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1
2
3
1
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•;•• 4: .
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i
'M.
)
V.
i^
y — -:
ANALYSIS
OF THE
MONEY SITUATION
Of
4, t-v.
GREAT BRITAIN,
WXTH RESPECT TO ITS
COINS AND BANK NOTES
4
.*
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LONDON:
iS 1
la
VRXNTBD FOR J. MACKINLAY, 87, STRAND ; AN%
RICHARDSON, CORNHILL;
■T •fM*Mlt.(iAK» BOW STREET, COVKNT OARDIN-
1810.
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CONTENTS,
CHAP. L
VACt
ON THE BALANCE OF TRADE, AND THE CONSeO
QUENT PLENTY OR SCARCITY OF TEE PRECIOUS > 1
METALS, ^
CHAP. 11.
ON THE CIRCULATION OF PAPER MONEY, WHEN^
A BALANCE OF TRADE HAS CARRIED OUT OF I j^
THE COUNTRY THE GREATEST PART OF THE f
CIRCULATING COIN, J
. •. ; *.•'''.".,;"».•'
I » .■ , •
■<'
1 ,1
• • . ' •
' • • .
• • ..; ■
• * » •
I
ANALYSIS,
i'ik-j\ij » .i
Sfc. S^c,
:.'/..: : Th! !r
CHAP. I.
\..M'
I
On the Balance of Trade, and the consequent
Plenty or Scfircity of the "Precious Metals.
>.<)'.'
TN order to form a complete idea of a ba-
lance in the Precious Metals which may
be coming into, or going out of a Trading
Nation, it is necessary to take into view, and
to state, in addition to the value of goods
exported and imported, various other money
transactions on the Debtor and Creditor sides
of the general National Account. For in-
stance,
'#;
B
J)i\ iderids on public or private debts due lo
Foreigners ;
Stocks bought or sold by the same, and
money lent to, or borrowed from them.
In short, every transaction must be taken
into account in one way or the other; and the
balance ultimately due to one or to the other,
becomes apparent in the favourable or unfa-
vourable exchanges with Foreign Nations, as
there must naturally be too many or too few
Bills to be drawn on, or to be drawn by the
exchanging Nation. ,. :;
y
i
. f , '%^ 'T r
The result must, of course, be an import or
export of the Precious Metals to the amount
of such balance for the purpose of liquidat-
ing the impending accounts ; without which, the
exchanges would become more and more fa-
vourable or unfavourable on all the transac-
tions of that Nation, excepting for the Public
Pividends which are for account of the Fo-
reign Creditor.
» ' *
I
To put a stop by Law to the export of the
Precious Metals, is like an individual refusing
to let bis money go out of his house for the
purpose of paying bis debts, though be must
ultimately pay them with an increased ex-
pence, for having refused to do it at first.
Without debts to pay, they must naturally
remain where they were before. Force would
be employed to compel the individual, and a
clandestine exportation of the Metals, even of
the National Coins, would take place, in order
to pay the National Balance, whenever the
exchange became so unfavourable as to
afford a premium or profit adequate to the
risk of melting down the Coin of the Country
into Bullion, as well as of exporting it as
Coins,
1 iM
It cannot appear surprising, that the ba-
il 2
8
lance should for some time past have been
against Great lirituin with the Continent of
Europe, when it is considered how great a
sum is to be paid annually to Foreigners for
dividends, for corn, for subsidies, for naval
stores, and for troops serving abroad.
Add to this the difficulty of disposing of a
sufficient quantity of manufactures, West and
East India, as well as of American produce,
to the Powers on the Continent,
/.'
The various drawbacks on the amount ex<«
ported (even at very low prices), such as
bankruptcies, capture, confiscation, fraud,
and losses at sea, prevents her receiving also
the full amount of it. The usual, and proba*
bly very much increased exports to the East
and West Indies, as well as to South and
North America, have been for the most part
paid for in produce, which has so much in-
creased the dead stock of Great Britain, after
providing for her own consumption, as to
9
ereate no small alarm to the Mercantile ln«
terest. The home consumption hnn no doubt
considerably increased, which has been the
cause of the annually increasing produce of
various taxes. Many years have past, since
between thirty and forty millions sterling
were thought to be the amount of the circu-
lating Coins of Great Britain, for the purpose
of supporting the then existing fabric of na-
tional industry.
• - i
But since that time (the new coinage) this
febric is very considerably increased in bulk
and value also; while the circulating Coins are,
on the contrary, very much diminished, from
the balance being so often against Great
Britain, and from a sufficient Coinage not
having taken place of late years, in order to
replace it and fill up the measure wanted.
Paper Money or Bank-Nolcs have been
issued in greater quantities, and substituted
for the deficiency that arose, to supply tbo
hitherto required quantity of circulating re-
■i-
10
presentative signs, and produced the desired
effect in many respects ; yet however great
the confidence which is due to it at
home, it is an article which cannot be ex-
ported towards paying a balance due to Fo-
reign Nations. '
The stoppage of the Bank of England,
arose from a considerable export of the Me-
tals having taken place sometime before, so
as to render Coin and Bullion very scarce ;
for if that had not been the case, the Bank
ought and would have bought all the im-
ported Bullion, and turned it into Coin in
order to continue or resume its payments.
A small sum would, however, not have
been sufi^lcient for the purpose. It must
here be observed, that the Bank of Eng-
land's Notes amounted tjien only to fourteen
millions ; that Bullion can only be called for
with the intention of coining it, or for paying
a balance to Foreigners ; that the Directors
11
of the Bank are always acquainted with the
existing quantity ; and that no great stock of
imported Bullion can be existing, because it
is in that state not worth keeping, on account
of its not circulating, or giving any interest
to the proprietor, but only the prospect of
profit from a future unfavourable balance.
Gold may even with a favourable balance,
from its general scarcity throughout Europe,
be higher than the coinage price; but in tiiat
case Silver will become cheaper than the
coinage price, and thereby become the cur-
rency of the country in place of Guineas.
It may possibly come to this in Great Bri-
tain, as Gold is settled in other countries at
a dearer rate relative to Silver, and it does
not appear that so much Gold comes now
into Europe, as at the time that Great Bri-
tain settled her Gold and Silver standard in
her Coins.
.•(•Ill <
4
7. '
■1
i
12
When or how a sufficient quantity of the
Metals will return to Great Britain in order
to convert them into Coin, and thereby ena-
ble the Bank to resume and to continue its
payments, no individual can possibly state,
or even conceive, and particularly now that
Paper Money is of necessity so much in*
creased, and tliat the call for Coin is so ge-
neral.
Several years favourable balances must take
place in order to give the Directors the fa-
culty of doing it, and that only by gradually
accumulating new Coin, which will necessa-
rily occasion an increase of their paper during
this operation, in order to pay for it, and
for keeping up the same accommodation to
the Government and to the Merchants : in
short, the evil arose from there not being a
sufficiency of Coin in circulation to admit of
Bank- Paper passing freely without payment
being called for, and that evil is very far, in-
deed, from being yet remedied. The first
13
sy Itiptom of an unfavourable ^ lande appears
then in the unfavourable exchcfnges ; and the
second symptom must naturally be a demand
for Gold and Silver Bullion or foreign Coihs
(of all which the exportation is allowed), ac-
cording as the one or the other metal will sell
in the highest relative proportion in foreigti
countries. '
first
If a sufficient quantity of the preferable
metal is not to be procured, the other will
naturally be demanded in its place, which
occasions the price of both metals to rise
above their coinage price, furnishing thereby
a premium or profit to the melter of the Cut-
rent Coin into Bullion, and to the clandestine
exporters of it (particularly of Guineas), in
addition to the advantage obtained on foreign
exchanges by sending Bullion. That pre*
mium is now about fifteen or sixteen per centi
on Gold, and twelve or thirteen on Silver,
which can well be afforded, when the ex-
change of Bills is so unfavourable to Gitat
c
1.
1 1
I
14
Britain as eighteen or twenty per cent, and
that Guineas sell so high abroad as to make
the whole profit above twenty-five per cent,
instead of three or four per cent, on Bullion.
It has been already stated, tliat gold and
silver have a relative price to eadi other (in.
the proportion of one ounce of gold to about
fifteen or sixteen ounces of silver), which is
constantly varying, though fixed by Law in
the respective Coins of the kingdom.
, Both have also a relative price to Bank-
paper, when called upon to settle foreiga
accounts, because the last cannot serve that
purpose, and the current price of the metals
above the coinage price, denotes that relative
price, which would be the same whether ten
or twenty millions of paper existed, because
it does not proceed from discredit, but from
the danger attached to the exportation of the
Current Coin of the kingdom, and on which
account twenty-three Guineas will sometimes
15
be given for the weight of twenty Guineas in
Bullion.
I . . . • .
This last resource will therefore only be re-
Borted to when a sufficient quantity of Bullion
is not to be procured, which must constantly
happen when unfavourable exchanges exist.
It appears then, that the sole cause of the
unfavourable exchanges, of the high price of
the Precious Metals, and ultimately of the
melting down or clandestine exportation of
the Current Coin, is the balance of trade
having been too often against Great Britain
during this and former wars.
The facts just mentioned are known to
exist, and a comprehensive examination of
the cause, cannot fail of bringing it fully to
view, without any reference to individuals for
information on partial points, which will in
general tend to darken the subject from many
existing prejudices, and from a variety ofundi-
c2
16
gested opinions entertained on each point by
men of reputed penetration, yet inadequate
to the analysation, and to the comprehension
of the whole system, which nature follows, or
rather, to which each individual is prompted
by the spur of self^nterest, and necessary
caution in his money transactions.
17
CHAP. II.
On the Circulation of Paper Money, when a
Balance of Trade has carried out of the
Country the greatest part of the Circulate
ing Coin,
THE balance of trade has been so often
pgainst Great Britain during the last eighteen
years, that we cannot wonder at its having
bpen drained of its Bullion ajid of its Coin.
This demanded of course a greater mass
of the circulating medium called Bank of Eng-
land, and Country Bank Notes being sub-
;itituted in their place.
Though the Country Bank-Notes may in
their general utility be equal to those of the
B?ink of England, yet they are much exposed
18
to being stopped in their circulation from a
temporary discredit, without the possibility of
making them a legal tender by general con-
sent, as is the case with Bank of England
Notes.
The great circulation of money in Great
Britain consists therefore, at present, mostly
in Country Bank-Notes, aided and supported
by those of the Bank of England,
We are assured by respectable authority,
that the first amounts to thirty millions, and
the last to twenty millions sterling ; that the
Bank of England issued only thirteen years
ago, to the amount of fourteen millions sterling,
and that the Country Banks have since that
time increased in number from one hundred
and seventy to above seven hundred.
We may therefore conclude, that this most
precarious part of all the circulating Notes,
has of late years been increased by fifteen or
a
i9
twenty millions sterling, in order to piovicle
for the want ol' a siifticicncy ot* coin through-
out the whole kingdom. ,
These Country l*)anks were (when so much
more limited in their number, and in the
amount of their paper) supported by the de-
posit of a certain number of coin, but now
anostly by the deposit of a certain quantity of
Bank of England Notes, as a necessary pre-
caution against any sudden call upon them*
The Bank of England was also obliged for-
merly to have a more considerable deposit of
Coin than at present, when their Notes are
no more payable on demand, but are received
by general consent as the Current Coin of
the kingdom.
The scarcity of Coin has therefore been gra-
dually provided for in the most ample manner
by additional PaperrMoney.
But a temporary discredit, oi; i\}e failure
20
of Country Banks, produces a total change irt
the quantity, and in the activity of this gene*-
ral medium of circulation, and a scarcity of
what is now called Money, takes place in con-
sequence.
It obliges, in the first place, the Bankers of
London, as well as the Country Banks, to
keep a greater quantity of Bank of England
Notes locked up as a deposit, to answer any
sudden run upon them, which in its effect is
equal to the diminution of their quantity.
The Country Banks may possibly be also
obliged, for their own safety, to diminish the
quantity of their own Notes in circulation.
There can be no doubt that the late fai-
lures, and the consequent general discredit,
derived their origin from the very great accu-
mulating dead stock of West and East India
produce, &c. in Great Britain and in Heligo-
land. Is it then to be wondered at, on con-
t
1^
31
sidering all these facts, that Interest of Mo-
ney should rise, and that Public Stocks, iis
well as houses, land, and all other capitals
giving an annual income, should fall in their
value, when they must, in order to find pur-
chasers, be sold at such a price as to give an
increased annual income to the purchaser, pro-
portioned to the rise in the Interest of Mo-
ney. . ; :
That multitude of theorists, who maintain
that the great or small quantity of Money
circulating in a country, determines the high
or the low price of other objects of daily use,
are about to experience in Great Britain, even
without diminishing the Bank of England
Paper, which they seem so desirous of, the
full effects of a great scarcity of Money.
They will probably lament the first effect of
an increased Interest of Money, of the conse-
quent fall in the value of Public Stocks (not-
withstanding the weekly purchases of the
Sinking Fund Commissioners), as well as of
D
22
hou.^rs, land, &c. and congratulate them-
sflvc'S solrly with the reduced price of other
objects ot'gcnrral and daily use, from the want
of sutlirient nioans to pay them. .
But it certninly cannot afford real cause of
gratulation, that West and East India pro-
r]uce should fall still lower, and produce the
total ruin of West India property, as well as
of the commerce with India.
To such lamentable consequences, however,
must a scarcity of Money lead; and if these
theorists would apply to those who (kal in
other objects of daily want, in order to know
what they would do next year, in case they now
only got three-fourths of I heir present prices,
they would l>e uniformly answered, " We
should abandon our occupations, because we
should be suffering a considerable loss instead
of gaining our daily bread." .• , ;
What Mould frecr^iC c^'the v/hole commu*
23
r
of
nity on every thing l>econilii«; scau.f •! ix-
iiewed and even iiicreiisud dcMrnuss i'or sonic
persons, and a total want ot' various (oji^cts
for others, must take place. These ideas oi
great cheapness from a scarcity of Money,
arise from taking a superficial view of the sub-
ject, and from I'^t a< .Riding to the ultimate
consequences o^ thai check upon industry,
which arises from it, and also that rents re-
main the same while their capital falls in
value. They never examine the combination
of circumstances, from which each object as-
sumes its proportional, its natural, and its
permanent value, so necessary for its repro-
duction, independent of good, middling, or
bad crops, but dwell solely upon its competi-
tion price with the scarcity or plenty of Mo-
ney, the effect of which can only be tempo-
rary. It is indeed mu( h to be lamented,
that 1^ •/ natural price due to so many objects
of daily use, is doubled within '20 years past,
and .that therc])y all person-, who have had
1)2
24
fixed incomrs since that period, or who even
exist by an income since acquired through the
means of the usual interest granted them on
pubhc or private debts, may justly be stated
as reduced (by the double expence of living)
to the proportion of fifty for every one hun-
dred pound sterling income, and by the fur-
ther reduction often per cent, for the Income
Tax, to forty pound sterling.
It is in its effects, for the holders of
Public Funds, tantamount to those which
would arise from a National Bankruptcy ; and
the cause will most probably not be attended
to, until it is too late to be remedied.
If it was true, that plenty of money pro-
duced ultimately the dearness of every article,
a balance of trade in favour of Great Britain
would in that case be a national curse instead
of a blessing, which the inhabitants are go
anxious of obtaining by it. . .
25
The truth however is, that plenty of Mo-
ney causes every diing to fructify, while
scarcity of Money causes every thing to wi-
ther; and Great 'Britain is about to experi-
ence the last, if some genius does not arise to
•avert the impending blow.
Superabundance of Money in Coin (not
Paper Money) can do no harm ; and of this
there was in former days sufficient proof in
Holland, when the interest of money fell there
to two and two and a half per cent, from its
very great abundance, and yet every thing
of daily use remained cheap and equally abun-
dant, until Great Britain called for large
supplies of corn, butter, cheese, &c. &c.
The Bank Directors are perfectly aware of
the consequences attending a diminution of
their Paper at a time when Money, taken in
its most general sense, is so much wanted ;
and it must be furtlier observed, that the
quarterly payments of six millions for the
26
Dividends on the Public Debt, brings at that
period only the total emission of their Paper
to twenty millions. They are certainly the
best judges of any danger attending the in- '
creasing or decreasing of their Notes, and
It would be an unpardonable presumption
in any individual, to dictate to them on
that point, upon which they alone are com-
petent judges.
They have fully merited at all times the
confidence of the Public, and are therefore
entitled to its gratitude. No part of their
conduct can have produced the awful situa-
tion to which Great Britain is now reduced,
bv means of a continuallv increasino" and un-
saleable stock of merchandize, of a balance
of trade still continuin£r ao-ainst it, of the
small quantity of Current Coin in the king-
dom, and of the necessity to keep Paper
\fonry within certain bounds, in order to
^^ecu^e Us i\ec circulation without the danger
.'27
of a depreciation from discredit, which would
occasion every thing to have a coin price and
a paper price, and be more alarming than
giving more Gold in Guineas for less Gold in
Bullion.
Tlir END.
!1
Lon4on : Printed by B. M'Millan, J
Bow Street, CorciU Ctrdca- ^