It is therefore not the scarcity of money, but the extinction of confidence, which produces a pressure on the money market; and an examination of all the great commercial crises in this country, will shew that they have always been preceded and produced by a destruction of Credit, which has usually been brought about by extravagant overtrading.

10. The principle that the relation between supply and demand is the sole regulator of value, combined with the action of the Credit system, will explain all the phenomena witnessed during a pressure on the money market. The failure of Credit in any one branch of business will produce its full effect on the general market rate of interest, because that is regulated by the intensity of the demand for money from whatever quarter it comes : but it will not necessarily follow that the market prices of all commodities will be depressed. The market price for each commodity will be governed entirely by its own peculiar circumstances. If the holders of one commodity have independent capital, and have prudently abstained from overtrading, the price of such a commodity will not suffer much, because the ratio of supply and demand will not be altered to any great extent, but it cannot help sympathising to a certain extent with other commodities. But if the holders of another species of commodity have overtraded, and depended too much on credit, without sufficient means they will necessarily be obliged to throw a great quantity of their produce on the market to realise, and this excessive supply will depress the price. And this effect will be increased because such are the very times when persons who have ready money are particularly cautious in buying, partly because they always hope the market will fall still lower, and they hope to buy cheaper when prices have fallen to a minimum, and they certainly will not buy more of any commodity than they can help, which is diminishing in value: and partly because they must keep their ready money to maintain their own position. From these causes not only is the supply increased, but the demand is diminished, so that the fall is doubly aggravated. Thus we see at once that a falling market will always be well supplied, because people who must sell hasten to do so before the price falls still lower: and buyers hold aloof, waiting as long as they can to see the lowest. On the other hand, when markets are rising, the case is reversed. The sellers hold aloof, hoping the price will be still higher, and buyers crowd in hastening to purchase before the price rises more. A market which is desponding and inactive will usually continue so until people are persuaded that things are at the lowest, and are at the turn. It is evident that these considerations and observations apply to home produce, or at least to produce which is already in this country, and which can be thrown on the market immediately. In order to attract foreign produce, the market must rise high for a considerable time, with the appearance of continuing so.

11. Considering that any bill whatever which is drawn against bond fide produce is in commerce technically a Real bill, it will be seen at once that their supposed security is greatly exaggerated, because any operation, however foolish and absurd, is a good basis for a Real bill. In times of rapid changes in price, multitudes of bills will be generated by speculative purchasers, and when the price falls as rapidly as it rose, as it usually does, it is simply occupat extremum scabies. Hence losses, and very severe ones too, are sure to happen in such times. But there is always this security at least with Real bills. When persons have speculated unluckily and lost their fortunes they are brought to a standstill. When a man has ruined himself by speculation, no banker out of Bedlam would advance him more money to speculate with. Hence ill-judged speculation must stop a man's mischievous career in a comparatively short space of time, that is whenever he has lost the value of the goods he has been speculating with. We shall find in the next chapter, unfortunately, that traders have devised a method to extract funds from bankers to speculate with, by which they can go on long after they have lost all they ever had many times over, and adding loss to loss, until, perhaps, they may bring down their bankers, whom they duped and defrauded, as well as themselves. We have shewn in the next chapter, that there are symptoms which will often indicate a commercial crisis.