be a great loser, for, by as much as these bills were under the value of silver, he would receive so much less than before.

"The landed man who owed debt, would pay his debt with a less value than was contracted for, but the creditor would lose what the debtor gained."

Oh! that the philosophers of 1811 had only pondered over this extract from John Law.

14. Law then shews that

"Notwithstanding any Act of Parliament to force these bills, they would fall much under the value of silver; but allowing that they were at first equal to silver, it is next to impossible that two different species of money shall continue equal in value to one another.

"Everything receives a value from its use, and the value is rated according to its quality, quantity, and demand. Though goods of different kinds are equal in value now, yet they will change their value from any unequal change in their quality, quantity, or demand.

"And as he leaves it to the choice of the debtor to pay in silver money, or bills, he confines the value of the bills to the value of the silver money, but cannot confine the value of the silver money to the value of the bills, so that these bills must fall in value as silver money falls, and may fall lower, may rise above the value of these bills, but these bills cannot rise above the value of silver."

15. Law succeeds, with great skill and acumen, in exposing the wild insanity of Chamberlain's plan, and truly predicts the results which would follow from it, or at least some of them, for there are many important ones he has omitted. The exact consequences which he predicted were manifested in Ireland, and England a century later; and the sentences we have quoted, if we did not know their origin, might have been supposed to have been written to rebuke the folly of the Directors of the Banks of Ireland and England, and the mercantile witnesses of 1804 and 1810. But having demolished Chamberlain, he comes to his own proposal, which he says is "to make money of land equal to its value, and that money to be equal in value to silver money, and not liable to fall in value as silver money falls."

He then says, "ANY GOODS THAT HAVE THE QUALITIES NECESSARY IN MONEY, MAY BE MADE MONEY EQUAL TO THEIR VALUE. Five ounces of gold is equal in value to £20, and may be made money to that value; an acre of land, rented at two bolls of victual, the victual at £8, and land at twenty years' purchase, is equal to £20, and may be made money equal to that value, for it has all the qualities necessary in money."

16. In this sentence is concentrated the whole essence of that eternal delusion, so specious and plausible, and so fatal, which we designate as LAWISM. It is, indeed, nothing but the stupendous fallacy that money represents commodities, and that paper currency may be based upon commodities. This delusion is deeply prevalent in the public mind at the present day, and probably there are few persons, except those who have studied the true philosophical principles of Political Economy, whose views are not deeply tainted with this infection. No man who does not thoroughly understand the great fundamental doctrine established by Turgot and others, that money does not represent commodities, can ever have sound ideas on this subject. MONEY DOES NOT REPRESENT COMMODITIES AT ALL, BUT ONLY DEBT, OR SERVICES DUE, WHICH HAVE NOT YET RECEIVED THEIR EQUIVALENT IN COMMODITIES. Now, the views of Law are much more extensively prevalent than is generally supposed. All those who think that there is any necessary connection between the quantity of money in a country and the quantity of commodities in it are influenced by them. Take the case of a private individual. Is there any necessary relation between the quantity of money he retains, and the quantity of commodities he purchases? The quantity of money he has, is just the quantity of debt-of services due to him-which he has not yet parted with for something else. It is the quantity of power of purchasing commodities he has over and above what he has already expended. And the quantity of money a nation possesses is simply the quantity of accumulated industry it possesses over and above all commodities, but they have no relation whatever to each other. Now, money does not represent commodities, but it represents that portion of a man's industry which is preserved for future use. Whatever a man earns is the fruit of his industry, money included; and none of these separate items represents

anything else, though it may be exchanged for other things. Now, the value of money depends upon its relations to what it represents, namely, debt, and not to commodities. If money, or currency, increases faster than debt, or services due, it immediately causes a diminution of its value. If debt increases faster than money or currency, then the value of money is raised. The infallible consequence, therefore, of an increase of currency, without a corresponding increase of debt, is to change the existing proportion between debt and currency, and to cause a depreciation of the latter commensurate to the changed proportion. The necessary and inevitable consequence, then, of issuing vast quantities of paper currency on the assumed value of property, is simply to cause a total subversion of the foundation of all value and of all property, and to plunge every creditor into irretrievable ruin.

17. In fact, a moment's consideration will shew that the theory of basing a paper currency on commodities, involves this palpable contradiction in terms, THAT ONE CAN BUY COMMODITIES AND ALSO HAVE THE MONEY AS WELL. When a man buys commodities with money, he gives either a portion of his own industry represented by that money, or a portion of some one else's industry who gave him the money. But it is quite clear that he cannot buy the commodities and keep his money as well. It is exactly the same with a nation. A nation cannot buy commodities and have the money it bought them with as well, which is the principle necessarily involved in issuing paper currency as the representative of commodities. But the money of the nation is the mode and form in which the accumulation of industry which has not yet been spent in commodities is preserved; and if a nation wants other commodities besides what it has got, it must pay for them either with money, or with the goods it has already. The idea of basing paper currency upon commodities is just as wild and absurd as if England were to sell her cotton goods to America for coin, and then demand back her cotton goods. The only result of such an attempt carried out into practice must be the most tremendous convulsions, and destruction of credit and all monetary contracts.

18. Law, as we have seen, immediately saw through it, and exposed the ridiculous absurdity of Chamberlain's proposal.

His own was that the value of all the land in Scotland should be estimated at 20 years' purchase, and that a parliamentary commission should be appointed with power to issue an inconvertible paper currency to that amount. He says "The paper money proposed will be equal in value to silver, for it will have a value in land pledged equal to the same sum of silver money that it is given out for. paper money will not fall in value, as silver money has fallen or may fall."

This

19. We must, therefore, be careful to be just to Law. He was no advocate of an unlimited inconvertible paper currency. Quite the reverse. But seeing that a convertible paper currency could only be based upon bullion to a certain limited extent, preserving its equality in value with bullion, his idea was to base a paper currency upon some other article of value. And he thought that it might preserve its equality in value to silver on an independent basis. His idea was, that it was only necessary to have it represent some article of value. But this attempt was contrary to the nature of things. His paper currency, though avowedly based upon things of value, had exactly the same practical effects as if it had been based upon silver. It became redundant, and swamped everything. And the reason is plain. It was a violation of that fundamental principle we have obtained" Where there is no debt there can be no currency." And the fresh quantities of currency issued on such a principle only represent the previously existing amount of debt, and then suffer a necessary diminution in value. The necessary and inevitable consequence, then, of issuing vast quantities of paper currency on the assumed value of property, is simply to cause a total subversion of the foundation of all value, and of all property, and to plunge every creditor into irretrievable ruin.

20. To give a full account of Law's banking career in France, would far exceed our limits, and to give an imperfect one would be of no use. We must, therefore, content ourselves with referring those of our readers who want information on the subject to our Dictionary of Political Economy, Art. Banking in France, where a full account of Law's scheme is given. It may be sufficient to say that his career, like his writings, is divided into two distinct portions. His writings are on Banking and PAPER

CREDIT, and his scheme for PAPER MONEY, which are quite distinct from each other. Nothing can be sounder, or more judicious than the first. He clearly saw that paper credit must be limited by specie-his scheme was to create a PAPER MONEY, beyond the limits of Paper Credit based on specie, which he expected would maintain an equality of value with specie. Multitudes of people have thought the same, and multitudes of people believe in it to the present hour. In 1705 the Parliament of Scotland fortunately turned a deaf ear to Law's specious proposal of creating Paper Money based upon land. In 1855 the representatives of commerce in the same city which had rejected Law's plan 150 years before memorialised the Government, and "do most emphatically object to the plan of restricting the security (upon which the paper currency is based) to the possession of gold alone," which is simply Lawism.

Nothing could be more extraordinary than the restoration of prosperity caused by the foundation of Law's Bank in 1716. It is probably one of the most marvellous transitions from the depth of misery to the height of prosperity in so short a space of time in the annals of any nation. And, if Law had confined himself to that he would have been one of the greatest benefactors any nation ever had. It was only when, after three years he had attained the very pinnacle of success, that he determined to carry out his scheme of PAPER MONEY, which was the famous Mississippi scheme.

The next example of Lawism was the Ayr Bank. The proprietors of this Bank were enormously wealthy, and, because they were so, they thought that their known wealth would sustain the credit of any amount of paper issues. But, alas! their experience too fully and fatally verified the sagacity of the directors of the Bank of Scotland, who, in 1727, in answer to proposal for enlarging their credit, said-" For the quota of credit in a banking company must be proportionate to the stock of specie in the nation, learned and understood by long experience, and not extended to a capital stock subscribed for, which cannot in the least help to support the company's credit, if the specie of the nation decay." This doctrine contains the refutation of many wild schemes, and the true plan of regulating a paper currency, is simply to discover how a certain proportion shall be maintained between specie and credit.