but all its efforts could not raise the active circulation over twenty-three millions. It consequently reduced the rate of interest, first to 2, and then to 2, per cent a year, the lowest rate at which it had ever discounted bills. Consols, moreover, or government three-per-cent stock, rose to par and above, and the ministry, therefore, formed a plan for reducing the rate of interest on the national debt. The Bank of France, also, had specie to the amount of 120 millions of dollars, or far more than it needed. The accumulation in our own Sub-Treasury, or government exchequer, was about seventeen millions; and the coin in the New York banks exceeded the amount of their notes in circulation. Supported by these heavy amounts of specie in their vaults, the banks of England, France, and America might safely have increased their issues of notes to a very great extent; and they did endeavor to increase them, as otherwise their profits would have been much diminished. Accordingly, they pressed more accommodation upon their customers, and money was offered at very low rates. Everywhere there appeared to be a superfluity of currency, or of money seeking investment, which did not fail soon to produce its usual results.

It has already been said, that it is only the coin in active circulation which operates directly upon prices. What is in the vaults of the banks is dormant in this respect, its office being only to guard the really active portion of the currency against frequent and sudden fluctuations. The effects of an influx or efflux of the precious metals are first felt on these bank reserves, which so far retard or deaden the shock, that it is not even perceptible by the community at large till the increase or drain has become very serious. Then, even the banks begin to feel the pressure. After an unnatural inflation of prices by a speculating fever, the heavy importations of goods, and consequent heavy exportations of specie, so far diminish these specie reserves, which are the ballast of the banks, that they find they must furl sail, or contract their paper issues, if they would not be thrown on their beam-ends. On the other hand, an anomalous state of things, like that which existed in 1852, creating an immense influx of specie, they find their ballast so much increased, that the motion of the vessel has become sluggish, and they cannot force their

way through the water unless they spread more sail, or induce their customers to borrow a larger amount of bank-notes.

It may seem strange, that, as the spirit of speculation has usually been rife when but slight temptation was offered, it should have shown itself so dull, when there was a moral certainty that there would soon be a general rise of prices. But the prospect of a general and gradual rise of prices does not tempt men into hazardous enterprises so strongly as the chance of a sudden and great enhancement of the price of one commodity or several. The report of a war with China may double or triple the price of tea in a month; or a rumor of the potato-rot and a failure of the crops in England may create a fever almost at once in the flour-market here in America. But a gradual enhancement in the money value of all commodities does not quickly induce people to purchase largely on borrowed capital. There may be brief and violent fluctuations in the relative value of particular commodities, while the great movement is silently going on which slowly enhances the value of all. It is conceivable, and even probable, that one effect of the abundance of capital seeking investment, and the consequent diminution of the rate of interest, will be to lower the prices of many commodities, instead of raising them, because these circumstances aid and stimulate production. More cotton will be spun, because it will be more easy to obtain capital wherewith to build manufactories and keep them in operation.

Still, the loan of capital could not be so generally offered at very low rates of interest without producing, sooner or later, its proper result, - a disposition to speculate and a general inflation of prices. This effect began to be manifest towards the close of 1852, and became very conspicuous the following year. Commodities generally rose in price, to the extent, on an average, probably of 15 or 20 per cent beyond what was obtained for them in 1850; and in the case of breadstuffs and some other articles of provision, a partial failure of the crops in Europe in 1854 made the enhancement of price much greater. As a necessary consequence of the increased cost of living which was thus produced, there was a general rise of wages and salaries, amounting to at least 15 per cent. These results were attended by considerable speculation, it is true;

as loans could be easily obtained, and there is always a strong temptation to buy on a rising market. Thus, the very lucrative trade with California and Australia, stimulated by the extraordinary disturbance of values which was created by the discovery of the gold deposits in those two countries, was soon carried to excess, and a reaction ensued which ruined many adventurers. A reaction followed throughout the United States in 1854, which extended to England and France the following year. Many persons had traded beyond their means, and therefore found great difficulty in meeting their engagements. The rate of interest rose to its highest point, and loans were difficult to be obtained on any terms. The rate of discount at the Bank of England was fixed at six per cent at the close of 1853, and seldom fell below this point during the two following years. In short, there were all the features of a commercial crisis, except a fall of prices, which was prevented by the steady influx of gold, diminished in amount, it is true, but still sufficient to maintain prices and wages at the eleva tion which they had reached. It has become manifest, then, that this is a permanent elevation; having withstood a general pressure in the loan-market, which continued for an unusual period and with extraordinary severity, there is no reason to believe that it will give way when ease and prosperity return. No one expects that prices will return to the level at which they were in 1850; money has depreciated in value within five years about fifteen or twenty per cent.

The question will naturally be asked, What has become of the large amounts of gold, which were deposited in the banks of England, France, and the United States in 1852? The answer is easy; it has been absorbed by this very rise of prices, or depreciation in the value of money, assisted in some degree, perhaps, by the exigencies of the war with Russia, which has caused large amounts of specie to be transported to Constantinople and the Crimea. If, as has been estimated, the whole amount of coin circulating in the commercial world before 1850 was 400 millions sterling, and if prices have risen generally 20 per cent, 480 millions are now needed to effect the same amount of exchanges as before. The depreciation has taken place because 80 millions sterling, or nearly 400 millions of dollars, have been added to the active specie currency of the

world. This amount was first accumulated in the banks, there being no demand for it in open market till the disposition to make purchases was excited, which at last produced the rise of prices. But the addition to the bank reserves, as we have seen, necessarily created this disposition to buy; loans being offered in large amounts, and on very easy terms, the purchases were made, prices rose, and the money was absorbed into the active circulation, instead of being thrown back upon the banks. The continued influx of the precious metals from the mining countries prevented prices from receding again, and the depreciation in the value of money is thus established. The reserve in the Bank of England has now fallen to less than half of its amount in 1852; that in the Bank of France has been reduced so low as to create alarm for the safety of the institution.

The experience which we have now had enables us to predict with some confidence the future course of the depreciation in the value of money. It will not stop here; the continued influx of at least 100 millions of dollars a year from the silver mines and gold deposits must again raise the prices of commodities, within five or six years, another 15 or 20 per cent. As farther supplies are received from California and Australia, the specie reserves of the banks will again be distended, the rate of interest will again be reduced, loans and discounts will be freely offered, and, as a necessary consequence of the larger amount of money thus thrown into the market, prices will rise still higher, or, what is the same thing, the value of money will be still further depreciated. That a speculating fever should also ensue, many persons being encouraged by this abundance of money and enhancement of price to make purchases beyond their capital, is a natural, but not a necessary, consequence of this alteration of value. It is evident that the change might take place by a steady and gradual process, each annual receipt of the precious metals from the mines operating upon the market to raise prices to an extent almost too slight to be appreciated; if so, there would not be even a fluctuation in the rate of interest to indicate the change which is going on. But it is more probable that the revolution will not be thus uniform in its progress, but that it will advance, so to speak, by hitches and starts, a single year being marked by a

considerable rise in prices, which will be followed by two or three years of seeming quiescence, and then another rise will ensue. Such has been our experience thus far. The principal effect upon the market was produced in 1853, the receipts from California and Australia having reached their highest point the previous year. Since 1853, there has been no general advance; prices have only been maintained, - those of some commodities have even fallen off.* In a year or two, we may expect another start, if the annual supply from the mining countries should not be suddenly and largely diminished.

One reason why money does not sink in value slowly and uniformly, but by starts, is to be found in the time which is required for equalizing prices throughout the world. After they have risen in the chief commercial countries, such as England, France, and the United States, the effect must be transmitted to the East, to British India and China. The price of opium, tea, silks, and other Eastern products, must also rise, and large amounts of gold and silver will be transmitted to pay for these commodities at their enhanced valuation. The East has always required more metallic currency in proportion to the extent of her commerce than the West, as it has fewer banks and other expedients for economizing the use of money.

It may be readily inferred, from what precedes, that, far from regarding a considerable decline in the value of money, when produced by natural causes, as a calamity, we consider it as a blessing. It will greatly alleviate the burden of taxation in many states that are now oppressed by a heavy national debt. Private debts, as well as public, will become easier to bear; they will be subject to a steady process of abatement, too slow, and compensated in too great a variety of ways, to occasion any serious loss to the creditor, and still affording a sensible relief to all who have payments to make. The greater proportion by far of fixed payments are made by those who are engaged in business or industrious undertakings, to those who are enjoying leisure and wealth. Thus, the

* Breadstuffs may be thought to be an exception; but these ought not to be taken into account, except on an average of a considerable number of years. A very short or very abundant harvest will affect the price of flour much more than any advance or decline in the value of money.