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."

14. 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 without the necessity of resorting to the use of money, in consequence of the economising process of deposit business in the Bank of England.

3171. "Can the debt of £1,000 which one person owes to another be discharged, without money being paid, or its value?— A debt of £1,000 cannot be discharged without, in some way or other, transferring the value of £1,000; but that transfer of value may certainly be effected without the use of money.

3172. "Was not the deposit transfer in the Bank of England, to satisfy that debt of £1,000 of the same value as the £1,000 notes which passed in the other case?-A credit in the Bank of England I consider is of the same value as the same nominal amount of money; and if the credit be transferred, the same value I consider to be transferred as if money of that nominal amount had been transferred. .

can by law compel his creditor to take in payment of a debt.

Lord Overstone further said (3082)—" When I give a definition of "Currency," of course it is Currency in the abstract: it is that which Currency ought to be: that definition properly laid down and properly applied, will include paper notes payable on demand, and it will exclude bills of exchange."

Here again Lord Overstone is absolutely wrong. It will be seen from the judicial decisions given above, that it is perfectly impossible to frame a true definition of Currency which shall include bank notes and exclude bills of exchange: and, moreover, no bank notes in England, except Bank of England notes, are money; because no debtor can compel his creditor to take any Bank Notes in payment of a debt, except Bank of England Notes, and these only so long as the Bank pays them in money on demand. If the Bank were to stop payment, Bank of England Notes would immediately cease to be legal tender: a consideration which will be found of the greatest importance when we come to investigate the mechanism and operation of the Bank Charter Act of 1844.

15. Mr. TOOKE was asked-" In using the term 'circulation' of the Bank of England, what do you include in that term ?-I include in that term only the Bank notes in the hands of the public. In order to avoid confusion, perhaps the Committee would allow me to state the meaning which I attach to the different terms 'Currency' and 'Circulating Medium.' The Currency I consider to be, in strictness of language, according to the apparent derivation of the term, that part of the circulating medium, such as the coin of the realm, and Bank of England notes and country bank notes (although not a legal tender), which pass current from hand to hand, without individual signature, such as appears on drafts or indorsements. I am doubtful whether cheques on bankers might not be included, from their perfect similarity to bank notes, in many of the purposes for which they are employed; at the same time, there is the feature of distinction which I have mentioned, viz., that cheques require the signature of the party passing the draft, and that they do not pass from hand to hand. Bills of exchange I consider as a part of the general means of distributing the

productions and revenues of the country, and, therefore, as constituting a part of the circulating medium. I consider, also that the simple credits by which goods are, in many instances, bought and sold, come likewise under the general description of the circulating medium, in as far as the prices of commodities are in question because a simple contract of sale, whether any payment eventually passes or not, is commonly entered in the price currents without distinctions from those for which any actual payment is made. I cannot consider that transferable debts constitute circulating medium, but only the actual transfers.

3279. "What do you mean by transferable debts?—The deposits in the hands of bankers, against which the depositors are entitled to pass their drafts.

3280. Mr. Grote: "You include, not simply transfers of deposits in the hands of the Bank of England, but also transfers of deposits in the hands of other bankers?—Yes; transfers of deposits generally.

3281. Chairman: "Do you then consider a deposit to be a transferable debt owing by the banker to the depositor ?—Yes. 3282. "In the use of the term 'Currency' in your future examination, do you propose, in addition to coin, Bank of England notes, and country bank notes, to include cheques upon bankers ?Yes; I think upon the whole the distinction I have mentioned is not sufficient to exclude them, and, therefore, I shall propose to consider them as included.

3283. Mr. Warburton: "By cheques, you mean cheques actually drawn, and passing from one person to another?-Yes; that which is current, in fact.

3284. "Will you be good enough to state what you propose to include in the word 'circulation' in the course of your future examination ?—I propose to include in the term 'circulation' the notes of the Bank of England, and of country banks, payable on demand.

3285. "What do you mean by circulating medium ' ?—I mean all instruments of interchange by which the productions and the revenue of the country are distributed; everything which serves and is received as a mode of payment, or which constitutes nominal money-price which appears in price

currents.

3286. Mr. Grote: "There is the Currency, and there are