2662. "Do you include Bills of Exchange ?-No, I do not

2663. "Why do you not include deposits in your definition of circulation?—To answer that question, I believe I must be allowed to revert to first principles. The precious metals are distributed to the different countries of the world by the operation of particular laws, which have been investigated and are now well recognised. These laws allot to each country a certain portion of the precious metals, which, while other things remain unchanged, remains itself unchanged. The precious metals, converted into coin, constitute the money of each country. That coin circulates - sometimes in kind; but, in highly advanced countries, it is represented to a certain extent by paper notes, promising to pay the coin to bearer on demand; these notes being of such a nature in principle that the increase of them supplants coin to an equal amount. Where those notes are in use, the metallic coin, together with those notes, constitute the money or Currency of that country. Now, this money is marked by certain distinguishing characteristics; first of all, that its amount is determined by the laws which apportion the precious metals to the different countries of the world; secondly, that it is in every country the common measure of the value of all other commodities, the standard, by reference to which the value of every other commodity is ascertained, and every contract fulfilled; and, thirdly, it becomes the common medium of exchange for the adjustment of all transactions equally at all times, between all persons, and in all places. It has, further, the quality of discharging these functions in endless succession. Now, I conceive that neither deposits nor Bills of Exchange, in any way whatever, possess these qualities. In the first place, the amount of them is not determined by the laws which determine the amount of the precious metals in each country; in the second place, they will in no respect serve as a common measure of value, or a standard, by reference to which we can measure the relative value of all other commodities; and, in the next place, they do not possess that power of universal exchangeability which belongs to the money of the country

2664. "Why do you not include Bills of Exchange in circulation?-I exclude Bills of Exchange for precisely the same reasons that I have stated in my former answer for excluding deposits. There is another passage in the same report which

appears to me to shew very clearly that the French Chamber have fully appreciated the distinction between Bills of Exchange and money—' Every written obligation to pay a sum due may become a sign of the money: the sign has acquired some of the advantages of circulating money; because like bills of exchange, it may be transmitted by the easy and prompt method of indorsement. But what obstacles there are! It does not represent at every instant to its holder the sum inscribed on it; it can only be paid at a distant time: to realise it at once, it must be parted with. If one finds any one sufficiently trustful to accept it, it can only be transferred by guaranteeing it by indorsement. It is an eventual obligation which one contracts one self, and under the weight of which, until it is paid, one's credit suffers. One is not always disposed to reveal the nature of one's business by the signatures one puts in circulation. These inconveniences led people to find out a sign of money still more active and more convenient, which shares, like the Bill of Exchange, the qualities of metallic money, because it has no other merit but to represent it, but which can procure it at any moment; which, like the piece of money, is transferred from hand to hand, without the necessity of being guaranteed, without leaving traces of its passage. The note payable to bearer on demand, issued by powerful associations formed under the authority and acting under the continual observation of government, has appeared to present these advantages. Hence Banks of circulation'

2665. "Under similar circumstances, will the aggregate amount credited to depositors in bankers' books bear some relation to the quantity of money in the country ?-During temporary fluctuations in the amount of circulation, all other things remaining unchanged, I conceive the amount of deposits will be affected by such fluctuations

2666. "Is the amount of bills of exchange dependent in some degree on the quantity of money ?—I apprehend that it is dependent in a very great degree. I consider the money of the country to be the foundation, and the bills of exchange to be the superstructure raised upon it. I conceive that bills of exchange are an important form of banking operations, and the circulation of the country is the money in which these operations are to be adjusted; any contraction of the circulation of the country will,

of course, act upon credit; bills of exchange, being an important form of credit, will feel the effect of that contraction in a very powerful degree; they will, in fact, be contracted in a much greater degree than the paper circulation

2667. Sir Robert Peel: "What are the elements which constitute money in the sense in which you use the expression, ' quantity of money?' What is the exact meaning you attach to the words' quantity of money-quantity of metallic Currency?' -When I use the words quantity of money, I mean the quantity of metallic coin and of paper notes, promising to pay the coin on demand, which are in circulation in this country

2668. "Paper notes payable by coin ?—Yes

2669. "By whomsoever issued ?—Yes

2670. "By country banks as well as other banks ?—Yes

2671. Chairman: "Would this superstructure, consisting of sums credited to depositors in bankers' books and bills of exchange, equally exist, although no notes payable in coin on demand existed in the country ?-Yes; I apprehend that every question with respect to deposits, and with respect to bills of exchange, is totally distinct from the question which has reference to the nature of the process of substituting promissory notes in lieu of coin, and of the laws by which that process ought to be governed. If the promissory notes be properly regulated, so as to be at all times of the amount which the coin would have been, deposits and bills of exchange, whatever changes they may undergo, would sustain these changes equally, either with a metallic Currency, or with a paper Currency properly regulated; consequently, every investigation respecting their character or amount, is a distinct question from that which has reference only to the substitution of the paper notes for coin

2672. "There would be no reason why, if there were no notes payable in coin on demand, the amount of this superstructure should be less than it now is, with a mixed circulation of specie and of notes payable on demand ?-None whatever. I apprehend that, upon the supposition that the paper notes are kept of the same amount of the metallic money, the question of the superstructure, whether of deposits or of bills of exchange remains precisely the same

2673. "That answer takes for granted that, in the first case

the metallic Currency, and, in the second case, the metallic Currency, plus the notes payable on demand, are the same in quantity? Yes

2674. Sir Robert Peel: "You suppose the notes payable on demand to displace an amount of coin precisely equal to those notes? They ought to be so under a proper regulation of the paper money, otherwise they are not kept at the same value as coin

2675. Mr. Attwood: "Would you consider that the superstructure of bills of exchange, founded entirely upon a metallic Currency, might, at particular times, become unduly expanded? -The answer to that question depends entirely upon the precise meaning of the word 'unduly.' I apprehend, undoubtedly, that it is perfectly possible that credit, and the consequences which sometimes result from credit, viz., over-banking in all its forms, and the over issue of bills of exchange, which is one important form of over-banking, may arise with a purely metallic Currency; and it may also arise with a currency consisting jointly of metallic money and paper notes promising to pay in coin; and I conceive further, that if the notes be properly regulated, that is, if they be kept at the amount which the coin otherwise would be, whatever over-banking would have arisen with a metallic Currency, would arise, and to the same extent, neither more or less, with money consisting of metallic coin and paper notes jointly

2676. "May not over-banking and over-issue of bills of exchange, forming a superstructure based upon money composed of metal and paper notes, derange the certainty of the notes being duly paid in gold?-I apprehend that if the paper notes be properly regulated, according to the sense which I have already attributed to that expression, and if a proper proportion of gold be held in reserve, the solidity of the basis cannot be disturbed; that is, that if there be a proper contraction of the paper notes as gold goes out, the convertibility of the paper system will be effectually preserved by the continually increasing value of the remaining quantity of the Currency, as the contraction proceeds"

About this period, and for a long time preceding, the greatest part of the Circulating Medium of Lancashire were bills of exchange, which sometimes had 150 indorsements on them before they came to maturity. Lord Overstone was asked

3026. "Does not the principal circulation of Lancashire consist of bills of exchange ?-As I contend that bills of exchange do not form a part of the circulation, of course I am bound, in answer to that question, to say No

3027. "Is there not a large quantity of bills of exchange in circulation in Lancashire ?-Undoubtedly, wherever a large mass of mercantile or trading transactions take place, there will exist a large amount of bills of exchange; and that is the case, to a great extent, in Lancashire

3028. "Do not the bills exceed, to an immense amount, the issue of notes payable on demand in Lancashire ?-Undoubtedly they do, to a great amount"

12. Mr. Hume had a long fencing match with Lord Overstone as to the distinction between Bank Notes and Deposits. Lord Overstone admitted that a debt might be discharged either by the transfer of a Bank Note, or by the transfer of a Credit in the books of the Bank: but he strongly contended that Bank Notes are money, and that Bank Credits, or Deposits, are not

3148. "Do you consider any portion of the deposits in the Bank of England as money?—I do not

3150. "Could 20,000 sovereigns have more completely discharged the obligation to pay the £20,000 of bills than the deposits did?-Where two parties have each an account with a deposit bank, a transfer of the credit from one party to the credit of another party, may certainly discharge an obligation in the same manner, and to the same extent to which sovereigns would have discharged that obligation

3169. "Will not the debt between the two be discharged thereby ?-Yes

3170. "In the one case I have supposed that payment of £1,000 was made by means of notes in circulation; payment was made by the delivery of these notes from one hand to another, and they are transported from place to place: but in the case of a payment made by means of a transfer in the books of the bank from one account to another, I ask you are not those payments equally valid, and would not the debt be discharged equally in either case?-In the one case the debt has been discharged by the use of money in the other case the debt has been discharged