effect gives the owner to a special degree the command over many other things. "Anything that can be used for this general purpose, in so far as it is so used, is money. If any one substance more than another becomes vested with this property of general exchangeability it acquires an intrinsic and quite independent value arising from this newly developed property alone. It may still in part supply certain special wants as before, for its inherent qualities remain the same, though those which fit it for the one purpose are not necessarily conterminate with those which fit it for others."*

It is needless to show how the precious metals are pre-eminently fitted to serve this purpose, but a few words may be added to point out how naturally and unconsciously this special use would become attached to them. The utility of holding such a reserve is based on conditions ordained by nature, from which there is no escape. Abundance reigns in one region and scarcity in another. There was corn in Egypt and dearth in Syria. And so also with men ; chances and changes happen to all. But long experience has shown that these divergencies are for the most part partial and temporary. There is, therefore, a natural correlation between superfluity and scarcity. The latter intensifies demand, the former decreases the utility of supply. We have not to deal with any ideal state of society where all men freely shared their goods, but perishable commodities, the excess of which the owner cannot use, will naturally be exchanged readily for any other objects which may gratify his desires, and if these objects be not of a perishable nature they will serve the same purpose over and over again. Hence even if we assume that gold and silver were first used merely as ornaments, experience would soon show that it was well with those who possessed something that would long remain with them, and serve to save them from the extremity of distress even in the worst of times. Once let this feeling prevail and associate the ownership of the precious metals with a sense of power and immunity from evil, and the demand for them is based on a very solid and independent foundation. Men have, as before, their wants to satisfy with the consumable products of the earth and of industry, but the mitigating effects which "the law of average" lays open to us are secured, even though unconsciously, by the use of this reserve constantly shifting from those whose wants are most urgent to those whose wants are better satisfied and less urgent, but as an imperishable reserve these metals in whatever form always remain in one hand or another.

This primary use of the precious metals as money had surely become almost an instinct long before the dawn of history, yet Mr. Tooke seems very fairly to represent the current opinion of his day

* The definition of money according to its functions rather than its forms seems most in accordance with the true method of scientific classification.

when he "admits" that "the value of the precious metals as money must depend ultimately on their value as materials for jewelry or plate, since if they were not used as commodities they could not circulate as money ;" and again, "the primary cause of the utility of gold is its use as the material for plate. The secondary cause is its use as money." Even Mr. J. S. Mill lays some stress on the statement that "the strongest inclination in a rude state of society is for personal ornaments, and that in such a state every one was eager to accumulate as great a store as possible of things at once costly and ornamental." But is this a true representation of the case? Mere savages who know nothing either by tradition or experience of the special "purchasing power" of gold and silver set no special value on them as ornaments. Has not the use of these metals as money become for ages past beyond all comparison the greatest use we have for them? Was the "current money of the merchant" in ancient days held on the chance of some day getting it worked up into ornaments? Are the necessary reserves of bullion and coin in our banks now held with any such intention? Would any one give up the convenience of the money he puts in his pocket for daily use for an ornament ten times the value? The poorer classes in India are no doubt very fond of rings and bangles, but though thus bent on ornament have yet a frugal mind and know that they are keeping a reserve which, with very little loss, can be utilised in time of need. The "exception proves the rule." In fact, when we speak of the intrinsic worth of plate, what do we mean but the general value the metal would bear if turned into money, which could only be done by the sacrifice of all the skilled and often highly paid work expended on it. I do not say that the demand for plate and jewels has no effect on the value of the precious metals, but the natural demand for them as money is, and has been for ages, incomparably the most important. I press this point, because if the substantial reality of this demand is accepted there is no room left for occult notions of the absolute value of metallic money which have so much obscured the enquiry into the uses which it actually subserves. The fact that its properties are special and unique, that it stands on one side, while all other commodities, the values of which are expressed in the terms of it, stand on the other, does not in any way place it beyond the most ordinary operation of the "law" of supply and demand. Nevertheless, this special use of the precious metals has come down to us from time immemorial and has spread with civilization to all parts of the world, so that the application of this "law," and equally any attempt to modify or control its operation, is futile and delusive unless it be made with full recognition of world-wide considerations.

A glance back into the past serves to illustrate the tenacity with which the natural and primary notions of such money have been maintained. The earliest traces of exact systems of weights are

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associated with these metals, and it is instructive to trace their continuity in spite of all the attempts that have been made to tamper with the nominal value of "money." Thus we find seven centuries before our era a Babylonian talent which had existed concurrently with a Lydian talent in the East from the earliest historical periods in the proportion of 12 to 10 in weight. In Asia also there is a very old binary division of the sixteenth part. This fraction is the "anna," common to all India, and is found in our own avoirdupois scale. The sixteenth of the Lydian talent corresponds with the tael weight (580 grs.) in China. The practical use of such units of moderate size is evident. Now Solon, about 600 B.C., had, among other troubles, to deal with a financial crisis at Athens, and reduced the weight of this same talent in the proportion of from 100 to 72. Athens and the Colonies connected with it were foremost in extending Eastern commerce to the Western world, but it was not till Rome, some centuries later, had come into close connection especially with the Greek cities of Southern Italy that silver money was adopted by it. Its "libra was 12 parts or ounces only, naturally on the reduced scale. Charlemagne took up this pound. Our old Tower pound weight of silver was 11 oz. 5 dwts. only of our present scale, which, at the standard of 92 per cent., or 3 parts fine, gives the old Roman pound of about 5,000 grains, pure metal. This somewhat strange standard still obtains in the northern districts from whence sprung the great Chinese Empire, which still comprises a large portion of the wealth and population of the world. The weight of the Roman ounce was thus very nearly 416 grains, more or less, and this is the weight of the old Spanish and the Mexican dollar. Both old and new Spain were silver-producing countries dependent on outside demand for the sale of it. They could not deal with it as the French did with their domestic standard, which was at one time the same as our own, but was reduced to a twentieth part of its original weight and value. Further, the precious metals have never been coined in China, so the great temptation to tamper with their weights has been wanting there also. After ages of separation the East and West again come together, and we find these working units: the ounce dollar, a constituent part of the reduced Solonic talent, on the one side, and the "tael" on the other, connected with the older Lydian scale, in just the same proportion of 72 to 100, according to the change made 23 centuries ago, accepted by the Western world, but with which there is no reason to suppose that the East was in any way concerned. A definite weight of the precious metal has thus been maintained as a unit for commerce, notwithstanding the violence done over and over again by authority to nominal local standards of value. Further, whenever the attempt is made to bring back these latter to accordance with the actual world-wide practice, we may yet

trace the old weights, though curiously disguised in new combinations.

Happily in England, after an infinity of pedantic mystification, we attained to this simplicity in fact, though expressing it obscurely in a very complex fraction, but I may add that, assuming a metallic standard, we thus do no more than a court of law would be forced to do if there had never been any currency legislation at all.

Still some of the phrases associated with the old fallacy of "regulating value" stick to us; among others, that gold (or silver) in the currency and gold as a commodity are in some way essentially different. But how does the case really stand? Current money is coined or marked, and by this means is made locally more useful and is more extensively used, but it does not follow that more of it is used, for it thus does its work very much more rapidly; and if it did not flow practically with perfect freedom in and out of circulation, local currency would inevitably break away from the common standard of the world. Whether gold and silver are coined by a State mint or marked by a well-reputed banker, as in China, is only a question of the degree of facility afforded. The process is substantially the same in all countries. No one-banker, trader, or private individual-holds more than he sees his way to use for safety or advantage. If more than is immediately required comes into a country, it naturally finds its way into the hands of those who can afford to hold a reserve and wait for their opportunity. It yields them no profit for the time, but it is not subject to waste or decay, and there is no urgent desire to part with it, for all dealers know that a hasty buyer must raise prices against himself. In Asia, where banking is not very fully developed, such reserves are very generally distributed, though a large portion will be with bankers even there. In countries like this, banking organization very quickly and certainly throws out the excess to the Bank of England, as the common bank of bankers. Thus in 1877, and again last year, we had a large reserve of gold, and a similar increase was found in the corresponding balances of "other bankers." But this special commodity, gold, though it could at any time be coined, could not by that or any means be forced suddenly into circulation, though a very general rise in prices might cause us to use 11 or 12 sovereigns where ten had served our purpose before, and so absorb the increased quantity. But again, the use of this commodity is common to the world at large, so we deal with it on just the same principle as we would deal with any other which is or will be in the long run in very extensive request. We do not try to make a use on any terms within the comparatively narrow limits of our own country; but on the other hand, it is not enough to say "the surplus is thrown out of our circulation, and need no longer concern us," for if a like accumulation takes place in other monetary systems, we shall have

to take our share, even though the only effect may be a depreciation of value indicated by a general rise in nominal prices.

But when we speak of bullion "flowing in or out," we must not forget that this takes one side of the question for granted. When we have to consider fully the necessary conditions of interchange, we must have in view supply and demand on one side brought into connection conversely with demand and supply on the other. A must have corn, and want calico; and B must have calico, and want corn, or there is no chance of their dealing together. If we want such an exchange as this made in the terms of money, we require fourfold instead of twofold correlations; for though when A buys from B the transaction is complete as between themselves, still it is only A who gets some specific thing for his own profit or enjoyment. The money which B receives only enables him to purchase what will best serve his ends whenever he in turn chooses to part with it. Thus, from a more general point of view, the operation is not complete. B, in modern phrase, is on the look out for an investment.

It is a mere truism that men do not give money unless they get something they prefer to have in exchange for it, yet a vast amount of very ingenious writing on such subjects as free trade, international exchanges, and lately especially on the value of silver, totally ignores this simple truth, which therefore I shall proceed very briefly to apply to the present question of the movements of bullion. The fact that any one may send several million pounds worth of silver to India or China and there pass it into the circulation is only half the transaction. The other half is, what can he buy with his money which will serve his purposes? If he wants to get back all his money's worth to Europe he is restricted (1) to the imports which Europe will take, and (2) to the supply of them which these markets will afford to him at a suitable valuation, or (3) he may indirectly compete for the value of what others have bought for transmission to Europe by giving a high price for bills of exchange. This action was very noticeable in India in 1877, when large quantities of bullion were hastily forced upon that country. As a rule, exceptionally large transfers of bullion can only be made when an exceptionally large value of commodities or property are available as returns for it in excess of the ordinary adjustments of trade. Thus, for ten years, from 1856 to 1865, Europe exported an annual average of over £16,000,000 of bullion -£161,000,000 in all, but then the failure of our silk crop and the cotton famine induced Europe to take all the supply they could get of these two staples from Asia at very greatly enhanced prices. If Prince Bismark could have induced another such famine, the German currency operation would have been carried out with the greatest facility. No limit can be assigned to local and temporary perturbations brought about by transactions forced in disregard of