Fallacy 9th. That, whatever the effect upon other classes, bank stockholders at least are made richer by an expansion of the currency.

That this is not universally true will appear on examination.

An expansion of the currency raises prices: that we take to be indisputable. If so, the stockholder may be made richer or poorer by the cause that increases his bank dividends.

For example: suppose he has an income from various

sources of...............\$5,000

And from bank stock......... . . . 1,000

Total income.........\$6,000

In consequence of an increase of circulation by the banks, he gets an increase of \$500, equal to fifty per cent on his bank dividends, making his whole income \$6,500. But prices and commodities have advanced twenty-five per cent in consequence of the inflation. What he would have bought before for \$6,000, now costs him \$7,500. The result, then, is, that the bank stockholder has gained \$500 in his dividends, and lost \$1,500 in his purchases; so that he is actually \$1,000 poorer, reckoning the real satisfactions or commodities, &c, which he obtains from his income.

There is nothing fictitious in this statement. The natural and certain operation of an inflation of currency affects in just this way all who hold bank stocks, but have the main part of their income from other sources. But we can suppose a case in which the stockholder would gain by expansion.

For example: he has an income from bank stock of . . \$4,000 From salary...............1,000

Total income........\$5,000

Now, by expansion, his dividends are increased fifty per cent, as before; and his income stands: —

From bank stock..............\$6,000

From salary............... 1,000

\$7,000

Prices have advanced, as before, twenty-five per cent, so that what he could have bought for \$5,000, now costs him \$6,250; but, since his income has increased to \$7,000, he is a gainer by \$750.

These two cases present, it is believed, a fair illustration of the effects of an increase of dividends upon bank stocks occasioned by an inflation of the currency. It is seen, that, if a man's income is derived mainly from such sources, he may gain by an increase of his dividends, notwithstanding the rise in price. But few persons are so situated. Nearly all capitalists have a variety of investments, bank stock being only one of them; so that, to the great mass of stockholders even, the gain by increased dividends is more than counterbalanced by the loss from enhanced prices.

Who gains by fictitious currency?

But it may be asked, if stockholders do not gain by bank expansions, who does? There is an increase of dividends: who gets the advantage?

This inquiry brings us face to face with one of the prime mysteries of currency, and, indeed, of political economy. "Who gains by fictitious currency?" Before answering this, we will ask, What is gained by a currency not consisting of actual value? We answer, nothing but price. Prices are changed by it. Values are not created: they remain the same. By the change in the standard or measure from a value to a mixed currency, prices no longer accurately determine values. Prices are increased. Those who hold commodities while prices are advancing, gain by such an advance. Debtors may discharge their obligations with less value. Speculators may make favorable operations. The value of every commodity has been interfered with; the integrity of every contract to pay value has been impaired. Some are constantly gaining; others, losing: both parties, it may be, unconscious of the cause of such prosperity or adversity." Times " are said to be good or bad, as men gain without earning, or lose without a fault. Here we have the answers of the questions,— What is gained by a mixed currency? Who gains by it?

Such is the " consummation " of mixed currency. " It is a grand system of insidious swindling." So said " Hard-castle " (who was no other than Mr. Page of the Bank of England) forty years ago; and what that shrewd observer then discovered is apparent now to all who enter into a full examination of the subject.*

* Richard Cobden repeated this remark of Mr. Page to the author at Manchester, more than twenty years since, with his emphatic approval.