AN ESSAY ON THE THEORY OF MONEY AND PRINCIPLES OF COMMERCE. BY JOHN WHEATLEY. VOL. I. LONDON: PRINTED FOR T.CADELL AND W. DAVIES, STRAND ; BY W. BULMER AND CO. CLEVELAND-ROW, st. james’s. 1807. TO THE RIGHT HONOURABLE LORD GRENVILLE, &c. «e. My Lord, From the noble and constitutional Principles, which have uniformly governed your actions, and from my admiration of your conduct in every event of your political life, I should be led to solicit the honour of addressing this Inquiry to you, in pre¬ ference to any other Statesman, did not your su¬ perior attainments as a Public Economist, and the [ iv ] great and transcendent talents, which you displayed in (he direction of our Finances, during your late Administration, peculiarly prompt me to request your acceptance of a work so materially connected with the department of the government under your immediate control. I have the honour to be, My Lord, With the greatest respect, Your very faithful and Obedient humble Servant, JOHN WHEATLEY. Lesimy, April 6, 1807 PREFACE. The theory which I have attempted to establish in the following Essay, is precisely the same as that of which I gave a general analysis in the Prospectus which I published of this work in 1803, under the title of Remarks on Currency and Commerce; but the detail which was there omitted, is here added, and with the enlargement I hope there is some improvement. It may, perhaps, be necessary to offer an apology for present¬ ing to the Public the First Volume only; but the work admits of a distinct division; the first part relating to the refutation of our existing commercial system, and the second to the develope- ment of a new one. b c vii 2 HEADS OF THE CHAPTERS. CHAPTER I. On the Writings of Mr. Hume, Sir fames Steuart, and Dr. Adam Smith, - -- -- -- - page l CHAPTER II. On the Functions of Money, - -- -- -- 30 CHAPTER III. On the Course of Exchange, ------- 60 CHAPTER IV. ' On the Fluctuation of -the market Price of Money \Cthove and below its Mint Price, - -- -- -- -go CHAPTER V. On Lord Liverpool’s Letter to the King, - - - - 116 CHAPTER VI. On the Amount of our Specie, ------- 141 CHAPTER VII. On the Balance of Trade, - -- -- -- - 558 CHAPTER VIII. On the Payment of our foreign Expenditure, - - - 175 Vlll HEADS OF THE CHAPTERS. CHAPTER IX. On the Import of Corn, - page 227 CHAPTER X." On Lord King’s Hypothesis, that the Surplus of Exports is occasioned by the Remittance of Silver to India, 24,0 CHAPTER XI. On the Causes of the Depreciation of Money, - 248 CHAPTER XII. On the Effects of the Depreciation of Money, - 296 CHAPTER XIII. On the Reformation of the Paper Currency of Europe, 330 CHAPTER XIV. On Lord King’s Thoughts on the Effects of the Bank Restrictions, - - 358 [ i* ] THE TABLE OF CONTENTS. CHAPTER I. On the Writings of Mr. Hume, Sir James Steuart, and Dr. Adam Smith. PAGE. The Political Discourses of Mr. Hume, published in 1752 - 1 The fundamental Principles deducible from his Argument - 2 His partial Inconsistencies - - - - 3 His Incapability of accounting for the Excess of Exports - 4 General Accomplishment of his Object - - ib. The Inquiry of Sir James Steuart into the Principles of Political Economy, published in 1767 5 Inefficiency of his Plan - ib. His Aversion to general Rules and Systems 6 Impropriety of this Aversion 7 Inconsistent with his Adherence to the System of the Balance of Trade ib. His general Incompetency - g His Efforts to illustrate the Principles of Circulation and Commerce 9 His Attempt to substantiate the Position, that the complicated Oper¬ ations of Demand and Competition determined the Standard Price of every Thing - IO The Imbecility of his Argument - - - It His Inability to refute Mr. Hume’s Principle, that all Prices are in Proportion to the Quantity of Money - - - 12 His Decision in Favour of the Theory of the Balance of Trade ib. Futility of his Objections to Mr. Hume’s Hypothesis, respecting the • Influx of Money - His uniform Error in regarding Money and Wealth as Terms - synonymous CONTENTS. FAOE, The Fallacy of his whole Reasoning - • The Inquiry of Dr. Adam Smith into the Nature and Causes of the Wealth of Nations, published in 1775 - His uniform Observation of the Distinction between Money and Wealth ..... His Conviction of a latent Principle, that regulated in all Countries the Amount of their Currency - This Principle, the Action of Money in Conformity to the Purport of its Institution, as an uniform Measure of Value His Failure to attain to this Principle - The inefficient Positions, which he adduced instead of it Their Inadequacy to refute the Theory of the Balance of Trade The same Inability with Mr. Hume to account for the Excess of Exports - - - - - The Failure of his Efforts to accomplish the Refutation The Misconception of the Principle of the Limitation of Money equally fatal to the whole of his Inquiry on the Subject of Cir¬ culation - His Disacquaintance with the Theory of Exchange --with the Cause of the Efflux and Influx of Money - ■ - -- with the Principle that governs the Price of Bullion - - - —--and with the Principle that regulates the Circu¬ lation of Paper - His consequent Inadvertence to the Depreciation of Money His general Merit .... 14 ib. *5 ib. 16 18 *9 22 23 24 25 ib. 26 ib, 27 28 29 CHAPTER II. On the Functions of Money. The present commercial Policy of Europe, directed to the Accumu¬ lation of Money - _ _ ^0 The fundamental Principles advanced to shew- the Error of this Policy - . ;i,. 1st. Principle, that an Increase of the national Stock-of Specie is an Increase of Currency, and not of Capital . ib. CONTENTS. xi PAGE. The familiar Habit of adverting more to Money than Money ’s Worth 3 c No Capital retained in a Mass of Money r - 33 All the Specie existing in a Country appropriated to the Purposes of Circulation - - - 34 ad. Principle. An Increase of Currency not an Increase of Wealth 35 All Persons retain the same relative Position in Society under what¬ ever Increase - - - - 36 A Nation just as rich with a Currency of Five Millions, as with a Currency of Fifty 37 An Increase of Money has no other Effect than to cause its own Depression - - lb. This Result sensibly experienced in the Reign of Elizabeth - 38 Money the Effect, not the Cause of Wealth - - 39 The Increase of Money no Stimulus to Industry - 40 3d. Principle. No one Nation can possess a greater relative Cur¬ rency than another 42 The same Exertions among Nations as among Individuals to main¬ tain the Uniformity of the Measure of Value - - lb. No particular Town or District can possess a greater relative Cur¬ rency than others 43 Exception from the Difficulty of Conveyance 44 The same Reason which prevents any particular Town or District from possessing a greater relative Currency than another prevents any one Nation from possessing a greater relative Currency than another - - - - - 45 Two Causes that operate to prevent a complete Equalization of Prices, the Difficulty of Intercourse, and Commercial Prohi¬ bitions - 46 Spain decisive Evidence of the Impracticability of obstructing the uniform Gravitation of Money to its Level 47 Average Prices of Europe, by Mr. Arthur Young - 48 General Correspondence - - - 49 Mr. Young’s Testimony the more conclusive from his Disacquaint- ance with the Principles pf Circulation - -50 High Prices no Criterion of Prosperity - - - 54 The Testimony of Mr. Le M»itre, Mr. Kotzebue, and Mr. Weld, confirms the Fact of a .general Correspondence of Prices - 53 CONTENTS. PAGE. Two Circumstances which may appear to clash with the Argument, the Inferiority in the Wages of Labour, and in the Military Pay of the Continent - 54 The Poor of the Continent compelled to submit to a less competent Provision, from the relative Excess in their Population - ib. The Earnings of Labour in England 76 per Cent, greater than the Earnings of Labour in France - 57 The Inferiority in the Wages of Labour on the Continent proceeds from the Privation, not the Enjoyment ofsimilar Advantages ib. The same Reasoning applicable to the Inferiority in the Military Pay of foreign Nations - 58 Illustrated by the Difference between a British and Sepoy Regiment, in the East Indies - - - ib. No Conclusion deducible from these Facts to clash with the general Principle of the Level of Money - - 59 CHAPTER III. On the Course of Exchange. The Course of Exchange the practical Means by which the Equi- valencey of money is maintained - - - 60 The Fluctuations in the Exchange proportionate to the Fluctuations ' in the Value of money - ib. Merchants distinguish the Variation in the Value of Money by the Variation of Prices - - - - 61 A relative Excess of Currency occasions a Premium on a Foreign Bill ib. A relative Scarcity occasions a Discount - - 62 The Course of Exchange between any two Countries nothing more than the Amount of the Difference in their respective Prices ' - 63 It affords an accurate Criterion of the relative Value of Money Over the whole World - - ! - 64 A Credit uniformly given in Conformity to its Fluctuation - ib. When the "Bills are reduced to a Discount beyond the Charge of the Transit of Money, they are purchased by the Bullion Merchants for Investment in Specie - - 66 'CONTENTS. xiii PAGE. The surplus Specie imported into other Countries to restore the Level 66 A relative Excess of Currency may be occasioned by Paper as well as Specie - 67 The Conditions upon which the Paper is issued, of no Avail to check the Equalization in the Value of Money - - it. Paper convertible at Option into Specie returned, when excessive, upon the Banks that utter it - - - 68 Paper not convertible into Specie at the Option of the Holder re¬ duced to a Discount proportionally to its Excess - 69 Upon a Reduction of the Value of Money to any Extent beyond the Charge of Transit by the relative Excess of the Paper, Specie separated from Paper, and restored to its Level by the Annexation of a Premium - - - 70 Paper reduced to a correspondent Discount - - it. Two distinct Prices established for the same Produce a Price in Specie and a Price in Paper - - - 71 Two distinct Rates of Exchange also established by Foreign Countries for the Bills which they draw - - it. The Rate for the Orders payable in Specie not variable to any Extent from par - - - - - it. The Rate for the Orders payable in Paper lowered as the Quantity of Paper increases - it. The Discount on the Paper correspondent with the Discount on the Bills that are drawn by foreign Nations - 72 The same real Uniformity of Prices maintained by the Course of Exchange, notwithstanding the excessive Utterance of the Paper it. The Positions that the Specie of one Country will maintain itself upon a level with the Specie of another, and that Paper will be reduced to a Discount in proportion to its Excess, confirmed by the State of the Circulation in France and Ireland - 73 By the Authority of the first Table the Discount on a French Bill in London correspondent with the Discount on French Paper in Paris, and the same Sum in Coin of the same Value in both Countries - it. By the same Table, the Paper of France depreciated in proportion to the Superiority of its Paper Prices above the Prices of this Country - - - - - it.. xiv CONTENTS, PAGE. Delineation of the Table - 75, 76 An average Difference of four per cent, between the Value of French and English Specie 77 By the Authority of the Second Table, the same Amount of Paper given for a Guinea in Dublin as for a Guinea, or an Order for a Guinea in London, exclusive of the average Sum of 14s. per cent. 78 Exposition of the Table - 79,80,81 The Course of Exchange between Belfast and London never to any Extent above or below Par - - - 81 Partial Inference - - - ib. The Par of Exchange altered, in conformity to the Debasement of the Coin 82 Recapitulation of the Argument - - - 83 No Connection between the Course of Exchange and Balance of Trade 84 Exchange favourable notwithstanding an adverse Balance, and ad¬ verse notwithstanding a favourable Balance - - 85 The Fluctuations in the Exchange not occasioned by the Excess or Scarcity of Bills 86 The Position that a favourable or unfavourable Exchange coincided with a favourable or unfavourable State of Commerce derived from the Sophistry of the Theory of the Balance of Trade - ib. No prior Reference made to the relative Value of Money as the governing Principle of the Course of Exchange - -87 An Opinion for the most Part prevalent that the Course of Ex¬ change regulated the Value of Money, rather than that the Value of Money regulated the Course of Exchange - - ib. Erroneous Opinions of Mr. Hume, Sir James Steuart, and Dr. Adam Smith, on this Subject - - 88, 89 CHAPTER IV. On the Fluctuation of the Market Price of Money above and below its Mint Price. The unsuccessful Attempts of the Political Writers of the last Cen¬ tury to discover the Cause of the Fluctuation in the market Price of Money - - - - 90 CONTENTS. xv PAGE. More Exertion made to explain the Excess above the Mint Price than the Depression below it - - - 91, The two leading Causes assigned for the Excess, the debased State of the Coin, and the Inaccuracy of the Mint Proportions - ib. Incorrectness of the Reasoning on the debased State of the Coin 92, 93 Incorrectness of the Reasoning on the Inaccuracy of the Mint Pro¬ portions - - - 94 > 95 > 96 The aggregate Quantity of the Currency of a Country, and not the State and Quality of the Coin, the real Cause of the Fluctuation 97 ^.When a greater relative Currency is employed in this Country than in others, a greater Quantity of our Coin given for a smaller Quantity of Foreign Coin - - - 98 The Superiority in the Value of Foreign Coin not confined to one Metal only - - - ib. Upon a relative Excess of Currency, the same correspondent Supe¬ riority in the Market Price of all our Coins - - ib. And upon a relative Diminution of Currency, the same cor¬ respondent Inferiority - - 99 Bullion and Foreign Coin convertible Terms - - ib. Bullion being dear and Coin cheap, any given Quantity of Gold or Silver, or Copper, in Bullion, of more Value than the same Quantity in Coin, notwithstanding the Purity of the Coin and the Accuracy of the Mint Proportions - - 100 The market Price not excessive because one of our Coins is cheap compared with another, but because all our Coins are cheap com¬ pared with Foreign Coin - - 101 All molten at the same Profit, and all disappearing at the same Time ib. Tables to shew the same Correspondence in the Superiority and In¬ feriority of the Market Price of our Gold and Silver Coins 102, 103 General Conclusion - 104 The Mint Proportions to be correct, notwithstanding their In¬ efficacy to prevent an Excess in the Market Price of Money - 105 Erroneous Opinion of Dr, Adam Smith on a nominal Rise in the Value of the Silver Coin - 107 Fallacies of Dr. Adam Smith and Sir James Steuart, on the Impo¬ sition of a Seignorage - ib. The Over-utterance of Paper being the sole Cause of the Excess in CONTENTS. PAGE. the Market Price of our Money, the Contraction of our Paper the sole Policy to prevent it 108 Necessity of a new Coinage - ib. The Purity of our Gold Coin - 109 The debased State of our Silver Coin - - no The Excess of Paper not always productive of the Debasement of the Silver—Exception in the Instances of France and America in The Bank of England to bear the Expense of Coinage 112, 113 Augmentation of the Size and Substance of our Coin - 114 CHAPTER V. On Lord Liverpool’s Letter to the King. Lord Liverpool’s Principles of Coinage - - 116 An Opinion very generally prevalent, that one Metal has more par¬ ticularly constituted the ruling Standard of Value than another ib. The circulating System defective where such a Superiority prevails 117 Gold and Silver Coins form a common Measure if the Mint Pro¬ portions be accurate, and the Coins be correspondent with the Mint Standard - - - - - ib. Where a Departure is made from the Proportions, which the two Metals bear to each other in Bullion, the Coin partially de¬ preciated will be the governing Measure - - 118 The partial Depreciation of a Coin may be effected by an original Inaccuracy in the Mint Regulations, which may assign, a greater Proportion of one Metal to be given for another than their re¬ lative Value in Bullion directs - H, By an Inaccuracy arising subsequently to the Mint Adjustment, from a gradual Diminution in the Value of the Metal of which the Coin is composed, in Consequence of a greater relative In¬ crease of its Quantity - - _ 119 By an improper Rise jn the nominal Value of one Coin, without a similar rise in the nominal Value of another - - 120 By the Dimunition of its Weight, or Adulteration of its Quality, by the legal Authority of the Crown - - 12 r CONTENTS. And by the clandestine and illicit Debasement of the People The deteriorated Coin more apparently the current and prevailing Measure of Value, when reduced to a Discount below the station¬ ary Coin than when circulating at par with it Corroborative Instances - - - - The deteriorated Coin no less the prevailing Measure when circulat¬ ing at par with the superior Coin—proved by the Participation of our pure and adulterated Gold Coin in the degraded Value of our Silver Coin - - - - Lord Liverpool’s Conclusion, that all Produce now takes its Value in Reference to the Gold Coin, and experiences no Advancement of Price from the partial Depreciation of the Silver, proved er¬ roneous by the existing State of the Circulation of Ireland The excessive Issue of the Paper of the Bank of England the ex¬ clusive Cause of the Degradation of the Silver, and of its Selection as the current Measure of Value By the Removal of this Cause and the Reformation of the Silver Currency, the two Coins will again form a common and co-equal Measure - Lord Liverpool’s Conclusion supported by Mr. Locke Explanation of our circulating System in the Reign of William III. Its Irregularities attributable to the Over-issue of Paper False Conclusions of the Government and the People Grounds upon which Mr. Locke’s Opinion was founded Lord Liverpool inconsistent in concluding that Gold began at this time to be the prevailing Measure, though it constituted the superior Coin - _ More correct in contending that it has since formed the superior Measure because it has constituted the inferior Coin The fact, however, of its constituting the inferior Coin incorrect— Silver the inferior Coin instead of Gold The general Inference that one Coin has more particulary consti¬ tuted the prevailing Measure than another, only so far true as one Coin has been partially depreciated below the other The particular Inference of Lord Liverpool, that Gold has latterly become the prevailing Measure, the converse of the Truth Error of Lord Liverpool’s first Principle Error of his second Principle _ Error of his third Principle _ .OH. i2r 122 I2 3 124 125 126 ib- ib. 137 128 129 ib. 130 * 3 * ib. ib. 132 ib. ib. CONTENT'S. Xviii PAGE. The Precaution of preventing Silver from being a legal Tender, for more than 2ir., nugatory - 133 His System incompetent to counteract the Disappearance of the Silver upon a Recurrence of the Excess in the market Price of our Money - 134 Cause of Lord Liverpool’s Failure to explain the Principles of Coinage ----- - 135 Inadvertence to the Property of Money as an uniform Measure r - 136 Concurrence in Mr. Locke’s Opinion, that an Ounce of Silver, ■whether in Coin or Bullion, was of the same Value - 137 Subjected by this Concurrence to the singular Imputation of having written a Book to remedy a Grievance the Existence of which he denied - - - - - ib. His Supposition that the Theory of the Balance of Trade was self- evident - 139 Fallacy of this Supposition - 140 CHAPTER VI. On the Amount of our Specie. The Mint Returns of our Coinage an imperfect Criterion of the Quantity of our Specie - 14X The Proportion, which Specie bears to Paper, a more correct Mode of Computation - U>, Evidence of Mr. Abraham Newland on the Proportion of the Cash and Paper Payments of the Bank of England - - 142 Not one-tenth Part paid in Specie - - ib. Not one-tenth Part in the other Payments of the Metropolis - 143 The Amount of Specie in the Metropolis not more than £2,000,000. ib. The Amount of provincial Paper unknown - _ 144 Lord King’s Estimate of forty Millions much exaggerated - 145 The probable Amount 7 or 8 Millions - - ib. The Proportion of Coin about £1,500,000. - - 146 The aggregate Amount in Circulation throughout the Kingdom not more than £3, 500,000. - 147 The aggregate Amount in Deposit by the London and Country Brinks not more than £830,000. - 147 CONTENTS. Estimate of the Deposits of the Bank of England greatly exaggerated 148 Evidence of the low State of their Coffers at different Periods during the last Century - ib. Arguments confirmed by an Inquiry into the Melting of the Coin - and the Mint Returns - 149 Guineas always purchasable at the Bank at £3. 17 s. lobd. an ounce, the market Price frequently £4. 2s. and £4. 41. an ounce z50 Consequent Drain upon the Bank for Guineas to be converted into Bullion . .... ib. This Conflict between the Bank and the Goldsmiths the practical Check to the Over-issue of Paper - - 151 In the Mint Return of our Coinage £32,000,000. out of £57,000,000. avowedly coined from molten Guineas - ib. This Proportion most probably under-rated - - 152 Erroneous Conclusion, that the Ingots are composed of light Guineas ib. Small Part of the £25,000,000. alleged to have been imported from Portugal now remaining - 153 Small Amount of the Coinage of Silver an additional Confirmation of the Argument - 154 Mint Returns of the Coinage Evidence of the Scarcity of our Gold Coin ..... 155 The disadvantageous Purchases of the Bank, Proof of the exhausted Condition of its Coffers - ib. Its Solvency not dependent upon the Amount of its Bullion - 156 Average Deposit not more than six or seven hundred thousand Pounds - - - - ib. Aggregate Amount of Specie, in Circulation and Deposit throughout the whole Kingdom, not more than £5,000,000. - 157 Impolicy of the Laws against the Exportation and Melting of the Coin . .... ib. XX CONTENTS. CHAPTER VII. On the Theory of the Balance of Trade. PAGE. Recapitulation of the Heads of the preceding Arguments 158,159 The fundamental Tenets upon which the Theory of the Balance of Trade is supported - - - 160 Fallacy of the one System and Truth of the other - 161 Explanation of the Theory of the Balance of Trade - ib. Received the Sanction of our Government in 1695 - 162 Many Efforts previous to 1695 to ascertain the Extent of the Balance 163 Aggregate Excess of Exports during the last Century £300,000,000. 164 Attention of Government directed to the Subject by the Scarcity of our Specie in 1797 - ii. Amount of the annual Balance according to Mr. Rose £14,800,000. ib. The Statesmen of France equally misled with the Statesmen of this Country - - - - 165 Statement of the average Balance of our Commerce according to Mr. Chalmers - 166 Counter-statement by other Countries - - 167 The Theory inconsistent with the Principle that regulates the Influx and Efflux of Money - - - ib. Originated in the Error of regarding Money and Wealth as synony¬ mous Terms - ib. No Criterion of the Profit or Loss of a Nation in its Commercial Relations - - - - 168 Directly opposite to the Principle on which an individual Merchant forms an Estimate of his private Balance - - ib. The Detention of the Money received a necessary Part of the System - - 169 The Stock of Specie ought to correspond with the aggregate Value of the favourable Balances - 170 Inquiry into the Purposes to which the £300,000,000. of Bullion supposed to have been received by our favourable Balances during the last Century may have been applied - 17 j Not realized in Specie - ib. Not consumed in Manufacture - - 172 CONTENTS. xxi PAGE. Not applied to the Payment of our foreign Expenditure - 173 Never been received - ib. The Theory inconsistent with Reason and Fact - - 174 CHAPTER VIII. On the Payment of our foreign Expenditure. The Efflux of Money not necessary for the Discharge of a foreign Expenditure - The Channels by which a foreign Expenditure may be paid Determined by the State of the Exchange If the Exchange were unfavourable Specie would be preferred to Bills - If the Exchange were at par Bills would be preferred to Specie If the Exchange were favourable Bills would more strongly be pre¬ ferred to Specie - Were the Agent for the Remittance of the Subsidy left to his own Discretion he would invariably determine the Channel by the State of the Exchange - Injurious Interposition of the Bank of England General Opinion of the Incompatibility of a favourable Exchange with a large foreign Expenditure Incorrectness of this Opinion - The Influx of Money may be effected to any Extent, at the very time that the Expenditure is in Payment Favourable Exchanges of 1793, 1797, and 1798, conclusive Evi¬ dence to attest the Truth of this Reasoning Importance of the Subject to the Interests of this Country Correspondence between Mr. Pitt and the Directors of the Bank of England _____ No Intention to detract from the general Character of Mr. Pitt - Remonstrance of the Bank against the Imperial Loan of 1795 Rumour of another Loan, and Opposition of the Bank to it Letter of the Court of Directors to Mr. Pitt, on 5th October, 1795 Interview with Mr. Pitt on 23d October Another Interview on the 18th November Resolution of the Court of Directors on 3d' of December d 175 176 ib. 177 ib. 178 ib. r 79 ib. 180 181 182 183 ib. 184 ib. 185 ib. iSf6 187 188 CONTENTS. xxii PAGE. Mr. Pitt’s Answer - - - - 189 Another Interview with Mr. Pitt on the 5th of November, 1796 190 Strong Remonstrance of the Bank on the 1 ith of February - ib. Misguided Policy of Mr. Pitt in narrowing the Supplies to the Court of Vienna in Consequence of it - - 191 Disacquaintance of Mr. Pitt with the Principles of Public Economy 193 A due Compression of our Paper Currency would have led to the Influx of Money at the very Moment that the Loan was in Pay¬ ment - - - - ib. The Remonstrances of the Bank contained in themselves a Solution of the real Cause, that effected the Run for Gold, the Excess in the Market Price of Money - - - 194 Improvidence of Mr. Pitt in pressing the Bank for a further Pub¬ lication of Paper, and aggravating the Cause of their Exhaustion ' ib. Had the Opinion of the Bank been fully acted upon no Money would have been raised for the Service of the War beyond our own Shores - 195 Remonstrance of the Directors against the Loan to Ireland - ib. Practical View of our foreign Expenditure and Exchange during the last War - ib. Statement of the Exchange between Hamburgh and London - 196 Par of Exchange - ib. Amount of our Loans and Subsidies to foreign Powers - 197 In 1794 Bills of Exchange the most favourable Vehicle of Pay¬ ment - ;b. The next favourable Vehicle Bullion - - xqS And the last favourable Vehicle British Specie - ib. The Prussian Subsidy paid in Bills and Bullion - ib. Imprudent Interference of the Bank of England in offering the Bullion - No Director would have made a private Remittance by the Channel of Bullion - ft* No Difficulty in remitting £7,111,700. for other Services without the Intervention of Bullion - 20O No Difficulty in remitting £550,000. to the Emperor of Germany ib. Money coming into the Country instead of going out during the whole Period - 201 I n * 795 > from January to July, the Exchange favourable to a Re¬ mittance by Bills - CONTENTS. PAGE. From 21st of July, 1795, to the 11th of November, 1796, the Ex¬ change favourable to a Remittance in Specie - 202 Evidence of Mr. Boyd goes to shew that Remittances were made in foreign Money - - ‘b. Information received by Mr. Pitt that large Quantities of English Guineas were at this period exported to Hamburgh - 203 Partial Inference - - - 204 Real Cause of the unfavourable Exchange of 1795 the Over-issue of the Paper of the Bank of England - - 205 Statement of their Paper >b. I11 the Summer of 1796 the Exchange again favourable to a Re¬ mittance by Bills - - - ib. No Necessity for the Secrecy with which Mr. Pitt effected the Pay¬ ment of the Loan of £1,400,000. to the Court of Vienna - 206 In 1797 and 1798 the Exchange 8, 10, and 12 per cent, in Favour of this Country - - - ib. Money flowed into this Country, notwithstanding a foreign Ex¬ penditure to the annual Amount of £8,000,000. - 207 Real Cause of the favourable Exchange the Contraction of our Paper ib. General Conclusion - - 208 The Bills for the Payment of our foreign Expenditure invested in British Produce - ib. This Investment the principle Cause of the Superiority of our Ex¬ ports above Imports - - - - ib. Opinions of the Supporters of the Theory of the Balance of Trade on the Mode of paying a foreign Expenditure - - 209 Their general Fallacy - 210,211 The Ingress and Egress of accumulative Millions, so confidently asserted in Conversation and Debate, have no practical Existence sir The Conclusion that our foreign Expenditure conduced to the Re¬ servation of Money abroad, which would otherwise have been im¬ ported, colourably justified by the occasional Remittance of Bills from this Country instead of by the Draft of Bills from abroad 212 This Opinion erroneous even upon the Event of a favourable Ex¬ change, and still more preposterous should the Exchange be at par or adverse, as no Money could then be imported without Loss - 213,214,2.15,216 xxiv CONTENTS. PACE. Our foreign Expenditure during the last War paid almost without Exception by the Draft instead of the Remittance of Bills - 217 The Series of Positions, by which the Advocates of the mercantile System endeavoured to resist the Attack, that was made upon it, subverted - - - - 218 The Excess of Exports instead of arising from the Import of Money for the Payment of a favourable Balance occasioned by the Ex¬ port of Produce for the Payment of an unfavourable Balance - 219 Correspondence between the Amount of our foreign Expenditure and the Superiority of Exports - - 220 Error in the Official Returns of our Exports and Imports - ib. The Error in a great Degree corrected by Mr. Irving, in the Estimate which he formed of the Excess of Exports for the four Years preceding 1796 - 221 Annual average Balance £6,500,000. - - ib. The Estimate prepared by Mr. Long of the Amount of our foreign Expenditure superior to this Sum - - 222 An Excess of Exports not in all Countries attributable to the Pay¬ ment of a foreign Expenditure - ib. Imported Produce in all Countries subjected to a Duty and at¬ tempted to be concealed - - - 223 Exported Produce greatly exaggerated for the Augmentation of Credit - - - - - ib. Argument of Dr. Adam Smith, in Refutation of the Opinion that the Expenses of the seven Years War were defrayed by the Remittance of Specie - 224 His Error in supposing that they were paid by the finer and more improved Manufacturers ... 225 The foreign Expenditure of every Country principally discharged by its staple Produce - 226 CHAPTER IX. On the Import of Corn. Contended by Government in Parliament not only that the Scarcity had prevented the Influx, but that it had occasioned the Efflux of Money - - - - 227 CONTENTS. PAGE. The Sum of Specie exported for the Purchase of Corn, and the Payment of our foreign Expenses estimated at £48,000,000. - 229 Exaggeration of this Estimate ... ib. The first Scarcity in 1795, and the Pressure in 1796 - ib. The Exchange declined in May 1795, and recovered in April 1796, when the Dearth was greatest - 230 The same Observations applicable to the Scarcity of 1799—Depres¬ sion of the Exchange in May, and the Continuance of it in an adverse Position through 1801, 1802, and 1803, notwithstanding the abundant Harvests of these Years - - ib. Undue Publication of the Paper of the Bank of England the real Cause of the unfavourable Exchange - - 231 The Amount of their Paper - ib. The unfavourable Exchange not originating in the Scarcity im¬ material whether the Bills that were purchased by the Goldsmiths were drawn against an Invoice of Corn or an Invoice of any other Commodity - 232 Mr. Fox having controverted the Opinion, that the Import of Corn conduced to the Efflux of Money, contended by Lord Hawkesbury, that it was the same Thing whether it contributed to the Efflux or whether it only prevented the Influx of Money - 233 Incorrectness of his Lordship’s Argument - - ib. Lord Hawkesbury’s Opinion supported by the Authority of Lord Liverpool, who contended that the Balance of Trade would have been much more favourable had not £8,946,012. been paid for Corn, £7,825,876. for Naval Stores, and £1,234,292. for vic¬ tualling our Fleets on foreign Stations - 234, 235 This Conclusion inconsistent with the first Principles of Commerce 236 The equal Interchange of Produce for Produce, a necessary Result of the commercial Relations of Independent States - ib. Our Excess of Exports not incompatible with these Principles - 237 A Diminution of Imports productive of a correspondent Diminution of Exports - 238 State of England and France had Lord Liverpool been Minister of this Country at the Time that Mr. Neeker was Minister of France - 239 The Sentiments of Lord Liverpool and Lord Hawkesbury incon¬ sistent with Reason - ib. xxvi CONTENTS, CHAPTER X. On Lord King's Hypothesis that the Surplus of Exports is occasioned by the Remittance of Silver to India. PAGE. Lord King’s Supposition, that a perfect Correspondence should subsist between our Exports and Imports - - 240 Erroneously imagined that the Fact of an Excess was rejected by the new School - 241 Endeavours to shew that the Excess originates in the Influx of Money from the Continent of Europe to supply the East Indies with Silver - - ib. Conjectures that the Enumeration of the Imports from India with the Imports from the other Parts of the World would bring our export and import Trade to a perfect Correspondence _ 242 Impossible to accede to the Truth of this Hypothesis - ib. So far was the Excess of Exports from being rejected by the new School, that it was expressly contended that the real was superior to the official Amount - 243 Lord King draws from the Excess the same Inference with the Advocates of the old School ... ib. Adduces the State of the Exchange in favour of his Argument - 244 Its Position during half the Period of his Statement in direct Opposition to it - - - - tb. Contends that the Money which is left by the partial Balance of our Trade is remitted in Silver to India - - 245 Mr. Irving’s Estimate of the Balance of our Trade with Europe, during the four Years preceding 1796 before shewn to be £26,000,000., or £6,500,000. a Year - - tb. Silver remitted to India during the same four Years by the Returns of the Bullion Office of the India House £859,880. 8x. yl. or £200,000. a Year - ib. Inconsistency of the two Accounts - - 246 The Imports from India, when added to the Imports from Europe, equally fatal to his Argument ... ;b. CONTENTS. xxvii PAGE. A large Surplus of Exports uniformly apparent - 247 Statement of the Exports and Imports for twenty Years, including the Imports from India - ib. Refutation of the Hypothesis >b. CHAPTER XI. On the Causes of the Depreciation of Money. From the Conquest to the present Times the Value of Money pro¬ gressively depreciated - 248 The Epoch divisible into three Periods, from William I. to Eliza¬ beth, from Elizabeth to the Revolution, and from the Revolution to the present Times - ib. From William I. to Elizabeth, the Depreciation occasioned by the Debasement of the Coin ; from Elizabeth to the Revolution, by the Influx of Gold and Silver from America; and from the Re¬ volution to the present Times, by the Issue of Paper - 249 From William I. to Elizabeth our Coins debased to nearly one Third of their primitive Weight - - ib. Extract from Lord Liverpool’s Letter to the King - ib. The Pound Weight made use of till the Reign of Henry VIII. was denominated the Tower Pound - - ib. The Pound Troy introduced in 18th Year of his Reign - 250 At the Accession of William I. the Pound in Tale equal to the Pound in Weight - ib. Different Ways of debasing the Coin - - 251 The Periods of the Debasements - - 252 to 255 The Table of the Debasements - 256 The Cause of the Debasements - ib. The Impolicy of them - 257, 258 Dr. Henry’s Illustration of their Effects - - 259 The Pound in Tale reduced to one Third of its primitive Value in Consequence of its Reduction in Weight - - 260 Still further depreciated by the gradual Augmentation of its Quantity ib. Sir George Shuckburgh’s Table gives the Depreciation of the Pound in Weight and not of the Pound in Tale - - 261 CONTENTS. PAGE. Mr. Folkes’s Table of the relative Weight of the Coins previous to the 43d Year of Elizabeth - 262 The Pound in Weight depreciated from William I. to Elizabeth, five Times its primitive Value, by the increased Influx of Money - 263 Erroneous Opinion of Dr. Adam Smith, that the Value of Money was on the Advance instead of the Decline, from 1350 to 1570 264 This Opinion derived from the Reduction which he observed in the Price of Corn - - ib. Corn an inconclusive Criterion of the Value of Money - ib. The Value of Money rose with Reference to Corn, and fell with Reference to every other Produce, and was depreciated on the Aggregate in the 220 Years 30 per cent. - - 265 Pound in Tale depreciated by the Operation of the two Causes of Debasement, and an increased Quantity of Gold and Silver from William I. to Elizabeth to one Sixteenth of its primitive Value 266 The Depreciation of Money during the second Period, from Eliza¬ beth to William III. was accelerated by the Influx of Money from America - ... 267 From 1550 to 1600 Money fell 44 per cent. - - ib. Plan of Lord Burleigh and Sir Thomas Smith to obviate its Effects on College Rents - ib. From 1600 to 1650 Money fell only 30 per cent. - 268 From 1650 to 1700 Money fell only 26 per cent. - ib. In the third Period of the Depreciation, from 1700 to 1800, Money fell in the first fifty Years 32 per cent, and in the last fifty 79 per cent. _ _ - - 269 Error of Dr. Adam Smith, in supposing that the Value of Money had rather risen than fallen, during the 18th Century - 270 His Supposition founded on the Price of Corn - 271 The Inconsistency of his Argument - 272 The Value of Money deteriorated according to his own Reasoning 273 Impropriety of his Distinction that it was the Produce, which rose in Value, and not the Money that fell - - 274 According to the Criterion of Corn from 1760 to 1800 Money declined 100 per cent. - 275 The Depreciation of Money Matter of Fact, not Matter of Argu¬ ment - - - - - ib. CONTENTS. xxix PAGE. No Doubt of the Fact of the Depreciation - - 275 Since Sir George Shuckurgh’s Table little Doubt of the Degree 276 Principle upon which Sir George Shuckburgh’s Table is constructed 277 Its general Merit - 278 Constitutes a masterly Refutation of Dr. Adam Smith’s Opinion - ib. The Excess in the Depreciation of Money during the first fifty Years of the 18th Century of 10 per cent., and during the second fifty of 61 per cent, above what the Proceeds from America could effect, occasioned by the Circulation of Paper - - ib. State of the Circulation of Paper during the first fifty Years of the 18th Century - - 279 State of its Circulation during the last fifty - - 280 Error of Dr. Adam Smith in conceiving that Paper had no Ten. dency to depress the Value of Money - - 281 Explanation of his Opinion, that Paper could never exceed the Value of the Gold and Silver, which would circulate if there were no Paper - 282, 283, 284 The Fallacy of this Opinion - 285 The Quantity of Paper may be carried to any Extent if all Countries utter a correspondent Proportion - - 286 Superiority of the Quantity of Paper above the Quantity of Specie in of Europe - 287 The accelerated Depreciation of Money Evidence of the Superiority 288 The Errors of Dr. Adam Smith on the Circulation of Paper at- tributable to his Disacquaintance with the Principle of Equiva¬ lency in Money - 289 Had Dr. Adam Smith’s Positions been correct, the circulating System of the World would have been completely perfect - 290 General Conclusion - - - - 291 Amount of the Paper of the Bank of England from 1782 to 1803 292 Statement of the Depreciation of Money in other Countries, by Mr. Arthur Young - 293,294, 295 XXX CONTENTS. CHAPTER XII. On the Effects of the Depreciation of Money. PAGE. On the Importance of making Money a durable Measure for the same Value - 296 Money hitherto an inefficient Instrument for the Fulfilment of the Conditions of permanent Compacts - - 297 Inquiry into the Effects of the Depreciation of Money on our public Revenue and National Debt, during the 18th Century 298 Table of the Depreciation in every tenth Year of the 18th Cen¬ tury - 299 Comparative Estimate of the Depreciation and Revenue of the different Reigns of the 18th Century - _ 300 General View of the comparative Value of the Revenue in every tenth Year of the 18th Century - 301 Diminution of the Revenue in Consequenee of the Depreciation 302 Effects of the Depreciation of Money on the Amount of the National Debt ----- 203 Value of the Pound sterling in every tenth Year of the 18th Century 305 The Public regain what the Treasury and the national Creditor lose 306 Statement of the Operation - - 307, 308, 309 Inequitable Mode of Exoneration and Redemption - 310 Effects of the Depreciation of Money on the Civil List Revenue 311 Illusion of Parliament - - ib. Error of Mr. Pitt - - - - 3x2 The present Revenue no more than half of the Revenue, which was granted to William III. - - - ;6. Explanatory Calculation - 3x4 How far the Revenue should be augmented to be equal to the Revenue of King William - 3x5 Cause of the frequent Applications to Parliament for Relief 316 Unfortunate Composition, which His Majesty made with Parlia¬ ment at the Commencement of his Reign - - 317 CONTENTS. xxxi PAGE. Unremitting Perplexity from the Moment of the Compact 317 Policy of revising the Compact - 3 1 ^ Uliberality in suffering the Revenue of the Crown to be reduced to half its original Value - The same Observations applicable to the Provision, which is made for the other Branches of the Royal Family - Z l 9 Propiiety of separating the Revenue of the Crown from the other Charges of the Civil List ... ib. Statement of the Charges - 320 Statement of the Revenue of the Royal Family - ib. Inconsiderable Emoluments of the great Offices of State 321, 322 On the Pay of the Army and Navy - - 323 Effects of the Depreciation of Money on landed Property - 324 The landed Interest suffer less than any Class of the Community, who receive a fixed Income - 325 Advantage of landed over funded Property - - 326 The Injuries of private Annuitants from the Depreciation of Money ib. The Depreciation of Money a Benefit to those, whose Incomes are not fixed - 327 General Impolicy in suffering the Continuance of the Depression 328 In all Compositions of a permanent Nature, an Increase or Diminu¬ tion of Income should be given according to a graduated Scale of the Value of Money ... 329 CHAPTER XIII. On the Reformation of the Paper Currency of Europe. The due Regulation of the Paper System of Europe, the most effec¬ tual Means of obviating the Depression of Money 330 The Utterance of Paper to be forbidden beyoncFthe existing Amount 331 The Privilege of Utterance and the Value of Paper to be limited 332 The Amount of the Paper to be disclosed - - 333 None but chartered Companies to be allowed the Privilege of Issue ib. xxxii CONTENTS. PAGE. The Circulation of private Paper impolitic on all Accounts - 333 Private Paper principally composed of small Notes, which lead to the Banishment of Specie ... 374, 335 Inquiry into the Effects of the Utterance of private Paper on the circulating System of this Country - 335 Failure of the Goldsmiths in the Reign of William III. 336 Failure of the Country Banks in 1793 - - ib. An unsuccessful Application made by them to the Bank of England for Relief - 337 The Means by which they secured the indirect Protection of the Bank ib. Another Run upon the Country Banks in 1797 - - 338 Drain upon the Bank of England - - ib. Previous Exhaustion of the Banks of the Counties and of the Metro polis - ib. All the Deposits in the Kingdom inadequate to supply the Place of provincial Paper 339 Necessity of the Order of Council - ib. The Inefficiency of Private Paper as a permanent Medium ib. Little Intimacy of Mr. Pitt’s Mind with the Principles of public Economy - 340 His Inadvertence in suffering the Counties to be exhausted of their Specie - - - - - ib. His further Inadvertence in augmenting the Paper of the Bank of England, and exhausting the Metropolis _ 341 His Misconception of the Cause of the Efflux of our Coin - ib. At a total Loss to provide the necessary Aid - - ib. His Conduct after the Suspension equally impolitic with his Con¬ duct before it - 342 Promotes the Publication of small Notes, and causes the total Departure of our Specie - ib. His General View of the Circulation of Paper erroneous 343 Hi- constant Prediction of the Ruin of France, from the Discount on her Paper - ib , His Surprise that the Country was glutted with Specie on the Failure of her Credit - - - ib. His Incompetencv to draw a just Conclusion from the Event 344. Brought upon h:s own Country the same Scarcity of Specie, which had led him to predict the Ruin of France - - ib. CONTENTS. xxxiii PAGE. The Court of Vienna not more enlightened than the Government of this Country - 344 Prohibits the Import of Sugar to make the Balance of Trade more favourrble - 345 Justifies the Peace of Presburgh, because her Paper was at a Dis¬ count, and her Specie had disappeared - - 346 Recapitulation of the Errors of Mr. Pitt - - ib. Superiority of Lord Grenville - - 347 Lord Grenville’s Plan for the Reformation of our Paper Currency, the gradual Abolition of small Notes - - 348 Efficacy of this Plan to arrest the Progress of the Depression of Money - 349 Efficacy of the Plan to restore the Circulation of Coin - 350 The Contraction, not Augmentation of Paper, the Object of Attention - - 351 Feasibility of the Plan - - 352 The Suppression of Paper necessarily leads to the Influx of Specie ib. No Effort of Government could prevent the Influx - 353 The gradual Compression of the Paper would occasion no Em¬ barrassment - ib. The War opposes no necessary Obstacle to the Reform - 354 Lord Grenville’s Plan supported by Experience - - 355 The Bank to defray the Expense of Coinage - - 356 To publish the Amount of their Notes - - ib. Application of the Plan to the Currency of other Countries - 357 Money made to constitute, at different Times as well as at the same Time, an uniform Measure of Value - - ib. xxxiv CONTENTS. PAGE. CHAPTER XIV. On Lord King’s Thoughts on the Effects of the Bank Restrictions. Lord King supports Dr. Adam Smith’s Position, that the Quantity of Paper in any given Country can never exceed the Value of the Gold and Silver of which it supplies the Place - 358 Inconsistency of this Support - - 359 Lays aside this Position and affirms, that Paper can never exceed the t effective Demand - - - 360 Lord King not the only Author who has accepted the Protection of this Principle - - - ib. Its Inefficiency - 361 Recommends to the Bank the Adoption of the practical Standard of a high Price of Bullion and an unfavourable Exchange - ib. Incompetency of his Theory to explain their Derivation 362, 363 The Inefficiency of his Reasoning on the high Price of Bullion 364, 365 The Inefficiency of his Reasoning on the Course of Exchange 366 Error of his Conclusion, that our Paper was depreciated below the Value of our Coin - 367 Error of his Conclusion, that a favourable Balance of Trade was a necessary Consequence of our commercial Relations - 368 Error of his Conclusion, that a favourable Exchange regularly re¬ sulted from it - 369 His inadequate Conception of the Theory of Exchange - ib. Impropriety of his Conclusion, that the Excess of Paper in Ireland proceeded exclusively from the Issues of the Bank of Ireland 370 Efficiency of his Plan of Reform - ib. His Declaration against the present System of the Multiplication of Banks - 37 r His Counter-declaration in Favour of it - 372 His Opinion, that private Paper had no Tendency to depress the Value of Money, because it increases in the same Proportion with the Paper of the Bank of England - - 373 CONTENTS. PAGE. The Error of this Opinion - 374 The proportional Augmentation of the Paper the immediate Means by which the Depreciation is effected - - 375 No Necessity that private Paper should be partially depreciated to produce a general Depreciation - 376 Contends that the Scarcity of our Coin was occasioned by the In¬ accuracy of the Mint Proportions - 377 Fallacy of this Opinion - - - - 378 Recapitulation of his Errors - - 379 His Superiority to Lord Liverpool - it. ESSAY, be. CHAPTER I. On the Writings of Mr. Hume, Sir James Steuart , and Dr. Adam Smith. IJefore I undertake to investigate the principles of cir¬ culation and commerce, it is necessary to explain the progress, which has been hitherto made in their illustra¬ tion. The three principal authors who have attempted to elucidate them are, Mr. Hume, Sir James Steuart, and Dr. Adam Smith. The Political Discourses of Mr. Hume were published in 1752; and, like every other production of that in¬ estimable writer-, display the powers of a comprehensive and enlightened intellect: but as it was not his intention to give to the world an elementary work, he forbore to enter into the detail and proof, which an elaborate treatise B CHAPTER L chapter required.(tf) He designed them to be what he em- phatically calls in his prefatory remarks, universal pro¬ positions, that included a whole science in a single theorem; and he (b) exclusively addressed them to the speculative politician, as a groundwork for the construction of a future system. The fundamental principles deducible from his argu¬ ment are : That all prices are in proportion to the quantity of money. That an increase of money is not an increase of wealth. And that the value of money is every where on a level. But as he examined his subject in too cursory a manner to give to his observations the consistency and precision of a regular inquiry, he frequently drew partial inferences in direct opposition to his general reasoning. Though he contended, that an increase of money was not an increase of wealth, as prices were raised in pro¬ portion to the augmentation, yet he asserted, that all commercial (r) relations were disadvantageous, which required the efflux of money to support them: and though he argued, that money every where maintained its level, yet he admitted, that one nation might retain a (a) See Hume’s Essays, Vcl. I. p. 282. (») Vol. I. p. 314. (r) Vol. I. p. 346. 3 greater relative quantity, than another, which is incom- chapter patible with the nature of a level.(^) He adduced the position, that plenty of money, which, in the spirit of the times, he termed (b) great riches, gave obstruction to trade, by the advance of prices ; (c ) yet he at the same time contended, that it gave a stimulus to industry—two effects, which are wholly inconsistent with each other. In conformity to these contradictory opinions, he in one place deprecates the increase of currency, and in another approves it. He condemns the circulation of paper, (d) because it causes the increase, and recommends the debasement ( e ) of coin, for the purpose of causing it. But even had these partial inconsistencies been avoided, and his argument been more correctly shaped, there were, at the time in which he wrote, no data, that could have enabled him to have established the validity of his principles, in refutation of the theory of the balance of trade by the testimony of facts. He was totally incapable of accounting for the constant excess of exports above imports in the custom-house entries, which every sup¬ porter of the balance advanced as indisputable proof of the influx of money, in direct contradiction of his inference. He endeavoured indeed to evade what he could not obviate, by observing, that the custom-house (a) Vol. I. p.311—350. (i) Vol. I. p. 311. (c) Vol. I. p. 313—316. \d) Vol. I. p.312. ( e ) Vol. I. p. 317. 4 Chapter books were allowed to be an insufficient ground of reasoning :( a ) but though the immutability of the rate for the estimate of the entries necessarily make the valuation inaccurate, yet as the exports and imports are both reduced in the same proportion below their current value, it furnishes no evidence to impeach the fact of a constant excess of exports : and until a satisfactory ex¬ planation be given of this fact, no successful argument can be constructed to explode the doctrine of a balance. In the examination, however, of Mr. Hume's Dis¬ courses, it is necessary to keep in view, that his exclusive object in the publication of his principles was to con¬ tribute to the formation of a future theory ; and that to reduce them to a system, to give them the form of a regular treatise for practical use, and to apply them to the existing state of our circulation and trade, was wholly foreign to his purpose. The preceding inconsistencies sufficiently shew, that he failed even to apply them to his own argument.—In the subsequent controversy, which he held with Dr. Tucker, on our rupture with America, he made no allusion to them, though they would have afforded the best solution of the question which they agitated. His Essays, therefore, should be examined with relation only to the object which he pro¬ fessed. In this object he has not been disappointed; since, notwithstanding that, from the remote and abstract nature of his oinions, they have failed to make their way into the public councils of Europe, they have materially operated (a) Vol. I. p. 342, 5 to guide the views, and reform the speculations, of the chapter political economist; and scarce an inquiry has been written into the theory of commerce and finance, since their in¬ troduction, without due reference to his high authority. To supply what he has omitted, and to give to his principles their proof and practical application, is the chief purport of the present investigation. The Inquiry of Sir James Steuart into the Principles of political Economy was published in 1767; and was an effort, (a) as is stated in the preface, to form into a re¬ gular science the complicated interests of domestic policy. But no means could have been more inefficient than those to which he resorted for the accomplishment of his object. He states, that his work ( b ) was the successive labour of many years passed in travelling through different countries, (c) which he constantly examined with an eye to his own subject; that he attempted to draw informa¬ tion from all with whom he was acquainted; but as his previous proficiency in the science was too limited to enable him to form proper questions, he was incapable of deriving from such an intercourse the full benefit, which it would have otherwise afforded; and as the variety of opinions, which he collected, prevented the con- fa) See Preface to Sir James Steuart, page 5. (i) Ibid, page 6. (r) He followed the fortunes and attended the exile of the fallen family of his name. 6 chapter struction of a regular plan, he framed his essay from a compilation of the observations which he casually made, after expunging the numberless inconsistencies (a) and contradictions, which he found had arisen from his sepa¬ rate inquiry into every particular branch. He adds, “ that he was particularly desirous of avoiding general rules, and the habit of running into what the French call systemes. ” ( b ) “ These are no more than a chain of contingent consequences drawn from a few funda¬ mental maxims adopted, perhaps, rashly; such systems are mere conceits ; they mislead the understanding, and efface the path to truth. An induction is formed, whence a conclusion called a principle is drawn; but this is no sooner done, than the author extends its influence far beyond the limits of the ideas present to his understand¬ ing when he made his deduction.” It would be difficult to give a more comprehensive definition of a principle than is conveyed by this intended sarcasm. In whatever light Sir James Steuart might have regarded the formation of systems, it is somewhat singular that he should have denounced them, because they were nothing more than a chain of consequences drawn from a few fundamental maxims. It may be said of the noblest exhibition of human reason, and the most accurate compo¬ sition in the world of letters, the Elements of Euclid, that they are nothing more than a chain of consequences drawn from a few fundamental maxims; and it may be with truth (a) See Preface, page 7 . (b) Ibid, page 9 . 7 affirmed, that they exclusively derive from this very chapter foundation their excellence and power. The perfection of every science peculiarly consists in the simplicity of its primitive principles, the unconstrained flow of the rea¬ soning immediately deducible from them, and the clear and obvious fidelity of its conclusions ; nor is it easy to conceive by what illusion Sir James Steuart could have been led to have entered his protest against systems, con¬ structed on the model of this immortal work, when it is evident from various parts of his inquiry, that he was himself an eminent mathematician. Many instances have doubtless occurred, where states¬ men have shewn considerable reluctance to the ad¬ mission of speculative reasoning, and the authority of fundamental principles for the regulation of their conduct; and it is probable, that Sir James Steuart might have been impressed with an unfavourable opinion of abstract posi¬ tions, from frequent communication with the leading cha¬ racters of the courts where he occasionally resided. But neither he, nor the statesmen of his time, appear to have been aware that they were acting in direct opposi¬ tion to the policy, which they prescribed, by conforming to the theory of the balance of trade. Upon this system, notwithstanding his cautious forbearance, Sir James Steuart has.grounded the main argument of his work ; and upon this system, notwithstanding their avowed repugnance, his cotemporary statesmen conducted the commercial relations of Europe. Yet the most refined and subtle theory, that ever played in the fancy of a visionary recluse, could not be more abstracted and remote from 8 chapter real existence, than this fallacious doctrine. It is ex- clusively founded on the speculative principle, that the wealth of a nation consists in its money, which is wholly illusive, and on the supposed fact, that vast sums are received and accumulated upon the annual recurrence of a favourable balance, for which there is not the slightest foundation. Previously, therefore, to a general denun¬ ciation of systems, an examination should have been made, how far the subsisting regulations for the com¬ mercial intercourse of Europe were formed upon system, and how far that system was consistent with truth. Not only, however, was Sir James Steuart adverse to the establishment of systems, but he repeatedly asserted, in the body of his work, that in the science (a) of political economy no general rules could be laid down, though he forbore to explain how a science could be completed without them. It would be wholly repugnant to reason to imagine, that an author, who, from whatever impulse, set out on his travels in quest of information on a subject, of which he had no previous knowledge, and compiled a vast mass of materials from casual observation and vague inquiry, without plan, principle, or system, could have formed into a regular science, which was to be composed without rules, the complicated interests of domestic policy. In the execution of his work he has rigidly conformed to the language of his preface, for in vain do we seek one luminous principle to direct us through the elaborate (a) See Sir James Steuart, page 394. 9 disquisition to a satisfactory conclusion. But as I should chaptei: be carried far beyond the limits of this inquiry, were I to follow him through his various research, I shall confine my observations to the efforts which he made to illustrate the principles of circulation and commerce. In his chapter on circulation, “ as it regarded the rise and fall of the price of subsistence and manufactures, he endeavoured to discover what it was that determined the standard [a) price of the articles of the first necessity;” and the best way,” he observed, “ to come at truth in all questions of this nature was to simplify them as much as possible, in order that they might be clearly understood.”— The simple conclusion, therefore, to which his argument conducted him for the solution of his question, was, ( b ) “ that the faculties of those who labour for a physical necessary must, in industrious nations, determine the standard value of subsistence; and the value in money, which they receive for their work, will determine the standard of their faculties, which must rise or fall, according to the proportion of the demand for their labour.”—“ By this exposition of the matter,” he adds, “ I do not pretend to have dissipated every obscurity, the question still remaining complex as the nature of it requires it should do,”—notwithstanding its simplification. After this elucidation “ of the cause of the rise and fall of the price of subsistence,” he proceeded to a further investigation of the general question, by controverting ( a ) See Sir James Steuart, p.395. {b) Ibid. p. 398. 10 chapter Mr. Hume’s position, that all prices were in proportion to the quantity of money. ( a ) “ In order to set the matter,” he remarks, “ in as clear a light as possible, I shall make a short application of my own principles relating to the decision of the main ques¬ tion, the causes of the rise and fall of prices. I have laid it down, as a principle, that it is the complicated opera¬ tions of demand and competition, which determines the standard price of every thing. If there be many labourers and little demand, work will be cheap : if the increase of tiches, therefore, have the effect of raising demand, work will increase in its value, because there competition is im¬ plied ; but if it has only the effect of augmenting demand, prices will stand as formerly. What then will become of the additional quantity of coin, or paper money ? I an¬ swer, that in both cases it will enter into circulation in proportion to the rise or augmentation of demand ; with this difference, that in the first case it will have the effect of raising prices, because the supply is not supposed to augment in proportion ; in the second, prices will stand as they were, because the supply is supposed to aug¬ ment in proportion. These are the consequences of the augmentation of zvealth, when it has the effect of either raising or augmenting demand. But if upon this revolu¬ tion, it be found, that the state of demand remains without any variation, then the additional coin will probably be locked up, or converted into plate; because they, who have it, not being inspired with the desire of increasing their consumption, and far less with the generous sentiment (a) Sec Sir James Steiiart, page 399. of giving their money away, their riches will remain with- ciiapi i:r out producing more effect than if they had remained in the mine. As for the paper money, so soon as it has served the first purpose of supplying the demand of him who borrowed it (because he had at that time no coin), it will return upon the debtor in it, and become realised, because of the little use found for it in carrying on circu¬ lation. Let the specie of a country, therefore, be aug¬ mented or diminished in ever so great a proportion, com¬ modities will still rise and fall according to the principles of demand and competition ; and these will constantly depend upon the inclinations of those who have property, or any kind of equivalent whatsoever to give, but never upon the quantity of coin they are possessed of.” The positions, which, by the preceding argument, and by the general scope of his reasoning, from page 400 to page 414, he endeavoured to establish, were, that an increase of money must either cause an increase of demand, which must consequently enlarge the supply, and keep prices, as they are ; or that, “ the augmented proportion will not enter into circulation,” but (a) “ wait not only the call of a desire in the proprietors to consume, but of the industrious to satisfy this call:” if, however, the position were true, that an increase of money led to a proportionate increase of produce, money would have re¬ tained through all ages the same invariable value ; as Sir James Steuart admitted, that if produce were augmented in the same proportion, there would be no advance of prices; but from the earliest period to the present times, as will (a) See Sir James Steuart, page 407. 1 2 chapter be sufficiently manifested in a future part of this work, there has been an invariable depression in the value of money. It is therefore evident that the augmented de¬ mand, in consequence of an increase of currency, has not occasioned a proportionate increase of produce. The other position, that if the additional sum did not cause this effect it would not enter into circulation, but be hoarded in treasure, is contradicted by the same fact; for, if it had never entered into circulation, it could not have contributed to the advance of prices. No conclusion can therefore be formed from his argu¬ ment to refute the position of Mr. Hume, that “ all prices are in proportion to the quantity of money.” (a) This principle, indeed, appears so obvious, that it would be superfluous to enter into the proof of its validity; and I shall assume it as a postulate that would be universally conceded. In the ensuing chapter he undertook to examine whe¬ ther there were really a balance of trade which enriched one nation and impoverished another; and as he was aware that the theory was impracticable, if the value of money were every where on a level, he endeavoured to refute this position, by controverting the hypothesis which Mr. Hume, for the sake of argument, proposed, that if four fifths of the money of Great Britain were annihilated in one night, commodities would sink in price, and be exported to foreign nations to bring over their surplus (a) See Sir James Steuart, page 414. currency. Sir James Steuart contended, that if such an chapter event took place, the people of Great Britain would starve, (a) because all the necessaries of life would bo exported for the money of the continent; and as it would annihilate both industry and the industrious, it could not afterwards be insisted on, that it would draw over a pro¬ portional part of the general wealth of Europe. Money, in Sir James Steuart’s imagination, though it be not so stated in his inquiry, exclusively constituted wealth: he always uses the money, the wealth, and the riches of a nation, as synonymous terms ; he therefore concluded, that all the exportable produce of the country must be transmitted to the continent to repair the loss, though the most cursory view of our custom-house entries might have convinced him, that the circulation could be re-estab¬ lished without the deprivation of a single grain. But even had his argument been applicable to the extreme case which Mr. Hume suggested, it would not have applied to the casual inequalities in the value of money, which arise in the ordinary course of events : as it could not in these instances be contended that the export of provisions would be necessary to restore the equilibrium. In order to refute the general principle, that money every where maintained its level, it was incumbent upon him to have pointed out some universal cause that tended in all instances to obstruct it, and not a particular cause, that could only operate in a particular instance : but deciding the controversy in his own favour, and realising the (a) See Sir James Steuart, page 418. 1 4 chapter supposition of Mr. Hume, he added, “ from this I conclude, that a nation, though industrious and populous, may re¬ duce itself to poverty in the midst of wealthy neighbours, as a private person, though rich, may reduce himself to w ant in the midst of the amusement and luxury of London or Paris; and that both the one and the other, by a dif¬ ferent conduct, may amass great sums of wealth far above the proportion of it among their neighbours.” It would be useless to pass any further observations upon the arguments which Sir James Steuart adduces to illustrate the principles of circulation; as he admits, that if Mr. Hume’s position be correct, that money over all the world is like a fluid, which must ever be upon a level, it leads to a chain of consequences (a) totally different from the whole plan of his work ; and as it is the main object of my investigation to establish this position, its subse¬ quent demonstration will sufficiently expose the fallacy of his reasoning. The Inquiry of Dr. Adam Smith into the Nature and Causes of the Wealth of Nations was published in 1775. This celebrated essay was the first successful attempt to form into order the elements of economical science, and the first systematic effort to apply the abstractions of phi¬ losophy to the commercial policy of Europe. All pre¬ ceding writers, in conformity to the popular opinions of the times, had invariably argued under a fixed impression that wealth exclusively consisted in money; for though. (a) See Sir James Steuart, page 416. as Dr. Adam Smith remarks, (a) “ they set out with chapter observing, that the wealth of a country consisted not in its gold and silver only, but in its lands, houses, and con¬ sumable goods of all kinds, yet in the course of their reasonings the lands, houses, and consumable goods seem¬ ed to slip out of their memory, and the strain of their argument frequently supposed, that all wealth consisted in gold and silver, and that to multiply those metals was the great object of national industry and commerce.” This impression had uniformly led them, from the age of Locke and Davenant to the time of Sir James Steuart, with the single exception of Mr. Hume, to uphold the theory of the balance of trade. But as Dr. Adam Smith, in no one instance, lost sight of the important distinction, he easily detected the fallacy of the theory. He was sen¬ sible that there existed some latent principle which pre¬ vented the accumulation of money in any given country, beyond a certain extent; and thence concluded that the theory of the balance of trade, which allowed indefinite augmentation, was inconsistent with truth: and though he never attained to the discovery of this principle, and knew not by what operation the general amount of the currency of different countries was limited, yet tjhe simple knowledge of a restrictive power sufficiently indicated to him the total impracticability of a continual balance. This effective principle, which regulates in all countries the amount of their currency, is the action of money in conformity to the purport of its institution as an uniform (a) See Adam Smith, vo!. ii. page 173, sixth eJition. 16 chapter measure of value. All authors have concurred in attri- buting to money the properties of being the universal measure of value, and the universal medium of exchange, but none have conceived it to be a necessary result from these properties that it should be an uniform measure, that the same sum should every where express the same value. However incompetent it would be to discharge the functions of its office, were £100. in one country to measure no more value than £10. in another; were every thing that cost £100. in the one to cost no more than £10. in the other, yet all authors have reasoned in economical disquisitions as if it were possible that such a disparity could subsist, and appear not to have been aware of the impracticability of maintaining the relations of com¬ merce under such an inequality, though it be obvious that the one country would lose and the other gain £go. per cent, in all their transactions with each other. For the due ascertainment of the weight and quantity of produce distinct measures are universally established, which are known by the different merchants of every country to contain fixed proportions of each other, and no obstruc¬ tion to the commercial interchanges can occur so long as they continue in the same state, as their known propor¬ tions give them the effect of complete uniformity. But were- all countries to adopt the system of subjecting them to perpetual variation, for the purpose of over-reaching each other, and to expose the commercial world to the hazard of receiving an hundred weight instead of a ton, or a gallon instead of an hogshead, it is easy to foresee the embarrassments that would ensue. But the same embar¬ rassments that would be occasioned by the impracticability of ascertaining the weight or quantity of produce, would 17 be equally ocasioned by the impracticability of ascertain- chapter ing its value, as the same risk must be incurred of inadequate compensation for produce remitted. The same necessity, therefore, exists for a due correspondence in the measure of value as for a due correspondence in the measures of weight and quantity. But the mea¬ sures of weight and quantity are universally maintained in the same fixed and settled order by established laws and usages ; no laws could, however, be efficient to maintain the invariability of the measure of value, as no arbitrary regulations could control the efflux and influx of money; but the concurrent property which money possesses of being the medium of exchange, as well as the mea¬ sure of value, supersedes the necessity of legislative interposition, and provides for the due performance of its functions with more regularity than the most perfect system of law could enforce ; for as this property directs its current where it will exchange to most advantage, and as it necessarily follows that money will exchange to most advantge where there is the least relative quantity, it invariably causes its remittance from the place where there is the greatest relative amount, to the place where there is the least, and by maintaining the currency of all countries in the same proportion enables it to discharge its functions with fidelity over the whole world as an uniform measure of value. The characteristic action of money, therefore, in- con¬ formity to the purport of its institution as an uniform measure, is the sole cause of the limitation of money, and the sole principle which regulates in all countries D chapter the amount of their currency. But as this principle by some inadvertency escaped the observation of Dr. Adam Smith, he was of course incapable of explaining the fundamental tenets of the science, and elucidating the real cause of the limit of money. Instead of contending that the same sum should every where express the same value exclusive of the charge of transit, he invariably conceded that it might differ to an indefinite extent, and invariably reasoned under the impression that the diffe¬ rence subsisted; and it is the more singular that he should have failed to have formed a correct conception of the functions of money, as his great predecessor, whom he loved and admired, and whose political discourses he fre¬ quently cited, had already communicated to the public the regular gravitation of money to a level, which directly led to the conclusion that the same sum must every where express the same value, and by reasoning from facts to theory, to the immediate inference that money would be incompetent to answer the purposes of its institution, un¬ less it constituted an uniform measure. But so little was he aware of this theory, that in the only part of his work where he alluded to the general (a) equivalency of money, and stated that the ( b ) removal of the prohibition on the export of specie in Spain and Portugal would raise the value of money in those countries to a level, or nearly to a level with its value in others, he repeatedly observed, that a particular degradation of its value might be effected in particular countries .; or in other words, that the same (а) See Wealth of Nations, Vol. 2, page 273. (б) It is perhaps needless to remark, that the prohibition is wholly nugatory. 19 sum might measure in one country a less value than it ci-iaiter measured in others. Little adverting, therefore, in the ground-work of his system to the real functions of money and the proportion of currency requisite in each country for the due discharge of the functions, he necessarily failed in the construction of his reasoning to explain the principle of limitation, and instead of asserting that no one nation could possess a greater relative currency than another, advanced the following inefficient propositions : ist. That the ( a ) quantity of money in every country depends upon the power of purchasing. 2d. That it is ( b ) regulated by the fertility of the mines which supply the commercial world. 3d. That it is in (c) proportion to the effectual demand. 4th. That it cannot ( d ) exceed the sum which is necessary for the purposes of circula¬ tion. 5th. ( e ) That it cannot be accumulated beyond what the nation can afford to employ. 6th. (j) And that when the channel is full, what flows in must run out again. These propositions I shall consider in their order ; and first, If it be contended, that the quantity of money in every country depends upon the power of purchasing, an inference is implied, that what is purchased may be retained; for if it follow that the proportion which is bought must in the natural order of things be instantly re-exported, it cannot be said, that the power of pur- ( a) See Wealth of Nations, vol. 1, page 37a. (b) See Wealth of Nations, vol. 1, page 372. (c) See vol. 2, page 149. (d) See vol. 2, page 156. (e) See vol. 2, page 271. (/) See vol. 1, page 436 ; vol. 2, page 158 ; and vol. 3, page 271. 20 chapter chasing determines the quantity. If the aggregate suni in every stlte depended upon the amount received, Spain and Portugal would have detained the collective product of their American mines ; but experience has uniformly demonstrated, that beyond a certain quantity, the efflux has been proportionate to the influx. The second position, that the amount is regulated by the fertility of the mines which supply the commercial world, is only saying that the amount can never exceed the supply ; but it is impossible to adduce this position to elucidate the nature of the limit in the common inter¬ course of trade, and explain the cause that prevents the currency of any one country from being wholly with¬ drawn and added to the currency of another. In the third position, that the amount is determined by the effective demand, or “ by the demand of those who are willing to pay the whole rent, labour, and profit, which must be paid in order to prepare and bring it to market,” it is implied, in the same manner as in the first, that the pay¬ ment of these expences secures its continuance, or it can¬ not be said to regulate its quantity. But it is well known, that banks of circulation have frequently made large purchases of specie at a price considerably above the sum that was necessary to discharge the whole rent, labour, and pi-ex which must be paid, in order to prepare and bring b to market, without any means of determining its quant. >r retaining it in circulation, as in the same degree in which they imported it at a loss, others ex¬ ported it ai a profit. 21 The fourth position, that the quantity of money can chapter never be accumulated beyond the sum winch is necessary for the purposes of circulation, implies that m inc.'.-are can take place unless the existing sum be incut.< ,.;e for the office : but if there could have been no augmentation beyond the sum which was necessary for the gtirw es of circulation, prices would have always remained ;he same; as it is evident, that if the increase were effected to a sufficient extent to cause their elevation, it would exceed what was necessary ; but as it is apparent that prices have been in a gradual state of advancement for these last 500 years, it is obvious that there has been a con¬ tinual increase of currency beyond the sum necessary for the purposes of circulation. His fifth position is so singularly vague, that it is only necessary to notice it in order to shew the perplexity of his mind, and the versatility of his efforts to possess and elucidate the principle of the limit. He says “ that the quantity of money can never exceed what the nation can afford to employ, or what the annual produce of its land and labour will allow it to employ but as he does not attempt to explain by what means the sum which it is capable of affording is to be defined, the position is neces¬ sarily nugatory from its loose and indeterminate nature. But the sixth position, that when he channel is full, what flows in must run out again, though a metaphorical allusion, was his chief resource ; as tic seldom attempted to define the limit, without referring to a pond, a stream, a dam-head, or a channel, to express his meaning. In his chapter general style Dr. Adam Smith was so eminently conspi- cuous for impressive simplicity, that it may be with truth affirmed, that he would not, in this particular instance, have accepted the aid of figurative language had he at¬ tained to a clear perception of the real principle. The image, however, which he adduced, contributed but little to illustrate the limitation ; for though it may be said of water, that when the channel is full, what flows in must run out again, yet this effect is by no means correspon¬ dent to the nature of currency. A country may be said to possess a plenitude of circulation when there is a suffi¬ cient sum to maintain existing prices, but it does not there¬ fore follow, that all further increase is impracticable, as an augmentation to any extent may be absorbed by a proportionate advance of prices. These positions, therefore, were little calculated to con¬ vey a correct definition of the real principle which limit¬ ed in all countries the amount of their currency, as they were either too indistinct to admit a determinate conclu¬ sion, or they supported the erroneous inference, that no increase of money could take place unless the existing amount were incompetent to discharge the office of cir¬ culation. As they were inadequate, therefore, to establish the principle of a limit, they were of course inadequate to refute the theory of the balance of trade. The two tenets upon which he particularly relied for the foundation of his argument against this theory, were, that the quantity of money in every country was regulated by the effective demand; (<7) and that it could not exceed the ( b) sum chapter: which was necessary for the purposes of circulation; but even if these positions were admitted, no conclusion could be drawn from them subversive of the theory ; for as the first position goes no further than to prove that the sup¬ ply is limited by the demand, without defining by what principle the demand is limited, it is competent to contend that a demand may have annually subsisted, to the whole amount of the excess of exports; and as in the second position he does not attempt to explain by what criterion the public could appreciate the sufficiency of the sum which was necessary for the purposes of circulation, it might in the same manner, as in the preceding instance, be contended, that an annual addition to the same extent had been necessary to render it sufficient, without the possibility of refutation, by any thing contained in his argument. Had, however, his reasoning been more conclusive, had he rightly understood the functions of money, and dis¬ covered that no one nation could possess a greater relative currency than another, which would have been a deci¬ sive refutation of the theory, he possessed, no more than Mr. Hume, the necessary data to confirm the validity of his argument by practical evidence. The documents for this purpose have been since disclosed by the committees of 1797, and justify the inference, that the surplus of ex¬ ports exclusively arises from foreign expenditure. But as Dr. Adam Smith had no means of access to the expla- ( a) Vol. 2, page 149. (b) Vol. 2, page 156 . chapter natory matter, which would have reconciled the surplus with his argument, he endeavoured, in the same manner as Mr. Hume, to erase it altogether from the question, by insinuating that the (/?) “ custom-house books were ac¬ knowledged to be a very uncertain criterion, on account of the inaccuracy of the valuation at which the greater part of goods were rated in them.” But I have already explained, that though the custom-house returns afforded an erroneous criterion of the current value of the exports and imports, from the remoteness of the period when the tarif was fixed, they furnished the most satisfactory evi¬ dence of their relative proportion, and correctly announced the uniform fact of a vast superiority of exports. This statement of Dr. Adam Smith’s argument suffi¬ ciently accounts for the failure of his efforts to refute the theory of the balance of trade ; for as he was incapable of defining the real principle which limited in all countries the amount of their currency, he was of course deficient in reasoning ; and as he had no means of procuring the re¬ quisite documents to explain the cause of a constant excess of exports, he was necessarily deficient in facts : no im¬ pression was therefore made on the public mind that indica¬ ted a conviction of its fallacy. But not only was the misconception of the real principle of the limit of money of fatal import in the particular argument which Dr. Adam Smith directed against the theory of the balance of trade ; but it precluded the (a) Vol. 2, page 213. possibility of a competent view or correct explanation chapter of any one question that related to the subject of circula- ^ tion through the whole work; for as it disqualified him from attaining to a just comprehension of the principles of exchange, it necessarily deprived him of the means of elucidating the appendant mysteries of the efflux and influx of money, and the fluctuation in the price of bullion ; it likewise misled him in his consideration of the effects of a paper currency, and in the inquiry which he made into the depreciation of money. I shall hereafter endeavour to shew that the course of exchange constitues the practical means, by which money is enabled to discharge its functions over the whole world as an uniform measure of value; and shall attempt to prove, that the fluctuations in the exchange exclusively arise from the efforts of the different individuals of different countries to reduce their respective currencies to the same relative amount for the purpose of maintaining the general equi¬ valency. But so far was Dr. Adam Smith from reaching its governing principle, that he was even unacquainted with its practical effect, and doubted whether merchants were not erroneous in concluding that an (a) unfavourable exchange necessarily led to the departure of money. As he knew not the cause of the variation in the’ ex¬ change, he was of course incapable of elucidating the subject of the efflux and influx of money. It will be hereafter seen that the transit of money from one country (a) Vol. II. page 145. 26 chapter to another, is effected for the exclusive purpose of equa- lizing its value ; that its efflux takes place upon a partial reduction of its value from excess, and its influx upon a partial augmentation of its value from deficiency. But Dr. Adam Smith observes only, that it is exported “ when it (a) exceeds in amount what the annual produce of the land and labour can employ for the effectuation of exchanges but it has been already remarked, that the circulation of a country is not a fixed quantity, and can never be excessive for the transaction of exchanges, as it may be absorbed to any extent by a proportionate eleva¬ tion of prices. The same disacquaintance with the theory of exchange, which precluded a correct perception of the principle, that regulated the transit of money, precluded a just compre¬ hension of the cause which governed the price of bullion. A long duration of the excess of the market price of money above its mint price, was attributed by Dr. Adam Smith, in common with all preceding writers, to the ( b ) debasement of the coin, and the inaccuracy of the mint proportions ; but the occasional fluctuations in the price of gold and silver bullion he ascribed to the faulty specu¬ lations of the merchant importers, (c) “ who,” he said, “ with all their attention, sometimes overdid the business and sometimes underdid it:” but in a subsequent part of this work I shall endeavour to shew, that the variations in the market price of money above and below its mint price originate in the same manner as the rise and fall in (a) Vol. II. page 17. (b) Vol. I page 63. [c) Vol. I. page 68. 27 exchange, and as the efflux ancl influx of money, in the interruption,which is given to the permanent establishment of a general level by the incidental employment of a greater or less relative currency by different countries ; for as the casual variation in the relative quantity of their currency necessarily causes the same specific weight of gold or silver to measure in one country a greater or less value than it measures in another, it necessarily causes a greater or less quantity of the coin of the one to be given for the coin of the other, to reconcile the difference. The price of bullion, therefore, will uniformly be above or be¬ low coin, or the market price of money will uniformly be above or below its mint price, in the same proportion, in which a given sum abroad is of a greater or less value than a similar sum at home. CHAPTER The erroneous opinion, which Dr. Adam Smith formed, that the general issue of paper made no addition to the aggregate circulation of the world, is attributable to the same misconception of the primary principles of his science. He says, (a) “ that the whole paper of every kind that can easily circulate in a country can never ex¬ ceed the value of the gold and silver of which it supplies the place, or which would circulate there if there were no paper, because it would be more than necessary to effect the exchanges which would otherwise have taken place.” In this, as in the preceding position on the exist¬ ence of a limit to the accumulation of money, in which he remarks, that its quantity can never exceed the sum which (a) Vol. I. page 448. 28 chapter is necessary for the purposes of circulation, the same in- advertency to the absorption of the superadded proportion by a commensurate elevation of prices again occurs. Had he, however, formed a more just conception of the func¬ tions of money, and constructed his inquiry on the basis of its constituting an uniform measure, he would have at¬ tained to the conclusion, that the issue of paper might be increased in any given country to any extent, provided that the currency of other nations were augmented in a similar ratio to preserve the equivalency. It is the impracticability of making the same sum express a diffe¬ rent value, that imposes a restriction on the further in¬ crease of either money or paper in any particular country, and not the sufficiency of the existing stock for the pur¬ poses of circulation. This conclusion, that the utterance of paper had no tendency to increase the aggregate amount of currency, prevented his perception of the rapid depreciation of money, which it occasioned. He well knew, that no de¬ preciation could take place without a continual enlarge¬ ment of the means of circulation; and as he was of opinion that the annual supply of bullion from America did not materially exceed the annual consumption, and that paper made no addition to the pre-existing stock, he necessarily drew the inference, that no (a) depression from the commencement of the preceding century had been effected ; but it will be sufficiently shewn in a future part of this inquiry that the depreciation of money during the (a) Vol. I. pages 310 and 328. 29 last century, in consequence of the universal circulation chapter of paper, exceeded the depreciation of any former period of history. From this outline it is evident that the leading errors of Dr. Adam Smith on the subject of circulation, exclu¬ sively arose from his inability to attain to a just perception of the functions of money. But though he failed to ac¬ quire a correct knowledge of these functions, he greatly contributed to the improvement of the science by the diffusion of more enlightened principles than had previ¬ ously obtained. To Locke, (a) Davenant, and Sir James Steuart he was eminently superior ; and if he reached not the extended views of Mr. Hume, he greatly surpassed him in consistency, justness, and precision of reasoning, as in most of the instances where he was least successful, he was rather inconclusive than erroneous, and rather fell short of the truth than -deviated from it. But much as he contributed to enlarge the science, and much as its various tenets have been lately discussed, it must still be admitted to be wholly in its infancy : no satisfactory argument has been yet framed to effect the explosion of the old system, and no approximation to success has been made in the attempts to develope a new one ; but what¬ ever progress it may hereafter make, to whatever per¬ fection it may attain, Dr. Adam Smith wifi ever be re¬ garded the great founder of the economical school of England. (a) I wish not to detract from the great name of Locke, but on the subject of money he imbibed all the prejudices of his time. 30 CHAPTER II. On the Functions of Money. chapter Most of the errors in the present commercial and ^ financial system of Europe appear to me to have arisen from a mistaken opinion of the functions of money. In the familiar intercourse of society money and wealth have always been regarded synonymous terms ; and as the principle that an increase of money constituted an increase of wealth seemed too obvious to the understanding to admit of investigation, the policy of this, as well as of every other country, has been exclusively directed to its accu¬ mulation, as the only means of advancing its opulence. The fundamental positions which I shall adduce for the purpose of exposing the fallacy of this policy are these: That an increase of the national stock of specie is an increase of currency and not of capital. That an increase of currency is not an increase of wealth. And that no one nation can possess a greater relative currency than another. The exclusive utility of money consists in its properties as an universal measure of value, and an universal medium of exchange. As it forms the universal measure of value, every one estimates his capital by the quantity of money 3 which it is worth. A merchant affirms that he is worth forty ch after thousand pounds, or an hundred thousand pounds, because there are no other means by which his capital can be estimated, and not because it actually consists of so much money. The person of landed or funded property al¬ ways makes the same remark; and though from the quantity of currency in the country, and from the average demand for the capital which they possess, there exist a facility of their making the conversion at their option, yet at the time that they make the assertion they have not perhaps twenty pounds of cash in their possession. No individual, when he is asked the question of what he is worth, enumerates his lands, his houses, his stock, his mortgages, or whatever may be the nature of his pro¬ perty, but immediately mentions the sum into which the whole of his property may be converted, and unless he estimated it by this universal measure of value, he would not be understood. It is this property, that constitutes the peculiar use of money, as it enables us to compute the value given and the value received, to ascertain the equivalency of ex¬ changes, through the various relations of society ; the wages of labour, the profits of stock, and the commercial interchanges between nation and nation, are exclusively estimated at their proportional value by this measure ; but as it is impossible that money can form an accurate mea¬ sure for these purposes, unless the same sum expressed every where the same value, I shall hereafter point out the means that are taken to effect its equalization. 52 chapter It is this property that peculiarly adapts it for a medium of exchange ; but as the only utility of the money is for the exchange, immediately that one capital, or some portion of a capital is sold, another is bought. No one keeps the money beyond the opportunity of making the conversion to most advantage. If any one were desirous of exchanging his estate in one county for an estate in another, for the purchase of government securities, or for the discharge of claims, the purchase money would be instantly applied to the purpose for which the exchange was made, and instantly re-appropriated to the general circulation of the country. But from these united properties of money, as a mea¬ sure of value and a medium of exchange, we usually affix the idea of the real possession of so much money when we talk of the capital of an individual, and so familiar is the custom, that we seldom advert to the specific pro¬ perty of which it actually consists : we even find it diffi¬ cult to divest ourselves of the idea that it does not really consist of money. (a) The customary terms of conver¬ sation imply that we think more of the money than the money’s worth ; we say of a rich man, that he has a great deal of money, and of a person becoming so, that he is getting money, without adverting to the money as a measure of value, but thinking at the time that it actually constitutes the wealth of which we speak. From this familiar habit of expression we are inadvertently led to {a) See Wealth of Nations, Vol. II, page 131. infer, that money constitutes the capital of an individual, CHAT’ and thence that it constitutes the capital of a nation. When we speak of the commercial as the monied inte¬ rest, an opinion is always implied that their capital consists of money ; but though the capital of the merchant be more frequently converted into money than the capital of the land proprietor, yet in this, as well as in every other instance, recourse is only had to this medium for the purpose of enabling him to exchange his existing pro¬ perty into property of another shape with more facility : it is no longer retained in money than is correspondent with his interest; and as pending its continuance in this state there is a total suspension of profit, its detention is not likely to be of long duration. No capital is ever converted into this medium for the purpose of being per¬ manently retained in a mass of money. Among the annals of domestic narrative two or three instances of an eccentric character are recorded, where a miserly being has converted his property into specie, and hoarded it in treasure for partial consumption as the paucity of his wants required : but I may venture to assert without any great probability of a violation of the truth, that no such character now exists, or at least the instance must be so rare, that it cannot be said to militate against the general conclusion that the capital of no individual in the country is retained in money. I admit that the existing stock of specie at any given moment constitutes the capital, ora portion of the capital, of many individuals; but it is discharging the functions F ch apter of currency at the time that it forms them. The same money, which constitutes the capital of an individual merchant at one moment, in the space of a short time may constitute the capital of five hundred, and the com¬ paratively small sum of ten millions may be capable of answering all the necessary purposes of circulation in a great commercial city, where the aggregate capital of the inhabitants may be of the value of a thousand millions, and may form by turns the capitals of all. Though large sums of money be necessary for moving the more im¬ portant transactions of trade, their magnitude does not alter the nature of money and convert it into capital be¬ cause it is occupied in circulating the materials of the merchant, when it is acknowledged to be currency in cir¬ culating those of the retail trader. The transit of large sums from hand to hand is as rapid in the city of London as the transit of smaller sums in the inferior transactions of the country village; and though they may constitute the capital of many individuals in their transit, they are not more stationary in the one instance than in the other. The detention of money in a state of stagnation for the for¬ mation of capital is obviously without foundation ; no one would retain it for the improvement of his property, as money is incapable, like produce, of being worked into profit or exchanged to advantage, and no one would retain it for expenditure, as expenditure, however gradual, must eventually lead to its consumption. If then it may be inferred from the foregoing obser¬ vations, that all the specie existing in a country must be appropriated to the purposes of circulation; that it constitutes the currency, and not the capital ofa nation, it chapter follows as a necessary consequence, that an increase of the national stock of specie must be an increase of currency. I shall now, therefore, endeavour to prove that an increase of currency is not an increase of wealth. Every individual is sensible that if he possesed so much money he could command so much produce, and if he pos¬ sessed so much more money, that he could command so much more produce ; and it maybe naturally concluded, that what is true of an individual must be true of the collec¬ tive body, and that an increase of money in a nation must be an increase of wealth. But as in an increase of currency all acquire in the same ratio, unless obstructed by exist¬ ing contrasts, no one will be in a better relative situation than another ; no one will receive a greater or less quan¬ tity, than that proportion, which is competent to maintain him in the same relative position in society. Mankind find out with ready facility, whether the money, which they obtain for their labour or produce can measure the same quantity, or command the same quantity of the ne¬ cessaries and luxuries of life, which they have been accustomed to receive for it; their wages and their profits are the criterion of that quantity, and no one will submit to an alteration of the measure to his own detriment; no one will suffer his produce to be sold at the same price, when the produce of another is advanced, as it would confound the equality of exchange, and prevent the same quantity of money from being the measure of equivalency between the respective produce of the one and the 36 cipptf.r respective produce of the other, by making more of the one exchange for less of the other than previously to the augmented currency. The price of all things, therefore, soon becomes commensurate with the increase ; anti me existing relations between man and man are unalterably maintained in the same state, though all receive a greater nominal income. If there were a general increase of currency in this country to such an extent that all could receive as many guineas as they now receive shillings, no one would be in a better relative situation than he is at present. If the peasantry of the country received as many guineas a week as they now receive shillings, and the gentlemen of property received as many guineas a year as they now receive shillings, the gentleman and the peasant would still continue in the same relation to each other; and though guineas would be circulated as shillings, no one would receive more for his guinea than he now receives for his shilling. Money can be of no greater value than is the produce for which it will ex¬ change, and if one piece of money would exchange for the same quantity as another, they must necessarily be of the same value. The livre ill France was once circu¬ lated at the value of an English pound, and is now circu¬ lated at the value of an English ten-pence ; but as it will now only exchange for a four-and-twentieth part of the value for which it would have formerly exchanged, no one is now richer in the possession of four-and-twenty than he would formerly have been in the possession of one. Four-and-twenty form the measure of value where one formerly sufficed, and all produce is now estimated at four-and-twenty, which was formerly estimated at one. 37 It is thus that a nation may be just as rich with a cur- chapter rency of five millions, as with a currency of fifty ; the ^J 1 ^, greater or less quantity is no criterion of its opulence. The wealth of a nation consists in the aggregate produce arising from its productive stock, for the interchange of which, between man and man, money forms only the measure of value ; and whether five or whether fifty pieces constitute the measure for the same quantity of produce is of no consequence. If a nation raised more produce with a currency of five than with a currency of fifty, it would in proportion to the excess be more opulent; and in that case the five millions would be worth more than the fifty, as any given proportion of the five would exchange for a greater quantity of produce than a similar proportion of the fifty, and exchanging for more, would be of more value. As money is exclusively appropriated to exchange, and does not participate in the nature of produce, which is grown for consumption, an increase of money retained for internal circulation has no effect like an increase of produce to augment the wealth of a nation : the greater the ^quantity in circulation the lower will be its standard as the measure of equivalency, the greater will be the quantity given in exchange between produce and produce, and the higher will be the price of all things : but as an advance in the price of produce, and a reduction in the value of money are convertible terms, an increase of money has no other effect than to cause its own depres¬ sion. This effect was sensibly experienced in the reign of Elizabeth, when the remittances from America considerably 38 chapter augmented the currency of Europe, and proportionally added to the specie of this country in common with the rest. But this increase had no other operation than to raise the price of produce, and augment the nominal in¬ comes of all, without making any addition to their real opulence, as their incomes exchanged for no more sub¬ sequently to the increase than before it, and exchanging for no more, could be of no greater value. The leading characters of her reign were so well aware of this cir¬ cumstance, that in the instance of leases from colleges a reservation was made of a third of the rent in corn, in order to prevent their impoverishment by the receipt of a fixed money rent from a further alteration of its value, which a further increase would have necessarily effected. The beneficial consequences resulting from this policy have been too repeatedly noticed by prior authors to require any comment from me. Yet so familiar is the opinion that the quantity of pro¬ duce in every country depends upon the quantity of money employed to raise it, that an increase of money has been invariably regarded as the exclusive means of effecting its augmentation. The want of money, or as it is more usually termed, the want of capital, has been esteemed by every nation the sole cause of its existing poverty, and has therefore constituted in every age the prevailing subject of complaint. To remedy this deficiency Mr. Law recommended the establishment of his land bank to the parliament of Scotland, which afterwards led, by the im¬ politic adoption of the Regent of France, to the fatal project of the Mississippi scheme ; and to remedy this deficiency 39 the present extensive issue of paper in every part of the united kingdom is exclusively encouraged. But though the currency of Scotland have been augmented to three times the amount, which circulated during the era of this unfortunate speculator, yet the same complaint of the want of money still subsists; nor, had it been increased to any given extent, would the clamour for more have been less urgent, as there must necessarily have been the same proportionate distribution of the augmented, as of the existing quantity, and consequently the same craving as at present for a further supply. It is not, therefore, the quantity of money that regulates the productive power, but it is the productive power that regulates the quantity of money. A nation is not rich because it has money, but it has money because it is rich: the money is the effect, not the cause of its wealth. If it were true that the quantity of money in every country was proportionate to the quantity of currency employed to raise it, simple indeed would be the means of augmenting the wealth of a nation, as an indefinite extent of paper must necessarily lead to an indefinite extent of produce ; but as the utility of money exclusively consists in forming the measure of value, by which all property is estimated, and the medium of exchange, by which one property is transferred for another, an increase of money has no other effect than to multiply the means by which these functions are fulfilled. If it could have operated to a proportionate augmentation of produce, prices, as I have already remarked, must necessarily have remained at a fixed standard through all ages, instead of 40 chapter having attained to an advance commensurate with the relative excess of money. It has been frequently contended, that an increase of currency gives a stimulus to industry by the elevation of prices ; but as the wages of labour are augmented only in proportion to the increase, and purchase no greater quantity of produce after the addition than before it, no greater stimulus can in reality exist, and therefore no greater effect is likely to be produced by the deception. The present condition of Spain is conclusive evidence that it does not necessarily conduce to national industry ; nor are there any means by which it can have this result; for as all the specie retained in a nation must be appropriated to the purposes of circulation, if an increase of money be effected without an increase of produce, it must be occu¬ pied by the produce already existing, and make a pro¬ portionate advance in the price, without any power to augment the quantity. If our Cornish mines could pro¬ duce annually a million of money, there is no doubt but that the proprietors would be the richer by the equivalent, which they procured; but no accession would be made to the wealth of the nation, as no equivalent could be provided un¬ less the additional sum were exported for an additional pro¬ duce. If it were retained for internal circulation, as it could obviously occasion no instantaneous increase of produce, and as it would not remain in a state of stagnation, till the proportionate increase were effected, it must necessarily be employedby the existing produce,and a partial rise would take place in the price of all things, unless an hundred times its value could be instantly procured, or whatever may be 4 the quantity of produce necessary for the occupation of chapter such an increase of currency at the existing prices. If, then, the currency of a nation be augmented to any extent, and retained for the purpose of internal circula¬ tion, no additional wealth would be gained, as any given proportion of the augmented currency would exchange for no greater quantity of produce than a similar pro¬ portion of the currency, that existed previously to the augmentation. There is, therefore, no foundation for the supposition that an increase of currency constitutes an increase of wealth. But though an increase of currency retained for internal circulation do not constitute an increase of wealth, yet every country possessed of an augmented proportion unquestionably receives an accession to its opulence by the equivalent which it obtains upon its foreign remittance. The exclusive source, however, from which a nation can derive a permanently increasing stock of specie, is from the produce of mines, as it will be hereafter shewn that the customary course of trade will lead to the influx of no greater quantity than the sum which is ne- cesary to maintain the general level of money. The American mines have certainly added to the wealth of Spain and Portugal in proportion to the equivalent received from the distribution of the proceeds among the other nations of the world ; and though the world at large would have been equally rich had there been no conversion of the ore into money, as it is wholly imma¬ terial whether its collective currency consist of two G 42 chapter hundred or two thousand millions, yet so long as these mines continue productive, from the instinctive tendency of money to gravitate to its level, the proprietors will continue to receive an increase of opulence according to the extent of the equivalent which its foreign remit¬ tance procures. From a misconception, however, of the principles of national wealth, the states of Spain and Portugal have uniformly endeavoured, to the utmost of their power, to retain the supply for their internal circulation. But immediately that any one nation should collect to itself such a quantity of currency as to circulate its produce at a higher price than others, foreign produce would be attracted by the advance in its market, and take off the surplus ; which leads me to an examination of the third position, that No one nation can possess a greater relative currency than another. There is the same exertion among nations as among individuals to maintain the uniformity of the measure of value, whether money be depressed or elevated by an increase or reduction of currency. I before observed that no individual in the same nation would submit to a material depression in the estimate of his labour or pro¬ duce in any instance where he could procure a better market. If a general increase of currency were effected, neither the peasant nor manufacturer would sell his labour at one place for less, if by removing to another he 45 could sell it for more of the necessaries of life. He would chapter naturally go, if no impediment obstructed his removal, where his labour was most highly estimated. This atten¬ tion to individual interest has a direct tendency to pro¬ mote an equalization of the wages of labour, and prevents their elevation atone place considerably above their stand¬ ard at another. The same attention to individual interest prevents any particular produce from exchanging at one place for more value than it does at another in the same country. As money is the measure of the value of other produce, which it is capable of procuring in exchange, the pro¬ prietor will naturally convey it where it will sell to most advantage. It is impossible that wheat could be at ten shillings a bushel at Oxford, and fifteen shillings a bushel in London ; as long ere this difference existed, the wheat of Oxford would have been conveyed to London to equa¬ lize the price and rectify the measure of value. It is im¬ possible, therefore, that any local rise can exist in the price of produce, or that any particular town or district can possess a greater relative currency than others in the same country, as it must necessarily create a partial rise. Wherever there was a tendency to this excess, the produce of remoter districts would be attracted by the advance of its market, and draw off the surplus currency. The disposition to buy cheap, as well as to sell dear, would make the possessors of the money as ready to part with it to their advantage, as the possessors of the produce to procure it for theirs. 44 chapter The uniformity of the measure of value is thus main- tained, and the same commodity is made to exchange for the same quantity of other produce in every part of the same country. Whether, therefore, currency increase or decrease, whether prices be advanced or depressed, money still maintains its attribute as a measure of equivalency. There must be a greater or a smaller number of pieces given in proportion as it is augmented or reduced; but the same number would, notwithstanding, be given in both in- tances for the same produce in every part of the country. I do not mean to contend, that no difference can exist in the price of the same produce at any two distinct places; but that the general attention of all to their individual interest has a tendency to approximate it so nearly to an equality as to prevent much difference beyond the expense of conveyance. The difficulties of conveyance must always make a certain difference. In commodities that are either of great bulk, or are easily perishable, there must always be some variation, as there are no means of conveying them from the place where they are cheapest to the place where they are on this very account dearest, without great expense, and this expense must be neces¬ sarily included in the price. But as this difficulty is only experienced in a few commodities, and as all other pro¬ duce, by the emulation of individuals to take advantage of a rise in the market, is nearly sold at par in every part of the kingdom, it follows, as a necessary consequence, that no one district can possess a much greater relative currency than another. 45 But for the same reason that no one particular town or chapter district can possess a greater relative currency than another in the same country, no one nation can possess a greater relative currency than another in the world at large. If by a partial increase of currency in any par¬ ticular country its prices were advanced above the prices of other nations, foreign produce would be attracted by the rise in its market, and draw off the surplus currency. In the commercial intercourse between nation and nation, money is in the same manner the measure of equivalency as in the domestic intercourse between man and man. The facility with which the reciprocal communication of nations is carried on has a necessary influence on the markets of all, and approximates the price of their pro¬ duce to a general level. If it were found that a parti¬ cular commodity could purchase only five pounds weight of silver at home, and could purchase six pounds weight of silver abroad, it would be naturally sent abroad for the most favourable exchange. Not only foreign pro¬ duce would be attracted to the country possessing the redundant currency, in order that it might sell dear ; but its money, notwithstanding the prohibition of government, would be clandestinely exported, in order that it might buy cheap. The same attention to individual interest, therefore, will cause the same exertion among nations as. among individuals to equalize the value of money as the common medium of mensuration. But there are two causes that operate in the commercial intercourse of nations to prevent a complete equalization of prices in the same produce—the difficulties of inter- 46 Chapter course on account of the distance, and on account of restr ^ ct i° ns on th e freedom of trade. The difficulties of intercourse from distance cannot create so great a diffe¬ rence in the circulable price of any given commodity in any two distinct nations, as to afford an extraordinary profit to the merchant who transported it out from one country to the other. The competition of nations has subsisted too long to afford any extravagant profit above the customary mercantile commission ; but the disabilities of trade, arising from prohibition, may make an essential difference in the price of the contraband goods. During the late scarcities in this country, from the restrictive regulations which France adopted, the price of wheat in London was nearly double the price in Paris, which could never have subsisted had the freedom of intercourse been permitted: but though the difficulties of conveyance and the prohibitions of government create a necessary variation in prices proportionate to their extent, yet uninterrupted by these disabilities, the action of money, directed by individual interest, has an uniform tendency to make any given quantity of the same produce exchange for the same value in every part of the world. In order to shew the impracticability of accumulating a currency in one country above the relative currency of another, it is only necessary to examine the effect which this attempt has produced in the instance of Spain: Spain has annually received from her American mines between three and four millions of pounds sterling for these last two centuries, and has made every exertion in her power to retain them for her internal circulation; but notwith- 47 standing her restrictive system, she now possesses, accord- chapter. ing to the estimate of Mr. Boetticher, only ten millions instead of six hundred; and if Mr. Fischer's account of the remarkable scarcity of her specie be correct, which from the extended issue of her paper there is reason to believe, even this sum is much exaggerated. The reduc¬ tion of her vast supplies to this inconsiderable residue is exclusively attributable to the impracticability of obstruct¬ ing the uniform gravitation of money to its level; for in every instance, in which it was perceived that she had a tendency to circulate her produce at a higher price than other nations, foreign produce was attracted by the rising market, and notwithstanding the vigilance of government, her specie was invariably exported, when it would ex¬ change for a greater quantity of foreign than home produce. So long as there is no one, who would give a guinea for a commodity at home, which he could procure from abroad by paying only a shilling, all restrictions to compel a nation to retain its specie must ever prove totally ineffectual; the detention would have produced no other effect than the depreciation of its value, and to prevent this depriciation of their property, was as much the object of every individual in the country, as it was the object of its government to enforce it. The surplus, therefore of her currency, that excess, which would have enabled her to have circulated her produce above the general level, was annually distributed among other nations to make the same sum exchange in all for the same value. If, then, the preceding observations be correct, it fol- 48 chapter lows, as a necessary consequence, that no one nation can possess a greater or less currency than its due proportion, than that proportion which is competent to circulate its produce at par with other countries : that in whatever instance it should be augmented above this proportion, foreign produce would be attracted by the advance in its market, and take off the surplus currency ; that in what¬ ever instance it should be reduced below this proportion, foreign bullion would be attracted by the cheapness of its market, and supply the requisite addition; and that no permanent variation can be effected in the value of money to prevent its universal agency as a common mea¬ sure of equivalency. But as it may be said that this principle, however specious in theory, may not be practically true, I shall make some inquiry into the general uniformity of the prices of diffe¬ rent countries for the purpose of confirming its validity, by the evidence of fact. Mr. Arthur Young has more fully investigated this subject than any other author, and has pointed out with singular perspicuity the average prices of the different countries of Europe, according to the money and weight of England, in his Statistical Tour in 1790. The average prices of England were. Beef per lb. 4 d. Mutton 41 - Veal 41 - Meat average of the three, 4^ Pork 4 Bread if The average prices of France were, Beef per lb. 3^ Mutton 3-i Veal Meat average of the three, 34 Pork 4^ Bread 1 The average prices of Spain were, Beef per lb. 3| Mutton 3f Veal 6f Meat average of the three, 4^- Pork 4 j Bread if The average prices of Italy were, Beef per lb. 3f Mutton 21- Veal 3 f Meat average of the three, 3 Pork S i Bread if These facts sufficiently manifest a general coincidence of prices ; but the reasoning which Mr. Young has ad¬ vanced (<2) to elucidate their correspondence, reduces them in reality to a perfect identity, as he satisfactorily accounts for every variation in price by a proportionate variation in the quality of the produce. The extensive catalogue which he has prepared contains the estimate of (a) For the prices of France see Mr. Arthur Young’s Travels, Vol. I. page 441; for the prices of Spain, Vol. II. page 333 ; and for the prices of Italy, Vol. II. page 293. H 50 chapter many other articles, in addition to meat; but I have the more particularly confined my statement to the price of this commodity, because, according to Sir George Shuckburgh’s table, it more nearly approximates the mean value of money than any other. It may be satisfactory, however, to add the following estimate, in order to shew the correspondence in the rent and price of the land of this country and France. The average rent of land in France, ( ^ restricted itself from paying in specie, it may be presumed, from the conse¬ quences which ensued, that an undue advantage was taken of this forbearance, not only by the Bank itself, (a) See Davenant’s Discourses, page 38. 128 chapter but by the different goldsmiths who engaged in the issue of paper, as the various evils which infallibly attend the excess of its utterance were immediately apparent; a premium on gold, a discount on paper, a depression in the exchange, an excess in the market price of money, and a debasement of the silver coin. I have not, indeed, been capable of procuring the necessary details to prove that these diff erent results of an over-charged circulation corres¬ ponded with each other with that precision which, consist¬ ently with the principles contained in this work,they ought to have done. But it may be collected from different au¬ thors that the premium on gold( a )rose, during a short pe¬ riod, to £50. per cent.; that the discount on ( b ) paper was twenty per cent.; that the depression of the (c) exchange with Amsterdam was £2, 5. per cent.; that the excess in the ( d ) market price of our money was £25. per cent.; and that the degradation of the silver ( e) coin was £25. per cent. I have, however, no doubt but that if an accurate account could be presented to the public of the progressive premium on guineas, the progressive discount on paper, the progressive depression in the exchange, the progres¬ sive superiority in the market price of money, and the progressive degradation of the silver coin, they would be found to have maintained a perfect coincidence. The material incongruity appears to have been between the (a) See Leake, page 338. (b) See Dr. Adam Smith, Vol. I. page 480. (c) See Dr. Adam Smith, Vol. II. page 216. (d ) See Leake, page 389. (e) See Dr. Adam Smith, Vol. II. page 216. 120 premium on gold and the discount on paper ; but this chapter difference was evidently impracticable, as a premium upon the one necessarily implies a discount upon the other to a correspondent extent: the other effects were precisely commensurate. These appearances, however, were attributed by the government and the people in the same manner as at present, to an unfavourable balance of trade, to foreign expenditure, to bad seasons, to the confusion of the times, to want of credit, to the imperfect state of the coin, and to any thing but paper : (a) £6,812,908. 19.?. yd. worth of silver was, therefore, coined at a charge and loss of £2,700,000. to redress the grievance, without any abate¬ ment of the real cause ; and as the excess in our currency still continued, and with it the excess in the market price of our money, the £6,812,908. 19s. 7 d. worth of silver was consigned to the crucible, and in the short space of 17 years not a shilling remained to attest the coinage. This exposition of the state of the coin will satisfacto¬ rily explain the grounds, upon which Mr. Locke's opinion was founded, that silver constituted the money of account and measure of commerce ; for as he perceived, that all prices were designated by silver, that the foreign ex¬ change was calculated by it, that all contracts were paid in it, and that gold took apparently a variable value ac¬ cording to the fluctuation in its market price, he naturally concluded, that silver more particularly gave the value. (a) See Lord Liverpool, pages 74 and 75. 150 chapter and formed.the superior standard. But it is extremely singular that Lord Liverpool should have fixed upon this period as the precise sera, when gold became the govern¬ ing standard ; he says, ( a ) “ that the high rate of the gold coin, to which the people then voluntarily submitted, can only be ascribed to the preference, which at that time began to be given to the use of gold coin in all payments, at least, of considerable amountbut the people then volun¬ tarily submitted to receive the guinea at £50 .per cent, pre¬ mium, for the same imperious reason for which they now submit to receive it at ten per cent, premium in Ireland. In every instance where they so submitted to receive it for the payment of a contract made antecedently to the annexation of the premium, they were defrauded of £50. per cent, of their legal claims ; and surely it cannot be Lord Liverpool's meaning, that a landlord willingly sub¬ mitted to the loss of half his income for the pleasure of receiving his rents in gold. But though Lord Liverpool contended that gold began to form at this period the prevailing measure, notwith¬ standing that it constituted the superior coin, yet he sub¬ sequently contends, with more propriety of reasoning, that it has continued to be the prevailing measure, because it has constituted the inferior coin. He says, (6) “that though the guinea was reduced in 1717 to 21.?. from 215. 6d., it was still rated at a higher value than it ought to be, compared with the silver coins, by at least 4 d. or 1 per cent. ; and experience has proved that when (a) See Lord Liverpool, pages 81 and 138. ( 1 ) Same author, page 85. 131 coins of two metals are made legal tender at given rates, chapter those who have any payments to make will prefer to discharge their debts or obligations by paying in that coin which is over-rated.” Had the fact been really correct, that from 1717 a given weight of gold in coin had ex¬ changed for a greater quantity of silver in coin, than a similar weight of gold in bullion would exchange for silver in bullion, Lord Liverpool’s conclusion that gold became from that period the governing standard would have been well founded. But I have already shewn that the fact has been directly otherwise, and that the partial depreciation of the silver by the illicit debasement of the people, has in reality made a given weight of gold in coin exchange for a less quantity of silver in coin, than a similar weight of gold in bullion would exchange for in silver bullion, which has necessarily reversed the mint adjustment, and communicated the superiority of men¬ suration to the silver instead of the gold coin; The general inference, therefore, which Lord Liver¬ pool, and all preceding authors w ho have incidentally treated on this subject, have deduced that the one coin has more materially constituted the ruling standard than the other in every period of our history, is only so far true, as the one coin has been partially depreciated below the other. But the particular inference, which Lord Liver¬ pool has drawn, that gold has latterly become more peculiarly the prevailing measure than silver, is the direct converse of the truth. In every instance, however, where by the partial ascendancy of either, the two coins have ceased to form a common standard, it has constituted 132 chapter a defect instead of a perfection, and has exclusively arisen from the inconsistent construction of our circulating sys¬ tem, which has too frequently and too long allowed a departure from the correct proportion, which the respec¬ tive metals bear to each other in bullion. The first position, therefore, which Lord Liverpool lays down, that the principal measure of property should consist of one metal only, would be to establish this defect for ever. The second position, that the principal measure of pro¬ perty in this country should be gold, would be to reduce the gold coin to the same state of partial depreciation with reference to the silver coin, to which the silver coin is now reduced with reference to the gold coin. But the third position, which contains the means by which he proposes to carry the preceding principles into execution, and communicate the superiority of mensura¬ tion to the gold coin, singular as it may appear, would have an effect directly the reverse, and continue it for ever with the silver coin : this proposition is, to take the expense of workmanship out of the silver coin, and still allow the guinea to exchange for a less quantity of silver in coin than it will exchange for in bullion, which would still leave the silver the inferior coin, and consequently the superior standard. In the conduct of his argument Lord Liverpool has so fully admitted that the over-rated, and thence depreciated coin, constituted the prevailing measure, that it is impossible to account for his inadver- tency in recommending an over-estimate of the silver, that must, by his own shewing, defeat his views. In investigating the consequences of the measure he even himself seems aware that this effect might result, and he therefore suggests that the silver coin should be a legal tender for no more than 21s. This precaution would, however, be wholly illusive. In the reign of William the Third, not a single piece could be selected from our silver currency that consti¬ tuted a legal tender, as it was not correspondent with the mint standard, and therefore could not consist of the good and lawful money of the realm ; nor did paper then constitute, in any one instance, a legal tender, yet were all prices designated, all contracts discharged, and even the revenue paid in silver and paper, though government and annuitants were by these means defrauded of £50. per cent, of their legal claims, and though the only lawful money consisted of the gold coin. In the existing state of the currency of Ireland there is not a single shilling that would constitute a legal tender, nor is the paper of the Bank of Ireland a legal tender, further than to pro¬ tect the person of the debtor from arrest in the first in¬ stance ; yet are all prices marked, all contracts paid, and all taxes collected in silver and paper, though a legal payment can be only made in gold, and though its go¬ vernment and land-holders sustain a loss of ten per cent, by their forbearance to demand it. Nor in this country could the aggregate mass of our 134 chapter currency furnish a pound sterling of silver that would form a legal tender ; nor does the paper of the Bank of England form a legal tender, further than to protect the person of the debtor from arrest in the first instance, yet all prices have risen in the same proportion in which silver has been debased, and all taxes and incomes are received in silver and paper, notwithstanding that a legal payment can be only made in gold. As a relative excess of currency, by producing a supe¬ riority in the market price of our money above its mint price, is the sole cause of the degradation of the paper and the consequent degradation of the silver coin, and as the forbearance to make paper a legal tender has no power to prevent its over-issue, it can have no power, while the present unlimited system continues, to prevent the ascen ¬ dency of paper and silver as the particular media of mensuration. But the communication of the superior standard to the gold coin was not the only advantage which Lord Liver- ' pool proposed to realise by the nominal rise in the silver coin: (a) he was in hopes of obstructing the disappearance of the silver, upon the recurrence of an excess in its mar¬ ket price, and of invariably retaining an adequate supply of legal currency for the transaction of inferior payments. But Lord Liverpool knew by his own experiments that the ( b) deficiency in the legal weight of our shilling was ( a ) See Lord Liverpool, page 157. [b) See same author, page 187. 24 per cent. If> then, the fabricators of our silver currency have found it necessary to reduce its weight 24 per cent, below the mint standard for the purpose of effecting its retention, Lord Liverpool’s diminution of two and a half per cent, must of course prove totally ineffectual. It was shewn in the preceding chapter that the market price of silver had occasionally advanced to 6s. and 6s. id.,or nearly twenty per cent, above its present mint price ; if, therefore, according to Lord Liverpool’s sug¬ gestion, the mint price were to be raised no further than to 3s. 3$d., or two and a half per cent., it is obvious that the whole of his coinage would disappear when the market price again advanced to 55. 7 d. and 5s. 8d., as under the existing system of our paper currency has very constantly occurred. The only means, as I have already observed, of main¬ taining a perfect circulating system with equable powers of mensuration, is to reduce the excess in the market price to a level with the coin by a contraction of the paper which occasions it, and not by innovating expedients to raise the nominal value of the coin to a level with the excess. The cause of Lord Liverpool’s failure to explain the principles of coinage, originated in the narrowness and inefficiency of his first principles; for though he endea¬ voured with peculiar propriety to construct his essay upon them, yet as he formed them upon too limited a scale for prospective application, he was incapable of recurring to them in the conduct of his argument for an 136 chapter unerring direction to an accurate conclusion. The funda- mental positions which he adduces are these : (a) That the money or coin of a country is the standard measure by which the value of all things bought and sold is regulated and ascertained. And it is itself at the same time the value or equivalent for which goods are exchanged, and in which contracts are generally made payable ; and he subjoins in a note, “ as this definition of money, though not always so accu¬ rately expressed, is given by all authors, from Aristotle to the present time, there is no need of any particular quotation." But notwithstanding that Lord Liverpool, and all preceding authors from the age of Aristotle to the present time, have concurred in the opinion that it was the peculiar property of money to be a measure of value, yet neither Aristotle nor Lord Liverpool conceived it to be a necessary consequence of this property that it should be an uniform measure, and that the same sum should every where express the same value. Construct¬ ing his essay, therefore, upon the supposition, that the same sum might express in all countries a different value, he necessarily drew erroneous inferences in every instance where the consequential attribute of money, as an uniform measure, was affected. This inadequate conception of the functions of money precluded Lord Liverpool, in the same manner as it pre- ( a ) See Lord Liverpool, page 8. eluded all prior authors, from solving the apparent para- chapter dox, that an ounce of gold or silver in coin of a given fineness might occasionally be of a different value from an ounce of gold or silver in bullion of a similar fineness, and reduced him to the necessity of concurring in the opi¬ nion, which Mr. Locke has so forcibly expressed, (a) “ that an ounce of silver, whether in pence, groats, or crown pieces, stivers or ducatoons, or in bullion, is and always eternally will be, of equal value to any other ounce of silver, under what stamp or denomination soever.” This opinion Lord Liverpool has asserted to be an undoubted and incontrovertible truth ; but had he, in the first instance, taken a more comprehensive view of the theory of money, and attained to the conclu¬ sion that the same sum should every where measure the same value, must uniformly gravitate to its level, he would have fully understood that an ounce of gold or silver in the coin of one country might, from an occasional varia¬ tion in the relative amount of their currency, express at a given moment a greater or less value than an ounce of gold or silver in the coin of another; and therefore, that an ounce of gold or silver in bullion might be sometimes worth more and sometimes less than an ounce of gold or silver in coin. His incompetency to refute this opinion of Mr. Locke has subjected him to the singular imputation of having written a book to remedy a grievance, the existence of which he has denied. The only practical alteration, which he has recommended in the present system of our coinage (a) See Lord Liverpool, page 76. 138 chapter he expressly recommended for the purpose of prevent- ing the disappearance of the silver currency, whenever it should happen that an ounce of silver in coin should be inferior in value to an ounce of silver in bullion ; and yet in the commencement of his argument on this point he contends that their inequivalency is .totally impracticable. The same limited conception of the functions of money which precluded him from explaining the paradox of the inequality in the value of coin and bullion, precluded him from explaining the just cause of the efflux and influx of money.(d) He says, “ Mr. Locke, ( b ) and many other writers, have clearly demonstrated that the coins of any country can only be retained within it, when the general balance of commerce or payments is not unfavourable; and that they will necessarily be exported when the value of the whole of the merchandize imported exceeds the value of the whole of the merchandize exported in order to pay the deficiency. If, indeed, the goods so imported are only an unusual quantity of stock intended for re¬ exportation, and not to be used or consumed in the coun¬ try, it is certain, that upon the sale and re-exportation of such stock, the coins will in due proportion again return. (a) See Lord Liverpool, page 109. [b) I know no edition of Mr. Locke’s works in which this demonstra¬ tion is contained. The only observations, which I have noticed, that he has passed on this subject relate to the indefinite accumulation of money, as an inexhaustible fund of riches, and evince a manifest misconception of the theory of money. The only other author of eminence, who has supported the theory of the balance of trade, is Sir James Steuart, upon the imbecility of whose argument I have already commented. or a quantity of bullion sufficient to replace them. These chapter principles are indeed self evident.” If these principles be self evident, I know not upon what grounds Lord Liverpool has estimated the aggregate stock of our specie at so inconsiderable a sum as £30,000,000., since it is obvious from the public returns that the value of the merchandize exported has exceeded the value of the merchandize imported during these last forty years, accord¬ ing to the official rate, 160,000,000, and according to the current value, above 300,000,000 ; and as he admits no other cause of the efflux and influx of money, it is im¬ possible to figure upon what principle he could reconcile to himself so material a reduction; but even this sum^ reduced as it is, I shall hereafter shew to be greatly exaggerated. If these principles were self evident, there is no mine, however productive, that could supply the necessary stores for the balances that are claimed by the different nations of the world. One country claims a balance of £14,800,000., another of five millions, another of three, and the others of two and one, to the aggregate amount of nearly £40,000,000. annually : and as all assert their commerce to be favourable, it is obvious that their col¬ lective balances must be paid by a continual influx of bullion from the mine correspondent with their amount; but the annual produce of the mines of the world does not exceed £7,000,000. If these principles be self-evident, money would act in direct violation of its primitive function as an uniform 140 ch apter measure ; and, contrary to all reason and fact, a guinea in one country would express no more value than a shilling in another : the prices of one would be indefinitely raised above the prices of another; and money, in defiance of the interests of those, whose subsistence depends upon their unremitting attention to the smallest variation in its value, would be continually exported from the place where its value was highest to the place where its value was lowest, and ebb and flow regardless of the laws, w hich have uniformly directed its motion. This inability of Lord Liverpool to account for the excess in the market price of money, and explain the cause of its efflux, necessarily prevented the suggestion of an adequate provision to obviate them. For the general character and talents of Lord Liver¬ pool I entertain, in common with the nation at large, the most sincere respect; but in the particular effort which he has made, in his Letter to the King, to elucidate the principles of coinage, his success is inferior to his esti¬ mation. For the accuracy of his historical detail, the perspicuity of his arrangement, and the elegant simplicity of his language, too much praise cannot be given; but as he failed to attain to a just perception of the principles of the system, which he has attempted to establish, his conclusions are necessarily erroneous. 141 CHAPTER VI. On the Amount of our Specie. As a correct estimate of our specie would materially chapter tend to elucidate the general reasoning contained in this ^ ^ work, I shall endeavour to form the best computation, which the loose nature of the subject will admit, though the most satisfactory calculation can only be said to ap¬ proximate the truth. It has usually been the custom to calculate the amount from the mint returns of our coinage, and Mr. Rose and Lord Liverpool have exclusively constructed their com¬ putations upon them. The estimate of Mr. Rose amounted to £44,000,000. ; the estimate of Lord Liverpool, as I have already stated, to £30,000,000.; but as the clan¬ destine exportation and melting of the coin totally disqua¬ lify these documents from furnishing a correct criterion, I shall endeavour to construct a more accurate estimate, by computing the proportion, which specie bears to paper in the general circulation of the kingdom. Previous to the present system of our currency, when paper occupied a less considerable space in the circulation of the country, and the Bank of England maintained a cautious silence upon the extent of their issues, it would have been impracticable to have deduced a satisfactory H2 chapter conclusion from a comparison between the amount of paper and specie in the general transaction of our payments: but as the mystery in which this subject was formerly enveloped is now in some measure removed by the reports of the Secret Committee of 1797, the comparison may be instituted with a nearer prospect of success. It was deemed, indeed, imprudent by the officers of the Bank to communicate to the Committee the amount of the specie retained in their coffers, but the evidence of ( a ) Mr. Abra¬ ham Newland upon the proportion of their cash and paper payments is sufficiently explanatory of the sum in circu¬ lation. He said, that previous to the restriction, if the dividends to the public creditors amounted to" £ 14,000,000. not more than from £1,300,000. to £1,400,000. would be paid in cash. If in so large a payment, where cash in any quantity might be demanded, and where, from the variation in the amount of interest, so many fractional sums must be given to the different proprietors, no more than one tenth part were paid in specie, it is fair to conclude that no more than a tenth would be given in all the other great money transactions of the metropolis. This opinion is fully corroborated by other parts of his evidence, where he says that £100,000. would be suffi¬ cient to effect all the cash payments of the Treasury; that in the gross produce of the customs, then amounting to £3,000,000., the Bank did not take above £5,000. cash • in the produce of the excise, then amountingto£7,ooo,ooc. not more than £60,coo.; and in the instalments of a loan, amounting to much larger sums, not more than one per cent. No doubt, therefore, can remain respecting the (a) See Repart of the Lords’ Committee of Secrecy, page 63. 14 vast predominance of paper over specie in all payments chapter of considerable magnitude. The payments next in im- porfance are those made by checks on private bankers ; and by the best information which I can collect from them, one pound in ten would greatly exceed the proportion of their average cash receipts and expenditure. In pay¬ ments of a still inferior order in the familiar intercourse of society it is only necessary to appeal to general notoriety and the evidence of each person in the sphere of his own experience. If, then, in the total combination of pay¬ ments in the city of London it may be inferred that not more than one-tenth part, and this evidence by no means warrants so great a proportion, be effected with specie, it is obvious that if the paper of the Bank amount to £20,000,000., and be exclusively confined to the metro¬ polis, the specie in a state of circulation cannot exceed the sum of £2,000,000. But it is not competent to con¬ clude that even this sum, small as it may appear con¬ sistently with public opinion, is customarily current in London, for as some proportion of the paper of the Bank is distributed over the whole kingdom, the specie, accord¬ ing to the above mode of computation, can only be estimated at one tenth of the quantity exclusively em¬ ployed in the circulation of the metropolis. But the proportion of extra paper is not, perhaps, very considerable ; the principal part of the currency of the country is composed of specie and the paper of provincial banks ; but as no authentic documents have been laid before the public for an estimate of the issues of these banks, an inquiry into the quantity of the paper, and the 144 chapter relative proportion of the specie of the country is attended with greater difficulty than a similar investigation in the metropolis where the issues of the Bank are made public. But not only is the amount of our provincial notes un¬ known, but the same rule of proportion for the compu¬ tation of the coin will not apply, as in some places such is the quantity of paper that it almost supersedes the use of the precious metals, while in others, though the dis¬ trict be very limited, specie still maintains its prescriptive ascendancy. As no direct communication has, therefore, been made of the extent of their issue, it is necessary to resort to presumptive evidence by an estimate of their profits ; for as the profits of their business almost wholly arise from the loan of their paper, (a) a computation of the one must necessarily lead, with some qualification, to a computation of the other. The country banks, according to the last returns, amounted to 549, [b) and as their average profits have been estimated at £2,000. a year, it is necessary that their outstanding notes should amount to £22,000,000., and that the public should be burthened with an annual contribution of £1,100,000. for the exclusive inconveni¬ ence of possessing their paper in lieu of specie : some estimates, however, have carried their paper to a much higher sum, and Lord King (< ) has even stated it at (2) Some allowance should certainly be made for the deposits of cus¬ tomers ; but from the information, which I have collected, they form, with the majority of the country banks, a fund of no considerable extent. ( b ) See List of Country Banks for 1806. [c) See Lord King, page 108. 11 9 double the amount of the paper of the Bank of England, or chapm.h (a )£4,0,000,000., which would give to the country banks an average profit of £3,500. a year, and raise the annual contribution of the public to £2,000,000. But these esti¬ mates are, in my opinion, much exaggerated, for though in the more opulent and extensive country towns the banks be for the most part formed by characters of the highest respectability, who are connected with no other branch of business, and whose profits are doubtless very con¬ siderable ; yet in the lesser towns they are established by retail traders of every denomination, whose ostensible expenses but little correspond with such an income, and who would long since have relinquished the inferior de¬ partment had such an accession been attainable. The annual average acquisition, therefore, of from £700. to £800. would, in my opinion, bear a much nearer affinity to the truth, which, some ( b ) allowance being made for the deposits of customers, would reduce their out-standing notes to £7,000,000. or £8,000,000., and the annual contribution of the public to between £350,000. and £400,000, But from the total failure of satisfactory evidence, every conjecture must be extremely arbitrary. As no just conclusion can therefore be drawn respect¬ ing the collective amount of the notes of country banks, there must necessarily be a still greater distrust of accu¬ racy in any estimate that can be formed of the relative (a) See Lord King, page 108. {b) Some allowance should also be made for the interest arising from the coin, which is displaced and invested in the public securities. U 146 chapter quantity of the coin : but whatever difference of opinion there may be upon the aggregate sum of our provincial paper, no difference can be entertained respecting its great preponderance above specie in the general transac¬ tion of country payments. With the view of ascertaining the precise proportion, a motion was made by Lord Grenville for an account of the remittances of the Re¬ ceivers General, with a specific statement of the sums that were paid in specie, and the sums that were paid in paper ; but from the reluctance of government at that time to enter into a discussion of the subject and reform the present system, the motion was lost. Though, there¬ fore the precise proportion cannot be ascertained, yet no doubt can subsist respecting the vast superiority of their paper, as in all the money dealings of the various markets, in the rent of land, and even in most instances in the wages of labour, their notes exclusively compose the medium of payment. From the immunity, however, of partial districts I am not disposed to estimate the coin at so low a proportion as in the metropolis: taking, there¬ fore, a nearer gradation, and computing the coin at a fifth instead of a tenth, the sum in circulation will amount to about £1, 500,000. ; and I am the more inclined to affix it at this proportion, notwithstanding that it may bring the notes and specie to a near'er correspondence than the average payments will authorise, that some al¬ lowance may be made should my computation of the paper, which I was particularly desirous not to over-state, appear to be founded on too reduced a scale. The aggregate amount, therefore, of the coin in cir- culation throughout the whole kingdom will not, by this calculation, exceed the sum of £3,500,000.; to this sum it is necessary to add the average proportion in deposit: the hoards of individuals it would be superfluous to in¬ vestigate, as the age of accumulating secret treasure has long sinse elapsed ; but the various banking establish¬ ments necessarily detain a certain fund for the security of their credit beyond their ordinary receipt and expen¬ diture. In private banks this fund is not, perhaps, very considerable, for as they in a great measure acquired the privilege of exemption from cash payments when the restriction on the Bank of England took place, it would be absurd to suppose that their deposits would be unne¬ cessarily extended, when no drain could be effected to exhaust them. If, therefore, the stock of coin in each of the 549 country banks be computed on the average at £1000., and in each of the 70 London banks at £4000., the estimate would, I am informed, be sufficiently ample to cover the real amount. There can, perhaps, be little doubt but that every bank, both in London and the coun¬ try, has at different times possessed ten times the propor¬ tion of specie which I have assigned to them ; but it is improbable that their ordinary deposit, exclusive of the sum appropriated to their daily transactions, should have exceeded this sum since the general suspension of their cash payments. The only remaining sum, therefore, which it is neces¬ sary to consider, is the deposit of the Bank of England. This deposit has at all times, in my opinion, been much exaggerated. It has generally been conceived by the 148 chapter public that their average stock of coin and bullion VI ~ , amounted to eight or ten millions ; but there appears to me to be no foundation for such a supposition. It is well known that at various periods during the last century their stock was extremely low: in 1745 they paid in sixpences, for the purpose of gaining time to procure an adequate supply of guineas for the pressure of the mo¬ ment. During the prosecution of the American war it is acknowledged by Mr. Bosanquet (a) that “ their funds had been gradually reduced to a certain degree of depression;” and in 1783 he expressly stated that their cash was re¬ duced to a lower scale than in 1797, at the period of the restriction. In the late war, so early as the year 1794, they made representations to Mr. Pitt of the exhausted state of their coffers ; in 1795 they had frequent confe¬ rences with him on the same subject, and on the 10th of ( b ) October delivered a paper, which was presented to the cabinet, explanatory of their embarrassment; in Decem¬ ber of the same year they limited their discounts, from an apprehension of the consequences that might result from an unrestricted acceptance of the bills that were presented to them; in 1796 further conferences were held with Mr. Pitt, from a further diminution of their cash ; and in 1797 they were reduced to the necessity of suspending their payments. These difficulties form conclusive evi¬ dence that the sum in deposit at these particular junctures was not to a material amount. Subsequently to the restric¬ tion, the state of the exchange, and the price of bullion. {a) See Report of the Secret Committee of the Commons, page 26. (i) See Report of the Secret Committee of Lords, page 152. 149 will sufficiently attest how small a quantity they have had chapter an opportunity of procuring ; for though in i 797, and the greater part of the year 1798, they were capable of re¬ plenishing their coffers from the favourable state of the exchange, yet from 1798 to 1803, such was its remark¬ able depression, that there is every reason to believe that the bullion trade has collected and molten, not only whatever proportion was imported in 1797 and 1798, but even the greater proportion of the sum that was previ¬ ously in circulation. But the most material fact in confirmation of my argu¬ ment is, the necessity, to which they have been frequently reduced of purchasing bullion for conversion into coin in large quantities above its mint price ; as it is obvious that they would never have submitted to the loss which they incurred by this expedient, had any superfluous treasure been remaining in their coffers. But in order to explain this subject more fully, it is necessary to make some in¬ vestigation into the surreptitious melting of our specie, and the mint account of our coinage. As £3. 175. 10 \d., the twelfth part of 44 guineas and a half, constitute in our coin an ounce of gold; £100., or 95 guineas and 5s., constitute 2,1b. 1 oz. indict. 1 5gr. Previous, therefore, to the restriction, the Bank of England were at all times compelled to give upon demand 2 lb. 1 oz. lgdwt. 1 $gr. weight of gold, or, which is the same thing, gsg. 5.9. for an -£100. bank note. The bullion merchant, therefore, by resorting to this Company, could at all times procure 2 lb. 1 oz. l^dzct. 1 50 CHAPTER I5gr. at the fixed price of £100. But it has already been seen, that upon a relative excess of our currency the market price has frequently advanced to £4., £4. e.v., £4. 4.V., and £4. 6s. an ounce: taking it, therefore, for instance, at £4. 44’., the goldsmith could demand of the Bank Qlb.ioz. igdzvt. 1 $gr. at the fixed sum of an £100. and sell it in the market, by an immediate conversion into bullion, for £107. 17 s., obtaining a profit of £7. 17s. per cent, as often as the conversion was effected, which might be done with facility in a few hours, and repeated every day, to the extent of many thousands. During the continu¬ ance of this excess in the market above the mint price of our money, a drain was naturally caused upon the Bank to secure the profit which the difference allowed ; and as this drain had a necessary tendency to exhaust their stores, they were frequently reduced to the necessity of re-purchasing at the market price the very gold which they had been compelled to utter at the mint price, not¬ withstanding the loss which they suffered by it. What¬ ever sum they thus procured was immediately remitted to the Tower again to be coined, again to be drained from their coffers, again to be consigned to the crucible, and again to be re-purchased to undergo the same process in the same succession as long and as often as the difference subsisted. The Directors have so frequently and so fatally experienced the effects of this excess, that in a letter to Mr. Pitt, dated October 8th, 1795, they simply state the fact, from a conviction that the result must be instantly admitted. “ The pr.esent price of gold bullion being from £4. 35. to £4. 4.x. an ounce, and our guineas being to be purchased at £3. 175. 10 £d. an ounce, clearly 151 demonstrates the grounds of our fears, it being only chapter. necessary to state those facts to the Chancellor of the Exchequer.” (a) This, then, is the conflict which the Directors and the bullion merchants have uniformly sustained, from the first institution of the Bank to the present time : and this is the conflict which has uniformly restricted the currency of this country, while our paper was convertible at option into specie, to the same relative amount with the currency of others ; for as in every instance where the over-issue occurred, and the market price of our money exceeded the mint price, the bullion merchants returned the paper upon the Bank, and by the contraction which they pro¬ voked, restored the correspondence, they invariably prevented the Directors from transgressing beyond a certain extent the just limits of circulation. The mint ( b ) return of our coinage will sufficiently illus¬ trate the activity of this contest during the present reign. It is admitted in this return that £32,000,000. out of the £57,000,000. which have been published by the mint during the present reign, have been coined from ingots composed of molten guineas, and £25,000,000. only from Portugal gold ; and as the three proclamations of 1773, 1774, and 1776, during the re-coinage, brought in no (a) See House of Commons Report, page 171. [b) See the annexed account, from the Report of the Secret Committee of the Lords, pages 239 and 249. 1 52 chapter more than (a) £1 5,563,593- in light guineas, it is obvious that £16,500,000. have been re-coined, by the confession of the officers of the mint, from guineas converted by the goldsmiths into bullion, from the cause which I have explained. Though this proportion form, indeed, a material fact to attest the truth of my argument, yet there is reason to conclude that even this sum, great as it is, is still under-rated; for as it is acknowledged in the return, that the officers of the mint cannot always discri¬ minate from what gold the ingots are produced, and as it is the interest of the venders to represent their compo¬ sition of foreign coin, it is competent to presume that the decision is very frequently made in favour of Portugal gold, contrary to the real fact. It is alleged, indeed, that the ingots are invariably produced from light guineas; but this assertion is only made by the vender to colour the transaction with an appearance of legality. The bullion trade is exclusively conducted by an order of people proverbially remarkable for their shrewdness in traffic, and who would not to their own loss have selected the lightest instead of the (a) It has been stated to me, and it is a fact well known, I believe, to the Directors of the Bank, that much the greater proportion of the X I 5>5^3»593’ I'gh 1 guineas were coined for the express purpose of taking advantage of the liberality of government, which allowed new guineas of full weight to be given for them ; nor can there, indeed, be the least doubt but that the light guineas of 1773 and 1774 were coined from the heavy guineas previously in circulation ; and that the light guineas of 1776 were coined from the heavy guineas so published in 1773 ant l 1774.- This mode of employing the liberality of government sufficiently indicates the impolicy of calling in old money at more than its mint value. [Tofact Pagt iji. Mint Office, 22d March, 1797. An ACCOUNT of all the Gold imported into His Majesty’s Mint, and the Amount of Gold Monies coined, during His Majesty’s Reign, distinguishing (as far as this Office appears to have been enabled to particula¬ rise*) the Ingots received in each Year produced from Guineas and from Foreign Gold, with the Value of each ; prepared pursuant to Order of the Right Honourable the Lords of a Secret Committee of the House of Lords, dated 20th March, 1797. Imported in each Year From 28th October 1760 — 3 9 — 1790 — 6 — To 22d March 1797 — 1 Gold in Ingots. produced from lAmountof Gold Mo- | Guineas. Value. | Foreign Gold. Value. Year. 111,325 10 lbs. 1 )z. dwls. gr. I £■ j. d. lbs. i )z. dwts. gT \ £■ s. d. J 12,154 9 9 567,932 5 550,887 15 13,001 5 5 1 607,511 13 6 553,691 5 988 6 46,188 8,976 14 419,406 8 513,040 10 40 1,871 6 4 20,195 15 943,657 4 3 883,102 10 3 2 4 I.J10 >7 5 11,363 18 530,975 9 538,272 — 34 8 *3 1,622 8 7 4 5 769,234 9 6 I I 4 2 iS 7 28,335 8 •5 1,323.987 8 1,271,807 15 6 42 I I 9 6 7 16,914 8 790,337 19 844,554 7 6 14,621 6 15 683,189 14 2 626,582 5 132986 18 7 653,542 10 623,778 15 13,7*5 9 15 640,868 9 637,796 s 29 — *3 *,357 13 4 17,706 7 19 827,318 5 — 843.853 10 21,623 — 9 1,010,336 20,184 8 13 9 933,681 3 — — 1,317,645 17 6 6 4,747,984 6 — — 4,685,623 11 7S.J54 19 3>5h,S78 6 33-754 3 5 14 i,577,i68 4,901,218 — 98,677 6 >5 4,610,709 5 8 6,532 4 16 5,006,350 2 6 58,143 4 9 2,716,749 8 1,561 8 5 4 72,969 17 7 3,680,995 10 7,085 6 5 »7 331,071 2 4,071 5 15 190,239 4 350,437 10 4,816 8 >4 6 225,061 10 ~ 28,298 *i 5 13 1,322,267 19 1,696,117 10 6,282 — 9 4 293,528 4 8 11,919 IO 13 13 556,956 16 U z 876,794 12 6 514,202 16 3,782 I 5 176,718 19 10 698,107 7 3 2, 37S 3 2 3 110,976 3 2,676 8 13 125,067 14 10 227,083 10 9,613 8 *5 7 449,201 9,129 2 23 >3 _ 822,126 7 6 12,462 10 l 9 9 582,329 13 2 42,585 1 5 15 1,989,789 9 — 2,488,106 5 — 14,645 2 9 4 684,297 3 11 12,231 8 4 9 571,525 9 5 — 1,107,382 10 — 72,851 3,403,965 7 4 16 57,oo7 15 2,849,056 17 6 46,562 3 13 2,175.652 19 4 19.103 9 8q2,c8g 8 8 3,664,174 10 28,215 8 9 7 1,318,378 16 7 16,835 7 6 17 786,643 18 8 '-5 30,71 1 — 25.360 23 1,184,985 6 19,186 6 14 8 806,402 8 21,943 9 14 1,025,321 16 7 30,326 16 1,416,985 9 3 2,456,566 17 6 18,471 4 3 *3 863,073 14 9 2,005 93,684 5 1,171,863 — 20,214 11 8 *9 944*543 13 9 50,144 6 17 7 2,343,005 2 6 _, 2,747,430 — 12,066 9 «9 2 3 563,822 15 7 30,535 5 19 7 1,426,771 I 9 —, 2,558,894 12 6 7,129 >9 9 333,114 1 5,472 17 17 255,721 11 8 _ 493,416 — 5,783 4 16 7 8 5 1-544 9 6 17 72,179 14 11 464,680 2 6 1,947 10 12 12 91,014 18 i* 1,447 8 16 7 67,645 7 9 — — — — 1685,216 321] 32,016,729 14 8 541,986 4 Z 3 | 25,314,861 2 2] 57,274,617 4 ~6 * Gold is received promiscuously in Ingots into the Mint, but it has no official Knowledge of the Species of Monies, &c. &c. from which they are produced.— EDWARD LUCAS, Deputy Warden The Communication of Importers at the Time is generally obtained, but in some JAMES MORRISON, Deputy Master Cases themselves cannot clearly ascertain it. JOHN WYETT, Deputy Comptroller’ heaviest pieces. It is true that light guineas are fre¬ quently sold to the Bank at a slight per centage profit to the collector, but they are made ( a ) light for the express purpose of being so sold ; and as there is no reason that guineas should undergo the process of attenuation preparatory to their conversion into bullion, the suppo¬ sition that the ingots are invariably composed of light money is obviously groundless. The £25,000,000. of gold alleged to have been im¬ ported from Portugal, if the preceding observations be correct, is probably much overstated : but the proportion of our coinage which has been produced from foreign gold in the present reign, has been for the most part remitted to this country during a favourable state of exchange, and purchased by the Bank below the mint price ; but that the whole of this proportion has been drawn from their de¬ posits upon the recurrence of unfavourable exchanges, and re-exported to the continent, is sufficiently confirmed by the exigency to which, as I previously remarked, they have been frequently reduced, of purchasing gold above its mint price, which would have been wholly unnecessary had this stock been dormant in their coffers. An additional confirmation of my argument is, the (a) As an assertion was made by the dealers in bullion, that guineas became light by wear, it was thought necessary to investigate the fact; and Mr. Hatchett and Mr. Cavendish, by a train of masterly experiments, have fully proved its utter impossibility. See Transactions of the Royal Society for 1803. 1 54 chapter comparatively small coinage of silver. Though the coinage of gold have amounted to (5 25>9°7 — 273,693 — 43,635 — 317,328 - 6,045,432 — - — 6,045,432 — 243,693 — 45,625 — — 326,620 — 29,115 — 289,318 - 5,913,357 — 355*735 - -6,868,840 — - — 5,913,357 - — 6,868,840 — 421,431 — 26,573 — 448,004 - 7,696,573 — - — 7,696,573 — 432,832 — 23,651 — 456,483 - 7,891,739 — - — 7,891,739 War of - - - - First of George III. 384,191 — 87,260 — 471,451 9 993,232 8,870,499 - English. { Unfavour- 1 able. f Doubtful. £■ 43>3 2 ° - 9,993,232 8,870,499 4i 1749 ] j«. i- 609,798 - 51,386 - 661,184 — 12,599,112 - — - 12,599,112 — 57 J 1760 1- 451,254 - 73,436 - 524,710 — ",708,515 - 663,401 - 12,371,916 — 471,241 _ 102,737 _ 573,978 — 14,694,970 _ 1,086,205 _ 15,781,175 — 61 — 508,220 — 117,83? —* — 14,873,191 — 1,165,722 — 16,038,913 — 62 — 480,444 — 120,126 — 600,570 — 13,545,171 — 998,165 — 14,543,336 -- 63 *— 561,724 — 87,293 — 649,017 . " 14,487,507 —• 1,091,436 — 15,578,943 64 583,934 658,734 16,512,404 1,243.927 17,756,331 65 651,402 67,85? 719,257 14,550,507 1,180,867 15,73',374 66 68 v,281 61,753 746,034 14,024,964 1,163,704 15,188,668 67 645,835 709,041 13,844,511 1,245,490 15,090,001 68 668,786 72,734 741,520 15,117,983 1,502,150 16,620,133 69 709,855 63,020 772,875 13,438,236 1,563,053 15,001,289 703,495 57,476 760,971. 14,266,654 1,729,915 25,996,569 7i 773,390 63,532 836,922 17,161,147 1,857,334 19,018,481 72 818,108 72,603 890,711 16,159,413 1,560,75 6 17,720,169 73 771,483 54,820 826,303 14,763,253 1,612,175 16,375,428 74 75 798,240 65,273 863,513 15,916,344 1,372,143 17,288,487 783,226 64,860 848,086 15,202,36 6 1,123,998 16,326,364 66 778,878 72,188 851,066 13,729,726 1,025,973 14,755,699 77 736,234 83,468 819,702 12,653,363 837,643 13,491,006 78 657,238 98,113 755,35 1 11,551,07° 12,253,890 79 590,911 139,124 730,035 12,693,430 837,273 13,530,703 1780 81 134,51? 753-977 11,622,333 1,002,039 12,624.372 547,953 163,410 711,363 10,569,187 763,109 11,332,296 82 — 552,851 —, 208,5 u — 761,362 --- 12,355-75° — 653,709 — 13,009,459 -- 83 — 795,669 — 157,969 — 953,638 — 13,851,671 — 829,824 — 14,681,495 — 84 — 846,355 — — 959,419 ■ 14,171,375 15,762,593 — 929,900 — 15-101,275 85 951,855 103,398 i, 0 55,2?3 1,007,635 16,770,228 86 982,132 116,771 1,098,903 15,385,987 9H,738 16,300,725 87 .,104,711 132,243 .,236,954 17,181,032 1,115,134 18,296,166 88 1,243,206 121,932 1,365,138 16,934,994 1,189,088 18,124,082 89 1,343,800 99,858 1,443,658 18,843,221 1,170,076 20,013,297 1790 1,260,828 144,132 1,404,960 18,884,716 1,235,404 91 1,333, '°6 178,051 i,5ii,'57 21.435-459 1.296,535 22,731,994 92 1,396,003 169,151 1,565,154 23,674,316 1,230,884 24,905,200 93 _ 1,101,326 — 180,121 — 1,281,44.7 -- 19,365.428 — — 20,390,180 94 _ 1,247,398 — 209,679 — 1,457,077 — 25,663,272 — 1,084,811 — 26,748,083 — 95 _ 1,030,058 — 370,238 — 1,400,296 —— 26,146,346 — 976,991 — 27,123,338 96 1,108,258 454,847 1,563,105 29,196,190 1,322,723 30,518,913 97 971,596 379-775 i,35i,37i 27,699,889 28,917,010 98 1,163.534 345,132 1,508,666 31,922,580 1,669,197 33,591,777 1,145,314 390,612 1,535,926 34,074,698 35.991,329 8 " — 1,269,329 — 654,713 — 1,924,042 — 40,805,947 *— 2,346,669 43,152,019 I \Net Customs II paid into the I Exchequer. || -- - £. 39 o,ooo[ -- - 55 i>i 40 - £■ 43,320 - 694,892 I -1,386,832-1,474,861 J Money Coined. By Charles II. By James II. £■ 7,524,105 - 2,737,637 £ ■ 10,261,742 - £ 10,511,963 1,904,151 —-1,904,15* 3,514,768 —-3-514,768 4,642,502 — -— 4,642,502 z,455,3'3 — 6,521,964 - — 2,455,313 235,412 417,082 289,240 187,54? 357,575 258,466 182,715 222,293 337,523 514,556 471,005 350,492 496,376 169.866 5,746,270 - 6,822,051 - 5,263,858 - 4,495,146 - 6,148,096 - 3,660,764 - 2,549,189 - 1,770,555 - 3,239,322 - 1^29,676 - 2,049,716 - 4,339,151 - 2,860,961 - 3,356,412 - 2,888,678 - 2,275,003 - 2,962,424 - 1,472,996 - 1,379,653 - 2,092,133 - 1,688,494 - g 52,209 — - - 775,824 —- 845,935- 383,939 —- 2,435,082- 1,442,267- 3,747,307- 5,776,615- 1,542,154- 4,818,273-- 4,677,977 —- 7,733,480- 8,179,016 —- 5,968,419 - 9,590,856-- - 12,448,135 — 133,278 - 4,046,465 5,981,682 7 , 239,133 5 , 553,098 4,682,691 6,505,671 3,919,230 2,731,904 1,992,848 3 , 5 ° 4,823 1,867,199 2,564,272 4,810,156 3-2 i >453 3,852,788 3,058,544 2,275,003 3,241,716 1,508,385 ■>379,953 2,154,634 1,787,809 862,650 775>824 845,935 3 8 3,939 .2,435,082 -,442,267 3,747,307 5*77 6,615 i, 542 ,i 54 4,818,273 4-677-977 7,733,480 8,179,016 5,968.419 9,590,856 12,581,413 1 , 399,865 1,565,942 1,763,314 1,969,934 1,866,152 1,858,417 2,249,604 2,169,473 BvG re , 8 .H.{gg e J ; / : ".g^ £• 11,966,576 By George III. 1 ^. old > £■ 3°,457>8oj before the 31st S,lver ’ - 7,*26 Dec. 1780, - ” J T. 30,464,931 5 , 599,087 7,538,355 6,799,755 59 I endeavoured in the third chapter to prove that the chapter course of exchange afforded the practical means by which money was enabled to discharge its functions as an uniform measure; that in every instance where it incidentally occurred that any one country employed a greater rela¬ tive currency than another, and that the same sum was temporarily made to measure in the one a less value than it measured in the other, the course of exchange became unfavourable, and led to the departure of its sur¬ plus specie to rectify the disproportion ; and that the interruption which this temporary difference in the rela¬ tive amount of their currency occasioned to the uniformity of mensuration, was the sole cause of the efflux and influx of money. I endeavoured in the fourth chapter to prove, that the fluctuation in the market price of money above and below its mint price exclusively arose from the same incidental variation in the relative amount of the currency of diffe¬ rent countries, which caused a temporary departure from the uniformity of mensuration, and occasioned a greater quantity of the coin of one country to be given for a less quantity of the coin of another, to reconcile the disparity. I endeavoured in the fifth chapter to prove, that when the coin of any given country ceased to constitute a common standard, the depreciated coin necessarily became the prevailing measure. And I endeavoured in the sixth chapter to prove, that the collective amount of the specie of this country, upon 160 chapter an estimate manifestly overcharged, did not exceed the sum £ 5 , 000 , 000 . But the fundamental tenets, upon which the theory of the balance of trade is supported, are : That money and wealth are synonymous terms, and that an increase of the one necessarily implies an increase of the other. That the aggregate specie of a country forms the capital by which its produce is raised. That the relative currency of any one country may be augmented to an indefinite extent above the relative currency of another ; and that a guinea in the one may express no more value than a shilling in the other. That the influx of money is exclusively governed by the excess of exports above imports, and the efflux of money by the excess of imports above exports. That the fluctuation in the market price of money above and below the mint price arises from the fluctuation in the state of trade ; that the market price of money is below the mint price, when bullion is imported for the payment of a favourable balance, and above the mint price when bullion is demanded for export to pay an unfavourable balance. And that the amount of the specie of any given country is necessarily correspondent with the progressive accu¬ mulation of its favourable balances. The tenets, therefore, upon which the theory of the balance of trade is supported, have been already refuted ; for as the one system shews that money has acted in 161 due conformity to its primitive institution, as an uniform chapter measure, and is fully confirmed by the evidence of facts, the universal correspondence of prices; and the other system shews, that, contrary to this evidence and the plainest dictates of reason, money has acted in direct opposition to the purport of its institution, and has con¬ stituted in one country a different measure from what it constituted in another, no doubt can be entertained of the truth of the one system and the fallacy of the other. This refutation of the fundamental tenets of the theory will materially simplify the subsequent argument; and so far, indeed, as the elements of the system are con¬ cerned, may be said to render any further investigation unnecessary. The theory of the balance of trade is formed upon- the following principle : When the value of the whole of the merchandize which is exported by a country exceeds the value of the whole of the merchandize which is imported by it, the balance of trade is alleged to be favourable, because an inference is deduced that the difference is received in money. And when the value of the whole of the merchan¬ dize which is imported by a country exceeds the value of the whole of the merchandize which is exported by it, the balance of trade is alledged to be unfavourable, be¬ cause an inference is deduced that the difference is paid in money. Y 162 chapter According to Dr. Davenant (a) this theory received the ^Xv***' sanct ion of our government in 1695. In his discourses on the public revenue and trade of England, he says, “ a true account of the balance of trade would shew what traffics are hurtful and what are beneficial to the nation. In the first appearance, those traffics seem hurtful which export money ; but when we come to reason upon things by figures, we find that such trades are beneficial, when they bring in one way more bullion than they carry out in another : we may seem to lose by the balance in one place, but perhaps that trade may be the cause of another twice as profitable ; so that to object against the motion of one wheel, without knowing and seeing how the whole engine moves, is to no manner of purpose. He that would, therefore, compute with any good effect in matters relating to trade, must contemplate the wealth, stock, products, consumption, shipping, exportations and impor¬ tations of his country; and, at the same time, he must consider the state and condition of other places. In this art the most difficult point is to find good materials, and to have a footing probably sure to fix our reasonings upon, for where our premises can be certain, our conclusions shall be almost undeniable ; and in order to this, the House of Lords did in 1695 lay a most excellent founda¬ tion, which we hope some able head and good genius will so improve, as by this aid, to find out that balance of trade which has been so often talked of. Their lordships have directed the Commissioners of the Customs to draw out an account of all the exportations from London and (ft) See Dr. Davenant on the use of Political Arithmetic, page 31. the out-ports, to every distinct country, and also of all chapter the importations to London and the out-ports, from every distinct country, for the years 1694, 1695, and 1696, and so downwards. Every commodity is under a separate head, and the drawbacks upon re-exportation are taken notice of, and the value is set down where the duty on goods is ad valorem ; and the whole is put into a very good method by the skilful hands of Mr. Culliford.” Though no public order had been previously given for a regular return of our exports and imports, and though the theory of a balance had not expressly received the sanction of government, yet its existence had been long admitted by the mercantile community; and various efforts were made by different individuals, but particularly by Sir Philip Meadows, ( a ) to ascertain its extent. But as in 1695 the scarcity of specie, from the over-issue of paper, pecu¬ liarly directed the attention of government to this subject, it was deemed necessary to lay before the public the pre¬ cise state of our exports and imports, for the purpose of removing the apprehensions which were entertained that an unfavourable balance occasioned its departure, (b) From this period an official statement has been annually pre¬ pared by the Inspector-General and submitted to Par¬ liament. According to the regular series of these returns during the preceding century, the annual value of the merchan- (а) See Mr. Chalmers’ Estimate, page 239. ( б ) From these documents it appeared that the superiority of export? amounted to £43,320. 164 cphater dize exported has exceeded the annual value of the mer- ^l 1 ^, chandize imported, to the average extent of£3,ooo,ooo.,(tf) and an inference has been deduced by the advocates of the theory, that the influx of bullion uniformly corres¬ ponded with this excess ; but notwithstanding the general admission of this inference, which gave to the country a stock of coin to the amount of £300,000,000., the scarcity of specie in 1797, from the same cause as in 1695, again attracted the attention of government to the subject, and a committee in both Houses of Parliament was appointed by Mr. Pitt, ( b ) who invariably approved himself a zealous supporter of the theory, for the purpose of correcting the errors of the custom-house tariff, and demonstrating to the public that the influx of foreign money, from the favourable state of our trade, considerably exceeded the sum, which the official statement announced. By the testimony of the late Mr. Irving, who so ably discharged the duties of his office, the average balance for the four years preceding 1797 amounted to £6,500,000.; but Mr. Rose in his Brief Examination ( c) has carried this com¬ putation much further, and says “ I will venture to state the probable balance of our trade to be in our favour on the average of the last four years, to the extent of about £14,800,000. per annum.” The statesmen of France have regularly drawn the same inference of a favourable balance from the superi¬ ority of exports, with the statesmen of this country, and fa) See the table of Mr. Chalmers at the head of the chapter. (b) See the Report of Mr. Pitt’s instructions to the Secret Committee of the House of Commons in 1797, page 100. (r) See Mr. Rose’s Brief Examination, page 39. 165 have no less exulted in its amplification. Mr. Necker ( 6o 5 Sweden, - - 117,365 Germany, - - 6 95 > 484 Turkey, doubtful, 120,497 Holland, - - 1,464,149 Venice, doubtful, 11,369 Italy, doubtful, 43.289 Portugal, - 274,132 1,172,068 Madeira, 9 , 5 H Spain, - - - 442,539 Canaries, - - 23.347 Streights, - - 113.310 Favourable bal. 3,636,504 Ireland, 663,516 Isle of Man, 13.773 Alderney, 1,229 Guernsey, 6,269 Jersey, - 8,850 £■ 4,808,572 (a) See the Estimate of Mr. Chalmers, page 249. Almost all of the places, however, which are mentioned chapter in his statement could faithfully extract from their entries a counter-rollment to shew that the balance was also in their favour during the same period. But if the leading principle of this inquiry be correct, that money discharges its functions with fidelity as an uniform measure, it is obvious that the influx and efflux of bullion, in the customary course of commerce, can never exceed the sum which is necessary to maintain in all countries the same relative proportion of currency, and that the inference, which is deduced by the advocates of the theory, that the excess of exports necessarily leads to the introduction of money correspondent with its extent, is wholly inconsistent with reason. This theory originated in the error, which has pre¬ vailed, even to the present day, of regarding money and wealth as synonimous terms, and conceiving that an in¬ crease or diminution of the one was only effected by an increase or diminution of the other : and to such an extent has this prejudice obtained, that scarce a sceptic has been found throughout the whole century to doubt the infalli¬ bility of the system. It has been universally established with an unfeigned and genuine conviction that it accu^ rately demonstrated the gain or loss, which a nation derived from its commercial intercourse, and formed a body of indisputable evidence to confirm its advancement or decline in real opulence. But even if the theory were admitted to be true, I 168 chapter know not upon what ground it could be urged, that it vn - furnished the smallest criterion of the profit or loss, which accrued to a country from its commercial relations; for as it is assumed, that the bullion, which is received, is no more than equal to the excess of exports, it is apparent, by its own shewing, that an equivalent in produce has been given for its purchase. But as a nation was con¬ ceived, in the familiar language of the times, to get rich by getting money, the receipt of the bullion was supposed to form an accession to the national capital, for such the aggregate specie of a nation was deemed, and hence was designated a favourable balance. Notwithstanding, therefore, that the theory has been usually denominated the mercantile system, it is grounded upon a principle directly opposite to that, upon which an individual merchant forms an estimate of his private balance. The merchant draws an inference of his gains from the excess of his imports, and justly contends, that if he export produce to the value of £20,000., and import produce to the value of £25,000., he gains £5,000. by the balance. But in the instance of a national balance, no attempt is made to prove the smallest acquisition of profit; the balance sheet does not shew that more has been received than given, but only that an equivalent in bullion has been returned, instead of an equivalent in produce, for a certain proportion of the exported mer¬ chandize. The theory, therefore, does not afford a criterion of what proportion of money a nation has gained by its commerce, but of what proportion it has saved. It is not grounded upon the principle of a commercial 169 profit, but upon the principle of accumulation ; and only chapter implies, that if a nation sold to a greater extent than it bought, the difference is saved and accumulated in capital. Since, then, it is the fundamental principle of the theory, that commerce enriches a country in proportion only as it leads to the accumulation of money, it is necessary that the money should be permanently detained, in order to support the position that the nation is enriched by its influx. Its re-appropriation to the purposes of trade would place the country precisely in the same position, in which it stood previously to the possession of the balance ; for as an equivalent had been given for its purchase, and as no more than an equivalent can be received for it, the produce, which purchased the bullion, might, so far as the wealth of the nation is concerned, have exchanged, in the first instance, for the produce, which the bullion pur¬ chased, without its auxiliary intervention as a medium. If the bullion, which this country receives from Spain and Portugal be eventually transmitted to China for teas, the teas of China might as well exchange in the first in¬ stance for the produce, which is exported to Spain and Portugal, as exchange for the bullion, that is received for it. The transitory possession of the bullion may mate¬ rially facilitate the operations of commerce, but if its export be equal to its import, there is no foundation for the conclusion that the nation is enriched by its introduc¬ tion ; the permanent detention, therefore, of the money received forms a necessary part of the system. In alluding to a proclamation that was issued in the reign 170 chapter of James the First, (a) Lord Liverpool terms the opinion which is expressed in the preamble, “ that the treasure of gold and silver brought into the realm should be con¬ sidered as an immoveable and perpetual stock, which should never go forth again,” a strange maxim ; yet he does not appear to advert, that the theory of the balance of trade, which he asserts to be self-evident, is expressly founded upon this doctrine. In conformity, therefore, to the fundamental principle of the theory, the stock of specie in this and in every other country, where no adverse balance has intervened to counteract the accumulation, should correspond with the aggregate value of their favourable balances from time immemorial; notwithstanding that the mines of the world have never produced a competent supply for such a demand. The united produce of the American mines bears no proportion to the superiority of the exports of this country only, still less would it be adequate to satisfy the claims of the collective nations of the world. By a retrospective view of our public entries, this coun¬ try obtained, in the language of those who support the mercantile system, a continued series of favourable ba¬ lances, with the interposition of scarce one sinister year, throughout the whole of the preceding century ; and the aggregate balance, even by the official rate, exceeded the sum of £300,000,000. It is true that the raw supply of our gold and silver factories, and the money remitted (a) See Lord Liverpool’s Letter to the King, page 59. 71 for the payment of our foreign expenditure should be de- chapter ducted from this sum. There is reason to conclude that the consumption of our manufactures during this period did not exceed the sum of £15,000,000. Upon the effect which our foreign expenditure may have had on the excess of exports I shall hereafter treat; but it is essential, in the mean time, to remark, that the public have possessed no data, that could enable them to form a just computation of our foreign expenditure. No particular document has been prepared by government relative to its foreign disburse¬ ments, nor could any correct estimate be formed of the external expenditure of individuals ; little notice was, therefore, formerly taken of this subject, and as none were capable of computing its amount, an inference was uniformly drawn, that a large surplus was annually re¬ ceived as a favourable balance. Assuming, for the pre¬ sent, that this may have been the fact, I shall consider the various purposes to which it may have been applied. The existing amount of our gold and silver coin is conclusive evidence of the small proportion, which has been realised in specie. I so fully endeavoured in the preceding chapter to prove, that our present stock did not exceed the sum of £5,000,000., notwithstanding the calculations of Mr. Rose and Lord Liverpool, that the ad¬ duction of any further reasoning in confirmation of my estimate would be wholly superfluous. If this computation bear a near affinity to the truth, instead of the existing amount of our coin giving any encouragement to the sup¬ position, that the nation has grown rich by the balance of its trade and the accumulation of money, there is some reason 72 chapter to conclude, such has been the increase of paper, that the stock of specie, now in hand, is inferior to the quantity in circulation at the commencement of the reign, 'notwith¬ standing the vast advance of prices since that period, and the uninterrupted recurrence of favourable balances. It is evident,therefore,that the aggregate balance to the amount of £300, 000,000., is not now extant in the legal currency of the country ; and to imagine that any considerable proportion of it is locked up in repositories in the shape of foreign coin or bullion, according to the arguments of Sir James Steuart, is so totally inconsistent with reason, that it is unnecessary to investigate so futile a suppostion. The consumption of our manufactures will also ac¬ count for but a small part of the united balance. Dr. Adam Smith estimated the annual consumption of Bir¬ mingham at £50.000., and if the consumption of London and the other manufacturing towns,Jie estimated at double this sum, the quantity introduced for this expenditure to the annual extent of £1.50,000. will amount in a century to no more than £15,000,000. If, then, but a very small proportion of these balances have been realised in specie, or consumed by manufac¬ ture, the remainder, if ever received, must have been re-exported. This exportation could only have taken place by means of commercial speculation, or through the foreign expenditure of government in the time of war. On the application of bullion to commercial purposes I have already remarked, that as an equivalent must be 173 given for the purchase of the bullion, and as no more than chapter an equivalent can be received for it, its transitory posses- sion can have had no tendency to have enriched the country, however greatly it may have assisted the opera¬ tions of commerce. It cannot be asserted that the nation has grown rich by the balance of its trade, if it be said that the bullion, which it leaves, is expended in commerce, as it would lead to the absurdity of contending, that the deposit could be detained, at the same time that it was sent away. I shall hereafter attempt to prove, that a very small part of the aggregate balance has been exported for the payment of our external expenditure. If, then, the existing stock of our specie, the consump¬ tion of our manufactures, and the foreign expenditure of our government, will occupy but a small part of the collective balances, it is evident that whatever proportion has been received above the sum applied to these pur¬ poses, must have been re-appropriated to the speculations of trade; for if the bullion, whicli they are supposed to have deposited, can neither be found nor accounted for, it is competent to conclude that its permanent detention has not been effected. The existing amount, therefore, of the bullion of this country, in whatever shape it may be extant, will lend but little countenance to the principle, that the nation has grown rich by the accumulation of money, or that its influx has ever exceeded that quantity, which was necessary to augment the currency of this country to the same proportion with the currency of others, and equalise the measure of value. 174 chapter If a comparison were istituted in any other country between the amount of its collective balances for a given series of time, and the existing amount of its bullion, the same disparity would occur. The conclusion, therefore, that an excess of exports necessarily conduces to the influx of bullion commensu¬ rate with its extent, is not only inconsistent with reason, but is also inconsistent with fact; and the theory of the balance of trade, which supposes that a nation grows rich by the accumulation of its money, is wholly without foundation. No. 23 , [Toface Page 175.. A Return to an Order of the Committee of Secrecy, dated the 24th Day of April, 1797. For “ An ACCOUNT, as far as it can be made out, of the Sums of Money paid for EXPENSES ABROAD in each Year since the Beginning of the WAR, distinguishing the several Services, and distinguishing the Money expended on the Continent of Europe, including the Imperial Loan, and the Advances made to the Emperor.” 1793- 1794. >795- 1796. Total. £. s d 551,511 16 10 110,409 16 3 67,000 - - 305,645 10 8 £. *. d 2,317,289 7 10 861,176 13 1 240,000 - -- 5 IO »743 - £■ s. d. 3,354,817 17 8 1,900,550 14 1 747,390 7 9 £■ *• d. 187,631 5 7 4,279,457 7 7 1,030,319 9 8 £. s. d. 6,411,250 7 11 7,i5i,S94 I* — 434,500 - 2,594,098 8 1 90,566 5 10 107,193 16 2 9.999 18 8 72,002 4 10 96,633 8 2 42,333 6 8 45,368 _ 9 109,409 15 6 32,528 - 16,830 - 147,446 5 9 175,427 11 2 159,260 15 9 460,683 5 7 566,480 6 7 810,391 15 8 1,418,762 9 9 1,419,725 — 8 4,215,359 12 8 3’°3 Z 9 3 51,390 9 7 3,088 8 4 286,128 7 £ 7,235 18 5 403,587 14 20,411 1 2 537,039 15 — 5,ooo ,- 33,767 17 2 1,278,146 6 7 62,141 7 2 109,032 10 8 910 6 8 3,866 2 2 102,203 11 7 206,186 19 2 72,426 16 2 327,209 7 6 3,574 16 6 167,698 14 4 600,586 16 11 243,991 12 8 u,8So 5 6 80,083 8 11 83,634 8 8 61,911 19 11 237,510 3 — 16,962 4 8 43,313 16 — 1,223,891 10 6 150,000 - 1,267,161 19 10 z 4>335 I 8 — ^ 22 5,543 8 5 38,641 19 7 56,441 16 7 155,359 16 10 150,000 - 651,475 15 11 14,481 8 6 150,000 - 1,503,140 17 2 148,068 4 2 478,977 n 7 50,000 - 568,473 7 4 158,194 5 4 | 1,580,023 7 9 1,223,891 10 6 500,000 - 3,990,252 — 3 345,079 16 —i *2,284544 7 9 2,785,232 3 1 8 ,335,592 5 5 11,040,236 13 — 10,649,916 — 81 32,810,977 2 2i Bills drawn on the Lords of the Treasury from the Continent of Europe Ditto drawn on Ditto from other Parts of the World 1 - Bills drawn on the Paymaster General from the Continent of Europe Ditto drawn on Ditto from other Parts of the World Remittances made by the Paymaster General to the Continent of Europe Ditto made by Ditto to other Parts of the World Bills drawn on the Office of Ordnance from the Continent of Europe Ditto drawn on Ditto from other Parts of the World Bills drawn on the Navy Office from the Continent of Europe Ditto drawn on Ditto from other Parts of the World, and Bills issued for Stores] of Foreign Growth - Specie sent to the Cape of Good Hope by the Commissioners of the Navy Bills drawn on the Victualling Office from the Continent of Europe Ditto drawn on Ditto from other Parts of the World Amount of Provisions and Victualling Stores sent to the Continent of Europe Amount of Ditto and Ditto sent to other Parts of the World Bills drawn on the Transport Board from the Continent of Europe Ditto drawn on Ditto from other Parts of the World Bills drawn on the Commissioners for sick and wounded Seamen, for the Service] of Prisoners of War, from the Continent of Europe Ditto drawn on Ditto for Ditto, from other Parts of the World Ditto drawn on Ditto, for the Service of sick and wounded Seamen, from the] Continent of Europe Ditto drawn on Ditto for Ditto, from other Parts of the World Amount of Prussian Subsidy Amount of Sardinian Subsidy Amount of Sums paid for Foreign Emigrant Corps - - Amount'of Foreign Secret Service, deducting £ 25,000. a year paid out of the] Civil List Purchase of Neutral Cargoes .... * From the above Sum of £2,284,544. 7s. gd. should be deducted the Sum of £942,608. 7s. id. being Government, the Produce of Neutral Cargoes already sold, or the Value of such Cargoes delivered either Sums paid on Account of for the Service of Government. Loan and Advances to the Emperor f £5,570,000. Whitehall, Treasury Chambers, the 24th of April, 1797. CHARLES LONG. 175 CHAPTER VIII. On the Payment of our foreign Expenditure. Having attempted in the preceding chapter to expose chapter the fallacy of the current opinion, that an excess of vm - exports is conclusive evidence of the influx of money, commensurate with its extent, I shall endeavour to ac¬ count for this uniform result in the balance sheet of our commmerce by an inquiry into the payment of our foreign expenditure. Upon the grant of a subsidy to a foreign power, an alarm has at all times been excited by the supposition that the remittance of money was necessary for its payment. This opinion is derived from the same error, which origi¬ nated the various tenets, upon which the theory of the balance of trade is constructed, the familiar habit of re¬ garding the intrinsic property of money as an object of value, without adverting to the attribute, which has been conferred upon it in consequence of this property, of forming the common standard of mensuration, and con¬ stituting the mean, by which all value is expressed. When it is asserted, in the customary language of conversation, that such a measure requires so much money, the money is conceived to be the specific object in demand, and instead of being considered as the medium, by which the 176 chapter means for the execution of the measure are estimated, is immediately concluded the sole and indispensible requisite to its completion. But the subsequent argument will shew, not only that the efflux of money is not necessary for the discharge of a foreign expenditure, but that the influx of money may be effected during the whole period that it is in payment. A foreign expenditure may be paid by the four fol¬ lowing channels : 1. By the export of specie ; 2. By the export of bullion ; 3. By the purchase and remittance of bills from this country against the continent; and 4. By the draft of bills from the continent against this country. Upon the grant of a subsidy, a commercial house of extensive connections is usually appointed agent to trans¬ act its remittance, with full powers to elect whatever channel may appear the most favourable ; this channel is determined by the state of the exchange. If the exchange were unfavourable, if by the partial excess of our currency and consequent superiority of our prices, the same sum were made to measure in this coun¬ try a less value than it measured in others, and £100. in London were worth no more than £95. in Hamburgh, I have already shewn, in the chapter on exchange, that the bills upon Hamburgh would sell in our market at five per cent, premium, because the superiority of the prices of this country would otherwise give a profit of five per cent, above the customary charge of commission, upon the importation and sale of the produce of the continent : 177 and that the bills upon this country would sell in the Ham- chapter burgh market at five per cent, discount, because the inferiority of the prices of the continent would otherwise occasion a loss of five per cent, upon the importation and sale of our produce. If, therefore, pending an unfavour¬ able exchange, the bills upon Hamburgh sold at a pre¬ mium, and the bills upon this country sold at a discount beyond the expense of remitting in specie, the agent who undertook the payment of the subsidy would naturally prefer the vehicle of specie to the vehicle of bills. The charge of remitting in specie from this country to Ham¬ burgh is from two and a half to three per cent.; if, there¬ fore, it were impracticable, from the relative excess of our currency, to remit by bills at a less expense than five percent., he would necessarily resort to a clandestine ex¬ portation of specie for the purpose of saving the difference. If the exchange were at par, if by the same relative amount of currency, and consequent correspondence of prices, a given sum in this country measured the same value as a similar sum on the continent, and £100. in London were equal to £100. Hamburgh, the bills that were drawn from the one place on the other would sell without a premium or discount, and the agent who trans¬ acted the remittance of the subsidy would prefer the vehicle of bills to the vehicle of specie, as he would save the charge of the transit of specie. But if the exchange were favourable, if by the partial compression of our currency, and consequent inferiority of our prices, the same sum were made to measure in a a 178 chapter this country a greater value than it measured in others, and £95. in London were worth an £100. in Hamburgh, the bills that were drawn from Hamburgh upon this country would sell at five per cent, premium, and the bills that were drawn from this country against Ham¬ burgh would sell at five per cent, discount, and the agent would be led more strongly to prefer the vehicle of bills to the vehicle of specie, as the preference would secure an advantage of five per cent., and give to our ally, if the subsidy were £1,000,000., £1,050,000. If, then, the agent were uniformly left to his own dis¬ cretion to elect the most favourable channel, he would be implicitly determined by the state of the exchange, and invariably remit by bills or specie, as its elevation or depression prescribed. But from a singular fatuity the Bank of England have occasionally obstructed the regular course of the transaction, and to their own exhaustion and the injury of our allies, have directed the efflux of bullion for the payment of a subsidy at the very time, that the exchange has been favourable, and that our goldsmiths have been effecting its influx. If the ex¬ change between Hamburgh and London were five per cent, in favour of London, though the market price of money would in consequence be reduced below the mint price, and bullion would be cheaper than our coin by about two per cent.; yet it would manifestly be the duty of the agent to transact the payment of the subsidy as already shewn, by the draft and remittance of bills, which would secure to our ally a gain of five per cent., instead of discharging it by the purchase of bullion at an 179 advantage of two per cent., and delivering it at Ham- chapter burgh to a disadvantage of three per cent., as our ally would sustain a loss of one per cent, upon the whole sum remitted, instead of acquiring a gain of five per cent. The interposition, therefore, of the Bank of England for the diversion of the transaction from its natural chan¬ nel is not more injurious to their own interest, than to the interest of the court, to whom the subsidy is granted. In every instance, however, where this interposition was withheld, it is obvious, from the preceding statement, that if by the partial contraction of our currency, and consequent inferiority of our prices, the same sum were made to measure in this country a greater value than it measured in others, and the course of exchange were favourable, the vehicle of bills would necessarily be pre¬ ferred to the vehicle of either bullion or specie. But it is very- generally conceived that a large foreign expenditure and a favourable exchange are totally in¬ compatible with each other ; and though it were even admitted to me, that in the customary relations of com¬ merce the effectuation of inferior prices by the compres¬ sion of our currency would cause the bills that were drawn upon this country to sell at a premium correspondent with the difference, and establish a favourable exchange, yet it'may be contended, that the grant of a foreign subsidy to a considerable amount would raise the bills, that were purchased in this country and remitted for its payment to a premium, and reduce the bills that were drawn from the continent to a discount, notwithstanding the inferiority of our prices; and turn the exchange against us. 80 chapter But if the prices of this country were five per cent. below the prices of the continent, and £95. in London were worth £100. in Hamburgh, the natural discount of the market upon Hamburgh bills would obviously be five per cent., as from the relative inferiority of our prices a dis¬ count of only four per cent, would entail upon the purchaser a certain loss of one per cent, upon the importation and sale of the produce in which the bills were invested. If, therefore, for the purpose of immediate payment, the British agent of the court, to whom the subsidy was granted, were disposed to remit at four or three per cent, discount, and give £96. or £97. f° r what was only worth £95., the dealers in bills at home would be sufficiently zealous to sell the requisite supply, as by purchasing in the market at the current discount, to answer the pay¬ ment of the bills, which they drew, they would secure a profit to themselves of one or two per cent, upon the whole sum granted. And if, while from the same infe¬ riority of our prices, the bills against this country were advanced on the continent to a premium of five per cent., the foreign agents of our ally were disposed to draw at only three and four per cent, advantage, the dealers in bills abroad would be as zealous to purchase, as the dealers at home to sell, since by disposing of the bills in the market at the current premium, they would in the same manner secure a profit to themselves of one or two per cent, upon the whole sum purchased. The remittance of the subsidy would, therefore, be transacted by the dealers in bills, without the slightest innovation on the price of the exchange, which would regularly corre¬ spond with the respective value of money in Ihe two 181 places. So long as this country should continue to possess chapter the same relative deficiency of currency, the exchange ^1!!^ would continue to hold the same advantageous position ; and as the payment of the subsidy by the dealers in bills would have no operation to alter, in either place, the relative amount of the circulation, it would have no opera¬ tion to disturb the exchange. Since, then, the occurrence of a foreign subsidy would have no effect to alter the natural state of the exchange, not only is it practicable, as already shewn, that its posture should be so far favourable as to preclude the efflux of money, but it is practicable, that it should be favourable to such an extent as to cause the influx of money in any quantity, at the very time that the subsidy was in payment. If by a due compression of our currency the prices of this country were reduced to an inferiority of three per cent, below the prices of others, and the exchange in consequence attained to a correspondent elevation, I have already explained that the vehicle of bills would be pre¬ ferred to the vehicle of specie, as the one would occasion an advantage, and the other a disadvantage of three per cent., and that no money would under such circumstances be remitted ; but if by the further compression of our currency the prices of this country were reduced to a relative inferiority of five per cent, below the prices of others, not only would not our money be exported, but foreign money would be imported, notwithstanding the supposed counteraction of the subsidy, to reduce the value of our money to a correspondence with its value 185 chapter elsewhere ; for as a bill against the continent would sell J'J, in our market at a discount; and a bill against this country in the foreign market at a premium beyond the charge of the transit of specie, the influx of bullion would be effected both by the importation of our goldsmiths who would purchase bills against the continent, and order their in¬ vestment in bullion, to take advantage of the discount; and by the exportation of the goldsmiths of the continent, who would draw bills against the money which they re¬ mitted to this country, to take advantage of the premium ; till by their respective operations a sufficient sum of specie were ( a ) introduced to raise the prices of this country to a correspondence with the prices of others, and restore the exchange to par. The favourable exchange of 1793, 1797, an d x 79^» during the last war, which led to the influx of money at the very time that our foreign expen¬ diture amounted to £8,000,000. a year, is conclusive evidence to attest the validity of this reasoning. The opinion, therefore, that the departure of money is necessary for the payment of a foreign expenditure, is wholly without foundation, as in every instance where a partial contraction of currency should raise the value of money in this country to a partial superiority above its value elsewhere, produce would invariably be preferred to specie. [a) In the present circulating system of Europe, which is so largely composed of paper, the level of money is maintained more by the con¬ traction or augmentation of paper, to which the efflux and influx of money conduce, than by the mere deduction or addition of specie occasioned by the fluctuation of the exchange. 183 It is of peculiar importance to the interests of this chapter country that this opinion should be completly ex- ploded. Its unfortunate prevalence has uniformly tended to narrow the liberality of our government in its subsidiary treaties with foreign powers, and has pre¬ vented the contribution of that assistance in its continental wars, which was essentially necessary for the attainment of the common object. The memorable correspondence between Mr. Pitt and the Directors of the Bank of Eng¬ land during the late war, while our subsidiary negociations were pending, will sufficiently illustrate the truth of this observation. I greatly regret that in these reflections on the finan¬ cial principles of Mr. Pitt it is not in my power to sanction the public opinion in favour of his due under¬ standing and correct administration of the resources of his country; but nothing can be further from my intention in this review than to detract from his general merit as a statesman. I regard him, and I am most confident that he will be regarded by posterity as one of the greatest characters that this or any other country has produced. No man ever approached perfection more nearly ; he had every qualification, that was requisite in virtue, in talent, and in conduct, for the consummation of excellence. In public life he was of an ardent and disinterested patriotism, of unsullied integrity, of invincible resolution, and of inviolable fidelity in his political engagements; and in private, he was every thing, that a characteristic noble¬ ness of nature, a manly and benevolent disposition, a strict regard to principle, and a high sense of honour. 184 chapter could make him. In ability he never was and never will be surpassed. His mind was formed by the hand of a master, who destined him for the government of his country, and no mind ever put forth more extraordinary qualities. In business, in council, and in debate, his supe¬ riority was equally transcendant; though his pre-eminence appeared more particularly conspicuous in parliament. His matchless powers were there shewn in all their great¬ ness, by a display of eloquence, of which there had been no example: he was clear and perspicuous, impassioned and vehement, splendid and sublime, as the varied nature of his subject dictated, and in narrative, argument, and in¬ vective, was alike incomparable. In conduct, he did all, that the utmost talent, combined with the utmost virtue, could do ; nor in a public career of four-and-twenty years, exposed to the severest scrutiny, is it possible for an enemy, if an enemy he have, to fix upon a word or deed unworthy of his name. Should I then be led by the natural current of my argument to some conclusions unfavourable to his financial principles, it will not, I trust, be imputed to proceed from any disrespect to his memory, which I most sincerely venerate. In the commencement of the year 1795, when a nego- ciation was opened for the advancement of a loan under the guarantee of parliament to the Emperor of Germany, the Directors of the Bank strongly remonstrated against its adoption, from the drain which they concluded that it would occasion on their deposits. There are no docu¬ ments, by which the precise amount of the pecuniary aid, which the court oi Vienna required, can be ascertained ; but as it was, in the first instance, in contemplation to raise the sum of £6,000,000., it is competent to presume chapter that an advancement somewhat exceeding this sum had been requested. In consequence, however, of the re¬ monstrances, which the Bank of England tendered against so considerable a grant, this sum was subsequently reduced to £4,600,000., of which £550,000. were reserved by our government for the reimbursement of the advances in the preceding year. The amount, therefore, remitted to Vienna did not exceed £4.000,000. ; and as this remit¬ tance was utterly inadequate to support the efforts of its government, the most pressing solicitations were made,, before the close of the year, for a further supply, which it was well known that our ministers were disposed to favour. As the grant, therefore, of a further loan became ex¬ tremely probable, the Court of Directors took an early opportunity to prepare the mind of Mr. Pitt for the oppo¬ sition, which they conceived it their duty to give to it; and upon an application for an advance of £2,500,000., on the credit of the Consolidated Fund, they accompanied their compliance with the following observations : “ Bank of England, Oct. 8 th, 1795. (a) “ The very large and continued drain of bullion and specie, which the Bank has lately experienced,arising from the effects of the loan to the Emperor, and other subsi¬ dies, together with the prospect of the demand for gold not being likely soon to cease, has excited such apprehen¬ sions in the Court of Directors, that on the most serious (a) See the Report of the Secret Committee of the House of Lords, page 152. isr> chai’Tek deliberation they deem it right to communicate to the Chancellor of the Exchequer the absolute necessity the}' conceive to exist for diminishing the sum of their present advances to government. “ It must occur to Mr. Pitt’s recollection, that last January the Governor and Deputy Governor of the Bank did by instructions from their court, formally announce to him their apprehensions of the consequences that were likely to ensue from the Imperial loan taking place. The events seem fully to justify their fears, and to render every measure of caution necessary for their future safety.” “ The present price of gold being from £4. 35. to £4. 45. per ounce, and our guineas being to be purchased at £3. 175. io-|- an ounce, clearly demonstrates the grounds of our fears, it being only necessary to state these facts to the Chancellor of the Exchequer.” This paper was a sufficient indication to Mr. Pitt of the resistance, which the Bank would make to the remittance of any further aid, and will fully account for his cautious reserve in the interview, which occurred on the 23d of the same month. In this interview, as stated in the Report, (a) “the Governor mentioned his having heard that there might be annexed to the ensuing loan one of £1,400,000. for the Emperor of Germany, and stated (a) See the Report of the Secret Committee of the House of Lords, page 153. 187 that in such a case it would be highly proper for the Bank CHAi’rOL to have some intimation of it, that they might adopt such ^v^- arrangements as the measure would render absolutely necessary. The Chancellor of the Exchequer replied, that he had not at present the most distant idea of it, though he did not pledge himself that on no occasion such a thing might happen. The Governor thanked him for his answer, which he told Mr. Pitt he received with pleasure, thinking as he did that another loan of that sort would go nigh to ruin the country. The Gove mo- also acquainted him that the drain of cash continued, a.nd was likely to do so while the bills from abroad continued to be drawn on the Treasury.” Notwithstanding, however, this disavowal of Mr. Pitt, the report that another loan was in agitation still pre¬ vailed; and on the 18th of November, when another interview took place, the (a) “ Governor informed Mr. Pitt that the present price of gold was £4,. as. an ounce, and that the daily large drains of specie from the Bank filled the minds of the Directors with serious apprehensions , and that in the present situation of their affairs, he must not rely on any aids from them, not even the vote of credit and supply bills.” (b) “ The Governor then hinted to Mr. Pitt his apprehen¬ sions from a rumour, that a further loan to the Emperor was in agitation, notwithstanding the assurances which (a) See the Report of the Secret Committee of the House of Lords, page 153. (b) See the same page of the same Report. 188 chapter Mr. Pitt gave him some time back, that he had not then the most distant idea of such a mea.aire. The Chancellor replied, that he then had not such a thought, from the tardy and slow operations of the Austrians ; but the face of things having since changed, and the Austrian army having been of late very successful, he confessed it was his opinion that a continuance of such exertions was the surest way of distressing the French, and bringing them to proper terms of peace: and on this ground ministry now had it in contemplation to let the Emperor have another loan not exceeding £2,000,000. ; but he added, that should the situation of the Bank be such as to make this measure a very hazardous one, he would, in compliance with our request, overlook every other consideration, and abandon the loan.” But as the Directors from some information were led to conclude that Mr. Pitt persisted in his intention of making a further advance to the Emperor, notwithstand¬ ing their representations, and that the loan was to be augmented to £3,000,000. they passed on the 3d of De¬ cember the following resolution : (a) “ That the Court of Directors, after a very solemn deliberation adequate to the importance of the subject, are unanimously of opinion that should such a loan take, place, they are but too well grounded in declaring, from the actual effects of the Emperor’s last loan, and the continued drain of specie and bullion they still experience, (a) See the Report of the Secret Committee of the House of Lords, page 144. 189 that they have the most cogent reasons to apprehend chapter very momentous and alarming consequences.” “ They are therefore led to hope (after expressing their acknowledgments to the Chancellor, of the Exchequer for haying hinted that the welfare and safety of the Bank should in this matter supersede every other considera¬ tion ) that he will be pleased to lay aside the adoption of such a measure, which they beg leave to repeat, would be, in their opinion, most fatal in its consequences.” Upon the communication of this resolution to Mr. Pitt, the evidence goes on to state, (a) “ The Chancellor of the Exchequer perused this paper with greit attention repeatedly, and said, that certainly as matters were there stated he should not think at present of bringing forward such a measure, adding that though he should in opening the budget make it known, that he made reserve with the present contractors for the loan to permit the Emperor’s raising £3,000,000., should circumstances require it, he should lay aside all thoughts of it, unless the situation of things relative to the Bank should so alter as to render such a loan of no importance or inconvenience to them in perspective.” It does not, however, appear that Mr. Pitt abandoned all hopes of bringing the Bank to a concurrence in the measure, as in the Interview which took place on the 5th of (a) See the Report of the Secret Committee of the House of Lords, page 146. 190 chapter February 1796, the evidence records, (a) “ Mr. Pitt again dwelt much on the necessity of some further support to be given to the Emperor to enable him to continue his efforts against the French, as the most probable means of bringing the war to an end : but knowing the sentiments of the Bank to be against any such assistance in money, he promised that he would not commit himself to any engagement for a further loan to the Emperor, without a previous communication on the subject with the gentle¬ men of the Bank.” But as it is evident from this minute of the interview, that the efforts, which he made to con¬ vince the Directors of the necessity of the loan were not successful, the arguments which he adduced, and which were probably enforced with much earnestness, had no other effect than to apprise them that he had not relin¬ quished the prosecution of his design : they therefore came to the following resolution, for the purpose of pro¬ testing against any responsibility for the consequences that might ensue. Resolved, nth of February 1796. (b) “ That it is the opinion of this Court, founded upon its experience of the effects of the late Imperial loan, that if any further loan or advance of money to the Emperor, or any other foreign state, should in the present state of affairs take place, it will in all probability prove fatal to the Bank of England.” “ The Court of Directors do, therefore, most earnestly W See the Report of the Secret Committee of the House of Lords, page 157. [ 1 ) See the same Report, page 145. 191 deprecate the adoption of any such measure, and they chapter solemnly protest against any responsibility for the cala- V J^^, mitous consequences that may follow therefrom.” Upon the communication of this resolution, Mr. Pitt re¬ plied,(a) “ that after the repeated intimations which he had given to the Governor and Deputy Governor of the Bank that no further loan to the Emperor would be resolved on without previous communication with the Bank, and a due consideration of their circumstances, he did not see any reason for this resolution ; that he did suppose it was adopted in a moment of alarm, and that he should con¬ sider it in that light.” The early representation, which the Bank made upon the first rumour of a loan, of their exhausted condition, the repeated remonstrances, which they tendered against its adoption while it was in contemplation, and the solemn protest with which they closed their communication, im¬ pressed the mind of Mr. Pitt with so full a conviction of its dangerous tendency, that though they did not compel him to relinquish altogether the advancement of a subsidy, they unfortunately misguided him, to the great disap¬ pointment of the house of Austria, and the irretrievable prejudice of the common cause, to narrow the supply from £3,000,000. to £1,400,000., at a time when we were fully and abundantly competent to furnish any aid which the exigencies of our ally required. This sum was remitted to Vienna with needless secrecy by the house of Boyd and Benfield. (a) See the Report of the Secret of Committee of the Hodse of Lords, page 146. 192 .chapter, No doubt can therefore be entertained but that our i VIIL foreign supplies in the last war were materially strait¬ ened by the fallacious representations of the Bank of England, and the fatal error, with which Mr. Pitt was impressed, that the departure of money was necessary for their payment; and though I would not go the length of asserting, that the fortune of the war would have been totally changed, that the arms of Austria would have triumphed, and France been reduced, had the ne¬ cessary subsidies been granted ; yet when it is considered how nearly the balance was maintained by the noble efforts of Austria, notwithstanding the inadequate support which we contributed, it is not too much to say, that the unfortunate treaties of Campo Formio and Luneville (a) would never have been signed. It is not, however, necessary for my argument, that the extent of the benefit, which a more consistent supply would have conferred, should be distinctly defined ; it is sufficient to have shewn, that it was the earnest and zealous wish of our government to have contributed a more important aid, and that this wish was defeated by the difficulty, which was supposed to have existed in the effectuation of more liberal remittances from the want of money. (a) The peace of Presburg is another confirmation of my argument. In one of the dispatches of the Court of Vienna, antecedently to the war; it was expressly stated that the tone of Austria to the French government would be precisely correspondent to the extent of the English subsidy ; yet though the fate of Europe hung upon the supply, how inadequate, how pitiful were our advances! See the papers laid before the House of Commons by Lord Castlereagh. 193 In the whole of this communication with the Bank of chapter England, Mr. Pitt evinced a singular disacquaintance with the principles of public economy ; and as all prac¬ tice must be imperfect unless the grounds, upon which it should proceed be understood, he was necessarily erro¬ neous in action. Of the real resources of his country, of the theory of circulation and exchange, and of the govern¬ ing cause of the efflux and influx of money, his concep¬ tions were wholly illusive. All the fond and idle sophisms of the old school, all the fallacies of a Steuart, a Liverpool, and a Rose respecting the importance and indispensable intervention of money had complete possession of his mind, and every effort, which he made to rescue himself from his difficulties, was instantly subdued by the never- absent thought that money was wanting. Had he rightly understood the functions of money, he would have known that a due compression of our paper circulation would have led to its influx at the very moment, that the loan was in payment, and would have glutted the country with specie, notwithstanding the drain, which the grant of the subsidy was loosely concluded to occa¬ sion. The very remonstrances, which the Bank presented to his consideration, contained in themselves a solution of the real cause, which effected the run for gold; for though they attributed the demand to the Imperial loan, and conscientiously attributed it to this cause, yet they uni¬ formly attached to their representations an account that the price of gold was ^4. 3s. and £4. 49. an ounce, while their guineas were to be had at £3.17 s. 10 \d.; and if Mr. Pitt had inquired, whether this superiority in the market price of our money above its mint price had not very fre- c c 94 chapter quentlyand constantly occurred in the time of peace as weH. as in the time of war, from the foundation of their charter to the moment that he was addressing them ; and whether an inferiority in the market price of our money below its mint price had not sometimes occurred in the time of war, notwithstanding the imaginary drain of a large fo¬ reign expenditure, he would have satisfactorily refuted their assumption, that the run for gold was attributable to the Imperial loan. I have already endeavoured to ' shew that the superiority in the market price of money exclusively arises from a relative surplusage of circula¬ tion, and the inferiority from a relative deficiency. If therefore, Mr. Pitt had with providential circumspection obstructed the excessive utterance of the paper, with which the country was inundated, he might have caused the influx of money to any extent, at the same time that he was forwarding the succours, which consistently with the real resources of this country it was our duty to have given, and which the produce that was clogging our markets from an inadequate vent, was immediately com¬ petent to pay. But instead of being actuated by this policy, at the same moment that he was transacting his remittances, he was pressing the Bank for a further pub¬ lication of their paper, and aggravating the cause of their exhaustion. Upon the conduct of the Bank Directors I shall make no comment: however much it may be regretted that they were not enlightened by a purer policy, it is im¬ possible to complain of the representation, which they made under the existing impression of their minds. They were solely actuated by a sense of duty, and the blame is 195 not imputable to them for uttering their remonstrances, but chapter to Mr. Pitt for obeying them. Though to such an extent did they urge their objections, that had their opinion been fully acted upon, no money would have been raised for the service of the war beyond our own shores. It has already been stated, that they remonstrated against the two loans to the court of Vienna in 1795 and 1796. In the commencement of the year 1797, when it was in contemplation to raise a loan of £1,500,000. for Ireland", they again remonstrated, and presented to Mr. Pitt the following resolution : “ 10th February, 1797. “ Resolved, (mmensurate with its extent, had not our foreign expenditure antici¬ pated the receipt, and caused a considerable proportion to be reserved in the debtor countries for its payment. Each of these conclusions is, however, erroneous, as each implies, in a greater or less degree, an uniform current of bullion into this country without any reference to the relative amount of our circulation or the state of the exchange. [a) I was sorry to observe Mr. Leslie Forster, a member of this class. (i) Our most eminent commercial characters have usually maintained this opinion. E e 210 chapter The first position I attempted to refute in the preceding chapter, by contending, that the influx of money could never exceed the sum, that was necessary to augment the currency of one country to the same proportion with the currency of another, and by proving, that our specie, not¬ withstanding the opinion, which the regular excess of our exports had encouraged the supporters of the theory to deduce, could not be computed at a greater sum than £5,000,000. The futility of the first position, therefore, necessarily establishes the futility of the second, as it would be need¬ less to treat upon the reflux of money, which had never been received ; though this position, indeed be rendered nugatory by the foregoing argument of the present chapter, for if the conclusion be correct, that a partial compression of currency would conduce to the influx of money, at the time that a foreign expenditure was in payment, it follows as a necessary corollary, that the expenditure is incompetent to produce by its natural ope¬ ration the departure of a greater sum than would other¬ wise have been remitted, as the same cause, which, not¬ withstanding its supposed counteraction, would occasion the influx of money when relatively deficient in quantity, till the just proportion were restored, would of course prevent the departure of money when relatively excessive, below that proportion. The uniform efflux, therefore, of £8,000,000. a year, or whatever may be the amount of our foreign expenditure, is wholly without foundation. If, then, neither the influx nor the efflux of money can take place beyond the sum, which is necessary to maintain 211 in all countries the same relative amount of currency, it is ciiAi’i r:u obvious, that the third conclusion, that money would in- variably be received to the whole extent of the supe¬ riority of exports, unless anticipated by foreign expen¬ diture, is equally irregular, as it implies the practicability of an idefinite accumulation of money in violation of the just proportion. The unform influx, therefore, of £14,800,000. a year, the computed balance of our trade, should our foreign expenditure cease, is not more con¬ sistent with reason than the uniform efflux of £8,000,000- a year during its continuance. The ingress and egress of million upon million, so confidently asserted in conversation and debate, have no practical existence. If it were true that £8,000,000. of specie were exported for one purpose, and £6 000,000. for another, again to be received through the balance of trade, the nation would at one time be totally exhausted of its specie, and at another possess an inordinate super¬ fluity ; and at various intervals in the preceding century prices would have experienced an abrupt and irregular depression, and again have attained to as abrupt and irre¬ gular an elevation, to the total contravention of the action of money as an equable standard. But it will be hereafter proved,that throughout all ages the prices of this and every other country have maintained a gradual, uniform, and correspondent advancement, which conclusively attests that each country possessed in every period of history the same relative amount of circulation, without any tendency to the exhaustion or repletion, which the sudden departure and return of accumulative millions would have neces¬ sarily occasioned. 212 ch \ pte li But this extravagant opinion of the ingress and egress of v ^ II ^ w , millions is the more inconsistent from the forbearance of all appeal to the position of the exchange, which is frequently adverse at the time that it is asserted that money is im¬ ported, and frequently favourable at the time that it is asserted that money is exported. After the preceding observations of this work it would be superfluous to ex¬ plain that in the natural constitution of things, unless the exchange be favourable no money can be imported, and unless it be unfavourable no money can be exported, which necessarily renders the assertion in many instances the converse of the truth; and in those, where the ex¬ change is not at variance with the assertion, the evidence of our goldsmiths, who exclusively conduct the transit of bullion, would sufficiently shew the comparative unimport¬ ance of the sums, that are remitted from one country to another to maintain the level, and fully illustrate the fallacy of the position, that a perennial current of bullion would have flowed into this country to the whole amount of the excess of our exports had no foreign expenditure intervened to obstruct it. The conclusion, however, that our foreign expenditure conduced to the reservation of bullion, which would otherwise have been imported, was colourably justified by the occasional remittance of bills from this country for its disbursement, instead of by the draft of bills from abroad ; for as it was conceived, that these bills could not have been granted without the pre-existence of a favourable balance at the place, upon which they were drawn it was naturally conjectured, in conformity to the principles of the mercantile system, that money would have been re- 21 ceived for the payment of the balance had their purchase chapter by government been forborne. It frequently happened, however, that the bills which were granted" were drawn upon credit, and that produce was subsequently remitted for their liquidation ; but in those instances, where they were drawn against exports antecedently effected, it would be wholly irregular to conclude, that a return would have been ordered in bullion, had no foreign ex¬ penditure subsisted, as it has already been shewn, that the occurrence of a foreign expenditure has no tendency to interrupt the influx of money, which would otherwise have been introduced. I endeavoured in the third chapter to prove, that the exchange assumed a favourable or unfavourable posture for the express purpose of preventing the obstruction, that would otherwise ensue in the commercial intercourse of different countries, from the incidental variation in their circulating system. If by the partial compression of our currency, and consequent inferiority of our prices, the same sum were made to measure in this country a greater value than it measured in others, and the exchange were notwithstanding to continue at par, there would be no practicability of importing foreign produce, as no indemni¬ fication could be made for the inferiority of our prices ; but if the exchange attained to a correspondent elevation, and a bill against the continent sold at a discount commen¬ surate with the difference, the difficulty would be re¬ moved,^ the importer would be enabled to purchase his investment at a proportionate advantage. If while the prices of London were five per cent, lower than the prices 2 14 chapter of Hamburgh the exchange continued at par, it would be VIIL impracticable to import the produce of the continent, as a bill upon Hamburgh for £100. would sell in London for £100., and the importer would lose five per cent, by his investment; but if the exchange attained to a corres¬ pondent elevation, and a bill upon Hambuagh for £\oo. sold in London for £95., the importer would be indemni¬ fied by the purchase of his investment at the current discount of the exchange, and no obstruction to their intercourse would obtain. Unless, therefore, the infe¬ riority of our prices below the prices of the continent were compensated, during the period of the disparity, by the interposition of a favourable exchange, it would be impracticable to support the import trade, and transact the mutual interchange of produce. And if, when the partial excess of our currency and consequent superiority of our prices caused the same sum to measure in this country a less value than it measured in others, the exchange were to continue at par, there would be no capability of exporting our produce, as no capability would exist of indemnifying the foreign im¬ porter for the inferiority of foreign prices ; but if the exchange were reduced to a correspondent depression, and a bill against this country sold at a discount commen¬ surate with the difference, the foreign importer would receive indemnification by purchasing his investment at a proportionate advantage, and no impediment would in¬ tervene. If while the partial excess of our circulation caused the prices of London to be five per cent, higher than the prices of Hamburgh, the exchange between the two places continued at par, it would be impracticable to chapter export British produce to Hamburgh, as a bill upon London for £ too. would sell in Hamburgh for £100., and the importer would lose live per cent, on his invoice; but if the exchange were reduced to a depression corre¬ spondent with the difference in their prices, and a bill upon London for £100. sold in Hamburgh for £95., the importer would be recompensed for the superiority of British prices, and no bar to their intercourse would subsist. The transitions, therefore, of the exchange effectually remove whatever impediment the temporary disparity of prices would otherwise occasion, and as they regularly reconcile the difference as it occurs, they inva¬ riably enable the same quantity of produce to be exported and imported as if the prices of all countries were uni¬ formly correspondent, and the exchange were uniformly at par ; and so fully is the principle, that the variation in the exchange between any two countries is the variation of their prices, admitted in practice by the commercial community, that they debit and credit each other for the imports and exports which they receive and remit, ac¬ cording to the value of their respective money by the criterion of the exchange, and only employ the interven¬ tion of a bill for the liquidation of a balance upon the final adjustment of their account. The favourable or unfa¬ vourable state of the exchange, therefore, is expressly established, that the correspondence of the merchant may experience no intermission from the same sum not being made to measure in all countries the same invariable value. If, then, at the time that the partial compression of our 210 chapter currency, and consequent inferiority of our prices, gave to the-exchange a favourable position, it happened that four or five millions of exports were forwarded to the continent, it would be wholly illusive to conclude that our merchants would order their equivalent in bullion, because a profit on bullion was at that time attainable, as it would lead to a complete dereliction of their peculiar and distinct departments of commerce, and cause an abrupt cessation of the customary intercourse : they would merely employ the favourable exchange to procure foreign produce at the pries.', which the difference in the value of our money and the money of the continent made necessary, and would order precisely the same investment in return for their exports, as if prices had been equal and the exchange been at par, the import of bullion being exclusively left to the speculation of the goldsmith. If it were really true that at the period of a favourable exchange all ex¬ ports were returned in bullion, and at the period of an unfavourable exchange all imports were returned in bul¬ lion, there would at one time have been no imports, and at another time no exports, to the total subversion of our commercial relations. The opinion, therefore, that the bills, which are granted for the payment of our foreign expenditure would be invested in bullion if government forbore to make their purchases, is wholly inconsistent with reason, even upon the event of a favourable ex¬ change, and would be still more preposterous should the exchange be at par, or adverse, as no bullion could then be imported without loss. But whatever plausibility the occasional remittance of bills from this country might have given to the opinion, that our foreign expenditure conduced to the reservation of money, which would otherwise have been imported, it is evident, from the paper prepared by ( a ) Mr. Long, that our foreign expenditure during the late war was paid almost without exception by the draft of bills from the continent, instead of by the remittance of bills from home ; and as these bills constituted a debt against us for the value received abroad, it could not be contended, that the discharge of our foreign expenditure by this channel had any tendency to anticipate the influx of bullion, and absorb that proportion, which would otherwise have been imported into this country, when no debt was due to us from foreign nations, and no bullion could be demanded: and when, on the contrary, we had a debt to pay to them instead of a debt to receive from them, and they could demand the bullion from us. In order to give to our foreign expenditure the means of anticipating the receipt of bullion, it is necessary, according to the tenets of the mercantile theory, that a commercial balance should pre¬ viously subsist in our favour to authorise the requisition of the bullion ; but if no such balance be contracted, it cannot be said that the draft of bills, which constitute a debt against us, can obstruct the import of bullion, as none would be claimed, if the debt were avoided. In the same manner, however, in which it was conceived, that the re¬ mittance of bills had a tendency to anticipate the influx of money, which would otherwise have been imported, it was concluded, that the draft of bills had a tendency to CHAPTER VI It (a) See the account at the head of the Chapter. F f 218 chapter cause the efflux of money, which would otherwise have been retained. But as it. has already been shewn, that our foreign expenditure has no operation to conduce to the export of a greater sum than would otherwise be re¬ mitted, this opinion is necessarily erroneous. The conclusions, therefore, which the different advo¬ cates of the mercantile system have deduced, That the excess of exports was decisive evidence of the influx and gradual amassment of money commen¬ surate with its extent ; That it was decisive evidence of the influx of money commensurate with its extent, but that our foreign ex¬ penditure occasioned the reflux of the greater proportion; And that it would have led to the influx of money commensurate with its extent, had not our foreign ex¬ penditure occasioned its reservation abroad, are alike aberrations from truth. These conclusions form in succession the series of posi¬ tions, by which the supporters of the theory endeavoured to resist the attack, that was made upon it. When the first po¬ sition, that the influx and accumulation of money were cor¬ respondent with the superiority of exports, was found to be untenable from the inconsiderable amount of our specie, they retired to the second position, and contended, that the bullion was uniformly imported to the extent of the supe¬ riority, but that our foreign expenditure as regularly occa¬ sioned its reflux; and when the long continuance of an un¬ favourable exchange, which rendered the import of money impracticable, enforced the surrender pf this position, they took their station at the third, and contended, that the bul- chapter lion would have been imported had not our foreign expen- diture anticipated its receipt; but as the expenditure was paid by the draft of bills from abroad, which established a debt against us instead of a claim in our favour, this position was not more tenable than the preceding, and the whole of the theory, which was constructed on the fact of a favourable balance being due to the extent of the superiority of exports, was effectually subverted. If, then, this argument be well founded, it is evident that the excess of exports, which was supposed to have arisen from the import of money for the payment of a favourable balance, is occasioned by the export of produce for the payment of an unfavourable balance. The bills, which are drawn for the discharge of our foreign expen¬ diture are discounted in the place where they are given, and their value is received by this country, through its delegated agents abroad, in as full and ample a manner, as if the produce, which they purchased, were actually imported and entered in the custom-house books, and afterwards sent to the seat of war for consumption : but from the circumstance of hs not being inserted in the custom-house entries as value received against the pro¬ duce exported for its payment, the equivalent remitted is deemed to constitute a favourable balance, when it is in reality exported to liquidate a balance against us. From this reasoning it is evident that the superiority of our exports above imports must nearly correspond with the amount of our foreign expenditure, as the influx and 220 chapter efflux of money for the maintenance of the common level are too inconsiderable to merit particular attention. The principle, however, upon which it has been usual to strike the difference between our exports and imports, and the partial statement which has been given of our foreign ex¬ penditure, make it impracticable to substantiate the pre¬ ceding argument by a satisfactory exposition of facts. The errors of the official balance arise both from an inac¬ curate estimate and an inaccurate classification of the public entries. The inaccuracy of the estimate is occasioned by the inferiority of the custom-house tariff, which was established in 1696, according to the current prices of that period, and is by (u) Sir George Shuckburgh’s table 136 per cent, below the prices of the present times. Mr. Irving, however, added no more than 40 per cent.; and Mr. Rose has added no more than 70 per cent, to the official rate in the respective valuations, which they made of our exports and imports in 1796 and 1800 ; but I am inclined to give a decisive preference to the conclusions of Sir George Shuckburgh, whose researches were di¬ rected by higher talents, and prosecuted with severer industry. It is probable, however, that the tariff of 1696 was affixed at a higher standard than the average prices of the market authorised, to swell the public accounts, and inspire the country with an exalted sense of its prosperity. The difference, therefore, between the prices of the (a) The value of money in 1700, according to the prices of the times, ■was 238: its value in i8co, according to the prices of the times, was 562; and the same proportion which 238 bears to 562, 100 bears to 236- 221 present times and the tariff may be much less than the chapter difference between the prices of the present times and the real prices of 179b. The inaccuracy in the classification of the entries arises from confounding the colonial with the foreign trade, and including the imports from our fisheries, and the East and West Indies, in the statement of our adverse balance. Mr. Irving very properly expunged this error in his estimate of 1796', and in striking the balance regarded only the exports and imports to and from foreign nations. In order to ascertain, according to the theory, which I have attempted to explode, what sum has been deposited by the balance of trade, or in order to ascertain, according to the system, which I have endeavoured to establish, the correspondence between the surplus of exports,, and the amount of our foreign expenditure, this mode of compu¬ tation is correct. Upon this principle, therefore, Mr. Irving estimated our annual average balance for the four years preceding 1796 at £6,500,000., including the 4,0 per cent, on the custom-house tariff. The paper which Mr. Long prepared by the order of the Secret Committees of 1797, is the only statement which has been presented to the public of the amount of our foreign expenditure. According to this document, the expenditure for the three years, 1793, 1794, and 1795, was £22,161,061. 6 d ; if co this sum be added the Imperial loan of 1795, amounting to £4,600,000., the private expenditure of individuals, and the whole ex¬ penditure, public and private, of 1792, our aggregate 222 chapter expenditure for the same four years, for which Mr. Irving struck our commercial balance, will considerably exceed £ 26,000,000., which was the extent of his computation. Till, therefore, the superiority of our exports be esti¬ mated by a tariff more nearly commensurate with the prices of the times, and a fuller account be presented to the public of the amount of our foreign expenditure, it will be impossible to illustrate a due correspondence by the evidence of facts. But the preceding returns of Mr. Irving and Mr. Long declare a sufficient conformity to justify the inference of a nearer correspondence upon the adduction of more accurate details. Though, therefore, it may be safely concluded, that the surplus of exports is in this country principally occasioned by the remittance of produce for the payment of a foreign expenditure, yet it cannot in all countries be contended, that the surplus is exclusively attributable to this cause, as in the same degree, in which some possessed an excess of exports, others should have an excess of imports. But as each has, more or less, laid claim to a preponderance of exports, it is necessary to refer to some other cause for a solution of the mystery. As a nation was supposed to become rich by the aug¬ mentation of money, and as the surplus of exports was sup¬ posed to lead to the augmentation, every country has endea¬ voured by its legislative regulations to promote the export trade by bounties, that money might come in, and oppress the import trade with duties to prevent money from going 223 out. This policy has necessarily conduced to the fraudu- chapter lent concealment of the imported produce subjected to the duty ; and the public returns of the imports have been materially narrowed by the subterfuges, which are practised for its evasion ; but the official statement is still further straitened by the general prevalence of the smug¬ gling trade, which by the run of contraband goods consi¬ derably diminishes the entries of the custom-house. But not only is the imported merchandize in all countries greatly under-rated in consequence of these subterfuges, but the exported merchandize is greatly over-rated. A disposition has very generally prevailed among merchants to make exaggerated entries in the custom-house books of the goods which they exported, for the purpose of aug¬ menting their credit by the parade of extensive connec¬ tions. So notorious was the practice in this country in the reign of Queen Anne, that (a) Mr. Lowndes proposed the enactment of a law to obstruct it; but as no essential injury resulted from it, and as government derived an indirect benefit by the imposing appearance of a large surplus of exports, his proposition was over-ruled. The late assess¬ ment, however, of a duty on exports has in a great degree counteracted this habit, and it is probable that less fraud u- lency is prastised in the entry of exported merchandize in this than in any other country in Europe. From this statement it is reasonable to conclude that the universal policy of distressing the import trade, and (a) See the estimate of Mr. Chalmers, page 240. 22 i chapter the universal practice of exaggerating the export, mate- rially conduce in almost every country to the superiority of its exports, though no doubt can be entertained but that in this country, from the magnitude of its external transactions, and the precautionary regulations of the custom-house, the superiority of exports is the immedi¬ ate and necessary result of its foreign expenditure. I have already remarked that Mr. Hume and Dr. Adam Smith had no means of accounting for the uniform return of an excess of exports, as the total failure of all docu¬ ments on the amount of our foreign expenditure disquali¬ fied them from forming a just comparison ; but Dr. Adam Smith was well aware of the impracticability of supporting the extended operations of war by the remit¬ tance of specie. Though he never attained to a correct perception of the theory of money, nor understood the real cause of its efflux and influx, which would have enabled him to elucidate the means of enforcing its im¬ port while a foreign expenditure was in payment, yet he fully exposed the error of the opinion, that the expenses of the seven-years war were discharged by its export. He says, (a) “ The last French war cost Great Britain up¬ wards of£90,000,000.,including not only the^75,000,000 of new debt that was contracted, but the additional two shillings in the pound land tax, and what was borrowed from the sinking fund. More than tw o thirds of this expense were laid out in distant countries, in Germany, Portugal, America, in the ports of the Mediterranean, in (a) See Wealth of Nations, Vol. II. page 159. 22 5 the East and West Indies. The kings of England had chapter no accumulated treasure : we never heard of any extra- ordinary quantity of plate being melted down; the cir¬ culating gold and silver of the country had not been supposed to exceed £18,000,000. ; since the late recoinage of the gold, however, it is believed to have been a good deal under-rated. Let us suppose, therefore, according to the most exaggerated computation, which I remember to have either seen or heard of, that gold and silver to¬ gether it amounted to jT 30,000,000. Had the war been carried on by means of our money, the whole of it must, even according to this computation, have been sent out and returned again at least twice in a period of between six and seven years. Should this be supposed, it would afford the most decisive argument to demonstrate how unnecessary it is for government to watch over the pre¬ servation of money, since upon this supposition the whole money of the country must have gone from it and re¬ turned to it again two different times in so short a period without any body’s knowing anything of the matter. The channel of circulation, however, never appeared more empty than usual during any part of this period.” He therefore concluded that the foreign charges of the war were chiefly defrayed by British produce, and ima¬ gined, that the finer and more improved manufactures were principally selected for the purpose, “ as they con ¬ tained a great value in a small bulk, and could therefore be exported to a great distance at little expense.” But the foreign expenditure of every country is for the most part discharged by its staple produce ; the foreign expen- g g chapter diture of this country is principally paid by its cottons, woollens, sugars, and hardware ; the foreign expenditure of France by its wine, silk, and colonial produce; of Russia by its hemp, flax, and tallow; of Sweden by its iron, timber, and naval stores ; of Prussia by its linen, grain, and spirits ; of Ireland by its linen and salted pro¬ visions ; and of every other country by the means, of which its surplus wealth is more particularly composed. 227 CHAPTER IX. On the Import of Corn. The same illusion, which led to the supposition, that chapter money was exported for the payment of our foreign ex- penditure during the prosecution of a war, equally led to the supposition, that money was exported for the purchase of grain during the pressure of a scarcity. In the debate, which took place in the two houses of parliament on the renewal of the restrictions oil the Bank of England after the peace of Amiens, it.was con¬ tended, on the part of government, that though a favour¬ able balance of trade were, in the natural constitution of things, a necessary result of the commercial relations of this country, yet as the ordinary course of commerce had received a temporary interruption from the war and the scarcity, not only had the influx of money been wholly obstructed, but the efflux of money had been occasioned to an unprecedented extent: but as no such interruption was likely to recur, the balance of trade would in a short time conduce to the import of many millions, which would enable the Bank to open its doors, and resume its cash payments with security. 22S chapter From what documents it was inferred, that the war and the scarcity had occasioned a temporary interruption to the customary course of commerce, I have not been able to learn ; as not only had the surplus of exports, which had uniformly led, in the opinion of government, to the conclusion, that the course of trade was in our favour, greatly exceeded the amount of any prior period; but the total value of our exported merchandize had increased in the same unexampled ratio.. No inference was there¬ fore deducible from these returns to support the assump¬ tion of the slightest interruption ; nor can I conceive that any grounds existed for the assertion. The whole of the argument was, however, founded on erroneous principles; as the positions, that our foreign expenditure and the import of corn had conduced to the efflux or reservation of money abroad, were equally fallacious with the position, that the balance of trade would hereafter conduce to its influx. If the doors of the Bank be to be closed till the cus¬ tomary course of commerce, in the natural constitution of things, should introduce ten or twelve millions of bullion into this country, they will be closed for ever. A partial compression of currency is the only policy, by which the influx of money can be enforced, and unless the remedial measures, that must hereafter be adopted, be grounded on this principle, they will fail of success. Tbe sum remitted for the purchase of corn was com- pitted in this discussion at (a) £23,000,000. : the sum cn \P' R!t remitted for the payment of our foreign expenditure was by some computed at £50,000,000 , by some at £30,000,000., but by none at a lower sum than£25,000,000- Estimating it, therefore, at this sum, the collective amount exported for these purposes will be £48,000,000. Now though it be competent to conclude, that in 1793, antecedently to the utterance of small notes, our specie bore a nearer approximation to our paper than has since subsisted, yet there can be no doubt but that the sum exported was considerably less than the amount of the notes, by which it was displaced. These notes may be estimated at between six and seven millions. If, there¬ fore, at the commencement of the late war in 1793, our national stock of coin be computed at double the present amount, and it be said, that we then possessed from ten to twelve millions of specie instead of five ; yet as it is impossible to pay £48,000,000. out of twelve, and leave five, there can be no foundation for the conclusion that such a sum was ever remitted. Our two unfavourable seasons occurred in 1795 and 1799 ; the severity of the pressure was consequently in 1796 and 1800 ; yet *0 early as in May 1795, when no scarcity was even in prospective, and before a single grain of corn was imported to obviate the calamity ( b ) the (a) It has since been ascertained that the quantity of corn imported has amounted to £30,000,000., and it is accordingly contended that £30,000,000. of spec e has been exported for its payment. (£j See the extract from Lord King’s Tables, page 196. 230 chapter exchange was on the decline, which clearly shews that its original depression did not result from this cause; and that the scarcity had no effect to maintain it in a state of depression, when the diminution of our paper conduced to its elevation, is attested by its recovery to par in April (■/} 17 g6, at the precise period, when the dearth was at the greatest height, and when our debt upon the continent for the supplies, that we had imported, was at its greatest extent. Though, therefore, from the soth of June 1795 to the 11th of February 1796, as shewn in the preceding- chapter, a run upon the Bank was effected, yet no argu¬ ment can be adduced to shew, that the drain was attribut¬ able to the scarcity, as the exchange had already declined before any indication of a scarcity had been given, and was restored to par, at the very time, that the pressure was felt with most severity. The same observations will nearly apply to the scarcity of 1799; for though the exchange were not reduced to an unfavourable state till the month of September, yet its depression had began in May ; and that its fall would have been precipitated, notwithstanding the occurrence even of a most propitious season, is fully demonstrated by its continuance, not only in an adverse but deteriorated condition, during the three years of 1801, 1802, and 1803, though the produce of these years, and particularly of the two last, were remarkable for its abundance. Had the unfavourable exchange of 1795 and 1799 (a) See the extract from Lord King’s Tables, page 196. 23 1 resulted from the respective scarcity of these years, not only is it impossible that it should have risen to par in 1796, when the dearth was greatest; but it is impossible that it should not have risen to par in 1802 and 1803, when no vestige of the calamity remained. It is there¬ fore evident, that its adverse position in 1795 was attri¬ butable, as I have previously explained, to the undue publication of the paper of the Bank, in compliance with the solicitations of Mr. Pitt; and its adverse position in 1799 to the premium, which the restriction held out to an excessive utterance. The gradual increase of their paper from 1797 to 1804 will sufficiently illustrate this obser¬ vation. £■ 1797, February, 11,103,880. 1798, February, 13,043,480. 1799, May (a) 13,920,260 1800, May 15,213,520. 1801, February, 16,365,206. 1802, November, 16,747,300. 1803, July, 17,254,100. Since, then, the origin, the continuance, and eventual rectification of the unfavourble exchange had no relation to the scarcity, it is obvious, that whatever sum might have been remitted during its depression, would have been equally remitted, had no scarcity occurred. But it is cer¬ tainly possible, that the bills, which were purchased by the goldsmiths abroad for investment in British specie, were (a) When the exchange began to decline. chapter in some instances drawn against an invoice of corn, as well as an invoice of flax, hemp, linen, or any other pro¬ duce. The only point, which it is necessary to ascertain is, whether the unfavourable exchange resulted from the scarcity ; and as its recovery to par in 1796, and its con¬ tinuance in a state of depression in 1802 and 1803, clearly shew, that its adverse or favourable position is not in all instances correspondent with an adverse or favourable season, it is wholly immaterial, whether the bills, that were purchased by the goldsmiths, were drawn against corn or against any other produce, as other bills would have been bought lor the same purpose had none been extant in the market for corn. The extent of the sum remitted it is impossible to as¬ certain with any precision ; but as it must have been within the amount of the small notes, by whose over-issue it was in reality detruded, it cannot be computed at more than six or seven millions, and was most probably much less, as my estimate of the coin antecedently to the war appears to me to be considerably above what a fair de¬ duction of reasoning would allow'. Not only, however, is it contended, that the import of corn has conduced to the efflux, but it is also contended that it has prevented the influx of money. When the posi¬ tion, that £23,000,000. of our specie had been remitted to the continent for the purchase of grain, was controverted by Mr. Fox in the debate on the Bank restriction bill in 1803, Lord Hawkesbury said, that it w r as the same thing, whether it w ere contended, that the purchase of corn had 233 occasioned the efflux, or whether it were only contended chapter that it had prevented the influx of specie, as in each case ^ 3 ^ the country was deprived of so much money: but if the import of corn prevented only the introduction of so much money, it in no shape accounted for the loss of what we before possessed : whatever sum had pre-ex¬ isted would by this reasoning have existed still, and the £23,000,000. assumed to have been exported, would have still formed a part of our circulating system. The argument, therefore, was by no means the same, as ap¬ plied to the subject matter of debate, since it did not go to prove that the prior stock was diminished, which it was the object of government to shew, but only that it was not increased. But the conclusion of Lord Hawkesbury, that the pur¬ chase of so much corn prevented the influx of so much money, was equally erroneous with the conclusion that the purchase of so much corn conduced to the efflux of so much money, notwithstanding the previous sanction, which it had received from the authority of Lord Liver¬ pool in the Report of the Secret Committee of 1797. In this Report, after having stated, that the surplus of exports amounted to £6.500,000. a year, ( a) Lord Liverpool says, “ great, how ever, as this balance of commerce may appear, it would have been still greater, in a very con¬ siderable degree, but from the unusual scarcity of grain, which made it necessary both for government and indi- ( a) See the Report of tls Secret Committee of the House of Lords, page 255. II h 234 chapter viduals to import large quantities of grain for the relief of the inhabitants of this kingdom. In an account deli¬ vered by Mr. Claude Scott, an eminent corn factor, it appears, that for the three years preceding 1797, there were paid to foreign countries for grain imported into this kingdom the following sums, viz. £■ In 1794, - 1,983,856 1795. - - - - 1 >535,672 179 6 , - 3,926,484 7,446,012 Add, imported in 1793, as estimated by Mr. Scott in his evidence before the Committee, - 1,500,000 Total, 8,946,012 This balance of commerce was also rendered less fa¬ vourable by the great sums paid for naval stores during the war beyond what are usually paid in time of peace. It appears by an account presented by the Commissioners of his Majesty's Navy, that the value of naval stores im¬ ported on account of his majesty’s navy in the four years previous to 1797, amounted to £7,825,876 And in the four years preceding 1793, amount¬ ed only to 2,500,139 Excess 5,325,737 And it appears by an account presented of the amount of bills drawn on the Com¬ missioners for Victualling, from foreign 255 parts, in the four years ending the 5th of chapter January 1797, that they a- mounted to - - £1,368,921 And in the four years ending 5th of January 1793, to - - 134,629 -1 234,292 Total excess - - - - 6,560,029 Though it cannot be doubted that the balance of our trade; even with these deductions, must have brought great wealth in various articles of commerce into this kingdom, and that unusual quantities of foreign (a) mer¬ chandize must in consequence thereof have been deposited in it; yet it may be doubted whether it brought so great a quantity of the precious metals to be converted into coin, as in former periods.” By this argument Lord Liverpool concludes, that if the £8,946,012. worth of corn, and the £6,560,029. worth of naval stores had not been imported, our surplus of exports for the four years preceding 1797 would have been ( b ) (a) This remark is singularly unhappy. It is impossible to say, that the balance of trade can lead to the import of an unusual quantity of mer¬ chandize, as, according to Lord Liverpool, the definition of the balance of trade is “ when the whole of the merchandize exported exceeds the whole of the merchandize imported, the difference is paid in money;” but if merchandize be imported, instead of money, no difference can subsist. (b) £8,946,012 6,560,029 15,506,041 _£i5,5°£>,°4i. more, and have led to the receipt of this sum in foreign money. But this conclusion is wholly inconsistent with the equability of our commercial system. The principles of commerce will be fully detailed in the second volume of this Inquiry ; but it is necessary in the mean time to remark, that all commerce with inde¬ pendent states consists in the equal interchange of pro¬ duce for produce. It is impossible that a nation could fulfil the relations of commerce, and drive an export trade to the amount of many millions, without importing to a similar extent. The power of buying depends upon the power of selling ; and unless the countries, to whom the produce was exported, were capable of vending an equi¬ valent in return, they would be deficient in means to maintain the intercourse. The equal interchange, there¬ fore, of produce for produce, is a necessary result of the commercial relations of independent states, and forms the leading principles, by which their intercourse should be regulated. It may be said, indeed, that according to this principle the exports and imports should have a reciprocal action on each other, and that the extent of the one should be implicitly governed by the extent of the other; nor can there be any doubt but that a perfect (a) ( a ) I do not mean to assert, upon the principle on which our balance is now constructed, that if the export trade were debited with the amount of our foreign expenditure, a perfect correspondence would subsist between our exports and imports, as our colonial imports from the East and West Indies are clashed with the imports from foreign independent stater, but I have no doubt but that it would be fully authenticated were the balance 237 correspondence would be fully established, did not the chapter payment of a foreign expenditure intervene to obstruct it. But though the interposition of a foreign expenditure, by causing an excess of exports commensurate with its amount, prevent the correspondence, that would otherwise subsist, yet it cannot be said to break in upon the prin¬ ciple, that all commerce with independent nations consists in the equal interchange of produce for produce, as the excess exclusively results from the return of an equiva¬ lent for the foreign produce already consumed by the public and private expenditure of British subjects abroad. Instead, therefore, of invalidating the position, it consti¬ tutes immediate evidence to confirm it. exclusively constructed with independent nations, according to the plan adopted by the late Mr. Irving. By the present construction of the balance, if the export trade were debited with the amount of our fo¬ reign expenditure, there should be a surplus of imports above exports to the extent of the surplus of imports above exports from the East and West Indies, and in time of peace, when our foreign expenditure is compara¬ tively of little moment, this excess has sometimes occurred.* The colo¬ nial trade is, for the most part, a trade of remittance instead of exchange. It is a trade of exchange so far as produce is exported from this country to purchase an equivalent; but it is a trade of remittance in the same proportion in which the imports exceed the exports, as the surplus of imports from the East Indies is purchased by the territorial revenue of the company, and the surplus of imports from the West Indies constitutes the returns above proceeds of the West-India planters, and forms the substance of their income. This trade should therefore be subjected to a separate balance, and the gain to the mother country would precisely be as the imports exceeded the exports. The trade with Ireland should likewise be subjected to a separate balance. f See Report of the Secret Committee of the House of Commons, p. 241. 2.5 S If, then, it be correct in theory, that the exports and im¬ ports to and from independent states have a reciprocal action on each other, and that the extent of the one is necessarily limited by the extent of the other, it is obvious, that if no demand had subsisted in this country from 1793 to 1797 for corn and naval stores, the countries that fur¬ nished the supply would have possessed so much less means of expending our exports, as an inability to sell would of course have created an equal inability to buy. It is totally irregular, therefore, to infer, that our exports would have amounted to the same sum, had the import of the corn and naval stores been withheld, as those who provided the supply would have been utterly incapable of purchasing them. Lord Liverpool’s position, therefore, that the balance of our trade would have been much more considerable had the scarcity and the war created no demand for corn and naval stores, is inconsistent with the first principles of commerce, as it rests upon the opinion, that our exports would have attained to the same extent though our imports had been materially curtailed. By Lord Liverpool, and all the partisans of the theory of a balance, the extent of the import trade is regarded as a serious calamity, that impoverishes the country by causing the elfiux or pre¬ venting the influx of money. Had it happened by any singular combination of circumstances, that he had been minister of this country, at the time, that Mr. Necker was minister of France, and that each could have carried into effect the system, which he deemed most conducive to the interests of his country ; the one would have prohibited 219 all imports from France, and the other have prohibited cn \rrat all imports from England, to the effectual exclusion of all commerce between the two states ; and had they pushed their means of augmenting the wealth of a nation to the extreme, to which their principles would have led them, they would have persisted in the total prohibition of imports from all other countries, with the fallacious hope of effecting in their own an indefinite accumulation of money ; till they had found, by fatal experience, that they had subverted all commerce, where they intended to promote it, and caused nothing but ruin, where they meant to produce the utmost prosperity. The sentiments, therefore, with which Lord Liverpool and Lord Hawkesbury were impressed, that the import of so much corn prevented the influx of so much money, had no foundation in reason, as the additional supply of corn, imported in a year of scarcity, instead of obstructing the influx of money, is paid for by the increase of our export trade commensurate with the increase of supply. 240 CHAPTER X. On Lord King’s Hypothesis, that the Surplus of Exports is occasioned by the Remittance of Silver to India. chapter Soon after the publication of my Remarks on Currency and Commerce, in which I attempted to refute the theory of the balance of trade, by contending, that the surplus of exports resulted from the payment of our foreign ex¬ penditure, instead of resulting from the influx of money, Lord King presented an hypothesis to the public, in which he contended, that it resulted from the remittance of silver to India. He was convinced, that the doctrine of the indefinite accumulation of money by the perpetual recurrence of a favourable balance of trade was erroneous, and he ad¬ mitted, that the theory of a balance, as applied to com¬ merce in general, had been successfully refuted by the arguments of the new school; but he thought, that the balance of trade and the excess of exports were con¬ vertible terms, that because there was an excess of exports there must necessarily be an influx of money commensu¬ rate with it? extent. He therefore concluded that, in conformity to the principle of the nullity of a balance, a perfect correspondence should subsist between our exports and i mports, not observing, that by deducting 24 1 from the surplus of exports the amount of our foreign chapter expenditure, the correspondence would be virtually estab- lished, though an excess would remain in the books of the Inspector General. He imagined, indeed, from a disregard or misconception of the argument, that the doctrine of the new school went to a rejection of the excess, instead of to a different interpretation of it; and he therefore paid no further attention to the reasoning, which had been adduced, than as it refuted the principle, upon which the theory was founded, that wealth exclusively consisted in money. Finding, therefore, that a surplus of exports existed, and thinking its existence incompatible with the nullity of a general balance, he conceived that it originated in a partial statement of our commerce, which returned the whole of our exports, and only a part of our imports ; and he imagined, that he discovered in the exclusion of the imports from India an omission of sufficient magni¬ tude to account for the disparity. He perceived, that, in the annual statement of our commerce, submitted to Parliament by the Inspector General, the imports from India were uniformly excluded ; and as he was aware that a certain proportion of Spanish dollars was annually remitted to India for the purchase of home investments, he concluded that the superiority of exports was occa¬ sioned by the influx of money into this country from a partial balance of trade with the continent of Europe to supply the East Indies with silver, and conjectured that if the imports from India were added to the imports from Europe in the Inspector's return, a perfect correspondence would be fully established between the export and import trade, and no surplus be apparent. In his own words, i i chapter (<•) “ When the subject is considered in this point of view, it will appear that in one quarter of the globe our exports must always exceed our imports, and that in another our imports must exceed our exports ; but that in the aggre¬ gate amount of the commerce of this country with the whole of the world the balance will be reduced on an average to the most perfect equality.” But much as I may admire the ingenuity, and respect the character of the author, it is impossible for me to accede to the truth of this hypothesis. From what argument in the modern doctrine of the economists Lord King collected that ( b)“ the possibility of any permanent and uniform excess of the exports above the imports was utterly denied,” I am at a loss to con¬ jecture. The theory of the balance of trade was derived from the opinion, universally maintained, that the surplus of exports was decisive evidence of the influx of money commensurate with its extent; but in controverting the truth of this theory, no attempt was made to impeach the fact of a surplus, but the inference, which was deduced from it, that it necessarily led to the return of its equiva¬ lent in money. The only difference between the old and new school on this point was, that the one contended, that the surplus was occasioned by the influx of money, and the other, that it was occasioned by foreign expenditure, the surplus itself remaining wholly undisputed. So far, indeed, was the surplus from being rejected, that it was expressly contended, that the official statement of the (a) See Lord King, page 58. (3) Ibid, page 52. 24 . Inspector General was within the real amount, and inade- chapter quate to cover the expenditure, which produced it. But as Lord King conceived, that the fact of a surplus was controverted, (a) he said, “ that the supporters of the old system have successfully appealed from theory to facts, and have established by the most satisfactory evidence, that a superiority of exports has uniformly subsisted.” Having thus established what was never rejected, he immediately deduced from the fact of an excess the same inference, which the partizans of a balance had done, con¬ cluding, that because he had proved a surplus of exports, he had necessarily proved the influx of money ; and he therefore (6) asserted, “ that it was impossible to deny the reality of a constant influx of the precious metals into this country from the continent of Europe.” But if it be impossible to deny the reality of a constant influx of the precious metals into this country from the continent of Europe, I know not by what means the specie has disappeared, which we recently possessed ; for Lord King does not contend, that more has been exported to India than was imported by the surplus of exports, nor is he so inconsistent as to argue, that the efflux and influx of money to and from the same nations of Europe are capable of being effected at the same time. In corroboration, however, of his inference, that money was returned for the surplus of exports, he adduced the general condition of the exchange ; (r) the favourable state {a) See Lord King, page 53. ( l) Ibid, page 53. •(£■) Ibid, page 54. i 44 chapter of which, he says, “ may be considered as a certain and indeed decisive criterion of a favourable balance of trade and in order, that the public might be enabled to judge how far the criterion of a favourable exchange would confirm his hypothesis of a favourable balance with Eu¬ rope, he subjoined in the appendix to his work a statement of the exchange with Hamburgh from 1789 to 1803. By this document it appears, that in seven years out of the fourteen, that in 1792, 1795, 1799, 1800, 1801, 1802, and 1803, the exchange was unfavourable to this country, and consequently led to the efflux instead of the influx of money. Yet during the whole of this period, an excess of exports was invariably returned by the Inspector Ge¬ neral to a greater extent than at any prior period of our history. If, therefore, it be contended that an uniform surplus of exports is decisive evidence of the uniform influx of money commensurate with its extent, it is necessary, that the exchange should have been uniformly favourable to have supported the influx. Its adverse position, there¬ fore, during the half of the period of Lord King’s state¬ ment, is in direct opposition to his hypothesis, as I well know that he has too much talent to contend, that five or six millions of money, the amount of the surplus of exports, could have been annually imported into this country during the continuance of its depression. Confiding, however, in the correctness of the conclu¬ sion, that the excess of exports was returned in money in consequence of a partial balance with Europe, it was necessary, according to the conviction, which he professed of the nullity of a general balance, that the money should be subsequently remitted to some other quarter of the 245 globe for the purchase of its equivalent in produce to chapter bring the export and import trade to a perfect correspon- deuce; and he therefore concluded that it went out in silver to India. I have already explained that the only period, in which the surplus of exports to the continent of Europe above the imports from it, was estimated with any approxima¬ tion to accuracy, was in the four years of 1792, 1793, 1794,, and 1795, by the late Mr. Irving. Its amount during this series of years was computed by that intelli¬ gent officer at £26,000,000., or at £6,500,000. a year. According, therefore, to Lord King’s hypothesis, the silver that was annually exported to India during the same interval should have precisely amounted to the same sum ; but according to the returns of the (a) bullion office of the India House, the Spanish dollars exported to India during these years were, in /:• -v. d. 1792, - - 666 , 95 4 14 10 i? 98 > - - 83,668 11 8 1794> - " 56,696 12 6 1 795 , - - 52,560 9 3 859,880 8 3 or only £214,970. os, a year, leaving a surplus of exports to the extent of £6,286,029. iS.s\ to be accounted for by some other cause. In bringing, therefore, Lord King’s hypothesis to the proof of facts, it appears that the only evidence to support his position, that the surplus of exports (a) See Report of the Secret Committee of the Hou^e of Lords, pages 235 and 237. 246 ciiaptkr to the extent of £6,500,000. a year resulted from the remittance of silver to India was the annual export of f 200,000 . of Spanish dollars. As he was, however, persuaded in his own mind of the accuracy of his system, he thought that nothing was warning to raise the imports to a level with the exports, but that the imports from India should be added to the imports from Europe But the amount of the produce returned from India will no more contribute to the veri¬ fication of his reasoning than the amount of the silver exported. In the statement, which is annually submitted to parliament of the exports and imports, it is impossible for the Inspector General to include the imports from India, as from the imposition of an ad valorem duty on the sale of various articles of our Indian trade, no accu¬ rate return can be made till six months after the arrival of the last ship, which is usually towards the close of the year; but in every instance where a regular series of our balances is exhibited, the imports from India are in¬ variably inserted, and the surplus of exports, which had been previously returned to parliament for the current year, is diminished in proportion to their amount. Yet notwithstanding this diminution, a vast excess of exports has uniformly remained, except in the years of peace, to which I antecedently alluded. So far, therefore, are the imports from India, which are purchased by the remittance of silver when added to the imports from Europe from establishing a correspondence between our exports and imports, that even when the imports which are purchased by the territorial revenue of the Company, by the private fortunes of individuals, and by the export of British To face page 246. An ACCOUNT of the Total Value of the IMPORTS into and EXPORTS from Great Britain, in the last Twenty Years, distinguishing each Year, and distinguishing the BRITISH from the FOREIGN MERCHANDIZE Exported. Value Value of Imports, exclusive of of Importations from TOTAL E. Indies and China E. Indies and China. Value imported. Value of Value of Years. British Manufactures Foreign Merchandize TOTAL Exported. exported. Value of Exports. Surplus of Imports. Surplus of Exports. £■ s. d. £■ s. d. £. s. d. £ s. i. £■ s. d. £. s. d £■ s. rf. 10,809,612 12 n 1,834,221 *4 9 12,643,834 7 8 1777 9,300,266 IO 4 4,190,763 9 6 13,491,029 19 10 847,195 12 2 9,449,402 10 5 1,526.130 IO 7 10,975,533 —1778 8,207,503 8 *0 4.046,39 2 4 i 12,253,895 12 11 1,278,362 I I I I 10,718,940 3 7 7*6,323 9 *0 *1,435,263 *3 5 *779 7,648,286 10 5,890,289 3 7 '3,538,575 4 5 2,103,311 9,841 >5*3 18 2 970,726 9 7 10,812,240 7 Q1780 8,8ii,6qo 5 3.834.925 8 9 12,648,616 1,836,37s *3 5 10,197,274 13 11 2,526,339 2 12,723,613 It> * 1781 7,633,332 5 3,708,963 l6 311,342,296 8 8 *,381,316 7 5 9>7 1 5>5°9 6 n 626,319 8 5 10,341,828 *5 41782 9,109,561 1 3,907,829 12 6 13,017,390 *3 7 2,675,561 18 3 11,820,759 14 3 *,301,495 *3 3 13,122,235 7 6 1783 10,409,713 3 5 5.o5 8 .574 I I 6 15,468,287 14 11 2,346,052 7 5 12,276,224 18 — 2,996,652 11 15,272,877 11117 84 11,887,628 7 8 3.846.434 8 * *5,734,o62 *5 9 461,185 *4 IO *3>575>4S 8 7 5 z >7°3>94° *4 1 16,279,399 6:1785 10,974,814 5 5.142,834 *9 7 16,117,649 161,759 9 6 12,629,385 6 io| 3>*56,687 .7 15,786,072 7 t 1786 11,830,104 *9 8 4,470,535 0 16,300,710 *2 5 514,658 5 — 14,373,156 *5 7 3>43°,*68 — 6 17,804,024 l6 1 1787 12,054,224 3 2 4,815,890 2 5 16,870,114 5 7 933,900 10 6 — *4,573, z 9° *7 9 3,453, 8 97 3 5 18,027,188 I 2 1788 12,724,612 7 > 4.747,796 — 6 17,472,408 7 7 554-779 *3 7 ■ - 14,461,954 9 2 3,359,*48 1 5 17,821,102 IO 71789-13,779,506 2 6 5,561,042 *4 5 19,340,548 16 11 1,519,446 6 4 18,298,116 11 11 832,069 *3 4 19,130,886 5 3 1790 14,921,084 9 7 5.*99,o,37 7 17 6 989,235 3 15,971,069 — 7 3,698,713 *3 — 19,660,782 13 7 1791 16,810,018 16 4 5,921,976 1122,731,995 7 3 *3 8 16,957,810 *7 3 2,701,547 9 4*9,659,358 6 7 *79 2 18,336,851 6 11 6,568,348 16 624,905,200 3 5 5,245,841 16 *5,757,693 16 10 3,499,023 12 1019,256,717 9 8 *793 13,892,268 *7 7 6,497,911 9 3 20,390,180 6 10 ■ • 1,133,462 7 2 17,830,418 *9 — 4>458,475 1 5 22,288,894 5 1794 16,725,402 16 2 10,023,564 *9 3 26,748,967 *5 5 — 4,460,073 *5 — 16,976,179 1 8 5,760,710 8 3 22,736,889 9 11 1795 16,527,213 2 *0,785,125 *5 227,312,338 *7 4 __ 4,575,449 7 5 19,800,957 - s| I1796I19,106,444 17 5 **,3*7,740 8|30,424,*84 *8 *| Thomas Irving, Inspector General’s Office, Inspector General of the Imports and Exports of Custom House, London, Great Britain and the British Colonies. March 27 th 1797. N. B .—From the manner in which the East India Importations are entered at the Custom House, no account can be given of the value of the Imports from India and China sooner than five or six months after the termination of the year; but in order to preserve the comparative view, the Inspector General has distinguished the amount of the Imports of the East India Company in all the years preceding 1796, from the Importations from all other parts. 247 produce from this country, arc superadded to them, a chapter large superiority of exports is still apparent. The an- nexed account of our exports and imports from 1777 to 1796, including the imports from India, as delivered by Mr. Irving to the Secret Committee of 1797, will fully confirm this reasoning. Whatever hope, therefore, whatever encouragement the omission of the imparts from India in the current returns of the year might have he ld out for the possible accuracy of Lord King’s hypothesis, yu it is wholly in¬ explicable, when the requisite evidence to confirm or invalidate it was so immediately on the surface, that a common regard for the truth of his observations should not have prompted an examination. Had the surplus resulted from so simple a cause as the omission of the imports tYmvlnTia, deluded indeed must the nation have been to Pave Constructed its commercial regulations for a century oil a fact, which merely arose from the incom¬ petency of its custom-house officers to balance their ac¬ counts ! It is scarcely credible, that a statesman of Lord King's talent could have imagined that a fact, which no inspector could have so winked as not to have seen, should so long have escaped observation. No ground, therefore, exists for supposing that our surplus of exports is occasioned by the remittance of silver to India instead of being the result of our foreign expenditure. 248 CHAPTER XI. On the Causes of the Depreciation of Money. HAPTER If the general reasoning contained in the preceding part of this inquiry be founded in truth, it is evident that at one and the same period the same sum has been uni¬ formly made to measure the same value, exclusively of the' charge of transit, in every part of the world; but as va¬ rious impediments have operated to disqualify the same sum from measuring the same value at different periods, I shall endeavour to state the causes and effects of this disparity, and point out the reform, which it is requisite to make in the circulating system of Europe for its future prevention. In this investigation, however, it is only necessary to illustrate the alteration, which has ensued from the progressive reduction in the value of money, as no instance has occurred of any alteration from a progres¬ sive advancement. In every period of history, from the conquest to the present times, the value of money has sustained a gradual depreciation: but as the depreciation has resulted from distinct causes in distinct ages of our history, I shall divide the whole epoch into three periods ; from William the First to Elizabeth, from Elizabeth to the Revolution, and from the Revolution to the present times. [To face page 248. A Table exhibiting the Prices of various Necessaries of Life, together with that of Day Labour, in sterling- Money, and also in Decimals, at different Periods from u e £° nqU A *° ,e P re f nt Time, denved from respectable Authorities; with the Depreciation of the Value of Money inferred therefrom To which is added the Mean Appreciation of Money, according to a Series of Intervals of 50 Years, for the first 600 Years; and, during the present Century at shorter Periods’ Year of our Lord THE PRICES OF VARIOUS ARTICLES AT DIFFERENT TIMES. | Wheat, per Bushel. Miscellaneous Articles. from Articles Beef and Mutton, per lb. in Hus¬ bandry, Depreciation of Money, according to the Price of Cattle in Husbandry. Poultry. Cheese, per lb. Gallon. Small Beer, per Gallon. Horse. Ox. Cow. Sheep. Hog. Goose. Hen. Cock. Wheat. ccllane- ous Ar¬ ticles. Meat. Day Labour. Mean of all. s. d. £. s. d. £■ ii d. /• d. £■ *- d. £. s. d. 4 . d. S. d. s. d. d. d. s. d. d. d. qr. s. d. IO5O 0 fii 11 76 *89 076 20 060 37 O 1 3 29 0 2 0 36 42 IO 42 2 6 1150 O 4 i OI25 0 4 Si Ol8 03° 0 3 0 2 I25O 1 n 111 O 107 0 17 0 0 17 1 O 0 3 O 4 i 1350 1 io£ O l8 4 43 1 4 6 66 OI72 106 0 2 7 61 0 2 6 45 0 9 75 0 2 24 O 34 t* 5 6 O 3 IOO 75 77 1450 T- 5 1 15 8 Ol 56 O 4 ll| O 5 1 0 b‘i 0 31 1550 1 lOjr 2 2 0 100 1 i6‘ 7 IOO 0 16 0 IOO 0 4 31 IOO 0 5 6 IOO 1 O IOO 0 IOO 1 O IOO 5 IOO 2 IOO ° H IOO 1 IOO* IOO i o\ 0 4 IOO IOO IOO 100 100 1600 4 °T 0 4 2 1 2 6 6‘ 1625 | 4 11 2 0 1 6 0 1650 | 5 6 0 4 2 1675 4 6 5 10 ° 250 36 ° 184 2 17 0 345 011 0 256 0 14 0 254 3 0 300 1 3 182 1 3 I2 S 4)2 90 2 IOO 0 8 530 250 239 1 0 7I 246 2.39 l66 188 210 0 0 t-'. 1 4 9-2 0 10 3 1720 14 4 ? 1 0 3 2 2 0 8 174° 3 S 1000 476 800 437 7 7 0 884 160 602 1 15 0 634 3 *> 35° 1 6 218 1 6 150 9 180 >75” 1 0 800 3 300 434 3 © 0 10 197 434 2 66 2 50 287 1760 3 9i 1400 667 810 0 4 6 5 700 874 170 626 1 15 0 6 34 5 0 500 1 10 266 1 10 i g 3 10 200 5*2 262 1 2 930 3 q 492 4 2 Oil 203 492 400 2 75 342 1780 1 4 5 t 1 2 1 795 7 10 iy 0 0 9°4 1680 890 16' 8 0 2000 1 18 0 882 580 i960 3 0 300 1 6‘ 218 1 6‘ 150 n| 230 5 250 1 969 H 275 75 z 5 3 1 5 ? 426 752 51 1 43 6 * The small figures denote the price in decimals, whereof those for the year 1550 may be taken for the integer, viz. 100. Mean Appre¬ ciation by Interpolation. A. D. IO5O 2 6 llOO 34 1150 43 1200 31 1250 60 1300 68 1330 77 14°0 «3 1450 88 1500 94 1530 100 l600 144 1650 188 1^75 210 1700 238 1720 2 57 1740 287 1750 3 H 1760 342 1770 3 8 4 1780 427 1790 496 J 795 531 1800 | nearly ^ 56 2 Besides most of the old chronicles and historians, the following books were consulted, in constructing the above table ; viz. Bishop Fleetwood’s Chrotiicon Pretiosum, 1st and 2d edit. Liber Garderobee , in 12QO The Sketch of the Establishments of this Kingdom, temp. Ed. III. et seqq. by J. Bree, 1791. Collection of Ordinances and Regulations of the Royal Household, in divers Reigns, from Edward III! to King William and Queen Mary, Lond. 1790, 4to. The 1 ith volume of the Archceelogia. A11 Enquiry into the Prices of Wheat and other Provisions in England, from the Year 1000 to 1765, by Mr. Combrune 5 fol. Lpnd. by T. Longman, 1768. Dr. Smith’s Wealth of Nations. Sir James Steuart’s Political CEconomy ; and Dr. Henry’s History. ' ’ 249 The depreciation of money from William the First to chapter Elizabeth was occasioned in part by the debasement of the coin, and in part by the gradual increase of gold and silver from the coexistent mines of Europe ; from Eliza¬ beth to William the Third it attained additional rapidity by the influx of gold and silver from the mines of Ame ¬ rica ; and from William the Third to the present times it has been still further accelerated by the general publica¬ tion of paper. From William the First to Elizabeth our coins were debased by successive innovations to nearly one-third of their primitive weight, as a Tower pound of silver was coined at the time of the Conquest into 20s. and in the reign of Elizabeth into 58 s. 1 \d. But as the mode and progressive augmentation of the debasement are detailed with peculiar perspicuity by (a) Lord Liverpool, I shall give the narrative in his own words, that I may not dero¬ gate from its merit by abridgement. (6) “ The pound weight which, was made use of in the mints of this realm till the 8th Henry the Eighth for weighing gold and silver was the Tower pound, or wt at is called the moneyer’s pound; it was lighter than the pound troy by three quarters of an ounce troy. It is certain that this Tower pound is the same, that had b en used by our Saxon ancestors in weighing the precious (a) Where a statement of facts is require*!, it is impossible to follow a better guide than Lord Liverpool. Where theory is requisite, I am sorry to add, it is impossible to follow a worse. !b) See Lord Liverpool’s Letter to the King, page 28. K.k 250 chapter metals, and nearly the same, that was made use of for the XI - same purpose in the principal cities of Germany: this pound was called by French writers the Rochelle pound. Henry the Eighth, in the 18th year of his reign, forbade the use of the Tower pound in his mint, and introduced the troy pound in its stead, which has continued to be used there ever since. “ At the accession of William the First to the throne of England, the pound in tale of the silver coins current in this kingdom was equal to the pound weight of standard silver, that is, the Tower pound before mentioned. The pound in tale was divided into 20.9. and each shilling into twelve-pence, or sterlings. The pound weight was divided into 12 ounces, and each ounce into 20 dwt., so that each penny or sterling weighed one pennyweight, or 24 grains. The only coins made in this early period were pennies or sterlings. This simple system of coin- age, by which the pound in tale was made equal to the pound in weight, and was divided in the manner before mentioned, is supposed to have been first introduced by Charlemagne into France and his other extensive domi¬ nions, towards the end of the eighth century. It might have been introduced from thence into this island in the time of our Saxon ancestors by the influence of the Norman princes, who had a considerable connection with this kingdom, before William Duke of Normandy took possession of the throne. The system of coinage thus described continued without any alteration in the weight of our silver monies till the 28th of Edward the First. It is true that halfpennies, then frequently called mailles. as well as farthings. Were introduced by Henry the First, ciiapf.er Pennies, however, were still during the whole of this period the highest denomination of our silver coins. “ Edward the First, in his 28th year, first debased our silver coins. “ Before I proceed to give an account of the successive debasements made in our coins, it is proper to observe, that coins may be debased in three different ways; “ First, by diminishing the quantity or the weight of the metal of a certain standard of which any coin of a given denomination is made ; “ Secondly, by raising the nominal value of coins of a given weight, and made of a metal of a certain standard ; that is, by making them current or legal tender at a higher rate than that at which they passed before ; “ Thirdly, by lowering the standard or fineness of the metal of which coins of a given weight and denomination are made ; that is, by diminishing the quantity of pure metal, and proportionally increasing the quantity of alloy. “ I shall be enabled to state in a clearer light the suc¬ cessive debasements made in the coins of this realm, if I arrange them in conformity to the different manners of debasing coins, before stated under the following heads : “ First, the alterations and debasements made in the silver coins of this realm by diminishing the quantity or weight of standard silver put into them. The silver coins have always been debased in this manner, except in the 252 chapter short period of nine years, from the 34th Henry VIII. to the 6th Edward VI. “ Secondly, the alterations and debasements made in the gold coins of this realm, either by diminishing the quan¬ tity or weight of the gold put into them, or by raising the nominal value of the existing coins, in order to preserve the relative proportion or value of the gold coins with that of the silver coins current at successive periods. The gold coins of the realm have been debased in both these manners, but more frequently in the latter. “ Thirdly, I shall reserve for a distinct head an account of the extraordinary and violent alterations and debase¬ ments that were made in the coins of this realm, particu¬ larly by lowering the standard of the metal put into the silver coins during the short period before mentioned. At the end of that period a reformation of the coins of the realm from the late unexampled debasements com¬ menced, though it was not completed, and though the old standard of our silver put into our coins was not perfectly restored till the 2d of Elizabeth. The various and violent proceedings which took place from the 34th Henry VIII. to the 6th Edward VI., may be considered as a sort of convulsion in the monetary system, and proper, therefore, for a separate head. “ It is necessary in'calculating these debasements to ad¬ here to one and the same weight, and as the Tower pound was the longest in use, I shall make my calculations according to the Tower pound. s 2 r> “ It has already been stated that Edward the First, in cn u-'rat the 28th year of his reign, first debased the silver coins of this realm. “ In this year he diminished the quantity or weight of sterling silver in the silver coins of the several denomi¬ nations made at his mint. He coined the pound weight of sterling silver into 20 shillings and 3d. in tale, so that the pound sterling in tale was thereby debased 1 ff per cent. “ This king first coined silver groats of the value of four pennies, which took the name of groats from their being larger coins than any that had yet been made. The groats coined by this prince were but few ; and this de¬ nomination of money did not become generally current till the reign of Edward the Third. “ The second debasement of our silver coins was in the 18th of Edward the Third, who then coined the Tower pound of sterling silver into 22 s. 2 d. in tale ; and the pound sterling in tale was thereby further debased 8 yottt per cent. “ The third debasement of our silver coins was in the 20th year of the same king, who then coined the Tower pound of sterling silver into 22 s. 6d. in tale ; and the pound sterling in tale was thereby further debased 1 ~T9T per cent. “ The fourth debasement of our silver coins was in the 251 chapter 27th year of this king, who then coined the Tower pound of sterling silver into 2/5.C in tale ; and the pound sterling hi tale was thereby further debased 13 y per cent. “ The fifth debasement of our silver coins was in the 13th of Henry the Fourth, who then coined the Tower pound of sterling silver into 30 s. in tale ; and the pound sterling in tale was thereby further debased 13 ^ per cent. “ The sixth debasement of our silver coins was in the 4th of Edward the Fourth, who then coined the Tower pound of sterling of sterling silver into 37 s. 6d. in tale ; and the pound sterling in tale was thereby further de¬ based 13 y per cent. “ Henry the Seventh, who made no change in the weight of his silver coins, first coined shillings, which had before been only a money of account. Shillings, however, did not become generally current till the reign of his suc¬ cessor, Henry the Eighth, and they were then commonly called testons. “ The seventh debasement of our silver coins was in the 18th of Henry the Eighth, who then coined the pound troy of sterling silver into 45s., or according to the Tower pound, into 425. 2 %d. ; and the pound sterling in tale was thereby further debased 5 i-y per cent. “ This king first coined crown pieces of silver of the nominal value of 55. ; but it is supposed that he made but 25 $ few of them, and that they did not become generally cur- Cii 'PTr.r. rent till the reign of Queen Mary. “ In the reign of Ouecn Mary silver half crowns were first coined, and silver crowns became generally current. “ The eighth debasement, of which I shall take notice under this head, was in the ed year of Queen Elizabeth ; of the great and extraordinary debasements in the stand¬ ard of the metal of which our coins were made between iSth Henry the Eighth and the 6th Edward the Sixth, as well as of the proceedings for the reformation of the coin in the last year of the reign of Edward the Sixth, and also during the whole of the reign of Queen Mary to the ad of Elizabeth, I shall give a separate account hereafter. “ Queen Elizabeth, in the ad year of her reign, restored the silver coins of her realm to the standard of old ster¬ ling, and she coined the pound troy of sterling silver into 60s. in tale, or, according to theTower pound,into 56.0 and the pound sterling in tale, compared with what it had been in the 18th Henry the Eighth, was thereby further debased 11 fj- per cent. “ The ninth and last debasement of our silver coins was in the 43d Elizabeth, who then coined the pound troy of sterling silver into 6gs., or, according to the Tower pound, into 58s. i\d .; and the pound sterling in tale was thereby debased 1 P er cent.” chapter According, therefore, to Lord Liverpool's statement the Tower pound of silver was corned in d. into 20 o - - 20 3 - - 22 2 - -22 6 - - 25 O - - 30 o - - 37 6 s. d. - - 42 z\ Pound Troy 45 o - - 56 3 - - 60 o - - 58 i{ - - 6 20 By these successive debasements, therefore, the pound in tale, or 20s., was nearly reduced, from William the First to Elizabeth, to one third of its primitive weight. The debasements, which were made in the coin during this period, were partly effected for the purpose of aug¬ menting the revenue by the seignorage which was ex¬ tracted from the coin on its refabrication, and partly with the view of relieving the crown from its exigencies, by enabling it to liquidate its debts with a smaller sum of money. According to Lord Liverpool, the silver subtracted on re-coinage or the dues of seignorage, sometimes amounted to a considerable sum, as the frauds which were practised, in the remedy of the coin and the admixture of alloy ma¬ terially contributed to its augmentation. A. D. 1066 1300 *344 1353 1412 1464 1527 1560 1601 257 The king was enabled to liquidate his debts in conse- chapter quence of these debasements with a smaller sum of money, as he was authorized by his prerogative to pub¬ lish the new coin at the same value, at which the old coin was previously published, and was therefore empowered to make the same quantity of silver discharge a larger proportion of debt, than it could have done antecedently to the alteration. But whatever temporary relief these innovations might have given to the exigencies of the crown, no expedient could have beem more impolitic, as the revenue was permanently diminished in the same ratio, in which the coin was deteriorated. This result was sufficiently experienced, though no efficient measures were taken to elucidate or remove the cause. The familiar habit of circulating money by tale, instead of by weight, had given rise to an opinion that govern¬ ment was enabled to affix on the coin an arbitrary value, and that it was only necessary to declare, that such a piece of money should be a legal tender for such a sum in order to make it permanently pass for so much value. But though, in the common intercourse of society, any given coin, impressed with a particular stamp, and desig¬ nated by a particular term, pass current by tale from a confidence in the government, which publishes it, without any consideration of its weight; yet when, from an alte¬ ration in the standard, it no longer indicates the same quantity of metal, which it antecedently expressed, it is immediately decried, and circulated at the value which it actually contains. For as all prices are regulated by the relative proportion which produce and money bear to each L 1 25S chapter other; and as no subdivision of the coin can have the least operation to alter the gross amount of gold and silver, all produce will exchange for the same quantity as before the debasement; and as this quantity will consist of a greater number of pieces, prices will be raised in propor¬ tion as the coin is subdivided, and money will be reduced in \ alue according as it is reduced in weight. If, there¬ fore, the constituted authority of the state should ordain, that a sixpence should effect the payment of a shilling, the pric - o' produce would be instantly doubled in nomi¬ nal value, and government would lose half its revenue. Exclusive, therefore, of the injustice of the alteration, which would defraud the public creditors of one half of their equitable claims, the crown w'ould be eventually involved in greater difficulties from the same nominal revenue being possessed of no more, than half the power, of which it was possessed before. The diminution, how'ever, of the public revenue, and the injustice to the public creditors, constituted but a small part of the evil, which resulted from these debase¬ ments : the mischief extended through all the gradations of society, and in every relation of private life, maintained by the payment of a fixed income, an injury was sustained commensurate with the extent of the innovation. ( a ) Dr. Henry in his history of Britain has ably illustrated the effects which they produced. “ Though our kings and great barons/’ he says. {«) See Dr. Henry’s History of Britain, 8vo. edit. Vol X. page s66. 2 59 “ were the chief promoters of the diminution of the weight chapter and value of the coin, they were by far the greatest suf- ferers by that imprudent measure ; for by that means all the fixed annual payments that, were due to them from their subjects and vassals, were much diminished in their real value, though they continued the same in name; they received the same number of pounds, which had been originally stipulated, but these pounds did not con¬ tain the same quantity of silver, and would not purchase the same quantity of goods with those in the original stipulation. The king and the nobility discovered the error they had made and the loss they had sustained, and endeavoured to apply a remedy, but it was not the natural and only effectual one of restoring the coin to its original weight and purity. An act of parliament was made in 1467 to the following purpose : ‘ that all debts should be paid in the same substance or quantity of silver as at the time of making the contracts.’ This law was certainly very equitable, but it is obvious the execution of it would be at¬ tended with many difficulties, and productive of many disputes, and that it would be no easy matter to persuade vassals, tenants, and debtors of all kinds, to pay a greater number of pounds, shillings, and pence, than they were bound to pay by their original obligations. There is sufficient evidence still remaining, that though several laws were made of the same tenor with that above, none of them could be executed, and that the several feudal payments due by the vassals of the king and barons, by the successive changes of the coin and of the value of money d vindled down to 1 ss than the hundredth part of what sas c-iiginaily intended, and in many cases to a moie trifle.” 260 chapter Even, therefore, had the value of gold and silver in the age between William the First and Elizabeth continued ^ the same ; had the same specific gravity been at all times exchangeable for the same quantity of produce, yet as money is exclusively estimated according to its weight, the pound in tale, or 20s., would have purchased in the reign of Elizabeth no more, than one third of the produce, which it purchased in the reign of William the First, and would consequently have retained no more than one third of its original value. Not only, however, was our money during this period reduced in value in proportion as it was reduced in weight, but it was still further depreciated by the gradual augmentation of its quantity from the co-existent mines of Europe. The table, which Sir George Shuckburgh has published of the depreciation of money, from the conquest to the present time, very properly relates only to money of the same standard, and therefore contains the gradual declination in the value of the same specific gravity of silver, without including the distinct depression of the coin from the debasements, which were effected in the age between William the First and Elizabeth. Unless the learned author, in his general estimate of the relative value of money, had proceeded upon the principle of reducing the coins of the different reigns in the ruder period of our history to a common standard, it is impos¬ sible that he could have attained to a correct conclusion. Had he found that 20 s. in the reign of William the First purchased so much more produce than 20 now purchase, and without adverting to the disparity in the weight of the 205. or 240^. of those days, and the 205. of these, had formed the deduction of the difference in the value of chapter money from the difference, which he observed in the nominal prices of the two periods, his inference would have been irregular, as 205. then contained nearly three times the weight of silver, which they contain in the present age. He therefore converted the money of the different reigns that preceded Elizabeth into the money of her reign, or what is the same thing, into the money of the present times, as our coin has undergone no alteration since the debase¬ ment, which she made in 1601. All the prices, therefore, which are recorded in the table, are given in the money of the present times, instead of in the money of the age, to which they refer ; and the depreciation, which is deduced is the depression of money of the same standard, of the pound in weight, and not of the pound in tale. In estimating, therefore, the value of money in the age between William the First and Elizabeth with the value of money in the present times, it is necessary to convert the money of the particular reign into the money of the present times, for the purpose of reducing them to a common standard, and preparing them for appreciation by Sir George Shuckburgh's proportions. This reduction may be effected by the following table of the specific gravity of our coin from William the First to Elizabeth, (d) constructed in the able and elaborate treatise of Mr. Folkes. (a) See Treatise of Mr. Folkes in the Society of Antiquarian Coins, 262 Year of the King’s Reign, and A. D. Standard 1 of the Silver. Weight of 1 20 Shillings in tale. (a) Value of the present Money. Propor- Conquest, 1066 old ster. oz. dwt.gr: 11 05 00 £ 2 . 5. d. 18 01 2 q. 2.906 28 Ed. I. 1300 — 11 02 03 2 17 °5 2.871 18 Ed. III. 1344 — 10 03 CO 2 12 05 1 q. 2.622 20 same 1346 — 10 00 00 2 11 08 2.583 27 same 1353 — 9 00 00 2 06 06 2-325 i3Hen.IV.1412 — 7 10 CO 1 18 09 i -937 4 Ed. IV. 1464 — 6 00 00 1 11 00 1*55 18 H. VIII. 1527 — 3 06 16 1 07 06 sq. 1.378 34 same 1543 oz. dzvt. W 1 2 3 00 00 i 03 03 1 q. 1.163 36“ same 1335 W 3 2 — 0 13 11 2 q. 0.698 37 same 1546 W 7 2 -- 0 °9 03 sq- 0.466 3 Ed. VI. 1349 3 same 1551, W 3 2 w 8 2 3 06 16 0 04 °7 sq- 0.232 6 same 1552' wo 1 4 00 00 1 00 06 $q. 1.028 1 Mary 1553 wo 2 -- 1 OO 05 $q: 1.024 2 Eliz. 1560 old ster. — 1 00 08 1 1.030 43 same 1601 — 3 17 10 1 OO OO 1.000 This table is as requisite to give the relative weight of our money, as the table of Sir George Shuckburgh is to give its relative value. According to this explanation, if the value of money (a) The word value ought to have been weight; value is a relative term depending on quantity as well as weight; and though the weight of 2or. in tale in the reign of William the First was no more than £?,. i8r. I \d. of our present money, yet their value was twenty times this sum. This mistake was frequently made by our old writers. Lord Liverpool has also committed this error. See Lord Liverpool’s Letter to the King, page 39, &c. in the age of William the First be e-timated with the chapter value of money in the present age, and 20.9. of his reign be compared to 9.0s. of this, the money of William must be first converted into the money of the present time, by the proportions of the table of Mr. Folkes, to reduce them to a common standard. These proportions give to 20.9. of his reign the same weight of silver which £9. 18.9. 1 \d. now contain. In applying, therefore, the proportions of Sir George Shuckburgh’s table to find their relative value, it is necessary to appreciate £9. 189. \\d. for the 209. of the reign of William, which make the pound in tale of his reign equal to £69. 16s. 4-i-. of the present times. But if the disparity in the specific gravity of the money of the respective periods were overlooked, it might be conceived that the pound in tale of William the First was worth no more than £9 1. 189. 3 \d. of the money of the present reign, and like the pound in weight, was depreciated only 20 instead of 60 times its own value. Since, then, the table of Sir George Shuckburgh ex¬ clusively relates to the depreciation of money of the same standard, it is obvious, according to the proportions which he formed, that the pound in weight was depreci¬ ated, from William the First to Elizabeth, from 1050 to 1600, somewhat more than five times its primitive value. This depreciation could only have resulted from an augmentation in the quantity of gold and silver, through the fertility of the co-existent mines of Europe, since it would be utterly inconsistent with reason to infer that it originated in the relative diminution of produce, as the 264 chapter historians of the times sufficiently manifest that the coun- try improved in opulence and civilization during the whole period. Dr. Adam Smith has, however, concluded, in the di¬ gression, which he made concerning the variations in the value of silver, that from the reign of Edward the Third to Elizabeth, from 1350 to 1570, money was on the ad¬ vance instead of the decline, though Sir George Shuck- burgh's table, during the same period, affirm a deprecia¬ tion of one third, or above 30 per cent. Dr. Adam Smith was led to form this conclusion from the reduction, which he observed in the price of corn ; and as he was of opinion, that corn was a more accurate criterion of the value of money “ than any other commodity or set of commodities,” he naturally inferred, that money had risen in the same proportion, in which corn had fallen. But this opinion appears to me to have been formed on insuf¬ ficient grounds. Corn can be no further regarded as a criterion of the value of money, than as the income of each individual is expended in its purchase. If at the time, that a reduction was effected in the price of corn, every other commodity were advanced, not only would it be erroneous to infer, that money had risen in value, but it would be erroneous not to infer that it had fallen ; as in every department of expenditure, except corn, the same sum would be incompe¬ tent to purchase the same quantity of produce, and JT 500. a year, or any given income, be inadequate to maintain the proprietor in the same position in society, in which 265 £4°o.,or whatever might be the depreciation,antecedently chapter maintained him, Of the earnings of the poorer classes of the community, as much the greater proportion is undoubtedly expended in corn, or in the necessaries of life composed of corn, corn may be said to them to form a better criterion of the value of money, than any other commodity; but in the middle and higher ranks of society a less and a less pro¬ portion of income is occupied in corn, and it is possible, that its price may materially decline, while the comforts, the elegancies, and luxuries of life, proportionally advance, and reduce a fixed income many degrees below its ori¬ ginal value. If, then, at any given period corn should increase in a much greater ratio than currency, and all other produce in a much less, it is obvious, that corn would decline in price, and all other produce advance ; and that money would sustain a general depreciation, notwithstanding the diminution in the price of corn. From 1350 to 1570, by an improved or extended cultivation, corn augment¬ ed in a much greater proportion than money, and as it experienced a correspondent reduction in price, money undoubtedly rose in value with reference to it; but as the advanced price of the miscellaneous articles in Sir George Shuckburgh's table during this interval sufficient¬ ly attest that money augmented in a greater ratio, than every other produce, it is evident, that it suffered a depres¬ sion in general value, notwithstanding the partial rise in its appreciation with relation to corn, and fell in the 220 years from 77 to 116, or above 30 per cent. m m 266 chapter The inference, therefore, which Dr. Adam Smith de- duced from the low price of corn, that money was on the advance instead of the decline during this period, was drawn from insufficient premises. In taking, therefore, a collective view of the deprecia¬ tion of money between William the First and Elizabeth, from the concurrent causes of an increase in the quantity of gold and silver by the fertility of the co-existent mines of Europe, and a debasement of the coin by the authority of the crown, it is manifest, that the pound in tale at the close of the reign of Elizabeth was reduced to about one sixteenth of the value, which it had possessed at the time of the Conquest; for though had the coin continued of the same standard, mas, of the reign of William the First would, by the proportions of Sir George Shuckburgh’s table, have been equal to no more than £5. 105. gd. of the reign of Elizabeth, yet as 205. of his reign contained the same quantity of silver as £m. \ 85.1 \d. of her reign, they were in reality equal to £16. 15. 8 \d. of the money of 1600, instead of £5. 105. gd. The con¬ sideration, however, of the depression of money from 1550 to 1600 should in strictness of reasoning have been deferred to the second period of this investigation, as it was almost wholly occasioned by the influx of bullion from the mines of America instead of from the mines of Europe ; but as the last debasement of our coin was effected in 1601, I thought it more conducive to the simplification of my subject to close the first head of my inquiry in that year, than at 1550. In investigating the depreciation of money in the second SG 7 period, from Elizabeth to William the Third, the subject m vn 55 .!t assumes a less complex form, as no controversy has ever arisen, either on the fact of the depression, or on the cause that led to it, the influx of money from America. America was discovered in 1491, and the mines of Potosi in 1527; but by Sir George Shuckburgh's table no sensible excess occurred in the depreciation of the money of Europe till 1550. From 1550 to 1600 its value- fell from 100 to 144, or 44 per cent. This remarkable depression did not, as already noticed, escape the obser¬ vation of the able statesmen who at that time conducted the councils of this country. In the words of Sir William Blackstone, (a) “ they directed,in 1570, by S. 18 Eii. c. 6 . that in college-leases one third of the old rent then paid should for the future be reserved in wheat or malt, reserving a quarter of wheat for each 6‘.v. 8^., or a quarter of malt for every 55. ; or that the lessees should pay for the same according to the price, that wheat and malt should be sold for in the market next adjoining to the respective colleges on the market day before the rent becomes due. This is said to have been an invention of Lord Treasurer Burleigh, and Sir Thomas Smith then principal Secretary of State, who observing how greatly the value of money had sunk, and the price of all provisions risen, by the quantity of bullion imported from the new-found Indies, which effects were likely to increase to a greater degree, devised this method for upholding the revenues of col¬ leges. Their foresight and penetration have in this (a) See Blackstone’s Com, Vol. II. page 322. 268 ch apter respect been very apparent, for though the rent, so re- served in corn was at first but one third of the old rent, or half of what was still reserved in money, yet now the proportion is nearly inverted, and the money arising from (./) corn rents is, communibus annis, almost double to the rents reserved in money.” In the second fifty years after the time that the Ame¬ rican returns assumed a certain degree of regularity, the depreciation of money proceeded with less rapidity, and from 1600 to 1650 extended no further than from 144 to 188, or 30 per cent. This diminution in the ratio of depre¬ ciation did not result from any decrease in the fertility of the American mines, but from the same quantity of bullion being no longer possessed of the same power. During the earlier period of the influx the sums imported necessarily produced a more powerful effect, as they bore a nearer proportion to the pre-existing stock of specie in circula¬ tion , but in the same degree, in which this stock accumu¬ lated by the regular remittances, the supplies received became of less value, and every successive year caused a less depression than the year preceding, from bearing a less proportion to the aggregate amount. In the third fifty years the depreciation was still less, and from 1650 to 1700 the value of money only fell from 188 to 238, or 26 per cent. ; nor would the depression (a) The price of wheat being now 80s. the quarter, the corn rent is six times the value of the money rent. 269 have proceeded so far, had not the banking system, which CHAPTEii began at this period to be generally established in Eu- rope, promoted its extent. It is evident, therefore, that towards the close of the reign of William the Third, the proceeds of the American mines were gradually losing more and more of their influence to lower the value of money, when a new system prevailed in Europe, that gave to the depreciation a new impetus. The accelerated depression produced by this system will form the subject matter of the third part of this In¬ quiry, in the period that elapsed from 1700 to 1800, from the close of the reign of William the Third to the present times. It was remarked in the preceding period, that the value of money fell from the year 1550 to 1600 44, per cent., from the year 1600 to 1650 30 per cent., and from the year 1650 to 1700 2 6 per cent., notwith¬ standing that the annual returns from America experien¬ ced during this interval no diminution ; but from the year 1700 to 1750 the value of money fell from 238 to 314, or 32 per cent., and from the year 1750 to 1800 from 314 to 562, or 79 per cent., notwithstanding that the American returns experienced no increase. It is impossible, there¬ fore, to attribute this acceleration in the ratio of deprecia¬ tion exclusively to the influx of money from America, not only because the annual supply prior to 1700 was regularly producing a less instead of a greater depres¬ sion, but because the extent of the depreciation from 1750 to 1800considerably even exceeded the depreciation, that was effected from 1550 to 1600 upon the first erup¬ tion of the American mines, when the annual remittances Z10 CH vPTiiii were acting with undiminished power on a relatively small amount of circulating specie. Had no depreciation resulted from 1700 to 1800 beyond that, which the import of bullion from America could have produced, the depres¬ sion of the first 50 years, according to the preceding ratio, would have been no more than 22 per cent, instead of 32, and the depression of the second fifty, 18 per cent, instead of 79. The ten per cent additional depreciation, therefore, in the first fifty years of the 18th century, and the 61 per cent, additional depreciation in the second, must necessarily be ascribed to some other cause. Some authors have, however, doubted the fact of the depreciation during the 18th century, and Dr. x\dam Smith has even gone the length of contending, that from 1700 the value of money has rather risen than fallen. (vas able, of the price of each article during an allotted period, and by striking the mean, gave to every price the authority of the whole pe¬ riod, instead only of the authority of a single year. As they thus assumed the complex character of mean prices, the depreciation, which was deduced from them, attained the same accuracy, or nearly the same accuracy, which a regular series wouldhave afforded, as it was drawn from a compound instead of a simple estimate. But though from 1050 to 1550 the prices enumerated in the table were the mean of whatever instances he was capable of collecting in each successive century, yet from 1550 to the present times, as evidence was more easy of access, each price is the mean of a shorter period, and the depre¬ ciation of course more nearly approaches the accuracy, which an unbroken series would have afforded. Not only however, do the prices represent, towards the close of the table, a shorter period, but the list of prices is more complete ; and in 1550, 1675, 1740, 1760, and 1795, the price of each article is distinctly mentioned. Even, there¬ fore, if it be said, that any darkness still hangs over the precise ratio of the depreciation of money in the ruder ages of our history, of its ratio from the reign of Eliza¬ beth to the present times no doubt can remain, for as the depreciation is in conformity to the difference of the prices, and as no ground exists for questioning the fidelity of Sir George Shuckburgh's researches in elucidating the difference, no ground can exist for questioning the ratio of the depression. 278 chapter Upon the general merits of this table, after the pre- ceding explanation, it is needless to descant. It is suffi¬ cient to say, that antecendently to its publication all cal¬ culations on the relative value of money in ancient and modern times, from the total failure of a graduated scale, were arbitrary and loose. This uncertainty is now re¬ moved, and the historical reader is directed through a mass of matter before inaccessible, and enabled to estimate, with a near approximation to truth, the private wealth and the public resources of the country through every reign. But important as is this document to the historian in the review of past events, it is still more important at the present period to give to money the means of forming a more durable measure for the same value, and preventing the loss, which fixed incomes sustain from its constant alteration. The whole of the table is executed with a precision and judgment worthy of the distinguished talents of its scientific and accomplished author, and is an honourable accession to the literature of the age. Of the opinion, therefore, which Dr. Adam Smith was led to form from the low price of corn, that the value of money was on the advance, instead of the decline, from the commencement of the 18th century, this table is a masterly refutation ; and as I have already proved, that the depreciation from 1700 to 1750 extended to 32 per cent., or 10 per cent, above the ratio which the annual proceeds of America could effect; and from 1756 to 1800 to 79 per cent., or 61 per cent, above the ratio which the American proceeds could effect; I shall now endeavour to shew, that the excess in each instance was exclusively occasioned by the introduction of a new circulating medium chAPTEit in the general publication of paper. During the first fifty years of the 18th century banks were established, or had already been founded in most of the principal cities of Europe, and the circulation of paper was more or less encouraged by all. I have already ob¬ served in my review of Lord Liverpool’s Letter to the King, that in the reign of William the Third our currency shewed every indication of an over-charged circulation of paper, an unfavourable exchange, an excess in the market price of money, a debasement of the silver coin, a pre¬ mium on the gold coin, and a discount on paper. The copper coin was equally defective with the silver, and card tokens were given by the manufacturers in the place of halfpence. The same excessive utterance was preva¬ lent in Scotland, and notes so low as the value of a six¬ pence were universally current. The Mississippi scheme also caused, though at a somewhat later period, a similar over-issue in France. But the circulation of paper during this interval was intermissive and irregular; though pushed to a nextreme in England and Scotland during the reign of William and part of the reign of Anne, and in France during the regency of the Duke of Orleans, yet its excess was in neither instance of long duration. The currency of England was composed of the paper of the Bank of England and goldsmith’s notes ; but as' the fre¬ quent bankruptcies of the goldsmiths discredited their paper, it gradually disappeared, and left to the Bank of England the exclusive supply of the market. The same causes led to a smilar reduction in the paper of Scotland, 280 chapter anc j the Mississippi scheme was but a bubble of a few months. The principal bank, moreover, in Europe in the scale and importance of its transactions, was the Bank of Amsterdam, which differed in its constitution from those of England Scotland, and France by b ing a bank of de¬ posit instead of a bank of circulation, and did not therefore so materially contribute to the depression of money; for though the transfer of the recipe facilitated the extended operations of commerce, yet as it could not be substituted for specie in the dealings of retail trade, it could not in the same degree conduce to an advance of prices as the publication of an inferior paper. Since, then, the over¬ utterance of paper was only effected at certain intervals, and was only productive of an extraordinary depression at the period of the over-utterance, it is not matter of surprise, that the regular depreciation of money, which resulted from the introduction of the new medium, during the first fifty years of the 18th century, did not exceed 10 per cent. But from 1750 to 1800 the system of a paper currency, however unpropitious in its commencement, was matured and perfected in every part of the civilized world. In England, Scotland, and Ireland, in France, Spain, Portu¬ gal, Italy, Austria, Prussia, Denmark, Sweden, and Rus¬ sia, in America, and even in our Indian provinces, the new medium ha been successfully established, and has subjected the intercourse of the world, in all its inferior as well as superior relations, to be carried on in a far greater degree by the intervention of paper than the intervention of specie ; and as all nations have encouraged 281 its utterance, without intermission or pause to a consider- ci-iapeer able extent, and many to a pernicious extreme, the depre- ciation, which has ensued, has necessarily exceeded the depreciation of the former period, and has surpassed the ratio, which the remittances from America could effect, by 61 per cent, instead of 10. It has, however, been conceived by many, that the issue of paper has no tendency to depress the value of money, and Dr. Adam Smith, in opposition to the sentiments of Mr. Hume, was among those, who advocated this opinion. But if it be true, that all prices are in proportion to the quantity of currency, and that the quantity of currency is augmented by the publication of paper, it necessarily follows, that paper must occasion an advance of prices correspondent with the augmentation, and proportionally depress the value of money. Were the currency of a country to consist of one million of specie and ten millions of paper circulated at par with specie, I know not by what reasoning it can be maintained that prices would remain at the point, at which they stood with the one million of specie only ; for if paper answer the purposes of money, it must of course contribute to an advance of prices in the same manner as an addition of so much money ; and if it do not answer the purposes of money, it can be of no advantage to the banks, that utter it. The very motive, therefore, with which it is published, suffi¬ ciently implies a depressive power; but as the power is exclusively limited by its ability to fulfil the office, and duly act as a substitute for money, if the paper be reduced to a discount, and be not convertible into the sum, which it o o 282 chapter expresses, the power will necessarily be diminished in , the same ratio, and have no influence beyond the actual amount of specie, for which it will exchange. Dr. Adam Smith, indeed, was so well aware of the validity of this reasoning, and that paper would depress the value in proportion as it answered the purposes of money, that he was led to contend, from a disavowal of the depreciation since the establishment of the banking system, that the issue of paper caused no addition to the / aggregate amount of currency, and endeavoured to prove, that it could never exceed the value of the gold and silver, of which it supplied the place, or which would circulate if there were no paper. According to his own explana¬ tion, (a) “Let us suppose that the whole circulating money of some particular country amounted at a particu¬ lar time to one million sterling, ^hat sum being then sufficient for circulating the whole annual produce of its land and labour ; let us suppose, too, that some time thereafter different banks and bankers issued promissory notes, payable to the bearer, to the extent of one million, reserving in their different coffers two hundred thousand pounds for answering occasional demands. There would remain, therefore, in circulation £8co,ooo. in gold and silver, and a million of bank notes, or £1,800,000. of paper and money together. But the annual produce of the land and labour of the country had before required only one million to circulate and distribute it to its proper con¬ sumers, and that annual produce cannot be immediately augmented by those operations of banking; one million. (a) Vol. I. page 436. therefore will be sufficient to circulate it after them. The chapter goods to be bought and sold being precisely the same as before, the same quantity of money will be sufficient for buying and selling them. The channel of circulation, if I may be allowed such an expression, will remain pre¬ cisely the same as before : one million we have supposed sufficient to fill that channel; whatever, therefore, is poured into it beyond this sum, cannot run it, but must overflow: £ 1,800,000. are poured into it; £800,000., therefore must overflow, (a) that sum being over and "bove what can be employed in the circulation of the country. But though this sum cannot be employed at home, it is too valuable to be suffered to lie idle ; it will be therefore sent abroad in order to meet that profitable employment, which it cannot find at home. But the paper cannot go abroad, because at a distance from the banks, w'hich issue it, and from the country, in which payment of it may be exacted by law, it will not be received in common payments. Gold and silver, therefore, to the amount of £800,000. will be sent abroad, and the channel of home circulation will remain filled with a million of paper, instead of a million of those metals which filled it before.” He again sup¬ ports the same opinion in these words : (b) “ The whole paper money, of every kind which can easily circulate in any country, never can exceed the value of the gold and silver of which it supplies the place, or which (the com¬ merce being supposed the same) would circulate there if (a) Dr. Adam Smith never took into calculation the absorption of the increased proportion by a correspondent advance of prices. See the first chapter of this work, p. 27. (^) Vol. I. page 448. 284 chapter there was no paper money. If 20 s. notes, for example, are the lowest paper money current in Scotland, the whole of that currency, which can easily circulate there cannot exceed the sum of gold and silver, which would be necessary for transacting the annual exchanges of 20s. value and upwards, usually transacted within that country. Should the circulating paper at any time exceed that sum, as the excess could neither be sent abroad, nor be employ¬ ed in the circulation of the country, it must immediately return upon the banks to be exchanged for gold and silver. Many people would immediately perceive, that they had more of this paper than was nesessary for trans¬ acting their business at home, and as they could not send it abroad, they would immediately demand payment of it from the banks. When this superfluous paper was con¬ verted into gold and silver, they could easily find a use for it by sending it abroad ; but they could find none while it remained in the shape of paper : there would im¬ mediately, therefore, be a run upon the banks,to the whole extent of this superfluous paper, and if they shewed any dif¬ ficulty or backwardness in payment, to a much greater ex¬ tent, the alarm, which this would occasion, necessarily in¬ creasing the run.” By this conception of the principles of a paper currency. Dr. Adam Smith undoubtedly maintained the consistency of his general reasoning. Had he admitted the depreciation of money during the ibth century be¬ yond what the proceeds from America could produce, it would have been impossible for him to have contended, that paper made no addition to the aggregate stock of cir¬ culation. But as he was misled, by the low price of corn, to controvert the depression, he was, of necessity, compelled to contend, that paper had no power to occasion it. 285 But as Dr. Adam Smith was incapable of attaining to chapter the principle, which regulated, in all countries, the amount of their specie, he was of course incapable of discovering the principle, which regulated in all countries the amount of their paper ; for as paper fulfils the office of money, it must necessarily be subjected to the same laws, or nearly the same laws, which govern the action of money; and i shall endeavour to shew, that the paper of any given country, instead of being limited to the amount of the gold and silver, which would circulate if there were no paper, may be augmented, without reduction to a dis¬ count, to an indefinite extent, provided that the paper of other countries shall be augmented in a similar ratio. The only principle, which operates as a check upon the partial accumulation of specie is the principle of equiva¬ lency, which directs, that when its quantity shall be aug¬ mented in any given country to such an extent as to cause the same sum to measure a less value than a similar sum in other counties, the surplus proportion shall be duly distributed among them, to bring the currency of all to the same relative amount. The same principle equally operates as a check upon the partial accumulation of paper, and adjudges, that when the paper of any particular country shall be uttered to such an extent as to cause a given sum, or the quantity of paper expressive of a given sum, to measure a less value than a similar sum in other countries, the paper, if convertible at option into specie, shall be returned by the bullion merchants upon the banks that issued it; and if 286 chapter not convertible at option into specie, be reduced to a discount commensurate with the excess, as I fully attempt¬ ed to prove in the third chapter of this Inquiry. But as this principle cannot be violated if all countries utter a correspondent proportion, the general amount of paper throughout the world may be carried to an unassignable extent, and instead of being limited by the value of the gold and silver, which would circulate if there were no paper, proceed without restriction to an indeterminate superi¬ ority. If at the time that a considerable publication was made by any particular country, the same relative pub¬ lication were made by all others, the same sum, though deteriorated below its prior worth, would still continue to measure in all an equal value, and as no alte¬ ration would in consequence take place in the exchange, no excess occur in the market price of money, no run be made upon the banks for specie, no discount attach to paper, and no premium to gold, it is impossible, that any check whatever could arise from natural causes to ob¬ struct the augmentation to an illimitable extension. The practical check to the utterance of paper exclusively results from an unfavourable exchange; but as no unfa¬ vourable exchange can occur without a disparity of prices, and as no disparity of prices can originate without a dis¬ proportionate amount of currency, no limitation to the issue of paper can be assigned, so long as the same rela¬ tive publication is universally effected. I do not, how¬ ever, mean to contend, that all countries have uttered the same proportion, as there has been a constant alternation of excess and deficiency, and some have scarcely any paper, and some scarcely any thing else, but that the issue of paper, proceeding on the principle of the same relative augmentation, may be carried to an indefinite superi¬ ority above the quantity of the gold and silver, which would circulate if there were no paper. But though the amount of paper cannot be augmented to an interminable extent, unless the same proportionate publication be made in every part of the world, yet it by no means follows that it cannot be augmented to a con¬ siderable superiority above the quantity of gold and silver, which would circulate if there were no paper, notwithstand¬ ing, that the issue may be every where disproportionate ; for as it is only necessary, that the aggregate amount of the currency of each country should be relatively the same, it is possible that the currency of one may consist of JE of paper and JL. of specie; of another of T 7 - of paper and T 3 - of specie ; of another of T 8 ^ of paper and — of specie ; and of another of T 9 - of paper and y- of specie, which would give to paper a decisive preponderance, though all maintained an equal proportion of currency: and this is in reality a correct delineation of the existing state of the circulation of Europe. In England, Scotland, and Ireland, in Denmark, and in Austria, scarcely any thing but paper is visible. In Spain, Portugal, Prussia, Sweden, and Eu¬ ropean Russia, paper has a decisive superiority. And in France, Italy, and Turkey only, the prevalence of specie is apparent. Since, therefore, in i-f of Europe the quan¬ tity of paper surpasses the quantity of specie, and in T ^- oniy the quantity of specie surpasses the quantity of paper, the aggregate amount of paper will necessarily exceed, in a very considerable degree the aggregate amount of 288 chapter specie. And this superiority of the paper, great as it is, would have been still greater, had not the obstruction, which the Revolution eventually occasioned to its circula¬ tion in France and Italy, narrowed its extension in the other states; for as it was impracticable for the countries, that uttered it, to carry its amount above the specie of the countries, where it was abandoned, the quantity, which each was enabled to maintain in circulation, could never exceed in relative amount the specie of the states, that re¬ sisted it. But should France and Italy sufficiently recover from the effects of the Revolution to be capable of creating a new system, there can be no doubt but that the present undue proportion of paper will be pushed to a greater extreme. As decisive evidence in confirmation of the opinion, that the amount of paper is not regulated by the amount of the gold and silver, which would circulate if there were no paper, it is only necessary, as I before noticed, to adduce the fact of the advance of prices during the first fifty years of the 18th century 10 per cent., and during the second fifty 61 per cent, above the standard, to which the proceeds from America could have raised them. Had not the quantity of paper exceeded the quantity of gold and silver, which would have circulated had there been no paper, this advance could never have occurred ; and prices would in the first fifty years have been elevated no more than 22 per cent, instead of 32, and in the second fifty no more than 18 per cent, instead of 79. The excess in both instances conclusively attests a pro¬ portionate excess of paper. 2 80 The errors of Dr. Adam Smith on the circulation of chatpf.r paper originated, in the same manner, as his errors on the .j 1- limitation of specie in his inability to attain to a correct perception of the principle of equivalency. He was led by the view, which he took of his subject, to imagine, that the currency of every country was a definite sum, that could not be augmented beyond the just purposes of circulation ; and, as he perceived, that the specie of a country some¬ times disappeared upon the utterance of paper, he inad¬ vertently drew the inference, that in every instance where so much paper was issued, a similar quantity of specie was withdrawn from circulation. But, though upon a relative excess of utterance in any given country a due proportion of specie be transferred to other states, to maintain the uniformity of the measure of value, yet the efflux of coin is by no means a necessary result of the issue ; for if the currency of any one country were rela¬ tively inferior to the currency of others in consequence of a more confined circulation of paper, so far would the paper be from causing the departure of specie, that an additional proportion would be received from other coun¬ tries to augment its currency to the same relative amount. I am willing, however, to admit, that the quantity of coin throughout the world has been consi¬ derably diminished since the introduction of paper, and that a less proportion of the proceeds from the American mines continued in a state of coin during the 18th than during the 17th century; but this diminution has taken place, not because so much specie has been withdrawn in consequence of the issue of so much paper, but because bullion has been rendered comparatively cheaper with p p 290 chapter relation to all other produce, than it was antecedently to the circulation of paper, and has consequently been applied in a greater degree to the purposes of manufacture. Had Dr. Adam Smith’s positions been correct, that the quantity of specie, in every country, could never exceed the sum, that was necessary for the due transaction of the annual exchanges of the produce of its land and labour, and that the quantity of paper could never exceed the value of the gold and silver, of which it supplied the place, or which would circulate if there were no paper, money would in all ages have constituted an equal measure for the same value, and the circulating system of the world would have been completely perfect, as the sum, which is necessary for the just purposes of circulation, is precisely that sum, which would maintain an invariable uniformity of prices. But, in reasoning on the influx of money from America in the reign of Elizabeth, Dr. Adam Smith him¬ self admitted the fallacy of his principles, for as he acknow¬ ledged, that money sustained during that period an extra¬ ordinary depression, he of course conceded, that it had increased beyond the necessary amount, or no depression could have occurred. It is because the quantity of real or factitious money has, in all ages, been superior to the sum, that was necessary for the just purposes of circula¬ tion, and because money has not constituted one and the same measure of value, that the circulating system of the world, which has regularly led to a greater relative increase of currency than the increase of produce autho¬ rised, has been so peculiarly defective. Had his positions been well founded, it would have attained to a state of perfection, which it would be vain to expect that it can ever chap i r.n acquire ; for, much as it may be ameliorated, it must still, from the impracticability of bringing currency and pro¬ duce to bear the same uniform proportion to each other, be ever imperfect. Having thus endeavoured to prove, that the amount of paper has greatly exceeded the amount of the gold and silver,which would have circulated had there been no paper, and having previously proved, that paper depresses the value in proportion as it answers the purposes of money ( it necessarily follows, that the depreciation, which has taken place during the 18th century, beyond what the American proceeds could effect, has exclusively resulted from the introduction of a new circulating medium in the general publication of paper. In order, however, to shew in a clearer light the pro¬ gressive enlargement of the means of circulation by the publication of paper, I have extracted from the Reports of the Secret Committees of 1787, and Lord King’s Tables, an account of the annual amount of the notes of the Bank of England from 1782 to 1803 ; and this account is of the more importance, as it points out by analogy the addition, which has been made to the respective currencies of the other states of Europe ; for, as all must possess the same relative quantity, it is impossible that an augmentation can occur in the one unless a proportionate augmentation be effected in the others. 292 CHAPTER *1783 - - £• 7,575 605 AT. 17 % - - - 6 , 55^,597 1784 - - - 6,209,855 1785 - - - 1786 - - - 1787 - - - 8,688,570 1788 - - - 9 , 370,350 1789 - - - 9,705,240 1790 - - - 10,217,360 1791 - - - 11,699,140 2792 - - - 11,349,810 1793 - - - 11,451,180 *794 - - - 10,963,380 1795 - - - 1 3 , 539 , 1 60 1796 - - - 10,030,110 ^797 - - - 11,642,400 1798 - - - 13,224,440 1799 - - - 14.006,960 1800 - - - 15=450.97° 1801 - - - 16,365,206 1802 - - - i 6 , 747 = 3 oo 1803 - - - 17 = 931=930 By this statement it appears, that from 1782 to 1803- the notes of the Bank of England progressively increased from £.7,500,000 to 17,900,000, or 157 per cent. It is competent, therefore, to presume, that other countries acquired a similar accession; and though no table be * In 1782, 1783, and 1784, I have taken the average of the returns for four months in each year. No returns were made for 1785 and 1786. 293 published on the plan of Sir George Shuckburgh's illus- chapter. trative of the regular depreciation of money on .he con- tinent, yet no doubt can be entertained from the instances which Mr. Arthur Young has collected of the advance of prices, that the depression has proceeded to a corre¬ spondent extent. These instances, indeed, go to prove a greater depression, but as they were loosely prepared from oral testimony, without any attempt to deduce a regular conclusion from average prices, they must be taken rather to shew the universal sense of the fact of the depression than its degree, for if it be true, that all countries must possess the same relative amount of cur¬ rency, it necessarily follows that the degree of the depre¬ ciation must be every where the same. Rise of Prices in France.(a) Sologne—La Fert6.—Cattle of all kind increased in price more than a third in one year. A cow from 48/?. to Qoli.; a horse 7 or 8 louis to 12^; a hog 15/z. to 30//. It has been owing to a want of forage. Berry—Vatan. See tw r o good cart horses, which were sold this year for 20 louis each ; and several farmers as¬ serted, that a borse, which three years ago was worth 5 louis, would now bring 12. Limosin — Limoges. The same quantity of cord wood which was sold 15 years ago at 50/2. now sells at 150//. Land greatly raised in its value, and husbandry doubly more productive than 20 years ago. Languedoc — Bagnere de Luchon. The measure of (a) See Mr. Arthur Young’s Travels, Vol. I. p. 453. 29 land, called the copc-rade, which some years since sold at 12/?. is now at 24//. and even 30/z. Bayonne. Within ten years, the prices of every thing, including house rent, very much increased. Bourdeaux. Very great increase in the price of every thing in ten years. Isle of France—Liancourt. Within ten years, the ge- neneral expenses of living, bread alone excepted, have risen 50 per cent., and labour nearly in the same pro¬ portion. Normandy—Havre. A house which in 1779 let without any line, on a lease of six years, for 24,0/7. per annum, was let this year again for three years, with a fine of 25 louis, for 600/7. per annum. A cellar which is now 60/7. was 24//. twelve years past. Bretagne—Rennes. Cord of wood 16/7. In 1740 it was 9^. Champagne—St. Menehoud. Cord of wood 18/7. 10 sous, but 25 years ago 7//. 10 sous. Lorraine—Pont au Mousson. The prices of the ne- nessaries of life risen one-third in 20 years. Luneville. Cord of wood now 26/7. was 52 years ago 9//. Strasbourg. Cord of wood 27/7. which 20 years ago was 12 to 15/7. Tranche Comj^c. Those estates which 20 years ago sold at 300/7. now are 800/7. Besampon—Dole. Meat now 7 sous the lb. some years ago 4, sous; a couple of fowls 24 sous, which were 12 sous. In general, every thing is doubled in price in ten years. Bourgogne—Dijon. Every thing raised in 20 years cent, per cent. 295 Rise of Prices in Italy. The prices of every thing are now at Bologna from 10 chapter to 15 per cent, dearer than ten years ago ; here attributed to the increased plenty of money, from a rise of the price of the products of the country, hemp and silk selling much higher. Twenty years ago hemp was at 30 pauls, now at 50; and in Tuscany the prices of every tiling have doubled since the free corn trade. 290 CHAPTER XII. On the Effects of the Depreciation of Money. chapter Having stated in the preceding Chapter the different causes of the depreciation of money, and consequent alteration of the measure of value, I shall now proceed to consider the effects. As money, from its properties as a measure of value, and medium of exchange, is made the instrument in permanent contracts for carrying into effect certain acts, which one of the contracting parties would otherwise be required to perform, it is of essential consequence, that the same sum should measure as nearly as possible for successive years the same value, in order that the implied conditions of the agreement should be duly executed according to the ori¬ ginal intention of the parties. For if, by a depreciation in the value of money, subsequently to the completion of the compact, the same sum should no longer possess the same power, the stipulated terms could no longer be ful¬ filled in conformity to the true spirit of the contract, as the means would cease to be adequate to the end desired. During the feudal ages, which immediately succeeded the fall of the Roman empire, when service was exacted in lieu of revenue, and lands were held by the perform¬ ance of obligatory duties ; and at the commencement of 20 7 a less turbulent asra, when the duties were commuted for chapter a rent in kind, with the reservation of but a small propor- tion in money, it was not of material import that money should constitute, for a period of long duration, one and the same measure of value ; but, when society again attained to a state of civilization, and the public revenue of the country, the appropriated income of the crown, the emoluments of the great officers of state, the pay of the army and navy, the rent of land, the interest of annuitants, and the wages of labour, became exclusively regulated by the medium of money, and fixed at a determinate sum, it was highly important that money should discharge the functions of its intermediate agency with due efficiency. But the reasoning of the preceding chapter sufficiently shews, that money has hitherto formed an inefficient instrument for carrying into effect the conditions of per¬ manent compacts; and that those, who have accepted a fixed income in compensation! for certain advantages* which would have been otherwise conferred, have been constantly receiving a less and less than their due pro¬ portion, as the same sum has been constantly losing more and more of its primitive power. At one and the same period the same sum is uniformly made to measure the same value in every part of the world, exclusive of the charge of transit, as a sufficient profit is attainable on the fluctuation of its value, above or below this charge, to support the principle of equivalency ; but so far is any principle from being in motion to cause the same sum to measure the same value at different periods, that a strong interest is regularly operating to prevent it, and mines 2 q "9 8 chapter and banks are perpetually augmenting the means of cir- dilation, without any power of control from those, who suffer by the alteration. As money has thus been brought to express a different value at different periods, it has necessarily been disabled from discharging the office of mediation in contracts of long duration with requisite precision. This disability will sufficiently appear from an inquiry into the effects of the depreciation of money on the increase of our public revenue and national debt, during the 18th century. In the compact, which the people entered into with their government, for the contribution of a certain in¬ come, it was implied, that the income should be fully competent to fulfil the conditions, or answer the pur¬ poses, for which it was granted. But I shall endea¬ vour to shew, not only that it was wholly inadequate for the permanent execution of the stipulations of the agreement, but that such was the depreciation of money, that the public revenue was nearly diminished in value in the same ratio, in which it was increased in nominal amount, throughout the whole century. According to Sir George Shuckburgh's table the depreciation of money during the 18th century proceeded in the following ratio, its value in 1700, being assumed at 238. 599 A. D. A. D. 1700 - 238 — 1760 - 342 1710 - 247 — 1770 - 384 1720 - 257 — 1780 - 427 1730 - 272 ■— 1790 - 495 174° 1750 - 287 - 314 — 1800 - 562 Two hundred and thirty-eight pounds, shillings, or pence, therefore, in 1700, were equal to five hundred and sixty-two pounds, shillings, or pence, in 1800, and all the different sums were at the year, to which they are appropriated, equal to each other, or would have changed at their respective periods for the same value. By the application of these proportions in the following calculation, it will be seen that, through the greater part of the century, the public revenue was diminished in value nearly in the same ratio, in which it was augmented in magnitude. The public revenue of Queen Anne, at the time of the Union, in 1707, according to Sir John Sinclair’s account, was £5,69 0,000. which, by assuming the value of money in that year at 245, and the value of money in 1800 at 562, will make her revenue equal to £13,050,000. of the money of 1800. The public revenue of the different reigns of the 18th century, estimated upon this principle will be as follows.: 300 M (M (c) £■ (d)£. chapter Queen Anne 1707 - 245 - 562 - 5,690,000 13,050,000 George I. 1727 - 267 - 562 - 6,760,000 14,228,000 George II. 1760 - 342 - 562 - 8,520,000 14,000,000 George III. 1770 - 384 - 562 - 9 500,000 13,900,000 George III. 1780 - 427 - 562 - 12,200,000 16,000,000 George III. 1790 - 496 - 562 - 15,500,000 17,500,000 By this calculation it not only appears, that the sums, which were granted, at the commencement of the cen¬ tury, were incompetent to answer the same purposes at the close, but that, from 1707 to 1770, the depression of money proceeded to such an extent, that it, in most in¬ stances, kept pace with the increase of the revenue, and in some even advanced with greater rapidity; that the revenue of Queen Anne, though nominally four, was in reality only one million less than the revenue of his pre¬ sent Majesty in 1770; that the revenue of George II. at the commencement of his reign in 1727, was superior to his revenue in 1760, though nominally two millions less, and superior to the revenue of his present Majesty, in 1770, though nominally three millions less; and that the revenue of 1760 was superior to the revenue of 1770, though nominally one million less. It is evident, therefore, that the public burthen pressed with nearly an equal weight upon the people, through the greater part of the preceding (a) This column gives the value of money at the stated periods. (b) The value of money in 1800. (c) The revenue at the stated periods. (d) The value of that revenue in the money of 1800. ■iOl century; and that the nation was more severely taxed in chapter in 1727, than in 1760 or 1770, though the pressure were supposed to be considerably heavier in the latter periods. According to Sir John Sinclair, the total expenditure of Queen Anne’s reign r was £122,000,000, which, by fixing the medium value of money in her reign at 247, will be equal to £277,000,000. of the money of 1800; and, as her annual average expenditure was £10,000,000., equal to£22,000000. of the money of 1800, it equalled the an¬ nual average expenditure of the present reign. But the following calculation, constructed on the same principle, will give a general view in round numbers of the comparative value of the revenue, during the 18th century. £■ £■ 1700 - 238 - 56 2 - 4,000,000 - 9,400,000 1710 - 247 - 562 - 5,500,000 - 12,500,000 1720 - 257 - 562 - 6,000,000 - 13,100.000 1730 - 272 - 59 2 - 6,500,000 - 13,400,000 * 74 ° - 287 - 562 - 7,000,000 - 13,700,000 1750 - S J 4 - 562 - 7,500,000 - 13.400,000 1760 - 342 - 5 6 2 - 8,500,000 - 13,900,000 1770 - 384 - 562 - 9,500,000 - 13,900.000 1780 - 427 - 562 - 12,000,000 - 15,700,000 1790 - 4 9 6 - 562 - 15,000,000 - 17,500,000 1800 - 56 2 - 5^2 - 30,000,000 - 30,000,000 It is true, that if money had remained at a fixed value, previously to 1800, the revenue would not, in that year, have amounted to so large a nominal sum, as such extend¬ ed supplies would not have been required for the public 302 chapter service. But, as it has been depressed to such an extent, it is necessary, for the direction of our future policy, to ascertain w hat diminution the revenue has sustained by the depreciation, which the following table, by shewing its gradual increase in the existing money of the times, and the value of that increase in the money of 1800, will in some degree explain. In the year 1700 our revenue, in the money of the times, was £4,000,000. which, according to the propor¬ tions of Sir George Shuckburgh’s table, was equal to £9,400,000. of the money of 1800; and the increase, from 1700 to 1800, being £1.500,000. was equal to £3,400,000. of the money of 1800. The progressive in¬ crease of the public revenue, estimated upon this prin¬ ciple, will be in the following ratio:— £■ £■ In 1700 - 4,000,000 equal to 9,400,000 From 1700 to 1710 - 1,500,000 — 3,400,000 1710 — 1720 - 500,000 — 1,090,000 1720 — 1730 - 500,000 — 1,030,000 173 ° — 1740 - 500,000 — 970,000 1740 — 1750 - 500,000 — 890,000 1750 — 1760 - 1,000,000 — 1,640,000 1760 — 1770 - 1,000,000 — 1,460,000 1770 — 1780 - 2,500,000 — 3,290,000 1780 — 1790 - 3,500,000 — 3,960,000 1790 — 1800 - 14,500,000 — 14,500,000 30,000,000 41,630,000 By this table it is evident, thafc if the money of the whole century had been equal to the money of 1800, the revenue would have been, in 1800, £41,000,000. instead ni\PTnu °f £30,000,000.; if its value had remained stationary, :n 1700, the revenue, though nominally less, would have been equal to £41,000,000. ; and, if it had been stationary at a subsequent period, in proportion as that period was nearer to 1700, the revenue would have been more nearly equal to £41,000,000.; but, as the depression continued throughout the whole century, it experienced the entire loss of £11,000,000. The greater part of this loss has been sustained by the public creditors. There is no doubt, but that many other classes, among whom the public revenue is divided, have suffered a partial injury; but the great and leading sufferers are the proprietors of national stock. The sub¬ sequent calculation, shewing the gradual increase of the debt in the money of the times, according to the propor¬ tions of Sir George Shuckburgh's table, and the value of that increase in the money of 1800, will, in some measure, point out the extent of their loss. Amount of the Gradual increase Value of the in- A. D. debt at the of the debt. crease in the stated periods. money of 1800. 1700 - l6', OOO,OOO - 16,000,000 - 37 > 7 °o,ooo 1710 - 44,000,000 - 28,000,000 - 63,700,000 1750 - 72,000,000 - 28,000,000 - 50,100,000 1760 - 88,000,000 - 16,000,000 - 26,200,000 177° - 126,000,000 - 38,000,000 - 55,600,000 1780 - 142,000,000 - 16,000,000 - 21,000,000 1790 - 238,000,000 - 96,000,000 - 108,700,000 1800 - 451,000,000 - 213,000,000 - 213,000,000 451,000,000 576,000,000 304 chapter By this table it appears, that the national creditors had in reality advanced £576,000,000. to government, for which only £4.51,000,000. were put to their credit, and that they sustained the loss of £125,000,000. in the course of the century. But it must be admitted, that these calculations are extremely loose. The state cf the revenue is taken in round numbers from Sir John Sinclair’s history, but in too imperfect a manner, for any other purpose, than merely to shew the general effect of the depression of money. The state of the public debt is taken from an account made out by order of the House of Commons, and is extracted from the Appendix to Mr. M’Arthur's Political Facts. Though the debt amounted to more than £44,000,000. in 1710, yet as it was subsequently re¬ duced to this sum, I forbore to take it higher, as the cal¬ culation is formed, on the gradual increase of the debt, without any allowance for the sums that were liquidated after many years standing. Had these sums been in¬ cluded, the estimate of the loss, which the public creditors have sustained, would have been carried to a greater extent. Much, however, as I regret the want of accuracy in the foregoing statements, they are still sufficiently cor¬ rect, for the purpose of shewing the operation of the principle. But the following calculation, the accuracy of which is less disputable, will shew more correctly the injury, which e\ery creditor has individually sustained, during the period that he has held a proportion of the 50* public debt; for as the same depression must occur in any chapter given number of pounds, which occurs in a single pound, the depression of the one will necessarily give the de¬ pression of the other. By applying the proportions of Sir George Shuck- burgh’s table to the value of the pound sterling, through every ten years of the preceding century, the following statement will be the result of the calculation. In 1700 1710 1720 1730 1740 1730 1760 1770 1780 3790 1800 As this table shews, that the pound sterling was depreciated one fourth, or nearly one fourth, from 1780 to 1800, it is manifest, that every individual, who held a proportion of the national debt, during that interval, lost one fourth of his principal and interest; and in the same manner may be calculated the loss, which he sustained, during a longer period. Not only, therefore, do the preceding calculations de¬ monstrate, that money has hitherto formed an inadequate £• s. d. 8 5f| 8 9 H 9 8 13 15 17 Were equal to a . pound sterling of 1800. r r 306 chapter instrument for the permanent fulfilment of the conditions, which every pecuniary compact implies, but they shew the powerful effect of the depreciation of money, in lessening the value of the revenue, and the silent reduction, which it works, of the real, though not nominal amount of the national debt; but, as the depreciation of the last twenty years is more immediately interesting, than the deprecia¬ tion of the preceding period, and has been more fully and clearly attested, I shall more particularly confine my observations to this interval. As it was proved by the last calculation, that from 1780 to 1800, the value of the pound sterling was nearly de¬ preciated one fourth, it is obvious, that any given sum in 1800 would only exchange for three-fourths of the value for which it would have exchanged in 1780; and that any person, receiving the same fixed nominal sum in 1800, would only receive three-fourths of the value, which it possessed twenty years before. By this altera¬ tion in the value of money, the public have been exone¬ rated from the payment of one-fourth part of the revenue then existing; and the public creditor has been deprived of one-fourth of the principal and interest of the stock, at that time placed to his credit in the national debt. As an augmentation of currency invariably causes a general increase of unrestricted incomes, by a commen¬ surate advance of prices, the public regain, in part, what they contribute, and lessen the revenue in the same pro¬ portion, in which the value of money is depressed. If a person, possessing forty pounds a year, be taxed eight pounds, being a fifth of his income, and he afterwards be ch apter taxed two pounds more, making his contribution a fourth ; and by an advance in the produce which he sells, he increase his income to fifty pounds a year, he again reduces his contribution to a fifth, and regains the two pounds, which he gave: and as ten pounds will exchange for no more after the increase than eight pounds previously to it, the revenue of government, though nominally augmented, is reduced to the same value, which it possessed before the additional duty. By this operation, the depression of money held such regular pace with the increase of the revenue, through the greater part of the preceding century, diminishing it in value in the same ratio, in which it was augmented in magnitude, and exonerating the public from the increased burthen in the same pro¬ portion in which the value of money was lessened.(u) ( a ) The observations that appeared in the British Critic,* on the pro¬ portionate pressure of the public burthen, are highly deserving of at¬ tention ; and it is much to be regretted, that the learned author has not favoured the public with a specific treatise on the subject. As it has been ably proved, in the masterly Essay of Mr. Malthus, that where the moral check to an increase of population, as in this country, ha= con¬ tinued to operate with undiminished effect, and population has, notwith¬ standing, augmented, the means for the support of the population, must have necessarily increased in the same ratio, the author of the Review has rightly contended, that the pressure of taxation is to be determined by the number of contributors ; and that if the relative population of the two periods, of 1700 and 1800, be taken into consideration, t gether with the relative value of money, it will appear that one pound con'd be raised in 1800 with the same facility as 5 s. 3 \d. instead of 8r. $\J. in 1700. In his own words: “ It has been shewn, that on account of the increase See British Critic for February, 1804, page 132. 308 chapter By this operation it reduced the revenue one quarter between 1780 and 1800, and is still continuing its re¬ duction. By the same operation it reduced the principal and interest of the national debt; for as the pound sterling of the number of contributors, the state could collect one pound in the year 1800, with the same burthen upon them as 0,6256 or i2x. 6 d. in 1700. Moreover, on account of the fall of the value of money separately taken, the burthen of the payment of/562. at the end of the century having been no more than that of 238 at that of the preceding, by Sir George Shuckburgh’s table, one pound was paid in 1800 with the same facility as 0,4234, or 8x. 5 \d in 1700, and consequently 0,6256, or I2x. 6 d. in the more recent period with the same facility as 0,2649, or 5x. ^{d. in the more remote. Therefore the payment of 20x, by the nation at one period was attended with no more burthen than that of 5*. 3! d. at the other; or a million might have been raised on the subject jn the last year of the 18th century, with as little burthen as £264,900. at the end of the preceding ; and conversely £3,774,000. in 1800 as £1,000,000. in 1700 ; and here the fraction 0,2649 is the product of 0,6256 and 0,4234, and 3,774 is the reciprocal thereof; and having given the amount of any payment to the state in the years 1700 and 1800, that of a charge of equal burthen at the other may be found in one of the following tables, as also for all intermediate years. TABLE I. Sums levied in Taxes in certain years, equal in burthen to £1. so levied in year 1800. 1^800 i/.or2 0J ; Col. 1, l/. • Population. *. d. Col. I. xl. Population 1 i. Col.I.&C. II. increas¬ ing both. d v 1700 0.4234 8 Si 0.6256 12 6 0.2649 5 3 i 0.4572 9 4 0.6871 .3 H O £ 0.3142 b ii 1740 10 ° 7547 ■5 » 'li.e 0 -3754 7 8| 1760 0.6085 12 2 0.8289 16 6| 13 S | o -5044 1783 0.7597 15 2| 0 9104 18 J-g 0.6917 13 10 1800 ] 1 1.0000 20 O 1.0000 20 0 I 1.0000 20 0 309 was depreciated one fourth, and as a similar depreciation chapter was effected in any given number of pounds, it is ob- vious, that the public creditors, in the receipt of their interest, obtained in 1800 only three fourths of the value, which they received in 1780 ; that the proprietor, who in the former period held £4,00. a year, received in the latter no more than what £300. would have then commanded, and that one fourth of his income was regained by the public. The same reduction was made in the principal which was made in the interest, and in the instance of alienation, he received only three fourths of the value, which it possessed in 1780. By this effect, though no diminution occurred in the nominal amount of the debt, yet a similar diminution took place in its real amount, as if an actual payment of the part depreciated had been accomplished. A deterioration in the value of the no¬ minal sum received by the depression of money, is similar to a reduction in the real amount, where the value has continued without variation, as the same nominal sum, at a reduced value, will exchange for no more than a proportionally diminished sum of the same value. TABLE II. Sums levied in 1800, equal in burthen to £1. raised in certain years. P 7 oo m Year's. l/.orior- Col. I. 1 /. Prices Popula- A r- i . Col. I. it l . 4 . d . Col. I- & Col. XI. increasing A a. d . 1700 2-3613 272} 1 -59^3 1 11 Hi 3-7743 3 IS Si 1720 2.1866 2 3 7i I.4552 1 9 1 1 3 -i 8 z 3 3 3 7i 1740 ‘•9581 1 19 i { ‘•3249 1 6 si 2-5945 2 11 I0|- 1760 I.6432 1 12 io*; 1.2062 1 4 15 ; i- 9 32 3 1 19 7 l J780 I.3l6l 1 6 3 i I.098-. 1 inf ; 1 445^ ji 8 io£ 1800 1.0000 1 0 0 1 .0000 1 0 0 1 1.0000 10 0 310 cii. p-'" r If this explanation of the effects of the depreciation of money from 1780 to 1800, be correct, it is necessary for the public to consider how far they will encourage the further depredation of this principle upon the property of their creditors. Whether by promoting an increased publication of paper, they will conduce to the silent re¬ duction of the debt, and an exoneration from the burthen by the further depression of money ; or whether by en¬ deavouring to prevent the increase, they w ill take ever 1 , means in their power to maintain their faith with their creditors, and conform to the spirit of their contract. By Sir George Shuckburgh's table, the depression of money from 1780 to 1800, considerably exceeded the depression of the twenty preceding years; and by the facility, with which the paper currency of Europe is now augmented, the depression of the next twenty is likely to be still greater, unless some measures be taken to retard its progress. But should it only pro¬ ceed in its present ratio, a quarter of the debt will be liquidated every twenty years, without any co-oper¬ ation from the sinking fund; and should the ratio in¬ crease, the reduction will take place with accelerated rapidity. However expeditious this mode may be of lessening our revenue and liquidating our debt, it cannot be con¬ tended, that the exoneration is achieved by the most ho¬ nourable means. In the original agreement between the public and their creditors, it was stipulated that they should receive the same interest till the redemption of their debt; and as that interest is continued to be paid in 311 the same nominal sum, no actual breach of faith is com- chapter mitted, but the faith of government is virtually violated, as that sum no longer retains the same real value as at the commencement of the contract. So far, therefore, as our political conduct should be regulated by public principle, we are bound in equity to adopt every precautionary measure in our power to prevent the progress of the depression. Much, however, as the public creditor has suffered, the crown has suffered in an equal degree. There is no sub¬ ject that has been more frequently discussed, nor less satisfactorily explained, than the inadequacy of the revenue appropriated for the payment of the civil list. This inade¬ quacy has wholly arisen from the incompetencv of money to form a just instrument for the fulfilment of the con¬ ditions of permanent compacts. But as this principle has never been recognised by parliament in its full extent, nor properly elucidated to the public : r always appeared on appeal to parliament for the payment of arrears, that the King was exacting from his subjects an increase, instead of that his subjects had been perpetually exacting from him a decrease of his revenue, and was erroneously concluded that there had been a considerable augmen¬ tation, instead of a considerable retrenchment, of expense on the part of the crown. It may indeed be said, in exculpation of those, wl>ose duty it has been to submit the exceedings of the civil list to parliament, that the subject of the depreciation of money has hitherto been involved in much obscurity; that pre¬ viously to the publication of Sir George Shuckburgh's 312 chaptsh table, no author had attempted to ascertain its regular pro- gression; and that, without an accurate knowledge of the gradation, no application of the principle could be made. The reasoning too of Dr. Adam Smith had, in a great measure, led to the inference, that no depression had lately occurred, and had in some degree diverted the attention of political writers from the subject. So little, indeed, was parliament familiarised with the principle, that the mere entertainment of it was almost forbidden ; and in one of the debates, that took place on the arrears, it was expressly stated by Mr. Pitt, that he should forbear to touch upon the “ abstruse learning”( a ) of the deprecia¬ tion of money, though it constituted in reality the sole cause of the application for relief, and was the sole plea, that could justify it. As this subject, therefore, was con¬ stantly debated under the supposition, that money formed an invariable measure for the same value, not only was it not believed that the crown had retrenched its expenses, and was impoverished by the loss of one half of its revenue ; but it was conceived, notwithstanding the re¬ markable moderation of the character of the King, that he had increased his expenses beyond the expenses of former times ; and that by the nominal extent of our grants, we were greatly superior instead of greatly inferior in libe¬ rality to our ancestors. But the following calculations will fully explain the fallacy of these conclusions, and demonstrate, that we now contribute no more than one half of the revenue, which was contributed in the reign of W illiam the Third. (a) This singular expression only shews the little intimacy of Mr. Pitt’s mind with the simplest deductions of the science of public economy. 313 In the spring of 1804, Sir George Shuckburgh favoured chapter me with the result of his calculations on the depreciation of money from 1800 to 1803. The depression had ad¬ vanced in the latter year, according to the proportions which he formed, to (a) 595. From 1803 to 1806 ,1 will («) As Sir George Shuckburgh died in the summer of 1804, before he had completed an" essay, which he was writing, on the subject of the de¬ pression of money, it is impossible for me to refer to a printed document in testimony of this assertion. It may be said too that the mere assumption of the same depression from 1803 to 1806, as from 1800 to 1803, is too loose for practical application. I certainly should not have made any attempt to give the depression to 1806, had not an addition of £ 60,000. a year been made to the civil list in 1804, and as it might have been conceived that this augmentation would bring the revenue to a cor¬ respondence with the charges, I thought it right to explain its effect. But the following calculation, which carries the revenue and the depre¬ ciation of money no lower than 1800, may perhaps be more satisfactory. A. D. 1700 — 238 __ 562 _ £■ 700,000 _ £• 1,652,000 1710 — 247 — 562 — 700,000 — 1,592,00 j 1720 — 257 — 56? — 700,000 — 1,530,000 1727 — 267 — 562 — 800,000 1,683,000 1730 — 272 — 562 — 800,000 — 1,652,000 1740 — 287 — 562 — 800,000 — 1,566,000 1750 — 3 H — 562 — 800,000 — 1,463,000 1760 — 342 — 562 — 8op,oop — 1,314,000 1770 — 3*4 — 562 — 800,009 — 1,170,000 1777 — 414 — 562 — 900,600 — 1,221,000 1780 — 427 — 562 — 900,000 — 1,184,000 1790 — 496 — 562 — 900,000 — 1,019,000 1800 — 562 — 562 — 900,000 — 900,000 The first column of the table gives the value of money at the stated periods. The second, the value of money in 1800. The third, the actual amount of the revenue at the stated periods. The fourth, the value of that revenue in the money of 1800. S S 14 HAPTER assume that the same depression occurred as from 1800 to 1803, which will nearly bring the value of our preserit money to 630. But the value of money in 1700 was 238* and the revenue of King William £ 700,000. a year. The same proportion, therefore, which 238 bears to 630, £ 700,000. will bear to £ 1,852,000., and upon this prin¬ ciple the table is constructed. A.D. («) (*) (0 £ (<0 £■ 1700 - 238 - 630 700,000 - 1,852,000 1710 - 247 - 630 700,000 - 1,785,000 1720 - 257 - 630 700,000 1,715,000 1727 - 267 - 630 800,000 1,887,000 1730 - 272 - 630 800,00O 1,852,000 1740 - 287 - 630 800,000 1,7 56,000 1750 - 314 - 630 800,000 1,605,000 1760 - 342 - 630 800,000 i, 473 > 000 1770 - 384 - 630 800,000 1,312,000 1777 - 4 H - 630 900,000 1,369,000 1780 - 4 2 7 - 630 900,000 1,327,000 1790 - 496 - 630 900,000 1,143,000 1800 - 562 - 630 900,000 1,008,000 1806 - 630 - 630 960,000 960,000 The subsequent statement will shew the extent to which the revenue should have been raised at the period (a) This column shews the value of money at the stated periods. (£) The value of money in the year 1806. (c) The actual amount of the revenue at the stated periods, (d) The value of that revenue in the money of 1806. $15 to which ,each calculation refers, in order to have been chat per maintained in 1700. A. D. upon an equality with the £ 700,000. a year («) (*)£• (0 (d) £• 1700 - 00. 0? - 700,000 - 238 - 700,000 1710 - 238 - 700,000 - 247 - 726,000 1720 - 238 - 700,000 - 237 - 755 »o oo 1727 - 238 - 700,000 - 267 - 784,000 1730 - 238 - 700,000 - 272 - 800,000 1740 - 238 - 700,000 - 287 - 843,000 1750 - 238 - 700,000 - SH - 923,000 1760 - 238 - 700,000 - 342 - 1,005,000 1770 - 238 - 700,000 - 384 - 1,128,000 1777 - 238 - 700,000 - 414 - 1,217,000 1780 - 238 - 700,000 - 427 - 1.255.000 1790 - 238 - 700,000 - 496 - 1,458,000 1800 - 238 - 700,000 - 56 2 - 1,652,000 1806 - 238 - 700,000 - 630 - 1,852,000 By these calculations, therefore, it is obvious, that the present revenue of £960,000. a year, though nominally superior, is in reality only one half of the value of the £700,000. which King William possessd, and will conse- (a) The first column of the table gives the value of money in the year 1700. (i) The second, the amount of the revenue in the year] 1700. (r) The third, the value of money at the periods to which each calcu¬ lation refers. (■d) The fourth, the extent to which the revenue should have been augmented at the different periods, to have been equal to the £700,000. a year in 1700. 316 chapter quently command no more than one half of the state and dignity, which were in his reign attached to the crown. They afford, therefore, the most satisfactory solution, that can be givon of the difficulties that pervade every depart¬ ment of the royal household, as no allotted subdivision of the income is sufficient for the purpose, to which it is ap¬ plied. Notwithstanding that retrenchment has been made upon retrenchment, and every expedient been adopted, that ingenuity could suggest, yet no economical arrange¬ ment, no practicable regulation, can bring the means to a correspondence with the end, and the whole establishment labours with the impoverishment that has necessarily ensued from the defalcation of so large a proportion of the funds, by which it was supported. This reduction of the revenue has consequently led to more frequent ap¬ plications to parliament for relief during the present, than during any of the preceding reigns. From (a) 1700 to 1713, the exceedings of the civil list amounted to no more than £500,000. as the income during this period was more nearly competent to cover the expenses, to which it was appropriated. From 1713 to 1727, in consequence of the increased depression of money, the exceedings amounted to £1,000,000.; and as parliament found by experience that the £700,000. a year, which was granted to William the Third, was inadequate to meet the necessary charges, though no knowledge of the governing cause of its ineffi¬ ciency were at that time diffused, they augmented the revenue on the accession of George the Second to (a) See Mr. Rote’s pamphlet on the civil list, from which the facts here stated are taken. 317 £800,000. a year; and by this addition exactly raised it chapter to a parity of value with the £700,000. a year in 1700. From 1727 to 1760, the exceedings amounted to no more than £450,000.; but the cause that the excess, during the thirty-three years of the reign of George the Second, did not proceed to a greater extent was, that the duties, which were levied to provide the sum of £800,000. a year, con¬ stantly furnished a considerable surplus, that was compe¬ tent to meet the depression as it occurred. But his present Majesty was unfortunately misled at the commencement of his reign, by the characteristic benevolence of his nature, to enter into a composition with parliament, and accept the fixed income of £800,000. a year in lieu of the duties, that were appropriated to raise it, and by this liberality involved his household in a constantly increasing series of difficul¬ ties, that have caused unremitting perplexity from the first moment of the compact. Had not this composition been made, the produce of the duties would have still provided an adequate fund for the counteraction of the depression, as from 178b to 1800 it amounted, on the average, to £1,416,000. a year. But the contract was no sooner completed, than the deficiency was manifested, and in 1769 the sum of £513,000. was granted to liquidate arrears. In 1777, the further sum of £618,000. was voted, and the revenue was augmented by an additional £100,000. to £900,000. a year; but as it should have amounted in that year to £1,217,000. instead ofjTgoo,oco, to have been equal to the £700,000. in 1700, the exceed¬ ings necessarily continued ; and in 1783,1784, 1786, and 1802, successive grants were made to the extent of £1,201,000. In 1804 the insignificant sum of £60,000. $ 1 s chapter a year was added; but as I have already shewn that the revenue, with this addition, by the accelerated depreciation of money, is but little more than one half of the value of die £700,000. a year in the reign of William the Third, there cannot be the smallest doubt of its utter inadequacy to meet the charges, for which it is provided. In order, therefore, that the civil list should be re¬ placed on the footing, on which it stood, in the reign of William III., it is absolutely necessary that there should be a revision of the compact, which the crown entered into with parliament at the commencement of the present reign; and either that the duties, which were applied in the reign of George II. to raise a competent revenue, should be reappropriated to the same purpose; or that an income correspondent with their amount should be granted. But in thus recommending an efficient estab¬ lishment to support the dignified relations between the Sovereign and his people, let it not be understood, that I wish for a provision, that should give to the crown a larger proportion of influence, than it now possesses. No one can be less desirous than I am, that the existing prerogative should receive any extension; nor can any one revere with more devotion the immortal name of Hampden, and the great, though not corrival, names of those, by whose successful efforts the constitution was eventually established : but it would be illiberal in the extreme, to permit the provision, which the very men, who formed our constitutional system, deemed it not in¬ consistent in the people to give, and the King to receive, to be reduced to half its original value, at a time, when we are competent to give double ; and it can scarcely be contended, that there would be danger in conferring now, what it was not conceived to be dangerous to besto\V at the period of the revolution. The same observations will nearly apply to the pro¬ vision, which is made for the other branches of the Royal Family, as it consists of a fixed income, instead of being derived from a contingent produce, that would yield an increased revenue, commensurably with the increased depression of mbney. In 1742, £100,000. a year was granted to the Prince of Wales then existing, which, converted into the money of 1806', is £219,000. or double the income of the present Prince: and in 1746, the Duke df Cumberland then existing was in possession of a revenue of £70,000. a year, which, converted into the money of 1806, is £150,000., or eight times the income of the present Royal Dukes. If, therefore, the same establishment be to be maintained by the present Prince of Wales, as was maintained by his grandfather, and by the younger branches of the Royal Family, as has been the customary appendage of their distinguished station, the same relative funds must be given. Their existing revenue is wholly incompetent for the purpose. But whatever conduct parliament may adopt for the more effectual support of the civil list, it would certainly be advisable to separate the revenues appropriated to the maintenance of the Royal Family from the other dis¬ bursements, and form them into a distinct head of public 320 chapter service, as an opinion s very 'generally prevalent, that the £960,000. a year is at the exclusive disposal of the crown. The following is an extract from Sir John Sinclair’s account of the charges of the (a) civil list for 16 years, prior to the 5th of January, 1802. Civil List. Class. 1 Annual Average of | Expense. j Total in 1a years. Royal Family Great Officers of State Foreign Ministers Tradesmen’s Bills Menial Servants of the House- 1 hold / Pensions . - Salaries to various Officers - Commissioners of the Treasury Occasional Payments Total £■ d. 5.09,988 15 0 33,279 10 0 80,526 0 2f 174.697 *3 ” 92,424 6 Ji 114,817 6 11 76,013 l8 2| 14,455 *4 7 f 203,964 6 o| £■ s. d. 3,359,828 7 10* 1 532,473 0 1 1,288,416 3 4| 2,795,163 2 3f ’ 1,478,7 8 9 5 8 1,837,077 10 6 1,216,222 17 0! 231,191 13 1 of 3,263,428 16 4 1,000,167 9 6 16,002,679 17 0 The annexed statement is an account of the aggegate revenue of the Royal Family from the civil list and con¬ solidated fund, extracted from the same author. From the Civil List. His Majesty’s privy purse £.60,000 The Queen - 58,000 The Prince of Wales 60,000 Princess Charlotte of Wales 6,000 Duchess Dowager of Cumberland 4,000 188,000 (a) See Sir John Sinclair’s History of the Revenue, vol. ii. p. 151. 321 From the Consolidated Fund. Prince of Wales - JT. 65,000 Duke of Gloucester (a) - - 17,000 Duke of York - 14,000 Duchess of York - 4,000 Dukes of Clarence, Kent, Cumberland, Cam- ridge, and Sussex, £ 12,000. each, (6) 60,000 CHAPTER 160,000 Civil List - - 188,000 348,000 It would be improper, however, to conclude these ob¬ servations on the inefficiency of the funds, that are applied to the payment of the civil list, without adverting to the inconsiderable emoluments of the great offices of state, which have continued, for the most part, without altera¬ tion from the reign of William III. In the inferior departments of government, a judicious augmentation has, in most instances, been made ; and public men have little ground to complain, that their services in these stations are not duly compensated ; but the income at¬ tached to the higher offices is not only incompetent to afford the remuneration, which a great nation should always make to her distinguished servants, but is insuffi¬ cient to cover the expenses, which the stations themselves (a) This refers to the late Duke. (b Lately made £18,000. a year ; but their revenue is still extremely inadequate for a princely establishment. T t 322 chapter necessarily occasion. In the subordinate departments, ministers have, in some degree, been enabled to exercise a discretionary power, and regulate the income according to the advance of prices, but, as delicacy forbid an appeal to parliament for a proportionate augmentation of their own emoluments, they were reduced to the necessity of implicit acquiescence in whatever depreciation occurred. According to the best information, which I have been capable of obtaining, it is scarcely practicable for the first minister to expend less than from fourteen to fifteen thousand a year; yet there is no office, under govern¬ ment, to which a salary of half this sum is annexed; and though it be usual for the minister to hold two, and even three offices, yet no one has ever held places to a larger amount, than £10,000. a year. All those, there¬ fore, whose private fortunes were inadequate to supply the deficiency, have been impoverished by their elevation to this high distinction ; and instead of receiving a just compensation for their services, have been reduced to a state of indigent dependence on the kindness of their friends. The debts, contracted by Mr. Pitt, sufficiently authorise this reasoning, as it was scarcely possible for any one to possess a greater degree of moderation in every thing, that related personal expense ; and yet the exceed- ings of his income amounted to £40,000. I am well aware, indeed, that the emolument of office is the last consideration, which those, who aspire to the government of the country, regard ; and that the love of money has been a passion, almost without exception, an alien to their nature; but it is, on this very account, the more necessary, that the nation should indemnify them against the loss, which must inevitably be sustained by the due support ciiAf'Tr.n of the station, which they occupy. In the inferior offices of the royal household, scarce a situation can be named of a competent salary. In the reign of William III. the lords of the bedchamber were entitled to £1000. a year, which converted into the money of 1^06, i; £2.6 a sum, not only adequate to meet the additional charges, which the situation re¬ quired, but fully sufficient to dignify the office, and enable the King to confer on his attendants an essential act of grace and favour; but, from the deductions, now exacted from places and pensions, the salary is little more than the odd £600. ; and were it not that the office has, by long custom, been deputed honorary, would degrade, rather than elevate the noble persons, who accept it. Every other department of the royal household wdll justify similar observations; and so little does the income accord with the expense, that no part of the establishment is characterised by the splendour, wdiich it formerly pos¬ sessed, or is consistent with the munificence, which a great people should always display in providing for the state and dignity of the august head of its government. In the pay of the army and navy, so far as the main body is concerned, a progressive advancement has been regularly made, commensurate with the depression of money, and the privates have no cause to impugn the liberality of their country. The pay of the officers has, for the most part, continued without alteration, from the reign, of Queen Anne; but the regulations, that are $2 4 chapter requisite to raise the army and navy to the highest state of appointment, have so fully engaged the attention of parlia¬ ment, that it is unnecessary for me to advert to them. It is only material to observe, that the alterations, which are suggested, should have no tendency to change the cha¬ racter of the profession ; and it is always to be recollected, in the words of a great and luminous historian, that “ the modesty of the soldier in peace, and service in war, are best secured by an honourable poverty.” ( a) In this review, therefore, of the effects of the depre¬ ciation of money on the various appropriations of the public revenue, it is evident, that money has hitherto formed an inefficient instrument for the fulfilment of the conditions of permanent compacts, to the great detri¬ ment of those, who have accepted a fixed income, in com¬ pensation for the advantages, which would have otherwise been conferred. It is only, however, in permanent com¬ pacts, that its inefficiency is so peculiarly detrimental. In contracts for years, an opportunity is afforded to the suffering party, on renewal of the term, to augment his income proportionally to the depression of money, though an injury be doubtless sustained during the cur¬ rency of the contract, according to the extent, to which the depreciation has proceeded. The landed interest of the country, therefore, are certainly injured in proportion to the duration of the term, for which they grant their leases. From 1780 to 1800, as the value of money was depreciated 5?. in the pound, or 25 per cent., the landed [a) Gibbon, page 221, Vol I. 8vo. 325 proprietor, who, in 1780, gave a lease of a farm for 20 chap per years, at an annual rent of £400., received at the close of the term what was only equivalent to £goo. at the com¬ mencement ; but, as long leases are not, in this part of the United Kingdom, so frequently granted as formerly, the proprietors of land suffer less injury, than sfhy class of the community, who receive a fixed income by the medium of money. The advantage, which is gianed by the tenant against the landlord, has no tendency to alter the value of the land, as it rises in price in the same proportion with its produce, and invariably maintains the same relative worth, whatever may be the depression of money. In taking, however, a comparative view of the situation of the landed interest at different periods, it is frequently observed, that a country gentleman cannot now live upon £1000. a year, as he formerly could, and an inference is thence deduced, that he cannot now main¬ tain himself in the same eligible position in society. When a specific sum is mentioned, the remark is just; but the same landed property, that' formerly produced jTiooo. a year, will now produce a proportionate sum to enable the proprietor to live with proportionate respecta¬ bility. This opinion originated in the supposition, that money at all times expressed the same value, and that the same land invariably produced the same sum. A comparative view has also been frequently taken of the advantages of landed and funded property, and a preference has, in many instances, though with very little reason, been given in favour of the funds ; for as the public creditors are compelled to receive the same nominal 326 ch atter interest, whatever reduction may be made in the value of money, without any means of renewing their contract, and demanding an increase of income correspondent to the depreciation they must necessarily suffer in proportion as tlve depression is augmented. Nor is their principal (a) fitter protected than their interest, as it equally constitutes a fixed sum, and is equally subjected to the deterioration. But though the landed interest certainly suffer during the currency of their leases, yet at the expiration of their contracts they are again empowered to raise their rents commensurably with the alteration in the value©f money, and re-establish themselves in the same relative situation. From 1780 to 1800, the public creditor lost one fourth of his principal and interest without any possibility of re¬ demption ; but what he lost the landed proprietor re¬ covered, and by obtaining one fourth more hi principal and interest, augmented his income in proportion to the depression, and regained the station, from which he had declined, while his lease was in force. The more distant too that the period is, from w hich the comparison is in¬ stituted, the greater will be the advantage in favour of the landed interest, as the greater will be the depreciation of money. The private annuitants by bond, mortgage, settlement, or jointure, suffer in the same manner as the public an¬ nuitants of the state, as they have no power of renewing (a) The rise or fall of stocks is problematical, and cannot fairly be brought into the comparison, as they may be at any given moment as much against as in favour of the proprietor. 327 their contracts, and no means of redress, whatever altera- ch apter tiun may ensue. But however inefficient money may have hitherto been as an instrument of mediation in all pecuniary compacts, whether of a permanent or temporary nature, yet as it has uniformly constituted at the same time an equal measure for the same value, all those whose incomes are unconfined, and immediately derived from the sale of pro¬ duce, sustain no injury by the depression, as from an equal advance in the price of all produce, all are augmented in the same ratio. The tenantry and peasantry of the country, therefore, together with the commercial, manu¬ facturing, and trading classes, suffer no inconvenience, as their incomes are increased in the same proportion, in which the value of money is depressed. It may, on the contrary, more properly be said, that their condition is considerably improved by the depression ; for as they are for the most pari under contract to pay a stipulated sum for rent, or interest on money borrowed, they are enabled by the advance of prices to defraud their landlords and creditors of their just due, and fulfil their obligations with greater facility. As the debtors, indeed, in all contracts, must, of course, be benefitted in the same proportion, in which the creditors are injured, their advantage is easily appreciated. But nothing can be more inequitable than to suffer the commission of this fraud by one half of the c >mmunity on the other without any restrictive provision, and permit the public revenue, the property of the public creditor, 328 chapter the income of the crown, and all the fixed incomes of in- dividuals, to be constantly deteriorated by the prevalence of a system, that is productive of no one advantage to compensate the mischief, which it occasions. All the evils, that resulted under the Henrys and the Edwards, from the adulteration and debasement of the coin, now result from the fabrication of factitious money ; and as parlia¬ ment then made various attempts to counteract the effects of the degradation, it is surely important, that it should interpose its authority at the present period, when money is made much more than formerly the instrument of mediation in all compacts. The only policy which it is necessary to pursue, is to prevent an increase of currency. If the relative amount of currency be not augmented, it is impossible that money can be depreciated. The means, by which this policy is to be carried into effect, will be the subject of the following chapter. But as all legislative provisions are necessarily imper¬ fect, it is essential, before I close these observations, to remark, that in compositions of a permanent nature, some criterion should be assumed for the purpose of pro¬ viding a graduated scale of the value of money, and that an increase or diminution of income should be allowed in conformity to the result. The present impoverishment of the crown is a sufficient warning against permanent com¬ pacts for a definite sum ; and no public composition will, I trust, be hereafter concluded, that does not contain within itself the power of revision as to the pecuniary 529 compensation. In a late projected composition govern- ciiaptlr ment very properly departed from the principle of a fixed income, and as a (a) commutation for tithes, it was pro¬ posed to grant a stipendiary salary, according to the price of corn. The basis upon which the compensation was to be negotiated was perfectly just; but I have already shewn the inefficiency of corn as an exclusive standard; and whenever it may be necessary for any object of ex¬ tended policy to ascertain the relative value of money for a period of long duration, the principles, upon which Sir George Shuck burgh constructed his table of proportions, will be found the least objectionable. (fl) Mr. Pilt had obtained the sanction of those most interested in the measure ; and so far was it approved, that a bill was even prepared with the view of submitting it to the consideration of parliament. U It 330 CHAPTER XIII. On the Reformation of the Paper Currency of Europe. chapter As the reasoning of the foregoing chapter evidently shewed, that it was of the highest importance, that money should be made to constitute at different times, as well as at the same time, an uniform measure of value ; and as the reasoning of the chapter preceding the last went to prove, that the variation principally arose in the ex¬ isting circulation of Europe, from the utterance of paper; it necessarily follows, that a due regulation of the paper system would be the most effectual means of obviating the inequality, and causing the same sum, as nearly as possible, to be permanently expressive of the same value. I certainly, indeed, endeavoured to explain, that other, and distinct causes of the alteration of the measure, had subsisted in distinct periods of our history; that in the ruder ages of society, it had principally resulted from the adulteration and debasement of the coin; and from the birth of Columbus to the close of the 17th century, from the proceeds of the American mines: but as the adulteration of the coin is now universally condemned, as a futile and impolitic expedient, and as the annual returns from the mines of America would, in a great degree, be absorbed by the annual consumption of bullion; by occupying the place of the inferior paper, which a 331 prudential reform would withdraw from circulation ; and chapter by supplying the additional proportion of coin, which would in most countries be necessary to meet the gradual augmentation of produce, and maintain prices at their existing standard ; it is evident, that if no increase were made to the present stock of paper, no material depre¬ ciation of money, nor consequent alteration of the mea¬ sure, could occur. For an efficient counteraction of the depression, there¬ fore, a revision should take place of the whole circulation of Europe ; and the utterance of paper should, in all countries, be forbidden beyond the existing amount, as any addition, however insignificant, would cause a cor¬ respondent reduction in the value of money. But under the present constitution of the banking establishments, no check to the issue of paper is in operation, except the obstruction, which arises from an unfavourable exchange upon a partial excess ; and as this check is removed, if the paper of all countries be augmented in a similar ratio, some reform should be proposed, that would sub¬ ject them to the regulations, which the common interests of the republic of Europe require. The limitation by exchange has been duly enforced from the first intro¬ duction of a paper medium ; and whatever influence it may have had to obviate a particular excess in any given country, it has had no influence to prevent the general amount from proceeding to a pernicious extreme. The present quantity of paper exceeds, in an unprecedented degree, the quantity that was in issue fifty years ago ; and if the same unrestricted utterance be permitted for 332 chapter the next fifty years, as has been permitted during the last, diere can be no doubt but that the powerful incentive, by which the banking companies are actuated to push their paper to the greatest possible extent, will augment the amount as much above the present proportion, as the present proportion is superior to the amount in cir¬ culation half a century since; and no check whatever will be opposed to the depression of money. In order, therefore, to erect a more effectual barrier against the extension of paper, it is necessary not only to deprive a certain proportion of the banks of the privilege of utter¬ ing paper, but to restrict those, invested with the power, from publishing any note below a given value. But this regulation, though powerfully restrictive, would still be incomplete, unless the amount of the paper of the privileged banks were from time to time disclosed to the public ; for though the prohibition of small notes would greatly tend to obstruct the augmentation, yet, as no auxiliary check would be brought into co-operation, but the state of the exchange, which is inefficient as a general control, the circulation of Europe might still be extended beyond its proper limits, and still continue, though by slower steps, the depreciation of money. For a complete prevention of the depression, therefore, it is necessary, in addition to the limitation of the privilege of utterance, and the limitation of the value of the paper, that the banks should communicate to the public, at stated periods, the amount of their notes. By this dis¬ closure, their paper would be exposed to the eye of government, and subjected to the animadversions of public men : and should an undue augmentation, at any ciUPThlL future period, be found to have taken place, such further restrictions might be proposed, as would be fully ade¬ quate to correct the excess, and maintain a durable uni¬ formity in the measure of value. But as it is impossible, from the nature of their institution, that this communica¬ tion could be made by private banks, it is essential to the effectuation of a competent reform, that none but char¬ tered companies should be allowed the privilege of issue. It is not, however, for the sole object of counteracting the depression of money, important as such a considera¬ tion may be deemed, that I recommend the privilege of issue to be withdrawn from private banks; but I have also in view, the correction of the abuses, that result from the interposition of their paper : and, exclusively of the reform, which it is necessary to make, for the purpose of supporting an uniform measure of value for a period of long duration, I should be led to deprecate the publication of their notes, as a peculiar defect in the circirculating system of the country, where they were authorised. One of the leading objections to the encouragement of private paper, is, that it is principally composed of small notes, which, invariably, occasion the banishment of specie : for if they be published in provincial districts, the coin is collected by the banks, and dismissed to the metropolis for investment in securities ; or, if published ■in the metropolis, is collected by the bullion merchant, and remitted to other countries, upon an unfavourable .exchange. 334 chapter Immediately that a private bank is established in any particular town, and advances its paper to the principal manufacturers resident in the neighbourhood, it easily commands the circulation of the district; for, as most of the money requisite for the transaction of exchanges, passes through their hands, it is no sooner received, than conveyed to the bank, for the promotion of their credit. Whatever quantity of coin, or of the paper of the metropolitan banks, is thus obtained, is transmitted to the metropolis, and laid out in securities, most easily susceptible of reconversion, a small reservation only being made to answer occasional demands ; and as the profits of the bank, almost wholly, depend on the amount of its circulable paper, and the sum of specie so invested, every effort is made, by the aid of connections, to maintain as large a proportion as possible of outstanding notes, and to displace as large a proportion as possible of the coin that antecedently circulated. So long, therefore, as the interposition of private paper shall be authorised by law, nothing but a run upon the Bank, and a compulsory demand for specie, can cause the return of a circulating system of coin in the district, where it is established. But sudden as the disappearance of the coin may be in provincial districts, where the publication of small notes is permitted, it is still more immediate in the metropolis, where the negociations of the exchange are transacted, and where the collection of specie is effected w ith greater facility. As all the important payments of a nation are made in the metropolis, and as paper of a superior de¬ nomination has consequently, at all times, furnished a competent profit to the metropolitan banks, no small notes chapter have been issued, but from the mistaken policy of finding a substitute for specie, already in a state of scarcity, from an excessive utterance of paper. The further accumula¬ tion, therefore, of the quantity, by an edition of small notes, has uniformly aggravated, instead of mitigated the evil, and caused an immediate departure of the remaining proportion. Exclusively, therefore, of the policy of assigning a limit to the publication of paper, for the purpose of coun¬ teracting the depression of money, and enabling it to form a more durable measure for the same value, the privilege of issue should be withdrawn from private banks, were no other beneficial object to result from it, than the abolition of small notes, and the readmission of coin in the currency of Europe. But the utterance of private paper is liable to many other objections, and the history of every country, where it has been authorised, will fully manifest the mischievous tendency of its intervention. But, as an explanation of the consequences, which have resulted in one state, will in a great degree illustrate the consequences in all, and as it is more immediately to my purpose, to consider its effect on our own system, I shall more particularly con¬ fine my observations to the irregularities, which it has caused in the currency of this country. I have already had repeated occasion to notice the de¬ fective construction of our circulating system in the 336 chapter reign of William III., from the publication of the notes of goldsmiths in conjunction with the paper of the Bank of England. The confusion, which ensued from this admix¬ ture, continued in part, till the frequent bankruptcies of the goldsmiths gradually led to the contraction, and eventually to the explosion of their paper. From the period of this explosion to the close of the American war, the Bank of England possessed an exclusive monopoly, and by forbearing to issue any note below the value of ten pounds, uniformly sustained, in every part of the kingdom, a sufficient quantity of specie for the fulfilment of inferior contracts, and the common purposes of do¬ mestic intercourse. But in the interval, that elapsed be¬ tween the American and the Revolutionary war, provincial banks attempted in the country, what the goldsmiths of the metropolis had previously attempted, and caused the same relative scarcity of specie in the districts, where they were instituted, as the notes of the goldsmiths had occasioned in the reign of William III. But the consequences, which flowed from their establishment, were equally prejudicial to themselves and the public : for, though during the period of peace no suspicion were excited of the credit of their paper, yet at the commencement of the war in 1793, a general distrust prevailed, and the country was dis¬ graced by their failures, in the same manner as it had before been by the failures of the goldsmiths. Nor was the calamity confined to their own institutions, as the contraction, which the run enforced of their paper, caused so great a deficiency of the means of payment, that, though the bankruptcies of the two preceding years had amounted to no more than 600, the bankruptcies of this year extended to the unprecedented proportion of chapter 1304- In this crisis the provincial companies applied to the Bank of England for relief, but the directors were too apprehensive of the difficulties, that awaited their own establishment, to comply with their requisition. The me¬ tropolis soon became distressed in the same proportion with the country towns, from the diversion of its cur¬ rency to fill the chasm which had been made, in the circulation of the other parts of the kingdom: and the mischief, already aggravated beyond all former example, would have proceeded to a greater extent, had not government interposed to arrest its progress, and by a provident issue of Exchequer bills, prevented any further embarrassment. In the general shock, though many of the country banks found means to avert the calamity, which threat- ned them, yet none were free from alarm ; none coul tell how soon the blow might be repeated, nor what de¬ gree of injury it might be capable of effecting. So soon, therefore, as the public consternation had subsided, they took the only means in their power of providing against the probable effects of another alarm, by forming a con¬ nection with the London bankers. By this co-operation, they were enabled to secure the support of the Bank of England, notwithstanding its indisposition to assist them ; for, though previously to the suspension of cash payments no London banker applied for aid, in his own name, as the application would have been deemed a reflection on his x x 3:3 8 ch \pter credit, yet assistance was easily procured by the interven- tion of liis customers, who subscribed their names to the bills, which he presented for discount. By this interme¬ diate agency the provincial companies were placed under the protection of the Bank of England, and that support was indirectly contributed, which their open application had failed to obtain. In 1797, a suspicion was again excited of the credit of their paper, but the connection, which they had establish¬ ed with the London bankers, in reality directed the draft from themselves to the Bank of England. Immediately that a run was made upon them, a drain was opened on the Bank of England for specie, through their London agents; and the evidence before the secret committees goes to shew, that considerable sums were remitted for their support. But the communication, which took place between Mr. Pitt and the Directors, in 1794, 1795, and 1796, decisively proves, that the coffers of the Bank had been too far exhausted, by the long continuance of an unfavourable exchange, to be capable of furnishing a fund of material import. Nor could all the deposits of the kingdom supply the requisite amount for the public exi¬ gency. The specie of the provinces had already been supplanted by the small notes of the country banks, and dismissed to the metropolis ; and the specie of the metro¬ polis had been gradually reduced to the lowest possible amount by the adverse condition of the exchange. The few guineas, therefore, that were left, were applied to effectuate the inferior payments of the city of London, and were wholly inadequate to occupy the place of .359 provincial paper, and enable the country to recover her chapter position, and reassume at once the circulation of coin. As no practicability, therefore, existed, of providing a competent sum, to meet the demand; and as the greater the difficulty, which the country banks experienced, the greater was the draft on the bank of England, no alter¬ native remained, but a suspension of cash payments ; and an order of council was accordingly issued, on the s6th of February, 1797, to restrict the directors from paying in specie. On a retrospective view, therefore, of the circulating system of this country, it appears, that, in the present reign, as well as in the reign of William III., the admix¬ ture of private paper, with the paper of the Bank of England, produced precisely the same consequences, the adulteration, melting, and scarcity of the coin, the failures of the banks that uttered the paper, and the suspension of payments in specie by the bank of England: and were an inquiry to be made into the effects, which the paper of private banks has occasioned in other countries, in Scotland, Ireland, Italy, and Denmark, where its re¬ lative quantity has been carried to a greater extent, little doubt would be entertained of the impolicy of upholding it, as a component part of the permanent currency of a country. Without any reference, therefore, to the ob¬ jects in contemplation, of retarding the depression of money, and restoring a system of coin, it is highly essential, that private paper should be prohibited, from its easy susceptibility of discredit, as an inefficient and dangerous medium. 340 CII \m TER But ’ n reason i n g on ^ ie or< J er of council, though it be necessary to admit, that it was strictly authorised by the existing pressure on the Bank, yet no instance can be adduced, more fully illustrative of the little acquaintance of Mr. Pitt's mind with the principles of public economy, than his inability to overcome the difficulties, that oc¬ casioned it. In the chapter on the payment of our foreign expenditure, it was essential to the explanation of my subject to notice the mistaken opinion, which he formed, of the cause of the efflux, and influx, of money, and the error, which he committed, in narrowing the supplies to the court of Vienna, from an illusive concep¬ tion of the want of money to pay them. The same principles, which misguided him in his subsidiary nego- ciations with foreign powers, misguided him in his policy to the Bank of England, and in the general view, which he took of the circulation of paper. Upon the successful establishment of provincial banks, in every part of the kingdom, he was apprised, by the returns of the Receivers General, of the tendency of their paper to displace the coin ; yet he suffered guinea after guinea to be transmitted to the metropolis, and every county, in its turn, to be exhausted of its specie, without any attempt to check the innovation, or any inquiry into the Consequences,that might result from it, though it be impos¬ sible to conceive, that he could have reasoned on the sub¬ ject, and not have foreseen the difficulty of resupplying the provinces, and reverting to a currency of coin, without a dangerous convulsion of the system. Not only, how¬ ever, was he regardless of the exhaustion of the counties. 341 but, as the specie, by degrees, was attracted to the me- chapter tropolis, he resorted to the only policy, that was calculated to enforce its departure to the continent, by incessant application to the Bank of England for additional grants, notwithstanding that the Directors had complained, so early as the year 1794,, of the impoverished state of their coffers, and had strongly solicited the repayment of their advances, for the express purpose of contracting their outstanding paper, and obviating the drain. 6ut he was fully persuaded, that the current to the continent was occasioned by the extent of our foreign expenditure; and he fondly trusted, that a favourable balance of trade, which he conceived to be a necessary consequence of the commercial relations of this country, would, upon the reduction of our external payments, immediately lead to a return of the specie. Of the theory of money, as an uniform measure of value, and of its property, to flow into, or out of a country, as a relative scarcity, or excess of circulation might direct, his mind had never entertained a conception. Upon the communication, therefore, which the Bank of England made to him, of the deficiency of their cash balances, he was at a total loss to provide the necessary aid; for as the public service would not admit any material diminution in our foreign expenses, and as the augmentation of a favour¬ able balance of trade was not within the government of political provisions, he knew no resource, by which an adequate supply of specie could be procured. As the counties, therefore, were wholly exhausted, as the me¬ tropolis possessed no more than the sum that was ne¬ cessary for its inferior transactions, and as the deposits 34 chapter of the bank were reduced to the lowest scale, no funds whatever remained, upon the failure of provincial paper, to replenish the counties with the coin, which they had lost; and the order of council was imperatively de¬ manded, to prevent the stoppage, that would otherwise have ensued. Nor did he evince any better judgment after the re¬ striction than before it. Upon the enactment of the sus¬ pension, it was the declared intention of government, that the Bank should resume its cash payments after a short intermission; but though the contraction of our currency, in consequence of the sudden disappearance of provincial paper, conduced to a large supply of specie from the Continent, which might have satisfactorily il¬ lustrated to his mind the real cause of the pre-existing scarcity ; yet so far was he from taking advantage of the influx, and the demonstration which it afforded of the origin of the mischief, by a judicious prohibition of paper of an inferior denomination, that he particularly exulted in parliament, that the restriction had furnished to the Bank of England additional facilities of discount, by the authority which it gave to the publication of small notes. By this policy, of encouraging, instead of obstructing, the augmentation of paper, he not only again reduced the exchange to an unfavourable position, and caused the departure of all the specie, that had been in¬ troduced sub equently to the suspension, but he enforced the export of that proportion, which had previously escaped, in consequence of the forbearance of the Bank of England to issue an inferior paper ,; and in 1799, and 343 l8oo, a less quantity of coin was extant in the country, chapter than in 1795, and 1796. The difficulty, therefore, of resuming the payment of gold was aggravated, instead of diminished, and the return to a system of coin was deferred to an indefinite period. The general view, however, which Mr. Pitt took, of the circulation of paper, was wholly erroneous. At the time when the government of France was continually adding to the discount on its paper by the continual increase of assignats, he was regularly predicting the ruin of the country ; and in every debate, which oc¬ curred on the conduct of the war, he not only proclaimed, that she was in the gulph of bankruptcy, but was fully convinced, so soon as her paper system should fail, that her government would be bereft of every resource, and that a total dissolution of the empire would immediately succeed. He was well aware, from the information which he received, that not a louis could be seen in cir¬ culation ; and as he was of opinion, that the efflux of her gold had been occasioned by her foreign expenses, he conceived, upon the failure of her paper, that no means whatever would remain to enable her to fulfil her en¬ gagements, and maintain her faith with the army. He therefore regarded the ruin of her credit, as the signal of her defeat; and he confidently looked to this event as the consummation of all his hopes. But to his surprise, and the surprise of the world, the paper no sooner dis¬ appeared, than, instead of a want of money, the whole country was glutted with specie, from every quarter of Europe, and a complete renovation of her circulating 544 chapter system was effected. Yet this illustration, remarkable as it was, imparted no instruction. So wholly was he absorbed in the errors of the old school, that no elucida¬ tion could wean him from the doctrine, or impress him with a just perception of the real cause of the reflux of the coin. But whatever difficulty the prepossessions of his mind might have opposed to a theoretical solution of the mystery, it is singular, that in so complete a discom¬ fiture of his views, he should have forborn to have drawn the practical conclusion, that the compression of paper necessarily occasioned the introduction of specie. Not only, however, did he fail to form a correct inference, but he was unfortunate enough to bring upon his own country by the same policy of an excessive utterance of paper the same scarcity of specie, which had led him to predict the speedy subversion of the power of France. The government of Austria was equally misguided, on the subject of a paper currency, with the government of this country. During the progress of the revolutionary Avar, and after the total failure of the credit of France, the court of Vienna was induced to make an extra¬ ordinary publication of paper, under an impression, that it would prevent the necessity of further exactions from the people. The expedient was attended with its usual concomitant, the departure of the coin ; and by the same misconception of the theory of money, as in all other countries, the scarcity was attributed to every thing, but the over-utterance of paper. An unfavourable balance, of trade was, however, conceived to be the principal cause ; for as the war had been for the most part 34 5 prosecuted in the dominions of the house of Austria, its chapter government possessed not the same plausibility of rea- soiling with the government of this country to impute it to the payment of a foreign expenditure. To check the imaginary drain, therefore, of an adverse balance, a pro¬ clamation was issued, in compliance with the immediate dictates of the mercantile system, to prohibit the impor¬ tation of sugar; and it was confidently expected, that specie would be returned for the whole of the export trade, that was customarily applied to its purchase. But as all commerce consists in the equal interchange of pro¬ duce for produce, a reduction of the imports necessarily enforces a reduction of the exports ; and the measure was in reality calculated to lessen the aggregate trade, without any tendency to leave a surplus of exports for the introduction of bullion. The prohibition, therefore, had no beneficial operation towards a reduction of the scarcity; and as the same excess of paper continued in circulation till the commencement of the campaign of 1805, the same deficiency of coin continued to subsist. The over-utterance of paper, however, would have done but little injury, had it simply led to a partial infringe¬ ment of the freedom of trade : but the great mischief of its excessive publication, consisted in the impression, which it spread, both in Austria, and in this country, of a total exhaustion of resources, from the common preju¬ dice, which mankind entertain, that money and wealth are the same thing, and that a want of the one neces¬ sarily implies a want of the other. The force of this prejudice was never more unfortunately exemplified, than in the manifesto, published by the court of Vienna, after the treaty of Presburg, where an attempt was made y y ,46 chapter to justify the peace, because no specie was remaining- in the country, and because the paper of government was reduced to a discount. But whatever were the errors of Mr. Pitt and of the ministers of other courts, in the judgment, which they formed, of the resources entrusted to their direction, no minister ever possessed a more intimate knowledge of the theory of finance than the great statesman who lately conducted the councils of this country. In whatever estimation Mr. Pitt will be held for his general policy, however exalted his merit, and power¬ ful his claims, it is impossible to admit, if the pre¬ ceding observations of this inquiry be well founded, that he either correctly understood the genuine wealth of a nation, or correctly administered the vast means of his own country. In the contraction of his subsidiary grants to the court of Vienna; in his illusive prediction of the ruin of France; in his admission of the theory of the balance of trade ; in the commercial regulations, which he adopted in consequence of it; in the drain, which he sup¬ posed a foreign expenditure, and the import of corn to occasion, of specie ; and in his conduct to the Bank, on the diminution of its deposits by the encouragement, instead of the compression of paper, it is necessary, according to the principles of this work, to conclude, that he was wholly misguided. Elevated by the intuitive force of his intellect above the prejudices, by which his illustrious relative was misled to the commission of these errors, and aided in his efforts by a more zealoiis and elaborate research, Lord Grenville has attained to clearer views and more enlarged conceptions. He is the first statesman 347 tha f acceded to the government of this country, unin- chapter fluenced by the tenets of the old school. In his mind the theory of the balance of trade, and the various fallacies, that lead to, and flow from the doctrine, have no place. Nor is he impressed with the opinion, that the efflux of our coin is attributable, either to our external expenses, or the purchase of grain. He first deduced the important inference, that it proceeded from the excessive utterance of paper; and in a speech, which he delivered in the House of Lords, after the peace of Amiens, on the second reading of the bill for restricting the Bank of Ireland from payments in specie, he not only detailed the cause of the efflux, but proposed the only plan, that was calculated to give effect to a mint coinage, and enable the Bank to pay in gold. The deep and extensive knowledge, which he displayed of the principles of public economy in this, and every other debate, that related to the subject, was a sufficient promise to the world, that the resources committed to his charge would be more ably administered than by his great, though less competent, predecessor; nor can any fact more fully confirm the promise, than the comprehensive and triumphant system of finance, which he submitted to parliament, for providing for the ex¬ penses of the war to an indefinite period, without any accumulation of the public burthen. (a) The plan, which he recommended for the reform of our paper currency, was, that the Bank of England, and (a) The pressure of matter during the last session of parliament pre¬ vented the execution of this plan. 34 8 chapter the provincial banks, should, at the expiration of three months from a given period, call in their one pound notes, at the expiration of three months more their two pound notes, and at the expiration of three months more their five pound notes; no note being eventually left in circulation below the value of ten pounds. By this policy, and this policy only, is it possible to check the depreciation of money, and re-establish a circu¬ lating system of coin. As the existing regulations of the currency of Europe authorise the publication of small notes to any amount, and permit their substitution for specie, in all the dealings of retail trade, it has already been shewn, that prices may be raised to any extent, and that no check whatever can be opposed to the depression of money. But if the banks were under the necessity of leaving a certain proportion of coin for the transaction of inferior payments, it is im¬ possible, that paper could be published to such an extent as to elevate prices above the standard, which the amount of the specie was adequate to support. The quantity of paper of a higher denomination must, in a great degree, be regulated by the quantity of the inferior means of payment; and if the inferior means be incapable of en¬ largement, a limit is necessarily assigned to the enlarge¬ ment of the superior. Specie may certainly be excluded from all intervention in contracts of an important nature, and confined solely to the interchanges of retail trade; but if there be no funds, from which it can be augmented, it will be impracticable to raise prices by the issue of paper, beyond what the specie so occupied can maintain, chapter Any attempt to advance them to a higher state, by the fur- I ^ / ther augmentation of paper, would cause an immediate return of the notes upon the banks, that uttered them, if convertible at option into specie; or would reduce them to a discount commensurate with the excess, if incon¬ vertible. The prohibition of small notes is, therefore, indispensibly necessary to arrest the progress of the depression. Nor while inferior paper is permitted, will it be possi¬ ble to revert to the circulation of coin, since not only will it be impracticable to introduce any considerable quantity of specie, by the operation of the natural cause of its influx, a relative deficiency of currency ; but it will be impracticable to retain it, if introduced by the irregular means of purchase above its mint value or capture. It has already been shewn, that the Bank of England, from its first institution to the present time, has uniformly main¬ tained in circulation as large a proportion of paper, as the position of the exchange would allow. During the period, that it published no note below the value of ten pounds, it was necessarily circumscribed in its power of utterance to a greater degree than it now is, as it was compelled to leave a sufficient sum of specie for the in¬ ferior payments of the metropolis. But, since the restric¬ tion has authorized the issue of small notes, and suffered them to supply the place of guineas, advantage is taken of the privilege to extend the amount of the paper the whole value of the specie, that was previously current, and no opening is left for the readmission of coin. If, J 50 chapter therefore, by capture or purchase, any considerable quantity were imported, the accession would have no other effect, than to aggravate the pre-existing excess of the currency, and by depressing the exchange to a lower standard, cause an immediate departure of the money to other countries. Without the suppression, therefore, of the small notes of the Bank of England, no coin can be maintained in the metropolis; and without the suppres¬ sion of the small notes of provincial banks, no coin can be maintained in the country ; for as the re-establishment of a mint coinage would deprive the banks of the profits, which they now derive from the free circulation of their paper, they would accumulate in their coffers and return to London the specie which was remitted, and defeat every effort that government could make to enforce its continuance. In a speculative point of view, I should certainly have preferred the reform that would have totally withdrawn the privilege of issue from private banks, to the reform that only limits the privilege ; but as private paper is principally composed of small notes, a proscription of the one paper will, in a great degree, comprise a pro¬ scription of the other. Various considerations may ope¬ rate, in this country, with the practical statesman, to prevent the introduction of so extended a reform, in the first instance, as an entire abrogation of the privilege. The chief object, in all questions of this nature, is to ascertain the real cause of the evil; tha^ being once dis¬ covered statesmen may apply, as circumstances appear to die.ate, the expedient to palliate, or the remedy to 351 remove it; and should the prohibition of all paper below chapter the value of ten pounds be found, at a future period, inadequate to realise the advantages, which are expected to result from it, such further limitations may be proposed, as would render the reformation more complete. With some few, however, it is probable, that an exception may be taken to the measure, not because it is not extended in a sufficient degree to correct the irregularities, for which it is designed, but because it is calculated to give a monopoly to the Bank of England ; because it is carried too far, instead of not being carried far enough. No one can be, in the abstract, less friendly than I am, to laws of monopoly, as they, invariably, lead to a limited supply, and high price, of the commodity, which is the subject of them; but a limited supply, and high price of paper, are the precise points, which it is necessary to obtain, as, contrary to the nature of produce, its redundance, not scarcity, is the evil to be redressed. Its monopoly, therefore, is wholly distinct from the monopoly of the necessaries, or comforts of life, as its contraction, not augmentation, is the peculiar object of attention. But it may, perhaps, be conceived, that if the inferior paper, were withdrawn, no specie would flow into the country, to occupy the chasm. Reason, and experience, however, concur, in shewing, that this conception is wholly groundless. If the theory be true, that money is made to act in due conformity to the purport of its institution as an uniform measure, and that no one country can, permanently, possess a greater or less cur¬ rency than its just proportion ; it necessarily follows, that 352 chapter if our currency be so contracted, as to cause the same sum to measure in this country a greater value, than it measures in others, the specie of the Continent will be imported to reduce its value to a common level. And that this theory is correct, is not only attested by the conduct of the Bank Directors, who have uniformly been compelled to resort to the policy of compressing their notes, for the purpose of counteracting a drain for specie, but is more openly proved by the favourable exchanges of 1793, and 1797, when a general consternation avow¬ edly produced a sudden contraction of the paper : though its truth may indeed be fully manifested, by the history of every country, where the circulation of paper has been authorised, as in each instance, where the paper has been augmented to a certain extent, specie has disappeared; and in each instance, where it has been suppressed, the specie has returned; and as no satisfactory explanation can be given, of this regular, and invariable effect, but the necessity, to which all countries are subjected, of maintaining the same relative proportion of currency, in order that money may be enabled to discharge its func¬ tions with due consistency, as an uniform measure, no doubt can be entertained of the validity of the policy which Lord Grenville has recommended. Not only indeed upon the contraction of our paper, would it require no effort of government to cause the influx of specie, but no effort of government could pre¬ vent the influx. If the same sum were made to measure in this country a greater value than it measured in others, no regulation of government could maintain, in our 3 5 3 ' exchange, the bills that were drawn on foreign nations at Ciiapti'-U par, as the superiority of the prices of the Continent , > would expose the buyers to an inevitable loss, from the produce, on which they were expended, being unable to return in our market the same value, which it cost abroad. They would, necessarily, therefore, fall to a discount, commensurate with the difference in the value of money ; and should this difference, by the compression of our paper, be sufficiently great to reduce them to a depression beyond the charge of the transit of money, no legislative provision could prevent our goldsmiths from purchasing, and investing them in the specie of the Continent, for the purpose of introducing it into this country, when a profit would be attainable on its import, by the whole amount of the excess. The intervention of government would, therefore, be as unavailing to ob¬ struct the influx of money, when it was the interest of individuals to import it, as it has uniformly been to obstruct the efflux, when an advantage was to be gained by its departure- Nor would the contraction, thus gradually carried into effect, occasion any embarrassment to the commercial world ; as the specie, which would be returned in con¬ sequence of it, would, in a great degree, supply the place of the paper that was withdrawn. The Bank of Englan have frequently lessened the amount of their notes, to introduce a supply of bullion, without any inconvenience- to the public, from the dimunition of the means of pay¬ ment: and as the compression, which would be necessary, for the effectuation of the reform, would- not exceed in z z <5 54 chapter exter", however it might exceed in duration, the com- pression that was customarily adopted by the Bank to attract the bullion of the Continent, it would be totally inconsistent with reason to conclude, that any injurious issue to the credit of the country would result from it. Some objections may, however, be made to the time of the reform; and it may be thought, by the public, to be more advisable to adjourn it to a period of general peace. A state of hostility is frequently adduced, as an apology for the postponement of many measures, to which it bears no relation ; and I have already explained, in the chapter on the payment of our foreign expendi¬ ture, that money may be made to flow into a country in any quantity, notwithstanding an external expense to any amount. The war, therefore, opposes no necessary obstacle to the reform, as it has no connection with the cause that directs the influx and efflux of money. An opinion was certainly very generally entertained, at the enactment of the restriction, that the departure of our coin was exclusively attributable to the war, and the scarcity. But peace and plenty have since returned, without the return of our specie: and though Lord Liverpool, “ the child and the champion” of the old school, may affirm, that the theory of the balance of trade is self-evident; and Mr. Rose may shew, by official documents, that the amount of the balance is £ 14,800,000. a year, yet, in bringing the affirmation of the one, and the calculation of the other, to the test of experience, it appears, that instead of the hundred and fifty millions of specie^ which the ten years, that have elapsed, since the order of council should have added to our currency, the chapter quantity of coin, now extant, is considerably less than the sum in circulation at the period of the suspension. But whatever authority there may be for concluding, that the plan, which Lord Grenville has proposed, for the reformation of our currency, is grounded on the real principles of public economy, yet he forbore to rely on speculative reasoning only, for the proof of its efficacy. In the view which he took, of our circulating system, he perceived that, at the time, when the Bank of England uttered no note below the value of ten pounds, and no private paper was issued, no complaints were made of the scarcity of specie; nor did a murmur escape, that our currency was inadequate to the scale of our transac¬ tions. For the correction, therefore, of the irregularities of the present system, nothing more was necessary, than to restore our currency to the state, in which it was maintained for the greater part of the preceding cen¬ tury, without any dependence on abstract principles, any regard to an untried philosophy, or any exposure to the danger and uncertainty of new experiments : and how¬ ever satisfactory it may be, that the plan, which ex¬ perience dictates, is also approved by the deductions of theory, yet a practical statesman, and no one was ever more so than Lord Grenville, will always prefer, where an election is offered, the broad basis of precedent and fact, for the foundation of his policy. Should then this reform be effected, and the Bank be again invested with the exclusive, or nearly the exclusive, 356 chapter privilege of utterance, it is highly important, for the pur- pose of preventing the frequent recurrence of a temporary excess of issue, and the consequent burthen on the public by the renovation of the molten coin, that the charge of coinage should be paid by the Company, and that the duties now levied to defray it should be appro¬ priated to some other head of public service. I have already explained, in the fourth chapter of this inquiry, that the superiority of the market price of our money above its mint price, originated in the over-issue of paper ; and as the over-issue, upon the completion of the reform, will be attributable to the Bank, it would be utterly inconsistent with every principle of law and equity, if the Company were not made responsible for the injury which they commit: and as they will have the power, by narrowing the circulation, of reducing the market price of money below the mint price, they will have the means of acquiring a profit by the stipulation, instead of incurring a loss. It is also essential, that they should be made to communicate to the public, at stated periods, the amount of their notes, not only as a check on the general augmentation of paper, but, should the check be inefficient, and the depreciation of money pro¬ ceed with any rapidity, approximating the present ratio, as a ground for the formation of a more restrictive system, to counteract its progress. Having thus explained the principle of the reform, which it is necessary to adopt in this country, it merely remains to apply the principle to the currency of other countries. If the preceding argument be well founded, it is obvious, that none but chartered companies should chapter be allowed the privilege of issue, and that no note should be published below a given value. The higher the point, at which the limitation of value is fixed, the greater will be the quantity of specie in circulation ; and I should, in most instances, be inclined to prefer the standard of £ 15 . rather than £10., for the purpose of leaving a larger space for the occupation of coin, than has been customarily left in this country. The utmost care should also be taken, to prevent, as much as possible, the ex¬ tension of paper beyond the present amount, as any in¬ crease will infallibly occasion a correspondent depression of money: and as the mines of America are competent to produce whatever proportion of specie the increasing prosperity of thriving nations may require, for the main¬ tenance of existing prices, little danger need be appre¬ hended of an insufficiency of supply for the just purposes of circulation. By a due regard to this policy, the various evils that result from the depreciation of money may be wholly obviated, and money may be made to constitute, at different times, as w r ell as at the same time, an uniform measure of value. 358 CHAPTER XIV. On Lord King’s Thoughts on the Effects of the Bank Restrictions. chapter Upon that part of Lord King's investigation, where an attempt is made to account for the superiority of our exports above imports in the custom-house entries, by the remittance of silver to India, I have already com¬ mented ; and it now remains to examine the arguments, which he has adduced to delineate the general principles of the circulation of paper. In the conduct of this exa¬ mination, I should have been gratified to have had it in my power to have passed that encomium on the success of his economical researches, which I was unable to bestow in my prior observations, but the argument, as it proceeds, will shew the little opportunity, which his Lordship has given me of indulging such a disposition. Notwithstanding the rapid depreciation of money, which the table of Sir George Shuckburgh has so clearly eluci¬ dated, and which is not only admitted by every public economist, but is acknowledged by Lord King through the whole of his discussion, he opens his inquiry with observing,( a) that the position, which Dr. Adam Smith advanced, that the quantity of paper, in any given country, could never exceed the value of the gold and silver of (a) See Lord King’s Thoughts, &c. page 2. 359 which it supplied the place, or which would circulate, if chapter there were no paper, was sufficiently true for all practical purposes ; but by what reasoning Lord King would be enabled to maintain its truth, I am at a loss to conjecture. In the Chapter on the Causes of the Depreciation of Money, I attempted to prove, by a reference to Sir George Shuckburgh's table, that the depression had proceeded, during the first fifty years of the 18th century, to 10 per cent., and during the last fifty, to 6 1 per cent., beyond what the proceeds of the American mines could effect; and if the reasoning, which I afterwards constructed to shew, that the excess in each instance resulted from the publication of paper, be admitted, it necessarily follows, that paper must have proportionally exceeded the value of the gold and silver, which would otherwise have circu¬ lated, or the superadded depression could never have occurred. It was perfectly consistent in Dr. Adam Smith to support the validity of the position, because he denied the fact of the depression ; but as Lord King has not only admitted, that the depreciation has taken place, but that the issue of paper is the cause of the depreciation, it is impossible to conceive with what consistency he can endeavour to vindicate its truth. But, whatever were the sentiments that were floating in his mind, in favour of the position, at the time that he wrote it, they appear not to have had any durable influence; for, notwithstanding his assertion, that it was sufficiently true for all practical purposes, he laid it aside the mo¬ ment that it was advanced, and so far was he from deducing any practical inference from it, that he never once alluded to it through the whole conduct of his 3 G 0 chapter argument; nor does it again appear till the general recapi- tulation at the close of the inquiry. A position presented itself to his notice, that offered, in his opinion, a readier solution to the difficulties that embarrassed him. This position was, (u) “ that paper, like every other article of use or consumption, regulates itself entirely by the effective emand.” To this tenet he regularly reverts through the remainder of the work, and applies it as the sole principle of limitation to every description of paper—bank notes, navy bills, exchequer bills, assignats, and provincial notes, none can exceed the effective demand, or if excessive, must uniformly be depreciated in proportion to their excess. Lord King is not the only author, who has been happy to accept the broad and generous protection of this principle. In every perplexity, in which Sir James Steuart was entan¬ gled, the “ complicated operations of demand” were sure to afford a prompt assistance and an honourable retreat. But Dr. Adam Smith, who disdained the aid of an inde¬ finite position, and who was peculiarly adverse, from his love of minute and accurate investigation, to loose and indeterminate tenets, added to the word demand the epi¬ thet “ effectual;” which he interpreted to imply (b) “ tha demand of those, who were willing to pay the whole rent, labour, and profit, that must be paid, in order to prepare and bring to market the commodity, that was required.” When, therefore, he asserted, that the quantity of money, in any given country, could never exceed the effective demand, he always meant the demand of those. (a) See Lord King’s Thoughts, &c. page 17. (b) See Wealth of Nations, Vol. II. page 149. who were willing to pay the whole rent, labour, and chapter profit, that must be paid, in order to prepare, and bring to market the metals from the mine. I have already, however, explained the inefficiency of this principle, even when applied to specie; but, when it is said, that the quantity of paper, in any given country, can never exceed the demand of those, who are willing to pay the whole rent, labour, and profit, that must be paid, in order to prepare, and bring it to market, the position is too ob¬ viously futile to admit a serious refutation. As the expense of providing and engraving their paper is to the Bank an object of little moment, this principle would be but ill calculated to afford to the Directors a competent criterion for the regulation of its quantity ; and in bringing his position to bear, Lord King seemed himself aware of its inefficiency, as he made no attempt to delineate, in theory, by what operation the banks were to be apprised, that their issue exceeded the effective demand. In the absence of theory, he therefore recommended a practical standard, and said, (a) “ that a mixed consideration of the price of bullion and the state of foreign exchanges, would probably be the best practical rule, by which the Directors, during the suspension of their payments in cash, could regulate the issue of their notes.” In my Remarks on Currency and Commerce, I ad¬ duced an unfavourable exchange and high price of (a) See Lord King’s Thoughts, p. 26. 3 A 362 chapter bullion as operative checks to an excessive utterance of ^ v " paper, because I was enabled satisfactorily to my own mind to trace the operation. I endeavoured to prove, for my fundamental position, that money was invariably made to act in due conformity to the purport of its in¬ stitution, as an uniform measure of value; and in ap¬ plying this principle to our circulating system, I at¬ tempted to shew, that when the Bank of England, by the over-issue of paper, caused the same sum to measure in this country a less value than it measured in others, the course of exchange became unfavourable, because a larger sum of our coin was given for a smaller sum of the coin of the Continent to reconcile the disparity; and that when the over-issue was so extended as to occasion a greater difference in the value of the same sum than was sufficient to cover the charge of transit, the gold¬ smiths returned the paper on the Bank for specie to be remitted abroad, or converted into bullion, and by the con¬ traction which they provoked, again reduced our currency to its due proportion, and restored the correspondence of the measure. Upon these grounds I conceived, that an unfavourable exchange, and high price of bullion, na¬ turally resulted from a breach of the system, which I attempted to establish, and were operative checks to the publication of paper beyond its proper limits. But as Lord King adopted them as a practical standard, without adopting the theory from which I derived their operation, it was incumbent upon him to have shewn, in what manner they were deducible from the breach of his system, the excessive utterance of paper beyond the 63 effective demand. No author, however pre-eminent his chapter talents, can rationally demand the reception of his doc- trine, unless it be full and consistent in all its parts, unless it contain, step by step, in regular progression, a sys¬ tematic gradation of cause and effect. But as Lord King has left a vast chasm from the first cause to the ultimate effect, from an excess beyond the effective demand to the final correction of the excess, without the interven¬ tion of a single link, by which the connection can be traced, he could scarcely expect, that his theory would be admitted. And as I have shewn, that the fundamental principle, upon which he endeavoured to erect his system, was wholly nugatory, no just theory, in reality, existed, to which it could lead. In reasoning, therefore, on the criteria which the state of the exchange, and the price of bullion, afforded of the value of our currency, without the assistance of a competent theory to guide him, he necessarily deviated into error. In reasoning on the criterion of the price of bullion, he says, (a) “ The value of the coinage, in any country, may be discovered by ascertaining the price at which any known quantity'of the precious metals is sold. Though the advantage of being in the form of coin gives to the metals in that state a certain preference above bullion, vet this seems in no case to be sufficient to produce any (a) See Lord King’s Thoughts, &c. p. 30. 364 chapter great difference in value ; and all commercial writers have, therefore, agreed in considering the market price of gold and silver as the most accurate tests of a pure or depreciated currency. ‘ When under all occasional fluc¬ tuations/ says Dr. Adam Smith, ‘ the market price, either of gold or silver bullion, continues for several years together steadily, and constantly, either more or less above, or more or less below the mint price, we may be assured, that this steady and constant, either superiority or inferiority of price, is the effect of something in the state of the coin, which, at that time, renders a certain quantity of coin either of more or less value than the precise quantity of bullion which it ought to contain. The constancy and steadiness of the effect supposes a proportionable constancy and steadiness in the cause.' This observation, respecting a currency in coin, is equally applicable to a paper circulation, not convertible into specie; but, on account of the perpetual fluctuations in quantity and value, to which the latter is exposed, the market price of gold or silver is a test more peculiarly applicable to such a currency. Bullion is, of all articles of commerce, the least subject to variations of price; and though, in comparing distant times, its value is greatly affected by accumulation, or the discovery of new mines, it may be considered as being stationary during short periods.” But I have already explained, that the price of bullion indicates the value of a currency, not because the value of bullion is more stationary than the value of coin, but because bullion and foreign coin are convertible terms ; 365 and therefore, when bullion is high, a demonstration is chapter given, that foreign coin, in consequence of a less relative V J quantity, is of greater value than our coin; and when bullion is low, that foreign coin, in consequence of a greater relative quantity, is of less value than our Coin. The price of bullion is, therefore, regulated by the re¬ lative amount of currency; and as it rises or falls, with every change in the proportion, a variation in the one necessarily enforces a correspondent variation in the other. Nor do the precious metals derive any intrinsic ad¬ vantage from being in the form of coin. During an excess in the market price of money, they experience, on the contrary, a disadvantage, and are converted into bullion for the enhancement of their value. Nor is a steady and constant superiority above, or in¬ feriority below the mint price the effect of something in the state of the coin, as I have already explained, that the market price of money may exceed the mint price, notwithstanding the utmost possible purity in the coin, and the utmost possible accuracy in the mint regulations. Nor is it the effect of something in the state of the paper, as the paper of the Bank of England has uniformly cor¬ responded in value with our pure and unadulterated gold coin, notwithstanding the excess in the market price of our money. The same imperfection of theory that precluded him from reasoning, with due propriety, on the criterion of the price of bullion, precluded him from reasoning, with more felicity, on the criterion of the state of the ex¬ change. He says,(a) “ Another test of a pure or depre¬ ciated currency, of great importance, though in some respects less accurate than the former, is the state of foreign exchanges. A currency in specie cannot pos¬ sibly be degraded by any excess in quantity, since the surplus, having an intrinsic value, may be exported to other countries: but paper, not convertible into specie, possesses no such quality.” And he then endeavours to shew, that the paper of the Bank of England was de¬ preciated below the value of our coin, notwithstanding that it had not fallen to a discount. Upon what general grounds Lord King could support the position, that a currency in specie cannot possibly be degraded by any excess in quantity, I am unable to sur¬ mise ; but the particular reason which he has adduced to establish it, is the strongest argument that can be brought to refute it, for if the specie were not degraded, it would not be exported to other countries. A retrospective view, indeed, of the circulation of Spain, would have immediately convinced him of its fallacy; for if, at the time when the currency of Europe was exclusively com¬ posed of coin, the specie of Spain had not been partially reduced in value below the speeie of other countries, it would never have been distributed among them. But as he was led by the impulse of his mind, to assume the (n) Sse Lord King’s Thoughts, &c. p. 31. 67 principle, that specie could not be degraded, notwith- chapter standing that the standard, which he adopted, convinced him that our currency was depreciated, he naturally con¬ ceived, that the degradation attached to our paper only, and that Bank notes were depreciated below the value of our coin, though they were not degraded to a suf¬ ficient extent to be subjected to public, discount. That our Bank notes were depreciated below the coin of the Continent there can be no doubt, but they were not de¬ preciated below it in a greater degree than our specie; and the error of Lord King consisted in conceiving that our paper was reduced below the value of our own coin, instead of that our coin and paper together were both reduced below the value of the coin of the Continent. In the chapter on the course of exchange, I en¬ deavoured to prove, that when the paper of any par¬ ticular country was not convertible into specie at the option of the holder, and a relative excess of currency ensued from its over-issue to such an extent, as to re¬ duce the value of a given sum considerably below its value in other countries, the charge of transit included, the specie would cease to participate in the degraded condition of the paper, and by the annexation of a pre¬ mium commensurate with the difference, resiliate to a level with its value abroad : but that, till the separation were effected by the adjunction of the premium, the specie would depart from its intrinsic worth, and be equally degraded in value with the paper. If then this reasoning be correct, and it be admitted, that the paper of the Bank of England has not been reduced to a 68 chapter discount, it is evident, that, pending the excess in the market price of our money, instead of Bank notes having been depreciated below our coin, our coin and paper were both depreciated below the money of the Continent. But having, as he conceived, established, by the tests of a high price of bullion, and an unfavourable exchange, the depreciation of our paper below the value of our coin, in consequence of its excessive utterance by the Bank of England beyond the effective demand, he en¬ deavoured to represent the conduct of the Bank as the more culpable, by contending, that a favourable exchange was in the natural order of things, and a necessary result of the commercial relations of this country. These animadversions were dictated by an opinion, that a favour¬ able exchange uniformly accompanied a favourable ba¬ lance of trade; and as he inferred, that our commercial relations regularly led to a favourable balance for the supply of silver to be remitted to India, he instantly con¬ cluded, that a favourable exchange no less regularly proceeded from it. Not only, however, have I already shewn, that his hy¬ pothesis of a favourable balance of trade was wholly erroneous, but I endeavoured, in the third chapter of this inquiry, to prove, that a favourable balance of trade, and a favourable exchange, had no connection with each other. Even, therefore, had his hypothesis been cor¬ respondent with reason, no inference would have been deducible from it, corroborative of his charge against the Bank of England, as there is no ground for the G9 conclusion, that it would have necessarily conduced to charier a favourable exchange. Of the real principle, which regulated in all countries the state of the exchange, his mind had never formed a just conception. Instead of contending, that the ex¬ change was governed by the relative amount of their currency, and was a faithful representation of the difference in their prices, he attributed its fluctuations in the same manner as the adherents of the old system, to (d) the balance of trade, (b) the payment of a foreign ex¬ penditure, and the import of corn, all of which I have previously explained, in separate chapters, to have no re¬ lation to the subject. Though, however, he were erroneous in concluding, that the notes of the Bank of England were depressed below the value of our specie, yet no doubt could be entertained but that the notes of the Bank of Ireland were depressed below the value of the specie of Ireland, as the equivalency was avowedly broken by the reduc¬ tion of the paper to a discount, and the resiliency of the coin to a premium correspondent with the value of money in this country. But he was irregular in attributing the excess of Irish paper, exclusively, to the issue of the Bank of Ireland, as the private paper of (c) Dublin alone (a) See Lord King’s Thoughts, page 51. (b) See the same author, page 36. (r) The house of Mr. Latouche, to its honour and credit, is the only private bank in Dublin, not actuated by the needy wish to issue paper. 3 b 5 70 chapter is computed to equal the paper of the national Bank, and as the provinces are deluged with an inundation of notes of the very lowest denomination. I do not, how¬ ever, mean to contend, that the Bank of Ireland have not abused their privilege, and published a greater quantity of paper than in propriety they should have done, but that private companies have equally abused the privilege, which they possessed, and that the excess is to be ascribed as much to the cupidity of the one as to the cupidity of the other. The plan, which he recommended for the correction of the abuse, was, (a) that the paper of the Bank of Ireland should be made convertible, at the option of the holder, into the paper of the Bank of England. This plan w'ould cer¬ tainly be efficient; for as no one would hold Irish paper, when he could gain five per cent, or whatever might be the current discount, by converting it into English paper, the run upon the banks for English notes would speedily reduce the currency of Ireland to the same relative amount with the currency of this country, and raise its paper to a correspondent value. But, as I have already shewn, that the paper and specie of this country are pre¬ cisely equivalent, the Bank of Ireland would experience no greater difficulty in paying in specie, than in paying in the notes of the Bank of England; for as a Bank of Eng¬ land note and a guinea circulate in Ireland at the same premium, the same expense must be incurred in the pur- (n) See Lord King’s Thoughts, page 73. 37 chase of the one, as in the purchase of the other, as the same sum must be given for the bills, that were to be invested in either of them. The measure would, there¬ fore, go to subject the Bank of Ireland to resume its cash payments, for as our paper and specie are both to be had on the same terms, it is of course to be expected, that the preference would immediately be given to coin. However desirable such a result would be, it is neces¬ sary, that it should be accompanied by the same reform, which Lord Grenville recommended in this country, and that the small notes of the Bank of Ireland and the private banks should be gradually withdrawn from circu¬ lation. The general interests, however, of the empire require, that this plan should be primarily executed in this country, and so soon as it has been established here, a similar measure may immediately be proposed for the re-establishment of a mint coinage in Ireland. But, in reviewing this part of Lord King’s inquiry, it is impossible for me not to express my full concurrence in the following denunciation against the present system of the multiplication of banks. In page 75, he says, ** an unlimited paper currency cannot exist, in any shape, or under any circumstances, with security or advantage to the public; but it is least in danger of being grossly abused, when it is entrusted to some one experienced and responsible body. The establishment of independent banks in different parts of the empire has the necessary consequence of subjecting the value of the circulating medium to perpetual fluctuations in every district, in which CHAPTER XIV. 372 chapter such banks are established. Under such a system the XIV "* notes of the several banks must vary in their relative values, and be depreciated in different proportions, accor¬ ding to the various degrees of prudence and moderation, with which the power of issuing the notes is exercised.” After this declaration in favour of the policy of only one bank, I know not by what perversion of reasoning he was led to make the ensuing counter-declaration in favour of the policy of many. In page 93, he says, “ the multiplication of banks, as is observed by Dr. Adam Smith, instead of diminishing, greatly increases the secu¬ rity of the public. The circulation of notes being divided into a greater number of parts, the failure of any one company becomes of less importance, and occasions less embarrassment. The competition of rival banks produces in all a greater caution, and more skilful and judicious management. It is indeed by no means improbable, that the country banks have indirectly contributed to the suc¬ cess and security of the Bank of England, by rendering the Directors of that establishment more cautious and circumspect, than they might perhaps have been under any other circumstances.” Having decided, therefore, in favour of his last opinion, that many banks are preferable to one, he enters into a general defence of the circulation of private paper, and controverts the opinion, that it has a necessary tendency to depress the value of money, (a) “ On the first view of (a) See Lord King’s Thoughts, page 101. 373 the subject,” he observes, “ it might seem probable, that chapter every addition of paper currency, of whatever description, would have a tendency to depreciate the value of the whole, by increasing that excess, which is itself the cause of the evil. But it will appear on further consideration, that the paper of private banks, immediately convertible into Bank of England notes, has no effect on the value of general currency ; the notes of private bankers being at present regulated by the standard of bank notes, in the same manner as paper currency of every description was formerly regulated by the gold coin. This opinion is by no means inconsistent with what is often alleged, and what must be admitted as an undoubted fact, that there has been a great increase of the notes of private banks, since the act of restriction of 1797. It may be easily shewn, that this increase is an immediate consequence of that measure, and that the additions to the amount of Bank of England notes, since that time, have had the necessary effect of increasing, in an equal proportion, the paper of private banks.” By what illusion Lord King could have been led to imagine, that if the notes of private bankers were re¬ gulated in their amount and value by the standard of Bank notes, they could not conduce to the depreciation of money, it would be idle to inquire. The correspond¬ ence in their value, and relative quantity with the notes of the Bank of England, certainly precludes their partial' depreciation; but it. is impossible to adduce this congruity as evidence of their inability to diminish, in conjunction with the Bank notes themselves, the general value of money. Had he established the fact, that provincial 374 chapter notes could not exceed the amount of the Bank notes of which they supplied the place, or which would circulate if there were no provincial notes, in the same manner as Dr. Adam Smith contended, that paper could not exceed the value of the gold and silver of which it supplied the place, or which would circulate if there were no paper, I should be ready to accede to the proposition, that pro¬ vincial notes would not add to the depreciation of money, as Bank notes would have been proportionably aug¬ mented, had their publication been withheld. But he well knew that the fact was otherwise; and he not only admits, but contends, not that the one supplied the place of the other, and that the one was increased only as the other was diminished, but that both have increased, and will continue to increase, in the same ratio. Under this admission, it cannot be said, that private notes have no power to depress the value of money, as I have already explained, that if paper be made to answer the purposes of money, it necessarily depreciates the value of money, exactly in the same proportion as an addition of so much coin. In order to have removed the power of depre¬ ciation from provincial notes, it was incumbent upon him to have shewn, that they made no addition to the aggregate stock of circulation, that they either led to a correspondent contraction of Bank notes, or a corre¬ spondent contraction of specie; but if they produce neither of these effects, and still more, if their augmen¬ tation be admitted, though the increase be precisely com¬ mensurate with the increase of Bank paper, they must obviously lessen the value of money, in proportion as they are augmented. So far indeed is the proportional augmentation of paper, by the respective banks, which exercise the privi- ledge of utterance, from constituting a check to the de¬ pression of money, that it forms the very means, by which the depreciation is produced. If no increase took place in the paper, or specie of the Continent, no increase could take place in the paper of the Bank of England, as it is impracticable to advance the prices of one country above the prices of another; and a correction of all further reduction in the value of money would im¬ mediately be established. It is by the facility, with which the prices of one place are augmented in the same ratio with the prices of another by the correspondent issue of paper, that the depression proceeds without any controul. Had the country banks forborn to have exercised the privilege of utterance, the Bank of England could not have augmented its paper beyond the relative amount of the specie of the provinces, and some check would have been in operation to arrest the progress of the depres¬ sion ; but as private paper is permitted to advance, in the same ratio with the paper of the Bank of England, all controul is, in this country, removed; and the general depreciation of money is increased, not only by the ad¬ dition of the provincial notes, but by the augmentation of the paper, which the transfer of the specie promotes in the countries whither it is remitted. Nor is it requisite, in order to contribute to the general depreciation of money, that the notes themselves should be partially depreciated. On the contrary, their power to cause the depression is diminished by this degradation, 3 76 chapter as they only operate to a reduction in the value of money, according to the sum of specie, into which they are convertible : and, therefore, if the premises be ad¬ mitted, that “ private paper cannot be depressed below the value of the standard medium, for which it is inter¬ changeable,” they have no bearing to support the con¬ clusion, that it cannot diminish the value of money ; as it is the addition, which it forms, to the aggregate amount of circulation, and not its partial degradation, that causes the general depreciation of money. But even the premises are ill founded; for though the private paper of this country have uniformly maintained a correspondent value with the paper of the Bank of England, yet the private paper of Ireland, after the failure of (a) a celebrated provincial house, was reduced to a dis¬ count below the value of the paper of the national bank: so true is the opinion which he antecedently expressed, that, “ under an unlimited issue of paper, the notes of the Several banks must vary in their relative values, and be depreciated, in different proportions, according to the various degrees of prudence and moderation, with which the power of issuing the notes is exercised,” though he here change that opinion, and affirm, (fe) “ that there are necessary causes which prevent the notes of private bankers from being depressed below that of bank notes.” ) See Lord King’s Thoughts, page 106. 377 So little, indeed, does Lord King appear to have un- chapter derstood the subject of the depreciation of money, that he regularly states the cause for the effect, and the effect for the cause, and says, that prices are advanced, because money is depreciated, instead of that money is depreciated because prices are advanced. The only remaining part of his inquiry, which it is necessary to notice, is the assertion which he made, (a) “ that the scarcity of silver coin entirely arose from the inattention of those officers of government, who had the direction of the mint, to the change, which has taken place, in the relative values of the precious metals, during the course of the last century.” But I have already had repeated occasion to shew, that the nicest observation of the change that takes place in the relative values of the precious metals, and the most perfect adjustment of the mint proportions have no power to obstruct the melting of the coin. The superiority of the market price of our money above its mint price, if the argument of the fourth chapter be correct, exclusively proceeds from the same sum being made to measure in this country a less value than it measures in others ; and as the utmost possible accuracy in the mint regulations can have no operation to prevent the over-issue of paper, and a relative excess of currency, it can have no tendency to prevent the superiority in the market price of our money, and the consequent melting of the coin. (a) See Lord King’s Thoughts, page 136. 3 c 378 chapter Lord King does not contend, that the inaccuracy in the mint proportions is to a greater extent than three per cent.; if, therefore, three per cent, were subtracted from the weight of our silver coin, with the view of obviating the superiority in the market price of our money, no effect would result from it corrective of the evil, as he himself has shewn, in the tables adjoined to his work, that the market price has frequently risen to 10, 12, 14, and 16 per cent, above the mint price. The charge, therefore, against the masters of the mint comes from Lord King with the less grace, as, had the mint been under his con- troul, the same scarcity of silver coin would have occurred, notwithstanding the reform of the irregularity, that may subsist, in the present proportions. If, then, this commentary on Lord King’s observations, be consistent with reason, it is manifest, that in the ori¬ ginal principle, which he laid down, that the quantity of paper in any given country could never exceed the value of the gold and silver of which it supplied the place, or which would circulate if there were no paper; in the sub-original principle, which he adopted, that it could never exceed the effective demand ; in the reasoning which he constructed on an unfavourable exchange, and high price of bullion ; in his conception, that the value of our paper was depreciated below the value of our coin; in his hypothesis, that the superiority of our exports above imports was occasioned by the remittance of silver to India; in the inference, which he deduced from this hypothesis, that a favourable exchange was in the natural order of things, and a necessary result of our commercial 379 relations; in his opinion, that the excessive utterance of chaffer paper in Ireland was, exclusively, attributable to the na- tional bank ; in his conclusion, that private paper could not conduce to the general depreciation of money, be¬ cause it was not itself partially depreciated ; and in the assertion, which he made, that the scarcity of our silver coin arose from the inaccuracy of the mint proportions, he deviated from the truth : and that his work is one con¬ tinued series of erroneous positions. But there are gradations in error; and however much I may regret, that so little has been added to the science of public economy, by his inquiry, it is impossible not to acknowledge, that the efforts, which he has made to advance it, have raised him to a superiority proudly emi¬ nent above Lord Liverpool, and the more misguided adherents of the old system. END OF VOL. I. Printed by W Bulmer and Co* Cleveland-row, St* James’s.