|An inquiry Into The Currency Principle|
CONNECTION OF THE CURRENCY WITH PRICES,
EXPEDIENCY OF A SEPARATION OF ISSUE FROM BANKING.
THOMAS TOOKE, ESQ. F.R.S.
LONGMAN, BROWN, GREEN, AND LONGMANS,
Some part of the following pages was written immediately after the appearance of the reports of the committee of the House of Commons on Banks of Issue, and the greater part has since been put together without any definite view to publication. The reason which has determined me in now publishing them is, that whether the views here presented be assented to or not, they are such, I think, as ought not to be wholly overlooked in the consideration of the measures which the government has announced its intention of proposing to Parliament in the course of the present session, with a view to placing the banking system of the United Kingdom on an unproved and permanent footing.
Some of the points which I have endeavoured to establish may probably be thought not to be made out with sufficient fulness of explanation, and doubt- less on several of the topics a more exhaustive process of proof and illustration might be required for the purpose of anticipating and answering objections. But such a process could not be comprised within a readable compass. It would require a book instead of a pamphlet.
The necessity for compression, which I feel to be thus imposed upon me, has prevented me from touching at all upon topics which are of importance and connected in some points of view with the subject here discussed, but to which justice could not be done in an incidental notice.
One of the great difficulties of dealing with the subject about to be discussed, as indeed in most cases of controversy, but in this more than in most others, arises from the use of the same words in different senses. Not to mention the mooted points, as to whether deposits, bankers' cheques, and bills of exchange should be considered as money or currency; because these involve rather definition and classifi- cation, according to the purposes for which they are supposed to be employed, than that loose and am- biguous use of terms to which I allude.
This consists in a shifting of the meaning of the term, when applied indiscriminately in the same argument to designate things and processes totally distinct.
It will be seen in the course of this discussion how much of the obscurity and perplexity and error, in which the objects of inquiry are involved, may be traced to the vague and ambiguous language commonly employed in treating of them: such for instance as "gold and silver," "the precious metals," and "bullion," used indiscriminately and synonymously with "money" and "currency;" the terms "money and currency" employed when "capital" is meant. "Issues of paper," meaning bank notes, for mere advances of capital where no bank notes pass; the "value of money or currency," for the rate of interest or discount. "Abundance and cheapness, or scarcity and dearness of money," to signify a lower or a higher rate of interest, or a tendency to either. And "expansion and contraction of the currency, or of the circulation," when undue extension of credit, and its consequent revulsion, would be the correct description of the facts of the case.
The instances in which confusion and inconsistency in reasoning may be traced to this loose and ambiguous use of language are innumerable; and if I could hope that by directing attention to the sources of error so pointed out, and thus induce more care and distinct- ness of phraseology, so as to render future discussions on the subject more intelligible, and consequently to narrow the grounds for difference of opinion, I should consider that my labour, in this publication has not been thrown away, even although I should fail of gaining assent to the conclusions, or any part of them, which I have endeavoured to establish.
London, March, 1844.