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THERE are certain questions of the highest importance to a clear understanding of the changes which are constantly taking place in what is popularly termed the money market,of a character too difficult and abstruse to command, under ordinary circumstances, a sufficient attention from the active man of business, in order that they should be fully understood. The only time when we can hope usefully and entirely to arrest public attention to such questions, is when the current events of the day clothe them with more than usual interest, and when every man is disposed to give his whole attention and intellect to their consideration, in order the more safely to govern his own policy at a time of existing or expected difficulties. Such an opportunity is the present moment, for the arrival of which, we candidly admit, we have been for some time waiting. It is impossible to conceive that at the present moment, when just a sufficient amount of the predicted disturbances of the capital and finances of the country is disclosed to public observation, tending to create a general belief that much more serious developments of the same elements remain behind—that those who are deeply interested either in the commerce or the finances of the country will be unwilling to devote the whole of their powers of mind to a clear comprehension of passing events, and of the causes by which they are governed. Many have been deterred from a sufficient attention to these subjects from an exaggerated notion of their abstruseness and difficulty. We shall, therefore, in the remarks which we are about to make upon the great elementary causes which regulate the money market,” and their influence upon the present passing events, use terms and language as popular and simple as possible.

The three first great primary points, without a clear understanding of which to start with, all attempts usefully to discuss the subjects of Bank


ing, Currency, or the “Money Market,” must be a mere waste of time, and a further bewilderment of bewildered notions, but with a clear understanding of which, the whole science of capital and money becomes comparatively simple to the commonest urderstanding, are

Firstly-What really constitutes capital?

Secondly—What constitutes the difference between fixed and floating capital?

Thirdly—What constitutes the difference between capital and currency or circulation?

Without clearly understanding these three points, all attempts to draw correct deductions from passing events with respect to the “Money Market” will be entirely vain; with a familiar and clear understanding of them, it will be a comparatively easy and simple task. We propose, therefore, shortly to consider these three points in as popular a way as possible, before we pass to a consideration of the present state of the Money Market,” and the claims which exist upon the capital of the country. With respect to the first point of consideration




The savage

There is a much more general and accurate notion than of the other two points. This question has been so often treated in a clear and distinct manner, that we do not propose to dwell much upon it. It is generally and clearly understood, that capital, in the broad sense, means labor accumulated in such a form as to facilitate future production. who hunts and fishes just enough, with the simple means which nature provides, in order to supply his wants, neither possesses nor accumulates capital. But the moment a savage spends any portion of his time in constructing an implement which facilitates his hunting or his fishing, so as to enable him to procure more food with the same labor, that moment he is possessed of capital, consisting of such implement, the value of which is determined by the extent of the facility which it affords in acquiring food. This capital, consisting, for example, of a net, bas two valuus; one which would be measured by the time and the skill expended in constructing it, which would determine the price which another person would be willing to pay for it by purchase, and another which would be determined by the profit or facility which its use would afford, and which would determine the price which a person would be willing to pay for the loan of it. The first value is the selling price, the second is rent or interest. If, in such an early stage of a community, only one person accumulated capital, that is, procured as much food as he himself consumed, and made nets besides, it is clear that he could not sell his nets, because no one else possessed more food than he actually consumed; but it would be quite possible at once for any one to rent such nets, and to pay a portion of the extra food which he was able to obtain by its use, for the loan of it. As soon, however, as the use of this net enabled the borrower of it to obtain as much food as was sufficient to support him, to pay the stipulated quantity for the usc of the net, and to leave him sufficieni leisure to make a net for himself, or to buy the net, he would become the owner of so much capital, in place of the renter of it

Thus, the capital of every individual would increase just in proportion as he produced more than he actually consumed, and the value of this accumulated labor would be proportioned to the facilities which it afforded for future production. If a man expended the labor of a year in the attempt to make a machine, which at length gave no new facility in production, he would add nothing to his capital; but if his labor was expended in improving the soil or making an implement, which would in future enable him, with the same quantity of labor, to produce more food or clothing, he would have added so much to his capital—which improved land or implements he might either sell for a price, or lend at an annual rent. What is true with respect to an individual, is equally so with a whole community. In proportion as a country produces more than it consumes, and in proportion as the extra labor or income from rents or interest, which must be all paid out of labor, are invested in profitable means of future production, does its capital increase. From the most simple to the most complicated state of society, all capital, therefore, represents accumulated labor, and is valuable just in proportion as it has been invested in means calculated to facilitate future production. In the earliest stage of society, the nel which represents the first saving or accumulation is valuable just in proportion as it is calculated to facilitate the natural and unassisted means of catching fish. In the most refined and complicated state of society, the machine, the railroad, or the ship, in which the accumulations of individuals are invested, add to the general amount of capital just in proportion as they facilitate and cheapen production or profitable exchanges, and that facility determines the price which people will pay for their purchase, or the rent which they will give for their use, as the case may be. It is, therefore, clear that capital consists of all improvements in the natural elements of productions—of all implements which facilitate production—and of all commodities which, though produced for consumption, yet the value of which will be replaced to the producers, from the incomes of those who consume them. Thus, permanent improvements on land, by which larger crops are raised with the same labor; improvements in water-courses, rivers, or docks, the construction of canals, roads, or railways, which facilitate intercourse and the exchange of commodities; buildings, ships, machines, cattle; all implements for reproduction, and commodities of every description, such as cloth, wheat, sugar, gold, silver, iron, &c., which are produced for the purpose of sale, the price of which is to be replaced from the income of the consumers, while the profit only is to be consumed by the producers, constitute the capital of a nation. Whatever adds to the efficiency of any of these elements of production increases the capital of a country, as, for example, the application of steam to ships, machinery, and railways, while anything which injures or destroys them, such as fires, shipwrecks, &c., abstracts so much from the capital of the country. The recent inundations in France have subtracted as much from the capital of France, as it will require of labor to restore the mischief they have done. So with regard to the effect of seasons on the productions of wheat, cotton, or other articles, while, in an abundant year, more is produced than is sufficient for the consumption


of the year, the surplus goes to accumulation, and constitutes so much capital, so, in a deficient year, when the produce is not enough for consumption, the accumulation of former years must be used to make up the deficiency, and thus the capital of the country is reduced.

The next point which we would consider is,



This is is a point, with respect to which much greater obscurity exists than the one which we have already examined; it is one also on which though the most important practical questions and considerations arise, yet which we believe has not yet met with such a clear and explicit explanation as to enable men of business readily to distinguish between the one and the other in the numerous cases which are constantly arising in the application of capital, and where a clear understanding of the distinction is of the first consequence. A want of a clear understanding upon this point has, we have little doubt, had the effect of causing losses to the community of this country to the extent of many millions during the last two years, as a consequence of obligations which have been undertaken, which, had this distinction been clearly understood, would not have been entered upon.

We will endeavor to do something towards clearing up this important point. Every accumulation of capital furnishes a certain command over labor, and can only be rendered productive by the employment of labor. This labor may, however, be used for the production of two distinct classes of commodities. It may be applied to the production of implements, the improvement of land, the building of houses, or the construction of roads, all for the purpose of facilitating further production, or it may be employed for the purpose of producing commodities for the immediate consumption of the community, to be repaid and replaced by the income of the country. In the first case, the labor is fixed, and the profit which is derived from it must be either in the form of an additional facility for future production, or in the form of a rent, which some one is willing to pay for the use of such facility. In this case the capital is not itself returned to the owner. In the latter case, the whole capital is returned to the producer along with his profit, paid from the fund constituting the general income of the country. For example, in the first case, a man builds a mill, and fills it with machinery; the mill and machinery present to the owner a facility by which he can more easily produce cloth than hitherto, and this greater facility returns a profit upon the capital thus sunk, analogous to rent; or he may let it on hire to another person, who is willing to pay rent for such a facility thus given. All the profit derived from such capital must be in the character of rent; and in all such cases the rent or interest alone is repaid from the income of the country, included in the cost of the goods, the production of which it facilitates. In all cases, therefore, where the capital itself is not repaid from the income of the country, but only a rent or interest for its use, it must be classed as fixed capital. This applies to houses, mprovements on land, navigation, roads, machinery, ships, and all classes of commodities which form only the means of producing articles of general consumption.

On the other hand, another man who rents or employs the mill and machinery in producing cloth, and uses his capital for that purpose, employs it in the purchase of wool, and in the payment of wages, and does so upon the faith of selling his cloth at such a price as will replace the whole of his capital so expended, together with the rent or interest of the outlay of the mill, and with such a profit as will remunerate him for the use of his capital, and the labor in conducting his business. In this case, the whole capital, with the profit, is replaced from the general income of the country, and is again available for the performance of a similar operation, and for continuing the employment of a similar amount of labor. All such commodities constitute the floating capital of the country; including agricultural produce, manufactured goods, imported articles for consumption, and, in short, every thing which is fully and entirely out of the income. In all cases of fixed capital, the community only pay out of income a charge for the use of a facility analogous to rent. As, for example, the fares paid to a railway company by the community, out of the general annual income, are only a consideration for a facility, and in the form of interest or rent, including the cost of upholding, but do not replace the capital which it cost to construct the railway. On the other hand, the prices paid by the community, out of the general income, for cloth, grain, or sugar, &c., replaces the whole capital expended thereon, leaving the same fund undiminished for the further employment of similar labor, and the reproduction of similar commodities.

The distinction, then, which we make between fixed capital and floating capital is—that all commodities or improvements, for the use of which only the current income of the country is charged—or, in other words, for which the owners only receive rent or interest—constitute the fixed capital of the country; while all commodities, the entire cost of which is replaced out of current income, constitutu the floating capital of the country. The former class of commodities are stationary, yielding only income; the latter class are constantly circulating, affording a constant means of new employment for their reproduction from the current income of the country.

The two most important distinctions between fixed capital and floating capital are, first, that the former consists of labor employed only for the purpose of affording greater facility for the production of those commodities required for the daily use of mankind, while the latter consists of labor employed in the actual production of those commodities themselves; and second, that the use of the commodities representing fixed capital, returns no fund from which the same amount of labor can be continuously employed, whereas the use of the commodities representing floating capital returns an undiminished fund, by which the same amount of labor can be again employed. The occupation of a mill, or the use of well-drained land, may add to the income of the capitalist, but the fund employed in the building of the one, or the performance of the other, is absolutely withdrawn, except so far as the additional profit, rent, or produce which they yield is concerned, from the fund for the

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