without the necessity of resorting to the use of money, in consequence of the economising process of deposit business in the Bank of England

3171. "Can the debt of £1,000 which one person owes to another be discharged, without money being paid, or its value ?— A debt of £1,000 cannot be discharged without, in some way or other, transferring the value of £1,000; but that transfer of value may certainly be effected without the use of money

3172. "Was not the deposit transfer in the Bank of England, to satisfy that debt of £1,000, of the same value as the £1,000 notes which passed in the other case ?-A credit in the Bank of England I consider is of the same value as the same nominal amount of money; and if the credit be transferred, the same value I consider to be transferred as if money of that nominal amount had been transferred

3177. "Is there any fallacy in the statement that in the accounts published by the Bank, their liabilities are divided into two heads, circulation and deposits ?-I am not prepared to state that there is any fallacy in it

3178. "Have you not said that deposits do not, in any way whatever, possess the qualities of money ?-If I have said so, I shall be glad to have the statement laid before me

3179. "Have you not, in question 2663, enumerated certain distinguishing characteristics of money?—I have

3180. "Have you not, in the same question, stated that deposits do not, in any way whatever, possess those characteristics? Yes, I have

3181. "Have you not, in answer to previous questions, admitted that for the discharge of debts, deposits have the characteristics of money ?-All that I have admitted is, I believe, that a deposit may, under certain supposed circumstances, be used to discharge a certain supposed debt "

Lord Overstone also said (3132)—" Will any man in his common senses pretend to say that the total amount of transactions adjusted at the Clearing House are part of the money, or circulating medium of the country?" No, of course, no one says that a transaction is money; but the operations of the Clearing House consist exclusively of the transfers of Bank Credits from

VOL. II.

Y

one bank to another; and, most undoubtedly, these Bank Credits are part of the circulating medium of the country

Now, we have already seen that in Roman Law these Rights are expressly classed as Pecunia; we have seen, that both by our Courts of Law and Equity they are held to be equivalent to Money; and Lord Overstone has himself admitted that they are of the same nominal value as money. How, then, can it be contrary to common sense to say that they are part of the circulating medium of the country? However, to avoid all such discussions, every one must admit that they have now become, in consequence of the general spread of the use of banking, the great medium of the payments of the country. And, therefore, those who consider the essence of money to be "closing debt," must admit them to be money. Thus they are answered by their own arguments; which are, however, erroneous, because money is not that which may happen to close a debt, but that which a debtor can by law compel his creditor to take in payment of a debt

Lord Overstone further said (3082)—“ When I give a definition of Currency,' of course it is Currency in the abstract: it is that which Currency ought to be that definition properly laid down, and properly applied, will include paper notes payable on demand, and it will exclude bills of exchange"

Here, again, Lord Overstone is absolutely wrong. It will be seen from the judicial decisions given above that it is perfectly impossible to frame a true definition of Currency which shall include bank notes and exclude bills of exchange: and, moreover, no bank notes in England, except Bank of England notes, are money; because no debtor can compel his creditor to take any bank notes in payment of a debt, except Bank of England notes, and these only so long as the Bank pays them in money on demand. If the Bank were to stop payment, Bank of England notes would immediately cease to be legal tender; a consideration which will be found of the greatest importance when we come to investigate the mechanism and operation of the Bank Charter Act of 1844

13. Lastly, we may quote Colonel Torrens, because he was not only one of the most influential of this school, but it was sometimes alleged that he was, in reality, the author of the scheme

which Sir Robert Peel adopted in his Bank Charter Act of 1844. He says"The terms Money and Currency have hitherto been. employed to denote those instruments of exchange which possess intrinsic or derivative value, and by which, from law or custom, debts are discharged and transactions finally closed. Bank notes, payable in specie on demand, have been included under these terms as well as coin, because, by law and custom the acceptance of the notes of a solvent bank, no less than the acceptance of coin, liquidates debts and closes transactions; while bills of exchange, bank credits, cheques, and other instruments by which the use of money is economised, have not been included under the terms money and Currency, because the acceptance of such instruments does not liquidate debts and finally close transactions"

Again he says, in reply to some perfectly just observations of Mr. Fullarton-" It is an obvious departure from ordinary language to say that whether a purchase is effected by a payment in bank notes, or by a bill of exchange, the result is the same. According to the meaning of the term, Money and Credit, as established by the universal usage of the market, a purchase effected by a payment in bank notes is a ready money purchase, while a transaction negotiated by the payment of a bill of exchange is a purchase upon credit. In the former case the transaction is concluded, and the vendor has no further claim upon the purchaser; in the latter case the transaction is not concluded, and the vendor continues to have a claim upon the purchaser until a further payment has been made in satisfaction of the bill of exchange. A bank note liquidates a debt, a bill of exchange records the existence of a debt, and promises liquidation a future day. Mr. Fullarton not only inverts language, but mis-states facts, when he says that the transactions of which bank notes have been the instruments must remain incomplete until the notes shall be returned upon the issuing bank, or discharged in cash. A bank note for £100 may pass from purchasers to vendors many times a day, finally closing on the instant, each successive transaction. A bill of exchange may also pass from purchasers to vendors many times a day, but no one of the successive transactions of which it is the medium can be finally

The Principles and Practical Operation of Sir Robert Peel's Act of 1844,

explained and defended, p. 79.

closed until the last recipient has received in coin or in bank notes the amount it represents

"Now it is the necessity of ultimate re-payment which constitutes the main point of distinction, which marks the boundary between forms of credit and money. It is a necessity which applies to bills of exchange and cheques, but which does not apply to bank notes; and, therefore, upon Mr. Fullarton's own shewing, upon his own definitions and his own conditions, as to what constitutes money, bank notes come under the head of money while bills of exchange and bankers' cheques, and such other instruments as require ultimate payments, transfers, and settlements, do not come under the phrase money. . Upon Mr. Fullarton's own shewing money consists of those instruments only by which debts are discharged, balances adjusted, and transactions finally closed: and, therefore, Mr. Fullarton, unless he should choose to continue to contradict himself, must admit that bank notes are, and that bills of exchange, cash credits, and cheques are not, money

14. We have now cited at length the doctrines upon which the Bank Charter Act of 1844 is based, and we have now to examine the necessary logical consequences to which these doctrines lead

Mr. NORMAN said that money, or Currency, should possess fixed value, and be a perfect numerator. But how can money, or any thing, possess fixed value, when its value is changing from hour to hour?-An instrument of credit may preserve an equality of value with respect to money, but not with respect to anything else, unless it is expressed to be payable in it. He said that he meant by a numerator that which measured the value of other commodities with the greatest facility. Why does a promise to pay £50 measure the value of things with less facility than £50 itself?

It is not a little amusing to find the celebrated phrase of the Roman Catholic Church,-Quod semper, quod ubique, quod ab omnibus, starting up and meeting us in a discussion on Currency. In Lord Overstone's opinion, money and Currency are identical, and include the coined metallic money, and the paper notes promising to pay the bearer coin on demand; and, he says, that

the characteristic of their being money is, that they are received equally at "all times, between all persons, and in all places." For the sake of shortness, let us designate this phrase by 3A, from the three alls in it. He excludes Bills of Exchange from the designation of Currency, because "they do not possess that power of universal exchangeability which belongs to the money of the country." This definition is fatal to Lord Overstone's own view. In fact, if it be true, there is no such thing as money or Currency at all. In the first place, it at once excludes the whole of bank notes. The notes of a bank in the remote district of Cumberland would not be current in Cornwall; therefore they are not 3A; therefore they are not Currency. Again, the notes of a bank in Cornwall would not be current in Cumberland; therefore they are not Currency. Similarly, there are no country bank notes which have a general Currency throughout England; therefore no country bank notes are 3A; therefore no country bank notes are Currency. Till within the last fifty years or so, Bank of England notes had scarcely any Currency beyond London and Lancashire; in country districts a preference was universally given to local notes; therefore Bank of England notes were not 3A; they had not a power of "universal exchangeability"; therefore they were not Currency. Bank of England notes would, even now, not pass throughout the greater part of Scotland. therefore, the test of 3A and "universal exchangeability" be applied, the claims of all bank notes to be considered as Currency are annihilated at once. The acceptance of a Baring or a Rothschild would be received in payment of a debt by a far larger circle of persons than the notes of an obscure and remote country bank

If,

But the universality of Lord Overstone's assertion is fatal to his argument in other ways. On the Continent, silver is the legal standard of value; in England, silver, like copper, is merely coined into small tokens, called shillings, &c., which are made to pass current above their natural value, and are only legal tender for a very trifling amount, hence it cannot be used in the adjustment of all transactions; therefore it is not 3A; therefore it is not Currency. There are other countries where gold is not a legal tender, therefore it fails to satisfy Lord Overstone's test, therefore it is not Currency. If, then, the test proposed by Lord Overstone