LI B RA R.Y OF THE UNIVER.S ITY OF ILLINOIS e>&7S v. 17 A SERIES OF LETTERS ON THE CIRCULATING MEDIUM OF TJie British Isles; ADDRESSED TO THE EDITOR OF THE ROYAL CORNWALL GAZETTE, AND IN TBS NUMBERS OF THAT PAPER For November 28 — December 12 — and December 19, 1818: WHEREIN IS LAID BEFORE THE PUBLIC A Plan for a General Reformation of the present vicious System of the Currency on a principle that, with entire deference to its decision, the Writer hopes will appear on considera- tion at once safe, simple, and efficacious. TRURO: PRINTED AT THE ROYAL CORNWALL GAZETTE OFFICE, BY F. SIIOBERL* 1819. ERRATA. The Reader is requested to make the following corrections and additions -. — Page 8, Hue 19, after insuring, omit the word at and insert a comma. Page 15, line 2, for the silver currency, read the proposed silver currency. Page 17, line 3, after the word same insert time. Page 28, line 16, for large read larger. 29, line 28, after revenue, insert and to trade. •line 25, after advantage, insert to the State. Page 34, line 15, for its read the, and after use, insert of gold bullion. Page 35, line 17, for exportation, read re-exportation. Page 36, line 5 from the bottom, for greater, read superior. Page 37, line 1, after evident, insert, ds observed in a former letter. Page 39, line 12, for one-fourth, read one and one-fourth. line 23, after with insert a. LETTERS ON THE Circulating Medium. LETTER I. Truro, Friday, Nov. 20, 1818. Sir, Every feeling and reflecting mind has long lamented the evils arising to society in this country from the state of the paper currency; to remove or palliate which various remedies have been proposed, all of which have been judged unfit to be adopted as containing some radical defect. A general recal of the Bank of England notes, and the issue of other notes for £5 each and above, executed with greater care, to replace those of the same denomination now in circulation, and of gold coin to replace the smaller notes, would doubtless be an effectual check to the prevalency of forgery ; but the gold coin continuing to be issued of the same intrinsic value and of the same relative value as compared with silver as at present, viz. the gold in the sovereign being continued, on the average of the market rates of gold and silver, worth as much as the silver contained in 20 shillings; it will be •bvibua that a variation in their relative market A prices must frequently offer inducements for melting down or exporting gold or silver coin as either uncoined gold or silver rises in its relative market price. Suppose by a variation in the market the gold in the sovereign becomes worth 24 shillings, (and we have known it higher) it can still pass in this country but for 20. What is the conse- quence? Why, one hundred pounds worth of uncoined gold may be brought from other countries and exchanged in our markets for one hundred sovereigns or one hundred and twenty pounds worth of coined gold, (as long- as the latter continue in circulation) and our gold coin will presently be melted down, or exported to countries where it is valued by its intrinsic worth. Thus a main branch of our currency will disappear; in replacing which the revenues will lose £20 per cent, besides the expences of the coinage — tolies quoiies — and if the foreign merchant is the speculator, this loss to the revenue is in no degree counterbalanced by any gain to subjects of the realm ; the im- provement of whose estates might .otherwise promise some future return in taxes, &c. A rise in the relative value of silver would offer, as I before observed, similar inducements for melttng down or exporting silver coin ; but the greater waste in the melting it, and the great- er weight and bulk of a given sum attempted to be exported, would both lessen the tempta- tion and increase the difficulty, expence and risk to the speculator; be more easily guarded against by the government ; and be attended with infinitely less eventual loss to the country : I shall therefore think it unnecessary to say more on that head at present. But to remedy the evils occasioned by a supposed rise in the relative value of gold, whilst gold coins retain their pre- sent intrinsic value, a reduction of the intrinsic value of the sovereign to 18 shillings has been proposed. It will be well therefore to consider what would be the probable consequence. Without some provision to counteract the natu- ral tendency of this measure, a general depretia- tion of the currency must ensue ; whilst the supe- rior intrinsic value of silver coin relatively, on the average of the market prices of silver and gold, would, on any unusual rise in the value of the the former, offer a dangerous encouragement to speculators, and such as might obviate all ob- jections and difficulties as to the melting down, or exporting that part of our coinage. We have then still to find some expedient that may, on the one hand, reduce the existing la- mentable temptations to forgery, and on the other to the exportation or the melting down of our coin ; and at the same time guard against the incalculable evil of a general depreda- tion of our currency. Without presuming to 6 say that I have discovered this most desira- ble expedient, the importance of the object is such that I beg your permission to lay before the public, through your paper, some ideas on the question. My suggestion will have at least this recommendation to attention, namely that it is simple in the extreme ; and supposing it to be suitable to the end in view, it will only be surprizing that so obvious an expedient should hitherto have been overlooked by so many hu- mane individuals, infinitely more likely than the writer of this to have hit upon it. Instead oj cither silver or gold coin, let a certain weight, say that of the present sovereign, in uncoined gold of the same degree of fineness, be the standard. Government might then, 1 con- ceive, reduce the intrinsic value of every deno- mination of its coin without risk of depretiating its current value in the domestic market, to which alone we wish to confine its circulation, and might derive a profit of 3 or 4 shillings from the coinage of each sovereign, and a propor- tional one on all its silver coin ; the greatest that I should suppose could be thence derived with- out giving too great encouragement to the frau- dulent imitation. Consequently, sovereigns of the intrinsic value of, say 16 shillings, and shil- lings of the intrinsic value of 1 G-20ths of their in- trinsic worth, will be Government Tokens; of which 20 of the latter should be convertible into ©ne of the former; and of these again 5 into a Government£5 Note— and one hundred of them, or Government Notes of the. same nominal value, into a weight in gold equal to one hundred sove- reigns of the present currency, and of the same degres of fineness, either at the Bank of England or at some Office to be established for that pur- pose by Government. In such circumstances a rise in the value of gold will cause a similar rise in the value of the gold coin or tokens, for the home market, without subjecting the country to risk of loss by either domestic or foreign specu- lation. For, whereas the sovereigns, when in- trinsically worth 20 shillings each on the average prices of different markets for uncoined gold, might by a turn of the market price become intrinsically worth 24 shillings, and could yet pass there legally but for 20 shillings, and might perhaps be bought in exchange for foreign mer- chandize at that rate, and to any amount, and exported at a loss to this country of above 20 per cent. : by the proposed change in the cur- rency, &c. the sovereign, intrinsically worth but 16 shillings, being legally and readily convertible into a certain weight of uncoined gold, would, at the same supposed rate of uncoined gold in the market, purchase in all the greater domestic marts the like quantity of foreign or home pro- duce as the weight of gold thereby represented would have purchased, viz. 24 shillings woith. 8 This question, as it migjit affect the relative concerns of Government and the Bank of England, would probably involve no very great difficulties, and the latter might be made sub- servient to the proposed arrangements. But I do not propose entering into minutiae, meaning to confine myself to suggesting the idea of making a given weight of uncoined gold, the standard, and to make the currency consist of counters of sufficient intrinsic value, and of such superior execution as to discourage fraudulent imitators, and at the same time, on the average of markets, so much below their nominal value as to leave little probability of their becoming at any time an object with speculators, either for melting down or exportation, thereby secu- ring the circulating medium from depretiation, and yet more from the annihilation to which it is at present exposed ; and insuring at a compara- tively trifling consideration indeed, a large im- mediate profit in seignorage to the Crown. I am, &c. _ Y. Z. LETTER II. Tuesday, Nov. 24, 1818. Sir, As the plan laid before the public in my letter addressed to you on Friday last, may, in the opinion of some, require farther development, aud is doubtless open to some objections, I have thought it right thus to solicit your attention to a farther discussion of the subject in a second letter, wherein I shall enter more into detail and endeavour to answer such objections as I can anticipate. It might, on a slight view of the question, be thought that, were it not for the temptation such step would hold out to the fraudulent imitation of that branch of our coin- age, a greater reduction of the intrinsic, as com- pared with the nominal value, of the gold coin, might be desirable than that I there suggested, since it is well known that guineas were, dur- ing a certain period of the late war, bought up even at 30 shillings each ; privately indeed in England, but openly in Ireland (where no law opposed it) till they were wholly withdrawn from circulation in both countries. But on far- ther attention to the principle of the proposed system, it will be seen that the relative value of the gold, silver, and paper currency under it will be subject to no fluctuation, and that the perma- nent circulation of the former will be fully secur- ed by any reduction of its intrinsic, below its re- presentative value, that shall make it worth while to exchange it; (for which object the proposed reduction of 20 per cent, would amply suffice) so that no possible rise in the value of uncoined gold as compared with silver, could endanger the circulation of the gold counter on the one hand or 10 the preservation of the relative value of the silver counter on the other; 20 of the latter being origi- nally supposed convertible at option into one of the former ; and these again by an easy process into uncoined gold, of 20 per cent, greater in- trinsic worth. The relative rise of uncoined gold above silver would consequently cause a general advance in the value of the currency, of whatever denomination (silver inclusive), as compared with uncoined silver; and the solven- cy of the Bullion Bank being undoubted, no con- siderable run on it is to be apprehended, for the counters and bills will, from their superior con- venience, be always preferred for domestic com- merce, and the merchants will gladly take them in payment at the legal rate for any gold bul- lion in their possession not wanted by themselves for exportation ; whilst the Government Bul- lion Office might advantageously re-issue a part, of the counters and notes, received there on any unusual demand for gold bullion, in the purchase of silver bullion; which proceeding would at the same time tend towards a resto- ration of the usual relative value of the precious metals, and to an economical mode of provid- ing materials for a future silver coinage. Mean- while it will be evident, that gold will in no shape leave this country but for its full intrinsic Value. It may indeed be justly objected against a minor branch of the proposed plan u (though I think ivith little weight) that should silver rise more than 20 per cent, above what is considered its average relative value to gold ; or in other words, should the silver contained in 20 of the proposed shilling counters at any time, by a turn of the market, become worth more than the quantity of uncoined gold for which they might legally be exchanged at the Bullion Bank ("and the rise of 30 or 40 per cent, in the relative value of silver would seem as probable as a similar one in that of gold, and it has been already observed that the latter, at a not very distant period, actually did rise nearly 45 per cent, in the comparative scale :) in such event, 1 say, it might be objected that in pro- portion to such excess of value, there would be temptation to the cupidity of speculators and danger of the silver coin being melted down or exported. I must acknowledge, that I know not how the evil of this supposed case can be obviated without running into afar greater* It is true that the currency being proposed to consist of legal pledges readily convertible into the ralue they represent, it might in any, or in every branch, equally, as already in the bills, be made totally devoid of intriusic worth and yet remaiu secure from depretiating, in domestic cir- • 1 had but just sent the above Letter t* its destination YiheR 1 perceived that this admission should be qualified : as the reader will set in his per uial of Letter tho Third. 12 dilation below its nominal value: but in re- ducing the gold and silver currency 20 percent, below the average value of the portion of gold re- presented by them respective! y, all danger as I have already said to the permanent circulation of the former seems to be obviated, and this comparatively small one to that of Me latter had, I think, better be risked than attempted to be re- medied by an expedient that, hy temptation to coiners, might give birth to as many crimes as those it was a main object of the proposed sys- tem to suppress. The reduction, therefore, in the intrinsic value of either the gold or silver currency should not, 1 think, be more than 20 per cent, and that of the latter, with a view to its probable preservation, cannot well be less : a less reduction, however, of the gold coin would, I suppose, suffice to secure the perma- nency of its circulation, should it be judged requisite for the greater discouragement of illegal imitation ; but when it is recollected that the temptation to such imitation in base metals will be nowise affected by a reduction in the size of the coin, and that besides, an apparatus not easily concealed and a capital will be ne- cessary to enable the illegal coiner to issue a coinage in genuine gold (which alone can long evade detection whatever skill may have been exercised) I should doubt whether it would be desirable to weaken in the slightest degree the. 13 securities for the permanent currency of that principal part of the coinage, and to sacrifice in the proposed new coinage the established rule of keeping to the average proportional value iu t he gold and silver c u rrency, * for a d anger which will be very small compared with the existing ones arising from the facility of forging the small- emotes. But this will be a matter for consi- deration where the subject will be better under-^ stood, and where every change in the present system must originate. The intention of calling in the aid of eminent skill in various branches of the arts for the fabrication of Bank Notes will do much for the security of the greater bills, which will not only from their superior execution be more difficult to imitate but from their currency being chiefly confined to the more opulent and better informed classes will more projjabJy thus find protection in the greater qualifications of those classes for detecting imposition ; and wheu it is further considered that their higher repre- sentative worth will naturally direct the receiv- er's attention to a proportionably stricter ex- ♦ Were gold coin made the standard, my Fourth Letter will •hew that I consider a reduction in the relative intrinsic value of its representative parts in the silver coinage as necessary to prr- lervc them to the circulation, in the event of a rise in favour of silver bullion as compared with gold bullion in the market price. But this even then could not sately exceed 20 per cent, on account of the temptation a greater reduction would hold out to the illegal coiner — and a reduction to that amount being in the pro- posed system meant equally for every branch ot the coinage, the average relative proportion of their intrinsic lvalues would in the latter case be still preserved. 14 amination of them, that branch of the currency may be considered as in a train for being satis- factorily secured ; I shall only add that should these suggestions be in any degree a means of leading to an equally effectual remedy of the existing defects in the system itself, and in the other branches of the currency, a great national object will have been attained; and (loyalty apart) every humane person would partake in the satisfaction at so great a check to crimes and punishments, that would be felt by Yours, &c. Y.Z. LETTER III. Wednesday, Dec. 2, 1813. As tfry communication to you by last Wed- nesday's post, (meant to correct art error aud Supply some omissions in my letter of the pre- ceding day, and the latter to be embodied there with in the printed copy,) through some acci dent reached you too late for that purpose, I find myself compelled to trouble you once more ; and, on resuming the subject in a third letter, I shall now probably pursue it somewhat further than I had originally designed. In my Tuesday's letter I adwittedthat, on the contingency of silver bullion rising in the mar- ket above 20 per cent, higher than its average 15 relative value to gold, J knew not how to obviate the danger of Ike silver cui^rency being withdrawn from circulation. This admission should have been qualified, and to qualify it icas a principal reason for my u riling you on the following day ; but having,as before observed, been then disappoint- ed in my views of correcting that error, and of making certain additions to the printed copy of my letter, I shall now proceed to remedy the in- convenience as well as I can, and without fur- ther preface. Instead, then, of saying* that I know not how to obviate this danger, I would, on recollection, father say, that / can suggest no positive securi- ty against it. A positive security against its re- currenceis, indeed, no where perhaps to be found, hut the proposed system furnishes a probable one, and certainly a palliative. For as it was rem arked th&t the national establishment recommended vrould, in the comparative rise of gold bullion, find an inducement for the purchase of silver, it •Alight clearly on the like rise of silver derive a profit from its resale. Let it be supposed that silver bullion has risen to, say, 23 per cent, above its usual or average relative value: the Establishment would thence have an opportuni- ty of making a net profit on as much of it as the managers should think it expedient to exchange for gold. Now this profit, on sales to a small amount, would be in exact proportion to the 16 Supposed rate of exchange, that is 23 per cent, on the quantity sold ; but the greater object of the Establishment, (and to provide for which, rather than any more immediate advantage, should have influenced them in the original pur- chase of the silver bullion) being to depredate its relative value to gold bullion for the preserva- tion of the silver currency, it would be prudent to throw, if possible, so much of it into the mar- ket, and withdraw so much gold bullion in ex- change, as might, by the combined operation thereon, lower the price of the former till the difference were brought within 20 per cent, of their average relative proportions ; when the silver currency would be again secured from immediate danger and that by a transaction embracing a collateral advantage of giving above 20 per cent, profit to the State. The silver bullion thus thrown again into the market was supposed, in my last letter, to have originally accumulated at the Bullion Bank through purchases made with a part of the notes and counters presented for payment in gold bullion, On a more than usual demand for the latter. Now the measure referred to, whilst calculated for effecting an immediate rise in the value of silver bullion made also a cheap provision for a future silver coinage and for a reversed inclination of the balance in the pro- portional value of gold and silver bullion ; but 17 in attempting to bring back the precious metals nearer to their usual relative value great cir- cumspection should be used in order at the same to preserve unaffected the relative value of gold bullion to all other commodities, as a check to its demand for exportation ; and perhaps it might, on this account, be desirable that silver bullion also should continue to hold an average relative value to gold lower at home than abroad, and that, though a great disproportion should be guarded against, some if possible should always be retained in favour of gold. It was on this consideration that in speaking in my last letter of the re-issue of the notes and count- ers from the proposed Bank Rafter their being presented for payment in gold bullion on any more than usual demand for that metal) in the purchase of silver bullion that / thought it right to suggest the limiting such re-issue to a part only of the portion of the currency so returned. Because, gold being necessarily, in a prevalence oj the proposed system , the standard of the value of all other goods, it follows from a rise in the value of gold, that a circulating medium repre- sentative in the aggregate of a less quantity of gold, will on such rise bear a given proportion to the whole wealth of the realm. It might, and I think, would be therefore proper in such case gradually to reduce the aggregate representative value of the government notes &c. till the precious 18 metals through the course of exchange returned nearer to their usual balance — which, were the loss of .that balance local, and chiefly contined to this country, they would quickly do; as the merchant*, rinding it for their interest whilst silver in the home markets was depretiated, to export it rather than gold to all countries where the relative value of the precious metals had suffered less change, would thence, in the pro- secution of their own views, most powerfully assist the Establishment in effecting its restora- tion. -^-Besides which, the greater relative value of gold with regard to all other commodities, would enable the manufacturer and agricultur- ist to carry on their respective pursuits, and the merchant to buy up a greater portion of the produce of their industry at a Jess nominal cost ; and gold bullion bearing a greater proportional value to silver at home than abroad, it would of course be preferred to it as an article for im- portation. At any rate while gold bullion re- mains at an advance in the home market ; it may I think, be justly observed, that its representa- tive aggregate amount in the currency of the nation should be proportionably reduced, however long that may be; and that (should it be for a very long period) it would be deserving of consideration whether the sovereign token ought not, for the convenience of domestic trade, to be subdivided into a greater number of fractional 19 parts, in the silver and copper currency and in your correspondent's opinion the thus withhold- ing a part of the usual aggregate amount of the currency from circulation, immediately on the occurrence of such rise on gold bullion, and in case of the pennaneucy of such rise, an ulti- mate farther subdivision of the sovereign in the smaller coinage seems, as combined with the proposed system, a sure and safe, and is proba- bly the only effectual method of at once prevent- ing great losses to the Establishment in provid- ing at any cost for the continual demands pf bullion, to which it would otherwise be subject, of insuring a sufficiently extensive currency for affording the usual facilities to trade at home, and of at length enabling the Establishment, by a consequent influx of gold bullion from foreign countries, to re-purchase on moderate terms as much of it as might be wished by a re-issue of the remainder, or of any portion of the remain- der, of the notes &c. before withdrawn from cir- culation ; and this without any necessity JoT dis- continuing payment in gold bullion even for a moment — unless, possibly, foreign wars or foreign loans give birth to it, in some manner that I cannot at present foresee. In both these instances, however, it must be evident that the quantity of gold bullion required for exporta- tion, or whether any, as in the ordinary case of the payment of the dividends to foreigners on 20 their Stock in the English funds, must depend on the rate of exchange. I wish for the sake of the interests of so many classes of the community, particularly of the stock-holder, the annuitant,, the land-hold- er, and the farmer., that this system, in re- medying, as I think it would, so many other evils of the present, could more effectually check the fluctuation in the value of the necessaries of life and of produce in general — but that must ever mainly depend, in every trading country, on the aggregate amount of the circulating me- dium of the great commercial republic of the world and can never be subjected to domestic control. k So much for the errors and omissions in my letter of the 24th ult. from which letter and from what has been now advanced, I am not without hope that the practicability and efficacy of the proposed changes have been made sufficiently apparent ; and shall therefore next endeavour to prove that they are no less safe. This I shall do by suggesting a specific mode in which they might, I conceive, be brought about, and form a system which, whilst it embraces all the advan- tages to the creditor arising from the responsibi- lity of the revenue, and the option of being paid in gold bullion ; need not, on that account, be de- ficient in any of the private security afforded by the present Bank of England establishment, and *J1 will besides insure to the State a certain and large emolument, in addition to that on the seignorage, and purchase and sale of silver bullion. The currency of notes for £5 and above being- all along supposed to continue, the greater proportion, in representative amount, of the circulating- medium would still consist of such notes, whether the nation chose to retain the use of the Bank of England, or to take the responsibility &c. immediately on itself. Should it prefer the latter, a treasure of gold and silver bullion would accumulate in exact proportion as the Establishment issued new bills, the obligation being contracted and a fund provided for its dis- charge simultaneously. By this arrangement, the legislature becoming pledged to the holders, the notes will consequently be secured on the revenue, and of the treasure thus raised, (a, sufficiency for payment of all probable demands being reserved,) a considerable part might, under due regulation, be immediately dispos- able for the accommodation of commerce, and the discount on such accommodations, or in other words, the profits of the Bank and in- crease of its capital beyond the amount of its responsibility, might, subject to parliamentary control, be from the same moment available for the exigencies of the State. The nation's taking on itself the maintenance of the Establishment in the cxpeuces for buildings, salaries, &c. would 22 greatly simplify the Bank accounts — but on ex- amination it would be found that, as from the principle of the proposed system, nothing could be lost in the purchase of gold, and the Bank could have no inducement for the purchase of silver bullion excepting when below its average price, nor for its sale but when above — this part of the arrangement, though desirable, would he nowise requisite. From this sketch it will doubtless be admit- ted that the machine is useful, if it ivill act ; it must therefore now be my object, in a more par- ticular description of it. to shew that provision may be made not only for its action, but for the. freedom, and, as far perhaps as in human insti- tutions is possible, the petpetuily of its action. Jt is well known that certain branches of the revenues of the State are already pledged to its creditors: the surplus or any part of it might be pledged to support the annual and occasional expences of the proposed establishment, and for the satisfaction of the demands of the different holders of the new currency. Let this be done, and the British Bullion Bank would in principle, and in the nature of things, be liable to no moral possibility of failure, excepting Government, in return for its guarantee, drew on its funds to too great an extent in aid of the revenue, and farther than by the proposed regulations it was authorised to do ; nor even then but with 23 the State itself. But though it might seem unnecessary to guard against such improba- ble contingencies, and the system might, without further precaution, he practically safe, if it is capable of being, at small expence, ren- dered so in theory also, it undoubtedly ought: and as I conceive it may, I will endeavour to shew how. If the Parliament,content with an un- qualified positive power over the surplus funds of the Bullion Bank, will retain only a negative one over what may be called its trading stock, and setting apart by law a certain portion of the latter for the ready satisfaction of demands by holders of the currency, and a second portion (amounting with the first to a sum equal to the aggregate of all its pledges) disposable at dis- •tion for the discounting bills of exchange &c. or affording other accommodation to trade: would vest the whole in Commissioners ap- pointed, under their sanction, by the Executive, with legal authority to hold the same, as the ^>Ie immediate trustees and guardians of the several creditors* interests, (as acknowledged by the nominal value of bills &c. held by them respectively) and oblige them by their oaths of office to exert their best abilities in the discharge of it in first securing the creditors' interests, and as far as consistent therewith promoting those of commerce and the State, and then holding the whole net profit or surplus funds beyond th$ 24 responsibilities of the Establishment and that only in trust for and at the disposal of the legis- lature : I conceive nothing remains farther to be done for fully effecting the object, if the Parlia- ment at the same time take the ultimate respon- sibility on itself. In such circumstances even a bankruptcy of the State would not necessarily affect the solvency, credit, or permanency ofthe proposed Bullion Bank: for its aids to the State would necessarily have been limited to the pro- fits of the Establishment ; and being answerable for no arrears of annual and occasional expences for buildings, salaries, &c. it would evidently (in the supposed case of a dissolution of the government or of its connection therewith) be u'hply provided from its daily profits with means for supporting every part of its expences in future — granting that the natural course of things be interrupted or disturbed by no violence or aggression from anarchy or tyranny. Many of the advantages that this plan offers to the nation might doubtless be attained through a private company acting on its own account. But in the alternative of the State's establishing such a Bank for its own advantage, it must be very apparent that the system could not be brought into full operation till the expiration or resignation for a valuable consideration of the Bank of England's charter — but meanwhile that establishment might be made use of as a 25 means for its gradual introduction; and at the termination of their charter the present Bank Corporation would doubtless gladly dispose of their buildings and remaining bullion to the State, and the rather to entitle them to recom- mend their subordinate officers to its employ ; whom it would be extremely difficult otherwise to provide for. Meanwhile the country might be supplied with a currency of 20s. and Is. counters through the Bank of England, which might receive them to any amount from the Mint in exchange for the weight in gold bullion represented by them, the State becoming thereby (without risk of practical consequences) answer- able for the ultimate re-payment in bullion, should the Bank of England, after putting them in circulation, require such iepayment in conse- quence of this metallic currency being returned on their hands. On the near approach of the close of the char- ter, notes of the State Bank might be prepared and placed at the disposal of the Bank of Eng- land, on the same terms as the metallic tokens were previously supposed to have been, fur enabling them to recal their own in a manner at once least inconvenient to the public, and most conducive to the immediate object of the State : till on its final close, Commissioners having first examined their accounts, might ne authorised to transfer the responsibility for any Bank of Eng- 26 land notes still in circulation to the New Estab- lishment, on receiving treasure for the value thereby represented ; and a proclamation might be issued for their recal and exchange within a limited time. All this seems easy to be done in the event of Government's coming to an under- standing about it with the Bank of England Corporation, and purchasing its treasure and buildings, and taking its officers into employ; and it is hardly to be expected that, supposing their charter nearly expired, any obstacle should be raised on their part, as they could nowise dispose of their property so advanta- geously elsewhere. It may be demanded ; what could be done, should the Bank of England, resenting the non- renewal of their charter, or exorbitant in their terms, decline to accept of any reasonable com- pensation? To this I answer — They must on an expiration of their charter dispose of their trading stock and establishment some way or other ; and mediately or immediately they would at length undoubtedly be at the refusal of Go- vernment ; and the utmost consequence of the supposition would be a temporary inconvenience in carrying the new system into effect; an incon- venience, however, that never in fact need be dreaded, since that respectable corporation is both enlightened and liberal, and such conduct on their part must be attended with great sacrifice 27 of their own interests, and at the risk of reduc- ing to great distress many faithful servants, who, but for this, would readily be retained on the new establishment, but Mould be thus thrown on the world without assurance of future em- ploy. But so far should I be from apprehend- ing any difficulty of this sort, that I should, ou the contrary, anticipate in many of the more distinguished managers of the affairs of the Bank of England, an anxious desire, on a dissolution of that body, to transfer their services to the honourable employ of superintending the pro- posed national establishment. I would, here observe, by the way, (which 1 purposely omitted before, that the plan might be seen in a more intelligible and less com- plex form) that as the choice of the com- missioners might easily, and would of course be made from among the great capitalists, it might be judicious to allow them for their super- intendence a given per-centage on the clear profits on the trade of the establishment, thereby making the mode of remunerating them at once a spur to vigilance and activity, and a guarantee from all losses through improvidence. I need not say much to prove that the other alternative must be yet more easy, namely : Jj the legislature, satisfied with providing a cur- rency, secure, on the one hand y from all danger of depretialion, and, on the other, of being melted D 28 down or carried out of the country, and to a very great degree less liable than at present to imita- tion, declining to seek farther advantages in the change of system, should wish rather to renew the charier of the Bank of Kngland and to effect it wholly through the agency of that establish- ment. This latter method would, in addition to its greater facility, have the farther recom- mendation to a nation jealous of encrease of patronage in the Executive, that none would thereby be created ; whilst the Bank of Eng- land, already accustomed to give considerable pecuniary aids to the State might, from an ap- prehension of a refusal to renew its charter, be induced to convenant for future accommoda- tions on a large scale and on more favourable conditions. In the event of such terms being assented to, the effecting the change of the currency, and the subsequent maintaining of the proposed new system through the agency of that corporation, (whose experience in business would qualify them and interest excite them to the most satis- factory execution of that more limited plan) ought certainly not to be declined without deli- beration. But it should not be forgotten, on the one hand, that the legislature having an un- doubted right to refuse the renewal of the Bank of England's charter, and to transfer the privi- leges of it to an establishment of its own, the 29 concession of a new charter &c. should be made only on condition of an adequate compensation ; nor on the other, that in the preference of this al- ternative the creditor loses the greater of the two securities that the former alternative would have given him, namely that of the public revenue. Oh the whole: of the alternatives suggested, for operating the change of system recommended, the writer cannot but prefer the machinery of a na? tional establishment to that of a private one, and from every consideration, that he has been able to give the question, he conceives, that he has in the former proposed an expedient at once simple, effectual,, and safe; and calculated not only to protect but to advance the prosperity of. the country both in. morality aud wealth. Were it requisite to keep in store a treasure to the total amount represented by the proposed circulating medium, which he has shewn, (as indeed is otherwise very obvious), that it. is not ; this great national object would be effected at the cost of some present inconvenience to the revenue : but if pursued in -the manner suggested its consequences would be,, an almost imme- diate pecuniary advantage, fjn profits derived from discount on merchants' bills, from seignor- age, &c.) and that accompanied with moral advantages that it would be an insult to huma- nity to appretiate. I am, &c. Y. & 30 LETTER IV. Wednesday, Dec. 9, 1818. Sir, Wishing to discover any weak points I might have overlooked, in the plan that I lately sub- mitted to the public for the amendment of the present defective system of the currency, (as dis- played in my first and second letters to you,) or to learn what further elucidation it might require, I took the liberty of addressing separately and by letter, two gentlemen of distinguished rank and ability, requesting their sentiments thereon ; and since sending you my third intended for publi- cation in your last week's paper, I have been favoured with most obliging answers from them both. One of them informs me that a writer of some eminence has preceded me, in proposing a plan not unlike mine, or founded on a similar principle ; but as my kind and respected corre- spondent immediately proceeds to point out cer- tain difficulties that he considers them both equally subject to in the execution 5 objections to which he thought them openj and defects supposed inherent in their common principle, some of which my third letter would have ob- viated ; I am not without hope that my plan, when fully laid open, will yet be found to con- tain something new and useful- At least this much I can most conscientiously declare, that J had never pre\iously even heard of the work iii question, nor of the expedient it seems to have proposed, neither had I heard of any other idea similar to my own, or that 1 thought likely to attain the object mine has in view. A regret expressed in a country paper, that the sove- reign could not be reduced to 1 8.s. intrinsic value for the purpose of at once superseding the ill note and checking the exportation and melting systems, without risk of causing a general depretiation of the currency, first di- rected my attention to the discovery of an ex- pedient that might obviate all the conflicting difficulties; when it presently occurred to me that such might be found in the establishment of a currency of more representative than intrinsic value, on the one hand, and so near in its intrinsic to its representative twine ,on the other, as at once to lay out no temptation to the melt er or exporter and to discourage the fraudulent imitation; and which should be convertible at option into the value .represented under such regulations, as whilst they preserved the currency from depreciation^ should also guard the responsible parity from any very serious inconvenience. The thought after- ward recurred to me at Truro, on the 20th ult. and appearing to me on closer examina- tion well founded, I thought it my duty to make it publicly known ; that if really so it might be taken up by some one likely to pro- 32 mote its ultimate adoption for the benefit of so- ciety ; and under that impression, I immediate- ly wrote you my first letter. As it was penned in haste, and on the impulse of the moment, ijt may on that account require an apology; but that, I trust, both it and its successors will find in the motive that gave them birth, whence con- stitutional infirmities must preclude all deliberate attempts at a finished or correct performance. I have only to add, on this head, that should the author in question and myself have actually proposed similar plans, or even the same, it is certainly original with me, being entirely a de- duction of reason founded on the complaints before referred to; and tha* the similarity of identity, if there be either, in our suggestions* ought to be considered a strong presumptive- proof that we are both near the truth. The answers of my obliging correspondents I am happy to say, have still farther confirmed my belief in the practicability, safety and effi- cacy of my plan, inasmuch rs a natural ex- tension of its principle se^ms to promise a remedy for every difficulty haherto pointed out to me, that has not been anticipated in my last Letter. I am told then that the great objections to such plan are : 1st. that the contiuual necessity for assaying the purity of the gold bullion, m passing from hand to hand, would be a great 53 -embarrassment to trade ; 2ndly, that the sub stitution of tokens for the present coin in the manner suggested by me is objectionable on two accounts ; first, as offering additional encou- ragement to fraudulent imitation ; secondly, as subjecting the holder to the loss of seignorage as well as to that of any reduction of its intrinsic worth, when it shall have got below the regu- lated weight (this last objection arose I am sure from a mere oversight on the part of my ingenious correspondent, but I shall nevertheless consider it with some attention in its turn, since your readers in general will be far more likely to fall into such an error,) and next an idea has been advanced that could payment in specie be once resumed at the Bank, the law making silver and copper a legal tender to 40s. and 12d. respectively would sufficiently protect the cur- rency, even under the present system. I shall begin with the objections to making gold bullion the standard: If I have judged rightly of the consequences of such an establish- ment, but little inconvenience could arise from the necessity of an occasional assay of the bullion. According to my conception it would never be much used in internal commerce, but would ge- nerally pass almost immediately from and to the importer and exporter and the Bullion Bank ; with the exception that a few capitalists of the jjreat marts and ports would probably find it h worth their while to provide, and supply the mer- chant with coin and notes in exchange for his foreign gold bullion 'on importation, or with gold bullion for coin and notes when the former was required for exportation ; in each instance re- ceiving a small pei-centage for accommodation in saving the trouble of an immediate commu- nication with the State Bank. That establish- ment would of course have no more trouble than the Bank of Enghuid or the Mint has at present in ascertaining the purity of any given quantity of the gold it would receive: but see- ing that its currency in an uncoined state, though very partial, would yet be considerably greater than its present use in commerce, commercial intercourse would be facilitated, and a general preference of the paper currency for domestic trade at the same time be preserv- ed, were gold issued from the Bank in 100-so- vereign-ingots (and not less) of a regular form* impressed with the Bunk stamp ; and which on being returned to the Bank would subsequently require no other examination than as to weight ; its deficiency in which respect should subject the presenter to a proportional deduction, and the ingot itself to an exact fractional reduction of weight (say 1 -100th or l-50th as occasion may require) by the striking off a portion from one corner, and to be re-issued with a second stamp over that corner intimating the amount of the. 3t> reduction in exchange for 99 or 98 sovereign^ accordingly — which process might be repeated till it were judged expedient to condemn it to the crucible. The bullion brokers and the merchants at the ports and marts would have their trans- actions greatly facilitated by such a regulation as to the gold required for exportation: and with regard to the imported, as it would, accordiug to my idea, not get into general circulation, but merely pass, for the most part, between the merchant-importer, bullion broker, and State Bank: it would either on reaching the latter, after a similar assay to that which gold always undergoes even now at the Bank of England or the Mint, be reduced to stamped ingots previous to a re- issue — or, if wanted for exportation before reaching the Bullion Bank, it would pro- bably occasion the necessity but for two exa- minations — namely that for the satisfaction of the broker, on its importation, and a second for the satisfaction of the exporter. The limiting the payments in bullion to the 100-sovereign- ingot and above could no-wise depretiate the note and counter ; since the bankers and other capitalists, having continually transactions with the Establishment to a greater amount, would of course take them at their full value: but the mutual conversion of the £d and the greater notes and of counters at the State Bank each 36 iiitd the other branch of the currency, as it might without inconvenience, should be left wholly free. Now with regard to the risk or* forgery, on reducing the intrinsic value of the medium of commerce, I do not think it fair to compare the counter with the guinea ; for though the guinea issued, as at present, at its average intrinsic worth, has much the advantage of the proposed counter, as offering less jrequent and less powerjul temp- tation to the illegal coiner; yet, as being less obnoxious in this respect only in exact pro- portion toils offering the like temptation on the other hand to the melter and exporter, it must I think be considered radically objectionable ; and must somewhere find a substitute. The question then should rather be on the relative utility, for domestic currency, of the small note, and of a gold coin representative of bullion of a greater intrinsic value than itself. It was suggested that this coin should represent a portion of uncoined gold equal to a sovereign of the present currency in purity and weight, but itself worth 20 per cent, less than the gold represented. Gold seems preferable as a standard to silver, from its greater convenience as a medium in great com- mercial transactions — and the weight of the pre- sent sovereign-coin to that of the guinea, as an- swering to the pound sterling of so long estab- lished use in accounts. But to return : For at- 37 tempting any imitation of such coin, it is evident that the provision of expensive apparatus and materials is iudispensible; and that consequent- ly very poor men cannot as principals be expos- ed to the temptation. This fraudulent traffic will then be confined to men possessed of a cer- tain trading stock and their prospect of gain limited to what there is a possibility of clearing, after allowing an interest on the stock propor- tioned to the risk of loss : but this being a pecu- liarly hazardous embarkation of property, such interest would reduce the profit, otherwise 20 per cent, on each successful transaction, to perhaps a third of the amount : and this reduced prospect of gain, balanced against the penalty of death on conviction, could have no weight but with few of even the most unprincipled — - namely, with those individuals in that class pos- sessed at once of the requisite ingenuity and of a bare sufficiency of property to qualify them for the pursuit. The forger, on the other hand, has no expensive materials or engine to provide, and supposing equal ingenuity to be requisite in both pursuits, this circumstance must expose a greater number of persons to be tempted to the latter; and when it is recollected that the pre- mium on the successful imitation of the note (the materials having no intrinsic worth) is nearly 100 per cent. ; there can be no doubt which of them is most exposed to fraudulent 88 practices ; and that the difference on this point in favour of the counter is so great as to much outweigh the consideration of the greater origi- nal cost to the State, and therefore to entitle it to an undisputed preference. The difficulty respecting a loss of weight in the counter I thought at first to have obviated by putting it in that respect on a footing with the old silver coinage, which, when reduced in weight in the course of circulation, the Govern- ment, in a late instance, called in and received at its full nominal value. But this would have left too great a temptation to cupidity and to the use of the hauvbag. I am however happy to say that this difficulty with regard to the counter, (if considered as relatively greater than as it exists at present with regard to the old coinage) wholly vanishes on reflection; and I am confident that the idea of throwing the loss, of the whole seignorage, in addition to the acr tual loss of intrinsic worth, on the holder, must have been a mere inadvertence. Supposing the identity of the stamp or genuineness of the coin apparent, it should undoubtedly and in com- mon justice, as it would without loss of the origin pal profit in seignorage, be received atthe Bullion Bank and thence returned to the Mint, at an abatement not exceeding its actual loss in weight. So that, supposing it to have lost 1-16 of its jw eight, or Is. of its intrinsic worth, it should 39 accordingly be received at the Bank for 19s. and thence returned to the Mint at the like rate in exchange for new coin : the Mint claiming no seignorage, more than at present, on such issue of new coin to the numerical amount returned to it in old, but solely on the issue of new coin to eularge,orto supply deficiencies in the numerical amount of that branch of the currency. Where- by any one presenting 100 gold counters at the Bullion Bank, deficient in their aggregate weight as much gold as is represented by a gold counter (or, one fourth of the actual legal weight of a counter itself) should be entitled, on paying one counter more of just weight to make up for the deficiency, to receive in exchange a 100- sovereign-ingot ; or without such addition (as soon as a long continuance of the bullion system rendered it practicable) an ingot stamped for re-issue as l-100th part deficient in weight: thus also in all instances, balancing the sum pre* sented, according to the amount of such de- ficiencies, if the deficiency be less than the represented worth of the gold counter, with proportional number of its fractional parts in silver coin ; if more with a gold counter and the requisite number of its silver fractions. Every one to whom the coin should in its course of cir- culation be offered in payment would by this means be so interested in ascertaining its weight as to prevent fraudulent practices going on 40 without great risk of detection, and that without being, on the other hand, himself exposed to excessive and unreasonable loss for inadver- tence; and to facilitate the relief of domestic trade from the clog that it would feel in a neces- sity of making continued deductions on every light coin, according to its deficiency — it should be legally payable at that rate of abatement for taxes, and so returned to the State Bank and Mint to be recoined ; but prohibited from gene- ral circulation immediately that it fell below the legal weight, and this regulation should equally apply to every branch of the coinage. I would here observe, by the way, that, though this sys- tem would do away £1 and £2 notes of country banks in common with those of the Bank of England, yet, (as those Banks offer great facility to trade) if their greater notes can stand the competition with the notes of the State Bank, they should probably be suffered to continue their trade, paying such taxes for stamps, &c. as the State might think a fair compensation for the privilege. Though I would not suppress Country Banks, yet, when I call to mind the severe losses sus- tained by so large a part of the community through the failure of many of them during the late war, and that even within a few weeks last past, when confidence in the stability of those that had survived -the shocks of that more 41 trying period was restored, a very large district was thrown into distress by the failure of an extensive concern of that description, and of high repute ; I cannot bat think that the often suggested idea of Branch Banks of the Bank of England might advantageously be adopted in regard to the proposed National Establishment. The managers might be appointed from the great capitalists of the trading and agricultural districts wherein the respective Branch Banks might be placed ; be made accountable to the Central Bank Council and like them be paid by a per-centage on the profits arising from their accouimodations-to trade; and in general be guided by the same regulations. This extension of the plan would almost wholly anticipate any occasion for bullion brokers and the consequent loss in discount to the merchants as far as re- garded the stamped bullion ; and without a general suppression of Country Banks, would do away the present absolute necessity for them, and leave a choice to individuals whether or not to trust their property therein ; when, with comparatively little trouble, they might lodge it under National Security. These Branch Banks should, at the option of the holder, be obliged to exchange £5 and higher notes and sovereign-counters for each other on demand, and within a given period ac- cording to the distance and the time requisite for 4ii procuring remittances from the Central Hank, bt equally obliged to pay the Bank Ingots Jor Notes and Counters, and Notes and Counters for Bank Ingots; making these latter exchanges aoouer, or even immediately at their discretion. To enter in this instance into minutiae : The mail coach establishment would be a ready means of conveyance, and were the coaches fitted up with suitable respectacles for them, caskets appropriated for each Branch Bank,(with duplicate keys, kept by proper officers at the Central Bank and by the superintendants at the Branch Bank respectively) and capable of con- taining from £1000 to £^000 worth, (this greater sum not amounting to six hundred weightj locked and sealed and under the charge ' of messengers of the Establishment, to act as extra-guards, might, with the greatest ease and safety, be sent to and from any part of the British Isles. I have hitherto indeed said nothing of Ire- land, and its currency — but, if my observations respecting the British currency be just, I can conceive no reason why the proposed change should not extend to the Irish also, the vices and defects of the currency and its system being equally pernicious in that island as in this. Scotland I have had in view all along in com- mon with the rest of this island. 43 Were payment in gold at the Bank re- sumed, the makiug the silver and copper coin- age a legal tender up to 40s. and 12d. respect- ively, does not I think, as one of my corre- spondents seems to suppose, free the present system from inconveniences in all cases of fluctuation in the relative value of silver and Copper to each other and to gold. The coun- try must indeed be greatly overstocked with those branches of the coinage to endanger any tendency to depreciation in either, unless the other branches of the currency are reduced to a very disproportionate amount in aggregate numerical quantity ; guarded too as the silver and copper coinage are by the law in question. But in the event of 9 or 10-penny pieces be- coming by the fluctuation of the market intrin- sically worth 1-2 1st part of a guinea; or 17s. or 18s. becoming by the like fluctuation worth a guinea — I know not what under the existing system is to check the mischievous cupidity of speculation in the melting down or exporting the silver and copper coin in their turn, in like man- ner as the gold in a similar rise of gold bullion in the market. Were it the object to amend the present sys- tem by making gold coin the standard, it could only be done, as 1 think I before observed, by a relative diminution of the intrinsic value of thfc 44 other branches of the metallic currency; when, supposing the shillings and pence convertible at twenty and twelve respectively into the next higher denomination, they could suffer no de- pretiation and no danger whatever could exist of the melting down and exportation of the coins of the two lower classes, unless the fluctuation of the market in favour of silver bullion and of copper should exceed at any time the supposed reduction in the relative value of the silver and copper branches of the coinage ; whilst superior execution might be brought in aid of the system to guard against the opposite danger of fraudu- lent imitation. But with the same vieiv, the reduction in intrinsic value of the silver coinage as relative to the gold on the average of mar- kets, should be limited to a certain extent. Now supposing the average difference of gold, silver, and copper coin, to be 20 per cent, on their re- lative intrinsic value in favour of the former, it is evident, as I have observed in a preceding- letter, that a rise of above 20 per cent, in favour of silver bullion or of copper would again en- danger the silver or copper branch of the coin- age, whilst, on the contrary, during the whole time gold was above par, or indeed even at par, the gold coinage would be in danger, inasmuch as the gold coin will generally be preferred to gold bullion for exportation, where the profit is 45 equal, on account of its greater convenience On the present system the whole currency is never safe ; on this, not often. This expedient then could be no more than a palliative; but my plan is intended to guard against all inconve- niences enumerated, and I still hope that either it, or something very like it in principle, will eventually prove a radical cure for most of the vices and defects of the present system. I am given to understand also, that an idea has been entertained whether it might not be eligible to take an average of the market prices of gold bullion for a given period from sworn returns, and oblige the Bank to pay its notes in specie according to such average. Against this expedient it appears to me there are strong- objections. / do not know that we have a right to consider a change of the relative value of gold and silver bullion as a positive change oj the intrinsic value of either, till one of them is made a standard for the other ; as it might and would then be for every commodity ; instead of our having to grope after it, as at present in our coinage; where if it exists, it is in no particular branch of it — and is looked for in vain. It must also be of great consequence that the holder of a bill should be in no uncertainty how much coin it may command on exchange. Uncertainty I should think must be very like 46 depredation m the value — and Bank bills would, at any rate, on the establishment of such mode of payment at the Bank, become a regular gambling speculation ; and the necessity for nice calculations on the probable amount in specie that any given sum in notes would realise pn presentation for payment, must, to say the Jeast, continue to act as a very inconvenient clog to all commercial intercourse, both at home, and in a yet greater degree in the foreign market. In an inquiry so new to me and pregnant with so extensive and important consequences, I dare not decide positively; but we seem to have a reasonable promise of finding a radical and safe cure for the vices and defects of the present system in the introduction of some such currency as here suggested, convertible at will into bullion, and the making the latter the common standard of value for all goods. But though I have considered gold bullion as pos- sessed of claims to preference for such standard, and have sketched a specific plan for effecting the whole change of system, I am aware that it is probably of small comparative importance on which of the precious metals the choice may fall so that a standard be established, or in what specific mode the change of system be effected, so that it be effected safely and to the 47 convenient attainment of its end ; my only object being to shew that a reformation (ad- mitted on all hands to be highly desirable) is also, apparently to a mere reasoner, safe and easy to accomplish ; and to call the attention of those who are better qualified by experience and by previous attention to similar inquiries to determine how far my views on the subject are well founded, and what use may be derived from my suggestions. I am, &c. y. z.