Evils of a Contracted Currency.

Professor Walker, of Yale College, in his work on Political Economy, describes the process of contraction of the currency as follows:—"When the process of contraction commences, the first class on whom it falls is the merchants of the large cities—they find it difficult to get money to pay their notes. The next class is the manufacturers—the sale for their goods at once falls off. The laborers and mechanics next feel the pressure—they are thrown out of employment; and, lastly, the farmer finds a dull sale for his produce. And all, unsuspicious of the real cause, have a vague idea that their difficulties are owing to the hard times. Periodical revulsions in trade of a frightful character have occurred in this country at short intervals ever since the introduction of the mixed currency system. Their terrible effects (1818, 1837, and 1857 in particular) have been seen by all, and we have become so familiar with them that we look upon them as the natural phenomena of business; but it is not so—such fearful disasters never happen in a normal state of trade, and can only be produced by a false and delusive standard of value—a fluctuating currency."

Mr Palmer, Governor of the Bant of England in 1847, gave the following evidence upon this subject:—

Being asked—"It is by producing a fall in the commodities in this country that you correct the exchanges?" Answer—"Yes; not only merely in that way, but you would bring capital into the country by a high rate of interest."

"It is by interference with trade that it acts, and not merely by the inconvenience of the bill-holders?" Answer—"It causes the stoppage of trade."

"What would be the effect upon the manufacturers and laborers of the country during such an operation?" Answer—"It destroys the labor of the country. At the present moment, in the neighborhood of London, and in the manufacturing districts, you can hardly move in any direction without hearing universal complaint of the want of employment by the laborers of the country."

"That you ascribe to the measures it was necessary for the Bank to adopt in order to preserve the convertibility (specie payments) of its notes?" Answer—"I think the present depressed state of labor is entirely owing to that circumstance."

"And the pressure of the Bank produces forced sales?" Answer—"It stops credit, and the British merchant sells his goods for the purpose of meeting his private pay- page 7 ments, and brings his capital to the Bank at an earlier period than it would come in the ordinary course of business. There is no means of supplying the Bank with gold excepting only the diminution of the bank-notes, which immediately contracts the currency, and lowers prices by increasing the value of money."

And Augustus Mongredien, in his Free Trade and English Commerce, concludes the discussion of this subject with the following words:—"What can be said of a policy that led to such disasters as its reversal alone could remedy." Yes, indeed, what can be said?