..,:&MM 
 
 THE UNIVERSITY 
 
 OF ILLINOIS 
 
 LIBRARY 
 
 33-2 
 
 "BS75 
 
 v.-7
 
 THE 
 
 BOCTKINE of EQUIVALENTS? 
 
 OR AN 
 
 EXPLANATION 
 
 OF THE 
 
 NATURE, VALUE and POWER 
 
 OF 
 
 MONEY: 
 
 TOGETHER WITH THEIR 
 
 APPLICATION IN ORGANISING 
 
 PUBLIC FINANCE. 
 
 3t GEORGE CRAUFURD, Esa, 
 
 IN TWO nPARTS 
 
 1 
 
 ROTTERDAM: 
 
 PRINTED BY \V. LOCKE AND CC. 
 
 On the Spanish Quay. 
 
 1808.
 
 CONTENTS, 
 
 PART I. 
 
 INTRODUCTION 
 
 i 
 
 CHAPTER I. On the proportional or 
 relative Value of different Objects, be- 
 fore the Introduction of the precious 
 Metals as a representative Sign 15 
 
 CHAPTER II. On (he Principles by 
 ivhich the specific Quantity of the pre- 
 cious Metals, due to each Object, is re- 
 gulated ; 4 1 
 
 CHAPTER in. On the Effects of Tax- 
 
 *&■ gl
 
 CONTENTS. 
 
 *^_4-^_4-4-4-* 
 
 PART II. 
 
 Page 
 
 CHAPTER IV. On the Nature and Va- 
 lue of Gold and Silver Coins, and on 
 the Principles of Variation in Foreign 
 Exchanges 1 23 
 
 CHAPTER V. On the Interest or Price 
 of Money ; on its Power of precluding 
 all Sinking Fund Systems ; and on the 
 Nature of public and private Mo- 
 ney Debts 147 
 
 CHAPTER VI. On the most perfect 
 System of public Finance 224
 
 INTRODUCTION. 
 
 Although thcdevelopementofthis 
 intricate subject has been attended with 
 considerable application on my part, yet 
 a great degree of attention will be re- 
 quired from my readers, in order to sup- 
 ply that want of perspicuity, which may 
 appear in the explanation of many ab- 
 struse points, and which I hope they will 
 in some measure attribute to the nature 
 of the enquiry. 
 
 The consideration of my incapacity to 
 do the subject that justice, which its im- 
 portance naturally claims, would indeed 
 have deterred mc from publishing the 
 result of my meditations, had I not been
 
 a INTRODUCTION. 
 
 extremely solicitous of eradicating ma- 
 ny prevailing notions respecting Money, 
 which appear not only to be in themselves 
 unfounded, but which have served also 
 to involve in confusion and obscurity 
 every subject connected with them. 
 
 i 
 I must confess, at the same time, that 
 I was urged to the full investigation of 
 this important and much -neglected sci- 
 ence, by the desire of explaining more fully 
 those principles of finance, which I pub- 
 lished some years ago, and which, from 
 being totally misunderstood, were not 
 much attended to. 
 
 How far this attempt to elucidate that 
 Work, may succeed, is uncertain ; but I 
 will venture to assert, that it is utterly 
 impossible, either to ascertain the first 
 ciuses of relative value, and form the 
 science of political economy into a com 
 prehensive, clear and familiar system-* 
 or to trace out any consistent theory o{ :
 
 INTRODUCTION. g 
 
 finance from those principles of Money 
 which are laid down by Mr. Harris, 
 Mr. Hume, Sir James Stuart, Dr. Adam 
 Smith, or any other Writer on that sub- 
 ject. 
 
 Had any of those Authors, who pre- 
 tended to a knowledge of the nature of 
 Money, proceeded to an examination of 
 the principles that give rise to the diffe- 
 rence which so evidently exists in the 
 money-price of various objects, and which 
 sufficiently indicates, that a certain price 
 or quantity of Money is specifically or 
 justly due to every object ; they would 
 naturally have been led to a discovery 
 of the effects which ensue from giving 
 occasionally more or less than this just 
 value,, as well as of the fallacy of their 
 general position " that by increasing 
 " the quantity of money in any country^ 
 u the value in money of every objeet must 
 '* alfo irtcreafe." 
 
 A
 
 4 INTRODUCTION. 
 
 An investigation of this kind would 
 have shewn to them, that the quicker and 
 slower motion or circulation of money 
 from hand to hand, which in its effects 
 is of the same consequence as increase or 
 decrease of quantity, must of course de- 
 stroy their assumed hypothesis, and that 
 the possibility of an increase or decrease 
 of objects to be represented, would in- 
 fallibly subvert the position above-men- 
 tioned, if proved to be dependent on, 
 or concomitant with the increase or de- 
 crease of money. By adhering therefore 
 too much to the principles of Writers 
 in an earlier age, they deceived and per- 
 plexed themselves, as well as their Rea- 
 ders, and have unfortunately left the 
 subject to be further explained. 
 
 I say unfortunately, because in refu- 
 ting the opinions of such celebrated Au- 
 thors, I feel my own want of talents as a 
 Writer ; while it must be acknowledged, 
 that their superior abilities would have
 
 INTRODUCTION. $ 
 
 made the truth appear more conspi- 
 
 cuous. 
 
 I flatter myself, however, with every in- 
 dulgence from the Public, as a return for 
 my zeal in attempting to correct errors, 
 which have not only been received as 
 truth, but which, from the reputation 
 of their Authors, and from the indiffe- 
 rence of mankind to investigations of 
 this nature, have been adopted as funda- 
 mental principles in the policy of States. 
 
 I must at the same time observe, that it 
 is become of the utmost importance in 
 the present state of increasing taxation, 
 to ascertain, in the fullest extent, the na- 
 ture, the value, and the power of the 
 precious metals; and I therefore consi- 
 der it incumbent on me (as professing 
 some knowledge of the subject) to trace 
 die origin and progress of their use, as 
 well as their operations in fixing the mo- 
 ney-value of every object, which human 
 A 3
 
 6 INTRODUCTION, 
 
 industry can either obtain or produce; 
 with the causes that contract or extend 
 the industrious exertions of man, in or- 
 der to shew the inconsistency of the re- 
 ceived opinions, and the political errors 
 which have resulted from the admission 
 of false principles. 
 
 It must doubtless appear very extraor- 
 dinary to men of reflection, that no con- 
 clusive arguments, or consistent theories, 
 are to be found in any Work hitherto 
 written on this important subject, and 
 that every publication has been confined 
 to some partial explanations respecting 
 industry and commerce, to some assumed 
 and vague principles concerning Money 
 as well as public credit, and to some vain 
 attempts to reconcile contradictory ef- 
 fects, which the Authors of such Works 
 were under a necessity of stating, and 
 with the causes of which they were un- 
 acquainted.
 
 INTRODUCTION. 7 
 
 This appears evidently to be the case 
 even in Sir James Stuart's political econo- 
 my, which successfully combats the opi- 
 nions of Messrs. Montesquieu and Hume, 
 by proving them inconsistent in then- 
 reasoning ; but it unfortunately does not 
 develope any fixed principles or ideas for 
 the purpose of obtaining more uniform 
 and comprehensive consequences. 
 
 I mention in particular the Writings of 
 Mr. Harris, Mr. Hume, Sir James Stuart, 
 and Dr. Adam Smith, because they must 
 be in the recollection of every enquirer 
 into this subject: and as Dr. Smith's 
 Work on the IVtalth of Nations has met 
 with almost universal applause, on ac- 
 count of the perspicuity of his style, 
 it becomes the more necessary to shew 
 the fallacy of his ideas; and especially 
 in those parts of his Enquiry, which 
 either tend to establish an improper ..nd 
 nowise existing distinction between gold 
 and silver, by affixing to the latter only 
 A 4
 
 8 INTRODUCTION. 
 
 the denomination of fiandard, or which 
 attempt to prove, that the natural price 
 of every commodity increases by the 
 greater abundance of the precious metals, 
 which is to say, in other words , " that 
 ce gold and silver , from the circumstance 
 ie of their greater relative abundance com- 
 " pared, with other objects^ lose in their 
 " comparative value with those objects? 
 
 I cannot indeed deny, that the pre- 
 cious metals have lost in their value within 
 this century; but this appears only in 
 the decreafed rate of interest, which con- 
 stitutes their real and I may say only price. 
 
 It is not less true, that the price or 
 specific value in the precious metals, 
 which is really due to almost every com- 
 modity, has been much increased during 
 the same period; but the accumulation 
 of taxes on various objects, and their 
 extensive influence over all the necessa- 
 ries of life , easily explain the cause of
 
 INTRODUCTION. 9 
 
 tliis enhanced value, without having' re- 
 course to the increased quantity of mo* 
 ney, which must infallibly have produ- 
 ced the contrary effect, if that accumu- 
 lation of taxes had not taken place. 
 
 There would indeed be a great impro- 
 priety of expression in saying, that the fluc- 
 tuating specific value in money of diffe- 
 rent objects, should be considered as the 
 price of the metals; because experience 
 sufficiently demonstrates, that this fluc- 
 tuation in value is for ever partial, and 
 nowise uniform on all objects, which 
 precludes the possibility of applying it to 
 indicate a change in the general medium 
 called Money; neither can the metals, 
 when representing every object, be consi- 
 dered in any other light, than as a measure 
 or equivalent^ of which more or less is 
 ultimately, required for the production of 
 each object, from a combination of cau- 
 ses, that are to be traced in this Work. 
 
 A 5
 
 IO INTRODUCTION. 
 
 The necessity of making this distinction 
 between the interest of Money as its price > 
 and the specific quantity of it due to each 
 object, when exchanged for Money, as its 
 measure^ will, from the nature of the in- 
 vestigation, appear in a very conspicuous 
 point of view ; as well as that of the further 
 distinction which I shall make between 
 the causes of such specific value , when 
 they are entirely independent of all taxa- 
 tion, and when they are combined with 
 it ; in order to shew, in the clearest pos- 
 sible manner, the mode in which the rise 
 and fall of interest afFeft ultimately the 
 price of every object, 
 
 A very little reflection would indeed 
 point out, that the fall of interest from 
 the abundance of Money, admits of a di- 
 minution in the specific value or price of 
 all industrious productions, to which di- 
 minished value the manufacturer could, 
 on selling them, chearfully consent 
 without injury to himself; while a rise of
 
 INTRODUCTION. II 
 
 interest, from a scarcity of money, produ- 
 ces on the contrary an increase in that spe- 
 cific value, which the manufacturer could 
 not possibly dispense with on disposing 
 
 of his productions. 
 
 But mankind do not hesitate to main- 
 tain, and all Authors who have written 
 on the subject, flatter the idea, "that the 
 e< relative abundance of the metals sends- 
 Ci simply to increase the specific value of 
 ** every object ; and their relative scarcity 
 c<m to diminish that specific value, on ac- 
 <e count of the faculty which the possessors 
 " of money hare to give more or less.* 9 
 
 This position may, to superficial encfui- 
 rcrs, appear conclusive; but a thorough 
 investigation of the subject will shew its 
 fallacy, and that the effects which they 
 point out, could only be temporary, be- 
 cause in the one case there must neces- 
 sarily arise an encouragement to produce 
 more objects; and in the other case a di$-
 
 13 INTRODUCTION. 
 
 couragement from the production even 
 of the same number of objects which had 
 before been usually produced ; as will 
 be demonstrated in explaining the prin- 
 ciple by which this increase or decrease 
 of industry is directed. 
 
 It wiH certainly not be denied, that 
 some varying cause directs the promotion 
 or the destruction of industry, indepen- 
 dent of that degree of security in pro- 
 perty which is afforded by each Go- 
 vernment, and which, by, being gene- 
 rally in the same state for a long pe- 
 riod, cannot in itself have either a pro- 
 gressive or a changeable influence on the 
 mass of industry ; neither can it be dispu- 
 ted, that the principle of taxing any ob- 
 ject must infallibly add to its specific va- 
 lue in money ; which shews the necessity 
 of examining each cause and each effect 
 separately and distinctly, before any ge- 
 neral and positive conclusion, respecting 
 finance, ca# be universally admitted.
 
 INTRODUCE !0N, J£ 
 
 I propose therefore to : examine the 
 primitive and immutable causes of the 
 different degrees of value attached to 
 every object; the principles which re- 
 gulate that specific quantity of the pre- 
 cious metals, to which all things are en- 
 titled ; the means, by which those pro- 
 portions are always kept up; and the origin 
 of the multiplication of objects in each 
 class of industry. 
 
 I shall also add such observations on 
 the writings of other Authors, and on 
 the application of my own principles, as 
 may appear useful and necessary. 
 
 Whatever relates to Money, will be 
 more or less touched upon; and I trust 
 that the important truths which I en- 
 deavour to explain, will, sooner or later, 
 be generally understood, and bring about 
 irn entire new system of policy respec- 
 ting finance, not only for the purpose 
 of extending the population, the agri-
 
 14 INTRODUCTION. 
 
 culture, the industry and the commerce 
 of Great Britain, but also for the still 
 more important object of diminishing 
 the specific value of every, thing, and 
 consequently the enormous expence to 
 which the nation is become subject, for 
 her protection in time of peace, as well 
 as for her defence in time of war ; an ex- 
 pence which no economy can sufficiently 
 counteract, because the services required 
 are not otherwise attainable.
 
 T H E 
 
 Doctrine of Equivalents ; 
 
 OR, AN 
 
 EXPLANATION OF THE NATURE, 
 
 THE VALUE, 
 
 AND THE 
 
 POWER OF MONEY, &c. 
 CHAPTER 1. 
 
 On the proportional or relative Value of dif- 
 ferent Objects lefore the Introduction of the 
 Precious Metals as a representative Sign, 
 
 IN the first stages of society, when 
 hunting and fishing were the only em- 
 ployments of man, and the means of his 
 support, the relative value of all commo- 
 dities was in proportion to the labour 
 employed in procuring them.
 
 l6 THE DOCTRINE 
 
 Let ns suppose, for instance, that the 
 taking of ten birds required no more time 
 than was necessary to catch one hare; 
 the, price of barter became then established 
 at the rate of one hare for ten birds. 
 
 A little experience shewed the different 
 degrees and kinds of labour which were 
 necessary for procuring every object; 
 and upon this principle a general scale of 
 value took place. 
 
 This necessary and, to appearance, re- 
 gulated proportion,, was indeed some- 
 times disturbed by a more general consump- 
 tion of one article in preference to ano- 
 ther ; as we may suppose, for instance, that 
 fish might in many places have been pre- 
 ferred to hares; such a circumstance would 
 naturally discourage the hunters, and en- 
 courage the fishermen, by the latter being 
 overpaid, and the former underpaid in 
 this general barter of labour against la- 
 bour.
 
 Or EQUIVALENTS. 17 
 
 Self-interest, however, prompts the ge- 
 nerality of mankind to follow the most 
 lucrative employment, and to increase 
 their exertions, wherever they are most 
 wanted : the greatest quantity . of food, 
 cloathing, and conveniences, procured 
 by the least trouble, was at that time, as 
 at present, the price or lucre to be derived 
 from the possession of any object that 
 was much wanted ; and being a suffi- 
 cient inducement to alter the mode, or 
 to increase the quantity of labour, a 
 greater number of persons would natu- 
 rally take to fishing, and restore by 
 those means . the necessary proportions 
 of value for keeping up both employ- 
 ments. 
 
 In this manner did a tendency to dis- 
 order produce the remedy itself, by 
 encouraging a greater produetion of the 
 object that had been overpaid; and this 
 unerring principle will always continue 
 to be the groundwork of human 
 B
 
 it? THE DOCTRINE 
 
 dustry, whenever the nun:berof objects 
 is not United by nature, as may frequently 
 be the case. 
 
 The precious metals derived also their 
 relative value from the labour exerted 
 in procuring them; and were at first 
 only employed as ornaments and uten- 
 sils* 
 
 It may be here necessary to observe, 
 that a contribution in kind on every pro- 
 duction for the purposes of Government, 
 could not in any degree alter these 
 regulated proportions, because the act of 
 levying p twentieth, a tenth, or any 
 other moderate proportion of each man's 
 industry, produced simply the conse> 
 quences of diminishing the stock of each 
 individual (whether his own production 
 or what he procured by barter), and of 
 inducing him to increase his labour for 
 the purpose of supplying the deficien- 
 cy, in case his wants should require it.
 
 OP E QUI VALE NTS. 1^ 
 
 Public contributions, therefore, #eSte 
 at that time rather incentives to further 
 labour, and did not check the pro press 
 of industry, as at present appears to be 
 the case, from their partial exaction and 
 complicated effects. 
 
 When civilisation advanced, a relative 
 value established itself between mental 
 and corporeal labour, solely by means of 
 competition^ as there could be no fixed 
 standard of value between them; 
 
 This competition Was, however, well 
 poised by counteracting principles; a 
 too high evaluation of the mental pow- 
 ers was prevented by a more general 
 cultivation of the mind ; while the limited 
 mental endowments of by far the greatest 
 number of individuals prevented a too 
 great depreciation of those powers. 
 
 A new sort of property must also 
 have arisen in an early period of society 
 B 2
 
 10 THE DOCTRINE 
 
 from the cultivation of certain spots of 
 ground, which became annually produc- 
 tive, and to which the established rules 
 would not apply, because Nature acted 
 her part as well as Labour, in producing 
 the objects required. 
 
 The more enlightened part of mankind 
 must at the same time have discover- 
 ed that there existed a general inconveni- 
 ence with a consequent impediment to the 
 further extension of industry, from the 
 want of a medium, by which every ob- 
 ject might be more quickly exchanged, 
 and retained at its due proportion of 
 value. 
 
 • Cattle and hides were consequently 
 first thought of as proper intermediate 
 signs of value for the purpose of facili- 
 tating every kind of exchange. 
 
 it may seem extraordinary, that such 
 tnwieldy objects should have been pre-
 
 OF EQUIVALENTS. A* 
 
 ferred to others; but it must be consi- 
 dered, that every thing, excepting the 
 metals, or some object of as small volume, 
 and of equal durability, would have been 
 equally troublesome ; that cattle and hides 
 were objects of general use ; were easily 
 transported from one place to another ; 
 and that the first, in particular, had a great' 
 affinity to land, with respect -to its na- 
 turally productive powers. 
 
 The evident distinctions, which existed 
 between corporeal and ment.J labour, as 
 well as between either of those sorts of 
 labour and the produce of nature, made 
 it then necessary to adopt several new 
 considerations in ascertaining the relative 
 value of one tiling with another; and 
 particularly when both objects to be 
 exchanged, had the quality of annual pro- 
 duction adherent to their nature; in 
 which case, the three following circum- 
 stances required a very attentive in- 
 vestigation, viz. 
 
 B 3
 
 ^a THE D.OCTR'NS 
 
 i <?.■ The relative difficulty of procuring 
 each object, w--.-.:L.r by labour or by 
 - ; < ; ' ; 2d. the probable ratio of this. 
 ease from its natural powers, 
 t)4etjt of that assistance from 
 l$?pjjir or other tna^iials, which are re- 
 quired in order to give its general pro- 
 duce ; and, lastly, the probable term of 
 possession* , 
 
 All these considerations might be ab- 
 solutely necessary for ascertaining th© 
 relative value of different objects ;, in the, 
 first place, because if, of the same na- 
 ture, their quantities might differ, as also 
 their .produce; while the circumstance 
 of their being naturally different (as cat- 
 tle and land): would of course subject 
 them to a competition- value between 
 themselves : in the second place, because 
 the labour and other materials to be 
 added yearly in order to obtain the ■gene- 
 ral produce, might be of different pro- 
 portions : and* lastly, because the period
 
 Oi? EQUIVALENTS. 2% 
 
 of possession might be of longer or of 
 shorter duration. 
 
 Cattle, for instance, ran wild, and were 
 at first to be caught by labour; while un- 
 cultivated land was to be procured every 
 where. 
 
 The latter cannot certainly be said to 
 be created, or obtained by any particu- 
 lar exertion or degree of labour in man, 
 (although exchangeable against such la- 
 bour) _; and frum its abundance it would 
 be of little comparative value, (as is yet 
 the case in many places), had not the as- 
 semblage of many individuals on one spot 
 of ground, and the general tendency of 
 human nature to increase in numbers, 
 wherever the necessary means of existence 
 can be procured, occasioned an almost 
 universal demand for it. 
 
 Competition may therefore be said to 
 constitute the price of land, when consi- 
 
 »4
 
 ^4 THE DOCTRINE 
 
 dercd relative to labour, (the point be- 
 ing duly ascertained to whom the soil; 
 originally belongs); and to local circum- 
 stances must be further attributed the va- 
 rious and widely-differing values for tie 
 same kind of ground. 
 
 Such competition -value must conse- 
 quently be determined by the relative 
 quantity of .land compared with the quan- 
 tity of labour or number of inhabitants; 
 and the local differences, by the advan- 
 tages to be derived by assembling in large 
 bodies on commodious spots of ground, 
 compared with the disadvantages that 
 arise from living at a distance, or in pla- 
 ces of diiiicuir access. 
 
 Those differences must naturally be 
 very great, while uncultivated land is to 
 be procured, and that the produce of its 
 cultivation must be transported to any 
 distance.
 
 OP EQUIVALENTS. ag 
 
 It becomes useful, therefore, to ob- 
 serve, and to keep in view, that it fs not 
 possible to ascertain the just proportion 
 either of the relative value of uncultiva- 
 ted land, or of that of mental exertions 
 as compared with corporeal labour, in 
 the same manner as may be done 
 where corporeal labour is alone employ- 
 ed; but there can be no doubt, at the 
 same time, that the above mentioned 
 competitions have certain bounds, be- 
 yond which they cannot proceed, ind 
 which depend on a variety of circuai; 
 stances too numerous and complicated 
 to be stated with any degree of preci- 
 sion. 
 
 The second consideration of the 
 probable ratio of the annual increase of 
 an object from its natural powers, meets 
 with less difficulty. • 
 
 Some part of the natural produce 
 was, indeed, always supposed to depend
 
 a6 the doctrine 
 
 on chance, or on the uncertain degree of 
 effects which arise from the seasons, and 
 against which no human industry could 
 provide ; but the experience of former 
 years established at least data for some 
 calculation, and the distinction. between 
 the naj^ral and the a:tif, ..al effect^ 
 required parti ' - ibl--. 
 
 lowing reasons, .viz. , 
 
 Every soil has more or less the 
 power of producing spontaneously j but 
 by" adding labour and other materials to 
 it, this produce is considerably increased. 
 
 In one case, | th? of such produce 
 might be attributed to natural causes, and 
 |tiis to labour, and other ingredients. 
 
 In another c\xsq f th only might be 
 attributed to the latter, and f !ls to the 
 former. 
 
 These proportions of labour and 
 Other materials, remained always to be
 
 OF EQUIVALENTS. £? 
 
 added yearly, in order to obtain the gf- 
 tier a I produce; and it became therefore 
 necessary, in the first instance, to deduct 
 
 such required proportions from the re- 
 
 » 
 
 speetive values of annual produce, irj 
 order to ascertain what was done by na- 
 ture, as it made a material difference to 
 the owners, whether they had to pur- 
 Chase in future f ths or 5 th of the real value. 
 
 This additional labour, and those ma- 
 terials, which I have been endeavouring 
 to point out as absolutely necessary to 
 Obtain any production, must however be 
 understood as independent of what may 
 be further added for the purpose of in- 
 creasing its future spontaneous powers, 
 or what is called improving an estate* 
 which gives it an additional value after 
 its produce is disposed of. 
 
 There remains, then, ultimately to be 
 considered, the probable term of enjoying 
 such produce, which depended on its
 
 a# THE DOCTRINE 
 
 limitation by agreement; or, if nowise 
 limited from that cause, either on the 
 uncertain events of nature, as in cases 
 of life and death, or on the liability of 
 Government, together with its due ob- 
 servance of justice in enacting, as well 
 as executing, such laws as were neces- 
 sary towards the security of ; property. 
 
 In order to form a clearer idea of 
 tnese different causes' of relative value, 
 by the proportion of numbers, I shall 
 suppose, that two annually productive 
 objects, limited to a certain number of 
 years, are to be mutually exchanged: 
 
 One shall be as'iooo in natural or- 
 competition value \ pr. ct. 
 its productive powers by 
 nature; and 2 pr. ct. more 
 by artificial exertions : in all, 
 10 pr. ct. 
 and 10 years its duration.
 
 Of EQUIVALENTS. 2$ 
 
 The other shall be as 1200 in natural 
 or competition-value ; 7 pr ct, 
 annually its productive pow- 
 .ers by nature ; and 4 pr. ct. 
 more its artificial powers; 
 in all 11 pr. ct. 
 and 11 years its duration. 
 
 The general result in comparative va- 
 lue of these varying causes in different 
 objects, will be as 800 for the first, tc 
 924 for the last. 
 
 3 pr. ct. on 1060 is So; multiplied by 
 to years, is 800. 
 
 7 pr. ct. on 1200 is 84; multiplied by 
 Xi years, is 924. 
 
 There might also arise a further dis- 
 tinction between these two capital stocks, 
 should the produce of the one be inert 
 and consumable, and that of the other 
 reproductive; in which case the latter
 
 go THE DOCTRINE 
 
 would be. further entitled to the com* 
 pound ratio of its natural produce during 
 the term of its duration, in the same- 
 manner as compound interest is calculated 
 on money. 
 
 The joint powers of nature and of la* 
 boiir, may therefore be said to have for- 
 med the component parts of every thing 
 produced; and although a relative value sub- 
 sisted even in an early period of society 
 between both, upon the principles alrea- 
 dy described, yet no determinate medium 
 or price could be said to exist for defining 
 each, excepting that of numbers. 
 
 Dr. Adam Smith lias indeed endeavou* 
 red to prove, that the real price of every 
 thing, is the labour employed in producing 
 it. It appears, however, beyond a pos» 
 sibility of contradiction, that Nature 
 acts her part also, which destroys hfc 
 hypothesis. 
 
 There does not even (in this state
 
 OF EQUIVALENTS. $\ 
 
 of things) appear a possibility of tra- 
 cing any foundation of value in many 
 cases, excepting the competition - value 
 between Nature and Labour, according 
 to their respective bounds and powers; 
 and although a specific measure in the pre- 
 cious metals, under the denomination 
 of Money, has since that time been ge- 
 nerally adopted, yet such measure, when 
 considered in its original abstract situa- 
 tion of a commodity procured by labour, 
 would still have been subservient to 
 the same principles, did not its univer- 
 sality, and consequent powers of pro- 
 duction, called Interest, give it a new 
 character, which will be further ex- 
 plained in a subsequent Chapter. 
 
 To trace, in the mean time, how a com- 
 parative value was established between 
 land, cattle, and other property of a 
 nature to return an annual produce, and 
 those objects which return no such 
 produce, it is necessary for me to oh-
 
 £2 THE DOCTRINE 
 
 serve, that the foundation ff om whence 
 arose all produce whatever, consisted in 
 natural and in artificial labour, represen- 
 ted by f0f/ 9 cattle, slaves, and freemen, 
 jointly or separately, the possessors of 
 which considered them as so much stock 
 in hand, of which the annual produce 
 was to be afterwards exchanged for what- 
 ever their exigencies mighr from time 
 to time require. 
 
 A productive and an unproductive 
 object, had therefore the same kind of 
 origin or foundation ; and the relative or 
 competition - value of every foundation 
 was ascertainable in the manner already 
 defined. 
 
 The natural or competition-value of 
 I productive stock, and its consequent 
 natural produce, became then to be 
 compared with one year's general produce 
 of the natural or competition-value of 
 some other stock.
 
 OF EQUIVALENTS. £3 
 
 Suppose, for instance, that the compe- 
 tition-value of die former was iooo; 
 
 8 pr. ct. annually its natural 
 produce; 2 pr. ct. its artifi- 
 cial powers*, and 10 years 
 its duration. 
 
 The full value must be 800, or 10 years 
 purchase of 80, being 8 pr. ct. on 1000. 
 
 If this produce should however be 
 naturally reproductive, the rate of that 
 natural produce must still be compound- 
 ed with it, as before stated. 
 
 Let the competition -value then of 
 the latter, from whence the unproduc- 
 tive object arose, be as 1200, and 10 
 pr. ct. the general produce. 
 
 The full value of the consumable 
 object must be 120, or one year's pur 
 chase. 
 
 The power of thus converting, or 
 C
 
 34 THE DOCTRINE 
 
 exchanging an unproductive object. by 
 a fair barter into a stock, or founda- 
 tion, giving an annual and independent 
 income for a certain number of years> 
 until an equal value was returned, in- 
 duced individuals to be more iudustri- 
 ous, and particularly so, when, through 
 the wisdom of Government, security in 
 property became better ascertained. 
 
 It must appear evident, that however 
 much mankind were inclined to pro- 
 duce such objects only as would re- 
 produce, yet the necessity that must 
 have existed for producing consumable 
 objects of indispensible use to each in- 
 dividual would at all times prevent 
 the former being over-rated when ex- 
 changed against the latter; while there 
 can be no< doubt at the same time, that, 
 from the naturally reproductive quality 
 of many objects, and the general de- 
 sire of mankind to accumulate, the mass 
 of stock reproducing annually, would
 
 Or EQUIVALENTS. 35 
 
 continue yearly to increase from the 
 general savings, until a compleat ma- 
 turity, or that degree of population 
 and industry, which any given tract of 
 country would admit of, had taken 
 place- 
 
 The impediments, which often arose 
 to this increasing principle in industry, 
 could formerly only be traced to the 
 want of proper protection, to which 
 may now be added, the want of an ad- 
 ditional quantity of the medium of re- 
 presentation, which will soon appear to 
 be a necessary cement in every in- 
 crease. 
 
 We must not however, from this 
 circumstance, lament the introduction of 
 a medium of representation ; as, had it 
 not existed, the nature of a mature state 
 would have been very different from 
 what it now is, an account of the 
 physical impossibility of promoting the 
 C 2
 
 36 THE DOCTRINE 
 
 same degree of population and industry 
 on any given tract --of ground, without 
 the facility which arises from such me- 
 dium. 
 
 Before I proceed,, however, to this 
 new order of things, which took place 
 on the introduction of the metals as re- 
 presentative signs,- it is necessary to re- 
 capitulate what I have said, as I Wish 
 to impress very strongly on the minds 
 of my readers the first principles of re- 
 lative value. 
 
 It has been stated above, that those 
 objects, which were procured by cor- 
 poreal labour only, were exchanged ac- 
 cording- to the nature and degree of it, 
 which each required, and that any de- 
 viation from such principle, occasioned 
 by the desire of man for one thing in 
 preference to another, was checked by 
 the encouragement which immediately 
 arose to produce more of the objects
 
 OF EQUIVALENTS. $? 
 
 preferred, excepting in cases where na- 
 ture limited thd number of objects, and 
 in which therefore the competition 
 price could have no bounds set to it. 
 
 The same principle applied also in 
 some degree to establish, or at least 
 to check, the relative value between 
 corporeal and mental labour, although 
 competition was the foundation of then- 
 primary value. 
 
 It has a'so been stated, that the com- 
 parative value between uncultivated soil 
 and labour arose from the relative quan- 
 tities of each, or the given number of 
 inhabitants on any particular tract of 
 land; and that great local distinctions 
 arose from the assemblage of many in- 
 dividuals on one spot, and the advuii- 
 s resulting from that assemblage, 
 compared with those to be obtained in a 
 more solitary and distant situation. 
 
 C a
 
 3^ THE DOCTRINE 
 
 I have also mentioned, that a.] inter- 
 mediate sign was found necessary, in 
 order to facilitate and multiply ex- 
 changes; and that cattle and hides> 
 though inadequate to the objects in 
 view, were first adopted for that; pur- 
 pose. 
 
 My readers will further recollect, that 
 three considerations were necessary to 
 ascertain the relative value of each spe- 
 cies of property, which produced in- 
 dependent incomes, vis. 
 
 The labour to be employed, or the 
 competition difficulty to be surmounted 
 in procuring each of these objects; 
 their probable annual produce from na- 
 tural causes ; and, lastly., the positive or 
 probable term of years, during which 
 each property would be possessed. 
 
 The first proceeded from the soil 
 and its natural powers, as also from
 
 OF EQUIVALENTS. 39 
 
 different kinds of bodily and mental la- 
 bour combined together and brought 
 to consistency; the second depended 
 on the species of object with the ex- 
 perience of its naturally productive 
 powers in former years, and the last 
 on a limitation by positive engagement 
 to a period of years, or, if unlimited, 
 on the uncertain events of nature in 
 the cases of ;life and death, together 
 with the stability of Government and 
 the proper administration of justice. 
 
 The further principles necessary to 
 trace a comparative value between ob- 
 jects, that were to produce, and others 
 which were not to produce, consisted 
 in tracing the comparative or competi- 
 tion-value of the stocks or foundations 
 from whence each arose. 
 
 The rate of the natural produce of 
 the productive stock, multiplied by the 
 term or years of its duration, was then 
 C 4
 
 4° THE UOCTRfNS 
 
 to be compared with the absolute value 
 ascertained to have arisen in producing 
 the consumable object either by nature 
 or art. 
 
 By means of all these principles, it 
 was in the power of every man to trace 
 a relative value between all things, ex- 
 cepting only those parts in which nature 
 was concerned, and which therefore 
 must necessarily have been left to 
 chance: and all objects were even ex- 
 changeable with each other, without 
 the intermediate and incompetent signs 
 or cattle and hides; but the introduc- 
 tion of the precious metals, as a general 
 medium of - representation, procured 
 more completely the object of greatly 
 facilitating and multiplying every kind 
 of exchange, while they simplified, at 
 the same time, the first principles of re- 
 lative value. 
 
 It will also be found, that they pos~
 
 o F Sb QUIVALEN -T s. 41 
 
 sessed, from their natural and acquired 
 qualifications, the most unbounded powers 
 in organising public finance ; their vir- 
 tues have, however, unfortunately been 
 so much misrepresented by mankind, as 
 to have occasioned the introduction of 
 thi most perplexing and dangerous 
 theories, winch human ingenuity could 
 invent. 
 
 t'S
 
 42 THE DOCTRINE 
 
 CHAPTER II. 
 
 On the Principles by which the specific 
 Qiianttty of the Precious Metals due 
 to each object is regulated, 
 
 IN the preceding Chapter I 
 have stated the cause and the nature of 
 a relative value, which subsisted be- 
 tween all things; and although it ap- 
 pears, that when the objects to be ex- 
 changed were not of the same nature, 
 the great principle or ground- work of 
 such relative value was Competition : 
 yet it is equally evident, that this 
 competition was always counterpoised 
 and regulated by the interest and in- 
 dustry of individuals ; from whence we 
 may conclude, that there has always been 
 traceable, from experience, a just and re- 
 lative value for all things, excepting in
 
 OP EQUI VALfe NTS. 43 
 
 those cases where nature limited the 
 number of objects. 
 
 To retain all things at that just and 
 relative value wiih one another, is con- 
 sequently an unerring principle, which 
 self-interest implants in the mind of 
 man, and no human laws can so effec- 
 tually operate to that purpose, as the 
 natural pursuit of the whole commmu- 
 nity. 
 
 It has been already observed, that the 
 metals derived originally their relative 
 value from the labour required in pro- 
 curing them, and that they were at first 
 only employed as ornaments or uten- 
 sils. 
 
 The reasons which induced mankind 
 to adopt them, as the propercst repre- 
 sentative signs, were, no doubt, because 
 they were divisible to the smallest pur- 
 poses, sufficiently: durable in their na-
 
 44 THE DOCTRINE 
 
 ture, and easily transported from one 
 place to another. 
 
 A relative value being already esta- 
 blished for these precious metals, it is 
 natural at first to conclude, that the 
 specific quantity of them to be given 
 for any particular object, was ascertain- 
 able upon the original principle of their 
 being an unproductive propeny, procu- 
 red out of the soil by labour, and that 
 there was of course no necessity for 
 taking any new principle of value 
 into consideration. 
 
 When we reflect, however, on the 
 great demand which inevitably took 
 place in consequence of their adoption, 
 as a medium of representation, we shall 
 find no difficulty in tracing the neces- 
 sity of admitting a new principle of 
 value, and at the same time discover in 
 what manner interest or annual pro- 
 duction arose, • as well as the wonder-
 
 OF EQUIVALENTS. 45 
 
 Ful arrangement of power and profit 
 that ensued to every community. 
 
 It is, in reasoning on this point, that 
 all Writers on the subject of Money de- 
 part from the first principles of its in- 
 stitution as a representative sign ; and 
 to their imperfect suggestions, may be 
 attributed a- series of errors, which have 
 produced many superficial, confused, 
 and discordant theories. 
 
 To trace, then, the origin of Interest 
 of Money, we have only to suppose, 
 that many individuals perceived a great 
 advantage in the possession of pieces of 
 copper, silver, or gold, for the pur- 
 pose of exchanging' them, upon the 
 principles already established, for what 
 things they might want in sowing, su- 
 perintending, and gathering in their 
 yearly crops, or in carrying 'on their 
 manufactories ; and that they were 
 therefore willing to procure a quantity
 
 4 <S THE DOCTRINE 
 
 of them, not in exchange against any 
 thing, but on the simple condition q£ 
 their being returned again to the pro- 
 prietor wttfy a. certain aJaiiional yum* 
 hcr, (from ten to fifteen per cent pos- 
 sibly in those days) after the realisa- 
 tion of their crops. 
 
 It is evident that, as those indivi- 
 duals who had occasion for these me- 
 t:.ls, could on the one hand afford to 
 add this premium to the sum bor- 
 rowed, on account of its having been 
 the means of extending considerably the 
 general produce of their industry; so 
 these metals, on the other hand, were 
 fu"y entitled to this new consideration 
 of annual hire for their use, from the 
 generally good effects which they pro* 
 duced. 
 
 The metals became then, of course, 
 classed with that kind of property 
 which produces annually, and, from
 
 OP EQUIVALENTS. 47 
 
 their universal utility, they obtained the 
 right of precedency in estimating all 
 
 things. 
 
 They, indeed, soon lost their origi- 
 nal principles of relative value; but 
 the reproductive power of interest, 
 which they had obtained, gave ample 
 encouragement to raise a greater quan- 
 tity of them by labour. 
 
 By the attraction also of this an- 
 nual premium, money was constantly 
 moving from hand to hand, as every 
 person lost so much increase by re- 
 taining possession of more than was 
 necessary for his daily occurrences. 
 
 The most common observer will per- 
 ceive, that this constant and inevitable 
 activity in the metals, enabled a small 
 mars of money to transact the business 
 of a great community, and that each 
 time it moved was tantamount in its
 
 48 'THE DOCTRINE 
 
 general effects to doubling the ,qiran- 
 tity. 
 
 The rapidity., therefore, with which 
 money moves from hand to hand, 
 forms, a material part of its powers; 
 and it consequently becomes necessary 
 .to state every principle which affects 
 that circulation, before . I proceed to 
 explain those causes which, by raising 
 or lowering the money value of the 
 objects to be represented, occasion a 
 relative scarcity or plenty of money, 
 in as great a degree, as if the num- 
 ber of objects h,ad been increased or 
 diminished. 
 
 It has been observed, in the pre- 
 ceding Chapter, that security in pro- 
 perty was the primary cause of all in- 
 dustrious activity; and this principle 
 applies, with peculiar propriety, to the 
 activity of money; because the inte- 
 rest of individuals inquires, that what
 
 OF EQUIVALENTS. 49 
 
 ever is exchanged for money should be 
 possessed, with as great a degree of 
 security, as human justice can, upon 
 general principles of policy, contrive to 
 establish. 
 
 If all Governments then differ from 
 each other, as to the degree of se- 
 curity which they afford to property 
 from the nature of their laws, and 
 from the degree of justice observed 
 in carrying them into execution, there 
 must naturally exist, at all times, in 
 different countries, a considerable va- 
 riation in the rapidity with which 
 money either circulates from hand to 
 hand upon simple credit, Gr is ex- 
 changed for other property producing 
 annually, as well as in the premium 
 demanded for its hiieJ 
 
 A moment of general confusion, or 
 discredit, will also produce a partial 
 suspension in the circulation of the 
 D
 
 50 THE DOCTRINE 
 
 representative signs, but tranquillity 
 •will restore it again, provided those 
 signs have not been sent out of the 
 country. 
 
 The high or low rate of interest* 
 arising from the relative scarcity or 
 plenty of money, may further occa- 
 sion some change in the rapidity of 
 circulation, as mankind are more or less 
 disposed to part with their money, 
 in proportion as they are tempted 
 with a high or low premium for its 
 use* 
 
 This circumstance can, however, on- 
 ly be considered as a trifling check to 
 the full consequences of plenty, or of 
 scarcity of money ; and we have there- 
 fore only to attend to the two first- 
 mentioned causes of the variation of 
 which 1 am treating. 
 
 In forming an idea of the plenty
 
 OF EQUIVALENTS. 51 
 
 or the scarcity of any commodity^ it 
 is iii general to be Understood, as 
 meaning the quantity of that com- 
 modity compared with the quantity of 
 some other object, which can only 
 be ascertained by the demand for the 
 one as offered to that For the other; 
 but, in tracing the cause of a relative 
 plenty or scarcity of moneys compa- 
 red with other objects, there appear 
 to exist the additional considerations 
 of the degrees of motion inherent to 
 the first, and of the specific or no- 
 minal value of the last; both which 
 circumstances seem to have been entire- 
 ly overlooked by every Statesman, and 
 Philosopher, in their reasonings on that 
 point. 
 
 Whatever adds therefore to the rapi- 
 dity of the circulating medium, or 
 takes ofF from the specific valne of 
 sny object to be represented, is in 
 effect the same as if a greater quad- 
 
 D2
 
 5- THE DOCTRINE 
 
 tity of money were produced, or a 
 less number of objects were to be re- 
 presented, and vice versa. 
 
 From these combined circumstances, 
 naturally arises the rate of interest, or 
 price of 'money; and no human- laws 
 can possibly alter it in the smallest de- 
 gree. 
 
 It becomes, therefore, not only an 
 act of injustice, but even impolitic in 
 Government, to fix, it in any manner 
 whatever, because every person has a 
 right to sell his money, as well as 
 his estate, or house, for whatever, 
 from the situation of things, he can 
 obtain for it ; and, money being a 
 moveable property, the proprietor can 
 always contrive to send it to those 
 countries where a better price is to 
 be obtained, if he should be obstruc- 
 ted at home in his natural rights.
 
 OF EQUIVALENTS. 53 
 
 The most material principle, in 
 the ''security of all possessions, is cer- 
 tainly founded on this freedom to 
 make the most of every kind of pro- 
 perty » and the reasoning of a mora- ' 
 list can no ways "controvert it, as the 
 principles of money, and the princi- 
 ples of morality, have no sort of af- 
 finity with one another, whatever 
 Philosophers may pretend to have dis- 
 covered in the vicious tendency of 
 money, as the engine of corrup- 
 tion ; which corruption equally ex- 
 isted, by means of all other pro- 
 perty, before the introduction of gold 
 and silver. 
 
 Laws, which limit the interest of 
 money, will also not be obeyed, if 
 contrary to the natural situation of 
 things, and will be easily evaded by 
 means of premiums privately given. 
 
 Government itself evaded the 
 15 3
 
 54 THE DOCTRINE 
 
 isting laws in raising money for the 
 public service during the last war, 
 while a Court of Equity thought it- 
 self obliged, at that time, to sanc- 
 i tion the breach of a money - contract 
 between man and man, because the 
 law. would not permit money to be_ 
 borrowed at the rate of interest then 
 existing (above 5 pr. ct.) for the pur- 
 pose of paying off a mortgage, which, 
 had been granted at a lower rate, on 
 condition of being redeemed at a sti- 
 pulated time. 
 
 It is impossible to conceive any 
 thing more unjust, or impolitic, than 
 this mode of proceeding; first, in pre- 
 venting any individual from borrow- 
 ing money at any rate he pleases; 
 and, secondly, in favoring a breach of 
 contract, by not granting a foreclo- 
 sure on a mortgaged estate. 
 
 The proprietor of money i$ cer-
 
 OF EQUIVALENTS. 55 
 
 tainly entitled to high interest, when- 
 ever it is obtainable, if on lending it 
 at low interest, he stipulates at what 
 time his right of being repaid is to take 
 place ; while it is evident, on the 
 contrary, that whoever has occasion for 
 the use of money, and has the ad- 
 vantage of low interest, when money 
 is plentiful, cannot complain of the 
 necessity he is under of borrowing at 
 high interest, when, money is scarce. 
 
 The fundamental error in this bu- 
 siness, consists in the having enacted 
 a positive and invariable law against 
 what is in its nature relative and va- 
 riable ; and the futility of this law 
 is evident from the facility of evad- 
 ing it. 
 
 The evil, however, that has arisen 
 
 from the decisions of the Court of 
 
 Chancery, is a discouragement to all 
 
 loans on mortgage, because it is now 
 
 D 4
 
 56 THE pOCTRINE 
 
 ipon record, that a court of justice 
 will not support a money-lender in his 
 just and natural rights. 
 
 The pleas urged of the low interest 
 having been regularly paid, and of the 
 hardship of being unable to borrow 
 money at the rate allowed by law, 
 are unworthy of a moment's considera- 
 tion, since this law can be evaded, and 
 since low or indeed any interest, can- 
 not be the just price for a property, 
 the capital of which the proprietor has 
 at that time by his contract a right to 
 claim. 
 
 Laws for the protection of Minors, 
 and for the conduct of Executors 
 and Tutors, are, on the contrary* 
 founded in policy and justice ; and 
 may be effectual,' without any limita- 
 tion of interest, or any violation of 
 natural principles.
 
 OF EQUIVALENTS. 57 ■ 
 
 In order, then, to point out the 
 principles by which the specific va- 
 lue of all objects in money is go*": 
 verned, I shall begin by stating, that 
 all mankind agree in exchanging mo- 
 ney for other property, of a nature 
 to retain an annual product on such 
 terms as will procure an income ade- 
 quate, upon due consideration of all 
 circumstances, ' to the existing rate of 
 interest, as produced by a relative plen- 
 ty or scarcity of money. 
 
 The productive power of money, 
 or the rate of interest, is consequently 
 become the standard price, by which all 
 other capitals are exchanged against it. 
 
 It will also be found to be the 
 regulator of the price, due to the 
 produce of all such capitals as are 
 not limited in their extent by nature. 
 
 These two points contain the great 
 D 5
 
 58 THE DOCTRINE 
 
 secret of the operations of money, in 
 fixing the price of all things; and I 
 must therefore claim the utmost atten- 
 tion, on the part of my Readers, to. 
 the following very material explanation. 
 of the process to which they give 
 *ise. 
 
 With regard to the first circum- 
 stance of the rate of interest being 
 the competition -price, by which other 
 capitals are exchanged, it will be 
 easily understood, when I state that, 
 if interest is about 4 pr ct. 25 years 
 purchase of the stated income of a 
 productive property (such as public 
 funds, &c. ) is the fair relative va- 
 lue, at which such property might 
 be obtained; and, if interest is about 
 5 pr. ct. 20 years purchase would 
 become that value, and so on pro- 
 gressively. 
 
 I do not, indeed, mean to assert,
 
 OF EQUIVALENTS. 55 
 
 by this position, that all capitals, 
 whether public funds, houses or land, 
 &c. &c. should give the same degree 
 of income as money will give, when 
 lent on simple security, because each 
 property may have qualities which are 
 peculiar to itself, and be consequently 
 subject to great variation in price. 
 
 It may also not be improper to 
 remark, that the rate of interest is at no 
 time fixed to any particular point, but 
 is subject to numberless gradations, as 
 well as constant variations in the ave- 
 rage price. 
 
 These gradations arise from the col- 
 lateral circumstances of trouble and risk 
 attending the receipt of annual income, 
 the degree of security, and term of 
 possessing the object exchanged. 
 
 It is therefore improper to state, at 
 •any time, a fixed rate of interest, as it
 
 5«J THE DOCTRINE 
 
 has various prices, in proportion to the 
 quality of the object obtained in return 
 for money, and can only be said to 
 run from 3 to 3f a 4 pr. ct. or from 
 4 to 4i a 5 pr. ct. and so on. 
 
 I can however affirm, that every gra- 
 dation has a connexion with the average 
 rate of interest; and that, if certain 
 circumstances produced, for instance, 
 a difference on a particular income of I 
 pr. ct. either higher or lower than the 
 average rate of 3^ pr. ct. when inte- 
 rest was at that price, there would, on 
 the principles of equity and relative va- 
 lue, arise on that same income a differ- 
 ence of I pr. ct. either higher or low- 
 er than the average rate of interest, 
 supposing such average price to rise to 
 5^ pr.ct. ; that is to say, that the point 
 of variation must be in unison with the 
 average scale, provided nothing should 
 intervene to affect partially that parti- 
 cular income. •
 
 OF EQUIVALENTS. 6l 
 
 From what I have said respecting the 
 acquisition of property at 25 or 20 
 years purchase of its income, in the 
 case of interest being at 4 or at 5 
 pr. ct. it is to be inferred, that the 
 capital rises or falls, in a kind of in- 
 verse ratio to the rise or fall of interest, 
 that is to say,, that a £ 100 rent in .per- 
 petuity ought to sell -for ^2500-sterl. 
 when interest is about 4 pr. cent, and 
 for £ 2000 sterl. only, when interest 
 is at 5 pr. ct. ; thus retaining the fn- 
 come at the very same nominal value 
 us before. 
 
 This is no doubt the process of na- 
 ture with respect to all fixed and im- 
 mutable incomes in money; but incomes 
 arising from industry, are of so different 
 a nature, that those principles do' not 
 apply: these incomes will, on' "the 
 contrary, appear to be regulated by 
 the rate of interest in a direct ratio, 
 that is to say, that their money va-
 
 fo THE DOCTRINE 
 
 jue will be either higher or lower, 
 according as interest may rise or fall. 
 
 An examination into the component 
 parte of i.ll estates or capitals (money 
 excepted ) will evidently prove this 
 point, by shewing of what they con- 
 sist; and how thy may be multiplied 
 or diminished by a disproportion of 
 value in some of their parts, with re- 
 spect to the rate of interest. 
 
 It will also explain, in what manner 
 this augmentation or diminution in their 
 quantity, will reduce or increase their 
 nominal value in money, as also that 
 of their produce, called Rents. 
 
 All estates or capitals, exchangeable 
 for money, are composed of land, an- 
 nually and perpetually producing; of 
 productions of land, either producing 
 zgzhii or only useful for a certain
 
 OF EQUIVALENTS* 63 
 
 time ; and of labour, as performed 
 by animals' or man. 
 
 Every production of industry is there, 
 fore an income from some capital, held 
 either in perpetuity, or for a limited 
 time, or on a life-rent* 
 
 The possession of land may be con- 
 sidered as a perpetuity ; its produc- 
 tions, which reproduce, or are found 
 useful in building, and in manufac- 
 tures^ &c. must perish in a certain 
 time, and the value of labour is 3 
 life - rent, by being the income for 
 supporting animal existence. 
 
 Land then, taken abstractedly from 
 the other parts of capital, is subject 
 to the competition of its quantity, 
 against the relative plenty or scarcity 
 of money; that is to say, when all die 
 land of a given country is cultivated 
 to the highest degree, there can be
 
 64. THE DOCTRINE 
 
 no principle to counteract its com- 
 petition - value relative to money ; arid 
 should interest of money fall; in that 
 state of things, from 5 fc@' 4 pr. ct. pr. 
 : annum, a .£ 100 rent, which in one 
 : -case would sell for £ 2000 sterling, 
 would, in the other case* 1 sell for 
 ^ 2500 sterl. 
 
 While new ground^ however, remains 
 to be ^cultivated, or that ground which 
 -is already in a state of cultivation, 
 ' can- be improved by labour. and other 
 -materials, I there must necessarily arise 
 a counteracting, cause to. the propor- 
 tional increase in the money -price 
 of land, corresponding to the dimi- 
 nished rate of interest ; in the first 
 place, because the new ground comes 
 in competition with the old; and in 
 the second place,, because the addition 
 of materials and labour makes the old 
 ground more productive, which is in ef- 
 fect equal to an increased quantity of lancfe
 
 OF EQUIVALENTS. (>$ 
 
 But in admitting, even for arguments 
 sake, that the full value should be given 
 for the landj in proportion to the rate 
 of interesr, there can. be no necessity 
 that the rent should rise also, in order 
 to do justice to all parties, since the 
 money paid for the land would still 
 retain its proportion of income relative 
 to the rent of money. 
 
 The long period, indeed, for which 
 leases are held, puts a general change 
 in the old established rents entirely out 
 of the question, though new leases might 
 admit of variation.. 
 
 In order to explain these principles 
 more fully, I will suppose, that an un- 
 cultivated spot of ground would, if 
 assisted by labour, and other materials? 
 produce what would sell for £ 70 sterl. 
 annually, but that £ 50 sterl. only of 
 that produce could be attributed to its 
 natural powers. , 
 
 B
 
 66 THE DOCTRINE 
 
 If the full value, then,, of the natural 
 productive power of this piece of land, 
 giving' £50 sterl. annually, is £1000 
 sterl. when interest is about 5 pr. cent, 
 there would certainly be no further en- 
 couragement to cultivate that ground,. 
 if the proprietor insisted on obtaining 
 £ 1250 sterl. in case interest should 
 have fallen to about 4 pr. cent. 
 
 A money-holder would, however, be 
 well pleased to give £ 1 1 50 sterl. if" 
 Interest fell to 4 pr. cent, as a £50 rent 
 would return to him in that case 4 & pr. ct. 
 interest for his money; and should the 
 competition arising from an increased 
 quantity of produce, lower the price' of 
 it, and force him ultimately to lower his 
 rent (suppose to £ 48) he Would still 
 letain more than 4 pr. cent, interest for 
 ^le money, which he had employed in 
 the purchase. 
 
 This argument is nowise weakened by
 
 OF EQUIVALENTS. 6? 
 
 supposing the full value of £1250 
 sterl.. to be given for a £50 annual 
 rent, which might be immutable for a 
 great number of years, as the lease 
 holder remains in that case exposed to the 
 diminished money-value of the produce, 
 from its quantity being increased; nor 
 will it make any difference., if the origi- 
 nal proprietor should prefer the culti- 
 vation to the sale of the new ground, 
 as he thereby puts himself into the si- 
 tuation of a money-holder. 
 
 It appears then, that, land, considered 
 by itself, will acquire an additional no- 
 minal value, in consequence of a relative^ 
 increase of money, though not in the full 
 proportion to that increase; but that 
 the rent of that land which belongs to 
 its natural powers of annual production, 
 has a tendency to diminish in pricey not- 
 only in conformity to the diminished 
 rate of income arising from money, but 
 also in consequence of the quaiiricy 
 E
 
 6" THE DOC T R I X E 
 
 :r rents, which will be continually 
 increasing. till the whole country be .cul- 
 tivated to the highest degree. 
 
 If this were not the casc 5 we should 
 have very great reason for considering 
 the introduction of representative signs 
 as injurious to the happiness of society, 
 by perpetually increasing the nominal 
 value of their, wants, instead of multi- 
 plying their comforts ; and the public at 
 large would then have more cause for 
 censuring, than for applauding, the con- 
 duct of those Statesmen who, by com- 
 mercial treaties, or any other means, arc 
 constantly aiming at acquiring a greater 
 balance in money than the State had before 
 obtained in its general transactions with 
 Ouier nations. 
 
 The second component part of all. 
 capitals, or estates, as consisting of 
 natural produtcions^ has by implication 
 been already fully explained; for tfese 
 productions constitute, in fact, the rents
 
 OF EQUIVALENTS. $9 
 
 'of land, and by multiplying the one or 
 die other, their money-value will natu- 
 rally diminish, without doing any injury 
 whatever to the proprietors; in the first. 
 plr.ee, because thcystill remain in unison 
 with mo diminished rent of the general 
 representative sign; and, secondly, be-, 
 cause every consumer ( including the 
 proprietors themselves ) will iimi his 
 daily wants of natural produce more 
 cheaply supplied. 
 
 It becomes apparent, from these de- 
 ductions, that, by increasing either the 
 quantity or the velochy of the circula- 
 _ :, im, an increased mass of na* 
 
 \:1 productions and" artificial labour is 
 promoted; and that those individuals 
 who arc exposed to a diminution in the 
 money-value, of their incomes, by this 
 superabundant quantity, are at the same 
 time fully compensated by the diminu- 
 .1 hi their. annual expences,
 
 ;0 THE DOCTRINE 
 
 This reflexion may, perhaps, lead man* 
 kind to contemplate these characteristics 
 of money in a more favorable point of 
 - k\% than they have hitherto done, and 
 ;-rt'.k;i 1 "rly as they cannot controvert a. 
 self evident proposition relative to its 
 ers.5 which is^tbat, by increasing such. 
 m as are acknowledged to facili- 
 tate arid extend industry, a correspon- 
 dent progress must naturally ensue, if 
 the country; be capable of improve- 
 ment 
 
 I come now to the last component 
 part of all estates, called Labour, as 
 performed by animals or man, and as 
 regulated in its money-value by the 
 price of whatever may be necessary for 
 their support, as well as that of their 
 helpless offspring. 
 
 Animal life is prone to increase, when- 
 ever the means of preserving it are to 
 be obtained, and the price of labour is
 
 OF EQUIVALENTS. 71 
 
 generally something above what is im- 
 mediately necessary for subsistence. 
 
 The proprietor of the animal requires 
 some hire for the use of his property, in- 
 dependent of what he must pay for his 
 food ; and man requires some little sav- 
 ings from his labour, for the future 
 exigencies of his family. 
 
 Should the necessaries of life be 
 therefore reduced in their money-value, 
 on account of a decrease in the value of 
 rents, and of natural produce arising from 
 the causes above stated, a competition 
 amongst the labourers, for procuring 
 only as much as might be necessary for 
 their food, cloathing, and conveniences, 
 as well as for their reasonable little sav- 
 ings, would naturally reduce the price 
 of their hire. 
 
 The price of labour being of course 
 a necessary and material part of the 
 E4
 
 7 J. THE DOCTRINE 
 
 money-value of all general productions 
 of nature, from which new capitals 
 or estates are constructed, we can find 
 no diihculty in ascertaining, that such 
 part receives a sensible diminution in 
 price from a decrease in the money- 
 value of the other part, called rents or 
 ■natural- produce. 
 
 It is also very evident, that rents 
 and labour form a very considerable part 
 of all capitals, and that their tendency 
 to decrease in money-value must coun- 
 teract the consequences of the increas- 
 ing value of the other part, called Land, 
 which appears to take place when mo- 
 ney becomes more plentiful. 
 
 Capitals have therefore, upon the 
 whole, when they are connected with or 
 arise in any degree from industrious 
 incomes or natural productions, the same 
 tendency to fall in money-value, when 
 interest falls, as those incomes or pro_
 
 of equivalents! 73. 
 
 ductions have ; and these consequences 
 are considerably increased by the action 
 and re-action between the capital r.nd 
 the income, which seem necessarily and 
 inevitably linked together by nature, and 
 influence one another, for the following 
 reasons. 
 
 The lower nominal value of the 
 capital requires less income in money, 
 besides the deduction which we suppose 
 to have before taken place in consequence 
 of the decline of the rate of interest; and 
 this additional diminution of income has. 
 again a tendency to diminish the nominal 
 value of the capital, and so on repeat- 
 edly, though in a less degree each time, 
 until the decrease becomes unworthy of 
 further attention. 
 
 In proceeding further to state the 
 effects produced oil the price of manu- 
 factures, by a greater plenty of money, 
 or a lower rate of interest, it is not only 
 
 E 5
 
 74 THE DOCTRINE 
 
 necessary to take into consideration the 
 diminished value of the raw materials, 
 as well as of labour, from the very pow- 
 erful causes above stated, but also that 
 the capital in money, employed for car- 
 rying the business into effect, or pur* 
 chasing the raw materials, will not only 
 be less, but even procured at « cheaper 
 rate. 
 
 Suppose, for instance, that a manu- 
 facturer employs in his trade a capital 
 of £100,000 sterling, when interest 
 is at 5 pr. cent, he will naturally expect 
 it to produce him 9 or 10 pr.cent. an- 
 nually,' which is of course to be drawn 
 out of the price of his merchandize. 
 
 If interest, then, fell to about 4 pr. ct. 
 and he continued to receive the same 
 price for his merchandize, a threefold 
 advantage would immediately accrue to 
 him,- first, from the diminution in the 
 money- value of the raw materials, and 
 of labour; secondly, from their requiring
 
 OF EQUIVALENT!. 75 
 
 less capital than before; and, thirdly, fYom 
 his obtaining that smaller capital at a lower 
 rate of interest. All these circumstances 
 would carry his profits much beyond ail 
 principles of relative value; and although 
 I by no means deny his compleat right 
 to obtain as much as he can, yet it is 
 obvious that, if the consumers indulged 
 him in his demands, he would be the 
 very first to think of extending this 
 profitable business ; and if indolence, or 
 any other motive, prevented him from 
 doing it, his neighbours would not fail 
 to begin the same trade in opposition 
 to him, so that a sufficient stock would 
 at last be produced, and the price of 
 his merchandize lowered to a scale of 
 value, more consistent with the effects 
 naturally resulting from a diminished rate 
 of interest. 
 
 If, on the contrary, a still higher 
 price than when interest was at 4 pr. ct. 
 should be given For his merchandize, a
 
 76 THE DOCTRINE 
 
 very extensive encouragement to the 
 progress of manufactures would inevita- 
 bly ensue, and the greater abundance 
 must necessarily produce the consequen- 
 ces I have been pointing out. viz. x 
 reduction in price, more or less border- 
 ing on the diminution of interest. 
 
 I flatter myself, that I have now 
 established the two leading principles, 
 which I have been endeavouring to 
 prove, viz. that the natural relative value 
 of all things is regulated, through cir- 
 cuitous operations, by the rate of inte- 
 rest, and that the encouragement to fui% 
 ther industry arises from the market-price 
 of its productions being higher than 
 the current rate of interest absolutely 
 demands, or than the principle of Equi? 
 valents will justify. 
 
 It is however necessary for me to 
 state, that there are accidental and lo- 
 cal bounds to probable and natural ef-
 
 OF EQUIVALENTS. '77 
 
 fects, as well as particular deviations 
 From general principles, to which all na- 
 ture, from its great complication, is sub- 
 ject; but that these accidental bounds, 
 and particular deviations, are of no ma- 
 terial consequence in the general effects; 
 and should therefore not be kept in view 
 by an enlightened mind; because the 
 danger of obscuring the first and gene- 
 ral principles would then become as 
 great to the present and future ages, 
 as has evidently been the case with the 
 past. 
 
 But, in order to remove every doubt 
 which might still remain in the breasts 
 of my Readers, I shall examine the con- 
 sequences to which the industrious 
 exertions of individuals are exposed in the 
 taking place of a relatively greater scarcity 
 of money; which will form the counter- 
 part of what lias been stated with in- 
 spect to il^ effects of a relatively greater
 
 7&" THE DOCTRINE 
 
 plenty of money, and cannot fail of 
 producing the complete st possible con- 
 viction respecting the truth both of the 
 one and the other* 
 
 Let us suppose, then, that interest 
 of money rises from 4 to 5 pr.cent. 
 •and that every landholder loses in the 
 •capital value of his estate in the pro- 
 portion of 25 to 20 years purchase, or. 
 of ? of its former amount ; that is to 
 say, that upon an income of £ 50 steri. 
 pr. annum, he loses £250 steri. out of 
 the £1250 steri. which was the amount 
 of its former capital value. 
 
 There will, in that case, exist no 
 inducement whatever to buy or culti- 
 vate new ground, because the old will 
 not only have lost considerably in its 
 value, but will also, from the circum- 
 stance of its being already in a state of 
 cultivation, be umversally preferred.
 
 OF EQUIVALENTS. 70 
 
 If we calculate further, the land- 
 holders chances of supporting, at the for- 
 mer value, those rents which are not 
 lixed for any distant period, we shall 
 find, that the scarcity of money will 
 not admit of so many purchasers of pro* 
 duce at the old prices, and that the mar- 
 ket-price of natural produce may on 
 that account immediately fall, notwith- 
 standing that it reasonably might, and 
 indeed ought, to lay claim to an increase, 
 if the value of the capital was not 
 lowered in such a degree as to cor- 
 respond with the increased rate of in- 
 terest. 
 
 As this decrease of capital value 
 cannot on all occasions ensue, a still 
 greater discouragement to cultivation 
 must take place, until rents not only 
 return to their old price, but even in- 
 crease in their value (by a ntgkctcd 
 cultivation) in conformity to theprinci*
 
 8o THE DOCTRINE 
 
 ,' of an equivalent increase from mo- 
 . r^v; since otherwise they would not be 
 Viewed. 
 
 Nor can this advance in the price of 
 rents, nor even the power of supporting 
 them at their former rates,, exist un- 
 der the circumstance of a diminished 
 quantity of representative signs, without 
 
 diminution in the mass of general pro- 
 
 ductions, from its being mathematically 
 
 ■' - . 
 
 possible that a lesser number should 
 
 *■ 
 
 ; resent a greater. Suppose, for. instance, 
 that ioo guineas represented ico objects 
 at a guinea each, 80 guineas certainly 
 could not represent the same number at 
 the same value; and therefore it follows, 
 that a diminution either in the quantity 
 of objects, or in their value, must take 
 place, in order 'to restore the powers of 
 representation. 
 
 Jt may vcrhzps be thought, that an 
 additional motion in the representative 
 
 \
 
 OV EQUIVALENTS. 8 1 
 
 signs would supply the deficiency in 
 their quantity, but unfortunately there can 
 exist no motive for such increased acti- 
 vity, excepting in the purchase of capi- 
 tals, and that only to a small degree, on 
 account of the increased rate of interest, 
 as stated above. 
 
 If the accelerated movement of the 
 representative signs became equal, or 
 nearly so, in its effects, to the loss sus- 
 tained in their quantity, the interest 
 would remain at the same rate as before, 
 and no change of consequence would 
 be perceptible, either in the price or 
 quantity of general productions. 
 
 It must be observed also, that the 
 diminished value of many capitals (pro- 
 ducing fixed incomes), which takes place 
 on a rise of the interest of money, will 
 not sufficiently relieve the representation 
 of money, so as to render it possible 
 that the annual produce of other capi- 
 F
 
 $2 THE DOCTRINE 
 
 tals should be represented at the same 
 price as before ; because the representation 
 of capitals is only a small part of the duty 
 of representative signs, and is confined 
 either to the transactions of those per- 
 sons who are exchanging the nature of 
 their property, or to new acquisitions 
 of capital arising from general savings; 
 while the representation of incomes calls 
 for a daily transfer, to an immense amount, 
 amongst producers and consumers of all 
 articles whatever. 
 
 It should also be further recollec- 
 ted, that capitals consist in part of pro- 
 ductions, and that such productions will 
 not admit of being so much reduced in 
 price, as to correspond, while in the 
 form of capital, with the increased rate 
 of interest;, because they are ultimately 
 not to be procured., unless purchased at 
 their just value considered as incomes; 
 notwithstanding that land in itself might be 
 subject to the full effects of competition
 
 OF EQUIVALENTS. $3 
 
 between its quantity, and the relative 
 plenty or scarcity of money. 
 
 The bad effects, therefore, which 
 arise in any society from a diminution 
 of its representative signs, are not only 
 very conspicuous in the neglected culti- 
 vation of its land, as well as in the di- 
 minished quantity of its annual industry, 
 but ultimately in the increased price of 
 annual produce necessary for the sup- 
 port of animal life. 
 
 This circumstance must naturally af- 
 fect the price of labour; and the in- 
 creased price of labour (as forming a 
 component part in all general produc- 
 tions) will again re-act, and increase the 
 price of annual produce ; they both affect 
 each other repeatedly (though in a smaller 
 degree each time), to the very great dis- 
 advantage of the whole community. 
 
 The population of a country must 
 Pi
 
 84 THE DOCTRINE 
 
 then inevitably diminish ; and although the- 
 reduced number of individuals may have 
 nominally higher rents from money, and 
 higher wages from industry, yet their 
 expenditure will unfortunately be increa- 
 sed in the same degree. 
 
 If we trace also the effects of higher 
 interest of money on the price of 
 manufactures* we shall find, that the ca- 
 pital employed must not only be increa- 
 sed, in order to purchase the raw mate- 
 rials, and labour, at advanced prices, but 
 that a higher annual premium must be 
 paid for the use of money, and that this 
 threefold accumulated charge must be 
 made good, by the higher price of the 
 manufactured goods. 
 
 We shall also perceive, that since 
 the higher wages of the labourer, the 
 advanced price of raw materials, the in- 
 creased interest of money, and extension 
 of capital, together with all their actions
 
 OF EQUIVALENTS, 8# 
 
 and re-actions, must ultimately form a 
 great accumulation of expence to be em- 
 ployed in producing only the same 
 quantity of goods as before, it would 
 become impossible for the manufacturer to 
 continue his business, (unless prices were 
 to rise in proportion to those increased char- 
 ges) without a compleat sacrifice of his 
 rights ; and it must in that case be more 
 for his interest to content himself with 
 the higher income, obtainable from 
 money, and to divest himself of all 
 trouble and risk attending the prose- 
 cution of business. 
 
 Whichever way, therefore, this 
 Subject is considered, the general result 
 will always correspond with the recapi- 
 tulation, which I shall here make in as 
 few words as the nature of the discus- 
 sion will admit. 
 
 Self-interest must, in genefel, be 
 F ~ *
 
 86 THE DOCTRINE 
 
 considered as the primum mobile of all 
 human industry. 
 
 This self-interest was originally 
 gratified by the maintenance of a proper 
 relative value between all objects founded 
 on those principles which have been 
 .stated in the preceding Chapter: but it 
 is now excited by the preservation of a 
 superior proportion in the money-value 
 of objects, either according to the rate 
 of interest, if the object be a production.,, 
 or according to its competition-value, as 
 opposed to money; if it be land, mental 
 labour, or any other object, the quantity 
 of which is limited by nature. 
 
 These distinctions are indeed so much 
 blended together, through a variety of 
 circuitous operations, that the propor- 
 tion of their separate effects, or the pre- 
 ponderance of either, has never been 
 properly traced, or ascertained, so as to 
 determine the general result, whenever
 
 OF EQUIVALENTS. 87 
 
 money becomes either scarcer or more 
 plentiful. 
 
 It appears, however, from the fore- 
 going investigation, that productions, 
 arising either from nature or from cor- 
 poreal labour, form the most material 
 part of all capitals, as well as of all ob- 
 jects of general use; and although the 
 price of land, mental labour, or any other 
 object, whose quantity Is limited by 
 nature, will be influenced by competi- 
 tion arising from the relative plenty o r 
 scarcity of money; yet it is very evident, 
 that this competition does not, upon the* 
 whole, counteract the general principle, 
 that a diminished rate of interest pro- 
 duces a diminution in the price of almost 
 every object, as well as an increase in their 
 quantity, and,/>er cunira, that an increased 
 rate of interest produces an augmentation 
 in the price of those objects, with a 
 decrease in their quantity* 
 
 ?4
 
 -33 THE DOCTRINE 
 
 This increase or decrease in the quan* 
 tity of industry, from an increase or 
 decrease of that medium, which was in- 
 troduced for the purpose of facilitating, 
 and of course extending, the mass of 
 industry on a given spot of ground, 
 appears indeed to be self-evident, be- 
 cause it naturally follows, that, by in- 
 creasing or diminishing the powers of 
 an engine, there must also arise an in- 
 crease or decrease in its general effect. 
 
 The circuitous operations of mo- 
 ney have, indeed, hitherto so much 
 puzzled the human understanding, that 
 this self-evident proposition has been 
 entirely overlooked: I flatter myself, 
 however, that it will be soon generally 
 acknowledged, and that the following 
 axioms will be found to contain the whole 
 mystery of the proceedings of money, 
 with respect to increasing the quantity 
 of industry, and diminishing its price, 
 whenever a relatively greater plenty of
 
 OF EQUIVALENTS, tfy 
 
 money occasions a diminution of interest, 
 and vies versa. 
 
 A country capable of improvement 
 in agriculture, in industry, or in popu- 
 lation, and enjoying such laws as will 
 secure to individuals their property, must 
 inevitably receive those improvements 
 through the medium of a diminished rate 
 of interest, whenever an increased quan- 
 tity of the representative signs shall have 
 been obtained* 
 
 The market-price of industry be- 
 comes then superior to what the dimi- 
 nished income from money demands ; and 
 the self- interest of man will of course 
 prompt him to extend his industry, until 
 its increase produces the effect of lowering 
 its price to a jitter proportion (on the 
 principles of relative value, or of an equi- 
 valent) with the income from money. 
 
 If the superabundance of money
 
 £0 TH£ DOCTRINE 
 
 should induce individuals to purchase 
 any object at a higher rate than they 
 paid (previous to the diminution of 
 interest), this active principle of self- 
 interest would be still more excited, 
 and the consequences above-mentioned 
 must therefore ultimately take place. 
 
 A diminution in the price of articles 
 of general use., produces also the same 
 good effects on the relative plenty of 
 money, as a further increase of repre- 
 sentative signs j and thus creates a pow- 
 erful and advantageous action and re-ac- 
 tion between the lower price of those 
 things, and the lower interest arising 
 from the greater relative plenty of nio^ 
 ncy;it having already been proved, that 
 the price of one part of general produce 
 acts and re-acts upon the other part. 
 
 Improvements in agriculture or manu- 
 actures, by means of mechanism, chy- 
 mistry, &c. or in the.mode of conveying
 
 OE EQUIVALENTS. $J 
 
 any. thing with less labour from one 
 place to another, produce also the ef- 
 fect of lowering more or less the. price 
 of all articles, even though these improve- 
 ments should be immediately confined 
 to one object, or even to a part of an 
 object of general use; and they thus 
 create a still greater plenty of money, 
 without even the introduction of an ad- 
 ditional quantity of representative signs ; 
 to which may be further added , the con- 1 
 sequences of each part acting and re-acting 
 upon the other, so as to produce a ge- 
 neral and sensible diminution in price 
 upon the whole mass. 
 
 If we trace the reverse of these 
 operations, (as far as concerns the in- 
 crease of interest) on money becoming 
 relatively scarcer, we are immediately 
 led to perceive, that the income from 
 money becomes higher, in proportion, 
 than the existing price of industry gives, 
 and that a discouragement will ensue;
 
 9a THE DOCTRINE 
 
 until the quantity of produce is unfor- 
 tunately reduced to such a degree, as 
 to admit of purchasers at a price pro- 
 portionate to the increase of income 
 arising from money. 
 
 This effect of a diminution in the 
 quantity of industry would be still more 
 considerable, if, in consequenee of the 
 scarcity of money, a still less price should 
 be paid for those productions of indus- 
 try, than was before paid for them ; and 
 a further evil would arise from- the prin- 
 ciple, according to which all the compo- 
 nent parts of industry act.and re-act upon 
 each other, while the higher money-value 
 of all objects must also occasion a rela- 
 tively greater scarcity of money, without 
 any further diminution in the number of 
 representative signs* 
 
 To sum up the whole : it appears, 
 that a greater plenty of money, by lower- 
 ing interest, becomes a very active and
 
 OF EQUIVALENTS. 93 
 
 powerful engine in lowering the price 
 and increasing the quantity of industry, 
 and of population on a given spot, if 
 well governed, and capable of improve- 
 ment; and that meliorations, which the 
 ingenuity of man is for ever contriving 
 in agriculture,, in manufactures, in chy- 
 mistry, and in the mode of conveying 
 goods from one place to another, pro- 
 duce also the effects of lowering the price 
 of industry, and thereby occasion a fur- 
 ther relatively greater plenty of money, 
 with all its happy consequences, with- 
 out the introduction of an increased 
 quantity of representative signs. 
 
 It appears also, per contra^ that a 
 greater scarcity of money, and conse- 
 quent increase of interest, is an active 
 and powerful engine in augmenting the 
 price and diminishing the quantity of 
 industry and of population; and although 
 no arts of improvement are likely to be 
 lost, and thus occasion the reverse of what
 
 jp4. THE DOCTRINE 
 
 the invention of those arts had produ- 
 ced, yet something analogous (in effect 
 at leastj has arisen in the political ad- 
 ministration of all societies, by the in- 
 troduction of money-taxes, which has 
 produced much confusion in several 
 States, and which will be fatal to many 
 more, if those who govern the different 
 empires in Europe, do not lay aside the 
 prejudices of their education, and aban- 
 don the unimportant discussions of mere 
 forms of finance, to make way for the 
 thorough investigation of its principles, 
 as well as of the baneful effects of 
 taxes. 
 
 These effects, together with the 
 means of providing against them, will 
 be fully developed in the succeeding 
 Chapters.
 
 OF EQUIVALENTS. *£ 
 
 CHAPTER Hi. 
 
 On the Effects of Taxation in Money. 
 
 THE preceding Chapters will, I 
 hope, have sufficiently explained the 
 principles of the relative value which so 
 „ idently subsists between every object 
 and money^ as well as the general ef- 
 fects which arise from a relative plenty 
 or scarcity of money, independent of 
 those which may further accrue from 
 taxation. 
 
 An examination into the nature and 
 effects of money-taxes, will, however, 
 throw a new light on every system of 
 public finance, which has hitherto been 
 brought forward, and probably urge
 
 96 THS DOCTRINE 
 
 either the present or the future genera- 
 tion to consider, if there be not a more 
 consistent plan of relief to be traced, 
 than that of increasing the evil of taxa- 
 tion by creating a sinking fund. 
 
 I have already stated, that when taxes 
 were levied in kind, and that all things 
 were exchanged against each other, no 
 inconvenience whatever arose to society 
 at large , as every man gave a propor- 
 tion of what his labour produced. 
 
 It induced him, indeed, to be ijiox-e 
 
 industrious 5 as otherwise the surplus 
 might not be sufficient, either for his 
 immediate wants, or for his plans of 
 annual saving. 
 
 This motive, it must be owned, 
 continues still to operate on the mind 
 of man, whenever any new tax is levied 
 in money ; but the uncertainty of his 
 obtaining an adequate number of ?.d.di-
 
 OF EQUIVALENTS. 9? 
 
 tional signs to represent his additional 
 labour.-, is perpetually thwarting his ul- 
 timate views ; for, without this increa- 
 sed power of representation, his addi- 
 tional labour is not only lost, but even 
 a part of his ordinary efforts is posi- 
 tively absorbed by the representation Of 
 the tax; and from thence results the in- 
 evitable necessity of selling his extra- 
 ordinary and ordinary labour for a less 
 sum, than he before obtained for the 
 ordinary labour only. 
 
 To prove this, we need only ana- 
 lyse the nature and effects of a tax, 
 whether it be considered in the light 
 of interest on money, raised for the 
 public service, or as an annual expen- 
 diture for the peace-establishment. 
 
 If considered as interest on money 
 borrowed by the public, it is then a 
 part of the money- value of an annual 
 produce, demanded by the public iti 
 
 d
 
 9<* T H I> DO C T 11 IN'B- 
 
 order to-pay that interest; and requires 
 of course the annual reproduction of 
 a new money-capital, added to that 
 which was previously .necessary towards 
 producing the object taxed. 
 
 This being the case, it is impossi- 
 ble for that object -to be produced at 
 the same price as before ; neither could 
 the person who gave his money, be 
 secured in his annual income, if this 
 additional value (equal to the tax) was 
 not absolutely linked to the object^ 
 solely and independently for his use, as 
 die interest of the capital he had fur- 
 nished, 
 
 It would be ridiculous to urge, that? 
 the producer of the object taxed could 
 relinquish a part of the pre-existing va* 
 lue for the benefit of the money-lender, 
 as that idea would militate against the 
 principle of a just value being due to 
 all things, so fully established in the
 
 OF EQUIVALENTS. O9 
 
 preceding Chapters; and experience suf- 
 ficiently proves,, that the producer al- 
 ways exacts more than the tax levied 
 on him; which will be further explained 
 on tracing the progress of the evil. 
 
 If we consider also the tax as a 
 provision for the peace- establishment, 
 it then becomes equally a part of the 
 money-value of an annual produce de- 
 manded by the State for the purpose of 
 purchasing some other income or pro- 
 duction, annually necessary for its sup- 
 port. Should therefore the object taxed 
 hot be immediately raised, in its nomi- 
 nal value, in a superior degree even to 
 the part required, the reproduction of 
 it must soon cease, and the whole sys- 
 tem of taxation would in this case, as wen 
 as when intended to furnish an annual iii 
 terest to the money-lender, become 
 mere fiction. 
 
 bis matter i 
 
 1 :
 
 100 THE DOCTRINE 
 
 clearly to the comprehension of any 
 man, by supposing the tax to be as two, 
 while the former cost of the object, 
 considered as an income from a capital, 
 should also have been as two* 
 
 To continue the object, in that case 9 
 at its former price, must annihilate ei- 
 ther the first cost, or the tax, to the 
 detriment either of the producer^ or of 
 the public service. 
 
 The stating this case in a less strong 
 degree, would by no means alter the 
 principle, or be less intelligible to en- 
 lightened minds; neither is it necessary 
 to addj that the contrary effect must be 
 produced, whenever a tax is taken off, 
 as it diminishes the capital employed in 
 producing the object relieved, whether 
 such tax existed for interest on money 
 raised, or was levied to exchange against 
 some other produce, wanted annually by 
 the State.
 
 OF EQUIVALENTS. Tol 
 
 ! shall now proceed to strte the ag- 
 gravation of the evil complained of; 
 first, by observing, that the producer of 
 the object taxed, claims a profit on the 
 tax, in proportion to the income he 
 receives from the other capitals em- 
 ployed in bis business ; and, secondly, by 
 recurring to the principle in which it 
 has been shewn that the additional price 
 of one production acts immediately upon 
 the price of others, and that these aug- 
 mentations of price re-act afterwards up- 
 on each other, particularly if the object 
 taxed should be necessary to human 
 existence. 
 
 This principle acts so imperceptibly, 
 yet at the same time so powerfully, in 
 raising the price of all objects, that it 
 may not be unnecessary to state a case 
 in point, by supposing the materials 
 of which cloathing is made, to be 
 tr.X'jd, at the very same time with the 
 G 3
 
 100 THE DOCTRINE 
 
 clearly to the comprehension of any 
 man, by supposing the tax to be as two, 
 while the former cost of the object, 
 considered as an income from a capital, 
 should also have, been as two* 
 
 To continue the object, in that case, 
 at its former price, must annihilate ei- 
 ther the first cost, or • the tax, to the 
 detriment either of the producer, or of 
 the public service. 
 
 The stating this case in a less strong 
 degree, would by no means alter the 
 principle, or be less intelligible to en- 
 lightened minds ; neither is it necessary 
 to add., that the contrary effect must be 
 produced, whenever a tax is taken off, 
 as it diminishes the capital employed in 
 producing the object relieved, whether 
 such tax existed for interest on money 
 raised, or was levied to exchange against 
 some other produce, wanted annually by 
 the State.
 
 OF EQUIVALENTS. TOI 
 
 1 shall now proceed to strte the ag- 
 gravation of the evil complained of"; 
 first, by observing, that the producer of 
 the object taxed, claims a profit on the 
 tax, in proportion to the income he 
 receives from the other capitals em- 
 ployed in his business ; and, secondly, by 
 recurring to the principle in which it 
 has been shewn that the additional price 
 of one production acts immediately upon 
 the price of others, and that these aug- 
 mentations of price re-act afterwards up- 
 on each other, particularly if the object 
 taxed should be necessary to hurnan 
 existence. 
 
 This principle acts so imperceptibly, 
 yet at the same time so powerfully, in 
 raising the price of all objects, that it 
 may not be unnecessary to state a case 
 in point, by supposing the materials 
 of which cloathing is made, to be 
 tr.xcd, at the very same time with the 
 G 3
 
 fCi THE DOCTRINE, 
 
 materials from which shoes are Manu- 
 factured. 
 
 The taylor makes the shoemaker 
 pay dearer for his cloaths, and the 
 shoemaker equally makes the taylor 
 j)ay dearer for his shoes j of course 
 both feel themselves taxed by each 
 other in their wearing apparel, consider- 
 ably beyond what Government levied*, 
 and both have again recourse to raising 
 their price, though in a less degree each 
 time, acting and re-acting in this manner 
 ifpon the wants of each other, until the 
 degree of increasing price becomes so 
 small, as not to be worthy of further 
 notice. 
 
 It may be asked, what mode of tax- 
 ation produces the smallest degree of 
 prejudice of the sort above described? 
 
 * Not Alone as a profit on the tax, but also on 
 account of a necessary article being increased in price, 
 although made by themselves.
 
 OF EQUIVAtJNTS, X03 
 
 To this it can only be answered, 
 that taxes laid on luxuries do L\ss mis- 
 chief in increasing the price of all things, 
 than those laid on the necessaries of 
 life; but that all capitation-taxes, or 
 whatever even may be classed under 
 that denomination, come nearer to the 
 original plan of taking the tax in kind, 
 than any other mode that can be adop- 
 ted ; because it then levies a part of 
 each person's profits, and levies it of 
 course upon the last stage of their pro- 
 ductions, which considerably diminishes 
 the action and re-action of one thing 
 upon another. 
 
 It must however be allowed, that 
 no tax (which can be denominated a 
 capitation; will ever fall impartially and 
 according to the faculty of each indi- 
 vidual, which occasions its bein£ £C- 
 nerally reprobated; but as partial evil 
 often produces general good, Nations 
 would do well to -ive the preference
 
 104 TH E DOCTRINE 
 
 to that system of taxation, because (how- 
 ever partially the advantages might be 
 distributed) every individual would reap 
 some benefit by it, and a very consider- 
 able increase of prosperity would ensue 
 to th'e community at large. 
 
 If we take into consideration the 
 multitude of taxes impofed in Great Bri- 
 tain within this century, and the accu- 
 mulated evil consequences which have 
 ensued from them, with respect to the 
 price of all articles, we shall be nowise 
 at a loss to account for the great in- 
 crease of expence to which ail ranks of 
 people are exposed. 
 
 Wc may, on the contrary, be sur- 
 prised, that Great Britain should have 
 continued yearly to increase in her po- 
 pulation and industry, under such an 
 accumulating oppression, and that many 
 articles of general use should still be 
 obtainable at a moderate price.
 
 OF EQUIVALENTS* |b£ 
 
 This will, however, not appear so 
 extraordinary, when we recur to the 
 good effects of decreasing interest on 
 money, and of improvements in cultiva- 
 tion, in conveyance from place to place, 
 in mechanism, and in chemistry, with all 
 their favorable actions and re-actions, so 
 fully developed in the preceding Pages. 
 
 A grett part of the annual impor- 
 tations of gold and diver from the 
 mines of South America, are naturally 
 drawn into Great Britain from Spain and 
 Portugal, either directly or circuitously, 
 from a general balance due to trade 
 with foreign nations, or as the purchase- 
 money of our public funds ^ in which 
 foreigners think it adviseable to lay out 
 a part of their annual savings. 
 
 This increase of representative signs 
 has of course provided, not only for 
 the increasing mass of industry, which 
 has annually arisen, but also for the 
 increased prices produced by taxation; 
 G 5
 
 10tf THE DOCTRINE 
 
 while those increased prices have 9 on the 
 other hand, been considerably checked by 
 the good effects of the lower rate of 
 interest, as well as by the daily improve- 
 ments in cultivation, in conveyance 
 from place to place, in mechanism and 
 in chemistry, which have tended to the 
 production of many objects with much 
 less materials and labour. 
 
 These circumstances, however, will 
 not justify any unnecessary extension in 
 the number of taxes, because it produ- 
 ces the inevitable consequence of dimi- 
 nishing the produce of pre-existing taxes, 
 or at least of checking their natural in- 
 crease, and of keeping the price of all 
 objects higher than they would other- 
 wise have been : for the increasing quan- 
 tity of representative signs is not al- 
 lowed by such aggravation to produce its 
 full effect in the reduction of interest, 
 in the increase of industry, and in the 
 decrease of its price.
 
 OF EQUIVALENTS* lO? 
 
 ft may be urged that, notwithstand- 
 ing all my assertions respecting the ac- 
 cumulated evils of taxation % our pro- 
 gress in industry lias been astonishing 
 since the year 1785, while the accumu- 
 lation of taxes since the year 1783 is 
 almost as great as during any other 
 period. 
 
 The answer to this is^ that the in- 
 crease of paper-money has also been 
 greater during that time, than any for- 
 mer period: but how Far that system of 
 increasing representative signs was con- 
 structed upon proper principles, the com- 
 mercial disasters of the year 17-93, will 
 sufficiently explain. 
 
 The unfortunate situation of France 
 has, however, thrown a greater quantity 
 cj* gold and silver into other countries; 
 and we may therefore hope, that a part 
 of the loss lately sustained by rhe anni- 
 hilation of a great mass of paper-money.
 
 TOO* TIfE DOCTRINE 
 
 will be supplied in bullion from abroad, 
 and prevent, in some degree, the bad ef- 
 fects which Great Britain hud to ap- 
 prehend in her future revenue, from 
 this diminution in her representative 
 signs. 
 
 As the great increase of money, 
 With its attendant good consequences 
 on the revenue since the year 1784, has 
 been improperly attributed to the wis- 
 dom of Administration, and that the bad 
 effects of its decrease will now be equally 
 attributed, with as little propriety, solely 
 to the war with France*, it becomes 
 
 * Notwithstanding that large sums have been 
 expended by our armies abroad, yet a balance is 
 still coming into Great Britain, by such expendi- 
 ture being returned on loan in the purchase of Stock. 
 After the peace of 1783, the contrary happened, as 
 foreigners called for their money, by selling out 
 of the funds, which threatened the industry and the 
 revenues of Great Britain with ruin, until the. 
 revived importation of gold and silvxr from Mex- 
 ico and Peru spread its benign influence over Eu- 
 rope, and enabled foreigners to send back the sums 
 previously wanted.
 
 OF EQUIVALENTS. log 
 
 necessary for mc to state, that the whole 
 money-system is in a maimer entirely 
 foreign to the administration of public 
 affairs; and that its particular situation, 
 respecting quantity^ must be regulated by 
 the interest and operations of indivi- 
 duals, as well as by their confidence in 
 one another; which last is very often 
 carried beyond all bounds in Great 
 Britain, and after producing conspicuous 
 advantages to the community at large, ends 
 in great individual distress, and dimini- 
 shes for some time the public revenue. 
 
 But if Ministers have no right to 
 interfere in forcing a greater importation . 
 of gold and silver, as well as in increa- 
 sing or diminishing the confidence be- 
 tween man and man, on which paper- 
 money is principally founded, and that 
 they must submit to every temporary evil 
 that arises from the want of those addi- 
 tional signs in coin, or from a diminu- 
 tion of that paper-money from which
 
 1}$ THE DOCTRINE 
 
 their Operations had been deriving con- 
 siderable Advantages-, they are certainly 
 bound to examine with attention, and to 
 promote with becoming zeal, any plan 
 which is found to produce the perma- 
 nent and solid advantages of diminishing 
 the price and extending the mass of in- 
 dustry, without the assistance even of 
 additional representative signs. 
 
 The first step towards this object 
 can only be founded on their dereliction 
 of every idea of a sinking-fund, which 
 <o evidently tends to increase the an- 
 nual expences of the Public, as well as 
 of individuals, and checks the growing 
 mass of industry. 
 
 The progressive and accumulating 
 bad consequences of both these circum- 
 -srances, are so very conspicuous, that it 
 will almost be needless to add, that no 
 future good, from ultimately taking off 
 taxes, equal to m sinking fund^ as well
 
 OF EQUIVALENTS. tr«$ 
 
 ■of money and the "price of all objects^ 
 as exemplified by the above-mentioned 
 operations of the taylor and the shod- 
 maker. 
 
 It is evident also, that no' liiimaft 
 regulations can possibly alter these pro? 
 oeedings of. nature, which carnbt ; fail 
 *o ; diminish the existing mass of industry 
 and population. 
 
 The counteraction which may arise 
 from the circumstances of an influx of 
 money, or of improvements of any s\)xt\ 
 must be considered as a distinct opera- 
 tion, producing different effects, which 
 would have baen fully developed, it • 
 other destructive principles hod not 
 tak&ti ph.ee at the same ti) 
 
 Pernicious principles have, howevo.. 
 1 uit too bfVefi been permitted to fclaiffl 
 flierit from a mitigation ci' evil, ; 
 >n truth from other, highly salutary cim- 
 H
 
 114 THE DOCTRIN» 
 
 scs; for we must keep in recollection^ 
 that the effect is exactly the same, whe- 
 ther, by means of the adoption of a 
 false system* the existing mass of indus- 
 try is positively diminished, and the price 
 of all things really increased ; or whether 
 such effects are only negatively produ- 
 ced, by the absorption of what would 
 otherwise have created a greater increase 
 of that industry, and a decrease in its 
 price* 
 
 To be consistent, then, we must 
 also admit, that the plan of taking off 
 money-taxes will produce fourfold good 
 consequences 5 first, by diminishing the 
 nominal value of the object relieved; 
 secondly, by the action and re-action of 
 the diminished price of that object upon 
 Others of general use ; thirdly, by these 
 combined good effects of decreased no- 
 minal value on all objects demanding * 
 less quantity of the existing represents 
 tive signs? by which means a greats*
 
 OS EQUIVALENTS, 115 
 
 plenty of money is produced 5 and, fourth- 
 ly and lastly, by the action and re-action 
 between interest of money and the 
 price of all objects, which must conside- 
 rably reduce the price of both, and ine- 
 vitably augment the general mass of in- 
 dustry and population. 
 
 A counteraction to these happy con- 
 sequences may indeed arise from some 
 other circumstances ; such as an exporta- 
 tion of the metals, annihilation of paper- 
 money, or partial commotions in the Em- 
 pire: but it will be some consolation in 
 that case to think, that the effect is ei- 
 ther annihilated or mitigated by the sa- 
 lutary consequences which arise from 
 taking off taxes. 
 
 I am persuaded, that any attempt 
 to establish other principles, respecting 
 the operation of money-taxes, must in- 
 evitably tend to every sort of inconsis- 
 tency ; and it seems to me that this 
 ^••uld be particularly the case with re-
 
 1,6 THE DOCTRINE 
 
 speet to 'any justification that might be 
 set up in favour of sinking-fund taxes. 
 For if the person maintaining this doc- 
 trine, : should be of opinion /that money- 
 taxes do no mischief, it is obvious that 
 ie' could have no motive for trying to 
 get rid of them ; -and if he should, on 
 the contrary, allow that some evil arises 
 from such taxes, it would be vei-y difficult 
 for him to shew, that the immediate pres- 
 sure of this evil, produced by the crea- 
 tion of a sinking-fund, by means of an 
 excess of taxation, does not far over- 
 balance any good that this creation may 
 be expected to produce hereafter. 
 
 I am, for my part, fully convin- 
 ced, that a permanent and annually in- 
 creasing evil of great magnitude is genera- 
 ted by such excess of taxation, and that the 
 ultimate good, which is supposed to en- 
 sue, is perfectly delusive. 
 
 Having na power, however, to al-
 
 OF EQUIVALENTS. 117 
 
 er the present unfortunate system, and 
 seeing the general indifference towards 
 any enquiry into the merits or demerits 
 of it, I can only seriously lament, that 
 neither the wisdom of our ancestors, 
 nor the enlightened understandings of 
 the present age, have sufficiently directed 
 their efforts to the comprehension or 
 to the explanation of this very important 
 subject; 
 
 Much- has indeed been written on 
 industry, on commerce, and on parti- 
 cular forms of finance and taxation ; 
 but the elementary principles of all these 
 have been misunderstood, and the sub- 
 ject has even been thought unworthy 
 the notice of elevated minds, as well as 
 too speculative to be traced with any- 
 degree of accuracy. 
 
 How far the suppositions of those 
 who neglect this science, 6r the err. 
 or t'r] i : Who h'a\ i its priri- 
 
 II 3
 
 Tl8 THE DOCTRINE 
 
 ciples, are justifiable, I must leave to 
 my Readers to determine. 
 
 The accumulation of taxes, for the 
 purpose of redeeming public annuities, 
 being thus reprobated as ineffectual, and 
 at the same time as cruel and oppres- 
 sive, I shall probably be accused of de- 
 stroying every hope of redemption from 
 the great mass of debt with which the 
 nation is burdened ; and it therefore be- 
 comes me to point out some other re- 
 medy,, 
 
 The following Chapters will, I flat- 
 ter myself, unfold the efficient resources 
 of every State ; and shew, by the clear- 
 est mathematical demonstration, as well 
 as by the application of established prac- 
 tice., that all public annuities carry na- 
 turally (upon the principle of an equi^ 
 valent value being returned) their extinc- 
 tion along with them, whether created 
 for a limited number of years, or grant-
 
 OP EQUIVALENTS. H9 
 
 led in perpetuity, but in that case ca- 
 pable of being redeemed whenever Go- 
 vernment can substitute a new creation 
 on more favorable terms for the Public. 
 
 My Readers will then perceive, that 
 any attempt to redeem annuities by means 
 of taxes, becomes in fact a double, nay 
 even a triple reimbursement ; and by thus 
 adding gratuitously to the public bur- 
 thens, produces the very contrary effect 
 to what is intended. 
 
 The wonderful financial resources 
 of every State, not yet matured in po- 
 pulation and industry, as well as the 
 possibility of rendering indefinite those 
 of an infant State, must naturally arise to 
 our view from an examination of the 
 nature and power of money., combined 
 with those principles of equivalent value, 
 which so evidently form the ground- 
 work of every transaction, or exchange 
 between man and man. 
 H 4
 
 13tO DOCfKHrfB oe EQUIVALENTS; 
 
 The particular application of those 
 principles must, however, be more oj: 
 less regulated by the circumstances df 
 -the moment, which wiH of course pro- 
 duce frequent alterations in the secon- 
 dary plans" of 'finance, such' as the extent 
 of annuities to be granted, the change in 
 their form, and the modification of par- 
 ticular taxes. 
 
 The relief to be procured for q 
 country compleatly matured^ must fur- 
 ther depend on the additional knowledge 
 of the nature and extent of its public 
 annuities, us well as of its taxes, and 
 ^nnual expenditure, to be applied in 
 lightening each by new modifications,. 
 
 The political existence of such 3 
 country may, by those means, be con- 
 siderably prolonged, although prospe- 
 xity cannot be expected in any great 
 degree. 
 
 END OF THE FIRST FART, 
 Anno 17SH
 
 THE 
 
 JDOCTMIJVE 
 
 O F 
 
 EQUIVALENTS, &< 
 
 PART II.
 
 1*8 
 
 CHAPTER IV. 
 
 On the Nature and Vah& of Gold and 
 Silver Coins, and on the Principles of 
 Variation in Foreign Exchanges. 
 
 IT has been stated in the pre- 
 ceding Part of this Work, that the du- 
 rability and the divisibility of the metals, 
 together with the facility of transporting 
 them from one place to another, indu- 
 ced mankind to adopt them as the most 
 convenient representative signs, and that 
 they immediately changed their original 
 comparative value, as objects of use and 
 ornament, to that of a real estate, from 
 their annual reproductive value, called 
 Interest, which may not improperly be
 
 1*4 THE DOCTRINE 
 
 compared to an annual hire for their 
 labour, on account of their active utility 
 in extending industry, and promoting 
 the general good of a whole commu- 
 nity. 
 
 These metals circulated at first from 
 hand to hand by weight; but as the de- 
 gree of fineness or purity of the metal 
 was not always easily discovered, it be- 
 came necessary to simplify the business, 
 by forming them into coins pf various 
 denominations, which should contain spe- 
 cific quantities of pure metal. 
 
 The expence of this coinage ought 
 naturally, and is in general made, to fall 
 on the national treasury, as the Public 
 obtain many conveniences and 'advanta- 
 ges towards the extension of their in- 
 dustry by this operation. The diminu- 
 tion of value, which arises from fric- 
 tion, or from clipping, must however 
 fall on the individual possessors, a^ they
 
 OF EQUIVALENTS. frsw? 
 
 are indemnified for any loss by the fitsr- 
 
 mentioiud -depreciation through the in- 
 terest received for the use of it; and the 
 person who clips it can certainly have 
 no right to offer it as a legal tender. 
 It is also necessary to observe, how the 
 ingenuity of man (under the influence 
 of a well-regulated Government) has 
 contrived to extend their powers of re- 
 presentation., without any increase in their 
 quantity. 
 
 Public and private Societies, under 
 the denomination of Banks, after acquir- 
 ing a sufficient degree of the confidence 
 of their fellow- citizens in their probity 
 and in their wealth, have been induced 
 to issue their promissory-notes, for sti- 
 pulated suras of moiiey 3 payable on de- 
 mand. 
 
 These notes tfefe of course I 
 in payment, and circulated from hand 
 to hand as money, for which they were
 
 S2d fHE DOfcTklN© 
 
 considered as a convenient and solid sub- 
 stitute, and which immediately increa- 
 sed the mass of representative signs. 
 It behoved these Banks, however* to be 
 at all times ( prepared for the immediate 
 payment of a considerable number of 
 their notes; and the greatest part of the 
 metals, received in return for the paper 
 thus issued, remained therefore locked 
 up, to answer any sudden demand. 
 
 The difference between the sum so 
 locked up, and the sum issued in pro- 
 missory-notes, circulating from hand to 
 hand as money, produces evidently so 
 much increase in the mass of represen- 
 tative signs ; and the Banks are indem- 
 nified for their expences, and for their 
 trouble, by laying out this difference at 
 annual or monthly interest. 
 
 It is impossible to state any propor- 
 tion of money which ought to be locked 
 up, in order to answer any Sudden cte-
 
 OP EQUIVALR NTS. tap 
 
 mand ; but it is evident, that the greater 
 this proportion is, the more will the pro- 
 prietors of such Bank be entitled to the 
 confidence of their fellow-citizens. 
 
 Money accounts kept between two 
 individuals, for goods reciprocally deli- 
 vered, facilitate also exchanges of every 
 kind, without the assistance of any sort 
 of representative signs : but the extent 
 of such facility is naturally very much 
 limited, and resembles, in some degree, 
 the ancient mode of barter, without 
 the great inconvenience and the trouble 
 which attended that system. 
 
 Bills of exchange come under the 
 £ame denomination, and are more exten- 
 sive in their Operations: but we fre- 
 quently see great disorders arise in com- 
 mercial affairs by such bills having no 
 other cause of existence, than the mu- 
 tual convenience of the drawer znd ac- 
 ceptor, for raising money upon fictitious
 
 debts, from one to the other, Which; 
 5n mercantile language, is called a paper 
 circulation. 
 
 Foreign bills of exchange are also 
 greatly liable to this charge, although their 
 general foundation, or principle, is the 
 debtor and creditor sides of accounts 
 With foreigners. 
 
 The creditor abroad A draws upon. 
 his London debtor B, while the foreign 
 debtor C takes the bill in order to send 
 it to his London creditor D* and vice 
 versa. 
 
 By fhe's'e means the great mass of 
 foreign accounts is settled, without tli£ 
 interference of money. 
 
 The balance, however, which may 
 "Be still due on one side, and for which 
 tio bills are: procurable, is sent in thf^ 
 rncfcaiSi cither to or from the fofeigrfers?
 
 . OF EQUIVALENTS. 1^9 
 
 at the. expcnce of the debtor. If this 
 exportation of the metals be transacted 
 by an intermediate agent, he grants an 
 equivalent sum in bills, while he takes a 
 profit for his trouble and risk ; and as 
 the Jews transact this sort of business for 
 a very small profit, the mercantile world 
 consider them as the most useful agents 
 in those negociations, for restoring the 
 equilibrium in foreign exchanges. 
 
 The balance thus due to or by fo- 
 reigners,, is constantly changing, which 
 of course occasions a constant variation 
 in foreign exchanges. 
 
 In stating the further causes of va- 
 riation in these exchanges, it is necessary 
 to observe, that all nations have a money 
 of account, (sometimes distinct fiftm 
 their coins, so as a pound sterling in 
 England, and a livrc Tournois in France) 
 and that the Government of each coun- 
 try has at different periods iixcd the 
 I
 
 330 THE DOCTR.INE 
 
 quantity of pure silver and of pure gold, 
 which such money of account was to 
 contain. 
 
 This is called fixing the standard of 
 money, and applies as much to gold as 
 to silver, because it fixes invariably the 
 price of one against the other, when 
 converted inro coin; although such legal 
 decision is perfectly inconsistent with 
 the principles of nature, and will in the 
 course of this investigation appear com- 
 pletely nugatory, on account of the per* 
 petual variation in price of one metal 
 against the other. 
 
 It shews, however, the incorrectness, 
 and even the fallacy, of Mr. Harris's and 
 Dr. Adam Smith's ideas, that such stan- 
 dard is confined to silver only, and that 
 gold is a mere commodity or object of 
 commerce. 
 
 This mistake may nave arisen from
 
 OP* EQUIVALENTS. 131 
 
 their perceiving that the metals very soon 
 lost that price against each other which 
 Government enacted should exist be- 
 tween them in the respective gold and 
 silver coins, when it declared, for in- 
 stance, that fifteen ounces of pure silver 
 should, when coined;, have the same value 
 in pounds, shillings, and pence sterling, 
 as one ounce of pure gold, or that the 
 gold and silver coins of Great Britain 
 should be legal tenders in that or any 
 other proportion. 
 
 Such decision of Government might, 
 tio doubt, be founded on the then exist- 
 ing relative value of gold with silver, 
 (bought as bullion, or objects of com- 
 merce against each other 'J but this rela- 
 tive value wa? perpetually liable to vari- 
 ation, in direct contradiction to this per- 
 manent law, respecting what was turned 
 into coin, and became regulated accord- 
 ing to the imported quantity and demand
 
 I3& 'l'H< DOCTRINE 
 
 for each metal towards their conversion 
 into plates ornament, or coin. ' 
 
 ' Mr. Harris adds further, that silver 
 was more liable to change its value than 
 gold, which is inconsistent with the na- 
 ture of a relative value, as one object 
 must fill when the other rises, not un- 
 like the operation of two buckets in a 
 well, because gold per se can have no 
 price in money, except with relation 
 to silver , and silver per se, no. price in 
 money, except with relation to gold, al- 
 though money, which is the general term 
 for both, has a general price, called In- 
 terestj or Annual Hire. 
 
 It appears extraordinary, that the 
 Legislature did not take into considera- 
 tion the constant variation in the quan- 
 tity of each metal imported and expor- 
 ted, as well as in the demand for plate, 
 ornament, and coins, which naturally pro- 
 duced very frequently a change in the
 
 OF EQUIVALENTS. 133 
 
 relative price of one against the other; 
 neither did they perceive that the neces- 
 * sary consequence which ensued from this 
 change in price was the sale of the under- 
 valued metal in coin, (melted down 
 privately in a crucible) and the payment 
 of all legal demands in the overvalued * 
 metal in coin. 
 
 Government, also, could not conti- 
 nue to coin the undervalued metal, or 
 a certain loss would ensue. 
 
 It is unnecessary to state the different 
 changes,, which the standard of gold and 
 silver has undergone in Great Britain, 
 and I shall there fere confine myself to 
 observing, that \° t parts of the quantity 
 of pure gold, which a guinea contains, 
 is the exact quantity which the law has 
 declared shall exist in our money of 
 account or pound sterling, and that as 
 silver is become dearer, relatively to 
 gold, since the period when the pro 
 
 I a
 
 1*4 THE DOCTRINE 
 
 portion of pure silver metal, which twen- 
 ty shillings or a pound sterling was to 
 contain, became fixed by law, it has dis-' 
 appeared in coin, (excepting light silver) 
 and our currency is of course stamped a 
 ^old and not a silver pound sterling. 
 
 There however exists a possibility, 
 that both metals may be above their 
 coinage price. 
 
 When a balance, for instance, is to 
 be paid to foreigners, and that silver bul- 
 lion is too dear, or not procurable to 
 send to foreign markets, gold bullion 
 may then be purchased above its coin- 
 value, to avoid the possibility of incur- 
 ring the penalty for melting down gui- 
 neas, in order to pay that balance. 
 
 This is, in fact, purchasing so many 
 ounces of pure gold-metal with more 
 ounces of pure gold coin, and can only 
 be considered as a premium of'insur-
 
 (IF EQUIVALENTS. 1 $5 
 
 ance against \an evident risk, widiout 
 which it would be an absurdity. 
 
 The right, indeed, which each in- 
 dividual possesses of paying his debts 
 in either metal, takes away the most ma- 
 terial inconveniences of the law, whicji 
 establishes a standard for each metal, and 
 
 •the facility of throwing coin into a hot 
 crucible, without detection, admits of 
 selling the undervalued metal for its 
 full value as bullion. 
 
 Any change then, which takes place, 
 by Jaw, in the standard of gold and sil- 
 ver coins, must naturally occasion a va- 
 riation in ih i exchange with other 
 
 ■tries. 
 
 We may suppose, for instance, that 
 if, by a new iau f , a pound sterling was 
 made to contain as much pure gold as 
 there is now in a guinea, it would be- 
 came \ luable by one in twenty; 
 
 14
 
 136 THE DOCTRINE 
 
 and we should, on that account, receive 
 in exchange five per cent more of the 
 money of account in other countries, 
 because all exchanges in money must 
 be ultimately regulated by the quantity 
 of pure metal which the respective coins 
 of each country contain, and the debase- 
 ment by alloy is of no use whatever, 
 but, on the contrary, very improper 
 beyond a certain degree, for preventing 
 too much friction, and may be considered 
 as so many folds of paper or linen wrapt 
 about pure gold or silver, in order to 
 conceal what a few hours will always 
 bring to light. 
 
 It may be asked, what effect the 
 changing of the standard, or adjudging 
 more or less pure gold and silver to the 
 circulating coins of a country, would 
 have on the internal money-operations 
 of that country ? 
 
 At first sight, it would seem to pr,o-
 
 OF EQUIVALENT.'. 137 
 
 duce a general increase or decrease in 
 the scale of value attached to all things; 
 that is to say, that as all incomes would 
 be proportionally increased or decreased 
 in the quantity of pure metal received, 
 those who gained or suffered thereby, 
 would be equally aggrieved or benefited 
 in their expenditure, according- to the 
 increase or decrease of pure gold and 
 silver adjudged to the money of account 
 and respective coins. 
 
 This position of a general rise or 
 fall in the value of all things, when 
 compared with pure gold and silver, un- 
 der the denomination of a Pound Ster- 
 ling, would also convey the idea, that 
 if the pound sterling was made to con- 
 tain less pure metal than is actually the 
 case, the different coins, or representa- 
 tive sign.*, would become more plentiful, 
 and produce the same good consequen- 
 ces as an increased' importation of the 
 metals. 
 
 15
 
 13$ THE D0CTIUN2 
 
 But these consequences, however 
 plausible in argument, would not result 
 from it; and it therefore becomes neces- 
 sary to give further explanations on this 
 subject, as the simplicity of such a plan 
 might otherwise captivate superlicial en- 
 quirers, and urge Statesmen to very 
 false operations, respecting a material 
 point in political economy. 
 
 It will be easily understood, that a 
 pound sterling, for instance, is given 
 ibr a particular object, not on account 
 of the name of a pound sterling, but 
 because a pound sterling contains a cer- 
 tain quantity of pure gold or silver 
 metal. 
 
 The quantity of pure gold or silver 
 constitutes, therefore, the price of an 
 object; and if, by law, it was reduced, 
 no person would be satisfied with the 
 same number of pounds sterling as be- 
 fore, in exchange for the same object.
 
 Ojf EQUIVALENTS. 13V 
 
 If a general consent could be ob- 
 tained, it would no doubt be compatible 
 with the interest of every -individual in 
 the community; bat there exists no prin- 
 ciple of immediate self-interest, to ren~ 
 der that consent voluntary, or no power 
 to enforce it. 
 
 The good consequences are too re- 
 mote fur obtaining, in this case, the 
 necessary consent of every individual; 
 whereas, on a fall in the rate of interest 
 on money, or on taking off a tax, ah 
 immediate advantage to the possessors of 
 the object relieved, produces the neces- 
 sary competition; promoting thus a ge- 
 neral good, by an increased quantity of 
 objects, and a reduction of their price. 
 
 Reducing, therefore, the quantity 
 of pure metal in the coins, or money of 
 account, which has in former days been 
 the resource of many superficial States- 
 men, never produced the consequences
 
 J40 THE DOCTRINE 
 
 which were expected from it, in de- 
 creasing the value of all things ; while it 
 was, in fact, an act of bankruptcy in 
 Government, because its money-debts di- 
 minished in their intrinsic though not in 
 their nominal amount. 
 
 The revenue suffered also the same 
 degradation; so that nothing but a ge- 
 neral discontent attended this plan ; while, 
 at the same time, there arose a great 
 degree of confusion, as well as injustice, 
 between individuals, with respect to their 
 money- debts and their bargains previously 
 made. 
 
 It becomes unnecessary to add more* 
 , in order to shew, that all changes in the 
 standard of money, must afreet foreign 
 exchanges; and I shall therefore only 
 observe, that it is of no consequence 
 whatever, how the standard of money 
 or the degree of alloy in coins, has been 
 established in any country, because every
 
 OP EQUIVALENTS. 741 
 
 person has the power of calculating the 
 exact value in pure metal, and of coun- 
 teracting any error, which the variation 
 ih value between the two metals may oc 
 Casion. 
 
 The permanency, therefore, of any 
 regulation respecting the coins, or mo- 
 ney of account, is all that is required 
 (if they were even erroneously con- 
 structed) because however small, or even 
 to appearance proper, the reduction of 
 the standard or diminution of the quan- 
 tity of pure metal might be, it immedi- 
 ately alters the settled scale of value for 
 all things ; and every individual will en- 
 deavour to counteract it, by asking a 
 higher nominal value for his goods, in 
 proportion to such reduction in the coins, 
 which cannot fail to produce much con- 
 fusion in the whole community, 
 
 I shall not speak of the effects which 
 would ensue from raising the standard
 
 J 43 THE DOC T 11 1 N E 
 
 of money, by making a pound sterling 
 contain more pure metal; as such an 
 operation will not enter into the head 
 of any Statesman, but proceed to state 
 another cause of variation in foreign ex- 
 changes. 
 
 1 have already mentioned, that sil- 
 ver has of late years become dearer, re- 
 latively to gold, than was fixed by law* 
 and that consequently the money of ac-' 
 count in Great Britain is now a gold 
 coin, while our silver lias been sold for 
 bullion. 
 
 The reverse of this has taken place 
 an other countries ; and Ave therefore 
 find, that gold has there been fixed at- 
 a lower rate than in Great Britain, rela- 
 tively to silver when converted into coin y 
 and being become dearer in bullion, and 
 melted down or sold with a premium, 
 their silver coin has ^become their cat*, 
 rency.
 
 OF EQUIVALENTS. 14* 
 
 A pound sterling, then, being a gold 
 money of account, as our current coin 
 is gold only, (excepting light silver} 
 and the money of account in other coun- 
 tries (Holland and Germany) being sil- 
 ver, there must necessarily arise a vari- 
 ation in the exchange with those coun- 
 tries, whenever a change in the relative 
 value of silver to gold takes place ; be- 
 cause, if silver becomes dearer, more 
 gold will be given in exchange, and vice 
 versa. 
 
 No par exchange can therefore be 
 established, excepting between two coun- 
 tries whose current coin is of the same 
 metal, and of course invariable. 
 
 The imaginary par of eleven gilders 
 in Holland for a pound sterling in Eng- 
 land, is of course the greatest absurdity 
 which ever entered into the human 
 mind
 
 144 TH'E "D'OCTHIflE 
 
 The act of rendering paper-money a 
 legal tender, will also affect the foreign 
 exchanges of a country, and will pro- 
 ceed in the exact ratio of the deprecia- 
 tion of that paper-currency* 
 
 This depreciation may arise from 
 the quantity of circulating paper-money, 
 compared with the quantity of circula- 
 ting gold and silver coins, and settle 
 itself in that proportion, or from the 
 want of confidence in the security of 
 such paper -money* 
 
 The first mentioned cause will always 
 have its natural limits; but the last-men^ 
 tionedmay become unlimited in its effects; 
 and as both caus.es are generally com- 
 bined in those depreciations, it is impos- 
 sible to trace the degree which each of 
 these causes occasions. 
 
 The principles, therefore, of varia- 
 tion in foreign exchanges, arc fourfold'
 
 OF EQUIVALENTS. 145 
 
 First, the balance of all transactions, pay- 
 . able in money, being for or against a 
 country^ because the cost of transport* 
 ing the metals must be either received 
 or paid for in the exchanges Secondly, 
 an alteration in the standard of money 
 in cither of the exchanging countries. 
 Thirdly, the variation in price of one 
 metal against the other. And, fourthly, 
 the depreciation of paper-money in either 
 country, supposing it to be made a legal 
 tender. 
 
 Having now stated the nature and 
 value of gold and silver coins, and the 
 principles of variation in foreign exchan- 
 ges, it becomes necessary to proceed to 
 an examination of the extensive power 
 of the precious motals, and of all their 
 substitutes and assistants, under the ge- 
 neral term of Money, or Representative 
 Signs. 
 
 This power arises from their utility 
 K
 
 I46 THE i»OCTKlNL 
 
 . having acquired a new price, called In- 
 terest, or annual hire., which immediately 
 led to the possibility of forming, by a 
 very simple combination, a safe, corn- 
 pleat, and never - failing system of 
 public finance, depending on the natural ( 
 and certain concurrence .of the whole 
 community, and not liable to be deran- 
 ged by the private views of any indivi- 
 dual or individuals whatever.
 
 OF EQUIVALENTS. 147 
 
 C II A P T E R V, 
 
 On the Interest or Price of Money \ on iti 
 Power of precluding all Sinking Fund 
 Systems; and on the Nature of public 
 and private Money Debts, 
 
 THE foregoing Chapter will 
 have sufficiently explained what is meant 
 by the price of gold and by the price 
 of silver ; which appears to be perfectly 
 distinct from the money-price of all ob- 
 jects, or from the price of money in ge- 
 neral, called Iutcrcst, or annual hire, 
 and relates merely to the comparative 
 value of one metal against the other. 
 
 In this point of view, gold and 
 silver may be called objects of com- 
 K 2
 
 J^8 TJlii flOCTRINE 
 
 merce against each other: but this com- 
 mercial character between the metals is 
 lost in their qualification of money, or 
 representative signs, to measure the va- 
 lue of every object, because the com- 
 mercial consideration arises, in that case, 
 from the combination of value, which 
 may be due to each object thus pur- 
 chased, or measured with a certain quan- 
 tity of those metals. 
 
 This combination of value has been 
 shewn to arise from the favorable or 
 unfavorable state of the seasons, render- 
 ing many objects more or less plenti- 
 ful, from the further expences incurred 
 in producing each object, and from the 
 accumulation of taxes, with all their 
 consequences ; which totally subverts the 
 idea of Dr. Adam Smith, "that the pries 
 of grain is the criterion of the price of 
 money" 
 
 The price of grainy or of any other
 
 OF E OUI VALE NTS. 149 
 
 object, appears, on the contrary, to be 
 a circuitous process of commerce, and 
 ultimately the measure of value naturally 
 due to such object, as the interest of all 
 the combined capitals and other expen- 
 ces (taxes included,) which were em- 
 ployed in producing it. 
 
 It is true, that the competition price 
 of an object may, from a greater or less 
 demand, be sometimes carried beyond 
 the natural price, which is due to it; 
 but as a greater or less number of that 
 object would be afterwards produced in 
 consequence of this competition. ^x\zt not 
 being in unison with the natural price, 
 there must ultimately arise a fair and 
 equitable price to the producer, and also 
 an increase or decrease in the quantity 
 of objects, in consequence of their having 
 been overpaid or underpaid. 
 
 This circumstance makes all fore- 
 stalling, or monopolizing, for any length 
 
 K3
 
 I£0 THE DOCTRINE 
 
 of time, impracticable; because all de- 
 mands which might be deemed more ex- 
 orbitant than the situation of each object 
 required., would be speedily counteracted, 
 to the great detriment of the extortioner. 
 
 The argument of forestalling and 
 monopolizing is, however, frequently 
 resorted to with great impropriety, in 
 order to account for the increasing 
 price of provisions, which might, with 
 more justice, be attributed to the errors 
 of Statesmen, in unnecessarily accu- 
 mulating tax upon tax. 
 
 The circuitous, and consequently 
 slow, yet not less certain and baneful 
 effects of taxation, seem indeed to have 
 totally escaped the penetration of Phi- 
 losophers and Statesmen; which is the 
 more to be lamented, as their progress 
 is undermining the happiness of those 
 individuals, whose incomes are so limit- 
 ed, as not to admit of increase upon
 
 O F E.Q U IVALEN T S. IJ I 
 
 every increased charge from taxation and 
 its consequences ; while a further ex- 
 tension of this individual distress, will 
 produce not only a more general dis- 
 content against Government, and aug- 
 ment the number of those who aim at its 
 overthrow, but also create a very alarm- 
 ing emigration to foreign countiies. 
 
 It is indeed evident to me, that the 
 errors of finance will be the real cause 
 of any resistance which may be made 
 to the established Government of Great 
 Britain, although defects in the consti- 
 tution may be the watchword, because 
 the distressed individuals would be look- 
 ing up to a new constitution for relief 
 from their misery, and attach them- 
 selves, on that account, to the disaf- 
 fected. 
 
 The ultimate effect would, indeed, 
 be contrary to their expectations, as all 
 political convulsions destroy the |vst 
 K 4
 
 152 THE DOCTRINE 
 
 principles of finance, which is public 
 credit, and render, by those means, the 
 evil irreparable for a certain time. 
 
 But to return from this digression, 
 in order to discuss the price or interest 
 of money, we must consider gold and 
 silver, bank-notes payable on demand, 
 or any other generally admitted repre- 
 sentative sign,, as a reproductive pro- 
 perty* by means of the annual hire 
 given in money for their services, and of 
 course bought and sold at so many years 
 purchase (in the same manner as land 
 and houses) according to their relative 
 scarcity or plenty. 
 
 This reasoning is perfectly applica- 
 ble, whether they are returned again to 
 the proprietor after a certain period with 
 the annual interest, or that they are im- 
 mediately exchanged for an object which 
 produces an annual income.
 
 OP EQUIVALENTS. 153 
 
 In either case, an annual reproduc- 
 tion arises to the possessor, as 5 pr. cent 
 interest is equal to 20 years purchase, 
 nnd land bought at 20 years purchase, 
 gives equally 5 pr. cent for the money 
 paid for it. 
 
 Land, however, seldom gives so 
 high an income as money laid out at 
 interest; and it is therefore of material 
 importance to discuss the principle from 
 whence this difference arises. 
 
 It may possibly be imagined, that mo- 
 ney is, in every point of vk\v 9 entitled 
 to a higher capital-value, or lower rate 
 of income, than other property produ- 
 cing an annual increase, on account of 
 its being the general representative of 
 all things as their measure of value, and 
 also the general director of this mea- 
 sure of value, by its price or rate of in- 
 terest producing an effect (equal to every 
 variation^ on the income of all capitals.
 
 UA THE DOCTRINE 
 
 This general superiority of value, 
 when bought at so many years purchase, 
 does not however exist, as money is. 
 defective in point of perpetual duration, 
 from the effect of clipping, as well as 
 from constant friction, and is also expo- 
 sed to accidental loss ; none of which 
 circumstances take place with respect to, 
 land. 
 
 The period of existence .cannot, in- 
 deed, be ascertained in money; and the 
 lenders of it at interest, or annual hire, 
 require therefore that an ample indem- 
 niiication, or life-rent, be given for its 
 use, -on account of this uncertainty res-, 
 pecting its. duration. 
 
 The indemnification, which is natu- 
 rally resorted to, consists in money ob- 
 taining a higher annual price, or in- 
 terest, than the purchase-money of land 
 gives in annual income.
 
 OF EQUIVALENTS Iff 
 
 When money, for instance, is gran- 
 ted at 5 pr. cent interest, or 20 years 
 purchase, land may probably sell at 25 
 years purchase; and, of course, gives 
 only 4 pr. cent income to the pro- 
 prietor. 
 
 This difference, or superiority, of 
 1 pr.ct. pr.ann. laid out at compound in- 
 terest, procures, in a .certain number of 
 years, a sum equal to the capital; and 
 should the original money-capital be lost 
 in that period, the proprietor, or his 
 heirs, will still be enabled, by the above- 
 mentioned accumulation, from the grea- 
 ter income, to purchase a perpetuity in 
 land. 
 
 Theory and practice are therefore 
 consonant to each other ; and prove, in 
 the most unequivocal manner, that mo- 
 ney-debts are not in their nature perpe- 
 tual, as their superior annual interest 
 furnishes the means of extinction.
 
 156 THE DOCTRINE 
 
 This principle is also completely- 
 established in public finance, by the crea- 
 tion of long and of short annuities, as 
 the reimbursement of their purchase- 
 money takes its rise from their superior 
 interest with its compound accumula- 
 tion* 
 
 This mode of raising money by li- 
 mited annuities, may no doubt be con- 
 sidered' as creating a sinking fund for 
 the gradual repayment of the capital re- 
 ceived; but the process is at any rate 
 very slow on the long annuities; and 
 as neither the long nor the short an- 
 nuities admit of a reduction in income 
 during the term of years for which they 
 are granted, it is in the power of every 
 person to calculate their value, and pre- 
 cludes the possibility of the public suf- 
 fering a very considerable loss by selling 
 3 pr. cents at 5^, or even lower, and re- 
 purchasing them during peace at 85, and 
 even at 96 pr. cent, which is in fact re-
 
 OF EQUIVALENTS. I57 
 
 turning above 180 for ioo received, and 
 has actually taken place in our financial 
 operations during the period of nine 
 years, or between the years 1784 and 
 1792; as 3 pr. cents were sold by Go- 
 vernment, in the first-mentioned year, as 
 low as 52, and repurchased by the sinking 
 fund at 07 in the last-mentioned year. 
 
 As a proof of this destructive sy- 
 stem of reimbursement being delibe- 
 rately adopted and publicly avowed by 
 the Government of Great Britain, we 
 need only peruse with attention Mr. 
 Rose's publication in the year 1799, 
 wherein is stated, that, by applying 
 1 pr. cent annually towards the extinc- 
 tion of every hundred pound sterling, 
 3 pr. cent stock created by Govern- 
 ment, a compleat redemption will take 
 place in the course of 39 years, sup- 
 posing the redemption-price to be on 
 an average 85 pr. cent for every £ 100 
 3 pr. cents.
 
 158 THE DOCTRINE 
 
 The loan of that year was made by 
 the sale of 3 pr. cents at about 56 pr. ct. 
 net after deducting the discount for 
 prompt payment, and even much lower 
 in the preceding years; so that the 
 sinking fund of 1 pr. ct. on every £100 
 3 pr. cts. created, became in fact nearly 
 2 pr. ct. on every hundred pound sterling 
 received in money by Government, and 
 the interest paid was about 5$ pr.cent 
 per annum. 
 
 The Public will therefore have to 
 pay above 7 pr. cent pr. annum during 
 the very long term of 39 years, if con- 
 sidered as an annuity, or if calculated as 
 a reimbursement, which it really is, (the 
 average purchase-price being 85 pr.ct. 
 for the 3 pr. cents} not less than £150 
 sterling for every £ 100 received, be- 
 sides 5$ pr. cent interest. 
 
 Such transactions, between indivi- 
 duals-, would be branded with infamy ; but
 
 OF EQUIVALENTS. Ifa 
 
 they seem to pass unnoticed, or to meet 
 with silent approbation, in a Ministe- 
 rial Speech and Treasury Pamphlet. 
 
 I can however assert, without any 
 fear of contradiction, that the financial 
 annals of no country afford an example 
 of such destructive reimbursements, and 
 that Great Britain is not likely to owe 
 her prosperity (as great Statesmen have 
 asserted]) to a system of reimbursing 
 £150 sterling for every £ 100 sterling 
 received during her expensive wars, 
 but that her downfal is, on the con- 
 trary, inevitable from excessive expence, 
 and that she has hitherto not bad it in 
 her power even to pay off £100 for 
 every £100 sterling received. 
 
 With what right, then, do we pre- 
 sume to boast of the goodness of our 
 public credit, or express our surprise 
 that money lender* should, with such
 
 160 THE DOCTRINE 
 
 prospects of gain before them, offer 
 to subscribe so. much more than is 
 wanted ? 
 
 It is fortunate, indeed, that natural 
 causes operate in such a manner as not 
 to admit of very extensive reimburse- 
 ments of this nature with impunity, and 
 that we shall at last, through impotence, 
 be checked in this determination to ruin 
 ourselves, by returning much more mo- 
 ney than was received, after paying a 
 very high interest for what was actually 
 obtained. 
 
 The creation of short annuities it, 
 however, by no means to be recom- 
 mended, as it is in fact a too rapid reim- 
 bursement of the capital received ; and, 
 although justice demands that the mo- 
 ney-lender should, by some means or 
 other, receive his capital back, yet the 
 national interest requires also, that the 
 money be kept as long as possible, in 
 
 \
 
 OF EQUIVALENTS. l6l 
 
 tjxdcY to produce the most possible pub- 
 lic good; which is best obtained by a- 
 dopting the most slow and imperceptible 
 mode of reimbursement, without losing 
 sight of the principle of returning only 
 what has been really received, and of 
 benefiting the public by a possible fall 
 in the rate of interest. 
 
 The long annuities afford a com- 
 pleat proof of the perfect practicability 
 of this system, as those now existing, 
 which have only 58 or 59 years to run, 
 arc equal in value to a 4* pr.cent per- 
 petual annuity, redeemable at pleasure, 
 
 In practice, therefore, we discover a 
 most effectual method of extinguishing a 
 public debt at the end of 6$ or 70 years, 
 as may be agreed upon, without paying 
 a higher interest than at present, and 
 without creating any sinking fund. 
 
 The reasons for that equality m 
 h
 
 l6fl THB DOCTRINE 
 
 value between a 4! pr. cent perpetual 
 annuity, redeemable at pleasure, and an 
 annuity for 58 or 59 years, are ob- 
 vious. 
 
 An annuity for a term of years, can- 
 not be reduced during that period, while 
 a perpetual annuity of 4* pr. cent be- 
 comes redeemable, and of course reduce- 
 able to 4 pr. cent, whenever a fail in the 
 rate of interest allows Government 
 to borrow at that rate ; and in the same 
 manner the 4 pr. cents may be reduced 
 to 3*, and even lower, if interest of mo- 
 ney should continue to fall. 
 
 The proprietor of a 41 pr. cent, re- 
 deemable at pleasure, would therefore 
 be exposed to receive less interest during 
 many years of the 65 a fo years, for 
 which a limited annuity might be gran- 
 ted to the same amount, on the payment 
 of one hundred pounds sterling, sup-
 
 OF EQUIVALENTS. I63 
 
 posing interest of money to be at that 
 
 rate. 
 
 No person could hesitate in giving 
 a decided preference to the limited an- 
 nuity, when interest of money is high, 
 because, on the supposition that the per- 
 petual annuity should be reduced only 
 I pr. cent during 45 or 50 years, the 
 holder of the limited annuity would, by 
 the one pr.cent laid out at compound 
 interest, procure, in that number of 
 years, a sum equal, nay even superior, 
 to the capital paid ; and thereby, on the 
 expiration of the annuity, stand upon an 
 equal or even better footing than the 
 holder of the perpetuity. 
 
 I have here stated a moderate in- 
 terest for money raised by Government 
 on long annuities j but in order to sub- 
 ject myself to no observations on the 
 impracticability of raising money in that 
 way, Imust observe, that a 5* or 6 pr. ct.
 
 «J4 THE DOCTRINE 
 
 perpetual annuity, however extravagant it 
 might at first appear, would probably be 
 subject to i pr.ct. reduction in the course 
 of 10 years; and the long annuity might 
 therefore be established with perfect 
 justice to the Money-lender and to the 
 Public, either at a lower interest, or for 
 a shorter period than 65 or 70 years, if 
 the disadvantage arising from a probable 
 fall in the rate of interest on the perpetual 
 annuity be kept in view, and allowed for in 
 a reasonable manner on both sides. 
 
 It is this consideration alone which 
 gives an equal value to a perpetual and 
 to a limited annuity, as also a propor- 
 tional higher value to 3 pr. cents than 
 to 4 and 5 pr. cents perpetuities ; as, for 
 instance, 3 pr. cents bought at 6s pr. cent, 
 give less interest than 4 pr. cents bought 
 at 80 pr. cent, and the latter purchased 
 at 80, give less interest than 5 pr. cts~ 
 purchased at 94 pr, cent.
 
 OF EQUIVALENTS. 16$ 
 
 This, or some other proportional dif- 
 ference in price, generally exists, because 
 5 pr. cents are more liable to a reduction 
 of interest than 4 pr. cents, and that these 
 are also liable to a diminution, while 
 
 3 pr. ceiits are in no degree subject 
 to this loss. 
 
 The lesser interest therefore aris- 
 ing from the proportional dearer pur- 
 chase of the 3 pr.cent. annuities, than the 
 
 4 and 5 pr. cent, annuities, is amply com- 
 pensated by the impossibility of receiving 
 less interest in future. 
 
 As mankind may be led to suppc 
 from the destructive mode adopted in 
 raising money for the Public, Which 
 renders it necessary to reimbur.se 150 
 for every 100 received, besides payi 
 above 5 pr. cent, interest, that pul 
 security is inferior to private seem 
 it be necessary to prove, that the 
 
 contrary is the case. 
 I 3
 
 166 THE DOCTRINE 
 
 Public debts, or annuities, arc foun- 
 ded on the security of every individual's 
 property; while private mortgages are 
 only founded on the property of the 
 individual possessor. 
 
 Government has the right, and the 
 power, of raising annually on individuals, 
 by taxes, the amount of all annuities 
 granted, and of course bankruptcies are 
 unnecessary* 
 
 Public debts can be subject to no 
 litigation in law; but private mortgages 
 are perpetually exposed to it, and occa- 
 sionally to ultimate loss of property by 
 defective deeds. 
 
 Public debts can always be converted 
 into money by a sale, at such prices as 
 the current rate of interest warrants. 
 
 Private mortgages cannot be turned 
 into cash, until the period of payment
 
 OF EQUIVALENTS. 167 
 
 agreed on arrives ; and a tedious process 
 of foreclosing is often resorted to, in 
 order to compel payment, even without 
 success in time of war. 
 
 Great sums of money are also lent, 
 in every community, upon the personal 
 security of the borrowers, of which a- 
 part is annually lost by the insolvency 
 of some of the debtors.. ■ 
 
 I shall suppose, that i pr. cent, of 
 the whole mass of money, which is lent 
 annually on personal security, is lost by 
 bankruptcies; it follows of course that, 
 in 50 years, a whole capital is extin- 
 guished. 
 
 It must not, however, be under- 
 stood, that the whole of the first year's 
 loans is lost in 50 years, but only a snro 
 equal to it, on the. wh ile transact' . 
 of that period. 
 
 L 4
 
 l68 THE DO CT RIME 
 
 Some of the proprietors may even 
 be lucky enough to lose nothing, dur- 
 ing the 50 years ; while others may lose, 
 during that period, more than their share 
 of the first year's capital ; which makes 
 it a kind of lotery for perpetuating mo- 
 ney-debts to some individuals, at the ex- 
 pence of others; as, in that case, the 
 fortunate save more, and the unfortu- 
 nate lose more, than the nature of pri- 
 vate money-debts warrant. 
 
 Private money-debts are therefore 
 entitled to a higher interest than public 
 debts, under the denomination of Public 
 Annuities, because the former cannot 
 be so secure as the latter. 
 
 It is evident then, that money-pro- 
 perty, lent upon personal security, is not 
 in its nature a perpetuity., and that the 
 security, even of mortgages, is also much 
 inferior to that of public debts, as the 
 mortgagees are not only exposed to occa-
 
 dF EQUIVALENTS. 169 
 
 sional loss, but also to much trouble 
 and inconvenience, as well as to the 
 same variation in the rate of interest to 
 be received for their money on a reim- 
 bursement being made to them. 
 
 Experience has shewn, that these 
 reimbursements are not procurable, with 
 the best-founded claims, before a Court 
 of Chancery,, when interest is high ; and 
 arc of course only to be expected when 
 interest is low. 
 
 ' The most perfect security for mo- 
 ney-property, consequently exists in the 
 possession of Public annuities ; and as no 
 other mode of lending money at inte- 
 rest, can extend its duration beyond a 
 longer or shorter term of years, accord- 
 ing to intervening accidents, there can 
 be no reason for a nation paying eter- 
 nally for the use of money, and parti- 
 cularly so as the interest paid is gene- 
 rally much superior to the income of a 
 
 L5
 
 1 70 THE DOC T R I N £. 
 
 perpetuity in land, and, in most instan- 
 ces, equal to what is paid for those pri- 
 vate loans, which are subject to annual 
 loss by bankruptcies; yet the granting 
 of 3 pr. cents, so much under par, for 
 the money received, is still more repre- 
 hensible, and openly avows this system 
 of eternal duration without the advan- 
 tage of very low interest, to which it 
 is naturally entitled, as it holds out no 
 prospect of extinction in the course of 
 time, nor partial relief from a diminution 
 of interest, but exposes the nation to a 
 perpetual burthen, or to the still more 
 destructive operation of repurchasing 
 these 3 pr. cents at a much higher price 
 than was obtained for them; either of 
 which circumstances must, at one time 
 or other, produce inevitable ruin, as will 
 be hereafter shewn. 
 
 Having thus explained the solid 
 foundation of public credit, under a well- 
 regulated Government, and a properly
 
 OF EQUIVALENTS. I7I 
 
 constructed system of public finance, it 
 will be superfluous to add, that it is n"t 
 easily shaken, and that those great varia- 
 tions which take place in the price of 
 public funds, are more to be attributed to 
 a wrong system of finance, and to the re- 
 lative plenty or scarcity of money, than 
 to an increase or decrease of confidence 
 in public securities. 
 
 Fears and hopes, respecting political 
 events, may produce temporary impres- 
 sions, which will soon yield to the effects 
 of a relative scarcity or plenty of money; 
 but interior insurrections, the invasion 
 of an enemy, or the impossibility of rais- 
 ing annually the amount of taxes for in- 
 terest of debts already incurred, or for 
 those that may be further required, will 
 no doubt produce the most serious ef- 
 fects on the price of public funds. 
 
 As long, however, as none of these 
 events take place in Great Britain, her
 
 r?ft THE DOCTRINE 
 
 public credit will remain unsullied,, and 
 every lasting rise or fall in the price of her 
 public funds will proceed from the rela- 
 tive plenty or scarcity of money, to which 
 a right or a wrong system of finance 
 will greatly contribute* 
 
 As a proof that this relative plenty 
 or scarcity of representative signs, has a. 
 very considerable influence, we find 
 that the price of our funds was lower after 
 the peace in 1783 and 1784, than dur- 
 ing the war which preceded it. 
 
 - This could only arise from the im- 
 mense exportation of the metals in the 
 year 1783; and if we should have again 
 to lament the same cause, and the same 
 effects, it will be attributed, by unin- 
 formed men, to want of credit for the 
 Public, to diflidence in the Ministry, or 
 to some trivial and unfounded cause. 
 
 Public credit is also generally sup-
 
 OF EQUIVALENTS. 1 73 
 
 posed to depend very much on the crea- 
 tion of a sinking fund, and consequent 
 reimbursements : but this idea falls to 
 the ground^ by the simple consideration, 
 that no engagement whatever has hither- 
 to been specifically entered into with 
 the public creditors, as Parliament is at 
 full liberty to retract its resolutions re- 
 specting a sinking fund, whenever it is 
 fully convinced of its impropriety. 
 
 An examination into the origin of 
 public loans, will also convince us of 
 the impolicy, as well as of the impro- 
 priety, of ever redeeming public debts 
 in any other way than by the sale of new 
 annuities at a more favorable rate of in- 
 terest ; that is to say, by selling 41 pr. cts. 
 at par, in order to pay off 5 pr. cents at 
 par, and continuing such operations as 
 far as the falling rate of interest will 
 admit of. 
 
 When taxes were made payable in
 
 174 THE doctrine; 
 
 money, they naturally increased consi- 
 derably the money-price of every arti- 
 cle, and also the interest or price of mo- 
 ney, as this additional value required re- 
 presentation in money, and made it re- 
 latively scarcer. 
 
 This produced naturally a very sen- 
 sible diminution in the quantity of in- 
 dustry, or at least a considerable check 
 to its annual increase in times of peace. 
 
 In times of war, these effects 
 became so very intolerable, on account 
 of the large sums immediately wanted, 
 that they could not escape the notice of 
 the most ignorant of mankind. 
 
 It was, indeed, so perfectly impos- 
 sible to raise a large sum by new taxes, 
 within the time it was wanted, that some 
 mode of anticipating the receipt became 
 necessary, and an immediate loan for the 
 amount of the taxes intended 'to be levied
 
 OF EQUIVALENTS. I75 
 
 within the year, was consequently re- 
 sorted to, under the positive engage- 
 ment of redeeming such loan with in- 
 terest at the expiration of a year. 
 
 But the enormity of taxes to be 
 levied in the course of the year, for the 
 purpose of carrying on war, produced 
 such violent effects on the mass of exist- 
 ing industry, that the produce of those 
 taxes fell infinitely short of what they 
 were calculated at, and the pre-existing 
 taxes experienced also a considerable di- 
 minution in their produce, from so great 
 a multiplication of their number. 
 
 The security given to the holders 
 of the loan, became therefore imperfect? 
 and the repayment of it within the course 
 of a year impracticable ; while the Public 
 funds experienced a general discredit, 
 and so great a diminution in their value, 
 as to give a most enormous yearly in- 
 terest to the purchasers.
 
 !^5 THE DOCTRINE 
 
 This destructive system of raising 
 the war-supplies within the year, and of 
 making loans, to be reimbursed also within 
 the year, was however still perseve- 
 red in, until the mischief had arisen to 
 such a height, as- to threaten a general 
 convulsion; when the Statesmen of that 
 day were forced to look out for some 
 other resource. 
 
 It occurred to some of the most en- 
 lightened, above a century past, that to 
 extend the term of paying back the capi- 
 tal until convenient, and to pay the in- 
 terest regularly, was the only plan that 
 could be adopted. 
 
 The funding system, therefore, 
 took its rise from this circumstance 
 of necessity, and not from the con- 
 viction of mankind, respecting its virtues 
 and its powers, whenever it became sub- 
 stituted for taxes to be raised within the 
 year: nor does there seem to have existed
 
 OF EQUIVALENTS. 177 
 
 an idea, that it required no fund for li- 
 quidation, on account of its self-extin- 
 guishing principles, as the knowledge of 
 these circumstances would have prevented 
 the intrusion of a sinking fund, or redemp- 
 tion system, which has so evidently oc- 
 casioned the premature ruin of many 
 flourishing nations. 
 
 From the moment of protracting the 
 repayment of all loans, (until it proved 
 convenient to the Public, which seems 
 not to have been thought practicable 
 until lately) Great Britain experienced 
 the happiest effects in the rise of her 
 public funds, in the diminution of the 
 interest of money, and in the rapid in- 
 crease of her industry, which has enabled 
 her not only to go on prosperously in 
 times of peace, but also to carry on very 
 expensive wars; proving thereby, that 
 neither policy nor public credit demand- 
 ed any reimbursements. 
 
 It remains, therefore, a duty in the 
 M
 
 373 THE DOCTRINE 
 
 supporters of a sinking fund plan, to 
 explain, upon mathematical principles, 
 the necessity for Great Britain recurring 
 again, in support of her public credit, 
 to that system which formerly occasion- 
 ed her distress, and which our ancestors 
 were forced to abandon, in order to 
 prevent a general confusion. 
 
 We have indeed been informed, in 
 general terms, by very high Parliamen- 
 tary Authority, that the ordinary means 
 of raising the supplies for war, were 
 become insufficient against the revolu- 
 tionary means employed by France, and 
 that it was therefore become necessary 
 to levy, for the service of the year 17999 
 only 15 millions by loan, and 10 millions 
 by an extraordinary tax, payable within 
 the year, which was further to be con- 
 tinued for two years after the peace, in 
 order to redeem the loan of 15 mil- 
 lions.
 
 OF EQUIVALENTS. 179 
 
 All my arguments, on the subject 
 of taxes, have sufficiently developed the 
 inevitable consequences of this extraor- 
 dinary measure of finance, which was for- 
 merly exploded; and I shall therefore con- 
 fine myself at present to observing, that 
 there certainly could exist no difficulty in 
 raising the interest of these 10 millions by 
 taxes, as it was thought very practicable 
 to levy the whole capital in that way, 
 and there could also be no difficulty in 
 extending the loan to 25 millions, as 
 those persons who are called upon to 
 give the 10 millions in taxes, would in 
 any event have preferred giving it on 
 loan upon the same terms as the 15 mil- 
 lions, and have chearfully submitted to 
 their share of a general tax for the in- 
 terest. 
 
 I must further observe, that the rise in 
 
 the price of our public funds, during the 
 
 year 1799, preceded in part this finantial 
 
 operation, and cannot therefore be at- 
 
 M 1
 
 l8o THE DOCTRINE 
 
 tributed thereto, but solely to the additi- 
 onal coinage of gold from the bullion im- 
 ported in 1797 and 179", with its conco- 
 mitant attendant, an increase of paper- 
 money, both of which circumstances 
 produced a considerable augmentation in 
 the number of representative signs, as 
 well as in the mass of industry and 
 in the public revenue. 
 
 Should it hereafter prove, by ex- 
 perience, to be a well-founded opinion, 
 that the redemption of near 75 mil- 
 lions sterling of 3 pi\ cent stock by 
 the purchase-money of the land-tax, and 
 possibly as much more by the old and 
 new sinking funds, aided by the conti- 
 nuation of 10 millions extraordinary 
 taxes, after the peace, would considerably 
 raise our public credit, and consequently 
 the price of our public funds, Mr. Rose's 
 opinion respecting the average price of 
 3 pr. cents will probably be incorrect, 
 in stating it so low as 85 pr. cent.
 
 OF EOUIVALENTS. l«3l 
 
 though it would sufficiently shew the 
 finantial powers of Great Britain, by re- 
 purchasing, with impunity, at 35 pr. cent. 
 what she sold at 56, giving thus, in dn 
 Uirtqutwcal manner, nearly 20 pr. ct. in- 
 terest pr. annum, during three or four 
 years, for monies levied during war. 
 
 If on the contrary, however the 
 price cfourpublic funds should, notwith- 
 standing these immense efforts by taxa- 
 tion, continue low after the peace, we 
 shall then have to lament the very heavy 
 burdens so inefficaciously laid on the in- 
 habitants of Great Britain, and particu- 
 larly on the landholders, for the purpose 
 of raising public credit, which could, even 
 in the event of success, only produce the 
 fatal effect above-mentioned, of paying 
 an enormous interest during peace, under 
 a different form, for monies borrowed 
 during war. 
 
 Our ancestors do not appear to 
 M 3
 
 l8fl THE DOCTRINE 
 
 have considered the funding system as 
 mathematically right, and at all times ex- 
 pedient, practicable, and necessary, but 
 only to have adopted it as a temporary 
 expedient, because they professed an in- 
 tention of ultimately reimbursing the 
 loans, whenever it proved convenient to 
 the Public to make the necessary efforts 
 by taxation. 
 
 The progress of this plan, for a cen- 
 tury past, lias been so slow, as to indi- 
 cate, in a very satisfactory manner to every 
 profound investigator of the business, 
 that it is utterly impossible to diminish, 
 by these means, the public burdens to 
 the amount of one farthing annually. 
 
 This will perhaps be called a very 
 strong, and even a very erroneous asser- 
 tion, because above 60 millions have 
 been actually redeemed by means of taxes 
 applied solely to that purpose.
 
 OF EQUIVALENTS. 183 
 
 But how can this apparent diminu- 
 tion of debt, and of annual burdens in 
 interest, be admitted as a reality, when 
 it can be proved mathematically, that 
 this effort towards redemption has not 
 only been carried on during war, by ex- 
 tending the new debt to the same amount, 
 but has crushed a mass of growing in- 
 dustry, which would have produced a 
 much greater increase of revenue to the 
 Public, than the amount of interest re- 
 deemed, and also enhanced the price of 
 every article, as well as the interest of 
 money, to such a degree as to augment 
 considerably the public expences, and 
 to occasion a much greater increase of 
 the debts contracted during war, and at 
 a higher interest, than would other- 
 wise have been the case, independent 
 of the increased expencc in our peace- 
 establishment and in our poor-rates, 
 which become perpetual annual bur- 
 dens, and of a much more serious na- 
 ture even than interest on debt, as they 
 M 4
 
 lo4 THE DOC TRINE 
 
 contain no possible means of extinction 
 or redemption. 
 
 The Finantial Committee, in the 
 House of Commons, corrected, in 1 791, 
 the estimate of the annual peace -esta- 
 blishment made in 1786, by increas- 
 ing it some hundred thousand pounds 
 pr.ann.: but it will be discovered here- 
 after, that this increase was not adequate 
 to the real expenditure, and that a fur- 
 ther correction, to a very considerable 
 amount, is necessary. 
 
 The Committee of if 86*, state also, 
 that, if the permanent taxes produced 
 13 millions pr.ann. there would be one 
 million surplus towards paying off the 
 national debt. 
 
 It appears, however, that these taxes 
 produced, in the years 1/90 and 1791, 
 much more, and in 1792 upwards of 
 £ 14 3 000, 000 sterling pr* ann. yet 11a
 
 OF EQUIVALENTS. l8$ 
 
 greater surplus than one million pr.ann. 
 ever appeared to public view, after pro- 
 viding for the necessary exigencies of a 
 peace-establishment. 
 
 Mr. Rose states, indeed, that extraor- 
 dinary and accidental expenccs, to a con- 
 siderable amount above the peace-esta- 
 blishment were provided for ; but he omits 
 to add, that extraordinary receipts to a con- 
 siderable amount, independent of the ordi- 
 nary receipt, equally took place, which 
 provided for these accidental expenccs. 
 
 An increase of one million annually, 
 in the peace- establishment, is not much 
 attended to, although equal to the in- 
 terest of above 33 millions of 3 pr. cts. 
 
 The bad effects, therefore, of all 
 sinking funds, and of all plans towards 
 ing the supplies within the year by- 
 taxes, are not limited to the annual loss 
 of industry, and the consequent lesser 
 produce of each rax, in some proportion 
 
 R f r
 
 l86 THE DOCTRINE 
 
 to the number which are added, but in- 
 crease considerably the burdens of each 
 succeeding war, as well as the expences 
 of a peace- establishment; branching out, 
 at the same time, to a variety of expen- 
 ces by their actions and re-actions, and 
 occasioning much greater future debt and 
 annual burdens, than the interest re- 
 deemed by paying off the capital. 
 
 I must indeed admit, that the loss 
 en the old taxes is much inferior to the 
 pioducc of any new tax which is levied, 
 so that every nation may, at any time, 
 increase its revenue by accumulating 
 taxes. 
 
 To account for this circumstance, I 
 have only to state, that the representa- 
 tion in money, required by the new 
 tax, can only be supplied by suppres- 
 sing the representation of some indus- 
 try, which would otherwise have exist- 
 ed :. and therefore the new tax is not
 
 OF EQUIVALENTS. H$7 
 
 only supplied by the tax lost on such sup- 
 pressed industry, but also by the mo- 
 ney-value of that industry, as both arc 
 combined together, since it is impossi- 
 ble to suppress, in part, the produce 
 of a tax without suppressing, at the 
 same time, the industrious source of 
 such tax; nor is it possible to increase 
 industry by a" new tax, although it 
 prove ever so productive. 
 
 It is impracticable, indeed, to trace 
 the loss which arises in the old taxes 
 from the circumstance of levying new 
 burdens, because this depends on the 
 nature of the new taxes; some of which 
 produce very little effect in augmenting 
 the price of industry; while others 
 produce very great effects in that 
 way. 
 
 As this difference refers to the Fis- 
 cal System, or art of levying in 
 most efficacions and in the least detri-
 
 l88 THE DOCTRINE 
 
 mental manner to the whole community, 
 such taxes as are absolutely necessary, 
 which is ; not immediately connected 
 with my present plan, I shall only state, 
 that capitation-taxes, or such as come 
 under that qiiaKficatiori, do the least 
 mischief in increasing prices, and in de- 
 manding additional representation, which 
 makes them come nearer to the original 
 design of levying contributions in kind; 
 and it is particularly fortunate for Great 
 Britain, that necessity obliges her to re- 
 sort, at present, to that kind of taxes 
 for levying large sums. 
 
 Admitting, then, that there is no oc- 
 casion for the existence of the sinking- 
 fund taxes, it follows, that their re- 
 peal would promote the principle of in- 
 creasing the produce of the remaining 
 taxes. 
 
 This increasing produce being equal- 
 ly unnecessary, would admit of a fur-
 
 OF EQUIVALENTS. iSp 
 
 ther reduction in the number of taxes, 
 in the price of all necessaries of life, 
 and of course in the public expendi- 
 ture. 
 
 We should then enjoy, in a twofold 
 manner, an annual diminution of taxes 
 and expences, from the increased pro- 
 duce of the former, as well as from 
 our diminished wants towards the lat- 
 ter, and experience a rapid increase in 
 the mass of industry ; so that, in the 
 course of a few years, ten taxes would 
 produce as much revenue as twelve or 
 thirteen of similar extent do at this mo- 
 ment. 
 
 In this manner is one relief from tax- 
 ation followed immediately after by ano- 
 ther relief, as also one diminution in 
 the annual public expences towards the 
 pcace-establishm.nt, followed by ano- 
 ther diminution; and, per contra, one 
 additional burden of taxation is the
 
 I90 THE DOCTRINE 
 
 source of another burden, as well as 
 of increasing expences ; both which 
 go on in a dreadful progression, until 
 finantial ruin ensues. 
 
 In examining, further, the operations 
 of Great Britain^ with respect to finance, 
 we find, that she has hitherto perseve- 
 red in raising the peace -establishment 
 expences within the year by taxes, and 
 the war -supplies by the sale of limited 
 or perpetual annuities, under the deno- 
 mination of Loans. 
 
 However practicable the former mode 
 may be, it will not be improper to 
 state, in a new point of view, the su- 
 perior advantages of the latter mode, 
 even for the peace-establishment, and 
 how these advantages are totally lost 
 sight of, whenever a sinking* fund sy- 
 stem is > adopted. 
 
 Raising the supplies by taxes with*
 
 OF EQUIVALENTS I9I 
 
 the year, is taking from individuals the 
 whole capital wanted ; whereas, by 
 raising those supplies through the means 
 of public loans, is only taking from 
 individuals, in taxes,, an annual interest 
 on the same amount. The last griev- 
 ance is no doubt annual; but it certain- 
 ly will be admitted, that, by leaving 
 the capital to individuals, they are not 
 only enabled, by an industrious applica- 
 tion of it, to pay the interest annually, 
 but also to procure some profit fo them- 
 selves, as long as the nation is capable 
 of improvement in various branches of 
 industry. 
 
 It follows then, that, in desisting 
 
 from levying, by taxes, one million 
 wanted, and substituting an annual levy 
 of fifty thousand pounds in taxes for the 
 interest of a million loan, the general 
 estate would be improved, in annual in. 
 come, to a much greater amount than 
 fifty thousand pounds.
 
 1Q1 THE DOCTKIKE 
 
 I shall be within bounds,, when I 
 state this improvement at three hundred 
 thousand pounds during each year that 
 is plan is adopted, either negatively or 
 positively; that is to say, either by not 
 levying the million by taxes if wanted, 
 or by taking off unnecessary taxes to 
 that amount. 
 
 Of these three hundred thousand 
 pounds, the public revenue would of 
 course receive a share,, and thus be more 
 than fully indemnified, because the re- 
 maining tax for the interest provides for 
 what the million would annually cost in 
 interest. 
 
 But, under the supposition even that 
 this annual increase to individuals, was 
 only one hundred thousand pounds 
 pr. ami. they would cheerfully give^ and 
 indeed could well afford to give, a part 
 of it, if the fifty thousand pounds pr.ann.. 
 left in taxes, for the interest of the mil- 
 lion loan were equally suppressed.
 
 O F EQUIVALENTS. I93 
 
 By applying the argument "also to an 
 individual who had raised ten thousand 
 pounds on an improveable estate at 5pr.ct. 
 interest, we must allow, that he would be 
 justly accused of doing himself, and his 
 posterity, a very material injury, if he 
 voluntarily offered to pay oil' the dept 
 with the prospect before him of improv- 
 ing his estate by means of these ten 
 thousand pounds, as far as 10 pr. cent 
 annually, or 5 pr. ct. above the interest 
 to be paid, and that his annual expences 
 increased also by such misconceptions 
 and such miscalculations. 
 
 Let ingenious calculators of the ef- 
 fects of compound interest, state the 
 magnitude of such compound accumula- 
 tion of evil in the course of 50 or 60 years, 
 and they will then produce to the world 
 an effectual antidote to th 
 bewitching poison, ini he un- 
 
 derstanding of man by former calcula- 
 tors, on the wonderful effects of a mil- 
 N
 
 194 THE DOCTRINE 
 
 lion sinking fund with its compound 
 operations, in paying off a national debt. 
 
 The advantages are evidently double, 
 in the former case, to what they are in 
 the latter; for the act of paying off 50 
 millions of the national debt occasions 
 the loss of 100 millions to individuals, 
 and to the revenue a share of the annual 
 income on that property, during its ac- 
 cumulation. 
 
 The analogy of reasoning between 
 the affairs of a nation and that of an 
 individual, is indeed very imperfect, and 
 can only be resorted to for partial elu- 
 cidation; for when a nation commits the 
 error of paying off its useful debts, 
 or of raising taxes within the year for 
 what might, with more advantage to the 
 Community, be levied by a loan, it is 
 further subject to increased annual ex- 
 pences, in times of peace, as well as in 
 times of war, and to higher interest
 
 OF EQUIVALENTS. 1 95 
 
 for the necessary loans in the latter^ 
 period. 
 
 Whoever doubts these consequen- 
 ces, may examine the progressive increase 
 of our public expences, in consequence 
 of every : war, and reflect afterwards 
 on the probable annual expence of a 
 future war. 
 
 On reading Mr. Chalmers's compa- 
 rative estimates of the prosperity of Great 
 Britain at different periods, I was anx- 
 ious to know if internal industry and 
 population was increased in any propor- 
 tion with that of exterior commerce and 
 shipping, and immediately applied myself 
 to a critical examination of the different 
 branches of our public revenue. 
 
 This examination convinced me, that 
 
 some internal branehes of industry must 
 
 have funk, in order to make way foT 
 
 foreign commerce, as I could perceive 
 
 N 1
 
 I96 THE DOCTRINE 
 
 no increase of consequence in our public 
 revenue since 1774, but what arose from 
 the accumulation of . above 6 millions of 
 new taxes during the American war. The 
 permanent taxes (including those 6 mil- 
 lionsj levied before 1786, produce at 
 this moment no more than 141 millions, 
 and those levied before 1775, (exclusive of 
 those 6 millions) produced in that year 
 about 7 millions ; consequently the general 
 increase on the old and new revenue is 
 not great during 25 years, and can have 
 only arisen from the increase of exterior 
 commerce between 1786 and 1802. 
 
 We have therefore no proof of in- 
 ternal prosperity during that period, and 
 have to lament, that our accumulated 
 wealth in money^ during 25 years, from 
 annual balances with foreign countries, 
 has been mostly absorbed in the repre- 
 sentation of new taxes, and in the con- 
 sequent additional nomisal value given 
 to all things; which is, in fact, accu-
 
 OF EQUIVALENTS. 10? 
 
 mulating a fictitious wealth of money 
 only, and not acquiring an addition of 
 objects, internally consumable, paying an 
 annual revenue, which can alone give an 
 independant and solid strength to a nation. 
 
 Instead then, of benefiting poste- 
 rity, by accumulating taxes for the pur- 
 pose of creating sinking funds, as is too 
 generally asserted to be the case, we 
 are laying the foundation of complicated 
 finantial distress, and of ultimate ruin, 
 not alone by checking the improvement 
 of the public estate, but also by caus- 
 ing greater expcnces to be incurred than 
 our income will admit of; while a con- 
 trary system, which is now so much 
 reprobated, would infallibly increase the 
 revenue much more annually than the 
 sinking fund could possibly redeem, im- 
 prove very considerably the national 
 estate, or groundwork for taxation, and 
 subject ourselves, and our posterity, to 
 much less annual expenditure. 
 N q
 
 198 THE DOC THINS 
 
 This contrary system of increasing 
 the public debt for a certain term,, and 
 of diminishing the number of taxes, 
 which will be the object of the follow- 
 ing Chapter, may therefore with justice 
 be called true political economy; while 
 our present system is entitled to the 
 appellation of political Extravagance. 
 
 Having noiv explained the reasons 
 for preferring, on every .possible occa- 
 sion, the system of raising the supplies 
 by loans in stead of taxes, and for desist- 
 ing from all sinking fund plans, it re- 
 mains for me to destroy an existing ide" 5 
 that the price of stocks is considerably 
 increased by the annual application of a 
 large sum of money towards their re- 
 demption. 
 
 I have already observed that, where 
 no obligation to reimburse has been en- 
 tered into, no diminution of confidence 
 can arise from the circumstance of not
 
 OF EQUIVALENTS. IQ9 
 
 redeeming public debts, and particularly 
 when the operation is detrimental to the 
 improvement of the general estate, and 
 productive of increasing annual expences. 
 
 In this point of view, a sinking fund 
 may even be considered as destroying 
 public credit, because those persons who 
 are injuring their estate, and increasing 
 their expences, are certainly less entitled 
 to the confidence of money-lenders, than 
 those who are pursuing a plan for im- 
 proving their estate, and for diminishing 
 their expences. 
 
 But it will be still urged, by those 
 who see no salvation excepting in the 
 redemption of debt, without any regard 
 to objects of much more importance, 
 that the annual application of a large 
 sum to a particular object, must inevi- 
 tably raise the price of that object. 
 
 In order to discover the fallacy of 
 N 4
 
 200 THE DOCTRINE 
 
 this position, we must enquire into the 
 mode of obtaining this large sum, as 
 well as what eft* let it has on the relative 
 scarcity or plenty of money, and also 
 investigate the process of its application. 
 There can be no difficulty in admitting, 
 that the scarcity of money is considera- 
 bly increased by raising a large sum in 
 taxes ; for, although the money received 
 is returned again into circulation in the 
 same manner as if received from indi- 
 viduals in the form of a loan, yet the 
 increased prices of various objects may 
 require, in some cases, the additional 
 representation in money of twenty-five 
 times the amount of those taxes, on ac- 
 count of the additional price of the 
 object taxed, the profit taken on it by 
 the producers, all the actions and re- 
 actions upon other objects, as well as 
 the repetition of all these increased 
 values in money, as often as the ob- 
 jects go from hand to hand until con- 
 gumed.
 
 OF EQUIVALENTS. 501 
 
 Returning the money again into 
 circulation, does not therefore produce 
 a general good, equal to the general evil 
 arising from its being levied, as is the 
 case with money raised by a loan, when 
 the representa:ive signs return again im- 
 mediately to the same situation with 
 respect to quantity, because twenty-live 
 times the amount may be required for ad- 
 ditional representation, if raised by taxee. 
 
 The general scale of interest is 
 consequently raised, and the price of 
 stocks lowered. 
 
 This is the first effect, and will be 
 better understood by the following de- 
 atioos. 
 
 fco. I. No. 2. 
 
 / • / / I / I ! I 
 
 Ii 4- 3*» 3* 3i>_4* 4*« 
 
 No. 5, Mo. 4. 
 
 ! I I I I I J > I I 
 
 ., 44, 4i- 3*i 4» 4*. 4i 4*' 
 
 .-. No. 6. 
 
 / /■./-/: 7 t ! I ! I 
 
 4, 4*. -.. A\, 4a» *)\> ^ 5*«
 
 202 THE DOCTRINE 
 
 Here are six different scales of in- 
 terest, increasing each * pr. ct. according 
 to the relative plenty or scarcity of 
 money. The five variations in each scale, 
 denote the different objects which give 
 degrees of interest, according to their 
 character for security, duration, &c. 
 
 I shall suppose, then, that the sink- 
 ing fund taxes produce the effect of 
 changing the scale of interest on money 
 from No. i to No. 2. 
 
 An impression is immediately made 
 on each object, producing an annual in- 
 terest; and of course the public stocks, 
 which form a part of those objects, fall 
 in capital value, so as to give t pr. ct. 
 more annual interest or income. 
 
 But, on the supposition even that 
 the sinking fund taxes produced no ef- 
 fect whatever on the scale of interest, it 
 will soon appear, that no particular ob-
 
 OF EQUIVALENTS. 2O3 
 
 ject, giving an annual income, can be 
 ultimately more benefited than any other 
 object in the same scale, by the appli- 
 cation of a large sum towards its pur- 
 chase. 
 
 It must be recollected, that the duty 
 of money consists in representing the 
 objects of daily consumption, the an- 
 nual or daily hire of man and of 'ani- 
 mals, and the transfer of all property 
 giving an annual income. 
 
 The power of any given quantity 
 of money, in thus representing all 
 things, is of course naturally limited; 
 and if an extraordinary service is occa- 
 sionally required for any particular ob- 
 ject, there must arise a deficiency of 
 power to represent other objects. 
 
 If the price of stocks then should 
 be carried by the purchases, through 
 the sinking fund taxes, higher than the 
 scale established by the relative plenty or
 
 204 THE DOCTRINE 
 
 scarcity of money entitled them to, a 
 discordance with the other objects in 
 that scale would immediately ensue, and 
 all the principles of relative value be 
 immediately destroyed. 
 
 It must then become the interest 
 of every individual, who wishes to ap- 
 propriate his money to the purchase of 
 an annual income, to neglect the public 
 stocks, and to apply such money, to 
 those objects which are proportionably 
 lower in price than their character, for 
 security, duration, &c. demands, until 
 every object giving an annual income 
 finds again its level in the natural scale 
 of interest, established by the existing 
 relative plenty or scarcity of money. 
 
 Raising large sums of money by 
 public loans, increases no doubt, in 
 some degree, the general sqUq of inte- 
 rest, because it is, in fact, creating ad- 
 ditional money-wealth, giving annual
 
 OF EQUIVALENT'S. 20$ 
 
 interest; but this effect is trifling when 
 compared with that which is produced 
 by raising the same sum in taxes ;• and as 
 Government expend the whole sum bor- 
 rowed within the year, the general 
 consumption of all objects is conside- 
 rably increased, and makes full amends 
 for all capitals being temporarily de- 
 creased in their money-v^lue. 
 
 But if, on the contrary, 10 pr. ct. 
 is taken from every person's income to 
 pay off a public debt, the money-wealth 
 is diminished at the expence of the ge- 
 neral consumption and of the public 
 revenue, and the operation of the tax 
 hurts the scale of interest much more 
 than the diminution of so much money- 
 wealth can have benefited it. The 
 influx of money prevents these effects 
 being generally perceived; but they are 
 not less mathematically true, whether 
 positive or negative; that is to say, 
 .'.her the evil really takes place, or
 
 206 THE DOCTRINE 
 
 that the good resulting from the influx 
 of money is lost by simply repairing the 
 mischief. 
 
 Having now fully combated the de- 
 lusive ideas of those who support sink- 
 ing fund systems, in every point of 
 view in which the subject can be pre- 
 sented., it behoves me to add a few 
 words on the imaginary consequences 
 of an ever-increasing debt, and of the 
 •supposed difficulty of finding money to 
 support it. 
 
 I have already stated, that there 
 exists, in practice, a mode of raising 
 money on annuities for 65 or 70 years, 
 which create no greater charge of in- 
 terest than perpetuities, and become 
 extinguished without any reimburse- 
 ment. 
 
 Had that mode therefore been 
 solely adopted for 100 years past, we
 
 OF EQUIVALENTS. C07 
 
 should at present only be burthened 
 with the annuities created during the 
 last 65 or 70 years, and have an an- 
 nuity falling annually into the public 
 Treasury, upon which a new annuity 
 for 6$ or 70 years might be annually 
 and perpetually granted, while we should 
 enjoy, unincumbered, the natural in- 
 crease in the yearly produce of existing 
 taxes, as a collateral resource and secu- 
 rity against future events. 
 
 No situation in finance could be 
 more enviable, and the financial machine 
 might then be said to revolve upon its 
 own axis, formed by taxes levied on 
 the national industry and prosperity 
 during 6$ or 70 years, with the addi- 
 tional security of a further increase in 
 the produce of those taxes from increa- 
 sing prosperity, promising thus eternal 
 duration without further burdens. 
 
 As modern nations have prospered
 
 208 THE DOCTRINE 
 
 during a much longer period, under 
 the most pernicious systems of public 
 finance, Jt follows of course that no 
 greater difficulty could have arisen re- 
 specting the representation of an increa- 
 sing debt, than has actually existed 
 -during the last 65 or 70 years. 
 
 But this fear of there not being a 
 sufficient quantity of money for the 
 support of an increasing debt, is equally 
 applicable to increasing estates, houses, 
 and industry; as neither the one nor 
 the other can conveniently take place 
 without additional representative signs. 
 
 The increase of public debts, when 
 substituted for a more pernicious mode 
 of raising money for the use of the 
 Public, is as useful and necessary to 
 the prosperity of a nation,, as the increase 
 of estates, houses., and industry, because 
 those debts are in that case the mea 
 of promoting all those objects of national 
 riches, or of preventing their decrease.
 
 OF EQUIVALENT*. 300 
 
 The complaints therefore, which arc 
 incessantly made against public debts, are 
 frivolous as well as groundless, and 
 should be levelled against raising the 
 supplies within the year, in order to avoid 
 public debts, against taxes for the pur- 
 pose, of paying off existing debts, and 
 even against the mode of constructing 
 many of those debts, as well as against 
 that kind of taxes ( levied even for the 
 interest) which produces the greatest ef- 
 fect in raising the price of all objects of 
 consumption. 
 
 Nations who accumulate money in 
 their public treasury, during peace, in 
 order to carry on future wars, act much 
 more erroneously ; and cannot much in- 
 crease in wealth and strength, as the 
 source of prosperity is locked up by 
 those means. 
 
 Philosophers attribute, in general, 
 every incapacity in point of public finance, 
 O
 
 »IO THE DOCTRINE 
 
 to the form of government, in place 
 of tracing it to a pernicious form in their 
 financial systems, which may be rectified 
 under a despotic as well as under a free 
 government. 
 
 The construction of all our public 
 debts, ought to have be'en confined to 
 long annuities, which extinguish them- 
 selves y or to perpetual annuities, redeem- 
 able at pleasure. 
 
 • 
 These perpetual annuities should 
 have been granted at such a rate "of in- 
 terest, according to the relative scarcity 
 or plenty of money, as to procure par, 
 or ioo pr.cent, in order to have the ad- 
 vantage of redeeming them, when inte- 
 rest of money fell; a temporary- high in- 
 terest not being an object of consideration 
 to a nation. 
 
 We shall suppose, for argument sake
 
 OF EQUIVALENTS. 2If 
 
 that 3 pr. cents might be sold at 64 pr.ct. 
 and 5 pr. cents at 100. 
 
 In the former case, money is no 
 doubt obtained at a fraction less interest 
 than in the latter; but of what moment 
 is such saving, when compared with the 
 possible reduction of those 5 pr. cents in 
 a few years to 4 pr.cent. and perhaps to 
 3§ and even to 3 pr. cent, in the course 
 of a more considerable number of 
 years. 
 
 This reduction becomes at least a 
 partial extinction of perpetual annuities^ 
 and arises naturally from the principle 
 of paying a low interest for the use of 
 money, when it is relatively plenty, after 
 having paid a high interest for it, when 
 it was relatively scarce. 
 
 These reductions of interest have 
 already been established by practice, 
 and it therefore becomes unnecessary 
 O 2
 
 Sift • THE DOCTRINE 
 
 for me to add more on the subject, or 
 to observe, that 3 pr. cents cannot, with- 
 out some equivalent consideration, or 
 without consent, of the proprietors, be 
 further reduced. 
 
 But it is necessary to remark that, 
 under this diminution of interest to 3 pr. 
 cent, our public debts would seem to 
 acquire a new character for durability 
 equal to that of land ; and although it 
 may be thought unfair, that the proprie- 
 tor can • never claim his capital at any 
 future period, and that he remains sub- 
 ject to the disposing of it much below 
 par when interest of money is high, yet 
 it must be considered, that every pur- 
 chaser of land, houses, &c. when inte- 
 rest of money is low, becomes equally 
 exposed to this loss when interest of 
 money is high, should his wants oblige 
 him to alienate his property. 
 
 This dispensation in Government
 
 OF EQUIVALENTS. QI3 
 
 from ever returning the capital, is fully 
 compensated to the proprietor of the an- 
 nuity, by its being perpetual and always 
 saleable ; by the superior security of all 
 public debts, and by the facility of re- 
 ceiving the interest half yearly. 
 
 I have however asserted, in the First 
 Part of this Work, that all public debts, 
 properly constructed, will extinguish 
 themselves without any reimbursement, 
 arising from a sinking fund: but this 
 appears, as yer, only to be the case with 
 the long and the short annuities, as the 
 partial extinction of the 5 and 4 pr.cts. 
 is confined to their reduction as low as 
 3 pr. cent, and it therefore now becomes 
 necessary for me to develope a new 
 mode of proceeding with those 3 pr. cts. 
 by which they may be further reduced, 
 
 & be at last fully extinguished without 
 a sinking fund, and without any injury 
 
 atevdr to the money proprietors. 
 
 may seem paradoxical ', but ic 
 
 3
 
 w* THE DOCTRINF 
 
 arises naturally out of the power of mo- 
 ney, combined with the principles of re- 
 lative value, on which all financial ope- 
 rations must be founded, in order to 
 produce strict justice to all parties, and 
 at the same time certain as well as salu- 
 tary effects to the whole community. 
 
 It is a well known fact, that our 
 greatest loans are made in times of war; 
 and as the scarcity of money is in ge- 
 neral relatively greater during that period, 
 than in times of peace, on account of the 
 the treasures of Spain remaining in Me- 
 xico and Peru, the 3 pr. cent annuities 
 are considerably below par, orioopr.ct. 
 
 V 
 
 Suppose^ for instance, that they are at 
 62 pr. cent, and that a new loan was ne- 
 cessary. 
 
 Government might offer to take the 
 3 pr. cents at 70 pr. cent, provided that 
 thirty pound sterling in money be added,
 
 OF EQUIVALENTS. 215 
 
 and for this one hundred pounds value 
 so received, the Stockholder might be 
 given the choice of a five pound an- 
 nuity redeemable at pleasure, or a five 
 pound sterling annuity for 70 years cer- 
 tain, and then to cease altogether. 
 
 No Stockholder would object to 
 such conversion, as his property would 
 be increased by £ 8 sterling on every 
 £ 62 sterling, and his interest or yearly 
 income 1 o shillings on every £ 62 value, 
 that is to say, above t pr. cent, on the 
 capital value of that moment ; nor could 
 Government hesitate at sacrificing 10 
 shillings or ' pr. ct. pr. annum on every 
 £ [qo sterling 3 pr. cents, which it re- 
 deemed in this manner from perpetual 
 existence. 
 
 If these converted 3 pr cents were 
 
 origin..liy 5 or 4 pr. cents, it is in fact 
 
 only giving back for a time some part 
 
 of a previous extinction, in order to ex- 
 
 4
 
 216 THE DOCTRINE 
 
 onerate the proprietors for the conse- 
 quences of further reductions, and the 
 advantages given, might serve also for a 
 part of the bonus on the new loan* 
 
 In these points of view, the sacrifice 
 could admit of no regret; but when 
 sirnply adopted, as a reparation for errors 
 committed, in granting originally 3 pr.cts. 
 much below par, it becomes a subject 
 of grief, on account of the additional 
 burthen, not unlike a sinking fund, which 
 it creates. 
 
 The 5 pr, cent additional interest 
 on each £ 100 sterling stock, which the 
 proprietor obtains, will, with compound 
 interest, procure him more than his ca- 
 pital in 70 years, if he takes the long an- 
 nuity ; and if he prefers the five pound 
 perpetual annuity redeemable at pleasure, 
 a reduction to 4 pr cent would only 
 diminish his original 3 pr. cent to 2 f^, and 
 if ultimately reduced to 3 pr. cent, there
 
 OF EQUIVALENTS. 517 
 
 would still remain about 2s pr. cent, of 
 the original 3 pr. cent, stock's interest. 
 
 Several conversions therefore are ne- 
 cessary, if perpetual annnities are granted 
 before the whole can be extinguished ; but 
 the new debt is also diminishing in an- 
 nual burthens at each reduction of in- 
 terest. 
 
 Should these repeated conversions 
 take 100 years to extinguish fully the 
 perpetual annuities, they would still be 
 less burthensome to the nation than a 
 70 years annuity, because a partial relief 
 of § pr^ cent, might take place in a few 
 years after their creation, whereas the 
 whole burthen of a long annuity mus: 
 remain during its existence of 70 years. 
 
 If it happened that the perpetual 
 
 annuities could not be reduced lower 
 
 than to 3i'pr. cents, the same principle 
 
 may still be adopted towards their con- 
 
 O 5
 
 Il8 THE DOCTRINE 
 
 version into 5pr.ct. perpetuities or long 
 annuities; nor must it be understood, that 
 I have stated the exact proportion to 
 be observed between those differently 
 constructed annuities, as their relative 
 price must depend on a variety of ex- 
 isting circumstances, to be considered 
 by the Minister, and by the Money- 
 lender, when any financial operation 
 takes place. 
 
 It is sufficient for me to have shewn 
 the general and unerring principles of 
 finance, as well as the solidity of my ar- 
 guments, and the practicability of the 
 doctrine so repeatedly urged by me, that 
 all public debts are extinguishable with- 
 out a sinking-fund, and without paying 
 a higher interest than the current rate 
 of money demands. 
 
 As the terms of all money transac- 
 tions are constantly varying, the Minis- 
 ter of Finance has not only to attend to
 
 OP EQUIVALENTS, 219 
 
 the general principles, in constructing all 
 public debts, but also to the existing 
 rate of interest, and to the principle 
 of equivalent value in differently coi 
 structed annuities. 
 
 The Money-lenders are by education 
 sufficiently instructed how to attend to 
 their own interest; but the education 
 of Statesmen has hitherto been ill-sui- 
 ted to acquiring that degree of know 
 ledge, respecting the interest of the 
 Public, when money is to be raised, which 
 would put him on a footing with his 
 antagonist, and give him a perfect idea 
 of his undoubted power to give such 
 a form to his loan as he thinks proper, 
 and ro enforce, at the same time, reaso- 
 nable terms. 
 
 It is to this disparity of knowledge, 
 that the doctrine of equivalents has been 
 entirely lost sight of in public finance, 
 and that the monied men in almost every
 
 03O THE DOCTRIN* 
 
 country, have made bold assertions, with- 
 out any proof on this intricate subject, 
 and have enormously enriched themselves 
 at the experice of a deluded, impove- 
 rished, and ruined Public. 
 
 In older to prove an assertion, 
 which I made in the former part of this 
 Work, that a reimbursement by means of 
 a sinking fund is in fact paying the ca- 
 pital twice, nay even three times, I must 
 observe, that a bonus from 3 to 5 pr. ct. 
 is given on each loan, which indemnifies 
 the money-lender against a possible fall in 
 the price of Stocks, while any advan- 
 tage which might proceed from a rise in 
 the price, is lost sight of, although it has 
 sometimes, from the influx of money from 
 abroad, been so considerable, as to bring 
 the bonus to 10 a 12 pr. cent 
 
 I do not pretend to find fault with 
 this principle, as I believe it to be neces- 
 sary for securing the money against the 
 time it is wanted, and in order to ena-
 
 0F EQUIVALENTS. 3»I 
 
 ble the Minister giving such a form to 
 his loan as he may think most beneficial 
 for the public interest, in conformity to 
 the principles of equivalent value, and 
 the natural powers of money. 
 
 This advantage is, however, unheard 
 of in all private money transactions, and 
 if laid out at compound interest, procures 
 to the money-lender, in a certain number 
 of years, a sum equal to the whole ca- 
 pital lent. 
 
 r 
 
 The higher income given for mo- 
 ney, beyond what is obtained for a per- 
 petuity in land, procures also to the 
 lender, in a certain number of years, whe'n 
 laid out at compound i: :rest, a second 
 sum equal to the whole capital lent. 
 
 A reimbursement, therefore, of the 
 capital at a distant period, by mea'ris of 
 a sinking fund, gives a third time the ca- 
 pital borrowed.
 
 £33 THE DOCTRINE 
 
 But what shall I say respecting 
 the sale of 3 pr. cents, at 55 a 56, and 
 the repurchase of them at 96 a 97 pr.ct. 
 that is to say, giving above 170 for too 
 received, over and above the annual in- 
 terest. 
 
 When the one and the other operation 
 takes place within the course of 8 or 
 10 years, as was lately the case in 
 Great Britain, the advantages to the 
 money-lender are superior to any I 
 have enumerated, and admit of no apo- 
 logy or justification whatever. 
 
 Having now shewn the insufficien- 
 cy of our present system, and collected 
 all the materials for raising a new finan- 
 cial machine, it remains for me to ex- 
 plain the arrangement of its component 
 parts, in order to produce the greatest 
 possible advantage to tfee whole com- 
 munity.
 
 OP EQUIVALENTS. 223 
 
 As this new financial machine will 
 have no decomposing principles in its 
 construction, it will require no repairs ; 
 and if not adopted too late, I will ven- 
 ture to assert, that it will last from 
 age to age, in every country which 
 is not yet matured in industry and po- 
 pulation, or which is not yet reduced 
 to an irremediable state of financial 
 distress.
 
 224 THE DOCTRINE 
 
 CHAPT.E R VI. 
 
 On the most perfect System of Public 
 Finance, 
 
 ALTHOUGH the preceding 
 Chapters contain very ample explana- 
 tions of every point necessary towards 
 the formation of my financial system, 
 yet it will be necessary to recapitulate 
 shortly, the several parts, in order to bring 
 them together into one point of view. 
 
 For this purpose, my Readers must 
 recollect, that as each money-tax in. 
 creases necessarily the v price of every 
 object upon which it is levied., as well 
 as of many other objects, by aqtion and
 
 OF EQUIVALENTS. ln£ 
 
 reaction, the system of money-taxes has 
 
 in its progress to this day, considerably 
 
 enhanced the money-price of labour, and 
 
 ■ 
 of every thing necessary for human 
 
 existence. 
 
 It must further be kept in view, 
 that as the same quantity of money, or 
 representative signs, becomes relatively 
 less by the objects to be represented, 
 demanding more of them as their measure 
 or price, the interest of money is also 
 considerably increased by money-taxes. 
 
 o This interest, or price of money, 
 has been proved to be the director and 
 the regulator of what each capital ought 
 to give in annual rate of income ; and 
 all productions being the annual income 
 of a capital representable by money, it 
 follows, of course, that a further in- 
 crease in the income of all capitals, and 
 in the price of all productions and of 
 labour must ensue from this greater
 
 235 THE DOCTRINE 
 
 relative scarcity of money, producing a 
 higher rate of interest. 
 
 I shall not here enumerate all the 
 actions and reactions which these two 
 causes give rise to, but confine myself 
 to saying, that they are numberless ; that 
 their accumulating consequences are more 
 and more distressing to each succeeding 
 generation, and that they operate in & 
 kind of geometrical progression. 
 
 Every Statesman admits, that taxes 
 are oppressive ; but none think it neces- 
 sary to examine into all the operations 
 of the disorder which they occasion, 
 and mankind have thereby been left 
 entirely in the dark with respect to the 
 ultimate effect, being necessarily a de- 
 creased mass of industry, as well as an 
 increased rate of interest, and a decreased 
 produce in the amount of each tax on 
 every accumulation which takes place, 
 either in their number, or in the ex- 
 tension of any one specifically.
 
 OP EQUIVALENTS. HQ.J 
 
 Neither could it possibly be disco- 
 vered under the general admission of 
 oppression, divested of all explanations 
 whatever, that money -taxes increased also 
 very considerably, and in a kind of geo- 
 metrical progression the national expen« 
 ces, so that every new tax created a 
 new expence, as well as a new deficiency 
 in the old revenue, at the very moment 
 that an increase in the last, or a decrease 
 in the first, became so essentially ae° 
 cessary. 
 
 These being then the consequences 
 of adding tax upon tax, it follows, tha* - 
 the taking off taxes must produce the 
 direct contrary effect ; and no person can 
 doubt, that the future prosperity of Great 
 Britain calls for that measure in the most 
 urgent manner. 
 
 If the consequences which I have 
 stated, should not be admitted by my 
 readers, it becomes necessary that the 
 P 2
 
 228 THE DOCTRINE 
 
 truth be explained by those persons who 
 pretend to have a better knowledge of 
 the nature of the oppression, in order 
 to prevent its being said, that the com- 
 plaints of mankind respecting money- 
 taxes are groundless, and that the system 
 of taxation may be pursued without 
 dread or without limitation whatever. 
 
 If we do not shew the mode in 
 which money-taxes create mischief to a 
 community, or prove any bad consequen- 
 ces which arise from them, we thereby 
 either acknowledge our incapacity for 
 the investigation, or we tacitly confess 
 that they do no mischief whatever : and 
 to this extraordinary idea, I am confident 
 the most ignorant as well as the most 
 enlightened of mankind, will not give their 
 assent. 
 
 Many Statesmen have indeed at- 
 tempted to account for the increasing 
 price of the necessaries of life, from the
 
 OF EQUIVALENTS. 220 
 
 general prosperity of the country, and 
 consequent influx of money, raising many 
 individuals from a state of competency 
 to a state of affluence. 
 
 In tins manner do they produce a 
 speculative cause, in order to account 
 for the mathematical effects of taxation. 
 
 Their speculative reasoning is also 
 divested of any depth of argument, be- 
 cause those who rise to affluence put 
 out their surplus money at interest, and 
 do not give higher prices in the market 
 for the necessaries of life. 
 
 Amongst those individuals also, who 
 become rich, there are many that obtain 
 their wealth at the expence of others 
 who are becoming poor$ and of course, 
 in this case, one set supplies the other 
 in thos^e markets where the necessaries 
 of life! are procured. 
 
 The additional money, also, which
 
 2J0 THE DOCTRINE; 
 
 the Nation is general acquires annually, 
 flows in gradually, and is absorbed by 
 the increased representation of an addi- 
 tional quantity of capital stock, and of 
 productions, which constitute jointly, that 
 national prosperity so much boasted of, 
 and requires to be supported by addi- 
 tional money or representative signs, as 
 forming a component part, which can- 
 not possibly be dispensed with. 
 
 The obscurity in which this subject 
 has been hitherto enveloped, may be justly 
 attributed to Philosophers having applied 
 speculative reasoning to a mathematical 
 
 subject. 
 
 They constantly neglected to trace 
 the mathematical operations of taxation, 
 which would have rendered the subject 
 perfectly intelligible, and confined them- 
 selves entirely to the simple idea, that 
 every thing became dearer on money 
 becoming plenties
 
 OF EQUIVALENTS. 231 
 
 Every investigation will, however, 
 prove the contrary to be the case, from 
 the diminu'.ion which takes place in the 
 rate of interest. 
 
 The number of objects to be re- 
 presented, are also so much increased by 
 a circuitous process, under the influence 
 of this diminished rate of interest, that 
 the additional quantity of money, or re- 
 presentative signs, brought into circula- 
 tion, as well as that which is saved in 
 the representation of all objects at their 
 diminished money- value, is thereby com- 
 pletely absorbed. 
 
 In this manner does one part of 
 the money system answer to the other 
 part ; so that plenty of money produces 
 plenty of all objects ; and as plenty of 
 money causes a lower interest, or price 
 to be given for it, so docs plenty of 
 all objects occasion a lower price to be 
 given for these objects, without any in-
 
 2*3 THE DOCTRINE 
 
 justice being done to the industrious pro- 
 ducers: for, in the same manner as the 
 effects of any machine will be in pro- 
 portion to the diameter of its wheels, so 
 is the quantity of industry in proportion 
 to the quantity and movement of money, 
 or representative signs ; and the price of 
 such industry, when divested of taxes, 
 in proportion to the price or interest of 
 muney. 
 
 Such is the course of nature, when 
 not interrupted in its proceedings by 
 money-taxes. 
 
 Let it for the present, then, be 
 ti'.en for granted, that I have truly ex- 
 plained all the intricacies of the perni- 
 cious effects which arise from taxation, 
 and that I have proved the price of 
 money to consist solely in the rate of 
 interest; while the money price of any 
 object- is the measure due to it, as the 
 interest of all the combined capitals
 
 OV EQUIVALENTS. 133 
 
 employed to produce it, with the ad- 
 dition of taxes and their effects, nnd that 
 the price of gold and silver is merely 
 the relative value of one metal with the 
 other. 
 
 With these fundamental principles 
 to guide our enquiry, we can be at no loss 
 to discover how there arose so much finan- 
 cial distress by levying the yearly wants 
 of the public through money taxes only 5 
 as well as the consequent necessity of 
 resorting ultimately to the funding or 
 loan system, which was so reluctantly 
 pursued, although so salutary in its ef- 
 fects. 
 
 The imperfection of our loans in 
 their construction, is another object 
 which claims our particular attention, 
 and arises from the ignorance of man- 
 kind respecting their self- extinguishing 
 principle. 
 
 In admitting, then, that the interest 
 P 5
 
 334 THE DOCTRINE 
 
 of all loans is subject to certain bounds 
 for its period of existence, without reim- 
 bursement, that the fatal consequences 
 of taxation are a less mass of industry 
 than would otherwise exist, and that we 
 subject ourselves to a less produce from 
 each tax, as well as to an increase in 
 the price of all things, and consequently 
 in our public expenditure, there can be 
 no doubt, that the true system of finance 
 must consist in such practical opera- 
 tions as will check, in the greatest pos- 
 sible degree, these pernicious conse- 
 quences, and procure, at the same 
 time, all the necessary supplies for the 
 State. 
 
 How easily would this object have 
 been attained, had Government enacted, 
 on the introduction of money- taxes, that 
 Io?ns should annually take place for the 
 whole of the public expences, and that 
 the interest of such loans should be the 
 , only object of money- tax es.
 
 OF EQUIVALENTS. 335 
 
 Such a system would have proved 
 adequate to the highest expectations that 
 could have been formed of it, and would 
 have had the certainty of endless dura- 
 tion, supposing no revolution took place 
 in the Government, by which public 
 credit could be injured or annihilated 
 for a time. 
 
 The funding system, therefore, con- 
 structed on self-extinguishing principles, 
 is the most advantageous, solid, and just 
 plan for raising the public supplies ; and 
 ought in the very first instance to have 
 taken place for the peace-establishment 
 as well as for the war-expences. 
 
 Supposing the interest, at that time, 
 to have been 15 pr. cent. pr. annum, it 
 would still have taken near 7 years to 
 have brought the amount of taxes re- 
 quired for the interest of loans, to what 
 was really levied the first year by a 
 CQiitfary system.
 
 2^6 THE DOCTRINE 
 
 The second, third, and further 
 years, would have had the advantage of 
 a rapid declension in the rate of interest^ 
 by the adoption of this plan. 
 
 The progress of industry, and the 
 growing produce of each tax, would then 
 have assumed a very different appearance 
 than what really took place at that re- 
 mote period; and the price of every 
 thing, as well as our public expences, 
 would have been kept down in such a 
 manner, as would hardly now be credited- 
 
 The taxes levied for the interest of 
 loans during 65 a ?o years, would have 
 formed an axis for the financial machine, 
 upon which it might have perpetually 
 revolved, whether such loans were foun- 
 ded on long annuities ceasing after a cer- 
 tain period, or on perpetual annuities re- 
 deemable at pleasure, and, after reduc- 
 tion of interest, ultimately extinguishable 
 by conversions., as has been already ex-
 
 OF EQUIVALENTS. 237 
 
 plained: the last-mentioned would evi- 
 dently have been preferable to long an- 
 nuities, while interest remained so very 
 high. Industry would then have been 
 no more subject to any check from new 
 taxes, and the price of every object pro- 
 duceablein Great Britain, would have been 
 no further increased from that cause. 
 
 The first loans would doubtless 
 have been subject to cue highest inte- 
 rest ; but, on their reduction to a lower 
 rate, there would have arisen a pro- 
 vision of interest for further annual 
 loans. 
 
 Three grand resources would have 
 been operating together, during those 
 f o years, in which the financial machine 
 was to be compleatcd for perpetual dura- 
 tion, if the Government was not anni- 
 hilated at one time or other. 
 
 i . The progressive increase of industry,
 
 $38 THE DOCTRINE 
 
 and consequently of the produce of exist- 
 
 ing taxes. 
 
 2. The power which Government 
 possessed of raising yearly 3 new tax 
 for the interest of loans. 
 
 3. The gradual reduction of inte- 
 rest, by paying off the loans at high in- 
 terest, when the rate became lowered. 
 
 These annual loans would naturally 
 become at first greater, in consequence 
 of so many years accumulating taxes, and 
 of the high interest of loans increasing 
 the price of every object, as well as the 
 pubhc expenditure. 
 
 It is however probable, that a con- 
 siderable number of the 65 or 70 years, 
 would have passed without laying on a 
 new tax for the interest of the annual 
 loan, because the natural increase upon 
 m established number of taxes, and the
 
 OF EQUIVALENTS. 339 
 
 I 
 
 reduction from high to low interest, 
 would have been more than sufficient for 
 the annual loans during peace. 
 
 We must indeed detach from our 
 ideas of the annual wants of the Public, 
 either for a peace or for a war-esta- 
 blishment, the scale of their present mag- 
 nitude, as it is no ways applicable to 
 the price of every thing for the first 
 70 years after the introduction of money- 
 taxes; and the low prices which then 
 really existed, would not have acquired 
 even that height, if the idea of making 
 loans had originated at the same moment 
 as that of taking taxes in money, and 
 that the latter had also been solely con- 
 fined to the interest of loans, and to the 
 Civil List, as an annual debt due to tL« 
 Crown. 
 
 Unfortunately for mankind, the rys- 
 tern of public debts was adopted some 
 centuries too late; and the present high
 
 240 THE DOCTRINE 
 
 price of European productions, as well 
 as the actual incapacity of many States 
 to raise money, have originated from 
 that circumstance, and from the general 
 ignorance respecting money, and money 
 taxes. 
 
 Great Britain has hitherto supported 
 the increase of taxation, by means of 
 her increasing industry, her insular situa- 
 tion, her superior constitution of go- 
 vernment, and her mechanical improve- 
 ments, which have procured her many 
 advantages over other nations. 
 
 Whenever she could not obtain, by 
 the balance of her foreign trade, the 
 necessary augmentation of representa- 
 tive signs, in order to support her in- 
 creasing industry, and her foreign ex- 
 pences in times of war, as well as 
 the consequences of her accumulating 
 taxes, she has never failed to acquire it 
 by her punctuality in all money con-
 
 OF EQUIVALENTS. 241 
 
 cerns; and consequently by her credit, 
 from the individuals of other nations, 
 through her public loans. 
 
 These purchases in our funds have 
 been carried to such lengths by foreigners, 
 that at this moment they have claims 
 nearly equal to all the circulating coins 
 of Great Britain. 
 
 However alarming this claim may ap- 
 pear 5 yet it is far from being so in reality, 
 because any attempt to sell a considera- 
 ble part of the public funds, in order to 
 receive the amount in coin or bullion, 
 would reduce the price of Stocks so 
 considerably, as to make Foreigners desist 
 from further proceedings of that kind. 
 
 The possibility of raising money by 
 loans, was probably, on account of the 
 ignorance of mankind., treated as chime- 
 rical some centuries ago, as well as the 
 possibility of having a never- failing 
 paper-money^ or Bank-notes, in circula-
 
 «42 THE DOCTRINE 
 
 tion, yet we see that both have taken 
 place, and that Great Britain could not 
 have existed without them. 
 
 But the progress of truth has, in 
 all ages, been impeded and even opposed 
 by those men who had the greatest re- 
 putation for wisdom. 
 
 This cannot arise from their want 
 of capacity for investigation, and can 
 only be accounted for by the bad ef- 
 fects of early prejudices, or to their 
 want of candor in adopting the disco- 
 veries and superior combinations of those 
 who do not enjoy the same reputation 
 for wisdom. 
 
 The resistance which the Copernican 
 System experienced by a tenacious adher- 
 ence to the erroneous ideas of Ptolemy, 
 affords a strong proof of this predilection 
 for received opinions, and should be a 
 warning against implicit confidence in men
 
 OF EQUIVALENTS. Hj^y, 
 
 of reputation, who are peculiarly endow- 
 ed with the gift of writing or speaking. 
 
 Mathematical truths must, indeed, at 
 last prevail over all difficulties or resist- 
 ance; and with whatever indifference 
 my ideas on finance may be at present 
 received, the time is not very distant 
 when necessity will call for their being 
 partially if not completely adopted, as the 
 only means left for saving the nation from 
 ruin, and healing those wounds which the 
 errors of Statesmen have given to the 
 financial sinews of Great Britain, and to the 
 peace of many families of small income. 
 
 The inconsistency of the human un- 
 derstanding, in reasoning upon public fin- 
 ance, and in supporting the plan of a sink- 
 ing fund, is inconceivable. 
 
 We complain of the national debt, 
 
 because the interest must be annually 
 
 paid by taxes. 
 
 Q 2
 
 244 THE DOCTRINE 
 
 Taxation is of course the disease we 
 are labouring under ; and we wish to get re- 
 lieved from a part, because we think that 
 it is gradually undermining the State. 
 
 But the mode in which taxes ope- 
 rate to the detriment of a nation, is 
 never considered or examined into, 
 although it is the only means of acquir- 
 ing a knowledge of what would operate 
 either as a cure, or as a partial relief. 
 
 We confine ourselves, on the con- 
 trary, to the popular idea that, by creating 
 a sinking fund, in order to pay off the 
 national debt, the interest, or the disease, 
 will of course cease. 
 
 Infatuated human nature! Is it 
 not evident, that the sinking fund, raised 
 by taxes I and the supplies raised by taxes 
 within the year, in order to avoid loans, 
 are not only the self -same disease as 
 the interest raised by taxes ? of which so
 
 OP EQUIVALENTS. ?45 
 
 much is complained, but also a dreadful 
 aggravation of twenty times as much as is 
 either attempted to be cured or avoided 
 by these operations for suppressing an- 
 nual interests! 
 
 The pretended cure, as well as the 
 precaution of avoiding any further disease 
 of interest on loans, by raising the supplies 
 within the year through taxes, are con- 
 sequently mere delusions of the human 
 brain, which lead to the most fatal con- 
 sequences. 
 
 We cannot even boast of the ulti- 
 mate relief which must ensue, when a 
 part of the debt is extinguished, and 
 that the sinking fund taxes, as well as 
 others to the amount of the interest re- 
 deemed, will be taken off, as the politi- 
 cal body will be reduced to a dreadful 
 state of debility by this important aggra- 
 vation of the disease during so great a 
 number of years. 
 
 Q 3
 
 2-p THE DOC THINE 
 
 By this state of debility, must be 
 understood the enormous prices of every 
 ■thing, and the consequent increased an- 
 nual expence, without any adequate 
 income. 
 
 Fatal symptoms of declining indus- 
 try, and even of insurrection, may also 
 appear, and become incurable, before 
 the period of relief arrives. 
 
 T.et us then reflect on the subject 
 before it be too late., and commence by 
 immediately delisting from that desperate 
 expedient of a sinking fund. 
 
 It is evident, that no good can pos- 
 sibly arise from it, and the act of aban- 
 doning this unfortunate and erroneous 
 system will insensibly lead us into all 
 the paths of financial wisdom. 
 
 The dread hitherto experienced re- 
 specting an ever-increasing and eternally
 
 E EQUIVALENT S. Htf 
 
 existing debt is now entirely removed 
 by a knowledge of the practicability 
 of making those debts completely extin- 
 guishable after a period of 60370 years, 
 or reduceable in their interest -in pro- 
 portion to the reduction which might 
 take place in the annual income or 
 price of money, with the possibility of 
 ultimate annihilation by repeated con- 
 versions. 
 
 As our ancestors have most undoubt- 
 edly deviated from the true principles 
 of finance, on the introduction of mo- 
 ney-taxes, and that every succeeding ge- 
 neration has thus been involved in greater 
 expences, in greater debts, and in grea- 
 ter difficulties, it becomes our immediate 
 duty to check and to mitigate those 
 evils as much as lays in our power, by 
 the most extensive adoption of the grand 
 panacea, called public Loans, wherever 
 their application can be substituted for 
 an annual levy in taxes. 
 
 Q4
 
 248 THE DOCTRINE 
 
 This substitution will at once reduce 
 such part of the disease to about one-twen- 
 tieth of what it would otherwise be. 
 
 No nation can possibly dispense 
 with that degree of taxation which is ne- 
 cessary for the annual interest of all 
 loans, because the annuity must rest 
 en the increased value, and of course 
 on a component part of the money-price 
 given for the objects annually taxed for 
 that purpose. 
 
 The annual settlement on the Crown, 
 as well as some other inferior annual 
 settlements, should also repose on the 
 same security. 
 
 Great Britain is no doubt sufficiently 
 capable of providing for the interest of her 
 national debt, and for those annual settle- 
 ments by means of taxation ; and it would 
 even be a matter of great consolation 
 to the Nation, that this annual interest was
 
 Olf EQUIVALENTS. C49 
 
 gradually diminishing from a proper con- 
 struction of the public debt, than by 
 means of further taxation, because an 
 additional annual fund would be then 
 naturally arising, in order to provide for 
 the interest of new loans* 
 
 V 
 
 But as the interest of this public 
 debt has become so very considerable 
 from the erroneous system of finance 
 which has been hitherto , pursued, and 
 that the improvident construction and 
 present form of those debts admit of 
 very little extinction by natural means, 
 we are called upon not to admit of any 
 aggravation to the disease of taxation, 
 when it can possibly be avoided. 
 
 This leads me to state that the pe ice- 
 establishment might also be raised by 
 loans in the same manner as the war- 
 expences. 
 
 It would be absurd to suppose that
 
 «5 d THE DOCTRINE 
 
 there was any necessity for levying the 
 expences of the army, the navy, and of 
 the miscellaneous services during peace, 
 in any other manner than the war ex- 
 pences with which they are often blen- 
 ded, as the regular payment of the ob- 
 jects furnished, is all that requires to be 
 attended to, and the Nation has of course 
 the right of raising the money in such 
 a way as may be found most beneficial 
 to the whole community. 
 
 The true principles of finance there- 
 fore, as well as the necessity of reducing 
 the disease of taxation to the lowest pos- 
 sible state, demands that the expences of 
 the peace-establishment be provided for 
 by annual loans, instead of taxes within 
 the year, in the same manner as dire ne- 
 cessity has already called for the provi- 
 sion of the war-expences. 
 
 How fortunate then for the inha- 
 bitants of Great Britain, that the very
 
 OF EQUlVALENTi. 25! 
 
 simple combination of self- extinguishing 
 loans can still be applied as a substitute 
 towards relieving us from that part of 
 our present taxes, which form a provi- 
 sion for our peace-establishment, and that 
 no substitute whatever is necessary for 
 the present amount of our sinking-fund 
 whenever its destruction is resolved on. 
 
 Supposing the former to be 5 mil- 
 lions and the latter 6 millions, it follows 
 of course that the nation may be imme- 
 diately relieved of 11 millions of annual 
 taxes ; though prudence will, no doubt, 
 suggest its being done gradually, in or- 
 der to avoid any bad consequences from 
 too great and too sudden a change in the 
 relative value of every thing. 
 
 To supply the wants of 5 million 
 annually for the peace -establishment, 
 an annual loan to the amount gradually 
 taken off, mus>t necessarily be resorted to.
 
 253 THE DOCTRINS 3 
 
 The annual interest on each year"* 
 loan, when fully taken off, may be cal- 
 culated on an average at 4 pr.cent. or 
 £ 200,000 sterling. 
 
 That additional charge, or accumu- 
 lating expence, every succeeding year, 
 will be found in the naturally growing 
 produce of the remaining taxes every 
 succeeding year. 
 
 This increasing produce in taxes has 
 been proved, in general, to be the effect 
 of an increasing importation of the me- 
 tals in Spain and Portugal, from whence 
 they are dispersed throughout Europe 
 to the most industrious nations, amongst 
 which Great Britain is so conspicuous. 
 
 But the act of taking off gradually 
 11 millions of taxes, being tantamount 
 in effect to the introduction of several 
 million sterling in specie, would produce 
 so rapid an increase of industry, and so
 
 OF EQUIVALENTS. £53 
 
 considerable a diminution in the price 
 of all things, that a further increased 
 produce in all the taxes would take place 
 annually, to the amount of several hun- 
 dred thousand pounds, independant of 
 what arose from the increase of the metals 
 and the whole n millions would be again 
 forth-coming in the course of a certain 
 number of years, on a lesser number of 
 taxes, by means of a more extensive in- 
 dustry. 
 
 The public expences for the peace- 
 establishment, would also be so much di- 
 minished by the reduced price of every 
 thing that a 4$ million loan, or even 
 less, would soon be substituted for the 
 5 million annual loan ; and as there 
 would be no use for the extraordinary 
 increase in the produce of taxes amount- 
 ing asabovementioned, to several hundred 
 thousand pounds sterling,evcry succeeding 
 year, until the whole elfect had taken 
 place, a tax or taxes might further be
 
 «54 X H £ DOC T K I N £ 
 
 annually taken off to a very great smount, 
 and particularly if the natural or ordi- 
 nary increase was equal to the interest 
 on the annual loans. 
 
 The distinction between the ordi- 
 nary and the extraordinary increase, will 
 no doubt be lost 5 as they must of course 
 appear blended together; but the ge- 
 neral excess will be easily ascertained. 
 
 The good consequences which would 
 arise from this plan, would be so nume- 
 rous, and succeed one another so rapidly, 
 as to astonish mankind, and make our 
 present system appear in that dangerous 
 and destructive lights which it so pecu- 
 liarly merits. 
 
 It may however be thought neces- 
 sary to put a part of our national debt 
 into a state of gradual extinction, in or- 
 der to secure with more certainty the 
 perpetuity of our financial resources, to
 
 OF EQUIVALENTS. $$$ 
 
 which the mode of making loans in the 
 3 pr. cents, during the two last wars, has 
 given a very sensible shock. 
 
 My readers will easily perceive, that 
 a conversion of the 3 pr. cents into a 
 70 years annuity, would nofafford a very 
 speedy relief, and that it therefore be- 
 comes necessary to convert a considera- 
 ble part, at kast, into a 4* a 5 pr cent, 
 fund redeemable at pleasure. 
 
 In this case, a part of the extra- 
 ordinary increase of the produce of 
 taxes, might be appropriated towards the 
 temporary increase of interest, from the 
 conversion, and will of course form that 
 sacrifice which is so necessary to be made 
 for our past errors. 
 
 The precaution of converting a con- 
 siderable part of the 3 pr. cents, into a 
 4* a 5 pr. cent, may perhaps not be ab- 
 solutely necessary towards the permanency
 
 25$ THE DOCTRINE 
 
 of our financial system, but the public 
 debt cannot with propriety be left in its 
 present state; and it behoves us to add 
 every sort of security, in support of a 
 fabric, which has been built upon very 
 unsafe principles, and to which no atten- 
 tion has been paid, until it was upon 
 the point of giving way. 
 
 The large sums of interest to be 
 provided for in times of war, present 
 themselves also for political consideration, 
 as the natural increase in the produce of 
 taxes is no ways adequate to such a 
 provision. 
 
 Hitherto the interests of war-debts 
 have been raised by new taxes ; but as 
 those times are not the most favourable 
 for such an operation of finance* it may 
 not be improper to allow the extraor- 
 dinary increase in the produce of the 
 taxes to accumulate to c$ or 3 millions, 
 during peace, and by applying it during
 
 OF EQUIVALENTS. r<7 
 
 that time to defray in part the peace 
 establishment, reduce thereby the neces- 
 sary annual loan of 4* or 5 millions in 
 proportion as that superfluity of produce 
 arose. 
 
 These 3 millions, in addition to the 
 annually growing produce of taxes, will 
 supply the interest of loans during war ; 
 and for any deficiency that might exisr, 
 some of the old taxes may be renewed, 
 until a peace takes place, when the grow- 
 ing produce of taxes will be again suf- 
 ficient for the interest of the loans to be 
 made annually for the peace-establish- 
 ment. 
 
 As there will probably, during that se- 
 cond period of tranquillity, arise some re- 
 ductions in high interest, or some extinc- 
 tion of annuities granted, an annual fund 
 may again be established, to be expended 
 in interest on loans during war ; and the 
 loans for the peace- establishment will, in 
 R
 
 358 THE DOCTRINE 
 
 consequence of this tinnual fund, be again 
 so much less. 
 
 I have now stated how far a nation 
 may go, with propriety and justice to all 
 parties concerned, in substituting loans for 
 taxes, and even how public loans may be so 
 constructed, as to disappear in the course 
 of a considerable number of years, with- 
 out any reimbursement of the capital, 
 or injustice to the money-lenders. 
 
 I only wish, however, to urge for 
 the present, the absolute necessity of 
 taking off taxes to the amount of the 
 sinking fund, and also the right which the 
 Public has to demand it from the Legisla- 
 ture, as a contrary system is so repugnant 
 to good sense, and extremely injurious 
 to the future welfare of the Nation. 
 
 This relief from taxation will alone 
 reduce, very considerably, our expences 
 below what they otherwise will be,
 
 OP EQUIVALENTS. aft 
 
 and occasion an extraordinary increase 
 in the produce of our taxes, suppo- 
 sing even a war to take place next 
 year. 
 
 This extraordinary increase, joined 
 to the ordinary increase, will pro- 
 vide for the interest of the loans in 
 the first years of the war; and when 
 that resource is exhausted, it will be 
 still expedient and practicable to avoid 
 new taxes, by encroaching on the an- 
 nual peace -establishment fund of 4f 
 or 5 millions, making of course the an- 
 nual war loan so much more as may be 
 expended in interest, until the war shall 
 cease. 
 
 For that part of the annual peace- 
 establishment C supposing even that it 
 amounted to almost the whole) which 
 might be thus consumed in interest of 
 loans during war, it will be necessary 
 to continue annual loans during peace, 
 R 2
 
 a6o THE J) OC TRINE 
 
 until the ordinary increase in the pro- 
 duce of existing taxes, the falling in of 
 annuities, and the probable reductions 
 in the interest of the loans made dur- 
 ing war, shall have again provided for 
 them. 
 
 On the supposition, however, that 
 the resources which I have enumerated 
 were not adequate to the exigencies of 
 the State, or that it was deemed politi- 
 cally expedient to have the deficient 
 part of the annual peace - establishment 
 immediately forthcoming from taxation* 
 recourse may be had to levying a cer- 
 tain annual sum in taxes, say 2 or 3 
 millions after peace is established. The 
 same mode of proceeding, as above sta- 
 ted, may again be followed during fu- 
 ture wars; and it is necessary to ob- 
 serve, that whatever disappointments 
 might occasionally arise, either in the 
 growing produce of taxes, in the reduc- 
 tions of interests during peace, or in
 
 ' I i E Q U I V ALEN T S. 2 ) I 
 
 " e of our public expences, that 
 it may it all times be provided for 
 through the mode which is now adopt- 
 ed; that is to say, by laying on new 
 ftOfcs, or by levying again some of those 
 -which were taken off, which every Go- 
 vernment hns the right as well as the 
 power to do. 
 
 It is evident, that the system which 
 I hive endeavoured to explain, destroys 
 m resource whatever ; but on the contrary 
 protracts, by a happy combination of 
 the' powers of money and of taxes, for 
 the interest of loans only, that accumu- 
 lation of burdens, which produce such 
 con Fusion in the economy of States, as 
 well as of individuals. 
 
 I am fully aware* that I have ap- 
 plied my studious hours to a very un- 
 grateful subject, of which few indivi- 
 duals will attempt an investigation; and 
 of which a mode] cannot.be made, as io 
 P »
 
 262 THE DOCTRINE 
 
 the case in mechanics, so as to convince 
 even the most ignorant man of its ef- 
 fects, without giving him the trouble of 
 examining tlie different parts by which 
 the whole is constructed, 
 
 I have however done my duty to 
 the Public, in communicating what know- 
 ledge I have acquired by reflexion and 
 deep meditation ; and if the inhabitants 
 of Great Britain persist in following a 
 system that leads to evident ruin, I can 
 only silently lament their infatuation. 
 
 They must not imagine, however, 
 that these principles are exclusively ap- 
 plicable to Great Britain, and that no 
 other nation can adopt them. 
 
 The principles I have explained 
 are applicable to the finances of all 
 countries, whatever may be the errors 
 which they have already committed.
 
 OF EQUIVALENTS. 263 
 
 Holland may be considerably re- 
 lieved in times of peace, although she 
 has bound herself to annual reimburse- 
 ments, which form a part of her an- 
 nual deficiency ; and this error can only 
 be repaired by new annual loans, on 
 proper principles, to the same amount, 
 on which a sacrifice for borrowing 
 with one hand, at high interest, to pay 
 off with another hand what was con- 
 stituted at lower interest, must natu- 
 rally ensue, because public credit calls 
 imperiously for the rigid performance 
 of all engagements which are entered 
 into. 
 
 This error proceeded from their 
 Statesmen supposing, very improperly, 
 that an obligation to reimburse was ne- 
 cessary to obtain the money wanted on 
 loan, or that a fractional part of the 
 annual interest would be saved by sub- 
 mitting to this inconvenience of reim- 
 bursement. 
 
 R 4
 
 26'4 THE DOCTRINE 
 
 It is in my opinion more excuse- 
 able than that of gratuitously paying off 
 without any obligation whatever to do 
 it, and at the rate of £ 140, or more, 
 for every £ 100 sterling received, as 
 will fake place in Great Britain ; though, 
 I must confess, that the impracticability 
 of paying off public debts has been self- 
 evident, in Holland, so long ago as 1795, 
 since which time this system has been 
 mostly adopted. 
 
 Holland is not even able to bear 
 her present taxes; and she will there- 
 fore be at last compelled to relieve her 
 inhabitants from the grievous oppres- 
 sion of paying annually, as a gratuitous 
 gift, 7 pr. cent, on their incomes, and 
 I pr. cent, on their capital, for the pur- 
 pose of specific reimbursements, and to 
 substitute, in lieu of it, annual and 
 voluntary loans, on proper principles, to 
 that amount, as well as for the remain- 
 ing annual deficiency.
 
 OF EQUIVALENTS. 06"5 
 
 The interest on the general annual 
 deficiency of, perhaps, 14 a 15 millions 
 of gilders in times of peace, would in- 
 deed appear to be an increasing annual 
 charge every succeeding year, which the 
 increase of her industry would probably 
 not be equnl to, nnd of course that the 
 additional annual interest would not be 
 forthcoming in the annual increased 
 produce of her taxes. 
 
 But the decrease of interest oh 
 her debt, which might, by a proper conr 
 struction, take place in afewyears, would 
 more than provide for it; and, by eco- 
 nomy in her annual expences, she may 
 even in part provide for this annual 
 interest on 14 a 15 millions aim mil loan, 
 particularly if she attends to the regu- 
 larity of her payments; as every irre- 
 gularity on this point produces a great 
 waste of public money. 
 
 If the East India Company, or i. ; 
 R 5
 
 266 THE DOCTRINE 
 
 settlements, and their commerce, could 
 also provide for the annual sum of 5 or 6 
 millions of gilders, which hpr debts and 
 her civil-establishment cost the nation at 
 present, the general deficiency would be 
 considerably diminished. 
 
 I consider her, however, as hardly 
 able to bear future wars, from the great- 
 ness of her debt, and of her expences, 
 as well as from her state of maturity, 
 with respect to internal industry and 
 external commerce, until the interest 
 of the national debt is considerably di- 
 minished by voluntary reductions, so as 
 to provide again for large annual loans 
 without new taxes. 
 
 Her breach of faith is also at pre- 
 sent much complained of, and of course 
 her credit much impaired, by taking 
 a mrzis, or not liquidating what was 
 due according to the obligation entered 
 into -with the Public, on taking over the
 
 OF EQUIVALENTS. 067 
 
 effects and engagements of the East 
 India Company, and confirmed by an 
 article of the Constitution of 1801, which 
 only required the sacrifice of borrowing 
 with one hand to pay off with the 
 other; and, like the first-mentioned re- 
 imbursements, demanded no very im- 
 portant new provision of interest. 
 
 It is to be hoped, that this sursis 
 will not degenerate into a permanent 
 act of bankruptcy, which would put 
 an end to all financial resources for a 
 very long course of time; as the in- 
 crease of taxes, either ordinary or ex- 
 traordinary, to any great amount, is im- 
 practicable, and the resource of public 
 credit cannot exist without justice. 
 Necessity must therefore ultimately en- 
 force fair-dealing, and repel the false 
 economy of a partial bankruptcy. 
 
 The financial situation of France 
 has never been an object of enquiry
 
 2(50 THE DOCTRINE 
 
 with me ; but I know that she has, in 
 imitation of the errors of Great Britain, 
 created a sinking-fund, of no great 
 importance indeed; though she hss 
 not bound herself to any reimburse- 
 ments since the act of bankruptcy 
 
 Which rpchirpd her debt to j Of its 
 
 amount. ' 
 
 An act of bankruptcy is no doubt 
 attended with serious consequences ; but 
 it must not be supposed, that the real 
 principles of finance do not afford the 
 means of 'repairing the machine, as the 
 sacrifice necessary, is only a very heavy 
 interest on the loans made for the first 
 years of diffidence, after a breach 
 of faith has taken place, and until 
 confidence be again restored. 
 
 These breaches of faith originated 
 from an ignorance of the true princi- 
 ples of finance; but a knowledge of 
 these principles will make it useless in
 
 OF EQUIVALENTS. H6 J 
 
 future, and they are of course no more 
 to be apprehended. 
 
 The French nation possesses so 
 many men of quick comprehension, and of 
 ready combination, that I have no doubt 
 they will make th© objprt of finance 
 their particular study, and discover that 
 such portion of their annual revenue 
 which is now applied to the interest of 
 their debt, is all that is required of the 
 nation in taxes, and that the remainder, 
 supposing it even 400 millions of francs, 
 might be annually raised by loans, pay- 
 able by instalments of 10 pr. cent, 
 monthly. 
 
 As England and Holland have al- 
 ready demonstrated the right and the 
 power to take 10 pr. ct. on every per- 
 son's income as a free gift, there can be 
 no shadow of doubt respecting the right 
 and the power of tacking to this bur- 
 den the current interest, so as to rtial
 
 27© THE DOCTRINE 
 
 it a favorable loan to those who are taxed 
 in this manner, should voluntary loans 
 not succeed. 
 
 But the French nation will na- 
 turally commence with loans for a small 
 part only, in order to be certain of the 
 practicability of this system; and will 
 gradually extend it more and more, 
 from the great prosperity which they 
 will find to arise from it, as well as on 
 account of the sensible diminution which 
 will take place in the ratio of interest 
 on their public funds, and in their ex- 
 pences, by the regularity of their pay- 
 ments, and by the diminished price of 
 various objects. 
 
 That they must now pay about 
 10 pr. cent interest for what they may 
 think proper to borrow, is mostly to 
 be ascribed to their having broke their 
 faith with their creditors; but the for-
 
 OF EQUIVALENTS. 0,^1 
 
 feit of increased interest will only exist 
 for a few years, if they attend to the 
 proper construction of their debts. 
 
 I doubt if their national interest 
 amounts to four millions sterling, in- 
 cluding that on arrears and on anticipa- 
 tion of revenue ; and as their former er- 
 rors and their past bad conduct, in break- 
 ing their faith, will in a few years be 
 repaired and effaced, they will have 
 many advantages over Great Britain, in 
 point of finance, since their taxes and 
 their debts will be both relatively and 
 positively much less. 
 
 Should both nations persist in fol- 
 lowing their present systems, they will 
 even ultimately be in the most favoura- 
 ble situation, because they are not fol- 
 lowing the system i f reimbursement to 
 any extent, and can at all times relieve 
 themselves from a great portion of their
 
 H7a T II £ DOCTRINE 
 
 present taxes, by substituting loans, either 
 voluntary or foreed, while we are bur- 
 dened with an immense debt, and are in- 
 volving ourselves in more taxes and 
 more expences, from our sinking-fund 
 system, to an enormous amount. 
 
 It will perhaps be said, that I act 
 improperly in talking so favourably, and 
 in so explanatory a manner, respecting 
 the finances of France: but it must be 
 considered, that the inhabitants of Great 
 Britain are kept in the dark upon this 
 subject ; that science is intended by Na- 
 ture to be for the benefit of all mankind ; 
 and that when a new and eligible system 
 is adopted by one country, it will natu- 
 rally be imitated in other countries. 
 
 The British nation has hitherto 
 neglected this science, and amuses her- 
 self with the paltry progressive increase 
 in the produce of her old taxes, as a
 
 OF EQUIVALENTS. 
 
 proof of her prosperity, and also with 
 the false idea, that the want of public 
 credit in France renders that nation in- 
 capable of any financial efforts. 
 
 This new system will therefore, 
 most probably, make its way first in 
 other countries, whose inhabitants have 
 not this increasing resource to amuse 
 themselves with, and be afterwards adop- 
 ted by Great Britain from dire necessity; 
 although it might have taken root there 
 eighteen years ago, and have produced 
 a very different political situation, with 
 respect to other countries, than at present 
 exists. 
 
 * 
 
 I shall now conclude with some 
 general observations, applicable to all 
 countries. 
 
 Every Government has the right 
 and the power to levy on the inhabitants, 
 by taxes or by loans, as may be fouu4 
 S
 
 3/4 THE DOCTRINE 
 
 most beneficial to the community, what- 
 ever may be necesssay for its internal 
 defence, and for its external attacks in the 
 case of war. 
 
 Loans are, in all cases, (except for 
 interest) to be preferred to taxes. 
 
 r 
 
 Those loans may be voluntary or 
 forced, at the current rate of interest, 
 without prejudice to any individual what- 
 ever ; and may be so constructed, as 
 to be subject to ultimate extinction in 
 the course of a given number of years, 
 without any greater burden in taxes 
 for the interest, than those levied in the 
 first 6$ ox 7° years- 
 
 These principles give the power of 
 establishing public finance with such 
 security., that it may move on its own 
 axis, as long as Government continues 
 to exist ; and be even continued under a 
 succession of governments, as long as 
 the world exists.
 
 OF EQUIVALENTS- 2.75 
 
 The resource of bankruptcy, by not 
 fulfilling every engagement, produces 
 ereater burdens and inconveniences than 
 it attempts to remove 5 and is the height 
 of injustice. 
 
 It acts, in the first instance, as a vio- 
 lently oppressive tax, solely upon those 
 individuals whom it injures; and, in 
 the result, becomes a very heavy tax 
 upon the whole community, by destroy- 
 ing public credit. 
 
 This is evident, in the depreciated 
 state of the remaining funds, and in the 
 high interest which a nation is afterwards 
 obliged to give ; both which circumstan- 
 ces are injurious to the whole commu- 
 nity, and particularly distressing to those 
 who are divested of their just claims 
 upon the Public. 
 
 It is therefore for the interest, as 
 well as for the honour of the Public, to
 
 2J$ THE DOCTRINE 
 
 submit to a general tax, in order to 
 avoid these consequences. 
 
 National bankruptcy, or national 
 incapacity, in point of finance, is of 
 course national nonsense; and takes its 
 rise equally with the financial distresses 
 of some countries., and the approaching 
 danger of others, from the want of a 
 sufficient knowledge of the subject. 
 
 FINIS.
 
 SUPPLEMENTARY NOTE. 277 
 
 Those Individuals who are not 
 disposed to enter into a full investigation 
 of the degree of credit, which may he 
 due to the foregoing reasoning on all the 
 points, which are there discussed, may 
 confine themselves to a general consi- 
 deration 0? Fiscally wd Finance, other- 
 wise called Taxes and Leant, which are 
 the only means, hitherto known, of rais- 
 ing the necessary supplies of the State. 
 
 Jhc first may be denominated by 
 the inhabitants, giving away ; and the last 
 only granting a mortgage, in order to 
 retain the sum wanted by consenting 
 to give the annual interest. 
 
 This annual Interest is equally | 
 amy in the firstmentioned case, a £5 PF- 
 annum is lost upon every £ 100 given. 
 
 The question resolves itself there- 
 fore into the certain fact, that the 
 inhabitants of every country can afford 
 to grant new mortgages, as long as the} 
 can afford to give an additional aid,
 
 2?o SUPPLEMENTARY NOTE. 
 
 This puts at rest the idea constantly 
 suggested of incapacity in a Nation to 
 boi row continually for the Public wants, 
 as the only alternative, that of giving con* 
 stantly, is liable to the same objections: 
 what remains therefore to be discussed is, 
 which of those modes of raising the sup- 
 plies is the least burthensome to the in- 
 habitants, and mostprofitabletothe State. 
 General ideas will sufficiently elu- 
 cidate this, without even taking into 
 consideration the possibility of diminish- 
 ing, and even annihilating ultimately? 
 the interet of every Loan, which effec- 
 tually prevents a constant increase of 
 burthen in interest, as stated in Chap- 
 ter V. 
 
 If an Individual then retains £ 100, 
 and is only taxed fur £5 annually, he can 
 by his Industry obtain annually more than 
 these £5. He is consequently enabled to 
 consume mere objects, end increases 
 thereby the produce of existing taxes 
 more by that mode of granting the sup-
 
 • UPPLEMENTARY NOTE. 2?C> 
 
 plies than by giving the £ ioo Which 
 would deprive him and the State ra- 
 dically of those advantages. 
 
 There can also -be no doubt that 
 a tax for j£ ioo will increase the price 
 of various objects much more than a tax 
 for £ 5 annually for the interest of/" ioo. 
 
 This mode, of raising the supplies 
 and the sinking fund by taxes, occasions 
 of course a much less general consump- 
 tion of every article from their increased 
 prices, and of course a less annual pro- 
 duce of existing taxes 3 than would be 
 the ca c, if these supplies were raised by 
 loans* and the inhabitants subjected only 
 to a tax for the interest. 
 
 The former mode increases also by 
 the same means the expencesof the State 
 much more than the latter would do; 
 and this additional expense, frum clear- 
 ness, becomes a further b-.uthen on *he 
 
 ; c, which must again be raised by 
 taxes or by loans. 
 
 T 2
 
 £8o SUPPLEMENTARY NOTEi 
 
 Unfortunately k is impossible to 
 ascertain fully all these results by any 
 other mode than that of reasoning, be- 
 cause the two systems cannot be tried 
 at the same time, and of course under 
 the same given circumstances, so as to 
 learn by experience the degree of ef- 
 fect which arises from each. 
 
 This is also the case with the sup- 
 posed depreciation of the public funds 
 by the non-existence of the Sinking 
 Fund,and by constantly borrowing, instead 
 of taking by taxes, the necessaiy sup- 
 plies, respecting which a reference to 
 Chapter V is particularly required. 
 
 Feurs and prejudices *nay no doubt 
 produce a temporary depression ; but 
 the ease in money matters, which indi- 
 viduals would enjoy by Government 
 avoiding taxes 9 must produce the most 
 salutary effect on the general rate of 
 interest, and on the price of the pub- 
 lic Funds.