THE THEORY OF THE EXCHANGES.

On Mill's doctrine of International Trade and International Values.

1. Mill's doctrine of Value contrary to the Principles of Physical

4. There can be only one General Theory of Value

5. Error of the Ricardo-Mill Theory of Economics

ON THE THEORY OF THE EXCHANGES.

1. DEFINITION of the Exchanges.

.

2. Difference between Money Changing and Banking

Definition of PAR of EXCHANGE

Depreciation of the Coinage causes a Fall in the Foreign

286

288

Exchanges

289

This disturbance of the Exchange expressed in two ways

3. No true Par of Exchange between Countries which use differ-

ent standards .

290

290

The NOMINAL EXCHANGE and the REAL EXCHANGE.

291

Rule to ascertain the true state of the Exchange when the

Currency is depreciated

292

87. Effects of an INCONVERTIBLE PAPER CURRENCY on the Foreign

EXCHANGES

8.

A Rise in the Market or Paper Price of Bullion above the

Mint Price, and a continuous state of the Foreign Ex-

changes below the limits of the Real Exchange, are the

proof and the measure of the Depreciation of the Paper

Currency

On EXCHANGE OPERATIONS

Causes which produce temporary fluctuations of the Ex-

change beyond the specie points

Arbitration of Exchanges

9. On the REAL OF COMMERCIAL EXCHANGE

Two branches of trade in Bullion

PAGE

299

303

.

10. On the RATE of DISCOUNT as affecting the EXCHANGES.

323

11. On FOREIGN LOANS, SECURITIES, and REMITTANCES as affecting

13.

On MONETARY and POLITICAL CONVULSIONS as affecting the Ex-

changes

332

14. On the MEANS OF CORRECTING an adverse EXCHANGE

333

Rate of Discount the most powerful method of acting on the

Exchange.

334

335

336

ON SOME THEORIES OF CURRENCY.

§ 1. It is necessary not only to ascertain the true principles of

monetary science, but to point out the fallacy of false

theories

5. It is a violation of the fundamental conception of a Currency

338

338

338

339

340

340

341

342

342

10. The same continued

11. The same continued

12. The same continued

13. The same continued

14. The same continued

15. The same continued

16. The essence of Lawism is that money represents commodities

and that paper currency may be based upon commodities;

MONEY DOES NOT REPRESENT COMMODITIES, BUT ONLY DEBT,

OR SERVICES DUE, WHICH HAVE NOT YET RECEIVED THEIR

EQUIVALENT IN COMMODITIES

17. The theory of basing a paper currency upon commodities in-

volves the palpable contradiction in terms that a person

may buy commodities and keep his money as well

18. Law's idea

19. Law was no advocate of an unlimited incontrovertible paper

PAGE

342

343

344

344

345

345

346

.

347

357

358

26. The same continued

27. Extracts from Sir Archibald Alison's History regarding the

assignats

28. His extraordinary inconsistency

30. Practical results of Law's theory

29. The same continued

31. Fourth example of Lawism-The Bank of Norway.

32. Fifth example-The American banking convulsions of 1837-9 359

33. The principle of basing a paper currency on the public funds
is identical with and is as vicious as basing it on land

34. Fundamental vice of the constitution of the Bank of England
35. The consequences of this vicious principle are prevented by
its being limited to that single instance

36. ON THE THEORY OF BASING A PAPER CURRENCY ON THE DIS-
COUNT OF MERCANTILE BILLS

37. Refutation of this theory by the Bullion Committee

38. This refutation incomplete

39. Demonstration of the fallacy of this theory on the principles

of this work

40. The same continued

44. Bullion as the representative of debt is the only proper basis

upon which to found a paper currency

370

§ 45. Bullion is the only regulator of its amount

PAGE

. 370

. 371

46. Specie and credit form the only true circulating medium

47. Specie and credit must always increase and decrease together

48. Problem to discover the true mode of acting upon the paper

currency

49. The rate of discount is the true mode of acting upon the

paper currency.

371

. 371

372

50. Arguments applicable to the wheat also apply to debt

51. Effects of the action of this principle

.

52. In all commercial crises production should be curbed

53. Consequences of violating this principle

58.

57. Historical proof of the fallacy of this theory

Mistaken view of Sir Archibald Alison

59. When the foreign exchanges are adverse the Bank must con-

tract its issues .

60. Consequences of adopting Sir A. Alison's plan

61. Absurdity of it.

376

376

62. Other considerations which prove that the rate of discount

is the true mode of acting on the paper currency

379

64.

63. Advantages of a proper attention to the rate of discount

The truth of the preceding principles exemplified in England

on various occasions.

65. Conclusion

380

§ 1.

2.

CHAPTER XVII.

ON THE DEFINITION OF CURRENCY.

Bank Act of 1844 based on a peculiar Definition of Currency 381

Dooms of the Anglo-Saxons regarding the sale of goods, mer-

All Negotiable Instruments subject to same rule of CURRENCY 389

PAGE

§ 17. Examination of the modern opinions on Currency.

18. Legal and Philosophical errors of these opinions

19. Consequences of these opinions

20. Opinion of M. Michel Chevalier

CHAPTER XVIII.

ON THE ORGANISATION OF THE BANK OF ENGLAND: AND ON
THE BANK CHARTER ACT OF 1844.

§ 1. Importance of the Bank Charter Act of 1844.

2. The Chinese invented Bank Notes .

Evil effects of Paper Money in China

The "CURRENCY PRINCIPLE " asserted in China

3. Banks in Europe constituted on the Currency Principle.

4. No English Banks on this Principle

5. Law's Theory of Money and the Currency Principle founded

on the same error

6. Foundation of the Bank of England in 1694.

7. The Bank increases its Capital

8. This principle erroneous.

9. Further increase of Capital

10. The Bank suspends cash payments in 1696 and 1797

11. Partial resumption of cash payments in 1816.

435

436

438

444

445

446

459

461

461

462

Misconceptions respecting this Act.

The Bank resumes cash payments in 1821

15. The Bank adopts the Principles of the Bullion Report in 1827

16. Method adopted to carry them into effect

17. Peel's opinion in 1833

22. Provisions of the Bank Charter Act of 1844

23. The Bank Act does not carry out the "Currency Principle". 473

24. Arithmetical error of the Bank Charter Act

25. Failure of the "Mechanical" action of the Bank Act in 1847 476

26. Explanation of this failure

27. The RATE OF DISCOUNT is the true governing power of the

Paper Currency.

28. On the causes which compelled the Suspension of the Bank