MB 
 
 Crombie 
 Letter to D. Ricardo
 
 THE LIBRARY 
 
 OF 
 
 THE UNIVERSITY 
 OF CALIFORNIA 
 
 LOS ANGELES
 
 LETTER 
 
 TO 
 
 D. RICARDO, ESQ. 
 
 CONTAINING 
 
 AN ANALYSIS OF HIS PAMPHLET 
 
 ON THE 
 
 DEPRECIATION OF BANK NOTES. 
 
 BY THE 
 
 REV. ALEXANDER CROMBIE, LL. 
 
 HonUoru 
 
 1817.
 
 ; U o 
 
 n vv 
 
 LETTER, &c, 
 
 SIR, 
 
 \VHF.N I had the pleasure of meeting you at Woolwich, 
 in company with our respected friend Major Torrens, I intimated 
 my intention of analysing your pamphlet, on the depreciation of 
 Bank Notes. My professional, and other engagements, since that 
 time, have so occupied my attention, that till within these few 
 weeks, I have not been able to command sufficient leisure for 
 carrying my design into execution. Having perused your pam- 
 phlet, with a mind, I trust, free from prejudice, and open to con- 
 viction, I submit the result to your candid examination ; assuring 
 you, that I am not ambitious of victory, but anxious to discover 
 truth. 
 
 The question between us is, " whether were bank notes, from 
 the passing of the Restriction Act, till lately, in a state of deprecia* 
 tion, or were they not ?" You maintain the affirmative ; to me, 
 on the contrary, the negative proposition appears the only one 
 consistent with acknowledged principles, and reconcileable with 
 known facts. 
 
 Before I proceed to the discussion of this question, as treated 
 in your pamphlet, it may be useful to specify one or two points, 
 concerning which we are agreed. 
 
 In the first place, then, we concur in the opinion, that com- 
 modities measure the value of money, in the same manner as 
 money measures the value of commodities , and that the only 
 proof which we can possess of the relative worth of currency, in 
 two places, is its greater or less power to purchase commodities.
 
 Rev. Dr. Crombie, on the Depreciation, <$c. 531 
 
 2dly. I agree with you in thinking, that coin, being easily con- 
 vertible into bullion, and exportable, may be regarded as a com- 
 modity -, remarking however, at the same time, that though coin 
 and bullion are mutually convertible, they ought not to be con- 
 sidered as things precisely identical. 
 
 In every controversy, it is of supreme importance, correctly to 
 conceive the meaning of the terms which we employ. Where 
 these are misunderstood, the contention may be endless, where 
 the parties are agreed , as on the contrary, opinions may seem to 
 harmonize, where in reality there is nothing but repugnance and 
 discord. As the term depreciation occurs frequently in this 
 controversy, and as our view of the question depends much on the 
 notions which we attach to this term, it is highly necessary that 
 we clearly and fully comprehend its import. At any rate, each 
 should understand, in what acceptation the other employs it. By 
 depreciation then, I mean, a diminution of exchangeable value, 
 whether that value be expressed in money, or in commodities. In 
 order to illustrate this, let us suppose, that all commercial inter- 
 course is effected by barter. In this case, any article brought to 
 market, would be correctly said to be in a state of depreciation, 
 when its power of commanding the usual quantity of other com- 
 modities, or the usual quantity of labour, was diminished. In a 
 country, where money serves as the medium of exchange, or as 
 the measure of exchangeable value, a commodity is said to be 
 depreciated when it commands a less than the usual quantity of 
 currency, whether that currency consist of the precious metals 
 only, or of these and paper money. 
 
 But though money, or the precious metals, be commonly employ- 
 ed, in all commercial countries, as the measure of value, possessing 
 a peculiar aptitude for that purpose, above all other mediums of 
 exchange, it is still to be remembered, that the real criterion, by 
 which the worth of any commodity is to be estimated, is the 
 quantity of labour which it can command. And, as labour is 
 undertaken chiefly for the purpose of procuring the necessaries and 
 comforts of life, the most correct measure of value, next to labour, 
 is the quantity of those necessaries and comforts, for which any 
 commodity may bo exchanged. Money may be conveniently 
 employed to express the value of labour, though that labour be 
 itself the only real measure of value : but it is still to be remem- 
 bered, that the labourer, in estimating his services, looks not at 
 the money which they may command, but at the portion of 
 necessaries, conveniences, and comforts, which that money may 
 be able to purchase. By the depreciation then of any commodity, 
 is meant a diminution of its exchangeable value, in relation to 
 ribour or to other commodities, those chiefly of primary necessity,
 
 532 Rev. Dr. Crombie, on the 
 
 whether the comparative value be estimated directly, or through 
 the medium of any species of currency. 
 
 On opening your pamphlet, I find your observations introduced 
 with a theorem, which I consider to be wholly gratuitous. You 
 state it to be the opinion of the most approved writers on political 
 economy, that the precious metals, previously to the establishment 
 of banks, were divided into certain proportions, among civilized 
 nations, according to the state of their commerce ; and that while 
 so divided, the precious metals every where retained the same 
 value. I will not stop to inquire, how far you are authorized to 
 ascribe this opinion to the most approved writers on political 
 economy ; but I do not hesitate to affirm, that this doctrine, which 
 constitutes the basis of your reasoning, is not only entirely gratuit- 
 ous, and, on this ground only, not entitled to our assent, but is 
 also contradicted by the testimony of positive and unequivocal 
 facts. On this hypothesis I would beg leave to submit to you 
 the following observations. 
 
 1st. It is not necessary, that the precious metals in one country 
 shall bear the same ratio, in respect to quantity, to those in another 
 country, as the quantity of commodities to be circulated in the 
 one, bears to the quantity to be circulated in the other. 
 Nothing is more conceivable, because nothing is more con- 
 sistent with known facts, than that equal quantities of homo- 
 geneous commodities may be circulated in two different countries, 
 by very different quantities of the precious metals. That a 
 certain quantity of coin is necessary for effecting exchanges, in 
 other words, that a minimum must be admitted, is clear -, but that 
 a larger quantity than is indispensable for this purpose, may exist 
 in every country, is equally evident. If the half of the whole 
 currency of this country, inclusive of paper money, were annihi- 
 lated in one night, the remainder, as Hume observes, would 
 answer the purposes of exchange : the only difference would be y 
 that money would acquire a double value. 
 
 2dly. The distribution of the precious metals, which you 
 suppose, among commercial nations, never did, and I may venture 
 to add, never can exist. Were every other argument wanting to 
 prove this impossibility, a reference to your own conclusion, as 
 its necessary effect, would be sufficient. For, if the necessary 
 effect of this supposed distribution of the precious metals were an 
 equalization of their value in different countries, the want of this 
 equilibrium is a sufficient evidence, that the assumed distribution 
 does not exist. If we compare the value of the precious metals in 
 England, France, and Scotland, not to mention some other coun- 
 tries, in which the disparity is still greater ; if we compare the 
 value of the precious metals in these countries, as exchanged 
 either for labour, or articles of primary necessity, we must arrive
 
 Depredation of Bank Notes. 533 
 
 at one or other of these two conclusions : 1 st, Either the precious 
 metals have not been distributed according to the ratio, which the 
 hypothesis presumes ; or, 2dly, If this distribution is affirmed to 
 exist, it has not been accompanied with that equilibrium in their 
 value, which you maintain would be its necessary effect. Either 
 alternative proves the doctrine to be false. The same quantity 
 pf the precious metals will command a larger portion of labour, 
 and the necessaries of life, in every other country than they can 
 command in England. What does this prove ? That the distri- 
 bution assumed by you, and its necessary effect, are merely ideal. 
 In no two commercial countries is money found to be of equal 
 value. If a cause then is necessarily accompanied with a certain 
 effect, the absence of that effect clearly demonstrates the absence of 
 the cause. 
 
 You may reply perhaps, that the supposed distribution was 
 antecedent to the establishment of banks. I am desirous to know, 
 what evidence you can produce, that such a distribution ever 
 existed. As far as my researches extend, I discover no period 
 in ancient times, when the comparative value of money in different 
 countries could justify your theory : on the contrary, I find clear 
 and decisive facts leading to an opposite conclusion. If I com- 
 pare the prices of corn, of slaves, of houses, of cattle in Rome, 
 Greece, and Judaea, at the same period, the comparison justifies 
 me in asserting, that money, at that period, was not distributed in 
 these coutitries in such a ratio, as to equalize its value. Nor do I 
 believe, that this equilibrium ever existed. The value of money 
 in every country must be in the inverse ratio of its whole amount, 
 and directly as the quantum of commodities, extern paribus y 
 which it has to circulate. If therefore I find no period, when in 
 commercial nations, ancient or modern, money was every where of 
 the same value, I am warranted in concluding, that money was 
 never so distributed among them as you have supposed. If the 
 necessary effect is not found, I may logically infer, that the cor- 
 relative cause does not exist. 
 
 I agree with you in thinking, that an increase of the quantum of 
 currency, whether that currency consist of coin, or of paper, or 
 of both, has a necessary tendency to diminish its value ; but with 
 this limitation of the general proposition, that the quantum of 
 Commodities to be circulated by that currency be supposed to have 
 experienced no increase. If their number, or their quantity, has 
 been augmented, the circulating medium may be proportionally 
 increased, without any reduction of its value. 
 
 I agree with you also in thinking, that, when the currency of a 
 country is reduced in value by an increase of quantity, while ex- 
 changeable commodities remain the same, if this increase has been
 
 534 Rev. Dr. Crombie, on tlie 
 
 occasioned by the issue of bank paper, the currency can be restored 
 to its former value in no other way, than by withdrawing the 
 increase in the quantity of paper money, or exporting an equiva- 
 lent quantity of coin. 
 
 You observe, that coin will never be exported, unless its expor- 
 tation be advantageous to the country. In this proposition, as 
 universally true, I do not concur. Necessity may require the 
 exportation of specie. But, as this subject will be resumed here- 
 after, I forbear at present to discuss the question. 
 
 You observe also, that, if the melting of our coin could be 
 effectually prevented, while the exportation of gold were allowed, 
 two ounces or more of coined gold might possibly be given for 
 one ounce of uncoined gold ; " This," you say, " would be a real 
 depreciation of our currency, raising the price of all other commodi- 
 ties in the same proportion, as it increased that of gold bullion." 
 
 Here I would offer two observations. In the first place, I do not 
 perceive how our currency would be depreciated by the advanced 
 price of gold bullion. The coin retains its former value in relation 
 to every other commodity for which it is exchanged. If so, unless 
 we are to suppose, that there is no other measure of the value of 
 gold coin, but gold bullion, (and this, according to a proposition 
 already stated, in which we both concur, is not to be supposed) 
 we cannot consistently maintain that gold coin has suffered 
 depreciation. But, say you, gold does not retain its relative value 
 in respect to other commodities ; their price is raised in proportion 
 as that of gold bullion is increased. By what process of reasoning 
 is this proved ? How do you show, that an increased price of 
 bullion increases the value of every other commodity, bullion in 
 this case being considered as a mere commodity ? I can no more 
 conceive how this effect should follow, than that, because a pipe of 
 wine may be sold for two hundred, instead of one hundred guineas, 
 owing to an increased demand, the price of every other commo- 
 dity should be raised in the same proportion. 
 
 But let us take it for granted, that your position is true, and 
 that the price of all commodities rising with that of bullion, gold 
 would suffer a proportionate depreciation, I would in the second 
 place request your particular attention to this doctrine, the truth 
 of which is here clearly and explicitly recognised by yourself, I 
 mean, that the value of currency is measured by commodities, and 
 thut a real depreciation of gold and silver coin is demonstrated 
 only by an advanced price of all exchangeable commodities. How 
 this admission is to be reconciled with your doctrine, I am at a 
 loss to conjecture j for here you admit, that a diminution of ex- 
 changeable value in comparison with that of commodities is the 
 criterion of "a real depreciation" of currency. You proceed :
 
 Depreciation of Bank Notes. 535 
 
 Thus then it appears, that the currency of one country can 
 never for any length of time be much more valuable, as far as 
 equal quantities of the precious metals are concerned, than that of 
 another." This conclusion, if logically deducible from your 
 preceding observations, would infallibly prove, that your premises 
 are false ; for at no period has the value of money, as measured 
 either by commodities or by labour, been nearly so high among 
 commerci.il nations on the continent, as it has been in England. 
 An ounce of silver or of gold will command double the quantity of 
 labour in France, that it will command in this country. And it 
 is this depreciation of specie, which has enabled Britain, as Mr. 
 Hume observes, to subsidize foreign nations, with comparatively 
 so small an assessment on the labour and industry of the English 
 people. One day's wages of a journeyman carpenter, if he were 
 taxed to that amount, would support a foreign mercenary for ten 
 days ; whereas it would require two or three days' labour of a 
 French or Russian carpenter to accomplish the same object. In- 
 controvertible as this fact is, you proceed to reason, as if an ounce 
 of gold were not of more value in France, than it is in England, 
 and argue, that were it of more value, gold would immediately 
 quit England, and go to France for the purchase of commodities, 
 which must be cheaper there than here. You do not surely mean 
 to deny, that an ounce of gold will purchase more labour, more 
 corn, more land, better lodging in France than in England. The 
 fact cannot be disputed. Gold is cheaper in this country, than in 
 France ; and sufficient reasons can be assigned why gold does not 
 quit England and go to France. The disparity of value should, 
 I conceive, have shown you the falsity of your theory. Were 
 your doctrine just, not a guinea would have been left in England. 
 Scotland, where labour continues still of lower nominal value than 
 it is in this country, compared with the precious metals, and 
 where thirty years ago, it bore not half of the nominal value which 
 it possessed here, must long ere now have drained England of 
 her last guinea. One or other of these positions then must be 
 affirmed, either that labour is not a measure of value, or that your 
 theory is false. 
 
 Your observations respecting the Bank issues, (p. 9. 10. 11.) 
 proceed on the same erroneous assumption of a general equili- 
 brium ; and your deduction founded in that error, that an un- 
 favourable exchange is owing to a redundant currency, I consider 
 to be entirely false. In opposition to the clearest evidence, that 
 the same quantity of gold or silver will in different countries be 
 exchanged for different quantities of labour, and is therefore of 
 different values ; in opposition, I say, to this incontestable fact, you 
 assume a fanciful hypothesis, that there exists an equilibrium of
 
 536 Rev. I)r, Crombie, on the 
 
 value, in respect to the precious metals, among all commercial 
 nations. 
 
 You observe, that, " if the Restriction Act had not taken place, 
 and the process of converting guineas into bullion had continued, 
 the Bank would have been compelled to withdraw part of its notes 
 from circulation, till it should have increased the value of the 
 remainder to that of gold bullion, and consequently to the value 
 of the currencies of other countries." 
 
 Here let me ask, what is the best criterion of the value of 
 currency here, or any where ? Is it not labour ? And can you 
 suppose, that the Bank could have so far reduced its issues, as to 
 make a guinea, or a pound note and a shilling, command as much 
 labour, or as much corn in England, as on the continent, without 
 inflicting a deadly blow on the whole community ? Besides, permit 
 me to ask, is the same quantity of gold or silver of equal value, 
 as measured by labour, in France, as in Russia ? in Poland, as 
 in Holland ? in Norway, as in Spain ? If it be not of equal 
 value in these different nations, I am desirous to know your mean- 
 ing, when you say, that the Bank note, if the issues of Bank 
 paper had been diminished, might have been rendered equivalent 
 to bullion, and the currencies of other countries. If these different 
 currencies, as measured by labour, are of different values, weight 
 for weight, how is this equalization to a variety of discordant 
 standards to be effected ? Can one quantity be equal to each of 
 two, or more, unequal quantities ? 
 
 Your doctrine therefore, that the exportation of money is 
 occasioned by a redundant currency, and for the purpose of equa- 
 lization, I must consider as wholly false. It appears to me indeed 
 to be a proposition superlatively paradoxical to maintain, that our 
 late exportation of gold was occasioned by redundancy, when 
 scarcely a guinea was to be seen in circulation. You may reply 
 perhaps, that your proposition refers to money generally, and not 
 to gold particularly ; and you may contend, that the redundancy 
 was created by excessive issues of Bank paper. This answer 
 appears to me unsatisfactory. From the year 1793 to the year 
 1797, during which period there were no extraordinary issues of 
 Bank notes, whence arose that unusual efflux of gold from Eng- 
 land to the Continent ? How is this to be explained consistently 
 with your doctrine ? Was this efflux owing to a redundancy of 
 gold, or was it not occasioned by the exigencies of state necessity ? 
 Was it not confessedly owing to large advances of gold made to 
 government by the Bank ? .advances, in which redundancy had 
 no concern ? And if large sums were thus exported by govern- 
 ment, the issue of an additional quantity of Bank pnpcr became 
 indispensable, in order to supply the deficiency, and by preserving
 
 Depredation of Bank Notes. 537 
 
 our currency at its former level, to prevent an injurious fluctuation, 
 of its- value. 
 
 " It being acknowledged," you say, " by Mr. Thornton, that 
 the price of gold bullion is rated in gold coin, and that the law 
 against melting and exporting gold currency is easily evaded, it 
 follows, that no demand for gold bullion can raise the money price 
 of that commodity. The error of this reasoning proceeds from 
 not distinguishing between an increase in the value of gold, and 
 an increase in its money price." 
 
 As I proceeded in reading this passage, I naturally conceived, 
 that the deduction, beginning with the words "it follows," was 
 an inference of your own, drawn from the preceding observations 
 of Mr. Thornton ; and the structure of the sentence obviously 
 requires this interpretation. But in the sentence immediately 
 following, this conclusion is affirmed to be erroneous. Thi3 
 apparent contrariety created in my mind considerable doubt, to 
 which of the two I should ascribe the deduction. The last sen- 
 tence however of the paragraph removed the uncertainty ; for 
 there you affirm, that * c an ounce of gold bullion could not, what- 
 ever the demand might be, while its price was rated in gold coin, 
 be of more value than an ounce of coined gold." This observation, 
 when analysed, will, I apprehend, resolve itself either into a con- 
 tradiction, or a truism. Certain it is, it cannot possibly subserve 
 your hypothesis. It proceeds on the supposition, that the statute 
 law of the country can infallibly and unalterably fix the value of 
 the guinea, as a certain and invariable standard ; while it pre- 
 supposes, at the same time, that the statute is incapable of fixing 
 this value, being very easily evaded, and that the standard itself 
 may vary into bullion. It supposes that to be definite and un- 
 changeable, which it supposes at the same time to be indefinite 
 and variable. You would, in my opinion, have advanced a more 
 consistent and philosophical proposition, if you had affirmed, that 
 the guinea itself is not uniformly or universally a correct measure 
 of value ; for being easily convertible into bullion, and no statute 
 being capable of wholly preventing that conversion, when the price 
 of bullion rises considerably above the mint price, it then ceases 
 to be a measure of value. 
 
 Besides, if the guinea is really to be considered as a fixed 
 standard, and if the price of bullion cannot rise above the mint 
 price of the guinea, is not this an absurdity equal to maintaining, 
 that the thing measured cannot exceed that, by which it is mea- 
 sured ? What sort of a standard is that, which may exceed the 
 thing measured, but cannot fall short of it ? The guinea is either 
 convertible into bullion, or it is not. If it is not convertible into 
 bullion, the extreme severity of the law being supposed capably Q 
 
 NO. XX. Pam, VOL, X, 2M
 
 538 Rev. Dr. Crombie, on the 
 
 preventing it, then bullion as rated in gold coin may rise conside- 
 rably above it in value. This you yourself have already admitted. 
 I may not be inclined to convert coin into bullion at the hazard of 
 my life, and may prefer giving an ounce and a quarter of gold coin 
 for an ounce of bullion. If it is easily, and without much hazard, 
 convertible into bullion, then the guinea, rising with bullion in va- 
 lue, ceases to be a standard. Hence bullion can no longer be said 
 to be rated in gold coin, the thing measured being as much a value 
 of the measure itself, as the measure is of it. In such circumstances 
 to maintain that gold bullion is rated in gold coin, is to maintain 
 that bullion is rated in bullion a proposition which no man will 
 controvert, however little information it may convey. 
 
 In short, your observation implies the truth of two contrary sup- 
 positions, either of which you may take; but without involving a 
 contradiction, or substituting a truism for an argument, you cannot 
 take both. Either say, that the guinea is a perfect and invariable 
 standard, marking the relative values of all commodities, in which 
 case, bullion may rise in value above coin ; or say, that the guinea 
 is not an invariable and just standard, because in some cases, in- 
 stead of determining or measuring the price of bullion, its own 
 value is measured by that of bullion : nor can it be denied, in any 
 consistence with propriety, that if the value of bullion rises, the 
 value of the guinea, which must be regarded as bullion, rises with 
 it. 
 
 In vain do you offer the distinction between the value and the 
 money price, to which distinction Mr. Thornton's inattention, you 
 observe, has led him into error. If gold coin be easily convertible 
 into bullion, the money price and the value are identical, when 
 bullion rises above the mint price. The guinea then ceases to be a 
 mere coin, a measure of value ; and becomes itself an exchange- 
 able commodity, subject to all the fluctuations of bullion, into which 
 it is, or may be, converted. If bullion be rated in coin, bullion 
 must be different from coin. If an ounce of bullion were uniformly 
 worth an ounce of coin, bullion could not be said to be rated in 
 coin as a measure of value. 
 
 In short, your view of the question places you in a dilemma, 
 from which there is no escape. Either gold coin is a standard oi 
 value, not liable to be melted or exported, and measuring the ex- 
 cess or the inferiority of the value of bullion above or below itself ; 
 or gold coin is not such a standard of value, but a mere commodity. 
 If the former alternative be assumed, then it follows, that bullion, 
 like any other commodity, may rise, arid continue for a considerable 
 time above the value of the coin. If the latter alternative be adopt- 
 ed, then gold coin, as being easily melted and exported, becomes a 
 mere commodity, is no longer a measure of value, and ceases to be 
 a standard.
 
 Depreciation of Bank Notes. 539 
 
 Suspecting, it would seem, the validity of your reasoning, you 
 continue, " If this argument should not be considered as conclusive, 
 I should urge, that a void in the currency, as supposed by Mr. 
 Thornton, can only be occasioned by the annihilation or limitation 
 of paper currency." This observation surprises me. Do you not 
 believe, that a void in the currency may be occasioned by the hoard- 
 ing of gold and silver ? Do you not suppose, that a void may be 
 occasioned by the exportation of specie for the support of our ar- 
 mies on the continent, or for the purchase of corn in a year of 
 scarcity ? You say, that money can never be exported to excess. 
 This seems to be one of those indefinite propositions, which it is as 
 easy to assert, as it is hard clearly to comprehend, and therefore 
 difficult to refute. But let us come to an explanation of terms, 
 that we may ascertain its precise purport. What do you mean by 
 excess ? Do you intend to signify, as your observation, respecting 
 a void would seem to imply, that money cannot be exported so, as 
 to create a void in our currency ? If this be what you intend to 
 express, the proposition is still indefinite and vague. A void is 
 either great or small, perceptible or imperceptible. Not a shilling 
 can be hoarded, or exported, but it leaves a void, though that void 
 may not be perceived. Can one or two millions of specie be ex- 
 ported without leaving a void ? Let the extent of that vacuum or 
 deficiency be explained, which you term a void, and we shall be 
 able more clearly to comprehend, what you mean by excess. 
 
 You deliver it as your opinion, that we should not import more 
 goods, than we export, unless we had a redundancy of currency. 
 How does this appear ? Or how do you ascertain a redundancy of 
 currency ? If you infer it from the simple fact, that gold is cheaper 
 in this country than elsewhere, and being therefore redundant is ex- 
 ported, or that money generally is cheaper, I answer that, were this 
 observation or conclusion just, the exportation of money from this 
 country must have gone on progressively, till our currency was 
 reduced to a level with the currency on the continent. Has this 
 exportation taken place ? or can it probably ever take place ? Cur- 
 rency is not redundant in England, because cheaper than in Scot 
 land ; nor redundant in Scotland, because cheaper than in France; 
 nor redundant in France, because cheaper than in Russia ; nor re- 
 dundant in Russia, because cheaper than in Norway Tlv com- 
 parative cheapness of gold and silver is no evidence of r>'dumiancy ; 
 otherwise, they would be redundant every where, that country ex- 
 cepted, in which they are dearest. 
 
 Besides, you ..dinit that a nation, having only its due proportion 
 of currency, may waste part of ts wealth, lose part of its trade, 
 and not be able to retain its usual quantity of currency. Now, 
 Sir, when this waste of wealth, this diminution of trade takes place, 
 is it a redundancy of currency that makes them export ? You
 
 .640 Rev. Dr. Crombie, on Hie 
 
 will not maintain this, because it implies a contradiction ; nay it in 
 contrary to your own theory, respecting the equilibrium. Is not 
 then the exportation of the precious metals frequently occasioned 
 by necessity, in order to discharge unfavourable balances ? When 
 a nation is threatened with famine, and when corn must be procured 
 at any price, is it choice, is it redundancy then, and not necessity, 
 that impels them to export their coin f 
 
 It is true, that if the foreign corn-merchant could import goods 
 in return for his corn, which would yield him a greater profit thv." 
 the payment in specie or the precious metals, he would unques 
 tionably prefer commodities ; but when these are prohibited, and 
 when there is no indirect mode of discharging the debt, the Eng- 
 lish corn-merchant has no alternative : he must purchase his grain 
 with gold. All your observations here presuppose, that commerce 
 is perfectly free, that there can exist no physical, no political ne- 
 cessity, to interrupt this freedom of intercourse, and that choice, 
 not compulsion, in all cases governs our commercial transactions. 
 This, however, is far from being uniformly the state of things. 
 
 You proceed to show, that by an Act passed in the 39th year of 
 the present reign, prohibiting the coining of silver, it would appear., 
 that government intended to establish gold as the standard of cur- 
 rency. This by no means follows ; but be it granted. Till go- 
 vernment can effectually prevent the melting and exportation of 
 gold coin, and as long as the statute is easily evaded, it is extreme 
 folly to talk of a standard, which shall in extraordinary cases be a 
 measure of value. The standard itself will be measured by that, 
 which it is intended to measure. 
 
 You proceed to remark, that, " If an English merchant owes a 
 debt in Holland, of 1 100 florins, and gold has not varied in value, 
 He will give 1001. in pure gold to a bullion merchant, allowing him 
 freight, insurance, and profit besides, and he will in return give 
 him a bill equal to 1 100 florins ; but if he pays the bullion merchant 
 iu depreciated paper money, he will expect a premium for his bill, 
 equal to the depreciation of the paper." This I admit to be true : 
 but, if the observation is offered for the purpose of showing, that 
 the Bank Note, because not exchangeable for its usual quantity of 
 gold, was depreciated, I am at liberty to deny the depreciation, till 
 you have demonstrated its existence. Your premises suppose the 
 paper to be depreciated , but we require proof, and not hypothesis. 
 We do not admit, that because gold rose in value, obeying the 
 general law of demand and supply, the bank note fell ; and for this 
 reason, that it retained its relative value in respect to other commo- 
 dities, allowance being made for that general depreciation of all our 
 currency, which has been gradually going on from the earliest pe- 
 riods of our history And let me remind you of your own ac- 
 knowledged criterion of. what you term real depreciation," name-
 
 Depreciation of Bank Notes. 54) 
 
 ly, a diminution of exchangeable value in respect to commodities. If 
 then this diminution in the value of the bank note did not take place, 
 there could be no depreciation, consistently with your own theory. 
 " The Restriction Bill," you observe, " enabled the conductors 
 of the Bank to increase and diminish at pleasure the quantity and 
 amount of their notes, and removed the previously existing checks 
 against an over issue." It does not appear, however, by any satis- 
 factory evidence, that an excessive issue of bank paper did in fact 
 take place. It is contended, I am aware, that the depreciation of 
 bank paper is a sufficient evidence of the fact. This argument 
 cannot be admitted. To reason in a circle, is to reason in- 
 conclusively and to beg the question, is not to argue. You 
 assume the depreciation, and infer the excessive issue j then again 
 you assume the excessive issue, and infer the depreciation. 
 Now this depreciation is denied, for the reasons, which have been 
 already stated. But I will add one simple fact, in corroboration of 
 these reasons. If depreciation had taken place, and if this depre- 
 ciation was occasioned by excessive issue, the depreciation would 
 have increased, as the issue was augmented But the very reverse 
 was the effect. In October of the year 1781, the exchange with 
 Hamburgh was at 32 ; the number of bank notes in circulation 
 amounted to 5,967,970/. In March of the year 1782, the ex- 
 change had risen to 32-10, though the value of notes in circula- 
 tion had increased to 9,160,000/. If there were no other argument, 
 than this fact, it would alone serve to prove, that, if any deprecia- 
 tion had taken place, it could not be occasioned by an excessive 
 issue of bank notes. At the close of the American war, while 
 bank paper was convertible into gold and silver, the price of gold 
 bullion rose 6 per cent., and that of silver no less than 18.' In the 
 year 1795 the Bank purchased gold at no less than 13 per cent, 
 above the mint price, as appears by the evidence of Mr. Newland. 
 It will not be said, that this was occasioned by an over issue of 
 bank notes, in consequence of the " salutary checks" against exces- 
 sive issue being withdrawn ; for the Bank was paying in specie. 
 Was the bank note then depreciated ? If bank paper did not then 
 suffer depreciation, when gold was 13 per cent, above the mint 
 price, by what argument is the depreciation proved, when it rises 
 still higher by 6 per cent ? Let those who maintain the deprecia- 
 tion of bank paper, clearly define the limit between depreciation 
 and non-depreciation. If there be no depreciation when gold bul- 
 lion is sold at 13 per cent, above the mint price, and if there be 
 depreciation when it is sold at 20 per cent, above that price, it is 
 
 1 This extraordinary advance in the value of silver is stated by Mr. 
 Vansittart, in his speech on the Report of the Bullion Committee. At this 
 period, it would appear that no purchases of silver were made by the Bank*
 
 .542 Rev. Dr. Crotabte, on the 
 
 incumbent on them to define the limit, where non- depreciation 
 terminates, and depreciation begins. 
 
 In short, let an excessive issue be proved, and depreciation will 
 be admitted, .is its necessary effect; or prove depreciation, and we 
 will infer with you an excessive issue : but we cannot admit a cir- 
 cular argument. 
 
 You may perhaps consider, th.it an additional number of bank 
 notes to the amount of . 1 6,000,000 furnishes a sufficient evidence 
 of an excessive issue. In this opinion I do not concur Let it be 
 granted, that the additional issues of notes by the national and the 
 provincial banks, amounted, as has been supposed, to twenty-five 
 or thirty millions; was this sum more than sufficient to supply the 
 void, occasioned by the hoarding and the exportation of gold, and to 
 preserve our currency at its usu.il level ? Nay, did not our increased 
 commerce, our increased population, and augmented taxes, require 
 an increased currency ? Is there any evidence whatever, that the 
 additional issues of bank paper were more than adequate to these 
 purposes ? Should it be answered, that the advanced price of com- 
 modities was a proof of depreciation, and that this depreciation 
 demonstrates an excessive issue; it may be replied, 1st. that this 
 depreciation affected our whole currency, and had begun rapidly to 
 show itself in the year 1795, two years at least before the Restric- 
 tion Act took place : 2dly, that additional taxation requires an in- 
 crease of currency, and that an increased currency, exchangeable 
 commodities remaining the same, is followed by depreciation. This 
 depreciation, therefore, was not a depreciation of b.ink paper onlyj 
 but of our whole currency, a depreciation not occasioned by an ex- 
 cessive issue of bank notes, which would affect their value only, 
 but by taxation necessarily requiring a larger quantity of circu- 
 lating medium. In evidence of this, I need only refer to the de- 
 preciation which took place during the American war, even while 
 the Bank paid in specie. 
 
 Now let us suppose, as has been conjectured to be near the fact, 
 that the currency in gold, at the commencement of the late war, 
 was 35, millions. It is not an extravagant statement to assume, that 
 25 millions of this sum disappeared by hoarding and exportation. 
 If it be true, that the nominal price of commodities is in the direct 
 ratio of the quantity of currency, and that the value of currency is 
 reciprocally as its quantity, it is evident, that the necessary effect of 
 withdrawing this sum from rhe circulation, vvould be to raise the 
 ralue of the remainder, and to lower the nominal price of labour, 
 and of every article of consumption How is this injurious effect to 
 be prevented ! In no other way, than by su, plying the void occa- 
 sioned by the abstraction of gold. If the Bank of England then, 
 with the provincial banks, had issued additional notes to the amount 
 of 25 millions, in order to fill up the void, so far from doing aa
 
 Depreciation of Blank Notes. 
 
 injury to the community, they would have rendered it an essential 
 service by preserving the currency at its customary level. Nor 
 has any evidence whatever been adduced, that the additional issues 
 of the national and provincial banks exceeded the sum requisite for 
 this purpose, especially when it is considered, that war and taxation 
 necessarily require an increased circulating medium. 
 
 You deny (p. 14.) that a void in the circulation can ever take 
 place, and maintain that the increasing scarcity of gold would pre- 
 vent it. I should wish you to explain, how this scarcity is occa- 
 sioned, but by the abstraction of gold ; in other words, by the pro- 
 duction of a void. The scarcity which you admit, implies the 
 existence of a void ; for where tht-re is the usual demand, and the 
 usual supply, there can be no scarcity , but where part of the usual 
 supply is withdrawn, thus creating a scarcity, to deny that a void 
 is left by this abstraction, is to deny the scarcity, which your argu- 
 ment presupposes. But let us appeal to fact. You surely will 
 not affirm, that gold was as abundant in the year 1813, as in the 
 year 1 792. Is it not a fact, not to be disputed, that towards the 
 close of the war, scarcely a guinea was to be seen ? If the ab- 
 straction then of almost the whole of our gold currency would not 
 have the effect of creating a void, I must confess that I am totally 
 ignorant what the term void can be said to imply. I see no proof 
 therefore, I see nothing but assertion, that the issues of Bank paper 
 were excessive or injurious. 
 
 You observe, (p. 29.) " that the exchange will be a tolerably 
 accurate criterion by which we may judge of the debasement of 
 our currency, proceeding either from a clipped coinage, or a depreci- 
 ated paper money." Will you have the goodn ss to reconcile this 
 position with the following facts, and then show me, how that can 
 be a criterion of elevation or depression, which, at one and the same 
 period, in respect to one and the same thing, ^ives two opposite 
 results. In the latter end of the year 1809, the exchange with 
 Hamburgh and Amsterdam was 18 per cent. Against us. Here, 
 say you, was an evidence of depreciation of English currency. At 
 the same time the exchange with Sweden was in our favour about 
 24- per cent, and with Spanish America about 20 percent. Here, 
 by parity of reasoning, was an evidence of the advanced value of 
 our currency What then can we think of the accuracy of that 
 criterion, which at one and the same period, represents our cur- 
 rency to be depreciated, and not depreciated to be falling in 
 value, and yet rising in value? Were I inclined to be surprised at 
 any paradoxical hypothesis, this above all others would excite my 
 astonishment. 
 
 Permit me also to request an answer to the following question, 
 your position being presumed, that the exchange furnishes a pretty 
 accurate criterion of the value of our currency. When the
 
 344 Rev. Dr. Crombie, <w the 
 
 exchange with Amsterdam was 7 per cent, below par, and the ex- 
 change wim Paris 14- per cent, below par, in what ratio was 
 English currency depreciated. Was it 7 per cent. ? or was it 14 
 per cent. ? or how do you estimate the general quantum of depre- 
 ciation ? To this question I should wish to be favoured with a 
 clear and satisfactory answer. 
 
 You refer to an observation of Dr. A. Smith, in which he con- 
 siders, that the market price of gold bullion could not greatly 
 exceed the mint price, while the coin was of standard weight and 
 purity. Mr. Lpcke had made a similar observation, respecting 
 the comparative price of silver bullion, and silver coin. But both 
 observations, though strictly true as general positions, are not 
 universally so. Mr. Thornton has observed, that fluctuations have 
 lately been experienced in our exchanges, and correspondent 
 variations in the market, compared with the mint price of gold, 
 amounting to no less than 8 or 10 per cent., the state of our coinage 
 continuing in all respects the same. You reply, that Mr. Thorn- 
 ton should have reflected, that, at the time he wrote, specie could 
 not be demanded at the Bank in exchange for notes. It is true. 
 But you may be furnished with cases, in which a much greater 
 rise in the price of gold bullion was experienced, than Dr. A. Smith 
 contemplated as possible, even while the Bank was paying its 
 notes in specie. From the year 1 702 to 1 709 the price of gold bullion 
 exceeded four pounds per oz., while the mint price was only 
 3>l. 14$. 2d.' From 1780 to 1784-, did not the exchange with 
 .Hamburgh rise from 5 to 8 per cent, against England, and the 
 price of foreign gold 6, and of silver 18 per cent, above the mint 
 price, during which three periods the Bank was paying its notes 
 in cash ? Dr. Smith's observation, therefore, I do not consider 
 to be universally true. 
 
 You observe, that, if one fifth were taken off from every guinea, 
 the market price of bullion would rise one fifth above the mint price. 
 Here, I conceive, you have inadvertently committed a small inac- 
 curacy, the rise above the mint price being one fourth, and no) 
 one fifth. The guinea being supposed still to be equivalent to 21 
 shillings, though only $ of its former weight, 4 of this added tc 
 .it makes T or the integral weight, equal in value to 265. 3</., not 
 25 shillings as you compute it. Accuracy requires, that we should 
 tither bay that the guinea has lost one fifth of its former intrinsic 
 value, or th t the price of bullion is one fourth higher than th 
 vr.lue of the guinea, the latter being that, from which the compu- 
 i?.tion is drawn. If a man buys goods at 100/. and sells them at 
 - "/., we do not say that he gains 4 but |, the selling price being 
 
 1 Sec Mr. Vansittart's speech.
 
 Depreciation of iBaftk Notes. ,545 
 
 A above the purchase money. This remark may appear immaterial 
 and captious ; but in all discussions of this nature, the strictest 
 accuracy of expression is requisite, because it serves to prevent 
 misconception and error. 
 
 You proceed. " Forty-four guineas and a half (the number of 
 guineas weighing a pound, and therefore called the mint price,) 
 would no longer weigh a pound, therefore a fifth more than that 
 quantity, or about 567. would be the price of a pound of gold : 
 and the difference between the market and the mint price, between 
 u7. and 4-67. 14s. 6d. would measure the depreciation." " If 
 such debased coin," you say, " were to continue to be called -by 
 the name of guineas, and if the value of gold bullion and all other 
 commodities were rated in the debased coin, a guinea fresh from 
 the mint would be said to be worth ll. 5s., and that sum would 
 be given for it by the illicit trader ; but it would not be the value 
 of the new guinea which had increased, but that of the debased 
 guineas which had fallen. This would immediately be evident, 
 if a proclamation were issued, prohibiting the debased guineas 
 from being current, but by weight at the mint price of 
 37. 17s. 10 ' 3 d. ; this would be constituting the new and heavy 
 guineas the standard measure of value, in lieu of the clipped and 
 debased guineas. The latter," you say, " would then pass at 
 their true value, and be called 17 or 18 shilling pieces. So," you 
 observe, ** if a proclamation to the same effect were now enforced, 
 Bank notes would not be less current, but would pass only for 
 the value of the gold bullion which they would purchase. A 
 guinea would no longer be said to be worth 17. 5s., but a pound 
 note would be current only for 16 or 17 shillings." You conclude 
 with remarking, that " at present gold coin is only a com- 
 modity, and Bank notes are the standard measure of value ; but 
 in that case, gold coin would be that measure, and Bank notes 
 would be the marketable commodity.'' 
 
 Permit me to examine this passage. You suppose that a guinea 
 by clipping loses of its weight, and that forty-four guineas and 
 and a half weigh only T of a pound. It is supposed also, that 
 every commodity is rated in the debased coin, and that the debased 
 guinea is still exchangeable for a pound note and a shilling. In 
 this case forty-four guineas 'and a half of this debased currency, 
 would command forty-six pounds of Bank paper with 14s- and 6<, 
 but a pound of gold bullion would be worth one fourth more, and 
 not one fifth, as you state, namely, 587. 8s. 1 :,d. and not 567, 
 according to your computation. 1 But let us dismiss this inadver* 
 teucy and proceed. 
 
 ' 5, ; i6l. Us. 6d. : : , ; 68/j. 8. lirf.
 
 546 Rev. Dr. Crombie, on the 
 
 You say, that during the circulation of this debased currency, a 
 guinea fresh from the mint would be said to be worth 17. 55. and 
 that this sum would be given for it by the illicit trader ; but it 
 would not be the value of the new guinea which had increased, 
 but th it of the debased guinea which had fallen. Here again you 
 appear to me to have formed an erroneous conception of the question. 
 By your own supposition, forty-four guineas and a half of the 
 debased currency are worth forty-six pounds 14s. 6d. and while 
 they are exchangeable for the same sum in silver and Bank paper, 
 and command therefore the same quantity as u c ual of commodities 
 and labour, they cannot be said to be depreciated ; for depreciation, 
 if it mean any thing, must mean diminution of exchangeable value. 
 They will not purchase the same quantity of bullion as before their 
 deterioration ; but in respect to every other commodity, they con- 
 tinue of the same relative value. But, if we take the contrary sup- 
 position, if we even suppose that the debased guinea, by losing 5 of its 
 weight, loses also -j of its exchangeable power, will it be asserted, that 
 it has suffered depreciation ? I conceive, that such an opinion would 
 betray great inaccuracy of thought. We know, that in many parts of 
 England and Scotland, certain commodities are sold at a certain rate 
 per lb., that pound consisting in some places of 28 ounces. Now let 
 us suppose, that in one of these places a pound of any commodity is 
 sold at L 28 pence, and that this has been the usual price for a series 
 of years. Let us next suppose, that a law is enacted, equalizing 
 weights and measures, and that the pound weight is every where 
 reduced to 16 ounces ; would it follow that, because a pound weight 
 of the same commodity is now sold for \6d. that it could with any 
 propriety be said to have suffered depreciation ? Certainly not. 
 The same real, though not the same nominal weight, still com- 
 mands the same sum in money ;;s formerly, and the same quantity 
 in barter of every other commodity. I cannot perceive then with 
 what propriety, if a guinea reduced to -.- of its weight still com- 
 mands of exchangeable commodities, it can be said to h,ive suffer- 
 ed depreciation. If it commands the same quantity of exchangeable 
 commodities, and also of silver and Bank paper as before, instead 
 of being depreciated, I should maintain, that its value has been 
 artificially raised, as far as all domestic transactions are concerned. 
 
 You say, " it would be evident, that the value of the new guinea 
 had not increased, but that of the debased had fallen, because, if a 
 proclamation were issued prohibiting debased guineas from being 
 current but by weight, the heavy guineas would become the 
 stand. trd, and the light ones would pass for 17 or 18 shillings." 
 
 Here again, I conceive- that your view of the question is charge- 
 able with inconsistency. By your hypothesis, the light gv.inea con- 
 tinues TO be equal to I/. Is. ; for your calculation proceeds on this 
 supposition. In what sense then can its value be said to have
 
 Depreciation of Bank Notes. 547 
 
 fallen ? A diminution of weight has taken place ; but this diminu- 
 tion, by your own hypothesis, is not followed by a diminution of 
 exchangeable value. In short, the light guinea has acquired an 
 artificial value, while bullion, if bullion in such circumstances 
 could exist, continued to remain, in all domestic transactions, at its 
 usual worth. The effect would be precisely the same, as if the 
 Mint price were raised above bullion in the ratio supposed, in 
 which case, bullion would immediately be converted into coin, just 
 as copper was for many years to a very great extent, converted into 
 halfpence and farthings. Were the halfpence depreciated ? The 
 reverse was the fact. They obtained a value, far above their 
 intrinsic worth. 
 
 You say, that the evidence of depreciation, is, that, after the 
 proclamation, which you suppose, the light guinea would be sold 
 for 17 or 18 shillings. But be it granted, that after the new 
 guinea is issued, the light one is reduced from 21 shillings to 18, 
 how does this fact demonstrate previous depreciation ? The very 
 hypothesis, which you state, controverts your doctrine; for you 
 suppose the light guinea, previously to the issue of the new coin, 
 to have been worth one pound and one shilling, and therefore not 
 to have suffered any depreciation. Had you supposed, that the 
 light guinea had, in consequence of its weight being diminished, 
 been reduced to 17 shillings previously to the issue of the new 
 coin, then depreciation might, in one sense, be said to have taken 
 place ; though even here, when the same weight in gold coin was 
 exchangeable for the same quantity of silver, bank paper, and com- 
 modities, as before, the guinea could hardly be said to be depre- 
 ciated. But according to your hypothesis, there cannot, I con- 
 ceive, be the shadow of a reason for affirming the depreciation of 
 the light guinea, when its exchangeable value for silver, bank 
 paper, and commodities, had suffered no diminution. 
 
 Nor is your argument consistent ; for it presupposes the equiva- 
 lence of the light guinea to 2 1 shillings, while ic attempts to prove, 
 that it is equivalent to only 17 shillings. It presumes non-depre- 
 ciation, as a matter of fact, yet endeavours to overturn this Let. 
 
 Again, either the new guinea is issued at 21 shillings, or it is 
 not. If the former alternative be assumed, I am desirous to 
 understand, what should induce the illicit trader to give 25 shil- 
 lings for the new guinea, when it is issued at twenty-one shillings. 
 On what rational ground is this position maintained ? If 
 the new guinea is issued at 25 shillings, then it follows, that the 
 light guinea, as being still equivalent to I/. Is., has suff red no 
 diminution. But at whatever value the new guinea may be issued, 
 it cannot alter an antecedent fact j it cannot affect the previous 
 value of the old light guinea, which you have supposed to be one 
 pound and one shilling. In the recoinage, of the 1773 7, pre-
 
 548 Rev. Dr. Crombic, on the 
 
 viously to which the country had been inundated with light coin, 
 bankers gave, in exchange for their notes, guineas and shillings of 
 the new issue, and therefore of full weight, while the old light coin 
 passed for nothing more than its intrinsic worth. But what does 
 this prove ? Not surely, that the old coin had been depreciated ; 
 but that it had acquired an increased artificial value, which it lost 
 immediately on the issue of the new coin. The same observation 
 is applicable to the late recoinage of silver. 
 
 I proceed to your conclusion. " So if a proclamation to the 
 same effect were now enforced, bank notes would not be less cur- 
 rent, but would pass only for the value of the gold bullion, which 
 they would purchase. A guinea would then no longer be said 
 to be worth 25 shillings, but a pound note would be current only 
 for 16 or 17 shillings." 
 
 It is doubtless true, that, if a proclamation were issued, that bank 
 notes should not pass, but for the value of the gold bullion, which 
 they would purchase, they \vould circulate at this value, and no 
 more ; for an Act of Parliament, whether founded in justice and 
 political expediency, or repugnant to both, will command our 
 obedience. This arbitrary procedure, however, would determine 
 nothing respecting the previous value of the bank note, It would 
 not prove,, that it had been depreciated , it could only prove, that 
 while the bank note had retained its usual value, in respect to 
 commodities, it had not risen with the value of gold bullion, 
 which by the proclamation was to be considered as the standard 
 of value ;i standard, which neither this, nor any other, country 
 has yet reco-gnised. 
 
 But in order to clear the comparison here instituted, of the 
 obscurity an d entanglement in which it appears to be involved, we 
 must revert, for a little, to the original subject. Your hypothesis 
 supposes, th.it the light guinea was equivalent to 21 shillings 
 antecedently to the proclamation, and was exchangeable for its 
 usual value irr. commodities. Here then there was no depreciation. 
 To render the cases parallel, and your comparison pertinent, it 
 rnust be supposed, that the one pound note, previously to the pro- 
 clamation, was; exchangeable for 20 shillings, and retained its rela- 
 tive value in respect to labour, and the great mass of commodities. 
 Here also thero wv.s no depreciation. But no sooner is the pro- 
 clamation issued, than the depreciation of both commences. But 
 how is this consistent with your doctrine, that the bank note was 
 depreciated, wlben no proclamation had been issued, reducing its 
 value. If the depreciation arose from the proclamation, it is evi- 
 dent, that, if tihere had been no proclamation, its artificial value 
 might have continued to exist. I wish you therefore to explain, 
 how the bank note was" depreciated, while by your own hypothesis
 
 Depreciation of Bank Notes. 54-9 
 
 it was equivalent to 20 shillings, retaining its usual exchangeable 
 power, and while no proclamation, reducing its value, had been 
 issued. But the whole argument proceeds on a pclitio principii 9 
 and is chargeable with inconsistency. It presumes gold bullion to 
 be the only measure of value, which you yourself consider as a 
 mere commodity, and therefore no more a measure of value, than 
 any other commodity ; and while one part of your argument 
 requires, that gold coin be considered, as a distinct thing from gold 
 bullion, the one being rated in the other, another part of your 
 nrgument requires, that they be considered as one and the same. 
 While you reprehend others for not considering gold and bullion 
 as mere commodities, while you expose their inconsistency in 
 confessing them to be commodities, yet reasoning, as if they were 
 not such, you yourself appear to me chargeable with the same 
 error. Coin you sometimes consider as distinct from bullion, and 
 as the measure of value ; and coin is, at other times, nothing but a 
 commodity, and therefore not peculiarly a measure of value. 
 
 I observe further. When you institute a comparison between 
 two subjects, in order to prove, that being of a similar or identical 
 nature, if they are subjected to the operation of the same causes, 
 the same results will follow, is it not incumbent on you, in the first 
 place to show, that the two subjects nre such, as your argument 
 presumes them to be ? You compare the bank note to the light 
 guinea. The latter you suppose to have been clipped, and its 
 value diminished, though it be not easy to see this diminution of 
 value, while it is exchangeable for its usual quantity of labour and 
 commodities. The bank note you presume to have been in the 
 same predicament, and that a royal proclamation would reduce 
 them both to their proper worth. Let me ask, in passing, what 
 was their worth previously to the proclamation ? Were they de- 
 preciated before ? If so, your proclamation is unnecessary. If 
 they were not depreciated, where is your argument ? But this by 
 the bye. I return to the point. Have you proved, that the bank 
 rote was in the predicament of the light guinea, clipped, shorn, 
 debased, or anywise deprived of any part of its exchangeable value ? 
 Have you demonstrated such an analogy or resemblance between 
 them, as will justify your conclusion? Hfcve you proved any 
 resemblance ? I conceive you have not ; you have merely pre- 
 sumed it. 
 
 It is in vain to urge, that the bank note was not exchangeable for 
 its usual quantity of gold. This proves nothing, but that gold had 
 risen considerably in value, a fact by no means unprecedented. 
 During the seven years' war, the price of gold rose above its usual 
 rate, not here only, but also on the Continent. This is attested by 
 Sir James Steuart. (Sec. 2, 3. p. 116, et aL] In. the par 17^
 
 550 Rev. Dr. Crombie, on the 
 
 particularly, gold became so scarce, and its price so high, that the 
 Bank of England issued, for the first time, 10/. and 151. bank 
 notes. ' Nay, it would appear, that not long before the Bullion 
 Committee made their report, the price of gold at Hamburgh and 
 Paris, rose considerably above par, and at Amsterdam, not less 
 than 17 per cent. * Was this advance occasioned by a depreciated 
 paper currency ? This will not be affirmed ; for at Hamburgh 
 and Amsterdam, they have no paper currency like ours. 3 
 
 I consider it then as an incontrovertible fact, that the value of 
 gold, like that of any other commodity, rriay not only rise, but, in 
 certain circumstances, may rise considerably above that of bank 
 paper. You acknowledge that gold coin is a commodity. You 
 acknowledge also, that the price of all commodities obeys the 
 general law of demand and supply. Hence the value of gold coin 
 as convertible into bullion, is liable to all those fluctuations, which 
 other exchangeable commodities experience. 
 
 I object, therefore, to the whole of this argument, on these 
 grounds: Isr. It is evidently inconsistent. You suppose the light 
 guinea to be depreciated, while at the same time you suppose 
 it to retain its usual relative value. I conceive, on the contrary, 
 that no article can be correctly said to have suffered depreciation, 
 while it is exchangeable for the same quantity of labour and com- 
 modities, as usual. A fortiori it cannot be said to be depreciated, 
 while a less portion of it has acquired a higher power. To apply 
 the term depreciation to it, on such a supposition, appears to me 
 to be a perversion of language. How much soever the light guinea 
 may have been clipped or debased, while it commands its usual 
 quantity of commodities, it cannot be said to be depreciated : on 
 the contrary, it has acquired an artificial value. 
 
 2dly. The argument begs the question. It presumes the bank 
 note to resemble the light guinea, asserting the similarity, without 
 attempting to prove it; beginning with depreciation, as a premise, 
 which it was the object of the argument to prove, as a conclusion. 
 
 You observe, (p. 89.) that " we err, when we say, that gold is at 
 a high price : it is not gold, it is paper, which has changed its 
 value." It appears to me extremely difficult to ascertain, what is 
 your fixed and decided opinion on this subject. At p. 13. you 
 say, " When there is a great demand for gold, its corn price will 
 rise." Here we have an acknowledgment, that gold, by reason of 
 the increased demand, may change its value, as measured by corn : 
 and if this be admitted, it follows as a necessary consequence, that 
 if the greater demand augment its corn price, it will augment also 
 
 1 Anderson's llM.ory of Commerce, Vol. lii. 
 
 Rutherford's Hints I'mua Holland. 
 J See Mr. Vunsitinit'j Speech.
 
 Depreciation of Bank Notes. 55 1 
 
 its general exchangeable value. An ounce of gold, as you ob- 
 serve, and as no person will deny, will not be worth more than an 
 ounce of gold, just as a bushel of corn cannot be worth more than 
 a bushel of corn. This proposition, confined to one and the same 
 time, is a perfect truism. But if referred to different times, the 
 proposition is not true j for both corn and gold, severally, in equal 
 quantities, may, at different times, be severally of different values. 
 If then a greater demand for gold will augment its commodity price, 
 you must either deny, that an increased demand existed, in oppo- 
 sition to notorious facts ; or if it did exist, you must admit, that 
 the price of gold, as measured by commodities, did rise. The fact, 
 implied in the former alternative, is too well known to be disputed : 
 the admission stated in the latter follows, as a necessary conse- 
 quence. But, if it be true, that the commodity price of gold did 
 rise, how is this reconcileable with your position, that it was not 
 gold that changed its value. Here, I conceive, is a manifest in- 
 consistency. 
 
 Again, you observe, (p. 23.) that "gold has lately experienced a 
 rise, compared with silver." Can gold rise above silver in value, 
 and yet not change its value in relation to silver ? To affirm this 
 would be to affirm a contradiction. And is not silver a standard, 
 or measure of value, as well as gold ? And was not a one pound 
 note of equal value with twenty shillings, though the note with one 
 shilling more might not be equivalent to a guinea, considered as 
 bullion, or a mere commodity ? Your position, therefore, that 
 gold did not change its value, appears to me utterly irreconcileable 
 with your own admissions. But let us next examine your proof, 
 though after the contradiction now evinced, this perhaps may be 
 deemed unnecessary. You say, " Compare an ounce of gold, or 
 3/. 17s. 10 d. to commodities, it bears the same proportion to them 
 which it has before done, and if it do not, it is referable to increased 
 taxation, or to some of those causes, which are so constantly ope- 
 rating on its value. But if we compare the substitute of an ounce 
 of gold Zl. 17s. lOr.d. in bank notes with commodities, we shall 
 then discover the depreciation of the bank notes. In every market 
 of the world, I am obliged to part with 4>l. 10s. in bank notes to pur- 
 chase the same quantity of commodities, which I can obtain for the 
 gold, that is in 3/. 17s. 10,,</. of coin." This affirmation I con- 
 ceive to be hasty and unfounded. With India and with Sweden, 
 for a considerable time, and also with Jamaica, the exchange was 
 in our favour. But let the affirmative be granted to be true in its 
 full extent. To what does the argument amount ? Is it not a re- 
 petition of the same fallacy, which has been already sufficiently 
 exposed ? For we have first an ounce of gold coin equal to 32. 17s. 
 10 T rf. compared with commodities j and then we have an ounce of
 
 552 Rev. Dr. Crombie, on the 
 
 bullion equal to 4/. 10s. as compared with commodities; and be- 
 cause the bullion price has risen above the mint price, ergo t the 
 bank note was depreciated. The argument is, for your purpose, 
 inconclusive. It proves simply, that, while the bank note conti- 
 nued to be the same representative of gold coin, the price of 
 bullion had risen above both in the ratio of 47. 10s. to 3/. 17s. 10 ^rf. 
 The argument, indeed, may be retorted. " Compare 3/. 17s. 10-j//. 
 in bank paper with commodities, it bears the same proportion to 
 them, as before, and if it do not, it is referable to increased taxa- 
 tion, or to some of those causes, which are so constantly operating 
 on its value ;" compare the equivalent of bank paper in gold coin 
 3/. 17s. lO-.d. as convertible into bullion, and it will purchase a 
 larger quantity of commodities. Hence, it is not the value of bank 
 paper, which has fallen, but that of bullion, which has risen. 
 
 I agree with you in thinking, that, while the Bank pays in gold, 
 it is quite impossible that bullion can rise 15 or 20 per cent, above 
 coin, because the latter would be converted into the former, 
 even to the last guinea in the Bank, before this event could 
 take place. But, when the Bank is restricted from paying 
 its notes in gold, I perceive no assignable limit to the advance of 
 bullion. A perpetually increasing demand, with a constantly de- 
 creasing supply, may raise the value of bullion, and of coin, as 
 convertible into bullion, to almost any height. 
 
 When the price of bullion rises above the mint price, the bank 
 note, notwithstanding, still continues to be a representative of its 
 usual value in coin, considered as a standard or measure of value j 
 though it ceases to be an equivalent for the same weight in bul- 
 lion, as is contained in the coin. This, however, furnishes no 
 evidence whatever of its depreciation. 1st. Because its exchange- 
 able value in respect to commodities, remains undiminished. And 
 iJdly. Because a bank note never was intended to represent the 
 value of gold as a commodity, but of coin according to the mint 
 price. 
 
 You infer from the difFerence of value in gold, amounting to LI 
 per cent, between the years 1797 and 1815, that bank paper was 
 depreciated, and that this depreciation was owing to an excessive 
 issue. But, though a greater issue is acknowledged, an excessive 
 issue is not proved ; and if an excessive issue has not been proved, 
 depreciation, its imputed consequence, has not been proved. 
 
 You ask, if it would be a matter of indifference to a tailor, whp- 
 ther he received the payment for a coat, valued at 3/. 17s. 10.',c/. 
 in bank notes, or in an ounce of gold, selling for 47. 13s. I an- 
 swer, it would not be a matter of indifference ; he would prefer 
 the gold 5 but docs this preference show the depreciation of bank
 
 Depreciation of Bank Notes. 553 
 
 paper ? It does not ; it proves merely, that the price of gold has 
 risen ; for bank paper still retains its relative value, as exchangeable 
 for labour and every commodity, gold excepted. 
 
 You observe, that an unfavourable exchange is limited to 4 or 
 5 per cent., and that this will not account for a depreciation of 1 5 
 or 20 per cent.. If you state as a general proposition, that an un- 
 favourable exchange is limited to 4 or 5 per cent., I agree with 
 you ; but if you intend to offer this as a proposition universally 
 true, I must express my dissent. 
 
 In the ordinary state of commerce, and while bank notes are 
 easily convertible into gold, your proposition is just. But, when 
 British commodities are excluded from the Continent, while gold 
 is not to be procured from the Bank, and while our debts to the 
 Continent must be discharged in gold, the price of bullion, by rea- 
 son of the increased demand, and scanty supply, may rise much 
 more above the Mint price, than the mere expense of freight, insu- 
 rance, and profit, amounting generally to 4 or 5 per cent. This 
 per-centage will satisfy the bill merchant, as long as bank paper is 
 exchangeable at the Bank for gold. But when the Bank is re- 
 stricted from paying its notes in gold, when English commodities 
 are prohibited abroad, and when an increased demand has raised 
 the price of bullion in the home, market, 10 percent., the bill 
 merchant certainly will not furnish you with bullion or a bill, at 
 five. But, if you infer from this, that the bank note is depreciated, 
 I must again charge you with begging the question, while I repeat 
 my former assertion, that your proposition, respecting the limit of 
 an unfavourable exchange, though generally, is by no means univer- 
 sally true. When exportation is prohibited, and importation al- 
 lowed, cash payments in the mean time having ceased at the Bank, 
 the proposition is false. 
 
 " An ounce of gold is coined into 3/. 17s. 10^. By possessing 
 that sum," you say, " that you have an ounce of gold, and would 
 not give 4/. 10s. in gold coin, or in notes which you could ex- 
 change for 47. 10s. for an ounce of gold." True ; but what does 
 this show, but that the market price of bullion has risen above the 
 Mint price ? you would therefore convert your coin into bullion. 
 " It is contrary," you say, " to common sense to suppose, that 
 such would be the market value, unless the price were estimated 
 in adepreciated medium." 
 
 I am desirous to have it explained to me, how the advanced 
 price of any commodity proves the depreciation of that, for which 
 it is exchanged. A pipe of port wine costs now nearly three times 
 as much as it cost 4-0 years ago. Is the value of the bank note, or 
 the guinea, only one third of its value at that period ? Why then is 
 it contrary to common sense to suppose, that the medium is not 
 
 NO. XX. Pam. VOL. X. 2 N
 
 5-54 Rev. t)r. Crombie* on the 
 
 depreciated, merely because any commodity, rated in th*tmediu'ffii 
 has advanced in value ? Your observation involves the fallacy, 
 which seems to pervade the whole of your reasoning. If gold 
 coin be a standard, it is incapable of variation : it must be fixed, 
 otherwise it is no standard. It is intended to show the fluctuations 
 in the price of all commodities, as compared with its uniform and 
 determinate value. These fluctuations it could not mark, if it were 
 itself susceptible of variation. The standard value of gold coin i: 
 i5/. 17s. 10 g r/. per ounce; and gold coin is the medium, in whicl- 
 bullion and other commodities are estimated. Is gold coin then 
 depreciated, because an ounce of bullion is sold not at 3/. 17s. 10 ? t7. 
 but at 4-7. 105. ? Certainly not : gold coin, as a standard, cannot 
 be depreciated : yet your argument, intended to prove the depre- 
 ciation cf bank paper, because the price of bullion has risen, woulc 
 prove this also, and thus, by proving too much, would prove no- 
 thing. 
 
 If you reply, that no man \fould give 41. 10s. for an ounce ol 
 gold bullion, when he could easily convert his 3/. 17s. 10 ^ d. of golv 
 coin into an ounce of bullion ; I grant the pertinency of the reply 
 But what follows ? View gold coin in this light, as either bullion, 
 or convertible into bullion, and it ceases to be a standard. It c;r 
 no more measure bullion, than a bushel of corn, as you, say, car 
 measure a bushel of corn* You must either then consider go': 
 coin as a standard, and fixed measure of value, not convertibl 
 into bullion, on which supposition, bullion may rise considerably 
 above it t as well as above the bank note ; and, considering th< 
 question in this light, infer the depreciation of gold coin, and tha 
 of the bank note together : or, if you dislike this conclusion, tak< 
 the other alternative, that gold coin is a mere commodity, beirj 
 
 . always convertible into bullion, and then your standard, and you 
 argument built on that standard, respecting bullion being rated i; 
 coin, sink together j for coin then, by your own showing, loses it 
 distinctive property, and must be regarded as bullion. Take eithe 
 alternative, and I am satisfied: but the two must not be con 
 founded. 
 
 - You observe, that if the price of gold were estimated in silver 
 .the price might rise to 4, 5, or 107. an ounce, and it would itsel 
 be no proof of the depreciation of paper currency, but of an alter 
 
 . jation in the relative value of gold and silver. Here, I conceive 
 you have stated a position perfectly just, but utterly irreconcileabl 
 v/ith your own theory. Ycm admit, that gold, estimated in silver 
 rr,ay rise more than 100 per cent, above it, while the silver, not 
 withstanding, is not depreciated ; this being granted, I am desirou 
 to know, why gold, as estimated in bank paper, may not rise 1, 
 pc* cent, above it, the paper at the same time not being depreciated
 
 Depredation qf Bank Notes. 555 
 
 If the cases are not perfectly analogous, I wish to know, what are 
 the points of difference. t\s far as I can discover, there is a mani- 
 fest inconsistency in maintaining that silver in the one case is not 
 depreciated, and that the bank note in the other suffers depreciation. 
 
 "But silver," you say, " is not the standard measure of 
 value granting, however, that it were," you observe, " as an 
 ounce of gold is only worth in the market 15^ oz. of silver, and 
 as 15 ^ oz. of silver are coined into 80 shillings, being equal to 
 them in weight, an ounce of gold ought not to sell for more 
 than 4/." 
 
 This is one of those specious fallacies which, as they deceive 
 the author, frequently elude also the detection of the reader. If it 
 Jae intended, as its object seems to be, to show the depreciation of 
 bank paper, it will totally fail you. It proceeds thus : 
 
 15 1 oz. of silver 1 oz. of gold, 
 
 15^- oz. of silver 80 mint shillings, 
 
 therefore 1 oz. of gold 80 mint shillings, or 4/., which, instead 
 of 47. 10s. should be the market price of an ounce of gold, even 
 if it were rated in silver. The argument stems to carry with it the 
 force of a mathematical demonstration. But here is the fallacy. 
 
 In order to prove the depreciation of bank paper, you seem to 
 think it sufficient to show, that 15* oz. of silver ara of the same 
 market value as 80 mint shillings. But did it not occur to you, 
 that, before any man would carry his 15- oz. of bullion to be 
 coined into 80 shillings, he would naturally inquire, whether it 
 would be of more value in a state of coin, than in a state of bullion ? 
 Did it not occur to you, that the market price of silver bullion, 
 was above the mint price, and that 80 mint shillings was in bullion 
 worth more than in coin worth more than 47. You seem to 
 have taken it for granted, that all which you had to do, was to 
 prove an ounce of gold equiyalent to 80 mint shillings, totally 
 overlooking the most material point for consideration, namely, 
 ihe market price of 15'- oz. of bullion, or of 80 shillings, as 
 convertible into bullion, forgetting your own repeated observation, 
 that in such cases gold and silver coin, if we take a just view o 
 their character, must be regarded as bullion, and thus again 
 proceeding on the same fallacy, silver being supposed the standard, 
 as vitiates your argument, when you assume gold as the measure 
 of value. You should have reflected, that to prove an ounce p 
 gold to be equivalent to SO mint shillings, is to prove not that bank 
 paper was depreciated, but that gold, by rising in value, purchased 
 more than its usual proportion of silver and bank paper. You 
 should have reflected also, that an ounce of gold may be of the 
 same value with SO shillings, but that 80 shillings as convertible 
 into bullion may be of more value than $L though the four pounds
 
 . 
 5J6 Rev. Dr. Crombie, on the 
 
 may retain their usual relative value in relation to every other 
 exchangeable commodity. 
 
 The market price of silver, you observe, is at present 55. 9'^d. 
 per ounce, estimated in bank notes, the mint price being only 
 3s. 2d. ; consequently, you say, the standard silver in 100/. is 
 worth more than 1121. in bank notes. If this observation be 
 offered to show the depreciation of bank paper, it will prove too 
 much, for it will prove the depreciation of silver standard currency. 
 If it is not offered with that view, it is foreign to the question. 
 If it is offered in order to show the depreciation of bank paper, be- 
 cause it took 1121. in notes to buy 100/. of standard silver ; the 
 same argument will prove the depreciation of silver standard cur- 
 rency; for it would have taken 100 ounces of standard silver coin, to 
 buy 90 ounces of bullion. And if in fact 100 ounces of standard 
 silver coin were equivalent to 100 ounces of bullion, it was only 
 because the former could be converted into the latter. The paper, 
 representing 100 ounces of standard silver coin, could not be so 
 converted into bullion. But could not bank paper, you may say, 
 be converted into standard silver coin, and the coin into bullion ? 
 It could not. The former was not to be obtained ; the market 
 value of silver having been long higher than the mint price, the 
 standard silver coin had almost wholly disappeared, and if more 
 had been issued, it would have instantly snared the same fate. 
 When you say, therefore, that the standard silver in 100/. was 
 worth more than 1121. in bank paper, you might have added, and 
 also more than 112/. in standard silver coin, thus proving the 
 depreciation of silver standard currency. An argument, thus 
 proving too much, proves nothing. 
 
 " It is said," you observe, " that the amount of bank notes has 
 not increased in a greater proportion than the augmentation of 
 our trade required, and therefore cannot be excessive." " This 
 assertion," you say, " it would be difficult to prove." Would it 
 not be equally difficult to evince its contrary, unless we were to 
 reason in a circle, or to beg the question, first, assuming excessive 
 issue, and then inferring depreciation, or assuming depreciation, 
 and inferring excessive issue ? You say, " the improvements, 
 which we arc making in the art of economising the use of the 
 circulating medium by improved methods of banking, would render 
 the same amount of notes excessive now, which were necessary 
 for the same state of commerce at a former period." It is true ; 
 but do you not perceive, that it matters not, what improvements 
 are devised and adopted, that the term excess implies more than 
 is necessary for the state of our commerce, these improvements 
 being taken into account, and that, if no excess, all circumstances 
 being considered, can be demonstrated, no depreciation can be 
 wurrant.ibly affirmed ?
 
 Depreciation of Bank Notes, 557 
 
 You believe it probable, that from " the competition between 
 the national and the provincial banks, the latter may have succeeded 
 in displacing with their own notes a portion of the paper issued by 
 the Bank of England." The fact would only show, that the same 
 amount of notes continued in circulation ; that there was no 
 addition, and therefore no excess. Besides, I repeat, a greater 
 issue does not prove an excessive issue. 
 
 Your observations in answer to the Edinburgh Reviewer, I 
 consider to be entirely irrelevant They are manifestly inapplica- 
 ble to the circumstances of the case in question. You say, that 
 a merchant will discharge a foreign debt, either with money or with 
 goods, as either mode may appear most subservient to his advantage. 
 It is true, interest is the main principle of all commercial 
 transactions. But your proposition implies, that the merchant 
 has a choice, that he never acts from necessity. Are you war- 
 ranted in assuming this to be a fact ? If English commodities are 
 prohibited on the Continent, will you explain to me, how a foreign 
 debt is to be discharged by the exportation of English goods ? 
 There are few physical propositions more generally true, than that 
 water will find its own level j but would he not be a bold dogmatist, 
 who should maintain, that water, notwithstanding all obstructions, 
 uniformly finds its own level ? It may be equally true as a general 
 position, that no merchant will discharge a debt with money, if he 
 can more advantageously pay it with commodities ; but it would 
 argue extreme ignorance and perversity to maintain, that the 
 exportation of commodities is always in his power. When 
 English goods were excluded from the Continent, how was the 
 Continental creditor to have his demands satisfied, but by English 
 gold ? 
 
 It is your leading and favourite position, that money is never 
 exported, but by reason of its redundancy, and for the sole purpose 
 of restoring the equilibrium. This theory appears to me radically 
 false, and repugnant to fact. In the first place, this assumed 
 equilibrium is a mere hypothesis j a mere fancy, having no real 
 existence. You have been pleased to assume it as the basis of 
 your argument ; but you have not even attempted to prove its truth. 
 On the contrary, I have shown, that, if we are to measure cur- 
 rency by commodities, or by labour, the best criterion of their 
 value, such an equilibrium, as you suppose, neither does, nor ever 
 did exist. This is a radical objection to your argument. 1 
 
 But, if such an equilibrium, though occasionally disturbed, were 
 in theory imagined generally to exist, the morally impossible 
 consequences, to which the hypothesis would lead, would demon- 
 
 1 This notion of an equilibriumy-NT. Ilicardo, in his work on Political 
 Economy, seems now to have abandoned.
 
 558 Rev. Dr. Crombie, wi the 
 
 strafe its falsity. Let us suppose this equilibrium in the currency of 
 commercial nations to be a matter of fact, and that each country 
 has its proper quantity of specie, though how this quantity is to be 
 ascertained, or determined, I am at a loss to know. Let us also 
 maintain with you, that in this state of things, currency, not being 
 redundant, (a complete equilibrium existing) cannot be exported. 
 Let us suppose also, that one of those countries is visited with 
 scarcity, nay threatened with famine, and that by reason of certain 
 political obstructions, it is debarred the liberty of purchasing corn 
 by the exportation of commodities. Well then, what is to be 
 done ? If ycur doctrine be true that money will not be exported, 
 nay, never is exported, unless redundant, money cannot be exported 
 to rescue them from starvation. So then we are to believe, that 
 the nation would suffer itself to be subjected to all the horrors of 
 famine, rather than export any part of its specie, because, forsooth, 
 this would destroy the existing equilibrium, and currency among 
 them was not redundant. Are we to believe this, or are we to 
 reject, as false, a doctrine, which leads to such impossible 
 consequences ? Is such a theory consistent with reason ? Is it to 
 be reconciled with the common principles of human action ? 
 Would not a people, placed in such circumstances, export their 
 last atom of gold, their last mite of silver, rather than perish 
 with hunger ? If so, it is evident, that, contrary to your doctrine, 
 gold may be exported, not by reason of redundancy of money, but 
 from necessity. 
 
 In examining the question, whether bank paper has, or has not, 
 been depreciated, it is highly necessary that we form clear and 
 correct conceptions of the proper meaning of the term depreciation. 
 With this view, I submitted to your consideration, what I appre- 
 hend to be the only accurate definition of the word in question. 
 A due attention to this point would, I am inclined to think, have 
 secured you against the misconception, under which you appear 
 to me to labour. 
 
 Depreciation, as a general term, denotes a diminution of ex- 
 changeable value* Applied to labour and commodities, it signifies 
 a reduction of price, or a depression of their market.ible value, 
 below the usual standard, or usual price, labour and commodities 
 being estimated in money. The average price of wheat being 
 supposed to have been, for a series of years, 70 shillings per quar- 
 ter, if the price fell to 60, wheat would be said to have suffered 
 depreciation. But as labour and commodities are estimated in 
 money ; so, conversely, the value of money is measured by labour, 
 or commodities. Money, therefore, is said to be depreciated, 
 when the same sum commands less than the usual quantity of 
 these. Thus, v/hen we compare the quantity of labour, or of 
 commodities, which any given sum can now command, with the
 
 quantity for which the same nominal sum was exchangeable fifty 
 years ago, we find the quantity diminished, and therefore say, -that 
 money has suffered depreciation. Thus the- .term depreciation is 
 applied to labour or commodities, when- their price is reduced j 
 and to money, when it is exchangeable lor. only a .diminished 
 quantity of labour, or commodities. 
 
 In order then to ascertain, whether our currency, or any part of 
 it, has been depreciated, we have only to consider, whether it can 
 purchase an equal quantity of labour and commodities, as usuiil* 
 If it purchases a less quantity, it has suffered depreciation ; if it 
 retains its relative value in respect to these, it cannot be said to be 
 depreciated. As the ratio between any quantity of labour or 
 commodities, and any quantity of currency, taken as a whole, is 
 not permanent, so the ratio usually subsisting among the com- 
 ponent parts of our currency may be disturbed by a variety of 
 circumstances. A greater or less quantity of gold, or a greater or 
 less demand, may destroy the ratio, which it usually bears to silver, 
 to copper, to the bank note, to labour, and to articles of consump- 
 tion generally, while the other component parts of the currency 
 retain their usual value in reference to one another, and also to 
 labour and commodities. The same observation may be applied to 
 the other parts' of the currency. It is to be observed also, that the 
 whole currency may be depreciated j an effect necessarily pro- 
 duced by war and taxation. 
 
 Here, then, I conceive, lies your error. Instead of taking la- 
 bour, or instead of taking commodities, the next best criterion, p.s 
 the measure of value, instead of comparing silver coin, and bank 
 paper with these, you compare them with gold. This, I contend, 
 is to substitute a false for a true standard. The only real measure 
 of value is acknowledged to be labour, and next to that, commo~ 
 dities of primary necessity, for which all labour is undertaken. 
 But instead of taking labour as a measure of value, or commodities, 
 the nearest to that in point of accuracy, you substitute gold coin, 
 which, by reason of its fluctuating value, as being convertible into 
 bullion, cannot possibly be regarded as a correct or uniform 
 standard. Besides, let me ask, what constitutes the value of gold ? 
 Is it not its power to purchase labour and commodities ? It is by 
 these, therefore, and not gold, by which the real value of any 
 exchangeable article is to be measured. Nor can any legislative 
 enactment, establishing, this or that standard, subvert this funda-t 
 mental principle. Instead, however, of comparing the bank note 
 with labour or commodities, the only just criterion of its worth, 
 you compare it with gold , and because gold has risen above its 
 usual ratio, in respect to silver, bank paper, and commodities, you 
 fhink yourself justified in concluding, that bank paper is depnu-
 
 560 Rev. Dr. Crombie, on the 
 
 elated. The deduction is false. It is derived from false prin- 
 ciples. 
 
 Nay, the error does not stop here : it proceeds to absurdity : 
 for you admit that, even if gold had risen in value, as you seem to 
 doubt, still you would have maintained, that the bank note was 
 depreciated, because it did not keep pace with the guinea in value. 
 This I conceive to be of all paradoxical propositions one of the 
 most extraordinary. Does the advanced price of one article or 
 commodity prove the depreciation of another, when that other has 
 not altered its value in relation to any other exchangeable com- 
 modity ? To affirm this, I conceive, is to violate every acknow- 
 ledged principle of reason, and grossly to pervert the meaning of 
 terms. Nay your doctrine would lead to this absurdity, that, while 
 the bank note was rising in value, if the guinea rose in a still 
 higher ratio, the bank note suffered depreciation. Thus, while it 
 was advancing in value, it was sinking in value. While it was 
 commanding a more than usual quantity of labour and commodities, 
 it was at the same time depreciating and commanding less. A 
 more palpable contradiction cannot easily be conceived.' 
 
 'Mr. Ricardo, in his work on Political Economy, has remarked, " that 
 the nations of the world must have been early convinced, that there was no 
 Standard oi' value in nature, to which we might unerringly refer, and there- 
 fore chose a medium, which on the whole appeared to them less variable 
 than any other. To this standard," he says *' we must conform, till the law 
 is changed, and till some other commodity i s discovered, by the use of 
 which we shall obtain a more perfect standard. While "old is exclusively 
 the standard in this country, money will be depreciated when a pound ster- 
 ling is not of equal value with 5 dwts. 3 grs. of standard gold, and that, 
 whether gold ri>es or falls in general value." 
 
 If this opinion did not, as I conceive, involve a manifest absurdity, it 
 might pass for one of those paradoxical assertions, which none, but those 
 initiated in the mysteries of Political Economy, could comprehend or 
 explain. That the thing measured, if at one time of equal length with the 
 standard, but, if afterwards found to be of less length, should be considered 
 as shortened, is an obvious truth. But on what rational principle, we are to 
 affirm it to be shortened, when it is afterwards found to be longer i.han the 
 standard, it exceed* my power of understanding to comprehend. If a pound 
 note cannot be exchanged for a Sovereign, Mr. Ricardo may contend, that 
 the pound note is depreciated ; but, if the pound note rould purchase u 
 Sovereign and a half, how the pound note, by rising in value above the 
 standard, could sufitr depreciation, 1 must leave it to the sagacity of Mr. 
 Ricardo, to explain. 
 
 Mr. Ricardo admits, that gold may rise or fall in general value; and there- 
 fore acknowledges, that the standard is variable, but contend-, notwithstand- 
 ing, that money is depreciated, if a pound note is not at all times of equal 
 value with ;, dwts. 3 grs. of standard gold. This is, in other words, to 
 acknowledge, that the standard is not uniformly the same, and therefore not 
 always right, but at the same time to contend, that whether right or wrong, 
 we are alway* to consider it as right. The standard may have varied ; the 
 tiling measured may have remained unchanged; but still we are to main-
 
 Depredation of Bank Notes. 561 
 
 You may urge, perhaps, that a bank note is an obligation to 
 deliver a specified weight of gold coin. lam not prepared to 
 affirm, that this position is false ; though it has been questioned, 
 whether the bearer of a bank note be entitled to a greater value for 
 it, than he had the expectation of receiving, when it became his 
 property, or than its value in gold, or silver, at the mint price. 
 But, be it granted, that the Bank is bound, legally and morally, to 
 deliver a certain sum in gold coin, whatever may be its intrinsic 
 worth, for a given sum in bank notes ; it is evident, that the mere 
 obligation to deliver any commodity, in exchange for another, can- 
 not sustain in a permanent state their relative value, as implied in 
 the contract, nor prevent either article from rising or falling in 
 value, at or before the period of delivery. It is manifest, that the 
 obligation to pay 44^ guineas for 46^. 14-5. 6d. in bank notes, can- 
 not prevent gold bullion, and consequently gold coin, from rising 
 in value. And to affirm, that the bank note was depreciated, 
 
 tain what is not the fact we are to assert, that the thing measured has 
 varied, because the standard has varied ; and why are we to affirm this ab- 
 surdity ? Because the statute law of the land lias determined gold to be the 
 .standard. So then, we are to refer the distinction between truth and false- 
 hood, between greater, equal, and less, not to the existing constitution of 
 things, or to established and unalterable relations, but to the authority of 
 an Act of Parliament. The Legislature may declare gold to be the best 
 measure of value; but no Act of Parliament can make this or any thing 
 else an invariable standard, which, from its own nature, or the urgent wants 
 of mankind, is necessarily subject to continual change. Nor has any Act of 
 Parliament yet declared, that gold is a correct and perfect measure of value ; 
 nor has it declared, that, when gold rises in value, or the standard varies, 
 bank paper, or any commodity, measured by that standard, varies also. What 
 egregious errors, what contusion and perplexity would such a doctrine, if 
 adopted in any science, necessarily produce ! Let us take a familiar example. 
 The barometer is acknowleged to furnish the most correct measure of the 
 weight of the atmosphere; hut it is liable to error, as affected by heat and cold. 
 Let us suppose it placed in tbe shade the mercury stands, at a certain 
 height; let it be removed and exposed to a high degree of caloric, and the 
 mercury rises. What should we think of the philosopher, who should main- 
 tain, that the weight of the atmosphere had increased ? If we should ven- 
 ture to suggest to him, that the rise of the mercury was merely the effect of 
 expansion that no change had taken place in the thing measured, but in 
 the measure itself, his answer would be, that as long as philosophers ac- 
 knowledge the barometer to be the most accurate criterion of the weight of 
 the atmosphere, and till a more correct measure is found, wo must believe,, 
 and maintain, not that the mercury rose by expansion, but that the weight 
 of the atmosphere had actually increased. Should we esteem this to be a 
 correct judgment ? a rational conclusion? Equally false is the doctrine, that, 
 since gold has been established as the standard measure, we are to maintain, 
 fhat commodities have changed their value, or the bank note has risen, or 
 fallen, because an arbitrary and imperfect standard, by which they are mea- 
 <vired, has acquired a greater, or sunk to a less value. A variation in the 
 measure ought surely not to be confounded with a variation in the thing 
 measured.
 
 562 Rev. Dr. Crombie, oil the 
 
 because it did not advnnce in the same ratio with gold bullion, is to 
 affirm the absurdity, that not to rise and to sink, in other words, 
 that a state of rest, and a state of motion, are things precisely 
 identical. 
 
 It is true, that, if the Restriction Act had not taken place, bank 
 pnper being then exchangeable for gold, the value of bullion, and 
 consequently of the guinea, would not have risen to 20 per cent. 
 But the Bank being prohibited from paying its notes in cash, gold 
 was with difficulty procured, and being in great demand, its value 
 necessarily rose. Still, however, the bank note, though it ceased 
 to be a representative of the value of a guinea in bullion, was still a 
 representative of its mint or statute value, and was received as an 
 equivalent in all commercial transactions. The guinea might rise 
 to the value of 26 shillings, but the bank one pound note was still 
 worth 20 shillings. And these 20 shillings, whether of equal or 
 inferior weight to the standard prescribed by law, answered every 
 useful purpose, as a measure of value, one person giving them to 
 another at the same nominal value, nt which he received them. 
 
 It appears from authentic documents, that an increased issue of 
 paper currency has been accompanied with a rising exchange, and 
 a diminished issue with a falling exchange. How these facts are 
 to be reconciled with your theory it is difficult even to imagine. 
 On the 1st of January 1781, the amount of bank notes in circulation 
 \ras 6,79i,G20/., and the exchange with Hamburg was 34.1. 
 On the 1st of October of the same year, the amount of bank notes 
 was diminished to 5,967, 990/., yet the exchange fell to 32. 2. On 
 the 1st of March 1782, the amount of bank notes in circulation was 
 !), 1GO,OOOZ. The issue was increased by nearly 5} millions ; yet 
 the exchange rose a little, namely, from 32.2 to 32.10. In De- 
 cember of the same year, tlie issue was diminished to 5,995,000/., 
 yet the exchange fell to 31.10. 
 
 ' Perceiving that the fact of a rising exchange with an increased 
 issue of bank paper, in evidence of which fact, many more 
 instances might be adduced, than are here offered, perceiving, I 
 say, that this fact is totally irreconcileablo with your theory, you 
 disclaim the opinion, that an increased issue of bank paper creates 
 a permanently low exchange, because, you remark, the redundant 
 and cheap currency \vill occasion the exportation of a portion of the 
 coin, so as to restore the exchange to par. 
 
 \Vhen you ofFercxl this remark, did it occur to you, as a perti- 
 nent question, ought not the currency to be depreciated according 
 to yov.r theory, before the exportation of the coin takes place? 
 The evil you acknowledge by the admission of its remedy. Yet 
 it would appear from the facts now adduced, that this same evil, 
 I mean the depreciation of the currency, or a depressed state of
 
 Depredation of Bank Notes. 563 
 
 exchange, was not created even for a short space of time, by an 
 increased issue of bank paper. Agreeably to your doctrine, how- 
 ever, this effect ought to have been produced. 
 
 You deceive yourself, then, if you imagine, that this explanation 
 serves in any degree to reconcile the facts now stated with your 
 theory. It may be true, that a permanently redundant currency 
 will occasion a permanently low exchange, arid that the exportation 
 of a certain portion of the coin would remedy the evil. But this is 
 not the point in question. This is not the fact which you were 
 called upon to explain. As a temporary excess of issue must, if 
 your doctrine be true, occasion a temporary depression of ex- 
 change, you were required to show, how it has happened, consist- 
 ently with your hypothesis, that an increased issue was accom- 
 panied with a rise, and a diminished issue with a fall, in the ex- 
 change. This is the fact, which it was incumbent on you to 
 explain, and this fact you have prudently left unnoticed. 
 
 You observe, that, as guineas will be exported for restoring the 
 exchange to par, the increase of small notes will ultimately be only 
 a substitution of a paper for a metallic currency, and will not 
 operate as an actual and permanent increase of circulation. It is 
 answered ; if they have no other effect, it amounts to a proof, that 
 there was no excessive issue. The same observation is applicable 
 to notes for />/. In short, the argument may be briefly stated thus. 
 An increased issue of notes either creaced redundancy, or it did 
 not. If the affirmative is maintained, then according to your doc- 
 trine, a depression of exchange must have been the immediate 
 effect : but, on the contrary, the increased issue was accompanied 
 with a rise. The fact therefore disproves your theory. If no 
 redundancy was created by the increased issue, then there was no 
 excess, and therefore no depreciation of bank paper This is the 
 argument, and I know no means by which you can evade it. 
 
 Before I conclude my letter, I will briefly state my objections to 
 your reasoning. 
 
 1st. You assume, as the basis of your argument, that an equili- 
 brium of currency exists throughout the commercial world : and you 
 maintain, that money is never exported from necessity, but from re- 
 dundancy, in order to restore the equilibrium, after it has been dis- 
 turbed : The existenceof this equilibrium must be rejected, as a mere 
 hypothesis. Unless it can be disproved, that labour is the only real 
 measure of value, I contend, that this supposed equilibrium of cur- 
 rency neither does, nor ever did, exist. 
 
 2dly. You gratuitously assume gold, as the sole standard of 
 value, though silver be equally acknowledged as such. The latter 
 was legally as much a measure of value as gold, while practically
 
 564 Rev. Dr. Crombie, oil the 
 
 it was more so, much the greater number of our ordinary disburse- 
 ments being made in silver. 
 
 Besides, permit me to ask, whether the gold or silver coin of 
 this country has at any period been such, as to furnish, in respect 
 to weight, a correct and precise standard. Five pounds in silver, 
 before the late re-coinage, if paid in crowns, weighed 1 Ib. 6 oz. 
 14 dwts. 7 grs. ; if paid in half-crowns, weighed 1 Ib. 5 oz. 
 
 8 dwts. 2 grs. ; if paid in shillings, weighed 1 Ib. 2 oz. 13 dwts. 
 
 9 grs. ; if paid in sixpences, weighed 1 Ib. 1 oz. 3 dwts. 3 grs. 
 The mint weight of 44^ guineas, since the year 1770, has been 
 one pound, and therefore the mint weight of one guinea has been 
 5 dwts. 9 grs. %?-. &ut has not the current guinea uniformly been 
 acknowledged in all payments, as equal to twenty-one shillings, 
 though weighing only 5 dwts. 8 grs.? Where then is that strict 
 accuracy and precision, which it behoves every standard measure 
 to possess ? 
 
 Let me observe also, that, while gold and silver, each recognised 
 as a standard, and being convertible into bullion, were continually 
 changing their value in relation to each other, it may be pertinently 
 inquired of those, who are perpetually referring us to a fixed 
 standard, what is that standard to which they appeal. Not surely 
 to one of the coins in exclusion of the other, for here both law and 
 practice concur to oppose them ; not possibly to both, for here 
 absurdity would meet them, the two standards giving different 
 results. " The moment," says Sir J. Steuart, " any measure 
 begins to be measured by another, the proportion of which to it 
 is not physically, perpetually, and invariably the same, all the use- 
 fulness of such a measure is lost." 
 
 3dly. You appear to me to reason in a circle. I find no argu- 
 ment to prove an excessive issue of bank notes, but an assumed 
 depreciation ; nor do I find any proof of depreciation, but a gra- 
 tuitous standard, or an assumed excessive issue. Thus you seem 
 chargeable with a circular argument, inferring depreciation 
 from excessive issue, and excessive issue from depreciation. 
 
 4-thly. You seem to reason inconsistently with your own princi- 
 ples. You admit that labour is the only real measure of value ;' 
 yet instead of comparing currency, or any component part of it with 
 
 5 That labour is the only measure of value, is a proposition which most 
 political economists concur in maintaining; hut while they agree in term?, 
 they differ in sentiment. Some, by this proposition, intend to express, that 
 the labour, expended in the production of any commodity, determines its 
 price, or exchangeable value ; others, that the value of any commodity is to 
 be estimated, by the quantity of labour which it can purchase, or command. 
 It is only in the latter of these senses, that I admit the truth of this proposi-
 
 Depredation of Bank Notes. 565 
 
 labour, m order to ascertain its value, you compare one part with 
 another, which you gratuitously assume as a standard. The diffe- 
 rent component parts of our currency, considererd as such, cannot, 
 unless by an act of arbitary power, interchange their relative value ; 
 for if one part be depreciated, all must suffer a proportionate de- 
 preciation ; but as bullion, their relative value may be subject to all 
 the fluctuations, to which all commodities are continually liable. 
 By comparing gold, silver, and copper together, we may ascertain 
 whether any and what change may have taken place, in the ratio 
 of their values one to another ; but their real worth is to be esti- 
 mated, not by this ratio, but by the quantity of labour, which, in 
 equal portions, they can severally command. But, in order to 
 ascertain the value of silver, or the bank note, you compare them 
 with gold bullion, or, which is tantamount, to gold coin, convertible 
 into bullion, though you admit that labour, next to which I add 
 commodities, is the only real measure of value. Gold, silver, or 
 the bank note, may serve as a medium of exchange, circulating 
 commodities, and determining their relative values ; but the real 
 worth of any article, by whatever sign it may be expressed, is the 
 quantity of labour which it can command, or the quantity of 
 commodities of primary necessity which it can purchase. 
 
 It is doubtless true that labour, though the only correct measure 
 of value, cannot, for obvious reasons, be employed as an instrument 
 of commerce, being incapable of performing all those functions, 
 necessarily required in a medium of exchange. Some standard, 
 therefore, more convenient, must necessarily be adopted ; but if it 
 is hoped, that any substantial or physical standard can be devised, 
 which in extreme cases will answer all the purposes of foreign and 
 internal traffic, the hope is visionary. A physical or substantial 
 standard, in order to become a measure of value throughout the 
 commercial world, must possess high intrinsic worth, and hence 
 the precious metals have been universally preferred ; and if like 
 these it possess a great intrinsic value, its exchangeable power 
 will, it is to be apprehended, notwithstanding all statutory re- 
 strictions, vary according to the fluctuations of its substantial 
 worth. An ideal standard, not subject to these fluctuations, mav 
 however be adopted. Of its possibility indeed, no doubt can be 
 
 tion. The labour employed in the production of any commodity, is a 
 measure merely of" what it cost to the manufacturer; but is no certain crite- 
 rion either of its utility, or its exchangeable value. The fancies and tastes 
 of mankind, ever varying and capricious, necessarily also affecting the 
 demand, the nature likewise of the commodities themselves, as having, 
 suffered quicker or slower decay, must necessarily affect their exchangeable 
 worth, as estimated by a former and a present demand, by the labour 
 which they once cost, and the labour which they can now purchase. It i-> 
 the latter only, which determines their value.
 
 GG Rev. Dr. Crombie, on the 
 
 entertained ; for the florin banco, denominated by Steuart an 
 ideal unit, furnishes an example, that such a standard might be 
 advantageously employed. To this standard, I conceive that our 
 bank note may be regarded as an approximation. But, as it was 
 not my intention to undejtake any scientific discussion of the prin- 
 ciples which pertain to the science of money, but strictly to con- 
 ilr.j myself to the limits prescribed by your pamphlet, I must- 
 forbear from entering more fully into this subject. 
 
 5thly. If your argument proves any thing, it proves too much. 
 If the bank note was depreciated, because it did not rise in value 
 with gold bullion, then it follows, that silver coin also, just as 
 much a standard or measure of value as gold coin, suffered depre- 
 ciation, not having advanced in value, in the same ratio with 
 gold. 
 
 Gthly. Your notion of depreciation appears to me not only in- 
 correct, but absurd. It is incorrect, as not implying a diminution 
 of exchangeable value, either of currency for labour and com- 
 modities, or of these for currency. You do indeed admit, that a 
 real depreciation of gold and silver coin is demonstrated by an 
 advanced price of all other commodities, thus acknowledging that 
 their real value is estimated by commodities; but this only serves 
 to evince the inconsistency of your reasoning. For, though you 
 acknowledge that the real value of coin is measured by commodi- 
 ties, you deny that the bank note, the representative of coin, is to 
 be estimated by the same criterion. 
 
 But your notion of depreciation involves also an absurdity; for 
 it leads tj> this conclusion, that bank notes would be depreciated, 
 though commanding a greater quantity of labour und commodi- 
 ties than usual, and therefore rising in value, and that they are at 
 the same time sinking, as not being exchangeable for the usual 
 quantity of bullion. 
 
 You may answer, that I have here assumed labour, and com- 
 modities, as the measure of value. It is true ; and you concur 
 with me in believing, that labour is the only real measure oi value, 
 and that the advanced price of commodities demonstrates a real 
 depreciation of currency, thus measuring currency by ccmmoditics. 
 But let us examine the question with a little more precision. 
 
 Every standard must be definite and invariable. If we are 
 desirous to find a correct and permanent standard of measures, 
 \ve fix on some- determinate and unchangeable line, either, for 
 example, the length of a pendulum vibrating seconds in a given 
 latitude, or a degree of the meridian, at a given distance from the 
 equator. Tin's standard line, when once determined, is dividedj 
 into parts, and a certain ratio betv/eeH the whole and these parts 
 
 f fc er,dulY,rr>
 
 Depreciation of Bank Notes. 567 
 
 Vibrating seconds in the latitude of London, which is 39,12G 
 inches. For the sake, however, of simplifying the illustration, let 
 the length be supposed to be 3G inches, and that to this standard 
 measure we give the name of yard. This we divide into three 
 equal parts, each called a foot, and this again into twelve equal 
 parts, each called an inch. The standard is a fixed and invariable 
 quantity ; and as long as the foot is ^ and the inch ^ of the 
 standard measure, they evidently continue of the same ratio in 
 respect to one another. But, if the foot were reduced to nine 
 inches, we should then say that the foot had suffered diminution, 
 or depression, its ratio to the yard or standard having been reduced 
 from -i- to J. So far, you and I cannot but agree. Let us now 
 proceed to the application. You assume the guinea as the standard 
 of value; and though silver and gold coin were equally recognized 
 by law, as standards, I will admit, for the sake of argument, that a 
 guinea was the sole statute measure of value. Now, before we 
 proceed, k must be observed, that depreciation being a relative 
 term, we can neither affirm nor deny its existence, till the ratio 
 between the standard and its several component parts shall have 
 been precisely defined, and also the customary ratio between them, 
 and what they are employed to measure. The former ratio is 
 fixed by law. A penny is ^'^TT, a sixpence T ' s , a shilling 7 ,- , and 
 a. pound, as the representative of twenty shillings, is -jy of the 
 guinea, or standard. As long then as these component parts of 
 the standard severally retain their just ratios to that standard, they 
 cannot be said to suffer depression. If the ratio of the shilling, or 
 of the one pound note, sunk below its established ratio to the 
 standard or guinea, as the foot was supposed to sink from -^ to ~ 
 of the standard yard, we should then say, that it had lost part 
 of its value, and had suffered depreciation. But while the just 
 ratio subsists between them, depreciation is an impossibility ;% 
 manifest contradiction. Show then, that the bank note has sunk 
 below the standard, and you prove your point. Bui, while you 
 attempt this, you are not to be permitted to alter the standard , 
 and to vary its dimensions, as the price of bullion varies. To du 
 this would be, as Steuart observes, to exemplify the folly of the 
 boy, who uniformly called his foot a foct measure, though hjs 
 foot was gradually increasing, in length. Or it might be compared 
 to the conduct of a man, who (to revert to the supposition of the 
 pendulum,) should .say, taking an inch to be -^ of a pendulum 
 vibrating seconds on the equator, as a standard, that an inch of 
 gold wire, measured at the equator, had been shortened, because 
 it was less than an inch or of a pendulum vibrating seconds 
 at the pole. Prove that 3/. 17 s. 10 d. in bank not^a -were net 
 equal in value to an ounce of gold coin, considered ns a standee?.,
 
 568 Rev. Dr. Crombie, on the 
 
 and you prove your point. But in order to prove this, you will 
 not be allowed to abandon your standard, first fixing it, then un- 
 fixing it first assuming an unchangeable measure of value, and 
 then assuming that measure to be changeable, considering gold as 
 coin, and at the same time as bullion, thus constituting it a 
 standard, and yet not a standard. This will not be permitted. 
 Either say, that bullion rose above the standard, whence it follows, 
 that the bank note did not fall ; or assume bullion as the standard, 
 and then it follows, that the guinea and the bank note were both 
 depreciated. But to say, that bank paper suffered depreciation, 
 because it did not keep pace with the value of bullion, or with the 
 guinea, as convertible into bullion, is an abuse of language. 
 
 Depreciation^ whether we consult its etymological meaning, or its 
 common acceptation, if it signify any thing, must signify a sinking 
 in value, a depression below some standard level, some fixed and 
 definite point. If it is not so employed, the term is perverted. 
 But can a thing be said to sink, merely because it does not rise ? 
 Is a commodity depreciated, because it does not advance in price ? 
 Was the bank note depressed, because gold bullion was raised ? 
 Or can any person, without being chargeable with palpable 
 impropriety, apply the terms depression, cfepreciation, deposition t 
 t/6'thronement, descent, Rejection, and many other analogous terms, 
 which might be specified, to a thing which has remained stationary ? 
 Common usage forbids such, application. You cannot be 
 permitted, therefore, to pervert the meaning of words, to 
 assume depreciation, where there is no depression, or to say, 
 that a thing sinks, because it does not rise. Much less will you 
 be allowed to say, that a bank note, though rising in value, sinks 
 in value, merely because it dees not keep pace with bullion, or the 
 guinea, as convertible into bullion j for this is a gross and manifest 
 contradiction. 
 
 It is in vain to object, that I have here presumed, as a matter 
 of fact, that the price of bullion rose. The fact is incontrovertible. 
 That the value of gold is subject to fluctuation, and has, on various 
 occasions, risen considerably above the mere expense of exportation, 
 is a truth, which cannot be questioned, without doubting the 
 testimony of experience.' To dispute it, indeed, is to relinquish 
 your own theory. For you must either show, that gold is not a 
 commodity, or admit, that it is subject to the general law of 
 demand and supply. 
 
 If you say, that you do not mean to contend for the guinea, as 
 
 1 It is in evidence before tlie Trillion Committee, on the authority of Mr. 
 Baring, a gentleman of the most extensive commercial connexions, that he 
 ttnild not have procured 10,000 ounces of gold, if he hud offc/ed a premium 
 jf 50 per cent.
 
 Depreciation of Bank Notes, 569 
 
 an Invariable or correct standard, I answer, that you must then 
 abandon your standard entirely, or leave your argument in that 
 equivocal state, which precludes even the possibility of any evidence, 
 which can be supposed to amount to satisfactory proof. Besides, 
 let me repeat, that the guinea has never been recognised in this 
 country, as the sole statute measure of value. A standard must 
 be invariable, or its utility is lost. If I assume, as a standard 
 linear measure a yard of common catgut, which the humidity of 
 the atmosphere contracts, and 1 aridity expands, and if I am desirous 
 toascertain with accuracy, what degree of expansion or contrac- 
 tion, heat or cold may have produced in a brass rod, how am I to 
 discover, by the application of the rod to this variable standard, 
 whether the rod has varied, or the cord, or neither, or both ? To 
 propose a variable standard as a correct measure of value, is to 
 ofier an ignis fatuus to direct the traveller's steps. 
 
 Again ; you do not seem to be aware, that your adoption of a 
 Variable standard would place you in a dilemma, from which no 
 ingenuity could possibly extricate you. If the guinea be the 
 standard, and if this standard is variable, it must vary either in 
 relation to something ab extra, something exterior to itself, or 
 ab infra, in reference to itself simply. One or other of these po- 
 sitions must be true. If the standard vary in respect to something 
 exterior to itself, then that exterior something, and not the guinea, 
 must be the standard. If it vary in relation to itself, then there 
 must be a point a zero, at which the guinea is at its standard 
 level, and from which point the variation must be computed. Have 
 you defined this point ? Have you determined the level ? The 
 definition would have shown, that your argument is illogical. 
 Take the mint value of the guinea as that point, or as the standard 
 level, and the falsity of your doctrine is instantly detected. In 
 shcrt, view your argument in every light turn it on every side, 
 and whether you admit the fact, that gold and silver were equally 
 recognised as standards, or whether you assume, what was not the 
 fact, that gold coin \vas the sole legal standard, or whether you 
 take the guinea, as a variable, or an invariable measure of value, 
 your argument is sophistical, and the conclusion false. 
 
 Tthly. Your mode of reasoning is of that species which may 
 riot inaptly be denominated, ambidexter. At one time, you acquaint 
 us, that, in order to form correct notio.ns on the science of money, 
 it is necessary to consider coin, as a mere commodity. At another 
 time, you represent gold coin, as a standard of value. There can 
 exist no reasonable objection to your considering guineas in both 
 these lights, provided, in whichsoever of them you view the subject, 
 the conclusion shall be consistent with that view. But in one and 
 the same argument, you regard them as coin, yet reason, as if they 
 
 NO. XX. Pam. VOL. X. 2O
 
 570 Rev. Dr. Crombie on the 
 
 were bullion ; and then again consider them as bullion, and therefore 
 a mere commodity, and yet argue, as if they were coin, or a mea- 
 sure of value. It is difficult sometimes to combat with an opponent, 
 whois completely master of this species of ambidexterity, especially, 
 if his argument be not formally, or logically stated. For, if we 
 show him, that guineas, considered as coin, cannot alter their 
 value, and that the bank note, while it represents this value, cannot 
 be depreciated, his answer is ready he considers them as bullion. 
 If, on the other hand, we contend, that guineas, being convertible 
 into bullion, are a mere commodity, and may rise in certain cir- 
 cumstances considerably above the mint price, and therefore cease 
 to be a measure of value, his answer is equally ready he considers 
 them as coin, and a legal standard. This species of argument is 
 illegitimate. It may serve to perplex, and confound ; but can never 
 contribute to conviction. 
 
 Again I have already alleged, that you assume one hypothesis 
 without evidence of its truth ; it may now be observed, that you 
 assume another, which, though it may be generally true, is not 
 universally supported by fact. You maintain, that the exchange 
 cannot rise more above, or fall more below par, than the expenccs, 
 attending the exportation of the precious metals. This theory is 
 contradicted by experience. In the year 1760, the exchange be- 
 tween London and Hamburgh was 7 , per cent, in f.ivour of 
 London. The expence of transporting the precious metnls, could 
 not exceed half this sum. From the year 1780 to 1784, the ex- 
 change with Hamburgh was from 5 to 8 per cent, against England, 
 though the expence of sending specie to Hamburgh could not 
 exceed 4- per cent. In the year 1695 remittances were made to 
 Flanders at 20 per cent, loss ; and though a new coinage was 
 issued in the year following, which, according to the theory of the 
 Bullion Committee, should have raised the exchange, remittances 
 were made at 2.5 per cent, loss ; more than six times the expence 
 of transporting the precious metals.' These facts are in direct op- 
 position to your assumption, that an unfavourable exchange never 
 can exceed the expences, attending the exportation of the precious 
 metals. 
 
 But, if your position were admitted, as generally true, it would 
 be totally inapplicable to the political and commercial state of this 
 country, at the period in question, and could not therefore, with- 
 out manifest impropriety, be adduced in confirmation of your 
 argument. 
 
 In the ordinary state of things, I agree with you in thinking, 
 
 * See Mr. Vansittart's Speech, delivered on the 13th of May, 1811.
 
 Depreciation of Bank Notes. 57 1 
 
 that the expence of transporting the precious metals constitutes the 
 maximum above or below par, in the rate of exchange. But to 
 this general rule extreme cases present themselves as exceptions. 
 While bank notes are not commutable for specie, and the balance 
 of payments are, to a large amount, against us, the rate of ex- 
 change may rise considerably above the maximum here stated. 
 
 You may reply, " Is not this an admission, that the unfavour- 
 able exchange was occasioned by the stoppage of cash payments 
 at the Bank ?" I conceive, it is not ; nor can it be regarded as 
 such, unless we are to affirm, that a disease is created by the 
 absence of the remedy, which might have served, for a little, to 
 counteract its effect. The state of exchange, as favourable, or 
 unfavourable, in other words, the balance of payments, has not, 
 nor can have, the most remote connection with cash payments at 
 the Bank. These, perhaps, might have for a short time contribut- 
 ed to supply the English merchant with gold, to discharge his 
 foreign debts, and might have thus for a little checked the advanc- 
 ing price of bullion; but the evil, thus repressed, would have 
 soon recoiled with tenfold violence. The bank, for its own pro- 
 tection, would have been compelled to contract its issues, within 
 a very narrow compass ; the provincial banks must have been 
 reduced to the same necessity ; and can any man contemplate 
 without trembling, the fatal consequences, which must have 
 resulted from this measure. I leave the picture for your own 
 imagination to draw. The agriculturist, the manufacturer, the 
 merchant, the tradesman, must have sunk together in one common 
 ruin. And amidst the wrecked fortune of thousands of individuals, 
 national faith, commercial confidence, and public tranquillity 
 would have sustained a shock, from which ages might have elapsed 
 before they recovered. 
 
 Fully persuaded as I am, of the rectitude of your principles, 
 and the purity of the motives, by which you are actuated, both as 
 an author, and as a man, firmly convinced, that neither you, Sir, 
 nor the Bullion Committee, were aware of the disastrous effects, 
 which might have followed the general adoption of your opinions, 
 nay believing, that no person would have deplored these effects 
 more deeply than yourself, I fully acquit you of any injurious or 
 unpatriotic intention- But the doctrine, which you maintained, 
 was eagerly seized by discontented and designing men, who seem- 
 ed to rejoice in the propagation of a theory, which, by annihilating 
 the credit of the B.mk, depreciating national securities, shaking 
 public faith, and creating universal distress, would have hurried 
 the country beyond the verge of bankruptcy and ruin. But, while 
 Igive you full credit for the rectitude of your intentions, I must 
 take the liberty to remark, that, before an hypothesis, pregnaat
 
 572 Depreciation of Bank Notes. 
 
 with such incalculable evils, was delivered to the public, it should 
 have possessed in its defetice little short of mathematical, or the 
 clearest metaphysical, evidence. Happy was it for the country, 
 that the opposite doctrine obtained general assent, and that the 
 Hypothesis of the Bullion Committee, was regarded merely as a 
 specious, but ill-founded speculation. Subsequent events have 
 proved the general opinion to have been correct. 
 
 I should do injustice to you, Sir, as well as to my own convic- 
 tions, if I concluded my letter, without assuring you, that I enter- 
 tain the highest sense of your candour, your integrity, and your 
 love of truth : and if any observation has escaped me, which can 
 admit a construction repugnant to these convictions, you cannot 
 censure it with more severity, than I shall be disposed to condemn 
 jtm yself. , 
 
 Accept my assurances of regard, believing me, 
 
 Sir, 
 Yours, &c. &c. 
 
 ALEX. CROMBIE, 
 
 ivick, Jprillth, 1,8 IT,
 
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