We have explained the organization of mixed-currency institutions, the character of their operations, the quality and form of their issues. We pass now to consider this currency in its several relations to the public wealth. Such an inquiry will demand great carefulness and impartiality, and must necessarily be made in detail.

We have two grand questions which arise naturally at the start: —

1st, Does it perform satisfactorily the functions of money? If we answer this inquiry favorably, we have still to ask,—

2d, What, and how great, are its effects on public interests, beyond the proper effects of value currency?

These questions are so full of interest to all the departments of wealth, are so deeply obscured by prejudice and misapprehension, and are so especially important at the present time, that their discussion will be protracted through several chapters.

1st, does a mixed, currency satisfactorily perform the functions of money?

Those functions are as already stated, — to act as a medium of exchange, and to be a standard of value.

Does a mixed currency perform them well? We answer, no. The essential quality of such a currency, which unfits it to act well as either a standard of value or a medium of exchange, is this: —

It Is Not Governed By The Laws Of Value

It is subject to quite other laws. It varies as to its volume and character; but we do not find that it does this out of respect for value. The great principle of value is, demand creates supply; supply satisfies demand. They are measured against each other, and are found equal. There is no supply which demand does not call for: there is no supply which is not enough for demand. And the reason for this perfect equality is that value cannot exist without labor. The same cause that increases supply, expands demand to the same proportions: the same cause that restricts supply, reduces demand correspondingly.

A mixed currency is not regulated in this way. In so far as it has not value, it is not controlled by the laws of value.

It is put out or taken in by bank managers at their pleasure, and for their profit. It is not produced by labor. This last fact removes the gravitation which alone can secure a currency. It makes it a thing to be blown about by every breeze, carried up or carried down with the currents, or whirled around in the eddies of trade. It should be stable, and not sport for the winds. There should be a reason for the putting-out or taking-in of every dollar of money; and that reason should be found in the laws of value.

Now, this law controls the expansion or contraction of money, or a value currency. If it is increased, as it may be in the natural course of commercial transactions, it is because actual money has been brought into the country by the balance of trade; but a mixed currency is increased by the voluntary and interested action of bank managers, without regard to the laws of value, and without the addition of a dollar to the real money, or wealth, of the country. The increase of money by importation takes place in obedience to causes that are gradual and appreciable; and any one who watches the course of commerce can anticipate its arrival. If it comes in excess, from any unusual source, it easily and naturally passes off to other countries, till the balance is restored. Real money is like the water of the globe, rising and falling by natural laws, and keeping its level by its own mobility. If a redundance exists in one spot, there is, for that reason, a deficiency, somewhere else. Where it is, it is less valued; where it is not, it is the more desired; and the equilibrium is soon restored. No artificial appliances or legal enactments are needed to keep true money at a level the world over.

We have found that the quantity of a mixed currency is not governed by the laws of value. Do we, then, find that it is controlled by accident? It would be better so, for there would be more chances of its coming right. But, on the contrary, we find laws positively mischievous substituted for the wholesome operation of supply and demand.

Firstly, Of expansion. The more that is issued of a mixed currency, the more will be wanted. The supply does not satisfy the demand: it excites it. Like an unnatural stimulus taken into the human system, it creates an increasing desire for more; and the more it is gratified, the more insatiable are its cravings.

There are two reasons for this: one, that, as the currency is expanded, prices are raised correspondingly, and more currency is demanded to effect the same exchanges; the other, that the speculation inevitably following the rise of prices leads to an enormous extension and repetition of indebtedness, which requires, for its discharge, a greatly increased amount of the circulating medium. Thus, by the action and interaction of these causes, the demand for the issue of this kind of currency is certain to be greatest when it is already redundant. All this, of course, is quickened and helped by the fact that the manufacturers of this currency are ready and eager to crowd upon the public all it will take, like a very earnest friend who thrusts his purse into your hand before you are quite decided that you wish to borrow.