A CATECHISM OF THE CURRENCY. LONDON : PRINTED BY SAML'KL BBNTLEY, Dorset Street, Fleet Street. CATECHISM OF THE CURRENCY. BY JOHN TAYLOR, AUTHOR OF " JUNIUS IDENTIFIED. " The pilots to whom the vessel is trusted, are not to be disturbed on every light occasion ; but if they are apparently running it upon a rock, a private passenger, who is to sink with it, may be permitted to give notice of the danger." DAVEHANT'S ESSAYS. LONDON: PRINTED FOR JOHN TAYLOR, UPPER GOWER STREET; HATCHARD AND SON, PICCADILLY ; AND PELHAM RICHARDSON, CORNHILL. 1835. PREFACE. THE following work was written at the request of a friend, who, having a general knowledge of the bearings of the currency question, but not an inti- mate acquaintance with its various details, was de- sirous of a manual which would give him special answers to particular questions. His object im- posed on the author a necessity of being prolix on some points, which to many of his readers may not seem to have required such minute attention ; and for these it must also be his apology. The work was completed before the late change of administration had taken place ; after which event the author withheld it from publication, thinking that the next ministry would scarcely venture to undertake the conduct of the affairs of the country without being prepared to counteract the pernici- ous effects which the Currency Bill had so obvious- ly introduced. In this, however, he was mistaken ; Sir Robert Peel puts forward the prominent part he took in passing that bill as one of his chief claims to the confidence of the country. Unde- terred by the consideration that his predictions as to 2002981 viii PREFACE. the results of that disastrous measure have been proved to be incorrect in the extreme, unmoved by seeing that it violated the very principle on which the greater part of the taxes imposed during the war had been assented to, and that the indus- trious classes were suddenly charged by it with an overwhelming weight of fiscal payments, from which they had been previously free, the premier leaves it to be inferred that he is resolved on maintaining to the end that line of policy which was so inauspici- ously commenced. It is for the nation to decide whether this shall be done and the work of confis- cation completed, or whether another party may not be found willing to correct the admitted errors of an act which is rapidly effecting the greatest re- volution this country ever witnessed. It is not yet too late for a statesman to rise up, who, by postpon- ing the complete return of cash payments to that period which public faith requires, and reason as well as equity approves, shall deserve the praise bestowed on one of the greatest men of antiquity " CUNCTANDO restituit rem !" Upper Gower-Street, Jan. I, 1835. CONTENTS. Page INTRODUCTION ... .1 I ON VALUE ... 4 II. ON THE STANDARD OF VALUE . 9 III. ON THE MEASURE OF VALUE . 19 IV. ON MONEY . . . .29 V. ON TAXATION AS IT AFFECTS PRICES 39 VI. ERRORS OF OUR PRESENT SYSTEM . 55 VII. THEORY OF THE PRICE OF CORN . 62 VIII. REDUCTION OF RENTS, AND RETRENCH- MENT . . . .75 IX. PROPOSED PAPER MONEY . 92 X. PRINCIPLES OF CURRENCY . . 104 CATECHISM OF THE CURRENCY. INTRODUCTION. 1. WHAT is currency? Money of the state, and also bills of exchange, promissory notes, bank bills and cheques ; all which, being accustomed to pass current among men in transactions of business, as the representa- tive of value, are hence called currency. 2. Is there not something very difficult of expla- nation and of comprehension in this subject of currency ? By no means. 3. How is it, then, that so few understand it, and that most people speak of it as a subject above their comprehension ? Every one knows something of the currency. He 2 CATECHISM OF THE CURRENCY. sees his way very clearly for a short distance, and this partial knowledge either emboldens him to theorize concerning the rest, as if he were equally familiar with the whole, or it causes him to feel im- patient of being schooled, as a person altogether uninformed, and so renders him willing to pro- nounce himself unable to comprehend it, that he may escape the trouble of learning. Yet, is it not worth while for the landlord to know why he cannot get his rents ; the farmer, why he cannot get remunerative prices for his corn ; the mer- chant, why he cannot get his bills discounted, or why his best-planned speculations fail ; the trades- man, what causes his shop to be deserted ; the manufacturer or artisan, what produces a cessa- tion of demand for his goods, when all around him people are in misery for the want of them ; the labourer, what renders all his toil unproductive, and, in the twentieth year of peace, has suggested the necessity of a bill to keep him and his family from taking refuge in a workhouse, as a place of comfort and luxury, in comparison with the home which his honest independence now provides him ? 4. But what is the use of inquiring into the cause of a state of distress from which there is no hope of emancipation ? We must go on in the course we have chosen, let it end as it may ; except we make a composition with the public creditor, which is INTRODUCTION. 3 only another name for a national bankruptcy ; and to have recourse to this would preclude the possi- bility of our ever again raising money on credit, if at any time our existence as a nation should be again seriously threatened. You are deciding without having had all the evi- dence laid before you. There is a way open yet an honourable, wise, and just way, whereby we may avoid every difficulty with ease, and maintain both public and private credit. It is in the power of parliament to restore prosperity within three months after the day of meeting, if its members are inclined to do justice to themselves, their con- stituents, and their country. Let us proceed with our Catechism, and I think you will agree with me that there is good foundation for this opinion. CATECHISM OP THE CURRENCY. I. ON VALUE. 5. What do you mean, when you say a thing is valuable ? I mean that it is desirable as a possession or pro- perty ; that it is capable of being transferred from one person to another ; and that it is considered equal in value to some other thing or things which it is agreed between the two shall be given in ex- change for it. 6. Is air valuable? The most valuable of all things; for without it, nei- ther man nor beast could live an instant; and in si- tuations where men are nearly deprived of it, they would willingly give every thing they have in the world in purchase of it : witness the case of those who were shut up in the Black Hole at Calcutta. Air is also valuable in a lower degree ; for instance, good air is worth more than bad or indifferent air. A house situate on a spot where the air is remark- ably dry and pure, is worth considerably more than one which has cost the same money to build it, and is, in every other respect, equal to it, but situated in a swamp. ON VALUE. 5 7. Is water valuable ? It is inferior only to air. There are times when men would thankfully exchange all other property for a single draught of water. In an inferior degree it is also valuable : a house supplied with a spring of good water will sell for more money than ano- ther, exactly similar, which happens to be less for- tunately circumstanced. 8. Then a good climate is valuable ? Undoubtedly. Men will pay a higher price to live in a good climate, than in a bad one : that is, they will give more for house-rent, and for all the articles they consume or wear, in a country where the climate is good, than they will give in a bad climate ; provided all other things are equal in both. The same may be said of a good government, and of a well-disposed people : they are both sources of pecuniary advantage to a country. 9. Even good society is valuable ? Yes : for that is one of the reasons why so many people, who might live anywhere, prefer the neigh- bourhood of large towns, where rent, and all other expenses incident to the maintenance of an estab- lishment, are much enhanced. A private family will pay as much annually to live in a confined house in London as would procure them the enjoyment of 6 CATECHISM OF THE CURRENCY. a mansion with an extensive domain in the country. 10. Will not this account for the fluctuations which so frequently take place in the value of private houses in London ? It will. Owing to the prejudice against some streets and squares, which are not now esteemed fashionable, the houses in them have fallen consi- derably below the value which was set upon them a few years ago ; while others, in more distinguish- ed sites, are rated above their natural level. In things of this kind there is no fixed rule. Opinion gives them an ideal value, often higher, sometimes lower, than that which otherwise would be their just appreciation. 11. Are not honours valuable ? Undoubtedly. A blue or red ribbon, the badge of an order of knighthood, would have great sums given for it, if it could be bought ; and, as it is, a great price has been often paid for a title of honour. In a restricted degree, honour is esteemed worth a considerable sum. The honour of serving his Majesty, in the capacity of a naval or military officer, renders a man content with less pay, though his life is constantly in danger from the service, than another receives who is more securely but less honourably employed in the commissariat. Gene- ON VALUE. 7 rally of employments it will be found to hold good, that in the degree in which there is more honour, there is less pecuniary recompense. Members of parliament and the unpaid magistracy afford proof of the value set on certain degrees of honour, by the pains they take to obtain them. 12. Can you mention any other things which are in the predicament of those just mentioned ? Many. Books of great rarity ; pictures, of the old masters especially, and generally those of paint- ers who are dead ; coins of uncommon occurrence ; wines of peculiar excellence, the supply of which is less than the demand : in a word, all those things which are in great request, but incapable of multi- plication or exact re-production. Their scarcity gives them a peculiar value, the amount of which cannot be calculated beforehand with any degree of certainty, being different in different countries, and depending chiefly on the abundance of wealth possessed by those who are competitors for the purchase of them. 13. What articles are there, the value of which can be calculated beforehand with some degree of cer- tainty ? All things which are capable of multiplication, or exact re-production, to an extent equal to the demand. These are valuable with reference to a 8 CATECHISM OP THE CURRENCY. fixed standard of value. Under this head are com- prised almost every description of goods, and every kind of ordinary service or labour. 14. You say "almost every description ;" what kind of goods is excepted ? Such as by a secret mode of preparation, the result of accidental discovery, obtain a price in the market beyond that which would, by reason of competition, be charged for them if the process of their manufacture were known, or if they were not protected by a patent. When, on the contrary, this superiority is the result of scientific discovery, or long and patient investigation, the goods, though protected by a patent, and sold at a higher price, come properly under the denomination of those which are governed by a fixed standard of value. 15. What services are excepted ? Those cases of peculiar talent which entitle the possessor, almost by intuition, to the rank, fame, and emoluments which others, practising the same art, procure by long-continued study and practice. The profession of music affords frequent examples of this kind of accidental advantage. On the con- trary, those professions in which distinction is ob- tained by study and practice, as law and medicine, exhibit only such cases as are paid according to a fixed standard of value. II. ON THE STANDARD OF VALUE. 16. You have spoken of the standard of value ; of what does it consist ? The standard by which the value of goods and services is properly estimated in all ordinary cases is corn, throughout Europe ; in Eastern countries, rice. 17. Why is corn better for this purpose than flesh- meat, and other articles of food ? Because it is the greatest necessary of life next to air and water : without it man cannot properly sustain life ; and, having this, he can barter his superfluity of it at all times for all other things. Bread is properly called the staff of life : a defi- ciency of it is the greatest affliction that can befal a nation. Under its name all other needful things are comprehended. Its supreme importance can- not be denied ; but there is another reason which operates to make it the standard of value. It can only be obtained by labour, and with labour it may always be obtained in proportion to the wants of the community. Again, it is a perishable commo- dity, and therefore it cannot be permanently laid 10 CATECHISM OF THE CURRENCY. up in store or accumulated, so as to cause it at any time to lose its value. Thus it is guarded from enhancement on the one hand, and from depreciation on the other; and these two qualities, joined with its universal desirableness and invincible necessity, fit it pre-eminently for a standard of value. Further, it may be obtained by the exertion of the lowest degree of skill ; so that, as long as there is land to be cultivated on the face of the earth, there is no need that any man, however humble his capacity, should perish for the want of it, or suffer from the privation of any thing which he can procure in exchange for it. 18. Is not labour a better standard ? Labour is a metaphysical term, denoting some- thing which is intangible : wrought up, it may doubtless be, into substances which are tangible; but it is impossible to be separated from those sub- stances, and therefore unfit to serve as a standard. From this imperfection in its nature, Dr. Adam Smith, after adopting it, was often obliged to aban- don the term, and refer to corn for a practical stand- ard. " The one," he says, " is a plain palpable object, the other an abstract notion, which, though it can be made sufficiently intelligible, is not alto- gether natural and obvious." * * From the following extracts it will be seen, that both Dr. Smith and Mr. Ricardo, finding it difficult, if not impossible, to ON THE STANDARD OF VALUE. 11 19. But is not corn an article which, above all others, varies in quantity in every country from one year to another ; the crops seldom being for any two years the same in bulk and quality ? Granted : but to obviate this, we have only to take corn on the average of seven or ten years, and the supply will be brought to a medium. 20. Assuming that there is a means of equalizing the variable supply of corn from year to year, how do you form it into a standard of value ? By estimating the quantity of corn which, on the prove how labour is the standard of value, are at last obliged to beg the question. " But though labour be the real measure of the exchangeable value of all commodities, it is not that by which their value is commonly estimated. It is often difficult to ascertain the pro- portion between two different quantities of labour. The time spent in two different sorts of work will not always alone deter- mine this proportion. The different degrees of hardship endured, and of ingenuity exercised, must likewise be taken into account. There may be more labour in an hour's hard work than in two hours' easy business ; or in an hour's application to a trade, which it costs ten years' labour to learn, than in a month's in- dustry at an ordinary and obvious employment. But it is not easy to find any accurate measure either of hardship or ingenuity. In exchanging, indeed, the different productions of different sorts of labour for one another, some allowance is commonly made for both. It is adjusted, however, not by any accurate measure, but by the higgling and bargaining of the market, according to that 12 CATECHISM OF THE CURRENCY. average, must be consumed and bartered by a man, ex necessitate, while he is engaged in preparing for and producing the work on which he is employed, and by the sale of which he expects to be sup- ported. 21. But how can this be estimated ? By the workman himself. He knows how much corn will be required to support him in future simi- lar undertakings, by knowing how long a time it has taken him to complete his present work ; and as much corn as he must have consumed and bar- tered away during that period to preserve himself sort of rough equality, which, though not exact, is sufficient for carrying on the business of common life." Smith's Wealth of Nations, (4 vols. 1828,) vol. i. p. 55. "In speaking however of labour as being the foundation of all value, and the relative quantity of labour as almost exclu- sively determining the relative value of commodities, I must not be supposed to be inattentive to the different qualities of labour, and the difficulty of comparing an hour's or a day's labour in one employment with the same duration of labour in another. The estimation in which different qualities of labour are held, comes soon to be adjusted in the market with sufficient precision for all practical purposes, and depends much on the comparative skill of the labourer and intensity of the labour performed. The scale, when once formed, is liable to little variation. If a day's labour of a working jeweller be more valuable than a day's labour of a common labourer, it has long ago been adjusted, and placed in its proper position in the scale of value." Ricardo's Political Economy, p. 13. ON THE STANDARD OF VALUE. 13 in health and strength, and to give him the com- forts essential to his proper existence, is the lowest standard of the value of that work on which he has been employed. 22. If you let him fix the quantity, he will demand more than enough, that he may live the more easily ? The remedy is at hand, in the competition of workmen. His customers will go from one to an- other, and see who is willing to work for the lowest quantity of corn ; they will employ him, as of course yourself and others naturally would do, for your own interest, and the overreaching workman will thus be forced to lower his demands. 23. But in order to get back his customers, he will be ready now to work for less than will maintain himself in his needful health and strength ? If it were so, he would be justly punished for his fault; but as soon as he has regained employment enough to allow himself needful rest and refresh- ment, he will, if he is wise, go on again contentedly in that track which Providence has marked out as best for him. 24. You think, then, that between the desire of ease and comfort on the one hand, and the check from competition on the other, the quantity of corn due 14 CATECHISM ON THE CURRENCY. to every man, for every kind of work, would be ac- curately adjusted? I do : and from the operation of these two princi- ples it is, I conceive, easy to see, that the proper quantity of corn due for mental as well as bodily labour would eventually become most exactly de- finable. 25. How does it account for the difference of com- pensation between an agricultural labourer and a working jeweller ? The lowest degree of skill, and very little prepa- ration, are necessary (see No. 17) to qualify a man to perform the inferior duties of husbandry ; but for discharging these, he is entitled to as much corn as will preserve him in health and strength, to as much more as in barter will procure him the cloth- ing which is necessary to keep him decent and comfortable, provide him a shelter from the incle- mency of the seasons, and leave him a small surplus towards his maintenance in old age, or he must come to the parish workhouse at last, which will be more expensive to his employer. Suppose he has two bushels and a-half of wheat per week for these exigencies, and the working jeweller earns ten bushels a-week, the greater remuneration of the latter is not beyond his due desert : for, in the first place, he required a long preparation to give him that degree of skill in his craft which has made him ON THE STANDARD OP VALUE. 15 an able workman in a difficult branch of art, and his recompense now is partly a return for expenses then incurred : secondly, his art is one which re- quires a correct eye, a nice hand, and good taste, qualities which every man does not possess, and which therefore bring him who has them under the description of persons enumerated in No. 15 : and, thirdly, his livelihood is a very precarious one, for a trivial accident might impair the dexterity of his hand ; his eyes may grow weak ; and he is more ex- posed to ill health, from his sedentary employment, than those who labour in the open air. 26. But can so great a difference as four times the quantity of corn for a week's labour be really due to the working jeweller, in comparison with the lowest labourer on a farm ? It certainly is, or he would find his income trenched upon and reduced by competition, ac- cording to the principle laid down in No. 22. 27. This, perhaps, may explain the case of the more highly-paid working jeweller, but what is the reason why some kinds of ordinary labour are much better paid than others? Wherever that is done, there are certain disad- vantages to which the labourer is exposed, for which he deserves a higher recompense. The hazard of digging wells commands and obtains for 16 CATECHISM OF THE CURRENCY. workmen of that class superior wages ; still higher are, or ought to be, given to men employed in white-lead works,* coal-pits, lead-mines, and other unwholesome or dangerous occupations. In these, and similar instances, the same quantity of corn obtained by less labour, or a greater quantity of corn by equal labour, gives no advantage to him who seems at first sight to have the greater gain ; for if he works fewer hours, it is because his health and strength would fail if he worked as long ; or if he gets more corn for the same quantity of labour, it is because his health or life will in all probability pay the forfeit some day, unless from the super- abundance he seems to have at present he lays up enough to enable him to withdraw in time from his hazardous employment. 28. You think, then, that all commodities and ser- vices are valuable in proportion to the quantity of corn supposed to be consumed or employed in pre- paring for and executing them ? Not exactly so ; or .an improvement made in the manufacture of an article, after, for example, a * Men engaged in dangerous or unhealthy employments are frequently those who have lost their character ; and because they are not able to get into better work, they accept this at a price frequently not greater than that of ordinary labour. These exceptions, it is scarcely necessary to observe, do not affect the principle, or what ought to be the principle, of the case. ON THE STANDARD OF VALUE. 17 year's consideration, would require to have the whole of the corn for that period charged at once on the first complete specimen of the inventor's success. But except it is guarded by a patent, or the process used is kept secret (see No. 14), the lowest value of every piece of work is the quan- tity of corn necessary to support those who are en- gaged in effecting its ordinary reproduction. 29. And the same of services ? Services also (with the exception of those men- tioned in No. 15) are worth, at the minimum, the quantity of corn necessary to preserve a man in health, strength, and comfort for his present exer- cise, with so much more spread over a long series of instances as will, in due time, return him that further quantity which he is supposed to have con- sumed and employed in preparing himself for his undertaking. 30. It is perhaps difficult to speak in terms so cor- rect as to defy all cavil, but I understand your meaning in the general, and can apply it myself to particular cases. You give us, then, a law, by which men are governed in making a charge for goods or services, which law secures to them the minimum amount of their reward ; for no man in his senses will work long, if he can help it, for a less quantity of corn than will suffice to keep him in the lowest 18 CATECHISM OF THE CURRENCY. possible degree of health, strength, and comfort : but where is the law that is to guard society against too high a demand where is that check to be found which limits the maximum ? It is met with, as I have said before, in boundless competition (see No. 22). If one man, or class of men, charge and obtain too much for any goods or services that is, more in proportion, all things con- sidered, than others obtain for their goods or ser- vices in a different way, the less profitably em- ployed part of the community will enter the lists with those who get too much, and will speedily reduce their advantages. 19 III. ON THE MEASURE OF VALUE. 31. Would there not be great inconvenience found in any attempt to pay people with corn ? Very great indeed, both in the act of payment, in carrying away the sum paid, and in treasuring it up. But all this is obviated by another means, the establishment of a measure of value, which, in the simplicity of its contrivance, and in the uni- versality of its use, leaves nothing to be wished for. 32. What is this measure of value ? Gold, silver, and copper ; either of them, or all. 33. How are they made to constitute the measure of a value which exists in corn ? We have seen in what manner the value of any commodity or service is found in corn ; let us sup- pose, then, that gold is tried by this test, and it comes out that to obtain one ounce of gold from mines or the sand of certain rivers, and to bring it to this country, requires, on the average, a repay- ment of two quarters of wheat as the equivalent; then will two quarters of wheat be equal to one ounce of gold, one quarter to half an ounce, and four bushels to one pennyweight six grains of gold, or a 20 CATECHISM OF THE CURRENCY. sovereign. We give then the gold instead of the corn to the party about to receive an equivalent for his goods or services, which gold he can keep as long as he likes, and exchange when he pleases for corn, or give to others in return for goods or ser- vices received from them. 34. I see this : but, for minor payments, you would require pieces so very small, that they would be in danger of being lost ; and so, I suppose, you would call in the aid of silver ? Yes : and it so happens, that the two metals may be obtained by the consumption or employment of the same quantity of corn, in proportions bearing a very convenient relation to each other. For as two quarters of wheat are the equivalent of one ounce of gold, it appears, since the discovery of America, that with the same supply of corn, men are now enabled to raise from the mines there, and transmit to England, nearly sixteen ounces of silver ; therefore, one ounce of gold and nearly sixteen ounces of silver are respectively equal. With cop- per we can go of course much lower.* * " Gold and silver, like all other commodities, are valuable only in proportion to the quantity of labour necessary to produce them, and bring them to market. Gold is about fifteen times dearer than silver, not because there is a greater demand for it, nor because the supply is fifteen times greater than that of gold, but solely because fifteen times the quantity of labour is necessary to procure a given quantity of it." Ricardo's Pol. Econ. p. 421. Substitute corn for labour, and this description is correct. ON THE MEASURE OF VALUE. 21 35. Would not the discovery of more mines of gold and silver alter the relative value of these metals ? Not in the least, unless those mines should ex- hibit the metal in so much greater abundance, that by the consumption and employment of the same quantity of corn, a greater quantity of metal could be obtained and brought to market ; then, indeed, the relation they now bear to each other and to corn would be altered. Increase the number of mines as much as you will, only let the difficulty of obtaining the produce be as great as it is at pre- sent, and there can be no alteration made in the value of either metal. 36. May not machinery be expected to make some improvement in the facility and rapidity with which silver is obtained ? It may ; but of that we have no certain evidence at present ; when we have, the proportion of silver must be increased to bring it up to the value of the gold. 37. Is it not generally considered that gold and sil- ver, being of all articles those which most slowly alter their value, are, on that account, either one or both of them, the best standards of value ? It is so thought by many ; but this is a strange error. How can that be fit for a standard of value, which under certain circumstances is of no value 22 CATECHISM OF THE CURRENCY. at all ? A standard ought to be something unsur- passable in its kind. Snow is considered a standard of whiteness, because it is the whitest object in nature ; the sun, of brightness, because it is the brightest object; the scriptures, of truth, because they are the only writings free from error. The most consummate thing of every kind is the stand- ard of its kind. But how does this hold good of gold and silver as a standard of value ? They are both surpassed in beauty and rarity, that kind of value which is attributed to them, by pearls and diamonds. But gold and silver, and pearls and dia- monds, are of no value at all to men cast on a de- sert coast, when corn would be of infinite value ; instead of being standards to which every thing else must conform, they then lose every trace of that character. Even with us at present, in years of moderate scarcity, they sink in value very much compared with corn ; and in times of famine, they fall almost to zero in the scale. But corn is always valuable, and always retains its proper value : that value may be increased for a time by failing sea- sons, but it can never be permanently diminished ; and, on an average of every seven or ten years, it may be pronounced invariable. 38. But is not that fluctuation in its value from year to year, which you admit, a strong argument against its employment as a standard ? ON THE MEASURE OP VALUE. 23 None at all ; for fight against it as we will, it is, and ever will be, the practical standard to which men will refer. In the long-run, they will demand and obtain for goods and services as much corn as on the average will maintain them in unimpaired health and strength ; and by the use of gold, silver, and copper as measures of value, of which they will receive such a proportion as makes allowance for ordinary differences in the annual supply of corn, they are enabled to obtain a sufficient quantity of it, from year to year, despite the variation of the seasons. Thus the imperfection which exists in corn is corrected by the use of gold or silver ; and that which exists in gold or silver, is obviated by corn.* 39. Are these metals the only measures of value ? No ; lead, tin, iron, platinum, are all equally so, according to their several equivalents in corn. Tin was formerly used for that purpose by the Syracu- sans in their coins : tin mixed with copper, which made brass or bronze, by the Romans : iron, by the earlier Greeks : lead mixed with copper, call- ed billon, by the French : and platinum is at this time employed by the Russians for coin. One is as good a measure of value as another ; but the rarer * From century to century, corn is a better measure than sil- ver From year to year, on the contrary, silver is a better measure than corn." Smith's Wealth, vol. i. p. 64. All that Dr. Adam Smith failed to discover, was, that by each being a check on the other, the advantages of both might be combined. 24 CATECHISM OF THE CURRENCY. metals are the more convenient, because they have greater value in less compass, and that recommend- ation has led to their general adoption. 40. Did the ancients always regard the intrinsic value of the different metals in the coins they used? They kept their several pieces of money to a certain relation to each other, which relation was in their opinion very nearly that which these me- tals naturally held. The Romans esteemed gold ten times more valuable than silver ; and silver one hundred times more valuable than copper or bronze. The Greeks valued copper at ten times the worth of iron. Before the discovery of the New World altered the value of silver, these proportions were very near the truth, and with that exception they still remain so.* * The average price of copper from the year 1800 to 1832, was 120L per ton avoirdupois, or one penny per ounce troy. Lord Liverpool, in restoring the value of our coin in 1816, made the penny of an ounce weight. Bar iron still retains its rela- tion of 10 to 1 less worth than copper; the average price from 1803 to 1829 having been not less than from III. 10s. to 12/. per ton, so that gold, copper or bronze, and iron, are not altered in relative value during 2500 years, and are thus shown to be re- markably well adapted for the measure of value. Compared with each other, the relative proportions may be thus stated : Gold. Silver. Copper. Iron. Ancient 1 oz. 10 oz. 1,000 oz. 10,000 oz. Modern 1 15 to 16 1,000 10,000 ON THE MEASURE OF VALUE. 25 41. Was a fixed denomination of weight preserved in their coins, such as that of pounds, ounces, penny- weights ? The Romans regarded their coins as so much weight of metal ; but as it is impossible to preserve a certain common denomination of weight among three metals, which differ in their respective value in the degree of 1 = 10 = 1,000, they gave to the more current and general coin a well-known spe- cific weight, and made the others comply with that weight in such degree as their relative value re- quired. Their principal money was the bronze as, which was coined at first of the weight of a pound, then it fell to two ounces, to one ounce, to half an ounce ; at each stage of its declension, the silver * and the gold coins were accommodated to the bronze, so as to preserve the relation of value above-mentioned. 42. Did we not observe the same rule in earlier times with our coins ; were they not originally cer- tain weights of silver ? Originally, pounds, ounces, and pennyweights, * In estimating the value of ancient silver coins, Arbuthnot and others have rated them 50 per cent, too low, from not attending to the difference in the value of silver. The intrinsic value of the drachma of 54 grains was equal to 10d. or 1 Id. of our pre- sent money, instead of 26 CATECHISM OF THE CURRENCY. were the denominations of our silver coins, (we had then no gold nor copper money,) the coins them- selves being pennies of twenty-two and a-half grains each. Of these, two hundred and forty made our Tower pound, which was exactly equal to the Roman pound. As late as Edward III. we find in public documents the accounts kept sometimes in pounds, ounces, and pennyweights ; and sometimes in pounds, shillings, and pence : after that, the latter denomination prevailed, because the weight of the penny was then in some degree diminished. 43. Would there be any essential advantage in restor- ing the ancient weight of our coins, or any other well-known denomination of weight? None : for their present weights are well known, and we, like the ancients, preserve a certain relation in the coins of different metals. If, however, we were to desire to imitate them, so far as to have a standard or normal weight, we might at the present time, conveniently enough, assign a well-known weight to the sovereign : by leaving out only three grains, it would be a quarter of an ounce. This change might be made without altering the weight of our silver coins, which at present are far too light in proportion. Or if we adopt silver as our principal metal, we might coin the crown-piece of an ounce weight; the half-crown, of half an ounce ; the shilling, of four pennyweights ; the six- ON THE MEASURE OP VALUE. pence, of two pennyweights ; and also restore the old pennyweight or sterling of silver, now worth three pence. These alterations would be imper- ceptible to the eye, and of very little importance to the public, for the general scale of prices would scarcely be affected by them. Of the two, it would be better, perhaps, to increase in that small degree the weight of the silver coin, than to make the gold lighter ; because, by the imperial measure, we have increased a little the weight of the quarter of corn ; and unless we keep up or slightly increase the weight of our coin also, we cannot so exactly ascertain, as we affect to do, the present price of corn in compa- rison with former years. 44. Is it not more desirable to make silver a standard weight, and raise it to be the principal measure of value, because other nations adopt it also ? It appears to be generally thought so. But if the use of machinery much affects the value of that metal, by raising it from the mines at a less cost of corn, our coin will undergo a silent depreciation ; and those who are in the receipt of fixed sums for long periods, will find their income gradually de- crease in its power to purchase corn, and, with corn, all other goods, and every kind of service. 45. Many would rejoice at that, and especially the working classes ? 28 CATECHISM OF THE CURRENCY. They would have no reason ; for wages would be silently depreciated too. With a proper system of money, it would neither improve nor injure their condition. 46. Are not gold and silver money ; and would they not have a greater quantity of that, if it were cheaper ? And where would be the advantage, if it would not command more commodities ? But gold and silver, when they are of equal value, as commodities, with the articles for which they are exchanged, are not more properly money than are those commo- dities. Strictly speaking, we have scarcely any money at present, and to this may be ascribed all our financial and commercial difficulties. 29 IV. ON MONEY. 47. WHAT is money ? Money is a token, of certain nominal amount, issued by government in return for value received, and payable into the exchequer for taxes, whence it becomes of necessity a general legal tender. 48. Does it not possess intrinsic value ? Not properly, or it would be a commodity, and not money. The word money means a token* * " Money," says Sir W. Blackstone, " is an universal me- dium, or common standard, by comparison with which the value of all merchandise may be ascertained : or, it is a sign which represents the respective values of all commodities." Commen- taries, B. i. c. 7. The learned author gives us in these words two definitions or descriptions of the meaning of the word money : the first has reference to the measure of value, gold or silver ; the second, to money properly so called. By confounding these two definitions together, he immediately afterwards makes bullion only the sign of value, and reasons thus erroneously concerning it : "As the quantity of the precious metals increases, that is, the more of them there is extracted from the mine, this universal medium or common sign will sink in valiw, and grow less pre- cious. Above a thousand millions of bullion are calculated to have been imported into Europe from America within less than three centuries ; and the quantity is daily increasing. The con- sequence is, that more money must be given now for the same 30 CATECHISM OF THE CURRENCY. 49. What value does it represent ? Whatever value the government pleases to fix upon it: I/., 51., 50/., or 100/. Small slips of paper, intrinsically not worth one farthing, may be made to pass current for any of these sums, or for others of much larger amount; and for the fractions of a pound metallic tokens will suffice. We used for- merly tallies of wood for sums of large amount.* 50. How comes it that articles comparatively worth- less can have this value given them ? The state which issues them engages to receive them again in payment of taxes at that rate of value which is fixed on them, and for which it has paid them away. This constitutes their value. 51. If government were to refuse to receive this paper or wood, it would be of no value ? Of none whatever. commodity than was given one hundred years ago." Comm. B. i. c. 7. To this incorrect conception of the nature of money may be traced all our modern mistakes in the science of political economy ; among others, the supposed necessity for a late enquiry into the present produce of the gold mines." (See No. 34 and Note, and No. 35.) * It is remarkable that Blackstone makes no mention of money of this kind. It was introduced by the earliest of our Norman kings, along with other processes of the exchequer. In the laws of Henry I. (c. 56) tallies are mentioned as a means of collecting the revenue, and a very particular account of them is given in ON MONEY. 31 52. Might not government refuse to receive it ? Not after issuing it, without a virtual surrender of all honesty, and with it all the right of govern- ment. In such a case, the rule of that power would be at an end : the attempt would be its well-merit- ed destruction. 53. Might not government with impunity impair the value of this sort of money by issuing too much of it? In the event of its issuing too much, the evil would recoil on itself. Independently of which, such issue would be a high crime in the government, a breach of trust committed against the people. 54. How would the evil of such extra issue recoil on government ? If it were to issue more annually than the annual taxes withdraw from circulation, the superflux would the Dialogus de Scaccario, written in the reign of Hen. II. They were usually struck for large sums, ordinary payments being made by the coin of the realm, and hence the barons, reproaching Henry III. with his extravagances and debts, add as the climax, that he had given " tallies for the victuals of his table." Knyghton, Col. 2445. In the year 1698, the sums of money represented by tallies amounted to 8,882,544Z. Tallies were afterwards gradually superseded by exchequer (paper) bills, and were abolished altogether in the twenty-third year of the reign of George III. For a description of tallies and their use, see " Essay on Money," (1833,) p. 24. 32 CATECHISM OP THE CURRENCY. then become of less value, by which the next issue would be impaired in public estimation ; less would be given for it in exchange, and yet the exchequer would be compelled to receive it at its nominal va- lue in discharge of taxes. 55. But the government could issue so much the more money next year, and so make up in quantity for the deficiency in quality ? Which would again add to the deterioration of the mass, to be remedied by a still further issue. The downfall of such a state might be predicted with safety. Such madness could only be the act of a despotic government, doomed to fall, and hast- ening its own destruction ; for no other government than a despotic one dare or could attempt it. 56. Could not a representative form of government do the same thing ? Not unless the people as well as their rulers had lost their senses. What rational minister would recommend what sane people would consent to, the issue of more taxation-money than represents their annual taxes ? They are aggrieved enough by such a degree of taxation as is unavoidable, and would of course rather lessen than increase its amount.* * " The sinking fund is managed by commissioners, responsi- ble only to parliament, and the investment of the money entrusted ON MONEY. 33 57. Why do you call it taxation-money ? Because money is issued by the state as a means of taxing the people.* The government pays with this money all to whom the state is indebted ; the army, navy, civil list, contractors, and public annu- itants. When these receivers spend their money, the people give goods or services for it : they then surrender it to the tax-gatherer, to liquidate the demands which the state makes upon them. Thus each man is annually minus that quantity of pro- perty which constitutes the amount of his annual taxes. 58. If government did not issue more than was re- quired to equal the amount of the annual taxes, you say it could not then be depreciated : what would be the effect if it issued only half as much ? The half must circulate so much the quicker, and perform double duty. Every pound of that money must, on the average, pass twice a year through the to their charge proceeds with the utmost regularity ; what reason can there be to doubt that the issues of paper might be regulated with equal fidelity, if placed under similar manage- ment?" Ricardo's Pol. Econ. p. 435. * We meet with the words " good taxing money" as early as 1389 : " dedit et concessit, videl. pro summa quadraginta libra- rum bonee monetee censualis." Carpentier. But the mention of tribute money is indeed coeval with that of money itself. D 34 CATECHISM OF THE CURRENCY. treasury, and twice through the hands of the peo- ple. Thus the effect would be the same : the go- vernment would still issue the same annual amount of money. 59. What would ensue if the government issued no paper money, as is the case at present ? It must borrow bills from the Bank of England or some other commercial body, to serve the pur- pose of making the above-mentioned payments. For these bills it pays interest. By issuing its own money, the expense of all that interest would be saved to the state. 60. How could the government begin to issue its own paper now, to the full extent, without doubling the amount of taxation-paper in circulation, which would at once depreciate its value? The government, when it began to issue its own paper, would not put into circulation again that which it had borrowed, but would return this to the parties lending it, as soon as it was brought in by the collectors, and thus cancel the debt it owed, by which means the saving of interest would be made. The government, therefore, would only issue for taxation purposes the same amount of paper money as before. 61. What would become of that bank paper, so re- turned ? ON MONEY. 35 It would be employed, as far as was necessary, in aid of commercial transactions ; for, besides tax- ation paper, which exists for government purposes, there is commercial paper, which exists for the con- venience of trade. 62. Is not commercial paper money 9 No. It is the acknowledgment and transfer of a claim of debt. A bill of exchange, " is an open letter of request from one man to another, desiring him to pay a sum named therein to a third person on his account. Promissory notes are a plain and direct engagement in writing to pay a sum specified at the time therein limited to a person therein named, or sometimes to his order, or often to the bearer at large. These, also, are made assignable and indorsable in like manner as bills of exchange*." Thus, commercial paper is not money ; it is only an engagement to pay money, on the faith of which it passes current as money. 63. Is there no reason to fear that such paper may be issued in excess? To the injury of the community, none what- ever. 64. To the injury of individuals ? Yes : when a man takes as the transfer of a claim * Blackstone's Comm. B. ii. C. 30. 36 CATECHISM OF THE CURRENCY. of debt a bank bill which is forged, or one which is issued by parties having no effects, he loses what he gave for it. He has been defrauded, or he has made what he calls a bad debt. 65. Is not that an evil arising from the excess of com- mercial paper ? No : it is an evil arising from his paper not being what it pretends to be, or from his giving credit to some person who was not worthy to be trusted. In every state of society such losses are unavoidable : they occur equally with bills, and without. The individual must be upon his guard, and take no paper but that of well-known solvent parties, as he is on his guard not to sell his goods except to men of approved credit. 66. Who is to take up commercial paper in gold ? Every banker will be an exchanger of gold for bills, or of bills for gold ; and the Bank of England will be the greatest mart of all for that purpose : but it is sufficient if commercial bills are paid in money. 67. Will there not be a liability on the part of the Bank and banking companies to stop payment, by having at times a run for gold made upon them ? None : for they will be able to protect themselves, if there should be any need, by giving in exchange ON MONEY. 37 for commercial paper, that of the government, which would be a legal tender. 68. Why did you say money was not an article of in- trinsic value, when we have money of gold, silver, and copper, issued by the state? Because intrinsic value is in such cases an acci- dental, and not a necessary quality of money. When our coins are of such weight and purity that as bullion they are worth what they professedly pass for, we may call them money, but they are properly bullion (No. 46.) They have received from go- vernment a stamp, it is true ; but without the stamp, they would pay for as much as they do with it. 69. For what reason then was it thought desirable to make our coins of such a weight as to be nearly if not of equal value with bullion ? To guard against their being counterfeited. Secure the inferior kind of tokens from being imi- tated, and there would be no need of our having coins of full value, or of any intrinsic value. We should take the metallic token for what it purported to be, as we take paper money for what it professes to be ; which, whether it passes for 51., 101., or 50/., is still only a piece of paper. 70. But it is very difficult to make metallic tokens which cannot be imitated? 38 CATECHISM OF THE CURRENCY. Let us then have paper money as low as the value of one pound; and for the fractions of the pound, silver, and copper coins, as we have at pre- sent, taking care to keep them, which we do, some- what below their proper value, that they may not be sold as bullion. We sustained no inconvenience from this system of paper money, with metallic fractions, during the war ; and I am perfectly sure the people of this country, of all classes, would re- joice to see it again. 71. Surely you would not recur to any system which is calculated to restore the high prices of the late war? If you care nothing for the interests of com- merce, which would be entirely destroyed by such a system, think of the distress it would bring on the labouring classes. We should soon have bread at 1*. 4d. the quartern loaf? But if the taxation of the country required it, and if relief cannot be brought to any oftJie indus- trious classes without such advance, then it ought to take place, according to your own argument. As for the interests of commerce, it is, in truth, the only way by which they can be effectually pro- tected. 39 V. ON TAXATION AS IT AFFECTS PRICES. 72. How can the taxation of a country require high prices ? There are three ways of taxing people : one of these leaves prices unaffected, another lowers them, the third raises them. 73. What kind of taxation is the first, which leaves prices unaffected ? That which takes the taxes directly from the wealthy, in proportion to their wealth, and lets the industrious poor man go free. 74. That is the perfection of taxation ; how is it accomplished ? Less perfectly in practice than in theory. We made an approach to it during the war, in levying a property and income tax; but it was very un- equally levied after all, and it was attended with such painfully inquisitorial investigations that the spirit of the people could hardly brook it. 75. Could it not be improved ? 40 CATECHISM OF THE CURRENCY. Perhaps it might ; but it is a difficult matter for the rich to tax themselves. Another form of this tax is the land tax; but that is now in a great number of instances redeemed, and it would occa- sion, I fear, great perplexity to attempt to renew it on a more extensive scale. 76. I fear there is but little to hope from taxation of this direct kind, if these are your only examples. What is the second mode, which lowers prices ? Taxes levied on industry, and paid out of prices to the diminution of profits. 77. Why that seems a very iniquitous mode. Here you directly tax the poor industrious man ? Yes, but it is conceived that the tax falls ulti- mately on the rich. 78. How? When the industrious poor man has paid his taxes out of his prices, to the diminution of his pro- fits, he has of course so much less remaining to discharge all other outgoings with : consequently, he must contrive to make less do for these outgoings, and accordingly his landlord must receive less rent, and all those persons of whom he buys the articles which he uses in his trade, and the farmer of whom he buys the corn which he requires to support him- self and his family, must all take less for their com- ON TAXATION AS IT AFFECTS PRICES. 41 modifies. Now, if the farmer receives a less price for his corn, he cannot afford to pay his landlord so much rent for his land ; and so the rich man, as he is the owner of lands, and lives upon what his tenants can afford to give him, at last finds the taxes begin to press upon him, and then he sets about removing them, because it is such as he who are in parliament and have that power. 79. But before it comes to him, the war may be over? It often is ; but if not, it soon comes to a termina- tion after that. The American war was defrayed out of taxes raised on this principle, and it is well remembered what distress it occasioned the farmer before it ceased. 80. This is an oppressive system. What is your third method ? It cannot surely be worse than this ? It is of recent discovery, and is not yet under- stood even by those who made use of it. They acted under a blind necessity doing this because nothing else was to be done ; and they cannot yet see that it was the only principle of taxation that ought to prevail, and the only one that ever will, if the people are wise enough to know their own interests. 81. What is this principle ? 42 CATECHISM OF THE CURRENCY. The reverse of the last. Instead of taking taxes out of prices, it adds them to prices.* 82. How is this done ? Suppose we have an issue of government paper money, or that Bank of England paper is made an absolute legal tender ; that, in consequence of this, the Bank is not compelled to give gold for its notes at the rate of pound for pound; that one pound notes are again issued ; and that every pound in paper is received as a pound in payment of the taxes. When, under these circumstances, taxes are demanded of the industrious man to a greater amount than he can afford to pay, he adds the amount to his prices, charging so much more on all his sales as returns him in the year all the taxeS he had paid above his ability. 83. But how can he do this now better than before ? By the increased issues of paper money : for the Bank of England, being released from all fear of an * " The sum required by the tax must be raised, and the question simply is, whether the same amount shall be taken from individuals by diminishing their profits or by raising the prices of the commodities on which their profits will be expended. Taxation under every form presents but a choice of evils : if it do not act on profit, or other sources of income, it must act on expenditure ; and provided the burthen be equally borne, and do not repress reproduction, it is indifferent on which it is laid.'' Ricardo's Political Economy, p. 184. ON TAXATION AS IT AFFECTS PRICES. 43 inconvenient demand for gold, is willing to extend its issues ; and a legal tender being all that is required of the country bankers, they are willing to issue their notes in greater abundance : when, therefore, the industrious man, requiring higher prices to re- pay him his increased taxes, has occasion for the issue of them, they come out, and he gets relieved from the taxes which oppressed him. 84. Who pays the taxes at last ? The richer part of the community, in the in- creased price which they pay for all the goods or services they have occasion to purchase.* 85. But a poor man pays the same price as the rich? Yes ; but being a poor man, he must work to live, and for his work he gets an increased price, because he cannot live as well as he ought unless he now charges more. He therefore remains un- injured by the increased taxation. * " If my revenue be 1000/. per annum, and I must pay taxes to the amount of 100/., it is of little importance whether I pay it from my revenue, leaving myself only 900/., or pay 1001. in ad- dition for my agricultural commodities or for my manufactured goods. If 100/. is my fair proportion of the expenses of the country, the virtue of taxation consists in making sure that I shall pay that 100/., neither more nor less ; and that cannot be effected in any manner so securely as by taxes on wages, profits, or raw produce." Ricardo's Political Economy, p. 185. 44 CATECHISM OF THE CURRENCY. 86. What now becomes of the standard and measure of value ? These remain unaffected by the change : the same quantity of corn and of metal is given for the same goods and services as before. It is only their price that is altered, and that is altered alike on all commodities : wheat is dearer, gold is dearer, labour is dearer, all things are dearer, but only to the rich and unproductive class, who pay the added taxes. 87. Of what does price consist ? It is the expression of the measure of value, and of taxation charged on commodities, which, being represented by money, adds to the price of all things, but does not disturb their natural relation to each other, and to the standard and measure of value.* 88. I perceive now the propriety of the distinction drawn between the metals and money. They are value itself, which cannot alter ; while, on the con- trary, money, being the representative both of the measure of value, and of taxation, has a double func- tion to perform, with relation to commodities, of * " The bullion price of all things may be considered to be their general price, because bullion necessarily bears that value, or nearly that value, in each country, in exchange for goods, which it bears in all." Thornton on Paper Credit, p. 299. ON TAXATION AS IT AFFECTS PRICES. 45 which price is the variable expression. I can see that 41. in paper, without taxation, may be equally the representative of four sovereigns, and of two quar- ters of wheat ; while the same articles, with taxa- tion, may require 6/. in paper to represent them. But in this case how are the 21. representing taxa- tion paid by the importer of the gold ? All the goods he can buy here are advanced by the taxes from 41. to 61. He pays that price for them when he buys them to send abroad in ex- change for gold. He has consequently bought the ounce of gold for 61. in paper money, which sum it will re-produce him when he takes it to the Bank and exchanges it for paper. 89. But how can he know the precise amount of taxes which ought to be charged on the goods he buys ? By finding out, in the market, the lowest price at which they can be purchased. 90. Will not this increased price injure our foreign trade ? No : it preserves it from injury. Foreigners have nothing to do with our internal regulations as to what taxes we shall pay, and by this means they are not in any respect made a party in the transac- tion. They sell their goods, as before, by a measure of value in gold or silver, founded on the stand- 46 CATECHISM OP THE CURRENCY. ard, corn ; but that is a natural, not a national price ; they receive that value from our merchants in gold, silver, or other commodities ; and whether that value be equivalent in this country to 41. or 61. of our money, is no concern of theirs. They get neither more nor less by the transaction on that account. 91. But I have heard it said, that they do get more value from us at present than we receive from them ? This indeed is true, under our present absurd system. But we are talking of what ought to be, not what is, the practice. 92. But how does the farmer under this paper-money system pay an increased price for his corn, so as to be justified in charging 60s. for a quarter of wheat, instead of 40*. ? In consequence of the increased taxation, he pays every tradesman more for his goods, and every labourer more for his services, than before ; and again, he has some taxes to pay on his own ac- count. He, therefore, charges more for his corn, that he may be placed in the same relative situa- tion which he was in before. An advance in the price of corn affects every one ; and thus again, in self-defence, the persons from whom he obtains ON TAXATION AS IT AFFECTS PRICES. 47 goods or services are compelled to charge still higher prices, that they may be maintained in their relative position. These charges and coun- ter-charges continue till the parties, the farmer as well as others, are relieved from that portion of the taxes which would otherwise sink them below their proper degree of health, strength, and com- fort. 93. If all men pay more for goods and services, and are allowed to re-imburse themselves by charging more for that which they have to dispose of, then landlords will charge more for house-rent and the rent of land ? House-rent and the rent of farms may in some instances become higher in consequence of that general prosperity of the country which would en- sue if the system of currency here proposed were adopted. Higher prices might also be expected, from that preference of England as a place of resi- dence over other countries which many are inclined to give it (see Nos. 8, 9). But, generally speaking, rents would not rise so high as to return the land- owner his taxation. He would, however, soon de- rive relief from the rapid reduction of the national debt ; the diminished rate of interest would render his estates worth a greater number of years' pur- chase ; and he would eventually be free from all 48 CATECHISM OF THE CURRENCY. pecuniary obligations, public and private, at a trifling cost compared with that which he will have to pay under the present system. 94. What check would he have against exorbitant demands on the part of those who deal in all sorts of commodities ? The same check which operates at present un- limited home-competition (see No. 22), with the further restriction imposed by the free admission of foreigners offering their goods for sale at the lowest metallic value. 95. Then you would admit foreign corn duty-free ? Certainly ; the farmer would have a sufficient protection at all times in the difference between paper and gold. He would in return have an op- portunity of exporting corn, a chance which he is utterly denied at present. 96. Where would be the harm if landlords received a general increase of rent, to make them some re- compense for the increased prices of goods and services ? It would only hurt themselves : every increase of rent would add to the cost of producing corn, in the same manner as an increase of taxation does ; and as the producer of commodities, to protect himself, would charge a higher price in conse- ON TAXATION AS IT AFFECTS PRICES. 49 quence for his goods, so the landowners in the end would lose more by the operation than they would gain. This is an argument also against corn laws. 97. Would you allow a free trade in every thing ? In every thing that is not taxed so high as to be brought into disadvantageous contact with a fo- reign production. Isolated cases of this kind must either be given up, or a duty equal to the difference be imposed on the foreign article. 98. Should we gain or lose, comparatively, by our fo- reign trade under this system ? The more goods we sent abroad, the more we should receive in return ; but with this difference in our favour, that by means of our superior skill in the use of machinery, we should export a value which would equal that of the foreign goods in a foreign country, while it would actually be pro- duced for less in our own. Thus the goods of the foreigner would in exchange come cheaper to us than they can be produced to him. In these ad- vantages, all classes, the wealthy especially, would directly participate, and be most beneficially in- terested. 99. But still the effect would be felt by the landed proprietor ? 50 CATECHISM OF THE CURRENCY. Undoubtedly. He would find his income rendered less available in the purchase of goods and services, in the same degree that prices generally increased. This is the just and necessary consequence of the late war, for which some one must pay. 100. But how would the fundholder or mortgagee be made to pay? His income being the same as before in nominal pounds, would lose its power to purchase, in the exact ratio that the landlord's rent had done. 101. Would not that be unfair to those who have lately become purchasers of landed or funded pro- perty ? Quite the contrary. As long as the present heavy taxes continue to be levied, every landowner will receive in rent a sum of money equal, if not superior, in amount to that which his land pro- duced before the war commenced, and the ne- cessity for those heavy taxes arose, but of less avail, since it will not now procure in exchange the same proportion of goods or services. The differ- ence, or what he loses, is what he pays to the state for the protection of his person and preservation of that property. As the taxes undergo reduction, the paper money which he receives for his rents will become in proportion more effective in purchases ; and when the debt is reduced very low, or the ON TAXATION AS IT AFFECTS PRICES. 51 taxes are brought down to a level with those of other countries, or of this in earlier times, his rents will resume their ancient value, and paper money will be at par with gold. 102. But suppose he wishes to sell or buy land at any period of the reduction of the taxes, how is he affected then by the difference in the value of money ? Precisely as he ought to be. Whether he sells or buys land, the money given in exchange for it will exhibit a greater or less difference in com- parison with gold, as land at that time happens to be burthened with a greater or less weight of taxation. 103. Is what you have said equally applicable to the fundholder ? Yes : He receives his income, or sells, or buys, in money of more or less value, according to the degree of taxation imposed on the country ; he bears, therefore, his proportion of loss on precisely the same equitable principle as the landowner. 104. Are there any other classes which would be af- fected by the change ? Every man whose income exceeds that of the poorest person performing the same services, or pro- ducing the same goods as himself, if such services and goods are of equal value with his. The lowest 52 CATECHISM OF THE CURRENCY. remunerative price would be found by unlimited competition, and all that was spent beyond, inas- much as it would prove that the party spending it had, or ought to have, more wealth than his rival, would place him in the same predicament as the landlord and fundholder. 105. What would be the effect on absentees ? It would deprive them of all that extra gain which they now derive from the comparatively higher prices of England. Their incomes, to be received abroad, must be shorn of that excess which our taxation adds to them here. If that excess was as 61. to 41., they would find their rents and pensions fall 33 per cent, in value before they could realize and spend them in a foreign country. 106. In fact, then, it would cause" the taxes to be paid by all the rich, in proportion to their wealth or ex- penditure, and would let the lowest grade of the industrious classes go free ? Exactly so. 107. The miser, however, would escape ? No. His income, whatever it be derived from, would lose its value equally with that of the land- holder and fundholder : and if he did not spend it himself, he would employ it in loans to others who would spend it for him, therefore the country does ON TAXATION AS IT AFFECTS PRICES. 53 not suffer from his parsimony ; neither does he gain by it, for if he had spent the money himself, he would have had an equivalent in exchange.* 108. What objections can there be to such a system ? I know of none ; yet I have little expectation that parliament will adopt the measure here sug- gested. Principle and precedent may be in its favour ; a strong infatuation can resist both. The present anomalous system will, in all likelihood, be persevered in for some time longer. We have not yet had reforms enough. Changes of still greater * " From taxes on expenditure a miser may escape ; he may have an income of 10.000/. per annum, and expend only 3001. : but from taxes on profits, whether direct or indirect, he cannot escape : he will contribute to them either by giving up a part, or the value of a part of his produce ; or, by the advanced prices of the necessaries essential to production, he will be unable to con- tinue to accumulate at the same rate. He may, indeed, have an income of the same value, but he will not have the same command of labour, nor of an equal quantity of materials on which