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 1 
 
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 6 
 
THE CURRENCY; 
 
 WHAT IT IS 
 
 AND 
 
 WHAT IT SHOULD BE. 
 
 
 BY ROBERT DAVIS. 
 
 (JDttaiDa: 
 
 PRINTED BY HUNTER, ROSE k CO. 
 
 1867. 
 
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 PREFARATORY NOTE. 
 
 Discussions upou the nature and uses of the Currency are far too dry and un- 
 interesting to oe attractive to the general reader. In almost every dissertation 
 upon this subject the primary question gets involved with the collateral ques- 
 tions of Banking and Exchange, and the character of thu true issue is lost in 
 amplification and complexity. The consequence is that a Gordian knot is woven^ 
 the complications of which not all the Davenport Brothers of financial jugglery 
 have yet been able satisfactorily to unravel. It is no wonder, therefore, that 
 the subject is generally repulsive, and its discussion confined to the few whose 
 avocation or habit of thought has led them to find gratification in the pursuit of 
 one of the dullest enquiries into the least attractive branch of social and political 
 science. 
 
 I make no apology for the reproduction of many observations contained in 
 the following pages, which have at various times appeared in the daily Journals 
 with which 1 have been connected. The ephemeral character of a newspaper 
 article is unfavorable to a lasting conviction unless the argument be frequently 
 repeated ; and a series of articles upon so dry a subject as the Currency could 
 only be ventured upon at long intervals, when the effect of the earlier produc- 
 tions had passed away. These former fragmentary effusions are now thrown 
 together and placed before the public, in connexion with gleanings and deduc- 
 tiona from the writings and comments of the ablest end most practical moneyists 
 of our day, and from the pregnant history of the Bank of England, from its 
 establishment in 1694 to the fatal return to cash payments after the close of 
 the long war. The object of this brochure will be fully attained if its contents 
 should be instrumental in attracting public attention to a subject which has 
 necessarily so large an influence upon the domestic commerce of the country, 
 and upon which the early development of its rtaources must mainly depend. Aa 
 labor is the source of all wealth, so must the advancement and progress of the 
 country be in proportion to its power of furnishing the means by which labor is 
 commanded. The acquisition of these means is through the agency of a free 
 and untrammelled currency, controlled and circumscribed solely by the exigen- 
 cies of the enterprise and aometatic trade of the people. 
 
 R. D. 
 OiTiW., July 1, 1867. 
 

 
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 THE CURRENCY 
 
 
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 n-va^ -J MONEY: ITS USES AND ITS FORM. 
 
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 There are few thinga with which people are more familiar than 
 the ordinary dealings with money ; yet there is nothing in com- 
 mon use the true nature and functions of which are so little under- 
 stood. It is, perhaps, a somewhat startling predicate which aflfirms 
 that nine-tenths of those who daily and hourly handle money in 
 their avocations, or in the usual transactions of domestic life, are 
 entirely ignorant of what money really is, or the definite purpose it 
 subserves. This large proportion of the community look upon a 
 dollar bill or a metal coin as so much actual value. Nothing can 
 be more erroneous. Money is wealth only in the degree that it 
 has the power of producing wealth. A man might be shut up with 
 countless millions, yet die from ,irant of the necessaries of life, 
 Wealth consists alone in that which is useful, as contributing to 
 the comfort and pleasure of mankind. A great deal has been 
 said, and quite as much written, to prove that the characteristics 
 of money are involved in some special mystery. But this is not ao. 
 The functions of money are of the simplest character ; it is 
 not until they are applied to the complications of international 
 commerce and the labyrinthian theories of the money-dealers that 
 any mystification appears ; left to its legitimate use, money is the 
 simpl st of simple agents. 
 
 '>i^ It is unnecessary to revert to a very early period of the world's 
 history to prove that all trade is barter, or to produce examples 
 of the inconvenience and impracticability of a direct exchange of 
 
6 
 
 MONET: ITS USES AND ITS FORM. 
 
 I:' i 
 
 i I 
 
 commodities, in even a slightly advanccc^ stage or ciTilization. It 
 is enough for our purpose to know that a very small proportion 
 of our wants is supplied by ourselves, and that we seek to provide 
 our requirements from the productive labor of others. As none 
 will give his services without an equivalent, it becomes indispen- 
 sable that we should possess some commodity which others are 
 willing to accept in exchange. To obviate the embarrassments 
 inseparable from a state of primitive barter a medium was early 
 adopted ; and this medium, in whatever form it has appeared, has 
 been the currency of the country in which it has been used. The 
 American aborigines who used pieces of rudely-fashioned coal and 
 wampum, found nothing darkly mysterious in their simple cur- 
 rency ; neither do their descendants of the present ^ay discover 
 any peculiar magic in our stamped metal or the engraved paper 
 of the banks. They trouble not themselves about the material 
 of which it is made or its convertibility into gold, nor the com- 
 plexities with which banking and brokerage surround it. All they 
 care to know is that it possesses the power to obtain for them the 
 thing they require. Unsophisticated an this view may be, it is, 
 nevertheless, the true estimate ; for, as long as the subject is kept 
 free from the complications of foreign exchange and bullion- deal- 
 ing, money is simply a convenient medium of barter, which at the 
 present day is confined, among all civilized nations, to metallic 
 coin and bank notes. The peculiar characteristic of money is its 
 being acceptable to all men for anything they have to exchange, 
 or, as we ordinarily say, to sell. It measures the value according 
 to an arbitrary and factitious price, affixed by an English Act of 
 Parliament to gold ; and when in some particular form, whether 
 of metal or paper, it circulates amongst a people — by virtue of a 
 social compact and general confidence — it becomes what is termed 
 the currency of the country. From this shewing it is clear that 
 very little more is wanting to establish any medium of exchange 
 as a currency than credit or its equivalent — confidence. Evidently, 
 value is not necessarily an element of an efficient currency ; were 
 it otherwise, the utterly worthless nature of the money in use 
 amongst the ancients could never have answered the purpose for 
 which it was used. 
 
 A word we have anglicised directs our revision to what kind of 
 thing money was in the olden time ; and that which, in its nature, 
 it then was it is now, and will be to the crack of doom. The ad- 
 jective pecuniary we get from the Latin pecus, a sheep, and the 
 Romans stole the term from the Greeks, who passed cattle as the 
 equivalent for a commodity exchanged, or, as we now say, the 
 
MONET: ITS U3E8 AKD ITS FORM. 
 
 IS, 
 
 the 
 
 thing purchased. The Romans stamped their early coin with the 
 imase of a sheep, and the coin became pecunia. Shells of a scarce 
 kind were issued in Africa ; and stamped pieces of leather was 
 the money in use amongst the Carthagenians. At the siege of 
 Milan, Frederick II. issued stamped leather for money ; as did 
 King John, of France, who became prisoner to the Black Prince. 
 The leather money of France had a small silver nail in the centre 
 of the piece ; i».nd if John the Good was ransomed by payment in 
 this money, it is not improbable that a large amount was demanded 
 for the king's release. Salt has also been used as money ; and 
 we -have the authority of Adam Smith that, at his day, in a cer- 
 tain village in Scotland, it was no uncommon thing for workmen 
 to carry nails instead of money to the baker's shop and the ale- 
 house. Marco Polo found, in China, the bark of the mulberry 
 tree, bearing the stamp of the sovereign, which it was death to 
 counterfeit, passing as money. Tobacco was used as money In 
 Virginia up to 1660. In 1641 the Legislature of Massachusetts 
 enacted that wheat should be a legal tender — should be received 
 in payment of all debts ; and the Convention, during the French 
 Revolution, long discussed the propriety of adopting wheat as the 
 measure of value of all things. Instances of the various kinds of 
 money, which are and have been in use, might be multiplied to 
 shew that money, per «e, is not value. Take a gold sovereign 
 and you have no further real value than the weight of metal has 
 intrinsic worth for consumption after labor has rendered it fit for 
 utilization, — labor alone rendering everything useful which is so, 
 and utility alone giving value. Thus, it is labor and intelligence 
 which alone give value to the commodity used. But the law has 
 excluded gold from this category. The English Mint price is 
 ^3 17s. lO^d. It is no longer a mercantile commodity regulated 
 by the demand and supply of the market — a price is fixed beyond 
 which it rarely passes ; because this fixed price is far above its 
 value as a commodity, and it is, therefore, shut out of the world's 
 markets. " In short," says a highly intelligent writer upon this 
 subject, " the precious metals must be looked upon in a two-fold 
 asp.-^ct : firstly, as metal; secondly, as money; and to a confound- 
 ing of these totally different natures, characteristics and functions, 
 may be traced all the confusion of thought and apparent mystery 
 which have puzzled every writer upon this subject.'* The con- 
 founding money with wealth ; the considering it the end instead 
 of the means ; the regarding it as a thing in itself instead of the 
 representative, is undoubtedly the source of much confused appre- 
 hension concerning money as wealth, capital and currency. All 
 
8 MONEY: ITS USES AND ITS TORM. 
 
 things useful are wealth, and money is wealth only in its useful 
 character. Aristotle asks, "May not money be an imaginary 
 wealth ? What value has it frofn nature ? Should public confidence 
 or opinion, which gives it circulation, experience a change, what 
 would be its real price ? What real want of humanity would it 
 then supply ? Alongside of a heap of gold one might be in want 
 of even food. What folly, then, to call a thing wealth in the midst 
 of which one might die of want ! " Thus spoke the sage two 
 thousand years ago, yet we are still inclined to dispute the fact, 
 so strongly has habitual error confirmed our obstinacy. 
 
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GOLD AS A CURRENCY : ITS QMBARRASSMENIS. 
 
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 ^' GOLD AS A CURRENCY: ITS EMBARRASSMENTS; ,' 
 
 Money, then, is not necessarily value, but the accredited repre- 
 sentative of value. For, as Mr. McCuUoch puts it, when it is 
 coined metal, the transaction in the adjustment of which it is the 
 instrument is as purely a case of barter as if it had been carried 
 out in its most primitive form by the direct exchange of commodi- 
 ties in kind. And it is only just a hundred years since tobacco 
 was the circulating medium of Virginia, and scarcely more than 
 a century ago that the highly civilized State of Massachusetts 
 made wheat a legal tender in discharge of all obligations. It is 
 perfectly true that gold and silver are the universal media of in- 
 ternational exchange, and have been so for ages ; but this fact in 
 nowise alters their representative character. The price of the 
 precious metals has varied as largely in the different periods of 
 the world's history as it was possible that commodities so facti- 
 tiously favored "ould fluctuate. Even so recently as the wars of 
 the firyt Napoleon, gold rose in Europe to over forty-five per cent., 
 and the British guinea was worth from twenty-eight and sixpence 
 to thirty shillings, according to weight and the wear the coir ' ad 
 uadergone. The increased value was not intrinsically in the gold, 
 but in the increased demand for the medium of exchange, which 
 all countries had agreed to recognize and accept in settlement of 
 their foreign balances. To a limited extent the fluctuation in the 
 price of gold is constantly going on, and the amount oscillates 
 with the Exchange between the gre. commercial centres, the flow 
 'at one time setting in towards Ramb ^rg, at another towards Paris, 
 and anon reflowing to the capital of Britain, when its price or 
 value is greater in London than on the Continent. 
 
 It is clear that that which partakes so largely of instability 
 can never be a perfect standard of value, or a true measure of the 
 value of all other commodities. It may be that gold, from its 
 paucity and indestructability, offers facilities for a standard in 
 advance of any other known material ; and as by common consent 
 it is the universal medium of international exchange or balances, 
 it is the only really available measure by «vhich values can b3 com- 
 mercially regulated. Its utility in such a character is undeniable. 
 But because of this adaptability to a certain function in the mon- 
 etary system which prevails between foreign countries, its despotio 
 
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 1 
 
 10 
 
 GOLD AS A CUREENCY: ITS EMBARRASSMENTS. 
 
 IF' i 
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 obtrusion as a test of the domestic currency is as preposttroua as 
 it is unnecessary and injurious. *'Our system of currency," said 
 The TimeB. speaking at the time of a recent panic, *'will remain 
 imperfect until some mode shall be discovered of enabling it to 
 apportion the supply and demand, without reference to the influx 
 or efflux of specie." 
 
 The radical error of Mr. Peel's Currency laws is the assump- 
 tion that gold has an intrinsic value exactly equivalent to the 
 Mint price, whereas that price is purely arbitrary and factitious. 
 If, for example, £3 17s 9d., the price at »vhich the Bank of 
 England is biund to take all gold offered, were really an intrin- 
 sic and staple value of the commodity, how comes it that the 
 precious motal has been so frequeiitly found to fluctuate in 
 
 Srice ? In the years 1797-9 the price of gold was under the 
 lint price,- but through 1800, 1801 and 1802, the market price 
 of gold rose above the Mint price from six to eight shillings per 
 ounce, and during the subsequent years of the war it continued 
 to keep far above the Mint price : moreover, from 1808, when 
 England was making large foreign expenditures, it not only re- 
 tained the augmented price of previous years, but actually reached 
 £6 12s. Od. per ounce, and the gold which the guinea contained 
 was worth, as a commodity, eight shillings and sixpence more 
 than the value attached to it as an English coin. Now, there is 
 no doubt but this largely increased price resulted from the in- 
 creased demand — the demand being ^ore powerful than the law 
 which fixed the price at seventy-seven shillings and tenpence half- 
 penny. It is to be observed that, during all these first fifteen 
 years of the present century, the Bank of England was rel''jved 
 from cash pd,yments ; bank-notes were a legal tender ; whei dfore 
 the enhanced value of gold could in no if ay have been stimulated 
 by the bank being a competitor in the market, but arose solely . 
 from the demand occasioned by the war. The bank suspenrion 
 lasted from 1797 to 1819 — the bank-vote during the whole period 
 being inconvertible. And what was the result ? Ruin, distress, 
 embarrassment ? Nothing of the sort. Yet such should ha\e been 
 the consequence if the creed of the "hard money-bigots" is worth 
 anything — if it have anything more than the most effete bigotry 
 for i<;s foundation. Never had England been more prosperous 
 thau during the suspension of specie payments. A very able 
 writer upon the monetary system of England remarks upon this 
 period: "While this great demand for gold continued there were, 
 of course, very few guineas in our home circulation ; but bank 
 notes proved such an effectual substitute that the public experi- 
 
 
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 €; 
 
GOLD /s A olrrbncy: its embarrassments 
 
 11 
 
 enced no difficulty in carrying on the internal coinmerce of the 
 nation in them, and the great body of the people thought no more 
 about the price of gold than about the price of diamonds. During 
 that period labor was generally in plentiful demand, and the em- 
 ployers of it were generally well repaid for their outlay — especi- 
 ally thoso who were engaged in improving and increasmg the 
 productions of the soil." Thousards are yet living who can attest 
 to the prosperity which reigned in England during the suspension 
 of "hard-money" payments ; and the same witnesses can prove 
 how quickly all this was changed after Peel's restoration of con- 
 vertibility. Convertibility ! What, in the name of common sense, 
 does the laborer or mechanic care about the material of the medium 
 in which he has wherewith to supply his necessities ? But, then, 
 the "bigots" say importations and foreign liabilities have to be 
 paid in gold. The answer the public have to make is like Pilate's : 
 "Look ye to that." Let those who do a foreign trade transact 
 their own business ; it is not for the mass of the people to be in- 
 convenienced — iiay, impoverished, and, peradventure, ruined — 
 because the foreign liabilities of a mere fraction of the population 
 have to be discharged in a costly metal. To an agricultural com- 
 munity the hard-money basis is a positive injustice. "The system 
 of convertibility," says an intelligent and experienced financier, 
 " operates against industry ; because when prices are high the 
 foreign merchant will draw gold and buy elsewhere and in other 
 markets, but when they are low, then gold flows in and is locked 
 up, giving no benefit to the producer." 
 
 When Mr. Peel introduced his bill into Parliament the market price 
 of gold was eighty-one shillings, but it was imperative upon the Bank 
 of England to provide bullion in exchange for bank notes at the rate 
 of £3 17s. lOJd. per ounce. The market price had to be forced down 
 to meet the bank's difficulty. The only way this could be accom- 
 phshed was by withdrawing Bank of England notes from circula- 
 tion ; and by the time the reduction in price was efiec^ed the 
 currency became contracted by seven million poimdsy or nearly 
 one-third of the note circulation. The consequence was natural. 
 Prices fell twenty-five per cent. ; great numbers of workpeople 
 were thrown out of employment ; within three months of the pas- 
 sing of Mr. Peel's bil? there were riotingg and burnings, and the 
 disastroub Peterloo meeting in Manchester took place. Farm 
 produce in like manner declined, and ruin and discontent were | 
 wide-spread. "In Ireland," says one remarking upon the return | 
 to cash payments, "che condition of the farmer was much worse, t 
 The chief of his produce had to be sent to England to find 
 
t2 
 
 GOLD AS A CURRENCY: ITS EMBARRASSMENTS. 
 
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 a market. The high price of agricultural produce which 
 had prevailed during the war had stimulated the Irish farmers 
 to invest all the money they could obtain in the improved man- 
 agement of their land, in which they were greatly assisted by 
 the local banks ; but the great decline which took place in farm 
 produce, after the passing of the Act of 1819, brought sudden 
 ruin, upon the Irish farmers and (through them) upon ftiany of the- 
 Irish banks." iVb less than eleven hcmks in Ireland failed in one 
 week of 1820, «o sudden and terrible was the effect of the resto- 
 ration to convertibility ! These disasters continued in both coun- 
 tries until it culminated in a dreadful famine in Ireland ; not from 
 the failure of crops, but, as Lord Liverpool stated in the House of 
 Peers, "from lack of money" wherewith to purchase food, ti ^x 
 
 That tho Bank of England should adopt stringent measures to 
 bring down the gold, which the system compelled them to provide 
 against their notes, is not surprising ; it was only self-preservation ; 
 and we see the same thing, under another phase, operating in 
 Canada. The consequence to us 19 still more depressing to the 
 internal trade of the Province than it is to England, where they < 
 have always a large amount of gold coin in circulation. A decrease 
 in our bank issue is, de facto, a decrease in our sole medium of 
 exchange, and the result is ruinously embarrassing to the in- 
 ternal trade of the Province and the labor market. The agricul- 
 turists of Canada are severe sufiferers by this fossil of convertibi- . 
 lity. Necessarily the banks have to protect themselves against a-^ 
 run for gold, which would be fatal to them. The currency is 
 therefore controlled by the caprice or interest of the banks, and 
 the whole internal commerce of the Province — which depends in 
 a great measure upon the abundance of the circulation — is entirely 
 at their mercy. 
 
 The eflfect of such a condition of the currency ia clearly illus- ■ 
 trated by the following hypothetical case of a high British • 
 authority : — " Suppose that gold is used as money, as it now is, 
 that Government issues a certain amount of coins and then shuts 
 the mints ; and that, after such limitation, the population of the : 
 country and the products to be circulated are largely increased. '4 
 In such case it is plain that the exchanges which the limited > 
 amount of money would have to perform would be proportionally ;i» 
 augmented. A smaller sum would, therefore, have t » be appro- f. 
 priated to each transaction, or, which is the same thing, money «< 
 prices would be diminished. This conclusion is so self-evident as » 
 to admit neither of doubt nor cavil; and therefore it appears that, j^' 
 when the supply of money is limited, the amount of it given itt I 
 
GOLD AS A OUBRBNGT: ITS SMBARRASSMENTS. 
 
 m 
 
 exchange for commodities varies inverselj as the demand, and is 
 affected by nothing else. It follows that, if double the usual sup- 
 ply of commodities be brought to market in a country with a 
 limited currency, their money price would be reduced one-half; 
 and that if only half the usual supply were brought to market it 
 would be doubled ; \nd this whether the cost of their production had 
 increased or diminished. . Products are not, then, exchanged for 
 money ; because, when metal, it is a commodity which maybe advan- 
 tageously used in the arts, and has cost a certain quantity of labor, 
 but because it is the universal equivalent, or legal tender, adopted 
 by society and, as such, willingly received by every one." ft is 
 needless to point out how irresistably this applies to Canada, where 
 we are solely dependent upon the issues of private banking estab- 
 lishments, whose interests must often unavoidably clash with those 
 of the trading public. It is & most undesirable condition of our 
 domestic trade and productive labor, making these two compre- 
 hensive interests dependent upon the will or greed of soulless 
 corporate bodies. The circulation of Canada is always under 
 what ough+. to be its average, by several millions ; because, for- 
 sooth ! our system must be a sham. No greater humbug exists 
 than the pretence that the banks are always prepared to meet 
 their notes in gold ; nor is there the slightest necessity that they 
 should be so if a proper order of things obtained. But while we 
 go en with this "bigotry" about convertibility across the counter, 
 the banks simply protect themselves by a contraction of their 
 issues, trade becomes crippled by the operation, and the resources 
 of the country go undeveloped. What is wanted, in order to give 
 the Province a forward movement, is a consistent, unfluctuating* 
 euirency, of a national character. 
 
 ;4'>i^ 
 
 »-■■ .'» ' '.;i.'. 
 
 IS, 
 
 
 

 14 
 
 aOLD AN UNRELIABLE blANDARD. 
 
 I: I 
 
 liii; 
 
 ii'ii 
 
 FPfe GOLD AN UNRELIABLE STANDARD.'* !\"^ 
 
 
 The Government of New Brunswick, some two years back, in- 
 troduced and carried through the Legislature a measure for 
 empowering the issue of Treasury notes to the extent of four " 
 hundred thousand dollars. These notes are received by the Gov- 
 ernment for taxes, dutias, and the like. Hon. R. D. Wilmot 
 explained the nature and operation of the proposed measure, and 
 observed that the issue of Treasury notes was no new idea ; that 
 two bills of the same character had been passed on former occas- 
 ions by the Lower Chamber, which were subsequently rejected by 
 the Legislative Council, at the instigation and through the influence 
 of the banking interest. The Secretary contended that it was , 
 perfectly justifiable to issue Exchequer notes to the amount of the 
 revenue ; and that inasmuch as the revenue was $700,000, all of 
 which, under the law, was payable in gold, the notes now proposed 
 to be issued were of equivalent value to the metal coin, as far as 
 the amount on their face. This would necessarily be the case 
 when they were paid in as duty or taxes. No valid objection 
 appears to have been offered to the principle ; most of thft speakers, 
 in the discussion upon the bill, admitted that a considerable sav- 
 ing would accrue to the Province, but the more cautious feared 
 the possibility of abuse of the privilege of issue. But surely this 
 is a most ungrounded apprehension, when Parliament has the 
 power to restrict the amount. 
 
 It is not so often because a thing is novel in itself that we 
 object to its adoption, as to the habits and predilections for old us- 
 ages and customs. We have learned to believe in gold, intrinsically 
 the most worthless of metals ; and, without the aid of an 
 arbitrary compact and legislative enactment would be one of the 
 cheapest and least prized. But men put their trust in it because 
 they have been so taught. And what is this trust but con- 
 fidence in the stability of the general agreement to accept it as 
 the universal representative of value ? Its modern history, 
 as recently exemplified in the United States, has proved what 
 an amount of fallacy we have been fostering in our theories con- 
 cerning money, capital and currency. "Why," said the New , 
 York Worldy a short time since, "do not prices follow gold? Our 
 currency is probably as redundant now as it has been at any time ; 
 during the war, ana the prices of most articles of immediate con- 
 
GOLD AN UNRELIABLE STANDARD. 
 
 16 
 
 
 sumption are correspondingly high. This is perfectly regular, 
 and in strict conformity with the general theory. But here gold, 
 which is the accepted weather-guage of the monetary dtmosjc here, 
 the universal measure of values and standard of prices, comes in 
 to perplex our conceptions. &old has gone down without any 
 corresponding reduction of the currency. Gold has gone down 
 without bringing down the prices of consumable commodities. If 
 we could lay the fall of gold out of view all would seem consistent. 
 There would then remain the simple phenomena of an inflated 
 currency, and high prices correspondent to and consequent upon 
 the inflation. If commodities should fall to the level of gold, it 
 would still remain to be explained why prices have fallen without 
 a reduction of the swollen volume of the currency. If commodi- 
 ties should not follow gold, it would still remain to be accounted 
 for why gold has lost its power to regulate the prices of other 
 things. As a first step towards the solution of these enigmas, let us 
 suppose our coasts surrounded by a wall of fire, intercepting all 
 intercourse with foreign nations ; gold remaining, as at present, 
 demoneytized. The immediate consequence would be a great fall 
 i«i gold, without any material disturbance in the prices of other 
 things. Gold would be of little value, because there would be 
 but little use for it; and the prices of other things would be regu- 
 lated by the amount of paper money in circulation." , .^ n 
 According to this illustration, gold is merely a factitious Stan- 
 dard, which caprice or circumstances may at any moment demoney- 
 tize. Yet political economists insist that the currency of a coun- 
 try must be based upon this unsteady foundation. In the United 
 States gold has been demoneytized for the last six years, and, 
 notwithstanding this departure from all the ancient theory oi 
 Adam Smith and company, trade has flourished, the people have 
 been prosperous, fortunes have been made and public works pro- 
 ceeded with ; and all has been carried on — the war to boot— with- 
 out gold either as currency or its basis. Then again, the same 
 journal teaches that " The precious metals are neither wanted for 
 domestic monetary transactions nor for purposes of ornament. 
 They are in demand only for the payment of duties, and the great 
 falling off of importations has reduced this demand to one-half of 
 what it was a year ago. Gold, therefore, falls under the laws of' 
 supply and demand — just as cotton might fall, without immedi-^ 
 ately affecting the prices of other things." Nothing can be more 
 easily understood than the commonplace fact here stated. Gold 
 is not wanted until we require value to be sent abroad ; and as 
 that metal is the universally-acknowledged representative of value, 
 
; 1 
 
 16 
 
 GOLD AN UNRELIABLE STANDABD. 
 
 i I 
 
 II i 
 
 !! > 
 
 it is the medium by which we can make parments at a distance, 
 where our paper is unknown. A Bill of Exchange answers the 
 same purpose, and the subsequent transactions arising out of a 
 payment made by bill might go on ad m^m'^wm without gold being 
 seen in any one of them. Domestic monetary transactions reqmre 
 only confidence in the medium of exchange — a something which 
 the whole country recognizes as a national representative of pro- 
 ductive labor ; and that confidence once established, it matters 
 not whether the circulating medium be a piece of bone, a leather 
 medal or a nicely engraved note, payable to Abraham Newland, 
 Bill Sykes, or other notability of high or low degree, so that the 
 bearer can discharge with it the debt he owes or obtain the com- 
 modity he requires. v ■■■'' ^ ? .?n^^^«/ . 
 The Legislature of New Brunswick has acted with a wisdom 
 that speaks well for the progressive intelligence of that body. 
 "The only objection I have to the bill," said Mr. Needham, "is 
 that it does not go far enough, — that it does not make the notes 
 legal tender." This is precisely the weak point of the measure. It 
 wul necessarily be the unpopular feature in its operation. It has 
 the appearance of being a scheme rather for the relief of the Gov- 
 ernment than a measure devised for unshackling the currency — 
 freeing it from the limit with which a gold-paying basis fences it 
 around; thus restricting the supply to the amount of gold held 
 by the banks. The only real advantage of making the current 
 bills of a bank redeemable in specie is the security it offers against 
 over-issue. And even in this respect the security is more of a 
 pleasing fiction than a fact; for while the issues of Canadian 
 banks amount to twenty millions, there is not, in all probability, 
 in the whole Province, four millions of coined bullion. If, then, 
 the security against over-issue were found in some other way than 
 the locking up the eleven or twelve millions which the banks re- 
 turn as their safety-fund to meet their current liabilities, that 
 amount would be added to the capital of the country, and be 
 available for investment. That the currency of a country being 
 based on its redemption in gold is by no means the unmixed good 
 that the money-doctors would persuade us is most certain. We 
 have only to note the havoc in mercantile houses which the sudden 
 determination of the Bank of England to curtail its issues inevi- 
 tably entails ; but it is the buffer against which the bank receives 
 a heavy run for gold. By this means it saves itself, but ruin 
 ensues to those who have made engagements upon the belief 
 that things would continue without any sudden and violent 
 derangement. 
 
GOLD AN UNRELIABLE STANDARD. 
 
 17 
 
 iistanoe, 
 v^ers the 
 )ut of a 
 Id being 
 require 
 ; which 
 of pro- 
 matters 
 leather 
 ewland, 
 hat the 
 he corn- 
 wisdom 
 t body, 
 im, "is 
 e notes 
 lire. It 
 It has 
 \e Gof- 
 ency — 
 nces it 
 d held 
 jurrent 
 ^.gainst 
 e of a 
 nadian 
 ibility, 
 ', then, 
 y than 
 ks re- 
 ) that 
 md be 
 being 
 Igood 
 We 
 adden 
 inevi- 
 oeives 
 t ruin 
 belief 
 iolent 
 
 Blackwood's Magazine has a very able article upon this subject, 
 from which the following valuable remarks are taken : — ^ 
 
 ** These, then, are the causes which produce the occasional drains of gold 
 from the bank, and such- are the limits by wliich these drains are circumscribed. 
 But never — not in a single instance — is gold demanded from the bank from any 
 loss of faith in its notes. No one doubts the value of the Bank of England's 
 
 NOxES, AND THE POWER OF CONVERTING THEM INTO GOLD IS NEVER DESIRED, 
 SAVE AS A MEANS OF PROCURING GOLD FOR ExPOP.T, BY THE PARTIES AND FOR 
 
 THE PURPOSES WHICH WE HAVE SPECIFIED. This city of gold is based upon gold, 
 and the foundation is found to be pro eminently unstable and perilous. The gold 
 base perpetually oscilates to and fro, and each of its greater oscillations is felt 
 like the shock of an earthquake. It rises and falls, expands and contracts, and 
 sometimes seems to slip away from beneath the city altogether. Then goodly 
 houses go down by the dozen — not because they are ill-built — not from any fault 
 of the architecture or occupants, but simply because the foundation on which 
 4hey all stand has given way. Of late years these oscillations have become 
 more frequent and more serious, and every ten years or so a convulsion takes 
 place — not of nature, but by Act of Parliament — which spreads terror and 
 disf-ater throughout the Golden City, and paralyses the whole coin'^'T as 
 effectually as if an earthquake had strewed with ruins the great seat o^ t r 
 national industry. The merchant and the manufacturer, the shop-keeper w 
 the day laborer, alike find their ti-ade stopped and their gains swept away. Sui- 
 fering and want spread over the land as if there were a famine. There is a 
 paralysis of trade, a dearth of employment ; and the hard times are felt by the 
 mill-worker and brick-layer not less than by the magnates of the trading and 
 commercial world. Is there not something wrong here ? Ought the presence or 
 absence of a tew millions of gold to make the difference between national pros- 
 perity on the one hand and national disaster and wide-spread suffering on the 
 other ? How will Posterity speak of us when it sees that we made the 
 
 HUGE fabric of OUR KaTIONAL INDUSTRY STAND LIKE AN INVERTED PYRAMID, 
 RESTING ON A NaRROW ApEX, FORMED OF A OhAMBERFUL OF YeLLOW DROSS ? 
 
 Will they not laugh at our folly — our barbarism ? When the usual supply of 
 gold is temporarily diminished why should our usual credit system be restricted 
 in proportion, or totally suspended ? Of what use is credit but to take the place 
 of payments in coin? Was it not for this purpose, and for this alone, that credit 
 and paper money were adopted ? Why, then, not make use of our credit system 
 as a means of compensating the temporary absence of gold ? Why not tide 
 over the diflSculty instead of aggravating it ? and sc avoid the tremendous suf- 
 fering which are ever recurrent under our present system of monetary legisla- 
 tion. Suffering thousands and starving myriads signalise each great monetarv 
 crisis. Even during the last year, though the crisis of evil has been escaped, 
 the usurious bank rate of 9 or 10 per cent, has swept away the profits of trade 
 into the pockets of bankers and capitalists. Parliament inflicts misejy upon the 
 country out of an antiquated deference to some bits of yellow dross. Is this 
 
 WISDOM, IS IT HUMANITY, IS IT CIVILIZATION? It 13 BARBARISM AND FOLLY, 
 preached UP BY THE MONEYED INTEREST, THE HIGH PRIESTS OF MaMHON, AT THE 
 EXPENSE OP THE COMMUNITY I " 
 
 "When, in 1825," says FuUarton, "the run on the banks was 
 averted, and the Bank of England itself probably saved by the 
 discovery of a box of eight or nine hundred thousand one pound 
 notes, which had been laid aside in some corner of the Bank and 
 
 
 
18 
 
 GOID AN UNRELIABLE STANDARD. 
 
 
 m 
 
 I "in 
 
 !i'l 
 
 III! 
 
 i t 
 
 forgotten, it has never been alleged or pretended that anything 
 but benefit ensued from the issue of these notes on that occasion. 
 ♦ * * * jjad the experiment been thought of earlier, some 
 portion of the severity of the crisis might very, possibly have been 
 spared." And this able moneyist regards this instance as the 
 " illustration of a great principle, and an important lesson and 
 example for after times." It was this principle which Mr. Chase 
 had the courage to put into practice, and which has so astonished 
 the bullionists of the old world, where they are not prone to believe 
 in innovations, even though adherence to old usages brings ruin 
 periodically to thousands. Thus is it in the moneyed world of 
 Europe ; and, to compare small things with great, so is it in 
 Canada. The banks only act with prudence in restricting, or 
 withdrawing, their issues when they perceive cloudy weather ahead^ 
 or when they fancy the trading bark is carrying too much sail. 
 It is unquestionable that with us gold can only be needed to pay 
 the balance of importations against us, and therefore perfectly 
 useless in all domestic transactions. Immediately that circum- 
 stances beat the controllers of the currency in the States gold 
 became a trading commodity, and was dealt in precissly as any 
 article of merchandise, subject to a species of barometrical influ- 
 rnce. And, call it what we will, a depreciated currency or a high 
 price of gold, there was the fact. The paper currency performed 
 its functions without the aid of the metal. In Nova Scotia, too, 
 they have long since been accustomed to Treasury notes, and the 
 result appears to have been satisfactory ; but, like their neighbors 
 in New Brunswick, they have halted at the point where most 
 general good was to be achieved ; where labor and enterprise 
 would have been aided, and where the development of the resour- 
 ces of a new country would have derived facilities — that of a free 
 paper currency, upon a legal tender and not a gold basis. 
 
 I) 
 
 lij'' 
 IP 
 i 
 
 
 
 
 - '■ .. : (■/-.. .- 1 , -s . -.A • ' 
 
 i 5 i 
 
 m' 
 
 ,' ' - •: -'I," .; ' fe ., "■ ■■-., .. - .■■4.,' 'i.' i '' 
 
 
 
 ;in 
 
 i-.n 
 
 ■'}}.■:_ 
 
PAPER AS CURRENCY : ITS ACHIEVEMENTS. 
 
 19 
 
 anything 
 occasion. 
 Her, some 
 have been 
 ce as the 
 isson and 
 ^r. Chase 
 stonished 
 to believe 
 ings ruin 
 world of 
 is it in 
 cting, or 
 er abead^ 
 uch sail, 
 id to pay 
 perfectly 
 circum- 
 tes gold 
 ' as any 
 |al influ- 
 r a high 
 rformed 
 tia, too, 
 and the 
 ighbors 
 •e most 
 ;erprise 
 resour- 
 >f a free 
 
 : ' M •■ '-■ 
 
 ' '* 
 
 
 "■■ .;;r 
 
 PAPER AS CURRENCY: ITS ACHIEVEMENTS. 
 
 ;j; 
 
 It was a bold step of Mr. Chase to take upon himself the respon- 
 sibility of supplanting the private issues of the banks by Govern- 
 ment paper, irrespective of the liking or disliking of the measure 
 by the banking interest ; and the result goes far to prove how greatly 
 inimical to the public welfai are those vested monopolies which 
 confine the trade in money to formal and antiquated grooves, out 
 of which he who would travel 'm cried down a^ a reckless innovator. 
 It can hardly be denied the the spirit and magnitude of the several 
 warlike expeditions — armaments which for promptitude and 
 extent have never been equalled — have been due to the boldness 
 and freedom of the financial policy. It is true, we may be told to 
 wait and see the consequences of a departure from the acknow- 
 ledged and well-tried laws observed in money operations, but we 
 have already certain facts which lead to inevitable conclusions. 
 Prophets have not been wanting who predicted a grand collapse ; 
 but there is really no absolute reason for very general disaster 
 ensuing from a temporary superabundance of the circulating 
 medium, so long as the people are content to receive it in exchange 
 for goods and labor amongst themselves, that is in the transactions 
 of domestic commerce. Even granting there is danger from a 
 redundancy, the evil is one that must eventually cure itself ; the 
 surplus being either wasted or lying idle ; while, on the other 
 hand, an insufficient currency necessarily cripples all enterprise 
 and renders labor unproductive. 
 
 It is of little importance of what material the medium is 
 made if it answers the purpose of parties requiring its 
 agency. The medium by which we exchange thoughts is 
 mere arbitrary signs, used by common consent to represent 
 any and every given idea ; and it is not until we want to convey 
 the idea abroad that we find a difficulty ; our sign, our symbol, 
 our medium is not current ; it is not accepted at the value we 
 place upon it and which it readily commands at home, where it 
 answers every purpose. So is it with the currency or circulating 
 medium of any country ; it is perfectly good so long as it keeps 
 within its own bounds, but offer it to the foreigner and he declines 
 to recognise it. Which then is of the first importance, to feed 
 and foster our own population and its interests, or to look to the 
 
i .!! 
 
 20 
 
 PAPER AS CURRENCY: ITS ACHIEVEMENTS. 
 
 convenience of foreign intercourse ? Tlie financial statesman will 
 tell us both are essential. But, he could not, we apprehend, say 
 that we should only use that particular material for a domestic 
 medium which would be accepted in a foreign market. If such a 
 rule were to prevail there are few countries that would be found to 
 have gold or silver enough to carry on all the transactions of their 
 domestic commerce. And after all, the value of gold as a standard 
 is entirely arbitrary, and only remains less fluctuating than other 
 metals by virtue of its limited quantity. Had Mr. Chase adhered 
 to a currency convertible into gold he would have been brought 
 to a stand-still long before the fourth year of the war, and the 
 country would have been bankrupt. He had wisdom enough to 
 see that currency was indispensable to call into operation the 
 latent resources possessed within the United States ; but he also 
 perceived that currency was not necessarily coined metal. And 
 here we may illustrate what the American Secretary seems to have 
 discovered by quoting an English writer upon "Banking and 
 Currency Reform ": — ^ ' - , . . 
 
 " Currency is coin or notes that have been declared legal tender 
 by Act of Parliament ; all else is only capital or money. Gold, 
 Silver, Copper Coin and Bank Notes is, strictly speaking, currency 
 and not capital, for they are the means of transferring property 
 from hand to hand irrespective of their intrinsic value, which is 
 the use and object of Currency. 
 
 " Currency is coin and legal tender notes or circulating medium, 
 by which property or capital is transferred from hand to hand. 
 It is therefore quite distinct from capital, for the thing which 
 transfers cannot be the same as the thing transferred. Such being 
 the important functions of currency, it will be understood that 
 great calamities must ensue whenever a want of it occurs, or a 
 want of confidence in the ability of the system to supply it in the 
 future. Look at a game of cards when a short-coming of counters 
 occurs. A kind of panic and a stoppage Cf the game takes place, 
 although every one knows there is sufficient capital in the pool 
 to meet engagements. This panic, it will be observed, occurs not 
 from the want of capital, but from the want of currency, as in the 
 case of the money crisis through which we are now passing, which 
 has caused a^ serious stoppage of trade, as shown by the falling 
 off of our imports and exports. Coin and bank notes may be 
 considered mere counters ; and all we have to do to perfect the 
 system is to see that there is always enough of counters, and 
 these of a sound description, equal to any strain that may come 
 upon them. At present we have neither enough counters, nor 
 
PAPER AS currency: ITS ACHIEVEMENTS. 
 
 21 
 
 these of a quality equal to the contingencies of trade. We may 
 have enough for fair weather, but certainly not for foul, and it is 
 principally to provide against contingencies that the Exchequer 
 notes are wanted." 
 
 Although the above remarks were written in reference to the 
 evils which have flowed from the fluctuations of gold in the cellars 
 of the Bank of England, they are of such universal application 
 that they meet alike the approval of Mr. Chase's policy and the 
 present need of Canada. A country with great natural resources, 
 whatever be their nature, requires currency or, as we loosely call 
 it, capital for their development. This development is denied to 
 the Province because, as in the allegory of the card-party, we 
 have not sufficient counters to carry on the game. Look, for 
 example, at our rich and inexhaustible mir eral resources ; and, 
 again, at the oil districts ; in neither case are Canadians able to 
 open up this latent wealth. They are compelled to stand aside, 
 while Americans, more happily circumstanced in the facilities 
 their monetary system afibrds, come in and reap the harvest the 
 native is unable to garner. But what is the remedy ? Evidently 
 that which, giving the currency an elasticity, would make it 
 adequate to the wants of trade and enterprise. So long as all 
 business must be done upon a gold basis, so long must our bnsiness 
 transactions be restricted, and all trade confined within the limits 
 of the banker's fears or his interest. The true remedy for the 
 evil which weighs so heavily upon the enterprise and energy of the 
 Province is an issue of Government Legal Tender notes. Ah ! but 
 these notes will not be convertible, say our currency doctors of 
 the old school. Exactly that. And therein lies the virtue of the 
 remedy. Make them convertible across the counter as now, and, 
 as now, you will have them come back as fast as you pay them 
 out. If our bank bills had had less of that convertible element in 
 their nature the Province would have been less inundated with 
 American silver, and the banks would have been able to keep 
 their gold. For all the purposes of domestic trade no convertibility 
 is needed, and a legal-tender note, it is presumed, would purchase 
 exchange or gold as readily as one that is not' a legal tender. 
 . If the Government were to issue Exchequer notes not bearing 
 interest nor convertible, making them a legal tender for all sums 
 and purposes, to be purchased and acquired by banking firms and 
 others, with Government securities or cash, not only would an 
 enormous saving accrue to the Province, but an impetus would be 
 given to manufactures, a greater enterprise amongst our people 
 would be evoked, and a general advancement in prosperity would 
 
ill 
 
 PAPER AS currency: ITS ACHIEVEMENTS. 
 
 result from the increased facilities which the monetary establish- 
 ments of the country could then, without danger to themselves, 
 afford to the various operations of commerce and industry. The. 
 abundance of the currency has had, at least, one wholesome effect 
 in the States ; whereas credit used to be the general and prevailing 
 system, all are now cash transactions. Of course it is not pre- 
 tended that no man owes for a coat or a pair of boots, but that the 
 mode of carrying on retail business as well as wholesale has under- 
 gone a great change is most certain. This would seem to indicate 
 that the insufficiency of the currency for the wants of the com- 
 munity may, in a degree, be measured by the prevalence of credit 
 amongst retail dealers. There certainly appears to be an a priori 
 cause in the non-possession of money payable at once that a defi- 
 ciency makes delayed payment a positive necesnity. Certainly 
 there is an alteration for the better in this regard in the United 
 States ; and it is a very reasonable inference to assume that, as the 
 currency has become plentiful the necessity for deferring payment 
 no longer exists. These are considerations which will now have 
 to be weighed upon this continent. The civil war of our neighbors 
 has elicited a financial policy that has astounded the world, and 
 upon the dire consequences of which a great deal has been 
 prognosticated. Up to the present time nothing serious has 
 resulted ; and if three thousand millions of indebtedness can be 
 worked oflf as skilfully as it has been created, without incurring a 
 foreign liability, our cousins will have taught the world a lesson 
 in finance that will explode the long cherished bubbles of Adam 
 Smithf UicMdo, et hoc genus omne. ' . '' ' ; 
 
 I' 
 
 i 1 
 
 f '->,.: 
 
 
 
 rH>I, VL.:i 
 
 
 
GOLD AS A MEASURE OF VALUE. 
 
 28 
 
 M '•' 
 
 ■■>> 
 
 GOLD AS A MEASURE OF VALUE. 
 
 Money is the one commodity which all have agreed to accept as 
 the general equivalent of exchange for their productions or ser- 
 vices ; and it is from its usefulness in this office that, whether of 
 metal or paper, it is usually termed the currency of the country 
 in which this peculiar function is exercised. But as we all know 
 even money — and that good money too — is not necessarily cur- 
 rency. Not only is foreign coinage not currency, but that which 
 is hoarded or withdrawn from circulation under any pretext, 
 although native and legal, is no longer currency ; while it still 
 remains money. It is evident, therefore, that money withdrawn 
 from the circulation is worthless simply because it has ceased to 
 be useful. This is precisely the condition of all the gold locked 
 up in the cellars of the banks. It is withdrawn from circulation, 
 disabled from being productive — in short, useless ; and since nothing 
 has value which has not utility, this fancied treasure turns out to 
 be valueless. "Not so," cry the gold-basis men, "thfs is the 
 foundation of our currency, of our bank bills." But, we reply, is 
 it necessary to lock-up on© dollar for the sake of putting forth 
 another, is your gold dollar not as convenient as that of paper ; 
 does it command less confidence, or, in using the paper dollar, 
 have you two producing dollars instead of one ? Nothing of the 
 sort ; you have locked up one to replace it with another ; which 
 other has value, not because it can be exchanged for metal, but 
 from its power of production in the service it will purchase ; it 
 will convert a valueless log into a cord of fire wood ; it will make 
 a set of horseshoes out of a worthless piece of iron, and leave the 
 world the result of its productive ability. What has the gold 
 dollar been doing in the interim ? Lying in the cofiers of a bank, 
 idle and unproductive. It has had no value ; it has contributed 
 nothing to the material wealth ; it has been without service to 
 humanity, while its supposed representative has efiiected an amount 
 of good in the services its activity has commanded — its circulation 
 has created material wealth. All transactions between man and 
 man, reduced to their primitive elements, are barter or exchange. 
 We don't seek money for itself, but for the enjoyments of life, 
 which it enables us to obtain. And, inasmuch as the world has 
 progressed beyond the age of the rude commerce in which com- 
 modities were accepted in exchange for others, the world has 
 
24 
 
 
 1 
 
 1^1^ 
 
 iiii 
 
 GOLD AS A MEASURE OP VALUE. 
 
 agreed to recognise a general media in gold and silver. This is 
 done by common consent, and not from the intrinsic value of the 
 metal. " The exchange," says McCulloch, ^* of a quarter of corn 
 for an ounce of pure unfashioned gold bullion is undeniably as 
 much a barter as if the corn was exchanged for an ox or a barrel 
 of beer , but supposing the metal to be formed into a coin, that is 
 impressed with a stamp indicating its weight and fineness, that 
 circumstance would evidently make no change in the terms of the 
 barter. Coins, instead of being in the same light as bullion or 
 other commodities, have beer regarded as something mysterious ; 
 they are said to be both signs and measures of value. Gold and 
 silver do not measure the value of commodities more than the latter 
 do gold and silver. The quality of serving as a measure of value 
 is therefore inherent in every commodity ; but the slow degree by 
 which the metals change their value render them peculiarly well 
 fitted for forming a standard by which to compare other and 
 more variable articles. The desire of uniting the different qual- 
 ities of invariability of value, divisibility, durability, facility of 
 transportation and perfect sameness, doubtless formed the irres- 
 istible reasons which have induced all civilized communities to 
 employ gold and silver as money." i * , • . . .r ,, 
 
 Again, the price of gold is X3 17s 10|d pei^ ounce — at least 
 so the Mint and thelaw will have it. But commerce, the need . 
 of the times and its contingencies, are sometimes stronger than 
 even the legislature and the mints. This strength on the part of 
 the market is only apparent when some fortuitous circumstance, 
 as war or the like, causes a sudden and large demand, and then 
 gold exceeds the Mint price, which it did at several periods 
 anterior to 1815, and during the long war. Gold, however, as 
 we have seen, has to be considered in two aspects, as a commodity 
 and as a measure of value. As a commodity its market is not 
 comparatively extensive. The arts requiring only a limited 
 quantity, and the demand appears to be fully supplied without 
 the artizan coming into the market as a competitor with the Mint. 
 The natural inference is that the Mint is the larger customer, and 
 by having a fixed price at which it will buy all gold brought to 
 it keeps up an artificial price. The large influx from California, 
 Australia and other places have made no change in the price of 
 gold, as a corresponding increase in the production of any other 
 commodity certainly would have done. " The commercial man," 
 says Mr. Galbraith, in his clever pamphlet on the Moneiary;, 
 Theory, " sensitively awake to the changes continually going on. 
 in the markets, caused by a deficiency or excess of supply in any' 
 of the commodities, is perfectly confounded by the anamalous 
 
GOLD AS A MEASURE OF VALUE. 
 
 tn 
 
 nature of gold in this respect." Where does it all go to? into 
 what vortex is it absorbed ? It is hidden away in dark cellars as 
 the basis of the monument of the financial ignorance and stupidity 
 of the nineteenth century. Mr. Galbraith remarks, " The arts 
 are fully supplied, and there still exists over and above the 
 demands of the arts an immense quantity, in the circulation and 
 vaults of the banks throughout the world, as money and its basis. 
 This it must be understood is already an o^ ci'plus, or it would not 
 remain there. Of what use or value can it be ? That is the 
 question. I do not hesitate to draw the conclusion : All the gold 
 in the circulation and in the vaults of banks, in bullion and coin, 
 as money, is valueless." And again, " with a determination to 
 pluck out the secret of this mystery we arrive at this conclusion, 
 startling as it may at first appear — that every ounce of gold in 
 the world, over and above what is required by the legitimate 
 demands of the arts, is valueless." If this be true, what a cruel 
 robbery is the fixed price of the Mint, and *That a wretched 
 imposition is the pretended gold basis. " I really know not," 
 says Fullarton, on the Regulation of the Currency, " why such 
 enormous stores of coin are hoarded up at so vast an expense, if 
 they be at all times inexcrably withhi^ld from the public, what- 
 ever be the urgency of the need." Mi-. Ricardo said that money 
 in its most perfect state is paper money ; and Moran remarks 
 that " paper money is preferable to any other, because it is 
 lighter, more easily handled, counted and transported, at the 
 same time that it offers the greatest additional advantage of being 
 the cheapest material out of which an instrument to facilitate the 
 exchanges of commodities and services could be made." Again,' 
 we have Adam Smith declaring that " the substitution of paper, 
 in tlie room of gold and silver money, replaces a very expensive 
 instrumert of commerce with one much less costly and sometimes 
 equally convenient. Circulation comes to be carried on by a 
 new wheel, which it costs less both to erect and to maintain." 
 The great argument against paper money is drawn from the abuse 
 which has attended its adoption on various occasion. But surely 
 the abuse of a thing is no valid reason for its universal rejection. 
 What of the good gifts of Providence is not capable of misuse ? 
 Which of these blessings has not been abused ? Are wo to forego 
 the enjoyment of all luxury because fools have committed excess, 
 and unprincipled men have committed public wrong ? With paper 
 money, as with everything else, the great point is to arrive at a 
 knowledge of the commerciul requirements of the community* 
 " If there v/ere perfect security that the power of issuing paper 
 
26 
 
 GOLD AS A MEASURE OF VALUE. 
 
 T 
 
 I! : 
 
 P 
 
 I!i 
 
 money would not be abused, that is," says McCuliocli, " if there 
 were perfect security for its being issued in such quantities as to 
 preserve its value relatively to the mass of circulating commodities 
 nearly equal, the precious metals might be entirely dispensed 
 with, not only as circulating means, but also as a standard to 
 which to refer the value gf p?iper." These authorities fully 
 answer the objections generally urged against paper money. In 
 no case does the history of currencies lead to the conclusion that 
 any element inherent in paper money, as a circulating medium, 
 justifies its rejection. On the contrary, whenever it has failed, 
 or evil consequonces have followed its adoption, the bad resul*-. 
 has been caused by a disregard of the principles which should 
 control its management. 
 
 While citing these acknowledged authorities, it may be well to 
 quote a modern and very able writer upon money and its uses, to 
 show that very many of the soundest thinkers of the present day 
 ridicule the theory which governs the gieat medium of the world's 
 commerce. " If it were once generally and clearly understood 
 that money is a mere instrument that facilitates the exchange of 
 commodities and services, and that the great desideratum of a 
 proper circulating medium is, not its redemption in gold and silver, 
 but its redemption by (which means its acceptance in exchange 
 for) comLiodities and services, the forced redemption of bank notes 
 in coin might be entirely dispensed with ; and, along with specie 
 redemption will inevitably disappear financial panics such as, here- 
 tofore, have so frequently occurred, often in the midst of an unu- 
 sual abundance of commodities, solely from a fear of an inadequate 
 supply of money, of an instrurrent only uSv>ful as a means of ob- 
 taining the very commodities of which there exists a glut ! Can 
 anything be more absura than to be panic-stricken from the fear 
 of the lack of a symbol, when we possess in abundance the very 
 things it symbolizes ? Whenever bank notes shall cease to be re- 
 deemable in coin, on demand, they will be freely issued to those 
 who will pay interest for them and furnish ample security for their 
 return within a specified time. The return of bank notes in re- 
 payment of loans is an ample and proper means of redeeming them, 
 and will always prevent the currency from becoming redundant. 
 There will then always be an adequate supply of money ; prices 
 will become regular, as they will be solely controlled by cost of 
 production, supply and demand ; and we shall no longer see com- 
 modities Bucrificed, and commerce and industi*y disorganised, 
 merely because the controllers of money refuse to furnish a supply 
 adeq^uate to uffect the current exchanges of coiimodities and 
 services." , ,-. 
 
A corollahy and a suggestion. 
 
 27 
 
 . A COROLLARY AND A SUGGESTION. 
 
 It is not » little remarkable that in so advanced a stage of 
 industrial pursuits and the extension of domestic commerce as 
 that which prevails in all civilized countries, at the present d^y, 
 no settled theory concerning the potent instrument that aids and 
 accelerates each operation has obtained a general acceptance. 
 Scarcely any two of the many able essayists who have attempted 
 to prescribe a code of laws regulating money, agree even in the 
 definition of that most useful but ordin . y commodity. It is not 
 surprising, therefe^'e, that, if we have no admitted predicate for 
 its chief term, the problem of its best practical adaptation to the 
 hourly purposes of local and domestic trade should also remain 
 unsettled, and the medium by which commercial transactions are 
 commonly facilitated appears in variously modified forms, each 
 having its advocates and opponents. 
 
 Rightl;y considered, the circulating medium of a country has no 
 more to do with banking or the banker than with any other indivi- 
 dual who simply buys money with his wheat, timber or other 
 merchandize. Unfortunately, however, those whose legitimate 
 province it is to regulate currencies are rarely, perhaps never, 
 free agents ; their actions being fettered by the circumstances 
 which surround their position — circumstances which, although 
 wholly extraneous to the regulations of the currency, are never- 
 theless compulsory upon those who ought to be its sole and 
 independent controllers. Governments, like ordinary traders, arc 
 often compelled to seek pecuniary accommodation, to anticipate 
 the incomings ; and from whom should they seek the required aid but 
 from the money dealers ? This class, from the very nature of their 
 calling, are ever shrewd hands at a bargain, and might, on an 
 occasion, seriously embarrass a government by a refusal. It :j 
 obvious, therefore, that the Minister whoso duty is the timely 
 provision of the Wa^s and Means must desire to stand in the 
 most favorable light and friendly relations with persons possessing 
 so much power to assist or inconvenience. In plain English, the 
 bankers must not be offended — coute qui coute their interest must 
 be favored, and in what more effectual way can they be propitiated 
 than by giving them a monopoly of the coinage of the currency, 
 with the irresponsible contro" of its circulation. Such is the 
 
23 
 
 A COROLLARY AND A SUGGESTION. 
 
 •ill 
 
 4: 
 
 fortunate position of the bankers in Canada, and such is the 
 inconvenient and fettered condition of its currency. To attempt 
 any innovation upon the antiquated system would bring ^uch a 
 hornet's nest about the ears of the Minister, who should have the 
 hardihood to venture upon its revision, as would appal the boldest. 
 Have we not heard of an intended Bank of Issue — have we not 
 had a more recent experience of a Legal Tender issue by the 
 Government ? Both these moves were in the right direction, but 
 neither has been carried out to its legitimate result — extraneous 
 influence burked the one, and has emasculated the other. In tho 
 shape the Legal Tender note now comes to the public it is no better 
 than the Promissory notes of the banks, with which in common 
 it passes current, no one looking upon it but as an ordinary bank 
 bill. How can it be otherwise estimated ? True it is a legal 
 tender, but how does that relieve commerce from the evils incident 
 to the bankers' note payable on demand ? The legislative 
 authority under which it is issued declares it intrinsically worth- 
 less until it is exchanged for gold. There certainly was no necessity 
 for such an issue, if it were to stop short of a remedy for the exist- 
 ing evil. The people were well content to accept the biPs of the 
 banks as a quasi-legal tender. There was no want of confidence 
 in those institutions ; where the ineflSciency of the old issue by 
 the banks really did, and still docs lie, is in the spasmodic and 
 capricious constriction to which that species of currency is liable, 
 certainly not in the modn of dealing with it between man and 
 man as a medium of barter. To give us a Legal Tender note, for 
 which gold may be demanded across the banker's counter, has 
 relieved neither the commerce nor enterprise of the country. 
 What was really wanted by the community was a Legal Tender 
 currency having a national character, and, above all, that was 
 not liable to fluctuation through its subserviency to the banking 
 interests. Such a currency could only be attained through an 
 inconvertible paper issue by the Government. The present Legal 
 Tender note affords no relief to the domestic commerce of the 
 country. It leaves the internal trade without the slightest relief 
 from the crying evils of a sudden contraction or a starved circu- 
 lation. For the matter of convenience or advantage to business, 
 it might as well never have seen the light ; it leaves the currency 
 for all practical purposes just where it was — in the hands of the 
 bankers, and they will very naturally, and very properly too, 
 look to their own safety. So long as they arc compelled to meet 
 the paper they put out with gold on demand, whether that paper 
 be the neAV Provincial Legal Tender or the irown promise, they 
 will take care, whenever their interests require it, to contract 
 
A COROLLARY AND A SUGGESTION. 
 
 29 
 
 an 
 
 their issues to the minimum, irrespective of the wants of the 
 domestic trader. Indeed, under a system of prompt convertibility, 
 it is their sole protection. The more pressing the need of accom- 
 modation with the trader, the more urgent becomes the banker's 
 caution. The great bug-bear is the draught of gold from the 
 bank coffers, and that is certain to occur whenever a derangement 
 of the exchange or some other reason causes the imnorter to 
 require gold for the payment of foreign balances, and when this 
 continues to any serious extent a monetary crisis is, from the 
 nature of our absurd monetary system, the inevitable result. 
 These crisis are so similar both in their origin and effect that 
 ex uno disce omnes, they only differ in degree, and, perchance, 
 in some unimportant feature — the importer or speculator requires 
 gold for foreign payments, the banks grow alarmed by the 
 abstraction of their specie, and contract their issues ; the circu- 
 lating medium is thus suddenly lessened, and the retail dealer 
 becomes cramped ; employment has to be curtailed, and general 
 distress and want of confidence follow. Now, how has ail this 
 rum — for ruin there certainly must be — and misery arisen ? 
 How, but by the derangement of the currency consequent on its 
 sudden withdrawal from circulation for the protection of the idle 
 gold in the coffers of the banks — for the support of a fiction. 
 For that the so-called gold basis is a fiction — a delusion, and a 
 snare of the most dangerous kind, is evinced by the very fact of 
 the contraction of the issues at the cost of the public, and the 
 destruction of general confidence. If the gold basis theory were 
 worth anything at all its excellence should be proved in the 
 emergency in which its advocates say it is all-eflicient. It has 
 never been found so. Its whole history proclaims its unprofitable 
 and mischievous inutility. In England the remedy for the evils 
 it engendered was Mr. Pitt's Suspension Act of 1797, by which 
 tlie Bank of England was relieved from cash payments. Com- 
 mercial disaster and general distress followed Mr. Peel's return 
 to specie in 1819, while panics, with their concomitant ruin, liavc 
 ever since been periodical. There can be but one conclusion 
 from so lengthened and sad experiences. 
 
 Little more need be urged in addition to what has been advanced 
 to place before the reader the positive evils of a system for the 
 upholding of which there is not a single sound reason, while daily 
 experience affords the strongest reasons for its abandonment. 
 It is too much the custom with us in Canada to consider, in ] 
 reference to business, two or three of our more populous cities 
 the whole country, ignoring in our estimate the veins and arteries 
 which convey and return the life blood of the commercial organiz- 
 
30 
 
 A COROLLARY AND A SUGGESTION. 
 
 ation. It may be all very well that the merchants at our great 
 cmporia should be able to obtain financial facilities for carrying 
 on their extended transactions ; but it should not be forgotten 
 that our retail traders are the vessels through which the circula- 
 tion has to be conveyed to the great mercantile centres, and that 
 if these vessels are to be occasionally depleted or the nourishment 
 withhelQ or but scantily supplied, derangement must necessarily 
 follow. Nor is this the only ill which afflicts Canada through her 
 monetary system. Let any one look at our manufacturing, our 
 mining, our farming — is it not patent at the very first glance 
 that these important interests ' :e all in a state of starvation, and 
 that the only interests that our system subserves are the import- 
 ing ard exporting — the foreign trade. Take any of the rural 
 villages of Upper Canada and you will find a scarcity of money 
 almost incredible. Look at the hundreds of farms upon which 
 drainage is sadly wanted, and would be done if the currency were 
 not kept at a starvation point. Again, it may be safely affirmed, 
 that there is not a harvest that ever occurs that thousands of 
 dollars are not lost by the scarcity of the circulating medium in 
 the purely agricultural localities. The townsman may twit the 
 farmer with the flippant observation, "Oh! bring good security 
 and you can have money." This is but a cruel mockery, for 
 many a solid farmer, that couldn't get six-pence out of a bank, 
 has two or three thousand dollars in fixed property ; but he is not 
 goose enough to create a mortgage because he needs a couple of 
 hundred dollars for three months. The consequence of this 
 all-prcvading scarcity of money in the rural districts is general 
 indebtedness to the village store-keeper, and the very certain 
 concomitant of high charges to the consumer, and inconvenience 
 to the trader. 
 
 If tie currency wore upon a wholesome footing it should be 
 adequate to the requirements of the general trade and enterprise 
 of the country. That it is far under what is necessary for the 
 legitimate wants of the community is fully evidenced by the con- 
 stant resort to New York or Boston, whenever it is desired to 
 inaugurate a new undertaking, or when the natural resources of 
 the Province ofier some i5pecial inducement for their spirited 
 development. The Montreal Qazettc remarked of Petroleum, a 
 short time since :— -'^ '" --^-\ - / -j 
 
 " Business at present is very dull. Many parties would come into the market 
 as purchasers to ship to England, but there is a difficulty in obtaining advances 
 trom the banks, as they evince a strong disinclination to make any advance on 
 this species of property. We arc informed that somo parties, who would have 
 shipped by the St. Lawrence, have proceeded to New York, and there made 
 arrangements for sending their oil via the Great Western Railway, and American 
 
A COROLLARY AND A SUGGESTION. 
 
 31 
 
 lines to that city for shipment to Europe, every facility of advances and forward- 
 ing tho oil being furnished them. We mention this fact to show the short- 
 si'jhted policy of our banks in driving away a large and profitnble branch of 
 trade from the city." 
 
 Upon which a Western journal remarks, with infinite justice : — 
 
 " To find that New York banks are willing to do for Canadians that which, 
 their own institutions deny them is not a flattering commentary upon the latter. 
 Bat 80 long as gold gambling in New York pays well, and the deposits of 
 Upper Canadian business men are drained away to furnish the means to carry 
 on that species of lottery sharping, little else can be expected. Tho tone of the 
 business men of Tororto, London and other centres is fast tending to an alter- 
 ation of this state of things, and the sooner that such a statement as that madr> 
 by the Montreal Gazette becomes an impossibility the better." 
 
 That there may be an abundance of Banking capital in the 
 country does not meet the question — there may be plenty of oats 
 in the granary while the horse is starving. How does it help the 
 oil-men to know that six or eight millions of gold is lying idle 
 and profitless in the cellars of the banks ? The managers of 
 these institutions cannot be blamed for the exercise of prudence, 
 or for conducting their business after their own preferences. But 
 meanwhile the trader and the country suffer ; its natural resources 
 go undeveloped, enterprise is choked off, labor finds no market, 
 and the immigrant passes away to a country where the circulating 
 medium is more plenty or not restricted by antiquated prejudice. 
 Surely these evils are worth remedying. But they will continue 
 to exist so long as our banks are compelled to pay in gold notes 
 that can be bought with American silver coin circulating below 
 its par value. The fault is with ourselves, not with the New 
 York gold gamblers. There s no doubt but our business men 
 will find it out by and bye, and that " this state of things " will 
 undergo a great alteration — the sooner the better for the whole' 
 country. The remedy is simple enough, and easy enough of 
 practical application, if the Minister of Finance were once really 
 in earnest, and would not permit the bankers and importers to 
 frighten him out of his honest convictions. In the adoption of 
 some such scheme as the following, the whole difiiculty of the 
 currency under the present system would be obviated, and trade 
 relieved from the fluctuations incident to direct convertibilitv. 
 
 Let the Government be the sole maker of the circulating 
 medium ; that being a Legal Tender paper issue for all amounts 
 above one dollar — to be both tribute and merchant money, taken 
 by the Government for all taxes and duties, as well as by tho 
 trader in payment for goods, and in every other case of purchase 
 or account. The Government not to be the issuer of these notes 
 otherwise than as the coiner or maker, but to supply them to 
 bankers and money-dealers at their face value (less a certain 
 
32 
 
 A COROLLARY AND A SUGGESTION. 
 
 bonus allowed to the parties purchasing) lor gold or debentures 
 of the Province. Gold would thus become a merchantable com- 
 modity, to be bought and sold in the ordinary way of commodities, 
 without the present factitious circumlocution. A paper currency 
 which could purchase gold or exchange would be efficient for all 
 the purposes of commerce, while it would supply the retail trader 
 with every facility for conducting his more multitudinous operations. 
 Such a currency, moreover, freed from the constraint of converti- 
 bility at the bank counter, would not be subject to the fluctuations 
 to which our present circulation is constantly lio-ble, and the injury 
 to trade from its contraction, at the time its extension was most 
 needed, would no longer exist — runs upon the banks and periodical 
 panics would be amongst the things that were. Relief would be 
 afforded to the retail dealer from the fact that such a currency 
 would keep afloat, not having the tendency to return for conver- 
 sion or to be withdrawn by its issuers to protect their gold, it 
 would permeate all the sinuosities of retail trade, and the country 
 atorc-keeper would be relieved from much of the petty credit now 
 so prevalent and inevitable. With such a currency, the banks 
 would no longer be embarrassed by the quick return of their 
 issues, or have cause for alarm at any unusual influx. It would 
 be at their own option whether they would part with their gold or 
 retain it, and they would quickly learn how absurd a system was 
 that which involved the alternative of hoarding or ruin. 
 
 It is scarcely necessary to direct attention to the immense 
 advantages to be derived incidentally from a national paper 
 curpency, such as is suggested. A very slight consideration of 
 the proposed system will convince every unprejudiced person of 
 the perfect efficiency of a circulating medium thus secured from 
 abuse, and capable of representing all values. It may be pre- 
 sumed that in adopting such a system its control would be placed 
 in the hands of a limited number of Commissioners, of whom the 
 Minister of Finance should be an ex officio member, and the only 
 one connected with the Government. The presence of this 
 administrative officer at the board would be both essential and 
 proper. The exchange of Provincial securities for the Legal 
 Tender notes would be a virtual purchase of the securities by the 
 Government. The interest upon which, as it accrued, would 
 become current revenue, and might form a part of the annual 
 consolidated revenue, or be appropiated as a sinking fund for the 
 purchase of other portions of the national indebtedness. This 
 suggestion obviously points to a financial scheme of more import- 
 ance than it is necessary further to discuss in these pages ; but 
 the consideration involves a subject of great national importance* 
 
A COROLLARY AND A SUGGESTION.. 
 
 33 
 
 It will be imperative upon the Federal Government, under the 
 new order of things which must obtain in the Confederated Ad- 
 ministration of the new Dominion, amongst other matters to 
 assimilate and unify its currencies, and in no way can this be 
 accomplished with such thorough efficiency, permanence, and 
 national advantages, as by the adoption of a system which all the 
 best thinkers and most practical men admit to be based upon true 
 and economical principles ; and, in the peculiar condition of a 
 country, demanding much crude and skilled labor, to furnish the 
 facilities for its employment, becomes one of the first duties of a 
 Government desirous of national progress and development. 
 Money, or the circulating medium, in whatever form, is the one 
 thing needful to the laborer ; he barters his physical powers for 
 the necessaries of life, and he does this indirectly through the 
 money wages paid by his employer. If the circulating medium 
 be made scarce or difficult for the employer to obtain, the laborer 
 has to seek another market, and the resources of the country 
 remain ai nature left them ; unprofitable, because unutilized. 
 
 The argument intended is that money should not be difficult to 
 obtain by those who have the means of repaying, or by those 
 who have value either in labor or commodities to exchange. But 
 such is not the state of things under the present system. This 
 system being so contrived that when the medium is most in de- 
 mand, it is most certain to be withdrawn from circulation, beause 
 the gold in the bank coffers is endangered. But, if this gold basis 
 be anything better than a false pretence, an arrant swindle, why 
 dread its being drawn out ? Is it not because it is well known 
 that there is not a fifth part of the issue covered by the horded 
 gold ? Then what a sham is here ! Yet, eleven-twelfths of the 
 whole people are suffering in order that this fraudulent, but 
 specious system, shall be perpetuated. There is no necessity 
 whatever for any other basis for a currency than the knowledge 
 that the note or coin will be accepted by all ; confidence is all 
 that is wanted- — all that keeps the banks on their legs or makes 
 their notes current. If the Government would give the people a 
 good Legal Tender note that should be available in every case of 
 indebtedness or liability, the delusion of a gold basis might be 
 abandoned to the great advantage of the country, and to the 
 prosperity and happiness oj the people. Let us nope that the 
 Government of the Dominion of Canada will have nerve enough to 
 handle this subject with that boldness and dexterity which the 
 circumstances of the country demand, and the people may expecti 
 from an enlightened and experienced statesmanship.