable in gold, or 
of equal value to gold, on demand. Any faltering in 
payment of paper diminishes its value ; it has become a 
kind of clipped coin, and no security can restore the 
apparent value but the confidence of the nation that the 
note will at all times and anywhere be of equal value to 
the money it represents. There is no necessity for this 
metallic guaranty to be abolished, as our commercial 
panics do not arise from too little gold, but upon the too 
large use of paper bills of exchange, that have got into 
circulation upon the representation that the merchant 
has consigned goods abroad to the value thereof, or that 
they represent a debt due by A to B ; and the value in 
both cases not being real, the collapse is inevitable. And 
I have failed in all the methods ever brought under my 
notice to see how this can be remedied by any system of 
paper money based upon labor, land, and other so-called 
articles of value, as the value must depend upon supply 
and demand ; and if paper money could be had by all 
producers, there would be too much of one thing and too 
little of the other. Therefore gold is the best measure of 
value, and the basis of the best medium of exchange 


between all men. We do not take a note if we think it 
can only be paid by another note which has a limited 
sphere of value, but we take it because we think at any 
time the five sovereigns it represents are to be had by 
applying for the same, and that the five sovereigns will 
give us equal value to what we gave for the note any- 
where, everywhere. You may talk as you like about 
money being only a medium of exchange, you cannot 
alter the fact that money is the universal medium of 
exchange, because it is based on the value of gold 
or silver ; and paper is taken as money because it is ac- 
cepted as a promise to pay gold for it when wanted. 
Paper, like steam, is. eminently useful in prudent hands, 
but of tremendous hazard when not controlled ; and the 
majority lack the practical wisdom required to manage 
paper money, the sagacity to know when to expand and 
contract it ; and they forget that, working with such 
explosive materials, whenever there is a doubt, they should 
incline to the side of safety. Hopeful men are not fit to 
use such a dangerous weapon, — they over-trade ; but 
there could be no over-trading without reckless credit, 
and this latter is caused by the facilities offered by banks. 
The remedy for panics is to borrow less, to give less 
credit, and to keep trade to legitimate demands and 
healthy channels. Keep, in fact, to real money, which 
can hardly ever multiply too much in any country, 
because its legitimate increase is the certain sign of the 
increase of trade, or thrift, of which it is the meas- 
ure, and consequently, of the soundness of the whole 
body. But paper money may, does increase with- 
out any increase of trade or thrift, for it is not the meas- 
ure of the trade or providence of a nation, but of its 

28 MONEY. 

necessities ; and it is absurd, and must be ruinous, that 
the same cause which naturally exhausts the wealth of a 
nation should likewise be the only productive cause 
or representative, of its money. For instance, there are 
those who argue that " consols " should be the basis of 
money. A, they say, lends the government ;;^i,ooo, and 
if he had a transferable promissory note he would retain 
a representation of his money, although he had parted 
with the reality. I know no better way of explaining the 
respective merits of gold and paper. Those in favor of 
the gold currency say " No." A has transferred his gold 
to B, therefore is simply entitled to his name being en- 
tered down as a creditor of the state, entitled to so much 
interest, and with power to sell his debt when he can find 
a purchaser, and it would be very unfair, and depreciate 
the value of every one else's gold, if he had a piece of 
paper like a bill of exchange that he could cash in case 
of need for the money so lent. There would be in reality 
two moneys in existence, the " paper money " and the 
" real money," for which the borrower has been able to 
obtain value in exchange, the paper money representing 
a debt truly, but with no real money behind it ; as money 
in the funds is not money at all, — it is a debt, bringing in a 
certain interest yearly, and on account of the regularity 
of payment of this interest, the people with money gen- 
erally are willing to pay the money back to A and have 
the indebtedness transferred from his name to theirs. 
But, in plain language, the possessor of a thousand 
pounds' worth of stock possesses nothing in reality but 
the right of receiving the interest of a thousand pounds, 
which money of his the government of the time having 
need of, borrowed of him, and spent. Bank notes as now 


issued are the anly legitimate paper money, and the 
nation should watch jealously any increase thereof, un- 
less warranted by an increase of gold in the coffers of 
the bank ; or, as you will perceive further on, my opinion 
is that the state alone should issue notes ; and that all 
bankers ought to have the right to obtain the notes they 
require, by depositing with the government national or 
other securities of the full value of the same ; every note 
to be stamped when issued in proportion to its value ; and 
that notes should be issued for one pound, two pounds, 
three pounds, four pounds, as well as for five pounds, 
etc., as at present. 


The reply of most will be : That something which 
raises us above those small schemes and struggling in 
which the mass of the people have to pass their existence ; 
that something which enables us to feel secure of our 
position, which enables us to be uppermost, to feel our- 
selves on the highest round of the social ladder, and 
therefore worshipped by all of us, because we hate the 
idea of being inferior to anybody. 

Money is a power whose sway 

Angel forms adore. 
And the lost obey, 

Weeping evermore. 

It will do us all good to understand money better, and 
talk about it more than we are in the habit of doing. It 
is the key to a man's character how he talks of money. 
Most people treat money as if it were a sin to mention 
it ; it is a subject rarely talked about in society — or they 


hug it to themselves as a bosom friend. It needs a well 
balanced brain to understand and treat money at its real 
value, and you can detect the weakness or strength of a 
man by the way he talks about money. Some will speak 
of it as if happiness consisted in possessing it ; whereas 
happiness is not in the money, but how the man will use 
it. The secret of happiness is to look things in the face, 
to resolve to do your best and endure the worst, to realize 
that " all is not lost when much is lost." The happy 
man is he who grasps the idea that the struggle of making 
life contented is always to make the best of things that 
might be worse ; to such souls " there are spring days 
in winter." 

What is money ? "A simple invention it was," says 
Mr. Carlyle, " in the old world grazier, sick of lugging 
his slow ox about the country till he got it bartered for 
corn or oil, to take a piece of leather, and thereon scratch 
or stamp the mere figure of an ox, pecuSy put it in his 
pocket, and call it pecunia^ money. Yet hereby did barter 
come to be sale ; the leather money is now golden and 
paper, and all miracles have been out-miracled ; for there 
are Rothschilds and English national debts ; and whoso 
has sixpence is sovereign, to the length of sixpence, over 
all men ; can command cooks to feed him, philosophers to 
teach him, kings to mount guard over him, to the length 
of sixpence." If money be " the sinews of war," it is 
that because, in a much more real sense, it is the sinews 
of trade. Money is metal coined for the purposes of 
commerce, and is usually stamped with the name and 
arms of the king or ruler of the state that directs it to 
pass current. In a more enlarged sense, money means 
any representation of property, whether as coin or in the 


fonn of paper ; the circulating medium now means any 
currency usually and lawfully employed in buying and 
selling as the equivalent of money, as bills of exchange, 
bank notes, cheques. Money was originally stamped 
coin, and afterwards any thing that generally takes its 
place in buying and selling. Cash was originally coin 
kept in hand for immediate use ; and hence cash pay- 
ments are strictly payments in coin, though bank notes 
and cheques are ordinarily received in such cases because 
of the public faith that they can always be cashed at the 
bank. Money in political economy is any representation 
of wealth, whether metallic or paper, issued by govern- 
ment and sustained by their credit. Commercially, bills 
of exchange are very powerful as monetary agents. Mr. 
Macleod tells us that " money is a representation of 
debt, a right or title to demand something from some 
one else," and that " the special and particular purpose 
of money is to represent the debts that arise from the un- 
equal exchanges of men." Debts are deferred payments ; 
whether money is given at once, or the goods are taken 
away upon a covenant to pay for them a month later, the 
nature of the exchange remains the same. No new ele- 
ment is introduced ; the exchange is simply not com- 
pleted at the time. But the debt is not money. By 
means of bills the tradesman can sell his claims to his 
banker, who will lend him the money and receive from 
the purchaser the money when due. But it is a great 
error to call a debt money — that is, wealth. Debts are 
not wealth, but simply an acknowledgment by A that he 
has received property of the value thereof from B, and 
that he will pay the money at a specified time. In large 
transactions debts are settled by cheques and bills of 

32 MONEY. 

exchange. A bill of exchange purports to be an acknowl- 
edgment by B that he owes A a certain sum of money 
for value received, the bill being payable to A or his 
order. By endorsing the same he transfers his right to 
receive from B a certain sum, at a time specified, to C, 
on condition that C gives him the money at once, less 
interest for the time to run. Bills of exchange are very 
useful as remittances between different countries, and 
for adjusting the commercial debts which may be mu- 
tually due and owing by other parties, besides those 
whose names may appear on the bills as drawers and 
acceptors. Bills are purchased by those who have to 
make remittances to places on which they are drawn of 
parties by whom they are drawn ; and the trade of pur- 
chasing and selling bills forms an important branch of 
monetary business, conducted by persons who are termed 
exchange brokers. The value of the bills when offered 
for sale depends not only on the actual amount for which 
they are drawn, but also on the conditions of the market 
as regards the demand and supply. If there are plenty 
of bills offered in any particular city, the price falls, and 
when they are scarce it rises. The fluctuations in prices 
are made public twice a week in London by what is 
termed the " Course of Exchange," being a list of the 
chief cities on which bills are drawn, and it shows the 
rate of exchange, or the premium, or discount, on bills 
in the places specified. Bills of exchange are very use- 
ful, and relieve the mind immensely. A merchant with 
heavy payments would never be able to bear the strain 
were it not for the knowledge that he holds in reserve an 
amount of paper money that in case of need his bankers 
will pass to the credit of his account, at the rate of inter- 


est current at the time, according to his position. Good 
bills may always be discounted. The facilities for con- 
verting bills into cash have caused at all times a large 
amount of what are called " accommodation bills." In 
reality such bills are a fraud, and the drawer and acceptor 
of all such fictitious documents ought to be punished for 
obtaining money under false pretences. Their origin 
arose as follows : A trader unable to meet his liabilities, 
yet in good credit with his banker, gets a friend, custom- 
er, or employ^ to accept a bill or bills, and pays the 
same into his banker's with other good bills, upon the 
assumption they are all bona-fide trade bills, received by 
the merchant from his customers for goods sold and de- 
livered. As the bill or bills become due, the same 
operation is repeated to raise money to meet it ; until 
invariably at last, during some commercial panic, the 
banker, being more cautious, refuses certain bills, and 
the bubble bursts. The ruin of the insolvent trader 
himself is accomplished, and he not unfrequently draws 
along with him others who unfortunately, or imprudently, 
or fraudulently have been acting in collusion to pass off 
as genuine bills, for value received, those unsubstantial 
representatives of value. Legally, a bill of exchange, as 
well in its original formation as in its successive trans- 
fers, is an assignment of a debt, by which the right of 
the original creditor to sue for and obtain payment is 
transferred to the holder for the time being. It is this 
assignability vesting in the holder a right of action 
against the original parties, which chiefly distinguishes a 
bill of exchange from every other form of legal contract. 
Another important privilege is, that though a simple 
contract debt, and as such requires consideration to give 

34 MONEY. 

it legal efficacy, the consideration is presumed until the 
want of it be shown. It is available, therefore, in the 
hands of bona-fide holders upon merely formal proof of 
title by the signature of the party to be charged — that is 
to say, it is unnecessary to prove value given unless it be 
first shown on the other side that the bill is in some stage 
or other tainted with an illegality ; and the bona fides are 
assumed until it shall be made to appear that the holder 
was at the time of making it privy to that illegality. 

Money is defined by Colonel Torrens as " the only 
power which cannot only effect the purchase of a com- 
modity, but close the transaction.*' A bill of exchange is 
" not money," although used as a medium of exchange, 
but it does not close a transaction ; it is merely a writ- 
ten acknowledgment of indebtedness by A B to C D, 
enabling the latter to raise money if needed thereby. 

The precious metals, gold ^nd silver, have always 
been esteemed the most desirable kind of property to 
hold, and through all time have been held in great 

In the second chapter of Genesis we are told of " the 
land of Havilah, where there is gold, and the gold of 
that land is good " ; and in the Book of Kings, that 
" silver was nothing accounted of in the days of Solomon, 
who made silver to be in Jerusalem as stones." As. 
standards of value, a basis for all exchange, a solvent 
of all human transactions of a commercial character, the 
precious metals have always been of great service. 

In "Money and Morals," Mr. Lalor sayis that "money 
is gold, notes, and bank-credit ; " but this is not a correct 
definition of money, which in reality is gold and silver, 
and the notes and bank credits are only useful, and only 

WffA T IS MONEY? 35 

money^ in the sense that by their aid the necessary gold 
and silver can be obtained. Notes or checks are, as a 
medium of exchange, of course equally useful as money 
itself, as being a substitute for, or representative of, so 
much money; they have the power to obtain the par- 
ticular kind of wealth one has need of. Money is 
wealth, but must not be confounded with the real wealth 
it commands ; it is only one of the powers necessary to 
obtain real wealth, "all useful, or necessary, created 
things." But the power of money is unmistakable in 
times of panic, or when one of those 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. Truly, with Shelley, then we feel 

" The awful shadow of some unseen power 
Floats, though unseen, amongst us." 

Who are then the strong men to stand unbowed beneath 
the storm ? Not the man for whom thousands are work- 
ing, still less the manufacturer with his costly machines, 
or the merchant with his warehouse full of goods, and 
his organized corps of laborers, whom it seems equal ruin 
to retain or to discharge. Whilst the possessors of real 
wealth are paralyzed and trembling, the men whose 
dominion for the time is supreme are those possessing a 
good stock of short-dated bills of exchange, easy of dis- 
count anywhere, or whose balance at their bankers is 
such that they can deliver the proudest merchant from 
the jaws of ruin by a leaf from their check book. These 
are the men who, according to the great thought of 
De Quincey, " have but to touch a spring in London to 

36 MONEY. 

produce a vibration throughout the world, to quicken or 
arrest the march of armies, to frustrate the ambition of 
kings and statesmen, and to perform the noble exploits 
of modem civilization — those great ocean canals and 
railways which bind together the families of men." 

When we think upon its great power, we must be 
ready to make allowance for those who foolishly regard 
money as an end in itself, and not as a means ; and 
hence their life is spent in honor of the deity " Mam- 
mon." Their song and praise are ever ready to do 
homage to the great idol they worship so indefatigably 
from early morning to dewy eve. Aye, not on the Sab- 
bath-day only, but every day, " their God is Mammon " ; 
their entire being is absorbed in thinking how to obtain 

"Gold! gold! Nothing but gold ! 
Bright and yellow, and hard and cold ! " 

Money is different to barter, inasmuch as in an act of 
barter each of the two parties make 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 money as a currency of " medial com- 
modity" divides the act of barter into two parts. 
Henceforth 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 
medium of exchange consists in its giving this power. A 
metallic currency was an immense step in civilization ; 
gold was obtained in exchange for domestic products. 
Each portion was a substitute for a portion of useful 
articles sent away. The currency of the country was 

IVffA T IS MONE Yf 37 

obtained by the community, as a whole, having paid for 
it a full equivalent out of the produce of its labor, and 
has acquired an instrument of singular power in quick- 
ening 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. Wise rulers and teachers 
would impress on the people under them the necessity 
and value of thrift, as by easily and multiplied associa- 
tions, money, gold, becomes attractive, and is very stimu- 
lating to common minds, more so than the things which 
it commands, and thus is instrumental in infusing a new 
energy into industry. The essential characteristic of 
money appears to be that of acting as an universal 
equivalent, in giving a power of purchasing anywhere to 
its possessor, whatever he desires, as far as its value 
goes, and the exercise of which power effects a payment 
as well as a purchase. Capital may be defined as money 
saved ; that is, lent to labor to purchase the necessary 
materials and necessaries of life whilst making or creating 
new wealth. Paper money is useful as a medium of ex- 
change for home purposes, and less costly than gold, 
paper suppl3dng the same good offices to gold that credit 
does for capital ; as, being in good credit, your banker 
helps you by loan, or discounting bills, with the capital 
necessary for carrying on trading operations. 

The distinction between gold and paper money is this : 
The man who sells his goods for gold is paid : ^' the 
gold is payment." It is real barter in one sense, as one 
commodity is given in exchange for another. The gold, 
if desired, can be melted, and sold in ingots for purposes 
of art, for those who use gold in different kinds of 

j8 MONEY. 

manufactures ; and this shows that (less cost of coinage) 
it is full payment. People take it because it is a com- 
modity worth the goods given for it ; hence it is that 
gold is so valuable as a medium of exchange. Men soon 
found out that it was impossible for them to exchange the 
relative products of their labor conveniently without 
some medium representing Talue. It is extraordinary 
from the earliest period of the world, and indeed down to 
the present day, how very curious are some of the sub- 
stitutes for what we now call money, which have been in 
use, at one time or the other, in different parts of the 
world. It may be taken as an axiom that the con- 
venience of the medium of currency indicates the civili- 
zation of the community. There are many parts of 
Asia where the cowrie shell is still the habitual cur- 
rency. Of course these little shells are of infinitesi- 
mally small value in themselves ; but, such as they are, 
they are sufficient to procure for their owners a meal of 
those cheap productions in which those countries abound. 
In some parts of Africa a measure of salt is the measure 
of value, and in those countries salt consequently be- 
comes the currency ; and even so late as the last century, 
when Adam Smith wrote, it was not unusual with 
our neighbors on the other side of the Tweed to pay the 
baker's bill or the ale-house score in iron nails. 

Those who argue in favor of paper money assume that 
trade is bad for want of gold, that low prices are unre- 
munerative, and that unremunerative prices kill trade. 
They are right and wrong. There is no denying that the 
general power of consumption is sufficiently strong to put 
aside the idea of over-production so far as regards the 
satisfying the wants of the masses ; and that supposing 


that every one had more gold, there would be more pur- 
chases made ; therefore it is a want of gold that indi- 
rectly causes diminution of demand. But by this want 
of gold, please remember I mean solely the want of 
power of the would-be purchaser to offer in barter for the 
gold produce of equal value. In fact, briefly, it is under' 
production^ not over-production, that causes depression 
of trade. 

Over-production is nothing but under-consumption. It 
is not that more things are produced than could be used, 
but either that more of certain articles are produced than 
there is a demand for, or that the people's power of 
purchase, the want of money to buy the articles pro- 
duced, forces them to consume less than usual, or than 
they have been doing. Therefore it is under-production 
that causes the distress. The remedy is to "produce 
more " ; create more produce, and get in exchange for it 
" money." Over-production is an absurdity ; that is to 
say, an over-production of articles really needed. If 
every household had the purchasing power, could all the 
factories supply for a time a sufficiency of bedding, 
clothing, furniture, etc., that could be bought ? 

There is abundance of gold, abundant facilities to get 
money in 1887 ; but the power to obtain the gold is 
wanting. We do not want to be flooded with paper 
money, giving people the power to obtain the goods that 
are in existence ; we want the people to see that they 
must work harder, and produce more or consume less. 
Trade is bad because the people have not the gold to buy 
commodities they could use. But they must be taught it 
is the want of gold as a thing of intrinsic value, the want 
of gold as a commodity, the want of the right to barter 

40 MONEY. 

by being in a position to give gold, or notes based on 
gold, or any commodity of equal value that gives you for 
your goods a something that will get you an equivalent 
anywhere. And the want of money, so much com- 
plained of, is caused by the want of goods to give in ex- 
change for it. The only remedy is to "produce," and to 
get the power to purchase something that you want and 
another man has. It is useless to say these are mere 
prejudices in favor of gold and silver. I deny the right 
to affix the stigma of prejudice against the innate mor- 
ality of the nation that decrees its money shall be real 
and not pretence. Paper may, by the signature of a good 
name, or by the stamp of the state, or in the shape of a 
note from a local bank of repute, or the bank of the 
nation, acquire a local value, and seem as precious to the 
unthinking mind as the gold it or they represent ; but it 
must not be forgotten that this value is only locals and 
that the assumed value the paper passes for is upon the 
supposition that the real money is available at a certain 
date on the one hand, or on demand upon the other. 
Paper money may be as useful and be more economical ' 
for all purposes of internal commerce ; and I admit that 
it is ; but it is not money. The very best paper money 
extant is but a promise to pay money ; therefore it is not 
available for foreign commerce. And the depression of 
trade arises not for want of, but because of, the fictitious 
money that has been used to develop trade beyond its 
legitimate compass ; and the low prices are the result of 
producing a certain class of goods in excess of the 
demand for it, or the money available at the time for that 
particular commodity. It must not be forgotten that in 
the greatest crisis or panic that ever existed, there is, 


always has been, as much gold as was really needed. The 
panic arises from so many people asking for gold they 
really da not wanty and locking up temporarily by their in- 
sane action the money that is needed to meet demands 
and engagements made before the panic was contem- 
plated ; hence there is apparently a scarcity, but always 
money enough for those who have a right to it. The 
exceptionally high rate of interest for a brief period 
would affect no solvent firm, the panic does good service 
in making bankers and money-lenders cautious, and 
stops rotten houses, or houses trading on fictitious 
paper, accommodation bills, etc. ; and the losses 
on forced sales are incurred by those who have 
been speculating beyond their position, by those who 
rely on smooth sailing, and who, in order to keep their 
vessels afloat, have to get rid of superfluous stock for 
what it will fetch, but whose losses may be traced, 
and should be attributed, to their want of judgment, and 
commercial and financial incapacity. The advocates of 
"paper" are right ; all these panics arise from want of 
money ; but it is from want of money that never ought 
to have been wanted. It is not wanted by the trade or 
business or financial establishments judiciously worked, 
but by those reckless schemers, financial and commercial, 
who have been distributing so freely "paper" broad- 
cast, and with no real value behind. Yet we are asked 
to increase this fictitious instrument, as a means of pre- 
venting catastrophes brought about by it ; like the Irish- 
man, who, being told to take two pills, argued to himself 
that as by taking two pills he would be so much better, 
therefore if he took four he would be so much better 
Still There is no doubt that during the last fifty years 

42 MONEY, 

the producing capacity of the world has increased im- 
mensely ; but it is wrong to infer that because we quad- 
ruple the powers of production we necessarily require a 
metallic currency four times greater. This is a mistake. 
I tell Mr. Harvey that "paper money is the money of 
civilization " ; that our exchanges are effected without 
the use of gold ; that gold and silver are only wanted 
for change ; that 97 per cent, of the settlements are 
made by checks j that by a system of book-keeping, ex- 
change of goods for goods, value for value, is made by 
check from A to B, and the sum simply credited to B 
and debited to A ; no money passes. We want no ficti- 
tious paper money, but greater care that it be more 
jealously excluded for the future by our bankers. It is 
not 'the "convertibility " of our paper money that is at 
the bottom of panics ; it is an ignorance of money that 
is the cause. A better system of currency would lessen 
the effects of panics ; but panics and depressions are 
caused by departures from the genuine system, by an 
unnatural inflation, caused by the temporary substitu- 
tion of paper, in the shape of bills, by a class of reck- 
less, speculative traders, shippers, " foreign merchants " 
as they call themselves, who have been too freely helped 
by bankers, men of straw, who, if the venture does not 
pay, are not prepared to redeem the promises when due. 

Currency — a region of mystery, that may be justly 
described as chaos. The word has been a bugbear at all 
times ; introduce it, you are voted a bore ; men fly from 
the subject, as though to obtain clear, definite, and intel- 
ligible knowledge thereof was a task exceeding the 
powers of the human intellect. 


" There was no need," exclaimed recently an ex-Lord 
Mayor in the House of Commons, " to go into all the 
deeper quagmires of bank notes and such things,'which 
no man could understand in this world, or, as he believed, 
in the next." Having a different opinion I have written 
this book, believing that not only is man easily able to 
understand what money, bank notes, bills, etc., are, but 
thai he ought to know all about such important subjects. 
Currency is only an invention of man's, a contrivance 
devised for, and capable of being altered to suit the 
wants, and render an indispensable service to the 
practical life, of every civilized people. It is an insult 
to the Creator to imagine that man's reason cannot 
comprehend the action of an instrument, a machine 
invented by man himself, to perform a specific purpose ; 
that he cannot understand the operations of a tool con- 
structed at the dawn of civilization, and which has 
gradually been varied and its powers added to, accord- 
ing to the need of man's progress. Whether they will 
trouble themselves to study and master the subject or 
not remains to be seen ; but this is certain, that it is of 
vital importance to the prosperity and happiness of every 
nation to solve correctly this currency question, as a bad 
or inadequate currency inflicts the most severe calamities 
on a nation ; periods of loss and ruin, public and private, 
are inevitable, from an ill adapted, badly constructed 
currency. It seems incredible that men should be satis- 
fied with using so important a tool as money, a tool that 
is in every man's hand, and yet never give a thought to 
the question — ^What money is, what it does ; is it a good 
tool, can we have a better ; or does our present currency 
do for us all money can do or we require it to do for us ? 

44 MONEY. 

I have no doubt in my own mind that money might be 
made infinitely more useful to every living being if they 
properly understood what it is ; and also as positively 
assert that it is a subject that can be easily and natur- 
ally explained, and be understandable by every one, if 
men only choose that it shall be. 

Currency is that which is in circulation, or is given 
and taken as having value, or as representing property ; 
as the currency of a country, a specie currency ; coin, 
strictly speaking, generally called " money." The word 
is derived from Juno Moneta, whose temple was the mint 
in which Roman coin was made, the stamped pieces of 
metal which constituted the currency of Rome. Thus 
the word money implies minting ; that is, the shaping 
and stamping those bits of metal which are employed 
in buying and selling. Barter was the fundamental 
basis of commercial transactions ; bullion was an acces- 
sory, very costly, most convenient, indispensable in fact, 
among wealthy and civilized nations, where the consum- 
ers had so many wants ; but, owing to the division of 
labor, each worker produced so little that was of use to 
himself, that simple barter soon became too cumbrous a 
process, and utterly impracticable for wholesale transac- 
tions, shopping, or retail business ; so counters or "cur- 
rency *' coins, notes, bills, checks, 'were introduced as 
needed by society to facilitate the exchange of com- 
modities in buying and selling, superseding barter, and 
gold became the basis of value, and was enthroned as 
a special, and has become to be regarded almost as a 
sacred, metal by nearly half the civilized world. As a 
basis of value there is no better medium than gold ; its 
utility consists in its representing value in little bulk, 


and it readily admits of the gains of life being reckoned 
and possessed in less cumbrous form than houses and 
land, herds of cattle, or ships and merchandise. So 
gold has become established as the metallic currency, 
as the form we recognize to represent all other forms 
of wealth ; and although as a metal for any purposes of 
utility almost worthless of itself, it derives its great 
value from the other kinds of property of which it has be- 
come the acknowledged representative. As a metal, its 
intrinsic value rests upon the difficulty in getting it ; the 
cost of conveying men to the distant gold countries, the 
cost of their living in a region where every thing is very 
dear owing to the distance from which it must be 
brought, and to the extra profit men require before they 
will go so far and suffer so much. Society pays dearly 
for its counters, a heavy price ; each ounce of gold repre- 
sents so much labor withdrawn from agriculture and 
other industrial pursuits, which minister directly to the 
necessities and comforts of mankind. 

We find by experience we cannot do without money ; 
that it is essential to have it, as buying and selling can- 
not be done without it ; that men generally take it in 
exchange for their labor, or their goods, or their houses ; 
that in exchange for it we can supply ourselves with all 
the comforts of life, the luxuries of modern times. Yet 
to prove it is only of value when recognized as such, we 
find that in China, India, Japan, Asia generally, the 
people repudiate the peculiar value we attach to the 
yellow metal, gold, and they exalt the shining white 
metal, silver, into a similar conventional importance ; 
whereas here, although we all take silver as we do gold, 
and accept it as being, — whether sixpence, shilling. 

46 MONEY. 

florin,— of proportionable value to gold, yet legally silver 
is not money here ; that is, it is not a legal tender, and 
may be refused, save to the extent of forty shillings, in 
payment of a debt or in exchange for gold. Above forty 
shillings the law regards silver simply as bullion ; it is 
no more money than it is a legal tender, a medium of 
exchange for debt or goods, than is brass or tin. 

We laugh if a semi-civilized people propose to pay us 
for our goods in sea-shells, or some other form of non- 
metallic currency ; we fail to see that the value of 
money, or the counter used as such, is the exchangeable 
power people give to it. These barbarians are equally 
averse to receive our gold and silver coins, which we 
have been taught to regard as the perfection of money ; 
but the value is only in their power as and when they are 
recognized as a medium of exchange. These barbarous 
tribes prefer selling us their produce for beads and 
trinkets that we consider as of no value. You will 
therefore perceive that although we regard gold as all in 
all, fully one half of the civilized world do not, silver 
taking the highest place with them, whilst barbarous 
tribes refuse to accept as money either our gold or silver 

A few years ago, when the trade with Japan was 
opened, our merchants were surprised to find that the 
Japanese appraised gold very differently from us ; so 
that a sovereign was only considered by them as equal 
to about one fourth of the quantity of silver which it 
represents with us. Half-a-dozen kinds of silver coin 
are current at Shanghai in China, five kinds of the dol- 
lar and the Indian rupee ; but until 1855 the old Span- 
ish Carolus dollar was the only legal tender ; the Carolus 


dollar was the one best known to the Chinese merchants, 
and the one in which they had most confidence ; 
and to show what prejudice does, although the intrinsic 
value of the five dollars was the same, the old Carolus 
dollar was considered to be worth yj., whereas the others 
were barely worth 5^. This is an extreme case, but all 
people view with suspicion the money of other people. 
The English sovereign is taken on the Continent, but 
does not circulate there, no more than napoleons will 
circulate in England ; being strange to the people, they 
are suspicious of them, and (as foreign coins are never 
a legal tender in any country) refuse to receive them as 

Another fact not generally known here is, that silver, 
which we do not recognize as a legal tender beyond the 
sum of forty shillings, is the most widely recognized, and 
therefore holds the first place in the currency of the 
world. It is the standard money of China and of India, 
and is recognized as money all over Europe and Amer- 
ica. It used to be the standard money of Europe, the 
English pound and the French livre originally consisting 
of a certain amount of silver ; and at this day it still 
constitutes the greater portion of the currency of the 
Continent, and in many of the outlying and half-barbar- 
ous parts of the world silver will be accepted where gold 
coins would be refused. Gold, however, is steadily 
rising in monetary importance, owing to its greater por- 
tability, and there is every probability that gold will 
ultimately be supreme in the metallic currency of the 
civilized world. We have implicit confidence in it, 
and all of us feel when we get a sovereign, whether for 
our labor, or the sale of our goods, or in payment 

48 MONEY. 

of a debt, that it is worth the 20s, we give in exchange 
for it. 

It would be very unwise to undermine this confidence 
in the power of gold coin, that it can only be had by 
giving for it full value in other goods. But this import- 
ant consideration is too much overlooked, that to sell 
property, and receive for it money, gold coins, or notes 
with a right to receive gold coin, is no increase of riches, 
but merely an exchange of two articles of wealth of 
equal value, a precious metal for some other article. 
You have the coin, I have the property ; if we can agree 
to sell the one for the other, well and good ; but do not 
forget we are but making an exchange, and there is no 
increase in the nation's or world's riches by exchanging, 
but only in producing. • An increase in the crop of tea 
increases the wealth of China, and increases ours, as we 
can buy more tea for the same money ; but cheaper gold 
coin does not. increase the national wealth, it only in- 
creases the nominal value of goods ; that is, more gold 
has to be used in the exchange of goods ; but there is no 
increase in real wealth, in the quantity of goods pro- 
duced. We think we are richer, but we are not, as the 
larger quantity of gold only exchanges for the lesser 
quantity of goods, only does, in fact, the work of the 
smaller quantity of gold used in effecting the exchange 
heretofore. The common opinion is the other way, that 
as the object of all trade is to obtain money, the object 
of our foreign trade should be to export less than we im- 
port, and unless we receive gold to make the difference, 
there is no benefit therefrom ; as if gold was more to be 
rejoiced over than raw material to manufacture the 
articles we require, but do not possess. People see that 


all strive after gold, are all eager to part with what they 
have for gold, not for ornament, not to keep ; it is got to 
be parted with, and is striven after, because it performs 
a service to its owner more readily than any other instru- 
ment he can obtain ; it is the most useful tool that was 
ever made, and performs thoroughly for man the work 
for which it was made. It should not be left idle. If 
we do not want to use it, it will bring us interest by lend- 
ing it to those who do ; it is too costly a tool, too inval- 
uable a machine, too productive an instrument to lie 
idle in our pockets ; it does its work not by staying in its 
owner's hands, but by leaving them. No other concep- 
tion of coin is rational or intelligible. It may be wise 
with money, as with other tools, to provide a stock 
of it beforehand, lest it may not be procurable when 
it is wanted for use ; but the fact remains, that money 
is of no utility whatever except when employed as 
a tool; that is, except when it exercises its proper 
function by being got rid of in exchange for other 

Gold and silver were used as media of exchange at a 
period long anterior to that when they appeared in the 
form of coin ; our earliest record of primitive civiliza- 
tion, the Bible, informs us that gold and silver were used 
in lieu of direct barter as early as the time of Shem, and 
we learn that Abraham^ returned from Egypt " very rich 
in cattle, silver, and gold." But although a metallic 
medium of exchange, passing by weighty was adopted at 
a very early period, the use of actual coins, passing by 
tale — that is to say, by counting, the weight and purity of 
each piece guaranteed by the government of a state by 
means of a public seal or stamp of a sacred character. 

50 MONEY. 

was a later invention. How came coin to be introduced ? 
From necessity. The need of a medium of exchange is 
one of the most urgent wants which beset humanity. 
The immense advantages of money were soon universally 
felt ; and its value was so self-evident, that its origin 
came to be invested with a mystic character, and was by 
succeeding ages shrouded in fable ; Saturn, Mercury, 
and other divinities, having successively received the 
credit of this important invention. To appreciate its 
value you have only to imagine for one moment society 
without its aid ; buyers wanting to obtain certain goods, 
and the difl&culty of obtaining sellers who would be 
willing to accept those which they have to offer in ex- 
change. The tailor might starve before he found a baker 
who was in want of a coat. The separation of employ- 
ment, the division of labor, is essential to social existence. 
No man can supply all his own wants ; we all depend 
upon others for most of the articles we use and require. 
At the present time it needs one's undivided attention to 
excel in the making of special things ; and the providing 
and distributing of the multitudinous things which human 
life requires employs an immense army of trained buyers 
and sellers. This giving to others what you have in 
order to obtain from them what you require, was an 
impossibility — a difficulty which must have been fatal to 
civilization. Money^ a medium of exchange^ was thought 
of ; it was rude and simple at first, but the key was given, 
the social problem was solved ; and subsequently the 
idea has been Alarged, and it is our duty to trace its 
origin, to know what money has been, what it is, if it is 
what it should be, and whether we can help to improve 
the vast benefits it confers upon mankind. 


Barter or exchange between buyer and seller is of 
course the more simple operation, but it is not practi- 
cable ; simple enough if you could always find some one 
willing to take what you have, and able to offer what you 
require in exchange thereof ; but this not being possible,, 
the difficulty is at once conquered by money. Barter 
your property for money, then take the money and get 
for it what you like and when you like. This is the ac- 
tion, as it is the essence, of " currency " : it enables you 
to sell for " money," of such intrinsic value that it will 
obtain for you anywhere what you want, and when you 
want it. Your property might lie idle, will cost you 
money to warehouse it, will deteriorate in value ; whereas 
the gold in exchange thereof, properly used or invested, 
will continue to grow and multiply. To its utility money 
owes its success. No law can compel, nor does our law 
command, traders to sell or give their goods in exchange 
for money ; the law imposes on us the obligation of tak- 
ing as a legal tender money for our debts, and sets the 
example by taking it for taxes ; but, as Aristotle said, 
men ** agreed " to take money in exchanging, and it is a 
matter of voluntary agreement to this day. With us 
there seems no difficulty in the matter; but until the 
seller knew that all other sellers would consent to do ex- 
actly the same thing — viz., give him their goods as readily 
for his money as he had given his goods for it — there 
must have been considerable difficulty, as no seller would 
be disposed to part with his property in exchange for 
coin unless he felt sure the money furnished him with 
the power to procure by its means property to the value 
of that which he had given for it. Money, to be valuable 
as a medium of exchange, must give this guaranty : a 

52 MONEY. 

seller must feel secure that he will get by a second pur- 
chase all that he gave away in the first. There must be 
value for value ; and with a metallic currency, with a 
note issue convertible into gold, with bills of exchange, 
checks, all credits based upon the gold coin, traders 
part with their property without hesitation ; all feeling 
a complete assurance that they get in exchange, in 
money, a commodity worth that which they are selling 
for it. So every one takes gold ; it is felt to be an equal 
exchange of property for property. The value of the 
gold in the market enables it as the medium of exchange 
to command goods of equal value everywhere. 

Money is a commodity ; its value does not consist in 
its being stamped as coin by the mint. The mint coins 
an ounce of gold into ^3 17^. 10^^. Here is the defi- 
nition of a pound, and a pound is the meaning and worth 
of a sovereign. If a copper coin could be obtained 
from the miners only at the same cost as a gold one, 
they both would be equally valuable ; but it cannot, and 
so the goldsmith will give a vast deal more for the gold 
coin than the coppersmith will for the copper one ; 
and that is the very reason why every seller will give 
many more goods for the one than he will for the other. 
It is the intrinsic value of the metal, its cost as a com- 
modity, which renders it so useful and valuable in doing 
its work as a coin, as the medium of exchange. The 
mint only makes known, on the word of the govern- 
ment, that the coined sovereign is made of standard gold, 
and possesses when it leaves the mint in full the pre- 
scribed weight ; in the words of Aristotle, " impressing a 
stamp on money to relieve men of the trouble of measur- 
ing it." 


Paper money plays the most important part in our 
currency ; without it, the present commerce of the world 
would be impossible. Only a bit of paper, yet, having 
faith in it as a representative of value, it is taken as will- 
ingly as gold. Currency of every kind, everywhere, is 
essentially dependent upon man's faith in man, upon which 
all credit is based. Having faith we accept the shadow 
for the substance, and take the " representative of 
wealth," the " five-pound note," as if it were five golden 
sovereigns. Therefore, the currency, like " Caesar's wife," 
must be above suspicion. Money is a reservoir of great 
power ; it is condensed wealth, available at any moment, 
for any purpose. " If there were no currency, no con- 
ventional means for storing up the accumulated gains in 
an instantaneously negotiable form, how long would be 
the time, and how cumbrous the preparations, requisite 
to perform an expedition, to get up a railway company, 
or to accomplish any great object ! " 


Be men ! rise above the savage worship of mere coin ; 
do not continue to worship the image, but the living 
power it possesses when rightly used, wisely used as a 
medium of exchange. Do not hoard it, but give life to 
your gold, rub the -canker off it, by sending it from 
hand to hand. " He best worships the God who 
made the heaven and the earth, and the sea, and the 
mines of iron and gold, by helping Him in His work 
with His own, and striving to learn to do His will 
with the use of them." Every thing has a mission ; 
aye, especially. 

54 MONEY. 

"Gold! Gold! Gold! Gold! 
Good or bad a thousand-fold ! 
How widely its agencies vary, 
To save, to ruin, to curse, to bless ! " 

— Hood. 

Alas ! too true, the general practice is to give the 
credit to the money, and not to the man, nor as to how 
he has made it. Gold and gold, and nothing but gold, is 
thought of. So the vices and virtues are written in a 
language the world cannot construe, but it reads them in 
a vile translation, and the translators are failure and suc- 
cess. Oh, for the day when the world will only make of 
heroes to w'orship and imitate, the truly great — those 
who are so, not with what fortune can give the base, but 
with deed and ends of which, for the great, fortune is but 
the instrument. And so in time our youtli may be trained 
to perceive that the true ambition of a man is his desire 
for the wisdom to be able to wield properly the power 
wealth, when earned or inherited, puts into his hands. 

Do not be impatient, my friend ; my moralizings 
are at an end, and we will begin at once about gold, 
that yellow substance all civilized men so eagerly 
seek after — for which, in their mad desire to obtaiti, 
men flocked to the gold-fields in feverish haste, although 
disease, like the fabled dragons and griffins of old, 
kept horrid sentry over the buried treasures. A pecul- 
iar fever, of the typhoid character, was that natural 
denizen of the spot ; besides which, the gold seekers 
suffered severely from eye-blight, owing to the concen- 
trated blaze of the sunshine reflected from the steep 
sides of the ravine, and they were at all times grievously 
tormented by clouds of flies. Bad diet and want of 


vegetables aggravated the diseases natural to the places 
and to the kind of work. It was a valley of death. 
"Constitutions that had borne the hardships of other 
fields broke down here," wrote an eye-witness of the 
scene ; " and hundreds have perished, dying unattended 
and unknown." The little levels between the stream and 
the base of the mountain wall for ten miles along the valley 
are so thickly studded with graves that the river appears 
to run through a churchyard." ^ One new-comer, wiser 
than the rest, having counted eleven corpses carried past 
his tent during the dinner hour of his first working day, 
and thinking that even gold may be purchased too dearly, 
left the place instantly. Many abandoned it after a some- 
what longer trial. But the greater number, fascinated by 
the unusual richness of the gold-bed, remained in de- 
fiance of disease, and " took their chance," with what 
result the numerous graves of the valley testify to this 
day. It was a scene " to point a mora> or adorn a tale." 
Had some wandering spirit from another planet looked 
down upon the valley of death, or upon the many other 
striking incidents of the gold-fever of the last fifteen 
years ; if he had seen men in myriads rushing across 
oceans and continents to the gold-fields of California and 
Australia, waste places in the uttermost parts of the 
earth ; if he had beheld them toiling in the gulches of 
the mountains, amidst all manner of hardship and dis- 
ease, beset with extremes of weather, exhausting work, 
exorbitant prices, and lawless society — he must have 
said to himself : " Surely mankind have some mighty end 
in view, when so many myriads come here to toil and 
suffer with such feverish energy and extraordinary en- 
durance." Yet the yellow substance which these crowds 

56 MONEY. 

SO eagerly seek after, what could it do for them ? They 
could not eat it or drink it ; it was neither food, medi- 
cine, nor clothing ; it was simply a metal of unusual 
weight and ductility, and exhibiting a yellow lustre. 
And were this wandering spirit to show a piece of the 
yellow metal to one of the natives of the country, and ask 
its use, the savage would tell him that it served to make 
rings for wearing in the nose and ears, or on other parts 
of the body, by way of ornament, but otherwise of no 
account ; it could neither head an axe for him, nor point 
a spear. In fine, were this planetary sage, following the 
track of the gold ships, to proceed to Europe, and the 
abodes of civilization, to see what is made of the metal 
which men seek for with so much eagerness, he would 
find that the getting of it is so expensive that (unlike iron 
and lead) it is of no use in the necessary commodities of 
life, and only figures as a costly means of ornamental 
decoration. He would find it, in fact, so far as the arts 
of life are concerned, closely allied in character to gems 
and precious stones, the exorbitant prices given for which 
show how much barbarism still lurks under the cloak of 

But this inquiring spirit would also see another side to 
the question. Were he to go into our banks, our market- 
places, our counting-houses, he would speedily compre- 
hend the object for which we mortals seek gold and prize 
it so much. If he were to visit the great emporium in 
Threadneedle Street, with its busy throng of customers 
ceaselessly depositing or withdrawing the yellow metal, 
and thereafter were to watch for half an hour the gay 
crowds who go a-shopping in Regent Street, he would see 
that this metal is the recognized symbol of property with 


which we can convert our wealth, whether it be of land, 
houses, or merchandise, storing it up in little space, and 
which we can ^ reconvert into any kind of property at 
pleasure. He would see that by common consent nearly 
one half of the entire civilized population of the earth 
take this view of the matter, and have made the yellow 
metal indispensable to them, by decreeing it to be the 
substance out of which shall be made the counters with 
which men buy and sell, and reckon up the gains of ma- 
terial existence. (From " Economy of Capital," R. H. 

Gold is not simply an expression of value. It does not 
mean that the gold sovereign merely represents 20j., but 
that it represents a certain definite quantity of gold. The 
value of gold is ;^3 17^. 10^^. an ounce, and the sov- 
ereign is of the intrinsic value of ;^i because it contains 
about a quarter of an ounce of gold. Gold differs from 
silver coinage, the latter being only three fourths of the 
weight it represents in money value — that is, the silver 
coin circulates for one fourth more than its real value. 
So again copper coins pass current for more than three 
times what they are worth intrinsically. Silver and cop- 
per coins, therefore, are " tokens " of value, but are not 
actually worth the sum they respectively represent ; and 
for that reason it is not legal to tender more than 40J. in 
silver or i^. in coprper coin in payment of a debt. Gold, 
on the other hand, has an intrinsic value independent of 
its nominal value, and the advantage of this is that al- 
though all men make use of tokens at home, we could 
not make use of tokens in our dealings with foreign 
nations ; so, having large payments to make to foreign- 
ers, the only medium we can use for that purpose is gold. 

58 MONEY. 

In 1847, what with our bad crop of grain and the failure 
of the potato crop in Ireland, the government, to avert 
a famine, entered into large engagements for the importa- 
tion of grain of all kinds, and from all parts of the world. 
Wherever there was grain to be got, it was bought up by 
the government, as well as by the merchants who im- 
ported it in the ordinary course of their trade. To carry 
out these large operations needed in gold ;^2o,ooo,ooo 
more than the ordinary amount, and this gold had to be 
taken from the coffers of the Bank of England, and was 
sent to America, Russia, and Prussia in payment for the 
extraordinary purchases of corn. Such was the intensity 
of the emergency, it roused our commercial activity, and 
although the Baltic was closed, gold was sent by trusty 
messengers to Russia, Poland, and elsewhere to buy up 
wheat and barley, in order to save the people of England 
and Ireland from starvation. It is obvious that if we 
had not had that reserve of gold in the Bank of England, 
if we had not had in hand something that would be 
acceptable to all the rest of the world, we should have 
been wholly without resources to meet such an emer- 
gency ; and we thus see the advantage of gold in com- 
mercial operations with other countries ; in fact, it ought 
to be used solely as the medium of exchange with foreign 
countries. As it is acceptable all over the world, it is a 
universal medium of exchange ; thus gold is very useful, 
nay, essential for foreign trade, and should always be 
here ready to meet the balance against us in dealing with 
foreign countries. When we import more than we ex- 
port, we send out gold to pay the difference ; when the 
demand for our manufactures is active, or we have a 
good harvest and do not need to buy so much corn from 


abroad, then the foreign countries have to pay us the 
balance in gold ; and London being the chief monetary 
centre, gold comes in from all parts of the world. 

Everybody will take gold at its intrinsic value, and 
wherever you may be, or whatever you may need to buy, 
the purchase can be made anywhere with gold. Its 
power is so great, we can scarcely wonder that the de- 
sire, the thirst for it, becomes as absorbing as the thirst 
for alcohol by the drunkard, or that it has led to such 
crimes in all ages to obtain it. Gold's hunger gives to 
the face a strange fascination ; in the eagerness for it, 
pain and weariness are forgotten. The craving desire 
for gold has a wonderful influence upon the face and 
action of the body. Watch the keen look of a trader, or 
any man debased to the sordid level, and see how near 
his face is to the cunning look of the monkey, and how 
the desire for gain has degraded the image of his man- 
hood. Better poverty than wealth if it can only be ob- 
tained by such a selling of the soul, such a forfeiture of 
our dignity as men, such a levelling of our higher natures 
to that of savages and animals, such a sacrifice of all the 
higher pleasures of our natures to the one insatiable de- 
sire of gain. 

Wealth is more often a curse than a blessing. I have 
known men happy and contented whilst poor, seen them 
bravely struggle through adversity and difficulty, and 
seen them miserable with wealth, begrudging parting 
with the money they have got to love too well, seen their 
brains turn and their minds lose ^heir bgilance with the 
thought of its leaving them, and committing suicide to 
escape from imaginary evils, the effect of their dis- 
ordered minds, through yielding to the one absorbing 


idea of increasing yearly their stock of gold, to leave be- 
hind them to their children, and too often ruin their 
nature. Wealth is a hindrance rather than a help to 
young men in this life's work ; it takes away the motive, 
the stimulus, to exertion, the desire to succeed, which in 
the majority of cases means the desire to make money. 
To remedy this, the education of our youth of both 
sexes must embrace the fullest knowledge of the 
laws of life and the duties of home. They want 
broader views and issues brought before their men- 
tal horizons. At the earliest period the child must be 
taught to regard the body as the shrine of the soul, 
to be kept as a sacred trust for their Creator, unsullied 
and inviolate. This would naturally follow if he were 
taught the minutest details of that wondrous machine, 
the human body, with its delicate tissues, its processes, 
its powers. Let the young be taught this first idea of 
their Maker from that wonderful creation, the human 
body and soul — a creation so beautifully adapted by its 
Creator to give pleasures if well treated, and so much* 
pain if neglected and dishonored. Having taught him 
the meaning of the life that is in* him, follow it up with 
giving an object in life in the future that is before him ; 
tell him of the faculties and powers that are entrusted 
to him ; give his life a significance, an aim ; and by this 
means, and this only, will money cease to be an "end," 
and become, what it should be to all of us, a " means " 
only to the higher ends in view. 


The price of silver had been undergoing a slow de- 
cline for some years, but in 1876 this suddenly culmi- 


nated in a fall of prices within a few months from 56^^/. 
to 48J</. an ounce ; the whole fall in four years repre- 
senting a depreciation of more than 20 per cent, in the 
value of the metal, measured in gold. The effect of this 
fall in silver will be best understood if you imagine 
gold, the basis of our currency, to be suddenly reduced 
in value one fifth. The fall in silver has this effect upon 
India, as silver is to that country what gold is to ours — 
the basis of its currency. Here we sell and reckon 
by the gold sovereign, there they sell and reckon by the 
silver rupee. . So that in 1876, when silver fell to about 
48^?! an ounce, the value of the rupee, expressed in gbld^ 
instead of being 2s, was reduced to less than u. 7</. 
Think of your sovereign being reduced in value to 15J. 
tod. In July, 1887, the price was 44^/. per ounce, so 
that the rupee and our florin are only really worth i6</. 

One of the principal causes of the depreciation in the 
value of silver is the large additional supply of silver 
yielded by the Nevada mines in recent years. In 1875 
the aggregate production of silver throughout the world 
is estimated to have been about ;^ 15,000,000 ; more than 
half this amount, ;^8,ooo,ooo, being obtained from 
American mines. Twenty years previously, namely, 
between 1852 and 1862, the average annual production 
was only from ;^8,ooo,ooo to ;^9,ooo,ooo, and at that 
time no appreciable quantity came from the United 
States. Simultaneously with this large increase in the 
supply of silver many circumstances occurred which 
greatly diminished the demand for silver. Silver was 
demonetized in Germany ; and Germany consequently 
not only ceased to require the large amount of silver 
which she had previously used for coinage, but a great 

62 MONEY, 

portion of the silver in circulation was withdrawn and 
sold by the German government. Another circumstance 
which has produced a very important effect in diminish- 
ing the demand for silver is the great increase in recent 
years in the Indian home charges. The value of the 
products exported from India has always been in excess 
of the value of those imported. Until quite lately the 
balance was liquidated by transmitting silver to India. 
In some years tlie silver thus sent amounted to more 
than ;^ 1 0,000,000. Such a transmission of silver con- 
stituted one of the chief sources of the demand for sil- 
ver, and was indeed one of the most important factors 
in maintaining its value. Each addition, however, that 
is made to the home charges diminishes pro tanto this 
demand for silver. An English merchant, for instance, 
who has purchased a hundred thousand pounds' worth 
of Indian produce, instead of sending silver to India to 
pay for it, purchases bills from the Indian government 
in England drawn upon the Indian government in Cal- 
cutta, and the amount of bills which the government 
has to sell in England increases, of course, with each 
increase in the home charges ; and a powerful effect is 
being exerted at the present time in depreciating the 
value of silver by the large amount of bills which have 
to be sold by the Indian government in England to pro- 
vide for the home charges. The amount of the home 
charges has increased to a most serious extent in recent 
years. Nothing, moreover, can avert a still further in- 
crease, if the expenditure is permitted so habitually to 
exceed the revenue that money has to be borrowed to 
make good the deficit. The loans being chiefly raised 
in England, it is obvious that the interest on these loans 



represents so much more which has to be transmitted 
from India to England, or, in other words, so much 
added to the home charges. The largest portion of the 
money which has been borrowed in recent years by the 
Indian government has been obtained by loans raised in 
England ; and the additional amount which has to be 
provided to meet the interest on these loans represents, 
of course, so much added to the home charges. In 
1856 the sum annually required to pay the interest on 
the Indian debt was ;^2, 190,000, in 1870-71 it was ;^3,- 
200,000, and in 1876-77 it was ;;^4,35o,ooo. From these 
figures it appears that in twenty years the indebtedness 
of India increased by about 100 per cent. 

The depreciation in the value of silver is a very serious 
matter. In 1874-5 the loss by exchange to the Indian 
government was only ;^5 00,000, in 1876-7 the loss was 
;^i, 676,482, in 1878-9 the loss was nearly ;^3,5oo,ooo. 
In 1886 the method of charging exchange in the Indian 
accounts was modified, and it may, therefore, be well to 
give the figures for the past years on the new system. 
The following are those which should be adopted for 
comparison with the charge in recent years : 







Tens of Rupees. 

Tens of Rupees. 


. 1,377,428 


. . 3,050,923 


. 2,252,611 


. . 3,375,158 


. 2,123,030 


. . 3,363,986 


. 2,891,902 


. . 4,329,888 


. 2,878,169 


. . 5,252,600 


. 2,264,848 


. . 5,434,800 


. 2,421,499 

* Rervised Eatiaukte. 

t Budget Estimate. 

64 MONEY. 

The government are also heavy losers by the land, as 
the revenue therefrom is a fixed sum to be paid in silver ^ 
and the depreciation means receiving about one fourth 
less rent until present engagements expire. The next 
class to suffer are all those with fixed incomes, the- rupee 
purchasing so much less in 1887 than it did fifteen or 
twenty years ago. 

The position of the Indian government is this : it has 
contracted various engagements to make payments in 
England in gold, for the interest of its public debt, and 
on the capital of its guaranteed railways, for the pensions 
of its retired civil and military servants, for its share of 
the home charges of the European troops serving in 
India, for the supply of military equipments, the pur- 
chase of stores, the cost of the establishment of the India 
office, and so forth, to the amount of about seventeen 
millions sterling a year ; and since the revenues of India 
are collected in silver, these engagements involve that its 
government must purchase gold to this amount out of 
the income which it receives in silver. The nature of 
the operation is to a certain extent disguised by the 
mode in which it is affected, through the agency of pri- 
vate trade. The commodities exported from India are 
largely in excess of imports into that country : a state of 
things, it may here be observed, which is partly the^con- 
5.;;querice of these home charges; and the exporting 
m'erchants, instead of shipping silver bullion to India to 
pay for the excess, purchase the bills which the Indian 
council sell for gold in the London market, and which 
are payable in silver at the treasuries in India. The 
amount of these bills sold in the year 1879 was seventeen 
millions sterling ; and the effect .of the arrangement, so 


far as the revenues of India are concerned, is precisely 
the same as if the government of that country were actu- 
ally to remit the silver to England and exchange it for 
its equivalent amount of gold. It follows that the charge 
on the revenues of India in respect of these payments 
will fluctuate with the price of silver as expressed in 
gold. So long as silver was worth about did, per ounce 
— its average price for many years — the rupee was worth 
almost exactly one tenth of a pound, and to purchase 
seventeen millions sterling required the remittance of 
170,000,000 rupees ; but when silver fell to about 48^^. 
per ounce, instead of 170,000,000 rupees being sufficient, 
216,000,000 would be required; the difference, 46, 000,- 
000 rupees, representing an extra charge on the Indian 
revenues of more than three and a half millions sterling, 
because the government of India receives its revenues in 
silver, and has to make very large payments annually in 
gold. According to the form adopted in the accounts, 
the rupee is taken at 2j., but, if its value in India is ix. 
7^/., a very much larger number of rupees is wanted to 
meet the payments in England. This is called the " loss 
of exchange," caused generally by transmitting money 
from one country to another ; but in this case, princi- 
pally through the government receiving its revenues in 
one metal and making its payments in another y as in tilling 
the rupee at \s. 'jd. instead of 2j. here, we only do so'1%- 
cause of the depreciated value of silver in relation to 
gold. As a proof that it is simply a loss for want of ar- 
rangement, we have the fact of a " gain of exchange " in 
the past, because the government of India in its transac- 
tions with the guaranteed railway companies have fixed 
the remittance at is, lod, per rupee under the contracts. 

66 MONEY. 

The price is continually fluctuating, the rupee now being 
only worth about i6</. This causes great loss to mer- 
chants, not only from the absolute fall, but in the uncer- 
tainty which these fluctuations in price throw over all 
the operations of trade ; and although it has been going 
on for over ten years, nothing has been done to remedy 
it There is no reason why the currency should be 
altered, but a mixed currencyy or the government at least 
offering to take gold as well as silver for rent and taxes, 
would counteract, so far as the government actually is 
concerned, these constant fluctuations in the value of 
silver, and thereby lessen the cost to the government, 
and save the Indian trade from its speculative character, 
which is so thoroughly demoralizing in its tendency. 

There is one cause for the evil, a removable cause ; 
why not remove it ? It is the English government's in- 
terference with the natural operations of trade, by coming 
into the market, and selling its bills on India for enor- 
mous amounts by auction to the highest bidder. Instead 
of the secretary of state selling such large amounts of 
council bills at fixed times, whether wanted or not, let the 
same be always obtainable at a certain price, at some 
government office. Let the secretary of state act like 
any other exchange banker, and sell from day to day, 
meeting demand as it arises. There could not be a more 
stupid plan than the present — forcing the sale of a valua- 
ble article at times when not wanted, or the market is 
overstocked, to the highest bidder, simply because he 
has decided to sell so much in one year, at so much per 
week. Trade will take these drafts at a fair price if gov- 
ernment will wait till they are wanted, instead of the 
present reckless m^QOer by which these bills are dealt 


with, the victim of speculators, and the buffet of the 
exchange banks. The obligation cannot be wiped out ; 
the seventeen millions of tribute from India to England 
must be paid. But the mode of payment may be altered ; 
and the easiest plan is to arrange that the revenues of 
India, instead of, as now, being collected in silver, whilst 
the Indian government is subject to a heavy loss, and 
trade is interfered with, because it receives in one metal 
and has contracted to pay in another, is either to contract 
to pay in the metal it receives, or to receive its revenues 
in the metal it has to pay its liabilities with. 

Currency is an invention of man's, and it is the duty 
of every state to. try for the soundest and most useful 
system that man's intelligence can supply. We are not 
beginning de novo j we have had centuries of experi- 
ence to guide us. Silver was the first standard of value 
in England ; then we had gold and silver ; and in 1816 
we decided in favor of gold. Now we are asked to use 
again both silver and gold — bi-metallism instead of 
mono-metallism. The reason assigned is, that there is a 
deficiency of money, thereby causing an undue apprecia- 
tion of gold, or a great depreciation in the value of all other 

Supply and demand is the law that regulates prices. 
By monetizing silver, the demand for it is greatly in- 
creased, and the price would be enhanced, but it would 
be a loss to the community, for the benefit of the present 
owners of silver. For example, silver, regulated by sup- 
ply and demand, is now worth 3^. 8^. per ounce ; but 
used as coin, it passes as if worth 5^. 2d. per ounce, with 
4//. per ounce added for seignorage. Silver, however, is 
only a legal tender up to 40J. ; is it wise to increase the 

68 MONEY. 

circulation of silver coins, so that the owners of silver 
get for 3J. Zd, goods to the value of 5^. ? But, it is 
argued, you fix the price of gold ; why not legally fix the 
price of silver ? The reply is obvious. We must have 
a medium of exchange. ^ It is a costly instrument ; but 
why have " two " expensive tools, when " one " is suffi- 
cient for the operation ? Is gold equal to our necessi- 
ties ? Yes, undoubtedly. According to Mulhall, the 
stock of gold, coined and uncoined, in the world in 
1850 was 630 millions sterling, and in 1885, 1,504 mil- 
lions ; an increase of 874 millions in thirty-five years. 
The imports and exports increased from 771 millions in 
1850 to 2,953 millions in 1884, so that the world was able 
to do 2,182 millions more trade with only 874 millions 
more gold — a proof that trade expands from other reasons 
than an increase of the currency. But, it is said, this 
deficiency means dearer gold or cheaper goods. If the 
price of goods depends upon the supply of gold, why did 
wool advance 50 to 60 per cent, in the summer of 1886 ? 
As a matter of fact, there was no difference in the supply 
or value of gold, but an increased demand for wool, and 
the price rose according to the law of supply and de- 

By the inevitable action of nature's law of supply and 
demand, if of late years there has been a scarcity of 
currency to carry on our trade with, money, owing to 
the supply not being equal to the demand, would have 
been more difficult to obtain, and, therefore, a higher 
price asked for its use. Has this been the case ? No ; 
money has been getting cheaper. The average rate of 
discount in Great Britain for 1851-60 was 4.17 per 
cent. ; 1861-70, 4.23 ; 1871-80, 3.28 per cent. ; the 


average value for 1881-90 will be under 3 per cent. 
Why is this ? Because of the fact that " the quantity of 
coin necessary to any country depends on neither popu- 
lation nor trade." In Great Britain ^4 per inhabitant 
is enough, but in France they require j£S, Two of the 
poorest countries in Europe — namely, Spain and Portu- 
gal — have the largest amount of metallic money com- 
pared to their commerce. To do without the vulgar 
idea of money — metallic coin — is evidence of civilization; 
in London, 99 per cent, of the daily payments is made 
by checks. The clearing-house returns for London for 
1 88 1-4 average 26 millions sterling per day, all done by 
paper, gold not being wanted ; what necessity is there 
for silver ? 


Bank notes were invented to perform the same work 
as coin ; but let me impress upon you that coin alone is 
currency, and that the use of bank notes is to supple- 
ment the action of, to represent coin ; the same being 
taken upon the distinct understanding that the Bank of 
England and other banks that issue notes will convert 
the same into gold for the holder when asked to do so, 
is one thing ; but treating bank notes even of the Bank 
of England as currency, as coin itself^ is another matter 

Paper money is useful for home purposes, being con- 
venient and economical ; an addition to the circulating 
medium that the world could not do without to effect its 
present bulk of exchanges, the work of distribution ; 
but the people must not forget that it is but /^^r, cancels 

70 MOUEY. 

no debt, effects no real transfer of property, — as it is not 
moneyy but only a promise to pay monty^ and, until cashed 
by the banker, of no more intrinsic value than the paper 
it is written on. 

So you will please confine currency to coin, and 
always treat of paper as paper money — a most useful in- 
strument for making transfers and exchanges, but of no 
real intrinsic value until you have obtained for it cur- 
rency coin of the value it represents ; next in importance, 
but not equal, to the coin itself. Both act as money when 
they are kept by, and stay in the hands of, the public. 

How few people properly appreciate the value of 
checks, the most important species of " paper money " 
ever introduced — the money of intelligence, the indica- 
tion of civilization ! It is the general impression that 
" bankers " are dealers in money ; but an ordinary 
banker does not deal in money, in cash, in sovereigns, 
and bank notes. Sir John Lubbock gave an analysis of 
a sum of ;^ 1 9,000,000 paid into his bank : it was com- 
posed of : 

Checks and bills ;£^i8,395,ooo 

Notes 487,000 

Coins 118,000 


You will perceive that " three per cent." only of the 
whole amount was paid in cash, and only " one half per 
cent.," or one in every ;^2oo, paid in in coin. " Money " 
— metallic money, — therefore, forms but a very small 
item in a banker's daily transactions ; 97 per cent, of his 
daily receipts being composed of checks and bills, A 
more convincing proof of the value of " system " it 
would be impossible to find than " banking " and the 
" clearing-house." Banking does away with the neces- 


sity for " coined money." A has money, or an amount 
to his " credit," at the London and Westminster Bank ; 
B has the same at the Union Bank. A owes C a sum of 
money, he pays it by a check on his banker ; B owes D 
a sum of money, he pays it in the same manner. The 
amounts are simply transferred from " one banker's 
ledger to another " ; so that banking is really an institu- 
tion for the collection of debts, in the shape of bills, 
checks, dividend warrants, coupons. The people hand 
to their banker their claims to collect, and these claims 
are sent in daily to the clearing-house by the different 
bankers. The clerks there ascertain the value of the 
claims sent in by one banker, and the value of those sent 
in by the other banker against him ; a balance is struck, 
and the banker who has to pay a balance gives a check 
for it upon the Bank of England. The following figures 
give the totals of the " clearing-house " for the first six 
months of 1878 and 1879, and furnish the most unmis- 
takable evidence of the value of thought and method in 
human affairs. Please remember, by this method these 
figures prove that debts were collected in six months of 
the value of " two thousand five hundred and sixty mil- 
lions one hundred and twenty-six thousand pounds," by 
means of checks and bills, not a note or gold coin being 
wanted for the settlement ; " it was simply a transfer " 
of debts from one banker's ledger to another, for the 
following gigantic totals : 


January ;f 448, 480, 000 

February 407,607,000 

March 442,887,000 

April 412,348,000 

May 428,052,000 

June 420,752,000 

;f2, 560, 1 26,000 


January ;f 421, 892,000 

February 369,584,000 

March 402,752,000 

April 409,767,000 

May 432,779,000 

June 384,390,000 

;^2,42i, 164,000 

72 MONEY. 

The above is a proof of my assertion that the subject 
of " money *' is not understood. We hear daily of 
money being abundant or scarce ; whereas money — that 
is, gold, sovereigns, notes — varies very little indeed. 
What should be told to the people is, that " checks " 
are abundant or scarce. The fact is always overlooked 
that borrowing and lending, buying and selling, takes 
place by an exchange of debts. A banker receiving 
many bills and checks to collect will lend freely, and at 
a low rate ; but if more bills and checks are drawn upon 
him than are sent in for him to collect, he is less willing 
to lend, raises difficulties, asks a higher rate of discount, 
does all he can to check the demand, and, by increasing 
the rate of interest he allows to depositors, tries to in- 
crease his supply. 

At present a banker thinks only of gold to replenish 
his reserves ; he does not see that the reserve dwindles 
away, because the receipts which feed it are diminishing ; 
he overlooks the fact that gold figures for only " one 
two-hundredth part ** in the daily returns, and, therefore, 
that its variation in the total receipts is not the cause of 
his inability to lend at one time less freely than at 
another. Trade being good, should make no difference. 
What does it matter if the " clearing-house " return be 
loo or 200 millions per week ? No more gold is needed 
for the settlement of business transactions represented 
by the larger than for the smaller sum. Bad times can 
only be remedied by increased production ; a banker's 
reserve can only be legitimately increased by his connec- 
tion increasing, or by his customers increasing their 
means. The American war caused the people to produce 
less ; they bought less. With every diminution of trade, 


there is a corresponding diminution of profit. A banker's 
resources dwindle away, he receives less, the demands 
upon him are greater than the sums given him to collect ; 
he has to sell or call in loans upon securities ; and there 
is a cry that gold is getting scarce. But whilst the 
merchants and the bankers are in agonies about gold, it 
is not gold that fails, but, as Adam Smith long ago 
remarked, " the means wherewith to buy it." It is not 
gold but capital which is in disorder. In the worst 
crises gold is always to be had, but not the loan of gold. 
Loans are dearer, but gold remains stationary in value. 
Outside the financial world, the buying power of gold 
in relation to land and property continues unchanged. 
You may say that the prices of commodities fall during 
a crisis, but then that happens because so many have 
become suddenly poorer, and can no longer afford to 
consume and buy as freely or recklessly as before ; or 
because the dealers in these commodities are obliged to 
make concessions in order to force sales, owing to their 
want of judgment in buying too largely in proportion 
to their capital, and being, therefore, compelled to get the 
capital of others even at a great loss. But " currency '* 
has nothing to do with this. The panic under our 
present system must be referred to " capital " and " busi- 
ness ** capacity, trading as though experience had not 
shown that in times of panic a large number of the peo- 
ple desire to keep their money in their own hands, and 
are not disposed to leave it in the hands of bankers for 
the use of traders as heretofore. 

What is wanted is a system that will abolish this want 
of confidence at certain periods. The people must be 
taught how valuable " b^nker^ " ?ire ; a machine of 

74 MONEY, 

superlative cheapness and efficiency, as it bears also the 
most decisive evidence to the public order, the sense of 
security, the supremacy of law, and the intelligence of 
the society in which it is freely used. In combination 
with the clearing-house, it dispenses with gold and paper 
currency almost entirely. Within its own sphere the 
** check" buys and sells with equal facility with the 
sovereign ; it does the work of the precious metals, is a 
more secure method of payment, and brings in a large 
amount of revenue. Its power is immense ; and instead 
of watching so closely the movements of gold and notes, 
the people, aye, and bankers also, should watch more 
closely the " clearing-house returns." It is the fluctua- 
tion in the " checks " they have to notice, and which in- i 
dicates so unmistakably the state of trade ; it is the 
" check " which brings the riches within the portals of i 
the banker, and the " check " is the instrument on whose 
wings it takes its flight therefrom. The barometer of 
the commercial atmosphere is the " clearing-house " 
daily returns ; the rising flood of checks is a sign of the 
activity which is the usual indication of the profitable- 
ness of business, as its ebb too surely announces the' 
drooping resources of commerce. Great is the " note," 
but far greater yet is the check. It is the " check " 
which constitutes the resources of the banker ; and it is 
the " check " — that mighty potentate — that orders him 
to pay, which in times of panic threatens and often ac- 
complishes his downfall. In the Sartor of June, 187 1, 1 
suggested that the post-office should issue " checks " 
made out in duplicate by the copying process, all payable 
to order, and all crossed " and Co.," all lettered Ln. for 
London, Mr. for Manchester, and numbered consequ- 


tively for each town. The postmaster would only have 
to fill in name of payee, and send up duplicates daily to 
head office, where all post-office checks would be pay- 
able to bankers only. The checks to be issued at risk 
of payer, commission being " one penny " for sums not 
exceeding 40^., " twopence " for sums over 40^. and not 
exceeding ^^5, " threepence " for over ^^5 and not ex- 
ceeding jQio, That this view is practicable is proved 
by the fact that in the analysis for May 8, 1876, in 
eleven large towns more than two thirds of the money 
orders were paid to bankers, and in 1875 the orders 
paid at the chief office to bankers were ;£" 2,039,775, and 
to the public only ;^ 125,918. We are told by the author- 
ities that the minimum cost of a money order, whether 
for 5 J. or ;^io, is the same — " threepence." They make 
this out by saying that id. is paid for every order issued, 
and id, for every order paid. Now, if two thirds of the 
orders are paid at the chief office through bankers, and 
two millions, or one eighth, are paid to bankers at the 
chief office in London, I want to know if the different 
offices are credited with id, on each of these orders, the 
same as if each had been presented at the respective 
office and paid separately by each postmaster. 

My objecf was to introduce a less costly method than 
" money orders " for transmission of money by post. 
This idea was adopted by the " Check Bank " ; but the 
checks of any banker would not remain so long in the 
hands of the public as those of the post-office, which 
might be made a legal tender like the Bank of England 
or " national notes." Dr. Lloyd Fowle, September 10, 
1878, submitted as "original" a similar plan to Lord 
John Manners ; and Mr. Edward S. Norris writes in 

76 MONEY. 

favor of " post-office checks " to the Times^ September 
19, 1879, ^^^ intimates that in 1875 he adopted the idea; 
but as in 1871 it was brought by me before the public, 
the honor is due to me. The " postal note," submitted 
to the "post-office committee " in 1877, was attributed 
to Mr. Chetwynd ; but Mr. Charles Green, editor of 
the Sartor, submitted to the Chancellor of the Exchequer, 
June I, 1871, *'that the post-office should issue a series 
of notes of different values, capable by their com- 
bination of representing any required sum, except odd 
pence, for which stamps could be used ; that these notes 
should be made of the strongest material, and present 
bold, easily recognized features ; that they should be 
obtainable at any post-office without charge." Mr. 
Green assumes that " post-office notes " would remain in 
circulation, and be an addition to our medium of ex- 
change, and that the post-office authorities would gain 
(after allowing for the cost of management) ;£'5 00,000 
per year. But Mr. Green overlooks the fact, that only so 
much money as is needed for " change " remains in the 
hands of the public. Our present currency is adequate 
for supplying us with sufficient of the " medium of ex- 
change." One note, the " national note," is all we re- 
quire or should have, and if issued for 20s, and 40J., with 
" postal checks " for loj., 15^., and 20J., stamped with 
the usual penny stamp, we should get what we require, — 
a safe and economical method for the transmission of 
money by the post ; the checks to be paid into banks, 
and the total daily credited to the bankers, and debited 
to the Postmaster-General's account at the Bank of Eng- 
land. Money-order telegrams are also much needed. 
"G. P." in a letter to the TitneSy Oct. 6, 1878, mentions 


that in France it is possible to authorize by telegram the 
payment at a distant office of a certain sum of money to 
a specified individual, and he asks why the same facil- 
ities are not afforded to us in England. As far back as 
1870 Mr. Piatt brought this matter before the Secretary 
of the Post-Office, and his letters, advocating money- 
order telegrams, have been inserted in the trade journals, 
and also in the Echo of January 21, 187 1, October 6, 
187 1, September 28, 1872, and March 17, 1875 ; and if 
the system can be carried out in France, why not in 
England ? 

" Sixpenny telegrams " are also much needed for 
messages not exceeding ten words ; and this and the other 
matters would have been granted but for that bugbear 
" impossibility," with which they met the late Sir Row- 
land Hill's idea of " penny postage," and have opposed 
all subsequent reforms. 

** With caution judge of possibility ; 
Things thought unlikely, e'en impossible, 
Experience often shows us to be true." 


There should be no distinction between a spurious bank 
note, a forged bill, and a check given when there are no 
funds of the drawer at the banker's to pay it. Each method 
is adopted to obtain " goods by false pretences." It is 
absurd to tell a tradesman that, as he can refuse to take 
checks in payment, the law can only regard it as a credit 
transaction ** deferred, not actual payment as with coin 
at the time of purchase." The law may be right logi- 
cally, — the trader ought to know that the check is but a 
" promise to pay," with no date when specified ; but 

78 MONEY. 

practically a tradesman parts with his goods in exchange 
for the check, upon the assumption that the drawer has 
given him an order to go and get the value for it ; and 
as upon the faith of the order to receive so much money, 
he has parted with his goods, the law ought to protect 
the victim, and not the thief ; the check being taken as 
a substitute for, but representing " money," as an order 
for payment that can be made at once, A " bank note " 
is really a check — a banker's order upon himself, — with 
this important distinction, that it " circulates," whereas 
a check of Rothschild's is presented for payment be- 
cause it will not. But still all notes are " checks," and 
this is another proof that " currency " is not understood, 
and must be considered as " not understood " until 
people recognize the fact that "bankers* notes," even 
though of the Bank of England, are merely " checks," 
promises to pay,' drawn by a banker upon himself. 
Yet in the height of the greatest panic, when bankers 
are trembling for fear of not meeting their liabilities ; 
when we hear such harrowing accounts of the scarcity of 
" money " ; that money is not to be had at any price ; 
yet the people are so little in want of the "money" 
which they are raving for like wild beasts, that, not 
knowing what money is, they eagerly take " bank notes." 
In 1826, when there was hardly a sovereign in the bank, 
the public readily accepted even old ;^i notes, which 
had been withdrawn from circulation, and which had 
not been a legal tender for four years before, yet they took 
them and hoarded them, forgetting they were but bits of 
paper, and that at all times a banker's engagement to his 
notes is identical with that which binds him to any 
check from a depositor. Both are payable on presenta- 


tion, when the holder chooses to make his demand ; the 
only difference is, the greater probability of the one being 
presented rather than the other. Comprehend this, and 
you will perceive the importance of the currency laws 
being altered so as to increase this probability ; nay, 
make it a certainty that the "note" will not be pre-* 
sented ; also, that bankers may feel secure that they can, 
if they have the requisite securities, obtain "notes" 
enoijgh to honor all checks that may be presented. 
The mint guarantees the genuineness of the sovereign. 
The government should have an office for the issue of 
notes to bankers upon their depositing securities for the 
repayment of the debts of issue to the public. Notes 
might be, would be, generally used, if issued for one 
pound, two pounds, etc. Notes are not money ; true, no 
more are checks, which, I have shown to you, take so 
well the place of money. Checks, however, cannot act 
as " money " ; it is not their province to " circulate," 
they are intended to make one payment, and no more ; 
but notes are used for a number of exchanges before 
being sent in for payment, and ceasing to exist. Notes 
act like coin, are taken the same as coin, go from hand 
to hand, are kept in pocket or desk till needed like other 
money, are as familiar to all of us as the sovereign ; in 
many respects are superior to the sovereign, being lighter, 
more easily carried, the best possible money to be had ; 
and if my suggestions were adopted, we should be able 
at all times to obtain " all the money " we need. In 
reply to those who dread " too many notes being issued " 
if paper money were more generally adopted, this cannot 
be with " convertible notes." With notes as with coin, 
as Mr. Bonamy Price says : " So many bank notes as the 

8o MOl^EY. 

public want and can use will circulate, and no more. 
Neither the bankers, nor the Parliament, nor the law, nor 
the need of borrowers, nor any other power but the 
wants and conveniences of the public, the number and 
amount of the specific payments in which bank notes are 
used, can determine how many convertible bank notes 
will remain in circulation, and not be returned upon the 
hands of the banker for payment. * This is the truth of 
truths in currency.* " 

Checks are not currency, do not run, since the recent 
decision less so than formerly, as it is dangerous to use 
checks as money ; they were never intended as such, 
being simply an order from the drawer to his banker to 
pay a specified sum to A B or the bearer, and now gen- 
erally by all prudent men are marked as soon as they 
receive them, not negotiable. They should be paid into 
the bank to have the transfer made, or be cashed as soon 
as possible. A bill of exchange is slightly more current ; 
as it passes, like other tools of exchange, through a few 
hands by being endorsed ; but its run is limited, as it has 
a fixed day for payment. Checks and bills need care — 
we do not take them from strangers ; hence they are not 
money in the popular sense, not being things like bank 
notes, or gold, that every one takes as a matter of course. 
It is to be regretted that bank notes, checks, bills, are 
called money. Even Mr. Bagehot, in his " Lombard 
Street," — written expressly to explain the money market 
as being as concrete and real as any thing else capable 
of being described in as plain words, so that it is the 
writer's fault if what he says is not clear, — gives six 
different meanings to the word " money ** ; whereas coin, 
metallic coin alone, is true money, and every kind of 


paper money extant is but an order to A B to pay money, 
or a promise by B A to pay money. Its value is in the 
order or promise ; and an order or promise is not the 
thing itself, — the thing is absent, — the paper is intrinsi- 
cally valueless ; if the check be dishonored or the bank 
fails, he has got nothing for the wealth he gave for it ; 
whereas in the gold he gets a property, a metal as valua- 
ble as the article he has sold. 

Mr. Bonamy Price, in " Currency and Banking," puts 
the matter very clearly. "If checks and bank notes are 
true money, then so are spoken words, for they can pur- 
chase property, and bind the buyer at law just as strongly 
as a check. To tell a bookseller to put five pounds' worth 
of books to his account, commits the buyer to payment 
as completely as a check. Coin is the substance, the 
reality covenanted to be given for goods bought ; conse- 
quently coin alone is payment. Every thing else, bank 
notes, checks, warrants, are nothing but title-deeds, evi- 
dence good at law to compel the stipulated payment in coin, 
if not voluntarily given. Without a court of law in the 
background, they are only acknowledgments resting on 
honor, and may at any moment prove to be empty 
writing. Coin pays ; no form of paper does till what is 
written upon it is fulfilled. A bank note is not property 
placed in a man's hands ; every seller may decline to take 
it. If the bank fails, the holder will never be paid at all." 

The truth that bank notes are not money received a 
remarkable confirmation from an elaborate judgment 
delivered in the Supreme Court of the United States ; 
and the careful reading and thinking over this will 
explain the weakness of " inconvertible " paper money. 

The question which presented itself for final decision 


was whether debts which had been contracted previously 
to the act of Congress which made the inconvertible 
bank notes called greenbacks legal tender, were dis- 
charged by the tender of these notes. Nothing could be 
sounder or more admirable than the doctrine laid down 
by Chief- Justice Chase. He ruled that such debts were 
contracts to deliver money, and that bank notes were not 
money, and could not be forced upon a creditor as a 
satisfaction of his claim. 

The distinction that coin alone, the metallic dollar, 
was money, was most sharply and accurately drawn, and 
the right of the creditor to the covenanted payment was 
clearly established. A bank note was pronounced not to 
be payment ; it did not fulfil the contract entered into 
to deliver money. The case was wholly different with 
debts contracted subsequently to the enactment of the 
law which declared greenbacks legal tender. The cred- 
itor had been distinctly warned beforehand that the 
word " dollar " would be understood by the law to mean 
that particular piece of paper which contained an 
acknowledgment of debt due by the govemme'nt of 
the United States. He knew when he gave credit on an 
undertaking to be repaid in dollars that he would receive, 
not money, but the transfer of a debt, expressed on 
paper which was due by the government. He did not 
stipulate for money, and consequently money he was 
not entitled to, and would not receive. He would get 
dollars, as interpreted by the law of legal tender, not the 
metallic dollars which are money, but a promise made 
by the government to pay such dollars without any sttpu- 
lation as to the time when they would be given. It was for 
him to consider when he gave away his goods what the 


promise of a dollar or the pieces of paper might be 
worth in the stores. 

Nevertheless, though bank notes are not money, it is 
hopeless to try to strip them of that title. When the 
bank notes are established in public confidence, it is 
impossible to maintain the distinction between them and 
coin in popular language. Mixed together in the same 
purse, the common heap is regarded as money. They 
both do the same work, both circulate and purchase with 
equal ease, both raise no other idea than that they are 
money to buy with. The radical distinction, however, 
between them, that coin makes a real payment and notes 
do not, is of the utmost scientific importance ; the dif- 
ference meets the inquirer at evey turn in examining the 
nature and action of bank notes. 

Paper money, out of its own country, in many cases 
carries no value at all. Bank of England notes, indeed, 
which have the same prestige over other kinds of paper 
money which the sovereign has over other coins, may be 
cashed without difficulty in Paris, Vienna, and other 
large cities, and at no greater charge than is made for 
converting sovereigns into French money. Indeed, as 
neither sovereigns nor Bank of England notes will circu- 
late abroad, and have to be sent back to England before 
the foreign holder receives value for them, the notes are 
fully more acceptable than the sovereign, seeing that 
they can be transmitted to England for the mere cost of 
postage. Convince a continental money-changer that 
the English bank note is genuine, and he will give you 
cash for it as readily as for our metallic money ; although 
of course there is this difference — that coins can be 
tested anywhere, their value is in themselves ; whereas 

84 MONEY, 

bank notes, even of the Bank of England, in foreign 
countries can only be received as genuine out of confi- 
dence in the person who presents or indorses them. 
All paper money needs this guaranty of its genuineness, 
that the promise on the face of it will be kept. The 
Scotch prefer paper money, as being in their opinion 
cheaper, safer, and more convenient for currency than 
the sovereign ; but their notes do not circulate out of 
the kingdom. We receive them daily, but always send 
them to the bank of issue and get gold in exchange. 
The same with notes of the provincial banks ; these are 
very useful in the immediate neighborhood of the banks 
that issue them, but they are received with great caution, 
if not suspicion, elsewhere. They will not circulate 
generally, because the public at large are not familiar 
with them, and therefore have not the necessary confi- 
dence required before parting with their gold or goods 
in exchange. 

In this country, the paper money issued under legal 
restrictions by the banks amounts to about ;£^4o,ooo,ooo 
sterling (the gold and silver money, whether in circula- 
tion or kept in reserve by the banks, amounts to about 
twice as much) ; and those who are friendly to Peel's 
Act, like myself, contend that it secures the convertibility 
of the Bank of England note. By the phrase '' securing 
the convertibility of the note," it is not meant that the 
issue department of the bank of England held a suffi- 
cient amount of gold and silver to pay off all the notes 
it had issued. The bank is allowed to issue notes against 
the value of government securities that it holds, say fif- 
teen millions ; so it is obvious that the amount of gold 
and silver must always be less by this amount. But by 


" securing the convertibility of the note " is meant, that 
the issue department of the Bank of England is in a con- 
dition to pay off any amount of notes of which payment 
was likely to be demanded for the purpose of exporting 
the gold. What they have to be prepared for is to be 
always ready to meet zxiy foreign demand for gold. This 
is called " securing the convertibility of the note." The 
principle is correct, and I fail to see why the Bank of 
England should not have additional power, and be per- 
mitted to issue notes to any amount the nation needs, 
upon the same conditions that she issues the* fifteen 
millions ; and I see no reason why the joint-stock banks 
and provincial banks, or, briefly, any banker, should not 
be allowed to issue notes upon the same conditions, de- 
positing government or other securities to the value 
thereof, the same to be stamped when issued, or paying, 
as now, a tax to government upon the notes so issued. 
By this means we should obtain always a plentiful supply 
of money for all internal purposes ; the nation would 
make a profit to help in reduction of taxation ; and the 
principal causes of pressure that caused the suspend- 
ing of the act, as in 1847, 1857, and 1866, would be re- 
moved. At present, when the exchanges are favorable, 
gold is imported. The bank is compelled to issue notes 
against this bullion, thus increasing the circulation and 
lowering the rate of mterest ; this leads to speculation ; 
these, co-operating with other causes, soon turn the ex- 
changes. Notes are taken to the bank, and gold de- 
manded, for the purpose of being exported. This 
contraction of the circulation of notes produces pressure, 
and the apprehension of further pressure produces panic. 
It is stated that during the pressure of 1847, notes to the 

86 MONEY. 

amount of ;^4,ooo,ooo were hoarded under the influence 
of panic. It is difficult to state where prudence ends and 
panic begins. That there is no real necessity for them, 
that they produce an incalculable amount of ruin and 
misery, is certain ; and if the Act of 1844 was enlarged, 
so that notes, upon depositing the requisite security, 
could be had for any amount, and panics be avoided, the 
change would be a national blessing. 

I have an implicit faith that " there is a remedy for 
every ill that flesh is heir to " ; and that the ills are in- 
tended iDy nature to make us exert ourselves to remove 
their causes. Our Currency Act should be so framed 
that at all times, more especially in times of panic, the 
people may be certain that any amount of money can be 
had by those who have the requisite securities to deposit 
for the same. It is the dread of not being able to get 
the money that causes half the mischief ; and it is folly 
to go on trusting in time of need to suspend the operation 
of the Bank Charter Act. When an act is suspended, it 
must be either to remove an evil which the act has pro- 
duced, or to prevent an evil which the act may produce. 
But it is in our power, and as prudent men it is impera- 
tive upon us to use the power we have, to adapt the act 
for all times ; we ought to have — considering the great 
interests at stake, and the overwhelming, irremediable 
evil an inefficient circulating medium causes — an act 
adapted for all times, and so provide against panics in 
the present or the future. If panics are caused by the 
act, let the act be altered ; if not, it cannot be wise to 
suspend the operation of the act ; but the real cause 
should be found out and removed. Currency has its 
laws ; these must be understood better generally ; the 


fluctuations are known by a banker, and expected as 
naturally as a farmer expects a recurrence of the seasons. 
The fallacy is in assuming that the nation is on the road 
to ruin or to prosperity because the circulation is higher 
or lower this month than in the preceding month. The 
circulation of the Bank of England is affected by the 
payment of the public dividends. The country circula- 
tion is affected by the price of com ; The Bank of Eng- 
land by the amount of her bullion. How absurd to 
expect that these should at all times correspond ! Even 
had we but one bank of issue for the whole nation, a 
constant conformity between the London and provin- 
cial circulation could never be maintained. An importa- 
tion of gold would expand the London circulation, and 
an exportation of gold would contract the London circu- 
lation. But the country circulation would never expand 
and contract in immediate conformity, and in certain 
seasons of the year would show a progress in an opposite 

Banking has economized enormously the wealth of 
every country in which, like our own, the system has 
been well developed. Strange to say, in London, the 
city of gold, gold is but little seen. We know, by official 
returns, that so many millions of gold lie in the vaults of 
the bank, and we infer that a few thousands of sovereigns 
are kept in each of the other banks, as small change for 
their customers* wants. But the precious metal itself 
makes no appearance in the immense daily transactions 
of our city of gold. Bits of paper, with some writing on 
them, are the potent agents of the scene. Paper, paper 
everywhere ; but no gold, not even bank notes. You^o 
to buy some shares, you see the rate they are quoted at, 

88 MONEY. 

and commission your broker to buy. The broker goes 
into the busy, crowded room of the Stock Exchange, 
finds or calls out for some one who has shares of the kind 
to sell, makes a bargain at the current rate, and brings 
back either a check or a stamped agreement to purchase, 
which he hands to his client ; coupons or certificates are 
given on one side, and a check on the other. But no 
gold — not even notes ! The same takes place in the 
Royal Exchange and Mincing Lane ; only bills and prod- 
uce are there dealt in, instead of stocks. If you pay a 
man, you give him a check. If you discount a bill, you 
get the produce in a check. If you obtain a loan from 
your banker on stock, or by his discounting bills for you, 
the amount is placed to your credit, and you tell your 
creditor to draw on you, or give him a check. It is 
really a strange thing to contemplate so much wealth 
changing hands — money ceaselessly in transitu — yet not 
a sovereign to be seen. It is but the ghost of money 
that occupies the city, or rather it is money in its most 
civilized form — convenient and inexpensive. It is the 
check system, the credit system. And, after all, money 
itself is nothing else than a form of credit — a thing 
(whatever its substance) which men by common consent 
have agreed to recognize as a definite symbol of wealth, 
— a representative of property. 

The truth is, the whole operations of this monetary 
metropolis would come to a standstill if the payments 
and exchanges of property had to be carried on in gold. 
A single dealer sometimes lends, or pays, or receives a 
million sterling or more in a single day ; and dealings to 
the extent of several hundred thousand pounds are by 
no means exceptional occurrences on the part of single 


individuals. Many millions of property are changing 
hands, in loan or purchase — in banks, discount houses, 
on 'Change, or in Capel Court — every day. Fancy what 
it would be if men had to carry about with them such a 
mass of gold ! A thousand sovereigns is a burden which 
few men would care to carry about with them for a single 
hour. What a sight, then, it would be if the busy hive 
had to trot about thus laden. Ants in their hive, carry- 
ing about their eggs as big as themselves, would be a joke 
to it. And consider, too, what insecurity there would be, 
what occasions for loss of the precious coins, what temp- 
tations to theft and robbery, if the transactions in this busy 
place were so conducted ! It would be quite impossible 
to carry about such a mass of gold as would be needed to 
liquidate the engagements which daily take place. Still 
more, even if it were possible to carry about these loads 
of gold, the gold itself in such quantities could not be 
procured. Happily, the yellow metal is not wanted. 
Checks, bills of exchange, and bank notes are found to 
be equally valuable and negotiable ; they represent 
property quite as reliably as gold, besides being infinitely 
more portable, safe, and convenient. And hence they, 
or rather bills and checks, constitute, to all intents and 
purposes, the only currency on 'Change and throughout 
the monetary city. By means of them transactions to 
the extent of many millions take place daily without a 
single sovereign or even bank note being visible. 

Yet gold, though not visible, is the presiding spirit. 
The power of paper, its very existence as a medium of 
exchange, the enormous sums it so easily transfers, — all 
its operations depend upon the presence of gold in one 
part of the locality — in the Bank of England. The 

90 hiONkV. 

thousands who daily operate never see it. But, visible 
or invisible, its presence and amount regulate the opera- 
tions of the bank, and those operations regulate and 
affect all the other operations of the precinct. Accord- 
ing to the weekly report of the officials as to the quantity 
of gold lying hid in the strongest chambers of the bank, 
the value of stocks and shares rises and falls ; high or 
low rate of interest, panic or prosperity, occur, according 
as much or little of the yellow dross is reported to be in 
the occult chambers of Threadneedle Street. The vital 
point in the day's monetary news are the lines that tell us 
how much gold has been taken to or withdrawn from the 
bank, as the movements of the precious metal regulate 
the bank rate of discount.; and although the leading 
joint-stock banks now act independently of the bank, 
and regulate the rate according to their power of lend- 
ing, still the bank rate is the principal regulator of the 
rate of discount, as it indicates the supply of or demand 
for gold. As before intimated, I think something should 
be done to remedy this, and prevent the great fluctuations 
the rate of discount is now subject to. The price of 
money depends on supply and demand ; bankers, and all 
dealers in money, like a high rate — the trading classes do 
not. To my mind, two per cent, is as bad as six, the one 
being as much too low to pay for the use of money as the 
other is too high ; the rate must fluctuate. But there is 
not sufficient reason for the extreme rates up and down 
in every twelve months that we now experience — varia- 
tions only justifiable upon the assumption that every one 
had literally to meet their payments in gold, which at 
times may not be easily procurable ; but it is not so. 
Bank of England notes answer every purpose equally as 

Paper money, J^ank notes, checj^s. 91 

well, and can be manufactured in any quantity. There 
is no reason whatever to alter the principle of the Bank 
Charter Act of 1844 ; but why ^15,000,000 should be 
the maximum sum for the Bank of England to be allowed 
to issue her notes against security I fail to see. On the 
contrary, there is every reason why a sum that was suffi- 
cient to meet the needs of 1844 should be altered to meet 
the larger needs of 1880. It is simply absurd, when trade 
is good, that our operations should be limited because of 
the scarcity of gold. It is impossible for gold to increase 
in proportion to the nation's needs. " Money ** will show 
you there is no need for more " gold/* Let the trade of the 
nation increase to any extent ; the exchanges, however 
large, may be made by checks, bills, banks, and the 
clearing-house. We only want the Currency Act altered 
so as to permit the Bank of England or government to 
increase the note issue to any extent, proper security 
being left for the same. If we found in times of panic 
that people lost faith in the notes, and all wanted gold, 
there would be some reason for our timidity upon this 
subject ; but, as a matter of fact, no such loss of confi- 
dence has ever occurred. People take the notes as 
readily when the stock of gold is low as when the bank's 
coffers are overflowing with the precious metal. The 
notes serve their purpose as money quite as well as gold 
does, and the public greatly prefer them as a means of 
internal circulation, as a means of settling accounts 
among themselves. Bank of England notes are accepted 
everywhere and at all times as preferable to specie. It 
has always seemed to me a great pity we have not notes 
for jQi, jQ2y ^3, jQ^ ; they are very convenient ; and it 
would make the poorer classes familiar with paper money 

92 MONEY. 

if they were paid their wages in paper money. With the 
middle and upper classes, paper money is always pre- 
ferred — a check being preferred to any thing else, al- 
though only an order to pay and not a legal tender 
at all. 

Gold must be the basis of our money, but it is unneeded 
in our monetary transactions with one another. And it 
is an insult to our common-sense, as a practicable peo- 
ple, to get in such a state of alarm at every diminution 
of our stock of gold, because the Bank of France, or any 
other foreign bank, buys up bills of exchange upon Lon- 
don, and sends them here to be cashed, in order to supply 
itself with gold from the stock kept in hand by the Bank 
of England ; or it may be our own government, which, 
by making loans to a foreign state, necessitates a corre- 
sponding export of the precious metal ; or which, in 
times of war, has to export specie to provide supplies for 
its army abroad. It may be our corn merchants import- 
ing grain to make up for a deficient harvest here ; or our 
manufacturers who purchase the raw materials of their 
industry ; or, finally, it may be great capitalists, great 
money dealers, who convert their money into gold or 
silver as best suits their purpose for the time, and who 
transfer it from one country to another, wheresoever 
they can make the largest profits upon it. It is these 
agencies, and not any mistrust of the notes, which pro- 
duce the occasional heavy demands for gold upon the 
Bank of England. These causes will always be in opera- 
tion ; we are aware of them, yet take no steps to prevent 
their operation every ten years or so ; causing a convul- 
sion which spreads terror throughout the city, and all 
commercial circles, paralyzing the whole country as 


effectually as if an earthquake had strewed with ruins the 
great seats of our national industry. Trade is stopped, 
gains ruthlessly swept away, suffering and want exist 
nearly all over the country, as if there was a great fam- 
ine ; and as a rule, this occurs just after or when the 
country is fully occupied and prosperous ; and the only 
reason is, we stupidly restrict or totally suspend the usual 
credit system by which the trade of the country is car- 
ried on, because the supply of gold ih the vaults of the 
Bank of England is temporarily diminished. We forget 
at once what credit and paper money were invented for 
— viz., to take the place of payments in coin, — and have 
not wisdom enough to be equal to the occasion, and make 
use of our credit system as a means of compensating for 
the temporary absence of gold. Instead of doing so, to 
tide over the difficulty, instead of having a system that 
gives greater expansion in the time of need, ours restricts 
its general operation, and makes every one doubt being 
able to get the money they may require, and so we ag- 
gravate the difficulty we are in ; and so long as we per- 
sist in this course, so long must the nation be subject to 
these periodical visits of commercial distrust, and be 
punished by suffering that must inevitably occur, unless 
more elasticity is given to the present system of monetary 

Do not imagine I am any speculative theorist ; no one 
is more utterly averse to the many remedies that have 
been suggested to save thousands from ruin — suffering — 
starvation. I am no advocate of Gray's, Harvey's, or any 
other remedy, with their consol notes, labor notes, land 
notes, inconvertible notes ; but thoroughly believe in the 
principles of the Bank Charter Act, and maintain that a 

94 MONEY. 

metallic currency is the only safe and reliable one — ^that 
it must be distinctly the basis of all notes, bills of ex- 
change, checks ; that the same are convertible into gold, 
and that the sums they represent are payable in gold 
currency. But the fact stares us in the face that these 
panics do not arise from the want of gold, but a limita- 
tion and restriction of the ordinary accepted currency of the 
kingdom, just at certain junctures when the nation re- 
quires more instead of less of the circulating medium ; 
and it can be proved that a larger issue of bank notes at 
these periods stops the distrust, the blind fear that 
creates panics. Therefore, why not remove the cause 
by not limiting the issue of notes to the stock of gold^ 
and a certain sum not exceeding ^15,000,000, upon 
securities ; and, as they cannot be increased upon the 
stock of bullion, alter the act to any sum the nation 
needs, if government security to the value thereof be 
deposited ? To those who will reply. This would destroy 
the " convertibility " idea, I answer, it is only extending 
the present latitude, and deny that there is any danger in 
the suggested alteration, as it is extremely rare that the 
drain upon the bank gold ever becomes so great as to be 
a real and unavoidable embarrassment to the bank. The 
export of three or four millions of specie generally pro- 
duces such an effect upon the rate of exchange, as of it- 
self to render any further exports of the kind unprofit- 
able ; hence the drain ceases ; and, except during a long 
and gigantic contest, such as we had with France under 
the First Napoleon, — an extremely exceptional circum- 
stance — the drain of gold for export has never assumed 
a magnitude such as really to imperil the position of the 
bank. The artificial restriction of the Bank Act simply 


wants removing, or rather its power of issue enlarged, 
so that the people will not be under a fear or a scarcity 
of the medium of exchange in circulation. We want the 
act to give confidence, to remove the senseless fears of 
timid, thoughtless people, and thus prevent panics, and 
the ruinous depression of industry. 

Inconvertible Bank Notes. — An explanation of 
these will perhaps give you a better value of the " con- 
vertible " bank notes. An inconvertible bank note is a 
paper tool of exchange which acknowledges on its face 
a debt to be due, which promises to pay it, but — mark 
this well — no time is specified for the payment ; and for 
all sucli notes, although the coin is promised, it cannot be 
obtained on demand. Now, as before explained, a " con- 
vertible " note is not payment, but the payment of it in 
coin can be had for the asking. Thus such notes are 
properly held to be a fair exchange, as they guarantee to 
the seller that by their aid he can obtain coin on demand, 
or other goods equal in value to those he has sold ; 
whereas a bank note not payable on demand supplies no 
such guaranty, and its value is based upon the assump- 
tion that the government that issues it will not repudiate 
its liability — will pay some day ; but it is not certain 
that it ever will be paid. How is it, then, that any one 
is willing to give away his property in exchange for 
such paper ? Because the government enacts a law com- 
pelling every creditor who has debited a buyer with a 
dollar or a pound to accept these notes as a full dis- 
charge of his debt. They endow these notes with the 
right of legal tender. They owe interest on the national 
debt, and force the national creditors to take these notes 
as payment of the interest due. They purchase supplies, 

96 MONEY. 

and persuade the contractors to supply them with goods 
by means of the knowledge that they will be able in turn 
to pass on these notes to all to whom they are indebted. 
Another very important point is, that bank notes pay- 
able on demand come back upon the issuers ; they only 
remain in circulation to the extent they are required. 
But with inconvertible notes there is no such machinery 
for adapting their number to the requirements of the 
public for them ; once put out into circulation, they are 
always out, and so in course of time there is an excess 
of this paper money, and an inevitable fall in its value 
as compared with the value of the coin which is acknowl- 
edged to be due. The supply of them is too *great ; 
many persons have more of them than they know what 
to do with ; they become uneasy, and to get rid of them, 
they are willing to part with them at a reduced value. 
Each fresh issue adds to the depreciation and to the dis- 
order it creates in all money transactions. The notes are 
worth less and less, and thus an inconvertible bank note 
is liable to the worst vice which a currency can possess 
— unsteadiness of value. The essence of a currency is, 
its giving a reliable assurance to a s.eller that he will 
be able to procure other goods of the same value as 
those he has given away. The " convertible " currency 
does this ; the " inconvertible " deliberately corrupts and 
vitiates that assurance, and, like protection, adds unneces- 
sarily and wantonly to the price to the consumer, as, 
the value of the notes being uncertain, the seller pro- 
tects himself by adding the risk to the price of every 
article he sells. The more civilized a nation is, the 
greater the development of its trade ; the larger the 
number of debts to be settled, and stipulated annuities to 


be paid, the more disastrous is the violence done to the 
currency, the more injurious its consequences to society. 
The essence of honor and good faith in contracts, as 
well as of trustworthy trade, is to give the value of the 
thing covenanted for. But the inconvertible paper note 
will not buy as much, as the dealers all ask a larger sum 
for their articles ; the notes will not obtain so much 
value as before in exchange ; and creditors, and in fact 
all parties with fixed sums to receive, landlords, annui- 
tants, all with fixed incomes, find that a portion of their 
yearly income has been confiscated by the introduction 
of a paper money not payable on demand. The plea is 
necessity. What is the government to do ? Why, choose 
the lesser of two evils ; levy the heaviest amount of taxes 
the nation can bear, and borrow upon interest or annui- 
ties the residue upon the best terms that are possible. 
Face the position, do not evade it by floating a false 
money — a lie, a fraud, that robs creditors of the indi- 
vidual and the state ; that harasses trade and every ex- 
change between man and man, damaging the national 
credit, and putting forth an unsound currency ; that per- 
secutes society, and poisons every sale as the days roll 
on, affecting every individual, as all more or less buy, 
distribute, exchange daily. 

The advocates of an " inconvertible paper currency " 
argue as if there cannot be too much money. Men are 
never taught what money is, have yet to learn the alpha- 
bet of currency, that money is but a tool, a medium that 
affects second-hand the exchange of goods. It is not 
the money which really buys ; money is only the instru- 
ment used in buying. " It is the property with which 
money is itself bought that buys.'* Buying is only e^ 

98 MONEY. 

changing goods ; to sell for money is only double barter 
in the place of single barter. Money does not directly 
produce a single particle of wealth, nor create any 
additional power of buying, which would not exist with- 
out it. By simple barter, you exchange the hat you 
have made with the shoemaker for shoes ; by double 
barter, you exchange the hat for money, and by its 
agency buy what you like and when you like to its value. 
But the power of purchase, you will perceive, depends 
upon the hats and shoes ; these are the real wealth, the 
power, that enables men to purchase money. Money 
cannot, does not, increase trade ; it enables large trans- 
actions, all exchange of property, to be made more 
easily ; but without coin or notes, the goods made, all 
property, would be exchanged ; people would buy and 
sell just the same. Gold is useful as currency, so we pay 
miners for it ; but we give real wealth, our produce, and 
manufactured goods for an article supposed to be of the 
same value ; but it is not so. If we could do without it, 
the miners and others employed in getting it would be 
employed in producing real wealth instead of artificial. 
You will also hear people argue that it is a good thing to 
have a national debt, forgetting that the debt implies a 
national indebtedness to pay so many people yearly an 
amount of money that enables them to obtain so much 
produce or manufactured goods without doing any thing 
that helps towards the production of the same. There is 
only one way for a nation to be wealthy : its people must 
work, mentally and bodily — be thrifty and thoughtful. 
The national debt, by giving a large number of people 
the right to live without labor — upon the labor^ thereforey 
of others — is a national curse ; as are all monopolies, 
taxes, restrictipn^ of .^IJ and every kind that stop the 


growth of produce, the development of manufacture. 
The more goods a people can make, the cheaper must 
the same be to the consumer ; the more goods the money 
will procure, the greater will be the demand. Upon this, 
and this only — the power of the consumer to purchase, 
and his right thereto being based upon his helping in the 
general work — can trade be healthfully developed and 
increased. Men must learn that it is what they produce 
which gives them the power to buy ; and the Currency 
Act must be so framed that men will not be thwarted and 
paralyzed in their endeavors, for fear of not getting 
enough of the medium of exchange. Briefly, it is im- 
perative that our manufacturers and merchants have the 
faith that " money ** can always be had if they have the 
necessary securities to buy it with ; and that our bankers 
should comprehend that in times of crisis they should be 
" more liberal " towards their regular customers, instead 
of, as heretofore, pursuing the opposite policy. 


A bill of exchange is a written form from one person 

to another, directing him to pay a sum of money either 

to the drawer or to a third person at a future time — as 

follows : 

London, Jaimary isty 1880, due April 4th, 

a> Q 

;f loo. O f. od, 3 . . 

Three Months after date, pay to my Order the sum of One Hundred 
Pounds, 'S rt § 

Ph '3 For value received. 

^ AB. 

To C. D., 
I, St. Paul's Churchyard, E. C. 

100 MONE y. 

The bill may be drawn for so many days, weeks, or 
months, either after the date of the bill or after sight. 
This latter is often misunderstood, and holders keep the 
bills the thirty or sixty days before presenting them. 
After sight means the thirty or sixty days after the bill 
has been seen and accepted by the banker or person 
upon whom it is drawn. All bills to be legally negotia- 
ble need the word " accepted," and if drawn after sight 
the acceptor also writes the date of the acceptance. 

The person who draws a bill is called the drawer ; the 
person on whom it is drawn is called the drawee. After 
the bill is accepted the drawee is called the acceptor. 
The drawer of the bill, if he wants his banker to present 
the same for him, or if he wants to discount a bill, writes 
his name on the back thereof, or endorses it, as it is 
called. Bills are often endorsed by a third party, as 
security for their payment, if the acceptor fails to honor 
the bill when due. The party who endorses a bill is 
called the endorser ; the party to whom it is endorsed 
is the endorsee. The person who pays a bill is the payer ; 
the person to whom it is paid is the payee. The best and 
only legitimate bills of exchange are those drawn by 
producers or manufacturers upon wholesale dealers, the 
second-best are those drawn by wholesale dealers upon 
retail dealers. Bankers should confine their operations 
to the above ; there should be no encouragement given 
to retail dealers to draw bills upon consumers. To 
discount these bills is to encourage extravagance in the 
acceptors and, ultimately, ruin to the drawers. The man 
who gives a bill to his butcher, baker, tailor, upholsterer, 
must be living beyond his income. The man who buys 
the necessaries of life upon credit, relying on his divi- 


dends or rents, is improvident ; the man who buys the 
necessaries of life, relying upon his future earnings, is a 
thief, as he may die at any hour, and has no moral right 
to incur debts the liquidation of which depends not only 
upon his living, but being able to earn his living. There 
are bills also given in anticipation of salaries or rents ; if 
these are against value, they should be discouraged ; 
persons out of trade have no business with bills. Accom- 
modation bills ought always to be refused by a banker ; 
they are a fraud ; " lie " is upon their face, for value 
received written thereon is an untruth. A B has accepted 
to oblige C D, but no real value is represented ; the bill 
is not what it professes to be — an acknowledgment of a 
debt — and the bill given that C D may transfer a debt 
due by A B to his banker. Bills of exchange are invalua- 
ble in commerce ; the knowledge of large payments 
in gold at fixed periods, monthly settlements, bills to 
meet on the 4th, etc., would be more than the nerves of 
ordinary men could bear, were it not lessened by the fact 
that they hold so much paper in their bill boxes that 
their bankers will discount for them if needed. There- 
fore, all commercial men sftould strive to keep their 
paper above suspicion. Bills are the best and cheapest 
means of transferring money from one place to another. 
Bills of exchange are a legitimate and useful means of 
borrowing, and a handy means of security for bankers to 
lend upon ; but it is most important that they be genu- 
ine, and be what in reality they are, a system of hypothe- 
cation — viz. : A (the trader) having ;^i,ooo owing to him 
by B, and B not being able to pay it at the time, and A 
wanting the money at once, draws a bill upon B, and the 
bankers believing in the genuineness of the bill, that it is 

102 MONEY. 

a debt for goods sold and delivered, discount the paper, 
and the right of receiving the debt of B is transferred to 
them by A, it being understood A has to pay if B fails to. 
Another ingenious expedient is that of A having con- 
signed certain bales of merchandise to B, draws upon him, 
at so many days after sight, and by depositing with a 
banker the bills of lading, policy of insurance, and bills of 
exchange, the banker advances him the money, and his 
agents collect the debt or receive payment of the bills 
drawn on the consignee. This is a very useful arrange- 
ment, and if bankers would only exercise the proper 
caution, have all invoices signed by the principals, and 
only undertake to collect the debt — that is, to hold the 
bills of lading and other documents until the bills are 
paid ; or, if they advance the money to consignor, keep 
rigidly to " two thirds " of the value, protecting them- 
selves, as at present, with letters empowering them to sell 
before the bills mature in case of insolvency of consignee 
— to act, in fact, as if themselves the direct consignors, 
but with power to sue the real consignors for any 
denciency, or to appropriate any excess, — the system 
would be a national benefit. But their laxity in making 
too large advances has been the means of introducing 
into this "shipping" trade the reckless, unscrupulous 
adventurers we have heard so much of the last ten years, 
— men who are not in a position to pay if their custom- 
ers fail to do so, or to bear the losses consequent upon a 
forced realization of the merchandise, too often recklessly 
consigned because of the facilities of borrowing upon the 
bills of lading, etc. Then follow commercial disasters 
and social shipwreck. So, instead of recommending an 
extension of credit, or an increase of fictitious money, I 


^advocate more strict adherence to legitimate, sound 
trading and banking, and the discouragement of all the 
ingenious shifts and contrivances by which speculators 
and needy men try, by means of the shadow^ paper ^ 
to take a position or do the trade justified only by the 
presence of the substance ^ gold. 

Bills fix the period for the payment of debts, and in 
case of litigation they afford an easy proof of the debt. 
Many otherwise good business men will have no scruple 
in putting off tradesmen to whom they owe money, and 
the creditors dare not be too pressing, for fear of giving 
offence ; hence the time of payment is uncertain. This 
is one of the greatest evils not only in the retail but the 
wholesale trade. With the consuming class, the time 
may not be ripe for insisting upon fixed ^^.y^ of payment ; 
but in the wholesale trade, a bill or check upon a fixed 
settling day every month, or the month when an account 
is due, should be strictly enforced, or the account at once 
closed. But you will perceive the value of bills ; a trader 
will meet his bills who has no hesitancy and thinks it not 
derogatory to his credit to keep putting you off with one 
excuse or the other upon an open account. It is sur- 
prising how even professedly religious men fail to see the 
dishonesty of thus depriving their creditors of the use of 
their money. Traders in good position will tell you they 
have been buying houses or shares ; therefore you must 
wait. The inconvenience to you is never thought of, or 
apologized for ; in fact, it is the most painful experience 
to a trader with an active conscientiousness ; this laxity 
of morals, this ignoring the rights of others, being done 
by men for gain, not from necessity. We need all men 
to perceive clearly that any man who fails to pay his 


debt on the day when it is due, whether accepted for or 
not, is, unless he pays interest — which is rarely, if ever, 
done, and is not allowed by law on open accounts, — de- 
riving an advantage at the expense of his creditor — an 
advantage which, in my opinion, no really honest man 
should take. If a man dishonors his acceptance, his 
character is stamped at once in the commercial world as 
being either very poor, very negligent, or very unprinci- 
pled, and at no future time will he be able so easily to 
raise money upon the credit of his name. I see no rea- 
son why the same opinion should not be generally enter- 
tained by those who fail to keep their word in paying 
their debts at the time agreed upon ; and if it was 
generally understood that the same stigma would attach 
to the failing to keep the verbal promise as the written 
bond, the means would have been taken to destroy the 
worst feature of our credit system. 

We have to overcome in the public mind a feeling of 
prejudice respecting bills of exchange. Many experi- 
enced traders refuse to accept, others boast they never 
accepted, a bill ; but if you regard your word as your 
bond, what difference does it make to you if, not being 
able to pay my debt when it is due for discount, you give 
me a bill instead ? By means of bills a trader can carry- 
on a larger business with the same capital. For instance, 
you owe me ;^ioo, but cannot pay ; if you refuse to 
accept a bill, the loss of this ;^ioo will seriously interfere 
with my payments, damage my credit, prevent my buy- 
ing stock, and thereby check my trade ; but if you 
accept the bill for the amount you owe me, I send it to 
my banker ; he, having faith in me, places the amount 
to my credit, and the bill is to me as useful as the cash 


would have been — in fact, you give me a lawful recog- 
nized medium by which others will supply me with the 
gold that temporarily you cannot pay me. Some trades- 
men pay their debts with customers' bills — a habit that 
should not be encouraged. All bills should go to 
bankers ; it is their business to discount the same. If 
you owe me a debt, you should pay me in money, or give 
me your acceptance for the amount. In business bills 
are invaluable to tradesmen, and they set in motion what 
would otherwise be large sums of locked-up capital. They 
also enable men to go into business that otherwise would 
be debarred therefrom ; as to give credit without drawing 
bills would require much larger capital than the majority 
of traders possess. To give no credit would restrict one's 
business ; by means of bills credit can be given, and the 
business extended, without any addition to the capital 
being required. 

Bills are an easy way of giving a guaranty. A wants 
to borrow ^100 of B, which the latter is in a position to 
lend, but not upon A's security alone ; A, therefore, gets a 
friend either to join him in signing a promissory note for 
the sum needed, or in endorsing a bill of exchange. By 
this means B can assist A, and money might be often 
lent safely and advantageously, as B, in case of need, 
could re-discount the bill with his bankers. But bear 
this in mind, there must be bona-fide consideration given 
for the bill ; as pure accommodation bills, I care not for 
what purpose needed, are dishonest, fictitious, and indi- 
cate the folly, as they invariably effect the ruin, of all the 
parties concerned. 

Bankers by means of bills unconsciously transfer capi- 
tal from the trade not wanting capital to the trade that 

I06 MONE r. 

does. Every branch of trade is liable to fluctuations, 
from an alteration in the proportions between the de- 
mand and the supply, and hence capital is continually 
undergoing a transfer from the production of those 
articles for which there is a less demand to the produc- 
tion of those articles for which there is a greater demand. 
So we hear from political economists of an average rate 
of profit in all trades, because by a natural law capital 
flows from or ceases to be supplied to those branches of 
trade where it is not remunerative, and finds its way to 
those other branches where it i^ wanted. Banking helps 
this natural law. A manufacturer does not leave his 
employment, or transfer his capital, but the manufacturer 
in the declining trade reduces his capital, while the manu- 
facturer in the prosperous trade will augment his capital, 
and the transfer of capital from one trade to the other is 
effected chiefly by bills of exchange. For example, the 
manufacturer who is selling a less quantity of commodi- 
ties will have fewer bills to discount with his banker, but 
the other manufacturer who is buying and selling a 
greater quantity of commodities will have more bills for 
discount. You will perceive that the banker who uses 
the bulk of his capital in the discount of commercial 
bills thus easily transfers from one branch of commerce 
to another money or capital in exact proportion to the 
circumstances of the respective parties. 


Banking is essential to our prosperity ; it is therefore 
imperative upon us, as a " practical people," to make the 
investing in " bank shares " less risky than it is. The 


large profits to the original shareholders of the leading 
joint-stock banks may justify incurring the liability as a 
speculative investment ; but in considering this question 
we have to remember that the market price of these 
banks at the present time on*y gives 4^ to 6 per cent, to 
the present investors ; and no sensible man of any re- 
sponsibility will for such remuneration put such a liabil- 
ity on his shoulders — a liability that may utterly ruin 
him at any moment. Therefore, I would substitute a 
" positive " for an. unlimited liability. In the new edi- 
tion of "Business," 1879, , before the Chancellor of the 
Exchequer brought forward his plan of multiple share 
value, I had advocated that all the shares be fully paid 
up, and that each shareholder be liable for a similar fixed 
sum ; and instead of ** reserve liability," as reserve might 
imply any sum, I wrote to the Chancellor of the Ex- 
chequer that my book had been in the printer's hands 
two months, and that there I had advocated " double 
liability " ; as the public, knowing that " limited " meant 
liability to the value of the shares, " double " would im- 
ply double the value of the shares, and that would indi- 
cate to the shareholder his responsibility, and to the 
public its security. In 1879 the law was amended ; some 
of the banks became " limited " ; and it is satisfactory 
to find, end of the year 1880, that Mr. Huth, chairman 
at the meeting of the London and Westminister Bank 
for the half-year ending December 31, 1880, stated that 
the deposits were ;^ 1,500,000 more than at June 30, 
1880, that the half-year's dividend was 9 per cent., 
against 7^ per cent., same half-year of 1879 ; that new 
accounts had been opened, and the list of shareholders 
been much strengthened by the entrance into it of per- 


sons of wealth and standing, who had kept away so long 
as the liability of shareholders was unlimited. The ob- 
ject of legislation should be to encourage the better class 
of investors — intelligent men who can understand a bal- 
ance-sheet, and competent ^o ask questions at the half- 
yearly meetings ; prudent men willing to incur a fixed 
amount of responsibility, but refusing to saddle them- 
selves with a liability that means " ruin " if an incompe- 
tent or unprincipled man be manager of the bank. The 
only argument in extenuation of "unlimited liability" 
was to guarantee the ^^^/^-holders, but if we had only 
" national notes *' issued by the government against 
security, this objection would be removed. 

The liability of directors and manager should be " un- 
limited." They have great power, and it is not in human 
nature to guard borrowed money with the same vigilance 
as money obtained by one's own incessant, self-denying, 
hard work. The only plan is to let those who have the 
power take the responsibility for all they possess ; so 
that they confine themselves to legitimate banking, and 
be not tempted to things best left alone. Their position 
is this, for a margin of one per cent, to two per cent., or 
for large sums half per cent, to one per cent., to find for 
their thousands of customers the prudence, caution, and 
common-sense which in many cases the customers ought 
to find, and it would be better for all parties that they 
found for themselves. Men must act for themselves more, 
and cease to regard joint-stock banks as a kind of cen- 
tral financial providence. 

The joint stock-banks of this country have been a 
most remarkable success. For their future prosperity, to 
retain the confidence of the "moneyed public," it should 


be understood that a banker's business is to use the 
"capital of others." It is a business in which the capi- 
tal of the proprietors is used, not to work the business, 
but to guarantee the business. It is only wanted as a 
"moral influence.** There was a time for all things. 
Whilst the idea was a new one, joint-stock banking 
needed from the public, confidence, without which banks 
cannot prosper; and the unlimited liability of each 
shareholder was then necessary ; but unlimited liability 
has done its work, and after the terrible catastrophe of 
the City of Glasgow Bank, no sensible man of property 
would continue to hold any shares in an "unlimited 
bank.*' Think for a moment what profit can compen- 
sate for the possibility of ruin at any moment. Who 
would incur the risk ? " Only men of no property,** an 
inferior class of shareholders ; whereas in banking com- 
panies we need the very best class that can be had. So, 
as the banks will in a very short time be " unlimited " 
only in name, it is time the Liability Act in reference to 
banking and other companies be amended. But as 
regards the issue of notes, until an alteration be made in 
the method of issue, there must be no limitation of lia- 
bility here, or you damage the value of notes as a medium 
of exchange. Currency must be kept above all suspicion ; 
therefore the holder of a note of a bank that fails should 
come in with the other creditors as regards the general 
assets, but have the right of a secured creditor against 
the shareholders for the residue. The reason, you will 
perceive, is obvious. A trader is almost compelled to 
take a note if offered. Notes are valueless unless they 
circulate ; to ensure their circulation needs confidence ; 
to give this there must be security. But a man who 

no MONEY. 

takes and buys shares, or has a current or deposit ac- 
count, acts upon his own free-will, for certain advan- 
tages to himself, and must take the responsibility with the 

M. Thiers has well defined responsibility in sketching 
the qualities necessary for success in war, and brings 
vividly before his readers the tremendous issues that 
hang, moment by moment, upon the genius, the strength 
of will, the promptness, and the presence of mind needed 
in a general on a day of battle. Bankers and bank 
managers need all the qualities except genius for their 
positions, and have daily need of all the other qualities 
necessary to a great general. If war has her reverses and 
defeats, so has peace ; and there are none equal to the 
carnage caused by incompetent bank managers. Their 
position is one of unlimited responsibility. They have 
the power to do immense benefit, and to do it, if they 
have the requisite capacity, by the rules of good banking, 
sound finance ; and they also have the power to bring 
forth the hqrrors that follow false and guilty finance, 
unsound banking, as with the City of Glasgow Bank^ 
the West of England Bank, etc., and thereby prostrate 
thousands of families in ruinous, hopeless misery 
worse than death. Shareholders must be more vigilant. 
The manager of one of the large banks has the control 
of millions, and there is more probability of mistakes being 
made, that, if not rectified or stopped, will be ruinous* 
than there is of a manager committing a fraud. But er- 
rors of judgment, the mistakes of a sanguine manager, are 
far more to be dreaded than the theft of a dishonest 
manager. Commerce needs energy and enterprise ; but 
banking is simple, steady-going, and cautious. '^ There 


is no more unsafe government for a banK," says Mr. 
Bagehoty '^ than that of an eager and active manager, sub- 
ject only to the supervision of a numerous board of di- 
rectors, even though that board be excellent ; for the 
manager may easily glide into dangerous and insecure 
transactions, nor can the board effectually check him." 
Banking is a very peculiar business, and it depends so 
much upon credit, the confidence of its depositors, etc., 
that the least blast of suspicion is sufficient to sweep 
away, as it were, the harvest of a whole year. Great 
vigilance is needed, and there is great anxiety. They 
have very large sums to employ, yet are expected to be 
ready at all times to pay ; so are compelled to restrict 
their advances to such securities as are available in case 
of need — " negotiable " securities, as they are termed. It 
is a terrible responsibility to feel that, whether weakly or 
wickedly, you have led the shareholders and depositors 
who have trusted to you along the road to ruin. 
The law shotdd be clearly defined as to the personal 
responsibility of managers and directors of all joint-stock 
companies. Their position is one of great trust ; their 
duties should be well remunerated ; but any deception, 
such as a false balance-sheet, should be punished 


We have but little information as to what kind of 
banks existed in the earlier ages, or on what system they 
conducted their business, as most of the nations of an- 
tiquity subsisted chiefly on agriculture. They probably 
had little occasion for banks, for it is only in commercial 
countries thUt these institutions have attained to any high 

112 MONEY. 

degree of prosperity. And as even the commercial nations 
of antiquity were unacquainted with joint-stock companies 
or commercial corporations, and had not discovered the 
use of paper money or bills of exchange, the business of 
a banker even among them must have been somewhat 
different from that of a banker of the present day. 
There was no necessity, in fact, for these instruments to 
supplement the work in conjunction with " money," or 
the medium of exchange between buyer and seller. 
Like every thing else, money has progressed from infancy 
to age. We are so familiar with its operations that we 
forget to pause and consider what a useful thing money 
really is. Imagine, at the present day, that there was no 
such thing as money ; how could it be possible to get any 
thing we might want? The shoemaker, for instance, 
wanting bread, meat, and beer for his family, must go to 
the baker and exchange his shoes for as much bread as 
they were worth, and would be compelled to go to the 
butcher for meat, the brewer for beer ; and if this species 
of bartering, which money saves us from, were general, 
one can easily perceive what a frightful state of confu- 
sion and misery we should be in. 

The merchants of early times employed as money 
gold and silver bullion, and received it and paid it away 
by weight. We read of Abraham weighing unto Ephron 
400 shekels of silver, current money with the merchant^ 
which implies that the money current with the merchant 
was different from that in ordinary use. After bullion 
was superseded by coin, and each nation had a coin 
of its own, the merchants would necessarily in the 
course of their business receive coins belonging to 
different nations ; and hence would be applied to by 


Strangers who wished to exchange their own money 
for the money of the country in which they so- 
journed. We read in the New Testament of money- 
changers who had tables in the Temple of Jerusalem. It 
is probable they attended for the purpose of giving Jew- 
ish money in exchange for those various coins which per- 
sons coming from the neighboring countries might have 
brought with them. Whether the business of money-chan- 
ging was carried on as a separate employment, or united 
with the general business of the merchant, we are not 
informed, but it is stated that the exchangers allowed in- 
terest for money lodged in their hands. " Thou wicked 
and slothful servant, thou oughtest to have put my money 
to the exchangers, and then at my coming I should have 
received my own with usury." From the circumstance 
of their allowing interest on money we may infer that 
they also lent money on interest, otherwise they would 
have had no use for the money they borrowed. " This 
scanty information," says Mr. Gilbart in his admirable 
book, " The Logic of Banking," ** forms the whole of our 
knowledge respecting the mode of banking practised by 
the ancient Babylonian, Egyptian, and Jewish nations." 
The Bank of Amsterdam was founded in the year 1609. 
It was occasioned by the vast quantity of worn and 
clipped coin then in circulation, in consequence of which 
the value of the currency was reduced above nine per 
cent, below that of good money fresh from the mint. 
The banks received these deficient coins at nearly their 
intrinsic value, and made all its issues in coin of the 
standard weight and fineness. At the same time a law 
was made that all foreign bills of exchange should be 
paid in bank money. This law raised the value of bills 

114 MONEY. 

on Holland in foreign countries, and compelled every 
merchant to keep an account at the bank in order that he 
might at all times have legal money to pay his foreign 
bills. The premium (called the agio) on bank money 
was regulated by the market-price of gold, and was sub- 
ject to considerable fluctuations. To prevent the gambling 
to which these fluctuations gave rise, the bank at length 
determined to sell bank money for currency at five per 
cent, agio, and to buy it again at four per cent. From 
this and other sources of profit the bank is supposed 
to have gained a considerable revenue. It was the en- 
tire property of the city of Amsterdam, and was placed 
under the direction of four burgomasters, who were 
changed every year. 

The Bank of Amsterdam was the model on which were 
formed most of the European banks now in existence ; 
but they have varied very considerably from each other, 
according to the circumstances of the respective coun- 
tries in which they have been established. The Bank of 
England was established by an act of Parliament enti- 
tled : " An act for granting to their Majesties several 
duties upon tonnage of ships and vessels, and upon beer, 
ale, and other liquors ; for securing certain recompenses 
and advantages in the said act mentioned to such per- 
sons as shall voluntarily advance the sum of fifteen hun- 
dred thousand pounds towards carrying on the war with 

After a variety of enactments relative to the " duties 
upon tonnage of ships and vessels, and upon beer, ale, 
and other liquors," the act authorizes the raising of 
;^i, 200,000 by voluntary subscriptions ; the subscribers 
to be formed into a corporation, and be styled " The 


Governor and Company of the Bank of England." The 
sum of ;^3oo,ooo was also to be raised by subscription, 
and the contributors to receive instead annuities for one, 
two, and three lives. Towards the ;^ 1,200,000 no one 
person was to subscribe more than ;;^ 10,000 before the 
I St day of July next ensuing, nor at any time more than 
;^2o,ooo. The corporation were to lend their whole cap- 
ital to government, for which they were to receive inter- 
est at the rate of eight per cent, per annum, and ;^ 4,000 
per annum for management, being ;£'ioo,ooo per annum 
in the whole. They were not allowed to borrow or owe 
more than the amount of their capital, and if they did so, 
the individual members became liable to the creditors in 
proportion to the amount of their stock. They were not 
to trade in any "goods, ware, or merchandise whatsoever," 
but they were allowed to deal in bills of exchange, gold 
or silver bullion, and to sell any goods, ware, or mer- 
chandise upon which they had advanced money, and 
which had not been redeemed within three months after 
the time agreed upon. The whole subscription having 
been filled in ten days, a charter was issued on the 27th 
day of July, 1694. This was the commencement of the 
world-famed Bank of England, than which there can be 
found no better evidence of the value of credit : a Bank 
of England note, a mere bit of paper, yet received by 
every one, everywhere, in payment of debt, as if it were 
gold itself, instead of a promise of a banking corporation 
to redeem it in gold when presented for payment ! In 
the year 1826 branches of the Bank of England were 
established in the provinces. The country bankers were 
strongly opposed to these branches, and held public 
meetings at which resolutions were passed in condemnji- 


tion of them, and in the year 1828 presented a memorial 
to the government upon the subject. 

In 1826, joint-stock banks, with unlimited liability of 
shareholders, were permitted to be established at a 
greater distance than sixty-five miles from London ; the 
object of the Act of 1826 being to promote the formation 
of those joint-stock banks, and thereby replace to a large 
extent the private country banks, of which so many had 
failed during the memorable panic of the winter of 

In 1833, by the 3 and 4 Wm. IV. c. 98, it was declared 
to be the law that joint-stock banks might be established 
in London. Under this statute the London and West- 
minster Bank was formed. And it should not be forgot- 
ten the great difficulties this bank had to overcome. 
The statute did not give them the power of suing and 
being sued by their " public officers," and they had to 
introduce into Parliament a bill to give them this privi- 
lege. The directors might well say in their first report, 
delivered March 4, 1835, "that they have had to en- 
counter difficulties of no ordinary kind, caused , by an 
opposition, in some degree natural, but carried to an 
unfair extent, by existing establishments, and likewise 
by the unaccountable course adopted by government, 
who seem to have been deterred by the same interested 
parties from giving effect to their own law." The oppo- 
sition of the private bankers was manifested at an early 
period by their refusal to permit any clerk to attend at 
the clearing-house on behalf of this bank. The clear- 
ing-house has been in existence for upwards of sixty 
years, and, although founded in the first instance for the 
accommodation of such London bankers as chose to 


avail themselves of it, yet it has become entwined with 
the mode of settling accounts in several branches of 
business, and is, for all practical purposes, a public 
institution. The opposition of the Bank of England 
began by their refusal to grant to this company the 
common convenience of a drawing account — a conven- 
ience granted, as a matter of course, to every respectable 
firm who may choose* to apply for it. But this hostility, 
as well as that of the government, was more strongly 
shown by their opposition to the bill introduced into 
Parliament for facility of suit. This, it was conceived, 
was a course that no party could adopt after the explicit 
manner in which the law had been laid down in the pre- 
ceding session of Parliament. However, the bill was 
opposed with a zeal and tenacity rather out of the usual 
.course of parliamentary proceedings ; yet it was carried 
by large majorities through each successive stage — viz., 
on the second reading, by a majority of 108 ; in com- 
mittee, after the fullest and ablest argument by counsel 
on both sides, by a still greater proportionable majority ; 
and again, on the third reading, by a majority of 61. 
Notwithstanding these majorities in the House of Com- 
mons, the opposition was continued in the House of 
Lords. In the beginning of 1837 the Bank of England 
got the Master of the Rolls to issue an injunction 
restricting the London and Westminster Bank from 
accepting bills drawn at less than six months after date, 
upon the ground that this would be an invasion of the 
charter of the Bank of England. (" Logic of Banking," 
by Gilbart.) Thus we see in every age the danger of 
monopolies. With banks, as with trade, government 
interference is a great evil ; we want to be let alone, and 


should all unite as one man in opposing any further 
encroachment by the government on the freedom of 
banking, commerce, labor ; and should also have an 
organized action to remove gradually all existing restric- 
tions upon companies or individuals, and for the aboli- 
tion of all monopolies. 

The Bank of England is a grand and imposing place ; 
its importance and its power are manifest, its exterior is 
like a fortress in the city of gold, only, unlike military 
fortresses, herein any one may enter who has the courage 
to do so, unchallenged. The chief entrance to the Bank 
of England is in Threadneedle Street. On either hand 
are the halls of the banking department of the establish- 
ment, and in front is the issue department. The portion 
of the banking department to the right, forming the 
entire eastern end of the bank, is devoted to the manage- 
ment of the national debt, where all transfers of govern- 
ment stock are registered, and where periodical payment 
is made of the dividends. At each quarterly term these 
rooms are crowded by people of nearly all ranks and 
classes, many of them from the country, who come to 
get payment of their dividends, which vary in amount 
from several thousands sterling down to a single pound, 
or even less. The amount of work which this entails 
upon the bank is greater than might be thought. Apart 
from the work of paying the dividends, the transfers of 
stock which the bank has to register amount in the 
aggregate to the enormous sum of about two hundred 
and thirty millions sterling a year. 

The following description of the Bank of England is 
from " Economy of Capital," by R. H. Patterson : 

" To the left of the chief entrance we find the drawing 

BANKING. 1 19 

offices — a long range of counters,— one of which is de- 
voted to public or government business, and the other, 
and larger, to banks and private customers. In the 
former of these offices are paid in the moneys received 
by the government in payment of revenue, while the 
government salaries and other expenses are paid out. 
This portion of the banking department forms two sides 
of an oblong court, once the little churchyard of St. 
Christopher-le-Stocks, in which is an elegant parterre, 
with some healthy trees and shrubs, and an ever-flowing 
convolvulus-shaped fountain, which is supplied by a well. 
Looking into this elegant court from the north is the 
grand court-room of the bank, where the directors meet 
in council every Thursday, and publish those announce- 
ments of change in the rate of discount which set a-pal- 
pitating the city of gold, and sometimes also the whole 
country. Adjoining is the committee-room, where three 
directors attend daily to supervise the business of the 
bank, seldom alone ; for other directors generally drop 
in, animated by a love of business, and attracted also by 
the excellent lunch which daily makes its appearance at 
one o'clock. 

'^ A large portion of the bank's business makes little 
show. The discounting of bills is the most important 
part of the daily operations, but very properly these 
operations are hidden from view. A man who has a 
* discount account ' with the bank, and who wishes to 
cash certain bills in his possession, drops them in the 
morning into places like letter-boxes, and returns in the 
afternoon to learn the fate of his application. Ordi- 
narily, the bills are discounted, as a matter of course ; 
but in ticklish times — and these are the very occasions 

120 MONEY. 

when money is most needed by the trader — many a heart 
palpitates as its owner awaits the decision of the bank 
parlor. But still larger issues are occasionally at stake, 
when the representatives of great firms are ushered into 
the court, and explain the state of their affairs with a 
view to obtain exceptional assistance in order to tide 
over some great but temporary embarrassment. 

" Let us now see the other great divisions of the bank. 
The issue department : Leaving behind us the first court 
which we entered from Threadneedle Street, with its 
red-mantled porters, and the detective in plain clothes 
who seems to idle his time over a newspaper in the door- 
way, we ascend half-a-dozen broad steps, and enter a 
hall where persons are getting notes exchanged for gold, 
or gold for notes, or notes for others of equal value. 
This is a public office open to all, whether customers of 
the bank or strangers. The chief applicants here are 
people who wish to exchange their notes for coin ; and 
as these notes are handed in, their genuineness is care- 
fully ascertained by an elaborate but rapid process of 
scrutiny. In the northwestern corner of the building, 
if you are provided with an order, you may see the 
manufacture, or printing of the notes ; and in another 
room, you may inspect the stock of cancelled notes, 
which are preserved for ten years after being returned 
to the bank. Thus, as in the printing-office, there is 
always a stock of unfinished notes, still wanting the date, 
number, and signature ; you may see the notes in em- 
bryo, as it were, before they are bom, and also after 
they have been long dead. 

" In the centre of the issue department, and in the 
very heart of the bank, you come into a glass-roofed 


court ; and standing on the landing-place of a flight of 
steps which leads down into it, you see below you men 
engaged in packing or unpacking the precious metals, 
conveying them into the vaults of the bullion office, or 
sending them away in vans. There you may see the 
precious ores in boxes as they come from the mines, or 
returning from the bank refiners in glittering ingots ; 
the silver in blocks almost as large as a common brick, 
and the gold of similar shape, but only about an inch in 
depth ; and finally, you may see them returning from 
the mint in the shape of coin packed in strong boxes. 
The packers toss about the ingots, or fill with bags of 
coin the iron-bound boxes, with an equanimity of indif- 
ference which seems strange to on-lookers, who have 
never seen the precious metals in quantity. The bullion 
vaults, as might be expected, are exceedingly strong 
chambers, and a guard of soldiers and policemen nightly 
keep sentry over the golden treasure. 

" For the coin and bullion thus brought to it the 
bank pays either in its notes, or, as is generally the case, 
simply by placing the amount to the account of the 
depositors. Thereafter the coin or bullion no longer 
belongs especially to the depositor, but equally to every 
one who keeps an account at the bank, or who holds 
any of its notes. 

" The bank is bound to give gold for all its notes on 
demand, and also, although this is utterly impossible, to 
pay all its deposits likewise in gold ; but the persons who 
brought the gold have no other claim upon the bank's 
stock of the precious metal than that which is common 
to all the note-holders and depositors alike. The gold 
has been sold to the bank, and thereafter any one who 

122 MO^tEV. 

has an account with the bank, or who holds some of its 
notes, may draw upon its stock of gold at his pleasure. 

" As you lean over the brass-topped balustrade, look- 
ing at the coming and the going of the precious ore, you 
witness operations which affect the whole business of the 
bank, and to a great extent also the whole trade and in- 
dustry of the country. Every van-load of gold which 
enters or leaves that court causes a rise or fall in the 
value of money, by increasing or diminishing the amount 
of currency available for the requirements of the com- 
munity. The reason of this is not obvious, but it is 
easily explained. 

" The bank is authorized by act of Parliament to issue 
notes to the amount of 14^ millions sterling (;;^ 14,650,000) 
upon an equal amount of government securities which it 
holds ; besides this, it is entitled to issue an amount of 
notes corresponding to the value of the gold which hap- 
pens to be in its vaults. Hence the amount of money in 
this country is constantly varying. When much gold is 
deposited in the bank, the currency is increased ; when 
little gold is deposited in the bank, the currency is 
diminished. What is of more consequence, the value of 
money on loan, the rate of discount, is affected to a still 
greater extent by every variation in the stock of gold in 
the bank's vaults. It is this latter process which invests 
with such critical importance the entrance or exit of the 
gold-laden vans through the gates of the Bank of 

" In * Currency and Banking * Mr. Bonamy Price re- 
marks that * up to the passing of this act, it was open to 
every bank or private person to put forth bank notes. 
One condition only was imposed as a guaranty of their 

BAMkWG. 15 J 

value — they were required to be convertible, payable on 
demand. Not to pay a bank note on presentation was 
an act of bankruptcy, and the issuer passed at once under 
the laws of insolvency.' 

" There probably never existed a law whose meaning 
has been so vehemently and incessantly disputed, and is 
disputed still, as the Bank Charter Act of 1844. No one 
has accused it of obscurity of language. What it pre- 
scribes is most simple, easy to be understood, and equally 
easy of execution. No one raises a question as to what 
is legal, and what is not, under its provisions ; yet the 
significance of the statute, what its enactments effect or 
do not effect, whether it is a revolution or beneficial law, 
are matters of the most differing and most bitter inter- 
pretation. It is regarded as the destroyer or the savior 
of trade. 

** The act divides the Bank of England into two de- 
partments, one the banking department, the other the 
issue department. The latter is exclusively concerned 
with the issuing of notes. That operation is carried out 
under fixed rules laid down in the statute ; and the vital 
point to observe here is that the corporation called the 
Bank of England has no voice, discretion, or control 
over the issues. In the issue department the bank di- 
rectors have no more authority or right to speak or act 
than any other person in the kingdom. The banking de- 
partment is the Bank of England, pure and simple, as 
private a bank as any other bank in the country. As 
such, as a private bank, it possesses two advantages — a 
very big customer in the government account, and a 
special benefit from the bank notes conferred on it by 
the law. 

124 MONEY, 

" The act limits the quantity of bank notes issued by 
private banks in the nation to the quantity existing at the 
time when the act became law. If any of these private 
issuers cease to issue, the bank notes assigned to them 
lapse, and the amount of the whole private issue becomes 
permanently reduced by neariy that amount. The Bank 
of England, the private bank so called, is authorized to 
receive from the issue department fourteen millions of 
notes, with a certain proportion of the lapse of private 
issues as they lapse. The quantity stands now at about 
fifteen millions. These bank notes the bank receives 
from the issue department, which in reality is an office of 
the state, on the condition that \X> shall give gold for 
them to the public whenever they are presented for pay- 
ment. Of course this fact may be regarded as meaning 
that the Bank of England is a direct issuer of notes to 
the extent of fifteen millions ; but it is far simpler and 
truer to look upon the bank as a receiver, for special 
reasons, of so many notes from the sole issuer, the office of 
the state, called the issue department. The bank is 
subject to the further condition that it shall invest these 
fifteen millions in securities on which it receives the in- 
terest. They are invested at three per cent. 

" Bank-of- England notes are declared to be legal ten- 
der everywhere except at the bank itself ; the bank 
cannot pay its debts with bank notes, as being legal 
tender. Any of its creditors may decline them. 

" Every note is payable at the premises of the Bank 
of England, some out of its private resources, the re- 
mainder at the state office, called the issue department. 
The law further enacts that all the notes issued by the 
issue department beyond the fifteen millions shall be 


covered for this payment by a deposit of gold kept in the 
department. The whole issue thus consists of two parts : 
one, now fifteen millions, assigned to the Bank of Eng- 
land, and payable by it ; the remainder put forth by the 
issue department in exchange for gold given to it by the 
public, and kept permanently in the vault to guarantee 

In 1844-5 Sir Robert Peel settled on a wise principle 
the constitution of the Bank of England, and the consti- 
tutions of the private and joint-stock banks of England 
and Wales, of Scotland and of Ireland, as regards the 
function of circulation. The principal object of all his 
measures was to limit, and as soon as possible suppress, 
the circulation of country-bank notes, and replace them 
in the first instance by notes of the issue department of 
the Bank of England ; but there can be no doubt his ul- 
timate intention was to provide for the supply of notes 
for the whole kingdom from a single central government 
office as soon as possible. In 1844 it was not thought 
possible to suppress the circulation of the notes then in 
issue, but the first step was taken. A limit was fixed for 
the English and Welsh banks to the average issue of the 
twelve weeks preceding the 27th of April, 1844 (6 and 7 
Vict., c. 32) ; and they were not allowed to issue notes 
beyond the maximum, even by keeping in hand gold 
coin equal to the whole of the excess. The consequence 
is that, notwithstanding the growth of population and 
trade in England and Wales, in thirty-four years the 
provincial banks have now only a note issue of four and 
a quarter 'millions, instead of the maximum issue of six 
and a quarter millions, assigned to them by the Act of 
1844 — caused partly by failure, and the prospective 

126 MONEY. 

clause in that act which provided that if any English or 
Welsh provincial bank commenced business in London^ 
it should forfeit its right of issue at its country branches. 
This clause compelled the National Provincial Bank to 
relinquish a circulation of nearly half a million when it 
opened a London office. Yet no such penalty was im- 
posed by the Act of 1845 on the Scotch or Irish banks ; 
and of late years the Scotch banks have taken advantage 
of the omission in the act and opened London offices* 
This should be remedied, as there should be no partiality 
shown by the law ; and the effect of the legislation gen- 
erally, of the Act of 1845, has been more in favor of the 
Scotch banks than the English and Welsh ; as the Act 
of 1845 (8 and 9 Vict, c. 38), by limiting the future note 
issues of the then existing Scotch banks to the average of 
the year ended on May i, 1845, — viz., two and three- 
quarter millions, — and requiring for all notes issued in 
excess of that sum that the Scotch banks hold in hand 
gold for the same, virtually gave the monopoly of circu- 
lation in Scotland to the banks existing there in 1845, 
and has prevented the formation of any new bank. The 
permission to issue notes beyond the statutory maximum 
on condition of holding gold coin for the excess, has en- 
abled the Scotch banks to keep pace with the growth of 
trade ; and we find the note issue averages the last few 
years six and a quarter millions, or about three and a 
half millions in excess of what it was in 1845. The 
Scotch banks have made great progress from 1870 to the 
half-year ending June 30, 1878. Their paid up capital 
has increased from eight and three quarters to ten mil- 
lions ; their reserves from three and a half to five and a 
half millions ; their note circulation from five and three 


quarters to six and a quarter millions ; their deposits 
from sixty to seventy-seven millions ; and their accept- 
ances from four to eight millions ; or, in total, the banks 
increased their liability to their proprietors from twelve 
and a quarter to fifteen and a half millions, and to their 
customers from seventy to ninety-one millions. The 
Scotch banks have never paid so well as the English. 
Fully one fourth of the sums invested in the latter pay 
over 15 per cent, whereas 13 per cent, is an exceptional 
rate for a Scotch bank to pay, because they act more 
justly towards their customers, and pay " daily interest " 
on deposits, etc. ; customers getting part of the profit 
made by the use of their money, the shareholders of 
course getting less. 

The Bank of England has been very useful, but the 
time has passed for monopolies of any kind, however 
seemingly beneficial. All must be equal before the law, 
and subject to the same conditions. It is simply absurd 
to restrict either the Scotch, Irish, or provincial banks of 
issue, because they have a branch or branches in London. 
All banks wishing to do so, should have the power to 
issue notes if they give the necessary security and com- 
ply with the government conditions ; but the security 
must be real, and must be deposited with the government ; 
and power to issue notes not be permitted upon a ban- 
ker's statement that he has so much gold in his coffers, 
unless the same be checked by a government official. 
The note-issue arrangement wants altering altogether, 
and notes by provincial banks . should be at once abol- 
ished. Why should the York Bank have had the power 
to issue notes to the extent of ^46,387 without security ; 
or any bank be allowed for a day longer so to do ? The 

128 MONEY. 

Scotch system has worked well ; but times are altered, 
and the facilities offered by open credits, " overdrawn " 
accounts, etc., are greater than they otherwise would be, 
because of the " note " system. The spirit of the act is 
complied with in their issue, but the principle is broken. 
Sir Robert Peel intended, as with the Bank of England, 
that for every note issued there should be gold to meet 
the same lodged in the banker's vaults. The Scotch 
banks may have gold enough in their possession to meet 
the notes issued beyond their authorized fixed issue, but 
where is the gold to meet all their deposits and other 
liabilities ? Or why should the Scotch banks have power 
to issue notes over two millions in value, without having 
in hand gold to meet them ; or the Irish banks be allowed 
to issue to the extent of six and a quarter millions, and 
only have three millions of gold and silver in readiness 
to meet the same ? The whole thing wants revision. 
The Act of 1844 was a compromise at the time with 
vested interests ; but the power given to certain banks, 
whether solvent or not, to continue to issue an immense 
amount of " promises to pay " without any security 
whether they can do so or not, after the failure of the 
City of Glasgow Bank and the York Bank, etc., ought at 
once to be the subject of inquiry. No bank should be 
allowed to issue their own notes. Every banker should 
have the privilege of getting notes from the government 
office of issue, by depositing the necessary security ; and 
the notes, like other promissory notes, should be stamped 
when issued by the government, and the stamp defaced 
when the notes are returned. All distinction between 
London banks and provincial banks, Irish or Scotch 
banks, should cease ; and every banker be allowed to 


open where he pleases, like any other trader. It is the 
duty of all governments on behalf of the people they 
represent to oppose and not to create monopolies. It 
seems ridiculous that an English provincial bank, be- 
cause it is a bank of issue, must not have branches in 
London or its neighborhood ; and thus bankers were 
naturally annoyed at the Scotch banks enjoying a privi- 
lege they were by law debarred from — a most unjust 
distinction. On the other hand, the London joint-stock 
banks naturally objected to opponents in their midst who 
had the advantage of using largely a spurious floating 
capital — viz., bank notes. The private banks of course 
object to unlimited- or limited-liability banks. But com- 
petition is the best protection for the public, and private 
interests must succumb to the national good — with banks 
as others. 

Credit is universal ; it is another word for lending 
goods on trust — a system of deferred payment. It is a 
system of business of immense utility, and quite justifiable 
with manufacturers, merchants, and all wholesale opera- 
tions. Great sagacity is needed to understand who to 
trust, how much to trust, when to cease trusting any one. 
It has its drawbacks, tempting men to overbuy when 
houses foolishly, recklessly credit weak houses as if they 
were strong, or tempt people by dating on and too long 
credit. But there are advantages connected with the 
system of great value. Banking is essential to the credit 
system ; the credit could not be given without the aid 
of the banker. The manufacturer or wholesale merchant 
sells the retailer goods to be paid for in a clear month, 
and then if the retailer cannot pay, he has to give a bill 
at three or four months' date. The banker takes the 

130 MONEY. 

bills, and thus relieves the merchant from having to wait 
till the bill is due. Banking, you will perceive, 4s a 
machinery for lending money in anticipation of these 
deferred payments ; and bankers by this action enable a 
vast increase of industry and trade to be developed. But 
distinctly understand, lending and exchanging do not 
create^ but simply place wealth in different hands. Credit 
is simply deferred payment ; bills of exchange simply 
enable the creditor to transfer his debt to his banker ; 
but they are, one and all, parts of a complicated system, 
through buying on credit, instead of buying with money. 
A banker is a dealer in money ; he is an intermediate 
party between the borrower and the lender. There may 
be said to be two great divisions of England : the rapidly 
growing districts, or the rising men, who can easily em- 
ploy any amount of money ; and the stationary or de- 
clining districts, or the men who have retired, who have 
more money than they could use. So the banker bor- 
rows of one party and lends to another ; and the differ- 
ence between the terms at which he borrows and those 
at which he lends forms the source of his profit. A 
banker is useful, because he draws out of the pockets of 
the people their reserve cash that would otherwise be 
idle, and puts the same into active operation ; money 
that would have been unproductive in the hands of 
private individuals becomes by means of the banker 
productive, by furnishing accommodation to those who 
have need of additional capital to carry on their com- 
mercial transactions. The banker is a broker between 
two principals, and charges his commission for the 
service he renders ; but there is this important distinc- 
tion : the banker takes all the risk ; if the man he lends 


the depositor's money to does not pay him, he is com- 
pelled to restore the sum deposited to the depositor on 
demand. So, to understand his function, it is best to 
regard the banker as a dealer, a buyer and seller of 
money; and as correct banking is of the utmost im- 
portance, it being a branch of trade that is intimately 
connected with every man's business, the subject of 
money and of banking should be more attentively con- 
sidered and thought of by the people at large. Banking 
is both an art and a science. The knowledge of it as a 
science may be acquired like that of other sciences, by 
reading, observation, and reflection. 

But the art of banking, as of every thing else, can only 
be acquired by serving an apprenticeship thereto ; and 
when you consider how few persons there are who can 
invest their own spare capital wisely and profitably, you 
will have some idea of the peculiar and special qualities 
necessary to manage banks like the London and West- 
minster, Union, Joint-Stock, etc. The responsibility of 
receiving money on deposit when people like to give you 
the same, and of finding safe and remunerative channels 
for the same, to invest very large sums of money at all 
times, so as safely to see a profit and yet pay the deposi- 
tors the current rate for money on deposits, is a very 
serious and responsible position for any man to fulfil, 
and needs a man of sound common-sense, of practical 
mind, with well defined principles of action for his guid- 
ance, as there is no time for deliberation. A wants to 
deposit, B wants to borrow ; you must know whether 
it is policy to receive or refuse the deposits, whether it is 
safe to grant or refuse the loan, whether to take all the 
bills offered, or if it be necessary carefully to scrutinize 

132 MONEY. 

and reject some ; whether the boiTower is to be helped 
upon the best, or upon what terms you should lend ; 
whether to lend for a specified time, taking the cus- 
tomer's bill and holding his deeds as collateral security, 
or to open a loan account, and if so, how far with safety 
you can lend upon the securities that he deposits with 
you. He has also to calculate how much money to keep 
invested in exchequer bonds, consols, and other govern- 
ment securities, and how much cash to keep in hand to 
meet the current demands of the head and branch 

The banker should be a thorough man of business, 
possessing the valuable combination of a number of 
qualities, not in themselves individually of a striking 
character, but rare only in their combination in the 
same person ; the possession of a well balanced mind, 
giving that wisdom we call common-sense, which can 
only arise from the due proportion of all the faculties. 
If you consider the number of bankers that fail in pro- 
portion to the small number of banks, you will agree 
with me that to be a good and successful banker requires 
qualities as rare and as important as those which are 
necessary to attain eminence in any other pursuit. Bank- 
ing is profitable because it is carried on chiefly with other 
people's money. They borrow of A under the bank rate, 
and lend to B at or above the bank rate ; they pay inter- 
est to A, the lender ; at the end of the six months, they 
deduct it from B, the borrower, when they lend him the 
money. But their capital, upon an average, is not one 
twentieth part of the money they hold of other people's ; 
and if they can lend to others what is lent to them, un- 
less they by want of judgment make bad debts, banking 


must pay a large interest upon the share capital, as they 
have also the advantages of the accumulated balances of 
all the current accounts ; so that there is a certain profit 
upon all money lent to them. 

The chief source of a banker's profits arises from his 
facilities for, and skill in, investing the aggregate of the 
sums entrusted to his care, yet so placed as to be readily 
available in case of need or an emergency. This is the 
most difficult part of the matter ; it is easy to invest, but 
not to do so and be able to realize at any moment with- 
out loss. Still the banker's profits will depend upon the 
moneys entrusted to his care, and it follows, therefore, 
that within certain limits it is the endeavor of every 
banker to increase the deposits to the greatest possible 
extent in every legitimate way. Depositors may roughly 
be divided into three classes. First, the large class, 
really the backbone of any banking system, those who, 
too timid to trust their capitals to investments in rail- 
ways, foreign bonds, or such like fluctuating securities, 
deposit their money with a banker, satisfied at receiving 
in return interest at the rate of one per cent, under the 
Bank-of-England rate, or the rate agreed upon and ad- 
vertised by the leading joint-stock banks. The second 
important class of customers, on which to a large extent 
the prosperity of a bank depends, consists of merchants 
and others, who, for the sake of the convenience of their 
business, leave in their bankers' hands a balance, paying 
in and drawing out daily, but always leaving a balance, 
and the bankers being compensated for their trouble by 
allowing no interest on the balances of such accounts. 
Large permanent balances yielding no interest are not to 
be expected, but in the aggregate an approximate sum 

134 MONEY. 

may be relied upon, as it is only the few keen business 
men who study finance, or know the value of money, and 
therefore use it, making what they can of it as they get 
it ; the majority wait for their regular pay days, whilst 
others will lose their discount with a creditor rather than 
reduce their balance. It is very pleasant to know you 
have a good balance — the banker has no objection ; but 
economically it is a great error of judgment, it being 
much wiser to anticipate and prepay your creditors if you 
have, or when you have, any sum at your bankers beyond 
what is needed for the necessary balance. The third 
very numerous class, especially in the provinces, is made 
up of those traders in a small way of business who keep 
a banker because it looks well, but whose capital does 
not enable them to keep the necessary balance required 
by bankers, and for the accommodation a " yearly com- 
mission " is charged. This commission ought to be as 
low as possible, as it is policy to encourage all traders to 
keep a banker and deposit daily the sums they receive 
with their banker. In Scotland interest is given on all 
balances, and the " canny Scotch ** are taught how " siller 
will breed siller," for the total deposits of the eleven 
principal Scotch banks exceed the respectable aggregate 
of eighty millions sterling — a most convincing proof that 
'* many a mickle will make a muckle." With bankers, 
as with traders, the generous policy will always tend to 
their profit. Equitably, it seems that beyond a fixed 
minimum balance, interest should be allowed on the 
residue, and interest charged when balance is below the 
sum fixed as the minimum balance necessary to pay the 
bankers for keeping the account. 

It is of great advantage to a country for its people to 


be able to take their money and deposit it safely, and be 
paid for its use by others when it cannot be used profit- 
ably by one's self. Bankers thus get the power to lend 
money. And my own experience will be confirmed by 
others, when I say that any honest, solvent man can 
borrow of his bankers more willingly, more pleasantly, 
and at a less rate of interest than he can of father, 
brother, or friend. To manufacturers and commercial 
men the banker is truly the "friend in' need": if you 
deserve his confidence he is ever willing to give it ; and 
he is the very antithesis of Shylock, a veritable Portia in 
his judgment, taking your word and helping you to an 
extent that can only be appreciated by those who have 
tried other sources and found them wanting. The 
banker is not only useful to the individual — he does 
good service to the state by increasing the productive 
powers of capital, viz., by economizing the capital 
already in a state of employment ; by the system of 
deposits, he gives employment to capital that would 
otherwise be, at all events temporarily, non-productive ; 
by the issue of his own notes, he virtually creates capital 
by the substitution of credit. Banking therefore pro- 
motes the prosperity of the country, by increasing the 
amount and efficiency of its capital. In the history of 
commerce we find no principle more firmly established 
than this, that as the capital of a country is increased, 
agriculture, manufactures, commerce, and industry will 
flourish, and where capital is diminished these will 
decline. The man who attempts to annihilate any 
portion of the capital of the country in which he dwells, 
is as forgetful of his own advantage as the miller who 
should endeavor to dry up the mountain stream which 

136 MONEY. 

turns the wheels of his machinery, or the farmer who 
should desire to intercept the sun and the showers 
which fertilize his fields. So the banker must be held in 
respect, and have a people's confidence, as it is essential 
to the prosperity of the nation that the people generally 
have faith in him, and will hasten to open accounts or 
deposit their surplus money with him. Individually they 
may be of small amount, but collectively they make a 
considerable sum, which the banker employs, must em- 
ploy, for his own interest, in granting facilities to those 
who are engaged in trade and commerce. Thus these 
little rivulets of capital are united and form a powerful 
stream, which propels the wheels of manufactures and 
sets in motion the machinery of industry. 

The Economist puts the estimated deposits of banks in 
the United Kingdom at the following dates : Bank of 
England stated separately : 

Bank of 
Say autumn, 1878 : England. In all say 

I £ £ £ £ 

527,000,000 or 530,000,000. . .24,000,000. . .550 to 560,000,000 
Say spring, 1879 : 

460,000,000 or 470,000,000. . .38,000,000. . .500 to 510,000,000 

This is an approximate estimate of the deposits held 
by bankers throughout the United Kingdom, not exact, 
but to be understood generally as showing the position 
of banking deposits at the two periods stated. The fig- 
ures indicate clearly the want of confidence generally ; 
the deposits in the joint-stock and private banks being, 
in the spring of 1879, do millions less than in the autumn 
of 1878 ; but the deposits in the Bank of England are 


14 millions in excess — an increase of over one third of 
money deposited simply for safety, bearing no interest^ and 
the greater part of the residue, no doubt, being kept by 
people themselves ; the failure of the City of Glasgow 
Bank having caused a general mistrust of bankers. 
That this is so, the diminution in deposits with the 
Scotch banks affords conclusive evidence, as the depos- 
its with Scotch banks were : 

May 18, 1878 ;f 78,000,000 

October 19, 1878 (including City of Glasgow Bank, 

;f 8,000,000, and Caledonian Bank, ;f 1,000,000) . . 78,000,000 

May 17, 1879 • 67,000,000 

Or II millions less in seven months ; and allowing 
;^ 9,000,000 for the City of Glasgow and Caledonian 
banks, there is still a diminution of two millions in the 
deposits. This want of confidence is a serious matter, 
as the increase of deposits, the development of banking, 
is essential to our progress ; it has helped us the last 
forty years more than any thing else, and to banking we 
must look for help in the future. 

Every one should keep a banker. Your money is 
lodged in a place of security, and you avoid all anxiety 
as to loss, as money is never safe in one's pockets, and 
it is not prudent to keep more in the till than is abso- 
lutely necessary, or after business hours. To all those 
who may reply, they can do without a banker, my 
answer is, you can do much better with one. The sav- 
ing of time is an important advantage, as it enables you 
to pay all accounts by check, and transfers the trouble 
of the real payment to your banker. But the most im- 
portant point is, its acting as a check upon your cash 

138 MONEY. 

account I advise every man, whether in trade or not, 
to have a banking account, and to pay into his banker 
all the sums he receives during the year, and never to pay 
anybody an account except by a check upon the banker, 
drawing checks for his personal expenses, or adding the 
same to his petty cash check drawn weekly, and ac- 
counted for in his books. The banking account will thus 
be a record of all the cash received, the cash paid, who 
to, and what for, during the year. I was consulted recently 
by a gentleman who had lent a " friend " nearly two 
thousand pounds, and nearly seven hundred pounds of 
which he could render no account of. I asked him to 
lend me his " bank book," and by it was enabled to make 
out the account and prove the claim. 

Assuming you have made up your mind to keep a 
banker, the next thing to do is to determine at what bank 
you will open your account. Nearly every man has a 
prejudice for or against some particular bank ; but we 
have so many first-class joint-stock banks now of nearly 
equal merit, that the wiser plan is to select that bank or 
branch of a bank nearest to your place of business hold- 
ing the position of the London and Westminster, or 
Union, or National Provincial. As time is money, when 
making a decision, you must remember the time taken up 
in going to your banker, and the greater probability of loss 
the farther the bank may be from your place of business. 
There are times in nearly every one's career when it is 
essential that his creditors and bankers have implicit 
faith in him ; when it rests with them, by helping or 
refusing to help at a crisis in one's faith, to materially 
help forward or retard your progress, or perhaps save 
you from ruin. Many a house of good standing in times 


of panic needs a helping hand, or, at all events, they do 
not want the help hitherto given freely to be restricted 
or withdrawn by their banker, or their credit shortened 
by their creditors, at these critical periods. Therefore, 
I advise every one to be open and straightforward alike 
with their creditors and bankers ; and in opening ac- 
counts with either, or when starting in life, to tell them 
plainly your position, and never represent yourself to be 
a richer man than you are ; accept no bills you are not 
likely to meet, — better ask for a month longer before so 
doing, if there should be any doubt ; and never discount 
with your banker any bills that are not likely to be paid 
when due ; and remember, you must so arrange your 
own balance that if any bills be dishonored you can repay 
them yourself. Never overdraw your account, and 
before opening discount account or loan account, see the 
banker or manager yourself, and have a distinct under- 
standing with him as to the terms on which he will dis- 
count your bills, whether at bank rate or half per cent., 
or one per cent, above rate ; also the amount of loan, 
and rate of interest, and if it can be renewed, or when to 
be repaid. Men with a large business to attend to, or 
bankers, are fully occupied, and when you call upon 
either upon any subject of importance, be punctual ; 
keep to the object of your visit, proceed to the business 
you have called about, and, as soon as it is over, leave. 
Remarks about weather, news of the day, etc., indicate a 
want of earnestness, as though the mind was not suffi- 
cietly firm or earnest about the matter in view. " The 
tree is known by its fruit ; men do not gather grapes 
from thorns, or figs from thistles." A bank is an institu- 
tion for the transfer of debts ; herein, so far as the 


nation is concerned, is its principal value. People talk 
of money being cheap or dear, abundant or scarce, for- 
getting that banking transactions may be enormously 
increased or diminished without any change in the 
quantity of money circulating. Banks principally deal 
in checks and bills of exchange. These are the results 
of sales or purchases. Every one of those paper trans- 
fers at their origin denote property bought and paid for ; 
every man who gives a check or a bill has bought some- 
thing in exchange ; and every man who gives the check 
or bill to his banker has previously sold something, and 
hands the paper to his banker to collect the payment for 
him, and then he in turn buys and orders the banker to 
pay for the purchase out of bills or checks previously 
deposited with him. The resources of banks proceed 
from goods sold, of which they collect the payment. So 
you will perceive it is still barter, but of a higher kind. 
Goods still buy goods ; one set of goods is exchanged 
for another, either with money as the medium, or with 
the intelligent medium, the banker, who is made to take 
the place of, but acts precisely as, a sovereign ; he is an 
instrument of exchange. He transfers, like the sovereign, 
purchasing power from A to B. He receives the check 
for which goods have been sold, or a debt to collect, and 
passes it on in the form of a debt he creates. That pur- 
chasing power resides in the goods sold, directly or in- 
directly, by the banker's depositor. It is because the 
depositor has sold corn that the banker is enabled to 
authorize the merchant to buy tea. 

Banking may be defined as the power that enables A, 
who has a balance to-day, to lend it to B, who is short, 
and that lends to A, when short, the balance of B. Its 


main value consists in its holding the collective balances 
and utilizing them ; and the power is greatly increased 
by the clearing-house, one of the most important collect- 
ing agencies ever introduced ; the checks upon each 
banker being collected, debited, and credited, and a 
check for the balance given. Thus we see the bank is 
an intermediate agent, like money itself — a medium of 
doing the work of money without having to use it. A 
sells com, and not wanting the money, does not lend it 
himself, but gives it to his banker, who does ; B wants 
to buy tea, but has not the money, only bills by him ; A 
would not lend his money to B, but the banker does. In 
reality it is A*s money that is lent. The banker is the 
broker, who finds a borrower ; his profit is the extra dis- 
count he charges B to what he pays A. A has paid the 
sum in by check, B draws it out by check ; both checks 
go to the clearing-house. Thus you see the value of 
banking ; it is a benefit to A and B and a profit to the 
banker, and no metallic money is needed in the matter. 
You must distinctly understand this : the great value of 
banking is its action, being similar to, but doing without 
the aid of, coin. But the only true definition of banking 
is that it places property in different hands. So you will 
at once perceive that the ability of banks to assist trade 
and the rate of discount do not depend upon bankers, but 
on the state of the wealth of the country, and in the effect 
which it produces on the two principles which the bank 
has brought together. The banker's value is in the op- 
portunities his position affords him to select the men into 
whose hands the wealth moved by his agency is to be 
committed. He neither created the wealth which his 
depositors sold, nor does he touch that other wealth 

142 MONEY, 

which his borrowers purchase ; but it signifies immensely 
to what sort of borrowers he gives the means of buying, 
by empowering them to draw checks upon his bank. 
(Overend, Gurneys, the City of Glasgow Bank, the 
West of England Bank, failed from this reason, and 
they prove the power in the hands of bank mana- 
gers and directors.) Upon the judgment of the 
banker will depend whether the bank fails or grows, 
pays fair interest to its shareholders, or ruins them ; 
and on him also mainly depends whether the money 
be advanced to men who will use it wisely or reck- 
lessly, whether it be lent to men who will use it as 
capital in processes which reproduce its consumption, or 
to men who will waste and destroy it in prodigal expen- 
diture, unskilful trade, or in reckless speculation in busi- 
ness, in unprofitable mines, or in making railways, where 
they cannot for a long period of years reproduce to the 
country the food, clothing, and material their construc- 
tion consumed. He is not the capitalist the vulgar herd 
imagines ; his capital is trifling, insignificant. The pub- 
lic must not be misled by the capital of a bank ; it all 
depends on the man with whom rests this mighty power 
of selecting the men to whom the country's wealth shall 
be entrusted — a glorious position, needing, if not a 
genius, a man of clear perception, sound common-sense, 
and great moral power. 

The Americans tax the capital of their banks ; the 
English tax their notes, their bills, their bonds, their 
transfers. The latter plan seems preferable, as the banks 
are taxed in proportion to their business ; but the duty 
is too heavy upon the transfer of shares in joint-stock 
banks. It seems hardly fair that a transfer of shares in a 

BANKmG. 143 

joint-stock bank should pay the same tax as a transfer 
of a landed estate of equal value. The estate will proba- 
bly not be sold again for a lifetime ; the shares in the 
bank may change hands several times in a year. If the 
tax were lightened, the transfers would be more numer- 
ous, and possibly the revenue more productive. 

There is hardly any single description of taxes more 
hurtful, especially to a commercial country, than taxes 
upon the transfer of property. Commerce and trade 
consist in the transfer of commodities ; and in propor- 
tion to the amount and frequency of these transfers, 
trade will be foiind to flourish and the nation to improve 
in wealth. The imposition of a tax, therefore, upon 
such transfers would have the obvious effect of diminish- 
ing their amount, and rendering them less frequent, 
leading, of course, to a reduction of trade and of national 
prosperity. Adam Smith says that one cause of the de- 
cline of trade in Spain was the imposition of taxes of this 

But of this class of taxes, the most injurious is that 
which is laid upon the transfer of shares in joint-stock 
banks. A landed estate, for example, is not transferred 
more than once or twice in a lifetime ; shares in banks 
may be transferred every week, yet upon each transfer 
these shares must pay the same duty as the law exacts 
upon the transfer of an estate of equal value. A tax 
upon bank shares is a tax upon productive capital, and 
is as indefensible in principle as a tax upon the transfer 
of bales of cotton or casks of tallow. It has been said, 
that if there were no tax upon the transfer, people ^ould 
buy bank shares with a view to sell them again at a 
profit. Do not people buy cotton, and tallow, and silk, 

144 MONEY. 

and indigo, and tobacco, and a thousand other things, 
with the view of selling them again at a profit ? Do they 
ever bu]^ things with a view to selling them again at a 
loss ? If it be true, then, that all purchases are made 
with a view to a profitable sale, why tax the transfer in 
one case more than in another ? 

Another objection to this tax is, that it is a tax upon 
the instruments of improvement. Wealth is a legitimate 
subject of taxation, but to tax a means of wealth is to 
strike at the very elements of the national power. For 
instance, what would be thought of the statesman who 
should propose to levy a tax on the plough of the farmer 
or the shuttle of the weaver ? So canal companies, and 
railway companies, and dock companies, and steam 
companies, and banking companies are the implements 
by which prosperity is produced ; and to levy taxes 
upon them is very much like the policy of the man who 
killed the goose that laid the golden eggs. Domestic 
investments should not be placed in less favorable cir- 
cumstances than foreign investments. At present, 
Dutch, or American, or even Spanish bonds can be 
transferred one hundred times a day in our market 
without paying any duty whatever, while the transfers 
of shares in any of our own public companies are heavily 
burthened ; and hence it is that large capitalists are not 
to be found extensively engaged in these investments. 
They naturally prefer those securities that can be real- 
ized immediately and without expense. If the transfers 
of shares in these companies were as exempt from 
chargejf as transfers in the government funds, how 
many millions, now invested in the hazardous bonds 
of foreign countries, might be drawn back to be em- 


ployed at home in stimulating the rewards of industry 
and quickening the operations df commerce ! Banks 
also contribute to the state by the stamp duties paid on 
cash credit bonds, surety bonds, and other legal instru- 
ments ; they also greatly increase the revenue from the 
stamp duties on checks and bills of exchange. 

Banking, you will perceive, is a very useful agency for 
the great work of exchanging wealth ; its two great instru- 
ments for transferring the ownership of wealth from one 
man to another are checks and bills of exchange '\ by this 
means a smaller number of coins are required. Their ob- 
ject and aim are to diminish the quantity of metallic money 
required. They supply us with enough money to carry on 
the cash business, and no more, as all surplus cash is at once 
returned to them. As we progress in morality, and the 
higher the commercial development, the more willing are 
the owners of goods to part with them for checks and 
bills. Every extension of this principle of deferred 
payment, helped by good book-keeping and the action 
of such institutions as the clearing-house, (enders less 
money wanted for the country's commerce ; and so the 
brain by its thoughtful arrangements provides a substi- 
tute for metallic currency. If every man had a banker, 
very little money would be wanted ; the nation's pay- 
ments would be solely a matter of book-keeping, of 
debiting and crediting by means of checks and bills 
of exchange. It is by their means that England, in 
comparison with her wealth and trade, needs and uses 
less metallic money than any other country in the world. 
If equal to the times we live in, we shall extend this 
"economical power," and increase our note issues upon 
the government security basis ; teach our people to 

146 MONE K 

understand the value of banks, what money is for — to be 
used, not kept idle in boxes or their pockets ; and ex- 
tend the clearing-house system ; for principally by 
these three means you may increase the trade and com- 
merce of the country, so far as they need the help of a 
medium of exchange, to any extent. Nothing stops us, 
nothing causes depression of trade, but our own igno- 
rance and want of judicious industry, and a wiser system 
of production and distribution. Gold should be a bless- 
ing to us, not a curse. All trade is an exchange of gold, 
I grant you, for money as a medium ; but, as Adam 
Smith has well remarked, England (or any other country) 
can replenish itself with gold from abroad if she has the 
wherewithal to pay for it. Gold is a commodity to be 
bought with other articles, like any other article ; and as 
all articles are exchanged for money, gold can be had to 
the extent needed for foreign trade if the proper means 
are taken to secure it. 

Banking is, briefly, the economy of capital, the economy 
of money. Every year we discover new forces, or bring 
others under the control of man ; but of all the inventions 
of which necessity is the stem mother, the inventions of 
economy are the most prominent, as they are the most 
useful, at the present day. To hold our own, we must 
carefully gather up what our forefathers threw away ; we 
must learn to appreciate what they neglected or despised. 
" Waste nothing," is the keynote of our material indus- 
try. Just as the farmer turns even the weeds to account, 
as a manure for the fields which they encumbered, so in 
all things we must utilize ** refuse," and see that every 
thing is of use, if we take it to the right place and put it 
to its right use. We can only hold our own against 


foreign rivals by learning the lessons past experience has 
taught us ; we must be more thoughtful, be more economi- 
cal, avoid losses ; try for making the many small gains 
instead of aiming at the few large ones. 

It is incumbent upon us to utilize all the neglected 
resources we possess, and trust, as the basis for maintain- 
ing and extending our power, to the accumulative and 
concentrated appliances of a thousand forces or savings 
within our reach, each trifling of itself perhaps, but 
capable by wise economy thereof to promote the nation's 
greatness and wealth. Our people must learn to be men 
of business — must learn that the high morality of " putting 
yourself in his place " and " doing to another as you 
would be done by," in all transactions, is the height of 
wisdom, proved by experience, as it is the only real proof 
of a nation's religiousness, the consummation of, and 
positive evidence of, a people's real worship. They must 
learn about banking, about " money," about the bugbear 
" currency," as it is only by such knowledge they can 
learn how to economize the force of money ; and I 
maintain that the knowledge by the nation how to cause 
this economy of their capital, would act like new gold 
mines, as an agency to give to commerce an expansion it 
so much needs. There has been latterly a strong feeling 
of mistrust in the public mind respecting banks, and I 
have therefore deemed it advisable, perhaps at too great 
length, to bring before the public notice some of the 
advantages of banking. 

The exchange trade is carried on by a small and 
special body of foreign bill brokers, of whom Messrs. 

.148 MONEY. 

Rothschild are the greatest. Messrs. Rothschild are 
immense capitalists, having also much borrowed money 
in their hands ; but they do not take ;^ioo payable on 
demand, and pay it back in checks, like an English 
banker. The borrowed money which they have for use 
is deposited in large sums, borrowed for terms more or 
less long. A foreigner thinks " an exchange business," 
— that is, the buying and selling bills on foreign countries 
— a main part of banking. English bankers deal with an 
aggregate of small sums, all of which are repayable 
on short notice, or on demand. 

The following will explain briefly, but I think clearly, 
what the " loss by exchange " is ; the " gain by ex- 
change " will be the reverse of this — viz., when there is a 
" gain " instead of a " loss ": 

A customer writes us, April 28, 1879, that he has not 
been able to order for some time past, the rate of 
exchange being so high, and when he sends this indent 
the exchange is 24 j ; viz., for every ;^ioo he remits us, 
he has to pay 1,247 J rupees instead of 1,000, and the 
ordinary cost of remittance. There is no mystery in the 
way of calculating the loss of exchange. Taking arbi- 
trary figures for the purpose, it is as follows : To remit 
;^ioo at 2s, the rupee, 1,000 rupees are required ; but if 
the rupee is reduced in value in India in relation to the 
value of silver as against gold, say to is, *]d, the rupee, 
1,263 rupees are required. You will at once perceive the 
difference between a favorable or adverse rate of ex- 
change, if you imagine yourself in India and have to find 
1,263 rupees instead of 1,000 before you can remit ;^ 100 
to London for gold, etc. The loss is represented by the 
excess number of rupees required to be sent home at the 


rate of 2^. the rupee, and therefore the sterling loss is 263 
multiplied by 2J., or ^2(i ds, upon every ;^ioo. The 
government accounts are calculated upon this principle, 
and would be represented by a larger sum, only that the 
loss is not in comparison with \s. 7^. against 25". but of 
IS, 7^. agkinst the average rate of exchange for some 
years past — ^viz., u. loj^/. Taking the whole amount of 
the remittances required to meet the home charges for 
1879, ^^^ taking the rupee at the rate of \s, "jd, as com- 
pared, not with 2s, but with is, io\d., the real loss to 
India is ;^3, 130,000 sterling. But as it was only pro- 
posed to remit 15 millions, the real loss will be 2|- mil- 
lions. Contrast this fearful increase of expenditure 
against the loss of " exchange " for the four years before 
the heavy fall in 1876, when the net average annual loss 
was ;^432,ooo. 

From Mr. Bonamy Price's able work, " Currency and 
Banking," I extract the following : " Gold exercises a 
most valuable function in liquidating the balances of in- 
ternational trade. All trade, as between individuals so 
between nations, is an exchange of property, of wealth, 
of goods. Every nation buys abroad with its own prod- 
ucts, its own goods ; it has nothing else to obtain its 
purchases with. When a country has mines of gold, gold 
passes as a product, just as cotton or wine. If the buy- 
ing equalled the selling every day, as would happen with 
direct barter, the accounts would always be balanced of 
themselves ; but as purchases and sales with one single 
foreign country are not always equal, there remains on a 
given day a balance to settle, and that is done with an 
export of gold from the country which bought most to 
the country which has sold most. At times this differ- 


ence is large, as when a bad harvest or famine urges on 
immediate and large purchases of food, and sufficient 
gold ^t the moment might be difficult to procure. But 
the machinery of modern commerce here comes in aid ; 
bills — which are only deferred payments — are brought 
into play, and often before they are due, the balance has 
been corrected with the export of goods. In any case, 
as Adam Smith has well remarked, England can replenish 
itself with gold from abroad, if she has the wherewithal 
to pay for it. Trade never is any thing else at last but 
exchange of goods." 

International payments require the currencies of dif- 
ferent countries to be compared with one another. Each 
country sells upon prices estimated in its own money ; 
hence in international exchanging two accounts have to 
be settled together, each expressed in different moneys. 
How is the position of each towards the other to be 
calculated 1 They must be reduced to a common meas- 
ure, to gold. French napoleons and francs must be con- 
verted into weights of gold ; so must the English 
pounds and shillings. This operation is carried out by 
expressing the coin of the one country in the coin of the 
other. The weight of gold in an English sovereign is 
compared with the weight of the same metal in French 
francs, calculated on the basis of the weight of gold in 
the twenty-franc piece, the napoleon. The discovery is 
made that twenty-five francs, and some -^^ more, ex- 
press the same weight of gold as the English sovereign, 
and this equality is called the par of exchange. When 
the exchange is at par, a man who has an English sov- 
ereign can obtain these francs, and vice versa these 
francs will get a sovereign. A bullion dealer who bought 


two heaps of sovereigns and napoleons on this basis, and 
melted the gold into ingots, would get exactly the same 
ingots from each heap. 

But exchange seldom stands at par between two coun- 
tries, for a very sufficient reason ; the buying and selling 
are seldom equal on the same day ; the difference, as 
explained, they agree shall be liquidated in gold. Now 
to send gold involves a charge for carriage and insurance ; 
and the man who has to send it will avoid this charge if 
he can ; so we find that goods purchased in foreign 
countries, all except the small balance liquidated in gold, 
are paid by the exchange of debts, by bills. The Eng- 
lish debtor pays his French creditor by sending him a 
bill due by a French debtor for English goods sent to 
France. Practically, one nation buys up the bills on the 
other, and settlements between the two countries are 
made by an exchange of bills. If the purchases in the 
two countries are equal, so will be the bills created by 
them ; if not, the debtor unable to find a bill has to send 
gold, or, as is generally the case, he offers for a bill 
rather more than its value in metal at the par of ex- 
change. If France owes us more than we owe her at 
any given period, the French debtor has fo pay, say, 25J 
francs for a pound, due in London, rather than send gold. 
If England owes more to France than France to Eng- 
land, at any period, the English debtor in London will 
be eager to obtain, and compete with? others to buy in 
London, a bill due by a Frenchman in France ; and he 
will give a sovereign for 24^ francs to be paid in France. 
In the former case the exchange is said to be in favor of 
England ; the Englishman gets a quarter of a franc 
more than the gold of his pound at par. In the second 

152 MONEY, 

case, the exchange is pronounced unfavorable ; the 
Englishman gets less gold in 24I francs than he gave 
away in his pound. So you perceive that a favorable 
exchange means that England has sold more than she has 
bought, the same not being able to be settled by the 
ordinary bills, she has a balance to receive in gold. As 
gold is costly to transmit, what bills are to be had are 
sought after, and fetch more in consequence ; and an 
unfavorable exchange means- the reverse ; she is the 
loser by the exchange of bills needed for the settlement. 

But the exchange will not rise above par, beyond the 
cost of carriage and insurance for the transmission of 
gold. If it costs half a franc to send a pound's worth of 
gold to England, the Paris debtor will accept an ex- 
change which makes him give 25 J francs for a pound, to 
be paid in England ; but he will refuse one of 25J, as it 
would cost him less to send the gold. 

Another popular fallacy is that of favorable exchange, 
meaning thereby we have sold abroad more than we 
bought, and had to receive gold for the balance. The ex- 
pression implies an ignorance of the very nature of all 
trade, and is made by those who ignore the fact that men 
sell to have the power to buy ; that all trade is only an 
exchange of goods, and the greater the power to procure 
goods of foreign countries, for use and consumption, the 

We only sell for gold, because it gives us a ready 
means to buy other goods. It is the goods we really 
want, not the money ; hence the terms, favorable and 
unfavorable exchanges, are misleading, but still exist, in 
spite of their refutation by Adam Smith. 

The delusion is based upon the absurdity that to sell 


is every thing — get gold for your goods ; whereas to sell 
without buying is to convert a man into a Midas, and to 
make him perish amid piles of gold. The value set on 
favorable exchanges Mr. Bonamy Price considers the 
greatest intellectual and literary wonder of our age. 

All persons interested in " Exchange " should care- 
fully read Mr. Bonamy Price on ** Currency and Bank- 
ing," and " The Theory of the Foreign Exchanges," by 
the Right Hon. G. J. Goschen. 


Interest on money is a refined idea, and not a uni- 
versal one. Not that this implies that interest ought not 
to be charged, but that the majority of persons in most 
countries do not appreciate it. Most savings in most 
countries are held in hoarded specie. In Asia, in Africa, 
in South America, they are thus held, and it would 
frighten most of the owners to let them out of their keep- 
ing. A modem Englishman assumes as a first principle 
that he ought to be able to *' put his money into some- 
thing safe that will yield five per cent. " ; but most 
saving persons in other countries are afraid to ** put their 
money " into any thing. 

That part of the business of banking which consists in 
the lending of money lay, during the Middle Ages, under 
severe restraints. The taking of interest for the loan of 
money was deemed sinful, and stigmatized with the 
name of usury. This opinion appears to be wholly un- 
warranted, either by the principle of natural equity or 
the enactments of the Mosaic law. " The taking of 
interest from Israelites was forbidden by Moses ; not, 
however, as if he absolutely and in all cases condemned 

154 MOj^EY. 

the practice, for he expressly permitted interest to be 
taken from strangers, but out of favor to the poorer 
classes of people. The further we go back towards the 
origin of nations, the poorer do we commonly find them, 
and the more strangers to commerce ; and where this is 
the case, people borrow, not with a view to profit, but 
from poverty, and in order to procure the necessaries of 
life ; and then it must be, no doubt, a great hardship to 
give back more than has been got. The taking of 
interest from strangers Moses has not only nowhere 
forbidden, but even expressly authorized. Hence it is 
clear that he does by no means represent interest 
as in itself sinful and unjust. Political economy 
demonstrates clearly that "thrift," or the accumula- 
tion of capital by a nation, depends on what profit can 
be obtained by self-denial, the reward of abstinence." 
In "Paper Money," Mr. Harvey denies that capital is 
the result of saving, and says the absurdity of stating 
that the only way of adding to the capital of a country 
is to save money, arises from our confounding capital 
and money. According to his theory, " the problem of 
life is to consume much and produce much." With this 
1 cordially agree — no one is more anxious that the mass 
of the people should have more of the comforts of life ; 
but to obtain this, they must not be misled by those 
" false friends " who tell them to limit the produce of 
their labor, but be guided by their " true friends," who 
advise them to produce all in their power. Mr. Harvey 
agrees with Mr. Ruskin, that thrifty people, accumulators 
of capital, are " worshippers of Mammon, and servants 
of the devil." If you have read my books, you will have 
noticed my contempt for the accumulator, who is actuated 

mr^kEsT. 155 

solely by his love of gold — whose pleasure is in the 
thought of his possessions, which yield gratification to 
his miserly soul ; but we must not ignore the fact, that 
the wages for next week, or month, or year, depend 
solely on the savings of the week, month, or year that 
preceded ; that the very existence of society now depends 
upon those who "think of the morrow," upon those 
whose " savings " of to-day are the " seed " for to- 
morrow ; and that capital, if not money, represents in 
loans, debts, or produce a right to money, a right to have 
when wanted an equivalent for what it abstained from 
using and lent to others. Capital is a " deferred pay- 
ment," a debt payable on demand, and until demanded, 
is entitled to interest, in proportion to the risk incurred 
in lending it. Any such prohibition of interest in our 
age and country would, without doubt, be unjust towards 
lenders and destructive to trade of every description. 
Among all the remnants of ancient laws it would be dif- 
ficult to find one which, in the present state of society, 
it would be more foolish and hurtful to revive and en- 
force. It could only suit a state so constituted as was 
that of the Israelites by Moses. The taking of interest 
for the loan of money was first prohibited in England by 
Edward the Confessor. This law, however, appears to 
have become obsolete ; for, in a council held at West- 
minster in the year 11 26, usury was prohibited only to 
the clergy, who, in case they practised it, were to be de- 
graded ; and in another council, held twelve years after- 
wards, it was decreed, " that such of the clergy as were 
usurers and hunters after sordid gain, and for the public 
employment of the laity, ought to be degraded." The 
earliest mention we find in English history of a certain 

156 MONEY. 

yearly allowance for the usury or interest of money is in 
the year 1199, the tenth and last year of Richard I. In 
this case the rate of interest was 10 per cent. This ap- 
pears to have been the ordinary or market rate of interest 
from that period until the time of Henry VIII. ; but 
there are many instances on record of a much higher 
rate of interest being taken, especially by the Jews and 
the Lombards, who in those times were the principal 
money-lenders. The exorbitant interest taken by them 
is supposed by eminent writers to have been the cause of 
the prohibition of usury. 

In the year 1546, the taking of interest for money was 
made legal in England, and the rate was fixed at 10 per 
cent. This act was repealed in the year 1552, but it was 
re-enacted in 187 1? The legal rate of interest was re- 
duced to 8 per cent, in 1624, and to 6 per cent, in 165 1. 
In the year 17 14 it was reduced to 5 per cent, where it 
now remains. The legal rate of interest is still 6 per 
cent, in Ireland. 

After the taking of interest was sanctioned by law, the 
term usury^ which was previously applied to interest in 
general, became limited to denote a rate of interest 
higher than that which the law allowed. Mr. Gilbart 
says : " Erroneous views are often entertained of the 
Mosaic laws, from neglecting to consider the state of the 
people to whom these laws were given. It was the ob- 
ject of the Jewish legislature to make the Jews a purely 
agricultural people. The promotion of agriculture was, 
as Montesquieu would say, the spirit of his laws. Hence 
he prohibited the taking of interest for the loan of money. 
By this means he interdicted commerce. His design 
was to prevent the Israelites from associating with the 


surrounding nations, and learning their idolatrous prac- 
tices. But even Moses permitted the Jews to take 
interest for the money lent to strangers — a circumstance 
which proves that the prohibition was only a political and 
not a moral precept. If the taking of interest for money 
were really wrong, it would have been forbidden in 
all cases. But in the Middle Ages the political 
and the moral laws of Moses were confounded to- 
gether, and all of them were supposed to be of 
perpetual obligation upon all nations. These opin- 
ions, which might have been useful in a purely 
agricultural state, were still indulged when a change of 
manners required that this country should become com- 
mercial. If we admitted the unlawfulness of taking 
interest for money, we might on the same principle con- 
demn all kinds of commerce, and even all profitable 
investment of capital. Where is the difference between 
taking money for the use of money and taking money 
for the use of commodities that are purchased with 
money ? If I lay out ;^ 100 in the purchase of a house, 
I am allowed to take rent for the use of that house. 
Why, then, if I lend to a friend the ;^ioo with which he 
purchases a house, am I to receive no remuneration ? If 
we are not allowed to receive any money for the loan of 
money, why are we allowed to receive money for the 
loan of a house or coach, or any other article ? An ex- 
orbitant charge for interest is certainly unjust, but so is 
an exorbitant charge for any thing else. Money is a 
necessity. A merchant having bills to meet must find it 
somewhere, at some price. It is this urgent need of the 
whole body of merchants which runs up the value of 
money so wildly in a great panic. On the other hand, 

158 MONEY. 

money easily becomes a " drug," and there is soon too 
much of it, and we are told in the money articles daily 
that "bills" are not to be- had, and then the value of 
money is very low. These fluctuations are caused by a 
slight excess of, or a slight deficiency of, quantity ; but 
the rate of interest depends upon supply and demand. 
When the supply is thought to be inadequate for the 
demand, all are eager to secure it, and the moneyed 
interest naturally charge a higher rate for the use of it. 
I do not believe in a scarcity of money ; it is the panic 
that gets into the minds of men at certain epochs, 
destroying all confidence of man in man ; when the 
most wealthy houses become subject to suspicion, and 
the best of our banks know not how soon they may 
become exposed to a run from the popular delusion 
which prevails. Hence money is hoarded, every one 
prepares for the worst, and money becomes, or is said to 
be, scarce, simply because no one will part with what he 
has. Take the panic of 1847 • ^^ Act of 1844 was no 
sooner suspended in October, 1847, people were no 
sooner told the bank was not to be restricted in its issue 
of bank notes, than the pressure immediately ceased. 
On the return of confidence the hoards were brought 
out ; the amounts held in reserve by bankers in England 
and Ireland can be reduced ; the stagnant funds, the 
locked-up capital, are again put into circulation ; money 
is vitalized, and soon overflows the country. 

The following list of the bank rate of discount for 
three years will prove that money is not paid too highly for : 
From June 19, 1884, to August, 1887, the rate has only 
twice been 5 per cent., five times 4 per cent., more than 
half the time not over 2\ per cent., one year out of the 
three only 2 per cent. 












19th June 

9th October 

30th October. . . 
6th November. 
29th Jan., 1885. 

19th March 

7th May 

14th May 

1 2th November. 
17th December. 



4 , 


2ist January. ., 
i8th February. 

6th May 

loth June 

26th August . . . 
2ist October... 
i6th December. 




3d February. . . 
loth March. . . . 

24th March 

14th April 

28th April 

4th August. . . . 




End of 1886, money was scarce, and more had to be 
paid for it, but since March the moneyed class have had 
to suffer. Cheap money is very useful in developing 
many industries that cannot afford to pay high interest ; 
bjit money is cheap generally, because goods are not 
being produced from a lack of enterprise, a falling off in 
production, or a depreciation in their value. Trade 
generally has not recovered the depression of 1877-78. 
We want new markets, and more attention given to what 
is required by the old ones. Our manufacturers and 
merchants do not pay sufficient attention to the wants of 
the large population growing up all over the world. 
There can be no surer indication of the " home trade " 
than the clearing-house returns, as these are the total 
settlements day by day between buyers and sellers. The 
four weeks of July, 1887, as against 1886, show an 
improvement : 

l6o MONEY, 

1886. 1887. 

Weekended July 7,;^ 132,389,000 

** " " 14. 94.675,000 

** ** ** 21, 134,221,000 

" 28, 81,545,000 

Total July, i886,;f 442,830,000 
Increase in 1887 15,669,000 

Week ended July 6, ;^ 1 36,662,000 

** ** ** 13, 100,940,000 

** " 20, 136,351,000 

'* ** "27, 84,546,000 



Ask any tradesman why business is so dull, you have 
the stereotyped reply, " Scarcity of money " ; yet money 
is waiting to be asked for, if they had the debts repre- 
sented by bills to give in exchange for it. This is 
caused mainly by a want of confidence, stopping produc- 
tion, distribution. Yet why this feeling of mistrust it 
would be hard to tell ; except that men do not 
think for themselves, do not act for themselves, but 
have trusted to bankers and others to invest for 
them ; and one gigantic failure shakes confidence 
in all, and so the public, the money-investing pub- 
lic, keep to first-class securities only ; and on the 13th 
of May, 1887, consols reached 103J, the highest price ; 
the lowest was 47} in August, 1798. There could be no 
safer indication that capitalists are at their wits* end to 
know what to do with their money. The discount rate 
for three months' bank bills is nominally 2 per cent, too 
little for borrowers to pay, or lenders to receive ; but 
practically the rate may be put at \\ per cent, owing to 
the competition among lenders ; whilst the London dis- 
count houses are obliged to refuse large sums of money 
offered to them on deposit from the provinces on account 
of the impossibility of making use of it profitably. The 
quantity of money required in any country must depend 


upon the extent of its trade ; and as both the foreign and 
domestic trade of this country has very considerably 
decreased the last few years, and still keeps in a very 
depressed state, less money is required to carry it on. 
Manufacturers and merchants have not the same quan- 
tity of bills to offer for discount ; hence there is a great 
falling off in the demand for money. The quantity 
of money required to carry on any given amount of trade 
depends also upon the general scale of prices ; and as 
the prices of nearly all commodities have been much 
reduced, the amount of money required for the exchange 
of the same quantities of commodities is proportionately 
diminished. So lenders cannot find legitimate borrow- 
ers, capital is in search of employment, and has to be 
satisfied with very poor remuneration. It is not want of 
money, then, that causes the present depression to last — 
there is abundance of money ; yet some of our most 
important branches of manufacture are in a state of great 
depression. At the March wool sales, 180,000 bales out 
of 240,000, or " three fourths," were bought by foreign- 
ers, the home trade only requiring " one fourth," instead 
of " one half." The third series of sales closed Septem- 
ber 26th, and, as in the preceding series, the foreign 
trade took a large proportion of the supply — 175,000 
bales out of 325,628 ; or, out of 899,400 bales sold in the 
three series for 1879, 59^»3oo bales were bought for the 
foreign trade, and only 301,100 for the home trade ; 
whereas in the corresponding three series of 1878, 
442,200 were bought for export, and 384,900 for home 
consumption : a great falling off in one of our staple 
productions, and a great increase in foreign productions. 
How is this ? There are various causes, and our 

l62 MONEY. 

working classes have yet to learn that it is a very easy 
task to bleed a man to death, but even with a profuse 
supply of money to put fresh blood into his veins, we 
cannot at our pleasure restore him to life again. 

What an outcry there is when money gets over 5 per 
cent., or even before it reaches that rate ; yet manufac- 
turers and merchants might well afford the capitalist his 
temporary gleam of sunshine without so much murmur- 
ing. The rule with manufacturers is to draw on their 
customers at four months if they are not able to take the 
discount ; so that even now, when they can take the bills 
to the bank and get the same discounted from i^ to 2J, 
they still charge their customers 7^ per annum. The 
City merchant houses, like Cook & Son, Moore, Cramp- 
ton, & Co., make a large profit by the necessities of 
their customers ; or, putting it another way, they lend to 
their customer ; that is, they extend the length of credit 
four months by his sacrificing 2\ per cent, discount. 
There are some houses who will only draw at three 
months. When I first began business, I bought 
largely of one, a very respectable house that 
served me well, but the counting-house profit of 
ten per cent, was a serious drawback. A busi- 
ness man of course always discounts such accounts 
if possible, and arranges that the house that draws at four 
months shall do so ; but the profit monthly in discount- 
ing a batch of bills at the bank rate, in comparison with 
the discount their customers have to forego, must be a 
large sum. A tradesman should always try and arrange 
his purchases so as to secure the discount ; to do with 
good men or to do a cash trade, taking the discount is 
essential. As a rule, it 15 not advisable to draw on 


houses that sell all for cash ; if a debtor's assets consist 
only of his stock in trade, that alone will never pay his 
creditors 20^. in the ;^, if he takes the full time allowed 
in the trade. For instance, the terms at least are 
one clear month and four months* bill ; then there is 
dating on — say six months' credit or half a year's trade. 
To pay, the stock must be turned over four times a year, 
or at least three times. You will perceive that there is 
only three or four months' stock to pay six months* pur- 
chases with. Yet merchants will not keep their eyes 
open, will not read the signs of the times, will not see 
that book debts will year by year be less of an asset as 
cash trade becomes more and more the rule. Despite, I 
say, of this, our leading City houses tempt their cus- 
tomers to buy by offering job lots, all under market 
prices, they say, dated as June, if bought March 25th, 
26th, 27th ; and the same house issued a circular in 
reference to an article that had advanced in price ^ offering 
to book orders at prices quoted, for delivery September 
I St as December, November ist as February, December 
ist as March. Can recklessness go further, or can we 
be surprised if such a policy caused this house to draw 
largely on their reserve fund to pay five per cent, interest 
on capital ? Another sent out twelve sheets of job lots 
in March, with the temptation also of June ; and so in- 
fectious has become this fatal disease, that another house, 
whose system was unique, whose counting-house policy 
was the most profitable as the most judicious in the City, 
whose rule used to be that if a parcel was bought on the 
last day of the month, it was charged for in that month's 
account if it left the premises, yet on March 29th, 1879, 
this house, to my great sorrow, so far departed from the 

164 MONEY. 

principle of its great founder, as to send out a circular 
offering goods under price, and to be dated as May. I 
know the excuse : trade is bad, others do this and that. 
Buyers grumble that the dating on will tempt men, aye, 
even more than price. All too true. Still the principles 
that have made a house, that have triumphed successfully 
over periods as adverse as the present, ought not to be 
departed from except as a last resource. Look at the 
damage it does the house ! A besieged castle has little 
chance against the enemy when it is known how nearly 
exhausted the supplies are ; and once begun, and you 
join in this dangerous system of dating on, there is no 
knowing where you may go. 

** Within the infant rind of this small flower, 
Poison hath residence, and medicine power. 
Two such opposed kings encamp there still 
In man as well as herbs — grace and rude will, 
And when the worser is predominant. 
Full soon the canker, death, eateth up that plant." 


Beginning life with a very small amount of borrowed 
capital, I am well aware of the value of dating on ; but 
at that time we sold our own goods on credit — credit 
was the rule and ready money the exception — and the 
dating on was only the two seasons' parcels bought 
some months in advance of the time they would be 
required. The " canker " in the present system is dating 
on by circular indiscriminately to every one, and after 
having sold the season's parcel dated as February to 
your regular customers, offering "job lines" to those 
who have not already bought in March dated as June. 
The judicious use of the system is the " medicine " ; the 


reckless use of the system is the " poison," in tempting a 
man in March to buy "jobs '* dated as June, before you 
know if he intends to pay in April for the season's parcel 
bought in February ; tempting men to incur liabilities ; 
making of business a reckless, haphazard kind of thing ; 
the counting-house, instead of, as formerly, being the 
safety valve, the drug luring men on to their destruction. 
Why is this ? Because men do not think, and are led 
away by specious expedients, and do not take the trouble 
to get at the bottom of things. A business man of 
course takes advantage of the liberal terms. Time is 
money, and if a house volunteers an extra month or 
two, he is willingv. to take it. As a rule, they allow you 
half per cent, extra per month for prepayment ; so buy 
upon their terms if you want to buy^ and if the price is 
righty and prepay them. But the tendency of the time is 
for the consumer to pay " cash," and get the best value 
possible for ready money ; and to help their customers, 
it would be wiser to " shorten credit," and charge a 
lower price for the quicker turnover and lessened risk. 
Goods cannot be sold cheaply, as they should be, to 
" cash " buyers whilst our system is one of reckless, 
foolish, indiscriminate " long credit." 

They justify the practice by saying trade is in a very 
depressed state. No doubt it is, and unless great caution 
is observed, the excessive glut of idle capital will lead to 
a deal of unsound speculative business. It may be diffi- 
cult to do so, it is very unpleasant to have to do so, but 
it would be wiser to keep the goods, as it will be wiser to 
keep the money till it can be legitimately used, than lend 
it rashly rather than not lend it at all. It is a calamity 
for the moneyed interest when the nation groans under 

1 66 MONEY. 

the pressure of an abundance of money-lenders not able 
to find borrowers ; capital in search of employment, and 
not able to find it. Trade being generally depressed, the 
Cause cannot be for want of money ; and the capitalist 
must have patience, and wait till the cause of the de- 
pression be removed. It should be a proof that the 
quantity of money does not of itself give the stimulus to 
domestic industry. Trade may be paralyzed when in 
full operation because money cannot be had, but money 
alone cannot set the wheels in motion. There was 
nothing to justify the difficulty in getting money during 
the last pressure. I have witnessed those of 1847, i^57> 
1866, but the 1877, 1878 collapse seemed to make our 
bankers lose their nerve. What manufacturer or mer- 
chant feels disposed to launch out upon such an insecure 
sea as our currency, with their bankers acting in a cer- 
tain manner up to the last moment, and in the hour of 
need, without the least warning, to object on some puerile 
objection, and return your paper? Why, inevitably, 
every prudent, sensible man resolves to curtail his opera- 
tions, and not risk his position upon such an insecure 
basis. As before stated, I see no reason, if the. bank 
act was altered to meet the requirements of 1881, why 
the bank rate should be at any time over six per cent. 
And I have also stated that even our present panic rates 
are nothing to any solvent man doing a legitimate busi- 
ness. This has always been my opinion, and I have 
simply regarded them as a little ofif my year's profit, and 
a little more in the banker's or money-lender's. We 
must all have our innings ; but what we object to is that 
that there should be any difficulty in getting money 
when wanted, and, after being refused, is lent. Then 


you open up a new aspect of the case, that crushes by its 
uncertainty the actions of the man, and all operations are 
necessarily for a time curtailed. This is the real evil of 
all panics ; the depriving of solvent houses of the means 
of meeting their legitimate engagements. Banking ought 
to be done upon a certain system ; bills of regular cus- 
tomers that are taken for certain sums or at certain dates 
ought not to be objected to at a time of pressure, when 
the market is not open to the customer. Six months' 
bills are right or wrong ; if right, they should be taken at 
one time as at another ; if wrong, they should not be 
taken at any time, no matter how plentiful money may 
be. If there be any deviation, it should be in being 
more liberal at the difficult time to the regular customer, 
unless his credit is unsatisfactory, or the amount of bills 
under discount much larger than usual. Bankers, of all 
men, should be superior to nerveless fear, as by such ac- 
tions wealthy men may be ruined. Manufacturers de- 
prived of the means of executing their orders, thousands 
thrown out of employment, the national industry para- 
lyzed, the progress of useful works stopped, through 
want of confidence, and the usual facilities of getting 
money stopped — such are the effects of pressure in the 
money market. The high rate is a mere bagatelle ; the 
stoppage of a man's credit, the limiting and restricting 
his loan account, or refusing to discount this or that 
paper, being the real evil that causes an immediate 
paralysis of trade. Bankers, as a rule, are too liberal ; 
their great fault is that, like an indulgent father, they 
suddenly, without cause or reason, refuse the helping 
hand they have heretofore so liberally given. Times of 
pressure, of course, are very trying to bankers, and flue- 

l68 MONEY. 

tuations in the value of money generally injurious. 
When money is abundant they get the minimum of profit, 
and are tempted to make imprudent investments, in 
order to employ their funds ; and when money is scarce 
the rate of interest on deposits is advanced, and although 
they get the advantages on the balances of the current 
accounts and their own capital of the higher rate of 
interest, on the other hand they have to keep a larger 
sum unemployed in the till ready in case of a rush, and 
there is more danger from losses by the failing of cus- 
tomers, or from the necessity of realizing the securities 
they hold. As a rule, the extremes of abundance and 
scarcity of money are unfavorable to banking profits. A 
state in which money is easy without being abundant, 
and valuable without being scarce, is the most conducive 
to the prosperity of both the banking and the commer- 
cial interests of the country. 


" Wealth in the gross is death, but life dififused ; 
As poison heals, in just proportions used : 
In heap, like ambergris, a stink it lies. 
But, well dispersed, is incense to the skies." — Pope. 

Mr. R* H. Patterson, writing upon the " Eastern 
Trade and Precious Metals," in the Contemporary Re- 
view iox April, 1879, says : "According to Mr. Jacob's 
estimate, the entire amount of specie in Europe in 1492 
was only ;^33,ooo,ooo ; and the comparative dearth or 
scarcity of money is shown by the fact that the precious 
metals were at that time three times dearer ; that is to 
say, their exchangeable value or purchasing power was 
three times as great as it had been in the reign of 

WEALTH. 169 

Augustus. But in the course of a century, after the dis- 
covery of America (a.d. 1490- 1600), the stock of gold 
and silver existing in Europe (after deducting loss by 
wear and by export) became quadrupled, and in a.d. 
1640 it became nearly sevenfold larger than it was in the 
days of Columbus. The result was that prices became 
nearly quadrupled ; that is to say, specie or money fell to 
only about a fourth part of its old value. Produce 
increasing out of proportion to money, more has to be 
given in exchange for that money ; the produce must be 
exchanged, money having a fixed legal value put upon 
it ; goods being in excess, go down in price ; the same 
amount of money will buy a larger quantity of produce. 
But the positions being reversed — gold being discovered 
faster than goods can be manufactured, and the holder 
of the gold wanting produce and not the gold, they have 
to part with more of the gold to get a share of the exist- 
ing produce ; so people get more money in exchange for 
their goods. But the flood of gold and silver causes a 
demand for goods ; and heavy as was the fall in the 
value of gold and silver which followed the inundation of 
the precious metals from America in the sixteenth cen- 
tury and onward, the fall was not proportionate with the 
multiplication of the stock of these metals in Europe ; 
prices being quadrupled, while the gold and silver became 
seven-fold. There is but one possible explanation — 
money stimulates trade, demand causes supply ; the 
great expansion of commerce caused the demand or re- 
quirement for specie to simultaneously increase since 
1492. The miners wanted goods, clothing, etc.; ships 
and sailors were needed to send the goods abroad to 
them ; new branches of commerce sprang up ; and the 


increased import of commodities led to the export of gold 
and silver. In 1492 the stock of gold existing in Europe, 
we are told, was only ;^33,ooo,ooo, and the produce of 
the European mines, then the only source of supply, was 
under ;^i5o,ooo a year. During the first half of the 
sixteenth century the Eastern trade was hardly in exist- 
ence ; but by the end of the century, however (in 1600)^ 
the export of the precious metals to the East, in connec- 
tion with the new trade had amounted (according to Mr. 
Jacob) in the aggregate to ;^ 14,000,000 sterling — a sum 
which, according to the same authority, was somewhat 
larger than the aggregate produce of the European mines 
during the same period (viz., 1492-1600). Thus, at its 
very outset, the Eastern trade was manifestly dependent 
upon a new supply of the precious metals, and, but for 
the conquest of Mexico (15 16) and Peru (1520), and the 
discovery in 1546 of the great silver mountain of Potosi 
by the Spaniards, which caused a large and permanent 
supply of specie from the New World, the Eastern trade 
could not have been prosecuted at all. 

" Europe had obtained almost its entire stock of gold 
and silver from the East. The East was proverbially the 
prolific seat both of gems and the precious metals. Yet 
for three centuries or more, ever since civilization began 
to revive in Europe, there has been a steady flow of the 
precious metals to the East. In the course of the next 
century (1601-1700) the aggregate export of the precious 
metals to the East amounted to 33 millions — a sum equal 
to the entire stock of gold and silver in Europe in 1492. 
The establishment of the Dutch and the English East 
India companies gave a great impetus to the Eastern 
trade ; and in the following century the export of specie 

WEALTH. 171 

to the East amounted to and less than 352 millions, 
or at the rate of three and a half millions a year through- 
out the entire century. The magnitude of this sum will 
be clearly apprehended when we state that, according to 
Mr. Jacob, whose authority we accept upon these mat- 
ters, the total existing stock of gold and silver money in 
Christendom (/. ^., after deducting the amount of the 
precious metals converted into ornaments, or lost, or 
destroyed by wear) was 380 millions in 18 10, which, al- 
lowing for the IOC millions yielded by the mines between 
1800 and 1 810, shows that the total existing stock at the 
beginning of the present century must have been consid- 
erably less than the amount of gold and silver which 
had been exported to the East during the preceding 

" We now come to a critical time in the history of the 
precious metals, and also not only of the trade with the 
East, but, as has recently and tardily become recognized, 
of the monetary and commercial condition of the world 
at large. In the year 1810, during the occupation of 
Spain by the armies of Napoleon, the Spanish colonies 
of South America and Mexico revolted against the rule 
of the mother country. A long period of revolutionary 
wars ensued ; industry was paralyzed, the whole region 
relapsed into a state of chaos, and the working of the 
mines, both in Peru and Mexico, temporarily ceased. 
The result was that the world's supply of the precious 
metals was reduced by one half, falling from ten millions 
in 1810 to an average of only five millions during the 
next twenty years. This disastrous change was strik- 
ingly reflected in the export of specie to the East, which, 
according to Mr. Jacob, declined from three and a half 

1/2 MONEY. 

millions, which it had averaged from 1700 down to 
1810, to only two millions a year from 1810 to 1830. 

" For the ensuing period we have no statistics or reliable 
computation of the export of the precious metals to the 
East generally. We must, therefore, confine our state- 
ment to India, which has always, and especially in recent 
times, been by far the chief absorbent of gold and silver 
from the Western world. Between, 1834 and 1852 we 
find, from the statistics furnished by Colonel Hyde, late 
Master of the Calcutta Mint, that the surplus of the 
imports of silver over the exports in India amounted to 
twenty-nine millions sterling, which gives an annual 
average of one and one third, million of silver absorbed 
by India* During that period there appears a new 
element in the case — namely, the home bills or drafts 
drawn by our government upon the Indian government, 
representing payments due from the Indian executive to 
this country. Doubtless such payments had always 
been in existence to some extent under the East India 
Company, although prior to this time we have no official 
record of them. These home bills during the period in 
question, 1834-52, averaged one and three quarter mil- 
lion a year. Accordingly the exports of silver to India, 
together with these home bills equivalent to specie, 
averaged during this period three and a half millions 
"annually, just equal to the average export of specie 
throughout the hundred and ten years ending with 18 10. 
Doubtless there was some export of gold to India during 
the twenty years ending with 1852, of which we find no 
official record. But viewing the whole case, it seems 
evident that, contemporaneously with the falling off in 
the world's supply of the precious metals, there was a 

WEALTH. 173 

Stagnation in the trade with the East, which cannot be 
carried on without a commensurate supply of specie. 

"We now come to the concluding, and by far the 
most remarkable and important epoch of the trade with 
the East, during which it has been the most powerful 
factor in determining the value of the precious metals, 
and of money generally in the Western world. Soon 
after 1852 the memorable expansion of our Indian trade 
set in. The vast supply of new gold from California 
and Australia created an abundance of metallic money 
or international currency ; and as gold could largely 
take the place of silver in the currencies of the Western 
world, a large quantity of the latter metal became availa- 
ble for carrying on an increase of trade with India and 
other silver-using countries of the East. Thus sup- 
ported, in 1855-6 an immense expenditure of British 
capital was begun in India for the construction of rail- 
ways. Mr. R. W. Crawford stated in 1876 that the total 
expenditure for this purpose amounted to ninety-four 
millions sterling, of which sum fifty-four millions were 
expended in India. And just as this expenditure was 
coming to a close in 1862, the cotton famine commenced, 
owing to the civil war in the United States, whereby our 
cotton merchants were compelled to have recourse to 
India for a supply of the raw material of our great tex- 
tile industry. Under these combined influences, a vast 
amount of money was invested in India, which operated 
like a fertilizing flood, increasing production and exports, 
and also enabling the population of India to increase 
their imports and consumption of foreign commodities. 
And thus the foreign trade of India in merchandise, 
including both exports and imports, which amounted to 

174 MONEY. 

thirty-seven millions sterling in the official year 1855-6, 
rose steadily to ninety-five millions in the year 1865-6, 
nearly trebling during those ten years. 

" Such, then, have been the vast and beneficial effects 
of the trade with the East upon the value of precious 
metals, and of money generally, throughout the Western 
world, alike in past centuries, after the discovery of 
America, and during the still vaster and more remarka- 
ble inflood of these precious ores since the discovery of 
the new American and Australian mines. This Eastern 
trade has happily carried off or found profitable employ- 
ment for every spare ounce of the 350 millions of gold 
which, since 1848, have been poured into the world from 
the new mines ; entirely preventing the immense fall in 
the value of moneys which, at the instant, appeared so 
inevitable and appalling. By preventing a fall in the 
value of money, it has made every ounce of the new 
gold, and until recently of silver, as highly valuable as 
in previous times : thus maintaining, at its full value, the 
labor of the miners, and saving the whole civilized world 
not merely from a monetary revolution, but from the 
pure and heavy loss which would have resulted from a 
diminution in the value of the vast existing stock of gold 
and silver. Solely and directly in consequence of the 
trade with the East, as the new gold has flowed into Eu- 
rope, silver has flowed out ; and thus the increased 
commerce with the East has proved to mankind a double 
blessing ; at once augmenting employment both in the 
Eastern and Western worlds, and averting any great 
change in the value of money. It is a waste pipe by 
which nothing is wasted ; it is a channel by which we 
not only get rid of a surplus of the precious metals, but 

WEALTH, 175 

turn them to most profitable account. In ,so far as the 
new gold and silver mines shall remain productive, the 
prosperity of the world depends upon the continuance 
of this drain of bullion to the East. Without it the new 
supplies of the precious metals would be robbed of their 
usefulness, through a great fall in their value. Their 
beneficial effect would be merely local and evanescent ; 
but with it the whole world will be partakers in its bless- 
ings. At present, unfortunately, this conduit or waste 
pipe is narrowed by the * Council Drafts,' — a circum- 
stance natural and proper of itself, but which is highly 
disadvantageous not only to our Indian Empire, but to 
the world at large, by producing a fall in the value of 
silver, which not only lessens the value of the labor of the 
silver-miners, but of the entire amount of the vast stock 
of silver existing throughout the world — the accumulated 
result and legacy of many generations of past labor." 

The " savings " of the United Kingdom are estimated 
at the lowest computation as above ;^ 100,000,000 annu- 
ally, so that " wealth," its production and distribution, is 
an important study. Nearly all men are engaged in the 
creation of wealth. The right way of working for it, the 
most fitting method of attaining it, must be of value 
to every one. Practical men have their theories and 
crotchets. They abound with views founded, as they will 
tell you, on experience ; and when new principles are 
proposed, none are so quick as practical men to crush you 
with the better wisdom of custom and prevalent practice. 
If panics and commercial crises teach us any thing, it 
is that trade and industry periodically go to ruin because 
of a transient embarrassment, in no way affecting the 
solvency of British trade, but solely because of a defect 

lyS^ MONEY. 

in our monetary system, through which the whole com- 
merce of the country is upset, and traders robbed of their 
wealth, through depression of the markets ; and hun- 
dreds of firms, as solvent as the Bank of England are 
forced into the Gazette, because of the inelasticity of 
our Currency Act, by which the ordinary monetary ac- 
commodation is withdrawn from trade at the very time 
when it is most urgently required. How long is this to 
last ! Until the practical man studies more thoroughly 
than he has done the science of wealth. It will give to 
his mind more breadth — will cause him to be more com- 
plete in his investigation, in the questioning of facts, 
and the more careful digestion of the instruction they 
contain. By no other method can he keep in advance, 
and be able to shake off many of the complicated, 
artificial, and cumbrous rules laid down for the attain- 
ment of wealth. By science alone can men be made 
superior to the old fallacy that the precious metals 
should be the one supreme object of industrial ambi- 
tion ; that to acquire them, all the resources of the 
intellect, the capital, the labor of the nation, must be 
applied ; that the export trade must be exalted over the 
import trade, because it attracts homewards the influx 
of the wealth-imparting stream of metal ; — as if the 
national prosperity could only be measured by the ac- 
cumulation of ingots, as if buying were not as important 
as selling. Once give the subject your thought, you 
will soon perceive that the power and prosperity of your 
country, the well-being of its population, and their con- 
tentment with the social system that surrounds them, are 
largely involved in a correct apprehension and a firm 
application of economic science ; as true principles 

WEALTH. 177 

enrich, whilst false principles impoverish the nation. 
Free trade or protection, direct or indirect taxation, the 
laws of limited liability or unlimited liability as applied 
to partnership, companies, and banks, the currency laws, 
poor laws, land laws, and the law of bankruptcy, whether 
framed to relieve or punish the careless or fraudulent 
debtor, are subjects that every man should have an 
opinion upon, and get all the light upon that the thought- 
ful men of these and other times have shed. Such light 
is now much needed to guide us. It will not do to float 
along the stream of life at haphazard, and to take no 
thought for guiding your conduct in attaining wealth, or 
the object you may be pursuing in life. Life must be 
" more real, more earnest " than it has been. The errors 
around us, the evils acquiesced in from carelessness, the 
good left undone from indifference, are amongst the most 
fruitful causes of human suffering. Wealth arises from 
an increase in the produce of our soils and our docks — 
viz., grain, animals, weaving materials, and fruits — and 
of coal, iron, and other metals ; or from a diminution 
in the cost of production thereof ; or from an increase 
in the amount of foreign goods which we manufacture 
and export, or in a diminished cost in the manufacture of 
them ; from the wise investments of our spare capital in 
the construction of railways or other similar enterprises 
that lessen the cost and facilitate the transport of people 
and goods ; and devoting our brains, labor, and capital 
to the production of articles that give the best possible 
value to the consumer, and yield a profit to the pro- 
ducer. It has become imperative that our leaders raise 
their voice as one man against that mischievous doc- 
trine, that the " wealth of the nation " is the exclusive 

1/8 MONEY, 

product of manual labor. This unjust and unfounded 
assumption must be combated, and the laborer invested 
with that consideration alone which his share entitles 
him to. Labor must hold its subordinate position ; and 
the capital and skill that search out the best method and 
direct their successful application, must hold the high 
position they are entitled to. If laborers need this 
enlightenment, the people generally require to be taught 
how to guard against the insidious doctrine of protec- 
tion. It is the universal ignorance of communities that 
enables the selfish few to dare, for the gain of the select 
few, to propose tariflfs, subsidies, bounties, etc., that are 
all adverse to the interests of the many. They are 
attempts by traders to eliminate competition from their 
class, and thus enhance the value of their product ; 
attempts that dare not be persisted in one moment if the 
people understood economic science. I have no hesita- 
tion in denouncing protection as the greatest curse a 
nation can suffer under, as being asked for by those who 
trample under foot and ignore the prosperity of the 
nation. When will men learn that what is " morally 
wrong " never can be politically or socially right ; that 
a policy that cannot be defended on the ground of 
principle, can only be excused on the plea of necessity 
by cowards ? The statesmen or nations that yield to 
necessity, and sink to the level of expediency, instead of 
keeping to the height of principle, should be the objects 
of our pity, as being the victims of a misfortune which 
has vanquished their judgment. Statesmen should be 
great, not specious and " clever," — wise^ not subtle, like 
charlatans. Nothing is worse for a nation than to be 
ruled by men endowed with that 

WEALTH. 179 

'* Low cunning which Nature, kind, indulgent parent, gave 
To supply the place of wisdom to the knave." 

The success of this type of men, whether as politicians, 
lawyers, doctors, or traders, would be impossible if the in- 
telligence of the people were equal to the refuting of these 
fallacies and illusions. The mind must be imbued with 
accurate principles ; prejudices must be combated ; 
truth must be firmly implanted, and more correct views 
given to all as to how the wealth and happiness of the 
people are to be obtained. 

Monetary writers assume that the delusive doctrine 
that " gold is wealth," that " wealth consists solely of 
money," was dispelled by Adam Smith ; and Mr. Mill 
paints the idea as an absurdity so palpable that the 
present age regards it as incredible, as a crude fancy of 
childhood ; yet I heartily endorse Mr. Bonamy Price's 
opinion, that this doctrine, that gold is wealth, breathes 
ia every line of the City articles in all our daily news- 
papers ; nay, further, if you were to ask 1,000 men their 
opinion, 999, if not the 1,000, would say the same. The 
intelligence of the present age is a great fallacy. I am 
willing to admit there are giants in our midst, whose 
power of thought is akin to the marvellous, whose 
breadth of vision seems without limit ; men worthy of 
the greatest homage from their fellow-men ; but the 
general knowledge is of a specious character, all surface, 
— there is no depth in it. Men do not think out the 
problem of life, are not in earnest in understanding 
themselves, or what causes the miseries that "flesh is 
heir to." Spite of all that has been done by theologians 
and moralists, men's daily lives prove that they do not 
believe that the greatest blessing is to possess that guar- 

146 MONEY. 

understand the value of banks, what money is for — to be 
used, not kept idle in boxes or their pockets ; and ex- 
tend the clearing-house system ; for principally by 
these three means you may increase the trade and com- 
merce of the country, so far as they need the help of a 
medium of exchange, to any extent. Nothing stops us, 
nothing causes depression of trade, but our own igno- 
rance and want of judicious industry, and a wiser system 
of production and distribution. Gold should be a bless- 
ing to us, not a curse. All trade is an exchange of gold, 
I grant you, for money as a medium ; but, as Adam 
Smith has well remarked, England (or any other country) 
can replenish itself with gold from abroad if she has the 
wherewithal to pay for it. Gold is a commodity to be 
bought with other articles, like any other article ; and as 
all articles are exchanged for money, gold can be had to 
the extent needed for foreign trade if the proper means 
are taken to secure it. 

Banking is, briefly, the economy of capital, the economy 
of money. Every year we discover new forces, or bring 
others under the control of man ; but of all the inventions 
of which necessity is the stem mother, the inventions of 
economy are the most prominent, as they are the most 
useful, at the present day. To hold our own, we must 
carefully gather up what our forefathers threw away ; we 
must learn to appreciate what they neglected or despised. 
" Waste nothing," is the keynote of our material indus- 
try. Just as the farmer turns even the weeds to account, 
as a manure for the fields which they encumbered, so in 
all things we must utilize ** refuse," and see that every 
thing is of use, if we take it to the right place and put it 
to its right use. We can only hold our own against 


foreign rivals by learning the lessons past experience has 
taught us ; we must be more thoughtful, be more economi- 
cal, avoid losses ; try for making the many small gains 
instead of aiming at the few large ones. 

It is incumbent upon us to utilize all the neglected 
resources we possess, and trust, as the basis for maintain- 
ing and extending our power, to the accumulative and 
concentrated appliances of a thousand forces or savings 
within our reach, each trifling of itself perhaps, but 
capable by wise economy thereof to promote the nation's 
greatness and wealth. Our people must learn to be men 
of business — must learn that the high morality of " putting 
yourself in his place " and " doing to another as you 
would be done by," in all transactions, is the height of 
wisdom, proved by experience, as it is the only real proof 
of a nation's religiousness, the consummation of, and 
positive evidence of, a people's real worship. They must 
learn about banking, about " money," about the bugbear 
" currency," as it is only by such knowledge they can 
learn how to economize the force of money ; and I 
maintain that the knowledge by the nation how to cause 
this economy of their capital, would act like new gold 
mines, as an agency to give to commerce an expansion it 
so much needs. There has been latterly a strong feeling 
of mistrust in the public mind respecting banks, and I 
have therefore deemed it advisable, perhaps at too great 
length, to bring before the public notice some of the 
advantages of banking. 

The exchange trade is carried on by a small and 
special body of foreign bill brokers, of whom Messrs. 

.148 MONEY. 

Rothschild are the greatest. Messrs. Rothschild are 
immense capitalists, having also much borrowed money 
in their hands ; but they do not take ;^ioo payable on 
demand, and pay it back in checks, like an English 
banker. The borrowed money which they have for use 
is deposited in large sums, borrowed for terms more or 
less long. A foreigner thinks " an exchange business," 
— that is, the buying and selling bills on foreign countries 
— a main part of banking. English bankers deal with an 
aggregate of small sums, all of which are repayable 
on short notice, or on demand. 

The following will explain briefly, but I think clearly, 
what the " loss by exchange " is ; the " gain by ex- 
change " will be the reverse of this — viz., when there is a 
" gain " instead of a " loss ": 

A customer writes us, April 28, 1879, that he has not 
been able to order for some time past, the rate of 
exchange being so high, and when he sends this indent 
the exchange is 24I ; viz., for every ;^ioo he remits us, 
he has to pay 1,247 J rupees instead of 1,000, and the 
ordinary cost of remittance. There is no mystery in the 
way of calculating the loss of exchange. Taking arbi- 
trary figures for the purpose, it is as follows : To remit 
;^ioo at 2s. the rupee, 1,000 rupees are required ; but if 
the rupee is reduced in value in India in relation to the 
value of silver as against gold, say to is, *]d, the rupee, 
1,263 rupees are required. You will at once perceive the 
difference between a favorable or adverse rate of ex- 
change, if you imagine yourself in India and have to find 
1,263 rupees instead of 1,000 before you can remit ;^ 100 
to London for gold, etc. The loss is represented by the 
excess number of rupees required to be sent home at the 


rate of 2s, the rupee, and therefore the sterling loss is 263 
multiplied by 2^., or J[^2(i 6x. upon every ;^ioo. The 
government accounts are calculated upon this principle, 
and would be represented by a larger sum, only that the 
loss is not in comparison with \s. "jd. against 2s, but of 
IS, Td, against the average rate of exchange for some 
years past — ^viz., is. io\d. Taking the whole amount of 
the remittances required to meet the home charges for 
1879, and taking the rupee at the rate of i^. ^d, as com- 
pared, not with 2X. but with is, io\d., the real loss to 
India is ;^3, 130,000 sterling. But as it was only pro- 
posed to remit 15 millions, the real loss will be 2\ mil- 
lions. Contrast this fearful increase of expenditure 
against the loss of " exchange " for the four years before 
the heavy fall in 1876, when the net average annual loss 
was ;^ 43 2,000. 

From Mr. Bonamy Price's able work, " Currency and 
Banking," I extract the following : " Gold exercises a 
most valuable function in liquidating the balances of in- 
ternational trade. All trade, as between individuals so 
between nations, is an exchange of property, of wealth, 
of goods. Every nation buys abroad with its own prod- 
ucts, its own goods ; it has nothing else to obtain its 
purchases with. When a country has mines of gold, gold 
passes as a product, just as cotton or wine. If the buy- 
ing equalled the selling every day, as would happen with 
direct barter, the accounts would always be balanced of 
themselves ; but as purchases and sales with one single 
foreign country are not always equal, there remains on a 
given day a balance to settle, and that is done with an 
export of gold from the country which bought most to 
the country which has sold most. At times this differ- 


ence is large, as when a bad harvest or famine urges on 
immediate and large purchases of food, and sufficient 
gold ^t the moment might be difficult to procure. But 
the machinery of modern commerce here comes in aid ; 
bills — which are only deferred payments — are brought 
into play, and often before they are due, the balance has 
been corrected with the export of goods. In any case, 
as Adam Smith has well remarked, England can replenish 
itself with gold from abroad, if she has the wherewithal 
to pay for it. Trade never is any thing else at last but 
exchange of goods." 

International payments require the currencies of dif- 
ferent countries to be compared with one another. Each 
country sells upon prices estimated in its own money ; 
hence in international (exchanging two accounts have to 
be settled together, each expressed in different moneys. 
How is the position of each towards the other to be 
calculated ? They must be reduced to a common meas- 
ure, to gold. French napoleons and francs must be con- 
verted into weights of gold ; so must the English 
pounds and shillings. This operation is carried out by 
expressing the coin of the one country in the coin of the 
other. The weight of gold in an English sovereign is 
compared with the weight of the same metal in French 
francs, calculated on the basis of the weight of gold in 
the twenty-franc piece, the napoleon. The discovery is 
made that twenty-five francs, and some -^^ more, ex- 
press the same weight of gold as the English sovereign, 
and this equality is called the par of exchange. When 
the exchange is at par, a man who has an English sov- 
ereign can obtain these francs, and vice versa these 
francs will get a sovereign. A bullion dealer who bought 


two heaps of sovereigns and napoleons on this basis, and 
melted the gold into ingots, would get exactly the same 
ingots from each heap. 

But exchange seldom stands at par between two coun- 
tries, for a very sufficient reason ; the buying and selling 
are seldom equal on the same day ; the difference, as 
explained, they agree shall be liquidated in gold. Now 
to send gold involves a charge for carriage and insurance ; 
and the man who has to send it will avoid this charge if 
he can ; so we find that goods purchased in foreign 
countries, all except the small balance liquidated in gold, 
are paid by the exchange of debts, by bills. The Eng- 
lish debtor pays his French creditor by sending him a 
bill due by a French debtor for English goods sent to 
France. Practically, one nation buys up the bills on the 
other, and settlements between the two countries are 
made by an exchange of bills. If the purchases in the 
two countries are equal, so will be the bills created by 
them ; if not, the debtor unable to find a bill has to send 
gold, or, as is generally the case, he offers for a bill 
rather more than its value in metal at the par of ex- 
change. If France owes us more than we owe her at 
any given period, the French debtor has fo pay, say, 25} 
francs for a pound, due in London, rather than send gold. 
If England owes more to France than France to Eng- 
land, at any period, the English debtor in London will 
be eager to obtain, and compete with? others to buy in 
London, a bill due by a Frenchman in France ; and he 
will give a sovereign for 24J francs to be paid in France. 
In the former case the exchange is said to be in favor of 
England ; the Englishman gets a quarter of a franc 
more than the gold of his pound at par. In the second 

152 MONEY. 

case, the exchange is pronounced unfavorable ; the 
Englishman gets less gold in 24} francs than he gave 
away in his pound. So you perceive that a favorable 
exchange means that England has sold more than she has 
bought, the same not being able to be settled by the 
ordinary bills, she has a balance to receive in gold. As 
gold is costly to transmit, what bills are to be had are 
sought after, and fetch more in consequence ; and an 
unfavorable exchange means* the reverse ; she is the 
loser by the exchange of bills needed for the settlement. 

But the exchange will not rise above par, beyond the 
cost of carriage and insurance for the transmission of 
gold. If it costs half a franc to send a pound's worth of 
gold to England, the Paris debtor will accept an ex- 
change which makes him give 25 J francs for a pound, to 
be paid in England ; but he will refuse one of 25f, as it 
would cost him less to send the gold. 

Another popular fallacy is that of favorable exchange, 
meaning thereby we have sold abroad more than we 
bought, and had to receive gold for the balance. The ex- 
pression implies an ignorance of the very nature of all 
trade, and is made by those who ignore the fact that men 
sell to have the power to buy ; that all trade is only an 
exchange of goods, and the greater the power to procure 
goods of foreign countries, for use and consumption, the 

We only sell for gold, because it gives us a ready 
means to buy other goods. It is the goods we really 
want, not the money ; hence the terms, favorable and 
unfavorable exchanges, are misleading, but still exist, in 
spite of their refutation by Adam Smith. 

The delusion is based upon the absurdity that to sell 


is every thing — get gold for your goods ; whereas to sell 
without buying is to convert a man into a Midas, and to 
make him perish amid piles of gold. The value set on 
favorable exchanges Mr. Bonamy Price considers the 
greatest intellectual and literary wonder of our age. 

All persons interested in " Exchange " should care- 
fully read Mr. Bonamy Price on " Currency and Bank- 
ing," and " The Theory of the Foreign Exchanges," by 
the Right Hon. G. J. Goschen. 


Interest on money is a refined idea, and not a uni- 
versal one. Not that this implies that interest ought not 
to be charged, but that the majority of persons in most 
countries do not appreciate it. Most savings in most 
countries are held in hoarded specie. In Asia, in Africa, 
in South America, they are thus held, and it would 
frighten most of the owners to let them out of their keep- 
ing. A modem Englishman assumes as a first principle 
that he ought to be able to ** put his money into some- 
thing safe that will yield five per cent. " ; but most 
saving persons in other countries are afraid to " put their 
money " into any thing. 

That part of the business of banking which consists in 
the lending of money lay, during the Middle Ages, under 
severe restraints. The taking of interest for the loan of 
money was deemed sinful, and stigmatized with the 
name of usury. This opinion appears to be wholly un- 
warranted, either by the principle of natural equity or 
the enactments of the Mosaic law. " The taking of 
interest from Israelites was forbidden by Moses ; not, 
however, as if he absolutely and in all cases condemned 

154 MO^EV. 

the practice, for he expressly permitted interest to be 
taken from strangers, but out of favor to the poorer 
classes of people. The further we go back towaYds the 
origin of nations, the poorer do we commonly find them, 
and the more strangers to commerce ; and where this is 
the case, people borrow, not with a view to profit, but 
from poverty, and in order to procure the necessaries of 
life ; and then it must be, no doubt, a great hardship to 
give back more than has been got. The taking of 
interest from strangers Moses has not only nowhere 
forbidden, but even expressly authorized. Hence it is 
clear that he does by no means represent interest 
as in itself sinful and unjust. Political economy 
demonstrates clearly that "thrift," or the accumula- 
tion of capital by a nation, depends on what profit can 
be obtained by self-denial, the reward of abstinence." 
In " Paper Money," Mr. Harvey denies that capital is 
the result of saving, and says the absurdity of stating 
that the only way of adding to the capital of a country 
is to save money, arises from our confounding capital 
and money. According to his theory, " the problem of 
life is to consume much and produce much." With this 
1 cordially agree — no one is more anxious that the mass 
of the people should have more of the comforts of life ; 
but to obtain this, they must not be misled by those 
" false friends " who tell them to limit the produce of 
their labor, but be guided by their " true friends," who 
advise them to produce all in their power. Mr. Harvey 
agrees with Mr. Ruskin, that thrifty people, accumulators 
of capital, are " worshippers of Mammon, and servants 
of the devil." If you have read my books, you will have 
noticed my contempt for the accumulator, who is actuated 

WTEkRST. 155 

solely by his love of gold — ^whose pleasure is in the 
thought of his possessions, which yield gratification to 
his miserly soul ; but we must not ignore the fact, that 
the wages for next week, or month, or year, depend 
solely on the savings of the week, month, or year that 
preceded ; that the very existence of society now depends 
upon those who "think of the morrow," upon those 
whose " savings " of to-day are the " seed " for to- 
morrow ; and that capital, if not money, represents in 
loans, debts, or produce a right to money, a right to have 
when wanted an equivalent for what it abstained from 
using and lent to others. Capital is a " deferred pay- 
ment," a debt payable on demand, and until demanded, 
is entitled to interest, in proportion to the risk incurred 
in lending it. Any such prohibition of interest in our 
age and country would, without doubt, be unjust towards 
lenders and destructive to trade of every description. 
Among all the remnants of ancient laws it would be dif- 
ficult to find one which, in the present state of society, 
it would be more foolish and hurtful to revive and en- 
force. It could only suit a state so constituted as was 
that of the Israelites by Moses. The taking of interest 
for the loan of money was first prohibited in England by 
Edward the Confessor. This law, however, appears to 
have become obsolete ; for, in a council held at West- 
minster in the year 11 26, usury was prohibited only to 
the clergy, who, in case they practised it, were to be de- 
graded ; and in another council, held twelve years after- 
wards, it was decreed, " that such of the clergy as were 
usurers and hunters after sordid gain, and for the public 
employment of the laity, ought to be degraded." The 
earliest mention we find in English history of a certain 

156 MOI^EY. 

yearly allowance for the usury or interest of money is in 
the year 1199, the tenth and last year of Richard I. In 
this case the rate of interest was 10 per cent. This ap- 
pears to have been the ordinary or market rate of interest 
from that period until the time of Henry VIII. ; but 
there are many instances on record of a much higher 
rate of interest being taken, especially by the Jews and 
the Lombards, who in those times were the principal 
money-lenders. The exorbitant interest taken by them 
is supposed by eminent writers to have been the cause of 
the prohibition of usury. 

In the year 1546, the taking of interest for money was 
made legal in England, and the rate was fixed at 10 per 
cent. This act was repealed in the year 1552, but it was 
re-enacted in 1871? The legal rate of interest was re- 
duced to 8 per cent, in 1624, and to 6 per cent, in 165 1. 
In the year 17 14 it was reduced to 5 per cent., where it 
now remains. The legal rate of interest is still 6 per 
cent, in Ireland. 

After the taking of interest was sanctioned by law, the 
term usury^ which was previously applied to interest in 
general, became limited to denote a rate of interest 
higher than that which the law allowed. Mr. Gilbart 
says : " Erroneous views are often entertained of the 
Mosaic laws, from neglecting to consider the state of the 
people to whom these laws were given. It was the ob- 
ject of the Jewish legislature to make the Jews a purely 
agricultural people. The promotion of agriculture was, 
as Montesquieu would say, the spirit oi his laws. Hence 
he prohibited the taking of interest for the loan of money. 
By this means he interdicted commerce. His design 
was to prevent the Israelites from associating with the 


surrounding nations, and learning their idolatrous prac- 
tices. But even Moses permitted the Jews to take 
interest for the money lent to strangers — a circumstance 
which proves that the prohibition was only a political and . 
not a moral precept. If the taking of interest for money 
were really wrong, it would have been forbidden in 
all cases. But in the Middle Ages the political 
and the moral laws of Moses were confounded to- 
gether, and all of them were supposed to be of 
perpetual obligation upon all nations. These opin- 
ions, which might have been useful in a purely 
agricultural state, were still indulged when a change of 
manners required that this country should become com- 
mercial. If we admitted the unlawfulness of taking 
interest for money, we might on the same principle con- 
demn all kinds of commerce, and even all profitable 
investment of capital. Where is the diifference between 
taking money for the use of money and taking money 
for the use of commodities that are purchased with 
money ? If I lay out ;^ioo in the purchase of a house, 
I am allowed to take rent for the use of that house. 
Why, then, if I lend to a friend the ;^ioo with which he 
purchases a house, am I to receive no remuneration ? If 
we are not allowed to receive any money for the loan of 
money, why are we allowed to receive money for the 
loan of a house or coach, or any other article ? An ex- 
orbitant charge for interest is certainly unjust, but so is 
an exorbitant charge for any thing else. Money is a 
necessity. A merchant having bills to meet must find it 
somewhere, at some price. It is this urgent need of the 
whole body of merchants which runs up the value of 
money so wildly in a great panic. On the other hand. 

ig2 MONEY, 

are the people who will use the Suez Canal if any use 
it." But, on the contrary, the main use of the canal 
has been by the English. None of the nations named 
by M. de Tocqueville has the capital, or a tithe of it, 
ready to build the large screw steamers which alone can 
use the canal profitably. 

This is a broad question, yet how often you hear this 
man condemned for trading beyond his capital, the other's 
success demurred to because he had abundance of capi- 
tal — ^both positions hard to prove, as often a man will 
fail when his capital is no less in proportion to hi^ trade 
than it has been at many periods of his career, and yet he 
has succeeded before, whereas now he has failed. I am 
strongly of opinion that good management with a little 
capital is more likely to lead to success than an abun- 
dant capital without the good management. Many 
concerns have too much capital ; the proprietors are 
always grumbling, and tell you they do not get interest 
for their money. This is because interest is added to the 
working expenses, for capital that is " unproductive — 
merely a big balance at the bankers." It is almost 
incredible the absurd ideas many merchants and manu- 
facturers have as to the necessary capital to carry on a 
business. It is surprising the little capital needed by 
skilful financiers — ^viz., men who understand " money.'' 
There is plenty of evidence of men with no capital, 
or very little, being always punctual in their payments, 
their word their bond, whilst others with abundance 
of capital are never to be depended upon. Finance, like 
Fortune, will not be played with ; to succeed with her, 
you must understand her, must work, must be in earnest 
To make capital pay, it must be used. I have no 


opinion of any tradesman as a "man of business " who 
has a large balance always lying idle at his banker's. 
The banker, of course, knows the value of money 
too well to let it remain idle ; so he makes the profit that 
the customer might have had. A good man of business 
has his pay days always in view, knows the days that will 
require all his strength, and carefully lessens the weight 
all he can beforehand by taking advantage of every 
opportunity that offers to put part of the burden a little 
later on, or, if in a position so to do, to prepay and 
lessen the extra strain of any special day. And having 
this liability ever present in his mind, he never loses the 
chance of a sale, if there be a profit — if the same will be 
paid for by or before that date ; and so masters the diffi- 
culty that to an outsider would seem insurmountable, by 
knowing exactly what he has to do, and using every 
available resource to meet it. Such men will sign a 
check, although it exhausts their balance at the bank, 
seemingly as unconcerned as if they had thousands lying 
idle ; whilst the other type, to whom finance is a mystery, 
who dread pay days and view bills with horror, will 
*'often lose their discount, damage their credit, for fear, if 
they pay, some unknown claim may be made, and they 
not have the wherewith to meet it ; or, being always in 
dread of not meeting their bills, will call and tell you 
they hope the bill will be met, etc. It is difficult, if you take 
the two extremes, to know where to draw the line and say, 
" It was fraudulent of this man to do such a trade with 
so little capital," as in many cases the man could prove 
he had done so before ; but his judgment has erred 
at last — ^he has got his money locked up, or some error 
of judgment has made his weakness known to others. 

194 MONEY. 

The real crime is not in the insufficiency of capital, but 
in a man keeping on and incurring fresh liabilities after 
his balance-sheet must have shown him the hopelessness 
of the struggle. The capital, indeed, will depend upon 
the credit you can get ; this will depend upon the man 
as much or more than upon the money that he has. 
Briefly, a good manager will buy as well, and get longer 
time, will sell at as good a profit, and yet get his money 
in earlier, and will make more of the money, than the bad 
manager. So, before you can decide what capital is 
necessary, or if you can lend money, you must know who 
the man is, and his business capacity. 

The same remark applies to nations. Thrifty business 
people do not lock their money up ; and you may judge 
the character of a country by the amount of its loanable 
capital, which represents the spare wealth of the people, 
which is deposited at interest in the banks. 

In 1840 the amount deposited with the various banks 
was ;^ioo,ooo,ooo sterling ; at the present time it is esti- 
mated at ;^6od,ooo,ooo. There is more money than the 
banks can use, unless the bankers enlarge their range of 
action, or the public use their money more themselves. 
There are lots of opportunities where one man could 
help another, by lending him money to take a trade or 
extend his trade, where a banker dare not ; so the money 
lies idle, and unproductive to the nation. It may be 
suggested that the present is quite an exceptional time ; 
that we are, and have been, passing through a period of 
depression that has perplexed the keenest economical in- 
quirer. But if the causes are as suggested by me, there 
is evefy reason to fear not only the continuance, but 
more frequent recurrence, of these long depressions. 


There have been times in which the crises have been 
more acute, but never any in which they have been so 
prolonged as from 1874 to 1879. This cloud will pass 
away, but if we are wise, some steps will be taken to 
remove the cause. There must be a cause, and the same 
should be ascertained and removed. One cause is an 
ignorance of currency and its laws by the people gen- 

" Money," — what a simple thing it seems ! Yet to 
whom is explained its nature, its power for good or ill, 
at any school in this commercial kingdom ? Our teachers 
want to know more of men, more of the real world, less 
of books. They are not, as a body, rich, and would be 
able to plead most forcibly as to the value of money ; 
although I doubt if any man can know the real value of 
money like the tradesman. And yet he is so ignorant of 
it that, like the pagan, he worships it as his god, and in 
his eagerness to clutch it, to meet his own sore needs, 
while failing to realize all its powers for good in the 
world, he, alas ! forgets its power also for evil, and that 
it may be a blessing or a curse to its possessor according 
to what he does with it. The solid progress of wealth in 
a country can only take place when those of its people 
who, by frugality, industry, inventions, or skill, have 
earned, produced, more than they have consumed — 
" saved money," as we put it — use their judgment wisely 
in the investment of the capital so acquired. All de- 
positors and investors must recollect that in handing 
over their capital to an individual, company, or bank, 
they are trusting their money implicitly to the judgment 
and integrity of the party they are leaving it with. And 
although no one values banking more highly than myself. 

196 MONEY. 

I should like to see the people regard bankers more as 
the " book-keepers of the nation," and see that, by the 
general use of banks, exchange to any extent, settlements 
to any amount, may be effected without the use of coin ; 
regard banks as places where money can be borrowed, 
or bills be discounted — as places of security in which 
capital may be lodged till the owners of it have dis- 
covered an outlet for its employment, which I maintain 
should be sought after more by the capitalist and less by 
the banker than heretofore, 


In " Lombard Street *' Mr. Walter Bagehot says that 
"any sudden event which creates a great demand for 
actual cash may cause, and will tend to cause, a panic in 
a country where cash is much economized, and where 
debts payable on demand are large. In such a country 
an immense credit rests on a small cash reserve, and an 
unexpected and large discount of that reserve may easily 
break up and shatter very much, if not the whole, of that 
credit ; hence the frequency of panics." The structure 
rests upon credit, and the remedy seems so simple : 
remove the cause that shakes confidence, that under- 
mines this credit. For a people to go on, subject to ruin 
at any moment from such accidental events as a bad 
harvest, an apprehension of foreign invasion, the sudden 
failure of a great firm which everybody trusted, the 
stoppage of a bank, and other similar events, is simply 
ridiculous. One thing is certain — one or the other of 
such events every now and then is sure to happen. Com- 
mon-sense suggests the inquiry. Why not prepare for 
their coming ? The reply will be in general : There must 

PANICS, 197 

be good and bad times, and our industrial organization is 
so complicated and so liable to changes, that panics 
come, they will tell you, by a fixed rule, every ten years 
or so. I deny that panics must come. It is a similar 
fallacy to saying that every child must have the measles, 
or that every one would have the small-pox unless vacci- 
nated. Because A produces in excess of what B wants, 
or B buys more than he can pay for if the same be not 
sold, or C, through the laxity of his banker, trades on 
accommodation bills, or renewal of bills, and when a 
crisis comes, they fail to get the help hitherto afforded 
them, and by their failure aggravate the disease, is not 
sufficient reason to show that the disease ought to have 
occurred, or that it need be made worse, having occurred. 
The times are good when there is no idle labor, no 
capital lying dormant, life everywhere, no sluggishness ; 
and as A being occupied, gets for his labor or skill 
money, and with that money buys of B, and so on, you 
will at once perceive how it is that if A's employer fails, 
A not getting the money, cannot buy of B, and B cannot 
buy of C, and so the wheels of distribution are stopped. 
The transition to the good or the bad times is sudden 
and complete in a complex society like ours, in which 
every one is dependent on the labor of every one else ; 
and so the loss by one spreads and multiplies, and 
affects all. This is also noticeable when food is dear, 
as the amount of absolute necessaries which a people 
consumes cannot be much diminished. The additional 
amount which has to be spent on them is so much sub- 
tracted from what used to be spent on other things. 
After two or three bad harvests, if corn be dear, every 
industry is impoverished, and almost every one, by be- 

198 MONEY. 

coming poorer, makes every one else poorer also. AH 
trades are slack from diminished custom, and the conse- 
quence is — capital unemployed, much idle labor, and less 

In England, during a panic, and for some time after, 
everybody is suspicious of everybody ; the mistrust 
spreads ; but in 99 cases out of 100 there is no founda- 
tion for the report, and as soon as the calamity is over, 
all is forgotten, and in the same thoughtless manner we 
find everybody again willing to trust and confide in 
everybody. This is partly owing to the speculative way 
we have got into of doing things, and the up-and-down 
action of prices. In the year preceding the panics of 
1847, 1857, 1866, 1873, we find a general rise in prices, 
and in the year succeeding these years a great fall. 
After a panic people are afraid of new investments, and 
mistrust many of the old ones ; so that there soon ceases 
to be an excess of loanable capital. But it must always 
be remembered that the state of the money market at 
such times is one of stupor ; it is a state of plethora from 
inaction, and not from strength. There is still that want 
of confidence in August, 1879, when I am writing this, 
which, should any new causes of alarm spring up as the 
result of the nearly certain disastrous harvest or of con- 
tinued bad trade, will soon make money dear, and our 
store prove none too large for our necessities. Our lia- 
bilities are immense. The Bank of England has no 
power by law to increase the currency, except by an 
increased deposit of bullion. With this " cast-iron " 
system, it is as well to think over a few of the following 
items, and see the amount of legal tender held by our 
bankers against their liabilities. 



Approximate Statement ofyj out of 118 of the Joint-Stock Banks of England 
and Wales from the two Half- Yearly Balance- Sheets^ as published in the 
** Economist," October ig, 1S78 ; and of f 4 out ug. May //, i8jg, 


Joint^toqk Bank!i of 

England and Wales. 

(73 out of iiSh) 











For the half-year end- [ 







1 3, 508,913 


333^4" !« a 

Joint-Ssotk Bankj of Scot- 
land , . , 



59= .09^ 






Add City o( Glassow, 
failed Oct, a, 1S78 . . 







JoiEt-Stock Banks of 
Ireland (on 44 per cent, ) ; 








Banks of England 

and Wales. 

(74 out of 1x9.) 






Liabilities on Bills 
in Circulation, 
Credits, Drafts, 
Rebate, etc. 




For the half-year* 
ending Dec.3i,x878f 











Joint-Stock Banks \ 
of Scotland . . f 








Joint-Stock Banks \ 
of Ireland (on 44 > 
per cent.) ... } 









Liabilities, June 30, 1878 ....... 

Cash in hand and money at call ....... 

Liabilities, December 31, 1878 ....... 

Cash in hand and money at call ....... 


Liabilities, June 30, 1878 ...••.. 

Cash in hand and money at call ....... 

Liabilities, December 31, 1878 ...•••• 

Cash in hajid and money at call ....••• 









Joint-Stock Banks 
of England and 

(73 out of zx8.) 



1— " 

Bilb Receivable 
and Discounted, 
Overdrawn Ac- 
counts, Loans and 
Other Securities. 

Total Assets 

For the half-year ) 
ending June 30, > 
X878 . . . .) 







Joint-Stock Banks 
of Scotland . . 

gow, failed Oc-V 
tober9,x878 . ) 











Banks of Ireland V 
(on 44 per cent.) 






Joint-Stock Bank? 
of England and 

(74 out of 1x9.) 

Investments, Gov- 
ernment Stocks, 
etc., wticrcatatc^l 




In *i 


^ « t £ 

Toul Assets 

Forthe-half-year | 
ending Decern- V 
bersx, 1878 . ) 







Joint-Stock ) 
Banks of Scot-V 
land . . . . i 






Joint-Stock ) 
Banks of Ireland V 
(on 44 per cent.)) 







ASSETS.— Coatinaed. 


Savings'-Bank Returns. 

Total amount at the credit 

The Fund for the Banks 

for Savings .... 
The Post-Office Savings- 

Banks Fund .... 


At May 3, 1879. 

£ 8. d. 

43.»30»94o o X 
31,869,877 X7 5 

75,000,817 17 6 

At Corresponding 

Period Last 


£ ». d. 

43»a75i99a ^ « 
3X,695,i46 X7 4 

74»97X»X39 3 6 

At Corresponding 

Period Last 


£ t. d. 

43t7«>»496 8 o 
30»224»336 XX 8 

73i9a4»83a 19 8 

P. S. — For this larae sum no cash whatever is held ; it is all invested in securities 
of the best kind, stilfliable to be asked for. 

If you comj^^are the items that make up the assets, you 
will observe how small a proportion the cash in hand, 
etc., bears to the total liabilities ; on an average, it is 
about one sixth. The magnitude of the liabilities shows 
how susceptible to the least whisper of suspicion the 
money market must be. And you will see the import- 
ance of the " currency question,'* also the forethought 
and caution necessary when in a short time, as credit 
improves and trade revives, provisions get back to their 
usual price, or something happens to give one of the 
great industries a push onwards, and the country will 
seem to leap forward into prosperity as if by magic. 
Then is the time for prudence to step in, for the brain to 
ponder over the causes of this great change. Does it 
arise from a greater quantity being produced, generally, 
of the right articles ? Because, if so, the basis is good, 
the increased demand being to supply in larger quantity, 
and with increased rapidity, the wants of men profitably 
employed. Or is it only based on some general advance 
in prices ? for, if so, it is only an imaginary, a fictitious 

202 MONEY. 

prosperity. A general rise of prices is only a rise in 
name ; it is not a real increase of the national wealth or 
capital. Where is the benefit if what one gains on what 
he sells, he loses in the increased price charged for what 
he buys ? " Money " is but the medium of exchange. 
You are no richer if what you sell be exchanged for two 
sovereigns, instead of one, should the two sovereigns 
only enable you to buy as much and no more than one 
would have done. It is singular how pleased nearly all 
sellers are when prices go up. Take the American war. 
Cotton goods went up to nearly double their price. In 
selling a "sixpenny" cotton for ninepence, the seller 
thought he had done well, made a " large profit " ; forget- 
ting that with the ninepence he could only replace as 
much cotton. In reality he was no richer ; his real 
wealth was still the same, " valued in cotton '* ; but the 
higher prices made his capital seem larger. More 
money is needed to do the same amount of trade, and 
money becomes dearer. It is no gain to the one class ; 
and the higher prices are really a reduction in all 
*' fixed " incomes, whose money will obtain for them in 
exchange less food than heretofore. Nevertheless, most 
people like " high prices " ; in their ignorance of the 
subject, they think with 40^. they must be richer than if 
they had only 20s,; forgetting altogether the essential 
point, that the value of the money depends on what it 
will exchange for, and therefore increased price or wage 
is useless, unless it will exchange for more than the 
lesser price did when all goods were cheaper. " Increased 
production " is the only policy, each one contributing to 
the general stock, and receiving in exchange more to 
consume. Getting higher prices for the thing produced 

PANICS. 303 

may be beneficial to the individual, if others do not ask 
the proportionately higher prices for their products ; but 
increased production, and all produced at the cheapest 
cost, is the only basis for the national welfare and pros- 
perity, for really good times. The "good times" of 
high prices lead to mad speculations, reckless over- 
trading. It is strange how for a time people seem care- 
less enough to believe in any thing that promises them a 
good interest ; but adversity is no sooner seen, a few of 
the schemes are no sooner found to be worthless, than 
begins again a senseless panic; people are as mad to sell 
as they were to buy, bubble after bubble bursts, confi- 
dence is gone. And until mankind will think more, and 
not be led by others, there must be a recurrence of these 
ills. But they do much harm, weakening credit ; and a 
remedy should be devised to stop the innocent from suf- 
fering, as they do now, with the guilty. 

The magnitude of our commerce, and the number and 
magnitude of the banks which depend on the Bank of 
England, are undeniable. In 1857 the loans on " private 
securities" by the Bank of England increased from 
;^2o,404,ooo to ;^3 1,350,000, and in 1866 from ;;^i8,- 
507,000 to ;^33,447,ooo, because of the larger number of 
people under great liabilities here. So, when prosperity 
seems at its height, by our present system of banking, 
directly the slightest breath of adversity is apparent, the 
whole commercial and monetary structure is ripe for a 
panic. And for this reason there has been a great ex- 
pansion of all the industries, upon the system of credit, 
— credit, that symbol of man's faith in man ; but all at 
once, when the ship is at full sail, and every shred of 
canvas is in use, every timber strained to the utmost 

204 MONEY. 

tension, there comes a Whisper of danger; there has 
been found a leakage. Man's trust in his fe;llow-men is 
weakened by some rumor or stoppage ; a revolution 
takes place ; all are eager to fly from the wreck, to save 
themselves from ruin ; and in their mad eagerness, they 
damage our commercial system, and one day will destroy 
it, unless steps be taken to avert these terrible catas- 
trophes, these social shipwrecks. They must inevitably 
occur again, if we persist in the " finality *' doctrine and 
refuse to remember that, since 1844, thirty-six years 
have passed — a period remarkable for its material prog- 
ress and banking development. Our people do not 
hoard their money ; they are bolder with it than any 
other people. If they do not lend it personally, they 
deposit it with bankers, and borrowers go to them for it. 
The same sum scattered in tens and fifties through a 
whole nation is no power at all. No one knows where 
to find or whom to ask for it. It is the concentration of 
money in banks that has made all people in want of 
money come to us for it ; and the country of banks by 
this means aids in the carrying out vast works which, 
but for that aid, would never have been planned. It is 
our " banking system," the faith of our people in " de- 
positing " their money in the banks, that has made our 
money market so exceedingly rich, so much beyond that 
of other countries. With such a responsibility hanging 
over us, the " masterly inactivity " doctrine is only ex- 
cusable because of the people's utter ignorance of the 

A panic is spread as follows : The bank reserve is 
getting low ; trade in England is carried on with bor- 
rowed money; a panic takes place; credit is shaken; 

PAj\r/cs. 205 

people are not content with the " promise to pay," they 
want to be paid. The banks, to protect themselves, and 
each fearing a run, refuse to discount, except to their 
own customers, and are less willing to do this than here- 
tofore. The manufacturers and merchants are under 
serious liabilities, and even if their books show 40^. in 
the j£f must stop payment, unless the banks will help 
them. They cannot by our present system ; so houses 
^ that are considered good fail ; the panic spreads, and 
carries in its train misery and ruin, until matters get so 
serious that the act is suspended, and the Bank of Eng- 
land does at last what should be done at first — lend freely 
to cdl able to deposit with it security for the same. But 
what a satire upon us as a " practical people " ! To 
satisfy the crotchets of certain monetary doctors, every 
eight or ten years we permit this modern plague to visit 
us, and instead of adopting the modern view, of strength- 
ening the patient at the first symptoms, thus checking 
the disease, we allow it to weaken, kill a lot of patients, 
and spread into healthy districts, instead of stamping it 
out at the first sign ; or, better still, having such a sys- 
tem in operation that the disease will have no chance of 
a victim. What is the disease ? A ravenous monster 
that will only be satisfied with "money." Why such an 
insane desire for it ? Because of limiting your money to 
some fixed sum— one of the most foolish things ever 
done by a wise man. Let the principle upon which the 
same " limited " sum is based be extended to meet the 
wants of 1880, and not restrict us, as if our operations 
were to be confined to the ideas of 1844. Let the act be 
altered, and let the people know that money— or what 
they will take as willingly as money. Bank of England 

206 MONEY. 

notes— can be had €ul libitum. But how is this to be 
done ? By the government alone having the power to 
issue notes ; by letting every bank, or any one, have 
these " notes " by depositing the requisite security for 
the same ; placing all banks upon an equality, each 
keeping his own reserve, as if its life and credit depended 
on itself ; government not restricted- to one bank, but 
having the choice of banks. At present the Chancellor 
of the Exchequer, when borrowing on deficiency bills, is 
confined to a single bank, which can fix its own charge ; 
whereas he should be able to borrow of the cheapest out 
of many competing banks. The nation would be helped 
by a diffused system — " national notes," freely issued by 
banks all over the kingdom ; and in this simple manner 
we should get a large revenue by charging stamp duty 
for every note, and also prevent panics, by giving our 
system what it needs-— confidence in the mind of every 
banker that he can obtain " money " to any extent to 
supply the needs of all who may apply for it, if he has 
the requisite security to justify his having the same. 
The more you study the subject, the more you know 
about " money " and " panics," the more you will become 
convinced that it is not real scarcity of money, but a 
general dread, a universal mistrust, an apprehension 
more or less strong, in the mind of every banker, manu- 
facturer, merchant, and trader, that makes all anxious to 
secure all the money they can, and to keep it for fear of 
not being able to get it in case of need. If this be so, 
by removing the dread, we get rid of the cause, and the 
disease will die a natural death. 

Do not misunderstand me ; no advances need be made 
upon which there is any risk. To refuse bad bills or bad 

PANICS. 207 

securities never created a panic, or made one worse ; the 
" unsound " people, the amount of bad business, being 
but a small portion. To prevent or check a panic, it is 
only needful that the great majority, the " sound " peo- 
ple, are protected from anxiety, loss, or ruin by a system 
that will give " money " to all such people as have good 
security to offer for it. Even under the present system, 
in these circumstances, the wiser policy is for the banks 
to be " more liberal " than usual, instead of the reverse ; 
as when it is rumored about that the Bank of England, 
or other banks, are refusing good and usually convertible 
securities, the panic must become worse and worse, as no 
one feels secure. What is wanted, and what is necessary 
to stop a panic, is to diffuse the impression that though 
money may be dear, still money is to be had. If people 
were convinced that they could have money if they 
waited till they wanted it in the ordinary way of their 
business, and that ruin is not coming, they would cease 
to run in such a mad way for it. 

You may lend a great deal, yet not give the necessary 
confidence. Bankers should see how essential this is for 
their own security ; the bold policy is the only safe one. 
Lend as if you have an illimitable stock of money. In 
" Lombard Street," Mr. Bagehot says : " Lending freely 
is the best method to check the demand. The brave 
policy, lending on every kind of current security, even 
on securities upon which money is not ordinarily lent, is 
more likely to get the banker higher praise than being 
timid, exhibiting a nervous caution, refusing to lend on 
this or that, that hitherto has been taken without demur. 
Take the panic of 1825. The Bank of England tried every 
means to restrict its advances; the reserve being very small. 

208 MONEY. 

it endeavored to protect that reserve by lending as little as 
possible. The result was a period of frantic and almost 
inconceivable violence ; scarcely any one knew whom to 
trust ; credit was almost suspended ; * the country was,' 
as Mr. Huskisson expressed it, 'within twenty-four hours 
of a state of barter.* The government were pressed to 
issue exchequer bills, but Sir Robert Peel refused, and 
the bank was ordered to issue their notes on the security 
of goods, instead of issuing them on exchequer bills, 
such bills being themselves issued on that security. 
They reluctantly consented, and the principle of such 
action being sound, the success was complete. As they 
lent money by every possible means, and upon every 
kind of security, matters settled down, and there was no 
real panic in the money market till 1847. In 1847, 1857, 
i866, the bank made very large advances, and more 
readily than it did in 1825. But there is still no certainty 
as to what the Bank of England considers * good securi- 
ties.' *' Mr. Bagehot doubts if the Bank of England in 
a panic would advance on railway debenture stock, and 
many other such securities. It should be clearly under- 
stood that money is to be had upon all genuine securities. 
The amount of the advance^ of course, must be left to the 
discretion of the banker. But the principle of lending 
should be clearly defined, for all banks to lend on every 
kind of security y irrespective of its nature^ always assuming 
the security to be goody and more freely, if any difference^ 
during a panic. The certainty of getting money would 
be a great relief to the minds of manufacturers and mer- 
chants, as industrial operations would not be checked 
suddenly, and goods sold for what they will fetch, as 
now ; for the experience of the past justifies us in 



assuming that the "extra" demand for money would 
occur less frequently, and certainly with less persistency, 
than heretofore. The best palliative to a panic is con- 
fidence that the money is to be had if wanted ; and, to 
ensure " liberal " action, we want the power to lend to be 
given to every banker ; whereas, in reality, practically, 
the Bank of England, during a panic, is the sole lender. 
Therefore, until the Act of 1844 is altered, we must be 
liable to crises ; and such crises will be a terror to us all, 
and national bankruptcy only averted, as heretofore, by 
the government at the last moment suspending the oper- 
ations of the Currency Act, which, instead of preventing, 
as it easily might, money panics — viz., the fear of not 
being able to get money — increases the mischief, from 
its policy of limitation. 

In the Appendix to " Lombard Street," Mr. Alderman 
Salomons, in his reply to the Chairman of the House of 
Commons' Select Committee, in 1858, confirms this view, 
although he made the statement to prove the contrary : 
1 146. — The Chairman : "The effect upon the London 
and Westminster Bank of the pressure in November, 
1857, was, I presume, to induce you to increase your re- 
serve in your own hands, and also to increase your de- 
posits with the Bank of England ? " " Yes, that was so ; 
but I wish to tell the committee that that was done 
almost entirely by allowing the bills of exchange which 
we held to mature, and not by raising any money or 
curtailing our accommodation to our customers." Yet 
Alderman Salomons admits that between the nth of 
November and the 31st December, 1857, the bank 
strengthened itself by allowing bills to the value of 
;^5 ,000,000 to mature ; that is to say, they added to 


their own reserve by " not discounting for bill brokers, 
as heretofore, to the extent of five millions of money in 
seven weeks," — a most serious withdrawal of accommo- 
dation from the commercial world by one bank. Mr. 
Salomons fails to see, by allowing bills to mature — re- 
maining quiescent, as he puts it — to enable the bank to 
meet any demand that might be made on it, that virtually, 
by this action, instead of helping the commercial world, 
this bank withdrew from commerce its usual support to 
the extent of five millions of money. Mr. Salomons in 
his evidence admitted that the opinion was " thoroughly 
engraved in the minds of the commercial world, that 
whenever you have good security it ought to be con- 
vertible at the Bank of England in some shape or way ; 
and he said he had great doubt indeed whether the bank 
can ever take a position to refuse to assist persons who 
have good commercial securities to offer." There can- 
not be two opinions upon this subject. To save individ- 
uals from ruin, to save the nation from suffering, to pro- 
tect the capital of the kingdom from unnecessary loss, a 
change of owners, manufacturers and tradesmen having 
good bills to offer for discount, or good security to borrow 
upon temporarily, ought to be free from any apprehen- 
sion, free from any doubt, that at their own bankers, or 
at the Bank of England, or in some way, there are 
facilities and means for discounting the bills, or getting 
the " money " needed to carry on the commerce of the 

The limitation of the Bank Act must be removed. 
There is no reason why the limit should be fifteen mil- 
lions ; whilst there is every reason why the act should 
be altered and the sum enlarged. There is no necessity 

PANICS. 211 

for a fixed sum. All we want is security for the notes 
issued — the same as now enforced by the act, and sim- 
ilar to the prudent action of the Metropolitan Board of 
Works, which, collecting a great revenue in London, has 
an account at the London and Westminster Bank, for 
which that bank makes a deposit of consols as a security. 
It is a great error of judgment to rely upon suspension 
of the act to save us ; such actions damage the national 
credit. Besides, why should we repeat the risks of the 
past? Mr. Pitt, in 1797, feared that he might not be 
able to obtain sufficient specie for foreign payments, in 
consequence of the low state of the bank reserve, and he 
therefore required the bank not to pay in cash — said they 
must not ; and from 1797 to 1819, the period of the 
bank restriction, as it is called, the bank did not pay 
its notes in gold — in reality, a suspension of payment ; 
which was nearly repeated in 1825, when only coin was a 
legal tender, and the bank had reduced its reserve to 
;^ 1,027,000. Except for the " letter of licence " by the 
government in 1847, 1857, 1866, it is doubtful if they 
could have kept on ; although no one doubted ultimately 
that the Bank of England would always pay 20J. in the 
;^ to every creditor and shareholder; but the law is, 
that it pay its notes in gold on demand. On Nov. 13, 
1857, however, the banking reserve was reduced to 
;£'95 7,000, and the bank only kept open through the sus- 
pension of the act, and the " letters of licence '* from the 
government enabling them to borrow from the currency 
reserve, which was full, in aid of the banking reserve, 
which was nearly empty. This crisis taught the directors 
a lesson, and they have since taken the proper steps to 
avert such a catastrophe — viz., raising the bank rate in 

212 MONEY. 

good time, and adopting Mr. Goschen's recommendation 
to raise the rate by steps of one per cent, at a time when 
the object of the rise was to affect the foreign exchanges. 
The elevation of the rate of interest is the bank's safety- 
valve. It has a double action ; it lessens the demand 
for, and increases the supply of, money ; and experience 
has proved that loanable capital, like every other com- 
modity, comes where there is most need of it, where it 
will be best paid for. When the bank raises its rates, or 
as soon as the rate of interest shows that it can be done 
profitably, continental bankers and others instantly send 
large sums here. 

I quite agree with Mr. Bagehot that what we want is 
the " national " system — government to be the " issue 
department,*' and to leave bankers alone ; so that instead 
of, as now, relying on one bank, there would be many 
banks of equal or not altogether unequal size. In all 
other trades competition brings the traders to a rough 
approximate equality. Banking should be free, a repub- 
lic with many competitors of a size or sizes suitable to 
the business. At present we have a constitutional mon- 
archy, one it would be unwise to overthrow ; as the 
credit of the Bank of England has grown with its growth, 
and could not be reconstructed. But it would be wise 
of us to gradually prepare a system, so that the banks 
would keep their own reserves, and rely upon them- 
selves, instead of leaning upon the Bank of England, 
which in its turn depends on government aid for help in 
a crisis. 

In a " panic " we forgot what paper money was intro- 
duced for — ^viz., to take the place of coin. The subject 
of money not being generally understood, we have not 


wisdom enough for the occasion, and therefore fail to 
make use of our credit system, as the legitimate means 
to compensate for the temporary absence of, or increased 
demand for, gold. Panics do not arise from the want of 
gold, but from the limitation and restriction of the 
amount of the ordinary accepted currency of the kingdom 
at those periodical junctures when the nation requires 
more of the circulating medium ; and it can be proved 
that a larger issue of bank notes at these periods stops 
the distrust, the blind fear, that creates panics. The 
Currency Act should be altered so as to give confidence 
and remove the senseless fears of timid, thoughtless peo- 
ple, and thus prevent panics, and the ruin that accom- 
panies them. 


Are there causes of success and failure ? Can money 
be made by earning it, by saving it, by wisely investing 
it ? Yes ; there is no higher mission than to teach men, 
all men, the practical lesson that if they want any thing 
in this world they must learn how to earn it. To acquire 
excellence in any thing, you must work — work persist- 
ently, unceasingly. There is an idea general enough 
that talent is best left alone to sink or swim, but I fear 
many sink who might be worth the saving. The soul 
may perish from a sheer lack of a spoonful of soup in 
the mouth. Look at the vast mass of people in every 
country under the sun, century after century, struggling 
to live ; born, as it were, only to know the pangs of life 
and death, and of nothing more. Methinks that human 
life is, after all, like a human body with a fair and 
smiling face, but all the limbs ulcered and cramped and 

214 MONEY. 

racked with pain. No surgery of statecraft has ever 
known how to keep the fair head erect, yet give the 
trunk and the limbs health. Why ? Because the attempt 
has never been made earnestly ; for the nation could, as 
easily as the individual, weather all difficulties if they 
had pluck and patience enough to overcome them. But 
it is of the utmost importance that men should see that 
the fault is in themselves, and that our teachers should 
perceive that what is wanted is a motive power to draw 
out what is good in people ; for there is a great deal 
more good than is generally supposed. Why is it that 
men remain pigmies when they might be giants ? " Man, 
do thy own work, and know thyself " (Plato). To make 
money, to be successful, it must be taught as a fact that 
to achieve success in any calling, every man, each in his 
place, must put his hand to the work as if he was work- 
ing for his very life, and from a sense of honor built 
upon self-reliance and self-help. To succeed, one must 
earnestly strive, as a trader, not for the mere gain, — as a 
doctor, not for the fees, — as a statesman, not for popular- 
ity, — but from the sincere desire and firm resolution to 
succeed in doing your duty in your calling ; earnestly 
striving at the same time for the welfare of others. Is 
there a more miserable object than the man who has 
become so absorbed in the desire for wealth, so selfish 
in his views, that he is the slave of his own selfish desires, 
thereby depriving himself of all the higher pleasures his 
nature is capable of ? A real man will toil amid obsta- 
cles, struggle against impediments, allow neither wrath 
nor despair to slacken his energy — determined to suc- 
ceed. In fighting against a false system, or in denoun- 
cing the blighting curse of an unsound practice, one needs 


the tenacity and will of Hercules to cleanse the Augean 
stable. Such men^ are upheld by their disgust at the 
folly, as well as foulness, of any immoral system that, to 
their clear minds, is as loathing as it is unnecessary, — 
upheld because their efforts are not for the mere pursuit 
of gain, but a desire for the triumph of truth and virtue. 
" A wise man should have money in his head, but not in 
his heart " (Swift). Talents are like vigor of body, — 
they demand to be used. You need not desire to be 
rich, but all need to live ; so all should be able to earn 
a competence, and be prudent enough to provide for a 
rainy day. The sluggish brook, gathering its stagnant 
waters from miry swamps and malarious quagmires, 
cannot be blamed because it is not a strong, sparkling, 
enterprising river, giving 5oy wheresoever it flows. To 
improve the brook, we must remove the cause of its 
sluggishness, and give vitality to its waters. So, to get 
men from being the unstable, dawdling, shallow-minded 
beings they are, we must give them an interest in life 
that will move within them the spirit to be better, and 
have nobler objects and aims in life than heretofore. 
Once set the ball rolling, who can say when it will stop ? 
Men will be led to follow their fellows when they see the 
beneficial effect of continuous, persistent effort in the 
direction for good ; and the world will not be so weary, 
when men see that to all, by the laws of God, is vouch- 
safed a consummation of desire even in this world ; 
that reward is not withheld here below, if the proper 
means be taken to realize the same. Oh, for the time 
when the majority will not have to stand without, and 
look through barred gateways at the light and warmth 
which shines for others, but never for them ! To achieve 

2l6 MONEY, 

this result, men must be taught so as to comprehend 
clearly tha* 

Fortune is the drudge and servitor 
Of those who act, and ask not benison 
From her capricious hand ; while they alone 
Are her dull slaves who let the deed go by, 
And think on bended knees to win her smiles." 

There is no surer element to future favor, to success, 
than to be able to perceive when business is being carried 
on according to new principles. The mass lack the 
courage to plunge boldly into the new current of things, 
and so lose the chance of being helped by the tide which 
would carry them on to success and fortune, and by 
foolishly fighting against it they lose the little hold on 
fortune they had obtained. Men will not learn from 
experience that " the infinitesimally small plays in the 
evolution of humanity the same latent and incessant part 
as in the evolution of nature " (Ribot). Nature attains 
great results by what seems insignificant means. Our 
bodily and mental capacities are developed and enhanced 
by practice and Stern necessity, and the difficulties aris- 
ing from new rivalries are necessary to rescue us from 
the torpidity and stagnation that follow from our being 
mere creatures of routine ; the growth of habit making 
the reflective man descend to the instinctive savage or 
animal. It is not sufficiently considered to what a re- 
markable degree the organic and mental faculties may 
be developed, and also how largely they may be influ- 
enced both in degree and direction by the circumstances 
and conditions of our surroundings in life. "As the 
eagle, by soaring in free air and among rocky heights, 
adapts itself to soar, so the mole fits itself by habit for 


the loose surface earth on which it lives, and the seal for 
its element, the sea" (Goethe). Man is a higher order 
of being, and it has not been sufficiently impressed upon 
him how necessary it is to ponder the exigencies of his 
time — to go about the daily life with his eyes open, ob- 
serving carefully and then thinking over what he has 
observed. Trained judiciously, he has power within him 
akin to the marvellous, an intuition of judgment we 
briefly call " common-sense." Started in the world, and 
told to read all he sees by certain premises stamped upon 
his brains, as the infallible chart for him to guide his life 
by, we see him blundering on, unable t9 read rightly or 
see correctly ; hence, if able to think, his reasoning may 
be right, but his conclusions wrong, being built upon 
incorrect data. 

The middle class of our day have a lesson to learn. A 
new power is in their midst. They must look their 
opponent in the face, recognize his strength, and, to 
arrive at a correct conclusion, start from a correct 
premise, viz. : that the real point is, who can supply at 
the least profit ? which is the cheaper process of distri- 
bution to the consumer ? By this test the question will 
ultimately have to be settled, and from this point I ad- 
vise all traders to view the question as it affects them- 
selves, as opposed to the stores. It is useless arguing 
that the skilled trader has a superior professional knowl- 
edge ; that he has a costly shop to keep, skilled assistants 
to pay. Time is certain to force buyers to the cheapest 
market ; and it must plainly be perceived at once by the 
trading class that though the trader who asks a larger 
profit than his neighbor may not be a rogue, he is un- 
doubtedly a fool, as thereby he is himself destroying his 

2l8 MONEY, 

prestige, cutting away the base upon which all permanent 
commercial structures must rest — is killing the goose 
which lays the eggs. A fatal error is being churlish to 
occasional buyers, more especially if you know that the 
buyer goes to the stores. It may be unpalatable — so is 
physic ; but it is necessary for the health of the body ; 
and the self-restraint and discipline is beneficial that 
forces us to be equally obliging and willing to serve the 
casual customer, who is making use of us, as the regular 
supporter. Attract him by selling articles as good, at 
prices as reasonable, with prompt and civil attention, and 
a disposition to study and oblige ; and so be superior to 
the stores. There is no other way to conquer in the 
struggle. You may make matters worse if you drive 
customers away by churlishly serving, or refusing to 
accommodate, those who merely use you for their own 

The next point is to frankly state that the prices of all 
articles sold shall not exceed the prices at the stores ; but 
if goods are sold at store prices, they must be sold upon 
the store condition — ready money, strictly cash, to be 
paid when the order is given. No booking whatever ; no 
expecting you to send goods home, and buyer promising 
to call and pay. This is credit. The goods having to be 
booked, the law considers it a debt, and liable to all the 
expenses and risks incidental to debtors. If a mixed 
trade of credit and cash, allow lo per cent, for cash with 
order, or on delivery ; but if the articles be not paid for 
when left, if the sale ends in what the law considers an 
act of indebtedness, reduce the discount to 5 per cent., 
send in all accounts quarterly, and close every account 
that is not paid within one month, after a second account 


has been delivered. Paying 5 per cent, interest to 
tradesmen if they wait for their money is simply absurd. 
A debt is not a mortgage or a loan with good security ; 
it is a loan at great risk, with all the worry, risk, and 
trouble incidental to every business. There are many 
businesses where it is wiser to buy of a tradesman with 
an established reputation, where the great advantage of 
the skilled tradesman's professional knowledge is of 
greater consequence than price. After great care and 
trouble, and with absolute accuracy, a skilled optician 
or surgical-instrument maker is able to supply you with 
the very thing you require ; and to obtain these articles, 
furnished on the reputation of a man who has a char- 
acter to lose, you must be prepared to pay. The same 
argument applies to nearly every thing. You may get 
your servants' liveries or your own clothing lower in 
price, but if they lack style or do not fit, they are dearer 
in reality than the higher-priced articles ; but with the 
necessaries of life, and numberless simple articles, it is 
as well only to consider who will supply you at the lower 
price. The greatest grievance the legitimate trader has 
against the public is their unwillingness to pay cash when 
they order of him, although they do so without the 
slightest demur at the various stores. 

The stores have proved that by the cash system goods 
can be sold at a low rate of profit, and that the rapid 
turn-over really gives a much larger net profit than the 
ordinary trader obtains. It is much to the credit of the 
civil servants and other promoters of associations that 
they have proved that a cash trade can be done ; that 
such a trade can thrive and* grow, can pay fair salaries to 
its servants, build or rent vast premises, pay fair interest 

220 MONEY, 

on capital, and charge the public an average moderate 
rate of profit upon all articles. The legislature has no 
right to interfere, except to remove any unfair advantage 
one trader may have over another. Tradesmen must 
rely upon themselves. To expect help from the legisla- 
ture is simply absurd. What they have to do is to alter 
their system, reduce the costs and risks incidental to 
their mode of doing business, and think more of the 
consumers' interest by having fewer " middle-men," and 
bringing producer and consumer nearer together. As to 
fearing the stores, it is one of the most extraordinary 
delusions that ever entered the mind of a practical body 
of men. Take the Army and Navy Cooperative Society's 
balance-sheet for the half-year ending July 31, 1879. 
The sales for the six months were ;^89i,i42 ; the gross 
profits from sales of goods, £filfis^ — about 7^ per cent.; 
working expenses, ;^5 1,417, or with interest on deben- 
tures, 5 per cent, dividend on capital, and ;^ 2,500 off 
buildings ; total expenditure, ;^ 5 6, 7 70, leaving a residue 
o/j£i2y26'j to be added to the reserve fund. I say it is 
a disgrace to the trading class, firstly, that such a result 
by outsiders should be possible ; secondly, that they are 
content to ask help from the government, like a weak 
child leaning on its parents, instead of following in the 
footsteps of a movement capable of producing such ex- 
traordinary results, obtained chiefly by a " rapid turn- 
over,** with ready money, and, after giving the buyer best 
value for his money, paying all expenses and interest, 
leaving a balance such as few merchant prindes can 
show, nearly twenty-five thousand pounds per year, clear 
gain, added io reserve — mark this — by a society started on 
the cooperative principle, which means that all profits be 


divided pro rata among customers. That these stores 
pay well there cannot be any longer a doubt, and my ad- 
vice to the trading class is, " Go thou and do likewise " ; 
if you allow the stores to undersell you, your occupation 
will soon be gone. The competition for custom — in 
other words, the struggle for existence — is so keen, that 
unless you can fulfil the needs of your customer, supply 
him as others can, you must choose another calling. To 
succeed now, the excellence of your goods and the 
lowness of your prices must compare favorably with 
the goods and prices of others. Dismiss from your 
mind the idea that the public are hard ; the public 
have a right to go where they can best be served. 
You, I presume, go where you can buy to the best 
advantage, and we all take advantage, without scru- 
ple, of our particular trade knowledge to supply our 
wants from those who serve us best, and pay the dis- 
tributer for his trouble as little as possible. Who pays 
retail prices if he can supply himself at wholesale ? The 
great fallacy is, regarding the stores as if they had been 
started to injure distributers ; whereas their object is to 
benefit consumers. Every man who sells at less price 
than his fellow in any trade might be accused, like the 
stores, of injuring the distributer ; although, so far as 
was consistent with his doing so, letting all others live as 
well. There can be no doubt that the sting of the whole 
matter lies in the success of the new system, and it is to 
be hoped that the public generally will exercise for- 
bearance with the retail traders whilst they pass through 
the transition stage, and give them time to realize as a 
fact that the unquestionable success of the new method 
of transacting the distributing business of the country, 

2^2 MO^EY. 

unless it revolutionize, must eventually ruin their own. 
Men will buy in the cheapest market; the instinct of 
self-interest makes every man who has money to spend 
prefer buying an article for one shilling to paying eigh- 
teenpence for it. This principle underlies all trade — 
that is, all ready-money trade. The real struggle is be- 
tween system and system, between cash and credit, be- 
tween thoughtful, careful, thrifty buying with honest 
intent to pay, and reckless, thoughtless, improvident 
purchasing, alike devoid of principle and honesty. Suc- 
cess to the modern system, which is but a recurrence to 
earlier, simpler, fairer, and sounder principles of trading, 
which later, more complex, and more perilous practices 
of trading had obscured. The credit system is rotten at 
the core, and has grown to such an extent, in its risks, 
its abuses, its recklessness, and its injustice, that common 
sense and common patience at length revolted from its 
tyranny. Can it be wondered at that the public, or that 
part of it that means paying for what it buys, are so 
willing to accept a better and fairer system, and are 
ready everywhere to cast off submission to the old pre- 
scription, and revolt against the injustice inflicted on 
them by a system which made the honest, ready-money 
customer pay for the bad debts of the dishonest spend- 
thrifts ? The puzzle to my mind is, that so many traders 
still refuse to open their eyes, will still charge the ready- 
money buyer the credit prices, still refuse to give dis- 
count to the ready-money buyer, although they give it to 
the credit customer ; then, when too late, they cry out 
because the ready-money buyer goes elsewhere directly 
the chance is offered in the form of a cheaper supplying 
medium for ready money. 


Common-sense indicates plainly the remedy to all 
traders who find their business in peril. You are likely 
to fail because of the success of a new rival. How is 
this ? Every trader tries to get as much profit as he can ; 
all have the same object, to make a profit for themselves 
after paying all expenses. If by the old system so many 
are perishing, so many fail to see their way any longer to 
success, and if it be, as I have indicated, because the 
times are against the system of those who fail (and this 
may be accepted as an axiom at all times), and if this is 
more strikingly apparent because of the introduction of 
a new system, which is a great success, why not at once 
adopt it ? I say unhesitatingly that the credit system is 
doomed ; it cannot stand against the cash system, now 
the public see what they had to pay for credit ; so cease 
to waste time objecting to the causes of this change, and 
adapt your practice to the altered state of things, and 
the true issue of the conflict will be the reform, not the 
ruin, of the " retailers' " trade. Be men, face your 
destiny ; keep your customers, still accepting the proud 
position of being one of the " middle class" of England ; 
rise above prejudice ; turn your shops into stores ; make 
cash the rule, credit the exception, instead of trying to 
live on under altered conditions, by the old exploded 
system of making credit the rule and cash the exception. 
The public do not care whether a business is carried on 
by government servants or not, whether it be managed 
by an individual or a company. Customers want in 1880 
to be assured, as a very condition of their dealing, that 
it is possible for the tradesmen they employ to give them 
the best goods on the lowest terms, and that ready-money 
buyers need no longer be mulcted for bribes, bad debts, 

224 MONEY, 

and losses consequent on giving trust or keeping accounts 
for people who defer their payments. The credit system 
will linger yet for a long time ; traders, if wise, will 
shorten this period, and, while snatching their own inter- 
ests from peril, confer a vast benefit on society at large. 
It will be a great step in the progress of humanity, a sys- 
tem of trading that will make the mass of customers live 
" before the world " instead of " behind the world," and 
conduce to the incalculable increase both of healthy 
trades and of individual peace of mind. This essay is 
founded partly on one by William Lewery Blackley, 
Rector of North Waltham, in the Contemporary Review 
for February, 1879, — the most sensible article I have read 
on the subject, — and I shall be well repaid if it makes any 
trader reflect, and, seeing that the fault is in the old sys- 
tem, at once resolve to exchange it for the new, a good 
instead of a bad system, which will not only save traders, 
but regain trade. If they will cling to the wrong system, 
ruin is inevitable, and they will have no right to com- 
plain, since, with the issue put clearly before them, they 
have preferred to immolate their interests on the altar of 
their prejudices. Before deciding, remember I am sug- 
gesting no new theory, but only asking you to do what 
has been done already, for those who have adopted the 
new system have been so successful, that their efforts 
should encourage and cheer on all to attempt the same 
reformation. In 1862 I began the cash system long be- 
fore stores were thought of, and have gradually devel- 
oped the shop into the store. The freedom from the 
anxiety of book debts is as being transferred from hell to 
heaven, whilst the uncertainty of trade is removed by the 
sale of numerous articles ; as when one department is 


slack, the others are brisk, and the sales in one depart- 
ment lead to sales in others. The men who have no 
trade are no more justified in saying, " Success is im- 
possible," than a person who never entered the water has 
to assure Captain Webb that no human being can swim. 

Progress cannot be impeded. Should the electric light 
prove a success, no consideration for the losses of gas 
companies will prevent its adoption. The success of the 
stores will hurt, nay, exterminate those traders who 
refuse to go with the times ; but the progress of the 
stores can no more be stopped to protect the trading 
class, than the railways be put aside to allow the old 
stage-coachs to be restored. Owing to the strikes and 
other causes, prices got higher ; people with fixed in- 
comes saw no other remedy than to reduce the cost of 
the necessaries of life. The majority being unable to 
increase their means, it was inevitable that they should 
all co-operate, or buy of those who did, so as to pur- 
chase what they required at moderate prices. The cash 
system will do away with many middlemen, who have 
only been necessary because they gave credit to a class 
the manufacturer would not credit, or gave the time by 
the old system of credit the retailers wanted. A reduc- 
tion in prices of the necessaries of life will tend to reduce 
the price of labor, and lead to returning trade and a 
revival of prosperity. 

Unfortunately, as Max MtiUer observes, "universal 
custom is more powerful than books, however sacred ; 
for books are read, but customs are followed." Still, I 
do most earnestly ask the trading class to meet the wants 
of the times ; reduce prices with cash payments ; strive 
in every way to regain the confidence of the public. 

226 MONEY. 

Reduced prices mean a greater consumption, and the 
consequently increased demand benefits the workers of 
all classes. The change means really that the middle 
class, the distributing class, must do more, and do that 
more thoughtfully and skilfully, than heretofore. Indi- 
viduals, as nations, dare not be deaf to the warning of 
Goethe : " Thou must rise or fall, must conquer and 
subjugate or serve and surrender ; must suffer or tri- 
umph, must be anvil or hammer." " No finality " must 
be our motto ; the world will progress whether we wish 
it or not. In days gone by the defence of the realm was 
left to the public spirit of monarchs, nobles, and large 
proprietors ; now it is dependent on a government sup. 
ported by public confidence. The maintenance and 
increase of our national prosperity have depended solely 
on the stimulus of private enterprise. The law, whether 
wisely or not, has interfered much, and imposed regula- 
tions and restrictions upon the mill-owner, ship-owner, 
and employer of labor. This has given our foreign com- 
petitors a great advantage over us ; and to overcome the 
new difficulty, a new power is springing up, private enter- 
prise is receiving a great check. Where the individual 
developed a trade in a single article or articles of a single 
kind, public companies worked by managers and serv- 
ants seem destined to take the place of the men who 
worked hard for their private gain. The expenses and 
risks of business have been steadily increasing, and the 
only plan to make a trade pay is to sell a multitude of 
articles. The times require broader views. We have 
grown beyond the shopkeeper who thinks it right to 
have his contra account with every shopkeeper he deals 
with, who tells you he believes in living and letting live. 


etc. Men of greater enterprise are needed. To suc- 
ceed, you- must understand business, money, bills of 
exchange, and their power if properly used. The method 
of trade will be that, whether we like it or not, which 
affords facilities for the raising of the greatest amount 
by all, and gives to each as large a proportion to satisfy 
the wants of each as the exigencies of production will 
allow. As our forefathers passed from feudalism to the 
modem era, so are we unconsciously passing from this 
to another, — passing from the era based upon the idea 
that individual enterprise is the best for the national 
w|alth, and that competition will determine the share of 
each individual. That idea has been wonderfully suc- 
cessful. The most suitable centres were sought out for 
different manufactures, and the population drawn to that 
quarter where their labor would be most productive. 
The same force broke down the restrictions which had 
fettered trade, and compelled men to adopt more rapid 
methods of doing their work. The era of private enter- 
prise has increased production, by developing the re- 
sources of each locality, and by introducing new methods 
of manufacture ; and there are many directions in which 
it has still a great part to play. But it is as well for men 
to see that private enterprise is not the force of the 
future ; nor does it give us the best means of carrying on 
our industry at the point which it has already reached. 
The advantages of the last fifty years have been too 
much regarded from the standpoint of the individual 
who competes, than the body politic as a whole. Doubt- 
less, in many cases the nation was the gainer by the 
energy of those who pushed their businesses so as to 
make fortunes for their families ; but we have too many 

228 MONEY, 

sleeping partners, and the loss to society from their inac- 
tion and idleness must be thought of, as well as the gain 
from the enterprise of the founder ; the permanent 
charge on the nation which is involved in supporting 
their posterity, is such a terribly heavy price to pay for 
the services of the great commanders, or the exceptional 
enterprise of forgotten capitalists. Nor is such a system 
the best for making as much as we might or should of 
the national resources. The basis of the future will be 
" organization " ; individuals will associate together 
more, and through the agency of these organizations 
more will be attempted and accomplished for the com- 
mon good than could be effected by isolated efforts. 
The post office is under the government ; the telegraph 
companies have been taken over by the state. The 
railways will be in the hands of the government ; the 
education department will gradually eliminate all pri- 
vate schools. There must be " national notes " issued 
by the government. All monopolies must be abolished. 
All positions must be open to the men who have the 
energy and capacity to fill them. Government offices must 
cease to be a sinecure ; the nation must learn the lesson taught 
by its servants. We must have '* value for our money** It 
is only by the people acting together that they can sup- 
ply each other with the light, water, public parks, gym- 
nasiums, baths, wash-houses, etc., that our crowded 
populations require. Birmingham, Manchester, Edin- 
burgh, have taken .the lead, and we see in many direc- 
tions how private enterprise and competition are giving 
way to organization. 

But it is when we come to the distributing class, the 
retail shopkeeper, that we see that private enterprise is 


doomed. The loss by the present method of distribution 
is enormous. Trades vie with trades in their efforts to 
catch the public taste ; and in those trades affected by 
fashion, where the demand is so capricious, there is 
plenty of scope for the individual judgment and private 
enterprise ; but in catering for the wants of the masses, 
for all the necessaries of life, for all articles that only 
need economical distribution by thoughtful organization, 
associations must supersede the individual, for they do 
their trade on a true principle — ready money, — and avoid 
that frightful waste of our time, advertising on the one 
hand or travelling on the other, with credit, " dating on," 
book debts, and bad debts. The extension of the new 
system has been most rapid. The growth of association 
among traders and of co-operative " distributive " socie- 
ties alike points towards the limitation of private enter- 
prise in retail trade, and indicates the development of 
organization in opposition to competition. The proba- 
ble advantages are that the price to the consumer will, 
as organization advances, bear an increasingly closer 
relation to the cost of production ; the more accurate 
calculation, which would be possible, of the probable 
demand would render production much less variable and 
uncertain ; the lessened dependence on the services of 
middlemen would render distribution less expensive ; 
and travelling for orders and advertising would cease. 

Do not imagine that the two systems will work to- 
gether ; whichever serves the public best will be the 
victor. As the old feudal and guild organizations dis- 
appeared before the era of competition, so, if it be a 
better means of supplying the public wants, will the new 
oganization spring up, and the dominance of competition 

230 MONEY, 

wane in its turn. For the individual these transitions 
are serious, ruinous ; for the public generally, of benefit, 
as a necessity of future life, a sign of continued growth. 
We want a new basis for commercial success, and if 
organization and associations are more economical for 
home industry, they will be equally so for the foreign 
trade. We have needed for some time past better organ- 
ization to compete with our neighbors. The future is 
for that nation that is willing to be taught how best to 
study thQ wants of each, and most economically satisfy 
the same, and, without limiting the liberty or crushing 
the individuality of the individual, so arranging for a 
greater and better division of the nation's wealth. 


The discovery that labor is the source of all wealth 
has been attributed to Adam Smith, but in the " Life of 
Paterson " we have the following extract from a tract 
first published in the year 1690 (Adam Smith was bom 
in 1723), and republished in the " Harleian Miscellany " 
half a century later. The work appeared in the name 
of Sir Dalby Thomas, and it was, doubtless, substantially 
the production of that experienced merchant ; but the 
author thinks Paterson contributed largely to its pages, 
for it is his style of thought. After an elaborate survey 
of the sources of all national wealth, the writer concludes 
that the " true, original, and everlasting source of wealth 
is nothing else but labor ; and that if all the laborious 
people of the kingdom left working, to live upon the 
national produce of it, distributed among them in an 
equal proportion by way of charity, as parish poor and 


beggars are supported, it would not be long before the 
nation became necessitous, naked, and starving, and, 
consequently, land and houses worth nothing." 

A little reflection will make us sensible that a very few 
years of idleness must complete the matter ; whence we 
can no longer doubt but that labor and industry, rightly 
applied, are the sole causes of the wealth of a nation ; 
that money is only the scales or touchstone to weigh or 
value things by ; and that land only will yield no rent, 
but as labor, employed for the support of luxuries as well 
as necessaries, finds due encouragement and increase. 
Industry, enterprise, and thrift are the three great factors 
in making a nation wealthy. Nations, like individuals, 
may find wealth a curse instead of a blessing, if not 
earned in the legitimate way, as instanced after the 
Franco-German war. The load France had to carry 
roused all her energy and thrift ; ignominiously beaten 
on the one hand, she came out of the industrial and 
financial ordeal most gloriously ; and the wealth has 
found itself wings, and only seems to have impoverished 
the victor. It is simple enough. You have money ; you 
pay no attention to production ; the money slowly, but 
surely, passes from your hands to another's ; the money 
remains, but you, in living upon it, are failing to pro- 
duce, and soon will cease to have money or money's 
worth. Your opponent has been deprived of his money, 
but he diligently, assiduously goes on accumulating 
money* s worth — things that will exchange for and bring 
him back the money taken from him. So nations and 
individuals get wealth, producing by their labor and 
skill money's worth, and taking care of the money they 
get in exchange ; by never losing sight of the fact that 

232 MONEY, 

plenty, splendor, and grandeur in the nation can have 
no other fountain but wisdom, industry, and good con- 
duct ; that the ornaments and delights of life are the 
true issues of virtue, valor, and the elevation of the 
mind, as well as the just reward of industry, plenty, and 
contentment ; and that progress of every kind must de- 
pend upon wisdom, industry, thrift, good conduct, as 
poverty, disgrace, contempt of us by our fellows, gener- 
ally spring from folly, idleness, and vice. 

How pleasant it is when trade is good, all forms of 
production in profitable activity, and orders flowing in 
upon manufacturers, causing the "sanguine" to be 
tempted to add to their capacities of production ! Labor 
being fully employed, the wages fund soon begins to ap- 
pear in the excise returns ; giving satisfaction to the 
Chancellor of the Exchequer, but the reverse to all people 
with ** fixed " incomes ; as good times to producers mean 
enhanced prices for all commodities, a reduction in the 
purchasing power, and a limiting of the enjoyments of 
this life to all with a stationary income. The result, 
however, is the benefit of the masses. It is a clear gain 
to the nation, as a whole, when all its members are fully 
employed ; though it necessarily puts to a disadvantage 
those whose incomes are inelastic. Bad trade means 
just the reverse. Orders are scarce ; production dimin- 
ishes ; employment is limited ; the revenue is a source 
of anxiety ; a blight affects every industry ; prices fall ; 
the " fixed " income class get more for their money ; the 
few benefit, but the mass suffer, during periods of de- 

" Panics " are always depressing, but in its length this 
last has been without precedent. For five years, nearly 


six years, we have had to suffer, without a gleam of sun- 
shine to relieve the monotony of gloom ; and we feel it 
all the more, because the few years before we went 
through a time of inconvenient activity, that caused a 
recklessness, a general waste, a want of thrift, that con- 
verted a period of extraordinary prosperity and growth 
into one of decline and seeming decay. 

How was this ? How is it that the commercial edifice 
seems to topple over so suddenly ? Surely there is a 
means of ascertaining or estimating the causes of these 
sudden variations. The last panic began with the failure 
of Overend, Gumey, & Co., in 1866 ; the present one 
commenced with the failure of Jay Cooke, in the autumn 
of 1873, i^ America ; and the redemption money of 
France became exhausted about the same time in Ger- 
many. Now if the feverish activity in Germany and the 
United States caused the unnatural demand, the too ex- 
uberant development of our industry, the previous " good 
times," — if that extraordinary prosperity was caused by 
" exceptional '* circumstances that we ought to have fore- 
seen could not last, surely we might have prepared for 
the collapse that was inevitable. The prosperity came 
from without ; with the cessation of the cause the effect 
ceased, so that flaccidity followed an energetic growth. 
We must look our privations in the face. The home 
population must be engaged more profitably. They must 
produce more, so as to be able to consume more ; they 
must increase their supply of produce, so as to get the 
" money " in exchange that will give them the right to 
" demand " more for consumption. All must be taught 
this rigid, inexorable law. Production must precede 
consumption. They must, one and all, do a something, 

234 MONEY. 

produce a something, that entitles them to " money " in 
exchange with which to buy what they want. Our prog- 
ress depends upon the development of our manufactures ; 
but to go on multiplying the quantity of our woven 
stuffs of cotton and of wool will be madness, unless we 
see the absolute necessity of producing every article at 
the minimum of cost, by taking advantage of every help 
the experience of the past has gained for us ; above all, 
recognizing the fact that our existence as a nation de- 
pends on our being able to supply the wants of others, — 
a position that can only be held by cheapness of pro- 
duction. By cheapness is not intended " low-priced '* 
articles, but the thorough understanding by masters and 
men of their work ; all earnest, thoughtful, and attentive 
to all details ; the zealous cooperation of all concerned 
in any and every branch of manufactures, so as to secure 
the maximum of product at the minimum of cost. An- 
other important point is, to divide our powers, — some 
directing their efforts to works of utility, others to works 
of art, to satisfy the highest tastes ; although I fail to see 
why, in the commonest products, beauty of form, beauty 
of properties, and the nearest approach to beauty and 
harmony of color that the price will admit of, should not 
be considered. 

" Panics " only represent an intensity of the struggle 
ever going on. " The survival of the fittest " is the in- 
exorable law of nature. We should educate our people, 
more especially the working class, to strive after 
producing the most beautiful, the most perfect work 
within their power. The time has come when it is 
imperative that we know our strength, and wisely hus- 
band all the means at our disposal, and enlarge those 


means to the very utmost, for the struggle for life, 
for the life of the nation, — a struggle that is 
certain to beset our future path. There can be no 
" excellence " in any thing unless our heart and soul are 
in the work. The material, however common it may be, 
win be better, and worth more money in the market — at 
the very least, will be sure of a quicker and more regu- 
lar sale — if well made^ than if carelessly made. Excel- 
lence, combined with cheapness, must be our study ; we 
shall then be able to defy the world ; whereas if we 
continue careless, only thinking of making things that, 
looking cheapo sell well at first, but not being really cfuapy 
do not bring us regular orders, our day has gone — others 
more worthy will have to fill our place. We want 
" true work " — all articles to be what they profess to be ; 
we want the people trained to see the mistaken policy, 
for any continuous trade, of " shams" ; we want them 
to see the value of a reputation without blemish ; we 
want them to see that " impostures " react upon those 
who trade trickily. No one has confidence in such 
men, will not trust them, and refuse to give orders to or 
buy from them. We want the " morality " of the nation 
to be so raised, that all such plausible, scheming trick- 
sters will be treated with the contempt such degraded 
natures deserve ; we want the people " honest " enough 
to express its disgust at every kind of chicanery, to have 
the moral courage to speak out, and call a cheat a cheat. 
The nation cannot exist, cannot hold its place in the 
world, by the efforts of the few ; it needs the concen- 
trated enterprise of the many, the desire for improve- 
ment to be stirred, and to manifest itself in the daily 
works of all. And we shall see an improvement in the 

236 MONEY. 

product when the brain and hand work together. The 
task of the future may be more arduous, but it need not 
be any the less successful than in the past. Nor is it 
more than men's energies are equal to ; it simply needs 
more earnestness, greater thoroughness ; being a benefit, 
in fact, to every one, for, increasing his mental, it will 
double the value of his physical labor. " Improvement 
in the work " will add to the market value of the work, 
and thereby to his own comforts and the enjoyments of 
his family. This is the way to make progress, to ensure 
success individually and nationally. It is useless to ex- 
pect miracles ; we must adopt the right means, and be 
resolved to conquer all obstacles, to surmount all diffi- 
culties, to achieve the end in view. And if that end 
be to ensure regularity of trade, we must make only 
durable, trustworthy goods — goods that experience will 
prove to be the cheapest, as, wearing better and lasting 
longer, they are really the cheapest, the best value to be 
had for the money. But " cheapness of production " 
must be considered. For instance, we are much inter- 
ested in the iron trade, which in August, 1879, is reviv- 
ing, because our prices are lower now than in America. 
But the manufacturers say, prices leave no margin of 
profit ; and it is said that there are some descriptions of 
iron and steel manufactures in which England cannot 
compete with the United States. Now, the reason is so 
simple, it seems nearly incredible that this point in favor 
of the American method should have existed for a day 
after we had found it out. It is similar to the superior 
method of the Swiss in making their watches, over the 
English method, which Sir John Bennett worked so hard 
to remove by his lectures, etc. American workshops, it 


is said, can turn out locomotives at 25 per cent, below 
English prices, by adhering to certain fixed designs, thus 
avoiding multiplicity of patterns. "Why not have all 
locomotives, all railway rolling-stock, one pattern, if it 
be so much cheaper ? ** The style of carriages is quite 
immaterial ; for on the American railways there are only 
three or four distinct types of locomotives, and in each 
of these types there is but little variation from the fixed 
standard. By this means the leading shops in Philadel- 
phia and in Rhode Island send out annually hundreds of 
engines, of which all the parts are perfect and interchange- 
able, the exact duplicates of each other. You may say, 
this is against your theory of excellence and beauty ; and 
that it keeps man to the level of an automaton, dis- 
couraging originality, etc. But I must remind you, two 
ideals were submitted — works of art and works of utility ; 
but in the latter striving after all the excellence and 
beauty possible at a given price. Men must think more. 
If they find themselves beaten, because of a more eco- 
nomical method, it is wiser to beat their rival with 
his own weapon. The American plan is much more 
economical than the English method of building its 
locomotives on innumerably different models, and 
seemingly for no other reason than to bring out inno- 
vations of design upon the smallest possible pretext. 
Another error in the iron trade was being overcome by 
the advent of Sir H. Bessemer's great invention, steel 
rails. The opposition ought to have stimulated the 
Welsh iron-makers to improve the quality of their goods 
in every possible way ; instead of which, they produced 
an inferior kind of iron, both bar and rails, which neces- 
sarily and deservedly suffered in competition with Besse- 

238 MONEY. 

mer steel. As " Iron ** suggested in the Times of August 
19, 1879, "a large and profitable trade is still open for a 
superior quality of bar iron ; and one is hardly permitted 
to doubt that if half the science which had been so 
successfully applied to the manufacture of steel had 
been devoted to the manufacture of bar iron, the posi- 
tion of this latter important industry in South Wales 
would have been widely different to what it has been 
during the past five or six years." Times of stagnation 
are the opportunities offered by nature for wise men to 
reform their ways. The morn seems breaking ; may we 
have learnt from the dark night from which we are emer- 
ging, how to keep the light of day, the sunshine of pros- 
perity, round about us ! If this be so, the ordeal will not 
have been borne in vain ; for if the right means be 
adopted, there is no reason whatever why activity and 
prosperity should not again exist in all our workshops 
and places of business. Adam Smith says, in the " Wealth 
of Nations," book iv., chap, ii., p. 750 : " If the exchange- 
able value of the annual produce exceeds that of the 
annual consumption, the capital of the society must annu- 
ally increase in proportion to the excess. The society in 
this case lives within its revenue, and what is annually 
saved out of its revenue is naturally added to its capital, 
and employed so as to increase still further the annual 
produce. If the exchangeable value of the annual prod- 
uce, on the contrary, falls short of the annual consump- 
tion, the capital of the society must annually decay in 
proportion to this deficiency. The expenses of the so- 
ciety in this case exceed its revenue, and necessarily 
encroach upon its capital ; its capital, therefore, must 
necessarily decay, and together with it the exchangeable 


value of the annual products of its industry." A society 
is but an agglomeration of individuals ; let us consider it 
as one huge family, and realize the argument of Adam 
Smith as applying personally to ourselves individually. 
There is no getting over the fact that a nation can only 
prosper, can only exist, by the individuals of which it is 
composed producing more than they consume, and wisely 
employing their capital upon works of utility and healthy 
recuperation. Professor Cairns, in his work on the slave- 
power, written while the Confederacy was still erect and 
vigorous, demonstrated the economical mischief of the 
system ; and it is much to the credit of Mr. Davis that 
in 1879 he had the moral courage to admit that the abo- 
lition of slavery had been economically advantageous to 
the South, although he was foremost with the Southern- 
ers in vehemently denouncing it as involving their ruin. 
The sufferings of the planters through the civil war are 
wellnigh forgotten ; but the South, under the system of 
free labor, paid for at market rates, according to nature's 
law of supply and demand, can grow cotton and sugar to 
greater advantage than under the slave system, and can 
open up new industries, which would never have been 
thought of — in fact, would never have been attempted—- 
with slave labor ; so the great blot bore its own punish- 
ment, as all infringements of God's laws do. Men have 
a right to be free of their fellow-men, and also a right to 
take their labor where it is most appreciated, and will be 
the best paid for. On the other hand, the employers of 
labor have an equal right to obtain labor at its market 
price, regulated by supply and demand, and free of all 
state control or interference ; to open as early as they 
like^ and close when they like ; subject to visits by in- 

240 MONEY. 

specters to see that there are proper means of ventila- 
tion and sanitation, and that the machinery is watched 
for the prevention of accidents ; but free from those mis- 
taken motives of philanthropy which attempt to fix the 
hours of labor, which should be left to the common-sense 
of the employer and employed to regulate for themselves. 
The anomaly of the nation's industry paralyzed for want 
of orders — as the retailers think, because of the want of 
money, although at the same time money is in such abun- 
dance that it can be borrowed at i per cent, or \\ per 
cent. — is really explainable by a want of production, by 
a want of a scarcity of goods asking for the money in 
exchange. People fail to see that the money is but a 
medium, and will be forthcoming, and is only to be 
had when the articles are made and ready to be ex- 
changed for the money. The money is useless without 
the commodity. To get the money, then, make the 
commodity, for and by which the money can be had 
in exchange. Our present depression began with the 
American crisis in 1873, and has affected for six years, 
more or less, nearly every nation distinguished by 
civilization, by industrial energy, and by commercial 
ability. Is the problem really insoluble ? How comes 
it to pass that, amidst resources so many and so mighty, 
with laborers and machinery capable of production to 
any extent, yet destitution and misery side by side with 
abundant wealth is allowed to exist ? Why, because the 
people are still frightened by that bugbear, " overpro- 
duction " — one of the greatest fallacies that ever ema- 
nated from the human brain. I deny positively that there 
can be such a thing as over-production — that is, as a na- 
tional evil. There may be loss to individuals if they 


produce more of any particular commodity than is re 
quired — that is, to sell at a profit ; goods can always be 
disposed of at some price. Therefore there is not an 
excess of goods, but an excess for the class that can pay 
a certain price for the same. But national depression is 
caused by " collective under-production." The distrib- 
uting classes are idle. The money is not needed, and 
remains uncalled for at the banks, because there have 
not been the commodities made that usually require to 
be exchanged. The power of purchase rests solely with 
the commodities. To put life into stagnant trade, set in 
motion th€ mills and factories that have been closed, or 
worked on a smaller scale. Produce, produce, but not 
madly, thoughtlessly, the goods there are buyers for. 
If all would produce to the extent of their power, 
there would be a general demand for all things. Re- 
member, goods buy money ; and the money gives the 
power to buy other goods. But now comes the import- 
ant point — one that, whether overlooked by the individ- 
ual or the nation, means paralysis, stagnation, ruin. The 
essential thing is to produce such things as will cause 
immediate reproduction, and only to invest year by year 
the surplus capital in articles of luxury, or in those pro- 
ductions that do not recoup you for the outlay till some 
distant period. For years we have gone on recklessly 
investing our capital in foreign loans, foreign railways, 
aye, and every scheme that ingenious promoters have 
been able to conceive. This wealth, I admit brings, in 
the shape of interest, tribute, which finds its way to this 
country in the form of commodities ; and some argue 
that the fact of our being able to import so largely is a 
good sign of the national wealth, and that this excess of 

242 MONEY. 

imports is not a drain on the resources of the nation, but 
a consequence of the greatness of those resources. The 
argument is good so far as it goes, but we are consider- 
ing the depression of trade, and the power of our wealth 
does not, has not removed that. It seems to me that the 
depression is mainly caused by so large an amount of our 
capital having been sent away/<?r others to use, to pay us 
in their commodities for the use thereof, when the money 
ought to have been employed in producing ourselves, and 
so enriching the nation by exporting our excess of pro- 
duction, instead of importing the excess of other peo- 
ple's. We have got into the condition of the spendthrift, 
who consumes and destroys more than he can replace. 
As a nation, collectively, we are " over-consuming " ; 
that is, we are letting other people produce ; we are con- 
suming their productions, and not replacing them by our 
own productions. We are living too much on interest, 
paid by the products of other nations ; and by not 
wisely using the money ourselves, we have got into the 
condition of having, in proportion to the population, a 
smaller quantity of commodities to exchange. This is one 
of the principal causes — this " over-consumption " and 
" under production " — why trade is stagnant, mills para- 
lyzed, and money lying idle, unasked for, in our banks, 
— a cause, if not removed, that must ultimately bring 
the nation to poverty. To meet the famines of the East, 
the bad harvests, the enormous waste of war, our increas- 
ing number of " unproductive workers " in the army and 
navy, etc., and the wonderful but excessive develop- 
ment of railway and house-construction, needs the con- 
centrated energy of the nation, of its thinkers and 
workers, with a view to producing an increased quantity 


of such articles and products as will lessen the evil effect 
of this over-consumption. We must use our brains more, 
not go on as recklessly in our undertakings as the unciv- 
ilized savage we are so prone to ridicule. Look how 
madly we took up railways ! Admitted that in the long 
run they are invaluable to a nation — nay, enrich it as 
much as any cause, — but we condemn as a fool, as a 
criminal, the trader who takes the life-blood of his busi- 
ness, and locks up in dead stock, book debts, or building 
operations, his money — who does not know that the 
necessary " floating capital " must never be used as 
" sunk " capital, but only the surplus capital at his com- 
mand. So with the nation and railways, or any under- 
taking of a similar nature ; they represent a gigantic 
over-consumption, not out of the surplus savings, but 
out of the floating capital of the country, that at the 
time, through being engaged in recklessly, brings the 
nation into poverty, commercial depression, and much 
misery. " P. Q." sent the following figures to the TimeSy 
August 20, 1879, and suggests that the time has come for 
the further extension of Indian railways without the aid 
of a government guaranty. Look at the total spent upon 
the railways of England and India, and think for a mo- 
ment that the construction of these works means in re- 
ality the consumption of so much com, food, clothing to 
the men, coals, iron, and other substances for the works ; 
you will then see how necessary " caution " is to the na- 
tion, before adding to its sunk capital. (See next page.) 
The percentage on capital proves railways to be a fair 
field for " permanent investment." The care needed is, 
not to construct needless lines, and to get value for the 
money that must be spent. You will perceive that the 



railways of England have cost six times as much to pro- 
duce double the length of lines in India. 

Railways of England. 




1 8 71.. ;f 461,400,000.. 9*o 

1S72.. 473,600,000.. 9*5 

1S73.. 490,000,000. .10 "O , 

1874.. 506,700,000.. 

1875.. 527,100,000.. 

1876.. 544,800,000.. 

1877- • 557.900,000. 

1878.. 570,800,000. 

» 3* 0^ ^S* 




Total miles completed in 1878, 22,229. 

Railways of India. 

Year. Capital. 


1874. . 


;f 87, 687,000 . . 
90,184,000 . . 
90,666,000 . . 
92,442,000 . . 
93,393,000 . , 
94,108,000 .. 






miles completed in 1878, 6,044 

5 3 


It must always be remembered that by our mad eager- 
ness, or thoughtless, reckless manner in these and other 
schemes, the immense demand for food, coal, iron, 
engines, and material kindles great excitement in the 
factories and the shops ; profits share the upward move- 
ment ; luxurious spending overflows ; prices advance all 
round ; and labor has to be paid a higher monetary 
value to enable the laborer to obtain the old quantity of 
food. So that it is not only the wealth that is sunk in 
making the railways, but we have to suffer for our 
thoughtlessness in the higher prices of all things, through 
the recklessness of a false feeling of prosperity — in reality, 
a national curse, — a retribution for its folly in a general 
feeling of waste and recklessness and national extrava- 
gance. Take the result on Germany of the war in- 
demnity received from France. How severely nature 
punishes tyranny ! Their seemingly boundless wealth 


produced an " over-consumption." The nation destroyed 
more than it re-made ; it diminished wealth rapidly. 
The people were blinded for a time by increased activity 
of trade, by great commercial prosperity, although the 
nation was on the road to ruin. There is only one way 
for a nation to prosper — to produce in excess of their 
consumption. Our habits have altered in the last fifty 
years. Our forefathers produced much, consumed 
little, and saved. We have crippled our resources by 
consuming out of proportion to our production. We 
have killed so many of our geese that used to lay the 
golden eggs. We must realize as a fact that we cannot 
have the cake and eat it too ; or rather, that if we want 
to have the cake again to-morrow, we must do to-day 
some work that will cause its reproduction. We must 
teach the operatives it is " over-time," not " short-time," 
that is wanted. We produce too little, and at too costly 
a rate. Short time means dearer goods. Trade is bad 
always where the power of the buyer is limited, less than 
it was. The remedy is more goodsy which means cheaper 
goods — produce, which is identical with the power to 
purchase. There is a cause for all things. No depres- 
sion ever did, ever will, occur without a reason ; and it 
can only be permanently got rid of by the removal of 
its cause — ^best got at by thought, patience, industry, 
thrift, sobriety, and a readiness on the part of all to sell 
their labor at the market price, and add daily to the pro- 
duction of the country to the utmost of their power. To 
produce thrifty habits, it is very important that the value 
of interest be explained to the young. To know that 
money has the power of adding to itself if properly used, 
is a fact every child should understand ; but the thought 

246 MONEY. 

as to money needs being extended far beyond tke mere 
fact of its value if wisely invested, or its use as a medium 
of exchange. We want the people to comprehend that 
real wealth consists in the increased power of produc- 
tion, that the increase of gold by a nation is nothing in 
comparison to an increased power to produce commo- 

Trade should be quite free ; there should be no artifi- 
cial restriction upon the individual or the nation ; leaving 
the consumer to buy, the producer to sell, when it 
seems best for either to do so. Taxing commodities is 
an error of judgment, inasmuch as it restricts the opera- 
tion of the natural law, that all mankind will study their 
own interests and buy where they can best be served. 
Free trade benefits all, but the man of fixed income 
mostly. For instance, in the year 1867-8 we imported 
8,000,000 quarters of wheat ; in 1877-8 we imported 
13,000,000 quarters, or 5,000,000 more quarters — a 
greater proportion than the increase in the population 
needed. The result was, of course, cheap bread to the 
man deriving his income from invested capital, or to all 
those with fixed incomes positively — to many of the 
laboring classes, also, an increase. But this large increase 
in the quantity of wheat imported led to unprofitable 
farming, which means decreased rents, and, being at a 
time of depressed trade, reduced wages ; but the re- 
duced wages were inevitable in many branches of indus- 
try from other causes, and this cheap bread materially 
diminished the general distress of the country. So free 
trade seems to work in accordance with the principle of 
the greatest good to the greatest number ; and this must 
be the wisest policy for all nations. 


The following words of wisdom by that clear-headed, 
practical statesman, Richard Cobden, should be stamped 
upon every Englishman's brain : 

" Upon the prosperity of the manufacturing interest 
hangs our foreign commerce ; on which depends our 
external rank as a maritime state ; our customs' duties, 
which are necessary to the payment of the national 
debt ; and the supply of every foreign article of domes- 
tic consumption, every pound of tea, sugar, coffee, or rice, 
all and the other commodities consumed . by the entire 
population of these realms. In a word, our national 
existence is involved in the well-being of our manu- 

" If we are asked, To what are we indebted for this 
commerce ? we answer, in the name of every manufac- 
turer and merchant in the kingdom : The cheapness 
alone of our manufactures. Are we asked. How is this 
trade protected, and by what means is it enlarged ? the 
reply still is : By the cheapness of our manufactures. Is 
it inquired how this mighty industry, upon which de- 
pend the comfort and existence of the whole empire, 
can be torn from us ? we rejoin : Only by the greater 
cheapness of the manufactures of another country." 

Practically, we want all products, for their quantity in 
relation to money, so to develop as to be cheaper, or 
rather, be supplied to the consumer in larger quantities 
for the same amount of money. This result some still 
think can be best done by a system of protection, as 
they say free trade has destroyed the benefits it seems to 
yield by letting in money as well as commodities. Is it 
so ? Yes, partly ; it is one of those specious half truths 
many are so fond of. Undoubtedly free trade has in- 

248 MONEY. 

creased the stock of gold, and, to a certain extent, has 
indirectly kept up the prices of articles ; its principal 
mission would seem to be to cheapen. But the more 
gold, the greater demand for articles. The demand 
causes supply, and supply, as a rule, has a tendency to 
exceed the demand. The price of an article will de- 
pend on its supply in proportion to the money seeking 
to purchase it. If the gold be kept at a fixed quantity, 
and the products increase threefold, to effect an ex- 
change, the gold will secure for itself three times as 
much as heretofore ; hence gold is argued to be dear, 
and goods cheap. On the other hand, the increased in- 
flux of goods, unless there be an increased supply of 
commodities in comparison, will cause the goods, being 
less proportionally to the gold demanding to be ex- 
changed for them, to be relatively dearer, or of a higher 
money value, than heretofore. But the real point to 
comprehend is — the money price of an article or labor 
is quite immaterial — the real point is, what the money 
will produce or exchange for at one time as against an- 
other. No one can doubt that free trade has lessened 
the real price of nearly all articles alike of necessity and 
luxury, and that the lower and middle classes of society 
enjoy in 1880 an amount of social comfort, and are able 
to purchase a great many articles that were not within 
their reach in 1840 ; and this will, must, continue, as 
there is not the slightest reason why an ounce of gold 
should not exchange for double the quantity of any 
goods which it now purchases, except for the fact that 
gold would then be worth half as much again relatively 
to other things as it now is. Now, this is what invention, 
improved machinery, better and cheaper facilities of 


carriage and distribution, and free trade really accom- 
plish : they give to the sound stationary article, gold, 
more goods in exchange, or, as it is termed, lessen the 
cost to the consumer ; and our efforts should always be 
directed to this end, as one shilling can just as easily 
" circulate " the same amount of goods as it is supposed 
that it takes a crown to move. To understand this sub- 
ject, you must remember that when we talk of the cheap- 
ness or dearness of goods — whether we intend it or not 
— the language we use means cheapness or dearness as 
measured against gold, for we have no other standard. It 
is only by cost in money that any comparison can be in- 
stituted. Why, for instance, can wheat be grown in 
South Australia at a profit on land that does not yield on 
an average more than twenty bushels per acre, and where 
wages are six shillings per day ; and not only at a profit 
in the colony, but that it can be taken to England and 
there compete successfully with wheat produced from 
land four times as fertile, cultivated by laborers not get- 
ting a fourth of the money wages, and certainly not liv- 
ing half as well as their fellows in South Australia ? The 
natural facilities in land and labor, the primary neces- 
saries for the production of wheat, are incomparably 
superior in England ; and, according to commonly re- 
ceived doctrines, what I have stated ought to be impos- 
sible, but it is the fact. The true explanation is, simply 
that the Australian wheat does not cost so much in 
money to produce, and peculiarity of climate enables 
machinery to be used for reaping, which saves money 
which must otherwise be paid for labor. But the fact is, 
that we delude ourselves when we suppose that these 
questions are settled altogether by imagined superior 

250 MONEY. 

facilities of countries for producing this or that com- 
modity. There are artificial causes at work ; for in- 
stance, land there is almost rent free, land here is ruin- 
ously dear. It is becoming every year more evident that 
England cannot compete with America in the raising of 
wheat ; and that the high price of meat, which has 
hitherto helped our farmers, will now be altered through 
the largely increasing quantity of meat America is ex- 
porting here. Our farmers in 1880 are literally being 
driven out of their farms, it being impossible for them 
to compete with the Americans and pay the present high 
rents. One thing is certain, farmers cannot pay, and 
unless trade improves it will be impossible for the trad- 
ing class to pay the present rents. The time, therefore, 
seems ripe for a readjustment of this rental question. 
Shop property reached fabulous prices during the pros- 
perous years, or the seemingly prosperous years, with 
much of its fictitious business. But with lesser trade, 
and a smaller rate of profit, from the competition of the 
stores, the question of rents and taxes must be considered, 
for rents will inevitably have to be decreased, in union 
with trade restrictions. The landlord has no more right 
to larger profits when all others concerned have to be 
satisfied with less. By the natural law, rents must fall, 
or houses remain longer empty. But we want more than 
this, — we want the landlord to be treated by the law like 
any other creditor ; we want this relic of the feudal 
ages, this preference for the interests of a class, abolished. 
We are told, in the eyes of the law all are equal ; we 
want this to be the fact. The game laws are a disgrace 
to us in r88o. 1 fail to see why, when a man fails, the 
landlord is to get 20s. in the ;^, and the creditors noth- 


ing. Laws should be made for the good of all. If there 
be any favor shown, let it be to the poor, as they spend 
as consumers nearly all they earn as producers. I there- 
fore advocate law, cheap and expeditious, clear and de- 
cisive, and an end to the delay, subtleties, and modem 
jugglery of appealing and going from court to court ; 
law to protect the interest of all, and united action to 
remove and stop protection to the interests of the few ; 
liberty to use my capital invested in machinery as and 
when I please — liberty for the laborer to use his capital, 
his " labor," when and how he pleases. We want to be 
free from the interference of the law that relieves a bank- 
rupt, honest or dishonest — a law that tempts men to be 
dishonest, by releasing them from the consequence of 
their own follies or crimes ; free from this " indulgent " 
legislation, that puts the burden of some people's short- 
comings upon the shoulders of others. Our system leads 
to " national improvidence " : if A eats, and has not 
earned what he eats, he is a tax upon society, and living 
on the labor of another. As regards education, every 
one should be able to read £^nd write ; but, to my mind, 
legislation diffuses a subtle, dangerous poison amongst 
the people, when it enforces the right of a child of A to 
be taught at the expense of B. The same with the 
" poor law " ; relief should only be given to the sick, 
incapable, or aged, and even then discouraged to the ut- 
most ; and the rule rigidly enforced that no man has a 
right, either morally or legally, to be maintained out of 
the labor of others. It lowers the self-respect of a peo- 
ple, having, a system that tempts, solicits men to forego 
their duty to themselves, their wives, their children, their 
fellow-men, I would have every man trained to feel 

252 MONEY. 

there is no more degraded being than he who can only 
exist by being a charge upon the community — ^living, by 
the aid of the lawj out of the hard earnings and savings 
of the more provident. Our system tempts men to be 
thoughtless and thriftless, by educating their children, 
and by promising them a house of refuge when old or 
incapable for work ; whereas all the efforts of wise legis- 
lation should be to teach men how to earn a living, what 
business is, what true morality is, — how true happiness is 
to be obtained, what money is, how to get it, the import- 
ance of taking care of it, by saving and wise use thereof, 
— how to maintain their independence as men, and be 
too proud to accept relief of their fellow-men, whether 
the same be sanctioned by law or not. 

Spite of abnormal causes, as high rents, etc., neutral- 
izing the otherwise natural advantages of one country to 
compete with another, there can be no doubt that Provi- 
dence has endowed nations with special facilities ; that 
one people admirably gifted for working in metals are 
not equally so for making cloth ; that others having pe- 
culiar advantages for growing food cannot, without 
infringing natural laws, turn their attention to weaving 
calicoes. We can all do some things better than others. 
But every one should be taught why free trade is so 
superior to protection — simply because it is more profit- 
able ; as well, that it is wiser to exchange with each 
other than to produce a thing at higher cost than it can 
be bought for. For instance, if I can buy a hammer for 
a shilling, you will perceive at once how foolish, how in- 
sane I should be if I persisted in shutting myself up, and 
saying : No, I shall make it myself, although it cost me 
double ; or wanting all my neighbors to pay double 


price because of my self-persistence in making hammers 
at the expense of the community, instead of using my 
faculties in a more profitable way. It would be really 
more to the advantage of a nation to keep a trade in 
idleness than to protect its special product by shutting 
out another because it is cheaper, or taxing it to make it 
equally dear ; because allied to the freedom of trade is 
competition, and competition is essential to protect man 
from the selfishness of his fellow-man. Both forces may 
at times seem pushed too far, and so as to work with 
some practical inconvenience, but both principles are 
right ; they are godlike in their actions — they fight for, 
and secure, the benefits for the many, against the interests 
of the few. There is not a man or company in existence 
but would charge more for distributing, carrying, or pro- 
ducing, if there were not the dread of a rival competing 
for and taking away the order. So trade should be left 
free to buyer and seller. 

If men once grasped the causes of " national pros- 
perity," this question of " protection " would be revolting 
from its very hideousness. Its aim is to compel, by the 
aid of law, buyers to pay more for goods than the sellers 
are naturally entitled to. Competition is nature's remedy 
to protect man against his fellow-men ; to keep down 
the value of a man's services to what they are worth, in- 
stead of his ideas of their worth ; as unfortunately it is 
too true — 

** How quickly nature 
Falls to revolt when gold becomes her object." 

For national prosperity we want no " reciprocity." Free 
trade is a law of nature, founded on mutual self-interest ; 

254 MONEY. 

if the principle be sound, why place any " restriction ** 
on its operation? Because other nations are foolish 
enough to break the laws of God, are we to follow them 
in their stupidity ? By free trade we mean that each 
country should produce freely that which it can produce 
best and cheapest, and should exchange the surplus of 
what it produces for the similarly produced products of 
other countries, and then all nations are benefited. 
Think of it, analyze it, dissect and pull it to pieces as 
you will, it is impossible to find a flaw in it. It is the 
law of God ; it is the wisest policy for the material and 
moral benefit of mankind, for national prosperity. 


" The price of wisdom is above rubies." — yob. 
** Wisdom is better than rubies ... is more precious than rubies." — 

Who can doubt these truisms, true for all times? 
Common-sense is the great thing to strive for ; it is a 
term full of meaning, popularly Refined as applicable to 
those who may be relied upon for sameness of action. 
" He is a sensible fellow," we say of that man whose 
opinions are characterized by a kind of intuitive saga- 
city, arising from not only knowing his business, but 
also his own mind in relation thereto, and a resolution 
within him, after thinking the matter over in all its bear- 
ings, to have his business done in a certain manner. 
Such men are credited with the art of persuading peo- 
ple, but they do so, not from humbugging them, but 
because they speak from knowledge and with conviction, 
and mean the truth ; and their earnestness and upright- 
ness succeed. They get people's confidence, from their 


quick perception and prompt action ; they are full of 
expedients, never at a loss what to do. What a contrast 
such men are to those who never have an opinion of 
their own, cannot decide or act without consulting 
others, and if they get on in the world, it is by knowing 
their own weakness and being wise enough to cling to 
the skirts of some one stronger than themselves. StiU; 
as empty bags cannot stand upright, believe me that 
every man that makes his way upwards must be better 
than his competitors in some way ; like the successful 
senator, he recognizes the fact that there are no little 
people ; or the philosopher, that there are no little things. 
To succeed, a man must see things as they are ; that the 
world is a huge school, wherein the dunces get punished 
most severely, and even the best and brightest do not 
escape the rod. The value of wisdom is essential to 
commercial men in understanding what is value. It is 
very difficult to define what is value ; that is, what is 
" cheap." I buy a lot of goods to-day that seem to me 
much under value — that is, the recognized market price 
for similar goods ; but to-morrow, when offering the 
same to a buyer, he submits other goods of similar ctiar- 
acter he has bought cheaper — that is, at lower prices. 
The being under-sold is one of the greatest anxieties of 
trade. A science of value is an impossibility ; there 
cannot be a science of a subject-matter whose nature is 
variable and capricious. A man values his old watch, 
which he has no wish to sell, or a man is in urgent need 
of money, and must sell. If you think of the different 
values of the watch to its owner under such dissimilar 
circumstances, you will at once perceive that, unlike 
gravity and chemical affinity, value is subject to no 

256 MONEY. 

definite laws ; yet a little reflection will convince you 
that political economists are right in stating that all 
articles have a market value, and that their prices de- 
pend upon supply and demand. Trade -is good, — men 
can place their goods as quickly as they are produced ; 
this gives an elation of spirit, an independence of feel- 
ing, to the seller ; he is firm as regards price, and objects 
to any deduction from what he thinks should be his 
profit. Trade is bad, — the mills must be kept going, 
goods are produced faster than they can be placed ; 
this leads to what is called " jobbing " — viz., the maker 
or holder offering the lot at a considerable reduction, 
and submitting to deductions in claim or extra discount 
pressed upon him by the buyer, according to his judg- 
ment of the need of the seller. Or let us consider the 
most legitimate reason for concession, or deviation in 
prices — viz., when a maker offers to take a lower price 
or give an extra discount if an order be increased, or if 
it be beyond a certain amount in quantity or value. 
This concession will vary according to the state of trade 
— ^that is, according to the power of supply in relation 
to the general demand ; as, if trade be uniformly good, 
the manufacturer can find orders enough without having 
to sacrifice part of his profit to induce one or two large 
buyers to order more than they would be disposed to, 
except at a reduced price. This only proves that the 
value, or rather the selling price, of an article does not 
depend so much upon its quality, or make, or real in- 
trinsic value, as upon what it will fetch in the market 
when it is offered for sale ; and this price will depend 
upon the aggregate demand for it, when offered for sale, 
in relation to the collective supply at the time. Take 


another illustration of the uncertainty of value : a trader 
is going along seemingly solvent ; his balance-sheet, 
with the usual fair allowance for bad debts and depre- 
ciation of stock, shows a satisfactory balance ; but he 
cannot meet his bills, and has to call a meeting of 
creditors ; his affairs are investigated ; he refuses to go 
on, or perhaps the creditors will not let him ; a forced 
sale of his stock, fixtures, lease, takes place, and his 
debtors are pressed and sued. " Well, we find by pain- 
ful experience that the value of every 20s. has been re- 
duced to 10s. or even 5^." Here circumstances mate- 
rially affect values, for, if the business had kept on, the 
debtor would have paid 20s, for every ;£, as the stock 
which had been bought to supply his customers' wants 
was worth in money value what he had paid for it ; but 
which, without his special demand, the demand not 
being equal to the supply, and the sale being pressed, 
results, as in the forced realization of the book debts, in 
a great depreciation in the value. 

The value of economy, of thrifty habits, is to make 
man self-dependent, self-reliant, and give him the glo- 
rious feeling of being independent ; to get people to 
have the common-sense to see that " true charity " is to 
adopt those means that will raise the object, elevate the 
people, by training them into habits of self-help ; alms- 
giving binding them still closer in the chains that enthral 
them. The poor law, as a right for men to look to and 
rely upon, has degraded men into becoming permanent 
pensioners. • There is no hope for the working class as a 
body until they are taught to help to save themselves. 
Put the matter so before their minds that they cannot 
fail to see that much of their misery from the poverty 

258 MONEY. 

prevalent in their midst is traceable to the conduct of 
those who suffer most from its consequences. The value 
of money must be explained to all. The stupidity of 
living up to one's income, the crime of living beyond it, 
are the lessons our youths of all classes should be taught 
at school and from the pulpit. 

" By no means run in debt : take thine owe measure. 
Who cannot live on twenty pounds a year 
Cannot on forty ; he 's a man of pleasure, 
A kind of thing that 's for itself too dear." 

George Herbert. 

Credit. — There has been an inquiry lately into the 
credit system, and it is surprising to what extent the 
whole human race lives and works on credit. No matter 
how widely nations differ in the scale of social advance- 
ment — Siam, Germany, Canada, St. Petersburg, or Hono- 
lulu, — the reports show that 90 per cent, of the business 
done is done on credit. Belgium is progressive, China is 
stationary ; yet in Belgium and China 80 per. cent of all 
commercial transactions are credit. In France and Italy 
credit is used with most moderation — in the one because 
the people are too cautious to take it ; in the other 
because they cannot get it ; but even in France and Italy 
two thirds of the business is done on credit, and this is the 
lowest estimate anywhere, except in Holland, wherey as it 
should be everywhere^ the retail trade is done for ready 
money, and the wholesale only on credit. 

Credit is a wide term, and the giving of it depends 
upon the condition of the nation or individual who wants 
it. It is justifiable to a new and progressive colony like 
Victoria ; it is speculative and unwise to a languishing 
empire like Turkey. Credit, as a matter of business con- 


venience, upon short and fixed terms is justifiable, but 
very unwise and dangerous under a system of long 'and 
indefinite terms. Credit is justifiable when given to 
enable a manufacturer or merchant to carry on his trade ; 
it is wrong and mischievous when used for the necessaries 
of life. Credit, in fact, is justifiable when used as an in- 
strument for progress and development ; it should be 
looked upon with great suspicion when it is a manifesta- 
tion of poverty. We shall be told, it is impossible to do 
without credit. To this I have always, and still respect- 
fully demur, so far as regards retail transactions. If a 
man wants clothes, furniture, meat, and drink he ought 
to have the money wherewith to buy them, and has no 
right, legally or morally, to buy the necessaries of life 
trusting to the future to bring him the money to pay for 

To those who say that ready-money trading limits trade, 
I reply, trade has no right to go beyond the limits of the 
money to purchase with. What is the ultimate benefit 
of anticipating next week's purchases by giving the buyer 
credit, instead of waiting until next week, when he could 
buy with money instead of on credit ? There is a limit 
to the purchasing power of every man ; if you tempt him 
beyond it, by giving him credit, you must ultimately suf- 
fer by ruining him, and having to bear the loss. For a 
time trade would be discouraged, but would soon right 
itself, and be much better afterwards, if the retail trade 
of the kingdom were done entirely upon the cash system. 
This is how the credit system operates, and is said to in- 
crease trade : A gets into debt with B for ten pounds, or 
a hundred pounds ; the amount is immaterial ; whilst 
getting into debt, or rather getting things without paying 

26o MOI^MY. 

for them, he is able to spend his money in the purchase 
of other articles ; so that at first he has an increased 
power of purchase. But there the advantage ends, alike 
to himself zxi^ the development of trade ; because when he 
goes to B again to buy he is expected to pay off the old 
debt in proportion to the amount of his new purchases ; 
so that if it was decided that all retail trade was to be 
for cash after a certain date, it could be done ; existing 
debts to be paid off by instalments. The volume of 
trade would only be lessened to the extent of those that 
buy without the means of payment, and although less trade 
were done, tradesmen would be better off. 

I have been an advocate for cash, or short-fixed credit, 
since 1862, and maintain that credit for necessaries can 
be abolished if those who serve the " consuming classes " 
will be firm in demanding cash, or will give only a short 
fixed term of credit for the necessaries of life. The ad- 
vantages of the " cash system " are obvious. The trades- 
man getting his money is independent of the wholesale 
dealer. " Cash " is an " open sesame " anywhere, every- 
where. The wholesale dealer getting his money more 
quickly, with less risk of bad debts, can do with a smaller 
profit, and be equally independent ; and so, as cash pay- 
ments come into use, credit will be driven out, and, as 
with the purchase of raw produce of all sorts, cash will 
eventually suppress credit. But we must begin with the 
laborer and consumer. How can labor be independent 
if, as in Turkey, the laborer be in debt to his employer ? 
In England, tailors borrow during the week of their em- 
ployers on account of the job or jobs in hand, and em- 
ployers borrow on Saturday to pay the week's wages ; 
and too many tradesmen think nothing of not meeting 


their bills when due ; pity 't is so ; and strange that in 
this land, where men are so fond of boasting of their 
freedom, so many voluntarily enter into, and remain in, 
the hard fetters of modern slavery — " debt," caused by 

It will be said : " But men go into business to make 
money, and more money was made in trade by the system 
of credit than that of ready money." By the credit sys- 
tem men made or lost money. By the cash system less 
is made, but there are fewer failures. What a contrast 
in the two systems ! With the credit system, there is the 
uncertainty of meeting one's payments — a perpetual 
source of anxiety, that undermines the health, and takes 
away all peace of mind. And to make credit pay, there 
is but one way — Peter must pay for Paul ; and it is not 
pleasant to be charging the man that pays you, too much 
because of the man or men who do not pay. Great 
wealth has been made in the past, is being made in the 
present, by men who charge credit prices, yet are shrewd 
enough to make the minimum of loss ; others more 
trustful or hopeful are ruined. But putting aside the 
question as to which system is the more profitable to the 
trading classes, I unhesitatingly condemn " credit," except 
to'wholesale dealers, as wrong and demoralizing to those 
who take it, and ask tradesmen to be firm in refusing to 
give credit for the necessaries of life, and consumers, for 
their own sake, pecuniarily and morally, to be self-deny- 
ing enough to abstain from purchasing until they can 
pay cash. 

The cash system is not liked by those tradesmen who 
rely on»the hold " being in their debt " gives them over 
their customers ; but the cash system is the right one^ 

262 MONEY, 

and must develop, as it has the approval of all honest 
men, and is to the advantage of those whose means are 
most limited — the salaried and wage-earning classes. 
That system must be the best that brings the necessaries 
of life within the reach of each consumer at the lowest 
possible price ; the few must suffer for the many, not the 
many for the few. 

There is a revolution in our midst — very unpleasant, 
as all revolutions are to those that lived out of the old 
system, but, as all improvements are, greatly to the 
benefit of the nation, if adverse to some individuals. 
The Suez Canal has quite altered the Indian trade ; the 
middlemen who used their capital in giving the long 
credit, that was formerly wanted, are no longer required. 
Bills on India, or drawn in India on London, were 
formerly at ten months* sight, then six months ; now six 
months is no longer necessary for genuine trade ; and as 
you shorten the length of credit required, you introduce 
a different class of distributers, or in many cases do 
without their aid altogether. To understand any 
change, you must get at the cause. The consul at 
Monte Video says of Uruguay : " The cause and origin 
of such long credit may be explained by the long time 
required for the goods bought in this city to reach 'the 
centres of distribution in the camps or country towns, 
and the long time the country dealer has to wait ere he 
can dispose of them and obtain returns, and these re- 
turns by barter as frequently as by cash." When these 
intervals are shortened by improved communications, 
shorter credits naturally follow, and middlemen are 
doomed to pass away before these improved facilities 
of communication, as the aborigines had to disappear 


before the builders of cities. This doing away with the 
" middlemen " is one of the causes of low prices — a 
cause that will continue to operate. In a recent address 
at Manchester Mr. Goschen said : " I think that this is 
the case in the Manchester trade as well as it is in other 
directions. I understand that formerly, when a Man- 
chester spinner wanted cotton, he went, generally speak- 
ing, to Liverpool, Liverpool went to New York, and 
New York went to New Orleans or Savannah. But now 
the spinner goes direct to the producer, and many inter- 
mediate profits and commissions are abolished. Again, 
when the spinner sells his goods, I am told that there is 
a great diminution in the number of agencies employed, 
and that often business is conducted for a ten-pound 
note where formerly large commissions were paid to 
houses who were agents on a gigantic scale. You all 
know that between Manchester and India there has been 
an elimination of a great many middlemen. Now as 
regards London, that is the case to a still more extra- 
ordinary extent. Let me tell you how the cotton trade, 
for instance, used to be conducted between New Orleans 
and the interior of Germany. The New Orleans man 
consigned his cotton to New York or to a New York 
house ; the New York house consigned it to Liverpool, 
Liverpool to London, London to Hamburg, and Ham- 
burg to spinners in the interior of Germany. But now 
the German spinner goes direct to New Orleans, and 
the producer's agent visits him in his home, and a num- 
ber of intermediate profits and commissions are swept 
away. England has lost a great portion, I will not say 
of its transport trade, but of that immense department 
of its business which consisted in mediating between 

264 MONEY, 

different countries. This has had a considerable effect 
not only in cheapening produce, but also in affecting 
the tone and temper of trade, because the middlemen of 
London — and I expect it is the case here, from what I 
have heard — the middlemen and agents often contributed 
largely to the excitement of the market. In Mincing 
Lane, when cargoes of sugar were sold, one cargo would 
be sold four or five times over. Then the brokers would 
all be cheerful ; they said : * Here 's a brisk business 
going on,' and it imparted a certain buoyancy to the 
market, and there appeared to be great vivacity in the 
trade. I hear that the same kind of thing went on in 
Manchester ; that there were houses which gave a cer- 
tain stimulus and impetus to trade at certain times by 
gigantic speculative operations." Mr. Goschen went on 
to say, that " if business is quieter for want of these 
middlemen, it is much sounder, and that it is really 
better to have five years of low profits than four years 
of high profits and a crash in the fifth, although few 
business men would make this better choice." 

" Credit " is a matter of custom. There is no par- 
ticular reason why wool should be bought for cash, and 
woollen goods upon credit. A great deal depends upon 
whether the profits to be made will draw capital to in- 
vest in this or that article. Unless a broker be rich 
enough to import himself, he generally sells for cash ; 
but in some countries where the manufacturers have 
little capital, manufactured goods are sold for cash. 
The native manufacturers of Mexico always receive 
cash for their goods, and the Austrian manufacturers 
are in the habit of insisting on weekly settlements, in 
order to obtain the means of paying their workmen. In 


England, also, the same rule applies. Small makers are 
compelled to part with their goods at the best price ob- 
tainable, in order to pay their men's wages, or meet 
their bills — which, no doubt, gave origin to the saying : 
"that you can buy cheaper than you can make." The 
same applies to houses ; so many small builders cannot 
hold, and have to mortgage, causing so many houses to 
be sold for what they will fetch, that it is cheaper to buy 
a house than to build one. 

Crecit depends on the time that it takes to grow prod- 
uce, t6 manufacture goods, or to get them from the 
manufacturer to the consumer. The longer time, the 
more ca;)ital is needed, and greater help in the shape of 
credit. The time occupied in bringing raw produce 
from abioad, and in the distributing of produce and 
manufaclired goods is much less, and increased facilities 
of communication have, and will make long credits less 
necessarythan they were. Consul Shaw, of Manchester, 
says : " Credit is much less extensively used, both in 
wholesale ind in retail transactions, than it was ten or 
twelve yeas ago. In wholesale businesses open credits 
have been shortened, and prompt payments are much 
more frequent than they used to be. Then, again, the 
amount of lills of exchange drawn against produce or 
manufacturs transferred to buyers is much less than it 
was ten yeas ago." This point is strikingly illustrated 
by the well-inown scarcity of " trade bills " in the Lon- 
don discoun market during the last three or four years." 
The latter fat is partly due to the altered method of do- 
ing business. The " middle-man's " occupation is gradu- 
ally going. A^hen the manufacturer sold to the city 
merchant, wb paid him by a bill, and the tradesman 

266 MONE K 

t)ought through the city merchant, paying him by bill, 
two bills were in the market being discounted ; whereas, 
now that the tradesman buys direct from the manufac- 
turer, one bill is sufficient. This change of system 
abolishes at once " half the trade bills " that used to be 

There is no hope for the man who is content to stoop 
to lift the coward's weapon of self-defence, and put jpon 
fate, chance, or circumstance his own inability to protect 
himself. It is his own weakness he has to conquer, and 
boldly lay hold of seemingly opposing circums:ances, 
and mould them by his own will to his ultimate advan- 
tage. It can be done ; it has been done. Whst other 
men have achieved, why not you ? or, if not, lay the 
fault upon yourself alone. But my advice is, itand up 
and fight. Determine to conquer ; determine to cast 
the lie back into the teeth of all scoffers at thestrength 
of a man's will, and at his ability to use ever^ circum- 
stance for the end he has in view. They are cowards 
who would check ambition in others, because .hey have 
none themselves. Man's moral courage wantsfostering, 
encouraging, developing ; or, like any other atribute, it 
will fall into decay for lack of exercise. Tlat the ele- 
ment is in the nature of every man, who Otn doubt? 
Unfavorable conditions have prevented its dd'^elopment, 
and it requires some exterior power to brin| it into ac- 
tion ; but the moral courage of every mar will exert 
itself as soon as he is properly taught th^ value of a 
trained intellect ; and how the nerve-force Df his brain 
will give muscular power to his hand, and st^ngth to his 
body in resisting all opposing forces to Js progress. 
The difficulties of life are but trials to btng out the 


Strength and endurance of our nature, as a storm tests 
the powers of a ship, or the knife of the cutter reveals 
the brightness of the precious stone. Never despair ; 
though fate betray and re-betray, with inflexible tenacity 
of purpose press on, ever struggling "onwards and 

** The height by great men reached and kept 

Were not attained by sudden flight, 

But they, while their companions slept, 

Were toiling upward in the night. 
Nor deem the irrevocable past 

As. wholly wasted, wholly vain, 
If, rising on its wrecks, at last 
To something nobler we attain ! ** 

Ladder of St. Augustine, 



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