be not only a cessation of improvement, but an actual diminis tion of private revenue, which will obviously continue in a geometrical proportion. If they exact less revenue than the total national gain, then so much of the remaining surplus as is employed in hiring more labour, or in any other facilities of production, will increase the total private revenue, and consequently the means of national accumulation.

A portion, however, of those gains may be employed in ob taining things valuable but not productive, as precious stones and metals, as works of art, pictures, statues, &c.; in which case the increase of capital would so far be in only an arithmetical, and not a geometrical proportion.

If, in the third case, the demands of government are commensurate with the private gains, the nation becomes neither richer nor poorer, and is in a state of indolent indifference, neither animated by a prospect of increasing riches, nor rendered de sponding by a feeling of their diminution..

The case before stated from private life will also explain the reason why it is probable that the price paid to the government by the purchasers of the annuities which are sold by it, is a part, and a part only, of the progressive increase of real capital.

If not so, it must either be a part of unproductive accumula tions of former gains, or it must be a subtraction from the active capital which was employed in replacing consumption or increasing the national wealth. Any material subtraction of the latter, would soon become as visible in its effects as if the farmer were forced to sell a part of his working stock, or leave a field un`tilled for want of money to pay his usual number of labourers. And it is equally clear, that it cannot in any great extent have been supplied by the unproductive accumulations of former gains; no farther, certainly, than it may appear that those accumulations on the whole have really diminished. In one respect this has happened, for a great proportion of metallic, money has been exported; but only so much of this can be placed to the public account as has been exported for public purposes, and by any probable calculation far the greater part of the money obtained by the funding system must have been furnished by recent increase of real wealth, and by a part only of that increase; for if amounting to the whole of it, by what means are buildings, canals, docks, inclosures, &c. &c. every where going on, and every where paid for? We must not entertain the absurd fancy that an increase of money prices is an increase of real capital, and thus furnishes the means of paying for all these additions to the stock of national wealth. The food of a labourer, if he is adequately paid, is the same, whether the money price of wheat is

on a medium four shillings or twelve shillings a bushel; the proportion of his pay to his subsistence depends on various causes, ⚫ and is more likely to increase than otherwise with the increase of money prices, and even beyond a due proportion to them. In any view of the question, a change of the scule by which things are measured and transferred cannot be a change of the things themselves, nor in any respect alter their quantity, the aggregate amount of which is the real national capital.

"A third important question is, by what means such immense sums are so easily collected as are now advanced by individuals for the public use by loans contracted under the funding system. We think it very doubtful if this could be done, were the whole or even the greater part of the payments made in metallic money, however plentiful it might be, when compared with the present circulation. The mechanism by which it is now done is much more convenient, though probably contrived without any anticipation of its utility in this respect, and perhaps now producing its effect without any general knowledge of the manner in which it acts. In a highly improved state of civil economy there are four principal means by which property is transferred. ug sid

The first is by metallic coins, which usually contain, în the materials of which they are made, nearly the same computed intrinsic value as that of the property transferred by them,

The second is by transferable securities, or acknowledgments for debts not bearing interest, of which debts metallic coins are the known measures; securities, of which the materials have no value, but which are useful as instruments for paying and receiving in proportion to the general confidence that the obligations contracted by them will be performed; and are valued in proportion to that confidence, encen 1906 A

The third is by transferable securities, or acknowledgments for debts bearing interest. These have the double use of money and of productive capital; metallic coins, as before, are the mea-sures of their nominal value; and as instruments in paying and receiving they are estimated by the degree of confidence which may exist, that the obligations contracted by them will be duly performed, and also as to this third kind, by regard to the profit obtained by them when compared with the general contemporary profit of lending moneyw you to slow 9ns of gaituroris t 13 The fourth is accomplished without any circulating security, by the intervention, in general, of money-agents or bankers, who place the money value to be transferred, as received from the one party and paid by the other, in their books of account; and bysthat not, with the concurrence of both parties, become substituted debtors and creditors, often transferring backward and forward for those who keep accounts with them to a very great

amount, without need of any payments in money of any sort, until the whole transactions are ultimately balanced, and then only to the extent in which the obligations they have contracted to pay and to receive for any person with whom they have so contracted, are found, on the close of the account, to be unequal. Thus it may often happen, that property to an immense value is transferred with little or no use of money as an instrument of paying for it. It will therefore readily be observed, how very much the extension of the private banking system adopted in this country has superseded the use of any sort of money in a great part of its local transactions.

Of these four means by which property is transferred, the third is practised by our government to a very great extent, and is a most important step in the progress of our funding system; one, indeed, without which the means of procuring the capital periodically funded would be very deficient.

A very large part of the expence of the nation is paid by exchequer and other bills, issued to obtain for that purpose other money of smaller numerical value. These bills being readily cir culated have, in a great degree, the nature and use of money, with the advantage of being a productive capital while possessed. The two sorts of money first described not having this advantage, do not create the same inducement to accumulate them. Metallic money, indeed, possesses within itself the guarantee of its exchangeable or commercial value; but then it affords no profit while hoarded, and consequently will only be collected and retained by those whose revenues equal their wants and wishes, without needing any productive employment of that portion of their wealth which they treasure up in coin; or else by those who speculate, that by accumulating it for some future employment with profit, the present loss will be more than compensated by the subsequent gain. The same reason holds against any great accumulation of paper money not bearing interest.

But exchequer and other similar bills, which have for their security the moral and political guarantee of unbroken national faith, while they have the uses of money, have also the great advantage of being a profitable treasure, and are therefore willingly retained by opulent persons, who either would not or could not afford to forego the profit on the same proportion of their capital, which they must do if they hoarded it in unproductive paper money or in specie.

It is evident, therefore, that by this management the means of obtaining money by the funding system are greatly facilitated. The nation in the practice of that system creates annuities, which it sells at a price agreed on with the persons contracting to purchase them. For a considerable part of the price of those annuities

it receives in payment its own debts previously contracted, and, aș they are called, unfunded, because no special assignment of revenue has been made to pay their interest and discharge them, A very large part of the remaining price received for the annuities created, though paid in money, is previously collected in similar securities given by the government for debts already contracted. The easy circulation of the unfunded debt, for which exchequer bills have been given, makes it convenient to hoard them till money is wanted to pay for the annuities that have been purchased; when the periods of payment arrive, money is very easily procured for them, and thus the capital is only for the shortest time possible unproductive.

The success therefore of the funding system evidently depends very much on the previous creation of unfunded debt; and if no such debt existed, however plentiful money, not bearing interest, might be, yet its dispersion would be too great to carry on that system equably and permanently. No doubt, patriotism and selfinterest would furnish ample loans out of a dispersed money capital in times of great emergency; but there could not be that confident dependence on such a resource, which is one of the peculiar and most important advantages of the present system. The provision of money for extraordinary expences, during war more especially, must never be confided to measures of uncertain efficacy; and the failure of any one attempt to provide it, now that the success of war so greatly depends on pecuniary means, may be more dangerous, and in a nation far advanced in civil economy, would create greater despondence than the loss of an important battle.

The principle of the mechanism of the British funding system, if we have rightly explained it, gives to it that certainty and equability of effect which may safely be made the basis of political calculations, by which the plans of warfare may be regulated in due proportion to the known pecuniary resources.

On the undiminishing permanence of those resources, the means almost entirely depend of protracting hostilities till they may be advantageously terminated. Doubtless where the ruling power is sufficiently dreaded, various ways may be adopted for extorting an adequate supply of money, and a country previously rich and prosperous may be long and greatly declining before its government, if despotic, may be much enfeebled by poverty. But the grand question is, by what pecuniary system this may be done without impoverishing the people-without taking more for the public use than a portion of an increasing addition to the national capital? The answer is found in the principle of the funding system of Britain. As to the construction and alteration of the plans which have been successively founded upon that

principle, we shall have more to say after we have reviewed Professor Hamilton's opinions respecting them.

We have been the more solicitous to make these remarks before we review the work of Professor Hamilton, because, although we adopt nearly all the principles he has laid down, and believe that his arithmetical calculations are generally correct, yet we differ very materially from him in the practical application of them to the extinction or diminution of our national debt. We are not yet convinced that the plan first adopted by Mr. Pitt for that purpose was not far more wisely constructed, with a view to its stability and to the general good consequences arising from it, than the more simple system, of which a preference is implied in the reasoning of Professor Hamilton. We cannot deny that its mechanism is somewhat more costly, but we think the difference amply compensated by its more durable construction. We do not altogether approve some of the changes of the original plan, and still less some essential deviations from it; but with respect to other modifications of it which have been adopted, we have no doubt that they had in view the very same principles which the Professor has so ably established, connected, however, with such practical arrangements as have greatly contributed to their adoption, and without which we are quite convinced that their adoption in any very useful extent would have been altogether impracticable.

In the work before us a short preface and table of contents are followed by a few pages of introductory "Inquiry concerning the national debt."-Having briefly stated the ancient ways of procuring money for extraordinary expences and their inconvenience, the Professor observes,

This irregular mode of borrowing gradually gave way to one more systematic, which has now been carried by this nation to an extent far beyond what was ever known in any other age or nation; far beyond what any person at its commencement, or even after its considerable advancement, believed to be practicable. This system is stilbexpanding. The public debt, which was inconsiderable at the revolution, has increased in a little more than a century to its present magnitude,The increase during every reign, except the pacific eign of George I., has been greater than during the preceding. The increase during every war has been greater than during the preceding. The increase during the latter period of every war, except the present, has been greater than in the earlier period. The increase by every national exertion has been greater than administration held forth when the measure was undertaken. The part of the national debt paid off in intervals of peace has borne a small proportion to that contracted by the preceding war. No man can foresee how far this system may be carried, or in what manner it will terminate. R. 3, 4