money, because it has no other merit but to represent it, but which can procure it at any moment; which, like the piece of money, is transferred from hand to hand, without the necessity of being guaranteed, without leaving traces of its passage. The note payable to bearer on demand, issued by powerful associations formed under the authority and acting under the continual observation of government, has appeared to present these advantages. Hence Banks of circulation.'

2665. "Under similar circumstances, will the aggregate amount credited to depositors in bankers' books bear some relation to the quantity of money in the country?-During temporary fluctuations in the amount of circulation, all other things remaining unchanged, I conceive the amount of deposits will be affected by such fluctuations.

2666. "Is the amount of bills of exchange dependent in some degree on the quantity of money?-I apprehend that it is dependent in a very great degree. I consider the money of the country to be the foundation, and the bills of exchange to be the superstructure, raised upon it. I conceive that bills of exchange are an important form of banking operations, and the circulation of the country is the money in which these operations are to be adjusted; any contraction of the circulation of the country will, of course, act upon credit; bills of exchange, being an important form of credit, will feel the effect of that contraction in a very powerful degree; they will, in fact, be contracted in a much greater degree than the paper circulation.

2667. Sir Robert Peel-"What are the elements which constitute money in the sense in which you use the expression 'quantity of money?' What is the exact meaning you attach to the words 'quantity of money-quantity of metallic Currency?' -When I use the words quantity of money, I mean the quantity of metallic coin and of paper notes, promising to pay the coin on demand, which are in circulation in this country.

2668. "Paper notes payable by coin?-Yes.

2669. "By whomsoever issued?—Yes.

2670. "By country banks as well as other banks?—Yes.

2671. Chairman-"Would this superstructure, consisting of sums credited to depositors in bankers' books and bills of exchange, equally exist, although no notes payable in coin on

demand existed in the country?—Yes; I apprehend that every question with respect to deposits, and with respect to bills of exchange, is totally distinct from the question which has reference to the nature of the process of substituting promissory notes in lieu of coin, and of the laws by which that process ought to be governed. If the promissory notes be properly regulated, so as to be at all times of the amount which the coin would have been, deposits and bills of exchange, whatever changes they may undergo, would sustain those changes equally, either with a metallic Currency, or with a paper Currency properly regulated; consequently, every investigation respecting their character or amount, is a distinct question from that which has reference only to the substitution of the paper notes for coin.

2672. "There would be no reason why, if there were no notes payable in coin on demand, the amount of this superstructure should be less than it now is, with a mixed circulation of specie and of notes payable on demand?-None whatever. apprehend that, upon the supposition that the paper notes are kept of the same amount of the metallic money, the question of the superstructure, whether of deposits or of bills of exchange, remains precisely the same.

2673. "That answer takes for granted that, in the first case, the metallic Currency, and, in the second case, the metallic Currency, plus the notes payable on demand, are the same in quantity? Yes.

2674. Sir Robert Peel-"You suppose the notes payable on demand to displace an amount of coin precisely equal to those notes? They ought to do so under a proper regulation of the paper money, otherwise they are not kept at the same value as coin.

2675. Mr. Attwood-"Would you consider that the superstructure of bills of exchange, founded entirely upon a metallic Currency, might, at particular times, become unduly expanded?— The answer to that question depends entirely upon the precise meaning of the word 'unduly.' I apprehend, undoubtedly, that it is perfectly possible that credit, and the consequences which sometimes result from credit, viz., over-banking in all its forms, and the over-issue of bills of exchange, which is one important form of over-banking, may arise with a purely metallic Currency;

and it may also arise with a Currency consisting jointly of metallic money and paper notes promising to pay in coin; and I conceive, further, that if the notes be properly regulated, that is, if they be kept at the amount which the coin otherwise would be, whatever over-banking would have arisen with a metallic Currency, would arise, and to the same extent, neither more or less, with money consisting of metallic coin and paper notes jointly.

2676. "May not over-banking and over-issue of bills of exchange, forming a superstructure based upon money composed of metal and paper notes, derange the certainty of the notes being duly paid in gold?-I apprehend that if the paper notes be properly regulated, according to the sense which I have already attributed to that expression, and if a proper proportion of gold he held in reserve, the solidity of the basis cannot be disturbed; that is, that if there be a proper contraction of the paper notes as gold goes out, the convertibility of the paper system will be effectually preserved by the continually increasing value of the remaining quantity of the Currency, as the contraction proceeds."

About this period, and for a long time preceding, the greatest part of the Circulating Medium of Lancashire were bills of exchange, which sometimes had 150 indorsements on them before they came to maturity. Lord Overstone was asked :

3026. "Does not the principal circulation of Lancashire consist of bills of exchange?-As I contend that bills of exchange do not form a part of the circulation, of course, I am bound, in answer to that question, to say no.

3027. "Is there not a large quantity of bills of exchange in circulation in Lancashire?-Undoubtedly, wherever a large mass of mercantile or trading transactions take place, there will exist a large amount of bills of exchange; and that is the case, to a great extent, in Lancashire.

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3028. Do not the bills exceed to an immense amount the issue of notes payable on demand in Lancashire?-Undoubtedly they do, to a great amount."

14. Mr. Hume had a long fencing match with Lord Overstone as to the distinction between Bank Notes and Deposits. Lord Overstone admitted that a debt might be discharged either by

the transfer of a Bank Note, or by the transfer of a Credit in the books of the Bank: but he strongly contended that Bank Notes are money, and that Bank Credits, or Deposits, are

not.

3148. "Do you consider any portion of the deposits in the Bank of England as money?-I do not.

3150. "Could 20,000 sovereigns have more completely discharged the obligation to pay the £20,000 of bills than the deposits did?-Where two parties have each an account with a deposit bank, a transfer of the credit from one party to the credit of another party, may certainly discharge an obligation in the same manner, and to the same extent to which sovereigns would have discharged that obligation.

3169. "Will not the debt between the two be discharged thereby?—Yes.

3170. "In the one case I have supposed that payment of £1,000 was made by means of notes in circulation; payment was made by the delivery of these notes from one hand to another, and they are transported from place to place: but in the case of a payment made by means of a transfer in the books of the Bank from one account to another, I ask you, are not those payments equally valid, and would not the debt be discharged equally in either case?-In the one case the debt has been discharged by the use of money: in the other case the debt has been discharged without the necessity of resorting to the use of money, in consequence of the economising process of deposit business in the Bank of England.

3171. "Can the debt of £1,000 which one person owes to another be discharged, without money being paid, or its value?A debt of £1,000 cannot be discharged without, in some way or other transferring the value of £1,000; but that transfer of value may certainly be effected without the use of

money.

3172. "Was not the deposit transfer in the Bank of England, to satisfy that debt of £1,000 of the same value as the £1,000 notes which passed in the other case?-A credit in the Bank of England I consider is of the same value as the same nominal amount of money; and if the credit be transferred, the same value I consider to be transferred as if money of that nominal amount had been transferred.

3177. "Is there any fallacy in the statement that in the accounts published by the Bank, their liabilities are divided into two heads, circulation and deposit ?—I am not prepared to state that there is any fallacy in it.

3178. "Have you not said that deposits do not in any way whatever possess the qualities of money?-If I have said so, I shall be glad to have the statement laid before me.

3179. "Have you not, in question 2663, enumerated certain distinguishing characteristics of money?—I have.

3180. "Have you not in the same question stated that deposits do not, in any way whatever, possess those characteristics? Yes, I have.

3181. "Have you not, in answer to previous questions, admitted, that for the discharge of debts, deposits have the characteristics of money?-All that I have admitted is, I believe, that a deposit may, under certain supposed circumstances, be used to discharge a certain supposed debt."

Lord Overstone also said (3132)-" Will any man in his common senses pretend to say that the total amount of transactions adjusted at the Clearing House are part of the money, or circulating medium of the country?" Now, of course, no one says that a transaction is money; but the operations of the Clearing House consist exclusively of the transfers of Bank Credits from one bank to another; and most undoubtedly these Bank Credits are part of the circulating medium of the country.

Now we have already seen that in Roman Law these Rights are expressly classed as Pecunia; we have seen, that both by our Courts of Law and Equity, they are held to be equivalent to Money; and Lord Overstone has himself admitted that they are of the same nominal value as money. How, then, can it be contrary to common sense to say that they are part of the circulating medium of the country? However, to avoid all such discussions, every one must admit that they have now become, in consequence of the general spread of the use of banking, the great medium of the payment of the country. And, therefore, those who consider the essence of money to be "closing debt," must admit them to be money. Thus they are answered by their own arguments; which are, however, erroneous, because money is not that which may happen to close a debt, but that which a debtor