The second of these important truths is, that an expanded circulation of promises to pay, caused by absolute or relative impoverishment, contracts to its normal limits as fast as the need for expansion disappears. For the conditions of the case imply that all who have mortgaged their fixed capitals to obtain the means of meeting their engagements, have done so on unfavourable terms; and are therefore under a strong stimulus to pay off their mortgages as quickly as possible. Every one who, at a time of commercial pressure, gets a loan from a bank, has to give high interest. Hence, as fast as prosperity returns, and his profits accumulate, he gladly escapes this heavy tax by repaying the loan; in doing which he, directly or indirectly, takes back to the bank as large a number of its credit documents as he originally received, and so diminishes the {333} credit-circulation as much as his original transaction had increased it. Considered apart from technical distinctions, a banker performs, in such case, the function of an agent in whose name traders issue negotiable memoranda of claims on their estates. The agent is already known to the public as one who issues memoranda of claims on capital that is partly floating and partly fixed—memoranda of claims that have an established character, and are convenient in their amounts. What the agent does under the circumstances specified, is to issue more such memoranda of claims, on the security of more fixed, and partially-fixed, capital put in his possession. His clients hypothecate their estates through the banker, instead of doing it in their own names, simply because of the facilities which he has and which they have not. And as the banker requires to be paid for his agency and his risk, his clients redeem their estates, and close these special transactions with him, as quickly as they can: thereby diminishing the amount of credit-currency. Thus we see that the balance of a mixed currency of voluntary origin is, under all circumstances, self-adjusting. Supposing considerations of physical convenience out of the question, the average ratio of paper to coin is primarily dependent on the average trustworthiness of the people, and secondarily dependent on their average prudence. When, in consequence of unusual prosperity, there is an unusual increase in the number of mercantile transactions, there is a corresponding increase in the quantity of currency, both metallic and paper, to meet the requirement. And when from war, famine, or over-investment, the available wealth in the hands of citizens is insufficient to pay their debts to one another, the memoranda of debts in circulation acquire an increased ratio to the quantity of gold: to decrease again as fast as the excess of debts can be liquidated.