THE UNIVERSITY 
 
 OF ILLINOIS 
 
 LIBRARY 
 
 352
 
 /^ws^'^p&i
 
 PRINCIPLES : 
 
 OP ^ i-. 
 
 BANKS AND BANKING OF MONEY, 
 
 AS 
 
 COIN AND PAPER; 
 
 THE CONSEQUENCES OF ANY EXCESSIVE ISSUE 
 
 NATIONAL CURRENCY, 
 
 COURSE OF EXCHANGE, PRICE OF PROVISIONS^ COMMODITIES^ 
 ANP FIXED INCOMES. 
 
 IN FOUR BOOKS, 
 
 BY SIR JAMES STEWART, BART, 
 
 LONDON, 
 
 f rioted by W> M'SowaU, Pemberton Row, Cough Squue> 
 
 JTOR J. DAVIS, 38, ESSEX STREET, STRAND; AND TO BE HAD Ot 
 ALL THE BOOKSELLERSo 
 
 1810.
 
 PRINCIPLES OF MONEY. 
 
 BOOK THE FIRST. 
 
 CHAPTER I. 
 
 Of Money of Account, 
 
 T] 
 
 HE metals have so long performed the use of 
 money, that money and coin are become almost 
 synonimous, although in their principles they be 
 quite different. 
 
 The first thing therefore to be done in treating 
 of money, is, to separate two ideas, which, by be- 
 ing blended together, have very greatly contributed 
 to throw a cloud upon the whole subject. 
 
 Money, which I call of account, is no more than 
 an ai^hitrary scale of equal parts, invented for mea- 
 suring the respective value of things vendible. 
 
 Money of account therefore, is quite a different 
 thing from money-coin, and might exist, although 
 there was no such thing in the world as any sub-= 
 B
 
 2 PRINCIPLES OF MONEY. 
 
 stance, which could become an adequate and pro- 
 portional equivalent for every commodity. 
 
 The subject therefore of the first chapter shall be, 
 1 . To point out the principles which determine the 
 value of things ; 2. The use of an invariable scale 
 to raeasnre their value ; 3. How the invention of 
 money of account is exactly adapted for measuring 
 the value on the one hand, and measuring the price 
 on the other ; and 4. How it preserves itself inva- 
 riable amidst all the fluctuations, not only of the 
 value of things themselves, but of the metals which 
 are commonly considered as. the measures of their 
 value. 
 
 First, Money of account, which I shall here call 
 moneys performs the same oflice with regard to the 
 value of things, that degrees, minutes, seconds, &c. 
 do with regard to angles, or as scales do to geogra- 
 phical maps, or to plans of any kind. 
 
 In all these inventions, there is constantly some 
 denomination taken for the unit. 
 
 In angles, it is the degree; in geography, it is the 
 mile, or league ; in plans, the foot, yard, or toise ; 
 in money, it is xh^poundi livre, florin, &c. 
 
 The degree has no determinate length, so neither 
 has that part of the scale upon plans which marks 
 the unit ; the usefulness of all those inventions be- 
 ing solely confined to the marking of proportion. 
 
 Just so the unit in money can have no invariable 
 determinate proportion to any part of value ; that 
 is to say, it cannot be fixed to perpetuity to any
 
 PRINCIPLES OF MONEt. 3 
 
 particular quantity of gold, silver, or any other 
 commodity Avhatsoever. 
 
 But it may be ascertained for a time, and then we 
 can, by multiplying it, ascend to the greatest value ; 
 and when we descend below the subaltern divisions 
 of this unit, we have the assistance of measures and 
 weights, which render the operation easy. Thus 
 in England, where a farthing is the lowest denomi- 
 nation of money, the grains of wheat are bought 
 by measure, and cherries by the pound. 
 
 Substances are valued either according to their 
 weight, their superficial measure, the measure of 
 their bulk, or by the piece. These may be consi- 
 dered as the four classes of vendible corporeal com- 
 modities. 
 
 All the species of each class according to their 
 different qualities of goodness, may be reduced to a 
 proportion of value. A pound of gold, of lead, of 
 different grains, of different butters, or ofwhat you 
 will, valued by the pound, may at any precise time, 
 be reduced to a scale of proportional values, which 
 the wants, demands, competition and faculties of 
 buyers and sellers, keep in a perpetual fluctuation. 
 
 The value of commodities therefore, depending 
 upon circumstances relative to themselves, their va- 
 lue ought to be considered as changing with respect 
 to one another only : consequently, any thing which 
 troubles or perplexes the ascertaining these changes 
 of proportion by the means of a general, determi^i 
 Date and invariable scale, must be hurtful to trade,: 
 B2
 
 4 PRINCIPLES OF MONEY. 
 
 and a clog upon alienation. This trouble and per- 
 plexity is the infallible consequence of every vice in 
 the policy of money or of coin. 
 
 Money, strictly and philosophically speaking, is, 
 as has been said, an ideal scale of equal parts. If 
 it be demanded what ought to be the standard value 
 of one part } I answer by putting another question ; 
 What is the standard length of a degree, a minute, 
 a second ? 
 
 It has none, and there is no necessity of its 
 having any other than what by convention man- 
 kind think fit to give it. But so soon as one part 
 becomes determined, by the nature of a scale, all 
 the rest must follow in proportion. 
 
 The first step being perfectly arbitraiy, people 
 may adjust one or more of those parts to a precise 
 quantity of the precious metals ; and so soon as 
 this is done, and that money becomes realized, as 
 it were, in gold and silver, then it acquires a new 
 definition ; it then becomes the price, as well as the 
 measure of value. 
 
 It does not follow firom this adjusting of the 
 metals to the scale of value, that they themselves 
 should therefore become the scale, as any one must 
 readily perceive. 
 
 But in former times, before the introduction of 
 commerce, when mankind had less occasion to 
 measure value with a scrupulous exactness, the per- 
 manent nature of the metals rendered them suf- 
 ficiently correct, both to serve as the scale, and a9
 
 PRIXCPLES OF MONEY. 5 
 
 the price in every alienation. Since the introduc- 
 tion of commerce, nations have learned the im- 
 portance of reducing their respective interests and 
 debts, to the nicest equations of value ; and this 
 has pointed out the inconvenience of admitting the 
 metals, as formerly, to serve both as the measure 
 and the price in such operations. 
 
 Just so geographers and astronomers were long 
 of opinion, that a degree of the equator was a de- 
 terminate length to measure every degree of lati- 
 tude upon the globe. 
 
 They then considered the earth as a sphere, and 
 no great inconveniency was found to result. from 
 this supposition. But as accuracy made a progress, 
 this measure was found to be incorrect. Degrees 
 of latitude are now found to be of different lengths 
 in different climates ; and perhaps in time it will 
 be found that no two degrees of any great circle 
 described upon the globe, are in a geometrical 
 equality. 
 
 That money, therefore, which constantly pre- 
 serves an equal value, which poises itself, as it 
 were, in a just equilibrium between the fluctuating 
 proportion of the value of things, is the only per- 
 manent and equal scale, by which value can be 
 measured. 
 
 Of this kind of money, and of the possibility of 
 establishing it, we have two examples : the first, 
 among one of the most knowing ; the second, 
 among the most ignorant nations of the world.
 
 6 PRINCIPLES OF MONEY. 
 
 The Bank of Amsterdam presents us M^ith the one, 
 the coast of Angola with the other. •■ 
 
 A florin banco has a more determinate vahie 
 than a pond of fine gold, or silver ; it is a unit 
 which the invention of men, instnicted in the arts 
 of commerce, have found out. 
 
 This bank money stands invariable like a rock in 
 the sea. According to this ideal standard are the 
 prices of all things regulated ; and very few people 
 can tell exactly what it dej>ends upon. The pre- 
 cious metals, with their intrinsic value, vary with 
 regard to this common measure, like every other 
 thing. A pound of gold, a pound of silver, a 
 thousand guineas, a thousand crowns, a thousand 
 piastres, or a thousand ducats, are sometimes worth 
 more, sometimes worth less of this invariable stand- 
 ard ; according as the proportion of the metals of 
 which they are made vary between themselves. 
 
 No adulterations in the weight, fineness, or de- 
 nominations of coin, have any effect upon bank 
 money. These currencies, which the bank looks 
 upon as merchandize, like every other thing, are ei- 
 ther worth more or less bank money, according to 
 
 the actual value of the metals they are made of. 
 
 All is merchandize with respect to this standard; 
 consequently, it stands unrivalled in the exercise of 
 its function of common measure. 
 
 The second example is found among the savages 
 upon the African coast of Angola, where there is no 
 real money known. The inhabitants there reckon.
 
 FRINCIPLES OF MONEY. 7 
 
 by niacoutes; and in some places this denomination 
 is subdivided into decimals, called pieces. One ma- 
 coute is equal to ten pieces. This is just a scale of 
 equal parts, for estimating the tracks they make.»_ 
 If a sheep, e. g. be worth 10 inacoutes, an ox may 
 be worth 40, and a handful of gold dust 1000. 
 
 Money of account, therefore, cannot be fixed to 
 any material substance, the value of which may va- 
 ry with respect to other things. The operations of 
 trade, and the effects of an universal circulation 
 of value, over the commercial world, can alone ad- 
 just the fluctuating value of all kinds of merchan- 
 dize, to this invariable standard. This is a repre- 
 sentation of the bank money of Amsterdam, which 
 may at all times be most accurately specified in a 
 determinate weight of silver and gold ; but which 
 can never be tied down to that precise weight for 
 twenty-four hours, any more than to a barrel of her- 
 rings. 
 
 iO '^i' 
 
 tt;
 
 S PRINCIPLES OF MONEY. 
 
 CHAPTER II. 
 
 Of artificial mid material Money, 
 
 ROM the infancy of the world, at least as far 
 back as our accounts of the transactions of mankind 
 reach, we find they had adopted the precious metals 
 that is, silrer and gold, as the common measure of 
 Talue, and as the adequate equivalent for every thing 
 alienable. 
 
 The metals are admirably adapted for this pur- 
 pose ; they are perfectly homogeneous : When 
 pure, their masses, or bulks, are exactly in propor- 
 tion to their weights : No physical difference can 
 be found between two pounds of gold, or silver, let 
 them be the production of the mines of Europe, Asia, 
 Africa, or America : they are perfectly malleable, 
 fusible, and suffer the most exact division which 
 human art is capable to give them. They are 
 capable of being mixed with one another, as well 
 as with metals of a baser, that is, of a less homo- 
 geneous nature, such as copper. By this mixture, 
 they spread themselves uniformly through the whole 
 of the compound mass, so that every atom of it be- 
 comes proportionally possessed of a share of this
 
 PRINCIPLES OF MONEY. 9 
 
 noble mixture; by which means the subdivision of 
 the precious metals is rendered very extensive. 
 
 Their physical qualities are invariable ; they lose 
 nothing by keeping; they are solid and durable; 
 and though their parts are separated by friction, like 
 every other thing, yet still they are of the number 
 of those which suffer least by it. 
 : If money, therefore, can be made of any thing, 
 that is, if the proportional value of things ven- 
 dible can be measured by any thing material, it 
 may be measured by the metals. 
 
 The two metals being pitched upon as the most 
 prn])er substances for realizing the ideal scale of 
 money, those who undertake the operation of ad- 
 justing a standard must constantly keep in their eye 
 the nature and qualities of a scale, as well as the 
 principles upon which it is formed. 
 
 The unit of the scale must constantly be the same, 
 although realized in the metals, or the whole opera- 
 tion fails in the most essential part. This realizing 
 the unit is like adjusting a pair of compasses to a 
 geometrical scale, where the smallest deviation from 
 the exact opening once given must occasion an in- 
 correct measure. The metals, therefore, are to 
 money what a pair of compasses is to a geometrical 
 scale. 
 
 This operation of adjusting the metals to the 
 money of account, implies an exact and determi- 
 nate proportion of both metals to the money-unit, 
 C
 
 10 PRINCIPI.f:S OF MONEY. 
 
 realized in all the species and denominations of 
 coin, adjusted to this standard. 
 
 The smallest particle of either metal added to, 
 or taken away from any coin, which represents 
 certain determinate parts of the scale, overturns the 
 whole system of material money. And if, not- 
 withstanding such variation, these coins continue to 
 bear the same denominations as before, this will as 
 effectually destroy their usefulness in meajsuring the 
 value of things, as it would overturn th(? usefulness 
 of a pair of compasses, to suffer the opening to vary 
 after it is adjusted to the scale representing feet, 
 toises, miles, or leagues, by which the distances 
 upon the plan are to be measured. 
 
 Debasing the standard is a good term ; because 
 it conveys a clear and distinct idea. It is dimi- 
 nishing the weight of the pure metal contained in 
 that denomination by which a nation reckons, and 
 which we have called the money-unit. Raising the 
 standard requires no farther definition, being the 
 direct contrary. 
 
 Altering the standard (that is, raising or debasing 
 the value of the money-unit) is like altering the 
 national measures or weights. This is best dis- 
 covered by comparing the thing altered with things 
 of the same nature which have suffered no alteration. 
 Thus if the foot of measure was altered at once over 
 all England, by adding to it, or taking from it, any 
 proportional part of its standard length, the altera- 
 tion would be best discovered, by comparing the
 
 PRINCIPLES OF MONEY. 1 1 
 
 new foot with that of Paris, or of any other coun- 
 try, which had suffered no alteration. Just so, if 
 the pound sterling, which is the English unit, shall 
 be found any how changed, and if the variation it 
 has met with be difficult to ascertain, because of a 
 complication of circumstances, the best way to dis- 
 cover it will be to compare the former and the pre- 
 sent value of it with the money of other nations 
 which has suffered no variation. This the course 
 of exchange will perform with the greatest exact- 
 ness. 
 
 Artists pretend, that the precious metals, when 
 absolutely pure from any mixture, are not of suf- 
 ficient hardness to constitute a solid and lasting 
 coin. They are found also in the mines mixed 
 with other metals of a baser nature, and the bring- 
 ing them to a state of perfect purity occasions an 
 unnecessaiy expence. To avoid, therefore, the in- 
 convenience of employing them in all their purity, 
 people have adopted the expedient of mixing them 
 with a determinate proportion of other metals, which 
 hurts neither their fusibility, malleability, beauty, 
 or lustre. This metal is called alloy, and being 
 considered merely as a support to the principal 
 metal, is accounted of no value in itself. So that 
 eleven ounces of gold, when mixed with one ounce 
 of silver, acquires, by that addition, no augmenta- 
 tion of value whatever. 
 
 This being the case, we shall, in speaking of 
 money, overlook, as much as possible, the existence
 
 12 PRINCIPLES OF MONEY. 
 
 of alloy, in order to render language less subject to 
 ambiffuity. I must except such cases, where the 
 considering the mass of the compound metal, ac- 
 cording to its weight, can be accompanied with no 
 inconvenience. 
 
 CHAPTER III. 
 
 Incapacities of Metals to jierform the Ojffice of an 
 invariable Measure of Value. 
 
 ERE there but one species of such a sub- 
 stance as we have represented gold and silver to be, 
 were there but one metal possessing the qualities of 
 purity, divisibility, and durability ; the inconve- 
 niences in the use of it for money would be fewer 
 by far than they are found to be as matters stand. 
 
 Such a metal might then, by an unlimited divi- 
 sion into parts exactly equal, be made to serve as a 
 toleral;ly steady and universal measure. But the 
 rivalship between the metals, and the perfect equa- 
 lity which is found between all their physical quali- 
 ties, so far as regards purity, and divisibility, ren- 
 der them so equally well adapted to serve as the 
 common measure of value, that they are universally 
 admitted to pass current as money. 
 
 What is the consequence of this ? That the
 
 PRINCIPLES OF MONEY. 13 
 
 one measures the value of the other, as well as that 
 of every other thing. Now the moment any mea- 
 sure begins to be measured by another, the propor-^ 
 tion of which to it is not physically, perpetually, and 
 invariably the same, all the usefulness of such a 
 measure is lost. An example will make this plain. 
 
 A foot of measure is a determinate length. An 
 English foot may be compared with the Paris foot, 
 or with that of the Rhine ; that is to say, it may be 
 measured by them ; and the proportion between 
 their lengths may be expressed in numbers ; which 
 proportion will be the same perjietuallv. The mea- 
 suring the one by the other will occasion no uncer- 
 tainty ; and we may speak of lengths by Paris feet, 
 and be perfectly well understood by others who are 
 used to measure by the English foot, or by the foot 
 of the Rhine. 
 
 But suppose that a youth of twelve years old 
 should take it into his head to measure from time 
 to time, as he advances in age, by the length of his 
 own foot, and that he should divide this growing 
 foot into inches and decimals : what could be learn- 
 ed from his account of measures ? As he increases 
 in years, his foot, its inches, and subdivisions, will 
 lengthen gradually ; and were every man to follow 
 his example, and measure by his own foot, then the 
 foot of measure now established would totally cease 
 to be of any utility. 
 
 This is just the case with the two metals. There 
 is no determinate invariable proportion between 
 their value ; and the consequence of this is, that
 
 14 PRINCIPLES OF MONET. 
 
 when they are both taken for measuring the value 
 of other things, the things to be measured, like the 
 lengths to be measured by the young man's foot, 
 without changing their relative proportion between 
 themselves, change however with respect to the de- 
 nominations of both their measures. An example 
 will make this plain. 
 
 Let us suppose an ox to be worth three thousand 
 pounds weight of wheat, and the one and the other 
 to be worth an ounce of gold, and the ounce of 
 gold to be worth exactly fifteen ounces of silver; 
 If the case should happen, that the proportional 
 value between gold and silver should come to be as 
 14 is to 1, would not the ox, and consequently 
 the wheat, be estimated at less in silver, and more 
 in gold, than formerly ? I ask farther, if it would 
 be in the power of any state to prevent this varia- 
 tion in the measure of the value of oxen and wheat, 
 without putting into the unit of their money less 
 silver and more gold than formerly r 
 
 If therefore any particular state should fix the 
 standard of the unit of their money to one species 
 of the metals, while in fact both the one and the 
 other are actually employed in measuring value ; 
 would not such a state resemble the young man, 
 who measures all by his groAving foot? For, if 
 silver, for example, be retained as the standard, 
 while it is gaining upon gold one fifteenth addi* 
 tional value ; and if gold continue all the while to 
 determine the value of things as well as silver, it is 
 plain that, to all intents and purposes, this silver
 
 PRINCIPLES OF MONEY. IS 
 
 measure is lengthening daily, like the young man s 
 foot, since the same weight of it must become 
 every day equivalent to more and more of the same 
 commodity ; notwithstanding we suppose the same 
 proportion to subsist, without the least variation, 
 between this commodity and every other species of 
 things alienable. 
 
 After having exposed the matter in this light, I 
 think it can hardly, with reason, be urged, that 
 notwithstanding it be admitted that gold and silver 
 may change their proportion of value with regard 
 to one another, yet still this does not prevent silver 
 from remaining the standard, without any incon- 
 venience; for the following reasons: 
 
 First, Because, when it is considered as a stand- 
 ai*d, it never ought to be looked upon as changing 
 its value with regard to gold ; but that gold ought 
 to be considered as changing its value with regard 
 to silver. 
 
 Secondly, Because being the measure itself, it is 
 absurd to consider it as the thing measured: that 
 therefore it retains all the requisites of an invariable 
 scale ; since it measures all things according to the 
 proportion they bear to itself, which physically 
 never can vary. And, 
 
 Thirdly, That a person who has bon'owed a cer- 
 tain weight of silver from another, is obliged to re- 
 pay the same weight of silver he had borrowed ; 
 although at that time silver should be of greatei' 
 value than when he borrowed it.
 
 l6 PRINCIPLES OF MONEY. 
 
 I answer to the first argument : That if in fact 
 silver should become of more or less value with 
 respect to merchandize, with respect to gold, and 
 with respect to bank money, by their being a 
 greater or less demand for it than there was before; 
 I cannot see how calling it a standard, can remove 
 this inconvenience, which is inseparable from the 
 nature of the thing; nor how we can change a 
 matter of fact, by changing our language, and by 
 saying, that merchandize, gold, and bank money, 
 become of more value, or of less value, with re- 
 spect to silver, in proportion as the demand for 
 them is greater or less. This language we must use, 
 although we know for certain that these things re- 
 main in the exact relative proportion of quantity 
 and demand as before; and although it should 
 evidently appear, that a demand for silver has raised 
 the price of it, with respect to every thing it mea- 
 sured the day before. 
 
 If the yard in a mercer's shop should be subject 
 to such revolutions, in consequence of the wood it 
 was made of; and if in measuring a piece of stuff 
 to a customer, which the mercer had bought by 
 this yard the day before for 50 yards, he should 
 find the piece measure but 40, it would not be easy 
 to persuade him, I believe, that his piece was be- 
 come shorter ; but suppose he should have the cu- 
 riosity to measure over again all the pieces in his 
 shop, and that he should find exactly one fifth di- 
 minution upon the length of every one, wojald h©
 
 PRINCIPLES OF MONEY 1 7 
 
 not very rationally conclude that his yard was 
 grown longer, and would he not run immediately 
 to his neighbour s shop and compare it? 
 
 As to the second argument, I agree that silver 
 may at all times very exactly measure the value of 
 things with respect to itself; but this gives us no 
 idea of an imiversal measure. 
 
 I can measure the proportion of the length of 
 things, with any rod, or with any line, the length 
 of which I know nothing about; but no body calls 
 this measuring, because I cannot compare the things 
 measured, with any other thing which I have not 
 measured with the same rod or line, as I might 
 easily do, had I measured with a foot, yard, or 
 toise; consequently the intention of measuring in 
 such a case is almost entirely lost. 
 
 To the third argument, I answer, that I subscribe 
 very willingly to the truth of that proposition; 
 provided that by silver is understood the bare me- 
 tal, without attending to its additional quality of 
 the universal standard measure of value. But if I 
 borrow the silver not as bullion, but as coin, (the 
 common measure of value), then I say, that I over- 
 pay in giving back the same weight I had received. 
 Is there any thing more familiar than such examples ? 
 I borrow ^100 from my neighbour, he proposes 
 to give so much of the value in grain; I accept. 
 The price of grain rises about the term of payment; 
 can I be obliged to repay an equal quantity of grain in 
 payment of a proportional part of what I owe? By 
 D
 
 18 PRINCIPLES OF MONEY. 
 
 no means; because I did not receive the grain as 
 any thing but as a species of money. But if 1 bor- 
 row some quarters of grain to be repaid in harvest, 
 then I am obliged to restore grain for grain, because 
 in this case I did not receive the grain as money, 
 but as a commodity. 
 
 Buying and selling are purely conventional, and 
 no man is obliged to give his merchandize at what 
 may be supposed to be the proportion of its worth. 
 The use therefore of an universal measure, is to 
 mark, not only the relative value of the things to 
 which it is applied a.^ a measure, but to discover in 
 an instant the proportion between the value of these, 
 and of every ntlier commodity valued by a deter- 
 minate measure in all the countries of the world. 
 
 Were pounds sterling, livres, florins, piastres, 
 &c. which are all money of account, invariable in 
 their values, what a facility would it produce in all 
 conversions, what an assistance to trade ! But as 
 they are all limited or fixed to coins, and conse- 
 quently vary from time to time, this example shews 
 the utility of the invariable measure which we have 
 described. 
 
 There is another circumstance which incapaci- 
 tates the metals from performing the office of mo- 
 ney ; the substance of which the coin is made, is 
 a commodity, which rises and sinks in its value with 
 respect to other commodities, according to the wants, 
 competition, and caprices of mankind. The ad- 
 vantage, therefore, found in putting an intrinsic
 
 PRINCIPLES OF MONEV. 19 
 
 ralue into that substance which performs the func- 
 tion of money of account^ is compensated by the 
 instability of that intrinsic vahie ; and the advan- 
 tage obtained by the stability of paper, or symbo- 
 lical money, is compensated by the defect it com- 
 monly has of not being at all times susceptible of 
 realization into solid property, or intrinsic value. 
 
 In order, therefore, to render material money 
 more perfect, this quality of metal, that is of a 
 commodity, should be taken from it; and in order 
 to render paper money more perfect, it ought to 
 be made to circulate upon metallic or land security. 
 The expedient with regard to the metals shall find 
 a plat*e in this inquiry (in the chapter of miscella- 
 neous questions at the end of this book, article 4th). 
 What regards the paper is foreign to our purpose, 
 and belongs to the doctrine of credit. 
 
 There are several smaller inconveniences accom- 
 panying the use of the metals, which we shall here 
 shortly enumerate, reserving the discussion of all 
 the consequences they draw along with them, until 
 we come to consider the operations of trade and 
 money, upon the complicated interests of man- 
 kind. 
 
 First, No money made of gold or silver can cir- 
 culate long, without losing of its weight, although it 
 all along presei-ves the same denomination. This 
 represents the contracting a pair of compasses which 
 •had been rightly adjusted to the scale. Such a de- 
 fect must appear striking, when we reflect upon the
 
 20 PRINCIPLES OF MONEY. 
 
 principles (already laid down) which necessarily in- 
 fluence the fixing of a standard. 
 
 Secondly, Another inconvenience proceeds from 
 the fabrication of money. Supposing the faith of 
 princes who coin money to be inviolable, and the 
 probity, as well as capacity, of those to whom they 
 commit the inspection of the fineness of the metals 
 to be sufficient, it is hardly possible for workmen to 
 render every piece exactly of a proper weight, or to 
 preserve the due proportion between pieces of diffe- 
 rent denominations ; that is to say, to make every ten 
 sixpences exactly of the same weight with every 
 crown piece, and with every five shillings struck in 
 a coinage. In proportion to such inaccuracies, the 
 parts of the scale become unequal. 
 
 Thirdly, Another inconvenience, and far from 
 being inconsiderable, flows from the expence requi' 
 site for the coining of money. This expence adds 
 to its value as a manufacture, without adding any 
 thing to its weight. I shall take notice in the pro- 
 per place, of the consequences which attend this in- 
 convenience, even to nations where coinage is free. 
 
 Fourthly, The last inconvenience I shall mention 
 is, that by fixing the money of account entirely to 
 the coin, without having any independent common 
 measure (to mark and control these deviations from 
 mathematical exactness, which are either insepara-» 
 ble from the metals themselves, or from the fabri- 
 cation of them) the whole measure of value, and all 
 the relative interests of debtors and creditors, be-
 
 PRINCIPLES OF MONEY. 21 
 
 come at the disposal not only of workmen in the 
 mint, of Jews who deal in money, of clippers and 
 washers of coin, but they are also entirely at the 
 mercy of princes, who have the right of coinage, 
 and who have frequently also the right of raising or 
 debasing the standard of the coin, according as 
 they find it most for their present and temporary 
 interest. 
 
 Several of the inconveniences we have here enu- 
 merated, may appear trifling, and so they are found 
 to be in countries where commerce is little known; 
 but the operations of trade surpass in nicety the con- 
 ceptions of any man but a merchant; and as a proof 
 of this, it may be affirmed with truth, that one shil- 
 ling can hardly lose a grain of its weight, either by 
 fraud or circulation, without contributing, by that 
 circumstance, towards the diminution of the stand- 
 ard value of the money-imit, or pound sterling, over 
 all England, as I hope to be able to shew both by 
 reason and facts. 
 
 All and every one of these inconveniences to 
 which coin is exposed, disappear in countries where 
 the use of pure ideal money of account is properly 
 established.
 
 22 PRINCIPLES OF MONET. 
 
 CHAPTER IV. 
 
 Methods which may he proposed for lessening the 
 
 • several inconveniences to which material 
 
 Money is liable. 
 
 N this chapter I sliall point out the methods 
 which maybe proposed for lessening the inconveni- 
 ences to which all coin is liable^ in order thereby to 
 make it resemble as much as possible the invariable 
 scale of ideal money of account. 
 
 The inconveniences from the variation in the re- 
 lative value of the metals to one another, may in 
 some measure be obviated by the following expe- 
 dients: 
 
 First, By considering one only as the standard, 
 and leaving the other to seek its own value, like 
 any other commodity. 
 
 Secondly, By considering one only as the standi 
 ard, and fixing the value of the other from time to 
 time by authority, according as the market price of 
 the metals shall vary. 
 
 Thirdly, By fixing the standard of the unit ac- 
 cording to the mean proportion of the metals, at- 
 taching it to neither; regulating the coin accord-
 
 PRINCIPLES OF MONEY. 23 
 
 ingly; and upon every considerable variation in the 
 proportion between them, either to make a new 
 coinage, or to raise the denomination of one of the 
 species, and lower it in the other, in order to pre- 
 serve the unit exactly in the mean proportion be- 
 tween the gold and silver. 
 
 In order to explain this thought, let me observe, 
 that the consequence of every variation in the pro- 
 portion between the value ©f gold and silver, has 
 this effect; namely, that the same weight of silver 
 acquii'es upon every change a different value in 
 gold, from what it had before; and the same 
 weight of gold acquires, upon the change, a dif- 
 ferent value in silver from what it had before. Let 
 me illustrate this by an example. 
 
 Suppose, then, the value of gold to be to the value 
 of silver, as 1 to 14. Then 100 grains of gold 
 will be worth 1400 grains of silver. Suppose, that 
 next year, the proportion shall change, and that it 
 shall come to be as 1 to 15; then 100 grains of 
 gold w^iil be worth 1500 grains of silver. 
 
 Here then, are two different values in silver for 
 the same quantity of gold, namely, at one time 100 
 grains gold =1400 grains silver; at another time 
 100 ditto = 1500 ditto. Add these two quantities of 
 silver together, they make 2900 grains. Take one 
 half of the sum, or 1450. This I call the mean 
 proportion of the silver. On the other hand, as 
 to the gold;
 
 24 PRINCIPLES OF MONEY. 
 
 Cr$. of Cold. 
 
 1400 grs. silver at one time are worth 100 
 
 1400 grs. ditto at another time are worths 
 
 93y 
 ITT or 
 
 T400 
 
 Together 1 93f 
 
 one half of which is 96!^ grs. or the mean pro- 
 portion of the gold. 
 
 Supposing, therefore, the unit to have been de- 
 termined at 100 grs. of gold, and at 1400 grains 
 of silver, as soon as the proportion comes to 15 it 
 must be changed to 93i grs. of gold, and to 1450 
 grs. of silver. 
 
 This shall be fully explained, and the usefulness 
 of it pointed out, in the sequel. 
 
 Fourthly, To have two units, and two standards, 
 one of gold, and one of silver, and to allow every 
 body to stipulate in either. 
 
 Fifthly, Or last of all, to oblige all debtors to 
 pay, when required, one half in gold and one half 
 in the silver standard. 
 
 I have here proposed the attaching the standard 
 to one of the species, as a remedy against the ef- 
 fects of variation between the metals, because when 
 this is done, the consequences are not so hurtful as 
 when the unit is affixed to both, as I shall prove in 
 its proper place.
 
 PRINCIPLES OF MONEY. 25 
 
 The regulating the proportion of that metal, 
 which is considered as merchandize, to the other 
 which is considered as the standard, upon every 
 variation in the market price of bullion, as well as 
 the other expedient, of establishing two units, the 
 one of gold, and the other of silver, does not render 
 the unit of money any more invariable than before; 
 all that can be said for this expedient, is, that mo- 
 ney becomes thereby more determinate, and that 
 people who enter into permanent contracts, are at 
 least apprised of the consequences of the varying 
 of the proportion of the metals, and may regulate 
 tlieir interests accordingly. 
 
 Fixing the standard to the mean proportion of 
 the metals, is a certain method of preserving the 
 value of the unit invariably in time to come; but, 
 upon subsequent variations in the proportion, it 
 implies either the necessity of a recoinage, or of 
 changing the denominations of the coin, by which 
 fractions of farthings, deniers, and other such small 
 denominations will be incurred, unless such a duty 
 upon coinage be imposed, as may raise the value of 
 the coins above that of common bullion, be- 
 yond the value of such fractions of farthings, &c. 
 which then may be thrown out. Example upon 
 changing the denomination of a shilling; supposing 
 the exact proportion of its new denomination 
 should be 1-2. 28d. the legal denomination may 
 be made 12id. which is 12. 25d. and the three 
 additional hundredth pai;ts of a penny may be 
 E
 
 26 PRINCIPLES OF MONEY. 
 
 neglected; because the duty on coinage will give 
 an advanced value to the shilling price, beyond the 
 three hundredth part of one penny; which, as 
 a meial, it will have more than in proportion to its 
 denomination. 
 
 rThe last expedient of making debtors pay half in 
 gold and half in silver, would remove every incon- 
 venience, provided that a similar regulation were 
 made at the mint and at the Bank of England, ap- 
 pointing all bullion to be delivered in both species 
 at the Mint; and all payments to be made in both 
 species at the bank: and also provided that the 
 same regulation should be observed in all bargains 
 of sale as often only as required. This would so 
 blend the value of the two metals together, as to 
 make them virtually but one. 
 
 The other imperfections of coin relate either 
 to its wear, to the want of exactness in the fabrica- 
 tion, to the price of coinage, or to the adulteration 
 and change of the standard. 
 
 First, As to the first, the best expedients are, to 
 strike the greatest part of the coin in large solid 
 pieces, having as little surface as possible, con- 
 sistently with beauty and ease of fabrication. 
 
 And to make all light coin whatsoever go by 
 weight. 
 
 Secondly, As to the inaccuracy of the fabrica- 
 tion, there is no other remedy than a strict atten- l 
 tion in government to a matter of so great conse- 
 quence. 
 
 1
 
 PRINCIPLES OF MONEY. 2^ 
 
 Thirdly, The price of coinage principally affects 
 the interest of nations with regard to foreign trade ; 
 consequently, trading states should endeavour, as 
 nearly as possible, to observe the same regulations 
 with their neighbours, in everything which regards 
 the coin. The consequence of this inconvenience 
 to those within the society is unavoidable, and 
 therefore no remedy can be proposed. 
 
 Fourthly, The establishment of public credit is 
 the best security against all adulterations of the 
 standard. No fundamental law can bind up a state 
 go effectually as its own interest. 
 
 CHAPTER V. 
 
 i'^^ariatioyis to which the value of the Money-unit is 
 exposed from every Disorder in the Coin, 
 
 lET us suppose, at present, the only disorder to 
 consist in a want of the due proportion between the 
 gold and silver in the coin. 
 
 This proportion can be established by the mar- 
 ket price of the metals only; because an augmen- 
 tation and rise in the demand for gold or silver has 
 the effect of augmenting the value of the metal de- 
 manded. Let us suppose that to-day one pound of
 
 28 PRINCIPLES OF MONEY- 
 
 gold may buy fifteen pounds of silver; if to-morro\r 
 there be a high demand for silver, a competition 
 among merchants, to have silver for gold, will 
 ensue, they will contend who shall get the silver at 
 the rate of fifteen pounds for one of gold: this will- 
 raise the price of it, and in proportion to their 
 views of profit, some will accept of less than the 
 fifteen pounds. This is plainly a rise in the silver, 
 more properly than a fall in the gold; because it is 
 the competition for the silver which has occasioned 
 the variation in the former proportion between the 
 metals. 
 
 Let us now suppose that a state having, with 
 great exactness, examined the proportion of the 
 metals in the market, and having determined the 
 precise quantity of each for realising or represent- 
 ing the money-unit, should execute a most exact 
 coinage of gold and silver coin ; as long as this 
 proportion continues unvaried in the market, no 
 inconvenience can result from that quarter, in 
 making use of the metals for money of account. 
 
 But let us suppose the proportion to change; that 
 the silver, for example, should rise in its value with 
 regard to gold; will it not follow, from that mo- 
 ment, that the unit realized in the silver, will be- 
 come of more value than the unit realized in the 
 gold coin? 
 
 But as the law has ordered them to pass as equi- 
 valents for one another, and as debtors have always 
 the option of paying in what legal coin they think
 
 PRINCIPLES OF MONEY. 2^ 
 
 £t, will they not all choose to pay in gold; and will 
 not then the silver coin be melted down or export- 
 ed, in order to be sold as bullion, above the value 
 it bears when it circulates in coin? Will not this 
 paying in gold also really diminish the value of the 
 money-imit, since upon this variation every thing 
 must sell for more gold than before, as we have al- 
 ready observed? 
 
 Consequently, merchandize which has not varied 
 in its relative value to any other thing but to gold 
 and silver, must be measured by the mean propor- 
 tion of the metals, and the application of any other 
 measure to it is altering the standard. If it is 
 measured by the gold, the standard is debased; if 
 by silver, it is raised, as shall presently be proved. 
 
 If, to prevent the inconvenience of melting down 
 the silver, the state shall give up affixing the value 
 of their unit to both species at once, and should fix 
 it to one, leaving the other to seek its price as any 
 other commodity, in this case no doubt the melting 
 down of the coin will be prevented ; but will this 
 ever restore the value of the monev-unit to its for- 
 mer standard ? Would it, for example, in the 
 foregoing supposition, raise the debased value of 
 the money-unit in the gold coin, if this species 
 were declared to be the standard? It would in- 
 deed render silver coin purely a merchandize, and 
 by allowing it to seek its value, would certainly 
 prevent it from being melted down as before; be- 
 cause the pieces would rise conventionally in their
 
 30 PRINCIPL-ES OF MONEY. 
 
 denomination; or an agio, as it is called, would 
 be taken in payments made in silver; but the gold 
 would not, on that account, rise in its value, or be- 
 gin to purchase any more merchandize than before. 
 Were therefore the standard fixed to the gold, 
 would not .this be an arbitrary and a violent change 
 in the value of the money-unit, and a debasement 
 of the standard? 
 
 If, on the other hand, the state should fix the 
 standard to the silver, which we suppose to have 
 risen in its value, would this ever sink the advanced 
 value which the silver coin had gained above the 
 worth of the former standard unit, and would not 
 this be a violent and an arbitrary change in the 
 value of the money-unit, and a raising of the 
 standard? 
 
 The only expedient, therefore, as has been said, 
 is in such a case to fix the numerary unit to neither 
 of the metals, but to contrive a way to make it 
 fluctuate in a mean proportion between them ; 
 which is in effect the introduction of a pure ideal 
 money of account. This shall be further explained 
 as we go along. 
 
 I have one observation only to make in this place, 
 to wit, that the regulation of fixing the unit by 
 the mean proportion, ought to take place at the 
 instant the standard unit is affixed with exactness 
 both to the gold and silver. If it be introduced 
 long after the market proportion between the me- 
 tals has deviated from the proportion established in 
 
 (
 
 ^RINC^PLEs of money. 3i 
 
 the coin, and if the new regulation is made to have 
 a retrospect, with regard to the acquitting of per- 
 manent contracts entered into, while the value of 
 the money unit had attached itself to the lower 
 currency, in consequence of the principal above 
 laid down, then the restoring the money-unit to 
 that standard where it ought to have remained (to 
 wit, to the mean proportion) is an injury to all 
 debtors who have contracted since the time the pro- 
 portion of the metals began to vary. 
 
 This is clear from the former reasoning. The 
 moment the market price of the metals differs from 
 that in the coin, every one who has payments to 
 make, will pay in that species which is rated highest 
 in the coin ; consequently, he who lends, lends in 
 that species. If, after the contract, therefore, the 
 unit be carried up to the mean proportion, this 
 must be a loss to him who had borrowed. 
 
 Fron\ this we may perceive why, in the first ar- 
 ticle of the preceding chapter, it was said, that 
 there was less inconvenience from the varying of the 
 proportion, of the metals, where the standard is 
 iixed to one of them, than when it is fixed to both. 
 In the first case, it is at least uncertain whether 
 the standard or the merchandizespecies be to rise; 
 consequently it is uncertain whether the debtors 
 or the creditors be to gain by a variation. If the 
 standard species should rise, the creditors will gain; 
 if the merchandizespecies should rise, the debtors 
 will gain; but when the unit is attached to both
 
 5^ TRmCtPLES OF MONEY. 
 
 species, then the creditors never can gain, let the 
 metals vary as they will: if silver rise, then debtors 
 will pay in gold; if gold rise, debtors will pay in 
 silver. But whether the unit be attached to one or 
 to both species, the infallible consequence of a vari- 
 ation is, that one half of the difference is either 
 gained or lost by debtors and creditors. The in- 
 variable unit is constantly the mean proportional 
 between the two measures. 
 
 I intended to have postponed the entering upon 
 what concerns the interests of debtors and creditors 
 in all variations of the coin, until I came to treat 
 particularly of that matter ; but as it is a thing of 
 the greatest consequence to be attended to, in every 
 proposal for altering or regulating the coin of a 
 nation, it will, perhaps, upon this account, bear a 
 repetition in another place. 
 
 To render our ideas as distinct as possible, we 
 must keep them simple. Let us now suppose that 
 the metals are perfectly well proportioned in the 
 coin, but that the coin is worn by use. 
 
 If this be the case, we must either suppose it to 
 be all equally worn, or unequally worn. 
 
 If all be equally worn, I think it needs no de- 
 monstration to prove, that the money-unit which 
 was attached to the coin, when weighty, (drawing 
 its value from the metals contained in it,) must na- 
 turally diminish in its value in proportion as the 
 metals are rubbed away. 
 
 If the coin be unequally worn, the money-unit
 
 PRINCIPLES OF MONEY. 33 
 
 will be variously realized, or represented; that is to 
 say, it will be of different values, according to the 
 weight of the pieces. 
 
 The consequence of this is the same as in the 
 disorder of the proportion of the metals: debtors 
 will choose to pay in the light pieces, and the 
 heavy will be melted down. In proportion, there- 
 fore, to this disorder, will the value of the unit 
 gradually descend. This was the great disorder in 
 England in 1695 ; while the standard of the pound 
 sterling was affixed to the silver only, the gold being 
 left to seek its own value. 
 
 Since the invention of the money whneel, the in- 
 accuracy in the fabrication is greatly prevented. 
 Formerly, when money was coined with the ham- 
 mer, the mint-masters weighed the coin delivered 
 by the workmen, in cumulo, by the pound troy 
 weight, without attending very exactly to the pro- 
 portion of the pieces. At present exactness is 
 more necessary, and every piece must be weighed 
 by itself. 
 
 It is of very great consequence that the weight 
 and denominations of coin be in exact proportion 
 to that of their current value, which is always re- 
 lative to the money-unit of account. When any 
 inequality happens there, it is easy to perceive how 
 all the pieces which are above the proportion of 
 their just weight, will be immediately picked up, 
 and melted down, and none but the light ones will 
 remain in circulation. 
 F
 
 34 PRINCIPLES OF MONEV. 
 
 This, from the principles ah'cady hiid dowii, 
 must proportionally diminish the value of the 
 money-unit. 
 
 From what has been observ^ed concerning the^ 
 deviations in the coin from the proportion in the 
 market price of the metals, and from the legal 
 weight, we may lay down this undoubted principle, 
 That the value of the money-unit of accouyit is not to 
 he sought for in the statutes and /regulations of the 
 mint, hut in the actual intrinsic value of that cur-^ 
 rency in ivMch all obligations are acquitted, and alt 
 accompfs are hept. 
 
 As I have at present principally in view to lay 
 down certain principles with regard to money, 
 which I intend aftenvards to apply to the state of 
 the British coin; and as these principles are here 
 restrained to the effects which eveiy variation in 
 the coin has upon the value of the unit of money in 
 account, I shall in this place observe only, as to 
 the imposition of coinage. 
 
 That coin being necessary in every country where 
 the money-unit is attached to the metals, it must 
 be procured by those who are obliged to acquit 
 their obligations in material money. 
 
 If, therefore, the state shall oblige every one 
 who carries the metals to the mint to pay the coin- 
 age, the coin they receive must be valued not only 
 at the price the metals bear in the market, when 
 they are sold as bullion,, (or mere metal, of no 
 farther value than as a physical substance), but also
 
 PRINCIPLES OF MONEY. 35 
 
 ijtt tlie additional value these metals receive iu being 
 rendered useful for purchasing commodities, and 
 acquitting obligations. This additional value is the 
 price of coinage. 
 
 If, therefore, in a country where coinage is free, 
 as in England, this coinage shall come to be im- 
 posed, the money^unit continuing to be affixed as 
 before to the same quantity of the metals, ought 
 to rise in its valne; that is, ought to become equal 
 to a greater quantity of every sort of merchandize 
 -than before; consequently, as the rough metals of 
 which the coin is m^de are merchandize, like every 
 other thing, the same number of money-units 
 realized, or represented in the coin, ought to pur- 
 ;Chase more of the rough metals than before : that 
 is to say, That in every country where coinage is 
 imposed J bullion must be cheaper than coin. 
 
 This proposition would be liable to no exception, 
 jvere it true that no debt could be exacted but in the 
 nation's coin ; because in this case, the -creditor 
 ?vould be constantly obliged to receive it at its full 
 'ralue. 
 
 But when nations owe to one another, the party 
 debtor must pay the party creditor in his coin : the 
 4ebtor, therefore, is obliged to sell his own coin 
 for what he can get for it, and with this he must 
 buy of the coin of his creditor s country, in order 
 to pay him with it. 
 
 Let us, to avoid abstract reasoning, take an ex- 
 ainple : and we cannot choose a better than that of
 
 36 PRINCIPLES OF MONteY. 
 
 England and France. In England, coinage is free, 
 in France it costs St^ per cent, as shall be made out 
 in its proper place. 
 
 France owes England £ 1000 sterling. In paying 
 in the market of London the bullion contained in 
 this sum, either in gold or silver, the debt is paid ; 
 because the coining of it costs nothing. Here 
 France acquits her debt cheaper than by sending 
 her own coin as bullion; because the bullion she 
 sends is not worth an equal weight of her coin. 
 
 England owes France 20,000 livres. In paying 
 the bullion contained in this sum, England is not 
 quit ; she must also pay France 8x5 per cent, in or- 
 der to put it into coin. 
 
 The operation of raising and debasing the coin is 
 performed in three ways. 
 
 First, By augmenting or diminishing the weight 
 of the coin. 
 
 Secondly, By augmenting or diminishing the 
 proportion of alloy in the coin. 
 
 Thirdly, By augmenting or diminishing the pro- 
 portion between the money (coin) and the money 
 of account, as if every sixpence were called a shil- 
 ling, and every twenty sixpences a pound sterling. 
 
 The French call this increasing or diminishing 
 the numerary value; and as I think it is a better 
 term than that of reusing or sinking the denomina- 
 tion, I shall take the liberty now and then to em- 
 ploy it. 
 
 These three operations may be reduced to one.
 
 PRINCIPLES OF MONEY. 37 
 
 and expressed by one term: they all imply the aug- 
 menting or diminishing of the weight of the pure 
 metals in the money-unit of account. 
 
 CHAPTER VI. 
 
 flow the variations in the intrinsic value of the unit 
 
 of Money must affect all the domestic 
 
 Interest of a Nation. 
 
 E have briefly pointed out the eftects of the 
 imperfections of the metals in*producing a variation 
 in the wlue of the unit of account, we must now 
 point out the consequences of this variation. 
 
 If the changing the content of the bushel by 
 which grain is measured, would affect the interest 
 of those who are obliged to pay, or who are entitled 
 to receive a certain number of bushels of grain for 
 the rent of lands; in the same manner must every 
 variation in the value of the unit of account affect 
 all persons who, in permanent contracts, are 
 obliged to make payments, or who are entitled to 
 receive sums of money stipulated in multiples or in 
 fractions of this money-unit^
 
 38 PRINCIPLES OF MONEY. 
 
 Every variation, therefore, upon the intrinsic 
 value of the money-unit, has the eftect of benefit' 
 ing the class of creditors, at the expence of debt' 
 ors, or vice versa. 
 
 This consequence is deduced from an obvious 
 principle. Money is more or less valuable in pro^ 
 portion as it can purchase more or less of every 
 kind of merchandize. Now, without entering 
 anew into the causes of the rise and fall of prices, it 
 is agreed upon all hands, I suppose, that whether 
 an augmentation of the general mass of money in 
 circulation has the effect of raising prices in gene- 
 ral, or not, any augmentation of the quantity of 
 the metals appointed to be put into the money-unit, 
 must at least augment the value of that money-unit, 
 and make it purchase more of any commodity than 
 before; that is to say, if 113 grains of fine gold, 
 the present weight of a pound sterling in gold, can 
 buy 113 pounds of flour; were the pound sterling 
 raised to 1 1 4 grains of the same metal, it would 
 buy 114 pounds of flour; consequently, were the 
 pound sterling augmented by one grain of gold, 
 every miller who paid a rent of ten pounds a-year 
 would be obliged to sell 1140 pounds of his flour, 
 in order to procure 10 pounds to pay his rent, in- 
 stead of 1130 pounds of flour ^hich he sold for- 
 merly to procure the same sum; consequently by 
 this innovation, the miller must lose yearly ten 
 pounds of flour which his landlord consequently 
 must gain. From this example I think it is plain^
 
 PRINCIPLES OF MONEY. 39 
 
 that every augmentation of the metals put into the 
 pound sterling, either of silver or gold, must imply 
 an advantage to the whole class of creditors, who 
 by contract are paid in pounds sterling, and conse- 
 quently, must be a proportional loss to all debtors 
 in such contracts, who must pay by the same deno- 
 mination. 
 
 We may therefore safely conclude, that every 
 dbn'mution of the metals contained in the money- 
 unit, must imply a loss to all creditors; and that in 
 proportion to this loss, those who are debtors must 
 gain. 
 
 That on the contrary, whatever augme^itation is 
 made of the money-unit, such augmentation must 
 by hurtful to debtors, and proportionally advanta- 
 geous to creditors. 
 
 In order to render this inquiry more useful, I 
 shall now apply the principles I have laid down, to 
 the present state of the British coin, and to the re- 
 solution of every question which shall occur during 
 the examination of the disorder into which it has 
 fallen.
 
 40 PRINCIPLES OF MONEY. 
 
 CHAPTER VII. 
 
 Of the Disorder in the British Coin, so Jar as it 
 
 occasions the melting down, or exporting 
 
 of the Specie. 
 
 JL HE defects in the British coin are three : 
 
 First, The proportion hetween the gold and 
 silver in it is found to be as 1 to 15t%, whereas the 
 market price, (17^9) riiay be supposed to be near- 
 ly as 1 to 14^. 
 
 Secondly, Great part of the current money is 
 worn and light. 
 
 Thirdly, From the second defect proceeds the 
 third, to wit, that there are several currencies in 
 circulation which pass for the same value, without 
 being of the same weight. 
 
 Fourthly, From all these defects results the last 
 and greatest inconvenience, to wit, that some in- 
 novation must be made, in order to set matters on a 
 right footing. 
 
 The English, besides the unit of their money, 
 which they call the pound sterling, have also the 
 unit of their weight for weighing the precious me- 
 tals.
 
 t>RlNCIPLES OF MONEY. 41 
 
 This is called the pound troy, and consists of 1 2 
 ounces, every ounce of 20 penny-weights, and every 
 penny-weight of 24 grains. The pound troy, there- 
 fore, consists of 240 penny-weights, and 5/60 
 grains. 
 
 The fineness of the silver is reckoned by the num- 
 ber of ounces and penny-weights of the pure metals 
 in the pound troy of the composed mass ; or in other 
 words, the pound troy, which contains 57^0 grains 
 of standard silver, contains 5328 grains of fine silver, 
 and 432 grains of copper, called alloy. 
 
 Thus the standard silver is 1 1 ounces 2 penny- 
 weights of fine silver in the pound troy, to 1 8 penny- 
 weights copper, or 111 parts fine silver to nine parts 
 alloy. 
 
 Standard gold is 1 1 ounces fine to one ounce sil- 
 ver or copper employed for alloy, which together 
 make the pound troy; consequently, the pound 
 troy of standard gold, contains 5280 grains fine, 
 and 480 grains alloy, which alloy is reckoned of 
 no value. 
 
 This pound of standard silver is ordered, by sta- 
 tute 43 Elizabeth, to be coined into 62 shillings, 2Q 
 of ^\hich make the pound sterling; consequently 
 the 20 shillings contain 17I8.7 grains of fine silver, 
 and 1858.06 standard silver. 
 
 The pound troy of standard gold, t^ fine, is or- 
 dered by an act of King Charles the Second to be 
 cut into 44t guineas; that is to say, every guinea 
 contains 129.43 grains of standard gold, and 118.644 
 G
 
 42 PRINCIPLES OF MO^EY. 
 
 of fine gold; and the pound sterling, ^vllich is tt of 
 the guinea, contains 1 1 2.994 which we may state at 
 113 grains of fine gold, as has been said. 
 
 The coinage in England is entirely defrayed at 
 the expence of the state. The mint price for the 
 metfils is the veiy same with the price of the coin. 
 Whoever carries to the mint an ounce of standard 
 silver, receives for it in silver coin 5s. 2d. or Q2d. 
 Whoever carries an ounce of standard gold receives 
 in gold coin £3 : 17 : IO2; the one and the other 
 making exactly an ounce of the same fineness with 
 the bullion. Coin, therefore, can have no value in 
 the market above bullion; consecjuently, no loss can 
 be incaiTed by those who melt it down. 
 
 When the guinea was fiist struck, government 
 (not inclining to fix tlie pound sterling to the gold 
 coin of the nation) rated the guinea at 20 shillings, 
 (which was then below its proportion to the silver), 
 leaving it to seek its own price above this value, 
 according to the course of the market. 
 
 By this regulation no harm was done to the Eng- 
 lish silver standard; because the guinea, or 1 18.644 
 grains fine gold being worth more, at that time, 
 than 20 shillings, or 17I8.7 grains fine silver, no 
 . debtor would pay with gold at its standard value, 
 and whatever it was received for above that price 
 was purely conventional. 
 
 Accordingly guineas sought their own price un- 
 til the year 1728, that they were fixed a-new, not 
 below their value as at first, but at what jvas thea
 
 PRINCIPLES OF MONEY. " 43 
 
 reckoned tlieir exact value, accordlrig: to the pro- 
 portion of the metals, to wit, at 21 shillings; and 
 at this they were ordered to pass current in all pay- 
 ments. 
 
 This operation had the effect of making the gold 
 a standard as well as the silver. Debtors then paid 
 indifferently in gold as well as in silver, because 
 both were supposed to be of the same intrinsic as 
 well as current value; in which case no inconve- 
 nience could follow upon this regulation. But in 
 time, silver came to be more demanded; the mak- 
 ing of plate began to prevail more than formerly, 
 and the exportation of silver to the East Indies in- 
 creasing yearly, made the demand for it greater; 
 or perhaps brought its quantity to be proportionally 
 less than before. This changed the proportion of 
 the metals, and by slow^ degrees they have come 
 from that of 1 to 15.2 (the proportion they were 
 supposed to have when the guineas were fixed and 
 made a lawful money at 21 shillings) to that of 14.5 
 the present supposed proportion in 1759- 
 
 The consequence of this has been, that the same 
 guinea which at the proportion of 15.2 was worth 
 1804.6 grains fine silver, at the time it was fixed 
 at 21 shillings, is now worth no more than 1719-9 
 grains of fine silver, according to the proportion of 
 14^ to 1. 
 
 Consequently, debtors, who have always the 
 option of the legal species in paying their debts, 
 will no more pay pounds sterling in silver, but in
 
 44 PRINCIPLES OF MONEY, 
 
 ^old ; and as the gold pounds they pay in, are not 
 intrinsically worth the silver pounds they paid in 
 formerly, according to the statute of Elizabeth, 
 it follows that the pound sterling in silver is really 
 no more the standard, since nobody will pay at 
 that rate, and since nobody can be compelled to 
 do it. 
 
 Besides this want of proportion between the me- 
 tals, the silver coined before the reign of George I. 
 is now become light by circulation; and the gui- 
 neas coined by all the princes since Charles II. pass 
 by tale, though many of them are considerably di- 
 minished in their weight*. 
 
 Let us now examine what profit the want of pro- 
 portion, and the want of weight in the coin can 
 afford to the money-jobbers, in melting it down or 
 exporting it. 
 
 Did every body consider coin merely as the mea- 
 sure for reckoning value, Avithout attending to its 
 value as a metal, the deviations of gold and silver 
 
 * These defects in the coin of Great Britain, occasioned at last 
 so great inconveniencies in circnlation, that in 1773 government 
 was obliged to attempt some redress by Parliament. AccorHuigly 
 an act was passed, empowering every person, and particularly re- 
 quiring the tellers of the exchequer, their deputies and clerks, to 
 weigh all gold money tendered to them ; and to cut, break, or de- 
 face all pieces thereof, which by the weight, or otherwise, shall 
 appear to be counterfeit, or diminished otherwise than by reason- 
 able wearing.
 
 PRINCIPLES OF MONEY. 45 
 
 coin from perfect exactness either as to proportion 
 or weight_, would occasion little inconvenience. 
 
 Great numbers indeed, in every modern society, 
 consider coin in no other light, than that of money 
 of account, and have great difliculty to comprehend 
 what diflference any one can find between a light 
 shilling and a hea^y one; or what inconvenience 
 there can possibly result from a guinea's being some 
 grains of fine gold too light to be worth 21 shillings 
 standard weight. And did every one think in the 
 same way, there would be no occasion for coin 
 made of the precious metals; leather, copper, iron, 
 or paper, would keep the reckoning as well as gold 
 and silver. 
 
 But although there be many who look no 
 farther than at the stamp on the coin, there are 
 others whose sole business it is to examine its in- 
 trinsic worth as a commodity, and to profit of 
 every irregularity in the weight and proportion 
 of the metals. 
 
 By the very institution of coinage, it is implied, 
 that every piece of the same metal, and same de- 
 nomination with regard to the money-unit, shall 
 pass current for the same value. 
 
 It is therefore the employment of those money- 
 jobbers, as I shall call them, to examine with a scru- 
 pulous exactness, the precise weight of every piece 
 of coin which comes into their hands. 
 
 The first object of their attention, is, the price of 
 the metals in the market. A jobber finds at present,
 
 46 PRINCIPLES OF MONEY. 
 
 (1760) that with 14.5 pounds of fine silver huUIon, 
 he can buy one pound of fine gold bullion. 
 
 He therefore buys up with gold coin, all the new 
 silver as fast as it is coined, which he can get at the 
 rate of l5f pounds for one in gold; these 15? pounds 
 of silver coin he luclts down into bullion, and con- 
 verts it back into gold bullion, giving at the rate 
 only of 14l pounds for one. 
 
 By this operation he remains wdth the value 
 of -/□ of one pound w^eight of silver bullion clear 
 profit upon the 15t pounds he bought; which tv is 
 really lost by the man who inadvertently coined 
 silver at the mint, and gave it to the money jobber 
 for his gold. Thus the state loses the expence 
 of the coinage, and the public the couvenience of 
 change for their guineas. 
 
 But here it may be asked, why should the mo- 
 ney jobber melt down the silver coin ; can he not 
 buy gold with it as well without melting it down ? 
 1 answer he cannot; because when it is in coin, 
 he cannot avail himself of its being new and- 
 weighty. Coin goes by tale, not by weight; there- 
 fore, w^ere he to come to market with his new sil- 
 ver coin, gold bullion being sold at the mint price 
 I shall suppose, viz. at j£3 : 17 : lol sterling money 
 per ounce, he would be obliged to pay the price of- 
 what he bought with heavy money, which he can 
 equally do with light. 
 
 He therefore melts down the new silver coin, and 
 sells it for bullion, at so many pence an ounce, the
 
 PRINCIPLES OF MONEY. 4f 
 
 price ot which bullion is, in the English market, 
 always above the price of silver at the mint, for the 
 reasons now to be given. 
 
 When you sell standard silver bullion at the mint, 
 you are paid in weighty money; that is, you re- 
 ceive for your bullion the very same weight in 
 standard coin ; the coinage costs nothing ; but 
 when you sell bullion in the market, you are paid in 
 worn-out silver, in gold, in bank notes, in short, 
 in every species of lawful current money. Now all 
 these payments have some defect: the silver you are 
 ' paid with is worn and light; the gold you are paid 
 with is over-rated, and perhaps also light; and 
 the bank notes must have the same value with the 
 specie with which the bank pays them; that is with 
 light silver .or over-rated gold- 
 It is for these reasons, that silver bullion, which 
 is bought by the mint at 5s. 2d. per ounce of heavy 
 silver money, may be bought at market at 65 pence 
 the ounce in light silver, over-rated ^old, or bank 
 notes, which is the same thing. 
 
 Wlien the unit is once affixed to certain determi- 
 nate quantities of both metals, if one of the metals 
 should afterwards rise in value in the market, the 
 coin made of that metal will lose a part, and will Ije 
 more valuable as metal than as coin. Consequentlv 
 it will be melted down, and the bullion will be sold 
 for a price as much exceeding die mint price, as the 
 metal has risen in its value. 
 
 If, therefore, in England the price of silver bul-
 
 48 PRINCIPLES or MONEY. 
 
 lion in the market be found to be 65 pence the 
 ounce, while at the mint it is rated at 62; this 
 proves that silver has risen above the proportion 
 observed in the coin, and that all silver coin of 
 standard weight may consequently be melted down 
 with a profit of sj 
 
 There are several other circumstances to be at- 
 tended to, which regulate and influence the price 
 of bullion, we shall here pass them in review the 
 better to discover the nature of this disorder in the 
 English coin, and the advantages which money- 
 jobbers may draw from it. 
 
 The price of bullion, like that of every other 
 merchandize, is ascertained by the value of the 
 money it is paid with. 
 
 If silver bullion, therefore, sell in England for 65 
 pence an ounce, paid in silver coin, it must sell for 
 65 shillings the pound troy; that is to say, the shil- 
 lings it is commonly paid with, do not singly exceed 
 the weight of ^V of a pound troy: for if the 65 shil- 
 lings with which the pound of bullion is paid weigh- 
 ed more than a pound troy, it would be a shorter 
 and better way for him who wants bullion, to melt 
 down the shillings and make use of the metal, than 
 to go to market with them in order to get less. 
 
 We may, therefore, be very certain, that no 
 man will buy silver, bullion at 65 pence an ounce, 
 with any shilling which weighs above zr of a pound 
 troy. 
 
 We have gone upon the supposition that the or-
 
 PRINCIPLES or MONEY. 4^ 
 
 dinary price of bullion in the English market is 65 
 pence per ounce. This has been done upon the 
 authority of some late writers on this subject: it is 
 now proper to point out the causes which may 
 make it deviate from this value. 
 
 First, It may vary, and certainly wdll vary in the 
 price, according as the currency is better or worse. 
 When the expences of a war, or a wrong balance 
 of trade, have carried off a great many heavy gui- 
 neas, it is natural that bullion should rise; because 
 then it will be paid for more commonly in light 
 gold and silver; that is to say, with pounds ster- 
 ling, below the value of 113 grains fine gold, the 
 worth of the pound sterling in new guineas. 
 
 Secondly, This wrong balance of trade, or a de- 
 mand for bullion abroad, becoming very great, may 
 occasion a scarcity of the metals in the market, as 
 well as a scarcity of the coin; consequently, an 
 advanced price must be given for it in proportion 
 to the greatness and height of the demand. In this 
 case, both the specie and the bullion must be bought 
 with paper. But I must observe, that the rise in 
 the price of bullion proceeds from the demand 
 for the metals, and the competition between mer- 
 chants to procure them, and not because the pa- 
 per given as the price is at all of inferior value to 
 the specie. The least discredit of this kind would 
 not tend to diminish the value of the paper; it 
 would annihilate it at once. Therefore, since the 
 metals must be had, and the paper cannot supply 
 H
 
 60 PRINCIPLES OF MONEY. 
 
 the want of them when they are to be exported, 
 the price rises in proportion to the difficulties in 
 finding metals elsewhere than in the English 
 nia;rket. 
 
 Thirdly, A sudden call for bullion, for the mak- 
 ing of plate. A goldsmith can well afford to give 
 
 61 pence for an ounce of silver, that is to say, he can 
 afford to give one pound of gold for 14 pounds of 
 silver, and perhaps for less, notwithstanding what 
 he gives be more than the ordinary proportion be- 
 tween the metals, because he indemnities himself 
 amply by the price of his workmanship: just as a 
 tavern-keeper will pay any price for a fine fish, be^ 
 cause, like the goldsmith, he buys for other 
 people. 
 
 Fourthly, The mint price has as gieat an effect in 
 bringing down the price of bullion, as exchange 
 has in raising it. In countries where the metals in 
 the coin are justly proportioned, where all the cur- 
 rencies are of legal weight, and where coinage is 
 imposed, the operations of trade make the price of 
 bullion constantly to fluctuate between the value 
 of the coin and the mint price of the metals. This 
 shall afterwards be sufficiently explained, in the se- 
 cond part. 
 
 Now let us suppose that the current price of sil' 
 ver bullion in the market is 65 pence the ounce, 
 paid in lawful money, no matter of what weight, 
 or of what metal. Upon this the money-jobber 
 falls to work. All shillings which are above sr of
 
 PRINCIPLES OF MONEY. 51 
 
 ^ pound troy, he throws into his melting pot, and 
 srells them as bulhon, for 65d. per ounce; all those 
 which are below this weight he carries to market, 
 and buys bullion with them, at 60 pence per 
 ounce. 
 
 What is the consequence of this? 
 
 That those w^ho sell the bullion, finding the shil- 
 lings Avhich the money-jobber pays with perhaps 
 not above -^ of a pound troy, they on their side 
 raise the price of their bullion to 66 pence the 
 ounce. 
 
 This makes new work for the money-jobber; 
 for he must always gain. He now weighs all shil- 
 lings as they come to hand; and as formerly he 
 threw into his melting-pot those which were 
 worth more than -sr of a pound troy, he now throws 
 in all that are in value above ■^. He then sells the 
 melted shillings at 66 pence the ounce, and buys 
 bullion with the light ones at the same price. 
 
 This is the consequence of ever permitting any 
 species of coin to pass by the authority of the 
 stamp, without conti'olling it at the same time by 
 the weight: and this is the manner in which money- 
 jobbers gain by the currency of light money. 
 
 Whenever shillings come below the weight of ^V 
 of a pound troy, then there is the same advan- 
 tage in changing them for new guineas: and when 
 this is the case, the new guineas will be melted 
 down, and profit will be found in selling them for 
 bullion, upon the principles we have now ex- 
 plained.
 
 52 PRINCIPLES OF MOxVEY. 
 
 It would be very tedious to enumerate all tlid 
 fraudulent operations which are occasioned by this 
 defect of proportion between the metals in the coin, 
 and by the unequal weight of coins carrying the 
 same denomination. 
 
 We have already given a specimen of the domes- 
 tic operations of the money-jobbers; but these are 
 not the most prejudicial to national concerns. The 
 jobbers may be supposed to be Englishmen; and 
 in this case the profit they make remains at home: 
 but whenever there is a call for bullion to pay the 
 bajance of trade, it is evident that this will be paid 
 in silver coin, never in gold, if heavy silver can be 
 got; and this again carries away the silver coin, 
 and renders it at home so rare, that great incon- 
 veniences are found for want of the lesser denomi- 
 nations of it. The loss, however, here is confined 
 to an inconvenience; because the balance of trade 
 being a debt which must be paid, I don't consider 
 the exportation of the silver for this puj*pose as any 
 consequence of the disorder of the coin. But be- 
 sides this exportation which is necessary, there are 
 others which are arbitrary, and which are made 
 merely with a view to profit of the wrong pro- 
 portion. 
 
 When the money-jobbers find difficulties in car- 
 rying on, in the English market, the traffic we have 
 described, because of the competition among them- 
 selves, they carry the silver coin out of the coun- 
 try, and sell it abroad for gold, upon the same
 
 PRINCIPLES OF MONEY. ' 53 
 
 principles that the East India company send silver 
 to China, in order to purchase gold. 
 
 This disorder, therefore, is an effectual stop to 
 any more coina£!;e of silver for circulation. 
 
 CHAPTER MIL 
 
 Of the disorder in the British Coin, so far as it affects 
 
 the Value of the Pound Sterling 
 
 Currency. 
 
 ROM what has been said, it is evident, that 
 there must be found in England two legal pounds 
 sterling, of different values; the one worth 113 
 grains of fine gold, the other worth 17I8.7 grains 
 of fine silver. I call them different; because these 
 two portions of the precious metals are of different 
 values all over Europe. 
 
 But besides these two different pounds sterling, 
 which the change in the proportion of the metals 
 have created, the other defects of the circulating 
 coin produce similar effects. The guineas coined 
 by all the princes since Charles II. have been 
 of the same standard weight and fineness, 44* in 
 a pound troy of standard gold ik fine; these have
 
 64 PRINCIPLES OF MONEV. 
 
 been constantly wearing ever since they have beeil 
 coined; and in proportion to their wearing they are 
 of less value. 
 
 If, therefore, the new guineas be below the value 
 of a pound sterling in silver, standard weight, the 
 old must be of less value still. Here then Is 
 another currency, that is, another 2)ound sterling; 
 or indeed, more properly speaking, there are as 
 many different pounds sterling as there are guineas 
 of diS'erent weights. This is not all; the money- 
 jobbers have carried off all the weighty silver; that 
 which is worn with use, and reduced even below 
 the standard of gold, forms one currency more, and 
 totally destroys all determinate proportion between 
 the money-unit and the currencies which are sup- 
 posed to represent it. 
 
 It may be asked, how, at this rate, any silver at 
 all has remained in England? I answer, that the 
 few weighty shillings which still remain in circula- 
 tion, have marvelously escaped the hands of the 
 money-jobbers; and as for the rest, the nibbing 
 and wearing of these pieces has done what the state 
 might have done; that is to say, it has reduced them 
 to their due proportion with the lightest gold. 
 
 The disorder, therefore, of the English coin, has 
 rendered the standard of a pound sterling quite un- 
 certain. To say that it is 17I8.7 grains of fine 
 silver, is quite ideal. Who are paid in such pounds ? 
 To say that it is 113 grains of pure cold, may also 
 not be true; because there are many cuiTencies 
 worse than the new guineas.
 
 PRINCIPLES OF MONEY.' 55 
 
 What then is the consequence of all this disorder? 
 What effect has it upon the current value of a 
 pound sterling? And which way can the A^alue of 
 this be determined? 
 
 The operations of trade bring value to an equa- 
 tion, notwithstanding the greatest irregularities pos- 
 sible, and so in fact a pound sterling has acquired 
 a determinate value over all the world by the means 
 of foreign exchange. This is a kind of ideal scale 
 for measuring the British coin, although it has not 
 all the properties of that described above. 
 
 Exchange considers the pound sterling as a value 
 determined according to the combination of the 
 values of all the different currencies, in proportion 
 as payments are made in the one or the other; and 
 as debtors generally take care to pay in the worst 
 species they can, it consequently follows, that the 
 value of the pound sterling should fall to that of 
 the lowest currency. 
 
 Were there a sufficient quantity of worn gold and 
 silver to acquit all bills of exchange, the pound ster- 
 ling would come down to the value of them; but if 
 the new gold be also necessary for this purpose, the 
 value of it must be proportionally greater. 
 
 All these combinations are liquidated and com- 
 pensated with one another, by the operations of 
 trade and exchange; and the pound sterling, which 
 is so different in itself, becomes thereby, in the eyes of 
 commerce, a determinate unit, subject however to va- 
 riations, from which it never can be exempted.
 
 56 PRINCIPLES OF MONEY. 
 
 Here is then the proof of what was said in the 
 end of the first chaj5ter, that the wearing of one 
 shilling had the effect of contributing towards the 
 diminution of the value of the pound sterling every 
 where ; a proposition which, at first sight, has the 
 air of a paradox, though, when it is understood, 
 nothing is more consistent with the ruling princi- 
 ples of commerce. 
 
 Exchange, therefore, is one of the best measures 
 for valuing a pound sterling, present currency. Here 
 occurs a question. 
 
 Does the great quantity of paper money in Eng- 
 land tend to diminish the value of the pound ster- 
 ling? 
 
 I answer in the negative. Paper money is just 
 as good as gold or silver money, and no better. 
 The variation of the standard, we have already 
 said, and I think proved, must influence the inte- 
 rests of debtors and creditors proportionally every 
 where. From this it follows, that all augmentation 
 of the value of the money-unit in the specie must 
 hurt the debtors in the paper money; and all dimi- 
 nutions on the other hand must hurt the creditors 
 in the paper money, as well as every where else. 
 The payments, therefore, made in paper money, 
 never can contribute to the regulation of the stand- 
 ard of the pound sterling; it is the specie received 
 in liquidation of that paper money which alone can 
 contribute to mark the value of the British unit; 
 because it is affixed to nothing else.
 
 PRINCIPLES OF MONEY-. 5 J 
 
 From this we may draw a principle, Thai in 
 countries where the money-unit is eyitirely affixed to 
 the coin, the actual value of it is not according to the 
 legal standard of that coin, but according to the mecm 
 proportion of the actual worth of those currencies 
 in ivhich debts are paid. 
 
 From this -we see the reason why the exchange 
 between England and all the trading towns in Eu- 
 rope has long appeared so unfavourable. People 
 calculate the real par, upon the supposition that a 
 pound sterling is worth 17 1 8.7 grains troy of fine 
 silver, when in fact the currency is not perhaps 
 worth 1638, the value of a new guinea in silver, 
 at the market proportion of 1 to 14.5; that is to 
 say, the currency is but 95.3 /;er cent, of the silver 
 standard of the 43d of Elizabeth. No wonder then 
 if the exchange be thought unfavourable ! 
 
 From the principle we have just laid down, we 
 may gather a confirmation of what we advanced 
 concerning the cause of the advanced price of bul- 
 lion in the English market. 
 
 When people buy bullion Avith current money at 
 a determinate price, this operation, in conjunction 
 with the course of exchange, ought naturally to 
 mark the actual value of the pound sterling with 
 great exactness. 
 
 If therefore the price of standard bullion in the 
 
 English maj-ket, when no demand is found for the 
 
 exportation of the metals, that is to say, when upon 
 
 change paper is found for paper, and when mer- 
 
 1
 
 58 PRINCIPLES OF MONEY. 
 
 chants, versed in these matters, judge exchange 
 (that is remittances) to be at par ; if t?ien, I say, 
 silver bullion cannot be bought at a lower price than 
 65 pence the ounce, it is evident that this bullion 
 might be bought with 65 pence in shillings, of 
 which 65 might be coined out of the pound troy 
 English standard silver; since 6*5 pence per ounce 
 implies 6'5 shillings for the 12 ounces or pound 
 troy. 
 
 This plainly shew^s how standard silver bullion 
 should sell for 65 pence the ounce, in a country 
 where the ounce of standard silver in the coin is 
 worth no more than 62; and were the market price 
 of bullion to stand uniformly at 65 per ounce, that 
 would shew the value of the pound sterling to 
 be tolerably fixed. All the heavy silver coin is 
 now earned off* ; because it was intrinsically worth 
 more than the gold it passed for in currency. The 
 silver therefore which remains is worn do\vn to the 
 market proportion of the metals, as has been said, 
 that is to say, 20 shillings in silver currency are 
 worth 113 grains of fine gold, at the proportion of 
 1 to 14.4 between gold and silver. Now, 
 as 1 is to 14.5, so is 113 to l638; 
 so the 20 shillings current weigh but l633 grains 
 fine silver, instead of 1/1 8.7, which they ought to 
 do according to the standard. 
 
 This was written during last war.
 
 PRINCIPLES OF xMONEY. 59 
 
 Now let US speak of standard silver, since we are 
 examining how far the English coin must be worn 
 by use. 
 
 The pound troy contains 5/^0 grains. This, 
 according to the standard, is coined into 62 shil- 
 lings; consequently, every shilling ought to weigh 
 92.^ grains. Of such shillings it is impossible that 
 ever standard bullion should sell at above 62 pence 
 per ounce, supposing the exportation of them to be 
 free. If therefoi'e such bullion sell for 65 pence, 
 the shillings with which it is bought must weigh 
 no more than 88.64 grains standard silver; that is, 
 they must have lost 4.29 grains and are reduced 
 to -ST of a pound troy. 
 
 But it is not necessary that bullion be bought 
 with shillings; no stipulation oi price is ever made 
 farther, than at so many pence sterling /7e/' ounce* 
 Does not this virtually determine the value of such 
 currency with regard to all the currencies in Eu- 
 rope? Did a Spaniard, a Frenchman_, or a Dutch- 
 man, know the exact quantity of silver bullion 
 which can be bought in the London market for a 
 pound sterling, would he inform himself any farther 
 as to the intrinsic value of that money-unit; would 
 he not understand the value of it far better from 
 that circumstance than by the course of any ex- 
 change, since exchange does not mark the intrinsic 
 value of any particular money, but merely the value 
 of that money when transported from one place to 
 another.
 
 Co PRINCIPLES OF MONEY. 
 
 The price of bullion, therefore, when it is not 
 influenced by extraordinary demand, (such as for 
 the payment of a balance of trade, or for making 
 an extraordinary provision of plate) but when it 
 stands at what evory body knows to be meant by 
 the common market price, is a very tolerable mea- 
 sure of the value of the actual money-standard in 
 any country. 
 
 If it be therefore true, that a pound sterling 
 cannot purchase above l638 grains of fine silver 
 bullion, it Avill require not a little logic to prove 
 that it is really, or has been for these many years, 
 worth any more; notwithstanding the standard 
 weight of it in England is regulated by the laws of 
 the kingdom at 17I8.7 grains of fine silver. 
 
 If to this valuation of the pound sterling drawn 
 from the price of bullion, we add the other drawn 
 from the course of exchange; and if by this we 
 find, that when paper is found for paper upon the 
 exchange of London, a pound sterling cannot pur- 
 chase above l638 grains of fine silver in any coun- 
 try in Europe, upon these two authoiities, I think, 
 we may very safely conclude (as to the matter of 
 fact at least) that the pound sterling is not worth 
 more, either in London or in any other trading city; 
 and if this be the case, it is just worth 20 shillings 
 of 65 to the pound troy. 
 
 If therefore the mint were to coin shillings at 
 this rate, and pay for silver bullion at the market 
 price, that is, at the rate of 65 pence per ounce in
 
 PRINCIPLES OF MONEY. Gl 
 
 those new coined shillings, they would be in pro- 
 portion to the gold; silver would be carried to the 
 mint equally with gold, and would be as little sub- 
 ject to-be exported or melted down. 
 
 CHAPTER IX. 
 
 Historical Account of the Variations of the 
 JSritlah Coin. 
 
 JL HE whole purport of this part of my inquiry 
 is, to examine and investigate the principles re- 
 lating to money; to range them in order, and to 
 render them easily applicable to any combination 
 of circumstances which may occur. 
 
 The present disorder has proceeded from neglect 
 on the part of government; a neglect however 
 which admits of an apology, for reasons afterv»'ards 
 to be assigned. When an abuse creeps in by de- 
 grees, no particular person can be charged with it: 
 when it is to be corrected, some person or other 
 must undertake the work; and few are found who 
 incline to be volunteers in the service of the public, 
 upon an occasion Avhere the interest of the nation 
 is not clear and evident.
 
 62 PRINCIPLES OF MONEY. 
 
 I'he question to be determined, is, what the 
 "weiglit of the pound sterling now is, and what it 
 ought to be. If it be made dirterent from what it 
 is at present, that operation nmst be conducted with 
 justice and impartiality. If a new standard be 
 pitched upon, the choice is quite arbitrary, as has 
 been said; and were any weight to be preferred 
 to another, the best of any, no doubt, would be the 
 pound troy of standard silver. This was the pound 
 sterling for many ages, and the most that can be said 
 for Queen Elizabeth's act, is, that it is the last rfe- 
 liberate adulteration by law of the English coin. 
 
 The next question is, how to conduct this opera- 
 tion so as to do justice to every man in the nation in 
 contracts already entered into; hoAv to do justice to 
 the creditors of Great Britain; how to do justice 
 to Crreat Britain with respect to her creditors; how to 
 do all this, I say, and at the same time to make an in- 
 novation upon the present state of the coin. 
 
 Debasing the standard is odious in the opinion of 
 every mortal ; and it seems also to be the opinion 
 of many, that every regulation which shall not 
 carry the value of a pound sterling, to the value of 
 the silver appointed to enter into it by the statute 
 of Oueen Elizabeth, is a debasing of it from what 
 it is at present. 
 
 In order to cast more light upon the historical 
 part of the English coinage, 1 shall here lay 
 together some short observations upon the state
 
 PRINCIPLES OF MONEY. 63 
 
 of this question from the reformation to the pre- 
 sent time. 
 
 Henry \ III. and Edward VI. during the violent 
 convulsions of the reformation, so sophisticated the 
 fineness of the coin, and so curtailed the weight of 
 it, that all proportion of value was lost. 
 
 This run the whole nation into inextricable con- 
 fusion, and forced the ministers of the young King 
 Edward, in 1552, to restore the purity of the metals, 
 and to raise the weight of the coin in the pound 
 sterling, from 220 grains troy of fine silver,, to 
 which it was then debased, to 1884. Mary re- 
 duced it to 1880 grains, at which it stood during her 
 reign. From this Elizabeth raised it in the second 
 year of her reign to 1888 grains; and in the 43d 
 she made the famous regulation of the mint, by 
 which it was debased to 1/18. 7, the present legal 
 silver standard. During the reign of James I. trade 
 began to take root in England; and this pointed out 
 the necessity of preserving invariable the standard 
 of their money. The confusions occasioned by the 
 former adulterations left a strong impression on the 
 minds of the English nation in the succeeding 
 reigns, a regulation which had been preserved with- 
 out alteration for many years acquired in time 
 great authority, and the standard continued con- 
 stantly attached to the silver. Gold was occasion- 
 ally coined; but circulated under a conventional 
 value only, and was not made a legal money. The 
 interests of trade at last required a more extensive
 
 64 PRINCIPLES OF MONEY. 
 
 circulation, and Charles 11. -vvlien he first coinerf 
 guineas, determined a value for their currency, in 
 order to compass this end: hut very well ohserving, 
 that without fixing- the gold at a price helow its true 
 proportion to the silver, there was no possibility of 
 preventing it from becoming- also a standard for the 
 pound sterling, and thereby introducing a confusion, 
 the guinea was valued no higher than 20 shillings, 
 and allowed to find its own value above that price. 
 
 The guinea accordingly fluctuated in its value; 
 sometimes at 22 shillings, which marks the pro- 
 portion of the metals at 1 to 15.84, sometimes at 
 21.9. 6^. which marks the proportion as 1 to 15.6, 
 at last at 21 shillings, which marks the proportion 
 as 1 to 15.2, and now it is Avorth no more than 
 its original statute value, to wit, 20 shillings, which 
 marks the proportion as 1 to 14.5. These conver- 
 sions are formed u])on the supposition, that during 
 all the variations the shillings Avere of the statute 
 weight, and that the guinea circulated according 
 to the market proportion of the metals ; two circum- 
 stances which are by no means to be depended on. 
 
 About the time of the revolution, silver money 
 had begun to be coined with the wheel, or fly- 
 press (which prevented the frauds to which coin 
 ivas formerly exposed from clipping and washing), 
 and then the custom of weighing the current money 
 went into disuse. But as at that time there were 
 still great quantities of the hammered money re- 
 maining, the clippers ]n'ofitcd of the inattention of
 
 PRINCIPLES OF MONEY. 65 
 
 tlie public, and fell to work with the hammered 
 money. The consequence of this was, that those 
 who Avere obliged to pay, paid in clipped money; 
 the value of the pound sterling fell to the rate of the 
 then currency; all weighty coin was locked up or 
 melted down; the guineas rose to 30 shillings, and 
 ^100 sterling, which in silver ought to weigh up- 
 wards of 32 pounds troy, did not commonly exceed 
 one half. 
 
 The kingdom at this time was involved in a war^ 
 and was annually obliged to borrow large sums, 
 paid in those pounds sterling currency, which were 
 worth no more than f of a guinea, or 14 shillings 
 of such currency as the present of 65 to the pound 
 troy. This is evident, since the guinea was then 
 worth 30 shillings, or It pound sterling; and that 
 at present it is worth 21 shillings of 65 to the pound 
 troy. 
 
 Lowndes contended strongly for having the pound 
 sterling reduced 20 per cent. Locke insisted upon 
 the old standard of Queen Elizabeth: the latter 
 carried his point. A new coinage was made in 
 1695, and government acquitted a great part 
 of the debts they had contracted from the revolu- 
 tion (which had been paid them at the value of be- 
 tween ten and fourteen shillings present currency) 
 at the rate of 20 shillings of the standard of Queeu 
 Elizabeth. This is the matter of fact: whether 
 this was doing justice to the nation, I leave every 
 man to determine. It must not how^ever be be- 
 K
 
 66 PRINCIPLES OF MONEY. 
 
 lieved that there was no reason for this extraordi- 
 nary step. By the raising of the standard, the state 
 gained coiisiderahly upon the score of taxes, as well 
 as the creditors upon their capitals and interest; 
 and the nation, which was the principle loser, was 
 pleased; because the standard was not debased: 
 thus all the three parties were satisfied. 
 
 Upon this coinage in 1695, the coin was once 
 jnore set upon a solid footing: all money was of 
 weight, and the pound was rightly attached to the 
 silver standard. Upon this footing it remained, 
 until the guinea was made a legal coin, and fixed 
 at its then supposed intrinsic worth: here is the 
 aera of the present confusion. 
 
 From the beginning of this century, till the year 
 1756, silver has been rising in its price. In 1709# 
 the French found it as 1 to 15, in tlie great coin- 
 age, by edict of the month of May; and so 
 early as 1726, they found the proportion to be 
 nearly as 1 to 14t, and fixed their coinage accord- 
 ingly, which till now remains the same. 
 
 We may therefore conclude, that from 1/26, at 
 least, if not several years before, a pound sterling 
 ought to have been worth at least 1181 grains troy 
 of fine gold, according to tlie proportion of the 
 silver standard; and yet, from the inattention of 
 government, it has constantly been suffered to be 
 acquitted with 113 . Has not this been a plain de- 
 basement of the standard for near 40 years, 
 which w^e can ascertain? If it be at this time re-
 
 PRINCIPLES OF MONEY. 6/ 
 
 Stored to what it was, will not this be raising it from 
 what it is at present? 
 
 We have seen, from a deduction of the plainest 
 principles, the utter impossibility of keeping a unit, 
 which ought to be invariable, attached at once to 
 the two metals, which are constantly varying be- 
 tween themselves. To this the state has not attend- 
 ed, nor has it probably been sufficiently infonned of 
 it, by those who were most capable, but least inte- 
 rested to point out the consequences. 
 
 The variations of the standard aifect chiefly 
 those who are engaged in permanent contracts, 
 which is not the case of trading men: the obli- 
 gations they contract are in a perpetual fluctuation, 
 and by the assistance of their pen, they can avoid 
 the inconveniences which other people, who do 
 not calculate, are liable to. 
 
 The rising of the value of silver has been all 
 along advantageous to this class: and it would be 
 still more advantageous to them were government 
 to allow guineas at this time to seek their own 
 value, as we shall observe in its proper place. 
 Every thing which tends gradually and insensibly 
 to debase the value of the money unit, and promote 
 confusion, is advantageous to merchants. When 
 this debasement proceeds by slow degrees, it is not 
 to be discovered but by foreign exchange ; because 
 at home there is no invariable standard for inonei/f 
 as there is for evety other hind of measure. This 
 ghall be proved.
 
 B^ PRINCIPLES OF MONEY. 
 
 The unit therefore being solely attached to the 
 coin, must vary as it does. 
 
 Now the value of the coin has varied impercepti- 
 bly; and this is the reason why people imagine that 
 such variations or debasements of the standard are 
 not of great consequence: the greatest mistake any 
 person can labour under! By this imperceptible 
 debasement, prices do not rise as they ought to do; 
 the ignorant, and those who do not perceive the 
 gradual diminution, keep the same nominal prices 
 as formerly, and the merchants profit in the mean 
 time. Is not this sacrificing the interest of all 
 the people of England to that of the trading part 
 of it? 
 
 The competition between the merchants betrays 
 the secret to the multitude from time to time; but 
 they ascribe the appearances to a wrong cause; they 
 think every thing is growing dearer, whereas the 
 reason is, that price (i. e. coin) is growing lighter; 
 and as this disorder is always going on, the mer- 
 chants, being the first informed of the progress of 
 the decline of the value of the coin, must con- 
 stantly be in the way to profit of the ignorance of 
 those who have not the opportunity of measuring 
 the value of the coin they receive by any standard 
 measure. 
 
 This being the case, it is no wonder that the trad- 
 ing part of the nation has not informed government 
 of a disorder which has brought, by slow degrees, 
 the pound sterling to about 95 per cent, of its for^
 
 PRINCIPLES OF MONEY. 69 
 
 mer value. This is a short review of the vicissitudes 
 of the English coin from the reformation to this day: 
 and it is at the same time an apology for the peglect 
 of the British administration in a matter of so great 
 consequence. 
 
 CHAPTER X. 
 
 Of the Disorder of British Coin, so far as it affects 
 
 the circulatio7i of Gold and Silver; and the 
 
 consequences of reducing Guineas to 
 
 Twenty Shillings, 
 
 MUST now take notice of the inconveniences 
 which this disorder has occasioned to the public, 
 and of the consequences which might follow upon 
 adopting the remedy proposed* for removing it, to 
 wit, by fixing the currency of guineas at 20 shillings, 
 without recoining the silver at the standard of Eli- 
 zabeth. 
 
 The great inconvenience felt by the public, is the 
 scarcity of silver coin, occasioned by the dispropor- 
 
 * By Mr. Harris, in his Essay on^oney and Coins.
 
 70 PRINCIPLES OF MONEY, 
 
 tion of the metals. No mortal will ever, as mat-- 
 ters stand, carry silver to be coined; that which is 
 worn by circulation, is not sufficient, even for 
 changing gold, much less for all those small pay- 
 ments which, in the course of business, are absolute^ 
 ly necessary. This being the case, all considerable 
 payments must be made in guineas; and as there 
 are great numbers of these already become light by 
 use, all the weighty are picked up, and either ex-^- 
 ported, or perhaps frequently melted down : so that 
 in general, the current specie of England is not suf- 
 ficient for the occasions of the nation, 
 
 The great scarcity of silver coin in England 
 being evidently occasioned by the disproportion be- 
 tween the metals in the coin, it has been proposed 
 to remedy this disorder all at once, by crying down 
 the value of guineas to twenty shillings, without 
 making a new coinage, or taking any measures for 
 preventing the horrid consequences which would 
 follow upon such a step, as matters stand at pre- 
 sent. Whoever is disposed to read all that may be 
 said in favour of this operation, may consult Mr. 
 Harris's " Essay upon Money and Coins," Part II. 
 p. 84, et seq. 
 
 My intention is not to refute the sentiments of 
 particular people, but to trace out the principles I 
 have laid down, and to apply them to the remo^ang 
 such objections as I think either plausible in them- 
 selves, or which may appear plausible to people whq 
 do not thoroughly understand those matters.
 
 .PRINCIPLES OF MONEY. /I 
 
 I shall then, in the first place, examine what con- 
 sequence this crying down the legal cuiTency of 
 guineas to twenty shillings would have upon com- 
 mon voluntary circulation; that is to say, buying 
 and selling, abstracting from unvoluntary circula- 
 tion, which takes place when people are about to 
 pay, or acquit obligations; two things totally diffe- 
 rent in themselves, and which ought carefully to be 
 iet asunder. 
 
 The consequences of reducing guineas to twenty 
 shillings, without a recoinage of the silver, will lie,- 
 1. To fix the standard of the pound sterling to the 
 mean proportioi^ or the avei^age value of the worn- 
 out silver money in the present currency. 2. To 
 make the light guineas, which are below the value 
 of twenty old shillings, to pass by tale for pounds 
 sterling, though intrinsically not worth the new 
 guineas. 3. To occasion the melting down of all 
 the new guineas. And 4. When once the coin is 
 brought to consist of nothing but old unequal pieces, 
 to occasion the hea\'iest of these to be melted down 
 in their turn, until at last coin must disappear alto- 
 gether. 
 
 If to supply specie, government shall send silver 
 or gold to be coined at the mint at the legal stand- 
 ard, the moment it appears, the old shillings and 
 the light gold will buy it up, and it will be thrown 
 into the melting pot. This will stop even the melt- 
 ing down of the more weighty pieces of the old spe- 
 cie; because (by this trade) they will become more
 
 7^ PRINCIPLES OF MONEY 
 
 valuable; since in currency there will be an equi- 
 valent for the new specie of full standard weightw 
 No private person surely wdll carry either of the 
 metals to the mint, because there they would receive 
 but 62 shillings, or 44 1 guineas for their troy pound 
 of the respective metals, whereas in the market they 
 w'ill get a greater number of old guineas and shiU 
 lings to buy, weight for weight, which will serve the 
 same purpose for circulation. ■« 
 
 Let not my reader laugh at the scheme of buying 
 old shillings at the market by weight. The thing 
 is done every day. For whether I sell my silver 
 bullion for 65 shillings per pound, ^aid in shillings, 
 guineas, or bank-notes) or buy old shillings weight 
 for weight, it is quite the same thing. The reason 
 why people do not sell the old shillings by the 
 pound, is merely because they are not all of the same 
 weight, although they be all of the same value in 
 circulation; but they sell their bullion, as it were, 
 against old worn shillings reduced to a mean pro- 
 portion of value; which sale of bullion is virtually 
 buying old shillings at market by weight. A man, 
 therefore, who can with a pound of silver bullion 
 buy the value of 65 old shillings, will certainly ne- 
 \QX employ it to buy 62 heavy ones from the mint, 
 which are no where worth mor6, except in the melt- 
 ing pot. The same is true of the gold. 
 
 I have endeavoured to shew by the plainest argu- 
 ments, that no silver coin, the value of which \$ 
 abov§ the value of any oth^r currency within the
 
 PRINCIPLES OF MONEY. 'ifQ 
 
 kingdom, can remain in circulation, or can escape 
 the money-jobber and the melting pot. I think this 
 is a point pretty well agreed to on all hands ; be- 
 cause it is the argument made use of against those 
 who propose to introduce shillings of base metal in- 
 to circulation, as an expedient for procuring change 
 for the gold: a scheme so entirely repugnant to all 
 tile principles of money, that I have taken no notice 
 of it. 
 
 If, therefore, it be. true, that the shillings are 
 really vrorth no more than tV of a guinea, what ef- 
 fect would the law, reducing guineas to 20 shillings, 
 have as to merchants ? Guineas would pass as before 
 with every banker in London for 21 shillings, and 
 21 shillings for a guinea- 
 
 But as we suppose no new Coinage set on foot, 
 and that the light silver would continue to pass cur- 
 rent by tale, at present, what security would there be 
 for the pound sterling not falling every year lower? 
 The standard would then be entirely affixed to the 
 old silver, and no man would pay in guineas at 20 
 shillings, any more than he will now pay in silver 
 of standard weight. ' The only expedient then to 
 obtain coin, would be to allow guineas to seek their 
 own value. Upon this they Would rise to 21 shil- 
 lings, which is here supposed to be their intrinsic 
 worth. In this case, would not the shillings, by be- 
 coming lighter, become of less value in proportion to 
 the guinea? Was not this the case in 1695? Did not 
 L
 
 74 PRINCIPLES Ot MONEY. 
 
 this abuse, raise the price of guineas, and propor- 
 tionally deba.se the worth of the pound sterling? 
 
 As every thing, therefore, which gradually de- 
 bases the standard, must be advantageous to those 
 who can avail themselves of it, so making gold a 
 merchandize, while the bulk of the nation has no 
 standard to measure it with, must be advantageous 
 to those who have a sure one, to wit, the foreign 
 exchange. 
 
 Besides the evident tendency such a measure 
 would have to debase the standard, below the pre- 
 sent value, it would be accompanied Avith the most 
 ruinous consequences to all the class of debtors, i 
 shall beg leave to state an example. A person is 
 debtor, I shall suppose, for a great sum, jCl 00,000, 
 his creditor demands payment. He offers guineas 
 at the current and conventional value of 21 shil- 
 lings, the creditor refuses the offer; he offers bank 
 notes, refused ; it is no excuse to say tliat ^100,000. 
 of silver coin cannot be picked up; he who ow«s 
 must find it. The creditor tells him that the mint 
 is open. Here the debtor is obliged either to part 
 \vith his guineas at 20 shillings value, or to carry 
 silver, which costs him 65 shillings the pound troy, to 
 the mint, and to pay it to his creditor at the rate of 
 62. There would be still some consolation, if, from 
 such a hard necessity, the state were to be provided 
 with weighty coin ; but this would not be the con- 
 sequence. The creditor is no sooner paid in silver, 
 than he throws his coin into the melting pot, and
 
 PRINCIPLES OF MONEY. J 5 
 
 then sends the bullion to the market to be sold at 
 65 pence the ounce in bank notes. 
 
 He next goes to the bank, and demands pay- 
 ment of his notes. It is not to be supposed that 
 there is old ivorn silver enough there to pay all 
 the notes in circulation. The bank must be in the 
 same situation with every debtor^ it must send 
 silver to the mint; not as perhaps at present to be 
 afterwards exported, or to furnish work for the 
 mint and then to be melted down again, but to 
 acquit the notes which it had issued in lieu of light 
 silver, or guineas at 21 shillings. The creditor 
 melts down his new silver again, sells it as bullion 
 for bank notes as before, and returns upon the bank 
 with a new demand. 
 
 It is the same thing as to this last supposition, 
 whether the guineas be left as merchandize to 
 seek their A'alue, or be fixed at 20 shillings; for no 
 man upon earth will give a heavy guinea for 20 
 shillings present cuirency; and if debtors were 
 obliged to pay at this rate, the hardship would be 
 exactly the same as in the foregoing supposition; 
 for the difl'erence in paying with heavy silver or 
 with good guineas at 20 shillings is no more than 
 that of 171 8.7 to 1719.9; a guinea which weighs 
 11 8x grains fine gold, being worth 1 7 19.9 grains 
 of fine silver, according to the proportion of 1 to 
 14f and a pound sterling, according to statute, is 
 worth no more than 17 18. 7 grains of the same 
 metal.
 
 ^6 PRINCIPLES OF MONEY. 
 
 We may therefore, conclude, that the scheme 
 of reducing guineas to 20 shillings must proceed 
 upon the supposition of a new coinage of all the 
 silver; without this, the same confusion as to the 
 coin would remain as formerly; a new dispropor- 
 tion of the metals would take place; nobody would 
 pay in gold, as at present nobody will pay in 
 silver. 
 
 CHAPTER XI. 
 
 Methodjor restoring the Money -unit to the Standard 
 
 of Elizabeth, and the Consequences of 
 
 this Change. 
 
 COME now to the proposal of restoring the 
 standard to that of the statute of Elizabeth, which 
 is in other words the same with what has been pro- 
 posed in bringing down the guineas to 20 shillings; 
 except that it implies a new coinage of all the silver 
 specie and of all the old gold. Nothing is more 
 easy than to execute this reformation. 
 
 First, The first step is to order all coin, gold 
 and silver, coined preceding a certain year, to pass 
 by weight only. 
 
 Secondly, To preserve the mint price of silver as
 
 PRINCIPLES OF MONEY. 77 
 
 formerly, at 5s. 2rL the ounce, and to fix that of 
 gold at £3: 14 :a?. 
 
 Thirdly, To order the pound troy standard silver 
 to be coined as formerly, into 62 shillings, and the 
 pound of gold into 441: guineas. 
 
 Fourthly, And last of all, to order these guineas 
 to pass for 20 shillings. 
 
 Thus the standard is restored to the value of the 
 silver by the statute of Elizabeth, the metals are 
 put at within a mere trifle of the proportion of 1 
 to 141: all the coin in the kingdom i» brought to 
 standard weight: no profit will be found in melting 
 or exporting one species preferably to another: ex- 
 change will answer, Avhen at par, to the real par 
 (when rightly calculated) of either silver or gold, 
 with nations, such as i''rance, who observe the same 
 proportions: and the pound sterling Avill remain 
 attached to both the gold and silver, as before. 
 
 The consequences of this reformation will he, 
 that the pound sterling will be raised from l638 
 grains fine silver (the value of the present worn sil- 
 ver currency) to I/IS./'; and from 113 grains fine 
 gold (the present gold currency) to 118.644; that 
 is to say, the value of the pound sterling will be 
 raised upon both species 4.9 per cent, above the 
 value of the present. This all creditors will gain, 
 and all debtors will lose. From the day of the 
 regulation, the exchange upon all the places in 
 Europe will rise 4.^ per cent, in favour of England, 
 and every man who is abroad, and who draws for
 
 78 PRINCIPLES OF MONEY. 
 
 the rents of his estate, >vill yearly gain 4.9 per cent. 
 upon his draughts or remittances made to him. 
 Whether prices in England Mill fall in proportion 
 I do not know; one thing is pretty certain, that 
 every article bought for foreign exportation will 
 fall; for this good reason, that merchants will not 
 be the dupe of this innovation, nor will they buy 
 with heavy money at the same rate they used to 
 buy with light. Justice Avill be done to all gentle- 
 men whose ancestors let their lands in the reign of 
 Queen Elizabeth, or at any time since, when gold 
 and silver Avere at the proportion of 1 to 24t, and 
 when the silver coin was at its standard weight. 
 All taxes imposed by pounds, shillings, and pence, 
 will be raised ; all those imposed at so much per 
 cent, of the value will stand the same, but will 
 appear to sink in the denomination; that is, they 
 will produce as much value, but fewer pounds, 
 shillings, and pence, than before. The nation will 
 lose 4.^ per cent, upon the whole capital and interest 
 of the public debts: this the creditors will gain. 
 The bank will gain in its quality of creditor upon 
 the public, and will lose (together with all the 
 bankers in England) 4.9 per cent, upon all their 
 circulating paper. All annuitants, landlords, and 
 creditors of every denomination, whose contracts 
 are under 30 years standing, will gain. All debtors, 
 mortgagers, tenants, whose contracts are of a fresher 
 date, will lose. All merchandize whatsoever ought 
 to fall 4.9 per cent, in its value j and every farthing
 
 PRINCIPLES OF MONEY. 79 
 
 any thing falls less in its price is lost to the con- 
 sumers. 
 
 These are some of the most evident consequences 
 which must result from this plan of reformation, 
 and the nation is the best judge how far they will 
 contribute to her advantage. 
 
 CHAPTER XII. 
 
 In what Sense the Standard may he said to have 
 been debased by Law, and in what sense it may 
 he said to have suffered a gradual Debasement by 
 the operation of political Causes. 
 
 jLN the course of this inquiry, the standard has 
 been represented sometimes as having been de- 
 based by law, above thirty years ago, to 1 13 grains 
 fine gold, at which it remains at present, and 
 sometimes as having gradually declined for these 
 many years. 
 
 These propositions are true, though they appear 
 inconsistent, or at least inaccurate ; and they must 
 now be set in a clear light. 
 
 I have had no opportunity of tracing the progress
 
 80 PRINCIPLES OF MONEY. 
 
 of the variations as to the price of tlie metals iri 
 the Englisli market from the heginning of this 
 century; and to supply tlie want of exact observa- 
 tion, 1 have gone u})on the following suppositions: 
 1. That while the guineas were left to find their 
 own value (being regulated by the law below their . 
 worth, and not being considered as a lawful money) 
 they naturally would fix themselves according to 
 the market proportion of the metals. 2. That, 
 at the time the standard was affixed to the guineas 
 in conjunction with the silver, and both were made 
 lawful money, the value of the guineas was exactly 
 incpiired into and regulated at their precise^ value. 
 
 From these circumstances I conclude, that after 
 this affixing of the standard to both species, the 
 least variation in the proportion of the metals 
 must have had the eftect of throwing the standard 
 (as I may call it) upon that metal which was the 
 least valuable in the coin: and since it is certain, 
 that for thirty years backward, at least, gold coin 
 of equal denomination has been less valuable than 
 silver, payments have been made, commonly, in 
 gold, under the sanction of law, while the silver 
 has been melted down or exported; for these 
 reasons, I have frequently represented the standard 
 as long ago debased by law to the value of 113 
 grains fine' gold; and I believe I have advanced 
 nothing but the trutli. 
 
 Here we may conclude, that it is impossible for.
 
 PRINCIPLES OF MONEY. 81 
 
 any law to keep the standard attached both to 
 the gokl and the silver coin at once, without pre- 
 serving constantly the market proportion of the me- 
 tals at par, with the numerary value of the coins. 
 The rise of silver for one week in the London mar- 
 ket is a cause of the silver coin's being melted; 
 and during that week, all payments will be made 
 in gold. If the week following, gold should rise 
 above the proportion fixed in the coin, gold coin 
 would be melted, and payments would be made in 
 silver. 
 
 I do not, at present, consider the small circula- 
 tion either among the nobility, or among the com- 
 mons; but I attend to the great circulation among 
 bankers, who have all the specie in the nation in 
 their hands once in a year; and I say, that the 
 payments they make must influence those of all 
 others. Every gentleman pays with the money 
 his banker gives him: did the bank of England 
 find its interest in paying in silver, would it not 
 soon become plentiful in circulation, and would 
 not payments begin to be made in it preferably to 
 gold? 
 
 The standard, therefore, has been debased by 
 law by being affixed to the gold, of which metal the 
 pound sterling has uniformly, for these thirty years 
 past, been worth 113 grains, in new guineas. 
 
 But I have also said, that the standard has been 
 gradually diminishing; consequently it may be 
 objected, that if a pound sterling had been, thirty 
 M
 
 82 PRINCIPLES OF MONEY. 
 
 years ago, equal to 113 grains of gold, if it has 
 been ever since at the same standard, and if it be to- 
 day 113 grains of gold, it cannot be said to have 
 been gradually diminishing. The answer is evident, 
 M'hen we reflect upon our principles. 
 
 The standard atlixed to the gold has been dimi- 
 nishing, because these 113 grains of gold have been 
 diminishing in their value with regard to the silver. 
 When the guinea, in 17^8, was fixed at 21 shil- 
 lings, the pound sterling was fixed thereby at 113 
 grains fine gold, as has been said; consequently, 
 if this weight of gold was then worth I/IS./ fine 
 silver, there was no debasement made by that sta- 
 tute : but in consequence of tliat statute, the de- 
 basement must have taken place the moment the 
 silver rose in its a alue. 
 
 I am not authorized, by any fact, to advance, 
 that at the time the guineas were brought down 
 from 21 shillings 6 pence to 21 shillings, the metals 
 in the coin were not put at the exact proportion 
 they then bore in the English market. The great 
 Sir Isaac Newton was the person consulted in this 
 matter, and to criticise his decision, without plain 
 evidence, would be rash. All I shall say is, that in 
 France the proportion then was 1 to 141, although 
 according to the English statute it was regulated as 
 1 to 15.21. 
 
 Let us therefore suppose, that in 1728, the metals 
 were at the proportion of 1 to 15.21; and that 113
 
 PRINCIPLES OF MONEY. 83 
 
 grains of fine gold were really woytli 17I8.7 grains 
 of fine silver. ^ , 
 
 But the silver haA'iilg fisen, the standard, for this 
 reason, has been thrown upon the gold, and has 
 constantly remained at 113 grains (that is, in new 
 guineas); and as the metals have varied from the 
 proportion of 1 to 15.21, to that of 1 to 14.5, by 
 the same steps has the value of the pound sterlingj 
 in silver, changed from 17I8.7 to l638.5; which 
 163S.5 is to 113 as 14.5 is to 1. And were the 
 proportion between gold and silver to come by 
 slow degrees to the Chinese proportion of 1 to 10, 
 the pound sterling would still remain at 113 grains 
 of fine gold, as it has been since the year 1728; 
 but the silver coin would either be melted down, or 
 so rubbed away, as to make a pound sterling of it 
 weigh no more than 1130 grains of fine silver, so 
 as to bring it to the proportion of 10 to 1, together 
 with the metals. 
 
 Does not this evidently shew the defect of fixing 
 the standard either to one or both the species ? 
 
 As a farther illustration of this matter, A^•hich, 
 because of its importance, cannot, I think, be too 
 often repeated, I shall shew, in a very few words, 
 how far people are mistaken, when they imagine 
 that by reducing the guineas to 20 shillings, and re- 
 coining the silver according to the plan proposed, 
 the standard of the pound sterling will be brought 
 to that of Elizabeth. 
 
 When Elizabeth fixed the standard of the pound
 
 84 PRINCIPLES OF MONEY. 
 
 Sterling at 1718.7 grains of fine silver, the propor- 
 tion of the metals, according to tlie table in the es- 
 say of money and coins above cited, was as 10,905 
 to 1 ; consequently that pound paid in gold was, in 
 1601, equal to 157-6 grains fine gold. 
 
 Had, therefore, by accident, the standard been 
 then fixed to the gold, instead of the silver, and had 
 the silver ever since been considered as a con^modity, 
 the pound sterling at present would be worth 157^ 
 grains of fine gold, and consequently worth 2285.3 
 grains fine silver, at the proportion of 14.5 to 1; 
 whereas, having been fixed to the silver, it has been 
 kept at the old standard of 17I8.7, and consequently 
 is worth no more than 118.5 grains fine gold. 
 
 Now supposing that in the year 160I, three dif-' 
 ferent payments of a pound sterling had been made, 
 and locked up in a chest till this day, let us inquire 
 what would be the value of each at present, were 
 they to be melted down, and sold as bullion in the 
 English market. The first payment I shall suppose 
 to have been made in silver, to the value of 17I8.7 
 grains fine silver, which make of standard silver 
 1858.06 grains; this sold at the rate of 65 pence 
 an ounce, the present supposed value of silver, at the 
 rate of the gold, when full weight, makes jCl : : 1 ll. 
 The second payment I shall suppose to have been 
 made in gold, to the value of 157-6 grains of fine 
 gold, which makes of standard gold 171-9 grains, 
 this at the mint price of gold, that is, ^3 ; 17 : lOf. 
 the ounce, makes of present sterling, jOl -7 '-^Oa,
 
 PRINCIPLES OF MONEY. 85 
 
 The third payment I siippose to have been made, 
 one half in gold, one halt" in silver, which makes 
 859-36 grains fine silver, and 78.8 grains of fine 
 gold, which, at the above conversions, makes for 
 
 the silver ^0 10 5i| 
 
 And for the gold o 13 1 1 tV 
 
 Together j£l 4 5 1 
 
 Here we have three different pounds sterling, pro- 
 duced purely by the variation in the proportion of 
 the metals, although in 160I, they must have been 
 absolutely the same. Which of the three, therefore, 
 is the standard of Elizabeth? Is it not evident, that 
 it can be no other than according to the value of 
 that pound which was paid, half in gold, and half 
 in silver? And is it not also plain, that this is the 
 exact arithmetical mean proportional between the 
 gold and the silver? Let the silver and the gold 
 pounds be added together, they make ^2 : 8 : lOf, 
 the half of which is the value of that pound which 
 was paid half in gold, and half in silver; to w^it, 
 \^1 : 4 : 5| of the present gold currency, reckoning 
 standard silver at 65 pence per ounce, and gold at 
 the mint price. To realize this value exactly in 
 gold and silver, while the proportion remains as 1 
 to 14.5, it Avould be proper to put into the pound 
 sterling 2001.9 grains troy fine silver, and 138.04 
 grains of fine gold. These quantities of the metals
 
 86" ' PRINCIPLES OF MONEY. 
 
 %vould answer exactly to the ralue of jCl : 4 : 10|, 
 the mean proportional aboA'e menfianed. 
 
 Here then is the standard of Elizabeth: if it has 
 any excellence in it abave all others, it may be pre- 
 ferred. 
 
 It must hovVever be observed, that this will remain 
 the standard as long only as the proportion of 1 to 
 14.6, npon which it has been established, shall re- 
 main unvaried between the metals ; and it will vary 
 from where it might be at present settled, in the 
 same manner as it has varied at all times from the 
 year l6oi, to wit, according to the vicissitudes 
 ■which shall happen in the proportion of the metals. 
 But at every period of time, and in all different va- 
 rieties of proportion between gold and silver, no pro- 
 blem is more easily resolved than that of the mean 
 proportional between the gold and silver, the mo- 
 ment one knows the proportion of the metals at the 
 time; as shall be demonstrated in a following chaj>- 
 ter. 
 
 During the whole seventeenth century, gold rose 
 in its value ; or to express this as the French writers 
 do, the proportion of the metaU teas increasingy 
 from that of 1 to 10. 905, to that of 1 to 15; and in 
 Spain it got up to that of 1 to l6. The standard, 
 therefore, being fixed to the silver by Elizabeth, was 
 then attached to that metal which, was least sought 
 for; and who knows whether the mercantile interest 
 at that time and in the succeeding reigns, did not 
 find it their interest to keep it attached to the silver^^
 
 PRINCIPLES OF MONE/. 87 
 
 for the same reason they now Avish to have it at- 
 tached to the gold? 
 
 Since the beginning of this century, the metals 
 have taken a different turn, and now the proportion 
 is dimhiishlng; that is to say, the value oi' fii/ver is 
 rising; the consequence of which is, that the mer- 
 cantile interest would gladly have the standard fixed 
 to the gold ; because in this case, (the proportion of 
 the metals being upon the diminishing hand) the 
 standard of the pound will gradually diminish, and 
 trading men will thereby gain, according to the 
 principles above laid dowfi. 
 
 Let me here recapitulate a few posititions, which 
 We may now have occasion to apply. 
 
 First, The standard is debased in consequence of 
 its having been fixed by statute to 1 13 grains of fine 
 gold, not by the act of fixing it, but by the rising of 
 the silver since that time, which rising the statute 
 CO aid not prevent: and gold being now the metal 
 the least sought for, is become the standard of the 
 pound sterling, and regulates its value so, that no 
 silver coin, which is above the proportion of the 
 gold, can I'emain in currency. 
 
 Secondly, That according as the proportion of 
 the metals shall diminish from what it is at present, 
 the standard mil still fall lower with respect to sil- 
 ver, but v/ill remain fixed with respect to gold, at 
 113 grains. 
 
 Thirdly, That the true value of the pound ster- 
 ling will always be found in the mean propoition
 
 88 PRINCIPLES OF MONEY. 
 
 between 113 grains of fine gold, and l638.5 grains 
 fine silver. 
 
 Fourthly, That if light guineas are allowed to 
 pass current the standard will fall below the 113 
 grains, and the price of gold bullion will rise above 
 ]£3 : 17 : IO2-, in the English market. 
 
 Fifthly, That upon crying down the light guineas 
 aftenvards, a hurt will be done to all those who have 
 made contracts during their currency. 
 
 CHAPTER XIII. 
 
 Circumsfances to he attended to in a new regulation 
 of the British Coin. 
 
 THINK I have sufficiently laid open all the prin- 
 ciples which can influence a new regulation of the 
 British standard, as far as a change may influence 
 either the value of the money-unit, or the interests 
 within the state. 
 
 As to the first, it has been said above, that if, by 
 the future regulation, any change whatsoever shall 
 be made upon the value of the money-unit, as it 
 stands at present, the adopting any other whatsoever 
 is a thing purely arbitrary.
 
 t>RINCiPLES OF MONEY. 89 
 
 To people who do not understand the nature of 
 isuch operations, it may have an air of justice to sup- 
 port the unit at what is commonly believed to be the 
 standard of Queen Elizabeth, to wit, at 1718.5 grs. 
 of fine silver. 
 
 The regulating of the standard of both silver and 
 gold to 4t fine, and the pound sterling to four ounces 
 standard silver, as it stood during the reign of Queen 
 Mary I. has also its advantages, as Mr. Harris has 
 observed. It makes the crown piece to weigh just 
 one ounce, the shilling four penny- weights, and the 
 penny eight grains; consequently, were the new. 
 statute to bear, that the weight of the coin should 
 regulate its currency upon certain occasions, having 
 the pieces adjusted to certain aliquot parts of weight, 
 would make weighing easy, and would accustom 
 the common people to judge of the value of money 
 by its weight, and not by the stamp. 
 
 In this case, there might be a*convenience in strik- 
 ing the gold coins of the same weight with the sil- 
 ver; because the proportion of their values would 
 then constantly be the same with the proj^ortion of 
 the metals. The gold crowns would be worth at 
 present ,^3: 12: 6, the half crowns ^1 : 16 : 3, the 
 gold shillings 14*. Gd. and the half '/s. 3d. This 
 - was anciently the practice in the Spanish mints. 
 
 I have, in one place, mentioned the pound troy as 
 
 the best weight of all for the pound sterling; and sO 
 
 it would be, were the pound sterling, by its nature 
 
 susceptible of being fixed to any determinate quan- 
 
 N
 
 90 PRINCIPLES OF MONEY. 
 
 tity of the metals. But wliat I there suggested, 
 was merely thrown out to shew, that the choice of 
 any other value than the present, is a matter of no 
 consequence, when all interests within doors are 
 properly taken care of, and when confusion and per- 
 plexity are avoided in making the alteration. 
 
 The interests within the state can, I think, be no- 
 wise perfectly protected but ])y permitting conver- 
 sions of value from the old to the new standard, 
 whatever it be, and by regulating the footing of such 
 conversions by act of parliament, according to cir- 
 cumstances. The intention of this chapter is to 
 point out some circumstances to which it would be 
 proper to attend; and to propose a scheme of esta- 
 blishing a new standard, which might perhaps ren- 
 der conversions and refi-ulations less necessarv. 
 
 Schemes are here proposed, not to be ado})ted, 
 but as the means of setting this important matter in 
 different lights, and thereby, perhaps, of" furnishing 
 hints to some superior genius, who may form a plan 
 liable to fewer inconveniences than any I can de- 
 vise. 
 
 For this purpose, I shall examine those interests 
 which will chiefly merit the attention of government, 
 when a regulation is made for the future acquitting 
 of permanent contracts already entered into. Such, 
 as may be contracted afterwards, will naturally fol- 
 low the new standard. 
 
 The landed interest is, no doubt, the most consi- 
 derable, in the nation. Let us therefore examine, in
 
 PRINCIPLES OF MONEY. 91 
 
 the first place, what regulations it may be proper to 
 make, in order to do justice to this great class, with 
 respect to the land-tax on one hand, and with res- 
 pect to their lessees on the other. 
 
 The regulation concerning the land-tax of Eng- 
 land was made many years ago, and reasonably 
 ought to be supported at the real value of the pound 
 sterling at that time, according to the principles al- 
 ready laid down. The land-tax, therefore, of the 
 whole kingdom, may rise or fall according to the 
 value of the new standard. This will be considered 
 as an injustice ; and no doubt it would be so, if, for 
 the future, the land-tax be imposed as heretofore, 
 without attending to this circumstance; but as this 
 imposition is annual, as it is laid on by the landed 
 interest itself, who compose the jjarliament, it is to 
 be supposed that this great class will at least take 
 care of its own interest. 
 
 Were the pound rate to be stated according to 
 the value of the pound sterling of 17I8.7 grains 
 of silver, which is commonly supposed to be the 
 standard of Elizabeth, there would be no great in- 
 jury done. This would raise the land-tax 5 per cent, 
 only. 
 
 There is no class of inhabitants in all England so 
 much at their ease, and so free from taxes, as the 
 class of farmers. By living in the country, and by 
 consuming the fruits of the earth without their suf- 
 fering any alienation, they avoid the effect of many 
 excises, which, by those who live in corporations,
 
 9« PRINCIPLES or MONEY, 
 
 are felt upon manij articles of their consumption, as 
 well as on those which are immediately loaded M^ith 
 these impositions. For this reason it will not, per- 
 haps, apjjear unreasonable, if the additional 5 per 
 cent, on the land-tax were thrown upon this class, 
 and not upon the landlords. 
 
 With respect to leases, it may be observed, that 
 we have gone upon the supposition that the pound 
 sterling, in the year 1728, was worth 17I8.7 gl'ains 
 of fine silver, and 113 grains of line gold. 
 
 There would, 1 think, be no injustice done to the 
 lessees of all the lands in the kingdom, were their 
 rents to be fixed at the mean proportion of these va- 
 lues. We have observed how the pound sterling 
 has been gradually diminishing in its worth from 
 that time, by the gradual rise of the silver. This 
 mean proportion, therefore, will nearly answer to 
 what the value of the pound sterling was seventeen 
 years ago; that is to say, in 1743; supposing the 
 rise of the silver to have been uniform. And seven- 
 teen years, I apprehend, is not much above the mean 
 proportion of the time elapsed of all the leases en-' 
 tered into with the landed interest of England. 
 
 It may be farther alleged in favour of the land- 
 lords, that the gradual debasement of the standard 
 has been more prejudicial to their interest in Jetting 
 their lands, than to the farmers in disposing of the 
 fruits of them. Proprietors cannot so easily raise 
 their rents upon new leases, as farmers can raise 
 the prices of their grain, according to the debase-
 
 PRINCIPLES OF MONEY. 93 
 
 ment of the value of the currency. We have shewn 
 how the operations of trade communicate tiieir 
 influence to country markets; but as the cause of 
 the rise of prices is not rightly understood by 
 country people, and as it is commonly ascribed 
 rather to accident than to any thing permanent, it 
 is easy to perceive how such a circumstance must 
 be prejudicial to the landed interest. These circum- 
 stances are too complicated to fall under any cal- 
 culation, and nothing but the Avisdom and penetra- 
 tion of the legislature is capable of estimating them 
 at their just Aalue. 
 
 The pound sterling, thus regulated at the mean 
 proportion of its worth, as it stands at present, and 
 as it stood in 17^8, may be realized in l6j8.6 
 grains of fine silver, and 11 5.76 grains fine s;old; 
 which is 2.4 pe?^ cent, above the value of the pre- 
 sent currency. No injury, therefore, would be done 
 to lessees, and no unreasonable gain would accme 
 to the landed interest, in appointing conversions 
 of all land rents at 2f per cent, above the value of 
 the present currency. 
 
 Without a thorough knowledge of every circum- 
 stance relating to Great Britain, it is impossible to 
 lay down any plan. It is sufficient, here, briefly 
 to point out the principles upon which it must be 
 regulated. 
 
 I'he next interest to be considered is that of the 
 nation's creditors. 
 
 In 1749, a new regulation was made with the
 
 <)4 PRINCIPLES OF MONEY. 
 
 public creditors, when the interest of the whole 
 redeemable national debt was reduced to 3 per cent. 
 This circumstance infinitely facilitates the matter, 
 ■w ith respect to this class, since, by this innovation 
 of all former contracts, the whole national debt 
 may be considered as contracted at, or posterior to 
 the 25th of December 1749- 
 
 I shall now give a sketch of a regulation which 
 may be made, not only for the national creditors at 
 present, but in all times to come, which, by setting 
 money upon a solid footing, may be an advantage 
 both to the nation, to the creditors, and to credit 
 in general. 
 
 Let the value of the pound sterling be inquired 
 into during one year preceding, and one posterior 
 to the transaction of the month of December 1749* 
 The great sums borrowed and paid back by the 
 nation, during this period, will furnish data suf- 
 ficient for that calculation. Let this value of the 
 pound be specified in troy grains of fine silver and 
 fine gold bullion, without mentioning any denomi- 
 nation of money according to the exact proportion 
 of the metals at that time. And let this pound be 
 called the pound of national credit. 
 
 This first operation being determined, let it be 
 enacted, that the pound sterling, by which the state 
 is to borrow for the future, and that in which the 
 creditors are to be paid, shall be the exact mean 
 proportion between the quantities of gold and silver 
 above specified, according to the actual proportion
 
 PRINCIPLES OF MONEY. 95 
 
 of the metals at the time such payments shall he 
 made; or, that the sums shall be borrowed or ac- 
 quitted according to the market-price of one half in 
 gold and one half in silver, at the respective requi- 
 sitions of the creditors or of the state, when borrow- 
 ing. All debts contracted posterior to 1/49, may 
 be made liable to conversions. 
 
 The consequence of this regulation will be, the 
 insensible establishment of a bank money, the use- 
 fulness of which has been explained. 
 
 1 he next interest we shall examine is that of 
 trade: when men have attained the age of twenty- 
 one, they have no more occasion for guardians. 
 This may be applied to traders; they can paiTy 
 with their pen every inconvenience which may re- 
 sult to other people from the cbanges upon money, 
 provided only the laws permit them to do themselves 
 justice with respect to their engagements. 
 
 The next interest is that of buyers and sellers: 
 that iis, of manufacturers, with regard to consumers ; 
 and of servants, with respect to those who hire 
 their personal service. 
 
 The interest of this class requires a most particu- 
 lar attention. They must, literally speaking, be 
 put to school, and taught the first principles of 
 their trade, which is buying and selling. They 
 must learn to judge of price by the grains of silver 
 and gold they receive. They are children of a 
 mercantile mother, however warlike the fathers 
 diisposition may be. If it be the interest of th^ state
 
 t^ HliNCli*LES OF MONfeY. 
 
 tliat tlieir l)0(lies be rendered robust and airtire, if 
 is no less the interest ot' the state that their minds 
 be mstructed in the first principle of the trade they 
 exercise. 
 
 For this pur])Soe, ta])les of conversion from the 
 old standard to the new must be made, and ordered 
 to be put up in every market, in every shop. All 
 duties, all excises, must be converted in the same 
 manner. Uniformity must be made to appear every 
 tvhere. The smallest deviation from this will be a 
 stumbling block to the multitude* 
 
 Not only the interest of the individuals of the 
 class we are at present considering, demands the 
 nations care and attention in this particular; but 
 the prosperity of trade, and the well-being of the 
 nation, are also deeply interested in the execut 
 tion. 
 
 The A^'liole delicacy, or the intricate combinations 
 of commerce, depends upon a just and equable vi- 
 bration of prices, according as circumstances de- 
 mand it. The more, therefore, the industrious 
 classes are instructed in the principles which influ-* 
 ence prices, the more easily will the machine move; 
 A workman then learns to sink his price without 
 regret, and can raise it without avidity. When 
 principles are not understood, prices cannot gently 
 fall, they must be pulled do^^'n ; and merchants dare 
 not suft'er them to rise, for fear of abuse, even al- 
 tliough the perfection of an infant manufacture 
 should require it.
 
 PRINCIPLES OF MONEY. 97 
 
 The last interest I shall examine is that of the 
 bank of England, which naturally must regulate 
 that of every other. 
 
 Had this great company followed the example of 
 other banks, and established a bank-money of an 
 invariable standard, as the measure of all their debts 
 and credits, they would not have been liable to any 
 inconvenience upon a variation of the standard. 
 
 The bank of England was projected about the 
 year 1694, at a time when the current money of 
 the nation was in the greatest disorder, and go- 
 vernment in the greatest distress, both for money 
 and for credit. Commerce was then at a veiy low 
 ebb, and the only, or at least the most profitable 
 trade of any, was jobbing in coin, and carrying 
 backwards and forwards the precious metals from 
 Holland to England. Merchants likewise profited 
 greatly from the effects which the utter disorder 
 of the coin produced upon the price of merchan- 
 dize. 
 
 At such a juncture the resolution was taken to 
 make a new coinage, and upon the prospect of this, 
 a company was found, who, for an exclusive 
 charter to hold a bank for 13 years, willingly lent 
 government at Sjper cent, upwards of a million ster- 
 ling (in light money) with a prospect of being re- 
 paid both interest and capital in heavy. This was 
 not all : part of the money lent, was to be applied 
 for the establishment of the bank, and no less than 
 4000 pounds a year were allowed to the company, 
 O
 
 98 PRINCIPLES OF MONEY. 
 
 above the full interest, for defraying the charge of 
 management. 
 
 Under such circumstances the introduction of 
 bank-money was very supei-fluous, and would have 
 been very impolitic. This invention is calculated 
 against the raising of the standard; but here the 
 bank profited of that rise in its quality of creditor 
 for the money lent, and took care not to com^ 
 mence debtor by circulating their paper, until the 
 effect of the new regulation took place in 1695: 
 that is, after the general recoinage of all the clipped 
 silver. 
 
 From that time till now, the bank of England 
 has been the basis of the nation s credit: and, with 
 great reason, has been constantly under the most 
 intimate protection of every minister. 
 
 The value of the pound sterling, as we have 
 seen, has been declining ever since the year 160I, 
 the standard being fixed to silver during all that 
 century, while the gold was constantly rising. No 
 sooner had the proportion taken another tmn, and 
 silver begun to rise, than the government of Eng- 
 land threw the standard virtually upon the gold, 
 by regulating the value of the guineas at the exact 
 proportion of the market, whether at the instiga- 
 tion of the bank or not, I shall not pretend to de^ 
 termine. By these operations, however, the com^ 
 pany has constantly been a gainer (in its quality of 
 debtor) npon all the paper in circulation; and 
 therefore has lost nothing by not having established 
 a bank-money.
 
 FtllNCIPLES OF MONEY. 99 
 
 The interest of this great company being esta- 
 blished upon the principles we have endeavoured to 
 explain, it is very evident that the government of 
 England never will take any step in the reforma- 
 tion of the coin, ^ hich in its consequences can 
 prove hurtfiil to the baidv. Such a step would be 
 contrary both to justice and to common sense. 
 To make a regulation which, by raising the stand- 
 ard, will prove beneficial to the public creditors, 
 to the prejudice of the bank (which I may call the, 
 public debtor), would be an operation upon public 
 credit, like that of a person who is at great pains 
 to support his house by props upon all sides, and 
 who at the same time blows up the foundation of it 
 with gun-powder. 
 
 We may therefore conclude, that with regard to 
 the bank of England, as well as every other private 
 banker, the notes which are constantly payable 
 on demand, must be made liable to a conversion at 
 the actual value of the pound sterling at the time 
 of the new regulation. 
 
 That the bank will gain by this is very certain; 
 but the circulation of their notes is so swift, that it 
 would be absurd to allow to the then possessors of 
 them, that indemnification, which naturally should 
 be shared by all those through whose hands they 
 have passed, in proportion to the debasement of the 
 standard during the time of their respective posses- 
 sion.
 
 100 PRINCIPLES OF MONEY. 
 
 CHAPTER XV. 
 
 Regulations tvhich the Principles of this Inquiry 
 
 point out as expedient to he made by a 
 
 new Statute for regulating 
 
 the British Coin. 
 
 'ET us now examine what regulations it may be 
 proper to make by a new statute concerning the 
 coin of Great Britain, in order to preserve always 
 the same exact value of the pound sterling realized 
 in gold and silver, in spite of all the incapacities in- 
 herent in the metals to perform the functions of an 
 invariable scale or measure of value. 
 
 I shall not pretend to determine the precise stand- 
 ard which government may prefer as the best to be 
 chosen for the value of a pound sterling in all future 
 times ; but let it be what it will, the first point is to 
 determine the exact number of grains of fine gold 
 and fine silver which are to compose it, according to 
 the then proportion of the metals in the London 
 market. 
 
 2. To determine the proportion of these metals 
 with the pound troy, and in regard that the stand- 
 ards of gold and silver are different, let the mint
 
 PRINCIPLES OF MONEY. lOl 
 
 price of both metals be regulated according to the 
 pound troy fine. 
 
 3. To fix the mint price within certain limits : 
 that it is to say, to leave the king and council, by 
 proclamation, to carry the mint price of bullion 
 up to the value of the coin, as is the present regula- 
 tion, or to sink it to per cent, below that price, 
 according as government shall incline to impose 
 more or less duty upon coinage. 
 
 4. To order that silver and gold coin shall be 
 struck of such denominations as the king shall think 
 fit to appoint; in which the proportion of the me- 
 tals above determined, shall be constantly observed 
 through every denomination of the coin, until ne- 
 cessity shall make a new general coinage unavoid- 
 able, 
 
 5. To have the number of grains of the fine me- 
 tal in every piece marked upon the exergue, or upon 
 the legend of the coin, in place of some initial letters 
 of titles, which not one person in a thousand can de- 
 cypher: and to make the coin of as compact a form 
 as possible, diminishing the surface of it as much as 
 is consistent with beauty. 
 
 6. That it shall be lawful for all contracting par- 
 ties to stipulate their payments either in gold or sil- 
 ver coin, or to leave the option of the species to one 
 of the parties. 
 
 7- That where no particular stipulation is made, 
 creditors shall have power to demand payment, half 
 in one species, half in the other; and when the sum
 
 102 PRINCIPLES OF MONEY. 
 
 cannot fall equally into gold and silver coins, the 
 fractions to be paid in silver. 
 
 S. That in buying and selling, when no particu- 
 lar species has been stipulated, and when no act in 
 writing has intervened, the option of the species 
 shall be competent to the buyer. 
 
 9. That all sums paid or received by the king's 
 receivers, or by bankers, shall be delivered by weight, 
 if demanded. 
 
 10. That all money which shall be found to a 
 certain degree under the legal weight, from w^h ate ver 
 cause it may proceed, may be rejected in every pay- 
 ment whatsoever; or if offered in payment of a 
 debt above a certain sum, may be taken according 
 to its weight, at the then mint price, in the option 
 of the creditor. 
 
 11. That no penalty shall be incuiTed by those 
 who melt down or export the nation's coin ; but 
 that washing, clipping, or diminishing the weight of 
 any part of it, shall be deemed felony, as much as 
 any other theft, if the person so degrading the 
 coin, shall afterwards make it circulate for lawful 
 money. 
 
 To prevent the inconveniences proceeding from 
 the variation in the proportion between the metals, 
 it may be provided — 
 
 1 2. That upon every variation of proportion in 
 tlie market-price of the metals, the denomination of 
 the gold and silver coins be changed, or else the 
 pieces be recoined according to the proportions of 
 the market.
 
 PRINCIPLES OF MOMEY. 103 
 
 I am now, once more, to give the rale for con- 
 ducting this operation; which is what has heen so 
 often called the fixing of the money-unit in the 
 mean proportion of the metals. 
 
 It has been observed in the fourth chapter, that 
 the consequence of every variation in the proportion 
 between the value of gold and silver has this effect, 
 namely, that the same weight of silver acquires, on 
 the change, a difi^^rent value in gold fi'om what it 
 had before; and the same weight of gold acquires, 
 on the change, a different value in silver, from what 
 it had before. 
 
 Let us illustrate this by an example: — We haA''e 
 said, that in the coin of Great Britain 113 grains of 
 fine gold were worth 1 71 8.7 of fine silver; and this 
 proportion is 1 in gold, to 15.21 in silver. Now, 
 suppose the proportion shall come to be 1 in gold, 
 to 14.5 in silver, in this case the 113 grains of gold 
 will be worth 113 multiplied by 14.5, or l638.5. 
 
 Here there are two different values in silver 
 at different times, for the same quantity of gold; 
 namely, 
 
 Grs.jinc Silver, 
 
 At the old proportion of 15.21, 113 grains 
 
 of gold were worth 171 8.7 
 
 At the new proportion of 1 4.5, 113 grains of 
 
 gold are worth 1638.5 
 
 The sum of both 3357.6 
 
 The half of which is 1678.6
 
 104 PRINCIPLES OF MONEY. 
 
 This half I call the mean arithmetical proportion- 
 al between the two values of 113 grains of gold, ac- 
 cording to the old and new proportion of the metals 
 in the London market. And this, I say, is the num- 
 ber of grains of silver which should compose the 
 value of one pound sterling, as long as the propor- 
 tion continues at 14.5. 
 
 In like manner with respect to the gold : 
 
 C)-$. of fine Coli, 
 
 When the proportion was 15.21tol,I718.7 
 
 grains of silver were worth 113 
 
 At the new proportion of 14.5, 17I8.7 grs. 
 
 of silver are worth ^^ 1 1 8.53 
 
 The sum of hoth is . . 23 1 .53 
 
 The half of which is 115 .765 
 
 This half I call the mean arithmetical proportion- 
 al between the two values of 1718.7 grains of fine 
 silver, according to the old and according to the new 
 proportion of the metals; and this, I say, is the 
 number of grains of fine silver which should com- 
 pose the value of one pound sterling, as long as the 
 proportion continues at 14.5 to 1. 
 
 This operation is very simple andveiy clear; and 
 as soon as the value of one pound sterling can be 
 determined to a certain number of grains of fine 
 gold, and to a certain number of grains of fine sil- 
 ver, a new coinage may be made; or the denomi- 
 nation of all the coins (silver and gold) already in
 
 PRINXIPLES OF MONEY. 105 
 
 eirculation, must be changed by the rule of three, 
 in proportion to the number of grains of fine metal 
 they severally contain. Example. 
 
 What ought to be the new denomination of a 
 guinea? Answer. A guinea contains of fine gold 
 118.651 grains. Say then by the rule of three: If 
 115.765 grs. fine gold be worth 240d. or one pound 
 sterling, 11 8.60 1 must be equal to 246 pence, or 
 20s. 6d. In like manner as to the shilling: a shil- 
 ling contains of fine silver 85.935 grains; one pound 
 sterling contains 1 6/8.6. State then, 
 
 Grains. d. Grains. d. 
 
 1678.6 : 240 :: 85.935 : 12.2865. 
 Thus the old guinea will pass for 20 shillings and 6 
 pence, and the old shilling for 12.2865, or 12|, in 
 common circulation. 
 
 It now remains to be proved, that by this change 
 upon the denominations of the coins, no change is 
 made upon the value of the pound sterling; and 
 that it will be quite indifferent whether' people pay 
 according to the new denominations, or continue to 
 pay according to the old denomination, provided in 
 paying by the old, one half be delivered in gold, 
 and one half in silver. Example: 
 Let the siyii to be paid be ^21 ster- 
 ling, 10 guineas in gold at the old 
 
 denomination . c^lO 10 O 
 
 210 shiUings at 1 2d. each 10 10 O 
 
 Together ^21 o O 
 P ^
 
 106 PRINCIPLES OF MONEY. 
 
 What is the vahie of these coins at the new deno- 
 mination? 
 The 10 guineas at 20*. Gd. the new 
 
 denomination ,^10 5 
 
 The 210 shillings at 12.2865<^. 10 15 
 
 ^21 O O 
 
 This will be a rnle for the niint^ to keep the 
 price of the metals constantly at par with the price 
 of the market; and coinage may be imposed as has 
 been described by fixing the mint price of them at a 
 certain rate below the value of the fine metals in 
 the coin. 
 
 13. As long as the variation of the market-price 
 of the metals shall not carry the price of the rising- 
 metal so high as the advanced price of the coin 
 above the price of the bullion, no alteration need be 
 made on the denomination of either species. 
 
 14. So soon as the variation of the market-price 
 of the metals shall give a value to the rising species, 
 above the difference between the coin and the bul- 
 lion ; then the king shall alter the denominations 
 of all the coin, silver and gold, adding to the coins 
 of the rising metal, exactly Avhat is taken fi'om 
 those of the other: as appears by the foregoing ex- 
 ample. 
 
 But it may be observed, that the imposition of 
 coinage rendering the value of the coin greater than 
 the value of the bullion, this circumstance ffives a
 
 PRINCIPLES OF MONEY. 10^ 
 
 certain latitude in fixing the new denominations of 
 the coin, so as to avoid minute fractions. For pro- 
 vided the deviation from the exact proportion shall 
 fall within the price of coinage, no advantage can 
 be taken by melting doAvn one species preferably to 
 another; since, in either case, the loss incurred by 
 melting the coin must be greater than the profit 
 made upon selling the bullion. The mint price of 
 the metals, however, may be fixed exactly, that is, 
 within the value of a farthing upon a pound of fine 
 silver or gold. This is easily reckoned at the mint; 
 although upon every piece in common circulation, 
 the fractions of farthings would be inconvenient. 
 
 15. That notwithstanding the temporary varia- 
 tions made upon the denomination of the gold and 
 silver coins, all contracts formerly entered into, 
 and all stipulations in pounds, shillings, and pence, 
 may continue to be acquitted according to the old 
 denominations of the coins, paying one half in gold, 
 and one half in silver; unless in the case where a 
 particular species has been stipulated: in which case, 
 the sums must be paid according to the new regu- 
 lation made upon the denomination of that species, 
 to the end that neither profit or loss may result to 
 any of the parties. 
 
 16. That notwithstanding the alterations on the 
 mint price of the metals, and in the denomination 
 of the coins, no change shall be made upon the 
 weight of the particular pieces of the latter, except 
 in the case of a general recoinage of one denomina-
 
 lOS PRINCIPLES OF MONEY. 
 
 tion at least: that is to say, the mh)t mnst not coin 
 new guineas, crowns, &c. of a different weight from 
 those ah'eady in currency, although by so doing the 
 fractions might be avoided. This would occasion 
 confusion, and the remedy would cease to be of any 
 use upon a new change in the proportion of the me- 
 tals. But it may be found convenient, for removing 
 the small fractions in shillings and sixpences, to re- 
 coin such denominations altogether, and to put them 
 to their integer numbers, of twelve, and of six pence, 
 without changing in any respect their proportion of 
 value to all other denominations of the coin. This 
 will be no great expence, when the bulk of the sil- 
 ver coin is put into five-shilling pieces. 
 
 By this method of changing the denominations of 
 the coin, there never can result any alteration in the 
 value of the pound sterling. And although fractions 
 of value may now and then be introduced, in order 
 to prevent the abuses to which the coin would other- 
 wise be exposed, by the artifice of those who melt it 
 down, yet still the inconvenience of such fractions 
 may be avoided in paying, according to the old de- 
 nominations, in both species, by equal parts. This 
 will also prove demonstratively, that no change is 
 thereby made in the true value of the national nnit 
 of money. 
 
 17. That it be ordered that shillings and sixpen^ 
 ces shall be current for twenty years only, and all 
 other coins, both gold and silver, for forty years, or 
 more. For ascertaining which term, there may be
 
 PRINCIPLES OF MONEY. IO9 
 
 marked, upon the exergue of the coin, the last year 
 of their currency, instead of the date of their fabri- 
 cation. This term elapsed, or the date effaced, that 
 they shall liave no more currency whatsoever; and 
 when offered in payment, may be received as bullion 
 at the actual price of the mint, or refused, at the op^ 
 tion of the creditor. 
 
 18. That no foreign coin shall have ajiy legal cut^ 
 rency, except as bullion at the mint price. 
 
 By these or the like regulations may be prevent^ 
 ed, First, The melting or exporting the coin in ge- 
 neral. Secondly, The melting or exporting of one 
 species, in order to sell it as bullion, at an advanced 
 price. Thirdly, The profit in acquitting obligations 
 preferably in one species to another. Fourthly, The 
 degradation of the standard, by the wearing of the 
 coin, or by a change in the proportion between 
 the metals. Fifthly, The circulation of the coin 
 below the legal weight. Sixthly, The profit that 
 other nations reap by paying their debts more cheap- 
 ly to Great Britain, than Great Britain can pay hers 
 to them. 
 
 END OF BOOK FIRST.
 
 PRINCIPLES OF MONEY. 
 
 BOOK THE SECOND. 
 
 THE PRINCIPES OF MONEY APPLIED TO TRADE, 
 
 CHAPTER I. 
 
 Consequences of imposing the Price of Coinage , and 
 the Duty of Seignorage on the Coin of a Nation, 
 so far as they affect the Price of Bullion, and of 
 all other Commodities, 
 
 HATEVER tends to simplify an intricate 
 theory, greatly assists the mind. The dividing this 
 book into two parts, seems, as it were, dividing the 
 burden which the memory has to carry. The prin- 
 ciples already deduced may there ripen by a short 
 pause, and the analogy of the matter which is to fol- 
 low in the second part, where new combinations will 
 be taken in, will recal them to the mind, and fix 
 them in the memory.
 
 112 PRINCIPLES OF MOSV.Y. 
 
 I am now to examine one of the nicest principles 
 in the whole doctrine of money, to wit, the eftects 
 of imposing the ])rice of coinage, and the duty of 
 seinorage upon coin. 
 
 When this question is considered, in relation to all 
 
 the combinations which arise 1. From the nature 
 
 of coin considered as a metal, and at the same time 
 as a money of accompt. 2. From the influence this 
 duty has upon the price of commodities. And 3. 
 From the imposition itself, as it affects directly, the 
 nation which lays it on, and all other nations trad- 
 ing Avith it occasloiiaUij. When all these combina- 
 tions are taken together, I say nothing will be found 
 more difficult, than to reduce this question to a dis- 
 tinct theory. 
 
 , I have said, that gold and silver are commodities 
 merely like every other thing. I have shewn the 
 utter impossibility of their being a scale, or an in- 
 variable measure of value. I have observed that 
 their being made into coin {arhong trading nations) 
 has not the effect of rendering them less a commo- 
 dity than they were before, except so far, as by this 
 operation every piece, instead of being valued by 
 its own weiglit, comes to be valued according to 
 the mean proportion of all the pieces, which com • 
 pose the currency: and I have shewn how the oJ)e- 
 rations of trade are capable to sift out and establish 
 tjhis mean proj)ortion, in spite ofvery great irregula- 
 rities. These are the principles laid down in the
 
 PRINCIPLES OF MONEY. 113 
 
 first part, which we must keep in our eye while we 
 examine this question. 
 
 Since gold and silver, then, are commodities like 
 every other thing, the invariable scale of value must 
 measure them as well as every other commodity, 
 and money of accompt must be considered in no 
 other light, than as a scale for expressing the pro- 
 portional value of grains of metals, yards of stuffs, 
 pounds of wares, bushels of grain, or gallons of 
 liquors. 
 
 Let us now suppose a country where the invention 
 of coin is not known, and where a yard of cloth of 
 a certain quality, is commonly sold for 100 grains 
 
 of either silver or gold, no matter which The 
 
 state falls upon the invention of coining, the conve- 
 nience of which every body understands; this 
 coinage, I suppose, to cost 2 per cent. — Coin is in- 
 troduced, and commodities are ordered to be 
 bought with it. I ask, what effect ought this revo- 
 lution to produce upon the price of the cloth, accord- 
 ing to strict theory, and without taking in any other 
 combination of circumstances ? I answer, that the 
 cloth ought in reason to fall 2 per cent, that is, that 
 the price of a yard ought to be a coin of 98 grains. 
 Here is the reason: He who formerly had the 100 
 grains, had the value of the yard of cloth, and 
 could change the one for the other when he would.. 
 Now he has the 100 grains, but he must give two 
 grains to have it coined, before he can buy; be- 
 cause, after this invention people will not tmst to the 
 
 Q
 
 114 PRINCIPLES OF MCNEY. 
 
 weighing of others, nor to the purity of the me- 
 tals; but they will believe, upon the authority of 
 the stamp, that in every piece a certain number of 
 fijrains of the fine metal is contained. He, there- 
 fore, who has a coin of 98 grains, comes to the 
 merchant, and oifers him his coin for his yard of 
 cloth; the merchant demands a coin of 100 grains; 
 says the other, these 98 grains which I give you in 
 coin, cost me two grains to have their weight and 
 fineness ascertained; and if you refuse to repay me 
 for what I have paid for this manufacture whicli 1 
 offer you for your cloth, I may witli equal reason 
 refuse to pay you for what you paid for weaving 
 your wool into cloth. Now since 1, in buying your 
 cloth, must pay the weaver, so you, in buying my 
 piece, must pay the mint. The merchant, con- 
 vinced by this reasoning, takes the piece, and as it 
 circulates from hand to hand, every commodity 
 , given in exchange for it, must fall 2 per cent, rela- 
 tively to the grains of metal it ^^'as worth before. 
 
 From this it follows, that since the value of coin 
 rises above its bullion contents with respect to every 
 commodity, it must also rise witli respect to the 
 metal it is made of, just as wool manufactured rises 
 with respect to wool which is not manufactured. 
 
 Now let us suppose that a prince, finding that he 
 has the exclusive privilege of making coin, shall 
 raise his price of coinage to 8 per cent, what will 
 the consequence be? 
 
 The first consequence of this m^II be to destroy.
 
 PRINCIPLES OF MONEY. 115 
 
 or at least to perplex the ideas of his subjects with 
 regard to coin, and to make them believe, that it 
 is the stamp, and not the metal which constitutes 
 the value of it. 
 
 The next consequence will be, to reduce the 
 price of the yard of cloth, which was worth 100 
 grains of metal before the invention of coinage, 
 from 98 where it stood at first, to 92. Now let 
 "US suppose that this country, which we shall call 
 (F), is in the neighbourhood of another which we 
 shall call (E), where there is both cloth of the 
 same quality, and coin of the same weight and fine- 
 ness which costs nothing for the coinage. In the 
 country (E), cceter/s paribus, the yard of cloth must 
 be sold for 100 grains, as it was sold formerly in 
 the country (F) before the coinage was imposed. If 
 the country (F) want the cloth of the country (E) 
 the cloth they demand must cost (F) 100 grains the 
 yard. If the country (E) want the cloth of the 
 country (F), this cloth will also cost 100 grains; 
 because to procure a coin of 92 grains of the coun- 
 try (F), (E) must pay 8 grains for the coinage, 
 which raises the price of the cloth to 100 grains. 
 
 Let us now suppose that for a certain time the 
 country (F) has absolute occasion for the cloth of 
 the country (E). The merchants of (F) who carry 
 on this trade, must send bullion to (E) to pay for 
 this cloth. But the merchants of the country (F) 
 who deal in bullion, perceiving the usefulnes of it for 
 this trade, will then raise the price of the 100 grains
 
 Ij6 PRINCIPLES OF MONEY. 
 
 of it above the 92 grains in coin (the commou 
 market-price of bullion before this trade was 
 known), and according to the demand made for the 
 foreign cloth, the bnllion Avill rise in the country 
 (F), until 100 grains of it become exactly worth 
 100 grains in coin. The bullion can never rise 
 higher; because at this period, the coin itself will, 
 be exported for bullion; and the country of (E) 
 will accept of 100 grains in their coin as willingly 
 as in any other form. Nor will it ever fall lower 
 than 92 grains; because the mint in the country 
 (F) is always ready to give that price for all the bul- 
 lion which is brought to be coined. 
 
 Here then is a case, where the coin is made to 
 lose all its advanced price as a manufacture; and 
 this is owing entirely to its being a metal as well as 
 a money of accompt. 
 
 The consequence, therefore, of this revolution 
 ought to be, that as the price of all merchadize 
 ought to be a certain number of grains of bullion or 
 their equivalent, the yard of cloth ought at this 
 time to cost, in the country of (F), 100 grains, either 
 of coin or bullion, since they are become of the 
 same value. 
 
 Farther, in proj^ortion as this demand for bullion 
 comes to diminish, that is to say, in proportion as 
 the balance of trade becomes less unfavourable to 
 the country of (F), in the same proportion will coin 
 rise in its price, Avhen compared with bullion; and 
 when the country of (E), in its turn, comes to have
 
 PRINCIPLES OF MONEY. 1 1 / 
 
 occasion for the country of (F), then (E) must pay 
 as formerly for a yard of cloth 92 grains in bullion, 
 and the remaining: 8 trains to have it coined ; in 
 which case, the yard of cloth will fall to the old 
 price of 92 grains in coin, and will stand at 100 
 grains in bullion as before. 
 
 But this theory does not hold in practice, nor can 
 it possibly hold, as long as the greatest part of a 
 people are ignorant of, and even do not feel the re- 
 volutions we have been here describing. 
 
 The price of bullion is entirely regulated by mer- 
 chants, who have tlie whole correspondence in their 
 liamls. It rises and falls in countries where coin- 
 age is imposed, in proportion to the state of the 
 balance of trade at the time. The smallest rise or 
 fall in the demand for bullion, is immediately 
 marked by the price of it, and this ought (by the 
 principles we have been laying down) to regulate 
 the rise and fall of every connnodity. But this 
 is by no means the case. Commodities rise and 
 fall after a certain time only; and of this interval 
 merchants will cx)nstantly profit. Does the price 
 of bullion rise, they immediately sell to strangers as 
 if all prices were immediately risen; but with re- 
 gard to manufacturers, they hide the resolution 
 with great care, and preserve prices from rising, 
 until the competition among themselves discovers 
 the secret. Does the price of bullion fall, they do 
 all they can to keep up the prices of every commo- 
 dity which they sell to strangers, until the competi-
 
 ) 1 8 PRINCIPLES OF MONEY. 
 
 tion among themselves obliges them to bring them 
 down; and with regard to manufacturers, they are 
 all in one interest to reduce the prices iu proportion 
 to the fall of the bullion, which works its effects by 
 slow degrees. 
 
 These are the operations of traders, in times when 
 there is ^fluctuation in the balance of the triide of 
 a country ; that is to gay, in times when the balance 
 is sometimes favourable, and sometimes not. 
 
 At such times, the true influence Avhich trade 
 ought to have upon prices is never exactly known^ 
 but to the merchants ; who seldom fail to profit "bf 
 their knowledge, instead of communicating it for 
 the benefit of the society. But this is not the case 
 when the balance of trade is quite overturned, that 
 is, when it remains for a long time against a nation, 
 without any favourable vibration; as we shall pre- 
 sently explain. 
 
 We have seen how, by the changes in the ba- 
 lance of trade, the price of bullion is made suscep- 
 tible of a variation in its value equal to the price of 
 coinage; and w^e have pointed out the principle 
 which confines the variation within these limits; 
 to wit, the value of the coin as a metal, prevents 
 bullion from rising higher than its fnll denomina-^ 
 tion as money; and the mint price, preserves it 
 from falling lower than what the mint is willing to 
 give for it. 
 
 We have observed how merchants may profit 
 of such variations, and how they obstruct the ope-
 
 PRINCIPLES OF MONEY. 119 
 
 xation of principles upon the rise and fall of prices. 
 We now proceed to another chain of causes, which 
 tend greatly to destroy the due proportion of va- 
 lue between coin and merchandize. This wdth 
 justice may be put also to the account of the imper- 
 fection of the metals in performing the functions of 
 money of account. 
 
 First;, then, it will be agreed that it is far easier 
 to make a price rise, than to make it fall; I be- 
 lieve 1 might take this for granted, without giving 
 the reason for it. At all times, a price which has 
 long stood low, may be made to rise; but it is next 
 to impossible to make a price which has long stood 
 high, to fall in the same manner. Here is the 
 reason — Let me suppose the yard of an extensive 
 manufacture which occupies a number of hands,' 
 to be worth 100 grains. The workmen here live 
 nearly at the same expence, and I suppose them to 
 live upon the profits of their work, when they sell 
 at 100 grains a-yard. The price rises to 120; here 
 is an additional profit of 20 grains. If a sudden 
 turn should diminish the demand which raised the 
 price of the merchandize, it will fall to the old rate 
 without much difficulty; the workmen will consider 
 the 20 grains addition as a precarious profit upon 
 which they cannot reckon; but let the price of 120 
 grains remain uniformly for some years, the 20 
 grains will cease to be precarious profits ; they will 
 consolidate, as we have called it, into the value of 
 the merchandize ; because the workmen, by having
 
 120 PRINCIPLES OF MONEY. 
 
 long enjoyed them, willhave bettered tlieir way of 
 livlnii"; and as they are many, and live miiformly, 
 any thing- which obliges them to retrench a part of 
 their habitual expence, is supposed to deprive them 
 of necessaries. 
 
 This is sufficient, as a hint, upon a subject which 
 branches out into an infinity of different relations, 
 not at all to the present purpose. But it is very 
 much to the purpose to shew how the imposition of 
 coinage must on many occasions, have the effect of 
 attaching the price of commodities to the denomi- 
 nations of the coin, instead of preserving them at- 
 tached to the grains of the metals which compose 
 them, as in theory they ought to be. 
 
 When Avars, e. g. occasion a wrong balance to 
 continue for many years against a nation, this keeps 
 coin at par with bullion for a long time. Is it not 
 very natural, that during this time, manufacturers 
 should estimate their work according to tlie coin, 
 and not as formerly, according to the bullion? The 
 consequence of this is, that when peace returns, 
 and when coin begins to rise above the price of 
 bullion, the manufacturers stick to the denomina- 
 tions of the coin, instead of descending in value (as 
 they ought to do by theory) along with the bullion. 
 What is the consequence of this? It is that the 
 p'ices of manufactures /o?' hojne-comuwpfion, and 
 of commodities pevullar to the country, stand their 
 ground; that is, prices do not descend, and cannot 
 be brought down by merchants.
 
 PRINCIPLES OF MONEY. 121 
 
 But as to manufactures for exportation, -which 
 are not peculiar, but which are produced by diffe- 
 rent countries, the prices of these are violently pulled 
 down by the force of foreign competition; and the 
 workmen are obliged to diminish them. 
 
 The imposition of coinage, therefore, does not 
 raise the price of such merchandize as is in common 
 to several nations, and which trade demands from 
 each, Avithout any competition with the natives; 
 that is to say, the prices of them stand as formerly 
 with respect to strangers; because, though the prices 
 be made to sink at home with respect to the bullion- 
 value of the coin, yet strangers being obliged to pay 
 for them in those coins, are also obliged to pay an 
 advanced bullion-price for the coin, in order to pro- 
 cure them. This is the price of coinage. 
 
 On the other hand, with respect to such commo- 
 dities as are peculiar to the country, the prices once 
 raised and continued high for some time, attach 
 themselves to the denominations of the coin, and 
 rise along with it. 
 
 R
 
 1^9 PRINCIPLES or MONEY. 
 
 CHAPTER II. 
 
 Concerning the Injluence which the imposing of the 
 Price of Coinage, and the Duty of Seignorage in 
 the English Mint, will have upon the Course of 
 Exchange and Trade of Great Britain. 
 
 elN the preceding chapter we have examined a very 
 nice theory, in which such a number of circumstan- 
 ces depending upon facts have been combined, that 
 little stress is to be laid upon several conclusions 
 which have been drawn from it, unless they be ap- 
 proved by experience. 
 
 Let the best workman in London make a watch, 
 he cannot depend upon its being a good one, until 
 it be tried; and when that is done, the application 
 of his theory Avill enable him to discover all the de- 
 fects and irregularities in the movement. It is just 
 so in political matters: the force of theory is not 
 sufficient to form a good plan ; but it is useful for 
 discovering many faults which could not have been 
 foreseen. 
 
 It is impossible to lay down a distinct theory for 
 the rise and fall of the prices of all sorts of commo- 
 dities in a nation such as Great Britain. All that
 
 PRINCIPLES OF MONEY, 123 
 
 can be said with certainty, is, that competition on 
 the part of the consumers will make them rise, and 
 that competition on the part of the furnishers will 
 make them fall. Now, the competition among tlie 
 furnishers may be reduced to theory; because it is 
 fixed within determinate limits, which it cannot ex- 
 ceed, and is influenced by this principle, viz. that 
 when profits are reduced to the minimum, that is, 
 to the exact physical-necessary of the workman, all 
 competition among furnishers must cease. 
 
 But the competition among consumers is fixed 
 within no determinate limits; some demand to sa- 
 tisfy physical wants ; others those of vanity and ca- 
 price. Most inland demand for consumption is of 
 this kind, and consequently it is impossible to fore- 
 see "what eifect the imposition of coinage will have 
 upon the prices of many commodities. Perhaps 
 they will fluctuate with bullion; perhaps they will 
 adhere to the denominations of the coin. Experience 
 alone can bring this matter to light. 
 
 But with regard to such commodities ,as are the 
 object of foreign trade, prices are influenced by cer- 
 tain principles on both sides. INIerchants, not the 
 consumers themselves, are the demanders here. — 
 Neither vanity or caprice, but profit alone, regu- 
 lates the price they offer. Thus it is, that as all 
 competition among furnishers must cease upon the 
 reduction of profits to the minimum, so all demand 
 from merchants, w4io in tbis case represent the con- 
 fumers, must cease^, so soon as prices rise above
 
 124 PRINCIPLES OF MONEY. 
 
 what they can afford to give, coni?istent with their 
 minimum of profit upon the sale of Avhat they 
 buy. 
 
 The degree, therefore, of foreign competition will 
 alone regulate the prices of several exportable com- 
 modities, and of consequence the profits of such as 
 are employed in them, as has been said. This pre- 
 mised, we come to examine the influence which the 
 imposition of coinage, will have upon the course of 
 exchan2:e and trade of a nation. 
 
 In speaking of exchange, as far as it influences the 
 decision of this question, we must throw out all ex- 
 traneous circumstances, and endeavour to reduce it 
 to the plainest theory. 
 
 When one nation pays to another the price of 
 what they buy, the interposition of bullion is una- 
 voidable; and the whole operation consists in com- 
 paring the value of coin with the value of bullion in 
 the one and in the other nation. 
 
 Suppose France to owe to England 1000 pounds 
 sterling; what regulates exchange here is the price 
 of bullion in Paris and in London. The French 
 merchant inquires first, what is the quantity of bul- 
 lion in London, which at the time is equal to the sum 
 he wants to pay? And next, what this quantity of 
 bullion will cost him to procure in the Paris mar- 
 ket? Upon this the par of exchange -ought to be re- 
 g:ulated.* Whatever is given more than this quan- 
 tity is the price of transportation, when the balance 
 of trade is against France. Whatever is given less.
 
 PRINCIPLES OF MONEr. 125 
 
 may be considered as the price of transportation, 
 which the En2:lish would be obliged to pay, were 
 the balance against England, if the French mer- 
 chant, by sending his paper to London, did not save 
 England the trouble, by diminishing so far the 
 balance against it: and of this France profits, until 
 the balance tarn to the other side. Now let us 
 leave the price of transporation out of the question, 
 and consider only how the imf)osition of coinage, 
 by affecting the ])rice of bullion, may influence the 
 course of exchange. 
 
 We have seen how the imposition of coinage 
 renders the price of bullion susceptible of a varia- 
 tion in its price, equal to the amount of the imposi- 
 tion. Wherever, therefore, coinage costs nothing, 
 there bullion and coin must always be of the same 
 value. 
 
 The bullion, therefore, in 'France, may vary 8 per 
 cent, in its price, according to the balance of trade: 
 the bullion in England must be supposed invariable, 
 let the balance stand as it Avill. 
 
 According to this representation of the matter, 
 may we not say that bullion in England is always 
 at the highest price it ever can be in France, since 
 it is at the price of the coin? Is not this the condi- 
 tion of France, when the balance of her trade is the 
 most unfavourable it possibly can be? 
 
 Is not this an advantage to France; since France 
 can buy the bullion w.ith which she pays her English 
 debts cheap in her ov.n market, and can sell it dear
 
 126 PRINCIPLES OF MONEY. 
 
 in that of her creditor? Is there not a profit in bay- 
 ing an ox cheap in the country, and selling him dear 
 in Sniithfield market? 
 
 l\ow let me consider the difference there is be- 
 tween the trade of France and that of England as 
 matters now stand; and what would be the case, 
 were the regulations of the mint the same in both 
 countries. 
 
 Suppose France buys in England for 1000 pounds 
 of her guineas in Virginia tobacco ; and that Eng- 
 land buys in France for 1000 pounds of her louis 
 d'ors of Bourdeaux claret; is not this called par? 
 Will not France pay her debt to England with lOOO 
 pound of gold bullion? Whereas England must pay 
 lOSO pounds to France; because 1000 pounds 
 weight of her louis d'ors, is worth in France 1080 
 pounds of any bullion of the same standard. — 
 The 1000 pounds then compensate the 1000 pounds; 
 the 80 pounds over, must be sent to France, and 
 the carriage of this quantity only, ought to be paid 
 for according to the principles of exchange. 
 
 Here is evidently a balance of trade against 
 England of 8 per cent, above the real par of the 
 metals. Will any body say that the 8 per cent, is 
 paid for the transportation of 80 pounds of bullion 
 due? Certainly not. 
 
 Now if the English should declare that they, for 
 the future, would coin neither gold or silver bullion 
 for any person, but at the rate of 8 per cent, below, 
 the value of the coin; and if it be true, that this re^
 
 PRINCIPLES OF MONEY. 12^ 
 
 giilatlon would have the effect of sinking the price 
 of bullion, on many occasions to 8 per cent, below 
 the coin ; in this case, would not the English and 
 tlie French acquit their debts of the i 000 pounds 
 weight of tlieir respective coin upon the same con- 
 ditions ? 
 
 If it shall be found, that English draughts on Pa- 
 ris, or French remittances to England, shall at any- 
 time occasion bullion to rise in the market of Paris 
 above the mint price, will it not be a]lowe<l that 
 such a circumstance demonstrates that the biilance 
 of trade is then in favour of England? If at that 
 same time it shall be found, that exchange is against 
 England, will it not be a demonstration of the truth 
 of Avhat I have here suggested as a question Avorthy 
 of examination? 
 
 For if the balance of trade be against France, so 
 as to make her buy bullion to send to England, this 
 is a proof that she owes England a balance ; and if 
 at the same time the English be paying above the 
 intrinsic value of the metals (in their respective 
 coins) in what they owe to France, this additional 
 value cannot be paid by England as the price of 
 exchange, or to pay for the transportation of their 
 bullion, but to pay the French creditors the addi- 
 tional value of their coin above the price of their 
 bullion. 
 
 May we not also conclude, that in a kingdom 
 such as England, where coinage is free, the course 
 of exchange is no certain rule forjudging of the ba-
 
 128 rRiNcirLiis of money. 
 
 lance of trade with France; but only of the value 
 ef French coin above French bullion? All authors 
 who have written upon exchangee, represent the 
 advanced price given upon bills above the intrinsic 
 value of the coins, to be the price of carnage and 
 insurance, &c. in which case excharige, no doubt, 
 maij mark the balance of trade; but if an advanced 
 price must be given in order to put bullion into 
 coin, or in other words, if the metals in the coin be 
 worth S per cent, more than any bullion of the same 
 fineness, is it not evident that a nation may be draw- 
 ins; ti irreat balance of bullion from another, al- 
 though she be, at the same time, paying 8 per cent. 
 above the rate of bullion, in the sums she re- 
 pays to the nation which is her debtor upon the 
 whole; that is to say, although she be paying 
 Bbove the real par of exchange, afi it is commonly 
 calculated. 
 
 If it be here objected that this cannot be the case, 
 because Avhen the balance of trade is against the 
 nation which imposes coinage, their coin falls to the 
 price of bullion : I answer, that a balance may be 
 against such a nation, without producing so great a 
 fall in the coin. Coin is reduced to the par of bul- 
 lion when the balance is at the height only against 
 a nation, and when it has remained so for a long 
 time. Who would give coin at a discount of 8 per 
 cent, if there were a prospect that in a few days, 
 weeks, or even months, it was to rise to its former 
 value?
 
 PRINCIPLES OF MONEYi 129 
 
 These are the reasons which engaged me, in a 
 former chapter, to lay it down as a rule, that trad- 
 ing states, should endeavour as nearly as possible, 
 to observe the same regulations with their neigh- 
 bours, in every thing relating to their coin. 
 
 From Avhat has been said, it appears that the com- 
 mon method of calculating the real par of exchange 
 is not correct, since it is calculated by comparing 
 the quantity of fine bullion in different coins, and at- 
 tributing the difference between the bullion paid for 
 the paper, and the bullion received in payment of it, 
 as the price of transportation. This, I say, is by no 
 means correct; nor is it possible it should be so, 
 unless bills of exchange were specified in the weight 
 of fine bullion, instead of being specified in the de- 
 nominations of the coin. An example will make 
 this j^lain. 
 
 Were a merchant in London, to ask of another 
 who has a correspondence in Paris, to give him an 
 order for a hundred yards of Abbeville cloth, and to 
 offer him, in exchange, the same quantity of cloth, 
 of a worse quality, would not the merchant to 
 whom the proposal is made, immediately calculate 
 the value of both commodities, and demand the 
 difference of the value between what he was to give^ 
 and what he was to receive? Could ever this diffe- 
 rence be considered as any thing else than the dif- 
 ference between the real ^^'orth of the commodities? 
 But were they to exchange at London an hundred 
 pounds of fine silver bullion, for the same weight at 
 
 s ■
 
 130 PRINCIPLES OF MONEY. 
 
 Paris, the proportion of the metals being supposed 
 the same in both places; then if the merchant de- 
 manded one grain more than he was to give, it 
 must be upon the account of transportation; be- 
 cause, weight for weight, there is not the smallest 
 difference between the fine metals. 
 
 Bills of exchange, then, being all conceived in 
 denominations of money of accompt, realized in 
 coin; and coin altering in its value with regard to 
 bullion; it is evident that the real par cannot be 
 computed upon the bullion alone contained in the 
 coin. 
 
 By the balance of trade, I here constantly under- 
 stand a certain quantity of bullion sent by one na- 
 tion to another, to pay what they have not been 
 able to compensate by an exchange of their com- 
 modities, remittances, &c. and not that which they 
 compute in their bills as the difference between the 
 respective values of coin and bullion in both coun- 
 tries. 
 
 How, then, is the real par of exchange to be re- 
 gulated, so as to determine Avhich nation pays a ba- 
 lance upon the exchange of their commodities? 
 
 I answer — ^To determine this (piestion, let bullion 
 over all the commercial world be stated at 100, 
 and let coin in every country be compared with it 
 according to the current price in each country. In 
 England, for example, (were all disorders of the 
 coin removed), coin must always be at 100. In 
 France, Avhen the balance is favourable, at 108. 27.
 
 PRINCIPLES OF MONKY. 131 
 
 In Germany, (were the Emperor's late regulation 
 with Bavaria to be made general), at 101. And so 
 forth, according to the price of coinage imposed 
 every Avhere. These advanced values above the 
 100, never can rise higher; and the more the ba- 
 lance of their respective trade is unfavourable, the 
 nearer they will severally come to 100; below 
 which they never can fall. These fluctuations will 
 constantly be marked in exchange; because all cir- 
 cumstances are exactly combined by merchants; 
 but the balance of the trade, and the degree of ity 
 will only be marked hi/ the degree in ichich the ex- 
 change varies from these proportions. 
 
 Let me suppose the trade of France to be favour- 
 able upon the whole, by great commissions from 
 Cadiz, and bullion at the same time to be carried to 
 the mint at 8 per cent, below the price of coin. 
 
 Let me suppose, that upon all the trade of Eng- 
 land with France, there shall be, at this time, a ba- 
 lance oi2per cent, sent from France to England in 
 bullion; and upon the trade with Germany a ba- 
 lance of 1 per cent. 
 
 I say, that the^Mr of exchange between England 
 and France is ^ per cent, against England; and that 
 the par of exchange between Germany and France 
 is 7 P^^ cent. 
 
 The course of exchange, therefore, if it be a rule 
 to judge by, ought to mark 6 per cent, against Eng- 
 land; which I say is 2 per cent, in her favour: and 
 the exchange with Germany ought to mark 6 per
 
 132 PRINCIPLES OF MONEY. 
 
 cent, against Germany; Avhich I call 1 per cent, in 
 her favour. 
 
 An example will make this plain. 
 
 Suppose English guineas, German carolins,' and 
 French louis, to be all of the same weiglit and fine- 
 ness; I say, the real par in the example we have 
 stated is between Paris and London, 100 louis are 
 equal to 108 guineas; because the 108 louis ai'e 
 worth 100 guineas in London, and 103 guineas 
 are worth no more than 100 louis in Paris. Again, 
 between Paris and Francfort, 100 louis are equal 
 to 107 carolins; because 108 carolins are worth 
 at Paris 100 louis; and 101 louis at Francfort 
 are worth 100 carolins; consequently, the diiFe- 
 rence between 107 and 108 is the real par, to 
 wit, 100 louis for I07 carolins. Next, as to the 
 par between London and Francfort, here 100 
 carolins equal 101 guineas; because 100 carolins 
 in London are worth 100 guineas; and 101 gui- 
 neas at Francfort are worth no more than 100 ca- 
 rolins. 
 
 Now in the ordinary way of reckoning the real 
 par, the 100 louis, 100. carolins, and 100 guineas, 
 are all supposed to be of the same value, in the three 
 markets; and the difference between this supposed 
 value, and what is paid for it, is supposed to be a 
 loss upon trade. 
 
 The general rule, therefore, I think, is, to settle 
 the real par of diflerent coins, not according to the
 
 PRINCIPLES OF MONEY. 135 
 
 hulUon they contain, but according to the bullion 
 they are worth in their own market at the time. 
 
 If 1000 pounds weight of guineas can purchase 
 at London 1000 pounds weight of standard bullion; 
 and that 1000 pounds of the same weight of louis 
 can buy at Paris 1080 pounds weight of the same 
 standard bullion; then the 1000 pounds weight of 
 guineas is at the real par with 925 tVA pounds 
 weight of the louis^ and not worth 1000^ as is com- 
 monly supposed. 
 
 If the doctrine laid down in this cliapter be found 
 solid ; if no essential circumstance has been over- 
 looked, which ought to have entered into our com- 
 binations (points left to the reader to determine), 
 then we may conclude — 
 
 First, That the course of exchange, in the way 
 people take to calculate the real par, is no rule for 
 judging of the balance of trade. 
 
 Secondly, That the great duty laid upon the fa- 
 brication of the French coin, either deceives the 
 English nation, aud makes them conclude, from 
 the course of exchange, that their commerce with 
 France is extremely disadvantageous: or, if it be 
 really disadvantageous, that it is the imposition of 
 a duty on coinage in the French mint which oc- 
 casions it. 
 
 As to the question, whether from the course of 
 exchange, and because the French crown is com- 
 monly paid with thirty-two pence sterling, it may 
 be concluded that the balance of trade is against
 
 134 PRINCIPLES OF MONEY. 
 
 Ens^land, we have decided that it cannot. If there 
 he no other objection against the trade of France 
 but this loss upon exchange; and if it be true that 
 this is no proof of trade's being against England, 
 but the consequence only of her free coinage; then 
 it will follow, that England may lay as many re- 
 strictions, duties, and clogs, upon the French trade, 
 as she pleases, and may even reduce it to nothing 
 without ever removing the cause of her complaint; 
 while at the same time she may be ruining a trade, 
 w^hich pays her upon the Avhole a great balance, and 
 upon which trade she has it in her power by fol- 
 lowing a different system in her mint, to render her 
 exchange as favourable as with any other nation in 
 Europe. 
 
 This point seems to be a matter of no small im- 
 portance to England ; since (from a mistake in 
 point of fact, into which she is led from a delusive 
 appearance) a very lucrative trade^ when considered 
 by the balance it produces, may, upon false princi- 
 ples, be proscribed as disadvantageous.
 
 PRINCIPLES OF MONEY. 135 
 
 CHAPTER III. 
 
 Is the Loss which the Course of Exchange inarhs oj» 
 
 the Trade of Great Britain with France 
 
 real or apparent 9 
 
 UESTIONS are here proposed which I do not 
 pretend to resolve; all I aim at is to discover how 
 they rnay be resolved. 
 
 If this inquiry shall prove an incitement to men 
 of better capacity, to review the same subjects, who 
 have more extensive combinations, more experience, 
 and better information as to facts, in this respect it 
 has some degree of merit- 
 
 I answer to the question proposed, that if the im- 
 position of a duty on coinage in England would 
 have the effect of rendering her trade with France 
 more lucrative, then the loss marked by the course 
 of exchange is real, at least in part; if otherwise, it 
 is only apparent. . , 
 
 What makes the commerce with any country lu- 
 crative, is the balance paid upon the exchange of 
 their commodities. 
 
 What regulates the quantity of commodities taken 
 from any country, in the way of trade, is the wants
 
 136 PRII5C1PLES OF MONEY. 
 
 of the country demanding; and what sets the ba- 
 lance even, is the reciprocal wants of the other 
 country. Nations do not give up correspondence 
 with their neighbours, because these do not accept 
 of merchandize in exchange for merchandize, but 
 because they find their advantage in supplying their 
 wants upon easier terms elsewhere. 
 
 Every merchant seeks to sell dear; and the dear- 
 er he can sell, the greater is his profit: that mer- 
 chant, therefore, must thrive most, who sells dear- 
 est, and who at the same time can afford to sell 
 cheapest. 
 
 If an imposition on coinage shall enable England 
 to sell dearer, without depriving her of the advan-^ 
 tage of being able to sell as cheap as at present, then 
 it will follow, that an imposition on coinage will be 
 advantageous. If it shall lay her under a necessity 
 of selling dearer, and deprive her of the possibility of 
 selling so cheap as formerly, then the imposition 
 of coinage will be hurtful. 
 
 These principles premised, as a foundation for our 
 reasoning, let us first consider the influence of coin- 
 age upon the profits on exportation ; and then pro- 
 ceed to inquire into the influence it has upon articles 
 of importation. 
 
 As to the first, I must observe, that England, as 
 well as every other country, has several articles of 
 exportation, which are peculiar to herself, and others 
 which she must sell in competition Avith other na- 
 tions.
 
 PRINCIPLES OF MONEY. 137 
 
 The price of what is peculiar is determined by the 
 competition of those who famish it at home, and 
 the lowest price is regulated by their minimum of 
 profit. The price of what is common, is regulated 
 by the comjietition of those who furnish fi'om dif-^ 
 ferent countries. 
 
 If the prices of what is peculiar shall remain, a3 
 before, attached to the denominations of the coin, 
 after the imposition of a duty on coinage, the com- 
 petition of those who furnish will remain the same 
 as before; because prices will not vary; but the 
 stranger, who buys, must nevertheless pay an ad- 
 vanced price for such merchandize, because the na- 
 tion's coin, with which they are purchased, will be 
 raised in its value with respect to bullion, the only 
 price he can pay with. 
 
 If the consequent rise in the price of exchange 
 should diminish the foreign demand for such Eng- 
 lish goods, by raising the price of them in the fo- 
 reign market, this at least will prove that coinage 
 does not make prices fall proportionally at home; 
 because if they had so fallen, strangers would buy as 
 cheap as formerly. 
 
 If the imposition of coinage, therefore, be said 
 to raise the price of English merchandize in foreign 
 markets, it must be allowed that it will not raise 
 the value of the pound sterling at home, by sink- 
 ing the value of commodities: that is to say, the 
 prices of commodities will adhere to the denomi- 
 nations of the coin; and the coin bearing an advan- 
 T
 
 138 PRINCIPLES OF MONEY. 
 
 ced value, above what it bore formerly, strangers 
 must pay it. 
 
 But will not this diminish the demand for English 
 goods? Not if they be peculiar to England, as we 
 here suppose. But allowing it should, will not this 
 diminution of demand sink the value of the English 
 coin, by influencing the balance of trade r If so, it 
 ■will render remittances to England more advan- 
 tageous: consequently, it will recal the demand. 
 The disease, therefore, in this case, seems to draAV 
 the remedy along with it. 
 
 Now what appears here to be a remedy against a 
 disease, is at present, as we may call it, the ordi- 
 nary English diet, since it is sinking the coin to the 
 price of bullion. If, therefore, the having of coin 
 always as cheap as bullion, can be any advantage to 
 trade, the nation is sure of having it, whenever 
 the balance is unfavourable, notwithstanding the 
 imposition of a duty on coinage. 
 
 Trade has its vicissitudes, and all nations find, at 
 times, that their neighbours must depend upon them. 
 On such occasions, the balance of their commerce 
 is greatly in their favour. 
 
 Is it not, therefore, an advantage to have a prin- 
 ciple at home, which, upon such occasions, is ca- 
 pable of diminishing with us the value of that mer- 
 chandize (bullion) which strangers must give as the 
 price of all they buy? 
 
 On the other hand, the same principle seems to 
 fly to the assistance of trade, when the balance be-
 
 PRINCIPLES OF MONEY. 139 
 
 comes unfavourable, as it virtually diminishes to 
 strangers the price of" all our commodities, by rais- 
 ing in our market the value of that commodity 
 (bullion) which they must give as the price of what 
 they buy. 
 
 This may suffice, in general, upon exportation. 
 
 I now pass to the second part of this operation, 
 to wit, the influence which the imposition of coin- 
 age has upon the interests of trade, when the ques- 
 tion is to purchase the commodities of other coun- 
 tries. These operations are quite different, and in 
 examining this, theory they must be carefully distin- 
 guished. 
 
 We have seen how the imposition of coinage, 
 during the favourable balance of trade, procures to 
 the nation an advanced price upon the sale of her 
 exports. As long as it remains favourable, it must 
 produce the same good effect Avith regard to her im- 
 portations, by sinking at home the price of the bul- 
 lion with which she must pay for them. Bullion 
 must become cheap in the English market, in pro- 
 portion as the balance of her trade is favourable, 
 and in proportion as it is cheaper there than in 
 other nations (with respect to their respective coins) 
 in the same proj)ortion the nation has an advan- 
 tage in paying what she buys, or in employing 
 her bullion for extending the fund of her own 
 commerce. 
 
 Upon the other hand, should the balance of her 
 trade turn against her, her bullion rises. This ren- 
 ders the price of all foreign merchandize deare;*
 
 140 PRINCIPLES OF MONEY. 
 
 to the importers than otherwise they would be; 
 because they must pay them in bullion. But this 
 loss is at present constantly incurred ; and when in- 
 curred, is not national, the national loss is upon 
 the balance of the trade; but whether this balance 
 be paid in bullion at the mint price, or in bullion 
 at the price of coin, the balance of the trade is just 
 the same. Now if this wrong balance (which I 
 here suppose to proceed merely from the imports 
 exceeding the exports upon trade in general) ren-» 
 ders the purchase of foreign commodities dearer to 
 :the merchants, without costing more to the nation; 
 is not this so far advantageous, that it discourages 
 importations just at the time they ought to be dis^ 
 couraiicd, and thereby may tend to set the balance 
 even again? 
 
 CHAPTER IV. 
 
 Of the different Methods of imposing coinage; and 
 of the influence they respectively have upon the 
 value of the Money-unit, and upon the domestic 
 interests of the Nation, 
 
 JL HERE are two ways of imposing coinage; one 
 by positive law, and by the force of that authority 
 which is everywhere lodged in the legislature; the
 
 PRiyCIPLES OF MONEY. 141 
 
 Other, which is more gentle, renders the imposition 
 ahnost insensible, and is effectuated by the influence 
 of the principles of commerce. 
 
 I shall now give examples of the one and of the 
 other method; I shall point out some of the conse- 
 quences which attend both ; 1 shall chalk out a rough 
 draught of the principles, which may be applied in 
 forming a plan for laying on this imposition in the 
 English mint: and last of all, I shall shew how 
 the experiment may be made. 
 
 Were the government of England to call in at pre- 
 sent, all the coin in the nation, in order to be recoin- 
 ed, and to fix the mint price of it, as gold and silver 
 standard bullion, at per cent. })elow the value of 
 the nev/ coin, this would be imposing coinage by 
 positive law; and being an arbitrary operation upon 
 the coin of the nation, could not fail of influencing the 
 value of the money-unit. 
 
 Were government, on the other hand, to give or- 
 ders to the mint, to pay for gold and silver bullion 
 for the fature, no dearer than per cent, below the 
 coin, this would be no arbitrary operation on the coin 
 of the nation, and would not, as I imagine, influence 
 the value of the money-unit, although it might 
 gink the price of bullion, by the influence of the 
 principles of commerce. 
 
 The different consequences of these methods of 
 imposing coinage are now to be explained. 
 
 Were England during a war, or at any time when 
 the balance of her trade is unfavourable, to impose
 
 142, PRINCIPLES OF MONEY. 
 
 coinage by law in the manner proposed, the conse- 
 quence would be, that all the specie in Great Britain, 
 or at least a considerable part of it, might possibly 
 be melted down, and sold in the market for bills of 
 exchange. In a nation of trade, Avhere credit is so 
 extensively and solidly established, there would in 
 such a case, be no difficulty to find an outlet abroad 
 for all the metals in the kingdom; because every 
 thing would then be considered as profit, which was 
 less than the per cent, loss in carrying the coin 
 to the mint. 
 
 If it be objected, that this plan has been many 
 times executed in France, particularly in 1 709 and 
 1726, without any such inconveniences; I answer, 
 as I have done upon other occasions, circumstances 
 are to be examined. 
 
 Upon such occasions, in France, the coin is or- 
 dered to the mint, upon penalties against those who 
 shall not obey; melting down is strictly inquired in- 
 to, and severely punished; all the roads which lead 
 to foreign countries are beset with guards, and no 
 coin is suffered to be exported ; all debts may be der 
 manded in coin; and all internal commerce is carr 
 ried on with specie. 
 
 Under these circumstances, it is very evident, 
 that those who have coin or bullion, must either 
 carry it to the mint, or Imry it: there is no middle 
 course to be followed. 
 
 Let me here observe by the bye, how frequent it 
 is to see people blame the greatest ministers rashly,
 
 PRINCIPLES OF MONEY. 143 
 
 Imd impute to them the most absm'd opinions con- 
 cerning the most simple matters. How much have 
 the ministers of France been laughed at, for pre- 
 tending to forbid the exportation of coin, in order 
 to pay the balance of their trade? They did not for- 
 hid the exportation of the coin for the paying of 
 their debts: on the contrary, this nation has some- 
 times had its bankers, whose business it was to send 
 coin to Holland, for this purpose. 
 
 If the ridicule is turned against those states, who 
 forbid the melting down and exportation of coin, 
 where coinage Is free, I must also make answer, that 
 there the prohibition is laid on, to save to govern- 
 ment the expence of perpetually recoining what is 
 melted down, or of coining the foreign specie im- 
 ported in return for that of the nation which has 
 been exported without necessity. 
 
 Let us next examine the consequence of imposing 
 coinage by law, when the plan is so laid down (no 
 matter how) as not to be fi-ustrated by the total de- 
 sertion of the mint. 
 
 Is it not evident, from the principles laid down 
 in the first chapter, that, in this case, the value of 
 the coin must rise, not only with respect to bullion, 
 but Avith respect to every commodity: or, in other 
 words, that the prices of commodities must fall uni- 
 versally, with respect to the denominations of the 
 coin ? For who will pay the same price for a com- 
 modity, after he has been obliged to pay per 
 cent, to purchase the price with which the sura
 
 144 PRINCIPLES OF MONEY. 
 
 )buy? But the moment the great operation of* 
 the general coinage is over, and that trade begins 
 to work its former effects, while the bahmce of it is 
 supposed to remain mifavonrable, all prices will re- 
 turn to their former rate, Mith regard to the deno- 
 minations of the coin, by the operation of another 
 principle. The new coin procured at so much 
 cost, will then fall to the price of bullion; that is to 
 say, all the price paid for coinage will be lost, and 
 consequently money will return to its former value; 
 or, in other words, prices will be made to rise to 
 their former height; because then nobody will be 
 obliged to pay per cent, to procure the price. 
 
 Now, it is the effect produced on prices by the 
 return of a favourable balance, when coin regains 
 an advanced price al)ove bullion, by the influence of 
 commerce, which my theory does not reach to. I 
 cannot discover a principle, M'hich can force the 
 prices o/" articles of' inland consumption to fall and 
 fluctuate with the prices of bullion; because I find 
 them too closely attached to the denominations of 
 the coin; and that foreign commerce has not suffi- 
 cient influence upon them. As this combination 
 is beyond my reach to resolve, I leave it to the de- 
 cision of experiment. 
 
 Let us next examine the consequence of im2)o- 
 sing coinage by the influence of the principles of 
 commerce. 
 
 The method here is to leave every one free to do 
 with his coin, or with his bullion, what he pleases.
 
 PRINCIPLES OF MONEY. 145 
 
 If people incline to melt clown or export the coin, 
 they may have entire liberty to do it: no penalty 
 need to be imposed; the expence of procuring new 
 coin, will be sufficient to stop the practice. 
 
 Suppose then (as an example) that the mint price 
 of fine bullion should be fixed at 8 per cent, below 
 the coin in England; What principle could oblige 
 people to carry bullion to be coined? 
 
 I answer__When the balance of trade is favour- 
 able for England, that balance must sooner or later 
 be paid in bullion. If trade still continue favour- 
 able, after the first balance is paid to England, 
 what use can those who have the bullion make of 
 it, if there be no demand for it to work it into 
 plate ? To export it, by employing it in trade, does 
 not remove the difficulty, because, while the ba- 
 lance stands favourable, export as much as you 
 will, more bullion must enter than it is possible to 
 export in the way of trade; for we do not suppose 
 that in exporting it, it is to be given away gratis. 
 The bullion, therefore, not being demanded for 
 exportation; not being permitted to pass current 
 for money; and not being demanded for making 
 into plate; must be employed so as to be profitable 
 to the owner in one way or other. For this pur- 
 pose it must be lent, or employed Avithin the coun- 
 try for purchasing some sort of effects which pro- 
 duce an income. For this purpose the bullion must 
 be coined, in order to render it capable of circula- 
 tion, and of becoming price. 
 U
 
 146 PRINCIPLES OF MONEY. 
 
 At all times, therefore, when in a country there 
 is bullion, not demanded as such, the proprietor 
 carries it to the mint, he sells it at the mint price ; 
 and as this mint price if stated at 8 per cent, below 
 the price of coin, he gives it for the price he can 
 get for it: this he does without regret, because, if 
 next day he should want to change his coin into 
 bullion again, he will find it in the market at the 
 same value. 
 
 Both theory and experience, over all Europe, 
 where, England excepted, coinage is imposed, 
 prove, that bullion is carried to the mint, and sold 
 below the price of coin, weight for weight of equal 
 fineness. 
 
 By fixing the mint price at 8 per cent, below the 
 value of the coin, it is not necessary that this price 
 be made invariable: a power may be lodged some- 
 where, by the state, to make deviations from the 
 ordinary mint price. A w^ar breaks out; large 
 quantities of coin are exported; specie becomes 
 scarce: May not the state, at such a time, deliver 
 coin to the mint at the current price of the bul- 
 lion? If peace return and trade become favourable, 
 the mint may then be ordered to sink its price, in 
 proportion to circumstances. In short, the mint 
 may receive bullion at different prices, at different 
 times, without occasioning the smallest confusion 
 by such variations in the intrinsic value of the cur- 
 rent specie, which must constantly be the same. It 
 is of no consequence to any person who receives itj ,
 
 PRINCIPLES OF MONEY. 14/ 
 
 whether the coinage cost nothing, or whether it cost 
 8 per cent. 
 
 By this method of imposing coinage, all the ad- 
 vantages reaped by France may be reaped by Eng- 
 land. The bullion Avill be allowed to fall as low as 
 with them, when trade is favourable. If it rise up- 
 on a wrong balance, the mint need not be stopped 
 in case coin be found wanting for the uses of the 
 state; and when that necessary demand is satisfied, 
 the mint price may be reduced again. 
 
 The j)rices of commodities, certainly, will not be 
 affected immediately by the imposition of coinage in 
 the way it has been proposed to lay it on; but 1 do 
 not say that, upon some occasions, they may not be 
 affected by slow degrees. 
 
 When the balance of trade at any time has stood 
 long favourable for England; When the coin has 
 remained long considerably above the price of bul- 
 lion; and when, consequently, the mint has been 
 well employed; then the value of commodities, as 
 has been said, may become influenced by the ope- 
 rations of foreign commerce, and be sunk in their 
 price. Yet even here, this consequence is by no 
 means certain; for this reason, that what turns the 
 balance of trade in favour of a nation, is the demand 
 which foreign markets make for her commodities t 
 now this demand, as it raises the value of her coin 
 above her bullion, so it rai^^es the price of her com- 
 modities, by increasing foreign competition to ac» 
 tjuire them«
 
 148 PRINCIPLES OF MONEY. 
 
 CHAPTER V. 
 
 How an Experiment may he made to discover with 
 certainty the real Effects of the Imposi- 
 tion of Coinage. 
 
 E have dwelt very long upon this part of our 
 subject, and after all our endeavours to elucidate the 
 principles which ought to decide whether the impo- 
 sition of coinage will raise the value of the pound 
 sterling, in a kingdom which, like Great Britain, is 
 in a mercantile correspondence with nations where 
 this duty is introduced, we have still been obliged 
 to leave the final decision of the question to an ex- 
 periment. 
 
 By that alone it will be clearly discovered, whe- 
 ther coinage will have the effect, first, of sinking 
 the prices of commodities, to the prejudice of ma- 
 nufacturers; secondly, of raising the price of the 
 pound sterling, to the prejudice of all the classes of 
 debtors within the nation; and thirdly, of hurting 
 trade, by putting England under the necessity of 
 selling dearer, without being able to sell as cheap as 
 before: or whether commodities will remain at their 
 former prices; the pound sterling at the same value;
 
 PRINCIPLES OF MONEY. 1 4^ 
 
 and England be enabled to sell dearer to foreigners, 
 when her commerce is favourable, without being 
 obliged upon other occasions to sell cheaper than at 
 present. 
 
 I shall noAv give a hint concerning a proper method 
 of making the experiment. 
 
 Suppose peace* to be restored, and a balance of 
 trade favourable to England ; that government shall 
 take the resolution to set about the reformation of 
 the coin; that they shall publish the plan of refor- 
 mation, three years before it be intended to com- 
 mence; that they shall make a change in the mean 
 time upon the regulation of the mint, by ordering 
 all silver coin, and all guineas except those of 
 Cieorge II. to pass by weight; that shillings shall be 
 ordered to be coined at 65 in the pound troy; the 
 mint price remaining as at present with regard to 
 the gold, and raised to 6o new pence per ouncej, 
 with regard to the silver. 
 
 So soon as there shall be a few millions of silver 
 coined free, let the mint price both of gold and 
 silver be diminished; suppose 4 per cent. This, I 
 imagine, will in a short time give an advanced 
 price to coin, and sink the price of bullion; which 
 will have the effect of recalling all the guineas of 
 the late King, from Holland and Flanders ; because 
 coin being then dearer than bullion in England, 
 
 * Written in the year 1761.
 
 150 PRIXCIPLES OF MONEY. 
 
 people will choose to send over current guineas 
 to pay their English debts, rather than to remit 
 bills of exchange. 
 
 In whatever way the experiment be made, by 
 the imposition of the price of coinage, a great ex- 
 pence will be saved to the state, namely, the expence 
 of the mint. The national coin will be kept at 
 home, and, when exported, will be preserved from 
 the melting pot. This is the case with the French 
 coin. Why are louis d'ors worth as much as guineas 
 in many foreign countries? It is evident that they 
 are not intrinsically worth so much by 4l per cent, 
 but they are virtually so in the eyes of money-job^ 
 bers; because, being exjjorted from France while 
 coin is fallen low by a wrong balance of their trade, 
 they still retain an advanced value, for this reason, 
 that when sent back, upon a revolution in trade, 
 they become better than bullion, by all the ad^ 
 vanced price of the French coin, at a time when 
 their balance becomes favourable; and for this 
 reason they are sought for, and are paid for in pro^ 
 portion: whereas any bullion, or any coin whatso- 
 ever, is as good to send to England as her ovm 
 proper specie. It is this which occasions the 
 guineas to be melted down without the smallest 
 regret. 
 
 It would be a curious inquiry to examine the 
 proportion of money coined in England and in 
 France, and to compare the quantities coined, with 
 the quantities in existence. People commonly esti
 
 PRINCIPLES OF MONEY. 151 
 
 mate the wealth of a nation by the quantity of its 
 coined money. Some go farther, and imagine that 
 the quantity of the coined money is the representa- 
 tion, and even the measure of its weakh. I cannot 
 be of this opinion, for reasons which I liave given 
 in another place; but 1 shall only observe here, 
 that coin, like eyery other thing, is made in propor- 
 tion to the occasions people have for it. 
 
 The more equality there is between industry and 
 consumption in any nation, the less coin they have 
 occasion for, in proportion to the alienations they 
 make ; the more a nation is given to penury and 
 hoarding, their occasions for coin are proportion- 
 ally greater. 
 
 An example will make this plain. Suppose two 
 markets A and B in the same country, where paper 
 does not circulate; that 1000 people come to the 
 market A with an intention to sell what they have, 
 in order to buy what they want; that 500 resort 
 to the market B with an intention only to sell, and 
 500 others only to buy. In the last example, it is 
 evident, that the there must be brought to market, 
 in specie, the price of all the goods offered to sale, 
 or else a part must remain unsold: but in the first 
 case, a much smaller proportion will suffice; be- 
 cause no sooner has any one sold the goods heJias, 
 than he buys with the money he takes, what he has 
 occasion for; so that the same money circulates 
 from hand to hand. 
 
 In proportion, therefore, to the trucks of com- 
 modities for commodities, money is the less neces-
 
 152 PRINCIPLES OF MONEY. 
 
 sary; and in proportion as people sell in order to 
 realize, coin is the more necessary. When hoard- 
 ing; was in fashion; and when lending upon interest 
 was little known, had alienation been as frequent as 
 at present, the (quantity of coin required must have 
 been much greater. At present nobody hoards, where ' 
 lending at interest is lawful, except in nations where 
 credit is precarious. Hoarding from this motive 
 is more hurtful than from any other; because, at 
 the same time that by preventing the lending of the'" 
 coin of the nation, it deprives the public of a cir- ' 
 culating value, it also prevents bullion from being 
 lent by neighbouring states, and from being earned 
 to the mint ])y those who have it at home. Whereas 
 hoarding from avarice has none of these incon- 
 \^niences: and when credit is good, there will al- 
 ways be found coin sufficient; because a demand 
 for it will always procure it. 
 
 Why is it thought by some that there is so little 
 coin in England, in proportion to what there is in 
 France? Does any man imagine that this is a mark 
 of poverty? By no means. Let the government of 
 England proscribe the currency of paper money, 
 the coin will quickly return; because then it will 
 be demanded. But at the present, the paper sup-^ 
 plies its place, and so it goes abroad in order to gain 
 niore; whereas in France it remains at home, and 
 produces nothing. The wealth of a nation can no 
 more be estimated by the quantity of its coin, than 
 the wealth of private people, by the w^eight of their 
 purse.
 
 PRINCIPLES OF MONEY. 153 
 
 CHAPTER VL 
 
 Miscellaneous Questloyis and Ohser^vations concern- 
 ing the Doctrine of Money and 
 Coin, 
 
 JL HE use^ therefore, of a miscellaneous chapter, 
 after the deduction of the general principles is over, 
 is to serve as an exercise upon them. This is done 
 ))y introducing questions which may tend to illus- 
 trate or explain the matters already treated of, and 
 which have not heen introduced in the hody of the 
 "work, for fear of rendering combinations too com- 
 plicated, and of drawing tlie attention from the 
 main object of inquiry. When a particular appear- 
 ance, also, seems to contradict a known principle, 
 this appearance may here be analized, and the pe- 
 culiarity of the case pointed out, and ranged under 
 the principle which influences it. Numbers of ob- 
 jections also occur to readers of such inquiries, and 
 which even naturally occur to the author himself, 
 although he be obliged to take no notice of them at 
 the time, for fear of interrupting his subject.— < 
 These may properly find a place in a subsidiary 
 chapter. 
 
 X
 
 154 PRINCIPLES OF MONEY. 
 
 Ol'Lst. 1. The first ([uestiun I shall propose for 
 ilhistratiiig this subject sluill l)c — W hence it comes 
 to pass that the doctrine of money is so extremely 
 (liificnlt and involved?" 
 
 Answ. This I ascribe chiefly to the introduction 
 of a money-jargon, employed hf people who have 
 had the management of mints, or who have been 
 practical merciiauts, without knowing any thing of 
 the theory of their business. 
 
 As long as money went by weight, and was con- 
 sidered as gold and silver bullion, the whole doc- 
 trine of it remained clear and intelligible: but the 
 introduction of a numeraiy value, or denominations 
 of money of accompt, sometimes attached to one 
 quantity of the metals, sometimes to another; have 
 both introduced an unintelligible language, and 
 have really involved the subject in so many exti*a- 
 neous circumstances, that, A\hen we consider every 
 thing, the perplexity is not so much to be wonder- 
 ed at. 
 
 I shall now endeavour to reduce these perjilexities 
 under some general heads. 
 
 The first is, confL»unding ideas qm'te different in 
 themselves. The teniis gold and silver, monejf of 
 accompt, coin, bullion, aiid price, are often under- 
 stood and made use of as synonimous, although no 
 things can be more different. 
 
 The terms gold and silver, sliould convey tons no 
 other idea than that cjf pure physical substances. 
 
 Thut oi' vioiici/ oj uccompt represents aii invariable 
 ecale for measuring value.
 
 rRiNcn»LE5 or moxey. 155 
 
 Coin, conveys the itlea of the pubjic authority as- 
 certaining the exact proportion of tine and alloy in 
 a mixed liietalj and the realizing-, in a dcteriyinate 
 weight of it, the inviuijible scale of niouey, ,some- 
 times correctly, sometimes ii)correctly. 
 
 BiiUion carries the idea of certain determinate 
 mixtures of the metals, commonly ascertained by 
 some ptiblic stamp or other, and drawing their va- 
 lue exactly from the proportion of the line metals 
 they contain, the workmanship being considered as 
 of no value. ; 
 
 Price, again, ^^lJiiin considered ?^ consisting iu 
 coin, is a more complex idea still. In it are com- 
 prehended the value of tlie metals;, the aiithority of 
 the stamj) for the currency; th^ actual v^lueof it as 
 a metal; and the common and universal equivalent 
 of all things alienable. 
 
 The ideas, therefore, of ^old and silver , oi vionei/, 
 of coin, oi' bullion, and of price, are all difi'erent; 
 they are commonly confounded, both in speaking 
 and in writing: from this arises the first cause of 
 perplexity. 
 
 The second is owing to the common niethpd of 
 estimating the value, and the proportions between 
 gold aud silver; coin, and bullion; inoney and; mer- 
 chandize. The terms usually employed to express 
 such relations are, rising and sinhi/ig, or the like. 
 People employ these terms, without previously agree- 
 ing upon the thing which they are to consider as the 
 fixed. The value of one of the precious nietals is 
 constantly relative to that of the other; and yet,
 
 IbS PRINCIPLES OF MONEY. 
 
 without attending to this, we sometimes consider the 
 gokl, and sometimes the silver, as the common mea- 
 sure: and while one is talking of gold as a common 
 measure, the person he talks to is considering it per- 
 haps the thing measured. This inaccuracy, in sup- 
 posing sometimes the one as the fixed, and some- 
 times the other, involves us in great obscurities ; es- 
 pecially when we speak upon such matters with those 
 ■who have not distinct ideas on the subject: audi 
 if three or four people be engaged in a conversation 
 upon money, every one using the same term in a 
 different acceptation, the confusion becomes inextri^ 
 cable. 
 
 In like manner, when we speak of coin and bul-- 
 lion, that of the two ought to be considered as the 
 fixed which changes its proportion of value the least 
 with respect to all commodities. 
 
 Were prices attached to grains of silver and gold, 
 bullion ought in that case to be considered as fixed; 
 but as they are more attached to the denominations 
 of the coin, coin ought to be considered as fixed. 
 
 In the next place, in speaking of coin and com-, 
 modities, we say, for example, that the imposition 
 of coinage sinks the price of commodities. We do 
 not, in this case, speak correctly ; because if any 
 thing ought to be considered as fixed, it is the rela- 
 tive proportion of value between the different sorts 
 of commodities. In this case, therefore, J think 
 it would be more proper to say, that coinage raises 
 the value of coin, than that it sinks the value of 
 commodities.
 
 PRINCIPLES OF aiONEr. ISJ? 
 
 To prevent the ambiguity of suck expressions 
 ti-om occajsioning contiision, witliout departing too 
 far from common language, I have frequently 
 spoloeiL of commodities as rising and sinking in their 
 values with respect to coin ; but 1 have at the same 
 time obsened the influence which this rising and 
 sinkiqg has upon the rismg and sinking of the value 
 of the pound sterling realized in it. 
 
 Thirdly, Our compariug the value of silver some- 
 times with the pure metal, sometimes with that com- 
 pounded with alloy, involves us frequently in a lan- 
 guage which is. hardly to be understoxjd. 
 
 Says one, a pound of sih er, troy, is worth 67 
 shillings. He means a pound of fine silver. We 
 in England, says another, coin our pound troy 
 of .silver into 6 ^ shillings. He means the pound of 
 standard silver, which contains 18 penny-weights 
 of copper. Says a third, our pound of silver, which 
 we coin into 62 shUhngs, is not worth b'fs. 6d. He 
 understands shillings of fine silver of the same 
 weight with those of standard silver. Another 
 afhrms, that an ounce of standard silver, which at 
 the mint, and in the coin, is worth no more than 
 5*. 2c?. is worth in the market 5s. 6(1. He means, 
 that one must pay at this rate for silver bullion, 
 when it is purchased with over-rated gold. 
 
 Fourthly, Another cause of perplexity in the 
 money-jargon, is the prodigious abuse of the terms 
 which express the denominations of the coin, or the 
 numerary unit.
 
 158 PRINCIPLES OF MONEY. 
 
 French historians write famiHarly of sqms . of 
 money in livrcs and crowns, through all the stages 
 of the monarchy. English writers (for the most 
 part) do the same, in speaking of pounds sterling. 
 Nothing is more different, however, than the ideas 
 expressed by the same term. 
 
 Were any person, talking of lengths and dis- 
 tances, to use the Word foot, sometimes to signify 
 yard, sometimes perch; or to use the word mf/p, to 
 signify sometimes league, sometimes inch, and some-' 
 times fathom ; who could comprehend one word of 
 his discourse concerning the matter? Should avc. 
 not even laugh at such a person, for pretending to 
 inform us of any thing concerning lengths or dis- 
 tances. 
 
 If any change be made upon the value of the 
 money-unit of a country, w^hich is called a pound ; 
 in propriety of language, it can no more be called 
 a pound, after the change, than it can be called a 
 rhinoceros. 
 
 Fifthly, Another reason for the obscurity of mor 
 ney-j argon, is the manner in which writers express 
 themselves, when they speak of variations in the 
 value of money. Upon this occasion, says one, the 
 king raised the money 5 ])er cent. What does this 
 mean ? No mstn living can understand the expresr 
 sion; because it may signify, that he raised either 
 the denomination of the coin, or the value of the 
 unit. If he raised the coin, he debased tlie unit : 
 if he sunk the coin, he raised the unit. A crown
 
 PRINCIPLES OF MONFV'. 159 
 
 of 6 livres is a coin; a liv^er is a miit. If it be said 
 that the six-livre piece is raised ;. this is as much as 
 to sav, it is made to be more than 6 unites: couse* 
 quently, as the silver in the piece does not change 
 its weighty it follows, that the unit, or money of 
 accompt, is diminished. On the other hand, if it 
 be said that the livre is raised, it implies that the 
 crown, which contained 6 livres, is made to con* 
 tain less than 6 units: therefore, the value of the 
 unit is raised; that is, it is made to contain more 
 silver than before. 
 
 Quest. II. What is the difference between the 
 effects produced by raising the value of the coin by 
 the imposition of coinage, and raising the denomi- 
 nation of it ? This question is proposed as a farther 
 mean of rendering the money-jargon intelligible. 
 
 Answ. The imposition of coinage, when it gives 
 an advanced value to coin above the metals it con- 
 tains, is very different from that advanced value 
 which the coin appears to receive when the Sove- 
 reign arbitrarily raises the denomination of it ; or 
 as the French call it, when he augments its nume- 
 rary value. 
 
 When the imposition of coinage gives an advan- 
 ced value to the coin above the bullioii it contains, 
 this advanced value becomes real, and extends itself 
 to foreign nations ; that is to say, the coin, so aug- 
 mented as a manufacture, must be bought with 
 more foreign coin than formerly. But when the 
 denomination^ or numerary value, is augmented.
 
 \<60 rRJNCIPLES OF MON'cEYk 
 
 tlie siinic ]ncce. (though ans:mented in denomination) 
 is houglit by sHrangers with the same quantity of 
 tiieir Coin as before. An example Avill make this 
 plain. 
 
 Let us suppose the coin in France, in war time, 
 to be reduced to the value of bullion, and that the 
 value of a crown of three livres, by the course of 
 exchange, should be then worth ^^j pence heavy 
 silver sterling money; if the balance of the French 
 trade should become favourable in general, and that 
 coin should become 8 pe?' cent, dearer than bullion 
 in the Paris market, then the jDrice of the crown of 
 three livres Avill rise 8 per cent, upon the London 
 exchange above 29r pence heavy silver sterling 
 money, although there be respectively no balance to 
 be paid in bullion either by England or France. 
 But let France ordain, that the crown ol" three 
 livers shall l)e raised in its denomination to six 
 livres, and let the coin at that time be supposed to 
 be at par with bullion in the Paris market, the 
 crown of three li^Tes will then be paid as formerly 
 with 291 pence : that is to say, the augmentation of 
 the denomination will have no effect upon the value 
 of the coin in other countries ; whereas the augmen- 
 tation produced by the operations of trade, in con- 
 sequence of the imposition of coinage, is a real aug- 
 mentation, since it extends to foreign nations. 
 
 Now it is certain and evident, that the augmen- 
 tation of the numerary value has the undoubted 
 effect of sinking the value of the numerary unit
 
 Principles of money. 16i 
 
 realized in tlie coin ; we ought therefore on such 
 occasions to say, that France has diminished the 
 vahie of the Uatc, and not that she has raised 
 the value of the coin. But the abuse of language has 
 made people consider the livre a* the thing fixed, 
 and therefore the coin is considered as the thing 
 which rises and sinks. The consequence of this is, 
 
 to introduce another abuse of language People 
 
 say, that the prices of commodities rise: I ask. 
 With respect to what ? Not with respect to the 
 pieces of the coin, but with respect to the denomi- 
 nations they carry : that is to say, with respect to 
 iivres; although the livre be considered as the thing 
 fixed. There is, however, a reason why people 
 should express themselves in this improper manner, 
 which proceeds from the pei^plexity and confusion 
 of their ideas concerning money. 
 
 When any king or state arbitrarily changes the 
 numerary value of the coin, commodities are found, 
 by universal experience, to stick so closely to the 
 denominations of it, that people are apt to think 
 that it is the king's will and pleasure, and not the 
 metal of which the coin is made, which gives it a 
 value. But commodities depart from these deno- 
 minations by degrees, and fix themselves a-new at a 
 determinate value of the fine metals, proportioned to 
 what they bear in foreign nations. This is brought 
 labout by the operations of commerce; and conse- 
 quently, the rise of prices not taking place till some 
 time after the numerary value of the coin has been 
 
 y
 
 1 62 -PRINCIPLES OF MONEY. 
 
 augmented, people accustom themselves to say, that 
 the augmenting the denomination of the coin raises 
 prices, and that diminishing the denomination sinks 
 them. But did all prices strictly adhere to the 
 grains of bullion contained in the coin, and not to 
 the denominations of the numerary value, then 
 language would change, and nobody would speak 
 about the rising and sinking of prices, but of the 
 rising and sinking of livres, sols, and deniers. 
 
 I hope, from what has been said, that the dif- 
 ference betAveen raising the value of the coin by 
 imposing coinage, and raising the numerical value 
 of it by augmenting the denomination or numerary 
 value of it, is perfectly understood. The first raises 
 the value of the numerary unit, by giving a real 
 additional value to the coin as a manufacture: the 
 last raises, for a while, the value of the numerary 
 unit; merely because the price of commodities, 
 being attached to the denominations of money of 
 accompt, stick to them, until the operations of trade 
 reduce them to their true principle. 
 
 Whenever, therefore, the terms rising and sink- 
 ing are applied to value, the thing which is said to 
 rise, is supposed to be the moveable; and the thing 
 it is compared with, or with respect to which it is 
 said to rise or sink, is supposed to be the term fixed. 
 Every one, therefore, who reads books upon this 
 subject, ought, upon all occasions where there is 
 mention made of rising and sinking of the price of 
 the gold, silver, bullion, coin, exchange, or com-
 
 PRINCIPLES OF MONEY. 1^3 
 
 modities, constantly to cast his eye upon the thing 
 which is supposed to ])e fixed, and retaining this in 
 his mind, he will preserve his ideas distinct. 
 
 Quest. III. Let us suppose that the imposition 
 of coinage, when properly laid on, will not raise the 
 value of the pound sterling; and consequently that 
 it will not affect the domestic interests of Great Bri- 
 tain: it may be asked. What influence this impo- 
 sition will have upon the interest of her foreign cre- 
 ditors, since it must affect exchange? 
 
 Answ. The foreign creditors of the nation will 
 thereby be gainers, provided their interest continue 
 to be paid in denominations of pounds sterling, and 
 not in a determinate number of grains of the fine 
 metals, as was proposed to be done in the four- 
 teenth chapter of the first part. The reason is plain: 
 upon all occasions, when coin canies an advanced 
 price above bullion, those who have funds in Eng- 
 land will gain upon exchange. This gain will no- 
 wise, I think, be at the expence of the nation, but 
 at the expence of those foreigners who have occasion 
 for paper draughts upon London. 
 
 A creditor of England (in Holland I shall sup- 
 pose) draws for a thousand pounds sterling (the in- 
 terest of his English fund); a Dutchman who owes 
 a thousand pounds sterling in London, buys his bill: 
 must he not pay the creditor of England, not only 
 the intrinsic value of the bullion contained in the 
 thousand pounds sterling, but also the difference be- 
 tvv^een the thousand pounds sterling in coin, and the
 
 l64 PRINCIPLES OF MONEY. 
 
 bullion it contains, according to the price of it in 
 the London market? This diflference then, received 
 by the proprietor of the English funds, is clear gain 
 to him, and is no loss to the nation ; it is a loss to 
 the Dutchman. 
 
 Farther, every Dutchman who pays his debts to 
 people residing in England, must suft'er the same 
 loss; that is, he must pay the coinage, which at 
 present the state makes him a present of. 
 
 From this I think it is plain, that while the ba- 
 lance of trade is favourable to England, or at par, 
 all remittances made by foreigners, to pay their 
 English debts, must pay the coinage. 
 
 The operation of this principle has not a little 
 contributed to facilitate the establishment of the 
 French credit. 
 
 . When France borrows, especially in war time, fo- 
 reigners can remit to Paris the money they lend near- 
 ly at par with bullion. Then they pay little or no 
 coinage; and when peace is restored, the coin ris- 
 ing in its value, they gain annually, at no loss to 
 France, several per cent, upon their draughts for 
 their interest, to wit, all the advanced value of the 
 coin. ^■ 
 
 Quest. IV. Is the preserving of the pound ster- 
 ling at the mean value of a determinate weight of 
 fine gold, and fine silver, a sure method of realizing 
 the unit of money of account, so as to preserve it 
 at all times invariable ? 
 
 Answ. I apprehend it is not; although it seems
 
 PRINCIPLES OF MONEY. l65 
 
 to be the best that can be devised, upon supposition 
 that the metals are to be made use of, as the most 
 proper substance for reahzing the scale. 
 
 I have said, in the beginning of this book, that 
 the use of the scale was to measure the relative va- 
 lue of things alienable. Now the metals themselves 
 being of the number of things alienable, and their 
 proj)ortion of value being nowise determined, but 
 liable to augmentations and diminutions, as well as 
 that of grain or any other commodity, no scale that 
 is attached to them can measure any thing but their 
 weight and fineness, and consequently can be no 
 permanent measure for any thing else. 
 
 Did the price of commodities rise and fall with re- 
 spect to grains of the fine metals in the same pro- 
 portion that it rises and falls with regard to the com- 
 modities themselves, the scale would be exact: but 
 if the grains of metal can acquire an increment, and 
 a diminution of value, from ciicumstances entirely 
 peculiar to themselves, such circumstances must ren- 
 der the scale they compose inaccurate with respect 
 to the price of commodities. 
 
 Now we have seen how the imposition of coinage 
 enhances the value of c»in. The rising and sinking 
 of the interest of money has the same effect. The 
 vicissitudes to which credit is liable, have a prodi- 
 gious influence upon the value of the metals. The 
 manners even of a people, which can be determinea 
 by no principle, operate the same effect. When 
 people, for example, are given to hoarding, the me-
 
 l66 PRINCIPLES OF MONEY. 
 
 tals come to he demanded with more eagernes;?, 
 that is, the competition to acquire them is greater; 
 consequently the value of them with respect to all 
 commodities, is greater than when they are purely 
 considered as money of accompt. 
 
 That scale, therefore, is the only just one, which 
 measuring the value of the metals, like that of every 
 thing else, renders every individual of a state equal- 
 ly rich, who is proprietor of the same number of de- 
 nominations of it; whether his wealth be in gold, 
 silver, or any other property or commodity. 
 
 Now I agree that, at any given time, this is the 
 case- when the scale is properly attached to the me- 
 tals; but it is not permanently so. A determinate 
 property in land bears sometimes a greater, sorae-^ 
 times a less proportion to a determinate property in 
 money. When the scale is attached to the metals, 
 he who is proprietor, for instance, of a thousand de- 
 nominations in coin, becomes richer or poorer ac- 
 cording to the fluctuation of the value of this com-^ 
 modity, the metals. Whereas when the scale is not 
 attached to any species of commodity, nothing caa 
 change his proportion of wealth. 
 
 The bank of Amsterdam pays none in either gold 
 or silver coin, or bullion; consequently it cannot 
 be said, that the florin banco is attached to the me- 
 tals. What is it then which determines its value? 
 I answer. That which it can bring; and what it 
 can bring when turned into gold or silver, shews 
 the proportion of the metals to every other commch
 
 PRINCIPLES OF MONEY. l6f 
 
 dity whatsoever at that time: such and such only is 
 the nature of an invariable scale. 
 
 To conclude; no material money^ let it be con- 
 trived as it will, is exempted from vicissitudes in its 
 value as a metal. This is proved by the universal ri- 
 sings and sinkings in the price of commodities, in 
 consequence of circumstances peculiar to the coin. 
 These risings and sinkings of prices, I say, are pro- 
 perly the risings and sinkings of the value of the 
 coin, and this fluctuation again in the value of 
 the coin, is a lengthening and contracting of the equal 
 parts of the scale of value which is attached to it. 
 Now there is no such thing as any vicissitudes in the 
 prices of all commodities with respect to bank mo- 
 ney, although nothing is more common than fluc- 
 tuations in agio, with respect to current money; 
 consequently, bank money has a property and a sta- 
 bility in it, which no material money is capable of 
 acquiring, and for this reason it is preferable to it, 
 and is properly considered as the thing jfixed. 
 
 Quest. V. Will not the imposition of coinage 
 in England prevent, upon many occasions, the car- 
 rying of bullion to be coined at the mint, when it 
 would be carried were the coinage free? 
 
 Answ, Without all doubt. When coinage is 
 free, every man who imports bullion runs with it 
 to the mint : there it is proved, cut, and stamped to 
 his hand, and at no cost. Now to what purpose all 
 this expence ? Why carry bullion to be coined, 
 while the balance of trade i.s against a nation, since
 
 Ida f»ktNCIiPLES dF JvmS'EY. 
 
 Such bullion must be re-exported, together with a 
 part of the national stock of the metals ? BesidcS) 
 the coining of it gratis adds not the smallest value 
 to the metals considered as a manufacture; con* 
 sequently, upon the exportation the whole price 
 of coinage is entirely lost, and the national stock of 
 coin is not thereby augmented ; nor would it be aug-* 
 mented while trade is unfavourable, were five hun- 
 dred mints kept constantly at work. 
 
 The imposition of coinage, therefore, has these 
 good effects. First, it prevents bullion from being 
 coined, except Avhen such coined bullion can rc-^ 
 main in the country and augment the national stock 
 of coin. Secondly, as has been said, it gives an 
 additional value to the coin, even in foreign coun* 
 tries, and thereby prevents it from being melted 
 down abroad, in order to be re-coined in other 
 mints, and to augment the stock of coin in rival 
 nations. 
 
 I believe nobody ever imports louis d'ors to be 
 coined in the English mint (notwithstanding the be- 
 nefit there is in importing gold into England from 
 France, where the proportion of the metals is low- 
 er), yet nothing is more common than to caiTy gui- 
 neas to every foreign mint, at the bare price of bul- 
 lion. This is the reason why so little English coin, 
 and so much French coin, is found in circulation in 
 countries foreign to both these nations. 
 
 Louis d'ors, in consequence of the high imposi- 
 tion of coinage in the French mint, pass current.
 
 PRINCIPLES OF MONEY. 1 69 
 
 almost every where^ for more than their intrinsic 
 value, even when compared with the coin of the 
 very nation where they circulate without the sanc- 
 tion of public authority ; and when this authority 
 regulates their currency, according to their intrinsic 
 value, such regulation has the same effect as for- 
 bidding them altogether; because the moment a 
 money-jobber lays' his hand upon them at the sta- 
 tute value, he circulates them no more; but sends 
 them either back to France, or to some country 
 where they pass, by a conventional value, above 
 their intrinsic worth. Thus louis d'ors, as well 
 as all French coin, are eifectually prcTcnted from 
 being melted down, and so soon as the balance of 
 the French trade becomes favourable, they return 
 home. 
 
 Quest. VI. Is not this return of louis d'ors to 
 France, upon the balance of their trade becoming 
 favourable, a loss to France? since, in this case, 
 the balance of their trade is paid Avith a less weight 
 of bullion than it Avould be paid Avith, were their coin 
 worth no more than bullion. And secondly. Because, 
 when the coin is exported to pay the balance, it is 
 exported upon the footing of bullion, and when it 
 returns it is paid back at an advanced price. 
 
 The difficulty of resolving this question proceeds 
 from the complication of circumstances in which it 
 is involved ; and the intention of proposing it^ is 
 to shew how necessary it is, in practice, to combine 
 every circumstance in political problems. 
 Z
 
 l^fO rr^INXIPJ.ES OF MONEY. 
 
 I shall tlierefore observe, that since, at all times 
 almost, French coin passes (ont of France) for 
 more than its intrinsic value, it is not well ])OSsible, 
 to suppose that, even during a wrong balance of 
 the French trade, their coin can ever fall so low 
 as the price of bullion; consequently, the French 
 exporting their coin, upon such occasions, above 
 the value of bullion, are gainers of all the diffe- 
 rence. This con^pensatcs the loss (if any they sus- 
 tain) upon the return of their coin. In the second' 
 place, when the balance ))econK'S favourable for 
 France, and when there is found a ])rofit in sending 
 back the French coin, the demand made for it l)y. 
 those who want to pick it up in foreign conntrj^'s, 
 raises the value of it in circulation; this again fa- 
 vours the trade of I'^rance, and makes the difference 
 of paying what one owes to France in bullion at 
 the market price, or in lonis d'ors at the advanced 
 value, very inconsiderable ; w^hich consccpientlyprcr 
 vents merchants from finding any great advantage 
 in sending back large quantities of it. 
 
 Or in an{)ther view. — This going out and return^ 
 ing of the French coin, may be considered as a loss 
 to France in this respect, that when the balance of 
 her trade is against her, when her coin loses of its 
 advanced value in payments made to strangers for 
 the price of foreign commodities, those who con- 
 sume such commodities in France, must consume 
 them at an advanced price to themselves, but at no 
 additional profit to foreign suppliers ; because as to
 
 PRIXCIPLfeS OF MONEY. 1 J" 1 
 
 these la.<it, the French coin, with which we suppose 
 the commodities to be paid, haA^ng h)st of its value 
 every where, cannot then purchase so nnich as at 
 anotlier time, and consequently is not worth so 
 much to the foreign supplier who re<^cives it. 
 
 In this respect, therel'ore, France may be sup- 
 posed to lose upon exporting her Coin, to wit, so 
 far as she consumes foreign commodities at an ad- 
 vanced value. 
 
 In these respects only can France be considered 
 as a loser upon exporting her coin: but in having 
 it returned upon her, when at an advanced price 
 above bullion, the loss is nothing; because the ad- 
 vanced price then is a real value added to the coin, 
 and there is no manner of difference as to France, 
 to receive, for the l)alance of her trade, an hundred 
 pounds weight of her ouii lo\iis d'ors, or an hun- 
 dred and eight pounds of standard gold bullion, at 
 Such times as bullion is commonly carried to the 
 mint; because the one and the other weight of coin 
 and bullion will answer the same occasions both in 
 the Payis market, and in most of the trading towns 
 n Europe. 
 
 From these principles we may gather how effec- 
 tually the imposition of coinage must prevent the 
 melting down of the coin, provided a sufficient at- 
 tention is had to preserve the denominations of the 
 Coin in both species at the exact proportion of 
 the market-price of the metals
 
 172 PRINCIPLES OF MONEY. 
 
 Quest. VII. The two metals being valued by one 
 another, if the English, by valuing the gold higher 
 than the French do, occasion the exportation of 
 their silver, why should not the French, by valuing 
 their silver higher than the English do, occasion 
 thereby the exportation of their gold ? And if the 
 English, by over-rating their gold, prevent the 
 carrying of silver to be coined at their mint, why 
 should not the French by over-rating their silver 
 prevent the carrying of gold to be coined in their 
 mint? 
 
 Answ. The English over-rate their gold not only 
 with respect to other nations, but with respect to 
 the value of it in their own market; whereas the 
 French preserve, in their gold and silver coins, 
 nearly the proportion between the metals as they 
 are sold in their own market. 
 
 In France nobody can profit by melting down 
 either of the species, in order to sell it with advan- 
 tage as bullion; but in England, by melting the 
 heavy silver coin, one may sell it in London for 
 more gold than the same coin not melted can pur- 
 chase. 
 
 But here it is objected, that although the pro- 
 portion between gold and silver in the English 
 coin were set upon a par with that of the metals 
 in the London market, still one species may be ex- 
 ported with profit, provided the proportion be dif- 
 ferent in other nations.
 
 PRINCIPLES OF MONEY. l^S 
 
 It is a principle in commerce, that the demand 
 tor any commodity raises the value of it. 
 
 Whenever, therefore, one of the metals bears a 
 value in one nation below what it bears in another, 
 this under-value makes that species more demanded 
 by strangers, and consequently it rises in its value, 
 even at home. 
 
 By this principle the proportion between the me- 
 tals in Euroj)ean markets is kept nearly the same 
 and the small difference which is found does not so 
 much proceed from the demand of foreign trade 
 as from the taste of the inhabitants. The foreign 
 demand tends to make the proportion equal in all 
 markets, and the internal demand for one metal 
 preferably to another, is what makes it vary. 
 
 The carrying of the metals backwards and for- 
 wards is attended with risque and expence. There 
 is not, therefore, so much danger of a nation's being 
 stripped of one of its species of current coin by such 
 a trade, as there is when the proportion of the 
 market-price of the metals is different, at home, 
 from that observed in the coin; because in the last 
 case, every one may profit of the disproportion, at 
 the trifling expence of melting down the rising 
 species. 
 
 From this we may conclude, that nations ought 
 to regulate the proportion of the metals in their 
 coin, according to the market price of them at 
 home, without regard to what it is found to be in
 
 IJ*-! PRINCIPLES OF MONEY. 
 
 other nations; because they may be assured, that 
 the moment any difference in tlie market-price fihall 
 begin to be profited oi\ that very demand will alter 
 the proportion, and raise the market-price of the 
 metal sought for by foreigners. While the coin, 
 therefore, is kept at the proportion of the market at 
 home, and while the denominations of both species 
 are made to keep pace with it, it will be utterly im- 
 possible for one nation to hurt another by any traffic 
 in the metals. 
 
 Here it is farther objected, that were these prin- 
 ciples just, there would not be found so great a 
 disproportion as there actually is, between the value 
 of gold and silver in Europe, and in the empire of 
 China. 
 
 To this I answer, that the principles are just; 
 and that this difference proceeds from incidental cir- 
 cumstances, wbich I shall now point out. 
 
 First, then, the European trade hardly penetrates 
 into that vast empire. Secondly, The lowness of 
 the proportion between gold and siher is maintained 
 by the high internal demand for silver in China. 
 Thirdly, The India trade being every where in the 
 hands of companies, there is not so great a compe- 
 tition between the sellers of silver in the Chines© 
 market, as if that trade were open to every private 
 adventurer; consequently the price of it is not so 
 liable to be diminished. x4nd last of all. The ex- 
 pence of carrying silver thither, and the long lyings
 
 PRINCIPLES OF MONEY. 175 
 
 out of the interest, would put a stop to the trade, 
 were the proportion between the metals to rise in 
 China. This prevents competition still more be- 
 tween the different European companies, and conse- 
 quently prevents the rising- of the proportion. 
 
 (^UEST. VIII. Is it the interest of princes^ to de- 
 base the standard of their coin? 
 
 Answ. Tiie question turning entirely upon the 
 interest of princes, I shall take no notice of the 
 iniquity of such a measure with res})ect to their sub- 
 jects; but shall confine it purely to the interest 
 princes may have in exercising this branch of pre- 
 rogative. 
 
 I answer then, as I have hinted above, that it is 
 their interest to debase the standard of their coin, 
 when they are in the situation of debtors; and it is 
 tlieir interest to raise the standard when they are ia 
 the situation of creditors. 
 
 Debasing the standard I have explained to be the 
 the diminution of the intrinsic value of the unit be- 
 low what it was before, either by raising the deno- 
 mination, augmenting the alloy, or diminishing the 
 weight of the coin. 
 
 Now since princes pay their servants by denomi- 
 nations, that is, by money of accompt, the more 
 they augment the denomination of the coin they 
 possess, the more they gain upon what they have at 
 the time. But they lose proportionally upon their 
 reveiiue ever after; because the rents and duties
 
 176 PRINCIPLES OF MONEY. 
 
 levied on their subjects being also paid by deno- 
 minations, the prince loses every year on his in- 
 come })roportionally what he had gained upon one 
 operation. 
 
 From this we may draw a principle, that kings 
 who have begun to debase the standard, ought to 
 go regularly on every year, as long as they find 
 themselves in the state debtors; and when they 
 come to alter their situation, and become of the 
 class of creditors, it is then their interest to raise 
 the standard. 
 
 The inconveniences, therefore, which proceed from 
 this exercise of power, may be reduced to three. 
 
 First, It disturbs the ideas of a whole nation with 
 regard to value, and gives an advantage in all bar- 
 gains, to those of the society who can calculate, 
 over those who cannot. 
 
 Secondly, It robs the whole class of debtors 
 when the standard is raised; and it robs the whole 
 class of creditors when it is debased. 
 
 Thirdly, It ruins credit; because no man will 
 borrow or lend, in a country where he cannot be 
 sure of receiving back the full value of his loan; or 
 of being in a capacity of clearing himself by paying 
 back the just value he had borrowed. 
 
 This last circumstance has overturned the whole 
 scheme in France. Princes would go on debasing 
 their standard as formerly, could thfcy do it and pre- • 
 serve their credit. But who will lend a shilling to^
 
 PRINCIPLES OF MONEY. 1^7 
 
 a prince, if he suspects he will pay him back, per- 
 haps with sixpence? 
 
 Quest. IX. What is the best form to be given to 
 coin } 
 
 Answ. The intention of coinage, Jor circulatmi, 
 being to ascertain the quantity of the fine metals in 
 every piece, and not to rej^resent the effigies of the 
 sovereign, we see a manifest difference every where ' 
 between the impressions struck upon medals, and 
 those upon the current coin: in the first, the head 
 is raised; in the last, it is purposely made flat. 
 
 Anciently, the impression put upon some of the 
 English coins was a cross ; which being indented on 
 the penny, instead of being raised, occasioned these 
 pieces frequently to be broken into four parts. This 
 is said to have given rise to the denomination of far- 
 things, or fourth parts. The indenting of the im- 
 pression upon the coin, is no doubt a preservative 
 against its wearing; but, as it is liable to other incon- 
 veniences, and is so repugnant to custom, it would 
 be ridiculous, perhaps, to propose it. 
 
 I shall reduce, therefore, all I have to propose as 
 a supplement to what has been said already on this 
 subject, to a very few observations. 
 
 First, The less surface any piece has in proportion 
 to its mass, the less it will wear in circulation; and as 
 all coin is made cylindrical, the nearer it approaches 
 to the cylinder, whose height is equal to its diame- 
 ter, the less surface it will have. Coin, therefore, 
 Aa
 
 178 PRINCII'LES OF MONEY. 
 
 ought to be made thick, and for this reason, louis 
 d'ors are of a better form than guineas, as guineas 
 are of a far better form than ducats. Were it easy 
 to give the surface a spheroidal form on both sides, 
 rendering the coin thicker in the middle than at the 
 edges, the surface would be thereby a little more di- 
 minished. 
 
 Secondly, The great credit of paper money in 
 England, is a vast advantage in many respects. It 
 renders coin less necessary. While this credit sub- 
 sists, large payments will always be made in paper ; 
 and this renders the coinage of gold in large heavy 
 pieces less necessary. The coin, tlierefore, in Eng- 
 land, ought to be calculated for the easy changing 
 of bank notes, not with a view to the making great 
 payments in it. For this purpose, two and three 
 pound pieces might be full as convenient as single 
 guineas, and half-guineas might be confined to a 
 smaller number. Small denominations of gold 
 coin lead to expence, and tend to raise the prices of 
 such commodities as people of fashion pay imme- 
 diately out of their o\m pockets. As for the silver, 
 the same principles are to be observed. Crown 
 pieces are very convenient in payments, and have 
 a great advantage over shillings and sixpences in 
 point of surface. The practice in France of coining 
 the greatest part of their silver in such pieces, abun- 
 dantly shews how few of the lesser denominations 
 (that is shillings^ &c.) are necessary for carrying on 
 circulation.
 
 PRINCIPLES OF MONEY. lj'9 
 
 Thirdly, The copper coin of England is exceed- 
 ingly bulky, in order to give it an intrinsic v.'ilue. 
 This makes many people ashamed to carry it; con- 
 sequently increases expence, and raises the price of 
 many things for the reason already given. 
 
 What inconvenience could there possibly be in 
 making pence of a mixed metal of a much lower 
 standard than the other coin? The coin would be 
 less bulky, and the intrinsic value might be pre- 
 served. This is the custom all over Germany. The 
 lower denominations of the coin are all of different 
 fineness. The standard for what they call the gros; 
 the 7? the 10, the 17, the 20 creutzer pieces, are 
 all of different fineness; but still in the same sum, 
 in whatever coin it l)e paid, according to the laws of 
 the empire, there ought to be found the same quan- 
 tity of fine silver. This enables them to coin pieces 
 of very small denominations; which have however 
 the same intrinsic value with the other denomina- 
 tions of the coin, and which are neither of an un- 
 wieldy bulk, or of an inconvenient smallness. This 
 is the re2;ulation in Germany: I do not say that it is 
 well observed, 
 
 Farthings of copper are good and convenient; a 
 few of these ought always to be presented in favour 
 of the lower classes of the people, who thereby are 
 enabled to keep down the prices of the small neces- 
 saries of life: a r^atter of the greatest importance ta 
 ^ trading nation.
 
 180 PRINCIPLES OF MONEY. 
 
 Nations ought to copy from one another what is 
 good and convenient^ and shonkl be a])ove the thral- 
 dom of little jirejudices in favour of establishcr! cus- 
 toms, which have frequently nothing but custom to 
 recommend them. 
 
 Fourthly, It must be observed that upon adopt- 
 ing the German regulation as to pence, such coin 
 must not be allowed to be put up in bags of coin de- 
 livered by weight; nor made a legal tender beyond 
 the value of the lowest silver coin. 
 
 END OF BOOK SECOND.
 
 PRINCIPLES OF MONEY, 
 
 BOOK THE THIRD, 
 
 OF BANKS. 
 
 CHAPTER 1. 
 
 Of the varions Kinds of Credit. 
 
 JOANKS differ from one another in point of poli- 
 cy, as well as in the principle upon which their cre- 
 dit is built. 
 
 If they be considered relatively to their policy, 
 they may be divided into banks of circulation, and 
 banks of deposit. 
 
 If they be considered relatively to the principles 
 upon which their credit is built, they may be divided 
 into banks upon />7'/ra^e credit, banks upon mercan- 
 tile credit y and banks upon public credit. 
 
 .It is to this last division only I must attend, in the 
 distribution of what is to follow; and therefore it is
 
 182 TRINCIPLES OF MONEY. 
 
 proper to set out by explaining what I understand 
 by the terms I have here introduced. 
 
 First, Private credit, Tliis is established upon a 
 security, real or personal, of value sufficient to make 
 good the obligation of repayment both of capital and 
 interest. This is the most solid of all. 
 
 Secondly, Mercantile credit. This is established 
 upon the confidence the lender has, that the bor- 
 rower, from his integrity and knowledge in trade, 
 may be able to replace the capital advanced, and 
 the interest due during the advance, in terms of the 
 agreement. This is the most precarious of all. 
 
 Thirdly, Public credit. This is established uj)on 
 the confidence reposed in a state or body politic, 
 who borrow money upon condition that the capital 
 shall not be demandable; but that a certain propor- 
 tional part of the sum shall be annually paid, either 
 as interest, or in extinction of part of the capital; 
 for the security of which, a permanent annual fund 
 is appropriated, with a liberty, however, to the state 
 to free itself at pleasure, upon repaying the whole; 
 when nothing to the contrary is stipulated.
 
 PRINCIPLES OF MOXEV. 183 
 
 CHAPTER IL 
 
 OfPrUate Credit. 
 
 RIVATE credit is either real, personal, or 
 mixed. 
 
 Real security, every body understands. It is the 
 object of law, not of politics, to give an enumera- 
 tion of its different branches. By this term, we 
 understand no more than the pledging an immov- 
 able subject for the payment of a debt. As by a 
 personal security we understand the engagement of 
 the debtors whole effects for the relief of his credi- 
 tor. The mixed, I have found it necessary to su- 
 peradd, in order to explain with more facility the 
 security of one species of banks. The notes issued 
 by banks upon private credit, stand upon a mixed 
 security: that is, both real and personal. Personal, 
 as far as they affect the banker, and the banking 
 stock pledged for the security of the paper: and 
 real, as far as they affect the real securities granted 
 to the banker for the notes he lends, which after- 
 wards enter into circulation.
 
 184 fftlNCIPLES OF MONEY. 
 
 CHAPTER III. 
 
 Of Banks. 
 
 JlN deducing the principles of banking, I shall do 
 the best I can to go through the subject systema^ 
 tically. 
 
 Banks may be divided as to their policy, into two 
 general classes, viz. those which issue notes payable 
 in coin to bearer; and those which only transfer 
 the credit written down in their books from one 
 person to another. 
 
 Those who issue notes, I call banks of circula- 
 tion; those which transfer their credit, I call banks 
 of deposit. 
 
 I shall, according to this distribution, first explain 
 the principles upon which the banks of circulation 
 are constituted and conducted, before I treat of the 
 others. 
 
 This will lead me to avail myself of the division 
 I have made of credit, into private, mercantile, and 
 ptiblic: because, according to the purposes for which 
 a bank is established, the ground of confidence, that 
 is, the credit of the bank, comes to rest upon one or 
 other of them.
 
 PRINCIPXES OF MONKY. 185 
 
 In countries where trade and industry are in their 
 infancy, credit can be but little known; conse- 
 cjuently, they who have solid property must find 
 great difficulty in turning it into money. 
 
 Under such circumstances, it is proper to establish 
 a bank upon the principles of private credit. This 
 bank must issue notes upon land and other securi- 
 ties, and the profits of it must arise from the per- 
 manent interest drawn for the money lent. 
 
 Of this nature are the banks of Scotland. 
 
 In countries where trade is established, industry 
 flourishing, credit extensive, circulation copious and 
 rapid, as is the case with England, banks upon 
 mortgage, however useful they may prove for other 
 purposes, would not answer the demands of the 
 trade of London, and the service of government, 
 so well as the bank of England. 
 
 Tlie ruling principle of this bank, and ground of 
 their confidence, is mercantile credit. The bank 
 of England does not lend upon mortgage, nor per- 
 sonal security: their profits arise from discounting 
 bills ; loans to government, upon the faith of taxes, 
 to be paid within the year; and upon the credit 
 cash of those who deal with them. 
 
 In France, under the regency of the Duke of 
 Orleans, there was a bank erected upon the princi- 
 ples of public credit. The ground of confidence 
 there, and the only security for all the paper they 
 issued, were the funds appropriated for the pay- 
 ment of the interest of the public debts. 
 Bb
 
 186 PRINCIPLES OF MONEY* 
 
 Banking, in the age we live, is that branch of 
 credit which best deserves the attention of a states- 
 man. Upon the right establishment of banks, de- 
 pends the prosperity of trade, and the equable course 
 of circulation. By tliem solid property may be 
 melted down. By the means of banks, money may 
 be constantly kept at a due proportion to aliena- 
 tion. If alienation increase, more property may 
 be melted down. If it diminish, the quantity of 
 money stagnating, will be absorbed by the bank, 
 and part of the property formerly melted down in 
 the securities granted to them, will be, as it were, 
 consolidated anew. Banks must pay, as agents for 
 the country, the balance of their trade with foreign 
 nations. Banks keep the mints at work; and it is 
 by their means, principally, that private, mercan- 
 tile, and public credit are supported. I can point 
 out the utility of banks in no way so striking, as to 
 recai to mind the surprizing effects of Mr. Law's 
 bank, established in France, at a time when there 
 was neither money or a'edit in the kingdom. The 
 superior genius of this man produced, in two years 
 time, the most surprizing effects imaginable ; he 
 revived industry; he established confidence; and 
 shewed to the world, that while the landed pro- 
 perty of a nation is in the hands of the inhabitants, 
 and while the lower classes are willing to be indus- 
 trious, money never can be wanting. I must now 
 proceed in order, towards the investigation of the 
 principles which influence this intricate and com- 
 plicated branch of ray subject.
 
 PIIINCIPLES OF MONEY. 187 
 
 CHAPTER IV. 
 
 Of Banks of Circulation upon Mortgage or private 
 Credit, 
 
 ANKS of circulation upon mortgage or private 
 credit, are those M'hicli issue notes upon private se- 
 curity, payable to bearer on demand, in the current 
 coin of the nation. They are constituted in the 
 following manner : 
 
 A number of men of property join together in a 
 contract of banking, cither ratified or not by public 
 authority, according to circumstances. For this 
 purpose, they form a stock which may consist in- 
 differently of any species of property. This fund 
 is engaged to all the creditors of the company, as 
 a security for the notes they propose to issue. So 
 soon as confidence is established with the public, 
 they grant credits, or cash accompts, upon good 
 security ; concerning which they make the proper 
 regulations. In proportion to the notes issued in 
 consequence of these credits, they provide a sum 
 of coin, such as they judge to be sufficient to an- 
 swer such notes as shall return upon them for pay- 
 ment.
 
 ifiS PRINCIPLES OF MONET. 
 
 The profits of the bank proceed from the interest 
 paid upon all the money advanced by the bank, in 
 consequence of credits given. 
 
 Out of these profits must be deducted, first, the 
 charge of management. Secondly, The loss of in- 
 terest for all the coin they preserve in their coffers, 
 as well as the expence they are put to in providing 
 it. And thirdly, The expence of transacting and pay-» 
 ing all balances due to other nations. 
 
 Let it be observed, that I do not consider the 
 original bank stock, or the interest arising from 
 that, as any part of the profits of the bank. So far 
 as it regards the bank, it is their original property; 
 and so far as it regards the public, it serves for a col- 
 lateral security to it, for the notes issued. It be^ 
 comes a pledge, as it were, for the faithful dis- 
 charge of the tinist reposed in the bank: without 
 such a pledge, the public could have no security to 
 indemnify it, in case the bank should issue notes for 
 no permanent value received. This would be the 
 case, if they thought fit to issue their paper either 
 in payment of their own private debts, or for articles 
 of present consumption, or in a precarious trade. 
 
 When paper is issued by a bank for no value re- 
 ceived, the security of such paper stands upon t!ie 
 original capital of the bank alone ; whereas when it 
 is issued for value received, that value is the secu- 
 rity on which it immediately stands, and the bank 
 stock is, properly speaking, only subsidiary. 
 
 As a farther illustration of this principle, ]e;t me
 
 PRINCIPLES OF MONEY. 189 
 
 suppose — an honest man, intelligent, and capable 
 to undertake a bank. I say that such a person, 
 without one shilling of stock, may carry on a bank 
 of domestic circulation, to as good purpose as if 
 he had a million; and his paper will be evej'y bit 
 as good as that of the bank of England. Every 
 note he issues will be secured on good private secu- 
 rity; this security cames interest to him, in pro 
 portion to the money which has been advanced by 
 him, and stands good for the notes he has issued. 
 Suppose then, that after having issued for a million 
 sterling, all the notes should return upon him in one 
 
 day Is it not plain, that they Avill find, with the 
 
 honest banker, the original securities, taken by him 
 at the time he issued themt* And is it not true, that 
 he will have, belonging to himself, the interest re- 
 ceived upon these securities, while his notes were 
 in circulation, except so far as this interest has been 
 spent in carrying on the business of his bank? Large 
 bank stocks, therefore, serve only to establish their 
 credit ; to secure the confidence of the public, who 
 cannot see into their administration; but who wil- 
 lingly believe, that men who have considerable 
 property pledged in security of their good faith, 
 will not probably deceive them. 
 
 This stock is the more necessary, from the obli- 
 gation to pay in the metals. Coin may be wanting, 
 upon some occasions, to men of the greatest landed 
 property. Is this a reason to suspect their credit? 
 Just so of banks. The bank of England may be
 
 190 PRINCIPLES OF money; 
 
 possessed of twenty millions sterling of good effects, 
 to wit, their capital ; and securities for all the notes 
 they have issued ; and yet that hank might he obliged 
 to stop payment , upon a sudden demand of a few mil- 
 lions oj' coin. 
 
 From what has be^n said, we may conclude, that 
 the solidity of a bank which lends upon private secu- 
 rity, does not so much depend upon the extent of 
 their original capital, as upon the good regulations 
 they obsei've in granting credit. In this the public 
 are nearly interested; because the bank securities are 
 really taken for the public, who are creditors on then> 
 in virtue of the notes which circulate through their 
 hands. 
 
 CHAPTER V. 
 
 Such Banks ought to issue their Notes on private^ 
 not mercantile Credit. 
 
 *ET me therefore reason upon the example of 
 two bankers; one issues his notes upon the best 
 real or personal security; another gives credit to 
 merchants and manufacturers, upon the princi- 
 ples of mercantile credit, which we have explain-
 
 PRINCIPLES OF MONEY. I9I 
 
 «d above. The notes of the one and of the other 
 enter into circulation^ and the question comes to be, 
 which are the best? 
 
 If we judge by the stock of the two bankers, per- 
 haps they may be equal, both in value and solidity; 
 but it is not upon this circumstance that the ques- 
 tion depends. The notes in circulation, may far 
 exceed the amount of the largest bank stock; and 
 therefore, it is not on the original stock, but on 
 the securities taken at issuing the notes, that the so- 
 lidity of the two cuiTencies is to be estimated. 
 Those secured on private credit, are as solid as 
 lands and personal estates; they stand upon the 
 principles of private credit. Those secured on the 
 obligations of merchants and manufactui'ers, de- 
 pending upon the success of their trade, are good 
 or bad in proportion to such success. Every bank- 
 ruptcy of one of their debtors, involves the bank, 
 and carries off either a part of their profits, or of 
 their stock. Which way, therefore, can the public 
 judge of the affairs of bankers, except by attending 
 to the nature of the securities upon which they give 
 credit.
 
 192 PRINCIPLES OF MONEY. 
 
 CHAPTER VL 
 
 Vse of Subaltern Banhers and Exchangers. 
 
 Ml 
 
 -ERCHANTS and manufacturers, however, 
 have constant occasion for money or credit; and at 
 the same time, they cannot be supposed to have ei- 
 ther real or personal estates to pledge, in order to 
 obtain a loan directly from the banks, who ought 
 to lend upon no other security. 
 
 To remove this difficulty, we find a set of mer- 
 chants, men of substance, who obtain from the 
 banks very extensive credits upon the joint real and 
 personal security of themselves and friends. With 
 this assistance from the bank, and with money bor- 
 rowed from private people, repayable on demand, 
 something below the common rate of interest, they 
 support the trade of Scotland, by giving credit to 
 the merchants and manufacturers. 
 
 To this set of men, therefore, are banks of circu- 
 lation upon mortgage to leave this particular branch 
 of business. It is their duty, it is the interest of 
 the country, and no less that of banks, that they 
 be supported in so useful a trade; a trade which 
 animates all the commerce and manufactures of Scot-
 
 PRINCirLES OF MONEY- 193 
 
 land, and which consequently promotes the circula- 
 tion of those very notes upon which the profits of 
 the banks do arise. iito'tq; i^JS'i*^ 
 
 These merchants are settled in all the inost 
 considerable towns: they are well acquainted with 
 the stock, capacity, industry, and integrity of all the 
 dealers in their district: they are many; and by this 
 are able to go through all the detail which their bu- 
 siness requires ; and their profits, as. we^ shall s6e pre- 
 sently, are greater than those of'banks, who lend at 
 a stated interest. 
 
 The common denomination bv Avhich they are 
 called in Scotland, is tliat of Bankers; but, to avoid 
 their being confounded with the bankers in Eng- 
 land (wliose business is very different) we shall, 
 while we are treating of the doctrine of banks, call 
 them by the name of Exchangers, since their trade 
 is principally carried on by ])ills of exchange. 
 
 As often as these exchangers give credit to deal- 
 ers in any way, they constantly state a commission 
 of k per cent, or more, according to circumstances, 
 over and above the interest of their advance; these 
 are profits, which greatly surpass those of any bank. 
 One thousand pounds credit given by a bank, may 
 not produce ten pounds in a year for interest: where- 
 as were a like credit given by a banker, to a mer- 
 chant, who draws it out, and replaces it forty times 
 in a year, there will arise u])on it a commission of 
 30 per cent, or ^200, 
 
 Cc
 
 194 PRINCIPLES OF MONEY. 
 
 This set of men are exposed to risks and losses, 
 which they bear without complaint, because of their 
 great profits; but it implies a detail, which no 
 bank can descend to. 
 
 These exchangers break from time to time; and 
 no essential hurt is thereby occasioned to national 
 credit. The loss falls upon those who lend to them, 
 or trust them with their money, upon precarious 
 security; and upon merchants, who make allow- 
 ances for such risks. In a word, they are a kind 
 of insurers, and draw premiums in proportion to 
 their risks. 
 
 To this set of men, therefore, it should be left to 
 give credit to merchants, as the credit they give is 
 purely mercantile; and to banks alone, who give 
 credit on good private security, it should be left to 
 conduct the great national circulation, which ought 
 to stand upon the solid principles of private credit. 
 
 From this example we may discover the justness 
 of the distinction I have made between private and 
 mercantile credit: had I not found it necessary, I 
 should not have introduced it.
 
 PRINCIPLES OF MONEY* I95 
 
 CHAPTER VII. 
 
 Concerning the Obligation to pai/ in Coin, and the 
 Consequences thereof. 
 
 I 
 
 rN all banks of circulation upon mdrtgage, the 
 obligation in the note is to pay in coin, upon de- 
 mand. 
 
 No coin is ever (except in very particular cases) 
 tarried to a bank, in order to procure notes. The 
 greatest part of notes issue from the banks, con- 
 cerning which we are treating, either in consequence 
 of a loan, or of a credit given by the bank, to such 
 as can give security for it. This loan is made in 
 their own notes; which are quickly thrown into cir- 
 culation by the borrower; who bori'owed them, be- 
 cause he had occasion to pay them away. 
 
 Coin, again, comes to a bank, in the common 
 course of circulation, by payments made to it, ei- 
 ther for the interest upon their loans, or when mer- 
 chants and landed men throw the payments made to 
 them into the bank, toAvards filling up their credits 5 
 or by way of a safe deposit for their money. These 
 payments are made to the bank in the ordinary cir- 
 culation of the country. When there is a consider- 
 able proportion of coin in circulation, then the
 
 196 PRINCIPLES or MON£Y. 
 
 bank receives much coin ; and when there is little, 
 they receive little. Whatever they receive is laid 
 by to answer notes which are offered for payment; 
 but whenever a draught is made upon them for the 
 money throAvn in as above, they pay in paper. 
 
 The consequences of the obligation to pay in coin 
 are two. The first is, that when the nation comes 
 to owe a foreign balance, the notes which the bank 
 had issued to support a domestic circulation only, 
 come upon it for the payment of this balance; and 
 thereby the coin which it had provided for home de- 
 mand only, is drawn out. 
 
 The second inconvenience resulting from this ob- 
 ligation to pay in coin is, that the confusion of the 
 English coin, and the lightness of a great part of 
 it, obliges the bank of England to purchase the me- 
 tals at a price far above that which tbey can draw 
 back for them after they are coined. The great pro- 
 fit is then made in melting down and exporting the 
 heavy species. This profit turns out a real loss to 
 the bank of England, which is constantly obliged 
 to provide new coin, in proportion as it is Avanted.
 
 PRINCIPLES OF MONEY. 197 
 
 CHAPTER VIII. 
 
 How a wrong Balance of Trade affects Banks of 
 Circulation, 
 
 W] 
 
 HEN there is a balance due by any nation, 
 upon the whole of their mercantile transactions with 
 the rest of the worlds such balance must be paid in 
 coin. This we call a wrong balance. Those who 
 transact the payment of this balance, are those who 
 regulate the course of exchange; and we may sup- 
 pose, witiiout the least danger of being deceived, 
 that the course is always higher than the ex- 
 pence of procuring and transporting the metals; 
 because the overcharge is profit to the exchanger, 
 who without this profit could not carry on his 
 business. 
 
 These exchangers, then, must have a command 
 of coin ; and where can they get it so easily, and 
 so readily, as from banks w^ho are bound to pay in 
 it? 
 
 Every merchant who imports foreign commodi- 
 ties, must be supposed to have value in his han^ls, 
 from the sale of them; but this value must consist 
 in the money of the country: if this be mostly in
 
 igS PRINCIPLES OF MONEV. 
 
 bank paper, he must give the bank paper for a bill 
 to the exchanger, whose business it is to place 
 funds in those parts upon which bills are demand- 
 ed. The exchanger again (to support the fund 
 which he exhausts by his draughts) must de- 
 mand coin from the banks, for the notes he re- 
 ceived from the merchant, when he gave hihi 
 the foreign bill. 
 
 Besides the wrong balances of trade transacted in 
 this manner, which banks are constantly obliged 
 to make good in coin, every other payment made to 
 foreigners has the same effect. It is not because 
 it is a balance of trade, but because it is a pay- 
 ment which cannot be made in paper currency, 
 that a demand is made for coin. Coin M'e have 
 called the money of the world, as notes may 
 be called the money of society. The first then 
 must be proaired when we pay a balance to foreign- 
 ers; the last is full as good when we pay among 
 ourselves. 
 
 It is proper, however, to observe, that there is 
 a great difference between the wrong balance of 
 trade, and the general balance of payments. The 
 first marks the total loss of the nations, when her 
 imports exceed the value of her exports ; the second 
 comprehends three other articles, viz. 1 . The ex- 
 pence of the natives in foreign countries. 2. The 
 payment of all debts, principal and interest, due to 
 foreigners. 3. The lending of money to other 
 nations.
 
 PRINCIPLES OF MONEY. I99 
 
 Tliese three put together, make what I call the 
 general balance of foreign payments: and these 
 added to the wrong balance of trade, may be called 
 the grand balance with the world. 
 
 Now as long as the payment of this grand balance 
 is negotiated by exchangers, all the coin required to 
 make it good must be supplied by banks, while 
 they have one note in cumulation. 
 
 How then is this coin to be procured by nations 
 who have no mines of their own r 
 
 CHAPTER IX. 
 
 How a grand Balance may he paid by Banhs, 
 without the assistance of Coin. 
 
 'ID all the circulation of a country consist in 
 coin, this grand balance, as we haA^e called it, 
 would be paid out of the coin, to the diminution 
 of it. 
 
 We have said that the acquisition of coin, or of 
 the precious metals, adds to the intrinsic value of a 
 country, as much as if a portion of territory M'ere
 
 :aOO PRINCIPLES GF MONEY. 
 
 added to it. The truth of this proposition will nmv 
 soon appear evident. * 
 
 We have also said, that the creation of svniboli- 
 cal money, adds no additional wealth to a country, 
 but only provides a fund of circvilation out of solid 
 property; which enables the proprietors to con- 
 sume and- to pay proportionally for their consump- 
 tion: and we have shewn how by this contrivance, 
 trade and industry are made to flourish. 
 
 May w^e not conclude, from these principles, 
 that as nations who have coin, pay their grand ba- 
 lance out of their coin, to the diminution of this 
 species of their property, so, nations who have 
 melted down their solid property into symbolical 
 money, must pay their grand balance out of the 
 symbolical money; that is to say, out of the solid 
 property of which it is the symbol? 
 
 But this solid property cannot be sent abroad > 
 and it is alleged that nothing but coin can be em- 
 ployed in paying this grand balance. To this, I 
 answer, that in such a case the credit of a bank may 
 step in; without which a nation which runs short of 
 coin, and which comes to owe a grand balance, naust 
 quickly be undone. 
 
 We have said, that while exchangers trans act th 6 
 balance, the whole load of providing coin lies upon 
 banks. Now the whole solid property melted down, 
 in their paper, is in their hands ; because I consider 
 the securities given them for their paper, to be the 
 same as the property itself. Upon this property.
 
 PRINCIPLES OF MONEY. 201 
 
 there is an yearly interest paid to the bank: this in- 
 terest, then, must be eng-aged to foreigners by the 
 bank, in lieu ot" what is owing to them by the na- 
 tion; and when once a fund is borrowed upon it 
 abroad, tlie rest is easy to the bank. This shall be 
 farther explained as we go along. 
 
 CHAPTER X. 
 
 In.siif[iciency of temporary Credits for the Payment 
 of a wrong Balance. 
 
 A HAVE said, that when the national stock of 
 coin is not sufficient to provide l)anks with the quan- 
 tity demanded of them, for the payment of the 
 grand balance, that a loan must take place. To 
 this it may be objected, that a credit is sufficient to 
 procure coin, without having recourse to a formal 
 loan. The difference I make between a loan and 
 a credit consists in this, that by a credit we under- 
 stand a temporary advance of money, which the 
 person who gives the credit expects to have repaid 
 in a short time, with interest for the advance, and 
 commission for the credit; whereas by a loan we 
 understand the lending of money for an indefinite 
 time, with interest during non-payment, 
 Dd
 
 202 PRINCIPLES OF MONEY. 
 
 Now I say, the credit, in this case, will not an- 
 swer the purpose of supplying a deficiency of coin; 
 unless the deficiency has heen accidental, and that 
 a return of coin, from a new favourable girnid ba- 
 lance, be quickly expected. The credit will indeed 
 answer the present exigency; but the moment this 
 credit conies to be replaced, it must be replaced 
 either by a loan, or by a supply of coin ; or by a 
 X'enewal of the former credit ; but, by the supposi- 
 tion, coin is found to be wanting for paying the 
 grand balance; consequently, nothing but a loan, 
 made by the lenders either in coin, in the metals, or 
 in a liberty to draw upon them, can remove the \\\- 
 convenience; and if recourse be had to a new credit, 
 instead of the loan, the same difficulty will recur, 
 whenever this credit again comes to be made good 
 by repayment. 
 
 Upon the whole, we may conclude, that nations 
 who owe a balance to other nations, must pay it 
 either with their coin, or with their solid property; 
 consequently, the acquisition of coin is, in this par- 
 ticular, as advantageous as the acquisition of lands; 
 but when corn is not to be procured, the transmis- 
 sion of the solid property to foreign creditors is an 
 operation which banks must undertake; because it 
 is they who are obliged either to do this, or to pay 
 in coin.
 
 PRINCIPLES OF MONEY. 203 
 
 CHAPTER XI. 
 
 Of the Hurt resulting to Banks ^ when they leave 
 
 the Payment of a wrong Balance to 
 
 Exehangers, 
 
 V v' E have seen in a former chapter, how ex^ 
 changers and banks are mutually assistant to one 
 another: the exchangers, by swelling and supporting 
 circulation; the bank, by supplying them with credit 
 for this purpose. Wliile parties are united by a 
 common interest, all goes well: but interest divides, 
 by the same principle that It unites. 
 
 No sooner does a nation incur a balance against 
 itself, than exchangers set themselves to work to 
 make a fortune, by conducting the operation of pay- 
 ing it. They appear then in the li2:ht of political 
 usurers to a spendthrift heir, who has no guardian. 
 Tliis guardian should be the bank, who upon such 
 occasions (and upon such only) ought to interpose 
 between the nation and her foreign creditors. This 
 it may do, by constituting itself at once debtor for 
 the whole balance, and by taking foreign exchange 
 into its hand, until such time as it shall have dis- 
 tributed the debt it has contracted for the nation, 
 among those individuals who really owe it. This 
 operation performed, exchange may be left to those
 
 204 FRINCIPLES OF MONEY. 
 
 who make this branch their business, because then 
 they will find no opportunity of combining either 
 against the interest of the bank or of individuals. 
 
 When a national bank neglects so necessary a 
 duty, as well as so necessary a precaution, the whole 
 class of exchangers become united by a common in- 
 terest against it; and the country is torn to pieces, 
 by the fruitless attempt it makes to support itself, 
 without the help of the only expedient that can re- 
 lieve it. 
 
 Those exchangers having the grand balance to 
 transact with other nations, make use of their cre- 
 dits with the bank, and of its notes, in order to draw 
 coin from the bank, which they export. This throws 
 a great load upon the bank, which is constantly 
 obliged to provide a sufficient quantity of coin for 
 answering all demands; for we have laid it df)wn as 
 a principle, that whatever coin or bills are necessary 
 to pay this grand balance^ in every way it can be 
 transacted, it must ultimately be paid by the bank; 
 because whoever wants coin for any purpose, and 
 has bank notes, can force the bank to pay them in 
 coin, or stop payment.
 
 PRINCIPLES OF MONEY. 205 
 
 CHAPTER XII. 
 
 In ivhat Manner the Pai/ment of a wrong Balcmcr 
 affects Circulafion. 
 
 TT * 
 
 JL HAT I may comniunicate my ideas with the 
 greater precision, I must here enter into a short de- 
 tail of some principles, and then reason on a snp- 
 posltion. 
 
 It has been said, that t!»e consequence of credit 
 and pa])er-money, seemed on sohd property, was to 
 augment the mass of the circulating equivaleiit, iu 
 proportion to the uses found for it. 
 
 These uses may be comprehended under two g^e- 
 neral heads. The first, payment of what one owes; 
 the second, hui/ing what one has occasion for. The 
 one and the other may be called by the general term 
 of readif-monei/ demands. 
 
 A certain sum of money, therefore, is necessary 
 for carrying on domestic alienation; that is, for 
 satisfying ready-money demands. Let us call this 
 quantity (A). 
 
 Next, in most countries in Europe (I may say 
 in all), it is customary to circulate coin, which, for 
 toany uses, is found fitter than paper (no matter for
 
 2o6 phinc'iPles of mox£V. 
 
 what reason); custom lias established it, and with 
 ciistoni even statesmen must comply. 
 
 Let this quantity of coin, necessary for circulating 
 the paper-money, be called (B), and let the paper- 
 money be culled (C); cons?quently (A) will be 
 equal to the sum of (B) and (C). A^-ain, we have 
 said, that all balances owing by nation to nation, 
 must be paid either in coin, or in the metals ; and 
 that bank paper can be of no use in such payments. 
 Let the quantity of the metals or coin, going out 
 or coming into the country for payment of such ba- 
 lance, be called (D). 
 
 These short designations premised, we may rea- 
 son A\ ith more precision. (A) is the total mass of 
 money (coin and paper) necessary at home, and is 
 composed of (B) the coin, and of (C) the paper- 
 money; and (IJ) stands for that mass of coin, or 
 metal, which goes and comes according as the 
 grand balance is favourable or unfavourable with 
 other nations. 
 
 Now, from what has been said, we may deter- 
 mine that there should at all times remain in the 
 country, or in the bank, a (juantity of coin equal 
 to (B); and if this be ever found to fall short, the 
 bank does not discharge its duty. '-* 
 
 When a favourable balance of trade brings the 
 price of exchange below par, and brings coin into 
 the country, the consequence is, either to animate 
 trade and industry, to augment the mass of pay- 
 ments, to swell (A), and still to preserve (C) in'
 
 PRINCIPLES.OF MONEY. SOT" 
 
 circulation; or else to make (A) regoro^e, so as to 
 sink the interest of money below the bank lending 
 price. In this case people will carry back the re- 
 gorgini;" part of (C) to the bank, and withdraw 
 their secnrities; which is consolidating, as we have 
 called it, the property which had been formerly 
 melted down, for want of this cii-culating equivalent 
 (money). 
 
 This is constantly the consequence of a stagnation 
 of paper, from an overcharge of it, thrown into 
 circulation. It returns upon the bank, and dimi- 
 nishes the mass of their securities, but never the 
 mass of their coin. 
 
 Let us now suppose a bank established In a coun- 
 try which owes a balance to other nations. 
 
 In this case, the bank must possess, or l)e able to 
 command, a sum of coin or bills equal to (B) and 
 (D) ; (B) for domestic, and (D) for foreign circula- 
 tion. 
 
 Those who owe this balance (D), and who are 
 supposed to have value for it, in the currency of the 
 country, must, in order to pay it, either exhaust a 
 part of (B), by sending it away, or they must carry 
 a part of (C) to the bank, to be paid for in coin. 
 If they pick up a part of (B) in the comitry, then 
 the coin in circulation, being diminished below its 
 proportion, the possessors of (C) will come ujwn 
 the bank for a supply, in order to make up (B) to 
 its former standard. Banks complain without rea- 
 son. If they carry part of (C) to be changed at
 
 20S PRINCIPLES OF MONEY. 
 
 the bank, for the payment of (D), they thereby di- 
 minish the t|nantity of (C); consequently there will 
 be a demand upon the bank for more notes, to sup- 
 port domestic circulation; because those notes, which 
 have been paid in coin by the bank are returned to 
 the bank, and have diminished the mass of (C); 
 which therefore must be replaced by a new melting 
 down of solid property. 
 
 Now I must here observe, that this recruit of 
 notes^, supposed to be issued by the bank, in order 
 to fill up (C) to the level, really implies an addi- 
 tion made to the mass of securities formerly lodged 
 with the bank: and represents, not improperly, that 
 part of the landed property of a country which the 
 bank must dispose of to foreigners, in order to pro- 
 cure from them the coin or bills necessary for an^ 
 sweringthe demand of (D). 
 
 When notes, therefore, are carried to the bank; 
 for payment of debts due to the bank, they then 
 diminish the mass of solid property melted down in 
 the securities lodged in the bank: but when notes 
 are carried to the bank, to be converted into coin 
 or bills, for foreign exportation, they do not dimi- 
 nish the mass of the securities: on the contrary, the 
 consequence is to pave the way for the angmentation 
 of them; because I snppose that these notes, so gi- 
 ven in to the bank and taken out of the circle, are to 
 be replaced by the bank to domestic circulation, 
 to which they belonged ; and the bank must be at 
 the expence of turning into coin or foreign bills.
 
 TRINCIPLES OF MONEY. 209 
 
 the value of these additional securities granted for this 
 new recruit of notes. 
 
 Were trade to run constantly against a countiy, 
 the consequence would be infinitely mischievous. 
 But in tliis case, banks never could neglect laying 
 dov.n a plan whereby to avoid a constant loss si- 
 milar to Avhat they casually sustain, when such a 
 revolution comes suddenly or unexpectedly upon 
 them. 
 
 Tlie method would be, to establish an annual 
 subscription abroad for borrowing a sum equivalent 
 to the grand balance. 
 
 If the security offered be good, there is no fear but 
 subscribers will be found, while there is an ounce of 
 gold and silver in Europe. 
 
 The bank of England has an expedient of ano- 
 ther nature, in what they call their hanh circulation ; 
 which is a premium granted to certain persons, 
 upon an obligation to pay a cetain sum of coin upon 
 demand. This is done with a view to answer 
 pressing occasions. But England being a pros- 
 perous trading nation, Avhich seldom has any consi- 
 derable grand balance against her (except in time of 
 war, when the j)ublic borrowings supply in a great 
 measure tlie defi[ciency, as shall be afterwards ex- 
 plained), this bank circulation is turned into a job; 
 the subscriptions being lucrative, are distributed 
 among the proprietors themselves, who make no 
 provision for the demand; and were the demand 
 again to come upon them (as has been the case) the 
 Ee
 
 210 PRINCIPLES or MONEY. 
 
 subscribers would, as formerly, make a call on the 
 bank itself, by picking up their notes, and pay their 
 subsciptions with the bank's own coin. 
 
 To obviate this inconvenience, which was severely 
 felt in the year 1745, the bank of England should 
 have opened a subscription for a perpetual loan 
 in some foreign country; Holland, for example; 
 where she might have procured large quantities of 
 foreign coin. Such a seasonable supply would have 
 proved a real augmentation of the metals ; the sup^ 
 ply they got from their own domestic subscribers, 
 was only fictitious*. 
 
 In the infancy of banking, we find banks taking 
 a general alarm whenever a wrong balance of trade 
 occasions a run upon them. This terror drives 
 them to expedients for supporting their credit, 
 which we are now to examine^ and which we shall 
 find to have a quite contrary tendency. 
 
 The better to explain this combination, we must 
 recal to mind, that the payment of the grand ba- 
 
 * At this time there was another circumstance, besides the de- 
 mand of a balance to be paid abroad, which distressed the bank, 
 viz. a suspicion which took place, that if the rebellion had succeed- 
 ed, the credit of the bank would have totally failed. 
 
 This very case points out the great advantage of banks upon 
 mortgage of private credit. 
 
 We have said, that the credit of such banks ought to be estabr 
 lished upon the principles of private securities only. If their notes 
 be issued upon solid property, then no rebellion can influence them. 
 But of this more hereafter.
 
 i^RINGIPLES OiF MONEY. 211 
 
 lance in coin or bills is unavoidable to banks. We 
 have said that this balance is commonly paid by 
 exchangers, who pick up the coin in circulation; a 
 thing the bank cannot prevent. This we have cal^ 
 led exhausting a part of (B). The consequence of 
 this is, to make the proprietors of (C) come upon 
 the bank, and demand coin for filling up (B): to 
 this the bank must also agree. But by these ope- 
 rations (C) comes to be diminished below the level 
 necessary for caiTying on trade, industry, and alie- 
 nation: upon which I have said there commonly 
 comes an application to the bank to give more cre- 
 dit, in order to support domestic circulation, which 
 if complied Avith, more solid property is conse- 
 quently melted down. 
 
 This swells the mass of securities, and raises (A) 
 to its former level. But here the bank has a choice, 
 and may refuse to grant more credit. In the former 
 operations it had none. Now if the bank, from a 
 terror of being drained of coin, should refuse to 
 issue notes upon new credits, for the demands of 
 domestic circulation; in this case, I say, they fail 
 in their duty to the nation, as banks, and hurt their 
 own interest. As to their duty to th^ nation, I shall 
 not insist upon it; but I think I can demonstrate that 
 they fail in their manner of reasoning, with respect 
 to their own interest, and that is enough. 
 
 I say, then, in the first place, that as long as 
 there is one single note in circulation, and any part 
 of a grand balance owing, this note will come upon
 
 212 PRINCIPJ.ES OF MONEV» 
 
 the bank for payment, ^vithont a possibility of its 
 avoiding the demand. Refusing; credit, therefore, 
 while any notes remain in the hands of the public, 
 is refusing an interest which may help to make up 
 the past losses. But of this more hereafter. 
 
 In the next place, I tliink I have demonstrated, 
 that as soon as the grand balance is paid, it is im- 
 possible that any more demands for coin can come 
 npon the bank for exportation. Why then should 
 a bank do so signal a prejudice to their country, as 
 to refuse to lend them pa})er, which the ready- 
 money demands of the country must keep in cir- 
 culation ? And why do this at so great a loss to 
 themselves? 
 
 In this light nothing can appear more imprudent, 
 than to refuse credit. 
 
 A bank is forced to pay to the last farthing of 
 this balance. By paying it, the notes that were ne- 
 cessary for domestic circulation are returned to 
 them; and they refuse to replace them, for fear 
 that their supplying a circulation should create a 
 new balance against them ! This is voluntarily 
 taking on themselves all the loss of banking, and 
 rejecting the advantages of it. 
 
 'I'o bring what has been said \\ ithin a narrower 
 compass, and to lay it under our eye at once, let us 
 call the sum of money necessary for carrying on the 
 domestic circulation of a country where a bank 
 is established, (A). The specie itself, to carry it 
 on, (B). The balances to other nations, (D).
 
 PRINCIPLES OF MONEt. 213 
 
 Tlie bank must be able to command coin and 
 credit equal to the sum of (B) and (D). If they 
 have in credit the value of (D) in any foreign place, 
 where a general circulation of exchange is carried 
 on, then they have occasion only for (B) at home, 
 and can furnish bills to the amount of (D). 
 
 But in furnishing bills to the amount of (D), 
 those who receive the bills from the bank, must pay 
 to the bank the value of these bills in bank notes : 
 and the notes with which they pay for the bills 
 must be taken out of (A), which (A) we suppose to 
 be necessary for carrying on domestic circulation- 
 Tliis diminution upon the xalwe of (A), will occa- 
 sion a new demand for notes in order to carry (A) to 
 its former extent; and the bank at issuing the notes 
 demanded, will receive new securities fi'om those 
 who demand them. Farther; the interest paid upon 
 these new securities, will answer for the payment of 
 the interest of the money owing to foreigners, in 
 consequence of the bills drawn upon them to the 
 order of those who bought the bills from the bank 
 for the payment of (D). 
 
 This transaction concluded, the consequence will 
 be; that (A) will be made up to the complete sum 
 necessary for domestic circulation; and that the 
 interest of the money borrowed from foreigners, in 
 order to acquit the balance (D), will be paid out of 
 the interest paid upon the new securities. 
 . As soon as (D) is thus completely paid ofl^ were 
 coin drawn from the bank, and sent away by pri-
 
 514 PRINXlPLES Ot* MONEY. 
 
 vate people, (exchangers, &c.) it would form a 
 balance due to the country; which balance would 
 render exchange favourable, and would occasion a 
 loss to those who sent away the coin. During this 
 period, the more credit the bank gives, so much 
 more will its profits increase, and no demand can be 
 made upon it for coin. 
 
 CHAPTER XIII. 
 
 Continuation of the subject; and oj" the Principles 
 
 on which Banks ought to borrow abroad, 
 
 and give Credit at home. 
 
 HE principle of banking upon mortgage, is to 
 lend paper money, and to give credit to those who 
 have property, and a desire to melt it dowTi. If such 
 banks, therefore, borrow, it must be done con- 
 sistently with the principles upon which their bank- 
 ing is founded. If the borrowing should tend to 
 destroy those advantages which their lending had 
 procured, then the operation is contrary to prin- 
 ciples, and abusive. So much for recapitulation.
 
 PRINCIPLES OF MONEY. 215 
 
 While trade flourishes and brings in a balance, 
 banks never have occasion to borrow; it is then 
 they lend and give credit. 
 
 When the country where the bank is established 
 begins to owe a balance to other nations, the bank 
 is obliged to pay it off in coin or in bills. In such 
 cases, it is inconsistent with their principles and in- 
 terest, to withhold lending and giving credit, as far 
 as is necessary for keeping up the fund of domestic 
 circulation. 
 
 To refuse credit, and at the same time to borrow 
 at home, must then, at first sight, appear to be 
 doubly inconsistent. But in order to set this point 
 in the clearest light I am capable, 1 shall reason 
 upon a supposition analogous to the situation of 
 the Scots banks, and by this means avoid abstract 
 reasoning as much as I can. 
 
 Let me then suppose that Scotland, during the 
 last years of the war, ended in 17^3, and ever 
 since (I WTite in 17^4), from the unavoidable dis- 
 tress of the times, was obliged, first, to import 
 considerable quantities of grain in some bad years. 
 Secondly, To refund the English loans of money 
 settled there in former times. Thirdly, To furnish 
 some of the inhabitants with funds, which they 
 thought fit to place in England. Fourthly, To pay 
 the amount of additional taxes imposed during the 
 war; while, at the same time, several of the ordinary 
 resources were witlidrawn; such as, first, a g^reat 
 part of the industrious inhabitants, who went to sup-
 
 •l6 PRINCIPLES OF MONEY. 
 
 ply the fleets and armies; secondly, the absence of 
 the ordinary contingent of troops; and thirdly, the 
 cutting off of several beneficial articles of commerce: 
 Let me suppose, I say, that from the total of these 
 losses incurred, and advantages suspended, Scot- 
 land has lost annually, for eight years past, two 
 hundred thousand. poUnds. I am no competent 
 judge of the exactness of this estimate, it is of no 
 consequence to the argument; but I think I have 
 carried it, as I wish to do, rather beyond the 
 truth. 
 
 On the other hand, let me suppose that the sum 
 of currency in paper, sufficient to circulate the 
 Tvhole of the alienations in Scotland to be one mil- 
 lion sterling. 
 
 Is it not evident, from this supposition, and from 
 the principles we have been deducing, that unless 
 the banks of Scotland had borrowed every year 
 ^200,000 sterling, and alienated annually in favour 
 of England, a fund for paying the interest of two 
 hundred thousand pounds capital ; the million of 
 Scots currency would have been diminished in pro- 
 portion to the deficiency: and would not the conse- 
 quence of this be, cceteris pa7'ibus; to bring the cur- 
 rency below the demand for it; and, consequently, 
 to hurt trade, industry, and alienation? 
 
 Now supposing the banks, instead of borrowing 
 in England a fund equal to this grand balance, to 
 remain in consternation and inactivity, giving the 
 whole of their attention to the providing of coin and
 
 PRINCIPLES OF MONEY. 217 
 
 bills to supply the demand «>f exchangers, whose 
 business it is to send out this annual balance; what 
 would the consequence be? 
 
 I answer, that if the banks, in such a case, do 
 not follow the plan I have proposed, the conse- 
 quence will be, that two hundred thousand pounds 
 of their paper will be, the first year, taken out of 
 the domestic circulation of Scotland ; will be car- 
 ried to the bank, and coin demanded for it. This 
 void must occasion applications to the bank for cre- 
 ilits to supply it. Is it not then the interest of the 
 bank to supply it? We have said in the former 
 chapters that it is. But now let us suppose it to be 
 objected, that if banks should issue notes at such a 
 time, their cash having" been exhausted, they Avould 
 be obliged to stop altogether, upon a return of those 
 notes issued upon additional credits. 
 
 To this I repeat again, because of the importance 
 of the subject, that notes issued to support the de- 
 mand of circulation never can return upon the bank, 
 so as to form a demand for coin; and if they do 
 return, it must be in order to extinguish the secu- 
 rities g:ranted by those who have credit in the bank. 
 Such return, therefore, canj.roduce no call for coin; 
 because m hen the notes return, it is not for coin, but 
 for acquitting an obligation or mortgage, as has 
 been often repeated. 
 
 But then it is urged that they do not return be- 
 cause circulation has thrown them out, but because 
 coin is wanted: be it so. Then we must say, that 
 Ff
 
 218 PRINCIPUBS OF MONEY. 
 
 circulation is not diminished, as we at first supposed; 
 but that the return of another year s balance, makes 
 a new demand for coin necessary. 
 
 Now 1 ask,how the withholding of this ^200,000 
 from circulation, after the first year's drain, can pre- 
 vent the i)alaiice from returaing? There are by the 
 supposition still ,^800,000 of notes in the country; 
 will not exchangers get hold of two hundred thou- 
 sand out of this fund, as well as out of the million ? 
 The withholding, therefore, the credits demanded 
 upon the first diminution, has not the least effect in 
 preventing the demand for coin the year following; 
 it only distresses the country, raising exchange, and 
 the interest of money, by rendering money scarce; 
 and, what is the most absurd of all, it deprives the 
 bank of^ 10,000 a year interest, at 5 per cew^.upon 
 ^200,000 which it may issue anew. 
 
 Suppose again, that- a third year's demand for a 
 balance of ^200,000 comes upon the bank: if the 
 coin is out, as we may suppose that after the first 
 year s drain it will not be in great plenty, expedi- 
 , ents must be fallen upon. In such a case, if the 
 bank do not at once fairly borrow at London (with- 
 out any obligation to repay the capital) a sum of 
 ^200,000, and pay for it a regular interest, accord- 
 ing to the rate of money, as government does, half- 
 yearly, on the change of London, it will be involved 
 in mischievous expedients ; and all these operations 
 will end (as to the bank) in paying this sum out of 
 the mass of its securities or stock.
 
 l>RINClPLES OF MONEY. 21<) 
 
 But let US suppose, that instead of this, it shouhl 
 have recourse to temporary credits, upon which the 
 capital is constantly demandable, what will be the 
 ■consequence ? To this 1 answer ; that those mer- 
 chants, or others who owe the balance, will apj^ly 
 to exchangers for bills, for M'hich they must pay a 
 high exchange : these bills will be bought from the 
 exchangers with notes (taken out ol circulation), 
 and will reduce this to ^6'oa,000; the excliangers 
 will carry these to the bank and demand coin. If 
 the bank should make use of an optional clause, to 
 pay in six months, with interest at 5 per cent, the 
 exchangers will obtain six months' credit at Lon- 
 don, and in consequence of this, their bills will be 
 honoured and paid. This credit, however, costs 
 them money, which is added to the exchange: the 
 bank, at the end of six months, must pay ^ 200,000 
 sterling in coin, which in the interval it must pro- 
 vide from London. It must pay also six months' 
 interest upon the paper formerly presented by the 
 'exchanger: add to the account, that bringing down 
 the coin must cost the bank at least 1 2 shillings per 
 hundred pounds, and as much more to the ex- 
 changer who receives it in order to send it back 
 again ; and after all these intricate operations, after 
 all, I say, the operation ends in this ; that ^ 200,000 
 of notes, taken out of the circulation of Scotland 
 returns to the bank, who must have provided, at 
 last, either coin, or credit at London for them. If, 
 therefore, from an ill-grounded fear of issuing as 
 much paper as is demanded, it shall withhold it,
 
 220 PRINCIPLE^ OF MONEY. 
 
 there will result to itself a los-s ecjual to the interest 
 of what it refuses to lend; that is to say, there will 
 be a lucrum cessans to the hank of the interest of 
 this ^200,000 at 5 per cent, or ^'10,000 a year; 
 which other banking- companies will fill up, and 
 thereby extend their circulation. 
 
 If, besides refusing credits, it should call in any 
 part of those credits already giN en, it will still more 
 diminish circulation: but tlien Ijy this oj)eration it 
 will diminish the mass of its securities, and so di- 
 minish the sum of the interest annually paid to it- 
 self. If it go farther and borrow money at home, 
 such loans will be made in its own pa])er, which 
 will diminish farther the mass of circulation; and if 
 it go on recalling its credits and mortgages, it will 
 soon draw every i)it of its paper out of circulation, 
 and remain creditor upon Scotland for the balance 
 only it has paid to England on her account. 
 
 Every penny it borrows, or calls in, circumscribes 
 its own profits, while it distresses tlie country. 
 
 The only objection I can find to this plan of 
 banking, is the difficulty of finding credit at Lon- 
 don to borrow such larij^e suni'^. 
 
 This, I think, may also be removed, from the 
 plain principles of credit. If the banks of Edin- 
 burgh enter into a fair coalition, as they ought to 
 do, 1 think, in order to form reailv a national bank, 
 totally independent of that of England; may they 
 not open a subscription at London, and establish a 
 regular fund of their own, as Avell as any other 
 company, such as the India, or South Sea? By
 
 J»RINCIPLES OF MONEY. ^21 
 
 borrowing in the beginning at a small advance of 
 interest above the funds, and paying as regularly as 
 government does, will not all those who make a 
 trade of buying and selling stock fill their loan, ra- 
 ther than invest it in any other carrying a less inte- 
 rest? And if the whole land securities, and stocks 
 of those banks at Edinburgh be pledged for this 
 loan, will it not stand on as good a bottom as any 
 fund upon earth? 
 
 By this means they will really become a national 
 bank: because England seems at present to be to 
 Scotland, M'hat all the rest of the world is to Eng- 
 land. Now, the bank of England has no such 
 ftind of credit on the continent, that 1 know; and 
 were that country to fall into as great distress, by 
 a heavy balance, as Scotland lias, she would find, 
 as many difficulties in extricating herself by do- 
 mestic borrowdng-s, bank circulation, (Sec. as Scot- 
 land has found by the like domestic expedients. She 
 would then be obliged, for her relief, to have re- 
 course to a fund opened in Holland, Spain, or Por- 
 tugal, like to what I propose for Scotland with 
 respect to England. 
 
 I have heard it alleged, that the whole distress 
 occasioned to the banks and circulation of Scotland, 
 w^as occasioned by a false step taken by them, some 
 years ago; at the time when the lowness of the En- 
 glish funds, and a prospect of a peace, occasioned 
 great remittances from Scotland, and a withdraw- 
 ing of the large capital of, perhaps, ^^500,000 owing 
 in Scotland to English persons of property.
 
 52 '2 PRINCIPLES OF MONEY. 
 
 At that time, it is saidj the hanks imprudently 
 launched out in giving extensive credits to the debt- 
 ors of tho.ee capitals, and to those \vho wanted to 
 remit the funds they had secured in the hands of 
 people who could not pay them; that this tlirew a 
 load of paper into circulation, which it could not 
 vent, being far beyond the extent of it ; and that, 
 consequently, the paper came back upon the bank, 
 produced a demand for coin, wliicli soon exhausted, 
 in a manner, all tliat was in Scotland; and that the 
 tourltry has never been able to recover itself since. 
 
 This representation is plausible, and has an air 
 of being founded on principles: in order, therefore, 
 to serve as a further illustration of the subject of 
 circulation, I shall point out where the fallacy 
 of it lies. 
 
 It is said the banks did wrong ih giving those 
 credits. I say, they did right; but they did wrong 
 iu not providing against the consequences. 
 
 Had they refused the credits, the English arid 
 other creditors would have fallen directly upon their 
 debtors, and obliged them to pay, by a sale of their 
 lands, at an under value; which, I think, would 
 have been an infinite loss to Scotland. In this way 
 the price would have been paid in bank paper, taken 
 out of circulation; for we have said, that he ivho 
 owes must 'pay- be the consecpience what it will. 
 This paper would have come uj)on the banks at 
 any rate; and being a balance due to strangers, 
 must have been paid by the banks. The banks 
 therefore did right to supply the credits demanded;
 
 PRINCIPLES OF MONEY. 223 
 
 but then they might have foreseen that the whole 
 load of paying those debts would fall upon them; 
 which they being in no capacity to do, should have 
 immediately pledged in England, the interest of the 
 credits they had given out, after supplying the want 
 of Scots circulation; and when the notes came in, 
 they would have had at London the capital of 
 that interest prepared for paying them off, and no 
 inconvenience would have been found. 
 
 The only thing then the banks seem to have mis- 
 judged, was the granting those credits too hastily, 
 and to people who perhaps would not have invested 
 their funds in England, had it not been from their 
 facility in giving credit. 
 
 Banks therefore should well examine the state of 
 circulation, and of the grand balance, in difficult 
 times, before they give credit. If circulation be 
 full, they may, with justice, suspect that the credits 
 are demanded with a view of expediency, to tran- 
 sport property out of the country, which otherwise 
 may remain. But in favour of circulation, or in 
 favour of what maybe exacted by foreign creditors, 
 banks never can misjudge it in giving credit; be- 
 cause, if they should refuse to do it, they in the 
 first place incur a loss themselves ; and in the second 
 place, they diminish the fond of circulation, and there- 
 by hurt the country. Now, when at such times a 
 credit is asked or given, that demand is a warning 
 to banks to prepare; and by preparing they are 
 ready, and no loss is incurred.
 
 224 PRINCIPLES OF MONEY 
 
 CHAPTER XIV, 
 
 Optional Clauses contained in Bank Notes, 
 
 >ANKS not regulated by statute, are private con- 
 ventions, in which the parties may inchide what 
 conditions they think fit. Banks, therefore, may 
 insert in their notes, the conditions they judge most 
 for their own advantage. Thus, they may either 
 promise peremptory payment in coin upon demand, 
 or they may put in an alternative, that in case they 
 do not choose to pay in coin, they may pay in bills, 
 or in transfer of their stock, or in other circulating 
 paper not their own; or they may stipulate pay^ 
 ment at a certain time after the demand, with inte- 
 rest during the delay. All these alternatives are in- 
 serted, in order to avoid the inconvenience of run-^ 
 ning short of coin, and of being obliged to stop 
 payment altogether. 
 
 We have said aboA^e, that the profits of banks 
 consist in their enjoying the same interest for the 
 notes they lend, as if the loan had been made in 
 gold or silver. 
 
 In which ever way, therefore, an optional clause 
 is inserted, it should be such as to cut off all profit
 
 PRINCIPLES Oi' MONEY. 225 
 
 jfi'om the bank^ upon all paper presented for pay- 
 luent, from the time of presentation; and every ar- 
 tifice used to suspend the liquidation of the paper, 
 to the advantage of the bank, and prejudice of the 
 bearer^ should be considered as unfair dealing in tha 
 bank, and prohibited by law. 
 
 When the optional clause has no tendency to pro- 
 cure an advantage to the bank, in prejudice of the 
 holder of the paper (except as far as the holder is 
 thereby deprived of the use of the coin, which on 
 certain occasions cannot be supplied by the paper), 
 it becomes the duty of a statesman to examine how 
 far it is expedient to suffer such stipulations to be in- 
 serted in a money which is calculated to carry on 
 the mercantile interest of the nation. 
 
 Banks, we have said, are the servants of the pub- 
 lic, and they are well paid for their services. Al- 
 though the notes issued by them are not commonly 
 made a legal tender in payment, yet the conse- 
 quence of a well established bank, is to render them 
 so essential to circulation, that what is not a legal 
 obligation becomes one, in J'act, from the force of 
 custom. 
 
 Let us therefore examlnfe the advantages which 
 result to banks from this optional clause, and the 
 loss which results to a nation from their using it, 
 and then compare the advantages with the inconve- 
 niences, in order to determine v/liether it be expedi- 
 ent to permit such obstructions iu the circulation of 
 paper. 
 
 Gg
 
 226 rklNClPLES OF MONEY. 
 
 The advantage which hanks reap, is confined to 
 that of gaining time, at the cxpence of paying in- 
 terest. The interest paid by them, is an ankvvard 
 operation. They receive interest for the note; be- 
 cause they have in their possession, the original se- 
 curity given for the notes when they were first 
 issued: and they begin to refund this interest to 
 the holder of the note from the time they avail 
 themselves of the optional clause. Could banks, 
 therefore, borrow coin" in a moment, at the same 
 interest which they pay to the holder of the note, 
 they would certainly never make use of this op- 
 tional clause. But this coin can not be found in a 
 moment; and the banks, to save themselves the 
 trouble, and tlie ex])eiice of augmenting their fund 
 of coin, or of procuring a fund in another country, 
 upon which they might draw for the payment of 
 that national balance, which, by becoming banks, 
 they tacitly engage to pay for the nation ; render 
 the credit of individuals precarious with strangers, 
 and raise a general distrust in the whole society 
 which they ought to serve. Here then is a very 
 great loss resulting to a nation from tlie establish- 
 ment of banks. Were no bank established, no 
 merchant would contract a debt to strangers, with- 
 out foreseeing the ready means of discharging it 
 with the coin circulating in the country. In pro- 
 portion as this coin came to diminish, so would fo- 
 reign contracts of debt diminish also. Thus credit, 
 at least, might be kept up, although trade might
 
 PRINXIPLES OF MONEY. 227 
 
 be circumscribed, and manufactures be discoura- 
 ged. Now when, in order to advance trade, and 
 encourage manufactures, a statesman lends his 
 hand towards the melting down of solid property, 
 and countenances banks so far as to leave this ope- 
 ration to them, with the emolument of receiving in- 
 terest for all their paper; and when, in order to 
 facilitate the circulation of this paper, the very in 
 habitants concur in throwing all their specie into a 
 bank ; is it reasonable to indulge banks so far as to 
 allow them to add an optional clause, which disap- 
 points the whole scheme, which stops trade, ruins 
 manufactures, raises the interest of money, and 
 renders the operation of melting down property 
 quite ineffectual for the purposes which it was in- 
 tended to answer! Farther: 
 
 The loss a bank may be at, in providing coin, is 
 susceptible of estimation, let it be brought from 
 ever so distant a country; because we know that 
 the quantity to be provided, never can exceed the 
 value of the grand balance. But who can estimate 
 the loss a nation sustains, when an interruption is 
 put to the carrying on of trade and manufactures? 
 When the industrious classes of inhabitants are 
 forced to be idle for a short time, the consequences 
 are hardly to be repaired: they starve, they desert; 
 the spirit of industry is extinguished : in short, all 
 goes to ruin. 
 
 Besides, when banks do not lay down a well di- 
 gested plan for paying regularly, and without com^
 
 228 PRINCIPLES OF MONEY. 
 
 plaining, this grand balance due to strangers, they 
 are forced to have recourse to expedietits for preserv- 
 ing their credit, more buvdensome, perhaps, thaa 
 what is required of them; and not near so effectual 
 for removing the inconveniences coniphiined of. 
 
 The expedients they fall upon to obtain credit, 
 coin, and bills, are so various, and so complicated, 
 that bankers alone are able to ex])hiin them. 
 
 Sometimes we see them entering into contracts 
 with private merchants and exchangers, (living 
 among themselves!) who engage for a certain pre- 
 mium to furnish coin as it is demanded. The con- 
 sequence of this is, to expose the bank to a new 
 demand for coin, from the very contractors, in 
 order to fulfil their engagements; an abuse we have 
 taken notice of above in speaking of the bank cir-. 
 cidafion of England. 
 
 Let us suppose that these undertakers for coin dot 
 really set out by doing in part what banks should 
 effectually do themselves, that is, by Ininging from 
 another nation the coin which they are to supply. 
 What is the consequence? The banks pay the 
 undertaker for this coin, in their own notes. Did 
 they only engage to pay a certain interest for the 
 coin so provided, then the end would be accomplish-! 
 ed, with the additional expence to them, of paying 
 the undertaker for his expence, trouble, and profit. 
 But if they, instead of paying interest for the coin 
 so turn' ^ed, shall issue their notes for the full value 
 of it, SI I notes can never enter into domestic cip^
 
 PRINCIPLES OF MONEY, 229 
 
 culation, so as to be kept up in it; because it is not 
 domestic circulation which has demanded them: 
 they njust then return upon the bank, either from 
 the very hand who received them, or at least, after 
 a short circulation; and thus draw out again the 
 whole coin furnished by the undertaker. This pro- 
 duces a prodigious circulation of coin, and induces 
 people to imagine that either the grand balance is 
 inexhaustible, or that the premium upon money at 
 London is very high, or that people can contrive a 
 fictitious balance, as a means of profiting upon coin, 
 after the balance has been actually paid. 
 
 This method of providing coin is absolutely de- 
 lusive, and opens a door to infinite aljuse. Those 
 who furnish the coin to the bank, are either in a 
 concert against the bank, and draw it out as fast a9 
 they throw it in ; or they are not in a concert. If 
 thev be in a concert, they profit by it; if they be 
 not, they are hurt by their contract, and other ex- 
 changers draw the advantage ; but the bank is 
 equally a loser in both cases. 
 
 Let me suppose that they are in no concert, and 
 that they honestly procure the coin at their own 
 expence. If the bank pay them notes for the coin 
 thev furnish, we must suppose that the coin they 
 have procured, is not in consecpience of a loan, but 
 of a credit given them in the place from which the 
 coin is sent: for I never can suppose that any mer- 
 chant will borrow coin upon a loan, and lie out of 
 so large a capital while he has bank notes in his
 
 230 PRINCIPLES OF MONEY. 
 
 hand to pay what he has received. If he have pro- 
 cured this coin upon credit, will not this credit, when 
 it comes to be replaced, augment the grand balance 
 against the nation in favour of the country or city 
 which granted that credit? And must not that ba- 
 lance be paid by exchangers out of the coin received 
 by the bank? If, therefore, we suppose that the 
 undertaker does not draw out the very coin he had 
 just delivered into the bank, will not exchangers do 
 it for him; will they not be ready with notes, as 
 soon as the coin is lodged in the bank, to draw it 
 out, and send it oft] in order to furnish the under- 
 taker with bills to j&ll up his credit for the coin he 
 had received from people residing in the place to 
 which the exchangers have sent coin, to be ready 
 to answer their draughts? Does this differ in the 
 least from what is called drawing and redraAving, 
 which is sufficient to ruin any man, and must not a 
 like practice ruin a bank, by raising exchange to 
 a monstrous height? 
 
 This being the case, the shortest and best me- 
 thod for preventing such abuses, is to oblige banks 
 to pay upon demand, in coin or bills, at the option 
 of the holder of the note. This will force them 
 into the method for providing them ; to wit, fairly 
 to boiTow money from nations to whom we owe, 
 and to pay a regular interest for it, without an obli- 
 gation to refund the capital, until the grand balance 
 shall take a favourable turn; in which case, the 
 banks will regorge with coin drawn from strangers;
 
 PRINCIPLES OF MONEY. 231 
 
 and these strangers will then find as great an interest 
 in being repaid, as the bank found in borrowing fi'om 
 them, while the balance was in their favour. 
 
 We have said, that a statesman should oblige all 
 public banks to pay regularly upon demand, in coin 
 or bills, at the option of the holder of the note. 
 But then he must facilitate to them the means which 
 he has in his power for providing themselves with 
 the coin, or bills demanded. 
 
 Por this purpose, he must first provide them with 
 a mint; for how, without a mint, can a bank con- 
 vert into coin the metals it mav provide from other 
 countries? Next, he must put that mint under such 
 regulations as to cut oif all profit from money- 
 jobbers, who will be ready to draw the coin out of 
 the bank the moment they find the least advantage in 
 tampering with it. In order to prevent this abuse, 
 a reasonable rate of coinage should be imposed, ac- 
 cording to the principles laid down in the third book; 
 and when banks have occasion to pay a balance out 
 of the nation's coin, a drawback for part of the coin- 
 age should be given them. This drawback will sup- 
 port the value of the coin, and the loss of the re- 
 mainder of the coinage will engage them to expoit 
 bullion preferably to coin, when it is to be found: 
 and if no drawback were given, the coinage would 
 be totally lost to the bank. 
 
 When this deduction is given, the coin must be 
 melted down, and stamped in bars at the mint; both 
 in order to prevent frauds in the drawbacks, and to
 
 i^ri PRINCIPLES OF MONEY. 
 
 disappoint strangers who receive it at the price d 
 bullion, from gaining the price of coinage when they 
 return it buck; And in the hist place, all the light 
 coin should be banished from circulation, and made 
 to |>ass by weight, for bullion at the current price of 
 the market. All banks should both receive and de- 
 liver coin by weight, when the sums are so consi- 
 derable as to require full bags of coin to pay them. 
 It is not here necessary to repeat what has been said 
 upon this subject so much at length in another 
 place. 
 
 The method of facilitating to banks the means of 
 providing bills for the payment of foreign balances, 
 is, secondly, to assist them in procuring loans beyond 
 the district of their own circulation. If government 
 shall be satisfied that the intention of demanding 
 such loans, is to enable the bank to interpose their 
 credit in favour of the trade and industry of those 
 who circulate their paper, and who have no way of 
 paying such balances, but with their solid property; 
 in this case, government will undoubtedly assist the 
 bank in obtaining loans for so national a purpose, 
 by declaring the security upon which they desire the 
 loan, to be good, and by becoming answerable to 
 the public for the solidity of it.
 
 PRINCIPLES OF MONEY. 2J3 
 
 CHAPTER XV. 
 
 Ofsubaltern Banks of Circulation, and of their Comr 
 petition with one another. 
 
 E have hitherto treated of the prmciples whix;h 
 influence national banks of circulation; we now 
 come to examine some peculiarities attending banks 
 of a subaltern nature, which for the most part trust 
 to the national bank for all supplies of coin ; and when 
 this resource fails them, they are thereby involved 
 in difficulties which are not easily got the better of* 
 Besides this inconvenience, to which all subaltern 
 banks are subject, they are frequently exposed to 
 competition with one another. 
 
 The great point of their ambition is to gain cre- 
 dit with the national bank; and could they prevail 
 with that company to receive their notes, or to give 
 them credit for their draughts, in cases of necessity, 
 they would be at their ease; because the national 
 bank would then be at the whole expence of provid- 
 ing coin and bills, and they would have nothing to 
 think of, but to extend the sphere of their own cirr 
 culation. 
 
 Did these banks consider one another in a proper 
 Hh
 
 234 PRINCIPLES OF MOf^Tr 
 
 light, they must see in an instant that the solidity of 
 every one is equally good; because I now suppose 
 them all standing upon the principles of private, not 
 mercantile credit, as above explained. 
 
 What benefit then can they possibly reap from 
 their mutual jealousies, from gathering up each 
 others notes, and coming with a mn upon one 
 another from time to time? The consequences of 
 this \\dll be, to oblige themselves and others to pre- 
 serve for domestic circulation a larger quantity of 
 coin than is necessary, and thereby to diminish their 
 own profit. 
 
 If, as matters stand, a very great inconvenience 
 result to Scotland from the want of a communica- 
 tion of paper credit with England, and if thereby 
 an exchange of 4 and even 5 per cerd. have been 
 paid for bills upon London, because all the coin in 
 Scotland is locked up in banks; I ask what would 
 be the consequence, if banks had their will in ba- 
 nishing from the circulation of their own district, 
 every other notes but their own? In this case, we 
 might, in a short time, find an exchange of 4 and 
 5 per cent, between Fife and Lothian, between 
 Glasgow and Ayr, and so of the rest.. What would 
 then become of manufacturers, who could not dis- 
 pose of their work at the distance of a few miles, 
 without having recourse to exchangers for their 
 payment? If such an abuse were once allowed to 
 creep in, there would be no other remedy but to 
 destroy banks altogether, and throw the little coin 
 there is into circulation.
 
 PRINCIPLES OF MONEY. 235 
 
 CHAPTER XVI. 
 
 Of some Regulations proper to he made with regard 
 to national Banks. 
 
 mJ ROM what has been said, we may conclude, 
 that were a national bank upon mortgage, estab- 
 lished on a plan calculated to answer the purposes 
 of the most extensive domestic circulation, it might 
 be regulated in the following manner. 
 
 First, Let a large stock of property, of one spe- 
 cies or other, be provided, in order to gain the con- 
 fidence of the public, and let it be pledged for the 
 payment of all the notes. 
 
 Secondly, Let all solid property intended to be 
 melted down into paper money, be first constituted 
 in such a manner as to be easily sold, and in the 
 mean time secured to the company, for their ad- 
 vance, preferably to every other person ; and let it 
 be of a revenue fully sufficient to acquit the interest 
 for ever. 
 
 Thirdly, The capitals due to the bank must not 
 be demandable by the bank, as long as the interest 
 is regularly paid. 
 
 Fourthly, All bank securities must be pledged in
 
 236 PRINCIPLES OF MONEY. 
 
 the hands of Government for the interest of what- 
 ever money the bank may borrow with their consent, 
 beyond the district of their own circulation. 
 
 Fifthly, A national, bank when rightly constituted, 
 may however be safely indulged in more extensive 
 methods for circulating their paper, than merely on 
 land security. The bank of England is allowed by- 
 charter to issue notes for discounting bills of ex- 
 change; it may trade in gold and silver; and may 
 advance money to government upon the security of 
 taxes imposed and levied with the year: but it is 
 in general debarred from commerce, and every pre- 
 carious object of traffic. The reason is plain. 
 The paper it issues becomes the property of the na- 
 tion, and may form in a short time the greatest part 
 of the currency of it. In such a case, were the bank 
 exposed to losses by trade, or by the insolvency of 
 debtors for great sums, the whole credit of the nation 
 might be ruined, and all the lower classes of the ma- 
 nufacturing inhabitants undone, before such a blow 
 could be repaired. 
 
 Sixthly, Under proper regulations, bank paper 
 might be made a legal tender in every payment: in 
 ■which case it is hardly possible that any considerable 
 demand for coin should ever be made upon them, 
 except for the payment of the grand balance. 
 
 Seventhly, This national bank ought to have diffe- 
 rent offices in different cities \vithin the kingdom, and 
 these would make subaltern banks both useless and 
 unprofitable. It might even be stipulated, that a cer-
 
 PRINCIPLES OF MONEY. *i37 
 
 tain proportion of bank stock, placed in the name 
 or for the behoof of any city, should entitle that 
 city to a proportional pai't of the administration 
 within their own district. 
 
 CHAPTER XVII. 
 
 fVhen and in what Case Banks should be obliged to 
 keep open Books. 
 
 F no national bank be established under proper 
 regulations, and if entire liberty be allowed to every 
 one to take up the trade of banking, ^ho can issue 
 his notes, I think it is against all principles of good 
 policy not to oblige such banks to keep books open, 
 to be inspected regularly by some authority or other; 
 in order to see upon M'hat security that paper stands, 
 which is the instrument of commerce, and a part of 
 every man's private property. This policy is the 
 more necessary, because, were any one bank to break, 
 either through knavery, misconduct, or misfortune 
 of a particular company, this would cast a general 
 discredit upon all paper money, and be the means 
 of bringing on those calamities which we have so 
 often mentioned.
 
 S88 PRINCIPLES OF MONEY. 
 
 The ordinary objection against this proposal is, 
 the inconvenience of throwing open the secrets of 
 trade. But here, I say, if the affairs of a bank are 
 in so ticklish a situation as not to bear inspection, 
 this Tery supposition shews how necessary it is not 
 to pe^rmit such a bank to continue its circulation. 
 The only inspection, in which the public is interest- 
 ed, is to know the quantity of notes which are issued, 
 and the extent and nature of the securities pledged 
 for them. They have no business to examine the 
 state of the bank cash, or of particular people's cre- 
 dit. The bank may be without a shilling in its 
 coffers, and still its paper be as good as if it had a 
 million. Such an inspection, as I propose, would 
 rather confirm than shake its credit, but it would be 
 the means of preventing it from launching out into 
 speculations in matters of commerce, which is not its 
 district; and from gaming with national property. 
 
 It is not sufficient to say, that the holder of the 
 note, if he doubts the security, may demand payment 
 of it: because it is not here the interest of any indi- 
 vidual, but that of the public, which w^e are attend- 
 ing to. If, according to the principles of common 
 reason, it be just that a creditor should have it in his 
 power to watch over the abilities of his debtor, so 
 as to secure his payment; certainly it is equally just 
 that the public, which I consider here as the credi- 
 tor, should be made certain that what is circulating 
 with as great facility as the king's coin, does contain 
 a real value in it. Would it be a good answer from
 
 PRINCIPLES OF MONEY. 239 
 
 any man who held a piece of false money in his 
 hand, for the use of circulation, to skreen himself 
 by alleging, that if it be false, nobody need take it! 
 It is the right of every man to detect false coin; but 
 it is the right of government onli^ to detect doubtful 
 paper: because law only can authorize such an in- 
 quisition. Does not the charter of the bank of Eng- 
 land establish this right in government? 
 
 CHAPTER XVIII. 
 
 Is it\the Interest ofBanhs to grant Credits and Cash 
 Accompts to Exchangers and others, who make a 
 Trade of sending Coin out of the Country ? 
 
 HE answer to this question is very short. 
 
 From the principles we have deduced, it is plain, 
 that it is both the office and interest of banks to give 
 credit to all who can give good security for it. 
 
 To set this matter in a clear light, let me supposa 
 that, some time ago, the banks had at once withr. 
 drawn all the credits granted to exchangers; and 
 opened a subscription for a loan of money, equal to
 
 240 PRINCIPLES OF MONEY. 
 
 what they might estimate the sum lent to this set of 
 men within the country, for the sake of carrying on 
 their business. 
 
 According to principles^ these two operations 
 should go hand in hand : the recalling the credits 
 would, no doubt, have greatly distressed exchang- 
 ers; but as long as they could find money to bor- 
 row from private hands, this inconvenience would 
 have been lessened. Besides, I apprehend that the 
 late custom among exchangers, of borrowing at 4 
 jier cent, owes its existence to the difficulty they felt 
 in obtaining extensive credits from the bank; and 
 if this be the case, then there has been a lucrum ces- 
 sans to the bank of 5 per cent, upon the amount of 
 all these borrowings ; because exchangers, I appre- 
 hend, would prefer a credit from the bank at 5 per 
 cent, to a loan at 4 per cent, payable on demand, 
 according to the occasions of those who keep their 
 money with them. 
 
 The most effectual method, therefore, to hurt ex- 
 changers, would have been to have recalled all their 
 credits, and offered to borrow, upon the same terms, 
 what was lent to them. 
 
 The execution of such a plan would, I think, 
 have been, first, diametrically opposite to the inte- 
 rest of the banks ; secondly, would have occasioned 
 such a nin upon exchangers, as to throw them into 
 great distress ; and thirdly, would have ended in the 
 total mill of the trade of Scotland. 
 
 That such a plan is diametrically opposite to ajl
 
 PRINCIPLES OF MONEY. 241 
 
 principles of banking, I suppose, is by this time suf- 
 ficiently understood. 
 
 That it would have occasioned a run upon ex- 
 changers, is pretty certain; because, however good 
 their credit might be, it must be acknowledged to be 
 inferior to that of the banks: and therefore nobody 
 would prefer them for debtors, to the bank, upon 
 the same terms. 
 
 The third consequence is as evident, upon a short 
 reflection, as the other two. The run upon the ex- 
 changers would have obliged them to make a call 
 upon all the merchants and dealers in Scotland, to 
 whom they gave credit: for which purpose, and for 
 which alone, they find an interest in borrowing at so 
 high an interest as 4 /?<?/' cent. 
 
 The call, then, made by the exchangers upon their 
 debtors, is neither more or less than a call upon the 
 money employed in the trade of Scotland. 
 
 CHAPTER XIX. 
 
 Application of the Principles above deduced, towards 
 forming the Policy of Circulation. 
 
 3l ROM the principles above deduced, there arise 
 three principal objects of attention. 
 
 The first, the circulation of paper for domestic 
 
 li
 
 i42 PRINCIPLES OF MONEY* 
 
 The second, the method of j)roviding coin for this 
 purpose. 
 
 Thetliird, tlie inetliod of paylnji' foreign balances. 
 Tlicse three objects are absohitely different in 
 their natnre, and they are influenced by different 
 principles. The consequence of blending them to- 
 gether, is to render the subject, which is abun- 
 tlantly intricate in its own nature, still more dark 
 and perplexed. 
 
 First, As to the circulation of paper for domestic 
 use. 
 
 It lias been said, that the great utility of banks of 
 circulation upon morti^^age, was to facilitate tlie 
 melting down of solid property; in order to enable 
 every one who has propcitv, to circulate tlie capital 
 of it for the advancement of industry. 
 
 For this purpose he comes to a bank, pledges the 
 capital he wants to melt down, and receives for hi& 
 obligation, bearing interest, paper monev which 
 bears none. 
 
 From thes«5 data, I sav, that the regular method 
 by which the bank should acquit the obligation in 
 the notes, is by restoring the security granted at 
 issuing the notes, if they be returned by the debtor 
 in it. All farther obligations laid upon banks, par- 
 ticularly that to pay in coin or inland bills, is merely 
 an equivalent expected from them in lieu of their 
 great profits. 
 
 When paper issued for domestic circulation re- 
 turns to a bank, were it not for the profits, on their
 
 FRIKCIPLES OF MONEY. 243 
 
 trade, I see no reason m liy a bank should pay in 
 any other species of property than what it received; 
 and if, by the interest they receive for their notes, 
 they be abundantly indemnified for all the ditference 
 between paying in coin and in transfer, I think the 
 public would be a gainer to dispense with this obli- 
 gation in lieu of an abatement of interest; which 
 would be an advantage to commerce, not to be coun- 
 terbalanced by the other. 
 
 Secondly, The method of providing coin for do- 
 mestic circulation is the business of mints, not of 
 banks, 
 
 I have, in the third book, treated very fully of the 
 doctrine of coin, and of mints. I have shewn the 
 difference between money, which is the scale for 
 reckoning value, and coin, vkhich is certain deno- 
 minations of money, realized in a proportional 
 iveight of the precious metals. I have shewn how 
 necessary a thing it is to impose the price of coinage 
 upon the metals manufactured into coin: and 1 have 
 said that it is inconsistent with all principles, to 
 allege that the metals, when coined, should thereby 
 acquire no additional value. 
 
 The expence, therefore, of providiiig the metals 
 should be thrown upon those who want coin; and the 
 mint should be obliged to convert gold and silver into 
 coin, upon the demander s paying the coinage. 
 
 This coin loaded \yith the price of coinage, nexei; 
 will be sent abroad to pay a foreign balance; never 
 will be l(^cked up in banks, which will have little
 
 244 PRINCIPLES OF MONEY, 
 
 occasion for it. It will, therefore, remain in circu- 
 lation, and serve those pnrposes for which the in- 
 hahitants think fit to employ it. 
 
 This coin, I say, never will be exported, as long 
 as any uncoined metals can be found in the country: 
 and if upon a national distress it be thought fit to 
 facilitate the exportation of it, the state may (as we 
 observed above) appoint the mint to receive it back, 
 in order to melt it down into ingots, stamped with 
 the mark of sterling, repaying to the beayer pev 
 cent, of the coinage. 
 
 Thirdly, The trade of paying off foreign balances 
 will then become a particular branch of business ; 
 of which we shall treat more at large, when we come 
 to examine the principles of exchange. 
 
 All that is necessary to be said in this place, is to 
 recal the principle w^e have mentioned above, viz. 
 that when a nation cannot pay in her metals, ma- 
 nufactures, and natural produce, what she owes to 
 strangers, she must pay in her solid property, that 
 is, she must mortgage the revenue of such property, 
 for a capital borrowed out of the country, which 
 capital she must employ for the payment of her 
 foreign debts. 
 
 This operation, then, should be performed by a 
 Tegular and systematic plan.
 
 PRINCIPLES OF MONEY, 545 
 
 CHAPTER XX, 
 
 Objections to this Docttine, 
 
 JL HAT bank notes can never be received as spe^ 
 cie, but from a persuasion that they may be ex^ 
 changed for it on demand. 
 
 To this I answer, that it is sufficient they be re-^ 
 ceived as value; and that they answer every purpose 
 in carrying on alienation. The use o^ paper money 
 is to keep the reckoning between parties, who are 
 solvendo; the use of specie or coin is to avoid the 
 inconvenience of giving credit to persons who per^ 
 haps may not be so. 
 
 When merchants make delivery on account, they 
 then give credit to their customers: when they sell 
 for bank bills, they give credit to the bank: when 
 they are paid in coin, they give credit to no])ody; 
 
 because they receive the real value in the coin 
 
 Where then is the difference between receiving the 
 real value, and receiving an obligation for it, con- 
 cerning the validity of which every one in the coun- 
 try is perfectly satisfied? 
 
 Money, we have said, ought to be invariable ia 
 its value: coin never can be so, because it is both 
 money and merchandize ; money, with respect to 
 the denomination it carries by law; merchandize^
 
 S4B PRINCIPLES OF MONEY. 
 
 with respect to the metal it is made of: but paper 
 inay. 
 
 If the country owes a balance to other nations, 
 let it be paid; nothing so just. 
 
 If the precious metals be the most proper vihicles, 
 as I may say, for conveying this value, let them bo 
 procured and sent off; but never let us say, that her 
 cause some of our mo.ney may be made of these me- 
 tals, that all our money should be made of them; in 
 order that those Avho transact the balance may have 
 an opportunity of sending our metals away with 
 greater ease, and thereby depriving us of the mean^ 
 of carrying on alienations among ourselves. 
 
 CHAPTER XXr, 
 
 How hy a return of a favourable Balance the Banh 
 may he enabled to pay off the Debts due to Fo- 
 reigners, and thus deliver the Nation from that 
 Burthen. 
 
 JOEFORE the payment of any balance for the 
 behoof of Scotland be made, the securities in the 
 hands of the bank can be equal only to the notes in
 
 PRINCIPLES OF MONEY; 24f 
 
 domestic circulation, and the accumulated profits 
 thereon. Let this be called (A). In proportion as 
 these notes come back upon the bank, in a demand 
 for bills to pay balances; in the same proportion will 
 there be a sum of securities added to the former 
 mass (granted upon new credits given for filling up 
 the void thereby occasioned to domestic circulation), 
 which quantity I shall call (B). 
 
 (A), then, represents the securities equivalent to 
 the notes in circulation. 
 
 (B) represents the securities equivalent to the 
 debts contracted by the bank, in favour of stran- 
 
 gers. 
 
 Now let us suppose trade to become favourable, 
 and to produce a balance in favour of Scotland; what 
 will be the effect of this? 
 
 I say, that this balance will be paid to Scotland, 
 either in coin, or in the metals, or in produce, or ia 
 manufactures, or in bills. 
 
 If it consists in the metals, it will, if coined, fill 
 up, pro tanto, a part of circulation : this will make 
 a proportional part of bank paper return upon the 
 bank, and extinguish a proportional part of their 
 securities; which we have called (A). But then 
 there will be more coin in circulation than former- 
 ly; consequently, more coin will enter into pay- 
 ments made to the bank, than formerly. But we 
 must suppose, that before this favourable turn of 
 commerce, there was coin enough both in the bank, 
 and in the country for the uses of domestic circula-
 
 248 t^RtNCiPLES dF MONEY; 
 
 tiori; consequently, the bank will send oft* this su- 
 perfluity of coin, and with it they will repay a part 
 of the debt they formerly contracted. 
 
 In the next place, let us suppose this favourable 
 balance to consist in foreign bills, upon Londouj 
 Amsterdam, &c. These will be discounted by the 
 bank, and notes issued for them. The bills will be 
 sent off by the bank, in order still to extinguish a 
 part of w^hat is owing to foreigners. These notes^ 
 agaiuj being supei-fluous to circulation, which we 
 suppose to be full, will return upon the bank, and 
 Still diminish the mass of (A). 
 
 By these operations, we see hoAv (A) will be con- 
 stantly diminishing;' but then, in the same propor- 
 tion, w^e see how the mass of foreign debts will also 
 be diminishing. Consequently (B), which was en- 
 gaged for them, will be returning to be the free pro- 
 pert)^ of the bank; and as we suppose no variation 
 upon the sum in circulation, we may consider this 
 as a sort of conversion of (B) into (A), and when 
 all (B) shall be thus converted into (A), then the 
 debt formerly contracted by the bank, in favour of 
 Scotland, will be totally paid off by the same me- 
 thod, (only inverting the operations) by wdiich it 
 was contracted.
 
 PRINCIPLES OF MONEY. 24^ 
 
 CHAPTER XXII, 
 
 Of the Bayih of England and Banks of Circulatioji 
 established on Mercantile Credit. 
 
 A HAVE examined with all tlie care I am capable 
 of, the nature of banks calculated for the melting 
 down of solid property, and the converting of it into 
 paper for the use of circulation. 
 
 The nature of such banks is but little known in 
 countries where they have not been established ; there- 
 fore a distinct account of them may suggest hints, 
 which in time may prove useful. 
 
 I now proceed to a deduction of the principles on 
 which are founded those banks which are chiefly cal- 
 culated for the use of commerce; and, as the ground- 
 work of my inquiry, I shall trace some of the princi- 
 pal operations of the Bank of England. 
 
 The establishment of this great company was 
 formed about the year 1694. Government at that 
 time having great occasion for money, a set of men 
 was found who lent to it about X 1,200,000 sterling, 
 at 8 per cent, for the exclusive privilege of bank- 
 ins: for 13 years: with this additional clause, that 
 ^4000 sterling per annum should be given them 
 Kk
 
 2 
 30 PRINCIPLES OF MONEY. 
 
 to defray the expence of the undertaking, This 
 sum of ^1,200,000 sterling, was the original buni< 
 stock. It has been since increased to ^ 1 1 ,000,000 
 by farther loans to government, for the prolonga- 
 tion of their privileges; as has been taken notice of 
 in the l6th chapter of the second part. 
 
 This stock, as in banks of circulation upon mort- 
 gage, is to be considered only as a subsidiary secu-^ 
 rity to the public for the notes they issue: were it 
 the principal and only security for their paper, this 
 bank would then be founded on the principle of 
 public, not of mercantile credit; under which last 
 denomination we are going to point out in what the 
 nature of it differs from those we have already ex-^ 
 plained. 
 
 It is a rule with the bank of England to issue no 
 notes upon mortgage, permanent loan, or personal 
 security. The principal branches of their business 
 may be comprehended under four articles, viz. 
 1 . The circulation of the trade of London. 2. Th^ 
 exchequer business of Great Britain. 3. The pay- 
 ing of the interest of all the funds transferable at 
 the bank. 4. Their trade in gold and silver. I 
 shall now shortly explain the nature of these four 
 great operations; and first, as to the circulation of 
 the trade of London. 
 
 If a London merchant has occasion for money at 
 any time, he sends to the bank tlie bills he has, be- 
 fore they become due; and the bank discounts thein 
 at certain rates, according to the nature,
 
 PRINCIPLES OF MONEY. 251 
 
 if It ])e a foreign bill, the bank, in discounting it, 
 detains of the sum, at the rate of 4 per cent, per an- 
 num, for the time the bill has to run; but if the bill 
 be at a longer date than 6o days, they will not dis- 
 count it. So in this case the merchant must keep 
 his bill until it is within 6o days of the term of 
 payment. 
 
 The reason for this is evident: the security upon 
 which such bill stands, is purely mercantile. The 
 nearer, therefore, the payment is, the less risk the 
 bank incurs from the failure of those who are bound 
 in it. 
 
 The intention of this operation of discounting 
 bills, is plainly to employ the cash of the bank in a 
 way to draw an interest for it; but as merchants al- 
 low their money to lie dead for as short a time as 
 they possibly can, the bank must have quick returns 
 for what they advance upon discount, in order to 
 be constantly ready to answer all demands. This 
 is no loss to the bank, and a prodigious advantage to 
 trade, as I shall briefly explain. 
 
 The bank is constantly receiving cash from every 
 person who keeps their cash with it. This occasions 
 a constant fluctuation of payments, which of course 
 must leave at all times a considerable sum of other 
 people's money in the bank; because it never is in 
 advance to any one. 
 
 By long practice in the trade, this sum of money 
 becomes determinate: let us call it the average- 
 tnoiwy m the hands of the bank. It is then with
 
 252 PRINCIPLES OF MONEY. 
 
 this average-money alone, that the bank can dis- 
 count bills. Now if the trade of London do afford 
 bills to be discounted at different dates within 6'odays, 
 sufficient to absorb the whole averag^e-nioney of 
 the bank appropriated for discountinii, this branch 
 of business would not go forward with the celerity 
 required for the trade of London, did the bank in- 
 dulge merchants so far as to discount at a longer 
 date. 
 
 From this we learn another reason why the bank 
 of England discounts no bill which has more than 
 60 days to run. The first, mentioned ah'eady, is 
 for the greater security of payment; and the se- 
 cond, which we now discover, is in order to be able 
 to discount more bills than otherwise they could do, 
 did they discount at a longer day. 
 
 Besides foreign bills, wliich the bank of England 
 discounts at 4 per cent. — they also discount inland 
 bills, artd notes of hand between merchants in Lon- 
 don, at 5 per cent. 
 
 The inland bills to be discounted at the bank 
 must all be payable in London. The bank calls in no 
 money from any distant quarter of the kingdom. 
 
 As the discounting of notes of hand between 
 London merchants might operate the same effect, as 
 if the bank should advance them money upon per- 
 sonal security, which would be the case, were the 
 notes of hand drawn for obtaining credit, instead of 
 paying money really due between the merchants, in 
 the course of business ; the clerks of the bank keep
 
 PRINCIPLES OF MOSEY. 253 
 
 a watchful eye over this hranch of management, 
 and, by examining the reciprocal draughts of mer- 
 chants betweeni themselves, they easily acquire a 
 knowledge of the state of their affairs, and are 
 thereby enabled to judge how far it is expedient to 
 launch out in discounting either the notes or bills 
 wherein they are concerned. 
 
 I shall not pretend to assign a reason why, in the 
 price of discount, the bank makes a difference of 
 1 per cent, between foreign and inland bills of ex- 
 cJiange. It may either be an indulgence and encou- 
 ragement to foreign trade; or it may be on the consi- 
 deration of the better security of foreign bills, which 
 commonly pass through several indorsations before 
 they are offered to be discounted at the bank- 
 
 I come next to the circulation between the bank 
 and the exchequer. 
 
 The bank of England is to the exchequer, what 
 ii private person's banker is to him. It receives the 
 cash of the exchequer, and answers its demands. 
 
 Cash comes to the exchequer from the amount of 
 taxes. The two great branches of which are the 
 excise and customs. To explain this operation with 
 the more distinctness, I shall take the example of the 
 excise. 
 
 The excise is computed to bring in annually from 
 London, and the fifty-two collections over all Eng- 
 land, nett into the exchequer, above four and a half 
 millions sterling. 
 
 yhe fifty-two collectors send the amount of their
 
 254 J»RmctPL£s Of monev. 
 
 collections to London eight times a year, almost en- 
 tirclij In bills^ drawn payable to the commissioners 
 of excise; they indorse them to the receiver-gene* 
 ral; he carries them to the bank as they fall due. 
 and gets a receipt for tlie amount; this receipt he 
 carries to the exchequer, who charges it in their ac- 
 count with the bank, and delivers tallies to the 
 receiver-general for the amount of his payments; 
 these tallies he delivers to the commissioners of ex- 
 cise, who enter them in their book of tallies. This 
 operation is performed once every week, and serves 
 as a discharge from the commissioners to the 
 receiver-general. 
 
 The bank, again, keeps an account with the ex- 
 chequer, which is settled once every day, by two 
 clerks, who go from the bank to the exchequer for 
 this purpose. When coin is wanted by the exche* 
 quer, for payments where bank notes will not an- 
 swer, the coin is furnished by the bank ; when paper 
 will serve the pui'pose, paper is issued. 
 
 Besides this operation in the receipt of taxes, the 
 bank advances to government, that is to the exche- 
 quer, the amount of the land, or other taxes impos- 
 ed, which are to be levied within the year. This 
 we see is a loan upon government security for a 
 short term, quite consistent with the principles on 
 which the bank is established. The large sums the 
 bank is constantly receiving of public money, and 
 the great assistance it obtains from thence in carry- 
 ing on the other branches of its trade, enable it at
 
 PRINCIPLES OF MONEY. 255 
 
 present to make advances of money to government 
 at 3 per cent. It observes the same rule with re- 
 spect to the great companies of the East Indies and 
 South Sea, for the same reason; but no advances are 
 made to private people; and in the discounting of 
 bills and notes of hand, the regulations above men- 
 tioned are adhered to. 
 
 Thus the whole amount of taxes is poured into the 
 bank, in the manner we have been describing. 
 
 The bank also keeps the transfer books of all the 
 funds negotiated at the bank; and out of the public 
 money in \t% hands it pays the interest of these funds, 
 for which government allows to the bank a sum pro- 
 portionate to the expence of this branch of manage- 
 ment. 
 
 When the bank, as a company, lends to govern- 
 jnent upon a permanent fund, the capital whereof 
 is not demandable, this operation is foreign to their 
 business as a bank, and is conducted by the compa- 
 ny as an article of management of their private pro- 
 perty. 
 
 Let us now exainipe by what channels their notes 
 enter into circulation, and the security upon which 
 they stand. 
 
 When issued in the discount of bills, they stand 
 on the principles of mercantile credit, and depend 
 upon the goodness of the bills discounted. When 
 issued upon the faith of taxes to be paid within the 
 year, they stand upon the security of this payment, 
 which is that of the public,
 
 256 PRINCIPLES OF MONET. 
 
 The greatest risk the bank runs, is in disconnting 
 had bills; but by the extent of their business in this 
 branch, and by circulating the cash of all the mer- 
 chants who keep accounts with them, they acquire 
 so perfect a knowledge of the state of their affairs, 
 that it rarely happens that any one can break for 
 very considerable sums, without the bank's having 
 a previous notice of it. A sudden loss may, no 
 doubt, happen, without a possibility of being fore^ 
 seen; but the matter of fact proves that their losses 
 upon bad bills, are inconsiderable. 
 
 I come now, to the last branch of their manage- 
 ment, to wit, their trade in gold and silver. 
 
 For the circulation of bank notes, coin is neces- 
 sary. In times of peace, and a favourable balance 
 of trade, the bank suffers little by the obligation it 
 is under, to pay in coin, except as far as the great 
 confusion of the present currency affords an occasion 
 to money-jobbers to melt doAvn the new guineas. 
 
 But when large payments are to be paid abroad, 
 the distress of the bank is, no doubt, very great. 
 
 The exportation of the heavy guineas in time 
 of war, and during a wrong balance on the trade of 
 England, leaves circulation provided with a light 
 currency only, in which the bank is obliged to pay 
 their notes; and the intrinsic value of the gold in 
 which they pay, regulates the price of the metals 
 they are obliged to buy at market. If they pro\ ide 
 them themselves from abroad, they must pay the 
 price of them in bills of exchange. But then the
 
 PRINCIPLES OF MONEY. 25 f 
 
 lightness of the cuiTency at home, sinks the value 
 of the pound sterling, as it raises the value of the 
 ounce of gold and silver. So the only considerable 
 loss they incur, is in providing the metals, which 
 must ever be considerable, as long as the old gui- 
 neas remain in circulation. 
 
 The loss upon coining silver, is still greater than 
 upon gold; because, besides the loss incurred by 
 reason of the lightness of the gold, the metals in the 
 silver and gold coin of Great Britain are not pro- 
 portional to the value they bear in the London mar- 
 ket, where they have been bought; as has been suf- 
 ficiently explained already in another place*. 
 
 The remedies I propose for this evil, have been 
 pointed out in the preceding parts of this inquiry, 
 and I recapitulate it briefly in this place, to recal it 
 only to mind while we are on the subject of the 
 bank of England. 
 
 First, then, while the coin is of unequal weight, 
 the value of the currency never can be permanent- 
 ly the same. Did the bank seriously set about form- 
 ing a plan for the reformation of the coin, I have 
 no doubt but government, as well as the voice of 
 the nation, would go along with it in forwarding the 
 execution of so noble a design. 
 
 The second step I should recommend, is, that 
 s:overnment should enable the bank to establish a 
 
 * See Book III. Chap. 21. Quest. 7- 
 
 LI
 
 268 PRINCIPLES OF MOKirV. 
 
 fund abroad, for borrowing sums of money equal to 
 what may be due by England to tlie continent upon 
 certain emergencies. 
 
 Let us now examine how far the paper of a mer- 
 cantile bank, like that of England, tends to supply 
 the demand of circulation. 
 
 Were no bank established at London, all bills 
 would be paid, or discounted in coin. 
 
 The bank, therefore, melts down into paper mo- 
 ney, all the bills discounted by them, and throws it 
 into circulation. 
 
 It also melts down mto paper all the sums it ad- 
 vances either to government, or to thegi'eat trading 
 companies. In this respect it acts upon the prin- 
 ciple of banks upon mortgage. 
 
 It also melts down into paper, all the interest on 
 the public funds paid at the bank. All this sum of 
 paper issues from the bank into the city of London, 
 and proportionally supplies the circulation of that 
 great capital. 
 
 Let us next examine how this paper can find its 
 way into the country of England, there to supply 
 the use of coin. 
 
 The whole consumption of London for meat, 
 beer, fire, and an infinity of articles of manufacture, 
 for domestic use, and foreign exportation,' comes 
 from the country of England. 
 
 Did the country owe nothing to London, the 
 sums due for those commodities would be sent into 
 the country, in the current circulation of London,
 
 PRINCIPLES OF MONEY. 259 
 
 which by what we have seen, absorbs a very large 
 quantity of paper. 
 
 But we have said above, that the whole amount 
 of taxes, almost, is remitted to London in bills: 
 this could not be the case, were not the capital con- 
 stantly indebted to the country. This circumstance 
 confines the circulation of bank notes chiefly to 
 London, and some other cities, to which the inha- 
 bitants of London resort, and whither they cany in 
 their pockets, the money of the capital, viz. bank 
 notes. For these reasons, bank notes can never be 
 common in the country : and if at any time, a scar- 
 city of currency there, proves hurtful to industry, 
 the defect cannot be remedied but by establishing 
 banks of circulation upon mortgage, in the princi- 
 pal to\AT»s of England. 
 
 It may be here objected, that such a regulation in 
 England, where there is already so great a bank set- 
 tled on different principles, might draw along with 
 it the following hurtful consequences, -viz. 
 
 First, By multiplying the circulation of paper, it 
 would send off the coin. 
 
 Secondly, The taxes would be paid in this paper, 
 which could not be received at the bank of England, 
 and this would throw the whole nation into confu- 
 sion. 
 
 To which I answer. First, That if the coin were 
 sent off, it would return, as has been said, while the 
 trade of England flourishes: and Secondly, That
 
 260 PRINCIPLES OF MONEY. 
 
 this new bank paper coming in place of the coin, 
 wonld no more be sent to London than coin is sent 
 now. The debts due by the country for taxes, would 
 be compensated by the reciprocal debts due by Lon- 
 don for subsistence, &c. and the compensation would 
 go on as at present by bills. But were the case other- 
 wise, and did a change of circumstances oblige the 
 country to make delivery in coin to London, the hold- 
 ers of the country notes would constantly, as is the 
 case in Scotland, have recourse to the bank establish- 
 ed in the district, for the coin wanted to be sent to 
 London. 
 
 CHAPTER XXIIL 
 
 Of the Jirst Establishment of Mr. Laws Bank in 
 France, in 171 6*. 
 
 jLN deducing the principles of credit, I have it 
 chiefly in view, to set in a fair light, the security on 
 which paper money is established: and, as I ima- 
 gine this important branch of my subject will still 
 be rendered more intelligible by an example of the 
 iibuse to which this great engine of commerce is ex-
 
 PRINCIPLES OF MONEY. <j6t 
 
 posetlj I* now. propose to give my render a short ac-^ 
 count of the famous bank of circuhition first esta- 
 bhshetl In France by Mr. Law; but afterwards pros- 
 tituted, (whether by design or fatality, I shall not here 
 determine), to serve the worst of purposes; defraud- 
 ing the creditors of the state, and a multitude of pri- 
 vate pel's ons. 
 
 So dreadful a calamity brought upon that nation, 
 by the abuse of paper credit, may be a warning to all 
 states to beware of the like. I'he best way to guard- 
 against it, is to be apprised of the delusion of it, and 
 to see through the springs and motives by which the 
 Missisippi bank was conducted. 
 
 After the death of the iate king of France, LouLs 
 XIV. tlie debts contracted by that monarch were 
 found to extend to 2000 millions of livres; that is, 
 to upwards of 140 millions sterling. 
 
 It was proposed to the Duke of Orleans, regent of 
 the kingdom, to expunge the debts by a total bank- 
 ruptcy. This proposal he rejected nobly; and in- 
 stead of it established a commission, called the f^lsdj 
 to inquire into the claims of such of the nation's cre- 
 ditors as were not then properly liquidated, nor se- 
 cured by the appropriation of any fund for the pay- 
 ment of the interest. 
 
 After many arbitrary proceedings, this commis- 
 sion threw the king's debts, at last, into a kind of 
 order. 
 
 Those formerly provided for were all put at 4 per
 
 2^2 PRINCIPLES OF MONEY. 
 
 cent. The creditors, to the amount of six hundred 
 millions, which had not been liquidated, nor provided 
 for, had their claims reduced, by the commission to 
 two hundred and fifty millions ; for which they ob- 
 tained notes of state {Billets d'etat, as they were cal- 
 led), bearing an interest of 4 per cent. also. 
 
 These operations performed, the total debts of the 
 late king were reduced to the sum above mentioned; 
 to wit, two thousand millions; bearing an interest of 
 4 per cent, or eighty millions per annum. 
 
 From the necessities of government, and the dis- 
 tressed situation of the kingdom, this interest was 
 ill paid ; and there hardly remained, out of an ill-paid 
 revenue, wherewith to defray the expence of the ci- 
 vil government. 
 
 About this time, Mr. Law presented to the regent 
 the plan of a bank of circulation. 
 
 For the better understanding of this affair of Mr. 
 Law's bank, and the views he had in establishing it 
 at that time, I must give a short account of the most 
 material variations of the French coin, before and 
 after the king's death, September 1, \^\5; which I 
 shall make as short as possible, consistently with per- 
 spicuity.
 
 PRINCIPLES OP MONEY. 263 
 
 CHAPTER XXIV. 
 
 f^arlations in the French Coin, before and after the 
 Death of Louis Xlf^, 
 
 AN the year 1709, there was a new general corn- 
 age in France; by which operation the king gained 
 23tt per cent, upon all the specie coined*. 
 
 Out of the marc of standard gold were coined 30 
 louis d'ors, of 20 livres denomination each. Out of 
 the marc of standard silver, 8 crowns, of 5 livres de- 
 nomination each. So that the silver was put at 40 
 livi'es the marc. — But, 
 
 By an edict of the month of September 1713, the 
 old king appointed a diminution of th^ denomina- 
 tion of silver and gold coins ; by which, after eleven 
 successive changes, the coin of France was ordered 
 to be brought down, from 40 livres the marc, to 28: 
 so that the 8 crowns, which were called 40 livres in 
 the month of September 1713, by the second day of 
 September 1715, (the day after the king's death), 
 were to be called only 28 livres. I say, called, be- 
 
 * Dutot, vol. i. page 104.
 
 264 miKCIPLES OF MONEY. 
 
 canse certainly the crowns had suffered no variation 
 but in their name. 
 
 On the loth of August 1715, a few days before 
 the king's death, he issued a declaration, ordering- 
 that for the future the silver coin should remain at 
 28 livres per marc. 
 
 At this rate of conversion, the two thousand m\\>- 
 lions were equal to ^142,857,140 sterling. 
 
 Soon after the king's death, on the second of Ja- 
 nuary 171^3 the new ministry issued an edict, which 
 totally destroyed all. This was the most extraordi- 
 nary operation, I believe, that ever was invented; and 
 to it was owing the establishment of Mr. Law's bank, 
 I must therefore explain it. 
 
 There had been no general coinage since 1709; 
 the lonis d'or had then been coined at 20 livres, and 
 the crowns at 5, as has been said. The edict of 
 2d January 171^3 ordered a new general coinage, 
 on the same footing, both as to weight, fineness, and 
 denomination, as that of 1709: the only dijfference 
 was, that the first had an old man's head upon it; 
 the other Jiad that of a chihi of six years old. 
 
 By this first operation, there was an end put to 
 the former diminutions on the denomination of the 
 coin; which was now raised again to 40 livres the 
 marc, as in 1709- This is nothing. 
 
 There being no difference between the old coin 
 and the new, exxept the stamp, the old coin was 
 called in, and a new face was stamped on the very 
 same pieces. But when the louis d'ors were called
 
 PRINCIPLES OF MONEY. IgfiS 
 
 ill, they were received at the mint at no more than 
 i6 livres; and by a stroke of the wheel, they were> 
 in an instant, converted into 20 livres, the denomi- 
 nation of the new coin; 
 
 Thus a person who brought 20 old louis d'ors to 
 the mint, received back l6 of his own 20, new 
 stamped, arid no injustice was said to be done. 
 
 Under these circumstances, it was natural for 
 "the inhabitants to wish to dispose of their old coin, 
 at any other market than that at the Ring's mint. — 
 They did what they could to smuggle it to Holland; 
 where the industrious Dutchman staihped a l6- 
 livre piece with the head of a child, as well as the 
 king of France could do, and sent it back to France 
 For a 20-livre piece. These operations were prevented 
 as well as government could; and every method was 
 tried to force in the old coin to the mint. 
 
 Mr. Law judged this a very proper occasion to 
 iform the plan of a bank of circulation, upon the prin- 
 ciples we have already explained. 
 
 He gave in his scheme to the Duke of Orleans; by 
 whom it was approved of; and the bank was esta- 
 blished the 2d of May of the same year, I716'. 
 
 The first thing Mr. Law did, was to buy up with 
 bank notes this old coin, at a price above what the 
 mint gave for it; but many per cent, below the pro- 
 portion of its value: his paper (payable in the neW 
 coin at 40 livres per marc) was sought after for this 
 as well as other reasons ; and an immense profit 
 ensued* 
 
 Mm
 
 266 PRINCIPLES OF MONEYS 
 
 CHAPTEU XXV. 
 
 Continuation of the Account of Laiv^ Banli. 
 
 HE bank accordingly was established in favoui^ 
 of Law and Company, by letters patent, of the 2d of 
 May 1716. The company was called, the General 
 Bank; and the note run thus: 
 
 The bank promises to pay to the bearer at sight.... 
 livres, in coin of the same weight and fineness with 
 the coin of this day, value received at Paris. 
 
 The first fund of this bank consisted in 1200 ac- 
 tions (or shares) of one thousand crowns (or 500O 
 livres) bank money; in all six millions; consequent- 
 ly, the shares were worth ^250 sterling, and the 
 bank stock worth ^200,000 sterling. 
 
 By the clause in the note, by which the bank was 
 obliged to pay according to the then weight and 
 fineness of the coin, those who received their paper 
 were secured against the arbiti'ary measures common 
 in France of raising the denomination of the coin ; 
 and the bank was secured against the lowering of it. 
 In a short tim^, most people preferred the notes to 
 the coin; and accordingly they passed for 1 per cent, 
 more than the coin itself. 
 
 This bank subsisted, and obtained great credit.
 
 PRINCIPLES OF MONEY. 26^ 
 
 until the 1st of January l/lf): at vi^uch time tliQ 
 king reimbursed ajl the proprietors of the shares, 
 and took the bank into his own hand, under the 
 name of the Royal Bank. 
 
 Upon this revolution, the tenor of the note was 
 ^hanged. It ran thus: The bank promises to pay 
 to the bearer -at sight .,.. livres, in silver cohif value 
 received at Paris. 
 
 By this alteration, the money in the notes was 
 made to keep pace with the money in the coin; and 
 both were equally affected by every arbitrary vari^ 
 ation upon it. This was called rendering the paper 
 jnonnoie Jixe ; because the denominations contaiped 
 in it did not vary according to the variations of the 
 coin : I should have called it monnoie variable; he^ 
 cause it was exposed to chajiges with respect tQ its 
 real value. 
 
 Mr, Law strenuously opposed this change in the 
 bank notes. No wonder! it was diametrically op-r 
 posite to all principles of credit. It took place, 
 however, and nobody seemed dissatisfied; the na-? 
 tion was rather pleased : so familiar were the varia- 
 tions of the coin in those days, that nobody eyer 
 considered any thing with regard to coin or money, 
 but its denomination. The consequences of the vari- 
 ations in the value of denominations, upon the ac- 
 compts between debtors and creditors, were not then 
 attended to; and the credit of the notes of the royal 
 hank continued just as good as the credit of those of 
 ]Vf rf Law's had been; although the livres in this coi^-
 
 268 . PRINCIPLES OF MONEY. 
 
 tained a determinate value; and the livres in that 
 could have been reduced at any time to the value of 
 halfpence, by an act of the king'§ authority, who 
 was the debtor in them. Nay more, they in fact 
 stood many variations during the course of the sys- 
 tem, without suftering the smallest discredit. This 
 appears wonderful; and yet it is a fact. 
 
 As long as the credit of this bank subsisted, it- 
 appeared to the Frepch to be perfectly solid. The 
 bubble no sooner burst, than the whole nation was 
 thrown into astonishment and consternation. No- 
 body could conceive from whence the credit had 
 sprung ; what had created such mountains of wealth 
 in so short a time; and by what witchcraft and fas- 
 cination it had been made to appear in an instant, 
 in the short period of one day. 
 
 I shall now proceed to set before my reader the 
 great lines of the royal Missisippi bank of France, 
 from the 1st of January 1719, to the total overthrow 
 of all credit, upon the fatal 21st day of May 172OJ 
 This was a golden dream, in which the French na^ 
 tion, and a great part of Eur6pe was plunged, for 
 the shpit space of 5 06 days.
 
 PRI^fCIPLES OF MONEY. 2% 
 
 CHAPTER XXVI. 
 
 Account of the Royal Misslsippl Banh of FrancBj esrt 
 tahlished qn Public Credit. 
 
 JlN order to unravel the chaos of this affair in a 
 proper manner, it will not be amiss to begin by giv- 
 ing the reader an idea of the plan which naturally 
 might suggest itself to the regent of France, from 
 the hint of Mr Law's bank. By the help of this 
 clue, he will be the better able to conduct himself 
 through the operation of this system^ as the French 
 call it. 
 
 The regent perceived, that in consequence of 
 the credit of Law's bank, people gr«w fond of pa- 
 per money. The consequence of this, he saw, 
 was to bring a great quantity of coin into the bank. 
 The debts of France were very great, being, as has 
 been said, above 2000 millions. 'I'he coin, at this 
 time, in France, was reckoned at about 1200 mil- 
 lions, at 6o livres the marc, or 40 millions sterling. 
 The regent thought, that if he could draw either 
 the whole, or even the greatest part of this 1200 
 millions of coin into his bank, and replace the use 
 of it to the kingdom, by as much paper, secured 
 upon his word, that he should then be able to pay
 
 $YQ PRINCIPLES or MONEr, 
 
 off, with it, near one half of all the debts of France: 
 and by thus throwing back the coin into circulation, 
 in paying off the debts, that it would return of itself 
 into the bank, in the CQurse of payments made to the 
 state; that credit would be thereby supported, as 
 the bank would be enabled to pay in coin the notes 
 as they happened to return, in the course of domestic 
 circulation, 
 
 Accordingly, during the whole year 17^9) the 
 <5redit of the royal bank was without suspicion, al-r 
 though the regent had, by the last day of Decembei;' 
 of that year, coined of bank paper, for no less a. 
 sum than 769 millions, reckoning in 59 millions of 
 paper which had been formerly issued by the ge-i 
 neral bank of Law and company; for which he had 
 given value to the proprietors, when he took the 
 hank into his own hands, as we have said above. 
 
 I must here observe, that by this plan of the re-r 
 gent, there was, in one sense, a kind of security 
 for the notes issued. So far as they were issued foy 
 coin brought in from the advanced value of the 
 paper, this coin was the security: in the second 
 place, when the coin was paid away to the creditors 
 of the state, the I'egent withdrew the obligations 
 which had been granted to them; and although | 
 allow that the king's own obligation withdruM'n, 
 ■was no security to the public, who had receiAed 
 bank notes for the payment of it; yet still the inr 
 terest formerly paid to the creditors, was a fund out 
 of which, upon the principles of public credit, the 
 annual interest for the notes was secured.
 
 PRINCIPLES OF MON£Ti gj^l 
 
 Tlie next remarkable and interesting revolution 
 tnade upon this famous bank, was by the arret of 22d 
 Febniary, 172O; which constituted the union of the 
 royal bank with the company of the Indies. 
 
 By this arret, the king delivered to that company 
 the whole management of the Imnk, with all the pro- 
 fits made by him since the first of January 1719, 
 and to be made in time to come. Notwithstanding 
 this cession, the king remained guarantee for all 
 the notes, which were not to be coined without an 
 order of council: the company was to be resjDonsihle 
 to the king at all times for their administration; 
 and, as a security for their good management, they 
 engaged to lend the king no less than sixteen hun- 
 dred millions of livres. 
 
 Here is the sera and beginning of all the con- 
 fusion. From this loan proceeded the downfal of 
 the whole system. 
 
 But before I proceed to explain the scheme of the 
 regent in these operations upon credit, I think it 
 will contribute to the clearing up of the subject in 
 general, to premise some short account of the rise 
 and progress of this great company of the Indies: 
 and to give a short abstract of some of the most me- 
 morable transactions during the Missisippi scheme^ 
 in the order of time iu which they followed oae 
 ^lother.
 
 Sf 2 PRINCIPLES OF MONET; 
 
 CHAPTER XXVI L 
 
 A 'short Account of the French Company of the 
 Indies: 
 
 VyARDINAL de Kiclilieu, that great minister to 
 Louis XIII. was the first who established trading 
 companies in Francej 1628, about the time of the 
 ^iege of Rochelle. 
 
 He then set on foot the companies of the West 
 and East Indies. 
 
 Several others, viz. one for Canada, dne for the 
 Leeward Islands, and another for Cayenne, wete 
 successively established in the beginning of the 
 reign of Louis XIV. 
 
 These companies, before l664, had fiequently 
 changed their forms, and had succeeded very ill; 
 
 At that time the great Colbert was in the admi- 
 nistration of the king's affairs; He engaged his 
 master to think seriously of establishing the trade of 
 his kingdom upon solid principles ; for which rea- 
 son all the partners in the former projects of com- 
 merce to the new world were reimbursed; and anew 
 establishment was made, called the Compagnie des 
 Jndes Occidentales. 
 
 This exclusive trade comprehended that of Ca-
 
 PRINCIPLES OF MONEY. 273 
 
 nada, the Caribbee Islands, Acady, Newfoundland, 
 Cayenne, the French continent of America, from 
 the river of the Amazons to that of Oronoko, the 
 coasts of Senegal, Goree, and other places in Africa; 
 the whole for 40 years. 
 
 The same year, 1664, there was another company 
 formed for the east Indies, of which we shall speak 
 afterwards. 
 
 The greatest encouragement was given to these 
 new establishments. Large sums were advanced by 
 the king for several years without interest, and upon 
 condition, that if at the end of that term any loss 
 were found on the trade, it should fall upon the mo- 
 ney due to the king. 
 
 On examining into the West India company's af- 
 fairs, after ten years' administration, that is to say, 
 in the year 16/ 4, it was found, that instead of pro- 
 fiting of their exclusive privilege, by carrying on a 
 regular trade themselves, they had sold permissions 
 to private people to trade with them. 
 
 This abuse committed by the company had, how- 
 ever, inspired a taste for trade among the French; 
 which the king wishing to promote, he reimbursed 
 to the company all their expences, added their pos- 
 sessions to his domain, and threw the trade open to 
 his subjects. 
 
 Thus ended the first company of the West Indies, 
 called by the French, the Compagnle d' Occident. 
 
 After the suppression of this company, the French 
 trade to America was cajried on and improved by 
 Nn
 
 '274 PRINCIPLES OF M0>JEY. 
 
 private adventurers, some of which obtahied particu' 
 lar grants, to enable them to form colonies. Of this 
 number was Robert Chevalier de la Sale, a native 
 of Ronen. It was he who first discovered the river 
 Missisippi, and Avho proposed to the king, in l683, 
 to establish a colony there. He lost his life in the 
 atteinpt. ;^ ^'^''^'^'^^ 
 
 Hiberville, a Canadian, took up the project; but 
 soon died. He was succeeded l)y Anthony CrOzat, 
 in 1712, who had better success: but the death of 
 the king in 1715, and the rising genius of Mr. Law, 
 engaged the regent of France to make Crozat re- 
 nounce his exclusive privilege of trading. Upon 
 which, by edict of the 6th of September 17 ^7 > was 
 formed the second Compagnie d" Occident, in favour 
 of Mr. Law: to Avhich was added the ftir trade of 
 Canada, then in the hands of private adventurers, 
 and with these, the farm of the tobacco, for which 
 he paid 1,500,000 livres a year. 
 
 I now come to the East India company. 
 
 I have already mentioned the establishment of it 
 by the great Colbert, in 166-4. 
 
 After his death, want of experience in those who 
 succeeded him, abuse of administration, carelessness 
 in those who carried on the company's business, 
 competition between diiFerent companies, and, in 
 ■ short, every obstacle to new establishments, con- 
 curred with the conse(|uences of the long and ex- 
 'peh^i\^e wai^s of Louis XIV. to render all commer- 
 'if^ii'l projects unsuccessful; and all the expence be-
 
 PRINCIPLES OF MONEY. 2/5 
 
 stowed in establishing these companies was in a 
 inanner losti 
 
 In 1710, the merchants of St. Malo undertook 
 the East India trade. It languished in their hands 
 until 1719, and their importations were not surti- 
 cient to supply the demand of France for India 
 ^oods: for this reason it was taken from them, and 
 incorporated with Mr. Law's company of the West 
 IndieSj in May 1719* 
 
 By this incorporation was established the great 
 Company of the Indies, which still subsists in France: 
 the only monument extant of the famous and unfor- 
 tunate Law. 
 
 For the better understanding, therefore, what is 
 to follow, let us attend to some historical and chro- 
 nological anecdotes, relative to the wonderful ope- 
 rations of this Missislppi bank, and company of the 
 Indies. These I shall set down according to the order 
 of time in which they happened, and my reader may 
 have recourse to them as he goes along. 
 
 Without the help of this table, I should be in- 
 volved in a history of those events, which, however 
 amusing it might be to some readers, would be quite 
 inconsistent with the nature of this inquiry.
 
 $76' PRINCIPLES OF MONEY. 
 
 CHAPTER XXVIII. 
 
 Chronological Anecdotes. 
 
 Ifog.xa. GENERAL coinage in France; the mare 
 of standard silver, worth two pounds sterUng, put 
 at 40 livres denomination. 
 
 September 171S. Tlie king reduces the denorai- 
 mation of the silver coin to 28 livres the marc, and 
 the gold in proportion. 
 
 These reductions were made gradual and progres- 
 sive, and were finally to take place no sooner than 
 the 2d of September 1715. 
 
 August 1715. The king declares, that in time 
 to come, the coin was to remain stable at 28 livres 
 the marc of fine silver. 
 
 September 1, 1715. The king dies. 
 
 January 2, 1716. The regent of France orders 
 a new general coinage; raises the silver coin to 40 
 livres the marc, and cries down the old king's coin 
 (though of the same weight, fineness, and denomi- 
 nation) 20 per cent. 
 
 May 1716. Law's bank established; banknotes 
 coined; and the old coin bought up at great dis- 
 count. 
 
 September 6, 1 7 1 7« Law's company of the West 
 established.
 
 PRINCIPLES OF MONEY. $77 
 
 September 4, 1718. He undertakes the farm of 
 tobacco. 
 
 September 22, 17I8. The first creation of ac- 
 tions of the company of the West, to the number of 
 200,000, subscribed for in state billets, at the rate 
 of 500 livres per action. 
 
 January 1, 1719' The bank taken from Law, 
 and vested in the king. At this time the number 
 of bank notes coined, amounted to 59 millions of 
 livres. 
 
 April 22, 1719' -^ 11®^ coinage of 51 millions of 
 notes; in which the tenure of the note was changed, 
 and the paper declared inonnoiejlxe. 
 
 May 17 19* Law's company of the West incor- 
 porated with the company of the East Indies; after 
 which it was called the Company qf the hid'ies. 
 
 June 1719. Created 50,000 new actions of the 
 incorporated company; sold for coin at 550 livres 
 per action. 
 
 June 3, 1719. The mint made over to the com- 
 pany for 50 millions. 
 
 June 10, 1719. Coined of bank notes for 50 
 millions of livres. 
 
 July 1719. Created 50,000 actions as above; 
 sold for notes, at 1000 livres /?er action. 
 
 July 25, 1719. Coined of bank notes for 240 
 inillions. 
 
 August 1719. The company obtains the gene- 
 ral farms ; promises a dividend upon every action of 
 200 livres; agrees to lend the king sixteen hun-
 
 ST'S PRINCIPLES OF MONEY. 
 
 dred iriilli(iiis at 3 per ccnti and Imve transferred t(i 
 them 48 millions per annum for the interest of that 
 sum. 
 
 September 12, l/lD- Coined of bank notes for 
 120 millions. 
 
 Se2)tember 13, 1719- Created no less than 
 ' 100,000 actions; price fixed at 5000 livres per 
 action. 
 
 September 283 1719. Created 100,000 more 
 actions; price as the former, fixed at 5000 livres 
 each. 
 
 October 2, 1719. Created 100,000 more actions; 
 price as the former, fixed at 5000 livres each. 
 
 October 4> 1719. Coined by the regent's pri- 
 vate order, not delivered to the company, 24,000 
 more actions, which completed the number of 
 624,000 actions; beyond which, they never ex- 
 tended. 
 
 Octol)cr 24, 1719. Coined of bank notes for 120 
 iiiil Lions. 
 
 December 29, 1719- Coined of bank notes for 
 129 millions. 
 
 Jandary 1720. Coined of bank notes for 21 mil- 
 lions. 
 
 Febniary 1720. Coined of bank notes for 279 
 millions. 
 
 Febniary 22, 1720. Incorporation of the bank, 
 with the company of the Indies. 
 
 Febraary 27, 1720. A prohibition by which no 
 -one.was to have in his custodyj more than 500 livres 
 of coin.
 
 PRINCIPLES OF MONEY. 279 
 
 March 5, 1720. The coin raised to 80 li^Tes jf?er 
 marc. 
 
 March 11, 172O. The coin brought down to 65 
 livres per marc; and gokl forbidden to be coined at 
 the mint, or used in commerce. 
 
 March 17 20. Coined of bank notes for 191,803,060 
 
 April 1 720. Coined of bank notes for 792,474,720 
 livres. 
 
 May 1, 1720. Coined ofbank notes for 642,395, 130 
 livres. 
 
 May 21, 1720. The denomination of the paper 
 diminished by an^et of council, which, in an in- 
 stant, put an end to all credit, and made the bubble 
 burst. 
 
 At this period, had been coined of bank notes to 
 the immense sum of Livres. 2,69^,400,000 
 
 Of which had been issued 2,235,083,590 
 
 Remained in the bank* 46l,3l6,410 
 
 May 27. 1720. The ai^ref of the 21st of this 
 month recalled, and the paper restored to its full 
 denomination. 
 
 May 29, 1720, The Qoin raised to 82 livres 10 
 sols per marc. 
 
 * Dutot, vol. i. page 1 44. Vol. ii. page 207.
 
 ggO PRINCIPLES OF MONEY. 
 
 June 3. 1720. 400,000 actions belonging to the 
 regent are burnt; and the 24,000 more, which 
 were created October 4, 1719? suppressed; also 25 
 millions of the interest formerly granted to the 
 company, for their loan of 1600 millions, yielded up 
 by the company, and constituted again upon the 
 town house of Paris. 
 
 October 10, 17 !^0. All bank notes are ordered, 
 by arre^ of this day, to be suppressed, if not brought 
 to the bank before the 1st of December following, in 
 order to be paid in manner therein specified. 
 
 CHAPTER XXIX. 
 
 Continuation of the Account of the Royal BanJc of 
 France, until the Time that the Company of the 
 Indies promised a Dividend of 200 Livres per 
 Action. 
 
 nn 
 
 JL HESE things premised, what follows, will, I 
 hope, be easily understood. 
 
 As soon as the regent of France perceived the 
 wonderful effects produced by Law's bank, he imme-
 
 PRINCIPLES OF MONEY. 281 
 
 diately resolved to make use orf that engine^ for 
 clearing the king's revenue of a part of the wiisnp- 
 portable load of 80 millions of yearly interest, due, 
 though indeed very irregularly paid, to the credi- 
 tors. 
 
 It was to compass this end, that he bestowed on 
 X^aw the company of the West Indies, and the farm 
 of the tobacco. 
 
 To absorb 100 millions of the most discredited 
 articles of the King's debts, 200,000 actions or 
 shares of this company were created. These were 
 rated at 500 livres each, and the subscnption for the 
 actions was ordered to be paid in hilkts d'etat, so 
 nmch discredited by reason of the bad payment of 
 the interest, that 500 livres, nominal value in these 
 billets, would not have sold upon change for above 
 l6o or 170 livres. In the subscription they were 
 taken for the full value. As these actions liecame 
 part of the company's stock, and as the interest of 
 the billets was to be paid to the company by the. 
 king, this was effectually a iQan from, the company 
 to the king of 100 millions at 4 per cent. 
 
 The next step was to pay the interest regularly to. 
 the company. Upon this, the actions which bad 
 been bought for 170 livres, real value, mounted to, 
 par, that is, to 500 livres. 
 
 This was ascribed to th? wonderful operations of 
 tbe bank; whereas it Avas wholly owing to the regu- 
 lar payment of the interest.
 
 282 PRINXIPLES OF MONEY. 
 
 In May following, 1719, the East India company 
 was incoi'porated with the West India company: 
 and it was stipulated that the 200,000 actions for- 
 merly created, were to be entitled to a common 
 share of the profits of the joint trade. 
 
 But as the sale of the first 200,000 actions had 
 produced no liquid value which could be turned into 
 trade, (having been paid for in state billets), a crea- 
 tion of 500,000 new actions w^as made in June 17195 
 and the subscription opened at 550 livres payable in 
 effective coin. 
 
 The confidence of the public in Mr. Law, was at 
 this time so great, that they might have sold for 
 much more: but it was judged expedient to limit 
 the subscriptions to this sum ; leaving the price of 
 the actions to rise in the market, according to de- 
 mand, in favour of the original subscribers. 
 
 This money, amounting to 27,500,000 livres in 
 coin, was to be employed in building of ships, and 
 other preparations for carrying on the trade. 
 
 The hopes of the public were so much raised by 
 the favourable appearance of a most lucrative trade, 
 that more actions were greedily demanded. 
 
 Accordingly, in a month after, July 1719, another 
 creation was made of 50,000 actions ; and the price 
 of them fixed at 1000 livres. 
 
 It must be observed, that all actions delivered by 
 the company of the Indies, originally contained an 
 obligation on the company for po more than 4 per
 
 PRINCIPLES OF MONICY, 283 
 
 Cipwf. upon the value of 500 livres, with a proportioij 
 of the profits on the trade; so that the rise of the 
 actions proceeded entirely from the hopes of tlioie 
 great profits, and from the sinking of the rate of 
 interest; a consequence of the plenty of money to 
 be lent. 
 
 But besides the trade, Avliat raised their value at 
 this time was, that just before the last creation of 
 actions, June 10, 1719, the king had made over 
 the mint to the company, for a consideration of 50 
 millions of livres; and this oj)ened a new branch of 
 profit to every one interested. 
 
 The sale of the last coined actions taking place at 
 .1000 livres each, so great a rise seems to have en- 
 gaged the regent to extend his views much farther 
 than ever. 
 
 The fourth creation of actions was in the begin- 
 ing of September 17^9. 
 
 In the interval between the third and the fourth 
 creation, the regent made over the general farms 
 to the company, who paid three millions and a half 
 advanced rent for them. And the company obliged 
 themselves to lend the king (including the 100 mil- 
 lions already lent upon the first creation of actions) 
 the immense sum of 16OO millions at 3 per cent- 
 that is, for 48 millions interest. 
 
 No sooner had they got this new source of riches 
 into their hands, than they promised a dividend of 
 no less than 200 livres on every action, which was
 
 f84 PRINCIPLES OF MONEV. 
 
 ten times more than was divided on them when at 
 first created. 
 
 The consequence of this was, that (supposing the 
 dividend to have been permanent and secure) an ac- 
 tion then became as well worth 5000 livres as at 
 Jirst it was worth 500 livres; accordintrly to 5000 did 
 it rise, upon the promise of this new dividend. 
 
 By this operation the whole debts of France were 
 to be turned into actions; and the company was to 
 become the public debtor, instead of the King-, who 
 would have had no more to pay but 48 million of 
 interest to the company. 
 
 CHAPTER XXX. 
 
 Conttnuution of the Account of the Royal Bunk (rf 
 
 France J xintll the total Bankraptvy, on 
 
 May -21, 1720. 
 
 NOW resume the thread of my story. We left 
 off at that period when the credit of the company 
 and of the bank was in all its gloi*y, November 
 1719; the action selling at 10,000 livres, dividend
 
 PRINCIPLES OF MONEY. 28^ 
 
 200 livres a-yeat per action, and the bank lending 
 
 at 2 per cent all this was quite consistent with the 
 
 then rate of money. 
 
 In this state did matters continue until the 22d of 
 February 172O, when the bank Avas incoiporated 
 with the company of the Indies. 
 
 The king still continued guarantee of all the 
 bank notes ; none were to be coined but by his au- 
 thority: and the comptroller-general for the time^ 
 being, was to have, at all times, together with the 
 Prevof des merchands of Paris, ready acxess to in- 
 spect the books of the bank. 
 
 As the intention, at the time of the incorporation, 
 was to coin a very great quantity of notes, in order 
 to buy up the actions, and to bonow back the mo- 
 ney, in order to pay off the creditors, it was ])roper 
 to gather together as much coin as possible, to 
 guard against a run upon the bank: for which pur- 
 pose, the famous Arret de Conse'iL of the 2/th 
 of February 1/20, was published, forbidding any 
 person to keep by them, more than 500 livres in 
 coin. 
 
 This was plainly annulling the obligation in the 
 bank paper, to pay to the hearer on demand, the sun} 
 ^specified, in silver coin. 
 
 Was it not very natural, that such an arret should 
 have, at once, put an end to the credit of the bank? 
 No such thing however happened. The credit re- 
 mained as solid after this as before; and nobody
 
 $8G PRINCIPLES OF MONEY. 
 
 minded gold or silver any more than if the denonil* 
 nation in their paper had had no relation to these 
 metals. Accordingly, many -vvho had coin and 
 confidence, brought it in, and were glad to get pa- 
 per for it. 
 
 The coin being collected in about a week's time, 
 another An^et de Conseil, of the 5th of March, was 
 issued, raising the denomination from 6o livres to 
 SO livres the marc. Thus, I suppose, the coin which 
 the w^eek before had been taken in at Go livres, was 
 paid away at 80: and the bank gained 33t pei^ cent. 
 upon this operation. Did this hurt the credit of the 
 . bank paper? Not in the least. 
 
 As soon as the coin Avas paid away, which was not 
 a long operation, for it was over in less than a week; 
 another AtTet de Consell, of the llth of the same 
 month of March, came out, declaring that, by the 
 first of April, the coin was to be again reduced to 
 70 livres the marc, and on the first of May to 6'5 
 livres. Upon this the coin, which had been paid 
 away the week before, came pouring into the bank, 
 for fear of the diminution which was to take place 
 the first of April. In this period of about three 
 wrecks, the bank received in coin about 44 millions 
 of livres ; and those who brought it in thought they 
 were well rid of it. 
 
 It was during the months of February, March, 
 and April 17 20, that the great operations of the 
 system were carried on.
 
 PRINCIPLES OF MONEY. 28/ 
 
 We may see by the chronological anecdotes in the 
 2Sth chapter, what prodigious sums of bank notes 
 were coined, and issued during that time. It was 
 during this period also, that a final conclusion was 
 put to the reimbursing all the public creditors with 
 banknotes: in consequence of which payment, the 
 former securities granted to them by the king, under 
 the authority of the parliament of Paris, were with- 
 drawn and annulled. 
 
 Here then we have conducted this scheme to the 
 last period. 
 
 There remained only one step to be made to con- 
 clude the operation, to wit, the sale of the actions, 
 which the regent had in his custody to the number 
 of 400,000. 
 
 These were to be sold to the public, who were at 
 this time in possession of bank notes to the value of 
 2,235,083,590 livres. See the foregoing table. 
 
 Had the sale of the actions taken place, the notes 
 would all have returned to the bank, and there have 
 been destroyed : by which operation, the company 
 would have become debtor to the public for the di- 
 vidends of all the actions in their hands, and to the 
 king for all those which might have remained in the 
 hands of the regent. 
 
 But alas! all this is a vain speculation. The sys- 
 tem, which hitherto had stood its ground in spite of 
 the most violent shocks, was now to tumble into 
 ruin from a childish whim.
 
 ?88 PRINCIPLES OF MONEY, 
 
 In order to set this stroke of political arithmetio 
 in the most ludicrous light possible, I must do it in 
 Dutot's own \vovds, uttered with a sove heart and io 
 sober sadness. 
 
 " This prodigious quantity of money in circula-r 
 *^ tion," says he, "had raised the price of every 
 '* thing excessively : so in order to bring down prices,, 
 *' it was judged more expedient to diiiiinish the de- 
 " nomination of the banknotes, than to, raise the 
 *' denomination of the coin; because that diminish-. 
 " ed the quantity of money, this augmented it." 
 
 This was the grand point under deliberation, be- 
 fore the famous arret of the 21st of May w^as given^ 
 viz. whether it were better to raise the value of the 
 coin, iv/iich did not belong to the bank, but to the 
 French nation, to double the denomination it bore 
 at this time, that is, to ISO livres the marc, by 
 which means the 1300 milKons would have made 
 2600 millions, or to reduce the 2600 millions of bank 
 notes to one half, that is, to 1300 millions, the total 
 denomination of the coin. 
 
 After a most learned deliberation, it was resolved 
 to reduce to one half, the denomination of all the 
 paper of France, bank notes as well as actions, in- 
 stead of raising the denomination of the coin; and 
 this because the prices of commodities were sup- 
 posed to be in proportion to the quantity of the de- 
 nominations of money. 
 The arret was no sooner published, than the whole
 
 PRINCIPLES OF MONEY*, 289 
 
 jpaper fabric fell to nothing. The day following, the 
 22d of May, a man might have starved with a hun- 
 dred millions of paper in his pocket. 
 
 The diminution ilpon the paper, by the arn^et of 
 the 21st of May, raised a most terrible clamour; 
 and Law became the execration of France, instead 
 of being considered as its saviour. He was banished^ 
 and reduced to beggary the same day. 
 
 Had matters been left without any change at all, 
 no bad consequences would have followed: these 
 existed only in the heads of the French theorists. 
 There was, indeed, twice as much money in bank 
 notes as in coin, in the whole kingdom of France: 
 and what then? 
 
 When the regent saw the fatal effects of his arret 
 of the 21st of May, he revoked it on the 27th of the 
 same month. On the 29th, he re-established all 
 the paper at its former denomination: but confidence 
 was gone, and was no more to be recalled. 
 
 Pp
 
 290 PRINCIPLES OF MONEY* 
 
 CHAPTEK XXXI. 
 
 OJ Banks of Deposit and Transfer. 
 
 NOW dismiss the siihject of banks of circulation. 
 The unspeakable advantages drawn from this insti- 
 tution, when properly regu]atedj in supplying money 
 at all times to those who have property for the en- 
 couragement of industry, aiul for improvements ol 
 all sorts ; and the bad consequences whicli result to 
 society, from the abuse they are exposed to; has en-^ 
 gaged me, perhaps, in too long a discussion of vari- 
 ous circumstances relating to them. 
 
 I now come to treat of banks of deposit, or of trans- 
 fer of credit: an institution of the greatest utilitv for 
 commerce. 
 
 These two species of banks differ essentially in two 
 particulars. 
 
 First, That those of circulation serve the purpose 
 of melting down unwieldy property into money ; and 
 of preserving the quantity of it at the proportion of 
 the uses found for it. Those of deposit, are calcu- 
 lated to preserve a sum of coin, or a quantity of pre- 
 cious movables, as a fund for carrying on the circu- 
 lation of payments, with a proportional value of cre- 
 dit or paper money secured upon them.
 
 PRINCIPLES OF MONEY. 291 
 
 Secondly, In the banks of circulation^ the fund up- 
 on which the credit is built, is not corporeally in the 
 custody of the bank; in the other it is. 
 
 The fundamental principle, then, of banks of de- 
 posit, is the faithful preservation of the fund deliver- 
 ed to the bank, upon which credit, in money, is given 
 for the value. 
 
 If at any time a bank of deposit should lend^ or 
 should in anywise dispose of any pait of this fund, 
 which may consist in coin, bullion, or any other pre- 
 cious movable, once delivered to them, to the end 
 that a credit in money may be written down for it in 
 their books of transfer, in favour of the depositor, 
 and his assigns ; by this act, the bank departs from 
 the principles upon which it is established. And if 
 any bank be e:,ta])lished which, by its regulations, 
 may so dispose of the fund of its credit; then such a 
 hank liecomes of a mixed nature, and paiticipates of 
 that of a bank of circulation. 
 
 END OF BOOK THIRD.
 
 PRINCIPLES OF MONEY, 
 
 BOOK THE FOURTH. 
 
 PF EXCHANGE. 
 
 CHAPTER I. 
 
 Of the First Principles of Exchange. 
 
 REGULAR bill of exchange is a mercantile 
 contract, in which four persons are concerned, viz. 
 J'irstThe drawer, who receives the value. Second- 
 ly, His debtor in a distant place, upon whom the bill 
 is drawn, and who must accept and pay it. Third- 
 ly, The person who gives value for the bill, to whose 
 order it is to be paid. Fourthly, The person to whom 
 it is ordered to be paid, creditor to the third. 
 
 By this operation, reciprocal debts, due in two dis- 
 tant parts are paid by a sort of transfer, or permuta- 
 tion of debtors and creditors. 
 
 (A) l^ Londqn, is creditor to (B) in Paris, value
 
 ^(^4 PRINXIPLES OF MONEY. 
 
 ^100; (C) again in London, is debtor to (D) in 
 Paris, for a like sum. By the operation of the bill 
 of exchang-e, the London creditor is paid by the 
 London debtor, and the Paris creditor is paid by 
 the Paris debtor; consequently, the twft debts are 
 paid, and no money is sent from London to Paris, 
 nor from Paris to London. 
 
 In this example, (A) is the drawer, (B) is the ac- 
 ceptor, (C) is the pmxhaser of the bill, and (D) re- 
 ceives the money. Two persons here receive the 
 money, (A) and (D), and two pay the money, (B) 
 and (C); which is just what must be done when two 
 debtors and two creditors clear accounts. 
 
 This is the plain principle of a bill of exchange. 
 From which it appears that reciprocal and equal 
 debts only can be acquitted by them. 
 
 When it therefore happens, that the reciprocal 
 debts of London and Paris (to use the same ex- . 
 ample) are not equal, there arises a balance on one 
 side. Suppose London to owe Paris a balance, va- 
 lue ^100. How can this be paid? I answer, that 
 it may either be done with or without the interven- 
 tion of a bill. 
 
 With a bill, if an exchanger, finding a demand 
 for a bill upon Paris, for the value of ^ 100 when 
 Paris ow^s no more to London, shall send ^100 te 
 his correspondent at Paris in coin, at the expence, 
 I suppose of ^1. and then, having become creditor 
 on Paris, he can give a bill for the v^lue of ^100. 
 upon his being repaid his expence, jtad paid for his. 
 risk and trouble. /;
 
 PRINCIPLES OF MONEY. 293 
 
 Or it may be paid witliout a bill, if the London 
 debtor shall send the coin himself to his Paris cre- 
 ditor, without employing an exchanger. 
 
 This last example sheAvs of what little use bills 
 are in the payment of balances. As far as the debts 
 are equal, nothing can be more useful than bills of 
 exchange, but the more they are useful in this easy 
 way of business, the less profit there is to any per- 
 son to make a trade of exchange, when he is not him- 
 self concerned, either as debtor or creditor. 
 
 When merchants have occasion to draw and re- 
 mit bills for the liquidation of their own debts, ac- 
 tive and passive, in distant parts, they meet upon 
 Change; where, to pursue the former example, the 
 creditors u})on Paris, when they want money for 
 bills, look out for those who are debtors to it. The 
 debtors to Paris again, when they want bills ibr 
 money, seek for those who are creditors upon it. 
 This is a representation of what we have frequently 
 called the money market, in which the demand is 
 for monei), or for hilh. 
 
 This market is constantly attended by brokers, 
 who relieve the merchant of the trouble of searching 
 for those he wants. To the broker every one com- 
 municates his wants, as far as he finds it prudent; 
 and by going about among ail the merchants, the 
 broker discovers the side upon which the greatei- de- 
 mand lies, for money, or for bills. 
 
 When balances come to be paid, exchange be- 
 comes intricate; and merchants are so much em-
 
 29^ PRINCIPLES or MONEY. 
 
 ployed in particular branches of busfness, that thby 
 are obliged to leave the liquidation of their debts td 
 a particular set of men, who make it turn out to the 
 best advantage for themselves. 
 
 We may, therefore, here repeat \^'hat we have 
 s^id above, that the more difficulty there be found 
 in paying a balance, the greater will be the loss, to 
 the nation. 
 
 I shall, in as short and distinct a manner as pos- 
 sible, recapitulate, under four articles, what I hope 
 will be sufficient to refresh the memory upon each 
 of them. 
 
 The first difficulty which occurs in paying a ba- 
 lance, is to determine exactly the tme and intrinsic 
 value of the metals or coin in which it is to be paid ; 
 that is to say, the real par. 
 
 The second, How to remove the domestic in- 
 conveniences which occur in paying with the me- 
 tals or coin. 
 
 The third, How to prevent the price of exchange 
 from operating upon the w^hole mass of reciprocal 
 payments, instead of affecting the balance only. 
 
 The remedies and palliatives for these three in- 
 conveniences once discovered, comes the last ques- 
 tion, viz. How, when other expedients prove in- 
 effectual for the payment of a balance, the same 
 may be paid by the means of credit, without the 
 intervention of coin ; and who are those who should 
 conduct this operation.
 
 PttlNCIPLES OF xMONEY. 297 
 
 CHAPTER II, 
 
 How to determhm exactly the true mid intrinsic vu- 
 lue of the Metals, Coin^ or Money, in which a Ba^ 
 lunce to foreign Nntions is to be pai<t 
 
 JL his first question regards the whole mass of re*- 
 ciprocul paynieuts, as well as that of the balance. 
 
 K\ ery payment to be made of a determinate and 
 fixed value, that is to say, of a liquidated debt, 
 must be paid in a value equally determinate in its 
 nature. 
 
 This I suppose to be the case, whether payment 
 !jc made in the precious metals unmannfacturedj 
 that is, bullion, or in a nation's coin, or in deno- 
 minations of money of account. Ail payments in 
 merchandize, except bullion, must suffer conversions 
 of value before the debts can be liquidated. 
 
 jMoney of account, which is what we understand by 
 denominations^ we have already defined to be a scale 
 of equal parts, calculated to determine the value of 
 things, relatively to one another. It must, therefore, 
 be by the money of account of diiferent nations, that 
 the value of bullion and of coin can be ascertained. 
 
 When coin is introduced, the denominations of 
 
 2q
 
 298 PRINCIPLES OF MOl^EY. 
 
 money are realized in a determinate quantity of the 
 precious metals; and the fabrication of the bullion 
 into coin, raises the value of this commodity, bul- 
 lion, like the manufacturing of every other natural 
 production. 
 
 When coin, therefore, is employed in paying sums 
 according to the legal denomination which it car- 
 ries, it is money, not merchandize; but when it is 
 given at any other rate than its denomination, it 
 is merchandize, not money. 
 
 In the third book, we have shewn how utterly 
 impossible it is to realize with exactness, the deno- 
 minations of money of account, in the metals which 
 are constantly varying in their value, and exposed 
 to waste in circulation. 
 
 We have shewn, by many examples, how, in 
 fact, the value of the pound sterling has been sub- 
 ject to great vicissitudes of late, from the ^eat dis- 
 order of the coin, 
 
 This being the case, the way to calculate the real 
 par of exchange between nations, who have in com- 
 mon no determinate and invariable money, exclusive 
 of coin, is to consider fine gold and silver as the 
 next best standard. 
 
 This is a merchandize which never varies in its 
 quality. Fine gold is always the same in every mass; 
 and weight for weight, there is no difference in its 
 value or quality any where. 
 
 This standard being once adopted, the calculation 
 of the real pai- becomes an easy operation to those
 
 PRINCIPLES OF MONEY. 299 
 
 who know the course of the bullion market in the 
 two places exchanging. 
 
 If, by the exportation of all the heavy coin of 
 London, bills must be paid in a worn-out currency, 
 the rise in the price of gold in their market, above 
 mint price, wull mark pretty nearly how far it is 
 light. 
 
 li\ on the other hand, the wars of France, or an 
 unfavourable balance upon her trade, shall oblige 
 her to export her coin, this operation will sink the 
 value of it, or raise the price of bullion, which ever 
 way you choose to express it. 
 
 We have, I think, demonstrated, in the second 
 book, that a wrong balance upon the French trade 
 may raise bullion in the Paris market to the price of 
 coin; and that a right balance may bring it down to 
 mint price. The price of coinage is above 8 per cent. 
 So that 8 per cent, of fluctuation in the price of bul- 
 lion is easily accounted for in the Paris market, 
 without taking into the account the variations in the 
 English market. 
 
 In London, where no coinage is paid, were all 
 the coin of full weight, and exportation free, coin 
 and standard bullion wotild constantly stand at the 
 same price: but when the heavy coin is exported, 
 and the currency becomes light by the old coin re- 
 maining in circulation, the price of b^llion rises ia 
 proportion. 
 
 Is it surprizing that, at London, gold in bullion 
 should be worth as much as gold of the same stand-
 
 300 PRINCIPLES OF MONfiY. 
 
 ard in guineas, weijrht for weight? Is it not worth as 
 much at the mint? Why should it not he worth 
 as much at the market? 
 
 To calcuhite, as every hody does, the par of the 
 French crown, either hy the gold or the silver in 
 the English standard coin, when no such standard 
 coin exists; and to state all that is gi>en for the 
 crown above 2^\d. if yon reckon by the silver, or 
 30id. if you reckon by the gold, for the price of a 
 wrong balance, is an error which may lead to th» 
 most fatal consequences. 
 
 If government should think fit to impost, in their 
 own mint, a coinage, equal to that of France, and 
 make all their coin of equal weight, and at the due 
 proportion, it will take otf all the loss we suffer by 
 paying coinage to France (which we at present im- 
 pute to the exchange) while she pays none to us 
 
 But then it will occasion nearly the same fluctua- 
 tions upon the real par of exchange as at present; 
 only from another cause on the side of Great Bri- 
 tain. At present our exchange becomes favourable 
 from the weight of our own currency, and the ba- 
 lance against France upon her trade; which, in 
 Paris, raises the price of the bullion with which we 
 pay our French debts. On the other hand, our ex- 
 change becomes unfavourable from the lightness of 
 our own currency, from the coinage Ave pay to 
 France, and balance against us; which last carries 
 off all our new guineas; and in the Paris market, 
 sinks the value of that bullion in which we pay our 
 French debts.
 
 PRINCIPLES OF MONEY. 301 
 
 Were matters put upon a right footing, we should 
 gain from France the price of our coinage, when our 
 balance is favourable, and pay coinage to France 
 when their balance is favoura])le; instead of seeing 
 our exchange turn more in our favour, from the 
 additional weight only of the coin in which we 
 pay. 
 
 CHAPTER III. 
 
 How to re7nove Inconveniences which occur in pai/- 
 
 inn: Balances with the Metals or Coin 
 
 of a Nation. 
 
 JL HE chief inconvenience which occurs when ba- 
 lances are to be paid in bullion or coin is this The 
 
 want of secure and ready transportation, from the 
 obstructions government throws in the way to pre- 
 vent it. 
 
 The first difficulty mentioned, to wit, the want of 
 secure and ready transportation of the metals, pro- 
 ceeds in a great measure from the obstniction go- 
 vernment throws in the way, to prevent the expor- 
 tation of them. To remove which difficulty, it is 
 proper to shew how far it is the interest of govern-
 
 302 PRINCIPLES OF MONEY. 
 
 intvnt to obstruct, how far to accelerate the transpor- 
 tation of the metals. 
 
 We have said that it is the advantage of every 
 state, in point of trade, to have balances paid with 
 the least expence. If then we suppose that it is ei- 
 ther necessary or expedient that this balance should 
 be paid in the metals, government should in this case 
 facilitate by every method the sending them off in 
 the cheapest and securest way. 
 
 But since governments do not generally follow 
 this rule, we must examine the reasons which engage 
 them to prefer a contrary conduct. 
 
 The principal, the most general, and most rational 
 objection against the exportation of the metals, is, 
 that when it is permitted without restriction, it en- 
 gages the people, when they go to foreign markets 
 for articles of importation, to run to the coin, instead 
 of carrying thither the product and manufactures of 
 the country. From which a consequence is drawn, 
 that as long as coin and bullion are fairly allowed to 
 be exported, the rich inhabitants will employ them, 
 for the' purchase of foreign commodities, to the hurt? 
 of domestic industry. 
 
 Nothing, however, is more irrational, than a gene- 
 ral prohibition to export the metals; because by 
 good regulations, you may prevent the importation 
 of manufactures; but it is hardly possible to prevent 
 the exportation of the metals necessary to pay for 
 what you have bought from strangers, by the per- 
 mission of government: and on the other hand.
 
 PRINCIPLES OF MONEY. 30"3 
 
 suppose you do effectually prevent the exportation of 
 the metals, the consequence will be, to put an end 
 to all foreign trade even in natural produce, which 
 on many occasions may be necessary for the subsis- 
 tence of the people. What nation will trade with 
 another who can pay only by barter? All credit will 
 likewise be cut off; for who will exchange by billsj 
 with a place which cannot pay, either in their own 
 currency, or with the metals, the debts which they 
 reciprocally owe? 
 
 The maxim, therefore, here, is to prevent, as 
 much as possible, the contracting of debts witli 
 strangers; but when they must be contrficted, to fa- 
 cilitate the payment of them. 
 
 To set this matter in a fair light, and as an exer- 
 cise upon principles, I shall borrow an example from 
 history; in which a clog upon the exportation of the 
 metals and coin was very politically laid on. 
 
 We learn from the history of Henry the Seventh of 
 England, a sagacious prince, that he established very 
 severe laws against the exportation of bullion; and 
 obliged the merchants who imported foreign com- 
 modities into his dominions, to invest their returns 
 in the natural produce of England, which at that time 
 consisted principally in wool and in grain. 
 
 Tlie circumstances of the times in which that 
 prince lived, must therefore be examined, before we 
 can justly find fault with this step of his political 
 economy. 
 
 In Henrv the Seventh's time, the foreign trade 6f
 
 S04 PRINCIPLES OF MONEY. 
 
 England was entirely in the hands of foreigner?, 
 and every elegant manufacture almost c^me from 
 abroad. 
 
 Under sud\ circumstauces, is it not plain, that 
 the prohibition to export bullion and coin, was a 
 compulsion only concomitant with other regula- 
 tions, to oblige the foreign merchants, residing in 
 his kingdom, to buy up the superfluity of the Eng-- 
 lish natural produce of wool and grain? Had not 
 the king taken these measures, the whole money of 
 the nation would have been exported; the super- 
 fluous natural produce of England w ould have lain 
 upon hand; the redundancy of Avhich would have 
 brought the price of them below the value of the 
 subsistence of those who produced them; agricul- 
 ture would have been abandoned; and the nation 
 would have been undone. 
 
 I allow that nothing is so absurd as to permit the 
 consumption of foreign productions, and to forbid 
 the exportation of the price of them. 1 also allow 
 that every restraint laid upon exporting silver and 
 gold, effects the consumer of foreign goods, and ob- 
 liges him to pay the dearer fur them; but this addi- 
 tional expence to the consumer, does not augment 
 the mass of foreign debts. The debt due abroad, 
 will constantly be paid with the same quantity of 
 coin, whether the exportation of it be allowed or 
 not; because the loss of those who pay the balance, 
 arises from the risk of confiscation of the money 
 t)>ey want to export against. law; or from the high
 
 PRINCIPLES OF MONEV. 305 
 
 exchange they are obh'ged to pay to those who take 
 this risk upon themselves. In both cases, the addi- 
 tional expence they are put to, remains in the coun- 
 try, and is repaid them by the consumers; conse- 
 quently, can never occasion one farthing more to be 
 exported. Prohibitions, therefore, upon the expor- 
 tation of specie, are not in every case so absurd as 
 they appear at first sight. It is very certain that 
 nobody ever gives money for nothing; consequently, 
 a state may rest assured that the proprietors of the 
 specie, their subjects, will take sufficient care not 
 to make a present of it to foreigners. The intention, 
 therefore, of such prohibitions is not so much to pre- 
 vent the payment of what people owe, as'to prevent 
 that payment from being made in coin or bullion; 
 and also to discourage the buying of such foreign 
 commodities as must be paid in specie, preferably to 
 others which may be paid for with *he returns of 
 home produce. 
 
 In a trading nation, I allow that no restriction of 
 this kind ought to be made general ; because it then 
 effects the useful as well as the hurtful branches of 
 importation: biit in Henry's days, the sale of corn 
 and wool was sufficient to procure for England all 
 it wanted from abroad; and the interests of trade 
 were not sufficiently understood, to enable the state 
 to act by any other than the most general rules. 
 Forbidding the exportation of coin, was found to 
 promote the exportation of English productions, and 
 this was a sufficient reason for making the prohibit 
 Rr
 
 306 PRINCIPLES OF MONEY. 
 
 tion peremptory. In this view of the matter, did 
 not Henry judge well, when he oliligcd the mei^ 
 chants who imported foreign goods, to invest the 
 price they received for them in English commodi- 
 ties ? Once more I must say it, he was not so much 
 afraid of the consequences of the money going out, 
 as of the corn and wool remaining at home: had he 
 been sure of the exportation of these articles to as 
 good purpose another way, the j^rohibition would 
 have been absurd; but I am persuaded this was not 
 the case. 
 
 When nations give coinage gratis, or W'hen they 
 allow the coin of other nations the privilege of pas- 
 sing current under denominations exactly propor- 
 tioned to its intrinsic value, then coin never can be 
 worth more than any other bullion of the same stan- 
 dard; consequently, will be exported or smuggled 
 out whenever there is a demand for it abroad. 
 
 If, therefore, a nation do really desire to avoid 
 an expence at the mint, they must make it the in- 
 terest of merchants to export every other thing pre- 
 ferably to their own coin. This is done by impo- 
 sing a duty upon the coinage; and this will either 
 prevent the coin going out unnecessarily, or if it be 
 necessary to export it, the coin will return in the 
 payments made to the nation; because of its ad- 
 vanced value above any other bullion which can 
 be sent. 
 
 The forbidding of the exportation of coin, im- 
 plies a restriction upon the exportation of bullion ;
 
 PRINCIPLES OF MONEY. 30/ 
 
 because, unless the bullion be examined at the cus- 
 tom house, and the stamps upon it looked at, it 
 may happen to be nothing but the nation's coin 
 melted down, with an intention to avoid the law. 
 For this reason, whoever brings bullion to be 
 stamped, whether it be for exportation or not, 
 must declare that it has not been made of the na- 
 tion's coin. How slender a check are all such de- 
 clarations ! The only one effectual is private interest; 
 and as no man will take his wig to stuff his chair, 
 when he can get cheaper materials equally good, so 
 no man will melt down coin which bears an advanced 
 value, when he can procure any other bullion. 
 
 On the whole, we may determine, that a flourish- 
 ing commercial state, which has, on the average of 
 its trade, a balance coming in from other countries, 
 should lay it down as a general mle, to facilitate the 
 exportation of its coin, as well as of bullion : and if 
 a very particular circumstance should occur, which 
 may continue for a short time, it may then put a 
 temporary stop to it, and facilitate the payment of 
 the balance by the means of credit.
 
 308 PRINXIPLES OP MONEY. 
 
 CHAPTER IV. 
 
 How the Price of Exchange, in a prosperous trad- 
 ing Nation, may he prevented from operating upon 
 the ivhole Mass of reciprocal Payments, insteadof 
 affecting the Balance only. 
 
 E have taken it for granted, that the price of 
 exchange is a hurt to trade in general. 
 
 In this chapter, we shall inquire more particular- 
 ly than we have done, in what this hurt consists. 
 
 The point of view of every man, whether he he a 
 merchant or not, is first honestly, and as far as law 
 and fair dealing do permit, to consult his own pri- 
 vate interest; and in the second place, to promote 
 that interest with which his own is most closely con- 
 nected. 
 
 According to this rule, every merchant will en- 
 deavour to manage his exchange business to the best 
 advantage to himself. If the balance be against his 
 country, he will sell his bills on the country credi- 
 tor as dear as he can ; that is, he will endeavour to 
 raise the price of exchange as high as he can against 
 his country, whatever hurt may thereby result to the 
 general trade of it: and in so doing, he does only
 
 PRINCIPLES OF MONEY. > 30^ 
 
 what duty to himself requires; because it is by mind- 
 ing his business only, that he can trade upon equal 
 terms with his neighbours, every one of whom will 
 avail themselves of the like fluctuations, when they 
 happen to be in their favour. 
 
 From this I conclude, that since the loss upon 
 high exchange against a country, affects principally 
 the cumulative interest of the whole, relatively to 
 other trading nations ; it is the business of the states- 
 man, not of the merchants, to provide a remedy 
 against it. 
 
 Let me now suppose that Paris owes a balance to 
 London, no matter for what sum. The reciprocal 
 debts between Paris and London are all affected by 
 the consequence of this balance: that is to say, some 
 pay or receive more than the real par; some pay or 
 receive less. To discover where the profit centers, 
 we are now to inquire who are those who receive 
 more, who are those who receive less. And as pro- 
 fit and loss are here only relative, that is to say, the 
 profit of the one is compensated by the loss of 
 the other; we must see whether upon the whole, the 
 price of the exchange in this case be favourable to 
 England, to which, by the supposition, the balance 
 is due, and unfavourable to France, which is the 
 debtor. 
 
 The question thus stated, let us examine the ope- 
 rations of exchange at London and Paris, and the 
 state of demand in both, for money or bills. 
 
 In the London market the demand will be for
 
 310 PRINCIPLES OF MONEYS 
 
 money in London for bills on Paris; and he who de* 
 mands, must pay the exchange; consequently, the 
 London merchants, creditors of the vation-dehtor\ 
 will pay the exchange; that is to say, they will 
 sell their ])ills on Paris below par; and the London 
 merchants, debtors to the nation- debtor, will buy 
 them_, and gain the exchange; that is, they will 
 buy bills upon Paris below par. 
 
 Now as this negotiation is carried on at Londortj 
 I must suppose it to take place amongst English- 
 men ; one part of whom will gain exactly what the 
 other loses; consequently England, in this respect, 
 neither gains or loses by the exchange paid in 
 London. 
 
 Let us next examine the interest of the merchants, 
 and the interest of the nation s trade. 
 
 The creditors of the nation-debtor, who have lost 
 by the exchange, are those who have exported Eng- 
 lish commodities to France. Upon this profitable 
 branch of commerce the exchange occasions a loss, 
 the consequence of which is, to discourage exporta- 
 tion. 
 
 The debtors to the nation-debtor, who have gained 
 by the exchange, are those who have imported 
 French commodities to England. Upon this hurt- 
 ful branch of commerce, the exchange occasions a 
 profit; the consequence of which is, to encourage 
 importation. 
 
 This is not all. The English merchants export- 
 ers, who have lost, cannot draw back their loss upoji
 
 PRINCIPLES OF MONEY. 311 
 
 the return of their trade; because the return of their 
 trade is the money due by France, the balance in- 
 cluded. Whereas the English merchants importers 
 may draw back their loss upon the return of their 
 trade; because that return is merchandize; which 
 they can sell so much the dearer to their own coun- 
 trymen. 
 
 If the balance be in favour of London, importers 
 gain, as we have seen; when it is otherwise, and 
 when they are obliged to pay the exchange, they 
 indemnify themselves, by the sale of their goods so 
 much the dearer. High exchange, therefore, may 
 hurt exporters, but never can hurt importers. 
 
 Let us next examine the operation of exchange at 
 Paris. 
 
 In the Paris market, the demand will ])e for bills 
 upon London for money in Paris; and he who de- 
 mands must pay the exchange. The debtors, there- 
 fore, to the nation-creditor, must pay the exchange, 
 and the creditors of the nation-creditor will receive 
 it; and as both are Frenchmen, the profit and loss 
 to Paris exactly balance one another. 
 
 But the debtors of the nation-creditor are here 
 the importers of English goods ; consequently, this 
 trade, hurtfiil to France, would be hurtful to the 
 importer, could he not indemnifv- himself by selling 
 them so much the dearer to his countrvmen. 
 
 The creditors, again, of the nation-creditor, who 
 gain the exchange, are the exporters of French 
 goods to England; so that here the exportation
 
 312 PRINCIPLES OF MONEY. 
 
 meets with an encouragement from a balance against 
 the country. 
 
 The reciprocal debts thus transacted by bills of 
 exchange, Ave see that no profit can be made, nor 
 loss incurred, either to London^ or Paris, by this 
 operation. 
 
 The profit to Frenchmen is compensated by the 
 loss to Frenchmen; the same may be said of the 
 English merchants : but the balance due after these 
 operations are over, and the more remote conse- 
 cjuences of high exchange, affect the relative interest 
 of the tv70 nations. 
 
 This balance is generally sent by the country- 
 debtor, either to the country-creditor, or to their 
 order in a third country, to which the country-^ 
 creditor is indebted. 
 
 The transportation and insurance of this balance 
 is an expence to those who owe it ; and the profit, 
 if any there be on this operation, naturally belongs 
 to the exchangers of the same nation, who conduct 
 it. So whether exchange be paid upon bills drawn, 
 or expence be incurred in the sending away the ba- 
 lances, no profit can accrue upon this to the nation- 
 creditor, to the detriment of the debtor: it must 
 therefore do hurt to both relatively to nations where^ 
 upon the average of trade, exchange is lower.
 
 PRINCIPLES or MONEY. 313 
 
 CHAPTER V. 
 
 How, when other Expedients prove ineffectual for 
 discharging of Balances, the same may he paid 
 by the Means of Credit, ivithout the Intervention 
 of Coin or Bullion; and who are those who ought 
 to conduct that Operation, 
 
 JiT remains to inquire, Avhat are the most proper 
 methods to acquit what a nation may owe, after it 
 has done all it can to pay the value of their balance 
 in the other way. 
 
 At first sight, it must appear evident that the only 
 method here is to give security, and pay interest for 
 what cannot be paid in any other value. This in 
 the end is constantly w^hat is done by every nation ; 
 but as the ordinary methods of bringing it about, 
 are very perplexed, and are attended with expences 
 which raise exchange to a great height, and thereby 
 prove a prodigious discouragement to trade in ge- 
 neral; it would be no small advantage, coukl all 
 this loss on exchange be thrown equally upon every 
 class within the state, instead of being thrown en- 
 tirely upon its commerce. 
 
 As this is the expedient to be proposed, it will not 
 be amiss to observe, that foreign balances arise 
 chiefly upon four articles. First, The great impor- 
 tation and consumption of foreign productions. Se- 
 condly, The payment of debts and interest due to 
 Ss
 
 314 PRINCIPLES OF MONEY. 
 
 foreigners. Thirdly, The lending money to other 
 nations. Fourthly, The great expence of the state, 
 or of individuals abroad. 
 
 It cannot be denied, that when a heavy balance 
 is due by a nation, it has the effect of raising ex- 
 change upon every draught or remittance. When 
 bills are demanded to pay a foreign claim, it cannot 
 be determined from which of the four articles, just 
 now mentioned, the claim has arisen. Whether for 
 national purposes or not, the exchange is the same, 
 and equally aft'ec ts the whole interest of trade. 
 
 If this be a fair state of the case, I think we may 
 determine that such balances ought to be paid by 
 the assistance and inters^ention of a statesman's ad- 
 ministration. 
 
 The object is not so great as at first sight it may 
 appear. We do not propose that the value of this 
 balance should be advanced by the state : by no 
 means. They who owe the balance must then, as 
 at present, find a value for the bills they demand. 
 Neither would I propose such a plan for any nation 
 who had, upon the average of their trade, a balance 
 against them ; but if, on the whole, the balance be 
 favourable, 1 would not, for the sake of saving a 
 little trouble and expence, suffer the alternate vibra- 
 tions of exchange to disturb the uniformity of pro- 
 fits, which uniformity tends so much to encourage 
 every branch of commerce. 
 
 THE END.