The Sun.
London, England, 1857-11-27 00:00:00

the universal equivalent; but these qualities com-
bined constitute another—its most practical charac-
ter—which appears to have been overlooked, and
which willgo a great way to solve the mysteries of the
irrency question—l mean its cardinal function as
a security for obtaining its equivalent value in
capital, on which security capital is transferred from
one party to another, and direct barter superseded.
The first step taken after emerging from a state of
barter, is to purchase money; the labourer instead
of exchanging his labour for food and clothes, re •
ceiving his wages in kind, exchanges it for, or buys
with it, such a sum of money as will enable him
to repurchase the same quantity of food and
clothes. Thus capital (ordinarily defined to be
services and commodities used in production), is
the 'original purchasing power, and not money,
which is merely a security for repurchasing. A
banker does not lend his capital, but his money
which he has bought with his capital. "Itis a
very common fallacy," says Lord Overatone, in
answer to question 3,721, by the late Bank Com-
mittee, "to consider money and capital as the same
thing ; " and a higher authority, Adam Smitb,
says, " The great wheel of circulation (money) is
altogether different from the goods (capital) which
are circulated by the means of it." A banker con-
verts his capital into money, and then lends the
money as the means of obtaieing a return far his
capital; just as another capitalist invests his in
laud and looks to rent ; er in trale, and looks to
profit for his return. The Bank Committee and
Lord Overstone, after battling about the nature of
money, come to a somewhat similar conclusion as
to its character. Lord Overstone is asked by the
committee, question 3,759—" Money is merely a
means by which capital is obtained ? " And he
answers, " Now we have got to a common locus
sta

A. If your definition of money be correct that its
most practical character is that of a security, for
obtaining its equivalent value in capital ; then, any-
thing possessing Ova character is 'money
B. Yes ; amongst the ancients, furs, cowrie
shells, &c., circulated as money—as securities for
obtaining their equivalents in value, estimated by
the labour necessary to procure them—these were
succeeded by coin, as a more accurate measure of
value, and of greater convenience, being divisible
into smaller sums ; and lastly came paper credit
money—paper promiA)s to pay money—tbe most
useful, convenient, and economical money of all,

provided it be as safe as coin.
A. Then what could be bsttsr money than the
promissory note of a Government, for which the
whole country wouldbs the guarantee I
B. Nothing ; if you could guard against over-
issuing; but the power of issuing hAs been so often
abused for political purposes, that it is desirable to
apply the drag-chain of convertibility,
A. Do not Bank of England notes constitu-
ting our paper legal tender money, possess then
the character of money in an eminent degree ? being

issued against Government securities or gold, and
being subject to convertibility on demand.
B. Yes; their quality is as near perfL ction as
possible, though in public opinion they might be
mote perfect were they issued directly by the Go-
vernment but this slight degree of imperfection
is counterballncecl by the greater facility which the
busmesi of a Bank affords of bringing them into
circulation.

A. But does not the principle of convertibility
expose us to all the evils of drains of gold ? and
is not the main object of the Act of 1844 to coun-
teract foreign drains by curtailing our domestic
currency, and making money dear, and everything
else chew, in order to bring back the gold ?
B. Yes; and a most suicidal and unnecesstry
policy it is, drying up the strt.ain which turns the
great wheel of circulation and keeps trade in mot ion
—throwing all hands out of employment. How
different to the pro3eedings of a sensible man of
bn.iness, who, having a mill turned by water power,
constructs a dam to fast the stream in times of

drought, and thereby obtains a more constant and
steady supply of circulating power. We possess
such a reservior of gold in the sovereigns absorbed
in the retail trade, through the means of which by
substituting one pound notes for sovereigns we can
maintain our stream of circulation steady. ,
A. Regarding money in the light of a security ;
how can a sufficient supply of such securities bo ob-
tained, as you say, at a moderate and steady rate ;
so as never to exceed 5 per cent, by the Bank of

England.
B. By establishing Free Trade in a sound cur-
rency, awl leaving the supply and demand of such
securities to adjust themselves to each other—al-
lowing all to issue notes of 51. and upwards, on
giving adequate security fortheirconverttbility, and
masking the note only of the Bank of England, (as
being the representative of the Government) A
legal tender—reserving to the Bank of England the
right of issuing one pound notes as substitutes for
sovereigns when ever their minimum rate of discount
reaches 5 per cent., on condition of depositing t

thirds of the amount of such issues in Government
Securities, and one-third in gold, and pa, iug 4
per cent. to the Government for the two-thirds of
the notes of which they would have the beneficial
use. By this means an adequate supply of money
could be obtained at a moderate rate, so as never

to exceed 5 per cent., by the Bank of England, and
such equable and moderate rate was maintained by
the Bank of England for 140 years previous to the
Act of 1844, excepting for a few months in 1839.
A. But were not the usury laws thou in force,
prohibiting a higher rate than 5 per cent, to be
charged ?
B. They were relaxed in 1833, and whatever
influence they may have had prior to 1833, they
could bare had none on the rate from 1833 to
1844, which ranged from 4 to 5 per cent., except-
ing for a few months in 1839 when it rose to 6 per
cent.
A. What would be the effect if 30,000,0001. of
notes were Substituted for sovereigns on the plan
you suggest
B. The Bank of England would retain
10,000,0001. in its coffers as a guarantee for the
convertibility of the 30,000,0001. of notes issued
(a proportion greater than the Bank have hitherto
considered to be safe, having acted on the principle
that one-third to meotall theirliabilities both o f depo
sits and notes was sufficient), this would set atliberty
twenty millions of sovereigns ; which could be
either sent abroad in exchange for cotton, corn, and
other capital, thereby adding so much to the float-
ing capital of the country, or be added to the Bank
reserve and lower the rate of discount, for on the
amount of the Bank reserve of legal tender money
depends the rate of discount, and so long as the
twenty millions of notes remained in circulation
they would yield a revenue of 800,0001. per annum
to the Government.
A. But would not a lower and steadier rate of
money lead to over-trading and speculation
B. It might lead to greater competition ; so
much the better for the public ; but not to greater
over-trading and speculation. The degree to which
these have been carried on under the Act of
1844, cannot be exceeded. Witness the railway
mania in 1845 ; and the present over-banking fluc-
tuations in the value of money are the mainsprings
of speculation. cnder the Act of 1844 money has
been lent by the Bank at 1f per cent., and is now
not to be had at the Bank under 10 per cent.
A. By allowing the Bank of England, when its
rate of discount reaches 6 per cont., to increase its
quantity of gold ; by substituting 11. notes for
sovereigns, and thereby preventing any further rise
in the rate of discount, are you not interfering with
the natural value of money ?
B. No, not with the natural but with the un-
natural value of money, occasioned by such extra-
ordinary drains of gold as the Indian mutiny and
the American panic give rise to. It is prepos-
terous that our monetary laws cannot spate a few
millions without bringing the trade of the
country to a st aid. Were this the inevitable
consequence of convertibility, some modifica-
tion of the principle would be necessary, but it is
not, as it may be obviated. Moreover, the natural
value of money is not interfered with, as the safety
valve is only opened when the monetary pres Sure
has raised the rate of discount to 5 per cent.—a
rate higher than rules in ordinary times on the
Continent—and one which admits the rectification
of the exchanges naturally. Under such a plan,
were a foreign drain of bullion to arise, to pay a
balance of trade due from us, say to the amount of
5,000,0001., that sum could be spared from this
national reserve, without any disturbance of our
domestic' currency—the debt would be paid—the
adverse rate of exchange be rectified—trad i would
pursue its usual course, and gold be left to find its