coinage; and the original solülus has now dwindled to the sou, or halfpenny : 13. Henry III. endeavoured to introduce a Gold Coinage, but it failed. In 1344, however, Edward III. reintroduced it, and since then Gold has been permanently coined in England. But the Gold coins were always ordered to circulate at a fixed ratio with respect to Silver and as the ratio fixed by the Mint seldom agreed with the ratio of gold and silver in the open market of the world, the Gold Coinage constantly disappeared, in accordance with Gresham's hitherto undiscovered law. In the reign of Charles II. the African Company brought home a large quantity of Gold from the Guinea coast. He coined this Gold into pieces which he called Guineas, which were intended to be of the value of 208. in Silver, so as to represent the Pound. But the Mint rating did not correspond with the Market Value of Gold and - Silver, and the Silver Coinage became exceedingly debased, so that Guineas rose to 288. and 30s., and rapidly disappeared. This was to a certain extent rectified by the great recoinage of the Silver Money in 1697: but still a considerable error prevailed. In 1717, Newton, Master of the Mint, reported to Parliament that the true Value of the Guinea was 20s. 8d. in Silver. Nevertheless, Guineas were declared to be current at 21s. ; and then, in the language of the Mint, Gold was fixed at £3 178. 10 d. per ounce Gold and Silver Coin were then declared to be legal tender for debts to any amount. But as Gold was overrated by 4d. in the £, and Silver was underrated by the same amount, merchants, in the course of the last century, universally adopted the plan of paying their debts in Gold, in preference to Silver, as being the cheaper medium. And, in accordance with Gresham's Law, the Silver coins were exported, as being below their true value in this country. Gold thus became the recognised measure of Value in England, though the exchanges were reckoned in Silver: and for exactly the opposite reason, Silver became the recognised measure of Value in France At the great recoinage in 1816, this custom was adopted as Law and Gold was declared to be the only legal measure of Value and legal tender to an unlimited amount: and the Sovereign was struck to represent the value of 20s. in Silver, or the £ 14. Ever since the time of Charles II. the coinage of Gold has been free to the public: but by the Act relating to the coinage in 1816, the coinage of Silver and Bronze, is retained in the hands of the Government. In order to obviate the effect of Gresham's Law, the value of Silver is artificially raised. Since 1816 the Pound weight of Silver has been coined into 66 shillings; but four of these are retained for the expenses of coinage and the 62 lighter shillings are declared to be of the same value as the previous heavier ones. Thus 20 of them are declared to be equal in value to the Sovereign: and thus their value is artificially raised about 6 per cent. But to prevent injustice being done, they are not legal tender for any sum above 40s.: it having been intended to have made the Double Sovereign the monetary unit The Bronze coins are only worth about one-fourth of their nominal value pence and halfpence are only legal tender for the value of one shilling and farthings to the value of sixpence CHAPTER IV THE THEORY OF CREDIT Preliminary Remarks We have now arrived at the subject matter of this Workthe exposition of the great System of Credit and Banking, the marvel of modern Commerce. What the Steam Engine is in Mechanism what the Differential Calculus is in Mathematics : that is Credit in Commerce : Daniel Webster, the eminent American Jurist and Statesman, truly said "Credit is the vital air of modern commerce. It has done more, a thousand times, to enrich nations, than all the mines of all the world. . Credit is to Money what Money is to articles of Merchandise. It is very true that Commercial Credit, and the system of Banking, as a part of it, does furnish a substitute for Capital " So, also, an able French writer, M. Gustave du Puynode, says-" "However fruitful have been the mines of Mexico and Peru, in which, for a long time after Columbus, seemed buried the fortunes of the world, there is yet a discovery more precious for humanity, and which has already produced more Wealth than that of America: that is, the discovery of Credit: a world altogether imaginary, but vast as space; as inexhaustible as the resources of the mind " At the present time Credit, in its various forms, is the most gigantic species of Property in this country inferior only, if it be inferior, to the Land in magnitude: and the negotiation of Debts is, beyond all comparison, the most colossal branch of Commerce. The merchants who trade in Debts-namely, Bankers-are now the Rulers and Regulators of Commercethey almost control the fortunes of States As there are shops for dealing in bread, in furniture, in clothes, in wine, and in every other specics of Property, so there are shops, some of the most palatial structures of modern times, for the express purpose of dealing in Credits, or Debts. And as there are corn markets, and fish markets, and poultry markets, and many other sorts of markets, so there is a market for buying and selling Foreign Debts-which is the Royal Exchange. Thus Banks are nothing but Debt Shops, and the Royal Exchange is the great Debt Market of Europe The description of the powers of Credit given by Webster and du Puynode is undoubtedly true: but, unfortunately, there is a reverse to the medal. If Credit, in modern times, when rightly used has produced these wonderful effects, it has, when misused, produced catastrophes of corresponding magnitude. False Theories of Credit, and the abuse of Credit have produced monetary cataclysms which have shaken nations to their foundations, and whose direful effects have only been equalled by those of the earthquake and the volcano. It is, therefore, of the deepest national importance to investigate and establish the true Theory of Credit It was out of discussions on the nature of Credit that the modern science of Political Economy took its rise and yet the subject of Credit is the one which has been least understood by Economical writers. Considering the mighty part which Credit plays in modern Commerce, and the effects it has produced for weal or woe upon nations, it might have been naturally expected that Economists would have thoroughly worked out the subject: and would have been unanimously agreed upon its nature and effects. So far, however, from this being the case, there is no subject whatever upon which they are more utterly at variance with each other, and with themselves. To understand the subject properly requires a thorough settlement of nearly all the Fundamental Concepts of Economics: which has been entirely neglected. It requires a thorough knowledge of some of the most abstruse branches of Mercantile Law, and the mechanism of Commerce. And, indeed, to explain some cases in Credit was too much for some of the most eminent judges on the Bench. In one case Lord Eldon said-"I think I argued the case of ex parte Walker, and I must say that the speculations about Paper certainly outran the grasp of the wits of the Courts of Justice. This sort of Circulating Medium puzzled as able a man as ever sat hereLord Thurlow.. What was to be done, then? The Court was puzzled and distressed. At last we came to an anchorage in that case, ex parte Walker. I have no difficulty in saying I never understood it. I am satisfied that though, no doubt, the Court understood that judgment, yet none of the Counsel did : As we have shewn in the following section, the whole of the system of Credit, Banking, and Bills of Exchange was originated by the Romans and a long series of illustrious Lawyers had brought the Theory of Credit to a state of absolute perfection: and their doctrines were embodied and declared to be Law in the great Code, or Digest of Roman Law, called the Pandects, published by Justinian in the early part of the sixth century. They were adopted and confirmed in the Basilica, the Reformed Code promulgated by the Basilian dynasty in the tenth century: and they have been the Mercantile Law of all Europe, except England, for 1,300 years. They are fully set forth in all the great Continental Jurists: but, from that unfortunate aversion which the Common Lawyers of England so long entertained against the Civil Law, they were comparatively unknown in this country though adopted in Equity: and they have never yet found their way into any treatise on Political Economy, either Foreign or English The Romans abandoned Britain in the beginning of the fifth century and the Common Law of England on the subject of Credit was exactly the doctrine stated by Gaius, which was the text-book of Roman Law generally used throughout the Empire at that period. The more advanced doctrines of the Pandects have long been adopted in Scotland: and the Courts of Equity in England. And by the Supreme Court of Judicature Act, which came into operation on the 1st of November, 1875, it was enacted that the doctrines of Equity should prevail over those of the Common Law in all cases where they conflict The investigation of this subject, moreover, opens up another |