this fundamental condition of exchange; but the free flow of bullion will not the less surely and constantly tend to work out a mean average value, though it may never exactly attain to it.

The stability which gold or silver possesses depends solely on the fact that its exchange value is governed in the long run by a world-wide average of demand, while the supply of both is limited severally by their natural costliness. The supply of artificial money may theoretically be even more strictly regulated by authority, but all experience proves that no government could be trusted with a discretionary power of regulating it, and no local money will be supported by the demand of the world at large.

Without entering at length into the polemics of the silver question, I will briefly allude hero to some points bearing upon it. (1.) If the mints of Europe and the United States were opened without limit to both gold and silver, this question of "returns assumes a very different aspect. The owners receiving legal tender money could at once exchange it for (buy) stocks, shares, landed or other property in these countries, where they no doubt desire to possess them. They would in this case have, at most, to draw out an annual revenue of, perhaps, a twentieth or a thirtieth part only of the original cost, which would not in itself cause any great fluctuation in the rate of exchange or in the moveable commodities on which bills of exchange are based. But the task of ultimately finding appropriate use for this "money" is merely shifted from the mining interest to the State or other banks to whom the surplus not immediately required in the currency would accrue. The ordinary check upon production is this very difficulty of getting returns, or, in other words, of completing in some way the double operation of exchange. It is partially removed by the coinage of one metal without limit. It would be removed to a far greater extent if the mints were open to both, and the metal in the least, general demand at any arbitrary fixed ratio would certainly be sent forward with much urgency.

(2.) Both gold and silver have always been used as money, but the natural causes which govern their relative value have always been beyond any artificial control. A Government may, indeed, by a wise prevision, assume a ratio which the world at large will adopt, and the two metals may then work side by side just as long as the exigencies of world-wide commerce permit, and no longer.

(3.) The acceptance or rejection of either metal from a place which it has previously occupied in any of the large currencies of the world will have a marked effect on its relative value, but this may be shown either negatively or positively. Thus, France and the United States suffered silver to flow out without stint at the time when, as has just been noticed, there was an exceptional demand for it to pay for supplies drawn from Asia. This abundance was certainly not an unmixed advantage. For, though the

relative value of silver, as compared with gold, was little affected, the prices of the staples so urgently required were enhanced to an altogether extravagant degree, with a wide-spread disturbance to general trade which a more limited supply of silver would have tended to mitigate. The effect of the German operation has been positive. Its attempt to force off silver, without regard to the existing conditions of commerce, aggravated the change in its relative value, which was probably in any case inevitable. But while operations which change the metallic currency of a nation will obviously have a great effect on the metals received or rejected, and which place the country making them practically in the position of any other large buyer or seller (who must always raise or depress prices as against himself), it is not to be inferred that such effects can be continuous. Such operations are rather like the artificial draining and filling of large ponds or lakes. There is a great rush and flow of water for the time, but when once they are all filled again, we have only to make up for the waste caused by natural evaporation. The wildest notions prevail about the waste of the precious metals. I have seen it put as high as 2 per cent. per annum. Now there are few harder worked coins than our sovereign. Its original weight is a little over 1231 grains. It is current till reduced to 122. But the average time which it takes to wear away this difference of little more than ths of a grain, worth about 1d., is 18 years; that is per cent. in all, or per cent. per annum. The waste on gold plate is hardly appreciable, and even that on silver is very small. There are, no doubt, other causes of loss, but they will not come to very much more. On the other hand, where prosperity is widely diffused among the industrial classes, a largely increased aggregate of coined money may be held in circulation. But we must look the truth in the face, that any large excess in quantity can only be absorbed by a decrease in relative value; but as this decrease will, in the long run, affect the whole stock of the world, both that in actual circulation and that held in reserve, we need not fear any violent change if only we do not attempt to thwart the operation of natural laws by artificial expedients, the failure of which, when the question is fairly worked out, will be found to be merely a matter of time.

Thus far I have referred to gold and silver, which are the money common to all the world. Whatever forms of local currency may be used, these will be the money of international commerce and exchange, as long experience, ending with that of the United States during the late war, has amply demonstrated. But what are we to say of the different substitutes for them which are found in all local currencies? I reply that we must admit to be money all that which actually does the work of money. We can still not the less clearly discriminate between good and bad forms of money, and judge of them according to their fitness to do the

special work required of them. And we shall further see that neither gold nor silver nor any other form can best serve all the purposes of highly organised industry. Money, then, I would still define as that which is practically vested with the most general and absolute purchasing power. It is held for its own sake because of this property. It passes freely from one to another, but is ever a reserve in the hands of the owner which for the time being yields him no increase. It does not properly speaking convey a "right," for a "right" vested in one person implies a corresponding duty in some other person or persons. This applies to property generally, but in no special way to money. No one is under the slightest obligation to take a man's money: that is, to sell to him on any terms, though it may, of course, be the subject of obligations otherwise contracted. Money implies neither interest, rights, nor obligations; but conveys simply a purchasing power freely given and taken by the common consent of mankind.

Taking, then, the money actually used to carry on the work of a great industrial community. (1.) We must have bullion in preference to coin, so far as by this means we can best pay any balance that has to be paid to foreign countries. This balance only arises. when the ordinary interchange of commodities leaves a deficiency which cannot be adjusted by any other export, direct or indirect, which promises the least margin of profit. Nothing can be sent more cheaply, i.e., at a less profit, than bullion. We must further, as regards the more advanced countries, include as commodities certain stocks, shares, &c.; that is the "capitalized value" of securities yielding an annual income, and it is easy to see how very ample such means may be as compared with the deficiency arising in any short period. Still these are not always available, and prudence requires that an ultimate reserve should be maintained. Some of our exports of merchandise are habitually paid for in bullion, and some other markets habitually take bullion in payment of imports sent to this country so far it comes and goes in the ordinary course of commerce. Nevertheless, this form of money may be required in the exigencies of foreign trade to prevent an undue strain on any of our markets, and give time for the due adjustment of supply to demand.

(2.) Coin is required for obvious reasons of local convenience, but although it is essential to keep it on a par with the bullion required to make it (token coins of course excepted) these two forms are severally best adapted to different purposes.

(3.) Notes are a further adaptation to the wants of the community. They do work which coin could not do with the same facility. When they are directly based on a deposit of gold which can be coined at will, it is hard to determine whether they increase or diminish the use of that metal, for they circulate and get through their extended amount of work very quickly. Legal tender notes

not based on gold, as are part of those of the Bank of England, and notes which are practically current, though not legal tender, like the authorised issue of sundry banks in the three kingdoms, certainly do the work of money, and must consistently be called money. Indeed in Scotland the £1 note is more current, and in this very essential respect does its work better there than the sovereign. Whether these notes are in all respects as securely based as it is possible for them to be is another question. But even if they were not so, as is certainly the case with some inconvertible and depreciated paper in other countries, a genuine note must still in one sense be called "good," and "bad" would only apply to one which was spurious. They may be, as a matter of fact, the best and only money that can be got and used there, and what is more will most pertinaciously stick to the country which issues them, as will any other form of debased currency.

(4.) And what are we to say of "cash balances in bankers' hands? I say that from some most essential points of view they must be regarded as "money" also. They do the special work of money, and that in a way which no other form of it could do so effectually. I do not say that it will serve all purposes, or that a credit in bankers' books should be "legal tender." On the contrary, the system works all the better because it is not so. We have to deal with the fact that such book entries do convey absolute "purchasing power," and to try to see how it is that they do so with such manifest advantage by common and voluntary consent. It must be admitted at once that a man with a balance at his bankers' has no

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right to any specific money. His right is not in rem to the thing itself, but in personam as against the individual, as he would find if ever the case were put to the crucial test by bankruptcy. assignee would take his "money as a personal asset of the bankers', and in due time distribute it with other assets among all the personal creditors. The reasons for the validity of bank money must therefore be sought for within the limits of the banking system.

Before going further I must refer to the more limited uses which money is required to subserve, specially within the bounds of an industrial community. Division of labour in some sort begins at a very early period, but as long as various operations are carried on in one household there is very little use for money at all. But labour when more fully organised is farther much sub-divided into distinct stages, through which its products pass before they are finally completed for use. The several sections as they have done their share of work naturally desire to be paid in the money which gives them the best means of independently selecting just what they want for their own purposes. Hence it is that it has been sometimes found that almost any tokens which are accepted by common consent may serve as money within narrow limits. Indeed, when

prices are very much governed by custom, there would be little temptation to attempt an over issue of them, and they may very fairly serve all the purposes of a more extensive currency. And still more, when rude forms of money are superseded this condition of things remains, and, in the aggregate, a very considerable amount of current money will be constantly required solely for local uses. But such sub-divisions of money, although they create a greater use for money, do not require that it should be held for any length of time in reserve. The more noteworthy result therefore is that this increased quantity will naturally circulate with a new degree of rapidity and certainty. We are just as sure that this money will pass from hand to hand, as that men will want their dinners every day. Nature ordains the constantly recurring want and custom, and convenience ordains the most ready way of satisfying it. What the total sum required is can only be determined by experience, and is practically tested by the amount which is retained in circulation. A permanent average demand-where the supply cannot be unduly augmented-is a perfectly valid basis of exchange value, and on it securely rests our own uncovered note issue. Its convertibility and the further fact that notes are freely given on the deposit of gold connect it with the money common to the world at large, and redress any local excess or deficiency.

The argument holds good further by analogy. Just as a sovereign or note may pass through twenty hands on a busy market day and remain at last, as it was at first, a reserve ready for future needs, so it is with bank money. It is valid "purchasing power to all through whose accounts it has passed, though each banker's ultimate cash balance is only partly in gold or notes, and partly a credit in account at the common centre in the Bank of England.

So when a tyro in finance cries out in alarm-"If banks were suddenly called upon to pay up all their balances, they could not possibly do so," we may answer him, according to his wisdom, "Just so! And if every man in London were suddenly to insist on laying up three months' store of provisions in his own house, there would certainly be a famine till people recovered their senses." The whole organisation of industry from first to last is adapted to afford a steadily continuous supply and the adjustment to demand, though not perfect, is such as to require an amount of money which fluctuates only within very narrow limits from day to day. The larger the aggregate to be dealt with, the more constant the average. We cannot in this sense forestall the use of our money, and there is no reason whatever why we should desire to do so, but it will assuredly be forthcoming from day to day. What one pays, some other must receive. There must be a credit for every debit. The money is not unreal. The reality is rather the inevitable certainty of its circulation.

Professor Stanley Jevons has lately quoted a forcible expres