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T8 
 ADVERTISEMENT. 
 
 THE first intention in writing the following pages, was 
 to animadvert on some opinions relating to the principles 
 of political economy, which had met with a very gene- 
 ral circulation, through the medium of several well-written 
 pamphlets on the depreciation of the currency. 
 
 It became irksome, however, arid seemed hut an invidious 
 task, to select from works that possessed generally a very 
 high degree of merit, a few particular passages, merely to 
 dwell upon their errors; and the author therefore determined 
 to arrange. his own thoughts upon the subject, in an order 
 that might admit of his incidentally commenting upon such 
 opinions of other writers, as appeared to be in opposition to 
 his own. 
 
 It will perhaps be but too apparent that these remarks 
 upon the principles of exchange have been written and sent 
 to the press, with more haste than is altogether consistent 
 with the respect due to the public ; and the author would 
 willingly have delayed the publication till he had an oppor- 
 tunity of revising and correcting the style : but the cir- 
 cumstances of the present moment seem so peculiarly suited 
 to a Treatise of this nature, that he has not been deterred by 
 personal considerations, from communicating his opinions to 
 the public, on a subject which has long occupied his at- 
 tention. 
 
 In the execution of his plan, his endearour has been, to 
 
. 
 
 iv ADVERTISEMENT. 
 
 hold a middle course between such a conciseness as might 
 be incompatible with perspicuity, and that degree of super- 
 fluous illustration which might appear to insult the under- 
 standing of his readers. 
 
 He is not without hopes that he may escape being classed 
 with those K who, while they imagined that they themselves 
 " had made important discoveries, uniformly found that 
 " no discoveries had been made by their predecessors j" for 
 the author neither pretends to discoveries himself, nor de- 
 nies that merit to others. If the following observations 
 have any claim upon the public attention, it can arise solely 
 from the attempt to discriminate^ more accurately than has 
 hitherto been done, the operation of causes that have been 
 long known, and frequently discussed ; but which have not 
 met with so distinct and detailed a consideration as the 
 author deems essential to a due comprehension of the 
 subject. 
 
 May 1810, 
 
 
OBSERVATIONS, 
 
 Xc. $c. Sfc. 
 
 INTRODUCTION. 
 
 JL HE principles which regulate the exchange 
 will be investigated in the simplest manner, by an. 
 arrangement that may lead the mind gradually 
 from the separate consideration of the individual 
 causes by which it is influenced, to the more com- 
 plicated results that arise from their combined 
 operation. 
 
 C The effects of the exchange are first practically 
 /felt, when the intercourse between foreign nations 
 has rendered it necessary to make a remittance 
 from one country to another. 
 
 The usual mode of making a remittance, either 
 for the discharge of debts previously existing, or 
 for the purpose of investing it in foreign produce, 
 is to purchase and transmit, to the person to whom 
 the remittance is to be made, a foreign bill of 
 exchange. 
 
6 
 
 A foreign bill of exchange is an order addressed 
 to some person residing abroad, directing him to 
 pay a determinate quantity of foreign currency 
 to the person in whose favor it is drawn. The 
 quantity, therefore, to be paid, is fixed by the 
 sum specified in the bill ; but the amount of Bri- 
 tish currency to be given here, for the purchase 
 of the bill, is by no means fixed, but is con- 
 tinually varying, from causes which it is the object 
 of this essay to explain. 
 
 When the market price of foreign bills is high, 
 the exchange is said to be unfavorable, because 
 a larger sum will be required for discharging a 
 given amount of foreign payments. When the 
 market price is low, the exchange is said to be 
 favorable, because the discharge of the same 
 amount of foreign payments will be effected by 
 a smaller quantity of British currency. What- 
 ever therefore affects the price of a foreign bill, 
 will affect the state of the exchange. 
 
 Now the price of bills will depend, in the same 
 manner as that of any other commodity, upon two 
 causes : 
 
 First, on their abundance or scarcity in the 
 market, compared with the demand for them ; 
 and secondly, on the value of the currency in 
 which they are to be paid, compared with the va- 
 lue of that with which they are bought. 
 
 If there be a certain quantity of foreign b'.lls in 
 
the market, and at the same time a great demand 
 for making foreign payments or investments, the 
 holders of bills will soon feel the effect of the compe- 
 tition for their purchase, and will refuse to part with 
 them, except an additional price be given as a pre- 
 mium. If, on the contrary, there be an abundant 
 supply of bills in the murket, and not much de- 
 mand for foreign payment or investment, there 
 will be more persons inclined to dispose of bills, 
 than there are persons desirous of purchasing 
 them > and the holders, who wish to convert them 
 into cash, will not be able to sell, except at a dis- 
 count; go that this variation in the market price 
 might take place, though the value of the cur- 
 rency of the respective countries continued abso- 
 lutely unchanged. 
 
 Supposing, however, the quantity of bills in the 
 market sufficient exactly to supply the demand, 
 and that there are no more persons wishing to sell 
 than there are persons wanting to purchase them, 
 so that any alteration in their price, from this cause, 
 is precluded; yet as the currency of all countries 
 is subject to continual fluctuations in its value, the 
 quantity of British currency to be given for a de- 
 terminate quantity of foreign currency, at any 
 period of time, will depend upon the comparative 
 value of each. An English guinea may be worth, 
 sometimes, a certain number of guilders, florins, 
 
3 
 
 or piastres, and at others a very different number, 
 depending either upon alterations in the value of 
 the guinea, or of the guilder, florin, or piastre. The 
 moment that these alterations take place, the in- 
 formation is communicated from one part of the 
 mercantile community to the other, and the price 
 of foreign bills is regulated accordingly. 
 
 The rale of the cDrftputed exchange, then, will 
 vary from two causes, totally distinct from each 
 other. The firs*-, arising from the abundance or 
 scarcity of bills in the market, is the foundation 
 of what may be called the real exchange, which 
 depends upon the payments a country has to 
 make, compared with those it has to receive, 
 and has no reference to the slate of the cur- 
 rency. 
 
 The second, arising from alterations in the value 
 of the currency, is the foundation of what may be 
 called the nominal exchange, which has no refer- 
 ence whatever to the state of debt and credit of 
 the country. And as the effects, which the real 
 and nominal exchange have upon the general 
 dealings and commerce of the country, are as dis- 
 tinct as their causes, the natural mode of investi- 
 gating the subject will be to follow the order which 
 this division points out; and after tracing the ope- 
 ration of the real and nominal exchange indepen- 
 dently of each other, to consider their combined 
 effect, in treating upon the computed exchange. 
 
OF THE REAL EXCHANGE. 
 
 IN order that the consideration of the real Ex- 
 change may be kept perfectly distinct from that of 
 the nominal, let it be supposed, during the review 
 of this subject, that the Coin of any two coun- 
 tries that have intercourse with each other is 
 in a perfect state, as to purity and weight ; and 
 that the proportion which the quantity of cur- 
 rency bears to the commodities to be circulated 
 by it in the respective countries, continues un- 
 changed, so as to exclude any alteration in its 
 value. 
 
 In the commercial dealings which take place 
 between any two nations, the surplus produce of 
 the one will be exchanged for the surplus produce 
 of the other. When neither of them imports from 
 the other to a greater amount than it exports to the 
 same country, the debts and credits of each will 
 balance ; and there will be no- difficulty in mak- 
 ing remittances from one to the other, without 
 the actual transfer of Bulliorx or money : for as the 
 Bills drawn by the merchants exporting produce 
 would exactly equal, ii>. amount, the Bills drawn 
 on the merchants importing produce, their mutual 
 
 B 
 
10 
 
 debts and credits would be easily liquidated by 
 the transfer of Bills of Exchange ; and as the sup- 
 ply of Bills would be equal to the demand for them, 
 they would neither bear a premium, nor be at a 
 discount, and the real Exchange would be said to 
 be at par. 
 
 At any particular period of time, however, it 
 may happen that a nation may have imported to 
 a greater amount than it has exported, and conse- 
 quently have more payments to make than to re- 
 ceive. If at that time payment were demanded, 
 the balance due from the debtor country could 
 only be liquidated by the transfer of money or 
 ^Bullion ; and the merchant, rather than incur the 
 expense of the freight insurance and commission 
 attending its conveyance, will be induced to give 
 more for a Bill of Exchange, than the sum for 
 which it is drawn. A competition will be there- 
 by created among the purchasers of Bills upon 
 the creditoi * country, and they will bear a pre- 
 mium in pro}, ^ortion to the demand. In that coun- 
 try, on the contrary, there will be more persons 
 holding, than the Te are persons wanting Bills, and 
 the excess above t'L" 16 demand can only be convert- 
 ed into Coin or Bu.^ on by sending them to the 
 place upon which the> * are drawn. But this Bul- 
 lion or Coin cannot be conveyed to the creditor, 
 without his paying the exp xense ^ * ts transit; and 
 the holder of a Bill in Jke creditor country, 
 
11 
 
 if tye be desirous of converting it into money, will 
 be content to receive something less than its 
 amount. There will therefore be in the creditor 
 country a competition to sell, and Bills will be at 
 a discount in proportion to the supply. The pre- 
 mium in one country will correspond with the dis- 
 count in the other. 
 
 Whatever, therefore, affects the proportion be- 
 tween the payments to be made, and those to be 
 received, will alter the state of the real Exchange. 
 
 This proportion varies principally from the 
 following circumstances: first, from the effects of 
 favorable or unfavorable seasons creating a dif- 
 ference in the customary supply of the annual pro- 
 duce of the land : secondly, from the alterations 
 which take place in the amount of the foreign ex- 
 penditure of a country, arising either from the ex- 
 penses of foreign establishments and expeditions, 
 subsidies to foreign powers, or remittances to ab- 
 sentee proprietors. 
 
 The population of the countries that have com- 
 mercial intercourse with each other, though it may 
 vary considerably in long periods of time, is not 
 subject to any sudden changes from year to year; 
 the wants, therefore, for annual consumption may 
 be considered as nearly constant; bat the supply 
 of those wants depending principally on the an- 
 nual produce of the land, will vary taa very great 
 extent. If in any particular country there should 
 
12 
 
 be a failure in a commodity which is also the com- 
 mon growth of the neighbouring countries, the de- 
 ficiency will be supplied, in a greater or less de- 
 gree, by an increased importation ; and where the 
 failure takes place in an article of the first necessity, 
 as for instance, in corn, which forms the principal 
 part of the food of the people, the importation will 
 be augmented nearly in proportion to the extent 
 of the deficiency. The average amount of annual 
 imports will in these cases be exceeded, and the 
 ordinary proportion of payments between the 
 country and foreign nations proportion ably af- 
 fected ; and though the effects of the failure of a 
 corn crop, from its magnitude, and its being an 
 article of the first necessity, are most apparent, an 
 alteration similar in kind, but not in degree, will 
 be induced by a failure in the produce of any 
 commodity to the use of which a country has been 
 long habituated. In an article of mere luxury, the 
 deficiency of its produce, by occasioning an in- 
 crease of its price, may contract the consumption, 
 and thus cause the value of the quantity exported 
 or imported to be in a certain degree uniform ; yet 
 it may be easily conceived that a combination of 
 circumstances would, even in commodities of less 
 necessity than corn, lead to an unusual export or 
 import, and therefore materially affect the state of 
 debt and credit of a country. 
 
 The second circumstance, which has been stated 
 
13 
 
 as affecting the payments and receipts of a coun- 
 try, is the variation in the amount of its foreign ex- 
 penditure, under which head maybe included, the 
 charge of maintaining its foreign establishments, 
 civil and military, subsidies to foreign powers, and 
 the remittances to absentee proprietors ; the last of 
 which it may be sufficient merely to mention, since 
 they must bear so very small a proportion to the 
 sum total of the foreign expenditure of a great na- 
 tion, that any variations in their amount would 
 scarcely have a perceptible effect upon the general 
 state of its payments and receipts. On the con- 
 trary, the subsidies to foreign powers, and the ex- 
 pense of maintaining the civil and military esta- 
 blishments abroad, may vary, in times of war, to 
 an enormous extent. 
 
 Now this expenditure may be supplied either 
 by the export of Bullion or Specie ; by purchasing 
 foreign Bills in the home market, and sending 
 them to the place where the money is wanted ; or 
 by authorising the agents abroad to draw Bills upon 
 the government, and discount them at the place 
 where they are drawn, upon the best terms that the 
 Bill-market will allow. 
 
 By the export of Bullion or Specie the expendi- 
 ture would be at once defrayed, without creating 
 any debt against the country, and therefore with- 
 out producing any effect upon the real Exchange ; 
 but there are various reasons why this mode has 
 
14 
 
 Hot been generally adopted. In the first place* 
 the quantity of Bullion or Specie in a country 
 which has no mines of its own, is exceedingly li- 
 mited, and the total amount that can be spared or 
 procured for exportation will bear a very small 
 proportion to the foreign expenditure arising from 
 protracted warfare. In the next place* there 
 must always be a certain expense of insurance and 
 freight attending its transport; and whenever, 
 therefore, foreign Bills can be procured at a less 
 premium than the amount of that expense, or Bills 
 on the government abroad can be negociated at a 
 less discount, the vehicle of Bills will necessarily be 
 preferred to that of Specie or Bullion. 
 
 The foreign expenditure of this country, as ap^ 
 pears by the account presented to the Committee 
 of Secrecy by Mr. Long, in 1797? was principally 
 paid by the draft of Bills from the Continent upon 
 England. A debt is thus created against the 
 country equal to the amount of the Bills drawn 
 upon the government, which must exist, in a 
 greater or less degree, till the whole of those Bills 
 are liquidated by the remittance of value of some 
 kind or other. Whatever, therefore, be the* pro- 
 portion between the payments to be made, and 
 those to be received, at any period of time, arising 
 from the ordinary commercial dealings; whatever 
 be the quantity of Bills in the home or foreign 
 market, which are, in fact, the evidences of that 
 
15 
 
 proportion ; the foreign expenditure of government 
 must derange the natural state of the balance, and 
 produce an alteration proportional to its amount *. 
 If the Bills be drawn from abroad, they will in- 
 crease the quantity of British Bills in the foreign 
 Bill market, and lower their vahefrom their abun- 
 dance. If the foreign Bills be purchased at home 
 for the purpose of remittance, the competition of 
 government will immediately raise their price, and 
 increase their scarcity. Whether the real Ex- 
 change, therefore, at the time of the expenditure 
 taking place, be favorable or unfavorable, it 
 will always be the less favorable, or the more un- 
 favorable, in consequence of that expenditure. 
 
 We have hitherto been considering the demand 
 for foreign Bills, as originating wholly in the ne- 
 cessity of liquidating balances arising from trans- 
 actions that had already taken place ; but there is 
 another cause of demand, which springs from the 
 desire of entering upon new commercial specula- 
 
 * See the examination of Mr. Huskisson before the Commit- 
 tee for enquiry into the policy and conduct of the Expedition 
 to the Scheldt ; where he states the difficulty of making the re- 
 mittances to Austria without lowering the Exchange, which 
 was already from 18 to 20 per cent, against this country. 
 
 See also Mr. Moore's Narrative of the (-kmpai^n in Spajn, and 
 the difficulty of negociating Bills there, for the supply of the 
 army in that country. 
 
16 
 
 tions, whenever the relative prices hi the home 
 and foreign markets are such, as to afford the pro- 
 spect of an adequate profit. If the current real 
 prices abroad are low, compared with those in the 
 home market, there will be an increased demand 
 for foreign Bills, for the purpose of making foreign 
 investments ; and the extent of this demand will 
 be in proportion to the probable amount of the 
 profits to be derived, and the unemployed capital 
 that will admit of being diverted into that channel. 
 As soon as a foreign price-current is received, it is 
 compared with the price-currents at home, and the 
 conduct of the merchant is regulated accordingly. 
 If commodities abroad be relatively cheap, there 
 will be more purchasers than usual of foreign 
 Bills; if they be relatively dear, there will be 
 fewer purchasers than usual; and thus whatever be 
 the real Exchange under any given . balance of 
 payment to be made, and payment to be received, 
 the arrival of a foreign price-current, or an alter- 
 ation in the home price-current, will have an in- 
 stantaneous effect upon the foreign Bill market; 
 and the weekly, and sometimes daily, fluctuations 
 in the course of the real Exchange, are attributable 
 principally to the variations in this species of de- 
 mand. 
 
 It must not be inferred, however, that because 
 the prices of commodities cause a fluctuation in 
 the course of the real Exchange^ that therefore the 
 
17 
 
 real Exchange causes a fluctuation in the prices 
 of commodities. The prices of commodities in 
 the home market (upon the supposition to which 
 we constantly adhere, that the value of the cur- 
 rencies throughout the mercantile republic remains 
 unaltered) cannot depend upon the number of 
 foreign Bills in the same market, but upon the 
 abundance or scarcity of the commodities them- 
 selves, compared with the real demand for them, 
 that is, the wants of consumers ; and it is essential 
 that this peculiar feature of the real Exchange 
 should not escape the reader's attention, since it 
 forms one of the leading distinctions between the 
 real) and the nominal Exchange, and is the cause 
 of the great difference of their effects upon the 
 general exports and imports of the country. 
 
 It may, then, be stated generally, that, when- 
 ever there is a balance of debt against a country, 
 arising, either from an excess of imports over ex- 
 ports, a large foreign expenditure of government, 
 or the remittance of foreign subsidies; whenever, 
 in short, there is a demand for' foreign payment, or 
 foreign investment, the price of foreign Bills will 
 rise, and may bear a premium; and the price of 
 Bills drawn on the country from abroad will fall, 
 and be at a corresponding discount ; and, on the 
 contrary, when there is a balance of debt due to 
 a country, and a diminution of demand for foreign* 
 payment or foreign investment, the price of Bills 
 
 c 
 
18 
 
 drawn from abroad will increase, and may bear a 
 premium; and the price of foreign Bills will fall 
 in the home market, and may be at a discount. 
 
 What effects the real Exchange has upon the 
 general exports and imports of the country, it will 
 now be proper to enquire. 
 
 The merchant is regulated in the conduct of 
 his business, by a comparison of the prices which 
 commodities bear in the home, and foreign market; 
 his attention is directed to the prices current, ac- 
 counts of which are constantly published, and im- 
 mediately communicated by his correspondents 
 abroad. If he finds that the price of any commo- 
 dity abroad is so much higher than the price of 
 the same commodity in the home market, that its 
 sale abroad will pay the expences of freight and 
 insurance, and at the same time leave him an 
 adequate profit for his trouble, he will immedi- 
 ately purchase and export the commodity in ques- 
 tion. As soon as the bill of ladipg has been re- 
 ceived by his correspondent to whom the goods are 
 consigned, he will draw his Bill upon him for 
 the amount ; and if the real Exchange be at par, 
 will have no difficulty in procuring money equal 
 to the value specified in the Bill, by negotiating it 
 in the market at home. But if the real Exchange 
 should not be at par, it is evident that his calcula- 
 tion upon the profit he is likely to derive from the 
 export, must include the premium, or discount. 
 
id 
 
 which he will receive, or pay, in the disposal of 
 his Bill. If the Exchange is unfavorable, or, in 
 other words, if the payments to be made are 
 greater than those to be received, foreign Bills will 
 bear a premium ; and consequently, the addi- 
 tional sum which he will receive on the dis- 
 posal of his Bill, will enable him to export with 
 profit, though the difference of prices of the com- 
 modity at home and abroad were such, as would 
 not allow him to export, with the real Exchange 
 at par. The more unfavorable the real Exchange, 
 the less might be the difference of prices that would 
 induce him to export ; so that an unfavorable state 
 of the real Exchange will operate as a bounty upon 
 exportation, to the amount of the premium, which 
 he will receive upon his foreign Bill. 
 
 The same calculation upon the state of the real 
 Exchange will be necessary, if the difference of 
 prices at home and abroad should lead him to im* 
 port. But whatever be the state of the real Ex- 
 change, it will affect the importing merchant, and 
 the exporting merchant, in a directly opposite 
 manner: for the importing merchant must pay 
 for the goods he imports, either by purchasing a 
 foreign Bill to remit to his correspondent abroad, 
 for which, if the real Exchange be unfavorable, he 
 must pay a premium; or, if his correspondent 
 abroad is authorised by the importing merchant to 
 draw a Bill upon him for the payment of the goods 
 
20 
 
 consigned, as that Bill cannot be converted into 
 money without a loss, he must draw for such an ad- 
 ditional sum above the invoice price of the goods, 
 as will counterbalance the discount to be allowed 
 in negotiating his Bill in the foreign market. 
 This additional sum, therefore, paid by the import- 
 ing merchant in the premium of the foreign Bill, or 
 drawn for by the correspondent to make up the 
 loss on the discount, will be so much deducted 
 from his profit. Unless, then, the difference of 
 prices at home and abroad be such as to admit of 
 this deduction, the merchant must cease to import; 
 so that an unfavorable real Exchange will operate 
 as a duty upon importation, in proportion to the 
 premium on a foreign Bill, or the corresponding 
 discount on the Bill drawn from abroad; and in 
 the same manner it is easy to see, that a favorable 
 real Exchange will operate as a duty upon ex- 
 portation, and will afford a bounty upon import- 
 ation. 
 
 An unfavorable real Exchange will, therefore, 
 have the effect of forcing the exports of a country; 
 because, during its unfavorable state, the merchant 
 can afford to sell at a lower price to the foreign 
 consumer, and this diminution of price will na- 
 turally lead to an increased consumption. It will 
 contract imports, because the importing merchant 
 must sell foreign produce at a higher rate to the 
 home consumer, to draw back the duty imposed 
 
14 
 
 upon him by the unfavorable state of the real Ex- 
 change, and consequently the high price will dirni-* 
 nish the home consumption. 
 
 It is evident that during an unfavorable state of 
 the real Exchange, the bounty received by the 
 exporting merchant does not depend upon the na- 
 ture of the commodity he exports. Whatever 
 kind of goods he sends abroad, it gives him the 
 power of drawing upon the person to whom he 
 consigns them, to the amount of their value ; and 
 upon this Bill he receives the premium that the 
 market affords. He will of course select those 
 commodities for exportation, which, besides the 
 premium afforded by his Bill, will give him the 
 greatest profit, by the difference of price abroad 
 and at home. Of a'l the commodities, which are 
 the objects of request among trading nations, 
 there is none perhaps that is subject to so little 
 variation in its real price, as Bullion. The an- 
 nual quantity produced from the mines is very 
 nearly constant, its distribution, from the facility 
 with which it is transported, is exceedingly uni- 
 form, and its value, and consequently its real 
 price, throughout Europe at least, must be consi- 
 dered as nearly the same. Unless, then, the bounty 
 afforded by the unfavorable state of the real Ex- 
 change, were greater than the expenses attending 
 the transit of Bullion, it would be of all others the 
 
Commodity * least likely to be selected by the ex- 
 porting merchant : but that same uniformity of 
 Value and of price, which would prerent its being 
 exported before the premium on a foreign Bill ex- 
 ceeded the expenses of the transit of Bullion, 
 would be the very cause, why, as soon as the pre- 
 iiiitim had reached that point, it would immedi- 
 ately be chosen as one of the most eligible for ex* 
 portation. 
 
 The export and import of Bullion are generally 
 Conducted by a class of the community remark- 
 able for their shrewdness, and the small profits 
 upon which they transact their business ; and as 
 soon as the premium on a foreign Bill exceeds, by 
 a very small amount, the expenses of the transit of 
 Bullion* the certainty of the profit compensates in 
 some degree for its smallness, and the opportunity, 
 when it occurs, is seldom neglected. The adverse 
 debt will thtfn begin to be paid, by the Bullion 
 merchants exporting to take advantage of the pre- 
 mium ; r and the competition will be such, that the 
 real exchange will be very rapidly brought down, 
 
 * Mr. Thornton, apparently from not being aware of the 
 mode in which the export of ordinary produce was increased by 
 an unfavorable real Exchange, seems to imagine that the 
 greater part of the adverse balance must necessarily be paid in 
 Bullion, (pp. 131 \o 134.) 
 
23 
 
 so as no longer to afford a profit upon the export of 
 this article. The exporters of consumable pro?- 
 duce will during this period co-operate with the 
 Bullion merchants ; and when the latter have 
 ceased to derive a profit, the former will still con-* 
 tinue their operations, till the unfavorable Ex*- 
 change is reduced to par, or, in other words, till 
 the expprts have been such, as to counterbalance 
 the adverse debt, and render the quantity of 
 foreign Bills in the market equal to the de- 
 mand. 
 
 From this statement it is obvious, that the na- 
 tural limit to the amount of the real Exchange is 
 the expense of the transit, of Bullion 5 and long 
 before it has arrived at tha^t point, the export -of 
 ordinary produce will be forced, and its import 
 restrained j so that the real Exchange can scarcer 
 ly begin to deviate from par, without calling into 
 action a principle that will correct its deviation. 
 It may oscillate a little on the one side, or the 
 other, from its point of rest, but can hardly admit 
 of remaining either permanently favorable, or per- 
 manently unfavorable, to a nation, in the qrdinary 
 course of its transactions *. 
 
 * This observation must be understood to apply to the gene- 
 ral balance that subsists bet een any one nation, and the whole 
 of those with which it has commercial intercoui'se - } it being evi- 
 
24 
 
 It must not be inferred, however, because the 
 expense of the transit of Bullion is the limit of the 
 real Exchange, that it is therefore a fixed limit, 
 and capable of being estimated at a certain per- 
 centage on the price of a foreign Bill : fbr when 
 the real Exchange has caused a transit of Bullion 
 to any considerable degree, it will at length create 
 a difference in the market price of Bullion itself. 
 This article will become scarce in the country 
 from which it is sent, and abundant in that into 
 which it is flowing. Its price will rise in the 
 former, and fall in the latter. The exporter, there- 
 fore, will then have to calculate the difference of 
 prices in the home and foreign market; and if in 
 the first instance the profit were but just sufficient 
 to induce him to export, it is clear that after the 
 change has taken place, the exportation of Bul- 
 lion, under the same rate of Exchange, will cease. 
 
 Mr. Boyd, in his evidence before the Secret 
 Committee of the House of Lords, in 1797, re- 
 specting the mode of remitting the Imperial loan 
 to Vienna, states, " that he thought the remit- 
 ".tances by Bills of Exchange were not quite 
 " so favorable as those in Bullion ; but, if he had 
 
 dent that where a nation trades with more than one coun* ry, the 
 real Exchange may be constantly favorable with oncy 
 it be constantly unfavorable wit'h another. 
 
" stuck exclusively to Bullion, the price of this 
 " article would have risen so high here, and 
 " probably sunk so low at Hambro', that in- 
 " stead of a good, it would have become a bad 
 " remittance." The limit therefore of the real 
 Exchange can only be fixed at a certain rate, 
 upon the supposition that the price of Bullion 
 is the same in the home and the foreign market ; 
 for when the real price of Bullion abroad is less 
 than it is at home, the transit of Bullion will not 
 take place, unless the rate of Exchange be suffi- 
 ciently high, not only to pay the expenses of 
 transit, but also to compensate for the loss attend- 
 ing the difference of home and foreign prices. 
 When, on the contrary, the price of Bullion 
 abroad is higher than in the home market, it is 
 equally evident that Bullion will be exported, when 
 the real Exchange is less than the expenses of the 
 transit of Bullion. 
 
 And thus it is that a very small part of the pay- 
 ment of an unfavorable balance is effected by the 
 transit of Bullion, since its transit can scarcely 
 begin to take place, without rendering it a more 
 unprofitable article of export than ordinary con- 
 sumable commodities. For the former cannot, 
 generally speaking, be considered as a commodity 
 the consumption of which will be augmented by a 
 diminished price, its use being confined to the 
 wealthy few, who are not likely to eocrease the 
 
 D 
 
26 
 
 quantity of their [late, or indulge themselves more 
 freely in the purchase of ornamental manufactures, 
 from the temporary variations in the market price 
 of Bullion: but it is not so with ordinary produce. 
 The great mass of mankind will always endeavour 
 to purchase their comforts at the lowest possible 
 rate. If by means of an unfavorable Exchange 
 our merchants can supply the nations of the Con- 
 tinent with British manufactures, cheaper than 
 when the Exchange is at par, our manufactures 
 will be bought and consumed; and in proportion 
 to the degree in which the Exchange is unfavorable, 
 in the same proportion, shall we be enabled to enter 
 more easily into a competition with the manufac- 
 turers abroad, even in their own market. 
 
 A possible case may, nevertheless, be supposed, 
 where the government may, from political causes, 
 be induced to continue a scale of warfore, demand- 
 ing a larger foreign expenditure than can be sup- 
 plied by a proportional excess of exports over im- 
 ports; and, consequently, if the quantity of Bul- 
 lion in the country were extremely limited, the 
 real Exchange might, notwithstanding the usual 
 causes that check and prevent its fluctuation*, 
 deviate so much from par, and create so great a 
 drain of Bullion, as to raise its market price above 
 its mint price. 
 
 l. is* certain that ihs Bullion merchants would 
 in that case, rather than pay the advanced market' 
 
27 
 
 price, endeavour to collect the current Coin for 
 the purpose of exportation: A pound of gold 
 at tli2 English mint is coined into forty-four 
 guineas and a half, or 4o/. 14.s\ 6cL * By exchang- 
 ing, then, bank-notes at the Bank, for coin, they 
 can always procure a pound of gold for 46/. 14r. 6d. 
 in notes; and so long as they have this power of 
 purchasing gold at the mint price, at the Bank, 
 they will not give a higher market price else- 
 where. If the paper, therefore, be convertible 
 into Coin at the option of the holder, the Bullion 
 merchants will be constantly pouring in their 
 notes upon the Bank, to be exchanged for Coin, 
 which will be exported f as fast as it can be pro- 
 cured ; and thus a drain upon the Bank will be 
 
 * Throughout this pamphlet, the Author, in speaking of 
 Bullion, has confined his observations to Gold Bullion only ; 
 iirst, because the Gold Coin is now the only one in which a le- 
 gal payment can be made for debts above 25 1. in amount ; and, 
 secondly, because he has deiived considerable assistance from, 
 and had frequent occasion to refer to, Mr. Mushet's valuable 
 Tables of the Exchange between London and Hambro', since the 
 year 1760, in which the price of Gold Bullion only is noted. 
 
 j- It is true the laws have affixed most severe penalties to the 
 melting or exporting the current Coin of the realm ; but these 
 penalties have always been found insufficient for its protection, 
 the Coin having uniformly disappeared, whenever either of the 
 above practices has been attended with an adequate profit. 
 
established, to a greater or less extent, in propor- 
 tion to the amount of foreign payment that must 
 be discharged ; before the real Exchange is suffi- 
 ciently elevated to prevent any profit upon the ex- 
 port of Bullion. As long as this drain continues, 
 the Bank will be compelled to purchase Bullion, 
 and to coin, for the purpose of supplying the de- 
 mand occasioned by the return of its notes; 
 and as the purchase must be made at the then 
 market price, it is evident that in whatever degree 
 that shall exceed the mint price, the Bank must 
 sustain a loss proportional to the difference; and 
 that a continuance of the drain, under such cir- 
 cumstances, might eventually lead to its ruin. 
 
 It was upon this ground that the Directors of the 
 Bank, in the year 1795, remonstrated in so urgent 
 a manner against any further loans to the Em- 
 peror; lest the drains, which those loans occa- 
 sioned, should prove fatal to that establishment. 
 In a 1 tter from the Directors to Mr. Pitt, dated 
 October 8, 1795, after observing upon the con- 
 tinual drain that the loan to the Emperor had oc- 
 casioned ; they proceed to state, " that the present 
 cc price of gold being from 4/. Ss. to 4/. 4r. per 
 xc ounce, and our guineas being to be purchased 
 " at 31. 17^. 10^., clearly demonstrates the 
 <e grounds of our fears, it being only necessary to 
 " state these facts to the Chancellor of the Ex- 
 
29 
 
 " chequer *." Now those very facts ought to have 
 led Mr. Pitt to suspect, that the drain upon the 
 Bank, at that time, arose from some other cause 
 than the loans to the Emperor ; for it has been 
 already shewn how impossible it is, that the Bul- 
 lion merchant should for any length of time con- 
 tinue the export of Bullion, without increasing 
 the quantity abroad, and lowering its price so 
 much, that it would no longer afford a profitable 
 speculation. Mr. Pitt should have recollected, 
 that for the last twenty-one years from 1774, 
 when the reformation in the gold Coin took place, 
 though the computed Exchange between Hambro' 
 and London had frequently been so unfavorable to 
 London, as far 'to exceed the expenses of the 
 transit of Bullion, the quantity required for ex- 
 port had been so easily supplied, either from the 
 spare Bullion, or from the export of the Coin, that 
 the market price of bullion had never exceeded the 
 mint price, except only for about six months, at 
 the time of the peace of Versailles, in the year 
 1783; and then only by about 3s. Zld. in 1OO/., 
 not much more than 4th part. Now as during a 
 great part of that period, the country was engaged 
 in active warfare, which would cause, from the 
 variations in the amount of the foreign expendi- 
 ture, occasional demands for large foreign pay- 
 
 * P. 152, Secret Committee of the House of Lords, 1797. 
 
30 
 
 merits, one would have expected, that such an ex- 
 cessive increase of the market price above the mint 
 price, as was asserted by the Bank Directors to 
 have taken place, amounting to ?/ 4^. 5\d. per 
 cent, being forty-five times greater than any vari- 
 ation that had occurred in the former war, would 
 have led him to receive their remonstrances with 
 considerable suspicion. 
 
 Ifj in addition to this, he had called to mind 
 that the excess of the market price above the mint 
 price, could be accounted for, and might have 
 taken place, though no loan to the Emperor had 
 been in a course of remittance ; that the excess of 
 the market price of Bullion over the mint price had 
 existed to a very great extent, attended with a 
 drain upon the Bank, prior to the year 1774, when 
 the gold currency was degraded below its stand- 
 ard weight; that the drain, under such circum- 
 stances, would have equally existed, though there 
 had been no demand for the exportation of Bullion > 
 (as will be fully explained, in the Section upon the 
 Nominal Exchange;) it seems unaccountable that 
 he should so easily have yielded to the repj-esenta^ 
 tions of the Directors; and it is the more to be 
 lamented, since the impressions he then received, 
 seem to have had considerable influence in pro- 
 ducing the fatal measure of permanent restriction 
 on Bank payments, which began in the year 1797, 
 only fourteen months after this period. 
 
31 
 
 But assuming it to be the fact, that the foreign ex- 
 penditure at that period was greater than on any 
 former occasion, and that the real cause of the drain 
 was that assigned by the Bank Directors, still they 
 had the means of prevention within their own 
 power ; for it will be shewn, in the next Section, 
 on the nominal Exchange, that when the currency 
 of a country consists partly of Paper, and partly of 
 Coin, and that the former bears a large proportion 
 to the latter, the Bank can at all times contract 
 the issue of its notes, and produce a considera- 
 ble diminution in the total amount of the currency, 
 By this means the nominal prices of commodities, 
 and amongst the rest, that of Bullion, will be 
 lowered. As soon, therefore, as a reduction has 
 thus been effected in the price of Bullion below its 
 mint price, the drain upon the Bank will at once be 
 stopped ; since it will no longer be the interest of 
 the Bullion merchant to purchase gold at the mint 
 price, by exchanging notes at the Bank, when 
 he can procure it at a cheaper rate in the market. 
 The Bank Directors were so well aware of .this 
 mode of counteracting the effects of a drain upon 
 them, that they had recourse to it at the very pe- 
 riod of making their remonstrances ; and the mar- 
 ket price of Bullion, which had been 9?. 7d. per 
 cent, below its mint price, in the beginning of the 
 year 1795, and which probably might never have 
 been raised, had not the Bank, at this period, ex* 
 
32 
 
 tended its paper from 11 to 131 millions, was, by 
 the subsequent contraction of it to 9* millions, 
 again reduced, before the middle of the year 1796, 
 to 9s. 7d. below the mint price. Unfortunately 
 too for the country, this same counteracting prin- 
 ciple was resorted to, when the drain took place in 
 the beginning of the year 1797> arising, not from 
 a demand for bullion for the purpose of export- 
 ation, nor from an excess in its market price 
 above the mint price, neither of which existed 
 at the time * ; but solely from the alarm occa- 
 sioned by the fears of invasion ; a drain that 
 will always occur under similar circumstances, and 
 which will be aggravated, rather than relieved, by 
 a contraction of paper. 
 
 It should be carefully remembered, that the pro* 
 fit from the export of Bullion in consequence of 
 an unfavorable real Exchange, does not arise from 
 Bullion selling for a higher price in the foreign 
 than in the home market, nor from any scarcity of 
 Bullion abroad occasioning an extraordinary de- 
 mand for it; but solely from the demand for 
 
 * In January 1797, the computed Exchange between 
 and London, was 5Z. 4s. per cent, in favour of London, and dur- 
 ing the year rose to 13 per cent j it never being;, at any part of 
 the year, less than 3Z . 2*. in favour of London. The market 
 price of Bullion, at the same period, was never above it <> mint 
 price. 
 
35 
 
 foreign bills, for the purpose of making foreign 
 payments, being so great, that the premium upon 
 them exceeds the expenses of the transit of bul- 
 lion; and, consequently, the transit will take place 
 and afford a profit to the exporter, though the 
 price of bullion be precisely the same abroad as it 
 is at home. 
 
 When such a quantity of bullion has been export- 
 ed as to raise its market price above the mint price, 
 the coin being obtainable at the mint price, will be 
 exported in preference to bullion ; not in conse- 
 quence of any depreciation in the value of the 
 coin, for it will purchase the same quantity of 
 ordinary produce after the rise of the J>rice of 
 bullion as before ; nor because it is more valuable 
 abroad than it is here, for it will not purchase more 
 in the foreign than the home market; but it will 
 be exported, for the same reason that the bullion 
 is exported, to tiike advantage of the premium on 
 foreign bills, and will be sent, though the price of 
 bullion be precisely the same in the continental 
 market as the English mint price. 
 
 After what has been stated, it will be sufficient- 
 ly apparent, upon what a false foundation the old 
 notions respecting the advantages of a favorable 
 balance of trade are built, and how futile all at- 
 tempts must be to procure and detain bullion, be- 
 yond the quantity that is actually wanted for con- 
 sumption. The transit of bullion from a high or 
 
 o 
 E 
 
34 
 
 low real exchange is an unnatural transit, not 
 arising from the wants of the country into which 
 it flows, but depending solely on the profits which 
 a temporary pressure for foreign payments affords 
 to the bullion merchants on the sale of foreign 
 bills; and as soon as the cause that has produced 
 the temporary influx subsides, (an event that will 
 sooner or later necessarily take place, by the im- 
 port of such ordinary produce as is wanted for the 
 purposes of consumption, and increased enjoyment 
 of the people,) the superfluous and unused quantity 
 of bullion that has been accumulated, will flow 
 back from the country where its abundance has 
 rendered its real price low, to those nations from 
 which it had been unnaturally sent, and where its 
 scarcity will have rendered its real price high. 
 
 Much of the confusion that attends this question 
 would have been avoided, had the dealers in bills 
 of exchange, and the dealers in bullion, (that is, 
 the persons who export or import bullion for the 
 supply of consumers,) been two distinct classes of 
 merchants. It would then have been seen that the 
 profits of the dealer in bills of exchange flowed 
 through very different channels from those of the 
 dealer in bullion. If at any time the course of 
 exchange were such as to afford a profit to the 
 bill merchant by the sale of foreign bills, he would 
 export that bullion which had been imported for 
 the use of the manufacturer, and would continue 
 
35 
 
 to export till it no longer afforded a profit. The 
 bullion dealer would then begin to re-import, in 
 consequence of the difference of prices in the home 
 and foreign markets, the bullion that the bill 
 merchant had sent away, in consequence of the 
 high premium on foreign bills. Whatever de- 
 rangement the bill merchants might occasion in 
 the quantity of bullion that would be otherwise 
 naturally distributed among the different countries 
 according to their wants, would be remedied by 
 the operations of the bullion merchants, who 
 would find their advantage in restoring the equili- 
 brium that the bill merchants had destroyed. 
 
 The dealer in bills of exchange would have 
 employment, when there was the least difference 
 between the prices of bullion in the home and 
 foreign market, and the real exchange at the 
 the greatest deviation from par. 
 
 The bullion dealer would be most engaged^ 
 when there was the greatest difference in these 
 prices, and the real exchange at its least deviation 
 from par. 
 
 Had this distinction been attended to by Lord 
 King, he would never have entertained such erro- 
 neous opinions respecting the exports of silver from 
 this country to India, nor have considered them 
 as indications of an exchange constantly in favor of 
 England against the Continent; for he would have, 
 seen, that the export of bullion is uot regulated 
 
36 
 
 merely by the speculations of the dealers in bills 
 of exchange, but is effected, like that of any other 
 commodity, when there is such a difference in its 
 real prices at any two places, as will afford a pro- 
 fit on its transit; an occurrence that will frequently 
 take place, even with an excliangelit par. 
 
 OF THE NOMINAL EXCHANGE. 
 
 THE market price of a foreign bill has been 
 stated to depend upon two circumstances : first, 
 on the scarcity of bills in the market compared 
 with the demand for them; and secondly, on the 
 value of the coin or currency in which they are 
 to be paid, compared with the value of the coin 
 or currency with which they are bought. 
 
 The first of these, as connected with the real 
 exchange, formed the subject of the foregoing 
 Section; we shall now proceed to examine the 
 nature and effects of the second, on which depend 
 the alterations of the nominal exchange ; and as 
 in treating of the real exchange we endeavoured to 
 
37 
 
 keep the subject as distinct as possible from the 
 question of the nominal exchange, by supposing 
 no alteration to take place in the value of the cur- 
 rencies in the respective countries ; so in tracing the 
 effects of the nominal exchange, we shall suppose 
 the state of the real exchange to remain unaltered ; 
 or the mutual dealings and intercourse between the 
 nations composing the great mercantile republic to 
 be such, that the price of foreign bills is not af- 
 fected by any variation in their abundance or 
 scarcity, but that the supply of them is constantly 
 sufficient to answer the real demand. 
 
 In this case the variations in their price can 
 arise only from changes in the comparative value of 
 the currencies in which they are paid, and those 
 with which they are bought. 
 
 It will not be necessary, therefore, to enter intq 
 any enquiry respecting those changes which have 
 taken place from the discovery of the American 
 mines, or which have arisen from any cause that 
 would affect all currencies in an equal degree; 
 since the object is not to compare the value of 
 currencies now, with what they were at any for- 
 mer period, but to estimate the local alterations 
 that have taken place in the currency of one 
 country, without a corresponding alteration in 
 that of others. 
 
 The currency of every nation is subject to con- 
 
tinual fluctuations in its value, principally from 
 three circumstances. 
 
 First, An alteration in the quality and standard 
 purity of the metal of which the coin is formed. 
 
 Secondly, An alteration in the quantity of the 
 metal contained in coin of the same denomination. 
 
 Thirdly, An alteration in the total amount of 
 the currency of a country, without a correspond- 
 ing alteration in the commodities to be circulated 
 by it. 
 
 The first of these is now seldom resorted to in 
 a civilized country, even under the most pressing 
 necessities of the government. 
 
 The second has been frequently adopted by 
 princes and sovereign states, who through a mis- 
 taken policy have imagined that they derived a 
 benefit from diminishing the quantity of metal 
 contained in their coins. The English pound con- 
 tained, in the time of Edward the First, a pound 
 of silver. The French livre contained a pound 
 weight of silver, in the time of Charlemagne. The 
 English pound contains, at present, only one 
 third, and the French one 66th part of their ori- 
 ginal value*; but I believe, except in Turkey, 
 there is no instance of this practice being counte- 
 nanced by any of the modern governments. The 
 
 Smith's Wealth of Nations vol, i. p. 39. 
 
39 
 
 metallic currencies, however, of most nations, even 
 where the governments have been desirous of mainr 
 taming them in a state of the utmost possible per- 
 fection, have been much diminished in value by 
 being worn from use, and dipt or otherwise de- 
 graded by the illicit practices of the people. To 
 avoid the confusion that would follow from the 
 constant fluctuations in the value of currencies, 
 merchants have adopted a mode by which they en- 
 deavour to estimate the extent of these fluctua- 
 tions; and for this purpose, have ascertained with 
 tolerable accuracy, in what quantities of coin of 
 the mint standard in different countries, an equal 
 weight of gold or silver of the same standard fine- 
 ness is contained. Thus it has been determined, 
 that a pound sterling of the English mint contains 
 the same weight of silver, of a certain fineness, as 
 33 schillings 8 grotes* of the Hambro' banco- 
 
 * From the evidence before the Secret Committee of the 
 House of lords, in the year 1797, it appears that there is a dif- 
 ference in the mode of estimating the par of Exchange with 
 Hambro' j the house of Goldsmid considering 33. 8. and Mr. 
 Boyd's 34. 8. as the par of Exchange. The difference seems to 
 have arisen, from the former estimating the par according to 
 the standard of Hambro' banco money ; the latter, according to 
 the actual currency of Hambro* which appears to be more than 
 3 percent, below the standard of the banco money. Upon this 
 supposition there is less difficulty in reconciling the apparent 
 contradiction, that 3 schillings above the par, has the same 
 
4o 
 
 money; and in speaking of the exchange with 
 f lambro', 33. 8. is in the technical language of 
 inerchants said to be the par of exchange. In 
 the same manner the par of exchange with France 
 is fixed at 24, because 24 livres of the mint stand- 
 ard of France contain the same weight of silver, of 
 a certain fineness, as the pound sterling of the 
 English mint. 
 
 By means of this rule, the merchants of one 
 country would never be at a loss to estimate what 
 quantity of their own money would be equivalent 
 to a specific sum of foreign money, so far as re^ 
 garded the weight of metal, provided the coins of 
 the respective countries contained the due weight 
 of their lespective mints. But in some countries 
 the coins are more, in others less worn, and ciipt or 
 otherwise degraded below the mint standard. When 
 these alterations have taken place, it would be ne- 
 cessary either to establish a new par of exchange, 
 
 effect, one way, upon the transit of gold, that 4 grotes below 
 par has the other ; a fact that was stated by Mr. Goldsmid's 
 partner, but which he was unable satisfactorily to explain. 
 
 If the Hambro' currency were so much degraded below tb 
 banco money, that 35 schillings 4 grotes currency were worth 
 vno more than 33 schillings 8 grotes banco money, there would 
 be a nominal Exchange of 1 schilling 8 grotes against Hambro;, 
 for every pound sterling j and if the par is estimated at 33. 8. 
 4 grotes below that sum, and 3 schillings above it, would be 
 equally distant from the real par of 3ft schillings 4 grotes. 
 
41 
 
 to guide merchants in their money transactions, 
 or, as is now the general usage, not to alter the 
 par of exchange, but to mark the fluctuation of 
 the currency, by considering it as so much above 
 or below the established par. In King William's 
 time, before the reformation of the silver coin, 
 (silver being then the metal in which the payments 
 of the country were legally made,) the current coin 
 was rather more than 25 per cent, below its stand- 
 ard value. The established par, however, was not 
 altered, but the exchange was said to be 25 per 
 cent, against England *. Before the reformation 
 of our gold coin in 1774, the guinea contained so 
 much less than its standard weight, that it was de- 
 graded 2 or 3 per cent, when compared with the 
 French coin at the same period ; and the exchange 
 between England and France was then computed 
 to be 2 or 3 per cent, against this country ; upon 
 the reformation of the gold coin, the exchange 
 rose to par. The Turkish government, in the 
 course of the last forty years, has made three great 
 alterations in its coin. Before these frauds were 
 committed, the Turkish piastre contained nearly 
 as much silver as the English half crown; and in 
 exchange, the par was estimated at 8 piastres to 
 the pound sterling. The consequence of these 
 
 * Smith's Wealth of Nations, vol. ii, p. C 21G. 
 F 
 
42 
 
 repeated adulterations has been, the reduction of 
 the silver in the piastre to one half, and a fall in the 
 exchange of 100 per cent., bills on London hav- 
 ing been bought in Turkey, in 1803, at the rate of 
 16 piastres for every pound sterling*. Now though 
 it is not absolutely conclusive, that these alterations 
 in the computed exchange were entirely owing to the 
 fluctuations in the value of coin, because the real 
 exchange at the time might not be constant ; yet 
 the correspondence of the difference of exchange, 
 with the acknowledged degradation of the coin, 
 renders it more than probable, that the fall of the 
 computed exchange arose from an alteration in the 
 nominal exchange only. _^ 
 
 It is unnecessary to enter further into the detail 
 of the consequences that arise from the degrada- 
 tion of the coin below its mint standard. As soon 
 as that degradation (which never can remain long 
 concealed) is discovered, the inconveniencies that 
 would otherwise attend the commercial intercourse 
 are obviated by a corresponding alteration in the 
 computed exchange ; and though during the con- 
 tinuance of the degradation, the nominal exchange 
 will remain permanently unfavorable to the coun- 
 try in which it prevails, it will be immediately re- 
 stored to par, by a reformation of the circulating 
 
 * Foster, on Commercial Exchange, p. 93. 
 
43 
 
 medium. We will therefore, in the remaining 
 part of this enquiry into the nature and effects of 
 the nominal exchange, suppose, that the curren- 
 cies are not degraded below their mint standards, 
 and confine our observations to the third cause, 
 which has been stated to affect the value of curren- 
 cies, viz. the ratio, which the total amount of the 
 currency in one country bears to the commodities 
 to be circulated by it, compared with the ratio that 
 the currencies of other countries bear to the com- 
 modities which they are respectively employed to 
 circulate. It is the fluctuation from this cause, 
 which at present principally affects the nominal 
 exchange. 
 
 Had the currencies of commercial states been con- 
 fined to the precious metals only, it is scarcely 
 possible that any increase of currency, more than 
 was demanded by the wants of increasing wealth, 
 could have taken place in countries that had no 
 mines of their own. As the metals of which the 
 coin was composed must have been purchased at 
 their value, no possible motive can be conceived, 
 that would induce the holder of bullion to convert 
 it into coin, unless there was a real demand for it. 
 The circulating medium of modern times no longer 
 consists of the metals only, almost all nations hav- 
 ing adopted, on a greater or less scale, the use of 
 paper currency, issued, generally, under the sanc- 
 tion of government, by corporate bodies or bayks, 
 
44 
 
 who are responsible for the payment of it in specie 
 on demand. As the profits of these corporate 
 bodies or banks are in proportion to the quantity 
 of the paper they can permanently keep in circu- 
 lation, there can be no doubt, that every effort 
 consistent with prudence, will be made to aug- 
 ment that quantity. But it is impossible that such 
 an increase can take place in the quantity of any 
 commodity that is given in exchange for others, 
 whose quantity is not augmented in the same pro- 
 portion, without affecting their comparative value. 
 If the currency of a country is increased, while 
 the commodities to be circulated by it remain the 
 same, the currency will be diminished in value 
 with respect to the commodities, and it will re- 
 quire a larger proportion of the former to purchase 
 a given quantity of the latter ; or, in other words, 
 prices will rise. If we were in the habit of consi- 
 dering money as purchased by commodities, instead 
 of commodities being purchased by money, the 
 diminution in the value of money from its abund- 
 ance, would be immediately apparent. f( Mr. 
 " Thornton admits, in the most explicit manner, 
 " that if the quantity of circulating medium is 
 cc permanently augmented, without a correspond- 
 " ing augmentation of internal trade, a rise will 
 " unavoidably take place in the price of ex- 
 cc changeable articles. Indeed this is a principle 
 " upon which ail th<; wrile-rs on Commerce, both 
 
45 
 
 '* practical and speculative, are agreed : they have 
 <c thought it so undeniable as to require no par- 
 cc ticnlar illustration, and have rather assumed 
 " it as an obvious truth, than as a proposition 
 " that depended on inference, Upon this idea is 
 <c founded Mr. Hume's well-known argument 
 cc against banks, and it is equally implied in Dr. 
 " Smith's confutation of that objection ; it forms 
 " the foundation of those presumptions from which 
 " Mr. Boyd has lately inferred an improper in- 
 " crease of Bank of England paper; and it is im- 
 " plicitly admitted, likewise, by Mr. Thornton, 
 " one great object of whose book is to persuade the 
 " public that there has been no such increase*." 
 Without entering, therefore, into an unnecessary 
 argument, I shall, for the present, assume as 
 admitted, that the increase of currency, while the 
 commodities to be circulated remain the same, 
 will be attended with an increase of nominal 
 prices, and a correspondent depreciation in the 
 value of money. 
 
 Now it is impossible, when the currency of a 
 country has been thus depreciated, that the same 
 amount of it should purchase the same sum of 
 foreign money as before its depreciation. A 
 foreign bill, or an order for payment of 4 a 
 
 * Edinb. Review, v. i. p. 173. 
 
46 
 
 given sum of foreign money abroad, will not be 
 sold, unless for such an increased amount of the 
 depreciated currency, as will counterbalance the 
 dimunition of its value. Foreign bills will, there- 
 fore, bear a premium, in proportion to the depre- 
 ciation. 
 
 In the same manner a bill on the country where 
 the currency is depreciated will be bought abroad, 
 where money retains its value, for a much less 
 7iominal sum than the amount for which it is 
 drawn ; or, in other words, will be at a discount. 
 Suppose, for instance, that the coins being in the 
 utmost state of perfection in England and France, 
 and the real exchange at par, the augmentation 
 of the total amount of the currency in England 
 Were such as to raise prices here, to double their 
 former amount, it would require, in that case, 
 twice the sum to purchase the same commodity in 
 England that would be required in France. The 
 same nominal sum would, therefore, be only of 
 half the value : 24 livres in France would pur- 
 chase an order for the payment of 2/. sterling in 
 England, and the nominal exchange, would be 
 100 per cent, against England. 
 
 An augmentation of currency that affects prices, 
 cannot take place without a corresponding altera- 
 tion in the nominal exchange. Merchants, from 
 the average sale of the produce which they re- 
 ceive and remit, and from the uninterrupted cor- 
 
47 
 
 respondence which they hold with each other, ex- 
 pressly for the communication of the prices cur- 
 rent, have not much difficulty in distinguishing 
 those fluctuations which are owing to the partial 
 abundance or scarcity of a few articles, from that 
 general increase of price which denotes a depreci- 
 ation of currency; or should they, from want of 
 experience, be tempted to engage in commercial 
 speculations, from a difference of prices not de- 
 pending upon the real demand, but arising merely 
 from an over-issue or contraction of currency, the 
 loss upon their returns would infallibly teach them 
 more caution in future. 
 
 After the par of exchange, therefore, has been 
 established, an alteration in the value of currency, 
 whether it arises from a debasement of the coin be- 
 low its standard, a diminution of weight below the 
 mint regulation, or depreciation of its value from 
 relative over-issue, will alike affect the price of a 
 foreign bill, and be made evident by an unfavor- 
 able nominal exchange. 
 
 It now remains to trace the operation of the 
 nominal exchange on the several exports and im- 
 ports of the country. 
 
 When foreign bills bear a premium from an un- 
 favorable nominal exchange, it appears advan- 
 tageous, upon a superficial view of the subject, to 
 export produce, in consequence of the profit aris- 
 ing from the sale of the bill, which the merchant 
 
48 
 
 Would be authorised to draw upon his correspondent 
 abroad. But a very little consideration will shew 
 that there is, in this respect a striking difference 
 between the real and the nominal exchange. 
 
 It is true that the merchant will obtain a pre- 
 mium upon his bill, but it is this premium which 
 alone enables him to export. The same cause 
 that has given rise to this premium, has increased 
 the nominal prices of the articles, which he buys, 
 for the purpose of exportation, in the home mar- 
 ket; whatever he gains upon the bill, he loses in 
 the purchase of his goods. The merchant, there- 
 fore, must calculate what is the difference at home 
 and abroad, in the real prices of commodities, by 
 which I mean the prices at which those commo- 
 dities would be bought and sold, if no deprecia- 
 tion of currency existed. If those prices are 
 such, as to admit of a profit, the merchant 
 will continue to export, whether the nominal ex- 
 change be favorable or unfavorable ; that cir- 
 cumstance can make no difference whatever in 
 his transactions. 
 
 Suppose, for instance, the currencies of Ham- 
 bro* and London being in their due proportions, 
 and therefore the nominal exchange^ at par, that 
 sugar, which from its abundance in London sold at 
 501. per hogshead, from its scarcity at Hambro' 
 would sell at 100/. The merchant, in this case* 
 would immediately export. Upon the sale of his 
 
49 
 
 sugar, he would draw a bill upon his corre- 
 pondent abroad for 100/. which he could at 
 once convert into cash, by selling it in the bill- 
 market at home, deriving from this transaction 
 a profit of 501. , from which he would have to 
 deduct the expenses of freight, insurance, com- 
 mission, &c. Now suppose no alteration in 
 the scarcity or abundance of sugar in London 
 and Hambro', and that the same transaction 
 were to take place, after the currency in Eng- 
 land had been so much increased that the 
 prices were doubled, and consequently, the no- 
 minal exchange 100 per cent, in favor of Hambro'. 
 The hogshead of sugar would then cost 100/. 
 leaving, apparently, no profit whatever to the ex- 
 porter. He would, however, as before, draw his 
 bill on his correspondent for 100/.; and as foreign 
 bills would bear a premium of 100/. per cent, he 
 would sell this bill in the English market for 200/. 
 and thus derive a profit from the transaction 
 amounting to 100 depreciated pounds, or 50/. 
 estimated in undepreciated currency; deducting, 
 as in the former instance, the expenses of freight, 
 insurance, commission, &c *. 
 
 * The reader will observe how much the nominal income, 
 and apparent profits, of the- merchant are increased by the d$ a 
 preciation of the currency, 
 
 O 
 
,50 
 
 The case would be precisely similar, mutatis 
 mutandis, with the importing merchant. The un- 
 favorable nominal exchange would appear to occa- 
 sion a loss amounting to the premium on a foreign 
 bill, which he must give in order to pay his cor- 
 respondent abroad. But if the difference of real 
 prices in the home and foreign markets were such 
 as. to admit of a profit upon the importation -of 
 produce, the merchant would continue to import, 
 notwithstanding the premium ; for that would be 
 repaid to him in the advanced nominal price at 
 which the imported produce would be sold in the 
 home market. 
 
 Suppose, for instance, the currencies of Hambn/ 
 and London being in their due proportions, and 
 therefore the nominal exchange at par, that linen 
 which can be bought at Ilambro* for 501. will sell 
 here at 100/. The importer immediately orders 
 his correspondent abroad to send the linen, for the 
 payment of which he purchases at 501. a foreign 
 bill in the English market, and on the sale of the 
 consignment for 100/. he will derive a pro lit 
 amounting to the difference between JO/. IUK! the 
 expenses attending the import. 
 
 Now, suppose the same transaction to take place, 
 without any alteration in the scarcity or abund- 
 ance 'of linen at Hambro' and London, but that 
 the currency of England has been so augmented, 
 a* to be depreciated to half its value. The- ?w- 
 
c- 
 
 r -. 
 
 W,inal exchange will then be 100 per cent, against 
 England, and the importer will not be able to 
 purchase a 501. foreign bill for less than 100/. But 
 as the prices of commodities here will have risen 
 in the same proportion as the money has been de- 
 preciated, he will sell his linen to the English 
 consumer for 200/. and will, as before, derive a 
 profit amounting to the difference between 100/. 
 depreciated money, or 501. estimated in undepre- 
 ciated money, and the expenses attending the 
 import. 
 
 The same instances might be put in the case of 
 a favorable exchange ; and it would be seen in the 
 same manner, that nominal prices and the nominal 
 exchange being alike dependent upon the depre- 
 ciation of currency, whatever apparent advantage 
 might be derived from the former, would be coun- 
 terbalanced by a loss on the latter, and vice 
 
 For the very same reasons that the nominal ex- 
 change produces no alteration in the imports or 
 the exports of ordinary produce, it can have no 
 effect on the export or import of bullion. Nothing 
 can be more evident^ than that bullion must be 
 subject to the same variation in its prices from an 
 alteration in the value of currency- as any other 
 commodity. If the value of currency is dimi- 
 nished, the prices of all commodities must advance, 
 
and that of bullion among the rest *. How then is 
 the profit of the merchant, from the export of 
 bullion, to arise ? Is it not evident that upon an 
 unfavorable nominal exchange, whatever premium 
 he may gain upon his bill, as much will be lost in 
 the advanced price which he must pay for the 
 bullion ? Yet all writers upon the subject of poli- 
 tical ceconomy^ that I have met with, seem to be 
 persuaded, that when the rate of exchange has 
 deviated from par beyond the expenses of the 
 transit of bullion, bullion will immediately pass; 
 and the error has arisen, from not sufficiently dis- 
 tinguishing the effects of a real, and a nominal ex- 
 change. This false opinion seems to have been 
 strongly impressed upon all the merchants and Bank 
 Directors who were examined before the Secret 
 Committee of the Houses of Lords and Commons, 
 in the year 1797; nor does Mr. Pitt himself ap- 
 pear to have been exempt from its influence. Mr. 
 Bosanquet expressly declares his opinion " that the 
 " favorable state of the exchange afforded a pros- 
 
 * " Bullion is a commodity, and nothing but a commodity, 
 " and it rises and falls on the same principle as all other com- 
 " modifies. It becomes, like them, dear in proportion as the 
 " circulating medium for which it is exchanged is rendered 
 "cheap; and cheap in proportion as the circulating medium 
 " is rendered dear." (Thornton, Paper Credit, p. 202.) 
 
53 
 
 <* peet of purchasing foreign gold, and setting the 
 " mint at work,'* (p. 32. Com. H. of Lords, & 
 passim.) Now it is absolutely impossible that an 
 exchange, arising from depreciation of currency, 
 can have any effect upon the export or. import of 
 bullion. For supposing the nominal exchange at 
 par, and the real prices of bullion in London and 
 Hambro' precisely the same, it is clear there could 
 be no motive, to export bullion, but that, on the 
 contrary, it would be attended with the certain 
 loss of the expenses of transit. Every thing else, 
 then, remaining the same, let the currency in 
 England be augmented so that the prices of com- 
 modities shall rise 4 per cent, and bullion of course 
 among the rest ; the depreciation of the currency 
 will immediately be indicated by an unfavorable 
 nominal exchange of 4 per cent. Is it possible 
 that the bullion merchant can be .deluded with 
 the idea, that he can derive any benefit from a 
 premium of 4 per cent, upon his bill, when he 
 purchases b :llion here at an advanced price, and 
 sells it at Hambro' 4 per cent, lower ? Docs he not 
 lose as much from the difference of prices, occa- 
 sioned by the depreciation, as he gains by the 
 premium on* his bill, occasioned by the same de- 
 preciation; and consequently subject himself to all 
 the expenses attending the transit, in the same 
 manner as when the nominal exchange is at par? 
 For the same reason, there would be no ad van- 
 
4 
 
 tage derived from the import of bullion if the no- 
 mmal exchange were favorable. Suppose it were 
 & pet cent. . in favor of this country; it is evident 
 that money here would be 4 per cent, more valu- 
 able than at Hambro' ; prices, therefore, would be 
 4 per cent, lower, and foreign bills in the English 
 market would be at 4 per cent, discount. Under 
 those circumstances, if foreign bills were pur- 
 chased to be invested in bullion at Hambro V and 
 the bullion were sent here, would it not be sold in 
 the English market at 4 per cent, less than was 
 given- for it at Hambro'? thus destroying every 
 advantage derived from the nominal exchange, and 
 subjecting the importer to the same loss, as in 
 the former instances. Is it then to be wondered 
 at, that with such opinions as the Bank Directors 
 seem to have entertained, they should be so totally 
 at a loss to reconcile the facts with their false theory 
 respecting the export and import of bullion ? Dur- 
 ing the course of the year 1796, for eleven months 
 previous to the Bank restriction, the exchange had 
 been, with only two exceptions, favorable ; and at the 
 end of February 1797, was so high as considerably 
 to exceed the expenses of the transit of bullion; yet 
 when Mr. Raikes, on the 13th March, \tfas examined 
 before the Secret Committee of the House of Com- 
 
 * Sfccrct Committee of the House of Commons, p, 23 
 
mans, ! he acknowledged, that -measures had been 
 taken by the Bank to procure a supply of bullion, 
 but without effect, as it could not be imported 
 except at a considerable loss. On the 14th, 
 Mr. Bosanquet stated to the same Committee, 
 that the influx of bullion is occasioned by a 
 favorable exchange; that the exchange had not 
 been unfavorable for many months; and, when 
 asked whether the importation had been such 
 as it ought to have been, considering the state 
 of the exchange, replied*, " I am not able 
 " to answer these kind of questions." The fact 
 is, that the nominal exchange might Tor years con- 
 tinue in favour of a country, and not cause a 
 single ounce of bullion to flow into it, or have any 
 effect upon the general state of exports and im- 
 ports, which would proceed in their usual course, 
 regulated only by the wants of consumers, and 
 the supply of commodities f. 
 
 It is in vain therefore to look for any remedy for 
 a high nominal exchange frpin any alteration in thf 
 
 * Secret Commiitee of the House of Commons, p. f#. 
 
 f It is not to be inferred, that because the nominal exchange 
 has no effect on the general exports and imports, that thrr-etuu: 
 the country sustains no injury ; the contrary of \\hich uill be 
 shewn, in treating 1 of the foreign expenditure of government, 
 and the unequal pressure that the depreciation occasions on f In- 
 different classes of the community. 
 
56 
 
 exports and imports of a country. When it arises 
 from a degraded state of the coin, a new coinage 
 immediately restores it to par; when it arises 
 from the augmentation or contraction of currency, 
 the restoration of the currency to a due proportion 
 with the commodities to be circulated by it, wiM 
 be the true and only remedy. 
 
 In what manner this restoration of the currency 
 to its level is effected, it will now be proper to 
 enquire. 
 
 In all countries the weight of bullion contained 
 in any specific quantity of coin issued at the mint 
 is determined by law. At the English mint, a 
 pound weight of gold is coined into 44 * guineas, 
 which, at 21s. the guinea, is equal to 46/. I4y. 6d. 
 or 31. 17s. IQzd. per ounce. This is said to be 
 the mint price of gold in England, or the quantity 
 of coin which the mint returns for standard gold 
 bullion. An ounce of gold, therefore, so long as 
 it remains in the shape of coin, can never be worth 
 more than 31. \7$. IQld. because while it retains 
 that form, it cannot be legally tendered in pay- 
 ment for more than that sum. As soon therefore 
 as air over-issue of currency has raised the prices 
 of all commodities, and that of bullion among the 
 rest, the weight of gold contained in any specific 
 quantity of coin will sell for a higher nominal va- 
 lite in bullion, than it will pass for in the form of 
 
 in, or,- as it is usually expressed, the market price 
 
57 
 
 of bullion will exceed the mint price, and there 
 will be a profit attending the conversion of coin 
 into bullion proportionate to the difference of the 
 nominal value. Accordingly, the conversion im- 
 mediately takes place, requiring very little greater 
 excess of the market price above the mint price, 
 than will pay for the fire that is to melt the coin. 
 The operation is so simple* and requires so little 
 apparatus, that it may be performed with the ut- 
 most secresy, and no penalties of the law, or vi- 
 gilance of the officers of the Mint or Bank> have 
 ever been found adequate to its prevention. 
 
 To account for this, there is no necessity for 
 supposing a demand for bullion abroad. It is the 
 conversion, that prevents the currency from ever 
 exceeding the due proportion that is wanted for 
 the purposes of circulation : for it can* never ex- 
 ceed that proportion, without augmenting the no- 
 minal price of bullion, and affording, as loiig as 
 there is a superfluous quantity,, a profit to the 
 melter. 
 
 It is true thai the same conversion may take 
 
 /.,. 
 
 * The reader will apply the proper limitation to tliis* general 
 assertion, which is not meant to convey the idea that the effect 
 will be instantaneous, or that it may not be counteracted by other 
 causes, but that the over-issue of currency will have this tend- 
 ency, and that ultimately the nominal price of bullion will 1* 
 raised above its natufal price, in prftportfoh to the 'over-issue.' 
 
 H 
 
place, by exporting the com to stay foreign 
 try, wher.e jjt vyill be estimated according to its 
 weight in bullion, and pass for its intrinsic value ; 
 an,d projoabjy this circumstance has Led so many 
 writers to assign the capability of the transit of 
 coin, as the reason why currency convertible into 
 coin can never be depreciated by excess. But it 
 is evident that, qf the twp modes of conversion, 
 that by melting will be preferred, since it will be 
 Unattended by any expenses qf transit. If the 
 market price of bullion in London were 4 per cent. 
 above its mint price, in consequence qf the depre- 
 ciation qf currency, while at Hambro' there was 
 no depreeiatjpn whatever, 100 guineas conveyed 
 to the latter place would purchase the same value 
 in commodities that 104 guineas would do in Lon- 
 4pn ; but as, the expense of sending them would 
 amount to 3 per cent. *, there would be a profit 
 to the exporter of one guinea only; whereas the 
 100 guineas, melted in London, would immedi- 
 ately sell in the market for 109/. 4.9. , leaving a 
 clear profit of four guineas by the operation. It 
 is absurd, then, to suppose that any man would 
 expose himself to the penalties of the law, by ex- 
 porting coin for a profit of 1 per cent., when with- 
 
 * The expense, as stated by Mr. Eliason, is 3/. 12s. lid. per 
 cent.. Evidence Secret Committee House of ix^rds,, 1*97,, p. 9, 
 
out subjecting himself to severer penalties, he 
 might, by melting it, secure a* pront of 4 per cent. 
 It is the melting* therefore, in consequence of 
 the high market price at home, and not the export 
 in consequence of a high nominal exchange, that 
 will cause the disappearance of the coin. It is 
 true* that after the melting has proceeded for 
 some length of time, (unless indeed the melted 
 coin be purchased for the purpose of being re- 
 comedy.) there Will' bo a- gradual accumulation of 
 bulliort beyond what may be wanted for consump- 
 tion-; and this abemdaUce may render the com- 
 modity so- cheap, that the bullion merchant- may 
 find' hid advantage in exporting, it, in consequence 
 of the difference of tile real prices in the home 
 and foreign markets. But this exportation is the 
 effect of the melting, and not the cause of it. It 
 is not a demand forthe exportation of bullion that 
 has caused the melting of the coin ; but the coin 
 being melted, to take advantage of the high no- 
 minal price of bullion, hav lowered its real price so 
 much, as to afford a profit upon its exportation. 
 It is by no means necessary, however, that the 
 bullion produced by the melting should be ex- 
 ported, since there may be a greater demand for 
 bullion at home, for the purposes of manufacture, 
 than there is abroad. The melter will always de- 
 rive bis profit by selling the melted coin at the 
 high market price, which the bullion merchant 
 
60 
 
 will be equally ready to give, \vhetherhesell to 
 the home manufacturer, or the foreign whether, 
 at the time, he be effecting the import or the ex- 
 port of bullion. 
 
 A want of attention to this distinction, so es- 
 sentially necessary towards a just conception of the 
 principle, which regulates the quantity of cur- 
 rency and the increase of prices, has led to some 
 very erroneous opinions respecting what is called 
 the universal level of currency : for it has been 
 maintained by many writers upon political eco- 
 nomy, and implied by almost all, that specie 
 leaves the country where it is depreciated in con- 
 sequence of the inferiority of its value to the cur- 
 rency of other countries * ; that if the currencies of 
 
 * tliis error pervades Mr. Wheatley's Work on the Theory of 
 Money and Principles of Commerce. He was well aware of the 
 fact, that specie i frequently exported in consequence of an un- 
 favorable exchange j .but as he does not admit of any alteration 
 in the exchange, from the abundance or scarcity of foreign bills, 
 (which is the real cause of the export pf specie, when it does 
 take place,) he attributed the effect, to the difference in the va- 
 lue of currencies ; and thence inferred, that the export of coin 
 was the remedy for its depreciationa principle, that leads at 
 once to the conclusion, that prices might be indefinitely aug- 
 mented, if the currencies of all nations were proportionally 
 increased. 
 
 Mr. Ricardo and Mr. Mushet have fallen into the same error, 
 respecting the export of specie, and do not seem to be a\\aie, 
 that the alteration in prices, from over-issue or contraction of 
 
61 
 
 other nations were depreciated in an equal 
 portion, there would be no advantage attending 
 the export ; and that upon the supposition of the 
 currency being proportionally increased through- 
 out the world, prices might be universally and in- 
 definitely augmented ; whereas the export has no 
 relation whatever to the value of currencies in other 
 countries, but arises entirely from the relative va- 
 lue of gold in the form of coip, and in the form of 
 bullion. 
 
 The coin of this country, when sent abroad, 
 passes only for its intrinsic value, according to its 
 weight, and it will not be sent abroad from an un- 
 favorable nominal exchange, unless its value in 
 the shape of bullion is greater than its value in the 
 form of coin. But the real value of bullion on the 
 Continent is no more affected by the depreciation, 
 of the currency there, than it is here. If there be 
 a profit upon the export of coin from this country 
 at a time when the currency is depreciated here, 
 and is not depreciated upon the Continent, there 
 would be the same profit, if the currency of the 
 Continent were depreciated also $ -for the market 
 
 currency, has no effect upon the exports and imports of ordi- 
 nary produce j since they uniformly describe commodities as 
 flowing from the nominally cheap, to the nominally dear mar- 
 ket, without adverting to the counteracting effects of the no- 
 minal exchange. 
 
price of bullion, at which our exported coin wowM 
 then be sold abroad, would be so much higher m 
 proportion to> tfoe* depreciation of the foreign cur- 
 rency. Suppose thafe the currency at London aiwt 
 Harobro J being m their due proportions, and the 
 nominal exchange at par, tile real yw*ice f billion 
 corresponds in both places with the English B*mt 
 price. Let the currency at JLondbn be depreciated 
 by over-issue 4 per- cent. ; th m&rfcet price of bul- 
 lion at London would then exceed the min* price 
 4 per cent.*, and the nominal etf^hangfc Would be 
 unfavorable to the; sttme attiou-nt Uiitter those 
 circumstances* & itterdtewi e^p^rtklg 100^'& Worth 
 of specie to Haai&tfo', atid; d^awirt^ bill tipon hi* 
 correspondent, W$ld guift 1 pr ceil. by 
 tpsmsaetio: for- tlte peeiei dtt fe arri45Eil att 
 bro* where the n*arfeetpme<$f b^i6tt^ ^ccerdi 
 1tie hypothesis, cdri*espodfe> with tie 'English 
 price, would sell* in the bullion market for 
 The English merchant would therefore draw for 
 IOO/. ; and, foreign bills bearing a> premium, wouW 
 sdl his bill in the English bill market for 10#/., 
 Which, after deducting 5 per cent, for the expenses 
 of transit, would leave him a profit of \L percent. 
 Now suppose the currency at Hambro' to be also 
 depreciated to the amount of 4 per cent. ; the no- 
 ifcmai exchange will then be at par, but the- market- 
 price- of buHkm* at Hambro* will exceed- the Eng- 
 lish mint price 4 per cent. The lOO/.'s w-ofth of 
 
63 
 
 will sell at Hambro' for 104/. ; the mer- 
 chant will therefore draw upon his correspondent 
 for 104/,, ami tke exchange being at par, will 
 procure 104/. for his bill in the English bill market; 
 and deducting 3 per cent, for the expenses of 
 transit, he will obtain a. profit of I/, per cent, a* 
 before. 
 
 It has been already demonstrated that bullion 
 will not be exported under an unfavorable nominal 
 exchange, merely in consequence of that ex- 
 change ; and the reason why specie is exported 
 under the same circumstances, is, that the coin, 
 while it remains here, passes for less than its worth, 
 and that abroad it passes for its real value ; in this 
 country it forms apart of the currency, and partakes 
 f the depreciation, abroad, it passes as bullion, 
 and is relieved from the depreciation. But it is 
 quite clear that even in the export of specie, there 
 WQuid be no profit whatever, unless its deprecia- 
 tion were groaior than the expenses attending its 
 export ; and therefore wore there no other remedy 
 for a depreciated currency than the export of spe- 
 $ie, the mwiiwl exchange might for any length of 
 tirne canine unfavorable, to an extent somewhat 
 |es than the expenses of the transit of bullion, 
 But the feet is, that no such continuance of an 
 unfavorable exchange, even to that extent, can 
 take place, so long as the currency is gapable of 
 being converted in^o bullion: for st SQO as the 
 
64 
 
 epreciation is evinced by an elevation of the 
 kef, price of bullion above the mint price, that mo* 
 rnent the conversion of the superfluous currency 
 commences ; and it depends upon the comparative 
 demand for bullion, in this country, and the de^ 
 ihand, upon the continent, whether the melted 
 specie be exported or not. 
 
 ' It must be admitted, that, as soon as the depre- 
 ciation has exceeded the expenses of the transit of 
 specie* and thus afforded an option as to the mode 
 of converting it into bullion, the foreign merchant, 
 by buying abroad the bills upon England, wnich 
 will necessarily be at a discount, and ordering his 
 correspondent to whom he sends the bills, to invest 
 them in English specie, will be enabled to procure 
 bullion at the English mint price. So that as long 
 as he can dispose of the bullion at that price 
 abroad, he will derive a profit equal to the ex* 
 cess of the discount at which he has bought the 
 English bills, aboye the expenses of the transit of 
 specie. But it having been already shewn, that 
 the profit on melting always exceeds the profit on 
 exporting, by the amount of the expenses attend- 
 ing the export, it can never be believed that a 
 merchant would collect the current coin, and by 
 exporting it, subject himself to the penalties of the 
 law, for the sake of obliging his foreign corre^ 
 spondent, and enabling him to acquire a profit of 
 1 per cent., when by melting the same coin, he 
 
65 
 
 might. himself, with less risk, obtain a profit of 4 
 per cent. 
 
 ., Again, if the nominal exchange were rendered 
 favorable, 4 per cent, by a forced contraction of 
 the currency, and the price of bullion were low- 
 ered with that of other Commodities, so as to be 
 4 per cent, below the mint price ; would any mer- 
 chant purchase foreign bills at a discount of 4 per 
 cent, and send them to Hambro* to be invested in 
 foreign coin, for the sake of gaining 1 per cent. 
 upon its import, when, by employing the same 
 capital in the purchase of bullion in the home 
 market, and converting it into coin at the mint, 
 he would derive a profit of 4 per cent. ? 
 
 The only case in which a superior advantage 
 .woulft be obtained from the export of specie, rather 
 than from the conversion of coin into bullion, or fi 4 om 
 the import of specie rather than the conversion of 
 bullion into coin, would be, when the over-issue 
 or contraction of the currency had created a pre- 
 mium or discount of 4 per cent, on foreign bills, 
 without producing an alteration of 1 per cent, in 
 the market price of bullion. But it has been al- 
 ready shewn, that the nominal price of bullion is 
 raised or lowered in the same manner as that of 
 other commodities, to which it would otherwise no 
 longer t bear its natural relative value. Such an, 
 occurrence, therefore, if possible, can be but tem- 
 porary, and does not affect the general argument. 
 
 I 
 
66 
 
 Where the currency consists partly of coifi, and 
 partly of paper convertible at option into coin, it 
 is for the same reason absolutely impossible that it 
 can continue permanently in a state of depreciation : 
 for should the IBank be so imprudent as to issue 
 notes beyond the demands of increasing wealth, 
 as soon as the augmentation of prices, and a con- 
 sequent unfavorable nominal exchange, denoted 
 the depreciation of the currency, the market price 
 of bullion would exceed its mint price, and all that 
 portion of the circulating medium which could be 
 converted into bullion would begin to disappear. 
 The paper of the Bank would be returned to be 
 exchanged for coin, which would be immediately 
 melted, and sold in the form of bullion, for notes, 
 at the advanced nominal price. These, in their 
 turn, would be sent to the Bank to be in the same 
 manner exchanged for coin, which would be melt- 
 ed and sold as soon as procured. 
 
 Now this process might be going forward, and 
 continue to drain the Bank of its gold, without 
 the slightest demand for bullion abroad, or without 
 any demand for foreign payments. It would 
 equally take place, though the country were re- 
 ceiving payments instead of making them- --though 
 it were importing bullion instead of exporting it. 
 .Should the Bank persist in its over-issue, and still 
 endeavour to throw the same quantity of notes into 
 circulation, the Directors would be compelled to 
 
67 
 
 purchase bullion, and coin it into guineas, in or- 
 der to supply the drain occasioned by the return 
 of their notes ; and as Mr. Thornton states, " they 
 " will have to do this at the very moment when 
 <( many are privately melting what is coined. 
 " The one party might be melting and selling, 
 " while the other is buying and coining ; and each 
 " of these two contending businesses will be car- 
 " ried on, not on account of an actual exportation 
 " of each melted guinea to Hainbro'; but the ope- 
 " ration, or at least a great part of it, will be con- 
 " fined to London the coiners andmelters living 
 " on the same spot, and giving constant employ - 
 " ment to each other V 
 
 Mr. Winthorp, in the evidence he gave be- 
 fore the Secret Committee of the House of Com- 
 mons in 1797, (p. 46 and 47,) concluded that be- 
 cause there was a drain upon the Bank, there must 
 necessarily be a drain upon the country ; and 
 stated "his belief that the coffers of the Bank ge- 
 " nerally shew whether money is coming into or 
 " going llt of the country." I should hope it 
 would be unnecessary, after what has been already 
 
 * Thornton on Paper Credit, p. 125. 
 
 Mr. Thornton admits that the melting is not always connected 
 with the export of bullion ; but as the object of his Book was 
 to shew that the currency was not depreciated, it was impossible 
 for him to give even a plausible explanation of this part of his 
 subject, without attributing the effect to an unfavorable real 
 exchange. 
 
68 
 
 observed, to offer any thing farther in refutation of 
 such opinions. The drain upon the Bank will be^in 
 under any circumstances, whenever the deprecia- 
 tion of currency from over-issue has raised' the 
 market price of bullion above its mint price ; and 
 it will continue, till the loss which the Bank must 
 suffer by the purchase of bullion to supply the drain, 
 shall compel the Directors to diminish the number 
 of their notes, so as to bring back the currency to 
 its natural level. The price of bullion will then 
 fall. to its mint price, and no longer afford a profit 
 on being melted ; the nominal exchange will inva- 
 riably mark the amount of the depreciation during 
 its continuance; and when the depreciation 
 ceases, the nominal exchange will rise to par. 
 
 The adoption of a paper currency, therefore, 
 can never be injurious to a country, so long as it 
 is convertible at option into specie. The tempta- 
 tion to its over-issue will always be sufficiently 
 checked by the principle that has been just ex- 
 plained ; and, independently of the convenience 
 of making the larger payments, it will certainly be 
 advantageous to carry on the circulation of a coun- 
 try by a cheap, rather than a costly, machinery. 
 
 It is obvious, that as the nominal prices of com- 
 modities will be increased by the over-issue of 
 currency, so, for the same reasons, the contrac- 
 tion of it belo'v the natural wants of circulation, 
 will diminish the nominal- prices in the same 
 
69 
 
 proportion. A smaller quantity of currency will 
 then measure the same value, and the nominal 
 exchange will be favorable to the country where 
 the value of the currency is increased. This is 
 an event that does not often occur; for as the pro- 
 fits of a bank that issues paper-money depend 
 upon the quantity it can circulate, the directors 
 $f the establishment will generally take care that 
 the supply shall not be less than the demand. 
 When the market price of bullion,- however, has 
 from any cause been elevated above the mint 
 price, the Bank has always the power of giving 
 the currency an artifical value by a diminution of 
 its total amount ; and it is evident 1 hat by such 
 a diminution, the price of bullion will be lowered 
 in the same proportion as that of any other com- 
 modity. Bullion will then be of less value in the 
 market than in the form of coin, and the merchant 
 will carry it to the mint, to obtain the profit at- 
 tending its conversion into specie. If, under 
 such circumstances, there should be a demand for 
 bullion for the purpose of exportation, this would 
 evidently occasion no drain upon the Bank, while 
 it could be procured at a cheaper rate in the 
 market; and should the demand for exportation 
 continue so long as to raise the price of this 
 commodity, in consequence of its scarcity* the 
 
 * The scarcity here spoken of refers only to the partial scarcity 
 
70 
 
 Bank would always have the power by a greater 
 contraction of its currency, to lower its nominal 
 price, and thus preserve the superiority of its value 
 in the form of coin over its value in the shape of 
 bullion. 
 
 It is thus that the value of the currency is made 
 to correspond with that of the precious metals of 
 which it is composed, or into which it is convert- 
 ible; and as long as they continue to be the 
 standard by which the value of other commo- 
 dities is estimated, the circulating medium of 
 the whole mercantile republic will suffer no per- 
 manent alterations, but what arise from the 
 variation in the intrinsic value of the precious ins- 
 tate themselves. 
 
 It is some proof of the truth of these positions 
 respecting the uniformity of the value of currency, 
 that from the period of the reformation of the gold 
 coin in 1774, to the year 1797, the computed ex- 
 change between London and Hambro' was gene- 
 rally in favor of the former, arising, probably, 
 from the superiority of our coin ; and that it 
 seldom varied, except in 1793, more than 5 per 
 cent, on the one side or the other of par. In 
 
 arising m particular countries from the temporary unequal dis- 
 tribution of bullion, and not an actual scarcity arising from a 
 permanent diminution of the usual quantky produced at the 
 mines. 
 
71 
 
 that year th computed exchange rose to 10 ami 
 1 1 per cent, in favor of this country, owing to 
 the sudden contraction of currency that took 
 place in consequence of the run upon and failue 
 of the country banks, at the breaking out of the 
 French revolutionary war, which had the effect 
 of raising the nominal value of the currency here 
 to the degree indicated by the favorable ex- 
 change. During the whole of this period the 
 market price of bullion never exceeded its mint 
 price, except in the year 1783, by the very trifling 
 amount that has been already specified; and in 
 the year 1795, when the Bank had extended its 
 paper from less than 1 1 to upwards of 13 millions 
 *nd a half. 
 
 After this review of the subject, and the strong 
 evidence which presents itself that the currency 
 of a kingdom, whether consisting of coin only, or 
 partly of coin and partly of paper, can never be 
 augmented beyond its due proportion, so long as 
 ttoe paper is convertible at pleasure into specie- 
 can any one for a moment doubt of ths result, 
 should this salutary check be removed, and at the 
 same time the paper currency be made a legal 
 tender for the payment of debts*? 
 
 * By the Restriction Act, bank notes are not absolutely Ale- 
 gal tender ; but if a tender be made in notes, the debtor caanol 
 be arrested. 
 
Without this latter provision, motives of prud- 
 ence might induce the Bank .so to restrain its is- 
 sues, as not to create an. open discount upon its 
 notes, and thus introduce a paper and a money 
 price for commodities ; but under the protection 
 now afforded by the Restriction Act, there is no 
 reason why it should not push the issue of this 
 currency to the utmost possible limit, and particu- 
 larly if there be a confidence in the public, that 
 sooner or later the notes will be convertible into 
 gold. There is no doubt, that with respect to the 
 Bank of England this confidence is strongly felt by 
 the public, and with good reason. Bank of England 
 notes are never issued but for a valuable considera- 
 tion, being principally advanced either upon Ex- 
 chequer bills or in discounting the bills of merchants. 
 Unless, therefore, the government is unable tore- 
 deem the former, or the .merchants should be in- 
 capable of paying the latter when they become 
 due, there must always be sufficient funds in the 
 Bank to answer, the demands upon it *. The de- 
 preciation from over-issue is therefore by no means 
 necessarily connected with any want of confidence 
 in the resources of the Bank, but rests upon an.en- 
 
 * There must in fact be more than sufficient, since the value 
 of the outstanding notes must be lass than that of the bills upon 
 Which they were issued, by the amount of the interest deducted 
 at the time they were discounted. 
 
73 
 
 tirely different foundation, and might equally take 
 place, whether the currency consisted partly of 
 coin and partly of paper, or was composed entirely 
 of the former: for it is not the paper only, but the 
 whole currency, both the paper and the coin, so 
 long as it remains in the form of coin, that is de- 
 preciated by over-issue. But as the latter is con- 
 vertible into bullion by melting, it will be con- 
 signed to the crucible, for the purpose of removing 
 the depreciation that it suffers, while it constitutes 
 a part of the currency. 
 
 The advocates for the Bank restriction triumph- 
 antly ask, how it is possible that the notes can be 
 depreciated, if 100/. in bank notes will purchase 
 as much as 100/. in specie: but the question, as 
 applied to the depreciation of the currency, is ab- 
 surd ; for the notes and the coin are alike depreci- 
 ated*, and therefore exchange, as before, for the 
 
 * This opinion is controverted in the Edinbro* Review, No. 25, 
 p. 54, apparently under an idea that, as the price of gold and 
 silver is nearly the same in all the countries of the world, a de- 
 preciation of the current specie in this country must necessarily 
 be accompanied by a corresponding- depreciation of the currency 
 of all nations upon the face of the earth . But there is a material 
 distinction between the depreciation of the specie, and the de- 
 preciation of the gold and silver that forms the specie. The first 
 may be effected by the over-issue of the Bank, but that can have 
 no influence on the real value of the bullion, which the specie 
 contains. As an argumentum ad hominem against Mr. Thorn- 
 
 K 
 
74 
 
 same quantity of produce in the market. But 
 their intrinsic value is not the same, because 
 guineas being convertible into bullion, the one 
 may be relieved from its depreciation by a change 
 in its form ; whereas the other cannot *. This 
 conversion is constantly going on, and must con- 
 tinue till not a piece of coin is left in circulation, 
 
 ton, it is indeed conclusive, because he imagines the remedy for 
 a depreciated currency consists in the exportation of coin to 
 other countries, where it is not so depreciated. It would be 
 impossible, therefore, for the specie to continue permanently 
 degraded, upon his principles, unless the value of the currency 
 of every other nation were equally so. But it has been shewn 
 that the remedy for depreciated currency from over-issue de- 
 pends on its conversion into bullion, and not upon its export- 
 ation. 
 
 The gold and silver currency may therefore fall in value be- 
 low the level of the currency of neighbouring states, but this 
 cannot be the case with the gold and silver of which it is com- 
 posed. 
 
 * As long as the bank note for a guinea is convertible into 
 gold bullion, at the option of the holder, its intrinsic value may 
 be said to be the same as a guinea. Take away the convertibility, 
 and the intrinsic value of the note is the value of the ink and 
 paper of which it is composed. No banking operation, nor le- 
 gislative provision, can ever alter the real value of the gold 
 bullion in a guinea j but the number of nominal pounds to be 
 given for that quantity of gold bullion, may be increased in the 
 proportion that the total number of pounds in the currency is 
 increased beyond what is wanted. 
 
75 
 
 unless its weight be so much reduced below the 
 standard as not to be worth the melting. The 
 disappearance of the coin is the proof of its de- 
 preciation. The reason why the ordinary shop- 
 keeper does not make a distinction between the 
 payments made to him in gold, and those which 
 he receives in paper, is, the confidence he feels 
 that at some time or other the notes will be paid 
 in specie, and that he is in the meantime deterred 
 by the penalties of the law from melting the 
 guineas the only mode by which he can derive 
 a superior profit, from a payment in coin. But 
 the occupation of melting the specie is nevertheless 
 followed by a less scrupulous class of the commun- 
 ity, who have not hesitated to give a premium for 
 guinea?,, whenever an opportunity offered of pur- 
 chasing them, and of profiting by their conversion, 
 without danger of detection *. But the difference 
 in the intrinsic value of the notes and the guineas 
 is not the less real, because it cannot openly be 
 avowed. If the coin were allowed by law to be 
 melted, if the penalties for this offence were less 
 severe, or if guineas could be collected without 
 exciting the suspicion of the officers of the Bank 
 
 * An instance of this has recently come before the public, 
 in consequence of an information against a person charged 
 with selling guineas for more than they are allowed to pass for 
 by law. 
 
76 
 
 and the Mint, neither the Restriction Bill, nor the 
 provision that bank notes may be tendered as legal 
 payment, would prevent a paper and a money 
 price for commodities, and consequently an open 
 discount upon bank paper. 
 
 The drain upon the Bank, in the year 1797 5 is 
 allowed by all the Directors to have arisen from 
 the alarm of invasion. The market price of bullion 
 was, at the time, below its mint price; the ex- 
 change with the Continent was in favor of London - 9 
 and therefore all the causes, that are usually as- 
 signed, as creating a drain upon the Bank, were 
 operating in a contrary direction. The alarm ori- 
 ginated, according to the evidence given by Mr. 
 Burdon, one of the proprietors of the Newcastle 
 bank, before the Secret Committee in 1797? from 
 the orders that had been issued for taking an ac- 
 count of the stock of the farms of Northumber- 
 land, for the purpose of regulating the mode in 
 which the county was to be driven, in case of in- 
 vasion. The farmers immediately sold their pro- 
 duce at very low prices, and the notes which they 
 received from the purchasers were poured in upon 
 the persons by whom they were issued, to be ex- 
 changed for specie; in consequence of which, the 
 banks at Newcastle were obliged to stop payment, 
 and their failure was followed by a similar run 
 upon the country banks throughout the kingdom, 
 many of which were in like manner obliged to stop. 
 
77 
 
 The alarm was communicated to the metropolis, 
 and occasioned a drain upon the Bank, which had 
 already been called upon for considerable advances, 
 in consequence of the run upon the country banks. 
 The distress of the mercantile class, from the great 
 extent of the failures, and the general distrust they 
 occasioned, aggravated by a violent, and there- 
 fore improvident, contraction of the usual quantity 
 of bank paper, combined to produce that crisis 
 which terminated in the restriction of cash pay- 
 ments at the Bank. It is unnecessary now to en- 
 quire how far this restriction at the time was po- 
 litic or otherwise. It probably was a measure of 
 prudence; but as the evil was temporary, so also 
 ought to have been the remedy. It might have 
 been expected, that the complete relief of the mer- 
 chants, and the returning confidence of the peo- 
 ple, would have been considered as the signal for 
 discontinuing a law, which has given the Bank Di- 
 rectors a power of permanently altering the value 
 of the circulating medium of the country. It has, 
 however, been decided otherwise ; and the conse- 
 quence has been, that as the fears of the Bank Di- 
 rectors have been dispelled, the quantity of cur- 
 rency has been gradually increased, and has pro- 
 duced all those symptoms, which any person ac- 
 quainted with the theory of money and exchange 
 would easily have anticipated; an augmentation 
 in the price of commodities, an increase of the 
 
78 
 
 market price of bullion over the mint price, and an 
 unfavorable nominal exchange. 
 
 The effect of the over-issue of bank-notes upon 
 the computed exchange may be visible from com- 
 paring the amount of the notes in circulation in 
 the years 1795 and 1797, with the computed ex- 
 change at the same periods. The amount was 
 augmented in February 1795, to 132 millions*, and 
 the exchange between Hambro' and London, which 
 was then 6 per cent, above par, fell, before Sep- 
 tember, to 31 percent, against England. In Febru- 
 ary 1797* the paper in circulation was reduced 
 to 81 millions, and the exchange bet ween Hambro* 
 and London rose to 61. ISs. per cent, in favor 
 of England. By the last returns presented to Par- 
 liament, it appears that the bank notes now in cir- 
 culation amount to 21 millions, the market price 
 of gold in November was 15/. 8^. 2d. per cent, above 
 the mint price, and the exchange between Hambro' 
 and London 16/. 18^. per cent, against England. 
 
 Should any one still be sceptical on the subject, 
 a short survey of the mode in which the business 
 of the Bank is conducted will probably remove 
 his doubt. It has been already shewn, that so 
 long as its notes are convertible at option into 
 specie, a bank can never permanently keep in cir- 
 culation more paper than the wants of the country 
 require. But it is not perhaps, quite so clear, 
 in what manner the over-issues of a bank that is 
 
 * Secret Committee of the House of Lords in 1797, p 176. 
 
79 
 
 not liable to be called upon for cash payments, 
 \vill augment the nominal prices of all commodities. 
 
 The notes of the Bank of England are issued to 
 the merchants who are in want of money, on the 
 security of bills of exchange of not more than 60 
 days date, which are brought to the Bank for 
 discount. 
 
 On the receipt of the bill, the Bank gives to the 
 merchant an equal amount in notes, deducting 
 the interest at the rate of 5 per cent. When the 
 bill is due, the Bank presents it for payment, and 
 receives the amount in full, deriving a profit 
 from the transaction equal to the interest of the 
 notes for the time. The oftener this process can 
 be repeated, and the greater the amount of the 
 notes it lends, the greater will be its profits. 
 Now it is evident, that if the purchases of the 
 merchants could be effected by their own bills, 
 it would be unnecessary for them to apply to 
 the Bank for discounts; this application, then, 
 is of itself a decisive proof that, the bills of 
 private merchants will not pass in the market 
 with the same facility as the bills of a national 
 Banking Company. The conversion, therefore, of 
 the bills into notes is an increase of currency, 
 which could not take place without the assistance 
 which a bank affords. 
 
 Now the merchant regulates the scale of his 
 
so 
 
 transactions by the amount of the capital he can 
 command. The greater the extent of this capital, 
 the larger the profits he will expect to derive from 
 its employment. If he can make a profit of 10 
 per cent, by his business, he will always be willing 
 to extend it by borrowing capital, for which 
 he is to pay an interest of only 5 per cent. Here 
 then are two parties exactly suited to the supply of 
 each others wants, and co-operating from mutual 
 interest towards the same object. The profits of 
 the Bank are in proportion to the paper currency 
 it can lend, and the expected profits of the mer- 
 chant are in proportion to the paper currency he 
 can borrow. Under such circumstances it is idle 
 to talk of the Bank Directors having the power to 
 contract their discounts when they perceive there 
 has been an over-issue, unless a motive can be 
 shewn for the exercise of that power. While the 
 Restriction Act is in force, the only rule of their 
 conduct will be the validity of the bills that are of- 
 fered for discount, and they are bound by the duty 
 they owe to the Bank Proprietors who appoint 
 them, to profit by the facilities thus imprudently 
 granted by the government, and to employ to the 
 greatest possible advantage the funds of which they 
 have the disposal. 
 
 It is equally idle to say that the merchant will 
 not employ all the capital he can command, or 
 
81 
 
 that his credit will enable him to borrow*. By 
 the facilities that are now given to discounts, the 
 merchants can always, either by immediate ap- 
 plication to the Bank by means of their bankers, 
 or, if in the country, by the intervention of the 
 country banks, coin their credit into currency, 
 which will operate upon the markets wherever it 
 makes its appearance: for the prices of any 
 given supply of produce will depend upon the 
 number of purchasers, and the extent of the 
 capital they can command. The more easily 
 capital can be procured, the greater will be 
 the competition in the market. Whenever 
 the prospect of a profitable speculation offers, 
 merchants will be eager to embark in it, and 
 the demand, which, under ordinary circumstances, 
 would be regulated by the amount of real capital 
 capable of being diverted into that channel, will 
 now be augmented in proportion to t\iz. fictitious 
 capital, called into existence by the facilities 
 
 * See a whimsical pamphlet published by Mr. Smith on the 
 Theory of Money. He asks, would bankers and merchants a^ply 
 to have good bills discounted at the Bank, if bank notes were 
 depreciated ? The answer to which is obvious. *The depreciation 
 in no way affects the dealings of the merchants ; who buy and 
 sell at the high nominal prices, and whose profits are nominally 
 increased in the same proportion as money is depreciated. 
 
 L 
 
afforded from the Bank discounts ; and thus an 
 over-issue of notes will immediately take place, 
 creating an additional number of purchasers, or 
 increasing their powers of purchasing in propor- 
 tion to the over-issue. If the increased currency 
 be employed in a foreign speculation, it imme- 
 diately acts upon the foreign bill-market, and 
 creating there a fictitious demand, it affects the 
 nominal exchange ; if it be employed by the bul- 
 lion-merchant, it raises the^market price of that ar- 
 ticle; if by the home dealer, it augments the prices 
 of native commodities. No sooner has it left the 
 merchants by whose means it was called into ex- 
 istence, than it passes to the wholesale dealers and 
 master manufacturers, who, in their turn, will 
 raise the prices in their respective markets by a 
 competition which is called into action merely by 
 the over-issue. 
 
 If the evil were confined to the increased quan- 
 tity of currency thus thrown into circulation by 
 the Bank of England, it might not be attended 
 with injurious consequences of such magnitude as 
 are now experienced : but the misfortune is, that 
 the same law which protects the National Bank, 
 and enables it thus to derange the natural state 
 of the circulating medium^ confers the same power 
 on all the country banks throughout the kingdom, 
 which are now relieved from the fears and incon- 
 venience to which under ordinary circumstances 
 
S3 
 
 they would be subject, should they at .any time be 
 tempted to issue their notes beyond the amount 
 which the wants of their respective districts might 
 require. 
 
 The country banks are, in the same manner as 
 the Bank of England, enabled to supply their re- 
 spective connexions with funds for speculation. 
 If the excess of their paper should at any time 
 excite doubts of their solvency, and create a 
 run, they may be supplied by their correspond- 
 ents in London with notes from the great cen- 
 tral paper mint; and thus are all the lesser esta* 
 blishments throughout the kingdom absolved from 
 every difficulty. They issue their notes almost with* 
 out limit, and by these means enable the country 
 dealers to enter into speculations and purchases, 
 which, without their assistance, could never have 
 been effected. Can any one then be surprised 
 that prices should rise, when, every addition of 
 currency is attended with profit to the Bank 
 by which it is issued ; and that there can never 
 be an additional issue of currency without creat- 
 ing additional purchasers to the same amount ? 
 
 An objection has been urged against this view of 
 the subject, which deserves to be noticed. It has 
 been stated, that if only such bills are discounted 
 at the Bank, as have been drawn in consequence 
 of bondjide commercial transactions, no additional 
 currency is thrown into circulation, more than the 
 
84 
 
 wants of the mercantile community require ; that the 
 bills so discounted are the representatives of the pro- 
 perty, by the transfer of which they are created ; and 
 thus a distinction has been attempted to be drawn 
 between real and fictitious bills; or, as the latter are 
 more generally termed, bills of accommodation. But 
 it will not require much consideration to perceive 
 that this, as far at least as concerns the over-issue 
 of currency, is a distinction with little, if any, dif- 
 ference. Mr. Thornton has well observed, that 
 4C notes given in consequence of a real sale of 
 " goods cannot be considered as on that account 
 " certainly representing any actual property. 
 " Suppose that A. sells 100/. worth of goods to B. 
 " at six months credit, and takes a bill at six 
 " months for it ; and that B. Within a month after, 
 " sells the same goods to C. at a like credit, tak- 
 " ing a like bill ; that C. after another month, 
 ic sells them to D. ; and so on : there may, at the 
 " end of six months, be six bills of 100 /. each, 
 " existing at the same time, and every one of 
 <c them may possibly have been discounted. Of all 
 " these bills, then, one only represents any actual 
 " property. If the credit given be a credit of twelve 
 " months instead of six, 1200/. instead of 600/. 
 " would have been the amount of the bills drawn 
 " on the occasion of the sale of goods, and 1100/. 
 " would have been the amount of those that repre- 
 " sented no property. In order to justify the sup- 
 
85 
 
 " position that a real bill represents actual pro- 
 " perty, there ought to be some power in the bill- 
 " holder to prevent the property which the bill 
 " represents from being turned to other purposes 
 " than that of paying the bill in question V 
 
 Now had these bills never been discounted, their 
 circulation would have been confined to those per- 
 sons only, with whom the parties, whose names ap- 
 pear on the bill, had credit; and their effect 
 upon the general currency of the country would in 
 such case have been exceedingly limited, compar- 
 ed with that which they have in the more negoti- 
 able form of the notes of a Banking Company. 
 
 " One of the motives of the seller who desires to 
 <c have a note for goods sold, is, that he may engraft 
 " on the transaction of the sale the convenient con- 
 <c dition of receiving from the buyer a discountable 
 " note of the same amount with the value of the 
 * c goods. A fictitious note, or note of aceommoda- 
 " tion, is a note drawn for the same purpose of being 
 " discounted, though it is not sanctioned by thecir- 
 " cumstance of its having originated in an actual 
 " sale of goods f." The Bank of England professes 
 to refuse the discounting of any bills except tjiose 
 drawn for bonafide mercantile considerations ; and 
 so far as their own interests are concerned, it may 
 
 * Thornton on Paper Credit, p. 30. f Ibid. 
 
86 
 
 be a rery proper and highly prudent regulation 5 
 tut to the public, it is of little moment upon what 
 degree of security the Bank may think right to 
 lend its notes; nor can the Directors, with all their 
 Vigilance, discriminate between real and fictitious 
 bills; Whether real or fictitious, their conversion 
 into notes will alike augment the currency of the 
 Country, which, without the check that has been 
 pointed out in the foregoing pages, may be in- 
 creased in an unlimited degree. In the case of 
 the real bn% a bond fide transaction takes place 
 prior to its being converted into currency, in con- 
 sequence of a credit subsisting between the drawer 
 of the bill and the seller of the goods. In the fic- 
 titious bill, for want of that credit between the 
 drawer and the seller, the conversion of the bill 
 into currency takes place in the first instance, and 
 the bond t fide transaction follows. 
 
 From what has been stated, the distinction be- 
 tjveen the real and the nominal exchange will be 
 sufficiently apparent ; they have been found to 
 differ most essentially, both in their causes and 
 effects* 
 
 The real exchange has been proved to depend 
 tipon the proportion between the foreign payments 
 which a country has to make, and the payments 
 it has to receive. 
 
 The nominal exchange depends upon the com- 
 parative value of currencies. 
 
87 
 
 The real exchange has an immediate effect upon 
 the exports and imports. 
 
 The nominal exchange, whether favorable or un* 
 favorable, has no effect whatever upon exports and 
 imports. 
 
 An unfavorable real exchange, if its rate be 
 sufficiently high, will cause an export of bullion, 
 and may, under peculiar circumstances, lead to a 
 drain upon the Bank. 
 
 An unfavorable nominal exchange, whatever be 
 its rate, will not necessarily lead to any export of 
 bullion, but will immediately cause a drain upon 
 the Bank, for the conversion of coin into bullion. 
 
 When the market price of bullion exceeds the 
 mint price, in consequence of its export from an 
 unfavorable real exchange, the currency is not de- 
 prepiated, for it bears the same relative value to all 
 other commodities ; it is the real price of bullion 
 that is raised, from a temporary scarcity, 
 
 When there is an excess of the market price of 
 bullion above the mint price, together with an un- 
 favorable nominal exchange, the real price of bul- 
 lion is not altered, for it bears the same relative 
 value to all other commodities ; it is the currency 
 that is depreciated, from a temporary abundance, 
 
 The real exchange cannot be permanently favorr 
 able or unfavorable, whatever be the state of the 
 currency. 
 
 
 
 The nominal exchange may continue fur any 
 
88 
 
 length of time favorable or unfavorable, provided 
 the yalue of the currency continues to be depre- 
 ciated. 
 
 Now the computed exchange depends upon the 
 combined operations of the real and nominal ex- 
 change ; and unless ^ the distinctions just pointed 
 out are kept constantly in view, it will be impos- 
 sible to reconcile the contradictory results to which 
 it appears to give rise. 
 
 THE COMPUTED EXCHANGE. 
 
 THE computed exchange is determined by the 
 fluctuations' of the price which a foreign bill bears 
 in the market, but affords no criterion by which 
 to distinguish whether those fluctuations arise 
 fronVvariations in the state of-ther/rtf/, or of the no- 
 minal exchange. As these arc perfectly independent 
 of each other, it is evident that if both are favorable, 
 or both unfavorable, the computed exchange .will 
 denote their sum ; but if the one is favorable, while 
 the other is unfavorable, it will express their dif- 
 ference, and may be at par, though neither thr 
 
89 
 
 real or nominal exchange are so, provided the un- 
 favorable state of the one be counteracted by the 
 favorable state of the other. Now let any one for 
 a moment consider, what different phoenomena 
 would present themselves under an apparently 
 similar state of the exchange, according to the 
 mode in which that similarity was produced. For 
 the computed exchange would be at par, if the real 
 and nominal exchange were so ; that is, if the sup- 
 ply of foreign bills were equal to the demand, and 
 the currencies of other countries of the same value 
 with our own, in which case the exports and im- 
 ports would proceed in their ordinary course. 
 
 It would be at par, though the real exchange 
 were unfavorable in any degree, if the nominal ex- 
 change were favorable in the same degree; that is, 
 if the high price of foreign bills, arising from their 
 scarcity, were counteracted by the superior value 
 of our currency over that of other countries. 
 In this case the unfavorable real exchange 
 would induce an increased ex, ortation and dimi- 
 nished importation; it would occasion a demand 
 for bullion for exportation, without creating any 
 drain upon the Bank; because from the con- 
 traction of the currency, the market price of bul- 
 lion would be below the mint price. Ordinary 
 produce would be cheap,- the real exchange 
 would be gradually restored to par by the opera- 
 lion of the exports and import*; and the nominal 
 
 M 
 
90 
 
 exchange would be raised to par by the conver- 
 sion of bullion into coin. 
 
 The computed exchange would also be at par, 
 though the real exchange were favorable, provided 
 the nominal exchange were unfavorable in a similar 
 degree; or, in other words, provided the low price 
 of foreign bills, arising from their abundance, were 
 counterbalanced by the depreciation of our cur- 
 rency compared with that of foreign countries* 
 In this case there would be a diminished export 
 and increased import, arising from the favorable 
 state of the real exchange, attended with an influx 
 of bullion; but there would at the same time \>e a 
 drain upon the Bank, in consequence of the mar- 
 ket price of bullion exceeding the mint price, from 
 the over-issue of currency. Ordinary produce 
 would be dear; the operation of the exports and 
 imports would gradually restore the real exchange 
 to par; and the nominal exchange would return to 
 the same level by the conversion of the superfluous 
 currency into bullion. 
 
 Again, the computed exchange might be in favor 
 of a country, under very opposite states of 
 the real and nominal exchange. Thus it would 
 be 2 per cent, in favor of this country, if the real 
 exchange were 3 per cent, above, and the nominal 
 exchange 1 per cent, below par. It would also 
 be two per cent, in favor of this country, with a 
 favorable nominal exchange to the amount of 3 { er 
 
91 
 
 cent, and an adverse real exchange of 1 per cent. 
 In the same manner, an adverse computed exchange 
 might be shewn to arise from very opposite states of 
 the real and nominal exchange*; and it would be 
 easy to point out, under any given circumstances, 
 in what manner the merchant would derive his 
 profit from the produce he was engaged either in 
 exporting or importing. Suppose, for instance, 
 the computed exchange between Hambro' and 
 London to be 1 per cent, against this country, and 
 that this arises from a real exchange which is 
 favorable to the amount of 4 per cent, and a no- 
 minal exchange unfavorable to the extent of 5 per 
 cent. ; let the real price of bullion at Hambro' and 
 
 * Mr. Wheatley, who assigns the relative values of currencies aB 
 the exclusive cause of the fluctuations in the computed exchange, 
 has endeavoured to prove, that the rate of exchange has con- 
 stantly corresponded with the relative issues of currency. But 
 the tables published by Lord King and Mr.Musbet furnish abund- 
 ant proof of fluctuations in the exchange, without a correspond- 
 ing alteration in the currency. Since the year 1797, when 
 the correcting principle of the nominal exchange was remoTed 
 in consequence of the Bank Restriction Act, there is, as might 
 be expected, a general coincidence between the increase of bank 
 notes in circulation and the adverse computed exchange j yet 
 even within that period, there have been considerable intervals 
 when the computed exchange between Hambro' and London has. 
 been in favor of the latter, and that too at the time when the 
 greatest issues of currency recorded in Mr. Mu&et's tallies took 
 place, viz. in May 1804, iiud January 1805, 
 
92 
 
 London be precisely the same, and consequently 
 the nominal prices different by the amount of the 
 nominal exchange or 5 per cent. Now if the ex- 
 pences of freight, insurance, &c. on the transit of 
 bullion from Hambro' are 3 per cent, it is evident 
 that a profit would be derived from the import of 
 that article, notwithstanding the computed ex- 
 change was 1 per cent, against us. In this case 
 the merchant must give a premium of 1 per cent, 
 for the foreign bill to pay for the bullion; 100/. 
 worth of bullion at Hambro' would therefore cost 
 him 101/. and the charges of importation would in- 
 crease this sum to 104/. Upon the subsequent 
 sale, then, for 105/. of depreciated currency in the 
 home market he would derive from the transaction 
 a profit of II. This sum is precisely the difference 
 between the real exchange and the expenses of 
 transit, that part of the computed exchange which 
 depends upon the nominal, producing no effect ; 
 since whatever is lost by its unfavorable state, is 
 counterbalanced by a corresponding inequality of 
 nominal prices. 
 
 In the same manner it might be shewn, that 
 with a favorable computed exchange, bullion might 
 be flowing out of the country; but it would be 
 tedious to multiply instances, which, as the intel- 
 ligent reader will easily conceive, may be infinitely 
 varied. Those which have been now adduced are 
 sufficient to shew, what contradictory conclusions 
 
93 
 
 may be drawn from any given rate of the computed 
 exchange, and how impossible it is, from that 
 alone, to determine either the relative value of 
 currencies, or whether, what is usually called the 
 balance of trade, be favorable or unfavorable to a 
 nation *. 
 
 * A singular instance of the confusion arising from a want 
 of attention to these distinctions occurs in the following passage 
 from the fifth' Number of the Quarterly ReviewV ^Mr '.Thornton 
 " having used the following expression*' If- atany.timethe 
 ' exchanges of the country become so unfavorable as to pro- 
 * duce a material excess of the market over the mint price of 
 " gold.' f Mr. Ricardo comments on this representation by 
 " concisely saying, ' Here the cause is mistaken for the effect. * 
 *' Mr/Thornton seems to us indisputably correct; not but that 
 " the unfavorableness of the exchange, and the rise in the bullion 
 " price of gold, alternately act as cause and effect; but the 
 " former may, in some cases, not improperly be said to precede 
 " the latter, and it certainly does so in the case of a bad harvest, 
 " of which Mr. Thornton is speaking in this case." P. 157. 
 Here it is evident that Mr. Thornton's observation, if confined 
 to the real exchange is correct. Mr. Ricardo's comment, if 
 limited to the nominal exchange, may also be considered as cor- 
 rect, though it would have been more accurate to have stated, 
 the unfavorableness of the exchange, and the excess of the mar- 
 ket over the mint price of gold, both, as effects of the depreci- 
 ation of the currency; and the Reviewer may be correct, if his 
 observations are intended to apply to the computed exchange. 
 The apparent contradictions arise from confounding the real, the 
 nominal, and the computed exchange, under the general, unqua- 
 lified term, exchange. 
 
94 
 
 The merchant, by knowing the computed ex* 
 change, and the current prices in the home and 
 foreign market, and without any acquaintance 
 with the theory of exchange, or the principles 
 which regulate it, will always have sufficient prac- 
 tical data to guide him in his commercial trans* 
 actions ; but jjie statesman should beware in mak- 
 ing general legislative provisions, that he is not 
 misled by the partial statements of men, whose in- 
 dividual interests are frequently in direct oppo- 
 sition to the general welfare of the country. - 
 Til is remark is not meant to convey any illiberal 
 insinuations against a most useful and respectable 
 class of the community; but experience sufficient- 
 ly proves that self-interest gives a bias to the mind, 
 which, without its being conscious of the influ- 
 ence, will mislead and pervert the judgment. 
 Perhaps a more than ordinary degree of caution is 
 requisite* in this commercial country, where there 
 seems to be a prevailing opinion, that the riches of 
 the merchants are evidence of the benefits that the 
 nation derives from its foreign trade; it being for* 
 gotten, or unnoticed, that the profits of that class 
 of persons are derived from the pockets of their 
 countrymen; and that the advantages of foreign 
 commerce consist in the stimulus it gives to the 
 increase of the produce of the land and labour 
 of the country; and to the opportunity which 
 it affords, of exchanging the surplus produce thus 
 
93 
 
 called into existence for an equivalent, and only an 
 equivalent produce, collected from every climate, 
 and materially contributing to the enjoyments and 
 the comforts of the community. 
 
 Of the Effects of the Depreciation of the Currency 
 on the Expenditure of Government^ and on the 
 Interests of the different Classes of the Com- 
 munity. 
 
 The foreign expenditure of government being 
 principally discharged by the remittance or the 
 draft of bills, must be subject to the premium or 
 discount in proportion to the computed exchange. 
 Whatever be the amount of that expenditure, it- 
 will always be effected with greater or less advant- 
 age, according fis the computed exchange is fa- 
 vorable or otherwise. It is of no consequence, so 
 far as the disbursements of the Treasury are con-, 
 cerned, in what way the foreign expenditure- 
 is ultimately discharged by the country : for as 
 long as bills are made use of, as the immediate* 
 mode of payment by the government, so lone? 
 must the government, whenever the computed 
 exchange is unfavorable, pay the premium for fo- 
 reign bills,, or submit to the discount"^ - : *~ 
 
96 
 
 and so long, on the other hand, will it derive the 
 advantage of the discount on foreign, and the 
 premium on its own bills, whenever the state of the 
 computed exchange is in favor of the gountry. It 
 is therefore most essential to the interests of go- 
 vernment, that the computed exchange should at all 
 times be as favorable as possible. Now this can 
 only be produced by a careful attention to the 
 state of the currency, and its effects upon the no- 
 minal exchange ; for the circumstances that affect 
 the real exchange are not, at all times, within its 
 controul. 
 
 Bad harvests and deficient crops will always cre- 
 ate an encreased and unusual importation; and in 
 the same degree, a demand for foreign payment. 
 This will eventually, indeed, be discharged by an 
 increased exportation ; but in the mean time, and 
 during the continuance of the pressure, the real 
 exchange will become unfavorable, and will conti- 
 nue so till the consequent bounty upon all export- 
 ed, and the duty upon all imported, commodities, 
 shall restore it to par. 
 
 The nominal exchange, on the contrary, is com- 
 pletely within the controul of government, and 
 can never be either permanently favorable or un- 
 favorable, so long as the legislature exercises a due 
 degree of vigilance over the state of the circulating 
 medium. If the coin, in which the legal payments 
 of the country are made, is not degraded, and the 
 
97 
 
 paper is convertible at option into specie, it is im- 
 possible that the currency can ever be reduced be- 
 low the almost uniform value, which the precious 
 metals preserve among the different nations of the 
 earth ; because the depreciation of the currency 
 will always be prevented, by the conversion of 
 any superfluous quantity of it into bullion. 
 
 Should the legislature be induced by temporary 
 circumstances to interfere with this regulating prin- 
 ciple, and restrict the issuers of notes from the 
 obligation of paying in specie, the consequences 
 are easily foreen, and must soon be felt. There 
 will be no longer any limit to the depreciation of 
 the currency ; the nominal exchange will continue 
 permanently unfavorable, and will render the com- 
 puted exchange so much the less favorable, or so 
 much the more unfavorable, in proportion to the 
 extent to which the currency may have been aug- 
 mented beyond its natural amount. 
 
 The government, under these circumstances, 
 will be utterly unable to relieve itself from the loss 
 which must be incurred upon the total amount of 
 its foreign expenditure, in whatever mode it is dis- 
 charged ; for the nominal exchange has a very dif- 
 ferent effect on the foreign payments of the state, 
 and those of merchants in the course of their com- 
 mercial transactions. The exporting merchant 
 gains a premium on his bill equivalent to the no- 
 minal exchange, and by that advantage is repaid, 
 
 N 
 
98 
 
 what would be otherwise lost in the high price he 
 must give for his goods here, and the low price at 
 which he must sell them abroad j he derives no 
 profit, and he suifers no loss. The importing 
 merchant gives a premium for the foreign bill with 
 which he pays for the produce he imports, but is 
 repaid by the high nominal price at which he sells 
 the produce at home. He also derives no profit, 
 and sustains no loss. 
 
 But the government has no means of repaying 
 itself for the loss occasioned by the nominal ex- 
 change. The equivalent is received abroad, and 
 consumed there, and the bill for which the pre- 
 mium has been given will purchase precisely the 
 same quantity of produce, whatever may have been 
 paid for it here. Neither would the situation of 
 government be altered, if, under an idea of saving 
 the nominal exchange, it were induced to export 
 commodities for the immediate supply of its arm- 
 ies, or its foreign establishments ; for independent- 
 ly of the expenses of the transit, it would lose the 
 whole amount of the nominal exchange, in the 
 high prices at which the commodities would lie 
 bought in the home market. 1C bullion could L 
 procured, there would still be \\\i same loss ; fira, 
 in the expenses of the transit; and secondly, in 
 the high market price at which it must be bought 
 here, while abroad it would pass for no more than 
 its intrinsic value. 
 
99 
 
 Without access to the documents and vouchers 
 of government, there is-no very accurate mode of 
 estimating the amount of the foreign expenditure; 
 but some approximation to it may be made, by a 
 comparison of the exports and imports. It has 
 been already observed, that the foreign expendi- 
 ture of a country can only be discharged by the 
 export of commodities to an equal amount; and 
 as the equivalent is received and consumed abroad, 
 it follows, that in every country where there is a 
 foreign expenditure, the exports must exceed the 
 imports to that extent : the larger the expendi- 
 ture, the greater will be the excess of exports 
 over imports. From this acknowledged truth, the 
 inference seems very obvious, or at least there is 
 strong presumptive evidence to lead to this con* 
 elusion, that if a foreign expenditure cause an ex- 
 cess of exports over imports, an excess of exports 
 over imports will denote a foreign expenditure. 
 Yet even at this day there are not wanting men in 
 the Cabinet, in the Senate, and among the best- 
 informed classes of society, who still adduce as a 
 proof of the gain?, that are made by foreign com- 
 merce, this same excess, which indicates expend- 
 iture, and not receipt*. Mr. Pitt was continually 
 
 * The same inference has been drawn, from the excess of ex- 
 ports, by the present Chancellor of the Exchequer, while there 
 
100 
 
 vaunting of the resources of the nation, as evinced 
 by this circumstance; and Mr. Rose, in his " Brief 
 
 sheets have been passing through the press. See his speech upon 
 opening the budget. 
 
 The gradual increase, both of the annual imports, and exports, 
 has been frequently adduced as a decisive proof of the nourish- 
 ing state of our commerce a conclusion that may be exceedingly 
 fallacious. The nominal value of the exports and imports will 
 in some degree keep pace with the increase in the nominal 
 price of commodities, and will swell the apparent amount of 
 merchandize exported and imported, without any material ad- 
 dition to the actual quantity. That the present increase arises 
 principally from this cause, is rendered more than probable, by 
 a comparison of the relative amount of tonnage employed for 
 the transport of that merchandize, in the years 1807 and 1809 
 The following table is drawn up from the returns made to the 
 House of Commons, January SOth and March 24th, 1810 : 
 
 Tonnage of Vessels, British and Foreign, including 
 their repeated Voyages, in the several Ports of 
 Great Britain, from and to all Parts of Europe. 
 
 Year ended 5th 
 Jan.. 
 
 1808 
 
 Inwards, 
 Tons. 
 944.282 
 
 Outwards. 
 Tons. 
 811.255 
 
 1810 
 
 882.255 
 
 814.811 
 
 Official Value of the Imports and Exports for three 
 Quarters, ending the 10th of October. 
 
 Year. 
 
 Imports. 
 
 Exports. 
 
 1807 
 
 19.717.396 
 
 22.464.875 
 
 1R09 
 
 29.000.782 
 
 39.824.104 
 
 As the nature of the commodities -is specified . in -the,returns, 
 
101! 
 
 Examination," states, with the same view, the an- 
 nual -'balance of trade in favour of this country at 
 14,800,000/. Mr. Necker, acting upon similar 
 principles, estimated the annual balance in favor 
 of France at 3,000,000/. ; and all other countries 
 have in like manner prepared official statements of 
 exports and imports, and boasted of a favorable ba- 
 lance *. Those, who have entered into the spirit 
 of the observations upon the real exchange, will 
 think it unnecessary that I should dwell upon 
 these absurd opinions respecting a balance of trade, 
 either favorable or unfavorable to a nation ; it be- 
 ing evident, that, though at any particular mo- 
 
 and does not appear to vary materially, as to the proportions of 
 value and bulk in the respective years, the equality in the 
 amount of tonnage employed is conclusive, that the apparent 
 increase of trade is in a great measure nominal. 
 
 * " There is no mine, however productive, that could supply 
 ' the necessary stores for the balances that are claimed by the 
 " different nations of the world. One country claims a balance 
 " of 14,800,0001." and another of 5,000,COO/. another of 3, 
 " and others of 2 and 1, to the aggregate amount of nearly 
 " 40,000,0002. annually ; and as all assert their commerce to be 
 " favorable, it is obvious that their collective balances must be 
 " paid by a continual influx of bullion from the mines corre- 
 " spondent with their amount ; but the annual produce of the 
 " mines of the world does not exceed 7,000,0002." (Wheatley, 
 on theThcpryof Money, p. 139.) 
 
102 
 
 ment there may have been more produce sent from 
 a country than has been received in return for it, 
 and that bullion does occasionally pass to liqui- 
 date the balance, this happens merely in conse- 
 quence of a derangement of the usual commercial 
 exchanges, and the bullion must eventually again 
 leave the country into which it flows, unless de- 
 tained there by the wants of the people, either for 
 the purpose of ornamental manufacture, or an 
 extended currency, in consequence of increased 
 wealth. 
 
 All trade, whether foreign or domestic, consists 
 in an exchange of equivalents. Gold and silver 
 will be sent as the equivalent, when gold and silver 
 are wanted for use. The hardware and woollens of 
 England are exchanged for the silks and the wines 
 of France, because these are more desired than 
 the bullion of France. If it were the taste of the 
 people of England to use gold and silver for their 
 ordinaiy utensils, the bullion of France would be 
 demanded, as the equivalent. But they prefer the 
 wines and silks, and rather than forego these luxu- 
 ries, are content with utensils formed of coarser 
 materials. When the exports exceed the imports, 
 (as they must do, when there is a foreign expendi- 
 ture, the equivalents for the excess are received 
 " abroad in as full and ample a manner, as if the 
 " produce which they purchased were actually im- 
 " ported and entered in the Custom-house books, 
 
103 
 
 ts and afterwards sent to the seat of war for 
 cc consumption. But from the circumstance of 
 " its not being inserted in the Custpm-house 
 entries as value received against the produce 
 " exported for its payment, the latter is deemed 
 " to constitute a favorable balance, when it is in 
 " reality exported to liquidate a balance against 
 us *." 
 
 Notwithstanding, therefore, the inaccuracy of 
 the Custom-house returns, and the difficulty of 
 ascertaining the actual value of the imports and 
 exports, notwithstanding that the imports from 
 the East and West Indies are confounded with the 
 imports arising from trade, when in fact they are 
 merely remittances - y the one, of territorial revenue 
 invested in produce ; the other, of rents and profits 
 remitted to absentee planters resident in this coun- 
 try; notwithstanding also, that the contraband 
 trade introduces an immense quantity of commo- 
 dities, which do not appear in the Custom-house 
 
 tarns; yet as the inaccuracies of one period are 
 probably neither much greater nor less than those 
 of another, if the ratio of the excess of exports to 
 the foreign expenditure in one year, is known, it 
 is fair to conclude, that the excess of any other 
 
 * Sec Wheatley on the Theory of Money, p. 219. 
 
104 
 
 year will be nearly in the same proportion to 
 foreign expenditure of that year. 
 
 It appears from the accounts presented by Mr. 
 Long to the Secret Committee of -the House of 
 Lords, in 1797, that the foreign expenditure in the" 
 year 1796, the fourth year of the French revolu- 
 tionary war, amounted to 10,649,000/. ; and the 
 excess of exports above the imports, for the same 
 year, taken from the Custom-house books, is 
 7,33l,494/. ; so that the foreign expenditure is to 
 this excess in the ratio nearly of 10 to 7*. The 
 excess of exports over imports for three quarters of 
 the year 1809, is 17,359,229^ or above 23 mil- 
 lions for the year, as appears by the returns from 
 the Custom-bouse presented to parliament the 10th 
 of January 1810; but as these returns are exclus- 
 ive of the imports from India, the amount of those 
 imports must be deducted, to make the calcu- 
 lation correspond with the returns for 1796, in 
 which those imports are included. The sale of 
 the East India Company's goods, from March 1, 
 1809, to March 1, 1810, amounted to 8,237,035/. 
 
 * The excess of exports over imports appears to be actually 
 less than the foreign expenditure, in consequence of the pro- 
 duce remitted from the East and West Indies being entered in 
 the Custom-house returns as imports. 
 
105 
 
 the excess of exports over imports for the year 
 1809, after deducting this sum, would be about 
 15 millions, which, according to the ratio obtain- 
 ed for the year 1796, would give a foreign expend- 
 iture of 21 millions; and considering the en- 
 larged scale of our military operations* together 
 with the establishments in Sicily and Malta, it will 
 perhaps be thought not much beyond the truth. 
 During the whole of the year 1809, the exchange 
 between London and Hambro' was never less than 
 7 per cent, in favor of the latter ; and, increasing 
 gradually towards the end of the year, it rose in 
 the month of November to 16 per cent. Mr. 
 Huskisson, in his examination before the Com- 
 mittee for enquiring into the policy and conduct 
 of the expedition to the Scheldt, states the diffi- 
 culties of negotiating bills in Spain, and in the 
 Mediterranean, as much greater than at Hambro' ; 
 so that it is not improbable an additional expen- 
 diture of some millions has been incurred in con- 
 sequence of the unfavorable state of the exchange, 
 occasioning a correspondent loss to this country, 
 which might have been entirely avoided, had the 
 currency been sufficiently contracted to reduce 
 the computed exchange to par. 
 
 Without, however, placing too much reliance 
 upon an estimate, which at best can only be con- 
 sidered as an approximation, it must be evident, 
 
 O 
 
106 
 
 that whatever may be the loss of government from 
 this cause, it can only be supplied by laying ad- 
 ditional burthens on the people. But this is not 
 the only injury sustained in consequence of the 
 depreciation of the currency ; the same evil per- 
 vades the whole expenditure of government. 
 Whatever purchases are made must be at an in- 
 creased cost in proportion to the nominal high 
 prices that an excessive currency produces. It 
 will be felt through all the departments of the 
 state, and the enlarged scale of expense must be 
 balanced by an encreased scale of taxation. It is 
 a matter of general notoriety, that money within 
 these few years has been considerably reduced in 
 value. The depreciation has been visibly going 
 forwards since the time of the Bank restriction ; 
 and as long as it continues, the interests of the 
 Bank are in direct opposition to these of the 
 government and the public. 
 
 . If the evils of an excessive currency affected all 
 classes of the community equally, there might be 
 less reason for complaint ; but the misfortune is, 
 that one class suffers no injury whatever, while 
 another is subjected to the whole pressure, without 
 the possibility of relief. It is of no consequence to 
 the merchant whether he purchase with guineas 
 the commodities which were formerly bought with 
 shillings. His exports and 'his imports are in no 
 
107 
 
 degree affected ; he is, in a great measure, relieved 
 from the fear of pecuniary embarrassment ; and in 
 the same degree that the value of money is lowered, 
 his nominal profits are increased. Without pos- 
 sessing greater means than before, of commanding 
 the comforts and the luxuries of life, he feels him- 
 self relatively raised in the scale of society, as far 
 at least as property has the power of raising him, 
 in proportion to the nominal thousands he re- 
 ceives. 
 
 The landed proprietor is subject to all the evils 
 of a depreciated circulating medium during the 
 continuance of his current leases. As they expire, 
 an opportunity is afforded him of profiting from 
 the high nominal prices of produce, by raising his 
 rents, and thus, to a certain degree, of preserving 
 his relative station in life ; but the uncertainty of 
 seasons, and the consequent excessive variations 
 in the prices of agricultural produce, will prevent 
 him from increasing the amount of his income in 
 
 O 
 
 the same proportion that its value is diminished ; 
 and as the depreciation proceeds, he must suffer 
 from its effects, in proportion to the length of time 
 for which his leases are renewed. 
 
 But it is upon that class of the community, 
 which receives a nominal income, that the depre- 
 ciation of the currency aets with the greatest 
 severity. The public creditor, the annuitant, the 
 
108 
 
 clergyman, the physician, the lawyer, the soldier, 
 and the sailor all the civil officers of government 
 all persons receiving salaries only, in short, all 
 those who have no produce to dispose of, by the 
 high price of which they might have the opportu- 
 nity of remunerating themselves for the losses 
 which the depreciation induces. They not only 
 bear the increased burthens which the govern- 
 ment is compelled to impose in consequence of the 
 depreciation, but the remainder of their income no 
 longer possesses the same power of procuring the 
 necessaries and comforts of life. 
 
 Let this view of the injury sustained by the class 
 receiving a nominal income be contrasted with the 
 advantages which the Restriction Act has con- 
 ferred on the Bank proprietors. Since the year 
 1797, the proprietors of Bank Stock have received, 
 
 In 1799, a bonus of 10 per cent. Loyalty. 
 Jn 1801, - - - 5 percent. Navy 5 per cent. 
 In 1802, - 2* per cent. Ditto. 
 In 1804, - - 5 percent. Cash. 
 In 1805, - - 5 per cent, Ditto. 
 In 1806, - - o per cent. Ditto. 
 In 1807, the dividend was raised from 7 to 10 per 
 cent, which, with the payment of the Property 
 Tax, makes more than 11 per cent regular in- 
 terest; and 100/. stock lias increased from 127i/. 
 
109 
 
 its price in X 1797, to 280/. its price in 1809*. 
 Besides which, there is generally understood to be 
 a very large surplus, which has not yet been divided 
 amongst the proprietors ; and, if the vast sums of 
 money that have been expended during this periocj 
 upon the buildings of the Bank, be considered, 
 some idea may be formed of the immoderate pro- 
 fits that have been acquired by this establishment. 
 The question therefore is simply this, whether 
 the interests of so large a part of the community 
 are to be sacrificed for the benefit of the proprie- 
 tors of bank stock, and the different banking part- 
 nerships throughout the kingdom ; and it is yet to 
 be explained on what grounds the continuance of 
 a system can be justified, which, if it were wise at 
 the time of its adoption, has long ceased to be either 
 equitable or politic. It might be called for by im- 
 perious necessity, during the moment of alarm, and 
 may be agr.in resorted to, should similar circum- 
 stances demand it; but in the mean time, it seems 
 no more than right, that the Bank should be content 
 with the profits that are to be acquired in a pursuit, 
 which has at all times afforded an adequate remu- 
 neration to tho>e who have embarked in it, without 
 the assistance of a legislative provision, that has 
 
 * .Reflections on the Abundance of Paper, &c. by Sir Philip 
 Francis, 
 
110 
 
 deranged, and will continue to derange, so long as 
 it exists, the circulating medium of the country. 
 
 Applications are continually making to parlia- 
 ment for an increase of salary to those who are un- 
 able to meet the pressure of the times, and to keep 
 up appearances suitable to their stations in life. In- 
 stances of this have recently occurred, as well in the 
 case of the inferior clergy, as of the officers of the 
 army and navy. The salaries in all public offices, 
 and public trading companies, are obliged to be 
 raised, to enable the persons who are employed in 
 them to purchase the necessaries of life*. Those 
 who sell as well as buy, have the means of trans- 
 ferring the weight from their own shoulders ; but 
 the possessor of a nominal income receives the 
 same number of pounds, whatever be their value; 
 he is a buyer only, and must submit to his fate. 
 The effects of ordinary taxation are the depression 
 of the same class, and a tendency, as it proceeds 
 to confound the different ranks of society. It is 
 the more incumbent therefore upon the legisla- 
 ture to be careful, that this depressed class be not 
 overwhelmed by that extraordinary taxation, which 
 
 * Mr. Rose, in his pamplet on the Public Expenditure, in 
 speaking of the increase of the expense of collecting the Excise 
 revenue, observes, " The increase in the Excise is nearly alto- 
 " gether for the augmentation of the salaries of the officers ou 
 " the establishment, to enable trnmio exist." p. 54. 
 
Ill 
 
 arises from the necessity of increasing the nominal 
 revenue of government, in proportion to the de- 
 preciation of its value. 
 
 The mode in which these evils are to be reme- 
 died, it is unnecessary, after what has been already 
 said, for me to point out. When the cause that 
 has produced the mischief is removed, the evils 
 will subside of themselves. Lord King very justly 
 observes, " Had parliament been called upon to 
 " authorize any of those direct frauds upon the 
 " currency, which have often disgraced arbitrary 
 " governments ; had it been recommended to 
 " them to raise the denomination of the current 
 " coin, th MO can be no doubt that such a pro- 
 " posal wo dd have been rejected with indigna- 
 " tion. Yet an abuse of the same nature has 
 " been established by law in this country. The 
 " power of reducing the value of the currency by 
 " a silent and gradual depreciation, is more dan- 
 " gerous, from the very circumstance of its being 
 " less direct, an i less exposed to observation*." 
 
 The difficulty that now presents itself is, in what 
 manner to revert to the former system, without in- 
 jury to the Bank, or to the merchants, who have 
 so long been indulged with the accommodation of 
 
 t* Thpugbte~eB4he -Restriction of Cash Payments at the Bank, 
 P- 
 
procuring the discount of their bills; and tlm 
 difficulty is the more embarrassing, from the very 
 peculiar and unprecedented combination of cir- 
 cumstances that exists at the present moment. 
 
 Iii consequence of the large army now maintain- 
 ed by this country on the Continent of Europe, 
 and in the Mediterranean, our foreign expenditure 
 is unusually great ; and the export trade, which 
 Under the ordinary facilities of commercial inter- 
 course, Would enable us to defray this expenditure, 
 is subjected to impediments from the conlroul ex 1 - 
 ercised by the enemy over the commerce of the 
 Continent, which it is difficult to overcome* Our 
 fiierchanLs are compelled to find secret and cir- 
 cuitous modes of introducing their merchandize 
 into foreign countries, which, even after its intro- 
 duction, is liable to immediate confiscation*.- 
 
 * It bias been said, that, in the countries more immediately 
 under the controuj. of the French, the merchants refuse to take 
 bur produce in exchange, and demand specie or bullion in pay- 
 la: nt for what we import from them. Should this be the fact, 
 it L a strong proof that the French decrees have produced their 
 effect, ar,d that the risk of confiscation has to a certain extent pre- 
 vented British merchandize from being introduced into those 
 countries. It will be impossible, under these circumstances, much 
 longer to continue such a commercial intercourse, unless the 
 means be found of procuring a veiy unusual supply of bullion from 
 the American mines : and it will become a question, whether the 
 South American market can take such a quantity of British pro- 
 
113 
 
 This must operate as a very powerful check upon 
 the export of the staple pro.duce of the country; 
 and great as the comparative excess of exports 
 appears to be, from the last returns of the Cus- 
 tom-house that have been laid before Parliament, 
 it is probable that the foreign expenditure would 
 have demanded and produced a much greater ex- 
 cess, but for the restrictions that the French de- 
 crees have imposed upon our commerce. It is 
 said, too, that the deficiency in the last year's 
 harvest has occasioned an increased and unusual 
 importation of foreign grain ; so that the real ex- 
 change has been acted upon by the combined in- 
 fluence of all the causes that can render it unfa- 
 vorable, a large foreign expenditure, demanding 
 an excess of exports which the restrictions on com- 
 merce obstruct; and an increased importation, to 
 supply the failure of an article of the first neces- 
 sity, counteracting the effect of the export trade, 
 and diminishing its excess. If the market price of 
 
 duce as will be sufficient to supply the bullion that will be wanted 
 for effecting the usual imports from Holland and France, and that 
 part of the Continent, where, the French decrees can be enforced 
 Independently of this, the. accumulation of bullion on the Con- 
 tinent will by degrees . render its .real price so low, that the 
 quantity to be given in exchange for commodities imported from 
 thence, must be continually augmenting, and of course the 
 price of continental produce so much enhanced to the con- 
 sumer here, as at length to stop the consumption altogether. 
 
114 
 
 bullion, therefore, were ever raised above the mint 
 price by an unfavorable real exchange, it might be 
 expected under the circumstances now enumer- 
 ated ; and should this be the case, and the Bank 
 be immediately rendered liable to the payment of 
 its notes in specie, there would be no possibility 
 of its withstanding the drain that would immedi- 
 ately commence, without such a sudden contract- 
 ion of paper as would endanger the stability of the 
 merchants. For the nominal and the real ex- 
 change being both unfavorable in a great degree, 
 the process of melting the coin, and the export of 
 bullion, would be carried on at the same time; 
 the first, to take advantage of the difference be- 
 tween the market and the mint price of gold; the 
 second, on account of the excess of the premium 
 upon foreign bills above the expenses of the transit of 
 bullion ; and this drain would continue till the issues 
 of bank paper were sufficiently contracted, to lower 
 the market price of bullion below its mint price. 
 
 It is not easy to ascertain what degree of con- 
 traction might be requisite to produce this effect, 
 for the issues of the country banks are probably to 
 the full as much above their due proportion, as 
 those of the Bank of England. In the year 
 1795, before the drain took place whic\h became 
 the subject o^such serious complaints to Mr. Pitt, 
 the usual amoim^ of bank notes in circulation was 
 about 11 millions ;Xat the time of the drain, the 
 
115 
 
 issue had been increased to 13 millions, and from 
 the 25th of February 1795, to the 25th of Febru- 
 ary 1797* had been violently contracted to 8^ mil- 
 lions. At that time bank notes were in common 
 circulation in all parts of the kingdom, and had 
 not been so completely displaced as they have 
 since been, by the country notes. The paper cir- 
 culating medium, therefore, required for the capi- 
 tal, and parts immediately adjacent, would pro- 
 bably not exceed 10 millions. The quantity of 
 coin at the same period may be estimated by the 
 proportion between the cash and paper payments 
 at the Bank, as given in evidence by Mr. Abra- 
 ham Newland, before the Secret Committee of the 
 House of Lords*. He states, that previously to 
 the restriction, if the dividends to the public cre- 
 ditor amounted to 14,000,000/., not more than 
 from 1,300,000/. to 1,400,000/. would be paid in 
 cash. If in so large a payment, where cash in 
 any quantity might be demanded, and where 
 there must have been many fractional sums, one 
 tenth only were paid in specie, it is fair to con- 
 clude that not more than one tenth would be given 
 in the other money transactions of the metropolis. 
 He adds, that 100,000/. would be sufficient for all 
 the cash payments of the Treasury; that in the 
 
the groW produce of the Customs, which then 
 amounted to 3,000,000/., the Bank did not re- 
 ceive above 3000/. in specie ; in the produce of 
 the Excise, stated at 7,000,000/., not more than 
 60,000/. ; and In the instalments of a loan, con- 
 sisting of much larger sums, not above 1 per cent, 
 upon the whole'*. So that taking 1 to 10 as the 
 probable "proportion of the specie to the notes, 
 there would be about one million of the former in 
 circulation, making, together with the paper, 11 
 millions for the total amount of the currency of tile 
 metropolis. By the last returns of the House of 
 Commons, the bank notes in circulation on the 12th 
 of Jan. in the present year, exclusive of the Bank 
 post bills, amounted to 20,22,'810J.; and as the 
 quantity of these notes that circulate in the country 
 is very trifling, it is not improbable that the currency 
 of the capital has been nearly doubled in the course 
 of the last thirteen years. The general opinion is, 
 that the country banks have made a still more ex- 
 tensive use of the privileges which the Restriction 
 Bill has afforded, and have multiplied their paper 
 to an enormous amount. There seems every rea- 
 son, therefore, to conclude, that the circulating 
 medium would be under-rated at double i&amount, 
 in the year 1797; and consequently that if the 
 
 See Wheatley ou the Theory of Money, p. 142: 
 
117 
 
 country does not require a greater quantity of 
 currency now, than it did at that time, the Bank 
 must contract its paper one half, or to about 1 1 
 millions, before commodities could be brought 
 back to their natural prices *. ^ t ^ i 
 
 Those who have attended to the distress in which 
 the merchants were involved at the period to 
 which we have referred, by a reduction of bank 
 paper from 13 \ to 8 1 millions in two years, may 
 conceive how infinitely more they must suffer by a 
 sudden diminution of it from 21 to 11 millions, 
 But this circumstance, which is a cogent reason 
 against the immediate repeal of the Bank Re- 
 striction Bill, is also the strongest proof of the 
 effect which the contraction of currency has upon 
 prices ; for whence could the distress of the mer- 
 chants arise, but frtfm tli err being compelled to dis- 
 pose of their stock at reduced prices ? They have 
 now been so long habituated to the enhanced rates, 
 that their purchases have been made with refer- 
 ence to this system, and under an expectation of 
 deriving their present high nominal profits from its 
 continuance. The number of purchasers in the 
 
 * Tlie increase of prices, arising from the gradual progress of 
 taxation, will probably require a larger circulating medium 
 than might be wauled in 1797- 
 
118 
 
 market, occasioned by the increased issues of 
 paper, will be withdrawn, when the paper is again 
 contracted, and consequently the holders of pro- 
 duce that has been bought upon credit, and for 
 "which bills are outstanding, must sell in the falling 
 markets, in order to meet their acceptances when 
 they become due. The Bank also, in consequence 
 of the drain, will be compelled to reduce its paper, 
 which it cannot effect, without refusing its usual 
 discounts. The merchant, no longer possessing 
 the means as before, of coining his credit into cur- 
 rency, must either sell, or be unable to make good 
 his payments. In the same proportion as an in- 
 crease of buyers was created by the over-issue, the 
 contraction will create an increase of sellers ; and 
 thus it appears evident, that so sudden a diminu- 
 tion of currency, as would be necessary to protect 
 the Bank, if the restriction were immediately 
 withdrawn, would inevitably occasion great pe- 
 cuniary distress, and be attended with the most in- 
 jurious consequences to the credit and commerce 
 of the nation. 
 
 But there is no necessity for such violence. The 
 Bank may gradually diminish the amount of its 
 paper, in the same manner in which it has for the 
 last thirteen years been gradually increased. It is 
 true such a proceeding will not be so popular with 
 the merchants, but it will not be attended with 
 
119 
 
 any real injury to their interests, \vliilst it will 
 confer a substantial benefit on the possessor of a 
 nominal income, a benefit to^ which he is upon 
 every principle of justice entitled. 
 
 It is only necessary for parliament to determine 
 the amount of the annual dimunition of the issues 
 of the Bank, and to enforce the continuance of 
 the measure, till it is found that the market price 
 of bullion is permanently reduced, in a triflng de- 
 gree, below its mint price. The currency will 
 then be of the same value as if it consisted entirely 
 of the precious metals, and the restriction may be 
 removed without the slightest injury to trie Bank, 
 or any real injury to the merchant. This experi- 
 ment may be made with the utmost safety, both 
 to the Bank and the country; because parliament 
 will at any time have the power of increasing or 
 diminishing the annual contraction, should it be 
 found that, in the first instance, too low or too 
 high a limit had been assigned*. 
 
 * The Bank has been indulged so long in the exercise of the 
 extraordinary privileges conferred upon it by the legislature, and 
 has, by its extensive advances, acquired such a controiil over the 
 finances of individuals, and of government, that ' it may, per- 
 haps, have become questionable, whether the Directors of that 
 establishment have not, at this moment, the power of dictating 
 their own terms ; and whether the legislature may not be under 
 the necessity o receiving, rather than of proposing conditions. 
 
120 
 
 It will require, however, much caution and some 
 firmness, lest the legislature should be misled by the 
 clamours of those who will first feel the effects of the 
 remedy ; for as the Bank will immediately experi- 
 ence adiminution of its profits, and probably be at 
 length compelled to lower the interest to the propri- 
 etors ; as the issues of the country banker will be re- 
 strained within their natural limits ; and as the 
 merchant, under the first alarm which the falling 
 prices will excite, and without forming a just con- 
 ception t)f its cause, will not fail to exclaim against 
 a system apparently so adverse to his interests; 
 there can be little doubt but that the public, dur- 
 ing its progress, will be assailed with the most 
 gloomy predictions of the decline of the general 
 Wealth, and the ruin of the commercial prosperity 
 of the nation. But a full and accurate acquaint- 
 ance with this most important subject, will lead 
 the government and the people to disregard and 
 despise such idle and interested clamours,-. to 
 consider these effects not as symptoms of decay, 
 %t -as evidences of the efficacy of a measure tend- 
 ing to restore the energies of the country. It will 
 teach them the necessity of perseverance, not 
 
 vShpiild these conjectures have any foundation in truth, tjiey fur- 
 nisftvthe most cogent reasons for the immediate extinction of a 
 -powcrV^ whose existence is incompatible with the independence 
 and the supremacy of government. 
 
121 
 
 merely for the purpose of obviating those mischiefs 
 which have hitherto been experienced, but in or- 
 der to prevent the still greater evils, which must 
 infallibly result from an adherence to the same 
 system. Above all, it will induce them to submit 
 with cheerfulness to those trifling and partial in- 
 conveniencies, which may occasionally be experi- 
 enced during the progress of the remedy, while 
 they look forward with confidence to the re-esta- 
 blishment of the ancient scale and order of things, 
 and the consequent increase, not only of the com- 
 forts of the great mass of the community, but of 
 the resources, the powers, and the independence 
 of the government. 
 
In tht following Tables, the figures indicating the 
 per cent age in favor of, and against London, de- 
 note pounds and the decimal parts of pounds, 
 which are not carried beyond one decimal place. 
 
O-^<-r-iO*-*-HC<O<0'5rO 
 
 CM<r5<tco<1 < "OOQQOO 
 
 * 
 
 Sfi 
 
 II 
 
 11 
 
 f) ^0 PO ^*> CN 00 CO 
 
 tt a 
 
 Z fc 
 
 O - Ctf CO * -f <? ~< ^ CN CO OK *t o> -^f ro t 
 
 8 
 
124 
 
125 
 
 V 
 
 W) ,, V 
 
 c-s o< c o c* 
 cr-ctct c-,<>< 
 
 ooooooooo 
 
 O ct ,_, 
 ft* xS 
 
 m 
 
 O CCNC^CNC'SCN^'- 1 
 
 SM 
 <u >~2 
 
126 
 
 oooooooooooooooooooooooooooooo 
 
 C 4) 3-1 
 
 9 > 4-1 
 
 o c 
 
 c 2 
 
 - u G 
 
 coo 
 
 I * 
 
 K 
 
 S >,^- >: . a 
 
 0> 
 
127 
 
 CN CM 0} CM C? 
 
 OOOOOOOOOOOOOOOOOOOO 
 
 IS 
 
 CN >> O( O< 
 W O* CN O* O O 
 
 co ^O CO CO fO co 
 
 o o o o o o 
 
 Il 
 
 er centage 
 n favor of 
 London. 
 
 rgh. 
 
 Ji -C 
 
 ..o .CJ -' 
 
128 
 
 o ~ 
 
 4) .6 
 
 oooooooooooooooooooocoooooo 
 
 I . 
 
 14 
 
 
 
 I"S 
 
 * O "* O r> ro <*s tO t^ b* oo ^ co si" ^ O> O ^ 
 
 * B rt ^S, c ^^^ c ^^S.S C 
 
129 
 
 R 
 
130 
 
 a S 
 rt O C3 
 
 c. 2 
 
 III 
 
 OOOOOOOOOO-OOOOOO 
 
 OOO 
 
 < ^'-i-o 
 
 .8 
 
 CM O< CM CM CM Ot 
 
 OlCi 
 OOO 00 
 
 OOOOOO 
 
 Per centage 
 above its 
 Mint Price. 
 
 111 
 
 COCO CO CO 
 
 l^. l^ t^. t>. 
 
 OJ O CN CX CM G^ O* 
 (O CO CO CO CO Oi Oi O> O) O> O5 
 
 OO 
 
 *** Oi 
 
 CM xn ro co oo 
 
 bu 
 
 CO 
 
 xn'co c 
 
 fOfOi' 
 
 ^ixsti > t ^^t< > is ^t^^ > is ^>.^ > fa ^t^^>* 
 
131 
 
 
 3 o 
 111 
 
 HI 
 
 '^5 o 
 
 0* <N -=* co 
 
 .s 
 
 --G 3 O) 
 
 ^ S 55 5 
 
 CO t^OO> 
 
 Sf S 
 
 
 CM CM O* CO 00 G-* 
 
 OiOlOlOiOO) 
 
 --t Jfc 1' 
 CN CS(*C^ 
 
 oooocoo 
 
 o o o 
 o o o 
 
 M 
 C S 
 
 &"o . 
 
 *t iO CO CN co 
 
 O CO PO co >r> 
 
 O5 oo O <O 
 
 fe^i? .-&^fcife l ii..ft35i4^-fi,fe 
 
 " ^^.t^ > 
 
 rt rt *^ Si* o 
 
132 
 
 
 
 J 3 
 
 f>*> 
 *n 
 lt> 
 
 C <& t& 
 
 8 
 
 to 
 
 
 III 
 
 bo w i-^ * o> OJ < 
 
 Hamburgh. 
 
 fC ~ 7^ -. ci ^ C > =t 
 
 ^0.0 e rt^^-o c ^^0,0 = '"i ^^>- 
 
 X 
 
 J. TYLER, Printer, Rathbone Place. 
 
AX 
 
 INTO THE 
 
 EFFECTS PRODUCED 
 our THE 
 
 NATIONAL CURRENCY 
 
 RATES OF EXCHANGE, 
 
 BY THE 
 
 RESTRICTION BILL,; 
 
 EXPLAINING THE CAUSE 
 
 OF THE 
 
 HIGH PRICE OF BULLION; 
 
 WITH PLANS FOR MAINTAINING 
 
 THE NATIONAL COINS 
 
 IN A STATE OF UNIFORMITY AND PERFECTION. 
 
 THE THIRD EDITION, 
 
 CORRECTED AND ENLARGED. 
 
 With the Tables brought down to April 5, 181 1; and some remarks 
 on Mr. Bosanquet's Observations on the Bullion Report. 
 
 BY ROBERT MUSHET, 
 
 OF HIS MAJESTY'S MIKT. 
 
 PRINTED FOR ROBERT BALDWIN, PATERNOSTER-ROW, 
 1811. 
 
C. Baldwin, Printer, 
 
erf 
 
 CONTENTS. 
 
 Page 
 
 CHAF. I. On the General Principles of Money 1 
 
 CHAP. II. On the connection between coined and 
 
 paper Money 6 
 
 CHAP. III. General Principles of Exchange fluc- 
 tuations in the par confined to the expense of trans- 
 ID itting the precious metals from one country to 
 another 8 
 
 CHAP. IV. On the Effects produced on the rates of 
 
 Exchange by a debased currency IS 
 
 CHAP. V. Bank Restriction Bill its general effects 
 high price of bullion of commodities the de- 
 preciation of currency unfavourable exchange with 
 foreign countries ,...! 
 
 CHAP. VI. Bank Restriction Bill its particular ef- 
 fects injury or injustice to annuitants and others 
 debasement of the national currency Country 
 Banks not the cause of these evils 28 
 
 CHAP. VII. On the Effects produced on the rates of 
 
 Exchange by a depreciated currency 37 
 
 CHAP. VIII. Proofs adduced to show that there exists 
 no necessity for the continuance of the Restriction 
 Bill 48 
 
 CHAP. IX. Objections of Mr. Bosanquet to the prin- 
 ciples of the last Chapter answered, with remarks 
 qn the theory of Mr. Locke 54 
 
 CHAP. X. On the Remedy which the foregoing facts 
 suggest as calculated to redress the evils of the Bank 
 Restriction Bill 67 
 
 CHAP. XI. Concluding Remarks on the pernicious 
 
 tendency of the Bank Restriction Bill 70 
 
 CHAP. XII. Summary View of the Doctrines wliich 
 
 the reasoning in thfi fnrpfrcnntr rhanters tenrl tn 
 
CONTENTS. 
 
 CHAP. XIII. Observations on the principle on which 
 the coins constituting the principal measure of pro- 
 perty are fabricated on the propriety of establish- 
 ing but one standard of money, and on the principles 
 of seignorage . ;78 
 
 CHAP. XIV. Observations on the principle by which 
 our silver coins have been fabricated : a plan of a 
 re-coinage for preserving the silver currency in a 
 state of uniformity and perfection 88 
 
 APPENDIX 101 
 
 1. A Table of the Market Prices of standard gold 
 and silver, showing their relative proportion to 
 eacli other ; with the par and course of exchange 
 between London and Hamburgh ; showing the 
 per centage in favour and against London ; also 
 the per centage above and below the mint price 
 
 of gold, from 1760 inclusive 104 
 
 2. A Table of the Monthly Account of the market 
 prices of standard gold and silver, showing their 
 relative proportion to each other, with the par, 
 course, and rates of exchange between London 
 and Paris, from the 3d day of January 17^2, to 
 
 the 3d day of December 1793, both inclusive ..... .114 
 
 3. A Table of the Monthly Account of the market 
 price of standard gold and silver, their relative 
 proportion to each other, with the par, course, 
 and rates of exchange between London and Paris, 
 from the 3d day of January 1809, to the 5th of 
 April 181 1, both included 115 
 
 4. A Reply to Mr. Grenfell's Examination of the 
 Tables of Exchange annexed to the first Edition 
 
 of this Work ..H6 
 
AN ENQUIRY, 
 
 Kc. 
 
 CHAPTER I. 
 On the General Principles of Money. 
 
 JL HE complexity attendant on the study of money 
 is not inherent in the subject, but has arisen, as Sir 
 James Stewart remarks (Book III. Chap, vi.), from 
 the defective information of those who have treated 
 of it. They have been chiefly practical mn, whose 
 habits have led them to a view of the money system, 
 in particular stages only, without affording them a 
 comprehensive survey of its origin and progress* 
 They have consequently perplexed themselves, and 
 obscured the study, by a multiplicity of technical 
 words, as well as by theories formed on contracted 
 notions. 
 
 The debasements of coin also, to which almost 
 all governments have resorted, have led to a per- 
 version of words from their original meaning, and 
 
 B 
 
have created in our money dialect, an apparent con- 
 tradiction, which forms no small impediment to an 
 accurate comprehension of the subject. 
 
 .In order to attain an accurate and distinct notion 
 of the theory of money, it will be necessary to take 
 a view of its origin, and progressive advancement 
 to that state in which it is found in all civilized 
 countries. 
 
 In some very simple states of society men are 
 without the use of money ; wealth is a name un- 
 known among them ; their wants are little more than 
 the suggestions of nature, and these wants are easily 
 supplied. In such states of society, all traffic must 
 be carried on by barter alone. Great inconvenience 
 must have attended the first operations of such a 
 system, from the difficulty of proportioning pay- 
 ments to the commodity purchased. If a man, says 
 a writer in the Edinburgh Review,* wishes to pur- 
 chase a hatchet, but has only a sheep to dispose of, 
 which is worth six hatchets, he knows not how to 
 accomplish his purpose. The man who has the 
 hatchet to sell wants not to purchase a sheep, but 
 a cloak ; while the man who has the cloak to dis- 
 pose of has no occasion for a hatchet, but for some 
 other commodity. In such circumstances it becomes 
 a matter of expediency for every man to provide 
 himself, if possible, with more or less of that 
 commodity which most people will be willing to 
 purehase, and with which he can most readily com- 
 
 * Edinburgh Review, vol. 13, p. 47. It is, indeed, requisite 
 to state, that the whole of this chapter is principally taken from 
 
 tnO nrfl/^li> in frl^ot- tir/M'L- tr\ ipV\i>-*K tl/r T'tifVir-ori r** oK/"i7/i ic rv\ori 
 
mand the various articles for which he may have 
 occasion. 
 
 In some states of society this commodity is cattle. 
 " The armour of Diomede," says Homer, " cost 
 only nine oxen ; but that of Glaucus cost a hun- 
 dred." In some parts of the coast of India, shells 
 are said to be the medium of exchange, and on the 
 sea coast of Africa iron at present is made use of for 
 that purpose. 
 
 But in the progress of society towards civilization, 
 the inconvenience of such traffic was severely felt ; 
 and no doubt, after various trials of other com- 
 modities, the course of affairs led to the use of the 
 precious metals, as the commodity for which most 
 people would be willing to exchange the articles of 
 which they had to dispose. Gold and silver, there- 
 fore, are the commodities which every man at last 
 purchases with the articles which he has to dispose 
 of, knowing that he can most conveniently exchange 
 them again in such proportions as he pleases, for the 
 other goods that he may want. 
 
 When the precious metals were first used, they 
 were in the rude and unfashioned state of bars, and 
 were bought and sold, in the different exchanges, by 
 weight, like any other commodity. 
 
 In time, however, it was found, that these metals 
 might be adulterated, and the means of detection 
 were not very obvious or easy. An expedient is 
 devised. The governors of the community agree to 
 fix a mark upon certain pieces of those metals which 
 they have proved, and the people will not receive any 
 pieces, but those on which that mark is found. These 
 
 B 2 
 
4 
 
 pieces accordingly these bars or ingots, they pur- 
 chase with the goods they have to sell, and offer 
 these bars again in sale for such goods as they wish 
 to purchase. Still, however, considerable incon- 
 venience exists. Those bars have often to be divided, 
 and always to be weighed ; and this is very trouble- 
 some. The government again extends its services. 
 It agrees to fix a mark which shall indicate both the 
 fineness of the metal, and its weight ; and to fix it 
 on such pieces of various weights, as shall most 
 effectually answer all the conveniences of purchasers. 
 
 This is now the coined money of civilized society ; 
 and it will appear abundantly evident, that there is 
 nothing in all this which alters the nature of the 
 metal, so coined, from that of a commodity. If it 
 were a commodity bought and sold for its mere value, 
 when it was rude bullion, it surely cannot be any 
 thing else for the stamp, which is only intended to 
 declare its quantity and quality.* 
 
 From this it will follow, that gold and silver are 
 commodities, whose, values are determined, like that 
 of all other commodities, by the demand for them ; 
 and that gold and silver, in coin, are nothing more 
 
 * Consistently with this principle, the denominations of coin 
 in this, as well as in other countries, were denominations of 
 weight; a penny being originally (Reign of Edward I.) a penny- 
 weight of silver; a pound, a pound weight of silver j and a 
 shilling, a weight making the twentieth part of a pound. Now, 
 it Will appear evident that, when an individual goes to market to 
 purchase the commodity that he wants, he exchanges a given 
 quantity of pennyweights of silver of an ascertained purity, as 
 tlje equivalent of that commodity. It is an exchange of value 
 for value. 
 
or less than bullion in such convenient shapes as to 
 facilitate all exchanges in civilized society. 
 
 Had a pound in silver coin remained equivalent to 
 a pound weight of silver, our ancestors would not 
 have been perplexed with the difference between mint 
 and market price; nor the country subjected to the 
 heavy expense of coinage, necessitated by their mis- 
 apprehensions. 
 
CHAPTER II. 
 
 On the Connection between coined and paper 
 Money. 
 
 HAVING seen that coins are commodities, which are 
 bought and sold in the market for their value, like 
 other commodities it will follow, that Bank notes 
 are an obligation upon the issuers to pay a certain 
 quantity of those coins, or commodities ; and these 
 obligations are also bought and sold for their value, 
 or that quantity of coin which they specify. Nothing 
 can be more simple than this ; nor can it be con- 
 ceived possible that a community would take in pay- 
 ment notes of Bankers which possess no intrinsic 
 value, if they were not payable in something that 
 possessed value to the amount expressed in the body 
 of the note. With us , the notes of Bankers are 
 payable in gold or silver. Hence every individual in 
 the community accepts of such notes, upon the faith 
 of their receiving on demand a certain quantity of 
 gold or silver, as therein specified. 
 
 Another, and a very different species of paper 
 money consists of notes, like the French assignats, 
 forced into circulation by the authority of govern- 
 ment, and containing no obligation on the issuer to 
 pay in coin. The value of this kind of paper money 
 
\ ' 
 
 is of course very doubtful ; while the value of the 
 former can undergo no diminution, so long as the 
 obligation to pay in coin continues to be fulfilled. 
 
 In this country we are, happily, but little ac- 
 quainted with such government paper. 
 
CHAPTER III. 
 
 General Principles of Exchange, -fluctuations 
 in the par confined to the expense of trans* 
 mitting the precious metals from one country 
 to another. 
 
 THE par of exchange between different countries is 
 determined by a comparison of the intrinsic value of 
 their respective currencies ; for instance we say, 
 34 1 1* thirty-four schillings, eleven grotes and a 
 quarter, are the par between Hamburgh and London ; 
 because 34 schillings, 1 1 grotes and a -f contain a 
 quantity of pure silver equal to the pure silver con- 
 tained in twenty of our standard shillings. Again, 
 in the case of Ireland, the currency of that country 
 is inferior to ours by 8-^ per cent. ; hence ^108 6 8, 
 Irish, is the equivalent at par of ^100 British. 
 
 It is evident that if the currency of a country 
 undergo alterations, its exchange with other coun- 
 tries will vary in proportion to these alterations. Let 
 us first examine the rate of exchange, considered 
 
 * Upon enquiry upon change, I have ascertained from re- 
 spectable author../, that 34, 1 1 are the real par between Ham- 
 burgh and London, and not 33, 8. as was stated in the first edition 
 of this work, 
 
 Jt appears by the table of the intrinsic par of Exchange pre- 
 sented by Dr. Kelly to the Bullion Committee, that the real par 
 with Hamburgh is 35. 1 making * difference, from 34. 
 about -J per cent, 
 
9 
 
 without reference to alterations in currency. It is 
 affected by the balance of mercantile transactions. 
 If at Amsterdam, for example, a larger sum than 
 usual is required for remittance to England, the 
 brisk demand for bills creates a rise in the rate of 
 exchange, a rise greater or smaller, according to the 
 demand; this rise may continue progressive for 
 weeks, yet it has a natural limit, beyond which in 
 a free state of trade, it cannot go namely, the 
 expense of transmitting the precious metals to Eng- 
 land. The contract on the part of a buyer of goods 
 is to pay a certain sum in specie, or in the equivalent 
 of specie ; now the price of specie is, in fact, nearly 
 equal all over the world ; and when the buyer finds 
 for his creditor specie, instead of bills of exchange, 
 he equally fulfils his contract. 
 
 The expense of transmitting gold from London 
 to Hamburgh, or vice versd, was in 1797* according 
 to the evidence of Mr. Eliason (an eminent con- 
 tinental merchant), before the committee of secrecy, 
 t3 12 11 percent. In a state, therefore, of peace 
 and unrestrained intercourse, the rate of exchange 
 between England and Hamburgh could not, for any 
 length of time, greatly exceed that rate, either on 
 the one side of the water or the other. 
 
 In regard to Ireland, it appeared by evidence 
 before the committee, on Irish exchange in 1804, 
 that the expense of transmitting slOO in cash, from 
 Dublin to London, or vice versa, was between one 
 and one and a half per cent, and the statement of 
 Mr, Foster (Essays,, p. 175) affords a remarkable 
 confirmation of the rule laid down in the preceding 
 
10 
 
 paragraph ; for he informs us, that in the long in- 
 terval from 1728, to 1797, the exchange never rose 
 beyond the expense of sending gold from one country 
 to the other, except under the temporary, and very 
 peculiar circumstances of the year 1753. 
 
 It has, however,, been contended, that in time an 
 unfavourable balance of debt might exhaust a country 
 of its gold, and then the rate of exchange would be 
 regulated in exact proportion to the balance of debt ; 
 it is, however, generally admitted, that an unfavour- 
 able balance of debt has no such effect, that its 
 tendency is to force exports, and diminish imports ; 
 but neither to raise the exchange indefinitely, nor 
 yet to exhaust the country of its circulating medium. 
 For this reason, an unfavourable balance of debt 
 produces an unfavourable rate of exchange ; and 
 while this rate is less than the expense of transmit- 
 ting gold, the debts of a country may be discharged 
 through the medium of bills of exchange. When 
 the exchange rises to the full amount of sending 
 gold from one country to another, it necessarily stops 
 there, as every person who has a debt to discharge 
 would rather send gold, than pay a premium for a 
 bill, surpassing the expense of sending gold. This 
 exportation of gold causes a diminution of it in the 
 country so exporting, and what remains must acquire 
 a superior value from its scarcity. Consequently, 
 the price of commodities must be diminished in 
 proportion to the diminution of the circulating 
 medium, and their cheapness has a natural tendency 
 to force exportation. On the other hand, the 
 country thus receiving the balance of debt must have 
 
j 
 
 a redundant quantity of gold; its value must dimi- 
 nish ; and the price of commodities will rise ; which 
 high price will cause a diminution of exports, as a 
 country cannot sell so much of a dear, as of a cheap 
 commodity. The low price of gold, also, will attract 
 the cheap commodities of that country which had 
 parted with a quantity of its circulating medium. 
 These imports being exchanged for gold, increase 
 the exports of the one country, and diminish the 
 exports of the other, or increase the exports of the 
 one country, and the imports of the other. 
 
 To render this more apparent, let it be supposed, 
 that the whole circulation of England consisted of 
 ten millions of gold, and that Ireland possessed the 
 same amount ; and, in the course of commercial 
 transactions between the two countries, that Ireland 
 became indebted to England one million sterling, 
 which debt could not be discharged, but by Ireland 
 remitting to England, in gold, this amount ; it will 
 be evident, that if Ireland export one million of her 
 circulating medium, while the produce of her land 
 and labour remains the same, that the nine millions 
 which remain will represent the same quantity of 
 commodities that ten millions did before this debt 
 was paid ; and, consequently, the price of Irish 
 commodities will fall in their value, in proportion to 
 the diminution of the circulating medium. Their 
 cheapness will give rise to exportation. England 
 having added one million of gold more to her cir- 
 culating medium, eleven millions will represent the 
 same quantity of commodities as ten did formerly; 
 this importation of gold will enhance the value of all 
 
12 
 
 English commodities in a correspondent proportion 
 to its increase, which will consequently discourage 
 their exportation. The cheap commodities, how- 
 ever, of Ireland, the cheapness of which forces their 
 exportation, will come to England to be exchanged, 
 not for English commodities which are dear, but for 
 the redundant quantity of circulating medium which 
 is cheap ; and this necessarily diminishes the export 
 of English, and increases the import of Irish com- 
 modities, till such time as the level of the circulating 
 medium of each country is restored. And if this 
 principle governs the balance of debt between Eng- 
 land and Ireland, it will also govern it in all their 
 commercial transactions with the rest of the world. 
 
 The conclusion, therefore, at which we arrive is, 
 that whatever may be the temporary and limited 
 effect of mercantile transactions on the rate of ex- 
 change, the permanent and great variations from par 
 are caused by the altered value p the circulating 
 medium. 
 
13 
 
 CHAPTER IV. 
 
 On the Effects produced on the rates of Ex- 
 change by a debased currency. 
 
 I HAVE already stated, that when the par of exchange 
 has been fixed between two countries, the rate of 
 exchange will vary in proportion to the variation in 
 the value of the currency of either country; if, for 
 instance, the legislature of this country debased the 
 standard of our gold currency five per cent, while 
 that of Hamburgh remained stationary, it would 
 follow, that the pure gold contained in our pound 
 sterling would no longer be worth thirty-four schil- 
 lings, eleven grotes and a quarter, but would only 
 be worth a smaller proportion of Hamburgh cur- 
 rency. The diminution would be equal to the He- 
 basement in the British currency ; the rate of ex- 
 change, in consequence, would nominally be five 
 per cent, against England. 
 
 Similar effects would be produced on the rates of 
 exchange, if the currency of this country became 
 debased from a deficiency of weight ; as the rate of 
 exchange is always calculated, not according to what 
 the currency contains, but what it ought to contain; 
 the rate, therefore, will be in the exact proportion 
 to the deficiency in the value of the currency. The 
 history of commerce abounds with examples of this. 
 
14 
 
 Previous to the re-coinage in King William's reign, 
 our silver coin was twenty-five per cent, belovr 
 standard r and our exchange with Holland was twenty- 
 five per cent, against us. Before the reformation of 
 our gold currency, in 1774, the exchange with 
 France was computed to be three per cent, against 
 us, the French coins being much less worn than 
 ours. Since 1774, the exchange has been against 
 France, and in our favour. In the same manner, 
 before that reformation, the exchange was generally 
 against us with Amsterdam, Hamburgh, Venice ; 
 but since the reformation, it has generally been in 
 our favour.* 
 
 A recent instance of the effects of degraded cur- 
 rency on exchange, has been afforded by the bar- 
 barous policy of the Turkish government. They 
 have made three great adulterations of their coin ; 
 the first in 3770; the second in 1787; and the 
 third in 1796. Before these frauds, the Turkish 
 piastre contained nearly as much silver as our half- 
 crown ; and, in exchange, the common computation 
 was eight piastres to the pound sterling. The con- 
 sequence of these repeated adulterations has been a 
 reduction of the silver in the piastre to one half, and 
 a fall in the exchange of one hundred per cent. ; bills 
 on London having been bought, in 1803, at sixteen 
 piastres to the pound sterling.-^ 
 
 In this country an unfavourable exchange, caused 
 by a debased currency, has been accompanied with a 
 high market price of bullion. In the case of the 
 
 * Wealth of Nations, vol. 2. p. 2735. 
 
 t Foster's Essays on Commercial Exchange, p, 94. 
 
15 
 
 silver currency in King William's time, the price of 
 silver rose to 6s. 5d. per ounce, as stated by Mr. 
 Lowndes. In the case of the gold coins, previous 
 to their reformation, the market price of gold, on, 
 an average of 16 years, was 3 19 2-f- per ounce. 
 When the currency was reformed, the exchange fell 
 to par, and the market price of bullion fell to its 
 mint price. 
 
 It would seem, therefore, that a currency debased, 
 either by adulteration, or by a deficiency of weight 
 in the coins, may cause the exchange to be per- 
 manently unfavourable to a country ; a circumstance 
 which can only be remedied by a reformation of the 
 circulating medium, and does not in the least degree 
 depend on the balance of debt ; as the exchange 
 depending on the balance of debt can at no time 
 exceed the amount of transmitting the precious 
 metals from one country to another. 
 
CHAPTER V. 
 
 Bank Restriction Bill its general effects* 
 high price of bullion of commodities the 
 depreciation of currency -unfavourable ex- 
 change with foreign countries. 
 
 As the unexpected continuance of the present sys- 
 tem of the Bank of England has been attended with 
 effects which appear to have excited considerable 
 surprise and attention, it is of some importance to 
 show in what manner they have taken place ; and in 
 so doing it will be proper to consider the state of 
 the gold currency from 1760 to 1797* and from 
 1797 to 1810. 
 
 On the accession of his present Majesty to the 
 throne, the gold coins of this country were in a very 
 debased state. Their deficiency in weight increased 
 so rapidly, that, in the year 1773, the government 
 found it necessary to take the subject into consider, 
 ation ; the result of which was, the recalling of all 
 the light coins from circulation, which were re- 
 coined in the years 1774, 5, 6, and 7- From this 
 period the gold coins were in a state of great per- 
 fection, and were maintained in this state by frequent 
 new issues from the mint. 
 
 It is a fact worthy of particular notice, that for 
 several years before the reformation of the gold 
 coins, the market price of gold was considerably 
 
17 
 
 7 
 
 higher than its mint price. From 1557 to 1773, a 
 period of sixteen years, its average price was 
 3 1Q 2|- per ounce. But immediately after the 
 re-coinage in 1774, the market price of bullion fell 
 below the mint price; and, during a period of twenty 
 years, from 1777 to 17Q7 5 the average price paid 
 by the Bank Directors for gold, was only 3 17 74., 
 which is 2-f-d. under the mint price. 
 
 From this fact the conclusion cannot be con- 
 sidered doubtful, that the high price of gold bullion 
 was occasioned by the defective state of the gold 
 coins ; that 3 19 2 of these coins did not contain 
 more than an ounce of standard gold; consequently, 
 it would not exchange for its nominal value, but 
 according to the quantity of standard gold which it 
 contained. And this fact is fully proved by the re- 
 formation of the coins. When every 3 17 10^ 
 contained an ounce of gold, the market price of 
 gold immediately fell to its mint price ; an ounce of 
 standard gold bullion could be readily obtained for 
 3 17 10J- in coins. 
 
 During the above mentioned period of the defec- 
 tive state of our gold coins, Lord Liverpool states, 
 that foreign exchanges were very much influenced to 
 qur disadvantage, and this circumstance Was one of 
 the principal causes which induced the government 
 to reform the coins. 
 
 Lord Liverpool states another fact worthy of no- 
 tice, that during the period already mentioned of 
 .the defective state of the gold coins, the price of 
 silver was influenced by their deficient, or perfect 
 state* From 1757 to 1773, the average price 
 
18 
 
 | 
 which the Bank Directors paid for dollars, was 
 
 64fd. per ounce, equal to 66f d. for standard silver. 
 But immediately after the re-coinage of the gold 
 coins, the price of dollars fell, so that, on an ave- 
 rage of twenty- four years, ending 17Q7, the Bank 
 Directors have paid for dollars 61-^d. per oz. equal 
 to 63^d. per oz. for standard silver, and less than the 
 average price for sixteen years previous to the re- 
 coinage by 3-f-d. per ounce, or 5 T 3 T V P er cent. 
 
 From these facts, it would appear of very con- 
 - siderable consequence to keep the gold coins in a 
 state of the greatest possible perfection. By neg- 
 lecting to do so, the exchange with foreign countries 
 becomes against us. We have a rise in the price of 
 gold ; the new and heavy coins are selected from 
 .the light and debased, and exported for the profit 
 attending the high market price of bullion. The 
 price of all commodities rises in proportion. The 
 price of silver is, also raised, which, with a currency 
 somewhat assimilated to the perfection of our gold 
 coins, would hold out a considerable temptation to 
 melt, and export it ; and this is now prevented only 
 by the very debased state of the silver currency. 
 
 I come now to consider the state of the currency 
 since 1797> the year in which the Bank suspended 
 payment. The causes which led to this memora- 
 , ble crisis in our pecuniary affairs, have already occu- 
 pied a great share of the public attention ; I will, 
 therefore, proceed to the consideration of the effects 
 that have followed. 
 
 It is generally admitted, that the value of a com- 
 modity depends greatly on its scarcity or plenty. 
 
19 
 
 Now there has been, within these twelve years, a 
 remarkable increase in our amount of Bank notes. 
 For several years before 17Q7, the amount of them 
 in circulation did not exceed eleven millions, and 
 bullion was cheap, being ^3 17 7 per ounce. But 
 after 1797* the amount of Bank notes was progres- 
 sively increased, and as soon as this increase became 
 considerable, the price of bullion rose. 
 
 Notes in circulation. Price of 
 
 gold bullion. 
 
 On 25th Dec. 1797 there were el 1,641, 4-00 3 \1 6 
 
 1798 12,708,657 3 17 6 
 
 1799 13,672,405 3 17 6 
 
 1800 15,251,240........ 4 5 
 
 The tables in the Appendix contain the quantity 
 of notes, and price of bullion for the remaining years, 
 and concur to show, that the rise of bullion has been 
 consequent on the increase of notes. Bullion has 
 never since 1800 been below a4, and it was lately 
 so high as k J3. 
 
 In further illustrating the subject on the high 
 price of gold, it is of consequence to remark, that 
 when silver was the money in which all bargains 
 were concluded, the course of exchange for or 
 against this country, was in proportion to the de- 
 fective or perfect state of the currency, and 
 this unfavourable exchange was accompanied with a 
 high market price of silver bullion. Previous to the 
 re-coinage of King William III. the exchange was 
 as much as twenty five per cent, against this coun- 
 try, and the market price of silver was 4s. 5d. per 
 ounce, Foreigners considered the silver coins as 
 
 C 2 
 
20 
 
 the principal measure of property, and rated their 
 exchanges accordingly. In 1717? the gold coins of 
 this country were, by proclamation, declared legal 
 tender, at the rate of twenty-one shillings to a 
 guinea ; and since that period, no such unfavour- 
 able exchange has taken place, although the silver 
 coins were, and still continue, in a very defective 
 state. Before the year 1717 the guinea was current 
 for 21s. 6d., but when reduced to 21s. it was still 
 so much over rated at the mint, in respect to silver, 
 as to render it the standard of our money. Accord- 
 ingly we find, that the course of exchange was con- 
 siderably affected to our disadvantage, in consequence 
 of the defective state of the gold currency, previous 
 to its reformation in 1774. With this unfavourable 
 exchange, we had a rise in the price of gold ; on 
 the reformation of the coins, however, we had a fall 
 in the rate of exchange, and also in the market price 
 of bullion, as has been already stated. 
 
 In these two instances, the defective state of the 
 currency acted on the price of all commodities in 
 the same manner as an increase of gold and silver 
 would have done ; it was like increasing the nominal 
 amount of pounds sterling in circulation. Let us 
 suppose that they were increased one-fourth, as in 
 the case of the silver coins, while the quantity of 
 commodities remained the same, or nearly the same; 
 does it not follow, that the price of all commodities 
 would be augmented in a similar ratio ? That the 
 consequences here stated actually followed the de- 
 fective state of the silver currency, will appear from 
 Mr. Lowndes' report to the Lords of the Treasury, 
 
21 
 
 of the 12th Sept. 1695 ; in which he states, " that 
 great contentions daily arose in all fairs, markets, 
 shops, and other places throughout the kingdom, 
 to the disturbance of the public peace, in conse- 
 quence of the defective state of the silver coins ; 
 that trade in general was on that account greatly 
 lessened; that persons before they concluded any 
 bargains, were under the necessity of settling the 
 price, or value of the very money they were to re- 
 ceive for their goods ; and that they set a price on 
 them accordingly; that these practices had been one 
 great cause of raising the price, not only of all mer- 
 chandises, but of every article necessary for the sus- 
 tenance of the people ; that the receipt and collection 
 of the public taxes, revenues, and debts, were greatly 
 retarded." P. 115. 
 
 In 1797? when Bank of England notes were 
 declared a legal tender, at the rate of twenty shil- 
 lings to the pound, for such I conceive to be the 
 spirit of the Restriction Bill, there was no longer 
 any restraint on the Bank Directors in the emission 
 of their notes. Previous to this period, they were 
 perfectly aware that, if they issued their notes to 
 excess, a rise in the price of gold would be the con- 
 sequence, and that these notes would be returned to 
 them to be exchanged for guineas, which would be 
 melted down, and exported at the advanced market 
 price. When the excess of their notes was thus 
 withdrawn from circulation, the market price of 
 gold fell to its mint price. This check alone was 
 always sufficient to prevent, for any considerable 
 time, an excess of Bank notes: and in the remon- 
 
22 
 
 strances of the Bank Directors with Mr. Pitt, on 
 the subject of advances to government, sufficient 
 evidence is adduced to show, how well aware they 
 were of the inconvenience of that excess. The 
 evidence of Mr. Giles, the Governor of the Bank, 
 before the Committee of Secrecy, tends also to 
 the same conviction, as does the evidence at large.* 
 Since, however, the Bank Directors have been 
 liberated from all restraint in the issue of their notes ; 
 if they increase them in an undue proportion to the 
 whole produce of the land, and labour of the country, 
 in which they are circulated, does it not follow, that 
 this increase of money will operate, in a similar 
 manner, on the price of all commodities, as the dis- 
 covery of a gold or silver mine would do ? The 
 effects of the discovery of the American mines are 
 in the recollection of every one. Silver, compared 
 to commodities, became cheap from so great an 
 increase, and the money price of all commodities 
 was enhanced. If, therefore, the Bank of England 
 has issued notes to such an excess as to raise the 
 money price of all commodities, it is no difficult 
 matter to account for the very high price of gold, 
 which is bought and sold in the market like any 
 other commodity. Gold can no longer be said to 
 be the principal measure of property in the country; 
 and the transfer which I mentioned, as having taken 
 place from the silver to the gold, on the latter being 
 declared a legal tender, seems to have taken place 
 m respect to Bank notes. Hence the money price 
 
 * See Report of that Committee. 
 
23 
 
 of gold in Bank notes has been of late & 13 per 
 ounce, and, from the great increase of Bank notes, 
 the amount of the nominal pound sterling has been 
 increased in the country ; and the whole produce of 
 the land and labour having continued the same, or 
 having not increased in the same proportion, the 
 price of all commodities has risen in proportion to 
 this increased quantity of money. I have already 
 proved, that when the defective state of the silver 
 coins, previous to the re-coinage of King William 
 III. increased the nominal amount of pounds ster- 
 ling in the country, the price of silver bullion, and 
 all other commodities rated in silver, rose in pro- 
 portion to the increase of money. Now the very 
 same thing has happened with respect to gold, and 
 all other commodities, whose prices are rated in 
 Bank of England notes. Having increased in an 
 undue proportion to the whole produce of the land 
 and labour of the country, these notes have become 
 depreciated, and the same nominal amount will not 
 command the same quantity of the necessaries and 
 conveniences of life. 
 
 To render this subject still more simple, let us 
 suppose the whole circulation of the Bank of Eng- 
 land to consist of ten millions of gold; and that 
 they possessed a piece of ground, in which they 
 discovered a gold mine, which enabled them to add, 
 in a period of ten years, five millions more to the 
 money in circulation; and let us suppose also, that 
 the produce of the country is not rapidly advancing 
 or declining : would the value of gold, and all 
 other commodities rated in gold, be the same ta- 
 
24 
 
 day as they were ten years ago, the day previous 
 to the discovery of the gold mine ? No, surely, 
 The money price of all commodities rated in gold 
 would rise in price, in proportion to its increased 
 quantity. 
 
 However much the value of gold might be in- 
 creased or diminished, yet its price would remain 
 unaltered. If the ounce of standard gold were 
 coined into 3 17 10-^ of gold coins, the price of 
 that ounce would be precisely 3 17 1O. It could 
 never exceed, and could nev 7 er fall below that price ; 
 and if the ounce of gold were coined into ^5, 
 the price of that ounce would be precisely 5, 
 The standard or mint price of gold is invariable 
 in its name or denomination, though not in its value. 
 
 Let us suppose again, that the circulation of the 
 Bank of England consisted of ten millions of gold, 
 and from a wish to save the expense of maintaining 
 the whole of this metallic currency in a state of per- 
 fection, they issue Bank notes, which they find 
 considerably cheaper ; and that upon the faith of 
 these Bank notes being exchanged for gold when 
 demanded, the community accept of them the same 
 as if they were in reality pieces of coined money. 
 Let us suppose further, that by an act of the Legis- 
 lature, the Bank is liberated from the obligation of 
 exchanging her notes for gold when demanded. All 
 restraints on her issues immediately cease to exist: 
 she may, as in the first supposition, add five mil- 
 lions of notes to those in circulation, in a period of 
 five or ten years; the community continuing to 
 receive them, either from necessity, or from a 
 
 4 
 
25 
 
 confidence that the Bank, at some future period, 
 not very far remote, will give to the holders of these 
 notes, gold to the amount therein specified in ex- 
 change. Now, the reality of this supposition has 
 been verified in the transactions of the Bank within 
 these last thirteen years. In J7Q7, the Legislature 
 liberated the Bank of England from the obligation 
 of paying her notes in gold when demanded ; the 
 consequence has been, that the average amount of 
 her notes in circulation has increased from 1O to 
 21 millions. And while the community accept of 
 these notes on the faith of the Bank being able 
 some day to give gold in exchange for them, there 
 can be no difference in the effects arising from 
 this increase of money, whether it consist in the 
 notes of Bankers, or in an increase of gold. In 
 confirmation of this fact, it is only necessary to 
 state, that Bank of England notes do not circulate 
 out of the Island of Great Britain, and that any 
 increase of them, while the public confidence, and 
 the produce of the land and labour remain the same, 
 must operate on the price of all commodities in 
 the same degree, that an increase of the precious 
 metals would do, and with this increased security, 
 that the precious metals might find their way out 
 of our island, and from scarcity become more valu- 
 able, while the paper money, from its possessing 
 no intrinsic value, is sure to remain at home, and 
 produce all the effects which are here attributed 
 to it. And if the Bank is allowed to retain her 
 present monopoly for thirteen years longer, and 
 increase the issue of her notes to twenty-seven or 
 
26 
 
 thirty millions, the price of gold, and every other 
 commodity, will experience a proportionate rise in 
 price. Allowing that Bank of England notes are 
 competent to supply the place of guineas in our 
 currency, a great difficulty, however, arises in pro- 
 portioning their number to the demands or neces- 
 sities of the country while it is the interest of the 
 Bank to lend, they will find borrowers even beyond 
 the necessities of the community, and as all re- 
 straint is now taken off the Bank Directors, they 
 have increased the issues of their notes beyond all 
 former precedent ; nor is it natural to suppose, that 
 they will diminish the quantity of their notes in 
 circulation, seeing it is not their interest, until they 
 are obliged to do so. Let the check be restored, 
 therefore, which formerly regulated the Bank in the 
 issue of her notes. This check was the obligation 
 to pay them in cash. 
 
 Some have supposed, that the Bank cannot in- 
 crease the issue of her notes to any improper length; 
 for, say they, the rate of interest, which is regu- 
 lated by the scarcity or abundance of money, will 
 be a proof of there not being too much money in 
 circulation, if the rate of interest remain stationary. 
 The fallacy of this doctrine has been distinctly 
 proved by Mr. Hume, in his Essay on Interest, and 
 by Dr. Smith, who has also proved, that the rate of 
 interest for money is regulated by the rate of pro- 
 fits on that part of capital which does not consist 
 in circulating medium; and that those profits are 
 not regulated by, but are wholly independent of, the 
 greater or smaller quantity of money, which may 
 

 be employed for the purpose of circulation; that 
 the increase of circulating medium will increase the 
 prices of all commodities ; but will not lower the 
 rate of interest. Wealth of Nations, vol. ii. book 
 ii. chap. iv. 
 
CHAPTER VI. 
 
 Bank Restriction Bill its particular effects 
 injury or injustice to annuitants and others 
 debasement of the national currency Cou?i- 
 try Banks not the cause of these evils. 
 
 THE depreciation of money which has followed in 
 consequence of the Bank Restriction Bill, bears 
 particularly hard on all annuitants, and that large 
 class of individuals, whose sole dependence is placed 
 on a fixed income ; those persons have the value of 
 their revenue diminished to the whole amount of the 
 depreciation on the currency, which appears from 
 the tables in the Appendix to be about 16 per cent, 
 so that ,84 per annum before the Restriction Bill 
 passed, could command the same quantity of the 
 necessaries of life as ^100 would at the present 
 day, if no other cause whatever had acted upon the 
 price of commodities.* It seems an unheard of evil, 
 that the Bank of England should possess the power 
 of diminishing, at her pleasure, the value of all the 
 monied interest in the kingdom ! 
 
 * That money has depreciated more than 16 per cent since 
 1797, I believe, is generally allowed ; but the depreciation which 
 I here mention, as having taken place in the currency of the 
 country, is very different from that caused by taxation. We have 
 the misfortune, however, to suffer under both evils ! 
 
29 
 
 Every contract made during the present system of 
 the Bank of England must be founded in injustice, 
 as will appear, if we suppose, for example, that a 
 farmer leases a farm of his landlord at the rate of 
 jlOO per annum, which rent the farmer is induced 
 to give from the general high market price of all 
 species of grain, which he supposes will continue 
 and enable him to pay his rent. He finds, however, 
 that the Bank is obliged to resume payments in cash, 
 from which circumstance a fall of l6 per cent, 
 takes place in the price of the whole produce of his 
 farm. It is unnecessary to relate the distressing 
 consequences to the poor farmer. 
 
 Another evil, resulting from the continuance of 
 the Restriction Bill, is the debasement which must 
 necessarily take place in the gold currency fronv 
 constant circulation, and from few new coins being 
 issued to supply the place of those that become 
 deficient in weight, which, according to the King's 
 proclamation, are not a legal tender below a certain 
 weight ; (the guinea for example, is not a legal 
 tender, when it weighs less than five penny- weights 
 and eight grains ;) also, from the tendency which 
 Bank notes have to force the gold coins out of cir- 
 culation : circumstances which on the repeal of the 
 Restriction Bill might subject the country to the 
 expense of a general re-coinage of all the gold 
 monies. 
 
 I have already stated, that for 16 years previous 
 to the re-coinage of gold, the market-price of that 
 metal averaged z 1Q 2f per ounce. z IQ 2-f- of 
 the gold coins then in circulation did not weigh more 
 
3O 
 
 j 
 
 than an ounce, being a deficiency of ^1 14 6-i- per 
 cent. The gold coins, now in circulation, are rapidly 
 advancing to this state of debasement : according to 
 the last experiments made by the officers of his 
 Majesty's mint, and laid before the committee of 
 council for coin, in 1807, the guineas were debased 
 by a deficiency in weight ^l 3 4 per cent, being 
 Q \ 1 2i per cent, less than the average debasement 
 for 16 years previous to the re-coinage. On the 
 average of guineas and half guineas; the debasement 
 by a deficiency in weight was l 12 11~ per cent, 
 being only ^0 1 7 per cent, less than before the re- 
 coinage. On the average of the guinea, half-guinea, 
 and seven shillings piece, the debasement, by weight, 
 was al 7 8^, being only *o 6 10^ per cent, less 
 than before the re-coinage : and it is probable, that 
 by this time, the debasement of the gold currency is 
 fully equal to what it was before its reformation in 
 
 1774. 
 
 If the Restriction Bill were just now repealed, it 
 must be expected that the market-price of gold will 
 not fall to its mint price, because of the deficiency 
 in the weight of the coins : it required on an average 
 of all species of gold coins in circulation, in 1807, 
 about $ 18 ll-i- to weigh an ounce. The market- 
 price of gold, (according to the principles to be laid 
 down in the eighth chapter,) would be precisely 
 
 $ 18 11-lr. 
 
 Since the Restriction Bill passed, little attention 
 has been paid to the state of the gold currency no 
 guineas have been coined since 1799*. several small 
 coinages of half-guineas and seven' shillings pieces 
 
$1 
 
 have been executed ; these, however, have only 
 enabled the Bank to answer the demands on her for 
 change in transacting the public business, and have 
 not been able to prevent the debasement of the cur- 
 rency. 
 
 The gold coins now in circulation are deficient to 
 a greater extent than allowed by proclamation ; and 
 if this proclamation is enforced, the public at large 
 will refuse the light coins, as they did previous to 
 1797. If it is suspended, the new guineas as issued 
 from the mint will be melted and sold for the high 
 market-price of bullion, caused by the debasement 
 of the coins ; a succession of the same evils which 
 existed previous to 1774, would be the consequence 
 of such a measure; a general re-coinage is therefore 
 forced upon the country, to avoid other evils ulti- 
 mately as expensive. The expense of the re-coinage 
 in 1774, amounted to about 7 50,000. A repeti- 
 tion of this expense seems unavoidable ; so that in 
 whatever point of view the Restriction Bill is con- 
 sidered, it is fraught with oppression to the whole 
 body of the people. 
 
 It has been supposed by some, that every increase 
 of Bank notes drove an equal amount of gold coin 
 out of circulation. For example, if the Bank of 
 England increased her notes from ten to twelve 
 millions, the two millions of additional paper forced 
 two millions of gold coins out of circulation. This, 
 however, does not appear to be the case ; for if the 
 paper money thus increased had only supplied the 
 place of gold, there would have been no rise in the 
 price of gold, s there would have been no more 
 
32* 
 
 | 
 
 notes in circulation, than there would have been 
 gold had no notes been used. There would have 
 been no excess of currency. For several years pre- 
 vious to the Restriction Bill, the average amount of 
 Bank notes was about eleven millions. Since the 
 restriction, they have increased to upwards of 21 
 millions ; if these IO millions of Bank notes had 
 displaced an equal amount of coin, we should have 
 experienced no rise in the price of gold. If we 
 could ascertain what increase of Bank notes it would 
 require to raise the price of gold 2O per cent, above 
 its mint price, we could exactly determine the 
 amount of the gold coin forced out of circulation ; 
 having no means to ascertain this fact positively, its 
 place can only be supplied by conjecture. 
 
 We may suppose, that the whole produce of the 
 land and labour of this country is nearly the same 
 now, as it was in 1797? and the calamities of war 
 will perhaps admit the supposition of but a small 
 increase : at the same time that, whatever this in- 
 crease may be, the improved methods of banking 
 now adopted may render about the same quantity of 
 circulating medium necessary, as in the former 
 period. If it be allowed, that an increase of cir- 
 culating medium of one- fifth raises the price of gold, 
 and of all commodities, 20 per cent, it would follow, 
 that if two millions and one- fifth were added to the 
 11 millions in circulation, being one-fifth of that 
 sum, that the price of commodities would be aug- 
 mented 20 per cent. We find, however, that lp 
 millions have been added to the Bank notes in cir- 
 culation, so that these 10 millions have only dis- 
 
33 
 
 placed 7 millions and four- fifths of a million of gold 
 coin, leaving thereby a permanent excess of cur- 
 rency of ^2,200,000. Though this statement does 
 not determine exactly the point in question, it gives 
 an idea of the matter somewhat approaching to 
 truth ; and it would appear, that if the Bank 
 Directors diminished the amount of their notes to 
 about 1 8 millions, the market-price of gold would 
 fall as near to the mint price as the debased state of 
 the coins would permit ; while, however, the present 
 system is continued, the evil of a debased currency 
 must be increased, and must render it both more 
 difficult, and more expensive, to return to the old 
 system of rendering Bank of England notes payable 
 on demand. 
 
 Since the first edition of this work was published, 
 it has become a very general opinion, that the 
 country Banks are the cause of all the evils which 
 we have attributed to the Bank of England. As 
 this is a question of great interest to the prosperity 
 of the country at large, it may not be unnecessary 
 to explain the nature of the connection existing 
 between the Bank of England and the Country 
 Banks. 
 
 After the suspension of cash payments at the 
 Bank of England, it was deemed necessary for the 
 security of the country, to render the notes of 
 Country Bankers payable in those of the Bank of 
 England ; this obligation was a check upon the 
 issues of the Country Banks ; they could only in- 
 crease their notes as the Bank of England increased 
 
 D 
 
'34 
 
 her notes. If the Bank of England diminished the 
 amount of her notes, the Country Banks, if they 
 understood their own interest, must have imme r 
 diately followed her example. If the Country 
 Bankers did not diminish the amount of their notes, 
 as the Bank of England diminished hers, they would 
 be liable to the inconvenience and danger of a run, 
 caused by their mutual and unceasing competition ; 
 and if these Banks have not Bank of England notes 
 to answer all demands, they must necessarily stop 
 payment: it is their interest to avoid this crisis. It 
 may be asked, how are the Country Bankers to know 
 when the Bank of England is diminishing her notes? 
 To this it may be answered, by the difficulty their 
 London correspondents find in getting discounts at 
 the Bank of England, of which they are apprised. 
 
 It will appear, therefore, that this obligation on 
 the Country Bankers to pay in Bank of England 
 notes, must operate on their issues in a similar 
 manner to an obligation to pay in cash. 
 
 This dependence of the Country Banks on the 
 pleasure of the Bank of England can be further 
 simplified and explained, by stating the natural con- 
 sequence of an over-issue of notes by the Bank of 
 England. 
 
 Let it be supposed, that the Bank of England 
 has made an over-issue of notes, say one million. 
 Bank of England notes do not in general circulate 
 many miles from London ; in the district, therefore, 
 in which this over-issue has been made, a rise will 
 take place in the price of commodities, and will be 
 
35 
 
 proportionate to the increase of money. In the 
 country, however, where no such increase has taken 
 place, the price of commodities will have experienced 
 no rise in price ; the high money price of com- 
 modities in London, however, will tempt the com- 
 modities of the country to come to the London 
 market for the advantage of the high price ; in the 
 country a scarcity will be experienced, and a con- 
 sequent rise in price ; this increased price, however, 
 cannot be paid without an increase of money. 
 Money will be demanded, and, as it is the interest 
 of the Country Bankers to lend, the void will be 
 supplied ; and the high price of commodities, caused 
 by this over-issue, will become general, and not 
 local. 
 
 It would, therefore, appear, that Country Banks 
 can only increase the evil of an excessive paper 
 circulation, by the latitude which is given to them, 
 or rather the necessity which is imposed upon them, 
 by the Bank of England. By an over-issue of the 
 Bank of England to-day, she creates a demand upon 
 the Country Bankers for a similar and correspondent 
 issue to-morrow or next day. On the other hand, 
 if after such over-issue the Bank of England found 
 it her interest or necessity to withdraw a considerable 
 quantity of her notes, the act might be attended 
 with the failure of almost any number of Country 
 Banks ; they would be unxepectedly deprived of the 
 means of upholding their credit, their notes being 
 payable in those of the Bank of England. 
 
 Such is the precarious and dependant situation of 
 D 2 
 
36 
 
 our Country Banks, as connected with the Bank of 
 England ; the extensive advantages derived from 
 those Banks render it desirable that their security 
 should be increased, and that they should be entirely 
 independent of the Bank of England ; for, without 
 imputing any improper motives to the conductors of 
 that concern, political circumstances alone might 
 compel them to such a sudden diminution of their 
 notes, as might produce the calamitous circum- 
 stances here ascribed to be within the limits of their 
 present uncontrolled powers. 
 
CHAPTER VI. 
 
 On the Effects produced on the rates of Ex- 
 change by a depreciated currency. 
 
 THE currency of a country is said to be depreciated 
 when a given quantity of it will no longer exchange 
 for a like quantity of that of another country ; for 
 example, if the circulating medium of England was 
 reduced in value Virth below its standard and re- 
 cognised level, while that of Hamburgh remained 
 stationary, the pound sterling of England would not 
 exchange for 34 schillings, 1 1 grotes and a -J- f 
 Hamburgh money, but for T V tn ^ ess ' The deprecia- 
 tion of English money would in this case be ten 
 per cent. ; and it is evident, that the rate of ex- 
 change would be also ten per cent, against England. 
 But from the doctrine already advanced, it would 
 appear, that a currency of gold and silver only, or 
 of gold and silver and paper, the latter convertible 
 into the former at the option of the holders, could 
 never, abstracting from debasement, be depreciated ; 
 for the rapidity with which the precious metals retire 
 from a cheap in quest of a dear market, would always 
 take the surplus quantity out of the country ; and 
 whatever excess and depreciation we have in our 
 currency has a direct tendency to raise the value of 
 the precious metals in other countries in a similar 
 
38 
 
 ratio. The price of commodities compared to the 
 gold and silver will be cheap, which will encourage 
 exports to bring home th quantity of bullion neces- 
 sary to restore the general level of those commo- 
 dities. 
 
 The depreciation of currency here described, is 
 different from that species of depreciation, which 
 the precious metals are subject to from the discovery 
 of new mines, or an accumulation of gold and silver 
 from those already known. In this latter case, while 
 the precious metals may be depreciated to an in- 
 definite extent, the currency of any one country 
 cannot undergo a greater permanent depreciation 
 than another, from the tendency which the precious 
 metals have to seek the best market. Hence in all 
 ages,, it has been found impossible for any country 
 to retain more gold and silver than the demands of 
 that country required. 
 
 We must, therefore, seek the cause of a depre- 
 ciation of currency, consisting of gold and silver 
 and paper, the latter convertible into the former, in 
 something else than mere excess, as any depreciation 
 caused by such excess must be a very temporary evil, 
 and from the very nature of things is daily working 
 its own remedy. 
 
 Since the Bank Restriction Bill took place, it has 
 generally been supposed, that the excessive quantity 
 of Bank notes in circulation has caused a consider- 
 able depreciation in their value. The sign of thi^s 
 excess and depreciation has been a permanently un- 
 favorable exchange, and a high market price of 
 
39 
 
 bullion, which never had taken place in this country 
 while Bank notes were payable in gold on demand. 
 
 When the Directors of the Bank of England 
 were obliged to give gold for their notes on de- 
 mand,* their quantity never could exceed the quan- 
 tity of gold and silver, that would have circulated in 
 their place, had there been no Bank notes ; but if 
 they issued their notes to excess, it appeared imme- 
 diately in the high price of bullion, and the un r 
 favourable exchange. The price of gold was no 
 longer rated in gold, otherwise it could not in the 
 entire state of the gold coin have exceeded 3 17 10-J. 
 per ounce : but its price in Bank notes varied in 
 
 * Mr.Bosanquet, in his Observations upon the Bullion Report, 
 has in several instances mentioned the circumstance of the Bank 
 being obliged to provide guineas for the holders of her notes at 
 the mint price of gold, even though she was obliged to pay more 
 in the market for the gold of which such guineas were made. 
 JMr. Bosanquct having stated that the Bank was compelled to do 
 so, this must have a tendency to impress the public mind that 
 there was something peculiarly harsh and unreasonable in the 
 obligation. But Mr. Bosanquet must be aware, that any such 
 impression is directly inconsistent with matter of fact. If the 
 Ban'r had never issued a note, and there are man'y such Banks, 
 would she not have felt obliged to the public to take her guineas 
 on loan ? That she would, 1 think will not be disputed. But 
 who er what obliges the Bank to issue any notes; is it not her 
 own interest? and in proportion as her interest is advanced, must 
 she not also feel obliged to the public to take her notes on loan in 
 place of guineas. But who would say, if they wished to speak 
 accurately, that a Bank in such circumstances is compelled to 
 provide gold above its mint price. 
 
 To believe Mr. Bosanquet's statements in their literal meaning, 
 would be to admit that the Governor and Directors of the Bank 
 managed the interests of their constituents under a system of 
 compulsion. To promulgate such a doctrine would not entitle a 
 man to many proselytes. 
 
40 
 
 proportion to the amount of notes in circulation. 
 Bank notes, not gold, for the time, became the 
 principal measure of property, in which the price of 
 all commodities was rated. Gold accordingly, as in 
 Bank notes, was sometimes 3 18 and & per 
 ounce. It will, however, appear evident, that while 
 these notes were convertible into gold at pleasure f 
 the dealers in bullion would take these to the Bank, 
 and exchange every j3 1710^ for an ounce of gold 
 coin, which, if melted and sold at the then market 
 price, would make a considerable profit by so doing. 
 But the excess of Bank notes could not remain for 
 any length of time in circulation while this was 
 practised ; nor, indeed, was it the interest of the 
 Bank to force the issue of her notes under such 
 circumstances, as she, by that means, rendered her- 
 self liable to be exhausted of her guineas. On the 
 contrary, it appears, from the evidence adduced be- 
 fore the committee of secrecy, that when the ex- 
 change became unfavorable, and the price of bullion 
 rose above its mint price, the Bank Directors limited 
 their discounts, until such time as the value of their 
 notes was the same as their guineas, or until the 
 market price of gold fell to its mint price, and with 
 this fall the rate of exchange fell also.* 
 
 * This principle, apparently so novel, and at present so much 
 disputed by those who are interested in its non-existence, has 
 nevertheless been firmly established for nearly a century, as wiU 
 appear irom the following extract from " A Discourse concerning 
 the Currencies of the British Plantations in America, &c." 
 
 " The repeated large emissions of paper money are the cause 
 of the frequent rise m the price of silver and exchange, uhich do 
 
41 
 
 Since, however, the Bank Restriction Bill passed, 
 this salutary check upon the issues of the Bank 
 Directors has been entirely destroyed, and there 
 can now exist no possible obstacle to the increase 
 of their notes, but what their own prudence sug- 
 gests. 
 
 as regularly follow the same as the tides do the phases or courses of 
 the moon. When no larger sums are emitted for some time fhan 
 what is cancelled of former emissions, silver in exchange is at a 
 stand ; when less is emitted than cancelled (which seldom Imp- 
 pens), silver in exchange do fall. 
 
 " This is plain to a kind of demonstration, from the history of 
 the paper-money emissions in New England. 
 
 " After silver had rose, Anno 1705, to 8s. per ounce, by light 
 pieces of eight superseding the heavy pieces, it continued at that 
 rate, while paper emissions did not exceed a due proportion to 
 the current silver: An. 17U, we emitted ^50,0()O upon loan, 
 and A. 171-3, Rhode Island, ,40,000, besides emissions oa 
 distant funds for charges of Government : in the autumn, A 
 1715, silver became 15 per cent, advance above 8s.; that is, about 
 PS. 2d. per ounce. Massechuset's Bay, A, 1717, emitted j 100,000 
 upon loan, and a very long period, silver rose to 12s. jjcr tuncc ; 
 A. 1721, Massechuset's Bay emitted s:>0,000, and Rhode 
 Island ^10,000 upon loan; silver, A. 1722, became 14s. per 
 ounce. From that time a chargeable Indian war required large 
 emissions, and silver rose to \6*.per ounce; it continued at this 
 rate till A. 1728, emissions not being larger than cancelling?, 
 A. 1727, Massechuset's Bay emitted 60,000, and A. 1728, 
 Rhode Island emitted a40,000 upon loan; silver became 1 8s. 
 pet ounce; A. 1731, Rhode Island emitted ,60,000 u pan loan 
 (N. B. Besides the several loans in the course of this history, all 
 the charges of the four Governments were defrayed by paper 
 emission*), and silver beca?ne, A. 1732, 21s. per ounce ; A. 1733, 
 Massechuset's Bay emitted ^7 6,000 upon funds of taxes, Rhode 
 Island fil04-,000 upon loan and taxes, Connecticut ^50,000 
 upon loan, and A. 1734, silver became 27s, per ounce. From A. 
 1734, to A. 1738, more bills were cancelled than emitted, exchange 
 fell from 440 to 400 per cent, advance. A. 1738, Rhode Island 
 emitted alOO,OCO upon loan, silver rose from 2fs, tv 29s. per 
 .- -Pa^e 2& 
 
42 
 
 If I am correct in my view of this subject, tha 
 high permanent rate of Exchange is a consequence 
 of a depreciated currency, occasioned by an excess 
 of Bank notes, which act on the rate of exchange 
 in a similar manner, as if our currency was debased, 
 either by adulteration of the standard, or by a de- 
 ficiency in the weight of the coins. This depre- 
 ciation affects the market price of the precious 
 metals in the same manner as the debased currency 
 affected it in the reign of King William the Third, 
 and previous to the reformation of the gold cur- 
 rency in 1774; and while this depreciation con- 
 tinues, the unfavourable rate of exchange will con- 
 tinue also ; and will be indicated by the excess of 
 the market above the mint price of gold. In the 
 case of an unfavourable exchange, caused by a 
 balance of debt, the rate will at no time exceed the 
 expense of transmitting the precious metals, bating 
 the depreciation on Bank notes, or the excess of 
 the market above the mint price of gold. With- 
 draw the cause of the depreciation, as was done 
 when the currency was debased, and we shall obtain 
 the same beneficial results in the one case as in the 
 other. 
 
 Let the Directors of the Bank of England resume 
 those principles for the rule of their conduct now, 
 by which they were guided before the Restriction 
 Bill took place. Let them on every rise of the 
 exchange limit the amount of their discounts, and 
 it will invariably happen as it did then, that a dimi- 
 nution of their notes will cause a fall in the rate of 
 exchange, and in the market price of bullion. 
 
43 
 
 The observance of the same rules by the Bank of 
 Ireland, in regard to the exchange, is stated in 
 very explicit terms by the committee, which sat on 
 their affairs in the year 1804. The committee, in 
 mentioning the necessity of contracting the issues 
 of paper money, say (page 7), " such has been the 
 natural practice of Banks, previous to the restric- 
 tion. Mr. Colville (a director) states it in very 
 clear and forcible terms, as to the Bank of Ireland. 
 Prior to \7Q7> they limited the amount of their issues 
 as exchange rose. If prudence had not dictated such 
 a course, necessity would have compelled a dimi- 
 nution of their issues, by diminishing the stock of 
 specie which could only be replaced at a loss pro- 
 portionate to the existing rate of exchange; and 
 your committee observe, that in fact, as well as in 
 theory, the effect of such practice always was, and' 
 must be the redress of the unfavourable exchange" 
 Again (page 14), " your committee do in express 
 terms declare their clear opinion, that it is incum- 
 bent on the Directors of the Bank of Ireland, and 
 their indispensable duty, to limit their paper at all 
 times of an unfavourable exchange, during the con- 
 tinuance of the restriction, exactly on the same 
 principle as they would, and must have done, in 
 case the restriction did not exist; and that all the 
 evils of a high and fluctuating exchange must be im- 
 putab'le to them if they fail to do so." 
 
 That the language of this committee, pointed as 
 it is, was not overcharged, is evident from a circurri- 
 stance of which Mr. Parnell informs us,* that in 
 
 * Parnell on Currency and Exchange, p. 15,4th Edition. 
 
44 
 
 Feb. 1804, guineas were openly bought with these 
 notes in Mr. Frank's office, Suffolk Street, Dublin, 
 at a premium of ten per cent. In London the sale 
 of guineas at a premium has not been so openly 
 conducted; but it has, notwithstanding, been car- 
 ried on to a great extent, and at a premium con- 
 siderably above ten per cent. 
 
 According to the principle which I shall endeavour 
 to establish, viz. that the market price of gold can 
 at no time exceed its mint price, provided every 
 3 17 104- contain an ounce of standard gold ; it 
 would appear, that every excess of the mint price 
 must be attributed either to a debased, or a depre- 
 ciated currency. For example, if 3 17 10 i- con- 
 tained an ounce of standard gold, the value of that 
 ounce would be precisely $ 17 10-J-. But if it 
 required four guineas of our present gold coin to 
 weigh an ounce of standard gold, the price of an ounce 
 would be precisely four guineas; and if the price of 
 an ounce of gold in Bank notes is 4 13, while the 
 ounce contains only 3 17 10-^, it follows that 
 gold is more valuable than Bank notes by 15s. 1^-d.; 
 the difference between the price of an ounce of gold 
 as rated in respect to itself, and its price as rated in 
 Bank notes. Again, if it be required of our present 
 gold currency four guineas to weigh an ounce, the 
 price of gold would not be higher than four guineas. 
 And if it required 4 13 of Bank notes to purchase 
 this ounce, or these four guineas, still the Bank 
 notes would be less valuable than the four guineas 
 by gs. which is a positive depreciation of Bank notes 
 to that amount. But as the deficiency in the weight 
 
45 
 
 of our present gold coins, according to the last 
 experiments made by the officers of his Majesty's 
 mint in 1807, amounted on the average of all spe- 
 cies in circulation, to about 14- per cent, this, de- 
 ducted from the excess of the mint price of gold, 
 will leave a depreciation of Bank notes equal to 
 about \& 13 per cent.* % 
 
 * See Tables in the Appendix. 
 
 f-The Bullion Committee, in enumerating the proofs of the de- 
 preciation of Bank notes, brought forward the high market price 
 of silver bullion among others, its having neaily corresponded 
 with the high market price of gold, which could not, in any 
 degree, be ascribed to a scarcity of silver. The importations 
 having of late years been unusually large, while the usual drain 
 for India and China has been stopped. (Report, p. 10, John- 
 ston's edition.) Mr. Bosanquet is extremely angry with the 
 Bullion Committee for having made this statem?nt, which, he 
 says, " is unpardonabiy erroneous, for the fact which refutes it had 
 " drawn the attention of the committee." (Page 34.) Mr. 
 Bosanquet alludes to the examination of Mr. Merle before the 
 committee, to whom the following questions were put: 
 
 " What is a dollar worth now ? Four shillings and nine 
 " pence: silver is about five pence an ounce above the coinage 
 " price." 
 
 " That is, about nine per cent., is it not? I suppose there- 
 " abouts." 
 
 " How do you account for the circumstance of gold being 16 
 " per cent, above its coinage price, and silver only nine ? I can- 
 " not answer that question, because I am not conversant with 
 " the foreign connexion." (Report, appendix of evidence, p. 40.) 
 
 Without the aid of the foreign connexion it is possible to ex- 
 plain what Mr. Merle could not account for, and in doing so J 
 shall be able to show Mr. Bosanquet how far his severe accusa- 
 tion of the Bullion Committee was consistent with matter of fact. 
 
 Upon the 4th of July, 1809, the market price of doubloons was 
 *g4 8 per ounce, equal to t 12 10J for standard gold; the 
 same date, Spanish dollars were 5s. 6d. per ounce, equal to 
 5s. pd. for standard silver. These proportions'wcre as 16.27 to 1. 
 The market price of gold was il9 5 3 per cent, above its mint 
 price. The excess of the mint price of silver was only ^115 7 j. 
 
46 
 
 The relative value of the two metals having (from 15.07 the 
 mint proportions) become as 16.27 to 1, the difference is equal 
 to 8 per cent., making the real li^e in the price of silver 
 fg\9 5 7J per cent., or 5d. per cent, more than the rise in the 
 price of gold. 
 
 Again, upon the 6th day of March, 1810, t*n days after Mr. 
 Merle was examined, the market price of doubloons was i 7 
 per oz., equal to a^-i J 1 10j for standard gold ; the same date 
 Spanish dollars were 5s. 6Jd., equal to 5s. ^ol. for standard 
 silver. These proportions were as 16 to 1. The excess of the 
 mint price of gold was \1 9 6 per cent. The excess of the 
 mint price of silver was only d\2 1 11 per cent. The- relative 
 proportions of the metals having become as Irj to 1, is equal to 
 3 5J per cent., making the total rise in the price of silver 
 5 4j per cent, or 5s. Qjd. per cent, more than the rise 
 in the price of gold. And if we deduct tor the rise in the mar- 
 ket price of silver above its mint price, caused by the inaccurate 
 determinations of the mint proportions, of which Mr. Bosanquet 
 1ms stated the average before the suspension of cash payments to 
 be 1 J per ounce, or l 8 4j per cent, j then, on the first ex- 
 ample, the real rise in the price of silver, caused by the depre- 
 ciation of Bank notes, will be lG l6 3 per cent. ; on the 
 second, ^15 17 per cent. Mr. Bosanquet, having stated that 
 'the price of silver had only risen 5% per cent, above its average 
 price, before the restriction took place, seems to have committed 
 an error of upwards of 10 per cent., but that his error is not 
 unpardonable is easy to decide: the public, however, should 
 naturally receive with jealousy the statements of practical men, 
 who so confidently assert as facts, what are only apparently so. 
 It seems singular that so acute an observer as Mr. Bosanquct 
 lias proved himself to be, should have overlooked the important 
 effect which is produced on the price of silver, in a country where 
 gold is the standard, by an alteration in the relative, value of the 
 two precious metal*, and more particularly so, as the Bullion 
 Committee had directed the public attention to this most im- 
 portant principle in the following pnssagf , in their valuable 
 report ; " That permanent rise in the market price of gold 
 ' above its mint price, which appears by Mr. Greffulhe's paper 
 " to have taken place, for several years, both at Hamburgh and 
 " Amsterdam, may in some degree be ascribed, as your coin- 
 " mittee conceive, to an alteration which has taken place in the 
 " relative value of the two precious metals all over the world ; 
 *' concerning which, nufch curious and satisfactory information 
 
47 
 
 14 will be found in the appendix, particularly in the documents laid 
 " before your committee by Mr. Allen. (Ace. No. 21 to 33.) 
 " From the same cause, a fall in the relative price of silver 
 " appears to have taken place, in this country, for some time 
 " before the increase of our paper currency began to operate. 
 '* Silver having fallen in its relative value to gold throughout 
 " the world, gold has appeared to rise in price in those markets 
 " where silver is the fixed measure, and silver has appeared to 
 *' fall in those where gold is the fixed measure." (Report, 
 p. 7 and 3, octavo edition*) 
 
 ' 
 
CHAPTER VIII. 
 
 Proofs adduced to show that there exists no 
 necessity for the continuance of the Restric- 
 tion Bill. 
 
 As the popular argument in favour of the con- 
 tinnance of the Restriction Bill, has been the 
 impossibility of the Bank resuming her payments in 
 cas'i. while the price of gold is so much above its 
 
 ot price, I shall here endeavour to prove that the 
 price of gold can, in reality, at no time, be above 
 its mint price, and that its being so at present, in 
 appearance, is^ caused by the excessive quantity of 
 Bank notes in circulation. 
 
 As much misapprehension has existed on this 
 subject, it will be necessary to explain the cause 
 of it. 
 
 The mint price of silver is 5s. 2d. per oz. and at 
 this rate was legal tender in all payments, and to 
 any amount^ until the 14th of his present Majesty, 
 when it was enacted, that silver should be a legal 
 tender to the amount of .25 only. 
 
 The mint price of gold is 3 17 JOi per oz., 
 that is, an ounce of gold is worth 3 1? 10J- of 
 silver, coined at the rate of 5s. 2d. per oz. The 
 gold coins were declared a legal tender at this 
 rate in 1717 to any amount. In consequence of 
 this measure, we became possessed of two standards 
 
49 
 
 of money, each legal tender. I have already stated 
 in what manner this declaration gave a preference 
 to the gold coins, and they have continued since 
 1717 to be the principal measure of property. As 
 the silver coins have continued to increase in de- 
 basement since this period., it would appear that the 
 gold coins have only a nominal reference to those 
 of silver; for if the gold coins were valued in the 
 present debased ones of silver, it would follow that 
 in place of gold being worth ^3 17 10^ it would be 
 worth about ^4 174 per oz. or 25 per cent, more 
 than its mint price, the silver coins being this much 
 debased below the standard of 5s. 2d. per oz. 
 Hence it would appear that gold in bullion, since 
 1717 9 has not in reality been rated in silver, but 
 in gold coins. The idea of gold in bullion being 
 rated in our silver coins, while in reality it has been 
 rated in those of gold, has been the cause of all the 
 misapprehension respecting the mint and market 
 price of gold, and which is likely to continue while 
 we have two standards of money each legal tender. 
 If the term. ^3 17 1CH- had been laid aside, and 
 the word ounce substituted in its place, would it 
 not have followed, that an ounce of gold was just 
 an ounce of gold, and would have continued so to 
 the end of time; its command over the conveniences 
 and necessaries of life being exactly in proportion 
 to the quantity of ounces in the country. But if 
 we choose to continue the term 5 17 104-, which 
 is just another name for an ounce of gold, it does 
 not in the least degree alter the question; for if 
 17 104- contains an ounce of gold, an ounce 
 
 
 
50 
 
 of gold cannot be worth more than 3 17 10-J-; or 
 in other words, an ounce of gold cannot be worth 
 more than an ounce of gold, if the same in purity, 
 which we take for granted. 
 
 This reasoning is confirmed, first, by the debased 
 state of the gold currency, previous to its reforma^ 
 tion, when 3 19 24 did not contain more than 
 an ounce of gold; and, secondly, by the reformation 
 of the gold coin. When every 3 17 10^- was 
 made to contain an ounce of that metal, the price 
 of gold immediately fell to its mint price^ at which 
 it continued for 2O years, and must have continued 
 so ad infinitum, had not the Bank Directors, by 
 their imprudence, deranged the system of our cur- 
 rency. 
 
 If the gold coins had in reality been rated in 
 silver, the guinea in place of being current for 21s. 
 would have been current for nearly 3Os. as it was 
 in 1695, previous to the re-coinage of silver in the 
 reign of William the Third. The price of silver 
 also would have risen in proportion, had its value 
 in bullion been rated by the debased coin, to per- 
 haps 6s. 5d. per oz ; 6s. 5d. of our present silver coin 
 not containing more than an ounce of standard 
 silver. The price of silver, however, was rated in 
 gold from 1774 to 17Q7> and was purchased 5 per 
 cent, cheaper, during that period, than it was for 
 1.6 years before, when the gold currency was much 
 debased. 
 
 Further, if silver had in reality been the standard 
 pf our money, and the coins maintained in that 
 
 5 
 
51 
 
 state of perfection, both as to weight and purity, 
 that our gold coins have been, we would then have 
 had an invariable price of silver ; if the mint price 
 of silver was fixed at 5s. 2d. per oz. and every 
 5s. 3d. contained an ounce, the market price of the 
 same standard silver never could exceed and never 
 could be below that sum ; its price not being refer- 
 rable to any other standard of value, and having a 
 reference only to itself, its price could not alter; 
 for how could 5s. 2d. be worth 6s. 5d. or an ounce 
 become worth an ounce and a quarter ? the thing is 
 impossible. According to this principle, gold would 
 vary in its price in proportion to its quantity and 
 the demand for it, its price would have been mea- 
 sured by silver, as a standard invariable in its price 
 or denomination; the reverse of this, however, has 
 been the case; from 1777 to 1797 we had an inva- 
 riable price of gold, and a varying price of silver; 
 which is a clear and decided proof that gold, and 
 not silver, has been the standard of the money of 
 England. 
 
 Having thus endeavoured to prove, that since the 
 period in which gold coins were declared legal ten- 
 der, their value has not been rated in silver; but 
 in gold coins, and that silver in bullion has not 
 been rated in the silver coins, but in those of gold, 
 and consequently, that while 3 17 lOi of gold 
 coins contained an ounce of standard gold, no differ- 
 ence could possibly exist between the mint and 
 market price of that metal; let us us next, to sim- 
 . plify this fact, still further suppose, that we had only 
 
 2 
 
52 
 
 gold coins in circulation, and in place of the sfrbr- 
 trary arrangement of pounds, shillings, and pence, 
 we had the more simple and clear terms, ounces, 
 half and quarter ounces, it will be evident, that the 
 value of these ounces, half and quarter ounces, 
 would be subject to a variation in real value, in 
 proportion to the quantity of them in the country; 
 but no force of language can make an ounce more 
 valuable than four quarter ounces, or an ounce any 
 thing but an ounce. Now the term 3 17 lO-i- I 
 have already proved to mean nothing but an ounce 
 of gold ; it does not mean that amount in our silver 
 coins, for it would require nearly 5 of our silver 
 coins to be equivalent in value to an ounce of gold, 
 taking them at the mint price. I have also proved, 
 that if 3 17 10-^ contain an ounce of gold, no 
 alteration even in that arbitrary term can possibly 
 take place, and we have the experience of 26 years 
 in proof of this assertion. If my reasoning on this 
 subject has been correct, it will follow, that since 
 Bank notes were declared a legal tender, the price 
 of gold in bullion has no longer been rated in gold 
 coins. I have also proved; that it was not rated in 
 silver coins, otherwise its price would have been 
 considerably higher than it has hitherto been. It 
 appears then to have been rated in Bank notes, 
 and its price accordingly, in Bank notes, has been 
 ^4 13 per ounce. In this we have a further proof 
 of what I before stated, that gold is no longer the 
 principal measure of property, but Bank notes; for 
 if gold had continued so, its market price never 
 
could exceed, bating the debasemement of the coins, 
 its mint price of *3 17 30^; and if silver had been 
 so, the market price of gold would have been about 
 *$ per ounce, its equivalent in our debased silver 
 coins. 
 
 Further, if my view of this subject has been cor- 
 rect., it follows, that there exists no just cause why 
 the Bank of England should not resume payments 
 in cash; and that the arguments of Mr. Henry 
 Thornton, and all those who advocated the cause of 
 the Restriction Bill, and its policy, possess no real 
 foundation in truth. The mode of avoiding all 
 danger will appear in the tenth chapter. 
 
 
CHAPTER IX, 
 
 Objections of Mr. Bosanquet to the principles 
 of the last Chapter anstvered, with remarks 
 on the theory of Mr. Locke. 
 
 MR. Bosanquet in his Practical Observations on the 
 Report of the Bullion Committee, has objected to 
 the accuracy of the principle stated in the last 
 chapter. He says tf it is the strong hold of the 
 theorists, and I shall not attack it otherwise than 
 by facts." It will., therefore, be necessary to exa- 
 mine the solidity of the facts adduced by Mr. Bo- 
 sanquet against the theory in question. 
 
 Because the market price of gold from May 1783 
 to May 1784 exceeded its mint price in the propor- 
 tion of 3 17 10 ; to 3 18, and in 17Q5 in that of 
 j3 1? 104- to ^4 3 and <^4 4, and because the 
 Bank on one occasion paid as much as 4 8 for 
 gold, Mr. Bosanquet infers that the theory in ques- 
 tion cannot be accurately applied to practice. Upon 
 these facts I would remark that in 1783 a period was 
 put to the American war. The stimulus which com- 
 mercial industry and speculation receives from so 
 desirable an event as peace, has a natural tendency 
 to call forth an increased circulation of money ; that 
 this was the case in 1783 cannot be doubted that 
 the Bank in this year had extended her issues to the 
 
 utmost limits that a prudent consideration for her 
 . 
 
5-5 
 
 own safety would admit is certain, from the circum- 
 stance of her having refused to advance money upon 
 the loan of that year.* 
 
 The excess of the mint price of gold, therefore, 
 during the period here mentioned, must have been 
 caused by a partial excess of Bank paper ; that this 
 was. the opinion of the Directors of the Bank is 
 evident from the precautionary measure they adopted, 
 to avoid a greater excess of paper, and consequently 
 of the mint price of gold. 
 
 The circumstance of the Bank Directors having 
 stated to Mr. Pitt, in 1795, that gold was ^4 3 and 
 3?4 4 per ounce, is the second fact brought forward 
 by Mr. Bosanquet to prove the insufficiency of the 
 theory in question. 
 
 It is somewhat remarkable (as Mr. Ricardo says, 
 page 31, the high price of bullion a proof of the 
 depreciation of Bank notes), " that no price of gold 
 above the mint price is quoted during the whole 
 year (1795) in Wettenhall's list. In December, it 
 is there marked ^3 1 7 6." I do not wish, however, 
 to doubt the truth of the statement made to R^r. 
 Pitt, though I am inclined to think the Bank 
 Directors meant gold in coin rather than gold in 
 bars ; but let us admit the fact as stated by the 
 Directors, and I think it possible to prove to Nfr. 
 Bosanquet, from the extent of the issues of the 
 Bank, that such a rise in the price of gold was 
 likely to be the result of such issues. In 1794, 
 the average amount of Bank notes in circulation 
 was * 10,699.520, but in the first quarter in 1/95 
 
 * See Bullion Report, Appendix, p. 92, Johnston's Ed. 
 
56 
 
 these were increased <to a 12,432,240, making an 
 increase in three months of <^1,732,720. If the 
 average of the whole of the year 17Q5 is compared 
 with that of 17Q4, an increase of Bank notes took 
 place of about ^800,000. It is no wonder then 
 that the price of gold exceeded its mint price, 
 with such an increase of Bank notes in so short 
 a period. It is of great importance to observe 
 the means which the Bank had recourse to, to 
 remedy this high price of bullion ; and they fully 
 confirm its cause. Their representation to the Chan- 
 cellor of the Exchequer was unnecessary, because he 
 could afford them no relief. The high price of 
 bullion, however, caused a run upon them, for 
 guineas for the purpose of being melted, and when 
 melted into bars, sold again to the Bank ; the Bank 
 to secure her own safety, and to answer the demands 
 of the holders of her notes in guineas, was obliged 
 to buy such gold at the advanced price, and to coin 
 it. But the Bank soon saw the folly of such a con- 
 test, and begun to use the means which are always 
 in her own power to bring the value of her paper to 
 the value of her coin she diminished the amount of 
 her notes, and by the first quarter in J7Q6 they were 
 reduced to ^10,824,150 which was a reduction from 
 the average quantity in circulation in the first quarter 
 in 1795 of \ ,608,090. The effects produced upon 
 the price of gold by this reduction of Bank paper 
 soon became visible, for by the 3d of June 1796, 
 not only gold in bars, but foreign gold in coin, could 
 be purchased in the London market at *3 17 6 per 
 ounce. 
 . I have thus endeavoured to dispose of the two 
 
ty 
 
 first facts stated by Mr. Bosanquet, and if he admiU 
 \vith me that the Bank have the power of regulating 
 the price of gold, and an admission to this effect 
 was made by the evidence of the Governor and 
 Directors examined before the committee of secrecy 
 in 1797, by Mr. Thornton in his Essay on the Paper 
 Credit of Great Britain, by Mr. Ricardo, and by the 
 Bullion Committee, then he. will also admit that the 
 temporary excesses of the mint price of bullion 
 which he has stated have been caused by the opera- 
 tions of the Bank itself, and not by the imperfection 
 of the principle which he has so boldly attacked by 
 facts. 
 
 The third fact stated by Mr. Bosanquet is, that 
 on " one occasion the Bank paid ^4 8 per ounce for 
 gold." This fact may be said to prove nothing more 
 than that the Bank, or their agent for them, made a 
 bad bargain, and like all bad bargains, when people 
 are sensible of their error, was not repeated. It is 
 exceedingly probable that the Bank did pay ^4 8 
 for gold as Mr. Nevvland stated ; if the demands of 
 the Bank for coin were urgent, and they employed 
 their ageiit to purchase gold bullion in Portugal for 
 them, without regarding its price in the Portugal 
 market at the time, which was probably as high as 
 it was in London, that it was not as much lower 
 than the London market price as to pay the expenses 
 of its freight and insurance to London, and afford a 
 profit to the importer, may be inferred from its not 
 having left the Portugal market, which in this case 
 would have been cheap for the London market that 
 would have been dear ; to whatever price, therefore, 
 which the agent of the Bank paid for gold in Por- 
 
58 
 
 tugal, must be added, agent's commission, the 
 charges of freight and insurance to London, and the 
 interest on the bullion purchased till it was coined at 
 the British mint ; these charges would probably make 
 the gold so purchased ^4 8 per ounce.* 
 
 This third fact 1 am inclined to think my readers 
 will admit has as little effect in impeaching the just- 
 ness of the principle under consideration as the two 
 first ; and it appears to me singular that Mr. Bosan- 
 quet should have brought forward any of them for 
 that purpose ; it at least evinces his anxiety to call in 
 question the justness of a principle which he finds it 
 impossible altogether to deny, but which militates so 
 decidedly and so justly against the cause which he 
 has so zealously espoused. Shall such solitary facts 
 overthrow a principle which the experience of 26 
 years has so firmly established ?-f~ 
 
 The circumstance of Portugal gold in coin selling 
 at a higher price in the market than standard gold 
 in bars, is brought forward by Mr. Bosanquet as 
 another fact irreconcilable with the theory in ques- 
 tion. This fact is admitted by the bullion committee, 
 and to me a very satisfactory reason is given why it 
 should be so. It appears to me, however, that Mr. 
 'Bosanquet does not fully comprehend the meaning of 
 
 * * Since writing the above, which would satisfactorily explain 
 
 to ae the cause of the price of gold exceeding its mint price, I 
 
 . have seen a stat-ement of the highest prices paid for gold by the 
 
 Bank sincf J773, in which it is stated that from 1786 to 1796' 
 
 the highest price was ^?3 17 -6 per ounce. It was in 1795 that 
 
 Mr. Bosinqiict states tl>e prices. to have been ^4 3, 4, a,nd 
 
 t a4 8. It is for Mr. B. and the Directors of the Bank to explain 
 
 " "tLis' 'fontfftdietioto. 
 
 t Sen; tfce market prices of gold in the Appendix. 
 
59 
 
 the fact admitted by the committee; for, if he did, 
 there would be no necessity for his exclaiming with 
 
 *such apparent delight, " this admission is like the 
 lettjng out of water ; it must have its way, you can- 
 not stop it." The meaning of the fact in question 
 appears to me to be this, that by law no individual 
 is allowed to export his own property, if it should 
 
 , happen to be in the shape of guineas, or of bars 
 melted from guineas, and rather than run the risk 
 of violating the law, at those periods when it is 
 necessary for him to export bullion, he would be 
 contented to pay 3s. or 4s. per ounce more for such 
 bullion as the law will allow him to export. This 
 premium has hitherto been sufficient to produce 
 abundance of exportable gold ; but whether it is 
 obtained by perjury or not is a difficult question to 
 decide. But this excess of the mint price of gold is 
 not to be attributed to the imperfection of the prin- 
 ciple which regulates its price, both at the mint, and 
 in the market ; it is occasioned by some of the 
 ancient laws of the land, the doubtful policy of 
 which the committee very justly calls in question, 
 and which Mr. Huskisson very justly observes ought 
 to be repealed, were it only to diminish the tempta- 
 tion to perjury. Let these laws be repealed, and 
 every man at liberty to do with his property what he 
 pleases, there would be no difference in price between 
 bar gold and Portugal gold in coin ; for the demand 
 for the latter., which is now caused by the laws 
 against the exportation of English gold, would never 
 be called into existence, for who would pay a pre- 
 mium for Portugal gold, When English gold at its 
 
 - 
 
6o 
 
 mint price could be obtained, and could be exported 
 \vithout the risk, and consequent loss, of violating 
 any law. The bullion committee have furnished us 
 with a very valuable example of the truth of the 
 opinion here expressed ; and as it is matter of fact, 
 and not theory, and so justly confirms the truth of 
 the principle in question, I shall lay it before my" 
 readers : 
 
 " The truth of these observations on the causes 
 * e and limits of the ordinary difference between the 
 " market and mint price of gold, may be illustrated 
 " by a reference to the mode, explained in the evi- 
 " dence, of securing a fixed standard of value for 
 " the great commercial payments of Hamburgh. 
 " The payments in the ordinary transactions in life 
 " are made in a currency composed of the coins of 
 " the several surrounding states ; but silver is the 
 standard there resorted to in the great commercial 
 payments, as gold is in England. No difference 
 analogous to that which occurs in this country, 
 " between the mint and market price of gold, can 
 '* ever arise at Hamburgh with regard to silver, be- 
 " cause provision is made that none of the three 
 fc causes above specified (the expense of coinage, 
 " the depreciation by wear, or the obstruction to 
 " exportation) shall have any operation. The large 
 ''.payments in Hamburgh are effected in Bank 
 " money, which consists of actual silver of a given 
 " fineness, lodged in the Hamburgh Bank by the 
 li merchants of the place, who thereupon have a 
 " proportionate credit in the Bank books, which 
 " they transfer according to their occasions. The 
 
 cc 
 
 tl 
 
61 
 
 " silver being assayed and weighed with scarcely any 
 " loss of time, the first mentioned cause of fluctua- 
 " tion in the relative value of the current medium 
 " compared with bullion is avoided. Certain masses 
 " of it being then certified (without any stamp being 
 <c affixed to the metal) to be of a given quantity and 
 " fineness, the value is transferred from individual to 
 " individual by the medium merely of the Eank 
 " books, and thus the wearing of the coin being 
 " prevented, one cause of depreciation is removed. 
 " A free right is also given to withdraw, melt, and 
 " export it ; and thus the other and principal source 
 " of the occasional fall of the value of the current 
 " medium of payment, below that of the bullion 
 " which it is intended to represent, is also effectually 
 " precluded. 
 
 " In this manner, at Hamburgh, silver is not 
 <c only the measure of all exchangeable value, but it 
 " is rendered an invariable measure, except in so fur 
 " as the relative value of silver itself varies with the 
 " varying supply of that precious metal from the 
 " mines. In the same manner the usage, and at last 
 " the law, which made gold coin the usual, and at 
 " last the only legal tender in large payments here, 
 " rendered that metal our measure of value : and 
 u from the period of the reformation of the gold 
 " coin down to the suspension of the Bank payments 
 " in specie in 17Q7, gold coin was not a very varia- 
 " ble measure of value ; being subject only to that 
 " variation in the relative value of gold bullion which 
 ff depends upon its supply from the mines, together 
 " with that limited variation which, as above de- 
 
62 
 
 " scribed, might take place between the market and 
 " the mint price of gold." Bullion Report, p. 14 
 and 1 5, octavo edition. 
 
 The last argument which Mr. Bosanquet brings 
 forward against the correct applicatin of the prin- 
 ciple in question to practice, is the instance of its 
 having failed in the recoinage of silver in the reign 
 of King William, which was planned and carried into 
 execution upon the theoretical principles of the great 
 Mr. Locke. I have no doubt, were the local facts 
 accurately known to us respecting the state of our 
 currency during the period of the recoinage, and 
 immediately after its completion, that it would be 
 possible to explain satisfactorily why the principle 
 failed in producing its naUiral effects in this instance. 
 At this distant date, and in the absence of these 
 facts, I shall offer a few observations that may in 
 some degree explain this interesting point in the 
 history of our currency. 
 
 Before the recoinage commenced, guineas were 
 ' current at 30s. each ; by an act passed in the 7th of 
 William the Third, they were declared current at a 
 rate not exceeding 26s. and by another act in the 
 year following (1696) they were made current at a 
 rate not exceeding 22s. leaving them to be paid and 
 received at any value under the rate last specified. 
 This act it is true did not declare the guinea a legal 
 tender at the rate of 22s. but while it circulated at 
 this rate, and for a short time after the recoinagc 
 was completed it did so, the mint proportions of gold 
 to silver were as 15.79 to 1 . The relative values of 
 gold to silver in the market. being about 14 to J, a 
 
63 
 
 profit attended the coining of gold of upwards of 8 
 per cent. In the same proportion it evidently be- 
 came the interest of individuals to pay their debts in 
 gold, thus much overrated at tire mint. But it will 
 be said, no person was obliged to take the guinea at 
 22s. Granted, but they did take it, and probably 
 the Exchequer showed the example; the scarcity of 
 currency also during the period of the recoinage, 
 which lasted about 4 years, perhaps left no other 
 alternative than both to pay and receive payments in 
 gold at the rate here specified. As silver had been 
 reputed the standard of our currency before the re- 
 coinage, to have returned to payments in it after its 
 completion as the only legal tender, would have been 
 attended with a disadvantage to every debtor of up- 
 wards of 8 per cent., gold being this much over-rated 
 at the mint. But neither the legislature, nor the 
 creditors of the state, took any means to effect such 
 a change. If the legislature had, when the recoinage 
 of silver was completed, declared the guinea current 
 at 20s. then the relative values of gold to silver in 
 the mint would have been fixed somewhat under 
 their market proportions, and silver would have be- 
 come the standard of our currency, because it would 
 have been the interest of every individual to have 
 coined and paid their debts in silver rather than in 
 gold. The guinea, however, was allowed to find 
 its own value, and soon after the recoinage was 
 finished, it became current, without the interference 
 of the legislature, at 21s. 6d. In consequence of 
 this fall in the value of the guinea, the mint pro- 
 portions of gold to silver became as 15.43 to U 
 
64 
 
 The market relative proportions remaining at about 
 14-^ to 1, there was a premium upon the coining of 
 gold of about 64- per cent. : by the same principle, a 
 premium to the same amount was to be obtained 
 upon every ^100 of silver coin converted into 
 bullion. The market price of silver exceeding its 
 mint price by the difference of the relative values of 
 the two metals at the mint compared with their 
 relative values in the market. But it may be asked, 
 \vhy did people receive the guinea at 21s. 6d. seeing 
 it was their interest by 6- per cent, to be paid in 
 silver rather than in gold ? It is difficult, if not im- 
 possible, to answer this question accurately ; but it 
 should not 'be matter of astonishment to us, if in 
 an age when the guinea had been current at 30s. 
 26s. and at 22s. that people should have persuaded 
 themselves that they were deriving an advantage 
 from receiving and paying it at the rate of 21s. fid. 
 nor can it be matter of surprise to us, that people 
 did not then perceive the effects produced on the 
 valuations of property by an inaccurate determination 
 of the mint proportions. The great Mr. Locke 
 himself did not impute the high price of silver after 
 the recoinage to this cause ; he attributed it to the 
 permission of exporting silver bullion, and to the 
 prohibition of exporting silver coin. This permission 
 of exporting, he said, rendered the demand for silver 
 bullion greater than the demand for silver coin. Dr. 
 Adam Smith very justly remarks upon this opinion 
 of Mr. Locke's, that " the number of people who 
 " want silver coin for the common uses of buying 
 " and selling at home, is surely much greater than, 
 
65 
 
 " that of those who want silver bullion either for 
 " the use of exportation or any other . use. There 
 " subsists at present a like permission of exporting 
 " gold bullion, and a like prohibition of exporting 
 " gold coin ; and yet the price of gold bullion has 
 " fallen below the mint price. But in the English 
 " coin, silver was then, in the same manner as now, 
 " under-rated in proportion to gold ; and the gold 
 " coin (which at that time was not supposed to re- 
 " quire any reformation) regulated then, as well as 
 cc now, the real value of the whole coin." Wealth 
 of Nations, vol. i. p. 58. 
 
 There is another circumstance which might operate 
 upon the disposition of people to pay and receive 
 payments in gold about the period in question, and 
 that is the disordered state in which the affairs of the 
 Bank of England were at that time. There can be 
 no doubt but the notes of the Bank were, in 1696, 
 at a discount of from 15 to 2O per cent.* In such 
 a singular state of credit, without good silver, with 
 paper so much depreciated, was it not natural for 
 people in general, both to receive and pay in gold,, 
 the only species of currency whose value may be said 
 to have been accurately defined at the time. 
 
 I submit the foregoing observations upon this 
 most interesting part of the history of our currency 
 to the public, with great diffidence, but with a firm 
 
 * See James Postlethwaite's History of the Public Revenue, 
 p. SOI. A short Account of the Bank by Mr. Godfrey. A short 
 History of the last Parliament, 1695, by Dr. Drake. The 
 Arguments and Reasons for and against Engrafting upon the 
 Bank of England, \vith Tallies, &c. 
 
 F 
 
66 
 
 conviction in my own mind, that they satisfactorily 
 explain the reason why Mr. Locke's theory in this 
 particular case .failed in producing the effect which 
 he had so confidently and so reasonably expected 
 from it : and if I have in any degree removed that 
 jealousy which Mr. Bosanquet says the public should 
 reasonably entertain of theoretical men, I shall feel 
 satisfied, even though I should fail in convincing 
 him that Mr. Locke was correct in his theory ; and 
 that its erroneous application to practice did not rest 
 with Mr. Locke, nor with his theory, but with the 
 legislature ; and unfortunately for the memory of 
 Mr. Locke, the legislature denied his theory, though 
 unintentionally, that opportunity of proving its cor- 
 rectness in practice, which we have witnessed in a 
 subsequent period in the history of our currency. 
 Mr. Locke's theory was acted upon at the general 
 recoinage of the gold currency in 1773, and 26 
 jears practice proved its truth. That this is fact 
 cannot be denied ; but I will admit with Mr. Bo- 
 sanquet that the theory seems now to have failed, for 
 we have a high market price of gold, and no gold 
 currency ; but in whose hands has the theory failed ? 
 by whose measures has the country been subjected to 
 -the loss of c7 50,000 for a gold recoinage ? the 
 theory has not in this instance failed in the hands of 
 theoretical men, nor by their measures has the 
 country been subjected to the loss in question ; but 
 in the hands, and by the measures, of those prac- 
 tical men, who unfortunately for their country have 
 had the power of regulating the value, of its currency 
 for fourteen years. 
 
CHAPTER X. 
 
 On the remedy ivhich the foregoing facts sug- 
 gest as calculated to redress the evils of the 
 Restriction Bill. 
 
 FROM what has been stated in the foregoing Chap- 
 ters, the remedy for the evils occasioned by the 
 Restriction Bill must be obvious. The manner of 
 applying it, however, is of a delicate nature. The 
 immediate resumption of payments in gold at the 
 Bank would be attended with serious inconvenience; 
 and no doubt considerable embarrassments would 
 follow. From the doctrine which I have endea- 
 voured to establish, a diminution of Bank notes 
 must take place before the price of gold is affected. 
 The particular mode of carrying this diminution into 
 effect, whether by a considerable reduction, in the 
 first instance, of one and two pound notes, or by 
 small, but simultaneous reductions of the different 
 classes of notes, is a question to be decided by those 
 who are practically conversant with the business of 
 the Bank, and with the ramifications of paper circu- 
 lation. It is clear, that an operation of so serious a 
 nature should be gradual. As soon as any consider- 
 able reduction of paper shall take place, bullion will 
 experience a fall ; the exchange will rise in propor- 
 tion, and the temptation to melt and export guineas 
 
68 
 
 will be lessened. A further reduction would bring 
 paper still nearer to an equivalency with bullion, 
 and exchange still nearer to par. A continued dimi- 
 nution of Bank notes would produce equality in the 
 bullion market, and bring the exchange to par, or 
 above it, after which the difficulty would be got 
 over. The money dealer would then find it his 
 interest to import bullion, and the Bank might 
 resume cash payments without apprehensions of a 
 run, it being at all times an accommodation to the 
 public to make their large payments in paper money. 
 
 In pursuing this measure I do not pretend to 
 deny, that considerable inconvenience would be felt 
 by the mercantile community, for want of such 
 liberal discounts as they may have had of late from 
 the Bank; but the evils arising from this temporary 
 embarrassment are by no means so great, as to plead 
 for a continuation of the present pernicious and 
 oppressive system. 
 
 As far as the Bank is concerned, the public is 
 entitled to the most liberal exertions. The Restric- 
 tion Bill has afforded the Bank enormous profits. 
 Observe the surprising effects produced on the value 
 of Bank stock, by the exemption from cash pay- 
 ments after \7Q7. 
 
 In 17^0, the average price of Bank stock was HOj 
 
 1777, ditto 133 
 
 1757? (having fallen after the alarm) 127| 
 
 1808, (having iisen progressively) the average was .... 235 J 
 1809., in July, Bank stock sold for 280 
 
 The usual dividend on Bank stock was seven per 
 
69 
 
 cent, a year. Observe the large premiums or lomses y 
 as they are called, given in addition to the dividend. 
 
 In June, 1799, there was given on every lOO Bank stock, a 
 bonus or present of alO Loyalty stock. 
 
 May, 1801 5 Navy, 5 per cent, stock. 
 
 Nov. 1802 2J Ditto. 
 
 Oct. 1804- 5 per cent. cash. 
 
 Ditto, 1805 5 Ditto. 
 
 Ditto, 1806 5 Ditto. 
 
 And in April, 1807, the dividend was raised to 
 ten per cent, at which it has since continued ! 
 
70 
 
 CHAPTER XL 
 
 Concluding remarks on the pernicious tendency 
 of the Bank Restriction Bill 
 
 i 
 
 I CANNOT leave this important, and highly in-. 
 
 teresting subject, without expressing my astonish- 
 ment, that the people of Great Britaip should have 
 so long submitted to a system, fraught with so much 
 injury to individual property, and to the prosperity 
 of the country at large. The people of this country 
 have always shown a laudible zeal for the perfection 
 of the currency; and had any member of the House 
 of Commons pleaded for a system that was to debase 
 the currency fifteen per cent, by an adulteration of 
 the standard of our money, his doing so would have 
 been considered as a grievous calamity to his country 
 and his motion would have been treated with the 
 utmost indignation. 
 
 The public mind has of late become considerably 
 enlightened on this important subject; and as the 
 progress of truth is to expunge error, let us hope to 
 see that love for the prosperity of the country mani- 
 fested by both Houses of Parliament, which was 
 exhibited when the affairs of the Bank of England 
 occupied their attention in 17Q7; when the welfare 
 pf the country was said to be so closely interwoven 
 
71 
 
 with her concerns. The country has a right to 
 expect, and it looks to the Legislature for the dis- 
 charge of the important duty an investigation 
 whether there now exist the same reasons for the 
 continuance of the Restriction Bill ; and, if the same 
 reasons still exist, the inquiry again, whether these 
 reasons imply any necessity which has its foundation 
 in truth. 
 
 If the public were well-informed of the conse- 
 quences that have followed the Restriction Bill, if 
 they knew that the present high price of provisions 
 is in a great measure attributable to the dangerous 
 power granted to the Bank of England, would not 
 the ears of the Sovereign have been assailed from 
 every city and town in Great Britain, for a repeal of 
 that impolitick measure? Would not the fathers of 
 families, widows and orphans, have supplicated the 
 removal of an evil which was so rapidly and unjustly 
 depriving them of the means of procuring daily 
 bread? The calamities of war have pressed suffi- 
 ciently hard on the poor, in the depreciation of 
 money that has ensued from taxation ; but it is cer- 
 tainly cruel and unjust to aggravate those evils by a 
 measure that has been adopted in no country with- 
 out the most serious injury to the body of the peo- 
 ple, and ended in calamities that every good man 
 would wish his country and his fellow creatures to 
 avoid. The people of this country have cheerfully sub- 
 mitted to all the inconveniences and expenses of a war, 
 in defence of their rights and liberties, and it is to be 
 
72 . 
 
 feared, that their burdens will rather be increased 
 than diminished. With this prospect before them, 
 it becomes the Legislature to watch over their 
 interests, to redress the grievances of those who are 
 injured, by the present system of the Bank of Eng- 
 land ; in general they will be found a meritorious 
 class of the community. The whole army and navy 
 are sufferers by the present system ; also all officers 
 on half pay, the widows of officers who have lost 
 their lives in the service of their country; those who 
 from age and other infirmities have retired from the 
 duties of office under Government. These classes 
 of the community must suffer a diminution of com- 
 fort in proportion to the extent of the depreciation 
 on Bank of England notes. They have no means 
 to shift the load from off their own shoulders. In 
 this respect they are worse situated than the day 
 labourer, who demands, and must obtain a recom- 
 pence for his services, proportionate to the existing 
 price of provisions. 
 
 Whatever evils may now exist in consequence of 
 the Bank Restriction Bill, the public has no security, 
 that they shall not be increased. An excessive 
 paper currency, however, has, in those countries 
 where the experiment has been fairly tried, worked 
 its own remedy, but not without giving an awful 
 shock to commercial credit. On the Bank of Eng- 
 land depends the credit of all our country Banks; 
 the notes of the latter being payable in the former, 
 the notes of all are at a discount of fifteen per cent. 
 
73 
 
 Must this evil be continued until it overthrow the 
 commercial credit of Great Britain ?* 
 
 * As the authority of Mr. Burke is, with an important por- 
 tion of our countrymen, high, it may not be useless to remind 
 them, not only that a forced paper circulation was one of thft 
 effects of the French revolution on which he dwelt with the 
 greatest indignation; but that the very circumstances which he 
 selected, as characterizing most strongly its mischievous effects, 
 are most of them the very circumstances in which it is found 
 coincident with that kind of forced circulation, under the effects 
 of which we now labour in this country. 
 
 Mr. Burke's opinion of the compulsory paper of the revo- 
 lutionary government of France is thus shortly expressed : " So 
 violent an outrage upon credit, property, and liberty, as this 
 compulsory paper currency, has seldom been exhibited by the 
 alliance of bankruptcy and tyranny, at any time, or in any na- 
 tion." Burke's Works, vol. v. p. 27*5. 
 
 Again, " We entertain an high opinion of the legislative; 
 authority : but zee have never dreamt that parliaments had any 
 right whatever to violate property, to over-rule prescription, or 
 to fore* a currency of their own fiction in the place of that "which is 
 real, and recognized by the law of nations." Vol. v. p. 327. 
 
 Mr. Burke further remarks, that " when so little within, 
 or without, is now found but paper, the representative not 
 of opulence, but of want ; the creature not of credit, but of 
 power; thev imagine that our flourishing state of England is 
 owing to that Bank paper, and not the Bank paper ro the 
 flourishing condition of our commerce, to the solidity of our 
 credit, nd to the total exclusion of all idea of power from 
 any part of the transaction. They forget that in Eugland, not 
 one shilling of paper money of any description is received but 
 of choice: that the whole had its origin in cash actually depo- 
 sited ; and that it is cojivtrtible, at pleasure, in an instant, and 
 without the smallest loss, into cash again. Our paper is of value 
 in commerce, because in law it is of none. It is powerful in 
 change, because in Westminster Hall it is impotent. Jn pay- 
 ment of a debt of twenty shillings, a creditor may refuse all the 
 paper of the Bank of England. Nor is there amongst us a single 
 public security, of any quality or nature whatsoever, that is 
 enforced by authority. In fact, it might be easily shown, that 
 our paper wealth, instead of lessening the real coin, has a ten- 
 
74 
 
 dency to increase it ; 'instead of being a substitute for money, 
 its only facilitates its entry, its exit, and its circulation ; that 
 it is the symbol of prosperity, and not the badge of distress. 
 Never was a scarcity of cash, and an exuberance of paper , a sub" 
 ject of complaint in this nation." Vol. v, p. 461-2. 
 
 Mr. Burke, in further descanting on the measures of the 
 revolutionary government, adds, " As to the bankruptcy, that 
 event has happened long ago, as much as it is ever likely to 
 happen. So soon as a nation compels a creditor to take paper 
 currency in discharge of his debt, there is a &aArupfcj/."- VoL 
 rii. page 47. 
 
CHAPTER XII. 
 
 Summary View of the Doctrines, ivhich the 
 reasoning in the foregoing Chapters tends 
 to establish. 
 
 IT has appeared, that the rate of exchange cannot 
 exceed the expense of transmitting the precious 
 metals from one country to another. And, should 
 it so happen, that, with a currency of gold and 
 silver only, the rate should appear to exceed that 
 amount, it must be occasioned by the debasement 
 of the coins, they being deficient in weight; and 
 whatever that rate exceeds the expense of transmit- 
 ting the gold or silver, must be the amount of the 
 debasement of the currency, as the rate of exchange 
 is calculated, not in what a currency contains, but 
 >n what it ought to contain. 
 
 If the rate of exchange exceed the expenses of 
 transmitting gold from one country to another, with 
 a currency consisting of gold and silver and paper, 
 the latter convertible into the former, it must ne- 
 cessarily be temporary, and will always effect its 
 own remedy. 
 
 I have endeavoured to establish, that the market 
 price of gold cannot exceed its mint price, with a 
 currency consisting of gold and silver only ; unless 
 
76 
 
 the coins be debased by a deficiency in weight, in 
 which case the excess of the market above the mint 
 price of gold will indicate the exact degree of de- 
 basement. 
 
 With a currency consisting of gold and silver and 
 paper, the latter convertible into the former at the 
 pleasure of the holders, the market price of gold 
 may exceed its mint price; but this excess is neces- 
 sarily temporary, and always effects its own remedy. 
 
 With a currency consisting of gold and silver and 
 paper, the latter not convertible into the former, 
 the market price of gold may rise above its mint 
 price to an indefinite extent, and may become per- 
 manent, which altogether depends on the discretion 
 of the Bank, in the issues of her notes. The price 
 of gold being rated in her notes will have a price 
 according to their quantity in circulation; in this 
 case, the excess of the market above the mint price 
 of gold, is the amount of the depreciation on Bank 
 notes. 
 
 With a currency consisting of gold and silver and 
 paper, the latter not convertible into the former, 
 the rate of exchange may exceed the expense of 
 transmitting the precious metals from one country 
 to another ; the excess may become permanent, and 
 it may rise to an indefinite extent, depending alto- 
 gether on the amount of paper in circulation ; an 
 evil for which the country can have no effectual 
 and permanent remedy, but fn the obligation of the 
 issuers of those notes, to pay them in gold or silver 
 on demand. Whatever the rate of exchange ex- 
 ceeds the expense of transmitting the precious 
 
77 
 
 metals must necessarily be the amount of the de- 
 preciation of Bank notes, together with the debase- 
 ment in the currency, as the rate of exchange 
 cannot exceed the expense of transmitting gold from 
 one country to another, but in consequence of a 
 debased or a depreciated currency. 
 
CHAPTER XIII. 
 
 Observations on the principle on which the coins 
 constituting the principal measure of pro- 
 perty are fabricated on the propriety of 
 establishing but one standard of money, and 
 on the principles of seignorage. 
 
 THE principle by which our gold coins have been 
 fabricated during the greater part of a century having 
 been fully explained in a preceding Chapter, it will 
 be only necessary here to recapitulate. It appears 
 that gold coins are now the exclusive standard mea- 
 sure of property in this country, and that the price 
 of gold, as fixed at the mint, is invariable ; that 
 while every a3 17 10^- of our gold coins contain an 
 ounce of standard gold, they will at all' times com- 
 mand an ounce of gold bullion in the market. It 
 must appear evident, however, that any imperfection 
 in these coins should be carefully avoided, as the 
 debasement will raise the price of gold in the market 
 in proportion to its extent ; the new and heavy coins 
 that may be issued from the mint, will be exchanged 
 for the light and debased ones, and will be melted 
 and sold for the profit attending the high market 
 price. This practice must subject the country to a 
 heavy loss in replacing the coins thus melted, and 
 
79 
 
 which in their turn are likely to undergo the same 
 fate. The reader is referred to the Tables of the 
 prices of gold, in the Appendix, from 1760 to 1773, 
 to show more particularly the effects produced by 
 allowing the gold coins, which then, as well as now, 
 were the principal measure of property, to become 
 debased. Upwards of seven hundred thousand pounds 
 on the average of every year during this period were 
 issued from the mint. There was, however, no 
 curing the evil but by a general recoinage of the 
 light and debased coins, which reduced the price of 
 gold to nearly a half per cent, below its mint price. 
 The judicious regulations of the late Lord Liver- 
 pool, announced in his Majesty's proclamations, that 
 the gold coins should pass by weight as well as by 
 tale ; and that the guinea should not be a legal ten- 
 der, when it weighed less than five dwts. and eight 
 grains, the half and third of the guinea in the like 
 proportion, but should be returned to the mint to 
 be recoined, were well calculated to maintain our 
 gold currency in that state of perfection to which it 
 was brought by the general recoinage. It is pro- 
 bable, that if the Restriction Bill had not deranged 
 our monetary system, we should have still possessed 
 a currency in a state of perfection which few or no 
 nations have ever enjoyed, and from which many 
 and great advantages would always result to the 
 country at larp;e. If it is considered, that the rate 
 of exchange for or against a country, in a great 
 measure depends on the perfection of the coins con- 
 stituting the principal measure of property, this will 
 further enforce the propriety and necessity of watch- 
 
80 
 
 ing over the perfection of this standard of value, 
 being a result in which the commercial community 
 is so much interested. 
 
 Among the objects which require the attention, 
 vigilance, and study of the Legislature, the state of 
 the money is not one of the least considerable. The 
 aim of government should be to obtain what is re- 
 quired in the shape of taxes with the least possible 
 oppression to the subject, and this it carinot do, if 
 it fetters his industry by imperfect systems of cur- 
 rency, of which the country at large have com- 
 plained as often as they have existed. 
 
 If this country have the good fortune to see the 
 Restriction Bill repealed, the proclamations of his 
 Majesty should again be put in full force in support 
 of the perfection of our gold currency for which so 
 much money has been expended. 
 
 When this desirable object is attained, it might be 
 proper to establish an office in his Majesty's mint, 
 for giving facility to the exchange of the coins be- 
 come deficient in weight from wear, as stated in the 
 proclamation; the government to determine at whose 
 expense the exchange shall be made. An office of 
 this nature anciently existed in the mint,, and the 
 person who held it was called the King's exchanger. 
 The following account of this office is given by 
 Lord Liverpool : tc This officer appears not only to 
 cc have exchanged the coins of one metal made at 
 " the royal mint, for those made of another ; but as 
 " the exportation of the coins of .the realm was 
 " prohibited, he furnished persons going out of the 
 " kingdom with foreign coins, in exchange for En- 
 
 4 
 
81 
 
 cc glish coins ; and he furnished merchants, strangers, 
 " coming into the kingidom, with the English coins, 
 " in exchange for foreign coins : this officer had his 
 " deputies in many of the out-ports and principal 
 cc cities of the kingdom : a considerable profit was 
 " made by this practice, of which the king is said 
 * s to have had his share. When gold coins were 
 fc exchanged for silver coins, a silver penny of that 
 " time was taken for the exchange of each gold 
 <c noble, being the largest gold coin then in cur- 
 " rency, and in like proportion for smaller gold 
 " coins ; and when silver coins were exchanged for 
 gold coins, a silver penny of that time was given, 
 for each gold noble received in exchange for them, 
 and in like proportion for smaller coins; and the 
 " exchanger is said to have gained thereby 1-i- per 
 " cent. When this officer exchanged foreign coins 
 " for English, or English for foreign, the exchange 
 " was regulated by a table, hung up in each of his 
 u offices. The last person that was appointed to the 
 " office of king's exchanger, was the Earl of Holland, 
 " in the third year of Charles the First." Lord 
 Liverpool, p. 213-4. 
 
 It must be admitted, that an office of the nature 
 here described would be a great public convenience, 
 and would powerfully tend to preserve the gold cur- 
 rency in that degree of perfection which is so essen- 
 tial to the prosperous course of the country. The 
 increased facility of the operations of the' new mint, 
 by which the light money could speedily be re- 
 coined, would render a large capital unnecessary ; 
 and if the government adopt any of the foregoing 
 
 G 
 
82 
 
 regulations of the exchanger's office, in respect to 
 foreigners, it may defray the interest of the capital 
 employed. This tax on foreigners should not, how- 
 ever, exceed the expense which they are subjected 
 to in disposing of their coins to a goldsmith, who 
 has his reasonable profit by the transaction. 
 
 In a preceding Chapter, it has been proved, that 
 coins of gold have been the exclusive standard mea- 
 sure of property in this country since 1717* not 
 only in our intercourse with one another, but with 
 foreign nations. During this period, silver coins 
 have acted in the same subordinate situation in re* 
 lation to gold coins, as copper coins have in relation 
 to silver. In point of law, however, the silver coins 
 were equally a legal tender with those of gold, and 
 continued so until 1774, when an act was passed 
 declaring silver a legal tender to the amount of j25 
 only, except by weight.* 
 
 The late Lord Liverpool has at considerable 
 length, in his letter to the King, stated the evils 
 which arise from a nation having two standards of 
 
 * Although this Act of Parliament prohibits an individual 
 from paying a debt in silver currency by tale beyond 25/., he 
 can, notwithstanding, pay to any amount, provided he does it 
 by weight, at the rate of 5s. 2of. for each ounce of silver 3 this 
 law, therefore, cannot prevent silver from becoming the standard 
 of our money, when it is the interest ol individuals to pay in 
 silver rather than in gold. 
 
 The clause of the Act here alluded to is as follows : " That 
 (t no tender in payment of money made in the silver coin of this 
 " realm, of any sum exceeding the sum of twenty-live pounds at 
 " any one time, shall be reputed in law, or allowed to be legal 
 " tender within Great Britain or Ireland, for more than accord- 
 " ing to its value by weight, after the rale of 5*. 2d. for each. 
 " unce of silver." 
 
83 
 
 money, each legal tender, and enforces the pro- 
 propriety of declaring by law, that silver should only 
 pass in exchange for the guinea, as copper now does 
 for silver. 
 
 It will be unnecessary here to enter into a detail 
 of the particulars stated by his Lordship : it is suffi- 
 cient for our purpose, that the practice of nearly a 
 century justifies the sanction of a practice by law, 
 which has so long obtained, but under heavy dis- 
 advantages without law.* 
 
 * Every necessary measure should now be adopted to prevent 
 silver becoming again the standard of our money ; if it were, 
 great injustice would be done to every person who had acquired 
 property ; it being acquired in reference to gold being the 
 standard. It appears from the Tables in the Appendix, that the 
 average relative value of gold and silver have been for the last 
 year fully as 1 to 16; the mint proportion areas 1 lo 15.07. I 
 silver, therefore, was allowed to become the standard of our 
 Bioney, it will appear evident that no individual who owed an 
 ounce of gold, or 3l. 17*. 10-yrf. would discharge his debt with' 
 that ounce, he would avail himself of the cheapness of silver, 
 and with his 3l. 17*. 10-J-d. of gold, purchase 16 ounces of silver, 
 which, if coined at the rate of 5s. 3d. per ounce, being the mint 
 price of silver, would produce 4/. 2$. Sd. and with 3/. 17*. 10|</. 
 of that sum, he could, and certainly would, discharge his debt, 
 making a profit thereby of 4s. $\d. or 61. 3s. Qd. per cent, so 
 that every individual who discharged a debt in this manner, would 
 save 61. 3s. 0-^d. while the creditor would be defrauded to the 
 same amount. 
 
 If the present market relative value of gold and silver should 
 become permanent, and our currency restored to that state in 
 which it was previous to 1797 (and the act annulled prohibiting 
 the coinage of silver at the mint, and its great scarcity will render 
 this necessary sooner or later), silver would unquestionably be- 
 come the standard of our currency, and the public creditor de- 
 frauded to the extent here described; silver only would be brought 
 to the mint to be coined, and as the ounce of gold would be 
 worth 4f. 2s! 8rf. in silver, all the coins would be melted and 
 exported for the profit attending the high market price of 
 
 G 2 
 
ft has been a question often agitated, but never 
 satisfactorily settled, at" whose expense the fabrication 
 of the coins of this country should be made. Lord 
 Liverpool was of opinion, that a seignorage might 
 be levied on the coins of silver, but not on those of 
 gold, the latter being the principal measure of pro- 
 perty, and would not in such case be perfect. 
 
 It would appear to me, that Lord Liverpool was 
 mistaken in his opinion respecting the effect which 
 would be produced upon the principal measure of 
 property by the imposition of a seignorage. To 
 render the statement as simple as possible, let us 
 suppose for example, that we had only coins of gold 
 in this country, and that a seignorage to the amount 
 of the expenses incurred in their manufacture was 
 imposed by the legislature, say 1-i- per cent. It must 
 be evident, that jlOO of such coins would be 
 more valuable than their weight in bullion of the 
 same purity by the expense of the coinage. Every 
 *lOO of such gold currency, therefore, would pur- 
 chase, not only its weight in bullion, but 1-i per 
 cent, more as the expense of converting such bullion 
 into coin ; the market price of gold would thus be 
 . J.J. per cent, under its mint price. If the seignorage 
 was made to exceed the expenses of the coinage, so 
 as to afford a profit to the illegal coiner, supposing 
 him to coin money of the legal standard in weight 
 
 The necessity and justice, therefore, of declaring, by a specific 
 Act of Parliament, gold to be the only standard of out- money, 
 and silver a legal tender to the amount of a guinea only, must 
 appear obvious ; and i't is to be hoped the importance of this 
 -measure will not escape the attention of the legislature. 
 
85 
 
 and fineness, then would the value of the currency 
 be reduced by such illegal additions to its quantity; 
 the market price of bullion would approach to its 
 mint price, but would fall short of it by the real 
 expenses of the coinage, and would thus destroy the 
 profits of the illegal coiner. It will also follow, that 
 ,slOO of such currency, would purchase a greater 
 quantity of any other commodity than its weight in 
 bullion of the same purity would do, and that by 
 the expense of the coinage, or 1-^ per cent. By the 
 imposition of a seignorage, therefore, the. price of 
 bullion and commodities would experience a fall, 
 limited however by the real expenses of the coinage, 
 no laws having as yet been devised to prevent illegal 
 additions to the currency. I would not, however, 
 apprehend that the coi/is, fabricated under this 
 system, would in any degree be imperfect : on the 
 contrary, I think a considerable national advantage 
 would be the result of such a principle being adopted 
 at the British mint. As the value of the coins 
 would be increased, so would their quantity be di- 
 minished ; a smaller amount of currency would cir- 
 culate the same quantity of commodities ; the gold 
 thus relieved from the channel of circulation would, 
 in the hands of individuals, become capital, the na- 
 tion deriving all the advantages of its reproduction 
 with a profit. 
 
 There are two modes by which a siegnorage may 
 be imposed ; the one by deducting its amount from 
 the weight of the coins ; the other by charging it 
 to the importers of bullion as I have proposed above; 
 this latter mode, I am of opinion, would be the 
 
86 
 
 rnost preferable, because the weight of the new 
 coins would not differ from those now in circulation, 
 and thus two of Lord Liverpool's objections to a 
 seignorage upon our gold coins would be obviated. 
 See his Letter to the King, p. 154, 155. 
 
 If the Bank of England, therefore, as almost the 
 sole importer of bullion into the mint, was subjected 
 to the expense of the coinage of gold, which I have 
 stated to be the natural limit of a, seignorage, she 
 would not necessarily lose by so doing ; the money 
 which she would receive for her bullion would be 
 augmented in value in the same degree. The go- 
 vernment, however, would derive all the advantage 
 of having the expenses of the gold coinage defrayed, 
 and this has been no inconsiderable charge during 
 the reign of his present Majesty.* 
 
 A particular advantage would be enjoyed by hav- 
 ing a seignorage, by diminishing that speculation in 
 the exportation of our gold coins, which so fre- 
 quently takes place, when the rates of exchange 
 make it a profitable transaction these coins have 
 hitherto been replaced at the expense of the Go- 
 vernment. 
 
 * In the regulations respecting the French coinage, passed in 
 the year 1803, as detailed in the Moniteur, it was enacted, that 
 no charge was to be made for coining, but the actual expense 
 incurred. It is also enacted in the French mint, that the im- 
 porters of bullion shall pay the expense of refining that portion 
 which is necessary to bring the whole to the standard of the 
 money. 
 
 .At his Majesty's mint this charge is defrayed by the public, 
 and is frequently a very serious expense, sometimes amounting to 
 a fourth, fifth, or sixth part of the whole charge of the coinage. 
 
 4 
 
87 
 
 If the principle of a seignorage was adopted in 
 his Majesty's mint, it would be desirable to give the 
 importers coin for their bullion on demand ; and 
 such regulations might be introduced into the mint 
 as to facilitate the business of the coinage, so as to 
 render a large capital for the purpose unnecessary. 
 Many advantages would result to his Majesty's mint 
 from such a system. 
 
83 
 
 CHAPTER XIV. 
 
 Observations on the principle by which our 
 silver coins have been fabricated ; a plan 
 of a re-coinage for preserving the silver 
 currency in a state of uniformity and per- 
 fection. 
 
 THIS country has hitherto been peculiarly unfor- 
 tunate in her attempts to retain a sufficient quantity 
 of silver in the state of coins. The great re-coinage 
 which took place in the reign of King William, 
 was executed according to the present mint price 
 of silver* which is at the rate of 5s. 2d. per ounce, 
 or 62s. to the pound weight troy. On the com- 
 pletion of the re-coinage, which is said to have 
 cost about three millions sterling, the market price 
 of silver kept superior to its mint price, thereby 
 holding out a considerable temptation to melt and 
 export the coins, so that, in a few years, the greater 
 part of them disappeared from circulation. The 
 growing debasement of the silver coins, which at 
 this period were deemed the principal measure of 
 property, led to the proclamation in 1717* which 
 I have already mentioned; declaring gold coins a 
 legal tender, at the rate of 21s. to the guinea. 
 From this period to the reformation of the gold 
 
89 
 
 coins, in 1773, the average market price of silver 
 was more than five per cent, above its mint price, 
 which prevented any considerable re-coinage from 
 being executed at the mint. After the re-coinage 
 of the gold currency, the price of silver fell some- 
 what nearer to its mint price, so that on an average 
 of twenty-four years, from 1773 to 1797, its price 
 was 5s. 3^-d. per ounce, or about two per cent, 
 above its mint price. This continued superiority 
 of the market was sufficient to prevent any coin- 
 age from taking place, and has been the cause of 
 the great debasement which has ensued in our silver 
 currency. 
 
 During the twenty-four years here mentioned, 
 our gold coins were in a state of great perfection, 
 and should have purchased silver bullion at the 
 mint price, provided its relative proportion to gold 
 had been correctly fixed. It appears, however, that 
 silver could not be purchased but at 1^-d. per ounce 
 above its mint price, which renders the relative 
 value of standard gold to standard silver as 14-^ 
 to 1. The mint proportions are as J5.07 to 1. It 
 appears, therefore, that the relative value of gold 
 to silver is erroneously fixed at the British mint, 
 and if a silver coinage was executed on the present 
 principle of 5s. 2d. per ounce, it would be more 
 valuable than the average price of silver in the mar- 
 ket by two per cent. This is supposing that the 
 Restriction Bill is repealed, and the country in pos- 
 session of a gold currency as perfect as it was from 
 1777 to 1797, and the relative value of. gold and 
 silver the same. 
 
It would appear from these facts, that before any 
 re-coinage of silver can take place in this country, 
 some alteration must be made in the principle by 
 which the coins have hitherto been fabricated. 
 
 The inconvenience which the country has hitherto 
 experienced from the scarcity of silver coins, renders 
 it desirable that some plan should be adopted, by 
 which that inconvenience might be remedied. It 
 is my intention here to propose a plan for this pur- 
 pose; but, before entering into the particulars of 
 it, it becomes necessary to consider the principle on 
 which it ought to be executed, that the country 
 may enjoy the advantages of a perfect currency, with 
 the least possible expense. 
 
 I have already stated the principle which regulates 
 the amount of seignorage on our gold coins. In 
 respect to silver, the seignorage is not limited by 
 the same law, but may be extended with propriety 
 beyond the expense of coinage. In fact, the ex- 
 pense of coinage would not give that security to the 
 silver coins which may be necessary to retain them, 
 in the country. Silver, being an article of more 
 universal employment as a commodity than gold, 
 is subject to greater fluctuations in price; and 
 although, at the expiration of a term of years, it 
 may not exceed its mint price above two per cent, 
 yet it is found, from experience, to rise from five 
 to twelve per cent, above its mint price.* The 
 price of silver is also affected by the perfect or im- 
 perfect state of the gold coins, and from both causes 
 
 * Lord Liverpool on the Coins of the Realm, p. 150. 
 
91 
 
 is liable to considerable changes* In some instances, 
 since the Restriction Bill passed, silver has risen 
 as high as 6s. per ounce., which is fifteen per cent, 
 above its mint price. That this would not be the 
 case, if the currency was restored to that state in 
 which it existed from 1773 to 17Q7> appears evident 
 from its average price not exceeding 5s. 3^-d. during 
 that period.* 
 
 To guard, therefore, against all hazard of melt- 
 ing the coin, the seignorage ought to be ten per 
 cent, above the average price in question; were it 
 less, past experience shows the possibility of a case 
 existing, in which a profit would be made by melting 
 the coin. 
 
 It is not sufficient protection, as was proposed 
 by Lord Liverpool, to make the seignorage equal 
 only to the expense of coinage, which might be 
 about 2i per cent. Besides, the additional 7-r per 
 cent, would supply a fund to meet the deterioration 
 of the coin, 
 
 It is a matter of difficulty to fix what quantity of 
 silver currency is requisite for the wants of the 
 country. At present, it is supposed, there are only 
 three millions in circulation; but this is evidently 
 quite inadequate, as appears from the quantity of 
 
 * From the alteration that appears to have taken place in the 
 relative value of gold to silver in the market of Europe, the 
 price of silver, in this country, should fall to about 5s. per 
 ounce j in reality it is so, but is prevented from being manifest 
 in the market by the depreciation now existing in our Bank 
 paper j the price of silver, like that of gold, being rated in tkis 
 depreciated paper, 
 
92 
 
 shilling, half-crown, and crown Bank notes, which 
 from time to time have been in circulation, and the 
 otherwise general complaint of scarcity of silver 
 coins. 
 
 The amount issued at the recoinage in King Wil- 
 liam's time is, perhaps, not a proper criterion to 
 judge by. The situation of the country has con- 
 siderably altered; our population and trade have 
 greatly increased; but as all great payments have 
 been made in gold, or in Bank notes, the quantity 
 of silver currency wanted, it being so for the subor- 
 dinate office of change solely, may upon the whole 
 be less now than formerly. Without naming any 
 specific sum, as an adequate supply for the wants of 
 Great Britain and Ireland, on the plan about to be 
 proposed, we may assume, as the supposed demand, 
 a currency of five millions, supposing that less would 
 not be a sufficient supply.* 
 
 If we suppose then, that a recoinage of silver is 
 to take place; that silver in place of the mint price 
 of 5s. 2d. per oz. shall be rated at 5s. 3^-d. the 
 
 * As an excess of silver currency would be attended with 
 great inconvenience, and loss of capital to those in whose hands 
 the superabundance might become fixed, it is necessary to 
 remark, that by the plan here proposed, this excess could not 
 in any great degree take place. As all demands would be made 
 at the mint, no more would be issued than demanded. But to 
 prevent the possibility of any such inconvenience, let it be en- 
 acted, among the regulations of the Exchanger's Office, that 
 every individual shall have the privilege of exchanging his silver 
 coins for gold; and if gold is declared by law to be the stand- 
 ard of our money, this convenience ought to be afforded to the 
 public. 
 
93 
 
 average price of the 24 years before-mentioned, or 
 at the rate of 5s. 4d.* to avoid the inconvenience 
 of fractions; and that a seignorage of 10 per cent, 
 is to be imposed, the plan in contemplation would 
 be, with a currency of five millions, that there 
 should be coined at the mint half a million yearly, 
 for ten successive years. 
 
 The following table will show the operation of 
 the seignorage during that period. 
 
 * The alteration which has taken place in the relative value 
 of gold to silver, already mentioned) may render it necessary to 
 fix a mint price for silver somewhat lower than that stated above. 
 
A Table of Seignorage upon Coinage of Silver, 
 at 10 per Cent. 
 
 
 Amoun 
 paid fo 
 coining 
 million 
 
 per cent 
 
 Amount 
 of seigno 
 rage on 
 ^500,00 
 at 10 
 per cent 
 
 Amoun 
 of 
 surplus 
 on each 
 yearly 
 coinage 
 
 Amount of 
 collective 
 interest 
 on each 
 yearly 
 surplus. 
 
 Total. 
 
 First Year 
 Deduct for coinage 2- 
 
 Second Year 
 Deduct for coinage 
 
 Third Year 
 Deduct for coinage 
 
 Fourth Year 
 Deduct for coinage 
 
 Fifth Year 
 Deduct for coinage 
 
 Sixth Year 
 Deduct for coinage 
 
 Seventh Year 
 Deduct for coinage 
 
 Eighth Year 
 Deduct for coinage 
 
 Ninth Year 
 Deduct for coinage 
 
 Tenth Year 
 Deduct for coinage 
 
 12,50 
 12,50 
 12,500 
 12.500 
 12,500 
 12,500 
 12,500 
 
 50,00 
 12,50 
 
 37,50 
 37,50 
 37,50 
 37,50 
 37,50( 
 37,500 
 37,500 
 37,500 
 37,500 
 37,500 
 
 1,875 
 3,843.75 
 5,919.93 
 8,081.48 
 0,360.55 
 2,753.58 
 5,266.56 
 7,904.32 
 0,674.55 
 
 37,500 
 39,375 
 41,343.75 
 43,410.93 
 45,581.48 
 47,860.55 
 50,253.58 
 52,766.36 
 55,404.32 
 58,174.55 
 
 50,00 
 12,500 
 
 50,000 
 12,500 
 
 50,001 
 12,500 
 
 50,000 
 12,500 
 
 50,000 
 12,500 
 
 50,000 
 12,500 
 
 12,500 
 
 50,000 
 12,500 
 
 12,500 
 
 50,000 
 12,500 
 
 12,500 
 
 50,000 
 12,500 
 
 
 25,000 
 
 
 75,000. 
 
 5,670.52 
 
 71,670.52 
 
 * 2^ per cent, is assumed as the expense of coinage, not with 
 any reference to what the real charge may be, but from its render- 
 ing the calculation more distinct. 
 
95 
 
 At the end of ten years, that is to say, when the 
 lOth half million has been one year in circulation, 
 the clear amount of the seignorage fund would be 
 471,670. 
 
 According to experiments made at the mint on 
 the wear of our silver currency (as quoted by Lord 
 Liverpool), it was found that the silver coins of King 
 William's reign had lost about 25 per cent, in a 
 century, which is at the rate of 24- per cent, every 
 ten years. A silver currency already debased 1 per 
 cent, by a seignorage, should be suffered to receive 
 as little debasement from wear as possible. It may 
 therefore be proper to recall it from circulation when 
 it may have undergone a debasement of 2-- percent., 
 as no law contributes more to the security of the 
 public against base money, than the newness and 
 uniformity of the coins. 
 
 According, therefore, to our plan, supposing for 
 example that the first issue of half a million took 
 place in 1810, each coin bearing that date, another 
 in 1811, another in 1812, &c. 8cc. until the whole 
 ten half millions were issued, when the half million, 
 first issued, has been in circulation ten years, it is 
 recalled by proclamation, and exchanged for an 
 equal quantity of new coin, bearing date 1820, every 
 annual issue bearing the date of the year in which it 
 was coined. The issi *, and recall pre-supposes an 
 eleventh half million owned, to be exchanged for 
 the half million just recalled. 
 
The expenses attending this recall 
 and issue would be loss by wear on 
 the half million recalled, at 24- per cent. 12,500 
 
 Cost of coining the new half mil- 
 lion in exchange, at 2-i. per cent. . , 12,500 
 
 Together 25,OOO 
 
 This expense to be defrayed as follows : 
 
 A year's interest on the 
 seignorage fund, say 23,750 
 
 Part of the half million in 
 circulation may have been 
 lost, and of course not being 
 presented for exchange, there 
 will be no occasion to make 
 good the loss by wear on that 
 part. Suppose it to be a 
 twentieth, or ^25,000, the 
 sum saved on this, at 2i per 
 cent, would be 6'25 
 
 Expense of re-coinage 
 saved on that amount at 
 
 24- per cent, < 625 
 
 Together 25,000 
 
 Not less than a- half a million would be issued of 
 the new coins, but that 25,OOO of this new half 
 million not being wanted for the purpose of replace- 
 ment, the expense of its coinage does not apply to 
 this account. 
 
 It is proposed, that the deficiency on the half 
 million recalled should be replaced by the importers 
 
97 
 
 of bullion, and should also bear a seignorage of 10 
 per cent. 
 
 Next year, the second half million issued might 
 be replaced in the same manner, and the yearly 
 routine of recalling half a million of coin ten years 
 old,, and re-issuing another half million of new coin, 
 might go on, ad infinitum, without calling on the 
 public revenue for a shilling towards defraying the 
 expense. 
 
 The eleventh half million necessary to complete 
 this plan, would have a clear surplus of 37,500, 
 it bearing also a seignorage of 1O per cent. The 
 interest on this sum added to the seignorage on the 
 annual supplies, which are estimated at ^25,OOO, 
 will constitute a fund of .4,375 per annum, which 
 may be applied to defray part of the expenses of the 
 mint establishment. 
 
 The seignorage fund would probably be invested 
 in the funds, under the management of public com- 
 missioners appointed by Government. 
 
 The principal advantages resulting from the adop- 
 tion of such a plan would be : 
 
 1. The great public saving on the score of 
 coinage. 
 
 2. The abundant stock of silver currency in a 
 state which would be very difficult to counterfeit. 
 
 3. Steadiness in the price of silver bullion, as, 
 instead of the present uncertainty of demand for 
 coin, the quantity wanted would be defined, and 
 after the first ten years would probably be insig- 
 nificant, perhaps from 15,000 to .=50,000 per 
 annum. 
 
08 
 
 4. Regularity in the employment of the officer* 
 and workmen at the mint. Hitherto their employ- 
 ment has consisted of great temporary exertions, 
 with long intervals of inactivity. During these in- 
 tervals, their time and attention have been directed 
 to other occupations. Such alternations are evi- 
 dently unfavourable to the proper management of 
 the establishment. How much more expensive 
 would a large manufacture be if conducted in this 
 manner, than by that even course which adapts sup- 
 ply to demand. 
 
 Let us now proceed to anticipate some of th* 
 objections that are likely to be made to this plan. 
 
 It may be urged that, were the old coins to re- 
 main partially in circulation after the issue of the 
 new, frauds might be practised by filing down the 
 new coins to the reduced state of the old, and that 
 if it be determined to recall the whole of the old 
 coins at once, the half million or million proposed 
 to be issued in the first instance, Would be a very 
 inadequate substitute. The better plan might be to 
 ascertain, if possible, the present amount of silver 
 coin in circulation, to get ready a correspondent 
 quantity of new coin, to make arrangements for the 
 issue of the new at the same time in different parts 
 of the empire, to prohibit the circulation of the old 
 by proclamation, and to enjoin its speedy transmis- 
 sion to the mint for the purpose of exchange. This 
 plan it would be advisable to follow, although the 
 first year's issue might in consequence be much 
 above a million. 
 
 It may be objected also, that the amount of the 
 
99 
 
 seignorage would give encouragement to counter-* 
 felting. It is important to remark^ that there are 
 two classes of counterfeiters. One class prepares 
 blanks of copper, or of some other inferior metal, 
 which they face or case with silver or gold leaf of 
 considerable thickness, and afterwards stamp. The 
 other fabricate coin in the way practised at the mint, 
 but with inferior metal. Guineas have been coun- 
 terfeited in this manner, and are in intrinsic value 
 about If s. 6d. They are nearly of the weight of 
 the standard guinea, and afford a profit of about 16 
 per cent. The former class would not be benefited 
 by the imposition of a seignorage: the second would 
 certainly have a considerable advantage by it. How- 
 ever, if guineas chiefly have been forged by this 
 class, the objection does not apply so much to this 
 argument, which regards silver. To answer all such 
 objections, it is perhaps sufficient to observe, that 
 the law should be made more explicit and effectual, 
 it being impossible to stop such frauds, under any 
 system of coinage, so long as the law continues in 
 its present vague and inoperative state. 
 
 It may be objected, that a currency, on which a 
 seignorage has been taken, may fall in value below 
 the denomination at which it was issued. The 
 answer is plain; no such depreciation has taken place 
 in consequence of the seignorage of foreign coun- 
 tries, nor has any taken place in our own, although 
 our silver currency has been degraded about 25 per 
 cent, for half a century. 
 
 Finally, it may be objected that it would be diffi- 
 
 H 2 
 
100 
 
 cult to recall the whole of the annual issue from 
 circulation, and that part will remain out through 
 the ignorance or inattention of the holders. The 
 plan would be to give in the first place every facility 
 to the exchange of new coin for old, appointing 
 agents in every considerable town for that purpose, 
 proclaiming a limited time, perhaps a month, for 
 the completion of the proposed exchange, after 
 which time it should cease to be current, and be 
 receivable only on the part of the mint at its intrinsic 
 value. The negligence of the holders would thus be 
 punished with a fine of 121 per cent., namely 10 per 
 cent, seignorage, and 2 per cent. wear. The agents 
 for the exchange might be the country Bankers, and 
 their number, as well as the length of time allowed, 
 would admit of each piece being weighed at the 
 time of exchange, which would be a great security, 
 counterfeits being considerably lighter than the law- 
 ful coin. As to the expense of this agency, it would 
 be small, and it may be fairly looked on as provided 
 for by the above-mentioned bonus of 12-1- per cent, 
 on the part omitted to be sent within the time. 
 
101 
 
 APPENDIX. 
 
 J. HE following Tables contain the market prices of standard 
 gold and silver, showing their relative proportions to each 
 other ; with the par and course of exchange, showing the per 
 centage in favour and against London ; also the per centage 
 above and below the mint price of gold, from the 1st day of 
 January 1760 to the 1st day of March 1811, both days in- 
 clusive ; also a quarterly account of Bank of England notes 
 in circulation since 1?90, taken from the accounts laid before 
 the committee of secrecy, and from the annual statements 
 laid before the House of Commons. 
 
 N. B. The notes under five pounds are included. The 
 prices of gold and silver, and the courses of exchange, have 
 been extracted from Lloyd's lists. The first number, pub- 
 lished every two months, has been selected and continued 
 throughout the whole of the Tables. 
 
 In the calculations in these Tables, gold has been made 
 choice of as being the principal measure of property, agree- 
 ably to the principles laid down in the foregoing Enquiry. 
 They concur in proving, that a debased currency has the effect 
 of raising the price of gold above its mint price they also 
 concur in a remarkable manner in proving the invariability of 
 the mint price of gold, to which important fact the reader's 
 attention is requested ; it is also particularly requested to the 
 effect which the operation of the Bank Restriction Bill has 
 had on the price of gold, and to the actual amount of discount 
 now existing on Bank notes in consequence. 
 
 In the first edition of this work I stated the par of exchange 
 with Hamburgh at 33 schillings and 8 grotes, and at that 
 considered it as a fixed par ; from the best information which 
 
102 
 
 I have been able to obtain upon 'Change since, 34 11 J arc 
 considered as the par, and in the present edition I have stated 
 it as such, I have also corrected the mistake of considering 
 the par to be fixed ; because gold being the standard of the 
 money of England, and silver in Hamburgh, there can be 
 no fixed par between those two countries, it will be subject to 
 all the variations which take place in the relative value of gold 
 and silver. For example, if 34 schillings, 1 1 grotes and a J, 
 of Hamburgh currency be equal in value to a pound sterling, 
 or ^ of a guinea, when silver is 5s. 2d. per oz. they can no 
 longer be so when silver falls to 5s. Id, or 5s. per oz. because 
 a pound sterling in gold being then worth more silver is also 
 worth more Hamburgh currency. 
 
 To find the real par, therefore, we must ascertain what was 
 the relative value of gold and silver when the par was fixed at 
 34 11J, and what is the relative value at the time we wish to 
 calculate it, 
 
 For example, if the price of standard gold was ^3 1? 10| 
 per oz. and silver 5s. 2d. an ounce of gold would then be worth 
 15.07 ounces of silver, being the mint proportions, 20 of our 
 standard shillings would then contain as much pure silver as 
 34 schillings, 1 1 grotes and a J j but if the ounce of gold 
 was 3 17 10J and silver 5s. (which it was on the 2d 
 January, 1798) the ounce of gold would then be worth 15.57 
 ounces of silver. If ^1 sterling in gold at par, therefore, 
 be worth 15.07 times its weight in silver, then at 15.57 it 
 would be at 3 per cent, premium, and 3 per cent, premium on 
 34 11J is 1 schilling, 1 grot and T \, so that the par when 
 gold is to silver as 15.57 to 1 will be 36 schillings, 1 grot 
 and T V 
 
 The above calculation will be more easily made by stating 
 as follows-: 
 
 As 15,07 : 34. 11 J :: 15.5? : 36. 1 T V 
 
 These Tables satisfactorily prove, that the rate of exchange 
 cannot exceed the expense of transmitting the precious metals 
 
103 
 
 from one country to another. From 1777 to 17^7> the period 
 in which we possessed a perfect currency, the yearly average 
 rate of exchange with Hamburgh never exceeded 5 per cent, 
 on either side of the water.* 
 
 A comparison of the rates of exchange, from 1760 to 1777 
 and from 1777 to 1797 S will prove the truth of the principle, 
 that a debased currency has the effect of causing an unfavour- 
 able exchange. 
 
 The reader is requested to pay particular attention to the 
 state of the exchange with Paris during the years 1?92 and 3, 
 when from a depreciated currency, caused by an excessive 
 issue of assignats, the exchange was upwards of 85 per cent, 
 in favour of London, even at that early period of the depre- 
 ciation of French paper. See Appendix, No. 2. 
 
 Appendix, No. 3, contains a monthly account of the state 
 of the exchange with Paris, from the 3d day of January* 
 1809, to the 2d day of April, 1811. 
 
 A comparison of the rates of exchange with Hamburgh 
 since the Bank Restriction Bill, with the rates of an equal 
 number of years previous to that period, will sufficiently 
 prove, that our currency is depreciated, that its influence on 
 the rates of exchange accords with the principles laid dowfl in 
 the foregoing Inquiry. The present state of the exchange 
 with Hamburgh and Paris, and the market price of gold, are 
 without precedent in these Tables, and can be accounted for 
 upon no other principle than that of a depreciated circulating 
 medium. 
 
 * I cannot help expressing my surprise, that Mr. Bosanquet should not 
 have seen the second edition of this pamphlet, which was published at 
 least six months before his Practical Observations, &c. j in the corrected 
 table of which, calculated upon the principle stated above, he would have 
 found an explanation of those inaccuracies which he has pointed out as 
 having appeared in the first edition respecting the exchauge with Hamburgh 
 and Paris. For a further and more particular explanation of these points, 
 I must 'refer the reader to the very ingenious and masterly reply of M. 
 Ricardo to Mr. Bosanquet's Observations, &c., a work in the highest 
 degree worthy of the attention of every one disposed to be well informed 
 upon this interesting subject. 
 
104 
 
 Ill 
 
 IK 
 
 11 
 
 Per centage 
 below the mfn 
 price ef gold. 
 
 482 fi. 
 
 rt j S S 
 
 = g|i ^ 
 
 g a 2 _v*:o" r$iijti <* 
 
 'S 42 v g -c 
 
 o ce .2 jf o 
 S -I T 
 
 O ifl - ^ <S* i?S W CO if5 05 t-; CO Ir^ CO OS CD -i ' -, t . 
 
 o d <o o d d n -*' co' oo' GO d oi ^ d co" ~ oi - w 01 ex 
 
 ^i'* 1 
 
 
 
 *} 5 | 
 a w 5^ I , 
 
 - . . 
 
 X 5 _,- ( 5 
 
 :'! 24^qW-V .aD^** 
 
 .S .> S a S oJ -,' co' -4 co' W <J o d o d d ' -H* t-' t-' -Jo" o" 5 o oJ * 06 oo" co ws oo a w 
 
 S 
 
 2 7 fi < ^- ; 
 
 " 8 
 
 -Sll s 
 
 S^^l, 
 
 03 -O C -3 o 
 
 s Jill I 
 
 TO Ui 
 
 III 
 
 "Q Sjj (4 - " ' "^ ^ 
 
 = ^P ....,...oo,.......,,,o-... w 
 
 SX-O. i i^CNi "W^tCOCO''C'*"-<UO-^CM'*OJCO^*^''-'CO' '0*'-"CO CNx- CO * N 
 
 ^ W t3 
 
 * I llltlilllllljlll'lllillllllllll 
 
 2- o = S- 
 
105 
 
 OOOO-tOO-< ~,<N p- *-<-.O}O*.-<-.P-ip-..-O*OJ-iC*a*COOO<W3''* 
 
 u 
 
 n o 
 
 o" o 
 
 oj co co* oo of GO* co' co* m* 10 ad ao* ad co* oo t-' " rr* GO" >r' co* co" o* o* -" ' o 
 
 
 *5 
 
106 
 
 Per centre 
 Kelow the min 
 price of pold. 
 
 o oooo o o c <=? 
 
 Per a-uta 
 ove tlie min 
 rice of gold. 
 
 OOOO 
 
107 
 
 ll? 
 
 if 
 
 -o 
 
 il 
 
 o *& 
 ga- 
 
 5 
 
 s * 
 
 n "* w o i ?e OJ os 0*3 a 
 
 '- fj o os ifl x 
 
 * * ' 
 
 30 OS O OJ <N - t- O <X5 CO - iT5 *T5 O OS ^ *O O* rf -i 
 
 so w Jo oo so <n co oc 
 
 COO 
 
 o-> 
 
 5 o 
 
 t 
 
 iO T CO rp rt 10 iO tfi c- 00 O t- O t- CT> QO O ^ -^ CO 
 
 ooo 
 
 o w> N - 
 
 .112 
 
 t t-t-t t- 
 
 t t t t 
 
 
 COCOCO800OCOCOOOCOCOCOOOCOCOCOOOCOCOCOCOCOCOCO3OOOCOSO8OCO3O 
 OOCOS V < T T < COrt (OOO^ICO" <COTOJ-'Q\> 1 ^ < O^CO'~'5O'-' iCOi-^QM 
 
108 
 
 Per ceut 
 elow the 
 price of 
 
 tl 
 
 HOJMOJHM^NHC*^HHt01^H01'^^^ 
 
 Gi C?) O Oi Gi G5 Gi Gi O O O Gi O Ct O Gi CO CO CO CO 
 
 Per centage 
 above the min 
 price of gold. 
 
 O) OJ 04 <** 0* 0? 
 
 CO CO CO CO CO CO 
 O O O O O O 
 
 against 
 
 London. 
 
 Si* I , 
 
 00 -i CO O* O CO -* O) -< O? CO W N <W GO TjJ b- r}< O) CO CO t-; -j -< OJ * O * 
 
 - M I O C3 t-^ 00 0*' CO 00 *O W O CC O> CO' QO* CO rj< -t GQ ^' C - O - O O -< O 
 
 i-ft 2 
 
 ^ i TJJ 01 00 t-; Cj^OT fc^ CO OT ft O> O >0. t O Q 0. *J 
 5 t-^ O i-<* O C35 -* "* >fj Oi O O rt* CO -<" O O5 -<' O -* t^ CO -<" ^* 0* 0< 8* CO 
 
 111 .. 
 
 ^ X . -. ................ ..-.-.. 
 
 ^ <* -^ * * rf^< 00 0*5 00 W5 WOT 00 00 0*5 00 (JO 00 50 OD 0*5 <* ^ 
 
 ___ 
 
 rs=s ^ ' 
 
 Hi 
 
 SJ '^^ Vw' '-^^ W '^ ^ *^ 1 ^-^' '^ ^ ^V ^^ ^^ S^ ^*^ W _ S^ N^ SW <W '^ ^ ^^ Svf % / W ^-^ 
 
 ^ 
 
 222? 
 t- t- 1 1 
 
 gl > =1 ^i> g'l ^U> si ^g.S si ^S," 
 
 IS 
 
109 
 
110 
 
 oooooooooo 
 
 * QOO5'rr < 0^*OCN' iC^i!?S 
 
 a I > """~ * ~ ~ , *T ~ > *^ ^. "IN i> ""I ^ ^ ^l. ^. ''V 
 
 J O5 *- C5 t- m ^ "# -N ift O ^| OJ 1^; Tji tfj O p-t O t-_ OJ ; t- ifl O 00 O -j 
 
 ' ' ' 
 
 m _ 
 
 ^' co -t si c-j < -* in in oi M oi 5*3 0*5 o o* o o od ' o^ o o* c^' rr o>< 
 
 O C5 OS iO C5 C> U5 10 05 ^ <T> !N 0* 00 -t O) 00 * Oi OS O> CO CO CO 05 CO CO 05 
 
 o *n c- : o "* t- - -T! o t- ^ co f c> co o o o^ o> or c*j 
 
Ill 
 
 <JLl 
 ill 
 
 if S 
 
 'II 
 
 oooooooo 
 
 *rj< On C> r >O O T 1 < 
 
 I I I I g I I 
 
 <<->oco5O i -o 
 
 2 Z 
 
 C-t-t-t- 
 
 t- t- t- t- 
 
 oooo 
 
 ooooo 
 
 oooooo 
 
 Per tape 
 bove the mint 
 price of gold. 
 
 a 
 p 
 
 Per centage 
 against 
 London. 
 
 00 
 Q Ot W 
 
 Per ceutage 
 in favour of 
 London. 
 
 t-' vi <ri -< 
 
 < ~* t- 
 
 -* o tf tfj o o o 
 
 III 
 
 -to* -KN 
 
 Price of 
 ndard sil 
 per oz. 
 
 OOOOOOOOOOCOO 
 
 b-t t~-Ot-t-t-f 
 
 J5 J5 jca 
 
 w >> >>'>_ vi >%>*;> u >>> 
 ' 
 
112 
 
 Amount of 
 of England 
 in circula 
 
 Per centage 
 of discount o 
 Bank notes. 
 
 "o .3 
 
 <* w . M o I 3 --a g 
 
 5 2 2fe?S s - s - 
 
 -^HCO <TjtO*i iT^CO^-* 
 
 h-rco'coo*cot-coa>oo 
 - p-i ao-Ht-coa>ci-<c: 
 
 Per 
 
 above the min 
 price of gold 
 
 entage 
 ainst 
 
 Course o 
 xchan with 
 
 nge 
 burg 
 
 
 S5 
 
 III 
 H 
 
 rce 
 
 standard 
 per o 
 
 Pric 
 ndar 
 per 
 
 5 s- c 3 113 ^ 
 
 HiliiN** 
 
 00 00 CO 05 iO 00 
 
 CO CO CO 
 <N W (M 
 
 <T!5j- 
 
 to 
 
 O) <N 00 00 W 
 
 C5 Oi O5 tf5 C5 
 
 oo o co o ~ 
 
 5 "* ^ -^ O 00 CO 
 
 OJ *'<-<* 
 
 sssi 3 
 
 m co w 
 
 CO C35 t-' 
 
 ^ CO 
 m t co 
 
 rr tfj UC5 
 
 O O 
 
 
 
 co 
 
 
 
 
 
 
 *' --3 c 
 
 ort 
 tio 
 
 ? ^ 
 
 :-is 
 
 Us 
 
 "OS 
 
 I S 
 f jfi 
 
 Ml 
 
 . 3 
 
 Sis- 
 }jl 
 
 Hi 
 
 IS! 
 
 rt 
 c >s 
 
 3l^ 
 
 .si I 
 
 c s* 
 
 TJ 3 O 
 
 "o cr 1 a> 
 
 nl 
 
 1^- 
 
 = cl 
 
 ^ C bO 
 
 8 
 
 2 is 
 11?. 
 
 <n ^ >> 
 
 Jji 
 
 ^'su 
 
 ^5^ 
 
 Hi 
 !i! 
 
 r. a 
 |l 
 
 1^1 
 s|l 
 
 Jlf 
 si 
 
 ilf 
 
 *, Ji 
 
 nil 
 
 o. 8 = 3 
 l|- = 
 ?||5 
 
 liP 
 
 !*? 
 *JI! 
 
113 
 
 8 $ 
 
 " CO t- 
 
 1 1 1 1 g I 
 
 .3 
 
 g w 
 
 00"* 
 
 00 80 CO 00 CO 
 O* 01 Q) 0* 
 
 00 00 30 t- 
 
 co ** <o so 
 
 Oi 04 04 Q) 0* 
 
 a* ^ ao 
 
 & 
 O 
 
 ~ 
 
 o , 21 
 
 o> a o ^* 
 
 
 
 
 
 * I O . 
 
 00 5e* 
 8 Q^o 
 
 6 o 
 to <o rf 
 
 
 ao o q> -* 
 
 C X O - 
 
 .HI 
 . 
 
 H 
 
 I? 
 
 !I 
 
 Hi 
 
 oooo o oooo oooooo 
 
 ooooocooo 
 
 s! 
 
 T3 C* 
 
 ^ a 
 
 I^ Q 
 
 ^^-M. 
 
 2 
 
 O A 
 
 O ~ 
 
 all 
 
 O <N Oi 
 
 ^rJ"*Tj< ^ 
 
 ^g 1 
 
 eoo 
 ** 
 
 -. s to 
 
 9 is -5 
 
 * 
 
 *1* 
 
 30 
 
 I? 
 
114 
 
 APPENDIX. No. II. 
 
 A Monthly Account of the market prices of standard gold 
 and silver, showing their relative proportions to each 
 other, with the par, course, and rates of exchange be-* 
 tween London and Paris, from the 3d day of January 
 1792, to the 3d day of December 1793, both inclusive, 
 extracted from Lloyd's Lists. 
 
 
 
 Pnce 
 
 Price 
 
 Their 
 
 Par 
 
 
 Per 
 
 Pr 
 
 
 
 of 
 
 tandard 
 
 of 
 
 standard 
 
 relative 
 
 proportions 
 
 of 
 
 exchange 
 
 exchange 
 with 
 
 oentage 
 in favour 
 
 centag* 
 
 
 
 gold 
 
 silver 
 
 to each 
 
 with 
 
 P:.ns 
 
 of 
 
 igainst 
 
 
 
 >rr oz. 
 
 per oz. 
 
 other. 
 
 Pan*.* 
 
 at sight. 
 
 London. 
 
 
 1792 
 
 Jan. 3 
 
 17 6 
 
 054 
 
 4.53 to 1 
 
 284 
 
 194 
 
 31 
 
 
 
 Feb. 3 
 
 3 17 6 
 
 054 
 
 4.53 
 
 284 
 
 
 39'.f 
 
 
 
 March 2 
 April 3 
 
 3 17 6 
 3 17 6 
 
 054* 
 055 
 
 14.41 
 14.3 
 
 28 
 274 
 
 154 
 
 17.* 
 
 
 
 
 May 1 
 
 3 17 6 
 
 5 5 
 
 14.25 
 
 27.* 
 
 17.* 
 
 36io 
 
 
 
 June 1 
 
 3 17 6 
 
 056 
 
 14.09 
 
 274 
 
 17.* 
 
 35.A 
 
 
 
 July 3 
 
 3 17 6 
 
 056 
 
 *4.09 
 
 274 
 
 18 
 
 34. 
 
 
 
 August 3 
 
 3 17 6 
 
 055 
 
 14.3 
 
 274 
 
 174 
 
 37.-$ 
 
 
 
 Sept. 4 
 
 3 17 6 
 
 055 
 
 14.3 
 
 274 
 
 194 
 
 M 
 
 
 
 Oct. 2 
 
 3 17 6 
 
 055 
 
 14.3 
 
 274 
 
 184 
 
 
 
 
 Nov. 2 
 
 3 17 6 
 
 000 
 
 
 
 194 
 
 
 
 
 Dec. 4 
 
 3 17 6 
 
 054* 
 
 14.36 1 
 
 274 
 
 
 28. - 51 
 
 
 1793 
 
 Jan. 1 
 
 3 17 6 
 
 5 4| 
 
 14.36 1 
 
 274 
 
 17' 
 
 38. A 
 
 
 
 Feb. 1 
 
 3 17 6 
 
 055 
 
 14.3 1 
 
 274 
 
 144 
 
 46.-A 
 
 
 
 March 1 
 
 3 17 6 
 
 052* 
 
 14.88 1 
 
 28.* 
 
 15 
 
 47*. T * 
 
 
 
 April 2 
 
 3 17 6 
 
 5 2J 
 
 14.88 1 
 
 28.* 
 
 12 
 
 57.1% 
 
 
 
 May 3 
 
 3 17 6 
 
 052* 
 
 14.88 1 
 
 28.* 
 
 
 
 
 
 June l 
 
 3 17 6 
 
 oil] 
 
 15.12 1 
 
 29-iA 
 
 
 
 
 
 July 2 
 
 3 17 6 
 
 5 1 
 
 15.24 1 
 
 29.* 
 
 9 
 
 69-Yo 
 
 
 
 August 2 
 
 3 17 6 
 
 5 1 
 
 15.24 1 
 
 29.* 
 
 44 
 
 85,-j 
 
 
 
 Sept. 3 
 
 3 17 6 
 
 051* 
 
 15.12 1 
 
 
 74 
 
 73.j^ 
 
 
 
 Oct. 1 
 
 3 17 6 
 
 5 l] 
 
 15.12 1 
 
 ^o,-ir& 
 
 9 
 
 69.4 
 
 
 
 Nov. 1 
 
 3 17 6 
 
 5 \i 
 
 15.12 1 
 
 Intercourse with France 
 
 
 Dec. 3 
 
 3 17 6 
 
 000 
 
 
 ceased at this period. 
 
 The par of exchange between London and Paris has been fixed &t 
 . See Lord King on the Restriction Bill, p. 150, 2d edition. 
 
115 
 
 f 
 
 APPENDIX. No. III. 
 
 A Monthly Account of the market prices of standard gold 
 and silver, their relative proportions to each other, with 
 the par, course, and rates of exchange between London 
 and Paris, from the 3d day of January 1809, to the 5th 
 day of April 1811, both included : extracted from Lloyd's 
 Lists. 
 
 
 
 
 Par 
 
 Coiirjt ot 
 
 P*r 
 
 Per 
 
 
 
 Price of 
 
 Price of 
 
 rheirrelative 
 
 of 
 
 exchange 
 
 cent age 
 
 centage 
 
 
 
 itaiidard 
 gold per oi. 
 
 siaiulnnl 
 Silver per oz- 
 
 proportion to 
 each oilier. 
 
 exchange 
 with 
 
 vmbParit 
 one day'* 
 
 in 
 
 favour of 
 
 attaint* 
 London. 
 
 
 
 
 
 
 Paris. 
 
 date. 
 
 London. 
 
 __ _____ 
 
 1809 
 
 Jan. 3 
 
 000 
 
 5 7i 
 
 
 
 22. 4 
 
 
 
 
 Feb. 3 
 
 000 
 
 000 
 
 
 
 22. 4 
 
 
 
 
 March 3 
 April 4 
 
 4 10, 
 4 11\ 
 
 5 5 
 5 7J 
 
 16.49 to 1 
 16.18 1 
 
 26. 5 
 35.15 
 
 20.19 
 20.19 
 
 
 20. 
 
 18- /o 
 
 
 May 2 
 
 4'11 
 
 056* 
 
 16.42 1 
 
 26. 3 
 
 20.19 
 
 
 19.il 
 
 
 June 2 
 
 4 10 '0 5 ll 
 
 16. 1 
 
 25. 9 
 
 20. 
 
 
 21. T 
 
 
 July 4 
 
 4 12 JOJiO 5 8* 
 
 16.27 1 
 
 25.18 
 
 20. 
 
 
 .fr 
 
 
 August 1 
 
 000 
 
 5 9 
 
 
 
 20. 
 
 
 
 1810 
 
 Sept. 5 
 
 4 9 10 
 
 5 &| 
 
 15.74 1 
 
 25. 1 
 
 20. 
 
 
 20. 
 
 
 Oct. 3 
 
 000 
 
 000 
 
 
 
 20. 
 
 
 
 
 Nov. 3 
 
 000 
 
 5 9 
 
 
 
 19. 6 
 
 
 
 
 Dec. 1 
 
 000 
 
 000 
 
 
 
 19.16 
 
 
 
 
 Jan. 2 
 
 000 
 
 5 7 
 
 
 
 19.16 
 
 
 
 
 Feb. 13 
 
 4 12 10& 
 
 5 8 
 
 16.27 1 
 
 25.18 
 
 19.10 
 
 
 24. ,V 
 
 
 March 6 
 
 4 11 101 
 
 059 
 
 15.97 1 
 
 25. 9 
 
 19.16 
 
 
 22- ft 
 
 
 April 3 
 
 000 
 
 000 
 
 
 
 21.16 
 
 
 
 
 May 1 
 
 000 
 
 5 9 
 
 
 
 21.11 
 
 
 
 
 June 1 
 
 4110 
 
 5 10 
 
 15.42 1 
 
 24.11 
 
 21.16 
 
 
 "A 
 
 
 July 3 
 
 000 
 
 000 
 
 
 
 21. 1 
 
 
 
 
 August 3 
 
 000 
 
 000 
 
 
 
 21. 1 
 
 
 
 
 Sept. 4 
 
 000 
 
 000 
 
 
 
 21. 
 
 
 
 
 O-.-t. 2 
 
 4 13 10 
 
 5 11 
 
 15.86 1 
 
 25. 5 
 
 21. 8 
 
 
 15. 
 
 
 Nov. 2 
 
 000 
 
 000 
 
 
 
 20. 6 
 
 
 
 
 Dec. 7 
 
 000 
 
 000 
 
 
 
 20. 2 
 
 
 
 1811 
 
 Jan. 1 
 
 000 
 
 000 
 
 
 
 19. 8 
 
 
 
 
 Feb. 1 
 
 4 11 
 
 5 11 
 
 15.13 1 
 
 24. 2 
 
 17.16 
 
 
 26. ft 
 
 
 March 1 
 
 4 13 6 
 
 000 
 
 
 
 17.16 
 
 
 
 
 April 5 
 
 5 100 6 2 
 
 16.52 
 
 26. 6 
 
 17. 6 
 
 
 34. A 
 
 In the above calculations I have considered the par between 
 London and Paris to be 24 livres to the pound sterling, which 
 I am informed is the reputed par on the London exchange. 
 
 It appears by the table of the intrinsic par of exchange 
 presented by Dr. Kelly to the Bullion Committee, that the 
 real par in Paris new coins by assay is 25 liv. 4 s. 5 den. or 
 24 fr. 91 cent?. 
 
 I 2 
 

 APPENDIX. No. IV. 
 
 A Reply to Mr. Grenfetfs Examination of the Tables 
 of Exchange annexed to the fast Edition of this 
 Work. 
 
 MR. GRBNFBLL, in a Postscript to his Defence of Bank 
 Notes, has given an examination of the Tables of Exchange 
 annexed to the first edition of this work, by which he has 
 endeavoured to prove, that Bank notes are not depreciated \ 
 because since 17$7> ^ e P oun( ^ sterling in England has 
 exchanged for more than 33 shillings, 8 grotes, that being 
 stated as the par between the two countries. If Mr. G. had 
 put himself to the trouble to have made the same experiment 
 on the thirteen years immediately preceding the Restriction 
 Bill, that he has made on thoee that followed, that never- 
 to-be-forgotten era, he would have found, that in the former 
 period the pound sterling in England had really exchanged 
 for 34s. lOjgr. ; so that according to Mr. Grenfell's own 
 principle, the currency of this country must have undergone 
 a depreciation of 10| grotes since that time, or about 2J per 
 cent., because an equal quantity of it has not exchanged for 
 a like quantity of Hamburgh currency. 
 
 As the principle which Mr. G. has assumed may have a 
 tendency to mislead those who are interested in the Defence 
 of Bank Notes, it will be necessary to expose the fallacy 
 
n; 
 
 and absurdity of it. In the commencement of the seventh 
 chapter of the first edition of this work, I have stated that, 
 " the currency of a country is said to be depreciated when 
 a given quantity of it will no longer exchange for a like 
 quantity of that of another country ; for example, if the cir- 
 culating medium of England was reduced in value ^Jth 
 below its standard, and recognized level, while that of Ham*- 
 burgh remained stationary, the pound sterling of England 
 would not exchange for 33s. 8gr. but for ^th less." The 
 meaning of this passage, although it appeared to me suf- 
 ficiently perspicuous, is not understood by Mr. Grenfell, 
 and his misunderstanding has led him to conclude that, 
 " the currency of this country has not been depreciated, 
 because an equal quantity of it has actually been exchanged 
 for rather more than an equal quantity of the currency of 
 another country." 
 
 It is necessary, on this account, to explain the passage 
 just cited. 
 
 If the guineas of England, which are admitted to be the 
 standard of our currency, were diminished one tenth by 
 clipping, it must appear obvious, that a merchant in Ham- 
 burgh purchasing a bill upon London, would not give 33s. 
 8gr. for the gold contained in the pound sterling so dimi- 
 nished; he would give a number of schillings and grotes 
 which would be equal in value to the gold contained in the 
 pound sterling. It will also follow, that if the currency of 
 England, being paper, is reduced in value T ^th by an in- 
 crease in its quantity, a merchant in Hamburgh will not 
 give 3Ss. 8gr. for the pound sterling, because the pound 
 sterling in the English, or in the Hamburgh market, will 
 not purchase a quantity of silver equal in value to the silver 
 contained in 33s. 8gr.; if it purchase ^th less, then the 
 Hamburgh merchant will only give about 30s. 4gr. for the 
 pound sterling. It is in this manner that a comparison of the 
 
118 
 
 intrinsic values of the respective currencies of two countries 
 will determine the par between them. 
 
 Had Mr. Grehfell sufficiently weighed this fundamental 
 principle, I believe he would have paused a little longer 
 before he drew his conclusion that " Bank Notes are not 
 depreciated." But, for the sake of argument, let Mr. G's 
 assumption be admitted, let 33s. 8gr. be taken as the fixed 
 par between London and Hamburgh, that is to say, let the 
 pure silver in 33s. 8gr. be regarded as equal to the pure 
 silver contained in twenty of our standard shillings ; these 
 proportions being fixed, any derangement of them, accord- 
 ing to Mr. G's principle, must be a depreciation of currency; 
 for example, if the pound sterling has exchanged for 34 
 schillings, on the average of thirteen years, the currency of 
 England has, during that period, been at a premium of 1 
 per cent, while that of Hamburgh has been depreciated to 
 that amount. Mr. G's principle proves the very converse 
 of what he wishes and what he pleads for. If the currency 
 of Hamburgh was depreciated when 34 schillings were given 
 for our pound sterling, our pound sterling must be depre- 
 ciated at present, because Hamburgh will not give more 
 than 28s. 6gr. or 29 schillings for it, constituting an unfavor- 
 able exchange, or a depreciation on our currency of about 
 20 per cent. 
 
 It would have been unnecessary to have added more on 
 this subject, but Mr. Grenfell has strayed so very wide of 
 the principle on which the doctrine of favorable or unfavor- 
 able exchange depends, that it may be necessary to explain it 
 to him, to show him more clearly the absurdity of the prin- 
 ciple which he has advanced. 
 
 No exchange .in strictness can exist between two countries 
 while the exports from the one balance the imports from the 
 other. For example, if the exports from England to Ham- 
 burgh were to the same amount as the imports from that 
 
country to this, the exchange would be at par ; bills upon 
 London sold on the Hamburgh exchange would be at par, 
 as would bills on Hamburgh sold on the London exchange. 
 But if the exports of England to Hamburgh amounted to 
 *l 00,000, while the imports from Hamburgh were only 
 i90,000, a balance of debt would be created between the 
 two countries. As more bills in consequence would be 
 drawn in London upon Hamburgh, than in Hamburgh upon 
 London by a 10,000, the bills in London would be natu- 
 rally at a premium ; the merchants in Hamburgh having this 
 debt to pay in London, and being inclined to give a premium 
 upon London bills for the purpose of discharging it. Thus 
 it appears, that it is the scarcity of London bills, and the 
 competition among the Hamburgh merchants to discharge 
 each his debt at the cheapest rate that causes bills on London 
 to sell at a premium. The amount of this premium is the 
 extent of the unfavorable exchange to Hamburgh, and the 
 favorable exchange to London. When all the bills, how- 
 ever, which were drawn in Hamburgh upon London are 
 sold, Hamburgh is still indebted to London 10,000 ; she 
 has no mode of discharging thi* debt but by a direct remit- 
 tance of that sum in gold or silver. The profit of the bullion- 
 merchant, and the expense of freight and insurance are the 
 necessary and unavoidable charges attending the transporta- 
 tion of this metal. But it would be absurd to say, as in the 
 first instance, that because a Hamburgh merchant could pay 
 Jiis debt by giving one or two per cent, premium for a bill on 
 London, or four per cent, for sending gold or silver to pay 
 it, that the currency of Hamburgh was depreciated. It 
 might with equal propriety be affirmed, that a bill remitted 
 by a merchant in Edinburgh to his correspondent in London, 
 was depreciated to the amount of the postage ; and with equal 
 justice, it may be said that the signature of a member of the 
 House of Commons could prevent the Edinburgh merchant'* 
 bill from being depreciated. 
 
120 
 
 i 
 
 According to the principle which I have just explained, our 
 unusual amount of imports from the Baltic during the last 
 year, can have no greater effect upon the rates of exchange 
 with Hamburgh, through which our principal payments to 
 the northern states are made, than the expense of sending the 
 precious metals there ; and as Mr. Eliason stated the charge 
 of sending gold to Hamburgh to be ^3 12 lid. per cent, in 
 1797, it certainly cannot now cost upwards of ^20, the 
 average of the exchange with Hamburgh against London, 
 during the year 1809. 
 
 I must refer Mr. Grenfell to the 8th chapter of the fore- 
 going Inquiry for information respecting the principle which 
 regulates the price of gold not only in the state of coin, but 
 in the state of bullion; and this is the more necessary, as Mr. 
 G. does not seem to be aware that such a principle exists. 
 
 THE END. 
 
 C. Baldwin, Printer, New Bridge Street, London 
 
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 JLoriBon: 
 
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 Black-Horse-Court, Fleet-Street, 
 
 London. 
 
ADVERTISEMENT. 
 
 IN this publication, the author has carefully avoid- 
 ed all discussion of the fittest means of redressing 
 the grievance, the existence of which he has en- 
 deavoured to prove. 
 
 For, in his opinion, it would be a ridiculous 
 waste of time and of labour, to explain the nature 
 of the remedies most likely to be efficacious, to 
 a people who are at present so much misled by the 
 folly, or deceived by the arts, of those to whom the 
 
 government of the country is intrusted, as generally 
 
 ^ 
 
 to regard the symptoms of their disorder as conclu- 
 sive evidence of the vigorous state of their health. 
 
 But, whenever the public have recovered from 
 this delusion, and appear to be impressed with a 
 just sense of the perilous state in which they are 
 placed, his efforts will not be wanting in endea- 
 vouring to suggest the mildest, and the most 
 
ADVERTISEMENT. 
 
 certain means of restoring our circulation to its 
 former salutary state, the benefits of which have 
 been so long and so invariably experienced in this 
 commercial country. 
 
 In the mean time, he must say, that he neither 
 thinks this fortunate change will follow as a matter 
 of course, from our enjoying the blessings of Peace; 
 nor does he believe that it can be effected by 
 the unaided efforts of the Directors of the Bank of 
 England. 
 
 He conceives the interposition of parliament, in 
 a variety of ways, to be necessary -, and the great 
 question must be, how an effectual interposition 
 for removing the evil, can be directed in the man- 
 ner best calculated to prevent a violent shock, from 
 the too sudden sensation of those latent, but daily 
 increasing calamities, which, if not arrested in 
 their progress, must terminate in that convulsive 
 change of property, and consequently of power, 
 that has justly been denominated the ruin of a 
 country. 
 
THE 
 
 DEPRECIATION 
 
 OF OUR 
 
 PAPER CURRENCY 
 
 PROVED, &c." 
 
 IT has been universally admitted, throughout all 
 the numerous publications, to which the Report of 
 the Select Committee of the House of Commons, 
 appointed to inquire into the high price of gold 
 bullion has given rise, that for a length of time a 
 difference of value has existed betwixt coin or gold 
 and the Notes of the Bank of England, amounting to 
 fifteen or sixteen percent, and more recently, in 
 the opinion of many, exceeding twenty per cent. 
 
 Attempts have, indeed, been made to establish a 
 distinction betwixt coin and gold, and to assert 
 that this difference in value is only in reference* 
 to gold in bullion, whilst Bank Notes remain in 
 every respect equivalent to the coin of the realm ; 
 but this opinion cannot be maintained, for the real 
 value of coin depends, not on a piece of gold 
 being called a guinea, or a piece of silver a shilling, 
 but on the quantity of pure gold or silver it contains ; 
 
 B 
 
and we know by experience, that the price of bul- 
 lion, and the state of exchange with foreign coun- 
 tries, both before and after the re-coinage in 1772, 
 concurred in shewing that our coin passed for its 
 value by weight, without reference to its value in 
 tale. 
 
 At all events, such a distinction is unauthorized 
 under the law, as it now stands, because the guineas 
 issued from the mint are, by statute, deprived of the 
 character of coin, if reduced in weight one grain 
 and thirty eighty-nine parts of a grain ; and since 
 the recent trial of De Yonge it must appear per- 
 fectly nugatory, for, on that occasion, notes were 
 proved to bear to coin the same proportion in value 
 they did to gold, whilst it was decided, that the 
 advantage derived from the sale of coin for a higher 
 denominative value in notes, was no illegal benefit.* 
 
 * Lord Castlereagh, following the opinion of many others who 
 have written on the subject, has stated, p. 13 in his Speech on 
 the Report of the Bullion Committee, that " there is no just 
 '* ground to consider the note as depreciated ; both the note and 
 " the coin were intended for internal circulation, and for internal 
 " circulation alone : the contingent but illegal profit derived from 
 " diverting the coin from its legitimate purpose, is a species of 
 " value, which the Bank Paper never was, in equity or in fact, 
 " intended to represent. It is only, through the operation of 
 " causes destructive of the established system of our standard 
 " coinage, that this advantage can attach to coin over Bank 
 " Paper. To derive such an illicit benefit is an abuse ; and so 
 " far as it may operate at this moment to occasion a disparity of 
 " value between coin and notes, the difference is very incorrect- 
 
 "ly 
 
Indeed it is surprising that (before the Act of 
 last session) the legality of selling Bank Notes 
 for coin should have been seriously questioned in 
 a court of law ; for in the reign of William III. 
 Bank Notes publicly circulated at a discount as 
 against coin, and though the amount of that dis- 
 count was as openly stated in the newspapers, as 
 the value of government securities, no doubt ever 
 occurred to the eminent lawyers of that day, on the 
 legality of the transaction. 
 
 Without, therefore, entering into further de- 
 tails to repel this groundless distinction, it may 
 be considered as universally admitted, that there 
 has existed, within these last two years, a dif- 
 ference of value betwixt gold or coin and Bank 
 Notes, which has increased rapidly, and now a- 
 mounts to upwards of twenty per cent. 
 
 This circumstance might, perhaps, be deemed 
 sufficient of itself, to authorize the opinion, that 
 the paper of the Bank of England is depreciated - y 
 
 " ly described under the term of " A depreciation of Bank Pa- 
 " per." 
 
 But this doctrine, which falsely assumes that the value of coin 
 can be regulated by law, by means short of a maximum on the 
 price of commodities, is evidently founded on a misunderstanding 
 of the law ; for in the case of De Yonge it was declared to be the 
 opinion of all the judges present, " that the exchange described 
 " on this record, that is, of guineas for Bank Notes, taking such 
 " guineas at a higher value than they were current for, under 
 " the king's proclamation, was not an offence against the 5th and 
 " 6th Edward VI. upon which the indictment was founded." 
 
4 
 
 for though it is true, that a variation in the compa- 
 rative value of any two commodities, must, when 
 unexplained, give rise to a doubt, whether the 
 change proceeds from an increase in the value of 
 the one, or a diminution in the value of the other ; 
 yet it does not appear that such a doubt can arise 
 from a difference betwixt the value of paper and of 
 the coin it represents. 
 
 Bank Notes, when differing in value with what 
 they engage to pay on demand, cannot with ac- 
 curacy be considered as! a case of variation 
 in the value of two several commodities. They 
 are only engagements to deliver a certain species 
 of commodity, and do not in themselves possess the 
 character of a commodity. A Note of the Bank of 
 England, promising to pay one pound sterling on 
 demand, being in truth an obligation to furnish the 
 person who presents it, with a portion of gold certi- 
 fied by the mint stamp to contain one hundred and 
 thirteen grains, troy weight, of pure gold, or a 
 portion of silver, certified, in like manner, to con- 
 tain seventeen hundred and eighteen grains and 
 seven-tenths of a grain, troy weight, of pure sil- 
 ver ; for the former is the quantity of gold that 
 forms a pound sterling by the regulation in 1601, 
 and the latter the quantity of silver forming a pound 
 sterling, as fixed in 1728.* 
 
 * The quantity of standard gold and silver in a pound sterling 
 is, of the former 123.273 grains, of the latter 1858.060 grains. 
 
It is, however, strenuously maintained, by men. 
 whose habits lead the public to presume great 
 knowledge on the subject, and whose errors, in 
 the situation in which they are placed may pro- 
 duce tjhe greatest national calamities, that the 
 papp of the Bank of England is not diminished in 
 value : that what is only an apparent deprecia- 
 tion of paper proceeds from a real augmentation of 
 the value of gold: alid these opinions require the 
 most minute consideration, as they lead to con- 
 sequences deeply affecting the interest of every 
 individual, as well as the general welfare of the 
 country. 
 
 If a note was issued promising to deliver on de- 
 mand a yard of cloth, and specifying distinctly its 
 quality and its breadth, it is obvious that such a 
 note must partake accurately of the value of the 
 cloth. It could never rise in value above the cloth ; 
 its value could never be depressed below that of the 
 cloth, for the variations in its value must be regu- 
 lated by the value of that article to which it must 
 of necessity be equivalent. 
 
 i 
 
 From the habit of using Bank Notes when paya- 
 ble in coin on demand, as a measure of the value 
 of commodities, and of giving them as an equiva- 
 lent for the commodities so measured, it has been, 
 by the vulgar, conceived, that they may possess a 
 value of their own, differing in degree from that 
 
of the pieces of gold and silver they promise to 
 -pay. But a note engaging to deliver a given 
 quantity of gold and silver of a specific fineness, 
 can no more possess value differing from that 
 of the gold or silver it obliges the issuer to pay, 
 than a note promising a yard of cloth, and speci- 
 fying the breadth and fineness of it, can differ in 
 value from the cloth. 
 
 The gold and silver which the one promises to 
 pay, is generally used as a measure for the value 
 of cloth and other commodities : the cloth which 
 the other promises to deliver is used as a com- 
 modity, of which we are accustomed to measure 
 the value by means of gold and silver, the com- 
 mon measure of value resorted to in all civilized 
 countries. We talk, therefore, of buying with 
 the former and of selling the latter ; and this 
 mode of habitually expressing ourselves, creates 
 an impression that the value of the gold, which 
 in common transactions we assume to be fixed, is 
 really invariable. Whilst to the cloth, the varia- 
 tions in the value of which we are accustomed to 
 express, we attribute not only the changes of value 
 which it undergoes, but also those that take place 
 in the coin or gold by which it is measured. 
 
 This process of erroneous reasoning naturally 
 creates a disposition to transfer the quality of pos- 
 sessing fixed value to notes payable in gold, whilst 
 
on the same principle it gives rise to a feeling that 
 the note promising a yard of cloth, must suffer the 
 same fluctuations in value we are habituated to re- 
 mark in the article it represents. Though in reali- 
 ty the note promising gold must vary in value with 
 gold, from the power of commanding which it 
 alone derives value, just in the same manner as 
 the note engaging to deliver cloth is regulated by 
 the value of that commodity. 
 
 In truth, a Bank of England Note possesses, and 
 can possess no value, differing from, or indepen- 
 dent of the coin it engages to pay ; to state that it 
 has a positive value varying from that of the coin, 
 is to suppose that it possesses in itself a power 
 of measuring value, and of acting as an equiva- 
 lent, or, in other words, it is to bestow upon it 
 those attributes which belong to the commodity it 
 engages to deliver. 
 
 To maintain that a note promising to deliver a 
 yard of cloth on demand, possessed on that ac- 
 count the qualities of that commodity, and was ca- 
 pable itself of being made into an article of cloth- 
 ing, would excite universal ridicule ; yet it is dif- 
 ficult to say, how the reasoning that would lead to 
 that conclusion can be considered as materially 
 differing from the train of argument that must ne- 
 cessarily be resorted to, to vindicate the opinion 
 that a note, promising a quantity of coin on de- 
 mand, has a power of measuring value differing 
 
from, and unconnected with that of the coin which 
 it promises to pay. 
 
 If a person who sold paper was to adopt the 
 practice of giving a small piece of gold, of the 
 weight of seven grains, promising to deliver a 
 quire of paper on demand, it is certain that such a 
 piece of gold, whilst the paper continued to be de- 
 livered, to those who presented it, would secure 
 the means of communicating with their corres- 
 pondents. But if not being able to procure the 
 paper the proprietor of the seven grains of gold was 
 to attempt to use it as a substitute for the paper, 
 he would soon be convinced that the gold possess- 
 ed none of the properties of the material, which 
 the person who issued it contracted to deliver. 
 Yet if an engagement in paper to pay in gold 
 could transfer to the paper the quality of measur- 
 ing value, it would be difficult to discern why an 
 engagement in gold, to pay a given quantity of 
 paper, should not bestow upon the gold the qua- 
 lities of the paper. 
 
 Till of late all this reasoning might have appear- 
 ed superfluous, the truth of the proposition it 
 aims at sustaining was held to be indisputable. 
 But when we are now told that Bank Notes are 
 not depreciated : that though they are not ex- 
 changeable against coin or gold, at the supposed 
 advanced value of that metal, they nevertheless ac- 
 curately represent the value gold coin enjoyed 
 
previous to the restriction ; or the average value of 
 gold coin for a certain number of years :* What 
 is it but to attribute to Bank Paper the power of 
 acting as an equivalent, and of being a measure of 
 value, on a scale differing from that which coin 
 affords, of which it falsely purports to be the equi- 
 valent ? 
 
 * " To assert that Notes have fallen in value, because they have 
 not risen with the precious metals, or that they have fallen com- 
 pared with the currency of other countries, because they are not 
 convertible at this moment, without loss, into them, does appear 
 to me to be a most inaccurate state of the question, founded on 
 a total misrepresentation of the first principles of our paper 
 currency." 
 
 Lord Castkrcagh's Speech on the Report of the Bullion 
 Committee, p. 41. 
 
 " But," says Mr. Huskisson (p. 43), " It is said that gold is dear, 
 Bank Notes cheap ; but Bank Notes are of the same value as 
 gold !" Thus stated the proposition certainly appears absurd, 
 but we would just observe that it is a perversion of the following ; 
 that Bank Notes bear their usual proportion to the average value 
 of gold, but that gold has now experienced a temporary rise of 
 price in the home market above that average." 
 
 Review of Mr Huskisson' s Book, p. 24 of the " British Review'' 
 (supposed to be the work of a person high in office.) 
 
 " If ten ounces of gold now are worth as much as twelve ounces 
 were before, why should the holder of notes receive now so much 
 a greater value in gold than he did before ? Or can it be said 
 truly that he suffers an injustice, because he is not permitted lo 
 do so?" 
 
 Observations on the State of our Currency t by the Earl of 
 Ross, p. 25. 
 
10 
 
 It is these and similar assertions that have now 
 rendered it necessary to establish, by argument, 
 that Bank Notes, from the circumstance of their 
 being engagements to pay a given quantity of coin 
 or gold on demand, are, in respect of value, identi- 
 fied with coin : and that a difference of value from 
 what they promise to pay can therefore only origi- 
 nate from a want of power in the notes themselves 
 to secure the possession of it ; for whilst they enjoy 
 that power, and things that are equal to one and the 
 same thing continue to be equal to one another, a 
 guinea and a guinea-note must be equivalent. 
 
 If this statement is just, it seems as easy to com- 
 prehend why the value of a Bank Note may in con- 
 sequence of this deficiency of power, be diminished 
 in comparison of the coin it promises to pay, as it 
 is difficult to conceive how such an alteration of 
 circumstances in the Note can occasion a variation 
 in the value of the gold; and it becomes impossi- 
 ble to imagine how it should augment the value of 
 the gold, which, as we shall afterwards shew, must 
 be banished from use in the country where such an 
 occurrence takes place, and must, on that account, 
 sustain a diminution of demand, which tends inva- 
 riably to lower the value of every commodity. 
 
 It is with confidence, therefore, it is asserted, 
 that the difference of value betwixt gold and Bank 
 Notes, which never did exist, whilst they possessed 
 the power of commanding coin, must arise from 
 
11 
 
 the deficiency in the value of the Note, which has 
 sustained this loss of power; and not from an in- 
 crease in the value of the coin on which this alter- 
 ation in the character of the Note can produce 
 no effect. 
 
 It must also be remarked, that the accuracy of 
 the opinion that Bank Notes possess an identity of 
 value with the coin they promise to pay, and that 
 this identity of value can in no degree be inter- 
 rupted by a variation in the value of that portion 
 of coin or gold which they represent, does not rest 
 solely on general reasoning, for it is a proposition 
 of the truth of which we have the most ample ex- 
 perience in the course of the last century. 
 
 Coin, and gold or silver, though the best and most 
 accurate measures of the value of commodities 
 from day to day, have themselves no fixed value. 
 '- The increase of the quantity of bullion is stated 
 by Sir George Shuckburgh (who, in his reasoning, 
 wisely considers the value of coin to be completely 
 dependant on the value of the material of which 
 it is made) to have reduced the value of coin more 
 than one-half in the course of the last century : 
 eight shillings and five-pence halfpenny, in the 
 year seventeen hundred, being, according to the 
 calculations in his tables, equal to a pound sterling 
 
 in eighteen hundred. 
 
 i 
 
 During the whole of this period, the Bank of 
 
12 
 
 England were in the practice of issuing Notes pay- 
 able in coin ; yet, notwithstanding this great and 
 gradual diminution in the value of coin, it never 
 was suggested that there was, or could be, a dif- 
 ference betwixt the value of a Bank Note, and the 
 value of that portion of coin it promised to pay. 
 Notes of the Bank of England were never supposed 
 to represent abstract values. Bank Notes were al- 
 ways considered as representing one hundred and 
 thirteen grains of pure gold, and seventeen hun- 
 dred and eighteen grains of pure silver ; and the 
 doctrines now prevalent, that they represented the 
 value those metals possessed ten years before, or 
 their value on an average of a number of years, was 
 never once thought of. 
 
 Yet it is impossible to imagine how Bank Notes 
 should have assimilated themselves to coin during 
 the whole progressive depreciation that took place 
 in its value $ and that they should assimilate them- 
 selves to thepast value of coin, or to its average 
 value for a number of years, the moment it is sup- 
 posed to increase "in value : for it would indeed be 
 a strange and unintelligible connection in respect 
 of value, betwixt Notes and the coin they repre- 
 sent, if the former were always identified in va- 
 lue with the latter, when it remained stationary, or 
 declined in value; and as uniformly assumed a 
 distinct and determinate value of their own, the 
 moment coin began to rise in value? 
 
From this short analysis of the relation which 
 Bank Notes bear to coin, it seems perfectly clear, 
 that, in reference to value, they can only be re- 
 garded as if they were the identical portion of coin 
 they engage to pay on demand : that nothing but 
 a deficiency of power to command it can make 
 them appear in any other point of view ; and that, 
 though this loss of power in Bank Paper may di- 
 minish the value of the Note, it cannot increase the 
 value of the coin, which undergoes no change or 
 alteration of character. 
 
 On this ground alone, therefore, the absurdity of 
 conceiving that the difference in value between 
 coin and Bank Paper arises from an increase in the 
 value of coin, and not . from a depreciation of 
 Paper, might be rested. But as this is a ques- 
 tion, on the decision of which must rest the cha- 
 racter of the late proceeding in parliament in pass- 
 ing " An Act for making more effectual provision 
 " for preventing the current gold coin of the realm 
 " from being paid or accepted for a greater value 
 " than the current value of such coin; for pre- 
 " venting any Note or Notes of the Governor and 
 " Company of the Bank of England from being 
 cc received for any smaller sum than the sum there- 
 " in specified; and for staying proceedings upon 
 " any distress by tender of such Notes ;" as well 
 as the merits of the controversy in respect to the 
 conduct of the Bank, its importance may be 
 thought to require examination abstractedly from 
 
14 
 
 the relation that bullion and Bank Notes bear to 
 each other, and a statement of the grounds on 
 which it distinctly appears ; 
 
 1st, That coin and gold have not increased in 
 value. 
 
 2d, That Bank Paper has got into a state of 
 depreciation. 
 
 Before, however, entering into the discussion 
 which is requisite to elucidate these two proposi- 
 tions, it may be proper to state what are now ge- 
 nerally considered to be the circumstances that 
 confer value, and what it is that regulates the rise 
 or the fall of value in all commodities. 
 
 Nothing in itself possesses value; the existence 
 of that quality is perfectly independent of any cha- 
 racteristic inherent in the commodity that has ac- 
 quired it. It is an attribute incident to all com- 
 modities that become the objects of mens* desire, 
 and that conjoin with the circumstance of being 
 useful or delightful to man, that of existing in 
 
 scarcity. 
 
 i 
 
 It may be, therefore, truly stated, that value can 
 only be conferred by exciting the desires of, men 
 for something that exists in a degree of scarcity ; 
 or by rendering scarce that for which, though un- 
 limited in quantity, men naturally feel a desire. 
 
lo 
 
 These premises evidently lead us to conclude, 
 that unless a substance could be found, subject to 
 no alteration in its quantity, and uniformly excit- 
 ing the same portion of desire, every thing valuable 
 must be subject to variations in value. 
 
 It is also clear, that all such variations must be 
 produced by one of four circumstances : 
 
 1st, A commodity must be subject to an increase 
 of its value from a diminution of its quantity. 
 
 2d, It must sustain a diminution of value from 
 an augmentation of its quantity. 
 
 3d, An increased demand must tend to create 
 an augmentation of value. 
 
 4th, A failure of demand must give rise to a di- 
 minution of value. 
 
 
 
 Further, as it would be as impossible to attempt 
 to measure, or to express the degrees of value 
 which any commodity enjoys, by means of a thing 
 that did not itself possess value, as it would be to 
 have recourse to a mathematical point for a mea- 
 sure of dimension, the value of every commodity, 
 when expressed in common language, must be sub- 
 ject to variation in consequence of eight different 
 contingencies : 
 
16 
 
 1st, From the four circumstances above stated, 
 in relation to the commodity of which the value is 
 to be expressed. 
 
 2d, From the same four circumstances in rela- 
 tion to the commodity adopted as the measure of 
 value. 
 
 From this short detail of the principles on which 
 the value, the variations in value, and the expres- 
 sion of those variations depend, it follows that 
 there must be a marked difference in the nature of 
 the variations to which commodities must be liable. 
 Some will vary in value in one place from the value 
 they possess at another. Some will be liable to 
 sudden variations even at the same place ; whilst 
 others, subject to more gradual and slow variations, 
 will always maintain nearly an equality in value in 
 different places, 
 
 * It is therefore of the greatest importance in the 
 conduct of the exchanges of the superfluities of 
 one man for those of another, to select as a mea- 
 sure of value and medium of exchange that com- 
 modity least subject to variation of value in the 
 different places where the parties reside - y and least 
 likely to alter in its value within the short space of 
 time in which the transaction is carrying into 
 effect. 
 
 Gold and silver, from the ease with which their 
 
17 
 
 precise purity can be ascertained, as well as their 
 divisibility into pieces of different sizes, are emi- 
 nently calculated to act as money; but these are 
 properties they enjoy only in common with lead and 
 other inferior metals. What they exclusively con- 
 join with these qualities is, the character of steadi- 
 ness in respect to value within a short space of 
 time, whilst they enjoy in a greater degree than any 
 other commodity, uniformity in value throughout 
 
 the world. 
 
 
 
 These are the attributes, which without any con- 
 vention, or even implied agreement, have induced 
 mankind in civilized society, universally to adopt 
 gold and silver as the materials best suited for the 
 matter of money. 
 
 When, therefore, we are told that gold has risen 
 *up wards of twenty per cent, within the limited 
 space of two years, we are informed that it has 
 suddenly lost that character for uniformity of value 
 which mankind by their conduct had unanimously 
 ascribed to it. Nay, more, we are desired to believe 
 that this metal is no longer subject to that slow, 
 but steady diminution of value which experience has 
 shewn (in consequence of its gradual increase in 
 quantity being uniformly greater than the* augmen- 
 tation of demand for it) to be the character of those 
 variations in value it has always sustained ; and 
 to give credit to the assertion, that gold, in vio- 
 lation of every principle, had so far altered its na- 
 
 c 
 
18 
 
 ture, as to have risen in value within the space of 
 two years, more than other commodity. 
 
 Some general reasoning might have been ex- 
 pected from those who maintain this hypothesis, to 
 explain the causes of such an extraordinary and 
 sudden exception to this constant and invariable 
 rule, by which, in the opinion of all who have 
 written on the subject, the variations in the value 
 of gold and silver had been guided. 
 
 But far from attempting to give any explanation 
 or reasonable account of so improbable an altera- 
 tion, there is not even the smallest uniformity in 
 the statements of those who assert that this singular 
 change in the value of these metals has taken 
 place : for some are of opinion, that it is on the 
 continent of Europe that gold has so rapidly in- 
 creased in value 5 others, confident that a rise 
 has taken place in this country, in the value of 
 gold, admit (what indeed appears incontrovertible) 
 that it has undergone no similar change abroad; 
 and there are not a few who endeavour to supply 
 the total want of every thing like reason in support 
 of their theory, by the ardour with which they 
 announce the conclusion that both gold and silver 
 have risen in value throughout the markets of the 
 world. 
 
 That it is the great demand for gold, and its 
 
19 
 
 increased value on the continent of Europe, -which 
 is the cause of its being withdrawn from this coun- 
 try, is an opinion supported by authority no less 
 respectable than that of the Governor of the Bank 
 of England, who in his examination before a select 
 committee of the House of Commons, appointed to 
 inquire into the cause of the high price of gold 
 bullion, distinctly states his conviction, that it is 
 the high price of gold abroad that has made our 
 gold coin disappear from circulation in this 
 country. 
 
 The committee in their report have themselves 
 truly observed, that this opinion is unsupported by 
 any detail of facts, and that it is contradicted by 
 those who seemingly possess the greatest knowledge 
 of the state of the foreign markets.* Besides, it is no- 
 torious that gold has not risen in a manner to au- 
 thorize this opinion, either at Hamburgh or Amster- 
 dam, where its value, *as expressed in silver, which 
 is the only legal tender, has experienced no altera- 
 tion similar to what is supposed to have taken place 
 in this country. 
 
 But in truth the speeches of two of the most 
 
 * See the examination of A. Goldsmid, Esq. and of John 
 Lewis Greffulhe, Esq. annexed to the Report of the Bullion Com- 
 mittee. 
 
 C 2 
 
20 
 
 strenuous advocates in favour of the present system 
 of circulation,* recently published by authority, 
 clearly demonstrate that neither the value of gold 
 or silver have undergone any unusual or material 
 variation on the continent of Europe. 
 
 In the former of these speeches, Sir George 
 Shuckburgh's calculations are referred to, to shew 
 that gold had diminished in value, betwixt the 
 year 1797 and the year 1800 ; thus sanctioning the 
 principle on which the value of gold is ascertained 
 in these tables. 
 
 It is therefore impossible that the author of this 
 speech can have been ignorant, that in these calcu- 
 lations, as published in the Philosophical Trans- 
 actions, the depreciation of the value of metallic 
 money, after making allowance for the various 
 changes in the weight and alloy of our coins, is 
 inferred from the rise in the price of labour, and of 
 numerous articles of provisions. 
 
 That the reasoning on which this inference pro- 
 ceeds is equally applicable to the Continent of 
 
 * The Right Honourable George Rose, Treasurer of the Navy, 
 Clerk of Parliament, and Vice-President of the Board of Trade 
 and Viscount Castlereagh, late one of His Majesty's Secretaries 
 of State. 
 
 f Mr. Rose's Speech, page 20. 
 
21 
 
 Europe, as to this country, is apparent : how 
 then can any one who sanctions these tables with 
 his approbation, deny, that if a rise has taken place 
 in the price of commodities at Paris, where gold 
 and silver almost exclusively circulate, these metals 
 must have continued to sustain the same slow and 
 gradual diminution in value, to which Sir George 
 Shuckburgh has shewn they have long been sub- 
 ject. For it must be obvious that if gold and silver 
 had really increased in value in the capital of 
 France, to the extent of fifteen or twenty per cent, 
 in consequence of that extended demand for them, 
 which the Governor of the Bank has alluded to, 
 provisions and other necessaries so far from rising 
 in value, must, on the principle of these tables, 
 have undergone a rapid diminution. 
 
 The penetration, however, of the Vice-President 
 of the Board of Trade, who by licence now regulates 
 the whole commerce of this country, has led him, 
 in the act of maintaining that gold has greatly 
 risen in value, to inform the public* that Monsieur 
 Silvestre, in a report made to the Agricultural 
 Society at Paris, in 1805, had stated the price of 
 labour to be increased from one-third to one-half 
 in different places of France, and that beasts of 
 labour, and all articles requisite for a farmer's fa- 
 mily, were [augmented in the same proportion. 
 Further, that Monsieur Daru had stated to the le- 
 
 * Ibid. P . 31. 
 
01 
 
 gislative body, so late as the year 1810, that the 
 difference betwixt the value of money at that time 
 and the year 1791, was such, that the same income 
 did not in January last represent more than two- 
 thirds of what it did at the former period. Facts 
 which conclusively prove, that the value of gold 
 and silver money cannot have increased on the 
 Continent of Europe.* 
 
 Thus the value of gold estimated in silver abroad : 
 the evidence of the merchants best acquainted 
 with the state of the foreign markets ; and even 
 the admission of those who are most eager in con- 
 tending that the difference of value betwixt gold 
 and Bank Paper proceeds from a rise in the value 
 of the former, concur in making it evident, that 
 the value of that metal has undergone no material 
 change on the Continent. 
 
 If gold then has risen in value at all, it must be 
 in the home market and yet it requires very little 
 reflection to discern the complete impossibility of 
 there existing in this country a partial rise in the 
 value of that metal to the extent of twenty or even 
 of fifteen per cent. 
 
 * Lord Castlereagh in his Speech pn the second reading of 
 Lord Stanhope's bill, page 48, resorts to the same reasoning. 
 Both these statesmen have extracted this evidence of the inac- 
 curacy of their own argument from a pamphlet entitled " A 
 " Review of the Controversy respecting the High Price of our 
 " Bullion, and the State of our Currency." p. 35. 
 
23 
 
 In the first place, there is against this hypothe- 
 sis, the direct information of merchants, of the 
 greatest character, whose statements distinctly es- 
 tablish, that notwithstanding the unfavourable 
 state of our exchange with the Continent, the 
 value of a pound of gold bullion, is exactly the 
 same at Hamburgh and London,* and that there 
 is only the small difference of seven shillings and 
 sixpence in the value of a pound weight of standard 
 gold betwixt Paris and London,-f that is, it is 
 
 * Extract of the Evidence of A. Goldsmid, Esq. 
 
 What Bill on England could be purchased at Hamburgh, ac- 
 cording to the last accounts of the course of exchange, for 100 
 ounces of English standard gold ? 
 
 About o460. 
 
 How much English standard gold for exportation, could be 
 purchased in London for o460. ? 
 
 100 Ounces. 
 
 Then the price of gold at Hamburgh and the price of gold in 
 London are nearly equal ? 
 
 They are. 
 
 See also the Evidence of John Lewis Greffulhe. 
 
 f Seven shillings and sixpence is to o50. 19s. 3d. the value 
 of a pound of pure gold, as fourteen shillings and eight-pence 
 halfpenny is to o6100. 
 
 Extract from the Evidence of A. Goldsmid, Esq. 
 
 You have stated that a guinea, or gold equal to what is con- 
 tained in a guinea, is worth about 25*. at Paris j that is, a dif- 
 ference of c8. 18s. upon 44 guineas and a half; so that gold 
 equal in weight to what is contained in 44 guineas and a half, 
 would sell at Paris for <55. 12s. 6d. do you mean to say that 
 the above quantity of gold would purchase at Paris a bill ou 
 London for o55. 12*. 6d. ? 
 Nearly so. 
 
 What 
 
24 
 
 nearly two-thirds of one per cent, higher at Paris, 
 where it has been shewn, that it has not risen in 
 value, than in London, where this rise in value 
 is supposed to exist. 
 
 Secondly, it is impossible that any one, in the 
 slightest degree conversant with the mere ele- 
 ments of political economy, can seriously believe 
 that a commodity which abounds on the Conti- 
 nent, and which has disappeared from circulation 
 in this country, can be higher by fifteen or twenty 
 per cent, here, than it is in the foreign markets. 
 For if gold was to desert the country where it was 
 most valuable, and resort in abundance to that in 
 which the least could be obtained in exchange for 
 it, it would be a violation of the invariable rule, 
 that every commodity finds its* way to the market 
 where its value is highest. 
 
 There are those, however, who maintain that 
 the balance of trade and of payments, with the Con- 
 tinent of Europe, are at present so much against 
 
 What would a pound of gold in London cost, at \rhat you 
 have stated to be the present market-price of gold in London, 
 namely <. 12s. per ounce ? 
 
 Does it not follow from what you have now stated, that the 
 pound of gold in London and at Paris, is at present nearly of 
 the same value, the difference being only 7s. 6d. per pound ? 
 
 It does. 
 
this country, as to make it impossible that gold or 
 silver should remain in circulation, and to have 
 occasioned the state of our exchanges, as well as 
 the recent high price of bullion ; and as this mode 
 of accounting for the present state of our circulat- 
 ing medium is resorted to by almost all who have 
 strangely discovered in the increase of paper, to 
 which the restriction of cash payments at the 
 Bank has given rise, an improved system for the 
 conduct of the circulation of this great mercantile 
 country ; it seems necessary to go into a little de- 
 tail, to shew how seldom it can happen, that the 
 exchange resulting from the state of trade and pay- 
 ments can be so unfavourable to a country, as to 
 induce the merchants (who must always be presumed 
 to act upon the principles of securing the greatest 
 profit) to export coin; and how impossible it is 
 that this, or any country, should by such means 
 be drained of its metallic currency. 
 
 That the exchange seldom can fall against any 
 country to the extent of making it profitable to 
 export the circulating coin, is one of those propo- 
 sitions that has been rarely controverted ; and it is 
 often more difficult briefly to establish by argu- 
 ment what has generally been received as self-evi- 
 dent, than to give a short view of a question which 
 has usually been the subject of controversy. For- 
 tunately, however, this long received opinion may 
 be illustrated without entering into very tedious 
 details. 
 
26 
 
 Let us suppose, as was asserted by the mer- 
 chants examined in the year 1797, when the re- 
 striction'on cash payments was imposed, that the 
 expence of sending bullion to Hamburgh was 
 three and a half per cent. ; from this statement it 
 is evident that gold could not be conveyed from 
 England to Hamburgh, the exchange being un- 
 favourable to the extent of three per cent, without 
 a loss of a half per cent. 
 
 Before, however, the exchange could fall even to 
 three per cent, there must have been so many 
 efforts on the part of the merchants to rectify it, 
 in consequence of the encouragement an unfavour- 
 able exchange, founded on the balance of pay- 
 ments, always must give to the exportation of com- 
 modities, and the effect it must have in preventing 
 the importation of them, that it is hardly possible 
 it can ever fall so low, if uninfluenced by the cir- 
 cumstance of great remittances from political con- 
 siderations. 
 
 For example, if five per cent, is deemed a 
 fair mercantile profit, without which a mer- 
 chant cannot have a proper return, on a cargo 
 carried from England to Hamburgh, it is obvious 
 that as long as the prices of cloth in England and 
 at Hamburgh are such as to give only a profit of 
 three per cent, on the resale, an exportation of 
 cloth from England to Hamburgh cannot take 
 place, if the exchange is at par ; but if, beside 
 
. 27 
 
 the profit of three per cent, on the cloth, there is a 
 profit of two and a half per cent, on the exchange, 
 that is, if a bill on London for one hundred pounds 
 can be purchased at Hamburgh for ninety seven 
 pounds ten shillings, then cloth will be immedi- 
 ately exported, because the profit by the ex- 
 change, and the profit by the cloth, will, when 
 combined, afford a profit upon the transaction of 
 no less than five and a half per cent. 
 
 On the other hand, suppose the difference of 
 the price of German linen at Hamburgh, and in 
 London, to be such as to afford a profit of six per 
 cent, when resold in England, still, as before the 
 money could be returned to Hamburgh, there 
 would be a loss of two and a half per cent, one 
 hundred pounds in London producing only ninety 
 seven pounds, ten shillings, at Hamburgh, it is ob- 
 vious linen could not be carried to England, because 
 instead of producing five per cent, which is assumed 
 to be the fair mercantile profit, the transaction 
 combining the gain upon the linen, and the loss 
 on the exchange, would only afford a profit of three 
 and a half per cent. 
 
 Thus, before it can happen that the real ex- 
 change, arising from the balance of payments, 
 can fall so far as to make it possible for a merchant 
 to export gold without a loss, there must be a 
 want of commodities in the country, which on ex- 
 portation will afford a profit, such as when com- 
 
28 
 
 bined with the rate of exchange, holds out the 
 prospect of a fair profit to the merchant; for, as 
 long as there are commodities of that description, 
 they must be conveyed in preference to gold; 
 and every such exportation co-operates with a ne- 
 cessary diminution of imports, as above explained, 
 to equalize the balance of payments : and by thus 
 rectifying the exchange, to prevent the possibility 
 of gold being exported without a loss. 
 
 It may however be said, that admitting all this 
 political arrangements may give rise to the necessity 
 of expenditure abroad, to such a degree as to occa- 
 sion the continuance of an unfavourable exchange, 
 even after the various commodities of a country have 
 been conveyed to an extent, that their abundance in 
 the country that receives them, prevents their return- 
 ing any profit to enhance that which the exchange 
 affords : that this is the situation of this country, 
 and that under such circumstances bullion must be 
 exported. 
 
 But, even granting this statement to be true, it 
 is in the nature of things impossible that the prac- 
 tice of exporting bullion, as a means of restoring 
 the balance of payments, should be long pursued, 
 either in this or any other country ; and it is most 
 completely impossible, that it can be carried on for 
 that purpose so as to deprive any country of its 
 current coin in circulation. For the quantity of 
 the coin of a country that can at any time be with- 
 
29 
 
 drawn from circulation to effect this object, is 
 small indeed, as must be obvious to those who re- 
 flect, that the moment gold begins to be exported 
 the value of that which remains must increase, or, 
 in other words, the value of all the commodities in 
 the country must diminish ; and of course, that 
 they will again present themselves to the foreign 
 merchant in a state, such as combining the pro- 
 bable profit on their exportation with the profit on 
 the exchange, will make it once more a loss to him 
 to export bullion. 
 
 It is also clear, that if from political causes, a ne- 
 cessity for further payments should again fill the 
 foreign markets with our manufactures, to an ex- 
 tent that rendered them incapable of being profit- 
 ably exported, and that the exportation of gold 
 should be reverted to ; the moment a little more 
 of our gold is withdrawn, a further reduction of 
 the price of our manufactures would again make 
 the exportation of gold the least profitable means of 
 paying a foreign debt. 
 
 Thus, before any country can be drained of its 
 gold, by an unfavourable balance of foreign pay- 
 ments, the commodities of its growth and pro- 
 duce must in the progress of this operation be re- 
 duced in value to a mere trifle. 
 
 Such is the reasoning that seems to justify the 
 opinion formerly held by practical merchants of the 
 
30 
 
 greatest eminence,* that no country can suffer a 
 great diminution of its coin from the state of the ex- 
 change, arising out of an unfavourable balance of 
 payments -, for the moment such an exportation 
 commences, a fall in the price of commodities, in 
 consequence of the rise in the price of gold, will 
 ensue, which must be a check to the practice ; as 
 the superior profits that will arise from the state of 
 the exchange,and the further reduced price of goods, 
 must induce merchants again to recur to the more 
 profitable channel of merchandise for conveying 
 their remittances. 
 
 But by those who wish to prove that the dif- 
 ference betwixt the value of gold and paper arises 
 from an advance in the value of gold, all reasoning 
 concerning the commercial relation of one country 
 to another, however just in the usual state of things, 
 is held inapplicable in the present state of Europe. 
 
 They regard the ports of the Continent as her- 
 metically sealed ; and representing this country as 
 unable to force the articles with which she would 
 discharge her obligations, through the barrier poli- 
 tical circumstances has interposed, ascribe to the 
 commercial decrees of France the power of pre- 
 
 * See the Evidence of Mr. Winthorpe, one of the Directors of 
 the Bank of England. Irish Exchange Report, p. 38. 
 
venting our manufactures from making their way 
 to a foreign market, and of rendering the exporta- 
 tion of coin inevitable.* 
 
 That this country could be drained of its coin 
 
 * Unlike, as in former times, when the intervention of neutral 
 states, or the ingenuity of our merchants, made exportation, even 
 in a period of war, little liable to obstruction, England is now with 
 teeming warehouses, unable to force the articles, with which she 
 would discharge her obligations, through the barrier which po- 
 litical circumstances have interposed. 
 
 The Principles of Currency and Exchanges, applied to the 
 Report from the Select Committee of the House of Com- 
 mons (Supposed to be the Work of an eminent Banker.) 
 page 43. 
 
 I am, on the contrary, ready to admit that the adoption of such 
 a measure can only be justified by an adequate necessity. In 
 the present instance, what is the fact ? That the ruler of France 
 has determined, at the price even of inflicting commercial ruin 
 upon those over whom he rules, to exclude your trade from the 
 Continent. If he does not succeed effectually in doing so ; if 
 much still finds its way, his system has had the effect ; compara- 
 tively at least, of turning the balance of intercourse against us, 
 and thus influencing the exchange. His decrees are less effectual 
 to prevent the produce of the Continent from finding its way to 
 us, than in excluding our produce from the Continental Markets. 
 Hence an obvious cause of an unfavourable exchange. In ordinary 
 times, the immediate effect of such an unfavourable exchange would 
 be, by a reduction of price to the foreign consumer, resulting from 
 the advantage of the exchange, to force out a greater proportion 
 of our manufactures: the quantity of bills would be thereby aug- 
 mented* 
 
cannot be admitted, even if the statement of facts 
 were accurate from which this inference was drawn. 
 But is it true that British produce and manufac- 
 tures have been totally excluded from the Conti- 
 nent ? Does it not, on the contrary, appear from 
 the accounts before Parliament, that in the last 
 two years, during which the exchanges have be* 
 come so unfavourable, and bullion has risen to so 
 great a value in Bank Notes, as to make our 
 coin disappear from circulation, there has been 
 a greater increase of our trade,* and even of our 
 
 merited, and the precious metals would, in but a comparatively 
 small amount, be sent abroad. So long as goods could be 
 applied to settle the account, the price of bullion would not rise 
 materially above its natural price. But now goods cannot be 
 sent as in ordinary times. 
 
 Speech delivered by Lord Castlereagh, May 8, 1811, page 26. 
 
 * Official Value of Exports from Great-Britain in the following 
 years : 
 
 Years. 
 
 British Pro- 
 duce <Sf Ma- 
 nufactures. 
 
 Foreign and 
 Colonial 
 Merchandise 
 
 Total. 
 
 Ending 5th 
 Jan. 1806 
 1807 
 1808 
 1809 
 1810 
 1811 
 
 
 25,004,337 
 27,402,685 
 25,190,762 
 26,691,962 
 35,104,132 
 34,940,550 
 
 
 
 9,950,508 
 9,124,499 
 9,395,283 
 7362,305 
 15,182,768 
 10,945,309 
 
 . 
 34,954,845 
 36,527,184 
 34,586,045 
 34,554,267 
 50,286,900 
 45,885,859 
 
 Average Annual Export, as appears from this table 
 
 dnring the first four years e35,155,585 
 
 Average Annual Export of the last two years . 48,086,379 
 
 Increase during the last two years . . , . . o12,930,794 
 
33 
 
 exports to Europe, than at any former pe- 
 riod ?* 
 
 This extension of our trade can indeed be surpris- 
 ing to no one, who has with any degree of attention 
 examined the effects of an increase of circulating 
 medium'; for the commerce of this country in the end 
 
 * Official Value of Exports from Great Britain to the Conti- 
 nent of Europe in the following years : 
 
 Year 1805 .15,465,430 
 
 1806 13,216,386 
 
 1807 12,689,590 
 
 1808 11,280,490 
 
 1809 23,722,615 
 
 1810 19,606,706 
 
 The average Annual Exportation to Europe 
 appears from this Statement to have 
 been, years 1805-6, 7, and 8 ... ^13,162,974 
 
 The average Annual Exportation during the 
 
 last two years, is 21,664,660 
 
 Excess, years 1809-10 ,8,501,686 
 
 From the Report of the House of Lords on the Bank, 1797, it 
 appears (page 254) that the whole Annual Exports, during the 
 last peace, to France, Flanders, Holland, and Germany, did not 
 exceed five million, four hundred thousand ; so that the annual 
 excess of our exports to Europe during the last two years, 
 exceeds, by nearly three millions, the total amount of our ex- 
 ports to these countries during peace. 
 
 D 
 
34 
 
 of the century before last,* as well as that of 
 our American colonies in the middle of the last 
 centuryf the recent increase of transactions in 
 
 * When in the order that is adopted, the state of the circula- 
 tion of this country in 1695-6, comes to be explained, and it 
 is shewn that the Bank of England from circumstances, was at 
 that time as at present, practically relieved from all demands for 
 cash payments, ample authority will be given to shew the exten- 
 sion of paper money, and the consequent augmentation of com- 
 merce even during the expensive war in which this country was 
 then engaged. 
 
 f We are told by the author of the Discourse concerning the 
 Currency of the British Plantations (page 38) that " the fallacy of 
 " quantities of Paper Money has increased our superfluous imports 
 " much beyond what was in former times. The seeking factors 
 " upon a large emission advise the merchant in Great Britain, that 
 t( money being now very plenty, a large quantity of goods will 
 " sell : accordingly, a glut of goods is sent to New England, more 
 " than can be sold for ready money and short credits ; the con- 
 " sequence is, a long credit, with its consequential multitude 
 " of evils." 
 
 The plan of this author's work is to state what has been 
 said in favour of an extended circulation of paper in Ame- 
 rica, and then to reply to it. In the following passage it 
 will be found that both he and his adversary agree in the fact, 
 that it has produced an extension of expenditure, and conse- 
 quently an increase of trade. 
 
 The goodly appearance which Boston and the country in general, 
 at present make, in fine houses, equipage, and dress, is owing to paper 
 money. All our plantations, from some infatuation are inclinable 
 to run into prodigality, profuseness, and shew : their paper 
 
 loans 
 
Ireland* and the extravagant augmentation of 
 all sorts of mercantile adventure from increase of 
 demand, during Mr. Law's operations in France, f 
 
 loans (from public or private schemes) upon long periods, give 
 the unthinking and unwary opportunities of involving themselves> 
 by thus sinking what they have borrowed ; by repeated emis- 
 sions they have opportunities of paying a former debt, by run- 
 ning further in debt, till at length they become insolvent. 
 
 Discourse on the Currency of the American Colonies, p. 39. 
 
 * See the Evidence of Mr. French, (Irish Exchange Commit- 
 tee, page 131) ascribing the increased importation of goods to 
 the extension of credit, since the augmentation of paper ; and 
 stating an instance of an individual increasing his imports from 
 1 0,000, to <80,000. per ann. which he never could have don 
 under any other circumstances. 
 
 f The following description of the extravagant demand for 
 commodities at Paris, during the year 1719-20 is extracted from 
 the History of Mr. Law's System. 
 
 Quant d ces hommes nouveaux dont il est fait mention, se 
 trouvent extrement charges de papier, ils se donnerent tous les 
 mouvements imaginables pour le realiser ; ce qui fit monter a un 
 prix excessif toutes les choses necessaires d Tentretien de la vie. 
 Les Merchands vendirent jusqu' a vingt cinq ecus Taune de 
 drap, qui ne valoit auparavant que seize d dix-huit francs ; le 
 velours, les etofes de soye, et autres merchandizes a proportion. 
 Les loyers des maisons etoient exorbitans, la fa9on de toute 
 sorte d'ouvrages se payoit au triple ; il y avoit des pieces d'or- 
 f^vrerie, dont le prix du travail cxcedoit deux fois la matiere ; 
 enfin tout etoit totlement bouleverse, que les gens senses ne sa- 
 voient meme plus a quoi s'en tenir. 
 
 II faut remarquer que la rue St. Honore que ci-devant auroit 
 fourni de quoi vetir superbement toute la France et les voisins, 
 se trouvoit alors comme epuissee ; sur-tout onn'y voyoit plus de 
 
 velours 
 D 2 
 
56 
 
 shew that it is a uniform consequence of an over- 
 issue of paper monqy. 
 
 The augmentation of our commerce is indeed 
 great ; but great as it is, it cannot appear extra- 
 ordinary to any one, who has maturely considered 
 the necessary effects of a great increase of paper in 
 a country, where the habits of extended credit be- 
 twixt man and man, and all the numerous devices 
 to economize the use of circulating medium, must 
 render any addition infinitely more efficacious. 
 
 Lord Liverpool, in his letter to the King on the 
 Coin of the Realms, states that, " when the situa- 
 " tion of the Bank of England was under the consi- 
 " deration of the two Houses of Parliament in the 
 " year 1797* it was his opinion, and that of many 
 * c others, that the extent to which paper currency 
 ,* c had then been carried, was the first and principal, 
 though not the sole cause of the many difficulties 
 to which that corporate body was then, and had 
 of late years, from time to time, been exposed 
 
 velours, ni d'etofes d'or ; le commencement de 1'hiver avoit 
 emporte tout ce qui s'en etoit trouve dans les magazins. Cette 
 saison, si triste d'ailleurs, avoit, du terns du systeme, plus 
 d'eclat et de brillant que le plus beau printems d'aujourd'hui, soit 
 par les habits de velours de toutes les couleurs, doubles de 
 tissues d'or et d'argent, soit par les galons et les broderies 
 magnifiques : quant aux pierreries, leur eclat eblouissoit les yeux 
 aux Cours et aux spectacles ; et le nombre de nouveaux Carosses 
 mis sur pied, paroit aujourd'hui, incroyable a ceux a qui on le 
 raconte. 
 
 " 
 
37 
 
 " in supplying the cash occasionally necessary for 
 " the commerce of the kingdom."* 
 
 He further adds, that cc it seems to have been 
 " discovered of late years in this country, that by 
 " a new sort of alchemy, coins of gold and silver, 
 " and almost every other sort of property, may be 
 " converted into paper ; and that the precious me- 
 " tals had better be exported, to serve as capital to 
 <c foreign countries, where no such discovery has 
 " yet been made. But this new sort of fictitious 
 " capital, thus introduced within the kingdom, has 
 " contributed more than any other circumstance to 
 " what is called over-trading, that is rash and in- 
 :c considerate speculations, and what is almost 
 " a necessary consequence, unworthy artifices to 
 " support the credit of adventurers already ruined ; 
 " as well as other evils, which tend to corrupt the 
 " morals of the trading part of the community, 
 " and to shake the credit on which, not only paper 
 " currency, but the internal commerce of the king- 
 " dom is founded."! 
 
 * Lord Liverpool's Treatise on Coin, p. 222. 
 
 f Ibidem, p. 228. In relying upon what Lord Liverpool has 
 said with regard to the state of our paper circulation, it is not 
 intended to express any approbation of the opinions contained 
 in his Letter to the King on the subject of the Coin of these 
 Realms. On the contrary, the arrangement recommended in 
 this letter, of making gold the sole legal tender, and of taking a 
 per centage from the real value of the silver coined at the mint, 
 
 equal 
 
38 
 
 Yet at the former period to which Lord Liverpool 
 alludes, the circulation of the Bank of England had 
 never, for any length of time, exceeded eleven mil- 
 lions,* and the number of country banks who issued 
 notes payable on demand, were only two hundred 
 and thirty. *) At present the circulation of the Bank 
 amounts to upwards of twenty-three millions ; J 
 and in the year 181O there were not fewer than 
 eight hundred and eighteen establishments that had 
 taken out licences for the circulation of their 
 paper. 
 
 Even since the publication of the letter to the King, 
 the circulation of the Bank of England has won- 
 derfully increased -, nay, since the end of the year 
 1808, there has been an augmentation in the cir- 
 
 equal to the charge of workmanship, is regarded by the author 
 of this tract as likely to be prejudicial ; whilst he is disposed to 
 deny both the accuracy of the reasoning used in recommending 
 it, and of the facts on which that reasoning is founded. 
 
 * See the accounts annexed to the Report of the House of 
 Lords and Commons, 1797. 
 
 f See Mr. Ellison's Evidence, Report of the House of Com- 
 mons, 1797, p. 121. 
 
 j By an account delivered to the House of Lords, of the 
 amount of Bank of England Notes in circulation, on the 25th of 
 each of the last six months, distinguishing the amount of those 
 above and below five pounds, dated 5th July, 1811, it appears, 
 that on an average the total circulation of Bank Notes amount^ 
 ed to ,23,421,866. 
 
 See an account of the number of licences for the issue of 
 promissory notes payable on demand, delivered to the House of 
 Lords by the Stamp Office, 4th July, 1811. 
 
39 
 
 culation of that Bank, to the extent of nearly six 
 millions, whilst from every information that can 
 be obtained, the issues of private banks have 
 more than proportionally augmented, so that it is 
 hardly possible to estimate the increase of paper 
 thrown into circulation, even within these last two 
 years, at so small a sum aa twelve millions.* 
 
 * Average amount of Bank of England Notes, as 
 already stated for six months, ending July 1811 o23,421,S66 
 Average amount of Bank of England Notes in 
 
 circulation in 1808 17,534,580 
 
 Increase of Bank of England Paper in two years <5,887,286 
 
 By Law, Country Bank Notes of Five pounds and upwards 
 cannot be issued for more than three years after their first emis- 
 sion. Notes of one and two guineas are also presumed, on the 
 information stated by the Bankers themselves to the Treasury, 
 when the law was passed, to be worn out in that time, so that 
 the value of notes stamped within three years must give nearly 
 the amount of Country Bank Notes in circulation. Estimated 
 by this criterion, the comparative amount of Country Bank 
 Notes, on the 1st of January, 1809, and the 1st of January, 1811, 
 will be as follows : 
 
 Country Bank Notes, 1st January, 1811 . <32,961,169 
 Country Bank Notes, 1st January, 1809 . 24,473,184 
 
 Increase of Country Bank Notes in the last 
 
 two years o8,487,985 
 
 Add increase of Bank of England Notes 
 
 within two years as above <5,887,286 
 
 Total increase of paper within two years . <14,375,271 
 
40 
 
 If then cc overtrading, that is rash and incon- 
 " siderate speculations, and unworthy artifices to 
 " support the credit of adventurers already ruin- 
 <c ed," was solemnly announced to the sovereign 
 in 1805, as the necessary consequence of the 
 extent to which the paper circulation of the 
 country had been then carried, is it extraordinary 
 that the unparalleled increase of Bank Paper 
 which has since taken place, should have over- 
 powered even the energy of the ^Emperor of 
 France, and that our exports to Europe should 
 have increased in defiance both of the war and of 
 his decrees ? 
 
 The public are much indebted to the Select 
 Committee of the House of Commons, for the 
 the care and attention with which their Report on 
 the high price of gold bullion has been framed. 
 But with all due admiration of the luminous man- 
 ner in which they have illustrated many of the 
 important doctrines contained in that Report, it is 
 impossible to agree to the position, that the first 
 advance of Bank Notes, by way of discount, if 
 given to safe hands, is always an operation useful 
 and beneficial to the public : this may be a natural 
 result of the opinion which the Committee seem 
 to entertain, that the moment the notes advanced 
 to the discounter, pass into other hands, they 
 cease to act as capital, forming merely an addi- 
 tion to the currency or circulating medium.* 
 
 * In the first instance, when the advance is made by Notes 
 
 paid 
 
41 
 
 Surely, however, a little more reflection must 
 have convinced the intelligent members of that 
 Committee, that in all cases of an over-issue of 
 paper, when notes pass from the hands of the 
 person to whom they are advanced by way of dis- 
 count, far from ceasing to act as capital, they 
 have only performed the first and least important 
 step of the career they habitually run, in accom- 
 plishing that mischief to the public, which in 
 their capacity of capital they are doomed to in- 
 flict. 
 
 In the usual routine of the monied transactions 
 of this country, whenever Bank Notes are received 
 from the Bank in discount, they are either lodged 
 by the person who receives them, or the person to 
 whom he immediately pays them, in the hands of 
 
 paid in discount of a bill, it is undoubtedly so much capital, 
 so much power of making purchases, placed in the hands of the 
 merchant who receives the Notes ; and if those hands are safe, 
 the operation is so far, and in this its first step, useful and pro- 
 ductive to the public. But as soon as the portion of circulating 
 medium, in which the advance was thus made, performs in the 
 hands of him to whom it was advanced this its first operation 
 as capital, as soon as the notes are exchanged by him for some 
 article which is capital, they fall into the channel of circulation 
 as so much circulating medium, and form an addition to the 
 mass of currency. 
 
 Report of the Select Committee on the high Price of Bul- 
 lion, p. 23. 
 
a banker.* By an extra issue of Bank Notes, 
 therefore, as the increase in the number of notes 
 is no reason for any individual keeping any more 
 money in his drawers or in his pocket'; Bankers 
 in general must have a sum in their possession, 
 large in proportion to the extent of our paper cur- 
 rency : and as the profit of a banker arises from using 
 the money deposited, he % must naturally wish to 
 enlarge those accommodations by discount and 
 otherwise, which form the source of his profits. f 
 
 * I ask my reader, what sum of money, what value in the 
 circulating medium of the country, whether of gold and silver, 
 or of notes, he keeps in his pocket or in his house ? The answer 
 must necessarily be, from one, a little more ; from another, a 
 little less; but from the richest to the poorest, from the highest to 
 the lowest condition, there will be admitted to exist this govern- 
 ing rule : A constant desire that the actual sum so kept should 
 be as little as the convenieuce or supposed necessities of the 
 individual will admit. 
 
 The Principles of Currency and Exchanges applied to the 
 Report of the Committee of the House of Commons, 
 (supposed to be the work of an eminent Banker,) p. 10. 
 
 f But these very men (meaning Commercial men) carry no 
 more money about their persons when they have obtained such 
 loans than they did before; they lock up no more in their strong 
 chests. If they pay the amount to their banker, or to any 
 former creditor, or if they pay it away in open market, it be- 
 comes the immediate care of the party who receives it, not to 
 allow the sum, whatever it be, now placed in his custody, to 
 remain unproductive and at his hazard. 
 
 Ibidem, p, 12. 
 
43 
 
 The moment, however, the person who borrows 
 this additional sum in notes from those in whose 
 hands it has been deposited, disposes of them in 
 the'purchase of goods or securities, with a view to 
 acquire a profit, either real or ideal ; or pays them 
 away for any other cause ; the notes from similar 
 motives are again returned into the hands of the 
 same, or some other banker, and his conduct being 
 regulated by similar principles, an attempt will 
 be immediately made to renew the operation of 
 lending them out as capital, which in point of fre- 
 quency of repetition, seems only to be limited by 
 the rapidity with which money may be spent, or 
 sales of goods, and transfers of commodities, can 
 be effected. 
 
 4 
 
 It is plain, then, that under our improved system 
 of conducting money transactions, a small excess 
 of Bank Notes thrown into the circulation, must 
 in their character of capital, give a wonderful de- 
 gree of facility, or rather of encouragement to mer- 
 cantile adventure. 
 
 Mr. Bosanquet, in his Practical Observations on 
 the Report of the Bullion Committee, states that 
 (e ^50,000. may pass successively through the 
 " hands of every banker in Lombard-Street, and 
 " absorb in its passage all the best bills in the 
 "market, to an unlimited amount; for if A. a 
 " merchant, borrow it of B. a banker, he immedi- 
 " ately pays it away to C. who deposits it without 
 
44 
 
 " loss of time (indeed, as I before observed, he ne- 
 <( ver withdraws it) with the same or other banker; 
 " but however often this transaction takes place 
 " during the day, it makes no real deduction in the 
 " supposed excess of notes, which will be as super- 
 " abundant after the last discount it has effected 
 " as before the first."* 
 
 If then, in the estimation of this great prac- 
 tical authority, fifty thousand pounds of Bank 
 Notes could in one day effect in their capacity of 
 capital such a multiplicity of real transactions, 
 who can doubt the irresistible influence the present 
 state of things must have in encouraging all sorts 
 of adventure, when an excess of more than twelve 
 millions must be at all times lying at the disposal 
 of the bankers and monied men throughout the 
 country, of which they must naturally be anxious 
 to make a profit. 
 
 But it may be thought that there is a sufficient 
 security against the temptation this state of things 
 affords, both to the banker and the mercantile ad- 
 venturer, in the integrity of the merchant, which 
 will prevent his engaging in desperate and unpro- 
 ductive projects with the funds of others ; as well 
 as in the cautious advances of supplies, which must 
 
 Page 58. 
 
45 
 
 and ought to distinguish the conduct of bankers in 
 regard to money transactions. 
 
 He is ignorant, however, of the spirit which 
 guides those concerned in modern mercantile en- 
 terprizes, who thinks that any thing can restrain the 
 desire of adventure encouraged by the prospect of 
 ideal profits, to which the power of commanding the 
 capital of others gives birth ; and the integrity of 
 those concerned in the conduct of our commerce, 
 can now afford but a slender security; for since the 
 introduction of the licence system, the trade of this 
 country, instead of being a scene of fair and ho- 
 nourable transactions, as was long the boast and 
 pride of British merchants, has become a labyrinth 
 of mystery and fraud, " conducted (as Sir William 
 Scott says) " by simulation and dissimulation/'* 
 and protected almost in every step by the perjury 
 of those who are concerned. 
 
 Little, therefore, as the integrity of men, whose 
 minds are trained to the conduct of trade, under 
 
 * See judgment in the case of the Eolus, August 8, 1810. 
 Lord Bacon tells us, that the great disadvantage of simulation and 
 dissimulation is, " that it depriveth a man of one of the most 
 " principal instruments of action, which is trust and belief;" 
 if Sir William Scott, in using this expression, had Lord Bacon's 
 Essay in his recollection, what a sad opinion he must entertain of a 
 system of commerce that tends to render the merchant unworthy 
 of trust. 
 
46 
 
 such a system, can be depended on to protect 
 the country against the temptations to mercantile 
 adventure, afforded by such an overflow of fictitious 
 capital ; still less security does the nation derive 
 against such practices from the caution which a 
 proper regard to his own interest may be supposed 
 to instil into the conduct of the backer; for in 
 truth his operations may be carried on to an extent 
 ruinous to the country, without any danger to 
 himself. 
 
 Under our former system of circulation, when 
 the necessity of payment in cash on demand formed 4 
 a proper check to the extension of commercial 
 transactions, that security which the laws of this 
 mercantile country afforded to the holder of bills, 
 was undoubtedly highly advantageous and bene- 
 ficial. But these regulations, under our present 
 system of circulation, when the unlimited issues of 
 paper must drive those, in whose hands, in the course 
 of business, it must be deposited, to exert their in- 
 genuity to find means of disposing of it, so as to se- 
 cure a profit, can only be regarded as affording a 
 dangerous encouragement to the accommodation 
 of speculative adventurers. 
 
 If the drawer, the acceptor, or any of the in- 
 dorsers of a bill are solvent when it becomes due, 
 the holder must receive payment ; and even, if all 
 of them are bankrupt, he can prove against their 
 several estates, receiving dividends from each, till 
 
47 
 
 he is paid in full ; thus it may often happen, that 
 the holder of ar* accommodation bill receives the 
 full amount of his debt, whilst the creditors of the 
 various parties, on the security of whose names he 
 discounted it, may not receive half-a-crown in the 
 pound.* 
 
 It is, with confidence, then, that under these cir- 
 cumstances it is left to the decision of the public, 
 whether there is any thing extraordinary in this ap- 
 pearance of extension of commerce, which the ac- 
 counts communicated to Parliament exhibit : for 
 the only decision that reason can justify any man 
 in anticipating is, that the extension of the trade of 
 a country, even if unprofitable, must be the neces- 
 sary result of a system of commerce, which at once 
 encourages adventurers and corrupts the minds of 
 those who engage in trade, combined with a system 
 
 * By the Law of England, the holder of a Bill (upon which 
 the drawer, acceptor, and any number of indorsers, are all be- 
 come bankrupts) is entitled to prove, under the separate com- 
 mission of each, the full amount due to^ him at the time he 
 makes his proof; and to receive dividends under each commis- 
 sion, upon the sums proved, until he shall in the whole have re- 
 ceived the full amount. If at the time of going to prove under 
 one commission, he has already received any part of the bill, 
 he can only prove for so much as remains. But if after having 
 proved for the whole, he receives a part of the bill from any of 
 the persons liable to pay it, he is still entitled to a dividend upon 
 the whole, provided it does not exceed twenty shillings in the 
 pound upon such part as remains due. 
 
48 
 
 of circulation, which, whilst it takes off the salutary 
 check against the superabundance of paper, af- 
 forded by payment of cash on demand, leaves that 
 encouragement to accommodation which our laws 
 wisely held out under different circumstances, to 
 operate on the transactions of the monied interest, 
 at a time when, within two years, they must have 
 received an increased issue of more than twelve 
 millions of paper into their hands. 
 
 If any one is disposed to doubt that this is the 
 real and the sound explanation of all the various 
 phenomena which our commerce has recently 
 exhibited, let him reflect on the numerous lists of 
 mercantile adventurers, the extension of whose 
 transactions have rapidly outrivalled those of the 
 best known and most respectable commercial esta* 
 blishments, though their names are only now to 
 be heard of as bankrupts recorded in the Ga- 
 zette ;* and then let him consider whether by any 
 other means it is possible to explain the occur- 
 rences we have within these few years witnessed. 
 
 Bankrupts gazetted in the following thirty -Jive years: 
 
 177? 
 
 609 
 
 1786 
 
 496 
 
 1795 
 
 704 
 
 1804 
 
 884 
 
 1778 
 
 692 
 
 1787 
 
 501 
 
 1796 
 
 735 
 
 1805 
 
 958 
 
 1779 
 
 5?3 
 
 1788 
 
 718 
 
 1797 
 
 866 
 
 1806 
 
 994 
 
 1780 
 
 448 
 
 1789 
 
 561 
 
 1798 
 
 724 
 
 1807 
 
 1067 
 
 1781 
 
 445 
 
 1790 
 
 583 
 
 1799 
 
 557 
 
 1808 
 
 1101 
 
 1782 
 
 559 
 
 1791 
 
 612 
 
 1800 
 
 736 
 
 1809 
 
 1110 
 
 1783 
 
 539 
 
 1792 
 
 625 
 
 1801 
 
 884 
 
 1810 
 
 1792 
 
 1784 
 
 539 
 
 1793 
 
 1299 
 
 1802 
 
 947 
 
 1811 
 
 2044 
 
 1785 
 
 511 
 
 1794 
 
 824 
 
 1803 
 
 920 
 
 
 
49 
 
 It is painful to perceive, and still more to disclose 
 such a change in the character of our commercial 
 transactions, from those times in which, not in this 
 country only, but throughout Europe, honour, 
 justice, and integrity, formed the proud characte- 
 ristics of our merchants. It seemed, however, a 
 necessary detail to support the credit of the ac- 
 counts of our exports, which so distinctly prove 
 the error of those who have regarded the diminu- 
 tion of our export trade to the continent as the 
 cause of our coin disappearing. 
 
 At all events, it is in vain to object to the inac- 
 cury of the information which these accounts 
 convey concerning the real value of our exports. 
 The objection, even if it were founded, is inappli- 
 cable to them as evidence of what they are here 
 cited to prove ; for they are only referred to, to 
 shew that there is no insuperable barrier to the ex- 
 port of our goods ; that, on the contrary, in com- 
 parison of former years, our export within these 
 last two years has been excessive ; and these ac- 
 counts of the Inspector-general of Imports and 
 Exports, have been at all times relied upon by offi- 
 cial men, as giving an accurate comparative view of 
 our commerce.* 
 
 * See Mr. Pitt's annual Speeches on opening the Budget, who 
 invariably states these accounts as giving an accurate compara- 
 tive 
 
 
50 
 
 It appears, therefore, difficult to suppose on what 
 ground any one can imagine that a rise in the real 
 value of gold and silver has taken place either on 
 the continent of Europe, or in this country. That 
 they have not risen abroad, seems to be established 
 beyond the possibility of doubt ; and it is as impos- 
 sible to suppose, that a local rise of their value in our 
 market could occasion their being totally with- 
 drawn from this country, as it is to believe that the 
 causes to which this supposed rise in value is as- 
 cribed, could have produced the effects attributed 
 to them. 
 
 But of all opinions the most extravagant, seems 
 to be that which announces an augmentation in 
 the value of these metals throughout the world. It 
 is indeed most strange, that a rise in the value of 
 gold and silver to the extent of twenty per cent, 
 should have been stated in this enlightened age as 
 a thing possible. For a moment's reflection on the 
 general principles that regulate the value of commo- 
 dities, in the accuracy of which all are agreed; and on 
 the peculiarities attending gold and silver which oc- 
 casion that uniform depreciation they have sustained, 
 and always must sustain, seems sufficient to produce 
 a conviction, that nothing short of a miracle could 
 
 tive view of our trade. See also Report of the Committee of the 
 House of Lords, on the state of the affairs of the Bank, 1797, 
 drawn up by the late Earl of Liverpool: 
 
produce so extraordinary a change^ Th the nature 
 of things. 
 
 The use of gold and silver, unlike that of grain 
 and many other commodities, that serve for the 
 sustenance, and contribute to the comfort of the 
 human species, does not imply the consumption of 
 them. These metals, even by receiving a form 
 that adapts them for use, do not, like cloth, timber, 
 and many other things, lose the power of resum- 
 ing their state of raw materials, and as they can 
 at all times be reduced when convenient into this 
 form, the quantity of them, that either is or can be 
 consumed, must be smaller than that of any other 
 commodity. 
 
 On the other hand, though the amount of the 
 annual augmentation of these metals has in the 
 course of ages, been sometimes greater and some- 
 times less, yet it has been constant, and of late 
 years the supply from Europe and America alone 
 has been calculated to amount to upwards of nine 
 millions.* It follows, then, that nothing but an 
 increase of effective demand, proportioned to this 
 constant augmentation of the quantity, can possi- 
 
 * The two following Estimates of the value of Gold and Silver 
 produced annually, are taken, the first from Garnier's Notes on 
 
 Dr. 
 E 3 
 
bly sustain the relative value these metals bear to 
 that of other commodities. 
 
 That under these circumstances they should have 
 
 Dr. Smith's Wealth of Nations ; the second from Humbold's Sta- 
 tistical Account of New Spain. 
 
 i ' . 
 
 FIRST ESTIMATE. 
 
 Mines. 
 
 Marcs 
 D' Argent. 
 
 Marcs d> Or. 
 
 De Russie . . 
 
 80,000 
 
 3,200 
 
 De Hongrie . . 
 
 92,000 
 
 4,666 
 
 De Suede & de 
 
 
 
 Norwege . . 
 
 15,000 
 
 
 De France . . 
 
 3,000 
 
 
 De Piemont . . 
 
 2,300 
 
 
 De Saxe . . . 
 
 50,000 
 
 
 De Hartz . . . 
 
 37,000 
 
 
 De Magdebourg 
 
 3,000 
 
 
 Argent 
 
 282,300 
 
 Or 7,866 
 
 V Argent evalue a 52. par le marc 
 I/Or a 780 fr. le Marc 
 
 14,679,600 fr. 
 6,135,480 
 
 PRODUIT DES MINES DE L'AMERIQUE. 
 Amerique Espagnole . . 159,000,000 
 Bresil . . SO^OaOOO 
 
 Produit total des mines d'Or & d'Arg. . 229,315,086 fr. 
 
 In reducing this sum to English money, at the rate of six 
 francs, sixteen cents, to the sterling crown, or twenty -four francs, 
 
 sixteen 
 
for centuries invariably suffered a gradual diminu- 
 tion in value, without a trace of their having at 
 any time sustained a rise in value, cannot appear 
 surprising ; especially when we recollect, that in- 
 creasing opulence and credit tend to supersede the 
 necessity of so frequently resorting to the use of 
 coin, the chief source of the demand for them ; and 
 that mankind, ever attentive in the progress of im- 
 provement to devise means of saving labour, or 
 expenditure, which from its power of commanding 
 labour, may be regarded as the same thing, have 
 
 sixteen twenty-fifths of a franc to a pound sterling (the propor- 
 tion fixed in the Imperial Almanac for the year 1810) the total 
 value of Gold and Silver drawn from these mines is o9,326,910. 
 14*. 3d. 
 
 SECOND ESTIMATE. 
 
 Countries. 
 
 Gold. 
 
 Silver. 
 
 Value of 
 both in 
 Francs. 
 
 Europe . . 
 America . 
 North Asia 
 
 Kilo- 
 grams. 
 
 Value in 
 Francs. 
 
 Kilo- 
 grams. 
 
 Value in 
 Francs. 
 
 16,171,888 
 236,353,667 
 6,677,333 
 
 1,297 
 17,291 
 538 
 
 4,467,444 
 59,557,889 
 1,853,111 
 
 53,670 
 795,511 
 21,709 
 
 11,704,444 
 176,795,778 
 4,424,222 
 
 Total 
 
 19,126 
 
 65,878,444 
 
 869,960 
 
 193>324444 
 
 259,202,8^8 
 
 Reducing this sum to English pounds, on the same principle a* 
 has been already adopted, it amounts to cJO,5 19,597. 14s. 6d. 
 
 These Estimates do not include the Gold and Silver collected 
 in China, Japan, Tonquin, Central Asia, and the interior of 
 Africa, but exhibits the whole amount of the precious metals 
 brought annually into the commerce and circulation of Europe. 
 
been and are in the constant habit of studying 
 with success the means of economizing the use of 
 coin. 
 
 What reason then has been suggested ; what 
 reason can be given sufficiently forcible to authorize 
 the belief that these metals, (the cause of the gra- 
 dual depreciation of which is so obvious,) have, 
 within these two years, suddenly ceased to suffer 
 that loss of value, which it is admitted they have 
 slowly but uniformly and progressively sustained, 
 to an extent, that eleven-pence and twenty-nine 
 two hundred_and eighty-one parts of a penny, are 
 represented in the year 1050 to be equal in value to 
 a metallic pound in the year 1800, that is, that one 
 pound sterling at the former period was equal in value 
 to twenty-one pounds, twelve shillings, threepence- 
 halfpenny, and ten thirteenths of a farthing at the 
 latter.* 
 
 * It is singular that many of the advocates for the present sys- 
 tem of circulation, who in former publications have talked with 
 enthusiasm of the Tables published in the Philosophical Transac- 
 tions, by the aid of which these calculations are formed, now at- 
 tempt to make quibbling distinctions on the subject, and even to 
 controvert the principle they applauded. 
 
 Mr. Chalmers, for example, the author of the Considerations 
 on Commerce, Bullion, and Coin, has the following note in that 
 part of his Estimate of the Commerce of Great-Britain in which 
 he treats of the increase of the Civil List 
 
 " The historian of our Revenue (Sir John Sinclair) does not 
 
 " distinctly 
 
0,5 
 
 But even this is a weak and imperfect statement 
 of the difficulties which must be encountered 
 by those who contend that the difference betwixt 
 
 <e distinctly state that arrangement which comprehends the royal 
 " grace and the parliamentary engagement. The learned ba- 
 " ronet, however, recapitulates the various sums which, from time 
 " to time, have been paid, in supplementary aid of the Civil 
 " List ; and at length infers, that the total, during the space of 
 " twenty-eight years, amounts to ,923,196. per annum. But his 
 " sagacity seems not to have perceived, that the depreciation of 
 " money was out-running the annuity ; and his algebra did not 
 " discover, by computation, that .923,196. in 1786 were not 
 " equal, in power of purchase, to ,800,000. in 1760: in fact, 
 " according to the table, and the principles before-mentioned, an 
 " annuity of ,900,000. was equal in its energies, during the year 
 " 1760, to an annuity of .1,478,947. 7s. 4c/. in 1800. Now 
 " the mathematics cannot be outfaced by confidence, nor out- 
 " argued by declamation." 
 
 Without commenting on the indecent degree of contempt with 
 which the author of the Considerations on Commerce, Coin, &c. 
 has in this passage treated the person who must be considered 
 as his leader in the attack on the Bullion Committee it is im- 
 possible not to observe that he himself has been guilty of what he 
 whimsically calls outfacing mathematics with confidence, or out- 
 arguing them by declamation, in the following passage (p. 121,) 
 of his recent publication : 
 
 " It was reserved for the late Sir George Shuckburgh, to re- 
 " duce this enigmatical subject (the depreciation of money) to 
 " a sort of system : but the true and the parliamentary language 
 " is, that the prices of land, of labour, and of the physical 
 " necessaries, rise, sometimei more and sometimes less, in 
 " particular periods : the value of money, then, does not de- 
 " predate, but prices rise." 
 
66 
 
 the value of Bank Notes and the coin of these 
 realms is to be attributed to a rise in the value of 
 bullion. 
 
 For before that proposition can gain credit, it is 
 not only necessary that the reasoning should be 
 disposed of, by which it has been made" evident 
 that Gold and Silver must, as heretofore, sustain a 
 gradual diminution of value ; but a task still more 
 difficult must be accomplished, for some plausible 
 grounds must be stated for conceiving it possible, 
 that all at once the depreciation in the value of 
 these metals, which has been so long and so uni- 
 formly experienced, should be succeeded by a rise 
 so sudden, as within two years to counteract the 
 formidable loss of value they have sustained during 
 the last twenty-seven years- 
 Yet that it is necessary to establish this by argu- 
 ment, must be evident to those who reflect, that fif- 
 teen shillings and eight-pence farthing was, ac- 
 cording to Sir George Shuckburgh's calculations, 
 twenty-seven years ago, equal to one pound in 1800; 
 and that fifteen shillings and eight-pence farthing of 
 standard silver is at present, in the estimation of the 
 Directors of the Bank of England, equal in value 
 to one pound, if we may judge from the value of 
 the tokens as recently adjusted for the purpose of 
 circulating along with Bank Paper. 
 
 It is material further to observe, that impossible 
 
57 
 
 as it is to conceive why gold and silver should 
 within the last two years experience a rise in value 
 so formidable, after sustaining, during all the vicis- 
 situdes of seven hundred and fifty years, a gradual 
 diminution of value : the difficulty of giving 
 credit to such a statement is infinitely increased, 
 when we learn from a little reflection, that these 
 are the two years of all others in which it is least 
 probable that such a miraculous change should 
 take place. 
 
 From the general principles already stated, by 
 which all variations in the value of any commodity 
 are regulated, it follows, that an extension of de- 
 mand for, or a diminution of the quantity of a com- 
 modity, are the only occurrences that can possibly 
 raise its value. Now instead of the demand for gold 
 and silver having been increased during the last 
 two years, or the quantity of these metals having 
 been diminished, it is evident that the demand must 
 have been diminished, and the quantity increased. 
 
 For this country's ceasing to enjoy a metallic 
 currency, must have curtailed the demand to an 
 extent proportioned to the share we used to acquire 
 of what was annually produced ; whilst the coin 
 withdrawn from this country, pouring in upon the 
 market in which there existed this diminished 
 demand, must, in conjunction with the usual 
 supply, have there produced a quantity in abun- 
 dance unparalleled. 
 
58 
 
 Such are the details, and such the reasoning, 
 that seems to authorize a confident belief that the 
 difference in the value of paper and the coin of 
 these realms cannot be occasioned by an augmen- 
 tation in the value of gold and silver; and if this 
 position is established, the conclusion is unavoidable, 
 that paper must be depreciated; for a difference in 
 the value of paper and of gold, gold bearing a 
 comparatively high value, can only originate from 
 a rise in the value of the latter, or a diminution in 
 the value of the former. 
 
 But a feeling of the importance of this question, 
 nay, a conviction that the interests of the country, 
 on no occasion were ever more deeply concerned, 
 irresistibly urges a further extension of this argu- 
 ment for the purpose of considering some of the 
 dangerous and long exploded doctrines, which 
 have been brought forward in support of the opi- 
 nion that Bank Notes are not depreciated ; and of 
 stating the grounds which justify the conclusion 
 that Bank Paper has, from its abundance, got 
 into a state of depreciation. 
 
 $ 
 
 For such an extension no apology can be neces- 
 sary to those who have studied the subject, as 
 in ascertaining the feelings that have predominated 
 on all similar occasions, they cannot have failed to 
 remark the popularity which has uniformly attend- 
 ed the extension of credit, arising out of a super- 
 
59 
 
 abundance of paper:* and prejudices on a question 
 easily involved in mystery, where the interests of 
 many are concerned, are not to be got the better 
 
 Mr. Law, it is well known, died in obscurity, execrated 
 for the mischief to which he had given rise, and the misery his 
 schemes had inflicted on many ; yet the following preface to an 
 edition of one of his tracts, printed at the time the delusion ex- 
 isted in France and in Europe, will shew the feelings that gene- 
 rally prevailed. 
 
 It is humbly hoped that the public will favourably receive 
 the following pages, which consist of some heads of a scheme, 
 which Mr. Law proposed to the parliament of Scotland in the 
 year 1705 ; which, though it was favoured by the High Com- 
 missioner, (who now serves His Majesty in a great office) and 
 by several members of parliament ; yet such were the prejudices 
 against which prevailed, that the proposal was entirely laid 
 aside. Having had so little success in that part of Great Britain 
 which was his native country, he applied himself to the Lord 
 Treasurer of England, and transmitted to his Lordship another 
 proposal for the increase of Trade and Credit, with explanations 
 at large, and adapted to the Constitution and usages here ; but 
 meeting with no more encouragement than before, and not 
 being able even to get his pardon, (having killed the famous 
 Mr. Wilson in a duel many years before), he was compelled to 
 live abroad ; where, after undergoing a great variety of perse- 
 cution from his enemies, he now appears a minister far above 
 all that the past age has known, that the present can conceive, 
 or that the future will believe. He has established the public 
 faith in a country that was become a proverb for the breach of 
 it. He has made the increase of the revenues of an arbitrary 
 government depend upon the subjects' free enjoyment of their 
 property, insomuch, that it might possibly cost the crown many 
 
 millions 
 
60 
 
 of by hints. On such a subject, all who have any 
 knowledge of mankind, must think that wholesome 
 truths cannot be presented in too great a variety 
 of shapes; at a time when those who hold the 
 government of the state have so far yielded to the 
 delusion, as not only to maintain that paper is not 
 depreciated, but to threaten the country with the 
 ruinous measure of making paper a legal tender. 
 
 By those who applaud our present system of 
 circulation, as solving the problem of reconciling 
 
 millions, together with all its present prospect 'of riches and 
 power, to refuse the very lowest demand of money which the 
 public has promised to pay : he has shewed the people of France 
 that their late King Lewis XIV. with his unlimited authority, 
 was not able to take more from them than Mr. Law has since 
 restored. He has now no enemies but those who are so to all 
 mankind ; and many, who some months ago thirsted after his 
 blood, now eat his bread, for he has appeared incapable of any 
 .other species of vengeance, but that of laying his enemies under 
 the shame and confusion of receiving their fortunes from him. 
 This is the man whom Britain has lost, having laid under the dis- 
 pleasure of three successive ministers, so as not to be able to 
 obtain his pardon, till at last, (too late for his country) it pro- 
 ceeded even unasked from the justice and discerning judgment 
 of a great L d now at the Helm. 
 
 Hiccine Vir Patrioe natus usquam nisi in patria morietur 
 hunc sua quisquam sententia ex hac urbe expellet, quern omnes 
 urbes expulsum a vobis ad se vocabunt : O Terram illam bea- 
 tam, quae hunc virum exceperit! hanc ingratam si ejecerit ! 
 miseram si amiserit ! 
 
61 
 
 national prosperity with a state of warfare,* and 
 who represent the practice of conducting the cir- 
 culation of the country with notes payable in cash 
 on demand, as a mere remnant of barbarous times,f 
 which if persevered in, would have prevented the 
 vigorous exertions we have made, in the course of 
 our enemy's extending his power over the Conti- 
 nent of Europe ; the proposition that Bank Notes 
 have suffered no diminution in value, has been 
 apparently maintained on two different grounds. 
 
 For some have confined their arguments to the 
 more limited object of shewing that they are not at 
 present depreciated ; whilst others have aimed at 
 establishing the more bold and extended position, 
 that under the system on which they are issued, 
 they cannot be depreciated. 
 
 Those who have endeavoured to maintain the 
 former conclusion, enlarging upon the idea suggest- 
 ed by some of the witnesses examined before the 
 House of Commons, that broad cloth, or indigo, 
 were as fair a standard for the value of Bank Paper 
 
 * Speech by Lord Castlereagh on the Report of the Bullion 
 Committee, p. 24. 
 
 t Observations on the State of our Currency, by the Earl of 
 Ross, p. 9. 
 
62 
 
 
 
 as gold or silver,* consider Bank Notes, since the 
 restriction, as representing the value of the commo- 
 dities which formed the basis of the transaction 
 that gave rise to their being issued, and assuming 
 that they are never advanced by the Bank, but for 
 the purpose of facilitating real transactions,! argue 
 
 * See Evidence of W. C. Chambers, Esq. Bullion Report, p. 
 103. 
 
 f It has been so asserted by all the Directors of the Bank of 
 England, who were examined before the Bullion Committee; the 
 following note, however, of the proceedings in an action before 
 the Court of King's Bench, in the month of July last, cannot 
 fail to create strong suspicions, that they occasionally deviate 
 from these principles, and discount paper which they know to 
 be bills of accommodation. 
 
 DENNISON v. TOLLETT IN B. R. 
 SITTINGS AFTER TRIN. TERM, 16th July, 1811. 
 
 The declaration states, that an indenture has been entered into 
 between Lowndes and Batteson, of Liverpool, on the first part ; 
 Dennison, Rainier, Thelluson, and others, eminent merchants of 
 London, on the second part ; and several merchants of Liver- 
 pool, on the third part ; reciting, That Lowndes and Batteson, 
 were unable to meet their acceptances and engagements, and 
 had represented that their embarrassments were of a temporary 
 nature. " And whereas the said Thomas Lowndes and Richard 
 ' Batteson, have made application to the Governor and Com- 
 " pany of the Bank of England, to advance or lend to them the 
 " sum of ,100,000, to which proposition, the said Governor and 
 
 " Company 
 
63 
 
 that, during the restriction of payments in cash, 
 coin may rise in value, whilst Bank Paper may 
 continue to represent in goods that value which 
 the same denomination in gold and silver possessed 
 prior to th^ supposed rise. 
 
 On the other hand ; those who wish to enforce 
 the latter conclusion, habituated to regard the 
 money of the country, circulating in the shape of 
 gold and silver, under those different denomina- 
 tions which have been established as expressing 
 fixed and definite degrees of value; and resting upon 
 what is certainly true, that the materials of which 
 it is composed are not invariable in value, 
 
 " Company, having been satisfied with the representations of 
 " the said Lowndes and Batteson, to the effect aforesaid, have 
 " agreed by way of discount of certain Bills of Exchange, to be 
 " drawn and accepted, or indorsed by the parties of the second 
 " part, in manner, and to the respective amounts hereinafter men- 
 " tioned" 
 
 Then follows a specification of the Bills to be drawn, accepted 
 and endorsed by the parties of the second part, and to be re- 
 newed three times (at three months) for the purpose of being 
 discounted by the banker, and a covenant from the parties 
 of the third part, to indemnify the parties of the second part of 
 all losses, in case they should be ultimately called on by the Bank 
 to pay the Bills so indorsed, drawn, and accepted by them. 
 
 Lowndes and Batteson became bankrupts, after the bills had 
 been twice renewed, and three times discounted by the Bank ; 
 and the parties of the second part being called on to pay, now 
 came on those of the third part for their indemnity under the 
 fovenant. 
 
64 
 
 strangely and inaccurately infer that the value 
 must be denoted by the denomination which is 
 unalterable. 
 
 By the partisans of these several principles, their 
 doctrines are ostentatiously, though falsely, repre- 
 sented, as the discoveries of this enlightened age. 
 But far from being novel in themselves, they are 
 no where more distinctly expressed, or more vio- 
 lently condemned, than in an account of the in- 
 tended Bank of England, written for the purpose 
 of displaying the principles on which that establish- 
 ment was to be conducted, a few months before it 
 was formed. 
 
 In describing the various plans of banks, and 
 public funds, that were at that time projected, the 
 author of this little Tract states, that, " a design 
 Cf was entertained by some mercurial heads, of 
 cc turning a Lumbard into a Bank," (that is, of 
 issuing notes on the credit of goods) cc and to that 
 " end they cried down the use of gold and silver, 
 " and up that of other materials, in lieu thereof, 
 " but when they found the world very unwilling to 
 " leave their old way, without a better reason, 
 " they run from their new mistake into an old one, 
 " which was, that the stamp or denomination could 
 " give credit to the value of money."* 
 
 * See a brief account of the intended Bank of England, page 
 3, published 1694. 
 
65 
 
 By those notionists, as they were then called,* 
 the impossibility of commanding gold and silver 
 sufficient for circulation, the industry and skill of 
 our enemy in drawing our coin abroad, and pre- 
 venting its return, were then as eagerly enlarged 
 upon as they have been of late by those who call 
 themselves practical merchants. j- But, above all, 
 it was strenuously denied that coin derived value 
 from the material of which it was made : and as- 
 serted that the metals only served as tokens of 
 credit representing imaginary denominative va- 
 lues of commodities : Indeed this is the prin- 
 
 * Ibidem, page 9. 
 
 f See An Abstract of the Consultations and Debates between 
 the French King and his Council, concerning the new Coin and 
 Coinage that is intended to be made in England, wherein is con- 
 tained the political designs and great hopes the French King and 
 his Council have to ruin the English Nation, in divesting and 
 draining them of their new Coin as soon as coined. Published 
 1695. 
 
 Also, A Preservative for our Money, or a way proposed, whereby 
 some Money may be kept in England, which otherwise will all 
 be gone ; or how we may carry on the war against France, with 
 vigour and with much better effect than hitherto, and yet keep 
 our Money : ly E. L. printed 1697. 
 
 See further, A short Treatise of the Reason and Cause why 
 our Bullion and Money should have been exported. Printed 1697. 
 
 F 
 
66 
 
 ciple which must, at all times, be assumed to 
 justify the conclusion, that paper, without being 
 payable in cash, can possess value. 
 
 For the opinion that paper may cease to repre- 
 sent coin, and derive its value from other commo- 
 dities, necessarily implies the assertion, that it 
 derives value from denomination, as in reality it is 
 impossible to hold that gold has ceased to be the 
 standard of value, and that paper, whose value 
 was formerly ascertained by its being equivalent 
 to coin, now represents commodities, without 
 either erecting a new standard of value, or attri- 
 buting to the denomination which the paper pos- 
 sesses the power of deciding the quantity of every 
 species of commodity to which it is equivalent. 
 
 It is certain, therefore, that though it is not di- 
 rectly asserted by those who consider paper as repre- 
 senting commodities, that the denomination gives 
 value to, and fixes the value of, the Bank Notes 
 in circulation ; this is a tenet, which, when Bank 
 Paper has ceased to represent coin, and there 
 exists no other standard of value, is the unavoidable 
 consequence of that opinion. 
 
 For those who have suggested the interest of 
 thirty-three pounds six shillings and eight-pence, 
 three per cent, stock, to be the standard by which 
 
67 
 
 a one pound Bank Note is to be valued ;* must 
 perceive that as the interest of that sum, in three 
 per cents, since the restriction, is necessarily paid 
 in a one pound Bank Note, it is in other words to 
 attribute the value of the note to the denomination 
 by which it passes. Such also seems the only 
 source from which the value of Bank Paper can be 
 inferred, by taxing our recpllection to discover 
 what was its value before the restriction, or our 
 imagination to divine what would have been the 
 value of notes in commodities at this time,f had 
 coin continued to circulate ; for nothing but the 
 denomination, can either refresh the memory, or 
 aid the imagination of those who, by such means, 
 try to ascertain the value of our paper. 
 
 Of this doctrine, the author of The Law and Prin- 
 ciples of Money, is one of the most distinguished 
 advocates^ in asserting, however, that it was re- 
 
 * See W. Bosanquet's Practical Observations on the Report of 
 the Bullion Committee. 
 
 f See the various definitions of the standard of value, since 
 gold has ceased to act in that capacity, given in the Review of the 
 Bullion Report, British Review, p. 26, (supposed to be written 
 by a person in high official situation.) 
 
 1 Mr.Raithby, whose pamphlet contains the sentiments of Mr. 
 Rose, as that gentleman has stated in his printed speech, p. 211. 
 
 F 2 
 
68 
 
 served for what he has termed the good sense of this 
 country, recently to discover, that any indifferent 
 substance marked with a clear certain denominative 
 value, which the law should stamp with its au- 
 thority, could perform the duties of money, he has 
 only displayed his ignorance of what he would 
 probably term the ingenuity of former times : for 
 these opinions were not only indirectly insinuated, 
 but directly asserted by many, who in the reign of 
 William III. thought they saw in the extension of 
 our paper credit, the same advantages which he 
 and others have now so sagaciously discerned. 
 
 The public were then told with as much enthu- 
 siasm as at present, that it did not signify what 
 the outward form of money was : that whether 
 metals, leather, or paper, it might equally serve to 
 commute value for value ; and that though com- 
 monly made of some metal, the value arising from 
 public authority might as well be set to any thing 
 else that was equally convenient, and could as well 
 be preserved from being counterfeited.* 
 
 * What matters it what the outward form of cash is ? Be it 
 metal, or leather, or paper, it is all one, so it will commute 
 value for value. As for the intrinsic value of gold and silver, 
 'tis no more than a relative value, in that they are, (by reason 
 of their scarcity) become the measure of commutation. But 
 as to any value inherent in their natures, I do not know that 
 they excel so much ; for other metals (called base, because they 
 
 are 
 
69 
 
 It was, however, reserved for the ingenuity of 
 the present times to discover, contrary to all au- 
 thority and experience, that paper not payable in 
 coin on demand, was capable of conducting the 
 circulation of a country, with an uniformity of 
 value which could not belong to it, if tied down 
 to a metallic currency as the standard.* 
 
 are found in great plenty,) are really of more use to mankind. 
 Now, if money be desirable only for its relative value, then I say 
 these notes may vie with it, for there is not one note but what 
 has relation to a pledge; 
 
 Discourse concerning a Lumber Office, p. 12. Printed 1696. 
 
 I find a great stupidity and dulness of apprehension in some 
 men, about the valuation of our money, and with great diffi- 
 culty havel made them sensible of this error, viz. that a crown 's 
 a crown, and that if it goes so, 'tis no matter if it were leather, 
 concluding that all things are valuable by our money, and money 
 by itself. 
 
 Objections to Mr. Lowndes'^ Proposal about the Amend- 
 ment of our Coin, page 9. Printed 1695. 
 
 * In its absence (that is, the absence of coin) the accredited 
 paper of our Banks preserves its established relation to the ge- 
 neral property of the country, which it continues to circulate 
 with an uniformity of value which could not belong to |it, if 
 tied down to Bullion as the standard, and obliged to conform to 
 all the present convulsive fluctuations in its price. 
 
 Lord Castlereagh's Speech, May 8, 1811, published by 
 authority, page 48. 
 
 The 
 
Sir James Steuart's Work on Political Economy, 
 has, indeed, been copiously quoted, as affording 
 authority for this strange and unintelligible doc- 
 
 The abstract idea of a pound, will be far more uniform in 
 Talue than any fixed quantity of gold or silver. 
 
 Defence of Abstract Currencies, by Gloster Wilson, p. 49. 
 
 Mr. Raithby, after declaring that the Standard of value, the 
 universal power of equivalence, is affixed to the coin, the guinea, 
 and not to the piece of gold ; and stating that a clear, well-un- 
 derstood, denominative value, is in truth the only rule ; (page 
 26.) in a subsequent part of his Treatise, proceeds, " it next occurs 
 " to consider the principle upon which a state must necessarily 
 " act, if it act wisely, in the choice or selection of a part of the 
 " commodity of a society, thus to pass from hand to hand with- 
 " out ever resting, throughout the society, as the representative 
 " of the value of the rest of the commodities destined to their 
 " use and enjoyment. 
 
 " In the first place, the subject that is selected must be palpable 
 " and substantial; small of bulk, light of carriage, and either dura- 
 *' ble or easily renewed. And one would suppose that when these 
 " qualities were ascertained, which all come within the general 
 principle of convenience, that the expence of this vehicle would 
 *' next be the subject of consideration ; and then that the commo- 
 " dity most easily obtained, and of course the cheapest, would be 
 " the commodity the state would fix upon for the purpose 
 " of money. One would not have imagined that the Govern- 
 " ment of any country, would have been' sedulous to select a 
 " commodity, the rarest and most expensive in the world ; that 
 " instead of considering the utility merely, of the qualities of 
 " the commodity, those of beauty and value should have been 
 " held, not only as indispensable, but as of primary considera- 
 
 " tion ; 
 
71 
 
 trine of the advantage of conducting the circula- 
 tion of a country by abstract currencies, repre- 
 senting imaginary denominative values : and it is 
 most certain, that there are many passages loosely 
 written, in that part of this valuable work, where 
 the author details his doctrine concerning money 
 of account. 
 
 It is true, he has stated the Florin-banco, as 
 representing no material value; and he has alluded 
 
 " tion ; qualities which are at total variance with the end de- 
 " signed/' Page 87-8. 
 
 Whatever in itself possesses an embodied form, and an intrin- 
 sic value, must, as^a material commodity, be subject to variation, 
 under the universal principle of the relative proportions of pro- 
 duct and demand. And paradoxical as it may seem in theory, 
 it is nevertheless most uncontrovertibly true in practice, that it 
 is this very attribute of intrinsicality which necessarily imposes 
 the quality of variation. It is the ideal money of account only, 
 which admits of invariable value ; because it is not formed of 
 substantial and therefore variable materials. 
 
 Observations on the Fallacy of the supposed Depreciation 
 
 of the Paper Currency. By Perceval Eliot, p. 32. 
 It is submitted to the refined ingenuity of this gentleman's 
 mind, that an immaterial army would also have the advantage 
 of being invulnerable. And paradoxical as it may appear to 
 him, it is just as easy for a man of science to conceive a success- 
 ful campaign carried on by such an army, as it is to imagine 
 that value can be measured by a standard which is deprived of 
 what he calls intrinsicality. 
 
72 
 
 to Macutes, as used for money on the coast of 
 Africa, divided into decimal parts called Pieces, as 
 a mere scale for estimating their trucks. 
 
 But on the materiality of that which the Florin- 
 banco represents, a variety of passages in his own 
 work, as well as other authorities innumerable, 
 which might be referred to, can leave no doubt. 
 And it is extraordinary Sir James Steuart should 
 have been ignorant that Macutes were pieces of 
 net-work, used by the people of Angola for a co- 
 vering,* with which they conducted their ex- 
 changes, on the same principle that the exchanges 
 of other countries have been conducted, by fish 
 and by cattle, neither of which, as has been al- 
 ready observed, could ever have been resorted to 
 as measures of value, had they not possessed value 
 as commodities. 
 
 It cannot, however, be said, with the smallest 
 justice, that it ever entered into the imagination 
 of the author of the Inquiry into the Principles 
 of Political Economy, that the circulation of a 
 country could be conducted by imaginary abstract 
 denominations of value expressed on paper. 
 
 He has certainly defined money of account to 
 
 * See Prospectus d'un nouveau Dictionnaire de Commerce, par 
 M. V Abbe Morellet, p. 122. 
 
73 
 
 be, " an arbitrary scale of equal parts, invented for 
 " measuring the respective value of things vendi- 
 " ble." But does he not say that before this scale 
 can be applied to use, mankind must by conven- 
 tion fix the standard value of one part? He adds, 
 indeed, that the first step is optional ; that one or 
 more of those parts may be adjusted to any pre- 
 cise quantity of the precious metals;* but when 
 once this adjustment takes place, does he not state, 
 that money is realized, as it were in gold and sil- 
 ver, and becomes the price, as well as the measure 
 of value ? 
 
 So far is it from being true, that Sir James Steu- 
 art sanctions the opinion, that the circulation of a 
 country can be conducted by paper representing 
 no metallic currency, and enjoying only denomi- 
 native value, that those who are really acquainted 
 with his writings, must consider such a repre- 
 sentation as a gross perversion of his doctrine ; for 
 he distinctly states, that " some intrinsic value or 
 " other must be found out to form the basis of paper 
 " money, for without that, it is impossible to fix 
 " any standard worth, for the denominations con- 
 " tained in the paper."f 
 
 i 
 
 It is indeed impossible for any one acquainted 
 
 * Quarto Edition of Sir James Steuart's Political Economy, 
 pages 529-30. 
 
 t Ibidem, page 525. 
 
74 
 
 with the works of this author, to think that his 
 authority can be relied on in support of a doctrine 
 he has reprobated to such a degree as to declare, 
 that " The moment money is realized in the metals, 
 " and that the standard measure of value is affixed 
 " to them, let them be worn or not, it is very evi- 
 " dent, that nothing but the grains of the metal 
 <( in the several pieces can represent the scale by 
 " which the coin becomes a measure of value. 
 " Whenever, therefore, people lose sight of this 
 " undoubted truth, and begin to measure by the 
 <c denominations of the ideal money of accompt, 
 " without examining whether that value be exactly 
 " realized or not, it is just the same thing, as if 
 " they were to measure a length upon a plan 
 " without adjusting their compasses to the scale, 
 " and upon a bare supposition that the opening 
 " they had by accident made, might answer the 
 " length they were to measure." 
 
 There is, however, one weighty and important 
 authority, which, unfortunately for the country, 
 may be now cited in favour of this extraordinary 
 doctrine, that denomination can add to, or take 
 from the value of money. For the House of Com- 
 mons has been induced to declare, " That the 
 <c rights of establishing and regulating the legal 
 cc money of this kingdom, hath at all times been a 
 cc royal prerogative vested in the sovereigns there- 
 " of, who have from time to time exercised the 
 
75 
 
 cc same as they have seen fit, in changing such 
 ic legal money, or altering and varying the value, 
 " and enforcing or restraining the circulation 
 " thereof by proclamation, or in concurrence 
 cc with the estates of the realm, by act of Parlia- 
 " ment."* 
 
 To the authority of either House of Parliament 
 the utmost deference is due, but there is no extent 
 of authority that can command the assent of men 
 to a proposition evidently false, attributing to the 
 Crown a prerogative no King of England ever pos- 
 sessed, and which could not be exercised without 
 being attended with the inevitable ruin of the 
 country. 
 
 The Crown has undoubtedly the power of regu- 
 lating the quantity of alloy that should enter into, 
 and of fixing the size, shape, and denomination of 
 the coin of these realms, by which all subsisting 
 contracts may be effected, and the debtor and cre- 
 ditor alternately defrauded for each other's benefit. 
 Even this power, however, has remained dormant 
 ever since the reign of Queen Elizabeth ; neither 
 was its existence then unquestioned, for though it 
 was confirmed by the judgment of a court of 
 law, the decision has been deservedly, censured, 
 
 Resolutions of the House of Commons, 3d May, 1811. 
 
76 
 
 as repugnant to every principle of natural jus- 
 tice.* 
 
 The Crown has also recently exercised the power 
 of fixing the value of gold coin relative to silver 
 coin, by proclamation, and though it cannot, and 
 never has, attempted to fix the value of coin in re- 
 lation to any other commodity, still the total ba- 
 nishment of all standard silver coin from circulation, 
 which the regulation of our mint effected, suffi- 
 ciently illustrates what would be the consequence 
 of exercising this prerogative of fixing and altering 
 the value of the coin, which the House of Commons 
 has declared to belong to the Crown. 
 
 It is a power which neither the kings of England 
 nor the head of any other empire ever pretended to 
 possess. It is true, that by most governments the 
 shape, the size, and the quality of the current coin 
 has been altered ; perhaps by none more disgrace- 
 fully than by some of the ancient monarchs who 
 held the crown of France. Yet their authority 
 may be cited to prove, that they never imagined 
 they had the power of altering the value of the 
 coin, as is evident from many of the ancient ordi- 
 
 * See note by Edward Christian, Esq. Professor of Law in the 
 University of Cambridge, in his edition of Blackstone, in which 
 he observes on the case of mixed money, in Davies's Reports, 
 48, vol. i. p. 278. 
 
77 
 
 nances, forbidding the engravers and other officers 
 to reveal the quantity of alloy used in the formation 
 of it ; a measure perfectly superfluous, if by these 
 ordinances the value of the coin could have been 
 altered, but in the conception of some of the kings 
 of France, of such importance as to be enforced 
 with the most solemn oaths.* 
 
 Even the revolutionary government of France, 
 who certainly cannot be accused of entertaining 
 very limited ideas of sovereign authority, never sup- 
 posed that such a power could exist ; as is apparent 
 from the royal proclamation of the 19th of April, 
 1790,f announcing the assent given to the decree 
 
 * Philip de Valois, in an ordinance of the year 1350, for mak- 
 ing the Doubles Tournois, directs the officers of his mint to alloy 
 for the merchants, and the engravers and other officers are forbid 
 to reveal the same, and directed to swear on the holy evangelists 
 that they will keep it secret. King John added to his mandate 
 for the like purposes upon the oath you have taken to the King, 
 keep this matter secret, the "best ye may : for if by your means 
 it shall be known, you shall be punished after such a manner, 
 that all others shall be terrified thereby. And in another place 
 Keep this matter secret, and if any one inquire of what standard 
 the blanks are, pretend they are of six deniers ; take as much 
 care as you would of your own honours, that they do not discover 
 the degree of alloy by your means. 
 
 See Le Blanc and Bouttcrouc in his Traite des Monnoyes. 
 
 f Extract from the Proclamation issued on the 19th of April, 
 
 1790, 
 
78 
 
 making assignats a legal tender ; in which the li- 
 mitation that is in the nature of things imposed on 
 all sovereign authority, is most accurately recog- 
 nized; and the people of France are only invited 
 from motives of patriotism to allow the assignats, in 
 the course of future transactions, that value which 
 was conferred on them by law, in so far as con- 
 cerned the interests of those, who in consequence 
 of past transactions stood to each other in the rela- 
 tion of debtor and creditor. 
 
 But should there be any one who really thinks 
 the Crown enjoys the prerogative of altering the 
 value of the coin, that is, the rate at which it 
 should pass in exchange with commodities, and who 
 is so ignorant as to believe that such a prerogative 
 has in modern times been claimed by any king of 
 England, let him reflect on the nature of the steps 
 necessary to effect this object, and he must soon 
 be undeceived. 
 
 1790, announcing the royal^assent to the decrees making assig- 
 nats a legal tender ! 
 
 " Ainsi quoique le decreet revetu de la sanction du Roi n'ait 
 " impose et n'ait pu imposer que 1'obligation de recevoir ces 
 " billets dans les paimens qui ont lieu d'un debiteur a un crean- 
 " cier ; sa Majeste invite tous les habitans xlu Royaume a les 
 " recevoir de meme, sans aucune objection ni difficulte, dans 
 " tousles contrats et les marches libres ; de telle maniere que 
 <f par FefFet d'une juste confiance les billets nationaux soient 
 a estimes partout a Tegal du numeraire effectif," &c. 
 
79 
 
 Supposing, for example, that the Crown should, 
 in the exercise of this prerogative attributed to it 
 by the House of Commons, issue a number of 
 pieces, of weight and purity of standard corres- 
 ponding to those of the present sixpences, and that 
 it should by proclamation order them to pass for 
 the value of shillings ; could this act of the Crown 
 produce the smallest alteration in the relative value 
 of bread, or of any other article, to the coin of these 
 realms? What is there in such a proclamation 
 that would prevent the baker from reducing his loaf 
 one half, or from asking two of these new shillings 
 for the loaf which the day before was sold for one ? 
 Yet, by either of these means, the exact proportion 
 that coin bore to bread in value, before the procla- 
 mation was issued, would be maintained. 
 
 It is obvious, therefore, that if the Crown pos- 
 sessed the prerogative which the House of Com- 
 mons attributed to it, the value of coin in relation 
 to bread could not be raised otherwise than by fix- 
 ing the value of bread, as well as that of coin ; or in 
 other words, by imposing a maximum on the price 
 of bread. 
 
 Neither could the value of money, in reference to 
 that of other commodities, be either raised or dimi- 
 nished, but by a similar proceeding with regard to 
 each article, the value of which was to be measured 
 by the coin of the realm. Thus it would require 
 that the Crqwn should possess the right of imposing 
 

 80 
 
 a maximum on the value of all articles of commerce, 
 before the sovereign could enjoy that prerogative 
 the House of Commons has declared he pos- 
 sesses. 
 
 If then there existed no other motive but respect 
 for the Commons House of Parliament, it seems ne- 
 cessary to attribute the resolution they have placed 
 on their journals, to their being hastily betrayed 
 into an opinion, on a subject on which they must 
 Have been ignorant : for it is impossible to accuse 
 them of being traitors to their constituents, and to 
 their country, to such an extent as to have intended 
 to attribute to the Crown the power of regulating 
 the value of all articles, whether of luxury or of ne- 
 cessity ; yet that the prerogative they have attri- 
 buted to the sovereign necessarily involves that 
 power, is certain, for without it the right of alter- 
 ing or varying the value of the coin of these realms 
 could not exist. 
 
 This discussion concerning the power of denomi- 
 nation to confer or to alter the value, which the 
 resolution of the House of Commons supposes 
 it to possess, might at any other time be con- 
 sidered as unnecessary in a country whose an- 
 cient laws have so clearly expressed that the 
 weight and purity of their standard are the sole 
 source of the value of its coins.* But when it is 
 
 * In the statute de Moneta (20 Edward I. stat. 4.) it is or- 
 dain ed, 
 
81 
 
 seriously stated by men of high authority, that de- 
 nomination is a more stable and invariable founda- 
 tion of value for paper than convertibility into coin 
 on demand. When it is even proposed to Parlia- 
 ment to resolve that neither gold nor silver ever did 
 possess, or ever can possess the various important 
 and necessary qualities for conducting the circula- 
 tion of a country.* The doctrines that paper, as 
 
 dained, " that he who receives or pays money, shall receive or 
 " pay the same by weight; and that the vicar or warden of the 
 " parish shall weigh the same; and in case it be new money, 
 " and the pound weighs not twenty shillings ; and in case of 
 " money that is much used, if the pound wants sixpence, it shall 
 " be re-delivered to him who brought the same." 
 
 At this time the pound in tale, being the same with the pound 
 in weight, it appears that no new money could be received or 
 paid but of full weight, and that money worn was not permitted 
 to be current, after the loss of one fortieth part of its weight. 
 
 * Lord Stanhope, in his Resolutions submitted to the House 
 of Lords, 12th July, 1811, and ordered to be printed by that 
 House, after stating all the various requisites of any material, for 
 forming a legal standard measure of value, proposed to that House 
 to resolve, " That neither gold nor silver ever did possess, or ever 
 " can possess, the various important and requisite qualities which 
 "are above particularly specified; and that not only each of 
 " those precious metals, (technically so called) but likewise every 
 " one of the other articles of merchandise, by means of which 
 " British debts to foreign nations can be discharged, is (from the 
 " irremediable fluctuability of their value, arising from the ne- 
 " cessary fluctuability of the course of foreign exchanges) an 
 
 " improper 
 G 
 
82 
 
 the mere abstract expression of value, is more 
 likely accurately to preserve its value; and that in 
 practice it is the value gold and silver naturally 
 possess that subjects them to the variations that 
 disqualify them for the conduct of circulation ; ac- 
 quire such countenance and support, that it be- 
 comes a duty to expose every argument by which 
 they have been defended. 
 
 In other times, these visionary schemes for con- 
 
 " improper and an unfit legal standard to serve as a fixed, inva- 
 " riable, and permanent measure of the relative value of different 
 " commodities and things within the country itself, which is the 
 " grand and essential end and object of an internal circulating 
 " medium." 
 
 Lord Stanhope's opinions generally possess novelty and origi- 
 nality, but these resolutions display neither ; they are really a 
 repetition from Mr. Law, who seems to have had the same ideas 
 on the disadvantage of gold and silver as circulating medium ; 
 for in the 3d article of the Arret, dated 22d January, 1720, he 
 advised his sovereign to announce the following regulation : 
 
 " S. M. voulant oter tout pretexte a ses sujets de se plairidre 
 " des peines qu'elle pourra ordonner dans la suite centre ceux 
 " qui ont garde de vieilles especes, elle permet d tous ses sujets 
 " et aux etrangers jusqu'au dernier Fevrier prochain inclusive- 
 " ment, de faire sortir hors le Royaume les especes anciennes 
 " et nouvelles, et les matieres d'or et d'argent, etant plus avan- 
 " tageux a Tetat que les sujets de S. M. les fassent valoir dans les 
 " pays etrangers, que de les retenir dans le Royaume sans circu- 
 " lation, en consequence, ordonne SaMajesteque pendant le dit 
 " temps, et s.ans qu'il soit besoin d'aucune permission, tous mes- 
 " sagers et autres voiturierspuissentse charger des dites especes." 
 
83 
 
 ducting the exchanges of a country by what may 
 be multiplied to^any extent, and therefore can pos- 
 sess no fixed value, would have been only alluded 
 to as a proof, that there existed some radical error 
 in the principle on which our circulation is con- 
 ducted ; for on such occasions these opinions have 
 uniformly found their advocates: but the weighty 
 authorities from which they have recently derived 
 support; nay, the majorities of Parliament, by 
 whom they have been listened to with favour, have 
 made the consideration of them a necessary prelude 
 to the task of establishing by direct proof, the de- 
 preciation of our paper currency. 
 
 A distinction between bills of credit, or state 
 notes issued by government, and notes of a corpora- 
 tion of merchants conducting a bank independent 
 of government, has been also much relied upon by 
 those who have attempted to display the advan- 
 tages arising from the restriction, and the subse- 
 quent conduct of the banking establishments 
 throughout England.* And this distinction has 
 been in a certain degree countenanced by some who 
 in many respects have shewn themselves to possess 
 an accurate knowledge of the subject ; for even 
 by them, Bank Notes have been stated as deriving 
 
 * See Lord Castle reagh's Speech on Lord Stanhope's Bill 
 page 44. 
 
 G 
 
84 
 
 value from confidence, and contrasted with govern- 
 ment paper, on which authority is supposed to 
 confer value 1 .* 
 
 It is certain, however, that no paper, whether 
 issued by a corporation of merchants, or by a go- 
 vernment, could be introduced into circulation in- 
 dependent of confidence. State notes, or govern- 
 ment paper, has been generally issued in payment 
 of services performed, or for commodities furnished 
 to the public. The notes of banking establishments 
 have been either advanced to government to accom- 
 plish these objects, or to individuals on the security 
 of goods which they possess or have transferred. 
 
 But in neither case would they be accepted of, 
 nor could they circulate, independent of a confi- 
 dence, on the part of those who receive them, 
 that they will possess an identity of value when 
 they are paid away. For the notes of no govern- 
 ment, however powerful or absolute, can procure 
 the service of those it employs, but from a confi- 
 dent opinion in its servants, that they represent 
 something, the value of which will enable them to 
 secure the clothing and subsistence necessary for 
 their existence. 
 
 * See Mr. Mushett's pamphlet, page 7, and Mr. Huskisson's, 
 page 3. 
 
85 
 
 If authority alone could give value to paper, it 
 would be difficult to discover why the same power 
 could not maintain it accurately in possession of 
 the degree of value it had bestowed. Yet experi- 
 ence shews us that a want of punctuality in the 
 discharge of them, and an excess of quantity, alike 
 affect the value of State Paper and of Bank Paper ; 
 and that it is impossible to bring the one into a 
 state of depreciation by means that would not 
 equally affect the value of the other. 
 
 The dictates of authority short of introducing a 
 maximum, can alone injure the interests of those 
 who are bound by past contracts ; and whether the 
 paper is that of government, or of a banking com- 
 pany, the injury is equally inflicted by a system of 
 laws which contrives to make either the one or the 
 other a legal tender. 
 
 It is, perliaps, true, that paper issued by go- 
 vernment, has been oftener reduced into a state of 
 depreciation, than paper issued by establishments 
 unconnected with government; but that only au- 
 thorizes the inference, that there has been a greater 
 frequency of imprudent management in the issues 
 of the former than of the latter; it establishes no 
 difference in the nature of the paper itself, for the 
 paper of no government ever lost value by means 
 which, if pursued, would not have discredited that 
 of any corporate body. 
 
86 
 
 From the manner in which every illustration de- 
 rived from the fate of bills of credit, and government 
 or state notes, as bearing upon Bank of England 
 Paper, is reprobated, it would appear there exists a 
 notion, that paper issued directly by the government 
 of a country, is from its nature doomed to immediate 
 depreciation. But is this true? Didnottheassig- 
 nats of France, and the paper dollars of the Ameri- 
 can congress, circulate for alengthof time, without 
 sustaining any diminution of value ? and was it not 
 an excess of quantity to which their ultimate de- 
 preciation in value is solely to be attributed ? 
 
 In the former case, it must be known to those 
 who are acquainted with the history of that singu- 
 lar period, that the sixteen millions of livres issued 
 under the decree of the 19th of November, 1789, 
 maintained undiminished value for a length of time, 
 and it is in the recollection of all, that they were in 
 France issued with confidence, and received by 
 practical merchants with enthusiasm, equal to 
 what is now boasted of as existing in relation to 
 Bank Notes, by those who vindicate our extended 
 issues of Bank Paper. Nay, the speeches delivered 
 at that time might almost pass for translations of 
 what we have heard at the Bank, and in places 
 which command a still higher degree of re- 
 spect.* 
 
 * The following are Extracts from the Report to the National 
 
 Assembly 
 
87 
 
 Even after, the only difference in the finan- 
 cial factions in the Assembly of France was, as 
 described by Mr. Burke, on the greater or lesser 
 
 Assembly, made by Monsieur Anson, member of the Committee 
 of Finance, on proposing the first emission of assignats to the 
 extent of sixteen millions of livres. 
 
 " Nous avons entre les mains des addresses rev^tus des sig- 
 " natures les plus recommendables des manufacturiers et 
 " commercans, qui reclament un nouveau numeraire. Vous 
 " n'avez point oublie cette addresse eloquente et patriotique des 
 " negocians de Bourdeaux, de cette cite si celebre dans les fastes 
 " du commerce ; elle a adopte Tune des premieres la circulation 
 " des assignats ; son example sera suivi de toutes ses rivales, ainsi 
 " que de toutes les villes qui ne peuvent pretendre a 1'etre. 
 
 " Elle a envoye son adhesion anticipee a celle des operations 
 " de finances qui vous paroitroit la plus adaptee aux circon- 
 " stances : ses commer9ans reunis Tont appuyee d'un sermeiit 
 " solemnel : bientot la circulation des assignats deviendra la plus 
 *' libre des operations puisqu'elle sera secondee des efforts et des 
 " volontes de tous. 
 
 " Vainement, Messieurs, vous objectera-t-on que Texces d'un 
 ** tel numeraire, en concurrence avec le numeraire reel,deviendroit 
 " tres prejudiciable ; oui, sans doute, si ces deux numeraires pou- 
 " voient long-temps rester en concurrence ; mais d'abord le nume- 
 *' raire reel de la France estdepuis long-temps audessous des besoins 
 " de son industrie. En ce moment, For et 1'argent se cachent : 
 " ils s'enfouissent* et la malveillance les resserre : le papier ne 
 " sera done pendant quelque temps qu'un heureux remplacc- 
 " ment." 
 
 a The gold and silver, as explained in this report, had been 
 driven from circulation by the paper of the Caise d'Escompet, 
 which had been issued to an enormous extent. 
 
88 
 
 quantities of assignats, which were to be thrown into 
 circulation ; when, as he expresses it, they had all 
 become professors in assignats ; their difference in 
 value from gold is recorded by him to have been 
 only seven per cent.* 
 
 Neither did the author of the Reflections on the 
 French Revolution allude to this distinction betwixt 
 the paper of a government and that of a corpora- 
 tion of merchants, when he so eloquently described 
 the circulating paper of England, and contrasted 
 it with that of the revolutionary government of 
 France. 
 
 Of the former, he at that time truly stated, 
 
 " That in England not one shilling of paper money 
 
 cc is received but of choice : the whole of our paper 
 
 (e has had its origin in cash actually deposited, and 
 
 " is convertible, at pleasure, in an instant, and 
 
 " without the smallest loss, into cash again. It is 
 
 cc of value in commerce, because in law it is of 
 
 <c none. It is powerful on Change, because in 
 
 " Westminster-Hall it is impotent. In payment of 
 
 cc a debt of twenty shillings, a creditor may refuse 
 
 " all the paper of the Bank of England. Nor is 
 
 " there amongst us a single public security, of any 
 
 " quality or nature whatsoever, that is enforced 
 
 See Mr. Burke's Works, quarto edition, vol. iii. page 311. 
 
89 
 
 " by authority. In fact, it might be easily shewn, 
 " that our paper wealth, instead of lessening the 
 " real coin, has a tendency to increase it ; instead 
 c< of being a substitute for money, it only facilitates 
 <c its entry, its exit, and its circulation ; that it is 
 " the symbol of prosperity, and not the badge of 
 "distress. Never was a scarcity of cash and, an 
 " exuberance of paper a subject of complaint in 
 cc this nation." 
 
 In stating his opinion of the latter, he describes 
 the government of France to be in a dilemma " If 
 cc they continued to receive the assi gnats, cash 
 cc must become an alien to their treasury : if 
 " the treasury should refuse those paper amulets, 
 " or should discountenance them in any degree, 
 " they must destroy the credit of their sole re- 
 cc source.'* Under these circumstances, he adds, 
 " They seem to have made their option, and to 
 Vc have given some sort of credit to their paper, by 
 <c taking it themselves ; at the same time, in their 
 cc speeches, they made a sort of swaggering declara- 
 <c tion, something, I rather think, above legislative 
 " competence ; that is, that there is no difference 
 " in value between metallic money and their as- 
 " signats. This was a good stout proof article of 
 cc faith, pronounced under an anathema by the 
 cc venerable fathers of this philosophic synod cre- 
 " dat who will certainly not Jud^us Apella." 
 
90 
 
 From these remarks, so truly characteristic of Mr. 
 Burke, it is evident that the preference given by 
 him to the notes of the Bank of England, was 
 founded on more solid considerations than the 
 mere distinction betwixt the paper of a private cor- 
 poration and the paper of government. Far less can 
 it be supposed that this circumstance could have 
 had any weight on his mind, had he lived to see 
 the notes of that establishment for fourteen years 
 not convertible into cash on demand, during which 
 time the country has surrendered the regulation 
 of the quantity of paper that should be thrown 
 into circulation to the unchecked discretion of the 
 Directors of the innumerable establishments, whose 
 profits depend upon the increase of it. 
 
 For we cannot believe that he, who when assig- 
 nats were inferior in value to coin, only to the ex- 
 tent of seven per cent, doubted of the legislative 
 competency of declarations that they were equal 
 in value to metallic money, could have approved 
 of a formal resolution of the House of Com- 
 mons, declaring the notes of the Bank of England 
 equivalent to the coin of the realm, at a time 
 when there existed a difference in their value to 
 the extent of nearly twenty per cent. Still less 
 can we suppose, that he who commented with so 
 much just severity on the speeches of those who 
 had the management of the French finance, 
 would have abstained, upon the mere ground of 
 our notes being issued by a corporation, from ex- 
 
91 
 
 pressing an increased degree of indignatioir at 
 the swaggering speeches of those in office, who, 
 during the last session of parliament, threatened 
 the nation with making paper a legal tender, should 
 any one dare to exercise that choice, betwixt paper 
 and coin, the existence of which he had regarded 
 #s the foundation of our credit. 
 
 In America, it is true, the paper dollars issued by 
 the government of that country, began to sustain 
 a diminution of value before they amounted to a 
 sum equal to what was at first thrown into circula- 
 tion in France. But it is also true that they remain- 
 ed equivalent to metallic money, for more than a 
 year after the Congress had recourse to that means 
 of providing for the maintenance of their armies.* 
 
 * From the Remembrancer in the year 1775, we learn, that 
 early in the month of June, the Congress passed a vote to strike 
 off two millions of Dollars value seven shillings and sixpence in 
 our currency ; and the following short account of their progress, 
 during the next year, is extracted from Dr. Ramsay's History of 
 the American Revolution. 
 
 On the 25th July, 1 775, it was resolved to add another mil- 
 lion of Dollars to the one already voted. For their redemption 
 they pledged the Confederated Colonies, and directed each Co- 
 lony to find ways and means to sink its proportion and quota in 
 four annual payments, the first to be made on or before the last 
 of November 1799; that time was fixed upon from an ex- 
 pectation, that previous to its arrival, the contest would 
 be brought to a conclusion. On the 29th November, 1775, 
 an estimate having been made by Congress of the public 
 expences already incurred, or likely to be incurred, in carrying 
 
 on 
 
92 
 
 They even circulated at par three months after 
 the enormous sum of twenty millions of dollars 
 had been issued, commanding the resources of the 
 country for public services equally with the same 
 sum in gold or silver. 
 
 At last by the great rapidity with' which their 
 issues were increased, in the Autumn of 1776 
 their paper was brought into a state of depreciation. 
 Then it was that the Congress, the Committees of 
 Public Safety, and the various provincial assem- 
 
 on their defence till the 10th June, 1776, it was resolved to 
 emit a further sum of three millions of Dollars, to be redeemed 
 as the former, by four annual payments, the first to be made 
 on or before the last day of November 1783. It was at the 
 same time determined that the quotas of bills to be redeemed 
 by each colony, should be in a relative proportion to their respec- 
 tive number of inhabitants. This estimate was calculated to 
 defray expences to the 10th of June, 1776, on the idea that an 
 accommodation would take place before that time. Hitherto all 
 arrangements, both for men and money, were temporary, and 
 founded on the supposed probability of a reconciliation. Early 
 in 1776, Congress obtained information that Great Britain had 
 contracted for 16,000 foreign mercenaries, to be sent over for 
 the purpose of subduing America. This enforced the necessity 
 of extending their plan of defence beyond the 10th of the next 
 June. They therefore, on the 17th of February, 1776, ordered 
 four millions of Dollars to be emitted, and on the 9th of May, 
 and 22d July following, emitted ten millions more on the same 
 security. Such was the animation of the times, that these seve- 
 ral emissions, amounting, in the aggregate, to twenty millions 
 of Dollars, circulated for several months without any deprecia- 
 tion. Vol. ii. p. 126. 
 
93 
 
 blies, came to resolutions and passed acts, which 
 though in words differing, are in substance the 
 same with the enactments proposed and adopted 
 during the last session of parliament* in support 
 of the notes of the Bank of England. At last 
 
 * That the reader may at once see the similarity of the mea- 
 sures, at first adopted to sustain the credit of the government 
 paper in America, and to maintain the credit of the notes of the 
 Bank of England, it is thought right to subjoin the following 
 extracts from the proceedings of last session, and to contrast 
 them with what took place in America under similar circum- 
 stances. 
 
 Extract of the Act as proposed by Lord Stanhope. 
 That from and after the passing of this act, no person shall re- 
 ceive for any double guinea, single guinea, half-guinea, or seven 
 shilling piece, respectively, any larger sum than forty-two shil- 
 lings, twenty-one shillings, ten shillings and sixpence, or seven 
 shillings, respectively ; and that no person shall receive for any 
 note of the Govenor and Company of the Bank of England, any 
 smaller sum than the sum therein mentioned to be payable to 
 the bearer on demand. 
 
 Extract of the Bill as it passed into an Act. 
 That from and after the passing of this act, no person shall 
 receive or pay for any gold coin lawfully current within the 
 realm, any more in value, benefit, profit, or advantage, than 
 the true lawful value of such coin, whether such value, benefit, 
 profit, or advantage, be paid, made, or taken in lawful money, 
 or in any note or notes, bill or bills of the Governor and Com- 
 pany of the Bank of England, or in any silver token or tokens 
 issued by the said Governor and Company, or by any or all of 
 the said means, wholly or partly, or by any other means, device, 
 shift, or contrivance whatsoever. 
 
 And 
 
94 
 
 their paper dollars continuing to increase, and in 
 consequence to depreciate, that measure was re- 
 sorted to in the month of February 1777, with which 
 this country has been threatened, and the Con- 
 
 And be it further enacted, by the authority aforesaid, that 
 no person shall by any means, device, shift, or contrivance 
 whatsoever, receive or pay any note or notes, bill or bills of the 
 Governor and Company of the Bank of England, as of less value 
 in money, except lawful discount, than the sum expressed there- 
 in to be thereby made so payable. 
 
 Extracts from various proceedings in America, during the year 
 
 1776-7. 
 
 Resolutions of Congress, Dec. 27, 1776. 
 
 Resolved, that the Council of Safety of Pennsylvania, be re- 
 quested to take the most vigorous and speedy measures for 
 punishing all such as shall refuse Continental Currency, and 
 that the General be directed to give all necessary aid to the 
 Council of Safety for carrying their measures on this subject 
 
 into effectual execution. 
 
 Remembrancer for 17 "1 '7. Page 36. 
 
 Extract of the Act of the Council of Safety. Philadelphia, January I, 
 
 1777. 
 
 Resolved, that if any person or persons, from and after the 
 publication of this resolve, shall refuse to take Continental Cur- 
 rency in payment of any debt or contract whatsoever, or 
 for any goods, merchandise, or commodity offered for sale, 
 or shall ask a greater price for any such commodity in Conti- 
 nental Currency, than in any other kind of money or specie, 
 on full proof made thereof before any three members of any 
 'County Committee, or any three field officers of militia of this 
 state ; the person or persons so offending, shall, for the first 
 offence, be considered as a dangerous member of society, and 
 forfeit the goods offered for sale, or bargained for, or debt con- 
 tracted, 
 
95 
 
 gress Bills of Credit, became in payment a legal 
 tender, an act of violence which was soon follow- 
 ed up by regulations on the part of the various 
 provincial assemblies, limiting the value of all the 
 various articles of commerce,* the only means, as 
 
 tracted, to the person to whom the goods were offered for sale, 
 or by whom they were bargained for, or from whom such debt 
 is due. Ibidem, page 37. 
 
 Resolution of the Albany Committee, January %\, 1777. . 
 Resolved, that every person who shall offer any thing for sale, 
 or shall sell any thing for a less sum in gold and silver money, 
 than in continental or other paper money, now passing current 
 in this country, shall be considered as a depreciator of the 
 paper currency, and treated accordingly ; and that every per- 
 son who shall refuse to take the same in payment shall be treat- 
 ed in like manner. Ibidem, p. 81. 
 
 * That the people of this country may see the nature of the 
 measure with which in parliament they have been threatened, 
 in Appendix No. 1, a copy is given of the act of Congress, mak- 
 ing paper Dollars a legal tender ; and the following statement 
 of prices as fixed by the state of Connecticut, may serve as a 
 specimen of those regulations which ensued as necessary to ren- 
 der the measure effectual. 
 
 Regulation of Prices as fixed by the General Assembly of Connecticut. 
 
 February 1777. 
 
 Labour in the Summer not to exceed 3s. per day ; Wheat 6s. 
 per bushel ; Rye Ss. 6d. Indian corn 3s. Wool 2s. per pound. 
 Flax lOd. Pork from 5s. to 7s. per score, 3kd. per pound ; from 
 7s. to 10s. S^d. from 10s. and upwards 3d. Grass fed Beef not 
 to exceed 24s. per hundred ; so in proportion according to its 
 
 quality ; 
 
96 
 
 has been already shewn, by which any govern- 
 ment can give that value to its currency, that it 
 does not naturally command. 
 
 These measures of violence and injustice, how- 
 ever, were not, as indeed they never can be in 
 any country, of long duration ; for on the 1st of 
 October, 1778,* Congress resolved that all limitation 
 on the price of gold and silver should be taken off. 
 But that it was solely the excessive amount of 
 paper thrown into circulation, which in the 
 opinion of Congress produced the fatal diminu- 
 tion of value in their Bills of Credit, is apparent 
 from the preamble to an act passed July 27, 1779, 
 for the purpose of raising money by loan, in which 
 it is stated that Congress, " being bound by every 
 
 %f. 
 
 :( motive of policy, and of public and private justice, 
 " to maintain the credit of the paper money emit- 
 cc ted by their authority, on the faith of the United 
 " States, it is their intention not only to avoid 
 "further emissions, but to diminish the quantity 
 
 quality ; Raw hides 3d. per pound ; Salt 105. per bushel ; West 
 India Rum 6s. per gallon, per hogshead ; best Muscovado Sugar 
 605. per hundred ; New England Rum 3*. 6d. per gallon, per 
 hogshead ; Molasses 3*. per gallon, per hogshead ; Tea 4s. 6d. 
 per pound ; Butter Wd. Cheese 6d. 
 
 Ibidem, 1777, p. 130. 
 The above prices are in Continental Currency, 
 
 * Ibidem, Vol. 1778-9, p. 347. 
 
97 
 
 \ 
 
 " in circulation."* Thus, evidently declaring 
 both, that a diminution of value could only be 
 produced by an augmentation of their quantity, 
 and that their value could only be sustained by a 
 diminution of their amount. 
 
 Nothing, indeed, can be so clear, as that it was 
 the quantity of paper thrown into circulation, and 
 that alone, which in America produced the depre- 
 ciation of the paper issued under the authority of 
 Congress. For in the years 1776 and 1777, when 
 the cause of the United States appeared desperate, 
 the comparatively small quantity that was issued, 
 circulated for a length of time at par, and after- 
 wards sustained only a slow and gradual diminu- 
 tion of value : whilst in the three following years, 
 though the events of the war, the Treaty with 
 France, and the other European alliances, gave to 
 the cause of those who issued the paper, the cer- 
 tainty of success, the quantity thrown into circu- 
 lation reduced its value to a trifle. f 
 
 Neither does the opinion, that the depreciation 
 
 of Government Notes and of State Bills of Credit 
 
 . has been uniformly and exclusively the effect of 
 
 an over issue, rest solely on what occurred in the 
 
 course of the French and American revolutions. 
 
 * Ibidem, 1779, p. 41. 
 
 t On this subject, see an Essay on Money, by the Rev. Dr, 
 Witherspoon. 
 
 H 
 
98 
 
 These, indeed, may be considered as the instances irt 
 which this abuse has recently been carried to the 
 greatest extent, but the history of all out Ameri- 
 can colonies, whose respective governments, in the 
 arly part of the last century, issued Bills of Cre- 
 dit, form one continued illustration of the prin- 
 ciple. 
 
 The paper emitted in all of them, at first circulat- 
 ed at par, or, as they expressed it, at silver value. 
 Those who regulated the amount thrown into circu- 
 lation by the dictates of prudence, were rewarded 
 with the continuance of a metallic circulation, and 
 a favourable exchange. Those, on the other hand, 
 who rashly presumed on seeing a small amount cir- 
 culate at par, that they had discovered an in- 
 exhaustible mine, and who listened to the sophis- 
 try of many, who in those days as at present, 
 argued, that the terms, Dollar, Crown, Livre, 
 Pound, were to be considered as exponents or de- 
 nominations of certain proportions; and that by 
 retaining the denomination after the bullion was 
 gone, things might be rated, bought and sold, and 
 a commercial circulation kept up ; had daily ex- 
 perience of the fallacy of the theory on which they 
 
 acted. 
 
 r 
 
 For when, in any of these colonies, large sums 
 were emitted, silver and exchange uniformly rose. 
 When Bills were cancelled, in value equal to 
 what was paid out, silver and exchange were at a 
 
99 
 
 stand ; and when more in amount were cancelled 
 than were emitted, exchange became more favour- 
 able, and silver fell.* 
 
 But the history of ^the paper issued by the go- 
 vernments of New York and of Barbadoes, fur- 
 nishes of all others the most complete proof that 
 government paper, if issued with prudence, will, 
 like the notes of a corporate body, circulate at 
 par; and that the depreciation of Bills of Credit 
 uniformly arises from an imprudent extension of 
 the amount. 
 
 In the former, just as the mass of paper was 
 increased, silver increased in .value, and exchange 
 became unfavourable, till it rose to four hundred 
 and forty; when the cancelling a greater value in 
 one year than was emitted, reduced the exchange 
 to four hundred. f In the latter, encouraged by 
 
 * See the Discourse concerning the Currencies of the British 
 Plantations in America, especially with regard to their Paper 
 Money, first printed in Boston, afterwards reprinted in Lon- 
 don. 
 
 t In New England, after silver had rose A. 1706, to 8s. 
 per ounce, by light pieces of eight superseding the heavy pieces, 
 it continued at that rate while paper emissions did not exceed a 
 due proportion to the current silver. A. 1 714 we emitted o50,000. 
 upon loan; and A. 1715 in Rhode Island ^40,000. besides emis- 
 sions on distant funds for charges of government : in the autumn 
 A. 1715, silver became 15 per cent, advance above 8s. that 
 
 is, 
 H 2 
 
100 
 
 Dollars circulating at par, when emitted to the 
 extent of sixteen thousand, they were induced to 
 enlarge the issue of Bills to the amount of eighty 
 thousand pounds more, when the whole imme- 
 diately fell forty per cent, below silver value, at 
 which rate they remained till, by an order from 
 home, they were again reduced to sixteen thou- 
 sand pounds, when they resumed their value, and 
 continued to circulate at par. 
 
 But it is needless to multiply illustrations of a 
 
 is, about 9*. 2d. per ounce ; Massachusetts Bay, A. 1717, emitted 
 100,000. upon loan, at a very long period : silver rose to 
 12*. per ounce. A. 1721, Massachuset's Bay emitted o50,000. 
 and Rhode Island o^OOO. upon loan: silver A. 1722, became 
 14*. per ounce. From that time a chargeable Indian war re- 
 quired large emissions, and silver rose to 16s. per ounce : it 
 continued at this rate till A. 1728, emissions not being larger 
 than cancelling. A. 1727, Massachuset's Bay emitted o60,000. 
 and A. 1728, Rhode Island emitted c40,000. upon loans; sil- 
 ver became 18s. per ounce. A. 1731, Rhode Island emitted 
 ,60,000. upon loan. (N. B. Besides the several loans in the 
 course of this history, all the charges of the four governments 
 were defrayed by paper emissions,) and silver became A. 1732, 
 21*. per ounce. A. 1733, Massachuset's Bay emitted e '76,000. 
 upon Funds of Taxes ; Rhode Island, <104,000 upon loan and 
 taxes ; Connecticut <50,000. upon loan, and A. 1734, silver be- 
 came 24s. per ounce. From A. 1734 to 1738 more bills were 
 cancelled than emitted ; Exchange fell from 440 to 400 per cent, 
 advance. A. 1738 Rhode Island emitted 100,000. upon loan ; 
 jsityer rose from 27s. to 29s. per ounce. 
 
 Discourse concerning the Currencies of the British Planta- 
 tions. Page 23. Edition 1751. 
 
101 
 
 principle, over and over again recognised, and 
 acted upon by the British legislature, in the caSe 
 of Bills of Credit issued by our colonial govern- 
 ments.* 
 
 * Preamble to the Act of the 24:th Geo. II. ch. 53. 
 Whereas the Act of Parliament, made in the sixth year of her 
 late Majesty Queen Anne, intituled, An Act for ascertaining the 
 Rate of foreign Coins in her Majesty's Plantations in America, 
 hath been entirely frustrated in his Majesty's said Colonies 
 of Rhode Island, and Providence Plantations, Connecticut, 
 Massachuset's Bay, and New Hampshire in America, by 
 their creating and issuing from time to time, great quantities of 
 Paper Bills of Credit, by virtue of acts of assembly, orders, re- 
 solutions, or votes, made or passed by their respective assem- 
 blies, and making legal the tender of such Bills of Credit in pay- 
 ment for debts, dues, and demands ; which Bills of Credit have 
 for many years past been depreciating in their value, by means 
 whereof all debts of late years have been paid and satisfied with 
 a much less value than was contracted for, which hath been a 
 great discouragement and prejudice to the trade and commerce 
 of his Majesty's subjects, . 
 
 Extract from the Preamble of the 4th of Geo. III. ch. 34. 
 Whereas great quantities of Paper Bills of Credit have been 
 created and issued in his Majesty's Colonies or Plantations in 
 America, by virtue of acts, orders, resolutions, or votes of assem- 
 bly, making and declaring such Bills of Credit to be legal ten- 
 der in payments of money : And whereas such Bills of Credit 
 have greatly depreciated in their value, by means whereof debts 
 have been discharged with a much less value than was contract- 
 ed for, to the great discouragement and prejudice of the trade 
 and commerce of his Majesty's subjects by occasioning confusion 
 in dealing. 
 
10$ 
 
 Distinctly, however, as a limitation of the 
 amount of issues has been stated and recognized 
 by parliament, in the year 1751, and again in the 
 year 1763, as essential to the maintenance of the 
 Credit of State Notes ; it is impossible that any 
 one conversant with the conduct both of the Di- 
 rectors of the Bank of England, and of the Banks 
 in Scotland, should not perceive that a due attention 
 to the circumstance of the quantity of paper issu- 
 ed has been always considered "as equally neces- 
 sary for the preservation of the value of the notes 
 circulated by those establishments. 
 
 So much were the Directors of the Bank of Eng- 
 land convinced of the advantage of possessing at 
 all times, even an extraordinary power of dimi- 
 nishing the mass of notes thrown into circulation, 
 that for many years, when the interest of money 
 was very low, they borrowed one hundred thou- 
 sand annually, at six and a half per cent, to have 
 the privilege of calling on the lenders at a moment's 
 notice for nine hundred thousand more, acquiring 
 in return for the extraordinary interest paid, no- 
 thing but the power, by calling in the nine hun- 
 dred thousand pounds, of rapidly withdrawing that 
 amount of their notes from circulation. 
 
 In Scotland, about the year 1762, the Exchange 
 with London had become highly unfavourable, 
 and coin bore a considerable premium, insomuch 
 that tedious obstructions were thrown in the way 
 
103 
 
 of cash payments, which were at last obtained 
 from the Bank with the greatest difficulty. The 
 Directors acting under a conviction that this was 
 the effect of an over-issue and consequent depreci- 
 ation of paper, came to a resolution on the 26th 
 of January of that year, of limiting their issues, 
 by calling in one-fourth of their cash accounts, 
 .and in* the month of March following they deter- 
 mined for the same purpose to borrow money at 
 five per cent, on Promissory Notes at six months, 
 and four per cent, on cash accounts. 
 
 This conduct was described at the time as high- 
 ly illiberal; it was arraigned as ruinous to the pro- 
 gress of trade and manufactures : the Directors 
 were told that the more they lent on paper secu- 
 rity, the greater was the safety of their establish- 
 ment, for that by such loans trade was increased, 
 and that increase of trade, extending the number 
 of transactions, was sure to give rise to a demand 
 for a greater quantity of circulating medium.* 
 
 Even Sir James Steuart, seems to have disap- 
 proved of their conduct, declaring that he could 
 not discern the benefit a bank could derive from 
 borrowing in a country in which it was the centre 
 
 * See Considerations relating to the late order of the two 
 Banks established at Edinburgh, by which they have recalled 
 one-fourth of their cash accompts. Printed 1762. 
 
104 
 
 of circulation ; nor what advantage it could ac- 
 quire by withholding its notes from those who could 
 give good security for them.* 
 
 Fortunately, however, for the country, the Di- 
 rectors persevered in the salutary expedient of 
 limiting their issues ; in which course they were 
 encouraged, whilst their conduct was ably defended 
 by a person of the highest rank and reputation for 
 talents,f and the wisdom of the measure was sub- 
 sequently proved by its complete success. For 
 the author of the Wealth of Nations, who discerned 
 that it was an excess of paper that gave rise to 
 these appearances, tells us, that the banks, by 
 refusing to give more credit to those to whom 
 they had already given a great deal too much, 
 took the only method by which it was possible to 
 save either their own credit, or the public credit of 
 the coyntry.J 
 
 No series of events, however, so distinctly dis- 
 plays the effects of an excess either of Government 
 Paper, or of Bank Paper, as those that took place 
 in the early part of the reign of William III. be- 
 
 * An Inquiry into the Principles of Political Economy. Vol. 
 ii. page 184. 
 
 f See Letter to J. F. supposed to have been written by Lord 
 Elibank. 
 
 $ Wealth of Nations. Quarto Edition, vol. i. page 379. 
 
105 
 
 fore and immediately after the establishment of the 
 Bank of England. 
 
 For whilst the facts that may be collected from 
 indisputable authority, leave no doubt of the na- 
 ture of the economical evil under which the country 
 then suffered, the details rightly understood, at once 
 shew the injurious effects of an over-issue of Go- 
 vernment as well as of Bank Paper, and throw 
 a fatal light on the fancied prosperity which of 
 late years has been so much boasted of. 
 
 Sir James Steuart says, that at the revolution, 
 when gold was to silver rather above the propor- 
 tion of one to fifteen, as appears by the convention 
 of Leipsic, when the German coinage was regu- 
 lated in 1690, guineas were at twenty one shillings 
 and sixpence ; and from hence he infers with cer- 
 tainty, that the English silver coin was standard 
 weight, because the guinea being left to seek its 
 own price, did not rise above that sum, which 
 is in the proportion of fifteen and six-tenths to 
 one.* 
 
 Within a very few years, however, after that 
 happy event, the silver coin of England was by 
 washing and clipping much diminished in its real 
 
 * Inquiry into the Principles of Political Economy. Vol. i. 
 page 604. 
 
106 
 
 value, for the statements both of Mr. Locke and 
 of Mr. Lowndes, in the beginning of the year 1695, 
 concur to make this indisputable, whilst the former, 
 by celebrating the dexterity attained by those con- 
 ^erned in this gainful and secret robbery shews, 
 that when he wrote, the practice must have endured 
 for some time. 
 
 Though the prevalence of this fraud, the laws 
 remaining the same, makes it apparent, that some 
 incident must have occurred peculiarly calculated 
 to encourage the criminal practice which in a few 
 years became so universal; yet by historians as 
 well as economical writers, the circumstance re- 
 mains unaccounted for. 
 
 To those, however, who reflect that soon after 
 the revolution, the expences of the war induced 
 government to issue Tallies, which being struck 
 for sums as low as five and ten pounds, circulated 
 as Government Paper; and that these were gradu- 
 ally forced on the public, till in the year 1694 
 they were at thirty per cent, discount, the occur- 
 rence cannot appear extraordinary.* On the coa- 
 
 * The Bank gives money for Tallies on Funds, having a credit 
 of loan by act of parliament, and which are payable in two years 
 time, for the growing interest only, without any other allow- 
 ance, on which there was used to be paid for the change as much 
 or more than the public interest. For even on the Land Tax, 
 
 which 
 
107 
 
 trary, it would have been strange indeed if that 
 adulteration of the current coin had not taken place 
 in this country, which in Sweden, in our Ameri- 
 can colonies, and in all other parts of the world, 
 had been the constant and uniform attendant on 
 an over-issue of paper. 
 
 Accordingly it is certain, that on the 27th of 
 July, 1694, when the Charter of the Bank of Eng- 
 land was granted by the crown, as empowered by 
 the 5th of William III. these Tallies or Govern- 
 ment Notes were at a discount of at least thirty 
 per cent, whilst the silver coin, then the only 
 
 which is counted the best of all the funds, there has been fre- 
 quently given on Tallies payable in three or four months time, 
 one pound, one and a half, one and three-quarters, and two 
 per cent, premio, over and above the public interest; and 
 Tallies on some funds, on which but twelve or eighteen months 
 past, there was c25. and thirty per cent, given over and above 
 the public interest, are now taken by the banks for nothing ; 
 and instead of allowing money to change them, there is now 
 money given to procure them ; so that Tallies are become better 
 than money, because there is seven or eight per cent, per an- 
 num benefit whilst they are kept ; and they are paid by the Bank 
 upon demand. 
 
 Short Account of the Bank of England: printed 1695, 
 p. 2. The author of this Tract, Michael Godfrey, 
 Esq. was, at the time', Deputy Governor of the IBank of 
 England. 
 
 The Bank of England hath also in twelve months past greatly 
 advanced the reputation of Tallies, which are now become (in- 
 stead of thirty per cent, loss on them) to be as desirable as money 
 
 itself; 
 
108 
 
 legal tender, was nearly in a corresponding state 
 of depreciation. 
 
 By the great purchases of Tallies speedily made 
 on account of the Bank, as well as by the facility 
 of purchasing, to which the liberal accommoda- 
 tion afforded to individuals by that establishment 
 gave rise, this species of government paper was 
 rapidly withdrawn from circulation, and of course 
 soon brought to par.* 
 
 But the substitution of Bank Paper not bearing 
 interest, instead of Tallies bearing interest, that 
 were thus withdrawn, more especially as the for- 
 mer were circulated to a greater amount, was 
 rather calculated to accelerate than to retard the 
 progress of the evil which occasioned the debase- 
 ment of the coin : and, as might therefore be ex- 
 pected, the silver currency was, in the month of 
 January following, in such a state as to attract the 
 attention of parliament; when a committee of 
 
 itself; and therefore, instead of giving money to change them, 
 money has been given to procure them. 
 
 Reasons for encouraging the Bank of England : printed 
 
 1695, page 3. 
 
 * The private necessities of single persons have been also 
 easily and cheaply supplied in these instances ; viz. 
 
 I. In lending money on Mortgages, at five per cent, without 
 any procuration or continuation. 
 
 II. In discounting foreign and inland Bills of Exchange, some 
 at three per cent, and others at four and a half per cent. 
 
 III. 
 
109 
 
 the House of Commons was appointed to receive 
 proposals how to prevent clipping of the coin: 
 And though in the course of that session of parlia- 
 ment, no final legislative arrangement resulted from 
 this measure, the intention of government to renew 
 the silver money of the kingdom, at the public 
 expence, became apparent, from the report made 
 on the 12th of March, and the resolution of the 
 House on the Hth of April following.* 
 
 That the clipping and adulteration of the coin 
 
 III. In lending money on pawns at five per cent, whereas 
 some in their necessities have heretofore paid above 100 per 
 
 cent, for money lent them on pawns. 
 
 Ibidem, p. 4. 
 
 * Mr. Scobell reported from the committee appointed to re- 
 ceive proposals how to prevent clipping of the coin of this king- 
 dom for the future ; and the exportation of silver ; and to report 
 the same to the House : that the committee had received several 
 proposals accordingly, and had agreed upon several resolutions ; 
 which they had directed him to report to the House ; and he 
 read the same in his place, and afterwards delivered the same in, 
 at the clerk's table ; and are as follow, viz. 
 
 I. Resolved, That it is the opinion of this committee, that the 
 best way to prevent clipping the silver coin of this kingdom for 
 the future is to new-coin the same into milled money. 
 
 II. Resolved, That it is the opinion of this committee, that ten 
 hundred thousand pounds is a sufficient sum to make good the 
 deficiency of the present clipped coin of this kingdom. 
 
 Journals of the House of Commons, 12* A of March, p; 265. 
 
 On the llth of April following, it appears, that on taking this 
 
 report 
 
110 
 
 about this time increased to a most alarming degree; 
 is recorded in a variety of publications of the day.* 
 By some the coin is said to have been even more im- 
 paired during the short space of time that elapsed be- 
 twixt this period and its being called in, than it was 
 in the course of the five preceding years ;f and that 
 
 report into consideration, the House agreed with the Committee 
 in the resolution, that a fund be granted to his Majesty for the 
 encouragement of the mint. 
 
 * I would hope that it is not so bad as we fancy, and that great 
 quantities of large money are hoarded up by those that can keep 
 it, which is laid by now upon the fear of an alteration ; and if 
 nothing be done in it, necessity may force that abroad, and so 
 come to be dipt, and thereby make the loss greater. You have 
 seen, and are convinced that had it been done in 1 694, your money 
 was not then scr bad as it now is, and it 's dangerous to kt a thing 
 run too long without repair. 
 
 See a Letter from an English Merchant at Amsterdam, 
 concerning the Trade and Coin of England, page 6, 
 1695. 
 
 And how dishonourable it is to the King and kingdom, that 
 our money should be so suddenly debased to such a shameful de- 
 gree, foreign states will soon determine. 
 
 See The regulating Silver Coin made practicable and 
 easy 1696 page 8. 
 
 f Historians who give an account of this transaction (the Re- 
 solution of the House of Commons in relation to renewing this 
 money) think it not improbable, that more was dipt under the 
 general licence than had been before. 
 
 Lord Liverpool, on the Coin of the Realm, page 191. 
 
Ill 
 
 this must have happened is evident, when we reflect 
 on the nature of the resolution adopted by the House 
 of Commons, for in announcing that government 
 was to be at the expence of renewing the coin, they 
 proclaimed the certainty of profit to those who, by 
 filing or by clipping, chose farther to reduce what 
 was called its intrinsic value. 
 
 In such a situation, the necessity of paying in 
 cash on demand ; that salutary means of restrain- 
 ing the issues of all banks within those limits which 
 the trade of a country requires, must have become 
 nugatory as a check ; for though many, as at all 
 other times, must have been anxious to procure 
 loans from the bank, the notes thus issued never 
 could be returned upon them, as no one could de- 
 sire to obtain in exchange for notes of an establish- 
 ment in full credit, coin that could only circulate 
 within the kingdom, and the real value of which, 
 in the year 1695, and the beginning of the year 
 1696, hardly amounted to one half of what its deno 
 mination announced.* 
 
 Thus, without any legislative restriction on cash 
 
 * Mr. Huskisson, in his pamphlet (page 103) and some other 
 of the recent publications, have stated the coin in the reign of 
 William III. to have been impaired thirty per cent. There can 
 be no doubt, however, as appears by a variety of authorities, of 
 which the following are a selection, that one hundred pounds in 
 
 tale 
 
payments, the circumstances of the country practi- 
 cally imposed a complete bar to the possibility of a 
 demand on the Bank for coin ; for no holder of notes 
 
 tale was in value only equal to fifty pounds as issued from the 
 mint. 
 
 No. I. A Computation of the common weight of One Hun- 
 dred Pounds of Tale in ordinary Silver Money at this day, taken 
 from a Medium of the Bags weighed at the Receipt of Exche- 
 quer, in May, June, and July last, as it is given in Mr. Lowndes's 
 Report, containing an Essay for the Amendment of the Silver 
 Coin. 
 
 No. of 
 Bags. 
 
 What they ought 
 to weigh. 
 
 Weight at the 
 Exchequer. 
 
 Deficiency. 
 
 40 
 74 
 133 
 120 
 105 
 100 
 
 oz. dwts. grs. 
 15,483 16 16 
 28,645 1 20 
 51,483 14 22 
 46,451 10 
 40,645 1 6 
 38,709 Jl 16 
 
 oz. dwts. grs. 
 8,095 5 
 14,373 5 
 27,318 
 23,496 15 
 20,899 15 
 19,588 5 
 
 oz. dwts. grs. 
 7,388 11 16 
 14,271 16 2 
 24,165 14 2 
 22,295 15 
 19,745 6 6 
 19,121 6 16 
 
 572 |221,418 16 8 1 113,771 5 1 107,647 11 8 
 
 ox. dwts. grs. 
 The medium of the weight of each hundred pounds, 19818 0| 
 
 The medium of the deficiency 188 3 2 If 
 
 387 1 22 
 
 No. II. Extract of an Essay for regulating of the Coin, by 
 A. W. Merchant. 1696. 
 
 I have gone to several goldsmiths in London, and have got 
 them to take out of their counters, a b#g of one hundred pounds 
 (as came to hand) which upon trial I have found at one place to 
 weigh : 
 
 A bag 
 
IIS 
 
 cpuld wish to get cash, that was less -valuable, in 
 exchange for what was generally esteemed so much 
 
 oz. dwts. gr. 
 
 AbagofoflOO . . . . .. .- . 230 13 6 
 
 Another place o100 weighed . . . 222 15 
 
 Another place . . . . . , 198 17 
 
 Another place . . . . . . 190 '0 0, 
 
 Another place 182 3 
 
 Another place . . ... , . 174 11 20 
 
 1198 5 17 
 
 The six hundred pounds, weighing in all one thousand, one 
 hundred, and ninety-eight ounces, five pennyweights, and se- 
 venteen grains, and is no more than what three hundred and ten 
 pounds in milled money will weigh. 
 
 But as it is believed that the money in the country is generally 
 not the one half so bad as it is. in and near London, I have pro* 
 cured an account to be sent me from the following cities : 
 
 oz. divts. gr- 
 in the city of Bristol one bag of olOO weighed 240 
 
 . Another weighed' . . 227 15 
 
 In the city of Cambridge a bag of clOO weighed 203 5 .10 
 
 Another weighed . .211 19 
 
 In the city of Exon, one bag of c100 weighed . 180 7 
 
 Another weighed . .192 3 
 
 In the city of Oxford, .100 in half-crowns weighed 216 10 
 
 100 in shillings . . . 198 15 
 
 Oz. . . 1669 1 20 
 
 The eight hundred pounds weighing sixteen hundred and sixty-r 
 nine ounces, one penny weight, and twenty grains, is not more 
 than fotir hundred and thirty-one pounds, fifteen shillings, of 
 milled money will weigh. 
 
 No. III. In Sir Richard Temple's short Remarks on Mr. 
 Locke's' Book, Sprinted 1696, it is stated, page 9, That our silver 
 
 I coin, 
 
114 
 
 4 
 
 more valuable, that even with a premium it required, 
 great industry to obtain them.* 
 
 coin, by reason of its clipping, was not worth a moiety of its in- 
 trinsic value. 
 
 No. IV. See also to the same effect Sir James Steuart, Quar- 
 to Edition, vol. i. page 605 ; and Lord Liverpool, page 76-7. 
 
 * No. I. Bank Bills were sold for money, at half per cent, 
 profit to the seller, and every body made use of their friends and 
 interest to get their money lodged in the Bank, and that for 
 sundry reasons. 
 
 As first, that money was so diminished and adulterated, 
 that none could receive and pay it without trouble and loss. 
 And, 
 
 Secondly, The Bank was esteemed a secure repository, not 
 only upon account of their credit, it had always had and pre- 
 served from its first opening, but also for the great reputation of 
 the managers of it, and likewise for its fund being settled by Act 
 of Parliament, which is the greatest security any Englishman 
 can have for his property. 
 
 Arguments and Reasons for and against engrafting upon 
 the Bank of England, p. 6. Printed November 1696. 
 
 No. II. At length by the rumour of calling in our coin, 
 which made every one glad of any tolerable occasion to thrust it 
 away from them ; the difficulty also of counting it, and know- 
 ing either one species from another, or what was good, or what 
 bad, inclining all persons to lodge their money with goldsmiths, 
 merchants, or factors, to call for it as they had need, which 
 trustees minding their own profit, bestowed it some way or other 
 upon trade in way of circulation. 
 
 The Present State of England, as to Coin and public 
 Charges, by J. Hodges, printed 1697, p. 77. 
 
 See also by the same author, the Groans of the Poor, the Mi- 
 sery 
 
115 
 
 
 
 There is a uniformity in the conduct of men, in 
 all transactions under similar circumstances, which 
 shews how much our ideas as well as our actions 
 are guided by the events of the day ; neither is 
 there any description of concerns in which this 
 propensity is at all times so distinctly to be dis- 
 cerned, as in what relates to our pecuniary in- 
 terests : and of this observation there is, perhaps, no 
 where to be found a more powerful illustration, 
 than what results from a comparison of the senti- 
 ments, and of the conduct of those who had in 
 1695 the management of the Bank of England, 
 with that of those who have recently enjoyed the 
 direction of that establishment. 
 
 For though the Governor and Deputy Governor 
 of the Bank, acting under the restriction on cash 
 payments, imposed by the legislature in 1797, had 
 certainly adopted very erroneous opinions, when 
 they announced, " Avoiding as much as possible 
 fe the discounting of what did not appear to be le- 
 te gitimate mercantile paper," as an ample and 
 satisfactory criterion for regulating their issues;* 
 yet even this rule of conduct does not appear more 
 calculated to occasion an excess of circulating 
 paper, than that announced by the Deputy Go- 
 
 sery of Traders, and the Calamity of the Public for Want of our 
 Money. Printed 1696, page 14, where he distinctly states, that 
 he had seen great striving to obtain Bank Notes, 
 * Report of the Bullion Committee, p. 97, 
 
TIG: 
 
 vernor in the year 1605, acting under the restric- 
 tions in cash payments, which the state of our 
 coin practically imposed, when he unequivocally 
 stated, V that all who wanted money, and who had 
 " securities, knew where to be supplied."* 
 
 Accordingly, the extent of paper issued be- 
 twixt the time of the Bank's being established, 
 and the spring of the year 1696, was proportion- 
 ally greater, and the increase of it certainly 
 tnuch more sudden than it has been, even in our 
 time.f 
 
 * See a short Account of the Bank of England, by Michael 
 Godfrey, Esq., published in 1695, p. 3. 
 
 f No. I. In a letter to a friend concerning the credit of the 
 nation, and concerning the Bank of England, printed 1697, 
 alluding to the year 195, it is said, that with that paper credit, 
 that is, with goldsmiths and with Bank Notes, which amounted 
 to near as much as all our current coin, the greatest part of our 
 trade in and about this city of London was driven. 
 
 All foreign and inland Bills of Exchange, and all great pay- 
 ments were made in those notes, and very seldom any consider- 
 able sums were paid or received in money. 
 
 No- II. And of late, when the coin grew so corrupted, the 
 gold and silver did, as it were, but minister in the market, 
 while all great dealings were transacted by Tallies, Bank Bills, 
 and Goldsmiths' Notes. 
 
 Paper credit did not only supply the place of running cash, 
 but greatly multiplied the kingdom's stock. For Tallies and 
 Bank Bills did to many uses serve as well, and to some better, 
 than gold and silver; and this artificial wealth which necessity 
 
 had 
 
117 
 
 At present it is a matter of dispute, whether the 
 principles on which the Bank conduct the circula- 
 tion of the country, is, or is not of advantage to 
 the community. For whilst all who can think, 
 are convinced that the superabundance of circulat- 
 
 had introduced, did make us less feel the want of that real trea- 
 sure the war and our losses at sea had drawn out of the na- 
 tion. Davenant's Works, vol. i. p. 442. 
 
 * No. III. In a discourse concerning a Lombard Office, print- 
 ed 1696, page I, it is expressly stated, that the circulation of 
 paper was at that time so extensive, that it appeared more than 
 probable the national cash was hardly a third-part of the me- 
 dium of commerce. 
 
 No. IV. In Mr. Law's book, entitled, Money and Trade 
 considered, it is said (Glasgow Edition, page 69) that " this 
 " Bank, (meaning the Bank of England,) was safer than the 
 " Goldsmiths' Notes in use before : it made a great addition to 
 " the money, having a much greater sum of notes out, than 
 " money in Bank, and the sum lent the king, which was the 
 " fund belonging to the subscribers, was negociated at profit, and 1 
 " had the same effect in trade as money." 
 
 Many other authorities might be quoted on this subject, but 
 it appears unnecessary, because the extent of notes which must 
 have been thrown into circulation cannot be -doubted, when 
 Mr. Godfrey, the Deputy Governor, states, that within a year 
 they had raised Tallies from thirty per cent, discount to a pre- 
 mium, and lowered interest to a great extent. Indeed we are 
 told in the argument for and against engrafting on the Bank, 
 that Tallies were at thirty per cent, discount, and that gold- 
 smiths had twelve and fourteen per cent, for discounting foreign 
 Bills of Exchange, the former of which were soon brought by 
 the Bank to par, whilst the discount of the latter was reduced to 
 three per cent, page 15, 
 
us 
 
 ing medium, or of unemployed capital, has advanc- 
 ed the price of commodities ; raised the value of 
 bullion ; banished our coin from circulation ; and . 
 rendered the exchange with foreign countries un- 
 favourable ; there are some from folly, and others 
 from motives of interest, who attribute the augmen- 
 tation of price to that increased demand which 
 prosperity creates; whilst they profess to see ample 
 means of accounting for the unfavourable ex- 
 change, and for a rise in the price of bullion, such 
 as to make our coin disappear, in the state of the 
 continent, that is falsely described as rendering 
 the ingress of our commodities impossible, and as 
 creating on that account a demand for our gold. 
 
 It is certain, however, that when the state of 
 our coin, by preventing the possibility of a demand 
 for cash, in exchange for the Bank Notes thrown 
 into circulation, left Mr. Godfrey and his associ- 
 ates in the direction to conduct the concerns of 
 the Bank without any chance of their experienc- 
 ing a call for coin, the economical occurrences 
 which attended the increase, and ceased with the 
 diminution of their issues, can only be ascribed to 
 a superabundance of paper. 
 
 Yet a rapid rise in the price of our commodities 
 and of guineas, which at that time circulated as 
 commodities ; a great reduction in the rate of 
 interest ; a wonderful augmentation in the value of 
 government securities ; and a still more rapid rise 
 
in the value of Bank Stock, are all features, which 
 as well as an advance in the price of gold, and an 
 increase of the unfavourable rate of exchange with 
 foreign countries, distinguished the pecuniary his- 
 tory of the short space betwixt the .establishment 
 of the Bank of England, and the 4th of May, 1696, 
 after which, under the enactment of the 7th of 
 William and Mary, cap. i. sect. 5. it became the 
 interest of individuals to return the surplus of notes 
 in circulation for that standard coin in which even 
 their taxes could alone be paid.* 
 
 * That the price of commodities rapidly advanced in the year 
 1695, is asserted on the following authorities. 
 
 1st, In Mr. Lo wndes' Report containing an Essay for the 
 Amendment of the Silver Coins, printed 1695, page 115, he 
 states the people to suffer under great grievance, from the rais- 
 ing of the price not only of merchandise, but even of edibles 
 and other necessaries for the sustenance of the common people. 
 
 2d, In a Dialogue betwixt a Country Gentleman and a Mer- 
 chant, concerning the fall of our guineas, wherein the whole ar- 
 gument relating to our money is discussed, printed February 1695, 
 page 6, it is stated, " that the country had a brisk trade all the 
 " last summer, in selling their manufactures at extraordinary 
 " rates/' 
 
 3d, In a pamphlet entitled " The Groans of the Poor, the 
 " Misery of Traders," by William Hodges, printed 1696, it is 
 said page 16, that foreigners " have taken our goods of late in- 
 " stead of money, and all our manufactures in England hath had 
 " the greatest trade for exportation this year, that it may be hath 
 " been this twenty years ; and our goods risen. 
 
 4th, In an Essay for lowering the Gold and raising the Silver 
 Coin, printed January 1696, page 27, it is said, " it is plain all 
 
 commodities 
 
120 
 
 It does ntit indeed appear, either in the discussion 
 that took place on the bill for remedying the ill state 
 of the coin of the kingdom, or on any other occasion 
 
 commodities are " more advanced in price than guineas are by 
 "name." 
 
 5th, In a short treatise on the Reason and Causes why our 
 Money and Bullion have been exported, printed early in 1697, 
 it is stated, (page 18) that " Wool, which was sold at 36s. a tod, 
 ** about a year ago, has since the regulation of our coin been sold 
 " for twenty shillings." 
 
 6th, In a pamphlet entitled The Alteration of the Coin, with a 
 feasible method to do it, humbly proposed to both Houses of 
 Parliament, by Thomas Houton, of Lime- Street, Gentleman, 
 printed 1695 (page 43) it is said, /' Is there any thing more 
 " fresh in our memory than what the people of this kingdom have" 
 " suffered for six years past, during all which time the manufac-: 
 " tures and goods of our products, as lead, tin, all sorts of cloth- 
 " ing, &c. have been at such low prices." He then proceeds to 
 state how much the times have grown better since the advance 
 of guineas and the rise of goods. 
 
 The augmentation in the price of government securities is as- 
 serted on the authority already cited, note, page 106, to which 
 many others might be added. 
 
 Of the value of the stock of the Bank of England, in the year' 
 1695, we have the following account in a pamphlet, entitled, . 
 Arguments and Reasons for and against engrafting on the Bank 
 of England, page 15. 
 
 And we found in a little time after the Bank was established, 
 they obtained a mighty credit, and made considerable profits' 
 besides the 8 per cent, interest, though they made no advantage* 
 by discounting of tallies, and so brought them to par, and the 
 discount of foreign Bills of Exchange from J4 to 3 per cent. 
 
 Those 
 
during the session of parliament which termi- 
 nated in the end of April, 1696, that the pro- 
 bable effects of this sudden transition from the 
 
 Those great profits, and a just expectation of their continuance 
 and increase, made everybody desirous to buy bank-stock, and 
 so in eighteen months after it was established, stock was sold at 
 hear 110 per cent, although at that time 60 per cent, was only' 
 paid in upon the subscription. 
 
 Various authorities may be adduced to shew the state of ex- 
 change at this time. 
 
 First, see A further Attempt towards a Reformation of the 
 Coin, by R. Ford, page 10. Printed 1696. 
 
 Secondly, see a Statement of the Exchange with Scotland and 
 Ireland, in a Treatise concerning the Coin of the Kingdom, by 
 R. C.-^Printed 1696, page 15. 
 
 That the price of gold was advanced, and that similar causes 
 were assigned for it, as have been of late, appears from the fol- 
 lowing Very curious extracts from a Dialogue, printed in a Dis- 
 course of Money, in a letter to a Nobleman, 1696. 
 
 Question " I would willingly be instructed by your reasons, 
 how and in what manner this scarcity and dearness of gold and 
 silver is come to pass in the world ; for the true reason being 
 known and consented to, good use, I do not doubt, may be made 
 to the public, of such knowledge. 
 
 " Answer The reasons and causes of this scarcity I take to 
 be manifold : I will name but a few, and shall begin with a main 
 cause : and that is, the long and obstinate war in Europe, 
 whereby, through the passion and ambition of princes and states, 
 the regular established methods of business and intercourse of the 
 world is broken. By sea, there is nothing but violence, piracy, 1 
 and depredation ; whereby the hands of industry are weakened^ 
 and the great channel and roads of the world's commerce is pos 
 sessed and beset by enemies and robbers." 
 
 He 
 
123 
 
 clipped money to coin of the standard value on 
 the price of commodities, on the state of the bank 
 circulation, and on public credit, was at all anti- 
 cipated. 
 
 He then'proceeds " Thus it is with us (by sea, by land the 
 " war rages more universally, and with greater violence, though 
 " not so sensible to our feelings here in England, because our situ- 
 " ation has hitherto secured us from hostilities at our doors, and 
 " our fields and farms are not yet foraged and plundered as our 
 " neighbours are ; but what we pay, as I may say, to be ex- 
 *' empted from such violence, is almost tantamount, and at a long 
 " run will as certainly impoverish and undo us." 
 
 He states, " That there are captious and sceptical contenders, 
 " who will be apt to ask, Does war annihilate your money ? Is 
 <c your gold and silver dissolved, or gone into the earth from 
 " whence 'twas taken ? This is malice and trifling, and nothing 
 " else. To these gentlemen then, and out of respect to truth and 
 " plain dealing, these few following reasons of the chief causes of 
 " poverty, and scarcity of money by war, are tendered." 
 
 The author then discusses, what he calls the causes of the decay 
 and scarcity of treasure by warfare: in the course of which he 
 uses many of those arguments we have seen in a variety of 
 pamphlets during the last year ; and he concludes with the fol- 
 lowing passage, which so forcibly shews the resemblance betwixt 
 the then and the present state of the country. 
 
 " To these common and evident causes of the evils, incident 
 " to war in general, we may here subjoin why war is of late more 
 " burthensome than heretofore, and that is by the overgrown 
 " greatness of the French monarch, that aspiring prince who 
 " would put a yoke on the neck of Europe, conceiving that by 
 " the force of an immense treasure, whereby being enabled to 
 " bring greater bodies of strength into the field than was ever 
 " before practised in our hostilities on this side of the world, he 
 " was given to hope, perhaps, thereby to overwhelm us ; which 
 " design, though we see hitherto to want the effect, we are from 
 
 " thence 
 
us 
 
 The science of banking was then in its infancy 5 
 neither the benefits to be derived from paper pro- 
 perly regulated, nor the mischiefs attending the 
 abuse of it, had become matter of history. The 
 Bank of England itself had not been established for 
 two whole years ; and from the circumstance of the 
 times, it had nev r er felt the consequences of that 
 check which naturally arises out of the necessity of 
 paying on demand in coin equivalent in value to 
 denomination of the note. 
 
 At that time there existed none who had seen 
 Bank Notes, after circulating at par with coin in 
 real value equal to the denomination of the notes, 
 reduced to circulate with tokens of inferior value, 
 under circumstances in which no penalties, how- 
 ever severe, could retain standard coin in circula- 
 tion ; otherwise the process of reasoning could not 
 have been very complicated, that must have given 
 rise to a doubt whether notes, when suddenly is- 
 sued to such an extent as to raise the value of pub- 
 lic securities 30 per cent, and to lower the discount 
 on bills from 14 to 3 per cent.* could remain in 
 circulation when payable on demand in coin of 
 standard value, though they might even bear a pre- 
 
 " thence nevertheless instructed in the causes of this over burden- 
 " some warfare, whereby we are put under an inevitable necessity 
 " of providing an equal force, which produces an equal charge, to 
 " withstand him, which I thought necessary to note." 
 
 * See note, No. IV. page 117. 
 
miurn, when only payable in coin depreciated to 
 the extent of 50 per cent. 
 
 ' But though the consequences t)f the legislature's 
 removing -the practical restraints upon cash pay- 
 ments at the Bank, by making all" payments in 
 clipped money cease in the month of May, 1 696, 
 seems by no one to have been foreseen, they 
 Could not fail almost instantly to display them- 
 selves, and indeed to become but too perceptible. 
 
 *" Those in whose 'hands that surplus of notes re- 
 mained, by attempting to dispose of which so as 
 to acquire a profit, the value of Exchequer Bills 
 and of commodities had been raised, and the in- 
 terest of money had been so extremely diminished, 
 feeling the immediate advantage -of realizing in 
 coin that denomination of wealth they had ac- 
 quired in exchange for the commodities they had 
 sold, whilst the price of goods was so greatly ad- 
 vanced ; naturally hurried to demand payment at 
 the Bank. 
 
 The avenues to that establishment no longer, 
 as in 1695, frequented by men soliciting for notes 
 even at a premium, in exchange for money alarm- 
 ingly depreciated in real, and doubtful in its future 
 legal value, were now eagerly crowded by those 
 who were anxious to acquire the standard coin of 
 the country in return for their notes. 
 
The Directors of the Bank made every exertion 
 to correct the evil which their unchecked desire of 
 gain had inflicted on themselves and the public ; 
 40 per cent, on their capital, which had never been 
 received, being called in from the proprietors, was 
 a means of withdrawing four hundred and eighty 
 thousand pounds worth of notes from circulation, 
 whilst an attempt was made to sink two hundred 
 and forty more, by borrowing 20 per cent, from the 
 proprietors.* Tallies were thrown into the market 
 till the extent of the discount made it ruinous to 
 part with them ;j- and money was borrowed at an 
 interest of six or seven per cent, on sealed bills, 
 to a great amount. J 
 
 * See a Reply to the Defence of the Bank: printed 1696, 
 where, in page 10, they are stated to have called in ^40 per cent, 
 and to have borrowed 20 from the proprietors. 
 
 See also Arguments for and against engrafting on the Bank of 
 England. Printed 1696, page 9. 
 
 f See the History of King William, printed 1703, vol. iii. 
 page 195, in which it is said that Tallies were at this time dis- 
 counted at 50 and even at 60 per cent, discount. 
 
 See also A Defence of the Bank of England, page 8, printed 
 1707. 
 
 | When the Bank of England were called upon by parliament 
 for an account of their stock, in the month of December, 1696, 
 it appeared that sealed bills, bearing interest of 6 or 7 per cent, 
 had been issued to the extent of o893,SOO ; and the Bank Notes 
 running for cash were reduced tOo724,196. 
 
 See Appendix, No. 2, containing the account of stock for 
 the honourable the Governor and Company of the Bank 
 of England, with the Report of the Committee, as given 
 in the Journals of the House of Commons. 
 
126 
 
 These several measures all calculated to raise 
 the value of notes, in reference to that of commo- 
 dities, by withdrawing that excess forced into cir- 
 culation during the practical restriction occasioned 
 by the state of the coin, had the desired effect of 
 removing that depreciation which superabundance 
 had occasioned. 
 
 But the desire for coin was so sudden and had 
 been so unexpected, that all the efforts of the di- 
 rectors could not provide cash sufficient so satisfy 
 the call on the Bank, and hesitation in payment, 
 which must be always fatal to credit, naturally in- 
 creased the demand, so that before the end of the 
 month of May, they were reduced to offer in cash 
 only ten per cent, in a fortnight on the value of the 
 notes, which were presented for payment ; and even 
 this insignificant portion of cash was gradually di- 
 minished, till in the three months antecedent to the 
 / 
 
 meeting of parliament in October, they found them- 
 selves incapable of giving more than three per cent. 
 in cash on the value of the notes for which payment 
 in coin was anxiously pressed.* 
 
 * The following Extract, No. I. from page 6 of a pamphlet, 
 entitled, " Arguments and Reasons for and against engrafting 
 upon the Bank of England, with Tallies, &c. as they were de- 
 bated in a late general Court of the said Bank, considered, in a 
 Letter to a Friend," shews, that Bank Notes must have begun to 
 be at a discount as against money, just about the 4th of May, on 
 which day an end was put by law to payment in clipt money ; 
 
 whilst 
 
lit 
 
 It was under these circumstances that a very con- 
 siderable depreciation from loss of credit succeeded 
 to that more formidable depreciation, to which dur- 
 ing the year 1695, and during the spring of 1696, 
 excess had imperceptibly given rise : for, in the 
 autumn of that year, when the bank became so de- 
 ficient in cash payments, their notes got to a dis. 
 count of seventeen, nay, of twenty per cent.* 
 
 There exists, perhaps, no record of circum- 
 
 whilst the Extract, No. II. from the " Reply to the Defence of 
 the Bank/' page 10, printed 1696, shews the rapid progress of 
 the discount. 
 
 No. I." It is well known that till May last, the Bank of Eng- 
 land Notes were not only esteemed equal to money, but preferred 
 much before it ; and every one in this city, when they sold any 
 goods, endeavoured to contract for payment in Bank Notes, and 
 not in money : nay, Bank Bills were sold for money at half 
 per cent, profit to the seller; and every body made use of their 
 friends and interest to get their money lodged in the Bank. 
 
 No. II. " But it remajns a secret to me, and most others at 
 present (if their practices be just and honourable) how their pay- 
 ments should be at first 10 per cent, once a fortnight ; then but 
 7 or S per cent, once in a month : then to give no notes out by 
 endorsement under five pounds ; afterwards none under twenty j 
 then to pay only according to the letters of the alphabet (and 
 that every morning-) afterwards to pay but 3 or 4 per cent, once 
 in three months, which is the present method of paying, accord- 
 ing to the letters of the alphabet two days in a week." 
 
 * And it is now become a common (not to say wicked and 
 unjust) practice, especially among retailers, if they have no 
 notes by them, they will purchase some with their money at 
 17 per cent, advantage to pay their debts, that ought injustice 
 
 and 
 
stances that afford a more instructive lesson on the 
 sound principles by which paper currency ought 
 to be regulated, than what is to be collected from 
 the economical history of this period. The Bank, 
 within the short space of one year, saw their notes 
 anxiously sought after, even at a small premium, 
 when depreciated by excess, and afterwards redu- 
 ced by discredit, from their being obliged to de-, 
 lay cash payments, into a state in which they could 
 with difficulty be circulated, even at twenty per 
 cent discount,* 
 
 Yet if we believe cotemporary writers, who are 
 only the more deserving of credit, from their hav- 
 ing been unconscious of the inference authorized 
 
 and, in equity to be answered in specie, which many times proves, 
 a grinding of the face of the poor ; for these notes are given in 
 payment from one to another, until they light into an indigent 
 person's hands, who is forced, through his urgent occasions, to 
 Sell them at 16 or 17 per cent. less. 
 
 A short Treatise of the Reason and Cause why our Money 
 and Bullion have been exported, printed 1697, page 14. 
 
 And this mischief became so great, that even Bank Bills were 
 brought to a great discount. 
 
 A Vindication of the Bank of England, printed 1707, p. 11. 
 
 It is easy to imagine what pinching circumstances the nation 
 was in, when the notes of the Bank of England, which had been 
 a mighty help to the public, were discounted at twenty, and tal- 
 Hes at forty, fifty, or sixty per cent. 
 
 The History of King William, vol. iii. page 195. 
 
 * See No. I. and II. note, page 127. 
 
129 
 
 by the facts they have detailed ; the Notes of the 
 Bank of England, when in 1696 they were at a dis- 
 count of twenty per cent, in comparison of standard 
 coin, were actually more valuable in reference to 
 commodities, than when issued in superabundance 
 they were sought after at a premium. 
 
 At the latter period we kno\v that wool sold at 
 the enormous price of thirty-six shillings a tod : 
 at the former period it was reduced ta twenty 
 shillings.* In 1695, therefore, when the Bank of 
 England Notes were said to be at a premium, a 
 tod of wool codld not be had under one pound six- 
 teen shillings ; that is, for less than one Bank 
 Note and four-fifths of a Bank Note -, whilst, in 
 1696, a tod of the same wool, though the Bank 
 Note was only worth sixteen shillings, could be 
 procured for twenty shillings, that is, for one Bank 
 Note and one quarter of a Bank Note. 
 
 But the case of wool is only selected to explain 
 and illustrate, what more or less took place in 
 relation to the value of all commodities, as esti- 
 mated in Bank Notes at these several periods. In 
 truth, the price of every article was in like manner 
 increased in 1695 : for we are distinctly told, that 
 when guineas, the value of which was not then 
 fixed by law, had advanced to thirty shillings, all 
 
 * See No. V. note, page 120. 
 K 
 
130 
 
 commodities had proportionally sustained a more 
 formidable rise. * Without, however, pushing 
 things to an extreme, let us suppose that the rise 
 in the value of guineas, which then circulated 
 as commodities, only equalled that which took 
 place with respect to all other commodities; it is, 
 even on this supposition, evident that it must have 
 required one twenty shilling note, and one half of a 
 note, when notes in 1695 were in such abundance 
 and so much sought after, to purchase that quan- 
 tity of commodity which could be acquired in 
 1696, when in reference to cash they were at a dis- 
 count of twenty per cent, for one note and three- 
 eighths of a note. For, at the former period, it 
 must have required one note and one half of a note 
 to acquire a guinea, then of value thirty shillings. 
 At the latter period, the note, though at twenty 
 per cent, discount, being still worth sixteen shil- 
 lings, one note, together with six shillings, which is 
 three-eighths of sixteen shillings, made up twenty- 
 two shillings, the value of a guinea. 
 
 It can hardly be objected to this reasoning, that 
 in the year 1696, a guinea was by legislative 
 enactment ordered not to pass, after the 10th of 
 April, for more than twenty-two shillings. In 
 truth the legislature might have spared itself the 
 trouble of framing this regulation, for the moment 
 light silver ceased to circulate, the quantity of 
 paper was sure to be diminished; and this reduction 
 
 '* See No. IV. note, page 1 19. 
 
131 
 
 in the value of gold coin must of course have taken 
 place.* But guineas are only here alluded to, as il- 
 lustrating what actually was the case with other 
 commodities, which we know, though the legisla- 
 ture did not interfere with their sale-prices, sustained 
 similar and even more extensive variations in value. 
 
 Thus within the space of a few years, at an aera 
 which may be considered that of the infancy of 
 Paper Currency, the history of our own country 
 displays : First, government securities, reduced by 
 the largeness of their amount, to circulate at a great 
 discount, occasioning that adulteration of our coin 
 which has been uniformly discernible in the coin of 
 all countries where paper was depreciated from an 
 over-issue. Secondly, the notes of the Bank of 
 England, when that establishment was practically 
 relieved from all check on the extent of their circu- 
 lation, issued to such an amount in accommodat- 
 ing individuals, and by purchasing public securi- 
 ties, as to reduce the market rate of interest, and to 
 bring Government Paper to par ; whilst the depre- 
 ciation produced in the value of Bank Notes them- 
 selves, by the amount thus thrown into circulation, 
 (distinctly marked by the sudden rise in the price of 
 all commodities) only encouraged the activity that 
 
 * They soon fell to twenty-one shillings and sixpence ; and a 
 Resolution of the Commons House of Parliament, within two 
 years, declared, that no person should be obliged to take the 
 guinea above that rate. 
 
prevailed in mutilating the coin that was condemned 
 to circulate along with them. Lastly, we see the 
 issues of the Bank reduced to a great extent, in con- 
 sequence of parliament's creating that check which 
 liability to pay in cash, in real value, equal to the 
 denomination of the note, must always afford ; 
 and that so suddenly, as from the impossibility of 
 instantly complying with the demand for cash, to 
 bring their notes into a state of depreciation, in re- 
 ference to the lawful coin of the realm. These 
 notes, however, even in this state, possessing a 
 greater value relative to commodities, than they had 
 when issued to a vast amount, and circulating at 
 a premium ; the antecedent depreciation from su- 
 perabundance having been in itself more formid- 
 able than the subsequent depreciation from dis- 
 credit. 
 
 To those who imagine that denomination can 
 confer value, this must appear unintelligible, for 
 they of course must conceive that depreciation 
 cannot exist if not designated by denomination. 
 
 It is impossible, however, even for the wildest 
 theorist amongst our modern practical men, to 
 dispute that Bank Notes were of more value in 
 reference to tin, to lead, to manufactures, and 
 to edibles,* when a given quantity of any of these 
 
 * On looking over the tables of the price of wheat and malt in 
 
 the 
 
133 
 
 articles could in the sunwner of 1696, be obtained 
 for one note and three-eighths of a note, than when 
 the same quantity cost in It395 one note and one- 
 half of a note ; and it is still more impossible to 
 contend, that Bank Notes had not risen in value 
 in comparison of wool, when one note and a fourth 
 of a note purchased a tod of that commodity, 
 which could not be obtained in 1695 for less than 
 one note and four-fifths of a note. 
 
 Important as these details must appear, there is 
 yet further instruction to be derived from what 
 
 the Windsor market, as printed in the Tracts on the Corn 
 Trade ; in Dr. Smith's Treatise on the Wealth of Nations ; and 
 in many other publications, notwithstanding what Mr. Lowndes 
 has reported, on the value of (what he calls) edibles, it appears 
 that wheat was lower in value in 1695 than 1696, though this was 
 not the case with malt : grain, however, is an article that fluc- 
 tuates so much in its value from year to year, that no in- 
 ference can be drawn from the price it bears concerning the 
 value of circulating medium, unless accompanied with accurate 
 details on the comparative fertility of the seasons. Indeed 
 the impossibility of drawing any conclusion from the price of 
 wheat relative to the value of Paper Currency, becomes evident 
 from what passed in the province of New York ; for when in 
 the year 1738 and 1739, it was by no one disputed, that aris.e in 
 the value of silver marked the extent of the depreciation of paper 
 in circulation, it is recorded in the discourse concerning the cur- 
 rency of the British Plantations, that wheat sold at eighteen 
 shillings a bushel in paper, when silver was only twenty-seven 
 shillings an ounce, and that though in the latter year, silver ad- 
 vanced to twenty-nine shillings an ounce, wheat sold at tei} 
 shillings a bushel. 
 
134 
 
 occurred at this, of all others, the period of our 
 history the most fertile of information on the sub- 
 ject of Paper Currency. 
 
 That two sorts of money, of similar denomina- 
 tion, but differing in real value, or in public 
 estimation, cannot circulate with each other, is a 
 proposition that can hardly be disputed. For that 
 desire of gain which regulates the pecuniary 
 transactions of mankind, must always induce, even 
 the most prodigal, to pay what he appreciates as 
 of least value, and to withhold from circulation 
 that which stands highest in his estimation. 
 
 Besides, when one of two sorts of money, of 
 similar denomination, has sustained a gradual di- 
 minution of value in public opinion, it is evident 
 that the interest which every man must feel to get 
 rid of that which has fallen in value, lest it should 
 diminish still farther, must force the depreciated 
 money into circulation ; whilst the certainty that 
 the species of money whose value has proved 
 more fixed and permanent, will acquire compara- 
 tive value by the further depreciation of the other, 
 furnishes a motive equally cogent for 'withholding 
 from circulation what has hitherto maintained un- 
 impaired value. 
 
 Thus in the year 1695, all money of standard- 
 weight disappeared, whilst the clipped money and 
 the Paper Currency circulated in such abundance ; 
 
135 
 
 but perhaps a still more forcible proof of this in- 
 disputable truth is to be derived from the circum- 
 stances attending the pecuniary history of the 
 summer and autumn of the year 1696. 
 
 At that time, the sum of new money that had 
 been delivered from the Mint was very considera- 
 ble; and the quantity of gold that had circulated, 
 in the preceding year, as well as of that which 
 had been coined on account of individuals, was 
 unexampled.* 
 
 The sum of Bank Notes that remained in cir- 
 culation, was comparatively inconsiderable 3 but 
 they were at a great discount,! and that discount 
 appeared to be increasing. It was impossible, there- 
 fore, that the gold and silver coin possessing such 
 a marked superiority of value, could circulate in 
 conjunction with paper in such a state. f 
 
 * See an Account printed in the Commons' Journals, vol. xi. 
 page 447, of what guineas had been coined betwixt Lady Day 
 1695, and February 1696, containing a list of 147 persons for 
 whom 721,280 guineas had been coined. 
 
 f See note, page 127. 
 
 t Now the consideration of this leads me to another sort of 
 payment that greatly hinders money from coming abroad, and 
 that is the Bank of England's Notes, that are daily offered in 
 payment instead of money : and many of these very persons 
 that offer them, have at the same time both gold and silver, 
 which they will not bring forth, if they can by any means put 
 off these bills in the room thereof. , 
 
 Short Treatise on the Reason and Causes why our Money 
 and Coin has been exported, page 13. 
 
136 
 
 Accordingly we are informed, that it became a 
 common practice, especially among retailers, if 
 they had no notes by them, to purchase them for 
 the purpose of paying that which both in justice 
 and equity ought to have been paid in specie; that 
 tradesmen in the country, who came to London 
 to get payment of their just demands, could get 
 nothing but Bank Notes ; and that it required the 
 interference of Government, who declared that 
 Bank Notes were no lawful payment of foreign 
 Bills, before the bill-holders could obtain coin from 
 the merchant.* 
 
 In this state of things, Mr. Lowndes's reasoning, 
 
 * Now the true reason why people are so earnest to put away 
 their notes, and keep up their money, arises from the difference 
 between the value of the one and the other ; and as long as there 
 remains a disparity between them, the one will always be plenty 
 and the other scarce. And if something be not done to prevent 
 this growing evil, the Mint may coin, and the country expect a 
 plenty of money thereby, and fall short of it at last ; for the 
 clothier, &c. comes to town, hoping to receive money to carry 
 home to pay his labourers; and being put off with a Bank Note, 
 and unwilling to lose so much by it, goes home without any : 
 for want of which many cannot keep the poor at work. 
 
 Now the best cure (that I know of) for this disease, would be 
 by making their notes as current and valuable in the eyes of the 
 people, as money itself; which (I conceive) cannot be done but 
 by the members of the Bank being enabled to pay all the de- 
 mands that can be made upon them ; for there is nothing (in 
 my judgment), that can make notes or paper credit equal to 
 money, but by their being answered by money whenever they 
 are demanded, which was the only thing that made them pass as 
 money at first, and gave them their original life and acceptance 
 
 among 
 
137 
 
 which Mr. Locke the year before had successfully 
 controverted, by contending that silver could not 
 rise in value in comparison of silver, and that the 
 apparent rise of the metals only proved the de- 
 preciated state of the coin used to measure their 
 value, was in substance renewed. The dipt coin. 
 
 among people ; and if once there is a stop in payment of any 
 sorts of notes, the credit of them immediately declines, without 
 having a regard to the ability of the subscriber thereof. 
 
 And therefore if it be objected, that it is impossible for the 
 Bank to procure money to answer their bills, or make them 
 equal to money, then they will greatly hinder money from com- 
 ing abroad, which produces many ill effects to the nation ; upon 
 which it will be much better to have them pass in no payment at 
 all, which would cause money to circulate, and come more plen- 
 tiful in. trade than it does now. 
 
 And it is evident by this one instance, that money would come 
 abroad more if those notes did not hinder it; viz. after the Bank 
 made a demur upon the payment of their notes, the people 
 began to refuse them upon foreign bills of exchange, upon which 
 several merchants addressed themselves to the government about 
 it ; and many people alledged, that unless they would take Bank 
 Notes in payment, the bills could noway be paid, there being not 
 specie to be found to answer them ; but after about fourteen days 
 consideration the matter resulted in this, viz. that Bank Notes were 
 no lawful payment of bills, and every merchant must find money 
 to do it himself: upon which no body that had a foreign bill would 
 take any thing but money for payment thereof; and daily experi- 
 ence declares these men were mistaken, for most merchants have 
 ever since, and do still continue to find money to pay their foreign 
 bills withal, nobody offering now to pay them with any thing 
 else but specie, by which means great quantities of money have 
 been brought forth, that had not appeared if Bank Notes would 
 have done in the room thereof; and it is thought if they were 
 
 not 
 
138 
 
 indeed, was no longer in circulation ; and therefore 
 neither bullion nor standard coin could be esti- 
 mated in that degraded species of currency ; but 
 Bank Notes, as at the present moment, were said 
 to represent the pound sterling ; the difference in 
 value betwixt them and the metals was ascribed to 
 a rise in the value of gold and silver, from the cir- 
 cumstances of the war,* and even to a supposed 
 diminution in the fertility of the mines. 
 
 It was argued, that the only remedy for the evil 
 
 not offered in payment for any inland bills also, the clothiers 
 and other manufacturers would get their bills in some time 
 (although with difficulty at first) paid in money, which would 
 be sent and distributed among the country people. 
 
 It is, therefore, worth the serious consideration of those con- 
 cerned in the Bank, (of which there are many worthy members,) 
 if they cannot raise money to answer their notes, to endeavour, 
 (if possible,) to find out some other way to make them equal to 
 money, which would give them a currency every where, and 
 make them at this juncture an advantage to trade in general ; 
 but if it cannot be brought about, they had better, for a public 
 good, give over giving out any more notes ; and those that have 
 them in their custody should keep them, and not offer them in 
 payment any more till the Banks are capable to comply with 
 the payment thereof, or by any other way they are made equal 
 to money. 
 
 A short Treatise on the Reason and Causes why our Money 
 and Bullion have been exported. Printed in the be- 
 ginning 0/1697, p. 1416. 
 
 But yet there is more to be considered : this denomination, as 
 the price of silver goes in England, and the value of gold now 
 stands, takes from and lessens the real value, and makes it less 
 than the same quantum either of gold or silver does contain : 
 
 twenty 
 
139 
 
 was, that Government should assimilate the value of 
 the coin to the value of the notes in circulation, 
 either, by giving an additional denominative value 
 to what they had recently coined, or by calling it 
 in, and diminishing the weight of what was to 
 enter into the composition of a pound sterling, just 
 in the same manner and on the same principle 
 that tokens have been recently issued by the Bank 
 of England. 
 
 Thus Bank Notes being then at twenty per 
 cent, discount, that is, a twenty shilling note being 
 worth sixteen shillings, or fourteen hundred and 
 eighty-six grains, and four hundred and forty-eight 
 thousand parts of a grain of standard silver, it was 
 proposed that the denominative value of the silver 
 which, according to the Mint regulations corn- 
 
 twenty shillings will not purchase sufficient silver to make four 
 crown pieces, nor will twenty-two shillings purchase enough 
 gold to make a guinea. Page 18. 
 
 Again: If either of the metals are compared with the coin 
 of divers countries, they seem to be both advanced ; but those, 
 that are better acquainted in trade know whether this be true or 
 false; but I think so far will be admitted, that by what can 
 be conjectured by the English uncertain money, the value is 
 here advanced in both, and in France it is plainly so ; and it can 
 hardly be denied, but that the advance of them in these two so 
 considerable parts of Europe is a sufficient reason for the rise in 
 all other parts : does not the rise of corn or any other thing in 
 any one county make the same commodity advance in all parts 
 of the kingdom ? Page 21. 
 
 An Essay for lowering the Gold and raising the Silver 
 Money. Printed 1696. 
 
140 
 
 posed twenty shillings, should in future be twenty- 
 five shillings; or, in other words, that eighteen 
 hundred and fifty-eight grains and sixty thousand 
 parts of a grain of standard silver, which com- 
 posed the pound sterling, should now be formed 
 into twenty-five shillings; a project which most 
 undoubtedly would have made the paper of the 
 Bank of England resume the appearance of circu- 
 lating at par; because, fourteen hundred and 
 eighty-six and forty-eight thousand parts of a 
 grain, which the Bank Note, when of value six- 
 teen standard shillings represented, would have 
 been, to a fraction, the quantity of silver contained 
 in twenty of these new shillings.* 
 
 In the same spirit, it was proposed that the 
 guinea should be advanced to twenty-eight shil- 
 
 * For by reason of the price of bullion here and beyond seas, 
 which is now above the value which by this law is put upon the 
 coin, the cure cannot likely thus be made. (The context shews 
 that the word thus means by coining money of standard value 
 sufficient for the circulation), for that the advantage of melting 
 down and transporting will certainly postpone, and always 
 hinder the having sufficient of this money to supply the nation. 
 
 Which two things being at least doubtful, as is conceived, are 
 not prudent to be at this juncture attempted, but rather that a 
 sure and safe method may be pursued, which is the only other 
 way to effect this cure, and that is to advance four crown -pieces 
 silver from twenty shillings to twenty -five shillings, or some 
 other advance, and either let the gold, as before, find its propor- 
 tion, or ascertain it by a law, and in this case the proportion is 
 the gold at twenty-eight, or thereabouts. 
 
 An Essay for lowering the Gold, and lowering the Silver 
 Money. Printed 1696, page 30. 
 
141 
 
 lings, which in truth was only raising the denomi- 
 nation of the guinea a trifle higher in proportion 
 than the projected rise in the value of the silver coin. 
 
 So forcibly was this arrangement recommended 
 at the time, and so doubtful did it appear to the 
 minds of many, whether parliament might not be 
 prevailed upon to adopt a measure so strenuously 
 contended for, that by cotemporary writers the 
 expectation of the denominative value of the coin 
 being raised, is stated as one of the reasons of 
 standard money being withheld from circulation 
 in the autumn of the year 1696.* 
 
 The situation of the country was indeed strangely 
 changed; for if in the preceding year it was 
 aggrieved by the high prices of commodities, and 
 with speculations of all sorts, encouraged by the 
 superabundance of circulating medium ;f it now 
 
 * Another thing that makes money more scarce, is a hope that 
 our money hoarders have gotten ; that it will be advanced this 
 Sessions of Parliament : for notwithstanding several persons 
 have desired to borrow money of those that have had quantities 
 by them, at more than 6 percent, interest, upon security of dipt 
 money, plate and lands, &c. they have refused it, by which it is 
 concluded they expected to have the money advanced. Now as 
 soon as ever this expectation comes to be put an end to, a great 
 deal of money that now lies dead, would come forth into trade 
 again. 
 
 A short Treatise on the Reason and Cause why our Money 
 
 and Bullion have been exported) 1697, page 17. 
 
 t In these times, (say* Mr. Anderson in his History of Com- 
 merce 
 
142 
 
 experienced the more apparent difficulties arising 
 from an unnatural diminution in the price of com- 
 modities, and a daily decay of trade occasioned 
 by the almost total want of all means of circula- 
 tion, whilst it was in vain that new coin was is- 
 sued from the Mint ; for it disappeared from cir- 
 culation the moment it was paid away.* 
 
 merce), viz. in the years 1694-5, a number of new projects 
 were set on foot in London, many of which were, in reality, 
 good for nothing, having drawn in numbers of people to their 
 undoing : some of these started up with the Bank of England in 
 the preceding year; others in this year 1695. 
 
 He then proceeds to give a list of nineteen different projects 
 to which the times has given rise ; amongst which there are va- 
 rious descriptions of banks lotteries for money and for mer- 
 chandize; many metallic and mineral projects; diving engines 
 of various kinds; projects for pearl fishing ; for hollow sword 
 blades; glass bottles ; japanning ; printed hangings ; lea- 
 ther ; Venetian metal ; a project concerning rock-salt, and a 
 salt-petre company ; companies for the manufacture of lute- 
 strings, hats and a-la-modes; various projects for draining ma- 
 chines and fisheries ; all the particulars of which may be seen 
 in a book printed in the year 1695, entitled " Angliee Tutamen ;" 
 or, The Safety of England; being an account of the banks, lot- 
 teries, diving, draining, metallic, salt, linen, and lifting, and sun- 
 dry other engines, and many other pernicious projects now on 
 foot, tending to the destruction of trade and commerce, and 
 the impoverishing of this realm. 
 
 *The following extract from a discourse concerning a lumber- 
 office, p. 3, being a true remedy for the scarcity of money, 
 printed at this time, gives a striking picture of what seems, from 
 a variety of authorities, to have been the situation of the country. 
 
 But according to the present method we are in, money ii 
 growing scarcer, and trade is decaying daily. Some may, 
 perhaps, impute our calamity to the present abatement of 
 
 the 
 
143 
 
 Such was the state of things, when on the 20th 
 of October, 1696, parliament was assembled for 
 the express purpose of considering the difficulties 
 that had arisen upon the re-coinage of the money, 
 and of devising expedients to restore credit, with- 
 out which neither the war nor the commerce of 
 the country could be carried on.* 
 
 Fortunately, on this occasion the same wisdom 
 that distinguished the conduct of Mr. Montague, 
 (afterwards Lord Halifax), when, by the advice of 
 Mr. Locke in the preceding year, he rejected Mr. 
 Lowndes's scheme for altering the standard of our 
 money, once more interfered to guard the 
 country against the proposal of raising the deno- 
 mination of the money that had been coined, for 
 the purpose of bringing it in value to a level with 
 Bank Paper. 
 
 the numbered money : but there is no reason for that, since we 
 have experienced not long ago that guineas (alone) did much 
 better answer the demands of trade than all our gold and silver 
 does now: or if such abatement before-mentioned were the 
 cause of it, what is the reason that by so vast an addition of new 
 money as has been since coined, we do not find our calamity 
 proportionably redressed ? The addition of two millions cer- 
 tainly is sufficient to make a conjecture by ; but if instead of 
 relief we find money more scarce and trade more sunk, then 
 the cause of our suffering lies somewhere else, viz. in the 
 loss of our Paper Credit ; and unless this be re-established as 
 well as the coin, our difficulties must continue. 
 
 * See the King's Speech, Commons Journals, vol. xi. p. 566. 
 
144 
 
 In these times and with our experience, it may 
 appear that there was a want of foresight in par- 
 liament, in not suspecting the consequences to 
 public credit, which must in the then state of the 
 paper circulation have resulted from so sudden a 
 transition from an obligation to pay in clipped, 
 to an obligation to pay in standard coin,* but no 
 
 * When, in 1797, Government imposed the restriction on 
 cash payments, the general impression, that the credit of the 
 Bank and of the nation required that it should be removed 
 with all possible speed, induced the eminent merchants then in- 
 trusted with the direction of the Bank of England, to act on the 
 belief that they should be called upon to resume payments in 
 coin at the meeting of parliament in the month of November 
 following. Accordingly they conducted their concerns in such 
 a mariner* as by the 26th of October to feel themselves autho- 
 rized to declare, " That it is the opinion of this court, that the 
 " Governor and Company of the Bank of England are enabled 
 " to issue specie in any manner that may be deemed necessary 
 " for the accommodation of the public ; and the court have no 
 " hesitation to declare, that the affairs of the Bank are in such a 
 " state that it can with safety resume its accustomed functions, 
 " if the political circumstances of the country do not render it 
 " inexpedient." 
 
 The public are uninformed with regard to the extent of the 
 discounts with which, in the course of the summer of that year, 
 the Bank accommodated the merchants. But they have been in- 
 formed by the Directors of the Bank of England, that the cash and 
 bullion in the Bank was, on the 26th October, 1797, more than 
 five times the value of that at which they stood on the 25th of 
 February; and much above what they had been at any time 
 since the beginning of September, 1795. They know also 
 from the account, No. 13, printed in the Report of the House of 
 
 Ix>rds, 
 
145 
 
 experience can suggest wiser measures, than those 
 pursued in 1696, to restore the credit both of Go- 
 vernment and of the Bank nor can there in any 
 age be exhibited more firmness in enforcing against 
 popular opinion, measures which a very critical 
 situation of affairs rendered absolutely necessary 
 for the salvation of the country. 
 
 To do away that temptation to hoarding, origU 
 nating from the false hopes that had been excited 
 by the reasoning of those who, assuming that gold 
 and silver had augmented in value, argued that the 
 denominative value of our coin should be raised, it 
 was on the very first day of their meeting, declar- 
 ed by the Commons House of Parliament, cc That 
 
 Lords, 1797, that the advances to government were in February 
 .11,718,730; and from the Report of the Committee of Se- 
 crecy at the Bank, on which the Resolution of the 26th of Oc- 
 tober proceeded, we learn that at that time these advances were 
 only ,44258,140. 
 
 Thus we see those very intelligent directors, who had the 
 management of the Bank in the year 1797, when they acted 
 under an apprehension of being liable to pay cash in value 
 equal to the denomination of their notes/ pursuing a very differ- 
 ent line of conduct from that announced by Mr. Godfrey, t( of 
 " furnishing all who cduld give security with money," for in the 
 short space betwixt the months of February and October 1797, 
 they called in advances to government to the amount of 
 7,460,590, and by that means were enabled greatly to in- 
 crease their stock of cash and bullion. See the Report of House 
 of Commons, Nov. 1797. Appendix, No. 3. 
 
 L 
 
146 
 
 " they would not alter the standard of gold or 
 " silver in fineness, weight, or denomination."* 
 And, if possible, to reinstate, the Tallies in public 
 estimation, or at least to arrest the progress of that 
 fall in their value which had been so rapid, it was at 
 the same time resolved, " That all Parliamentary 
 " Funds, which had been made credit for loans 
 " from the subject, since His Majesty's accession 
 " to the crown, should be made good."f 
 
 But the evil was too deeply rooted to be re- 
 medied by the declaration of general principles, 
 however sound : for that loss of credit the Bank 
 had suffered, from a sudden reverse of fortune, oc- 
 casioned by its extended issues and the want of 
 foresight concerning the effects of liability to pay 
 in standard silver, had given rise to a feeling of 
 diffidence and mistrust concerning all pecuniary 
 arrangements. 
 
 The Bank, indeed, had made great exertions 
 to sustain its credit, but suspicion founded 
 on hesitation in performing pecuniary engage- 
 ments is not easily allayed. Suddenly to create 
 confidence was impossible. To put things in 
 a state by which it might be gradually restored 
 
 * Commons Journals, vol. xi. p. 567. 
 t Ibidem, 
 
147 
 
 was all that with any prospect of success could be 
 attempted. 
 
 To many who were well informed, to those 
 concerned in the government of the country, and 
 even to the greater part of the Proprietors of the 
 Bank, it seemed doubtful whether for a length 
 of time its lost credit could be restored, and 
 whether it was not expedient to withdraw its whole 
 paper from circulation ; whilst to all it appeared 
 necessary, notwithstanding the resolution passed 
 to secure the gradual discharge of Tallies, imme- 
 diately to reduce the amount of those that were 
 outstanding. 
 
 To effect these two objects, an enlargement of 
 the capital of the Bank, was recommended by the 
 Committee appointed to take into consideration that 
 part of His Majesty's speech that related to public 
 credit : four-fifths of this subscription to be paid 
 in Tallies, and one-fifth in Bank Notes. 
 
 The amount of the additional capital seems 
 neither to have been limited by the Resolutions of 
 the House of Commons, nor by the Act of Parlia- 
 ment, founded on them for engrafting on the 
 Bank, and there are strong grounds to imagine 
 that it was intended to withdraw all the Bank 
 Notes then in circulation. For in a Report 
 of the arguments used at a meeting of Propri- 
 etors of Bank Stock, to take the measure under 
 
148 
 
 consideration, it is said to have been supported oil 
 the following grounds. 
 
 " First, That all their Bills and Notes will be 
 " brought in with the Tallies, and so at once help 
 " them out of debt. 
 
 " Secondly, As a natural consequence of the 
 " former, their Bills and Notes will then be at par, 
 (e or equal to money, for the payment of debts or 
 cc Bills of Exchange. 
 
 " Thirdly, That being once out of debt, and 
 " their Bills or Notes equal with money, they may 
 " begin to establish a new and lasting credit. 
 
 " Fourthly, That the Bank cannot otherwise 
 " recover their credit in many years ; and that till 
 " their Bills or Notes go current again, at par with 
 <c money, the present proprietors cannot expect 
 " any dividend either of profit or interest." 
 
 In the course of the discussion at this meeting, 
 even those who were most violent in opposition to the 
 proposed measure, seem to have entertained the same 
 view of the expediency of withdrawing the whole 
 notes from circulation ; for far from controverting 
 this position, they 'argued that the addition to the 
 capital was unnecessary, as the Bank could pay all 
 its debts, and of course withdraw its notes within 
 a short time, independent of the supply it might 
 derive from the new subscription. 
 
149 
 
 It is to be observed, too, that the plan then for 
 the first time adopted by parliament, of authorizing 
 government to issue Exchequer Bills, receivable in 
 payment of taxes, for stfms of five, ten, fifteen, 
 twenty pounds, or upwards, seems to have been de- 
 vised to supply the place of the Bank Notes, which it 
 was supposed would for a time be entirely withdrawn, 
 by means of the projected enlargement of capital.* 
 
 The measure, therefore, of engrafting on the Bank, 
 certainly in a degree failed of attaining the end 
 it was immediately expected to produce, for only 
 one million was subscribed, and of course only 
 eight hundred thousand pounds in Tallies, and two 
 hundred thousand in notes were paid into the Bank. 
 
 But the seeds of all the various evils by which 
 the circulation of the country had been deranged, 
 were now destroyed. The recent declaration of 
 parliament, which did away all expectation that 
 the denominative value of the coin would be rais- 
 ed, or that the real value of the coin, the denomina- 
 tion remaining the same, would be diminished, 
 brought the new money and the heavy coin into 
 circulation, for there could be no prospect of deriving 
 profit from hoarding them. Tallies were no longer 
 left to circulate without any certain means of dis- 
 charging them, as funds were appropriated for 
 paying them off within a given time, and the issues 
 
 * See Cap. 31 st, Sect. 76-7, of the 7th William III, 
 
of the Bank of England were subjected to that 
 prudent limitation, which liability to pay in coin, 
 in real value equal to the denomination of the 
 note, must always create. Time, therefore, was 
 only requisite to do away the distrust produced 
 by the derangement in our circulation, and to 
 create that salutary degree of credit which must 
 always exist where the pecuniary concerns of a 
 country are conducted on sound principles. 
 
 Accordingly, it is not Dr. Drake alone, in his 
 History of Opposition, who informs us, that a gra- 
 dual and progressive restoration of credit took 
 place 3 for the following account of the effect of 
 the measures that were adopted, extracted from 
 Chandler's Debates, and perfectly agreeing with 
 that of Dr. Drake, has been given, almost in the 
 same words, by every author who has detailed the 
 measures pursued on this occasion.* 
 
 " By this means the face of affairs was quickly 
 <c much changed for the better : credit begun to 
 " revive, and money to circulate on moderate 
 " terms; foreign affairs were less to our disadvan- 
 " tage, and soon after came to an equality : and 
 " whatever hardships the people had undergone, 
 
 * Mr. Rose, in the speech he has published, seems to treat 
 Dr. Drake's authority with great disrespect. But the account 
 given in The Short History of the last Parliament, is adopted 
 by most succeeding writers, who have even retained the words 
 in which that account is conveyed. 
 
" by reason of a long and expensive war, and the 
 <c receiving the silver money, which could not but 
 " occasion many complaints, yet the greatest 
 " part attributed this to the necessity of affairs, 
 " and began to hope, both from the prospect of a 
 '" peace, and the wisdom of those at the Helm, 
 <^that they should enjoy more favourable times." 
 
 In retracing this important period of our economi- 
 cal history, it certainly appears impossible, even in a 
 cursory manner, to remark the effects alternately 
 produced, in diminishing the value of Government 
 and Corporation Paper, by an extension of its 
 amount, and the restoration of value effected -in 
 either case by the diminution of it, without its 
 suggesting that an over-issue of paper is the pro- 
 bable cause of the evils under which our currency 
 at present suffers. 
 
 But when on examination we discover, that in 
 the year 1695, and in the beginning of the year 
 1696, the exchange became unfavourable ; That 
 bullion rose in value, That the interest of money 
 fell, That public securities sold to great advan- 
 tage, That the price of all commodities suddenly 
 increased, and that commercial enterprises of all 
 sorts were extended, whilst the country was in- 
 undated with projects and projectors:* it is im- 
 
 * In the course of the reasoning that has been submitted 
 on the economical occurrences of the years 1695 and 1696, no 
 
 notice 
 
possible to reflect, On the present price of bullion, 
 and state of exchange, On the value of Ex~ 
 
 potice has been taken of the remarks made on this period of our 
 history, in the speech published by Mr. Vansittart : Because, 
 though there is in this speech an affectation of peculiar preci^ 
 sion and research, the statements it contains are so inaccurate, 
 and exhibit such total want of information, that it would have 
 been idle to interrupt the discussion, by commenting upon such 
 a series of errors. ' 
 
 In page 127 of this pamphlet, the following passage from 
 Dr. Davenant's works, which has been already cited in note, p. 
 116, is quoted and relied upon ; " And of late when the coin 
 ef grew so corrupted, the gold and silver did, as it were, but minister 
 " in the market, ivhile all great dealings were transacted by Tal- 
 " lies, Bank Bills, and Goldsmith's Notes. Paper Credit did 
 " not only supply the place of running cash, but greatly multi- 
 " plied the kingdom's stock. For Tallies and Bank Bills did 
 " to many uses serve as well, and to some better than Gold and 
 " Silver, and this artificial weakh, which necessity had intro- 
 " duced, did make us less feel the want of that real treasure the 
 " war and our losses at sea had drawn out of the nation." But 
 the author has taken the liberty to alter the original, by substi- 
 tuting, at the commencement, the words ' during the recoinage 
 * of our silver,' instead of those used by Dr. Davenant, which are 
 here printed in Italics. 
 
 Now, as it is impossible to suppose that this alteration could be 
 made by a person so truly deserving of respect, for the purpose 
 of deceiving the public, it follows, that the author of this speech 
 must have conceived that Dr. Davenant meant to express what 
 is very clearly conveyed by the words " during the recoinage of 
 " our silver," which he has substituted. 
 
 That the recoinage of the silver was not terminated in the year 
 1696, is a circumstance of which he must have been aware, 
 because he states, (page 119) that only two millions four hun- 
 dred 
 
153 
 
 chequer Bills, On. the low interest at which money 
 has been obtained in loan, On the price of com- 
 
 dred thousand pounds had been delivered on the 20th of No- 
 vember, 1696. It is evident, therefore, that instead of col- 
 lecting from this passage what Davenant certainly meant to 
 express, that all transactions were conducted by paper be- 
 fore the 4th of May, 1696, when the clipped money ceased to 
 circulate. The author of this speech is so completely deficient 
 of information as to suppose Dr. Davenant to have stated, that 
 all great transactions were carried on by Tallies, Bank Notes, 
 and by Goldsmith's Notes, in the autumn and latter end of the 
 year 1696, at a time when these Tallies were not saleable, being 
 at a discount of fifty per cent, when Goldsmith's Notes hardly 
 could obtain credit ; and when Bank Notes, circulating in a state 
 of discredit at twenty per cent, discount, were reduced in amount 
 to seven hundred and sixty-four thousand pounds, a fact which 
 he might have learnt in the course of his examination of the 
 Journals, where he might also have seen, that during the recoinage 
 in December 1696, the whole accommodation given to mer- 
 'chants, by way of discount at the Bank, amounted to sixeen thou- 
 sand pounds. (See Extract from the Journals, Appendix, No. %.) 
 
 With regard to the passages so much relied upon, which are 
 said to be quoted from a manuscript memorial of Dr. Davenant's, 
 and a manuscript report of Lord Ranelagh's, supposing the ci- 
 tations to be accurate, of which there is certainly room for 
 doubt, after the very inaccurate manner in which the quotation 
 from Dr. Daven ant's printed works has been given, they really 
 cannot be considered as in the smallest degree countenancing 
 the doctrines of this speech. 
 
 That Lord Ranelagh's report must have related to a transac- 
 tion that took place before the month of May, 1696, is apparent 
 to all who recollect, that the pay-master could not legally have 
 paid into the Bank any thing but new, or heavy money, after that 
 date, or who know that the Directors withdrew at that time as 
 
 much 
 
154 
 
 
 
 modities, On the augmentation of our exports, 
 and on the tribe of commercial adventurers daily 
 
 much as possible from all transactions with government, as is 
 evident from the extreme difficulty with which they were pre- 
 vailed upon to advance the much censured loan of two hundred 
 thousand pounds, in August 1696. 
 
 Assuming, therefore, that it was a transaction that took place 
 before the 4th of May, 1696, the charge for Exchange is what 
 must have been expected, whilst the thirteen per cent, for base 
 money must have been an allowance not for clipped money, 
 which never was at a discount of more than half a per cent, in 
 relation to Bank Notes ; but for counterfeit money, such as the 
 law did not permit to pass in tale, of which there was then 
 abundance in circulation. 
 
 On Davenant's memorial it is to be observed, that as it pur- 
 ports to have been given into the treasury in the month of July, 
 1696, when the new money had hardly began to circulate, and 
 almost at the time a dispute existed whether foreign bills might 
 be paid in Bank Notes (then at a great discount), it is no proof 
 that the exchange remained unfavourable till the restoration of 
 peace. If the author of this speech had really made the careful 
 research into the writings of that day, for which he seems anx- 
 ious the public should give him credit, he must have discovered, 
 that the exchange became favourable to this country at a much 
 earlier period. Indeed, in a pamphlet, entitled A short Treatise 
 of the Reasons and Causes why our Money and Bullion have been 
 exported ; at the end of which is affixed the date, 17th of October, 
 1696, it is said, page 19, " For although many people have been 
 " uneasy because the coin was regulated at this juncture, yet 
 " when our difficulties are over, not only us, but the next genera- 
 " tion, will have the benefit thereof; and if it had not been done 
 tr (in all likelihood) it would have centered in the ruin of the 
 " nation. And the keeping our money to the standard, will 
 " prove otherwise than many, through ignorance, have imagined, 
 
 for 
 
U5 
 
 vanishing in bankruptcy, as circumstances inform 
 the prying eye of those who accommodate them 
 
 " for we see already, that it is loss at this time to carry out of 
 " the land either guineas or milled money, by reason the ex- 
 " change is risen so high, that it is above a par in silver, and 
 " much more in gold, by which means it is profit to bring over 
 " from Holland either of them. And the reason why it is more 
 " advantage to bring guineas than silver is, because the silver 
 " contained in 22 shillings of milled money is worth more in va- 
 " lue, and will yield more beyond sea, than the gold contained 
 " in a guinea." 
 
 The length of this note certainly requires an apology, but it 
 is impossible to abstain from shortly assigning the reasons 
 why the opinion delivered in so peremptory a manner, in this 
 speech, page 123, on the causes of the unfavourable exchange in 
 King William's time, appears unfounded. It is there said, that 
 this unfavourable exchange was not occasioned by the depreciation 
 of money (meaning the clipping of the coin), as the author of this 
 speech supposes the Bullion Committee to have stated, but that it 
 arose from the military expences abroad. 
 
 In the first place, this does not appear to follow as a necessary 
 consequence from the facts which are relied upon, either as 
 stated by Davenant or by Gregory King. In the second place, the 
 author of this tract must not only differ from Mr. Vansittart, in 
 the opinion he has stated, but he has the misfortune not even to 
 agree with the supposed opinion of the Bullion Committee : for 
 he believes that the exchange never was highly unfavourable till 
 the spring of the year 1695, when the issues of the Bank became 
 so extensive ; and in support of this opinion, he relies on the nu- 
 merous passages he has already quoted, to which he must add 
 the following direct testimony of cotemporary writers. 
 
 First, in a pamphlet entitled, A Preservative of our Money, or 
 a Way proposed whereby some Money may be kept in England 
 which otherwise will all be gone, by E. L. (Edward Lewis,) 
 
 printed 
 
156 
 
 with capital, that it is prudent to cut the thread ; 
 without imputing the calamity under which we 
 suffer to an over-issue of paper : and this conclu- 
 sion becomes indeed irresistible, when we are in- 
 formed that the paper circulation of this country, 
 where refinement in the art of economizing circu- 
 lating medium is brought to the greatest state of 
 perfection, has within these two years received an 
 augmentation of more than twelve millions.* 
 
 To add any thing to these details, for the pur- 
 pose of proving the depreciation of the paper now 
 
 printed 1696, it is said, page 13, " As for our dipt money, that 
 " had no effect upon the Exchange, till guineas did rise, which 
 " was less than a year since." 
 
 Secondly, Mr. Thomas Haughton, of Lyme-Street, in his Trea- 
 tise on the Alteration of the Coin, with a feasible method to do 
 it, distinctly states, page 41, that the rise in the value of guineas 
 took place after the 1st of May, 1695. 
 
 Thirdly, by those who know that the rise in the price of com- 
 modities, and the increase of an unfavourable rate of exchange, 
 must, under circumstances such as took place in King William's 
 time, have been co-existent, the following passage from R. Ford's 
 Further Attempt towards the Reformation of the Coin, printed 
 1696, page 10, must be deemed to corroborate the testimony of 
 Mr. Lewis. 
 
 " For if we examine the prices current of all commodities, 
 " it will be found they are not advanced near 50 per cent, one 
 " with another, and so much as they are risen, is not only on ac- 
 " count of the badness of o t urcoin, but is in great measure occa- 
 ." sioned by the extraordinary demand there is for many of them 
 *' both here and beyond sea." 
 
 * See note, page 39. 
 
157 
 
 in circulation, must indeed appear superfluous; 
 for it is hardly possible to believe, that all connec- 
 tion betwixt an increase of paper money, and the 
 evils under which we suffer, can be denied by those 
 who are informed, that our circulation has lately 
 been so much increased, and that it is certain the 
 same circumstances in every respect took place 
 when the Bant of England, in 1695, chose to in- 
 crease its issues, by acting on the principle of ac- 
 commodating all who could find security, whilst it 
 is equally certain, that things at that time returned 
 into their natural state the moment they were 
 obliged to diminish their issues. 
 
 But the plan which throughout this reasoning 
 has been pursued, does not limit itself to a mere 
 statement of what seems sufficient to convince any 
 rational man - 3 it aims at rendering it impossible ei- 
 ther for ingenuity to perplex the subject, or for 
 folly to confound all rational distinctions in rela- 
 tion to it, in such a manner as to produce even a 
 moment's hesitation concerning the present state 
 of our currency. 
 
 It is further necessary, therefore, in endeavour- 
 ing to accomplish this object, shortly to examine 
 whether independent of, and abstracted from every 
 thing that has been hitherto urged, the present de- 
 preciation of our paper may not be established in 
 a manner that hardly admits of dispute. 
 
158 
 
 In all cases where the causes or the consequences 
 of the events of the day form a subject of contro- 
 versy, the experience we derive from contemplat- 
 ing past scenes of a similar nature is so justly and 
 so generally regarded to be the best guide to accu- 
 racy of decision, that when a question is argued 
 without such an appeal, it affords a presumption 
 either that the case is unprecedented, or the ar- 
 gument untenable. 
 
 Accordingly, we find, that anticipating the pre- 
 judice this feeling seems likely to create, those who 
 have argued that our paper currency is not depre- 
 ciated, have been anxious to consider the case as 
 unprecedented, maintaining that no paper cur- 
 rency was ever thrown into circulation under simi- 
 lar circumstances. 
 
 Whilst, however, it seems impossible to make 
 any distinction between two species of paper, both 
 originally circulating at par, and neither of which, 
 from circumstances, are payable on demand, ex- 
 cept what arises from a comparison of the differ- 
 ence they respectively 'exhibit betwixt the value of 
 the note and of the cash it promises to pay : It is 
 impossible not to recollect, that there is hardly a 
 country in Europe where there has not existed a 
 paper currency under similar circumstances; yet 
 in no publication has a doubt ever been expressed, 
 that the difference betwixt the value of all such 
 foreign paper and the gold it promised to pay, 
 
159 
 
 formed the measure of the depreciation of the 
 paper: nor did there ever exist a single transaction 
 on the part of any British merchant with a foreign 
 country, where paper differed in value from the 
 coin it promised to pay, that was not conducted 
 on the faith that such was the case. 
 
 Thus the logic by which it is attempted to prove, 
 that the difference betwixt the value of coin and the 
 paper of the Bank of England, arises from an 
 augmentation of the value of gold and silver, esta- 
 blishes this singular proposition, That in Great 
 Britain the difference in value betwixt paper, the 
 payment of which on demand is suspended, and 
 coin, proves the extent to which the value of gold 
 and silver has increased, whilst, universally through- 
 out the rest of the world, the difference betwixt 
 paper under similar circumstances, and coin, forms 
 the measure of the amount in which the paper is 
 depreciated. ^ 
 
 The excessive bigotry in favour of every thing 
 English, which is supposed to distinguish some of 
 our young and inexperienced countrymen on first 
 going abroad, is a common subject of ridicule on 
 the theatres of foreign countries. But even the 
 Englishman, who at Paris is represented as knock- 
 ing down a Frenchman, because he was such a fool 
 as not to understand English,^affords but a tame in- 
 stance of this species of extravagance, when com- 
 pared to the deliberate opinions of those statesmen, 
 

 160 
 
 who uniformly admit, that abroad the difference* 
 betwixt paper and coin forms the measure of the 
 depreciation of paper, and yet knowing that we 
 have at work eight hundred and eighteen paper 
 mints,* all engaged in fabricating paper not payable 
 in cash on demand, gravely pronounce the dif- 
 ference that ensues betwixt coin and the value of 
 this paper to be a measure of the extent to which 
 the metals have risen in value ! ! 
 
 The ridiculous consequences to which such opi- 
 nions must lead, are infinite, but it is none of the 
 least remarkable, that those who hold them must 
 be forced to abandon the opinion that has hitherto 
 been uniformly maintained, and acted upon by all 
 mercantile men, that the difference betwixt coin 
 and foreign paper marks the extent of the depre- 
 ciation of the paper. 
 
 Yet this inference cannot be disputed For sup- 
 posing the paper of the Bank of Vienna to differ in 
 value fifty per cent, from the coin it engages to 
 pay, the practical merchant of this country, who 
 knows that there is a difference betwixt coin and 
 the notes of the Bank of England, to the extent of 
 twenty per cent, which he ascribes to a rise in the 
 value of coin, must be under the necessity of aban- 
 doning the opinion that the difference betwixt the 
 
 See note, page 38. 
 
161 
 
 paper of the Bank of Vienna and coin, is the mea- 
 sure of the depreciation of the paper, for consistency 
 requires he should hold, that thirty of the fifty per 
 cent, is the measure of the depreciation of Vienna 
 paper, and that the remaining twenty is the mea- 
 sure of the increase of the value of gold. 
 
 This strange notion concerning the state of the 
 paper at Vienna, would certainly appear very unin- 
 telligible to any merchant in Germany, who, un- 
 accustomed to the metaphysical refinement of the 
 practical men of this country, has always considered 
 the difference betwixt coin and paper as the mea- 
 sure of the depreciation of paper. And it would 
 be a task of no small difficulty for any of our inge- 
 nious practical advocates in favour of the modern 
 system of circulation, in a satisfactory manner to 
 explain it. They might, indeed, resort to the 
 means they have already had recourse to in this 
 country, and argue that the pound note, from its 
 denomination, retains that value which it possessed 
 before the rise of gold. But unfortunately, this 
 would oblige them to give some reason, why the 
 English language possessed a power of conferring 
 value by an expression of denomination which was 
 denied to the German. 
 
 Nay, more, if there ensued any controversy in 
 
 ;he course of this explanation, they would find 
 
 themselves under the necessity of assigning reasons 
 
 /hy the English language possessed this singular 
 
 M 
 
162 
 
 attribute, when used in the mother country, of 
 which it was at once divested, when used in the 
 
 colonies. 
 / 
 
 For they might truly be told, that the preambles 
 of the acts of the 24th of George II. and of the 
 4th of George III.* furnished evidence that the 
 denomination given to the paper money in Ame- 
 rica before the revolution had not that effect. And 
 that since that event, when Congress were forced to 
 attempt to convey by language a defined notion of 
 the value of the paper they meant to constitute a 
 legal tender, even with the aid of the English lan- 
 guage, they could fall on no means of doing it, but 
 by declaring, " that every paper dollar should be 
 " taken and esteemed at the rate or value of seven 
 <c shillings and sixpence, and of equal value in 
 " the payment of debts with a Spanish milled silver 
 " dollar, weighing seventeen pennyiveights and six 
 "grains"^ 
 
 Paper currency is the subject of all others most 
 apt to be involved in mystery ; for there are many 
 who in treating of it affect obscurity, to veil over 
 their ignorance of what they profess to understand; 
 whilst there are not a few, who knowing that they 
 
 * See note, page 101, containing Extracts from the Pre- 
 ambles of these Acts. 
 
 f See clause 2d of the Act, Appendix, No. 1, making Ame- 
 rican Bills of Credit a legal tender. 
 
163 
 
 profit by its increase, and who feeling therefore an 
 interest hostile to all examination and inquiry, en- 
 deavour to overwhelm all rational explanation by 
 mysterious and unintelligible panegyric, lest it 
 should derogate from the merits of a system from 
 which they derive such benefit. 
 
 But if the select committee of the House of Com- 
 mons had in their report gone more fully into the 
 discussion of the manner in which an excess of pa- 
 per produces the ruinous effects they have attri- 
 buted to the recent increased issue of Bank Notes ; 
 it is hardly possible that Parliament should have 
 been so blind to the real situation of our currency 
 as to have sanctioned the measures brought for- 
 ward at the end of the last Session. 
 
 For there is no means of throwing so much light 
 on the question, whether the difference betwixt the 
 value of paper and the coin it represents is occa- 
 sioned by an augmentation of the value of gold, or 
 by a depreciation of that of paper, as what naturally 
 arises out of a clear and accurate understanding 
 of the circumstances that regulate the order, in 
 point of time, and the manner in which a supera- 
 bundance of paper must produce a rise in the price 
 of goods, and create that difference of value 
 betwixt coin and paper, the causes of which are 
 disputed. 
 
 In explaining the means by which an over-issue 
 
164 
 
 of paper produces the effects that have been ascrib- 
 ed to it, it is a fortunate circumstance, that not- 
 withstanding the eagerness with which this contro- 
 versy has been conducted, there exists no dispute, 
 either in respect of the fact that a rise in the value 
 of commodities has taken place, and that a great 
 difference exists betwixt the value of gold and of 
 paper ; or concerning the order in point of time, in 
 which these occurrences have become apparent ; for 
 all have agreed in the opinion so distinctly expressed 
 by Mr. Rose, that in commodities, the rise in value 
 since the restriction has been annually progressive ; 
 whilst the difference betwixt gold and paper was 
 not very considerable till the end of the year 1808 
 and the beginning of the year 1809, when it sud- 
 denly became formidable.* 
 
 Now, however singular it may appear to the 
 Vice-President of the Board of Trade, it is certain 
 that this statement of facts, in which he agrees 
 with all his co-adjutors in the controversy, is alone 
 sufficient to authorize the inference, that the 
 paper currency of this country is at present depre- 
 ciated. 
 
 In the first place, if it is true that gold and paper 
 
 * See Report of the Secret Committee of the House of Com- 
 mons, page 1. See also Mr. Rose's Speech, page 4, in which 
 he says, " that commodities have risen rapidly is beyond dis- 
 " pute ;" and (page 29) where he states, " that since the Bank 
 " restriction we find the prices of other commodities advancing 
 " yearly, while in gold there was no considerable rise till the 
 year 1809." 
 
165 
 
 remained nearly equivalent till the year 1809 ; and 
 that betwixt the years 1797, when the restriction 
 was imposed, and the year 1809, there was a pro- 
 gressive rise in the price of commodities, it is 
 scarcely necessary to explain to a person, who in 
 the very same page in which he has given this 
 statement of facts, quotes and relies upon Sir 
 George Shuckburgh's tables, that he must admit that 
 betwixt 1797 and 1809* the value of our currency 
 that is, both of Bank Notes and of the coin that 
 circulated with them must have suffered a depre- 
 ciation. 
 
 But if, at the end of this period, it is also 
 true that coin rose rapidly in value, and that a great 
 difference of value betwixt coin and Bank Paper 
 became apparent, can there be two opinions on the 
 necessary inference ? Must not all agree in think- 
 ing, that though coin, in consequence of this rise, 
 may have resumed its former value, yet Bank Notes 
 which did not partake of this augmentation of value, 
 must have remained in the state of depreciation, in 
 which this statesman, by his facts and his reasoning, 
 has proved them to have existed ; and this observation 
 is equally applicable to the reasoning of all the other 
 advocates for our present system of circulation; 
 for whilst they admit the statement with regard to 
 the order of time in which the rise in the price of 
 goods took place, and in which the difference 
 betwixt Gold and Bank Notes became, compara- 
 tively speaking, apparent 3 there are none of them 
 
166 
 
 who have openly controverted the principle upon 
 which the tables in the Philosophical Transactions 
 proceed. 
 
 In the next place it is to be observed, that all 
 who have maintained that the difference in value 
 betwixt gold and paper arises from an increase in 
 the value of gold, have completely overlooked 
 the circumstance of the date, at which they admit 
 this difference to have become apparent, for there 
 exists not in the works of any of the numerous 
 orators and authors who have asserted this position, 
 a single sentence devoted to an explanation why 
 coin or gold should have suddenly advanced in 
 value in 1809. 
 
 The war in Europe, which, (as in King Wil- 
 liam's time,) is regarded by many as the cause of 
 the rise in the value of the metals, cannot account 
 for its becoming apparent in the year 1809 5 for it 
 is impossible, that if war could have produced such 
 an effect, that it should not have been perceived at 
 a much earlier period. Neither was it then, to 
 use the language of the year 1696, that " the over- 
 " grown greatness of the French monarch, that 
 ' ' aspiring prince, who had put a yoke on the neck 
 "of Europe,"* first displayed itself; for we had 
 unfortunately long experienced every species of 
 evil that his talents and ambition were capable of 
 inflicting. 
 
 * See note, page 122. 
 
167 
 
 The state of our commerce, in consequence of 
 our orders in council co-operating with the decrees 
 of Berlin and of Milan, is equally incapable of ac- 
 counting for this rise in the value of gold; as 
 it is impossible that the effects of these measures 
 should have suddenly displayed themselves in 1809. 
 
 It may, therefore, be fairly stated, not only that 
 no satisfactory cause has hitherto been assigned to 
 account for the supposed rise in the value of the 
 metals, but that no attempt whatever has been 
 made to assign any cause why such a rise should 
 have happened at the period in which it is said to 
 have taken place. 
 
 But if we ascribe the difference betwixt the 
 value of paper and of coin to a depreciation of 
 paper arising from super-abundance, there is no 
 man who really understands the manner in which 
 an over-issue of paper operates, that can have the 
 smallest difficulty in accounting for the order 
 in which the rise in the price of goods, and 
 the difference betwixt paper and gold has taken 
 place. 
 
 Though the quantity of gold in the coffers of the 
 Bank was considerably reduced at the time the 
 restriction was imposed, the portion usually 
 employed in Circulation throughout the coun- 
 try must have been nearly unimpaired; and 
 it is known that the restriction itself produced no 
 
170 
 
 and creating a desire in the sugar baker to acquire, 
 could not fail to raise the price of that commodity. 
 
 Mr. Thornton's evidence, indeed, only states 
 a single case, in relation to the price of sugars ; 
 but this case sufficiently explains the principle upon 
 which an extra-issue of paper operates, and makes 
 it impossible not to perceive that the great enlarge- 
 ment of accommodation, which an extended cir- 
 culation of paper affords to the mercantile adventu- 
 rers, by enabling some to withhold from the market 
 the commodities on hand, and creating a desire in 
 others to use the credit they can with such ease ob- 
 tain, for the purpose of purchasing on speculation, 
 must have universally the effect of raising the value 
 of commodities. 
 
 It is true these extended speculations, and this ad- 
 vance in the price of commodities, could not endure, 
 if it was not sustained by an increase of consump- 
 tion and consequent augmentation of demand, for 
 the various articles in which merchants are induced 
 to speculate. 
 
 But this is also a natural effect of a derange- 
 ment, produced in the economical state of a coun- 
 try by a superabundance of circulating medium. 
 
 An increased demand for our manufactures, 
 by raising the wages of manufacturing labour, 
 increases the expenditure of the manufacturer, 
 
171 
 
 whilst the extra expenditure of those who estimate 
 thei r revenue by calculations of the ideal profits likely 
 to arise from that extended commerce, in which en- 
 larged credits have enabled them to embark, as well 
 as the facilities which men acquire by the exten- 
 sion of credit, of encroaching on their capital, 
 alike contribute, by increase of demand, to advance 
 the price of all commodities, and to give for a 
 time the appearance of real prosperity to a state of 
 things pregnant with calamity. 
 
 Unless, therefore, the principle, that the price of 
 all commodities is regulated by the quantity of 
 them and the demand for them, is erroneous, it 
 is impossible that a gradual extension of paper 
 should not produce an increase of the price of 
 commodities. But guineas must partake of the 
 value of the paper along with which they circulate; 
 for the reasoning of the Committee of the House 
 of Commons, in their Report, is sound, which leads 
 them to assert, that an excess of any part of the 
 currency of a country must depreciate the whole. 
 Neither is it necessary for the Committee in main- 
 taining this principle, as the author of the De- 
 fence of Abstract Currrencies has in his Introduction 
 triumphantly stated, to pre-suppose some relative 
 discredit* before they can explain the cause of the 
 rise in the value of gold. 
 
 * See Mr. Gloster Wilson's Treatise on Abstract Currencies, 
 Introduction, page 12. 
 
limited to what constitutes a reward for the trouble 
 of collecting, and the danger of melting it. 
 
 The moment, however, guineas become so scarce^ 
 that even industry cannot procure them in ex- 
 change for Bank Notes, this check on the value 
 of gold no longer exists; and in assuming the 
 value in relation to paper, which in conjunction 
 with other commodities it ought naturally to bear, 
 it appears suddenly to sustain that rise of value on 
 which so many observations have been made. 
 
 It is impossible that this view of the subject 
 should not in itself appear decisive of the question, 
 whether the difference betwixt coin and paper is 
 occasioned by a rise in the value of coin, or by a 
 depreciation of paper - y for whilst those who con- 
 tend for the former position, can neither give, nor 
 have attempted to give, any reason for such a rise 
 having become suddenly apparent in 1808-9, after 
 commodities had undergone for years a gradual 
 augmentation in value ; all these occurrences ap- 
 pear the natural result of a depreciation of paper. 
 
 But this is not all ; for a very short examination 
 of the nature of the proposition, that coin of geld 
 and silver has risen in value, which we are thus, 
 independent of all argument, ordered to believe, 
 must shew that it is a thing hardly possible j 
 whilst a depreciation of paper, far from being im- 
 probable, seems the certain effect of the present 
 state of our currency. 
 
Those who maintain that the metals have risen in 
 value, are, from the very nature of the proposition, 
 under the necessity of considering Bank Notes as 
 a commodity 3 the value of which being inde- 
 pendent of the coin they promise to pay, must be 
 regulated on the principles which determine the 
 value of all other commodities. 
 
 It follows, then, that according to them, gold, 
 silver, and Bank Notes, must be considered as 
 three distinct species of commodities, the values of 
 which must be severally regulated, according to 
 the demand for, and the quantities of each. That 
 is, a rise in the value of gold must be ' occasioned 
 by an increase of demand for, or a diminution 
 of the quantity of gold ; a rise in the value of silver, 
 either by an increase of the demand for, or by a di- 
 minution of the quantity of that metal ; and an al- 
 teration in the value of Bank Notes must equally 
 depend upon the same change in the demand for, 
 or in the quantity of that commodity. 
 
 To suppose, then, that the difference in value 
 betwixt Bank Notes and coin of gold and silver is 
 the consequence of a rise in the value of coin, is 
 to suppose that the proportion betwixt the de- 
 mand for, and the quantity of gold ; and the propor- 
 tion betwixt the demand for, and the quantity of 
 silver, have both undergone a change which has 
 fortuitously happened to be such as to make the 
 
172 
 
 For though guineas, whilst they remain in cir- 
 culation at home, must partake of the depreciated 
 value of the notes with which they are inter- 
 changeable, that is no reason why they should 
 not retain their undiminished value abroad, 
 where the cause of the alteration does not exist ; 
 and though the laws of this country, under 
 such circumstances, may delay, they can never 
 prevent their gradual exportation; for even the 
 forfeiture of life, as enacted by the laws of Spain 
 and Portugal, could not retain within the Penin- 
 sula the coin imported from America. 
 
 
 
 It is clear, therefore, that whilst the price of 
 commodities must gradually increase in propor- 
 tion as paper is augmented, so the encourage- 
 ment to the exportation of gold must be precisely 
 in the same ratio ; for as gold, in the shape of coin, 
 sinks in value with the note at home, the premium 
 on its exportation, consisting of the difference 
 betwixt its value in relation to commodities in this 
 country, and its value in relation to commodities 
 abroad, must augment in the same proportion that 
 our goods appear to rise.* 
 
 * The trifling premium which in any country will command 
 the importation of foreign coin, or banish it from circulation, 
 is powerfully illustrated by the following extract from Sir Isaac 
 Newton's Representation relating to the coin of England in 
 1717: 
 
 ** Some years ago the Portugal moidores were received in the 
 " West of England at 28s. a piece : upon notice from the Mint 
 
 " that 
 
173 
 
 It is also material to observe, that though during 
 the progress of this augmentation of the price of 
 commodities, and whilst our gold coin is gradually 
 disappearing, the value of gold may increase ; yet 
 that increase, so long as gold coin remains at all in- 
 terchangeable with paper, must be regulated on dif- 
 ferent principles from those which determine either 
 the price of our commodities, or the premium on 
 the exportation of our coin ; for whilst things are in 
 that state, it is evident that the increase must be 
 
 " that they were worth only about 27s. 7d. the Lords Commis- 
 " sioners of the Treasury ordered their receivers of taxes to take 
 " them at no more than 27s. 6d. Afterwards many gentlemen 
 " in the West sent up to the Treasury a petition, that the re- 
 " ceivers might take them again at 28s. and promised to get 
 " returns for this money at this rate, alledging, that when they 
 " went at 28*. their country was full of gold, which they wanted 
 " very much : but the Commissioners of the Treasury consider- 
 " ing that at 28s. the nation would lose 5d. a piece, rejected the 
 " petition." 
 
 Thus an advantage of 5d. on 28s. was sufficient to fill the West 
 of England with foreign gold, whilst the loss of Id. on 28s. in 
 consequence of the proclamation of the Mint, seems to have 
 banished it all from circulation. 
 
 In the same report we are informed, that in the last year of 
 King William's reign, the Louis d'or of France, worth only 17s. Id. 
 a piece, passed in quantities in England, being received for 
 17s. 6d. and that a proclamation forbidding them to be taken at 
 more thtn 17s. sent, within a short space of time, upwards of 
 fourteen hundred thousand pounds worth to be melted at the Mint. 
 
 Thus, at that time, an advantage of 5W. per Louis d'or, suf- 
 ficed to bring into England a great quantity of French money : 
 and the benefit of 4^. per Louis d'or to be derived from melting 
 k, sent it all to the Mint. 
 
174 
 
 limited to what constitutes a reward for the trouble 
 of collecting, and the danger of melting it. 
 
 The moment, however, guineas become so scarce* 
 that even industry cannot procure them in ex- 
 change for Bank Notes, this check on the value 
 of gold no longer exists; and in assuming the 
 value in relation to paper, which in conjunction 
 with other commodities it ought naturally to bear, 
 it appears suddenly to sustain that rise of value on 
 which so many observations have been made. 
 
 It is impossible that this view of the subject 
 should not in itself appear decisive of the question, 
 whether the difference betwixt coin and paper is 
 occasioned by a rise in the value of coin, or by a 
 depreciation of paper ; for whilst those who con- 
 tend for the former position, can neither give, nor 
 have attempted to give, any reason for such a rise 
 having become suddenly apparent in 1808-9, after 
 commodities had undergone for years a gradual 
 augmentation in value ; all these occurrences ap- 
 pear the natural result of a depreciation of paper. 
 
 But this is not all 3 for a very short examination 
 of the nature of the proposition, that coin of geld 
 and silver has risen in value, which we are thus, 
 independent of all argument, ordered to believe, 
 must shew that it is a thing hardly possible $ 
 whilst a depreciation of paper, far from being im- 
 probable, seems the certain effect of the present 
 state of our currency. 
 
175 
 
 Those who maintain that the metals have risen in 
 value, are, from the very nature of the proposition, 
 under the necessity of considering Bank Notes as 
 a commodity 3 the value of which being inde- 
 pendent of the coin they promise to pay, must be 
 regulated on the principles which determine the 
 value of all other commodities. 
 
 It follows, then, that according to them, gold, 
 silver, and Bank Notes, must be considered as 
 three distinct species of commodities, the values of 
 which must be severally regulated, according to 
 the demand for, and the quantities of each. That 
 is, a rise in the value of gold must be occasioned 
 by an increase of demand for, or a diminution 
 of the quantity of gold ; a rise in the value of silver, 
 either by an increase of the demand for, or by a di- 
 minution of the quantity of that metal j and an al- 
 teration in the value of Bank Notes must equally 
 depend upon the same change in the demand for, 
 or in the quantity of that commodity. 
 
 To suppose, then, that the difference in value 
 betwixt Bank Notes and coin of gold and silver is 
 the consequence of a rise in the value of coin, is 
 to suppose that the proportion betwixt the de- 
 mand for, and the quantity of gold ; and the propor- 
 tion betwixt the demand for, and the quantity of 
 silver, have both undergone a change which has 
 fortuitously happened to be such as to make the 
 
176 
 
 two metals, all at once, augment in value, accurate^ 
 ly in the same proportion. 
 
 On the great improbability of such an incident, it 
 is certainly needless to enlarge $ it implies either that 
 the taste of mankind for two different commodities 
 should, at one and the same time, by accident be? 
 so altered as to create a corresponding increased 
 desire for each, or that the bounty of nature should 
 all at once have become limited in similar propor- 
 tions with respect to the quantity of each of these 
 metals : and we are desired to believe that this rise 
 of value has suddenly taken place with respect to 
 two commodities, which for centuries have been 
 uniformly diminishing in value in ratios so differ- 
 ent, that though silver was formerly to gold as 10 
 to 1, it is now become comparatively so abundant 
 as to be in value only in the proportion of rather 
 more than 15 to 1. 
 
 But in adopting the hypothesis, that the difference 
 of value betwixt our coin and our Paper Currency 
 arises from the dimin ution of the val ue of Bank Notes, 
 no such improbable co-incidence of change in value 
 betwixt two several commodities is assumed - 9 to 
 account for it, it is only necessary to suppose that there 
 has been a variation, either in the demand for, or in 
 the quantity of Bank Notes; and that this last cir- 
 cumstance has actually occurred, cannot easily be 
 disputed, when it is known that since the year 1808, 
 previous to which a sufficiency of paper must have 
 
177 
 
 been thrown into circulation to fill up the blank occa- 
 sioned by the absence of our coin ; an increase to 
 the extent of twelve millions has taken place. 
 
 There are many other views of the subject which 
 lead with equal certainty to the conclusion, that the 
 paper currency of this country is depreciated; but 
 it really seems ridiculous to accumulate further 
 proofs; for it is impossible to believe that there 
 exists the man who can doubt whether the differ- 
 ence betwixt coin and paper is occasioned by a 
 rise in the value of the metals, or by a depreciation 
 of Bank Notes, when he knows the state of our 
 currency, and is made acquainted with the manner 
 in which the increase of Bank paper accounts for 
 all that has happened. 
 
 Far less can it be believed that a doubt of the 
 real situation of our circulating medium can per- 
 vade the mind of any one, who reflects on the high 
 improbability of gold and silver having risen in 
 value on the still greater improbability of their; 
 having sustained that rise in value, in similar pro- 
 portion, at the commencement of the year 1809 
 and perceives that this hypothesis cannot possibly 
 explain any of the occurrences that have taken 
 place. 
 
 N 
 
APPENDIX. 
 
 No. I. 
 
 A N Act for making the Continental Bills of Credit, 
 and the Bills of Credit emitted by Resolves of the 
 late Assemblies, legal tender, and for other purposes 
 therein mentioned. 
 
 Whereas, it is highly necessary that the Bills of Credit 
 emitted and made current by the Continental Congress, and 
 the Bills of Credit emitted and made current by the late As- 
 semblies of Pennsylvania, ought to be made legal tender in 
 all payments, and to be alike taken by every person in this 
 state, in the discharge of debts and for the purchasing the ne- 
 cessaries of life, and materials of defence ; and it is evidently 
 necessary that the counterfeiting of the said Bills of Credit 
 made current by public authority, should be prevented. 
 
 Be it therefore enacted, and it is hereby enacted by the 
 Representatives of the Freemen of the Commonwealth of 
 Pennsylvania, in General Assembly met, and by the authority 
 of the same, That, from and after the sixth day of February 
 next, the Bills of Credit emitted and made current by the 
 Continental Congress, shall pass current in this state, and be 
 received in payments, and discharge of all manner of debts, 
 rents, sum and sums of money whatsoever, due, or hereafter 
 to become due, payable, or accruing upon or by reason of 
 
 kg 
 
180 APPENDIX. 
 
 any mortgage, bond, specialty, bills, note, book account, pro- 
 mise, assumption, or any other contract whatsoever, accord" 
 ing to the sum which the said bills respectively entitles the 
 bearer thereof to receive, each dollar therein expressed to be 
 taken and esteemed at the rate or value of seven shillings and 
 sixpence, and of equal value in the payment of such debts 
 with a Spanish milled silver dollar, weighing seventeen penny- 
 weights and six grains, any clause, proviso, or device, in any 
 bond, note, or other instrument of writing, to the contrary 
 whereof in anywise notwithstanding. 
 
 And be it further enacted, by the authority aforesaid, That 
 the Bilk of Credit emitted and made current by the resolves 
 of the late Assemblies of Pennsylvania, and the Bills of Credit 
 emitted on loan by an Act of Assembly of the 26th of February, 
 1773, shall in like manner be, and is hereby declared to be a 
 legal tender ; and shall be taken and received in payment and 
 discharge of all manner of debts whatsoever as aforesaid, ac- 
 cording to the sums specified in said bills ; and if any person or 
 persons, from and after the said sixth day of February next shall 
 refuse to receive any of the said Bills of Credit, when properly 
 tendered in payment of any debt or demand whatsoever, pro- 
 vided the whole of such debt or demand be tendered, he, she, 
 or they, so refusing, shall be for ever barred from suing for 
 or recovering the same in any court of this state, and if any suit 
 or suits shall be commenced for such debt or demand, after 
 tender and refusal as aforesaid, the defendant may plead pay-* 
 ment, and give this act and the special matter in evidence. 
 
 Provided, nevertheless, and be it further enacted by the 
 authority aforesaid, That after any such tender as aforesaid 
 being made, if the creditor to whom such money is tendered, 
 shall within four days next thereafter make demand of the 
 said debt before two creditable witnesses, it shall and may be 
 lawful for such creditor to sue for and recover such debt ; but 
 
APPENDIX. 181 
 
 shall recover no interest on said debt, after such tender or 
 costs on his action. 
 
 And be it further enacted, by the authority aforesaid, That 
 where any such tender shall, as aforesaid, be made, in order 
 to pay any debt or demand of money due and payable of any 
 kind whatsoever, and refused, and not demanded within four 
 days after such tender as aforesaid, then, and in such case, the 
 said debt or money due or payable, mentioned in any mort- 
 gage, bond, specialty, bill, or note, book account, or any 
 other debt whatsoever, is hereby declared to be forfeited, the 
 one-third part thereof to the debtor, and the other two-third 
 parts to this state: and every such debtor who shall make 
 such tender is hereby directed and required to pay the two- 
 third parts of every debt so forfeited, into the hands of the 
 Treasurer of the County appointed to receive the state tax, 
 (whose receipt shall be a sufficient discharge to such debtor 
 for the monies by this act forfeited) retaining the one-third 
 part in his, her, or their own hands. 
 
 And whereas, divers persons in this state, (taking advantage 
 of the necessitous) when they put money on loan, or in other 
 contracts, have bargained with, and bound the borrower or 
 purchaser to pay the debt in sterling money of Great Britain, 
 according as the exchange might be between the cities of Phi- 
 ladelphia and London. And as the intercourse between the 
 said cities is now so far obstructed that no such exchange can 
 be ascertained, and except some rule is settled by law, the 
 debtor cannot pay his debt, though he be so disposed and 
 has in his possession Bills of Credit for that purpose, for re- 
 medy whereof, Be it enacted, that where any person stands 
 bound to pay any debt in sterling money aforesaid, ac- 
 cording to the exchange as aforesaid, such creditor shall re- 
 ceive Continental Bills of Credit, or Bills of Credit of this 
 state, in payment and discharge of any such debt, at the rate 
 
.- : i.:-- : 
 
 ac- 
 
- .- _ - _ 
 
184 APPENDIX. 
 
 aforesaid, it shall and may be lawful for every such debtor to 
 sue for and recover, of and from such creditor, his or her heirs, 
 executors, or administrators, a sum of money equal to the sum 
 for which such mortgage, bond, specialty, bill, or note, was 
 given, together with interest and costs of suit. 
 
 And be it further enacted by the authority aforesaid, That 
 in every case where any title deed or deeds, have been, or 
 shall be, lodged or deposited in the hands of any person or 
 persons to whom any mortgage has been or may be made, 
 and the money mentioned herein forfeited, as by this act de- 
 clared, and such mortgager, his or her heirs, executors, or ad- 
 ministrators, or the owners of the lands and tenements men- 
 tioned in such deeds, shall demand the same and be refused, 
 it shall and may be lawful for such mortgager, his or her heirs, 
 executors, or administrators, or such owner of the lands, to sue 
 for and recover of such mortgagee, his or her heirs, executors, 
 or administrators, or assigns, a sum of money not exceeding 
 double the value of the lands and tenements mentioned in 
 such deeds ; and if any such person or persons as aforesaid, 
 being sued, shall, at any time before the determination of such 
 suit, deliver up to the plaintiff, or lodge such deed or deeds, 
 whole and undefaced, in the Prothonotary's Office of the 
 court wherein such action shall be, and pay the costs of suit, 
 and a sum as the court shall order, not exceeding twenty 
 pounds, to the prosecutor for his trouble, in that case such 
 action shall cease. 
 
 And in all cases where tender shall be made as aforesaid, 
 and the person to whom such tender may be made, shall after- 
 ' wards assign, transfer, or set over, any mortgage, bond, spe- 
 cialty, bill, or note, every such person shall be, and is hereby 
 declared to be, guilty of fraud, and forfeit and pay to the per- 
 son to whom such assignment as aforesaid may be made, or 
 
APPENDIX. 185 
 
 to his or her heirs, executors, or administrators, a sum equal 
 to double the sum mentioned in such mortgage, bond, spe- 
 ciality, bill, or note, so assigned or transferred, to be reco- 
 vered by an action of debt in any court of record in this 
 state. 
 
 And be it further enacted by the authority aforesaid, that if 
 any person whatsoever shall, after the sixth day of February 
 next aforesaid, refuse to take and receive any of the bills of 
 credit aforesaid, in payment for any live stock, necessary of 
 life, commodity, manufacture, article, or goods whatsoever, 
 which he or she shall sell, or expose to sale, and offer the 
 same for a less price, or smaller sum of money, to be paid in 
 gold or silver, or in any one sort of the Bills of Credit, or 
 other current money passing in payment of debts in this state, 
 than in the Bills of Credit emitted by the Continental Congress, 
 or in Bills of Credit emitted by resolves of assembly aforesaid, 
 every such person shall forfeit to the use of the state a sum of 
 money equal to, or as much as, the sum he or she had refused 
 to take for the commodity so sold, or that he or she had asked 
 for or rated such stock, necessary of life, commodity, manu- 
 facture, article, or goods at; and on proof thereof being 
 made by two creditable witnesses before any one of the justices 
 of the peace of the county, such justice shall (if such sum 
 of money as aforesaid forfeited shall not exceed Five Pounds,) 
 issue his precept in the name of the state in the nature of a sum- 
 mons, or capias, as the case may be, and prosecute and re- 
 cover the sum so proved to be forfeited, in the manner pre- 
 scribed and directed by the laws for recovery of debts not 
 exceeding five pounds, together with costs of suit. And if 
 any such forfeiture as aforesaid shall exceed five pounds, the 
 justice before whom any such proof shall be made, shall, 
 within six weeks, send an account in writing to the Commis- 
 sioners of the county, or one of them, containing the names 
 
APPENDIX. 
 
 of the witnesses proving the same, and the person who, and 
 the sum that he or she has so forfeited. And the said Commis- 
 sioners are hereby enjoined arid required, as soon as may be, 
 to sue for and recover such sum or sums of money in the same 
 manner, and whefl so recovered, pay the same to the same 
 persons as is in this act directed in cases of refusal on tender. 
 And when any justice shall recover any money, so as afore- 
 said forfeited, he shall pay the same to the treasurer afore- 
 said, who shall give his receipt for the same. And every 
 justice of the peace in this state shall, once in each year, 
 send an account to the said Commissioners, of the sum or 
 sums of money he shall have recovered, so as aforesaid for- 
 feited, which the Commissioners shall make fair entries of, 
 and report the same to the Committee of Assembly aforesaid, 
 for the time being. And the fees or allowance to the said 
 Commissioners, for the services and duties by this act re- 
 quired, shall be the same as they have a right by law to take and 
 receive in other cases. And if any of the said Commissioners 
 shall refuse or neglect to do and perform his or their duty, by 
 this act directed and required, such Commissioners respectively 
 shall be fined in a sum of money, not exceeding ten pounds, 
 by the next Court of Quarter Sessions, and another or others 
 appointed in his or their stead by the said court. Every 
 such fine to be for the use of the state, and be recovered as 
 fines are directed to be recovered by the act for raising county 
 rates and levies. 
 
 And be it further enacted, by the authority aforesaid, That 
 if any person or persons, from and after the publication 
 of this Act, shall counterfeit or alter any of the afore- 
 said Bills of Credit, with design to increase the value of such 
 bill, by thite act made a legal tender, or any of the Bills of 
 Credit made current by any one of the Assemblies, Conven- 
 tions, or Coogresses of any of the United States of North 
 
Of T 
 
 APPENDl. tffclV- 187 
 
 America, or utter any of said Bills of Credit^ so counterfeit- 
 ed or altered, knowing them to be such, and being duly con- 
 victed thereof, shall suffer all the pains and penalties, fines 
 and forfeitures, which by the late laws of Pennsylvania could 
 or might have been inflicted on any person or persons so 
 offending. 
 
APPENDIX. 
 
 No. II. 
 
 Feneris, 4 die Decembris, 1696. 
 
 THE House being acquainted, that the Governor and Di- 
 rectors of the Bank of England attended according to order : 
 
 They were called in ; and at the bar, presented to the House 
 two papers ; one intitled, Stock for the Honourable the Go- 
 vernor and Company of the Bank of England ; the other, A 
 particular List of Tallies on Parliamentary Funds ; inserted in 
 the said account of stock ; 
 
 And then withdrew. 
 
 And the said papers were read, and are as follow, viz. 
 
 Stock for the Honourable the Governor and Company of the 
 Bank of England. 
 
 Dr. Cr. 
 
 To sundry Persons ") <. . d. By Tallies on seve-"\ $. d. 
 
 for sealed Bank ^893,800 00 ral Parliamen- i 
 
 Bills standing out J tary Funds, as V -\ <TCM vstc. IKK. 
 
 To ditto due on 7 per List thereof f 1 ' 784 ' 576 16 5 
 
 Notes for running >764, 196 10 6 annexed with In- 1 
 
 Cash ... .3 terest . . .} 
 
 To Monies borrow- ) gnn ftn _ ft By Half a Year's 
 
 ed in Holland 300001 
 
 To Interest - ft nno ftrt 
 
 upon Bank Bills ' + we rt rt -.onnnM/ .r > 
 
 standing out 
 
 ow -Unnnnn n n By Half a Year'sN 
 ^ J 300,000 J Deficiency of 1 
 
 due") the Fund off 
 
 ills J 17,876 100,000/. per r 
 . . j Ann. in the 2d I 
 
 Year ... .7 
 
 Balance . . 125,315 2 11 By Mortgages, 
 
 Pawns, other 
 Securities, and 
 Cash . 
 
 ,2,101,187 13 5 ^2,101,187 13 5 
 
 London, November 10, 1696. 
 
 Examined by order of the Court of Directors, 
 Per.Tno. MERCER, Accountant. 
 
APPENDIX, 189 
 
 The said List of Tallies on Parliamentary Funds. 
 
 s. d. 
 
 On the 4th year's Land Tax 431,924 4 
 
 On continued Impositions on East India goods, 94,960 12 3 
 
 On the 4th year's Custom 20015 9 
 
 On the 3d year's Land Tax 122,029 4 7 
 
 On the Post-Office Security 60,629 1 8 
 
 On the 2d year's Customs 109,014 13 8 
 
 On Wines, Vinegar, &c 184,82318 3 
 
 On the Coal Act 174,775 19 6 
 
 On the 3d year's Customs ..... 130,71313 1 
 
 On Marriages, &c 431 12 
 
 On Joint Stocks 2,884 1 1 
 
 On | Excise 24,667 19 2 
 
 On the Reversionary Annuities .... 141,865 16 
 
 On the Salt Act 250,000 O 
 
 On Paper and Parchment 11,310 4 6 
 
 Interest grown due thereon 44,345 4 5 
 
 '1,784,576 16 5 
 
 London, November 10th, 1696. 
 
 Examined by order of the Court of Directors, 
 Per THO. MERCER, Accountant. 
 
 Ordered, That the said papers be referred to the consider- 
 ation of the Committee of the whole House ; who are to con- 
 sider further of that part of His Majesty's Speech which re- 
 lates to the credit of the nation; and of the supply to be 
 granted to His Majesty, for making good the deficiencies of 
 parliamentary funds. 
 
 Ordered, That the Governor and Directors of the Bank of 
 England do attend the said Committee. 
 
1QO APPENDIX. 
 
 Resolved, That this House will, to-morrow morning, re- 
 solve itself into the said Committee of the whole House. 
 
 Jovis 10* die Decembris, 1696. , 
 
 Sir John Bolles reported from the Committee appointed 
 to inspect the books of the Bank of England, and examine 
 into their accounts given into the House, that they had in- 
 spected the books, and examined into their accounts accord- 
 ingly ; and had directed him to report the matter thereof to 
 the House ; which he read in his place ; and afterwards deli- 
 vered in at the Clerk's table : where the same was read ; and 
 is as followeth, viz. 
 
 That as to the item of c893,SOO. the first article on the 
 debit side in the said account, it appeared by the books of the 
 said Bank, to be the balance of a debt due to sundry persons 
 for sealed Bank Bills standing out : 
 
 - That as to the item of .764,196. 105. 6d. it appeared tp the 
 Committee, that .68,669- 65. Id. part of that sum hath been 
 issued out in notes, called Specie Notes ; which carry inte- 
 rest, if for <20. or upwards, at the rate of <Q. per cent ; of 
 which Specie Notes there were reckoned to be about one-third 
 under c20. which pay no interest; and that ,695,527. 45. 5d. 
 remainder of the <?64,196. 105. 6d. was issued out by notes, 
 for running cash, without interest : 
 
 That as to the item of o300,000, it appeared to be the 
 balance of a general debt, contracted, and remaining due to 
 the States of Holland ; and that, for the security of the re- 
 payment thereof, they say, the Dutch Ambassador hath in hi* 
 custody Tallies belonging to the Bank. 
 
 That as to the item of <, 17,876, it appeared to be a sum 
 computed to be due for interest upon Bank Bills standing out ; 
 
APPENDIX. 191 
 
 but that there could be no exact certainty therein, till the 
 bills themselves came in, for the better ascertaining the same. 
 
 That as to the item of cl,784,576. 16s. 5d. the first article 
 on the credit side in the said account of Tallies on several Par- 
 liamentary Funds ; 
 
 There appeared to be entered in their s. d. 
 
 books, tallies for the sum of .... 1,520,407 13 9 
 
 And they produced orders and tallies 
 which were not entered in their books 
 for the sum of 219,S23 18 3 
 
 And for interest from the 1st of April 
 to the 1st of November, 1696, not en- 
 tered in their books, for 44,345 4 5 
 
 Which said sums make up the item of cl,784,576 16 5 
 
 But it did not appear by their books, after what sums the 
 said Tallies were payable upon each respective fund. 
 
 That as to the item of ooO,000. for half a year's deficiency 
 on the fund of < 100,000. per ann. the same appeared so by 
 their books : 
 
 That as to the item of o266,6lO. 17s. upon mortgages, 
 pawns, other securities, and cash, it appeared to consist of the 
 
 several articles following: 
 
 s. d. 
 
 By cash per balance book . . . . . 35,664 1 10 
 
 By Goldsmith's Notes as per ditto . . . 9,636 14 1 
 By private loans, mortgages, &c. as by the 
 
 abstract of the ledger . . . . . . 42,160 8 
 
 By tickets on the million adventure . . 1,320 
 
 By bills discounted not yet received . . 16,746 16 4 
 
 By Chamberlain Certificates discounted . 1,644 10 
 
 Carried over 107,172 2 11 
 
192 APPENDIX. 
 
 < s. d. 
 Brought over 107,172 2 11 
 
 By money due from Holland; entered 
 here, because the tallies deposited are so 
 much short of the credit the states have 
 of 300,000 30,176 1 9 
 
 By cash remitted, more than drawn ; in 
 regard there is so much due to the Gover- 
 nor and Company, after the credit of the 
 States of Holland is satisfied 27,507 12 4 
 
 Unpaid on account of the stock of 
 1 ,200,000, for which bonds are given, and 
 may be called in; therefore reckoned as 
 cash 101,755 
 
 o266,6 10 17 
 
 Ordered, That the consideration of the said report be re- 
 ferred to the Committee of the whole House ; who are to con- 
 sider of that part of His Majesty's Speech which relates to the 
 Credit of the Nation. 
 
APPENDIX. 
 No. III. 
 
 Report of the Committee of the House of Commons, 
 November 1797. 
 
 THE Committee of Secrecy appointed to inquire 
 whether it may be expedient further to continue 
 the restriction contained in two acts, made in 
 the last Session of Parliament, respecting pay- 
 ments in cash by the Bank, have inquired 
 accordingly, and agreed upon the following 
 report, viz. 
 
 Your Committee have, in the first place, examined the total 
 amount of out-standing demands on the Bank of England, and 
 of the funds for discharging the same; and find, from the exa- 
 mination of the Governor and Deputy Governor of the Bank, 
 and the documents produced by them, that the total amount 
 of outstanding demands on the Bank was, on the 1 1 th day of 
 this instant November, <l 7,578,9 10, and that the total 
 amount of the funds for discharging the same (without 
 including the permanent debt due from Government of 
 1 1,686,800, which bears an interest of three per cent.) was, 
 on the same day <<2, 1,4 18, 460, leaving a balance of surplus 
 in favour of the Bank (exclusive of the above-mentioned debt 
 from Government) of o3,839,550. 
 
 Your Committee next proceeded to examine the principal 
 articles of which the above-mentioned sum of <2 1,4 18,460, 
 being the credit side of the account, is made up, with a view 
 
194 APPENDIX. 
 
 of ascertaining how far the Bank might be enabled to resume 
 its accustomed payments in cash, in case the restriction at 
 present subsisting should be removed : and your Committee 
 find, that the advances to Government have, on the one hand 
 been so much reduced since the 25th of February last, as to 
 amount, on the said llth day of this instant November, to 
 no more than the sum of o4,258,140; while on the other 
 hand, the cash and bullion in the Bank have increased to an 
 amount more than five times the value of that at which they 
 stood on the same 25th of February last, and much above 
 that at which they have stood at any time since the beginning 
 of September, 1795. 
 
 Your Committee further find, that the course of exchange 
 with Hamburgh is, at present, unusually favourable to this 
 country, and that, from the situation of our trade, there is good 
 reason to imagine it will so continue, unless political circum- 
 stances should occur to affect it. 
 
 Your Committee next proceeded to examine the Governor 
 and Deputy Governor of the Bank, as to their opinion of the 
 inconvenience which may have arisen from the restriction im- 
 posed on the Bank from making payment in cash, and of the 
 expediency of continuing such restriction ; and your Committee 
 find that they are not aware of any such inconvenience, and 
 that they are supported in that idea, by knowing that the 
 bankers and traders in London, who- had a right by the Act 
 of Parliament to demand three-fourths of any deposit in cash 
 which they had made in the Bank, of 0^500 or upwards, have 
 only claimed about one-sixteenth ; and your Committee find 
 that the Court of Directors of the Bank, did, on the 26th of 
 October, 1797, come to a resolution, a copy of which is 
 Subjoined to this report. 
 
 Your Committee having further examined the Governor 
 and Deputy Governor, as to what may be meant by the poli- 
 
APPENDIX. 195 
 
 tical circumstances mentioned in that resolution, find, that 
 they understand by them, the state of hostility in which the 
 nation is still involved, and particularly such apprehensions as 
 may be entertained of invasion, either in Ireland or this coun- 
 try, together with the possibility there may be of advances 
 being to be made from this country to Ireland ; and that from 
 those circumstances so explained, and from the nature of the 
 war and the avowed purpose of the enemy to attack this 
 country by means of its public credit, and to distress it in its 
 financial operations, they are led to think that it wjll be ex- 
 pedient to continue the restriction now subsisting, with the 
 reserve for partial issues of cash, at the discretion of the Bank, 
 of the nature of that contained in the present Acts ; and that 
 it may be so continued without injury to the credit of the 
 Bank, and with advantage to the nation. 
 
 Your Committee, therefore, having taken into consideration 
 the general situation of the country, are of opinion, that not- 
 withstanding the affairs of the Bank, both with respect to the 
 general balance of its accounts, and its capacity of making 
 payments in specie, are in such a state that it might with 
 safety resume its accustomed functions under a different state 
 of public affairs ; yet that it will be expedient to continue 
 the restriction now subsisting OH such payments, for such 
 time, and under such limitations, as to the wisdom of Parlia- 
 ment may seem fit. 
 
 Copy of a resolution of the Court of Directors of the Bank : 
 
 " At a Court of Directors at the Bank, on Thursday, the 
 26th October, 1797. 
 
 Resolved, 
 
 THAT it is the opinion of this Court, That the Governor 
 and Company of the Bank of England are enabled to issue 
 
196 APPENDIX. 
 
 specie, in any msitjj*er that may be deemed necessary for the 
 accommodation, of the public ; and the Court have no hesita- 
 tion to .declare, -that the affairs of the Bank are in such _ a state 
 that it can with safety resume its accustomed functions, if the 
 political circumstances of the country $d not render it in- 
 expedient : But the Directors deeming it foreign to their pro- 
 viuce to judge of these points, wish to submit to the wisdom 
 of Parliament, whether, as it has been once judged proper to 
 lay a restriction on the payments of the Bank in cash, it may, 
 or may not, be prudent to continue the same." 
 
 
 F I N I S 
 
 Printed by J. M'CREERY, 
 
 Black-Horse-Court, London. 
 
PRACTICAL ' 
 OBSERVATIONS 
 
 ON TH 
 
 REPORT 
 
 OF THE 
 
 BULLION-COMMITTEE. 
 
Printed by Galabin and Marchant, [ngrain-Court, London. 
 
PRACTICAL 
 OBSERVATIONS 
 
 ON THE 
 
 REPORT 
 
 OF THE 
 
 BULLION-COMMITTEE 
 
 CHARLES BOSANQUET, ESQ. 
 
 LONDON : 
 
 PEINTEP FOR J. M. RICHARDSON, 23, CORNHILL, 
 OPPOSITE THE ROYAL EXCHANGE. 
 
 1810. 
 
PRACTICAL OBSERVATIONS, 
 
 " REASONING on things by figures is the 
 way," says Sir William Davenant, " to come to 
 sure conclusions." To reason in this mode, 
 exclusively, is the object of the present work. 
 The things to be reasoned upon are the opinions 
 of the Bullion-Committee ; and the figures to 
 be employed are chiefly those contained in the 
 Appendix to its Report Abstract reasoning is 
 foreign to my purpose; my observations will 
 be founded wholly on facts, and these will be 
 introduced with such details only as are ne- 
 cessary to render their application intelligible 
 to those who have not the Report, with its Ap- 
 pendix, immediately before them. 
 
 In the early part of 1 809, the foreign ex- 
 changes experienced a rapid and unusual de- 
 pression; at the same time, the price of gold- 
 
bullion rose in an equal degree, and the varia- 
 tion, when at the highest, in October and No- 
 vember, amounted to nearly 20 per cent. 
 
 The public attention was drawn to this sub- 
 ject by a pamphlet, published late in 1809, 
 (the substance of which had previously appeared 
 in the Morning Chronicle,) entitled, " The high 
 Price of Bullion a Proof of the Depreciation 
 of Bank-Notes." Tirb pamphlet, by Mr. Ricar- 
 do, is wholly theoretical, and, so far, unsatisfac- 
 tory ;- because the theories are not brought 
 to the test of experiment. Other publications 
 followed, oti the same subject, but I particularly 
 allude to Mr. Ri car do's work, not only as hav- 
 ing been the immediate cause, of the inquiry 
 which has since taken place, under the autho- 
 rity of the house of commons, but as a syllabus of 
 the Report which has been presented by the Com- 
 mittee: and I refer, directly, also to a pamphlet 
 published by Mr. Mushett, of t"he Mint, 'be- 
 cause the tables annexed to it are essentially 
 useful to the inquiry, and are not found, at 
 least not in so convenient a shape, in the Ap- 
 pendix to the Report. 
 
 At the commencement of "the last session of 
 Parliament, a select Committee of the House 
 of Commons was appointed to " Inquire into 
 the cause of the high price of bullion, and 'to 
 take into consideration the state of the circu- 
 
lating medium, and of the exchanges between 
 Great Britain and foreign parts." The Com- 
 mittee sat upwards of three months, and, at the 
 latter end of the session, presented a Report, 
 with a copious Appendix of evidence and do- 
 cuments, which supplies, in great measure, 
 the deficiency complained of in Mr. Ricardo's 
 work. 
 
 The Report is written in a tone of authority 
 which scorns doubt and spurns at hesitation ; 
 it delivers, " as most clear," opinions tvhich this 
 Committee has formed most " decidedly," on 
 topics the most speculative; and treats as 
 vague and unsatisfactory the results of practice 
 and the dictates of experience : a Report so 
 framed, and emanating from such authority, is 
 scarcely tangible by argument ; but as omnipo- 
 tence itself finds its limit in contradiction, SQ 
 must authority itself submit to the higher au- 
 thority of fact, 
 
 A rigid inquiry into the accuracy of opinions 
 so promulgated, on a subject of vital import- 
 ance to the national interests, might, under any 
 circumstances, be justified; but there is more 
 than usual cause for inquiry in the present 
 instance, because the opinions of the Com- 
 mittee are altogether at variance with those of 
 the persons selected for examination, and who 
 must be presumed to J*ave been, at least in the 
 
4 
 
 judgement of the Committee, most conversant 
 with the subjects brought before them ; there 
 are, therefore, two opposite opinions before 
 Parliament, on the influence, for instance, of the 
 greater or less amount of bank-notes in circu- 
 lation, on the course of exchange, and the 
 price of bullion ; the one theoretical, forming 
 the substance of the Report, the other practical, 
 and pervading the Appendix. 
 
 Under these circumstances, what opinion 
 shall the public adopt? what course is Parlia- 
 ment to hold? "When a theorem is proposed 
 to a mathematician, the first thing he does with 
 it," says Paley, " is to try it on a simple case ; 
 if it produce a false result he is sure there 
 must be some error in the demonstration." 
 The public must proceed in this way with 
 the Report, and submit its theories to the 
 test of fact. 
 
 The question referred to the consideration of 
 the Committee, viz. the cause of the high 
 price of bullion, meets no direct answer in the 
 Report; but the Committee has offered a 
 variety of opinions, and laid down several axia, 
 (the truth of which I am presently to ascertain,) 
 from which they deduce the inference, that the 
 present high price of bullion and low rates of 
 exchange are caused by an excess in the a- 
 mount, and consequent depreciation in the value? 
 
of bank-notes. The nature of the argument, on 
 which this opinion is founded, cannot be more 
 concisely or satisfactorily stated than by di- 
 rect reference to the passages in the Report, 
 and the corresponding passages in the other publi- 
 cations I have named, applicable to this part of 
 the subject. This notion was first suggested by 
 Mr. Ricardo, who states, " That Parliament, 
 by restricting the Bank from paying in specie, 
 have enabled the conductors of that concern 
 to increase or decrease, at pleasure, the quantity 
 and amount of their notes. (1st Ed. p. 23.) 
 Mr. Mushett says, " There can now exist no 
 possible obstacle to the increase of their notes 
 but what their own prudence suggests." (p. 41.) 
 And the Committee state, expressly, that " The 
 suspension of cash-payments has had the effect 
 of committing into the hands of the Directors 
 of the Bank of England, to be exercised by 
 their sole discretion, the important charge of 
 supplying the country with that quantity of 
 circulating medium, which is exactly propor- 
 tioned to the wants and occasions of the public." 
 (Rep. p. 24.) 
 
 In the exercise of this power the Bank, it is 
 assumed, has not been sufficiently guarded ; 
 and the consequence is, according to Mr. Ri- 
 cardo, " That the paper-currency of this country 
 has long been, and now is, (Dec. 1, 1809,) afe a 
 
considerable discount, proceeding from a su- 
 perabundance of its quantity. Mr. Mushett 
 says: "Since the Bank- Restriction-Bill took 
 place it has been generally supposed, that the 
 excessive quantity of bank-notes in circulation 
 has caused a considerable depreciation in their 
 value :" (p. 40.) and the Committee has formed 
 an opinion " that there is, at present, an excess 
 in the present circulation of this country ;" and 
 " that the excess is to be ascribed to the want 
 of a sufficient check and controul in the issues 
 of paper from the Bank of England." (p. SO.) 
 
 And as these writers agree in the fact of 
 excess, or superabundance, of the paper-cur* 
 rency of this country, so do they also concur 
 in the sign of its existence : " The sign of 
 this excess and depreciation has been a per- 
 manently unfavourable exchange," says Mr. 
 Mushett. " The exchange," in the opinion of 
 Mr. Ricardo, " will form a tolerably accurate 
 criterion, by which we may judge of the debase- 
 ment of the currency, proceeding either from a 
 clipped coinage or a depreciated paper-money ; 
 because, whilst paper can be exchanged for 
 undebased coin, the exchange can never be 
 more above, or more below, par than the ex- 
 penses of transporting the precious metals:" 
 (p. 18.) and the Committee report to the house 
 their " most ckar opinion^ that jso long as the 
 
7 
 
 suspension of cash-payments is permitted to 
 subsist, the price of Gold Bullion, and the gen- 
 neral course of exchange with foreign coun* 
 tries, taken for any considerable period of time, 
 form the best general criterion from which any 
 inference can be drawn, as to the sufficiency 
 or excess of paper-currency in circulation," (Rep. 
 j>age 2 1,) and this opinion appears to be founded 
 on the principle, which the Committee assumes 
 to be indisputable, " that the difference of ex- 
 change, resulting from the state of trade 
 and payments between two countries, is limited 
 by the expense of conveying and insuring the 
 precious metals from one country to tihe other." 
 
 (P- M) 
 
 On these points there seems no difference 
 
 whatever in the three Treatises ; the coincidence 
 of opinion, and even of expression, is as close 
 as possible, and the Committee appears to speak 
 the common sentiment of those who consider 
 the paper-currency to be excessive, .when they 
 sum up their previously-expressed opinions in 
 these words : " that there is at ipresent an excess 
 in the paper-circulation of this country, of which 
 the most unequivocal symptom is the very high 
 price of Bullion, and, next to that, the low state 
 of the continental exchanges : that this excess 
 is -to be ascribed to the want of a sufficient cheek 
 and controul on the issues of the paper of tbe 
 
8 
 
 Bank of England, and originally to the sus- 
 pension of cash-payments, which removed the 
 natural and true controul." (page 30.) 
 
 My purpose is to ascertain the sufficiency of 
 the grounds on which these opinions are found- 
 ed, the truth in point of fact of the several 
 propositions laid down by the Committee. 
 
 1st. That the variations of the exchange with 
 foreign countries can never, for any considera- 
 ble time, exceed the expense of transporting 
 and insuring the precious metals from one coun- 
 try to the other. 
 
 2d. That the price of Gold Bullion can never 
 exceed the mint-price, unless the currency, 
 in which it is paid, is depreciated below the 
 value of gold. 
 
 3d. That, so far as any inference is to be 
 drawn from Custom-House returns of exports 
 and imports, the state of the exchanges ought 
 to be peculiarly favourable. 
 
 4th. That the Bank, during the restriction, 
 possesses exclusively the power of limiting the 
 circulation of bank-notes. 
 
 5th. That the circulation of country bank- 
 notes depends upon; and is proportionate to, 
 the issues from the Bank. 
 
 Lastly. That the paper-currency is now ex- 
 cessive, and depreciated in comparison with 
 gold, and that the high price of Bullion and low 
 
fates of exchange are the consequences as 
 well as the sign of such depreciation. 
 
 Before I attempt to investigate the truth of 
 these propositions, by reference to the docu- 
 ments with which the Report has furnished 
 me, it may be convenient to ascertain what, 
 on a full admission of all the arguments and 
 reasonings of the Committee, is the extent of 
 the evil they point out, what the present state 
 of the national currency, as resulting from the 
 criterion established in the Report. 
 
 There is annexed to Mr. Mushett's pamphlet a ta- 
 ble, shewing, 1st, the rate of exchange with Ham- 
 bro' and Paris,for 50 years past, and how much it 
 has been, in each instance, above or below par. 
 
 2d. The price of gold in London, and a com- 
 parison of this price with the English standard, 
 or mint price. 
 
 3 d. The amount of bank-notes in circulation, 
 and the rate of their assumed depreciation, by 
 a comparison with the price of gold. 
 
 On reference to these tables it appears that, 
 for about two years antecedently to the suspension 
 of cash- payments, the exchange had been, in 
 some degree, unfavourable to England; that, at 
 the immediate period of the suspension, and for 
 two years and a half succeeding that measure, 
 from Nov. 1796 to July 1799, the exchange 
 was very greatly in favour of England, and gold 
 
10 
 
 at the mint-price. That, between the end of 
 1799 and 1802, the exchange was against Lon- 
 doh and the price of gold considerably above 
 the mint-price. That, from the end of 1802 
 to the end of 18 8, the exchanges were for six 
 years considerably in favour of Great Britain, 
 and the price of gold stationary, at 2| per cent, 
 above the mint price. * Subsequently to 
 the end of 1808 the exchanges have fallen, 
 the price of gold has risen as before stated, and 
 these circumstances have led to the investiga- 
 tion of the Committee. It results from this 
 reference, that, admitting the criterion established 
 by the Report, as the test of an excess of 
 paper, the grievance complained of is of recent 
 date, that it had no existence for six years pre- 
 viously to 1809, and' that the circulation of 
 bank-notes during this period did not therefore 
 exceed the natural wants of the public and was 
 not excessive. This inference appears undenia- 
 ble. I do not mean to infer that 17 or 18 milli- 
 ons of bank-notes then in circulation may not" 
 be too much, under other circumstances ; but I 
 conclude, that Mr. Ricardo's opinion, that the 
 
 * It ma'y be said, that even then the price of gold was above 
 the mint-price; but it appears by the questions of the Committee 
 and Mr. Goldsmid's evidence that the supply of gold was 
 ver> small, and the price of \ per oz, was fixed by the Bank 
 of England, whence ." the demand exceeded all competition." 
 
11 
 
 paper-currency had long been excessive, when he 
 wrote in 1809, was incorrect, that Mr. Mushett 
 had not referred to his tables when he stated 
 that the sign of this 'excess has been a perma- 
 nently unfavourable exchange. 
 
 It results equally from this theory, that du- 
 ring the year 1 809, and subsequently, the circu- 
 lation of paper has been excessive, because both 
 the exchanges and price of bullion indicate 
 such excess, During a part of this period* 
 from July to Nov. 1809, the loss on the ex- 
 change amounted to nearly 20 per cent. We 
 learn, however, from the Report, that, in the 
 spring of 1810, the exchanges experienced a 
 gradual improvement, that on Hamburgh rose 
 from 28, the lowest rate, to 31, that on Ams- 
 terdam from 30 to 33 : 5, that on Paris 
 from 19 ; 6 to 21: 11. "The exchange on 
 Hamburgh appearing (as stated in the Report) 
 to be 9 per cent, that on Amsterdam 7 per 
 cent, and that on Paris 14 per cent, against 
 this country. " These calculations do not ex- 
 actly agree with those of Mr. Mushett ; admit- 
 ting, however, the correctness of the state- 
 ment by the Committee, a small proportion 
 only of the loss thus experienced on the 
 exchanges with the continent is to be ascribed, 
 according to the opinion of the Committee, to, )C 
 the depreciation of our currency. 
 
It is a principle laid down by the Committee, 
 and which they consider to have been long 
 settled and understood, " That the difference 
 of exchange resulting from the state of 
 trade and payments between two countries is 
 limited by the expense of conveying and insuring 
 the precious metals from one country to the 
 other." It will be equally admitted that, in 
 the event of an unfavourable balance of pay- 
 ments, the depression of the exchange must ne- 
 cessarily attain this limit, before the balance 
 can be adjusted by the exportation of gold. 
 
 The Committee endeavoured to ascertain the 
 extent of this limit, that is the expense of send- 
 ing bullion abroad, under present circum- 
 stances, and they come to the conclusion. 
 " that this expense in the last half of the last 
 year (1809) di4 not exceed 7 per cent. and( 
 they observe that an expense to this extent 
 does not afford an adequate explanation of a 
 fall in the exchanges so great as from 16 to 20 
 per cent, below par. " The increased cost/" 
 they add, u of such remittance would explain, 
 at those moments when the risk was greatest, 
 a fall of something more than 7 per cent, 
 in the exchange with Hamburgh and Holland, 
 and a fall stilt greater perhaps in the exchange 
 with Paris ; but the rest of the fall, which has 
 
15 
 
 actually taken place, remains to be explained 
 in some other manner." 
 
 The expense of sending gold abroad was 
 in no degree less in the spring of 1810 than 
 in the autumn of 1809; and it follows, there- 
 fore, that, according to the statements of the 
 committee, the loss on the Dutch exchange, 
 in the months of March and April last, was 
 exactly equal to the expense of sending gold 
 as a remittance ; on that on Hambrugh 2 per 
 cent, greater ; and that, on the exchange with 
 Paris, it was undefined, because the expense 
 of sending gold to Paris was not ascertained. 
 According to Mr. Mushett's calculations of the 
 par between London and Paris, the loss on 
 the French exchange was 2 per cent, more 
 than the expense of sending gold to Holland : 
 As this was the state of things for some months 
 prior to the date of the Report, and at 
 the period when it was presented, it will, 
 perhaps, with some, be a subject of regret 
 that the passage referring to the extreme of 
 the lowest depression of the exchange was 
 not expunged, as the event had proved it to 
 be one of those temporary effects which the 
 Committee had previously determined to dis- 
 regard. 
 
 Whether, however, the difference, which re- 
 mains to be accounted for in some other manner 
 
14 
 
 be 2 per cent, or 1 1 per cent, it is not necessary 
 to travel out of the Report to assign a cause 
 for it, without recurring to depreciation : " Re- 
 ferring to the evidence of a continental merchant, 
 on whose opinion the Committee appears to 
 place much reliance, they state : " That poli- 
 tical events, operating upon the state of trade, 
 may often have contributed as well to the 
 rise as to the fall of the exchange ; and, in 
 particular, that the first remarkable depression, 
 in 1809, is to be ascribed, as has been stated 
 in the evidence already quoted, to commercial 
 events, arising out of the occupation of the 
 north of Germany by the troops of the 
 French Emperor; the evil has been, that 
 the exchange, when fallen, has not had the 
 full means of recovery, under the existing 
 system :" these means are explained to be, 
 " the clandestine transmission of guineas, which 
 improved it for the moment by serving as a 
 
 remittance." 
 
 Thus, then, it appears, that, on a full ad- 
 mission of all the principles adopted by the 
 Committee, and of their application to the 
 present case, the foreign exchanges were, at 
 the time when the Report was presented, 
 and for three months prior thereto, about 2 per 
 cent, below the natural limit of depression ; that 
 this excess was th* emnant of a much greater 
 
35 
 
 depression, occasioned by political events in 
 the preceding year, during a period in which 
 the means of exporting English gold coin, at 
 the mint-price, in payment of debts, were 
 withheld. When it is stated that, for 6 months 
 since the date of the Report, the exchanges 
 have continued at or about the same standard, 
 or rather higher, and that at present the loss 
 on the exchange is barely equal to the expense 
 and risk of transporting gold, it will probably be 
 thought that the question, as a practical question 
 of national importance, is altogether at rest. 
 That there is no necessity, at least, for the 
 adoption of hasty remedies, even though the 
 correctness of the general reasoning of the 
 Committee should, on full inquity, be conceded. 
 But I do not admit its correctness: I do not believe 
 that the fall of the exchange and the encreased 
 price of bullion indicate excess and consequent 
 depreciation of our paper-currency ; and I doubt 
 it, because the premises, on which this opinion 
 is founded, are unsound, and the conclusions 
 contrary to experience. 
 
 The basis of the argument of the Committee, 
 to the examination of which I now proceed, 
 is that which I have shortly stated in page 8 
 as the first proposition, viz. " that the difference 
 of exchange, resulting from the state of trade 
 and payments between two countries is limited 
 
16 
 
 by the expense of conveying and insuring the 
 precious metals from one country to the other ; 
 at least, that it cannot, for any considerable 
 time, exceed that limit :" (Rep. p. 1 1.) there- 
 fore, all excess of depression on the exchange, 
 beyond the expense of conveyance, is to be 
 attributed to depreciation of our currency. 
 This proposition is so fully admitted, and so 
 broadly stated, in each of the publications to 
 which I have alluded, that it is not even guarded 
 by the condition, that the country, by which 
 the balance of payments is due, shall possess 
 bullion or specie sufficient to liquidate it ; but, 
 boldly as the principle is asserted, and strongly 
 as reason appears to sanction it, I insist that it is 
 not generally true, and that it is at variance with 
 fact. 
 
 It is stated, in the Report, from the evi- 
 dence before the Committee of 1797, that 
 the average expense, at that time, of con- 
 veying specie from London to Hamburgh, was 
 3| per cent, yet, on reference to the course of 
 exchange with Hamburgh, in Mr. Mushett's 
 tables, it appears that, from the beginning of 
 1797 to the middle of 17.99, the exchange 
 was continually in favour of Great Britain more 
 than twice the expense of conveying gold ; 
 and, for eighteen months of that time, 1 1 to 
 12 per cent, in our favour, or from 7 to 
 
17 
 
 8 per cent, beyond such expense: nor does 
 tliis profit appear to have occasioned any 
 considerable importation of gold, which, dar- 
 ing this period, rose to the mint-price, although, 
 for several years before, it had, nominally at 
 least, been below it. 
 
 In the years 1764 to 1768, prior to the recoin- 
 age, when the imperfect state of the coins occa- 
 sioned gold to be 2 to 3 percent, above the mint- 
 price, the exchange with Paris was 8 to 9 per 
 cent, against London, at the same time the 
 exchange with Hamburgh was, during the whole 
 period, to 6 per cent, in favour of London ; 
 here appears, then, a profit of 12 to 14 per 
 cent, for the expense, in time of peace, of 
 paying the debt to Paris with gold from Ham- 
 burgh, which must have exceeded the fact by 
 at least 8 or 10 per cent, and it is worthy of 
 remark, that the average exchange with Ham- 
 burgh, for the years 1766 and 17^7, of 5 per 
 cent, in favour of London, added to 2 per 
 cent, the price of gold above the mint-price, 
 constituted a premium of 7 per cent, on the 
 importation of gold into England, or, deduct- 
 ing 1% per cent, for expenses in time of peace, 
 a net profit of 5 per cent, yet the exchange 
 was not rectified thereby. Again, in 177.3, 6, 
 and 7, after the recoinage, we find the exchange 
 
18 
 
 on Paris 5, 6, 7, and 8, per cent, against London 
 in time of peace, when half the amount would 
 have conveyed gold to Paris, and one-fourth 
 have paid the debts of Paris at Amsterdam. 
 In the years 1781, 2, and 3, being years of 
 war, the exchange was constantly from 7 to 
 9 per cent, in favour of Paris; and, during 
 this period, gold was the common circulation 
 of this country, and the Bank was compelled 
 to provide it for the public at the mint-price. 
 It has been already shewn how little effect 
 the precious metals produced towards equalising 
 the exchange with Hamburgh, during the years 
 1797 and 1798; and another instance may be 
 adduced in the years 1804 and 1805, when 
 the Paris exchange varied from 7 to 9 per cent 
 in favour of London. 
 
 In every case here cited the fluctuations of 
 the exchanges greatly exceeded the expense 
 of conveying gold from one country to the 
 other, and to a much greater degree in most 
 of them than in the present instance; the 
 circumstances of the times were, it will readily 
 be admitted, more favourable to intercourse, 
 on those occasions, than they now are, and 
 the state of metallic circulation afforded faci- 
 lities not now experienced here. Yet, under 
 all these advantages, the principle assumed by 
 the Committee was not operative, and cannot 
 
19 
 
 therefore be admitted as a solid foundation 
 for the superstructure of excess and deprecia- 
 tion, attempted to be raised upon it. If it 
 be said that probably, on these several occa- 
 sions, gold was proportionately dear on the 
 spot to which the exchange was^unfavourable, 
 I admit the fact as probable, because I am 
 without evidence respecting it ; but, if the 
 price of gold abroad enters necessarily into 
 the calculation of the "natural limit" of depres- 
 sion of the exchange, then the course of foreign 
 exchanges, rectified by the expense of sending 
 gold abroad, does not form a just criterion of 
 the adequacy or excess of our circulating 
 medium, 
 
 There appears also a defect in the application ^ 
 of. the principle to the particular case under 
 the consideration of the Committee. 
 
 It is admitted in the Report "that the first 
 remarkable depression of the exchange, in 1 809, 
 is to be ascribed to commercial events, arising 
 out of the occupation of the north of Germany 
 by the troops of the French emperor.' J (p. 16.) 
 If a depression equal to three times the cost 
 of sending gold be admitted as the effect of 
 any other cause than depreciation of currency, 
 it can be considered as not overturning the 
 principle of limitation, only by viewing the fall 
 in question as an "occasional depression;" 
 
20 
 
 but, if taken as an occasional depression only, 
 (as the event indeed proved,) how can it be 
 brought forward as evidence of an excess of 
 currency, the Committee having established 
 " a considerable duration" as a necessary con- 
 dition to reii(]f r the course of exchange a just 
 criterion ? 
 
 The circumstances I have stated, respecting 
 the exchanges on former occasions, were not 
 perhaps brought under the notice of the Com- 
 mittee; but they had two facts prominently 
 before them, bearing immediately upon the 
 question, of which they have taken no notice. 
 Mr. Greffulhe offered this problem to the Com- 
 mittee: "During the depreciation of English 
 currency on the continent of Europe, a pre- 
 mium was paid for it in America in hard dol- 
 lars." The balance of payments may be against 
 us with one country, and in our favour with 
 another ; and, if the exchange is regulated by 
 this balance, it will exhibit corresponding ap- 
 pearances, particularly where those countries are 
 remote. But, if the currency be depreciated be- 
 low the value of gold, it is so positively, not 
 relatively, and all exchanges must equally feel 
 the influence of the depreciation. 
 
 The other tact I learn from the paper 6\5, in 
 the Appendix to the Report; between January 
 1809 and May 1810, the Swedish exchange 
 
21 
 
 rose (against Sweden) 25 per cent, and was at 
 that date 24 per cent, in favour of London. 
 What are the circumstances of Swedish cur 
 rency? We collect them incidentally from the 
 examination of Mr. a continental mer- 
 chant ( p. 75 ) " Have you ever known the 
 exchange to fall to the extent of 12 to 15 per 
 cent, in any part of Europe, in which it was 
 computed in coin, containing a fixed quantity 
 of gold or silver, or in paper, or bank-money, 
 exchanged at a fixed agio either for such gold 
 or silver, or for gold or silver bullion of definite 
 amount."-^ Ans. "No, never; except in countries 
 where the export of their currency has been 
 effectually prohibited, such as Sweden ; I do not 
 recollect any other country where paper, resting 
 upon the foundation of coin, the latter is effec- 
 tually prohibited from being exported.*' Q.IIow 
 is that prohibition made effectual in Sweden? 
 "By the bank not issuing specie to any amount, 
 when the exchange is depreciated". Sweden 
 was greatly indebted to England, for goods sent 
 thither for the supply of the continent and 
 north of Europe. Gold could not be exported, 
 and therefore the premium on remittance by 
 bills was great ; this seems a very natural effect, 
 and one which will not surprize any one ; yet 
 to account for an effect exactly similar, under 
 similar circumstances, we are required to ad- 
 jrrit that our paper-currency is depreciated, 
 
22 
 
 whilst the Americans were giving a premium 
 for it in hard dollars. It will be recollected 
 that the question now agitated is not whether 
 any inconvenience attends the substitution of pa- 
 per for gold, as the medium of circulation, but 
 whether that paper be now excessive in amount, 
 and depreciated in value. As the result of the 
 facts I have adduced, I assume that from the 
 state of the foreign exchanges no such inference 
 can justly be drawn.* 
 
 * The terms favourable and unfavourable applied to 
 the exchange are, perhaps, correct, as indicating a 
 coi responding balance of trade and payments; but a favour- 
 able exchange is frequently a very unfavourable circumstance, 
 and vice versa. A British merchant sent goods to Sweden for 
 sale early in 1809 ; they were valued at 1000 rix dollars; the 
 exchange being at four rix dollars per pound sterling, they 
 would then have produced, by remittance, 250. They 
 were actually sold for 1000 rix dollars in the beginning of 
 1S10; and, remitted for at the exchange of five, produced 
 > 200. The funds for the bill were provided by a consign- 
 ment of goods from Sweden ; and England, therefore, recei- 
 ved goods worth ^"200 in payment of the original export 
 instead of 250, which it would have received had the ex- 
 change not become so favourable. In a more familiar instance 
 England benefits by an unfavourable exchange. When the 
 Dutch had large sums in our funds, the dividends were re- 
 mitted periodically, and a real or supposed demand for bills 
 on Holland, at those periods, occasioned a fall on the ex? 
 Change. Thirty-three shillings Flemish, for instance, were 
 given in exchange for a pound sterling, instead of 34, s. The 
 exchange was, therefore, less in favour of London. Yet it is 
 
23 
 
 The Committee considers, ho wever, the price 
 of gold as the most certain sign of excess and 
 depreciation. 
 
 " An ounce of standard gold-bullion will not 
 fetch more in our market than 3 : 17 : 10|-, 
 unless 3 : 17 : 10^ in our actual currency is 
 equivalent to less than an ounce of gold ; " yet 
 gold -bullion does bear in London a higher price 
 than this standard or mint-price ; whence a de- 
 preciation of the paper is inferred, which Mr. 
 Mushett estimates to have amounted, in Sep- 
 tember, 1 809, to 1 3 : 7 ' : per cent. Whilst 
 sanctioning this old, and in the abstract in- 
 controvertible, theory, and, as applying it to the 
 present case, the Committee do not appear to 
 have recollected, that, having admitted an ade- 
 quate cause for the fall of the exchange, from 
 commercial and political events, the increased 
 price of gold-bullion to any extent, within the 
 equivalent of the depression, is only a conse- 
 quence ; and the documents in the Appendix \ 
 shew that the price of gold-bullion did not at 
 any period of the depression of the exchange 
 exceed the price which it was worth as a remit- 
 tance, compared with its value in foreign mar- 
 kets. From the calculations furnished by Mr. 
 
 evident that on every 33 pigs of lead, blocks of tin, or ounces 
 of gold, sent to Holland, to provide funds for payment of the 
 dividends, one pig, block, or ounce, was saved to this country. 
 
24 
 
 Greffullie to the Committee, (Appendix 58,) 
 it appears, that, in the spring of 1810, an ounce 
 of gold, of English standard weight, was worth, 
 at Hamburgh, 4t : 17 : sterling, the price 
 being 101, and the exchange QQs. At this 
 time the extreme price of bullion, in London, 
 was 4i : 12 : 0, or 5| per cent, below the 
 price at Hamburgh* At the same time the 
 price of gold, at Paris, exceeded its value here 
 by 8| per cent, and, at Amsterdam, by 7 per 
 cent, at the then current exchanges. The ex- 
 pense of conveyance to Holland being then 
 about 7 per cent, gold would not then pay 
 for importation, neither would it be exported, 
 merely with a view to profit^ though it would 
 be exported, and was in fact exported, in pre- 
 ference to bills in abundance of instances, which 
 might readily have been ascertained by the 
 Committee. On reference to the paper, No. 60, 
 in the Appendix to the Report, it appears, that, 
 in June, July, August, and September, 1809, 
 the price .of gold, at Hamburgh, was 104J, 
 and the exchange %&s. if at 101, and 29s. there 
 was a profit on the export of gold from hence 
 to Hamburgh of 5| per cent, it follows that 
 at 104f, and 28 s* there was a profit of 12 ; 
 or, deducting the expenses of conveyance, that 
 gold, if bought here at 4 ; 12 : per ounce, 
 was a cheaper remittance by 5^ per cent, than 
 
25 
 
 a bill at the current exchange. This satne do* 
 cument, No. 60, shews also, that within twelve 
 months the price of gold at Hamburgh varied 
 from 100^ to 104f, the exchange with Great 
 Britain in both instances, and during the inter- 
 vening period of eight or nine months, being at 
 28 s. We find the price of gold continuing, in 
 other instances, at 104, whilst the exchange 
 rose from 28 s. to 29 s. lid. even to 30s. 8d. 
 variations of 4 or 5 per cent, in the cost of 
 a remittance in gold, which remained nearly 
 stationary in its price here during the whole 
 period. These fluctuations seem to militate 
 against the intimacy of connexion which the 
 Committee assumes to exist between the course 
 of exchange and the price of gold, in places 
 where the currency is gold or convertible 
 into it. And the facts stated, respecting the 
 actual price of bullion in the foreign markets, 
 satisfactorily meet the observations of the Com- 
 mittee, implying that they discover no advance of 
 the price of gold in those markets analogous to 
 that which has obtained here. Refering to Mr. 
 Greffulhe's documents, No. 58, they observe, in 
 deed, that it is important, " as it shews that 
 " the actual prices of gold in the foreign mar- 
 kets are jsut so much lower than its market- 
 price here as the difference of exchange 
 amounts to." Mr. Greffulhe's observations 
 
 E 
 
26 
 
 pn this paper convey a different impression : 
 " One of the papers I have delivered in shews 
 (he says) the foreign prices of gold reduced 
 into sterling money at the present low rates 
 of exchange, and the excess above the market- 
 price here may be considered as about equal 
 to the charges of conveyance? (page 3) ; nor 
 is this excess of price at Hamburgh merely re- 
 lative, and arising out of the exchange. It ap- 
 pears by the paper, 56, in the Appendix, that 
 the prices of gold at Hamburgh have, in the 
 two last years, risen considerably, as the fol- 
 lowing extract shews " highest and lowest pri- 
 " ces of gold at Hamburgh, in the years 1 806-7, 
 and 1808-9. 
 
 lowest highest. lowest, highest. 
 
 At Hamburgh, 1S06, 98 103 180S, 102 106 
 1807, 98| 101J 1809, 101J 104J" 
 
 The price of gold, at Hamburgh, was, therefore, 
 between three and four per cent, higher, on the 
 average of the years 1808 and 9, than in the 
 two years which preceded them. I observe, 
 also, that the fluctuations in the price of gold, 
 at Hamburgh, f where, as the Report informs 
 us, " Silver is not only the measure of all ex- 
 changeable value, but is rendered an invariable 
 (or unvarying) measure," have, within a period 
 of two years, amounted to no less than eight 
 per cent. But, it will be said, gold at Ham- 
 
27 
 
 burgh is a commodity ; here it is the standard 
 of value ; and an ounce of gold cannot sell for 
 more than an ounce of gold of equal quality, 
 unless the medium of payment is of less value 
 than an ounce of gold. 
 
 Mr. Mushett is of opinion, " that the price 
 of gold can in reality, at no time, be above its 
 mint-price, and that its being so at present in 
 appearance is caused by the excessive quantity 
 of bank-notes in circulation." 
 
 This is the strong hold of the theorists, and 
 I shall not attack it otherwise than by fact. 
 The theory may, however, xbe correct, and its 
 application erroneous." 
 
 In the Report of the Committee, I find this 
 statement, page 4. " Upon referring, for a 
 course of years, to the tables, which are pub- 
 lished for the use of the merchants, such as 
 Lloyd's List and WettenhalFs Course of Ex- 
 change, your Committee have found, that, from 
 the middle of the year 1773, when the refor- 
 mation of the coin took place, till about the mid- 
 dle of the year 1799, two years after the sus- 
 pension of cash-payments by the Bank, the 
 market-price of standard gold in bars remained 
 steadily uniform at the price of ,3 : 17 : 6, be- 
 ing, with the small allowance for loss by deten- 
 tion at the mint, equal to the mint-price of 
 3 : 17 : 1(% with the exception of one year, 
 
28 
 
 from May, 1783, to May, 1784, when it was 
 occasionally at 3 : 1 8 : ; during the same 
 period, it is to be observed, the price of Portu- 
 gal gold coin was occasionally as high as 
 4t : 2 : 0; and your Committee also observe, 
 that it was stated to the Lord's Committee, in 
 1797, by Mr. Abraham Newland, that the 
 Bank had been frequently obliged to buy gold 
 higher than the mint-price, and, upon one oc- 
 casion, gave as much for a small quantity, 
 which their agent procured in Portugal, as 
 ,4:8:0. But your Committee find, that 
 the price of standard gold, in bars, was never, 
 for any length of time, materially above the 
 jnint-price during the whole period of twenty- 
 four years, which elapsed from the reformation 
 of the gold-coin to the suspension of the cash- 
 payments at the Bank." 
 
 I submit the whole passage to my readers, 
 that I may not risk misrepresenting its mean- 
 ing, which I profess not to understand. Do 
 the Committee mean, that the value of stand- 
 ard gold in the market was only 3 : 17 : 10f, 
 or 3 : 18 : 0, when the Portugal, gold, from 
 which it was made, was worth ,4:2:0? To 
 me it appears evident, that the sentence re- 
 specting Bank purchases, beginning " during 
 the same period," and ending at " <& : 8 : 0," 
 introduced after the report was framed, 
 
29 
 
 and its operation on the statement not exactly 
 perceived. 
 
 It appears also to have escaped the notice of 
 the Committee, that, in 179->, the directors of 
 the Bank stated to Mr. Pitt, that the price of 
 gold was ..4:3:0 and ,4:4:0 per ounce ; 
 and that their guineas being to be purchased 
 at 3 : 17 : 10^- pointed out clearly the ground 
 of the fears of the Bank of a continued demand 
 for them, (see Report of Lord's Committee 
 anno 1797.) 
 
 The fair inference from the information gain- 
 ed from Mr. Newland, and from the Bank di- 
 rectors, seems to be this : that, although it ap- 
 pears, by the printed lists, that, during the 
 whole period between the recoinage and sus- 
 pension of cash-payments, standard gold never 
 exceeded the mint-price more than the differ- 
 ence between 3 : 17 : 10J and ,3 : 18 : 
 per ounce, yet that, in fact, the foreign gold 
 coin from which such standard gold was made 
 did sell for 4 : 9 : and 4:4:0. That 
 the Bank was in the habit of paying these 
 prices, and, on one occasion, paid 4:8:0, 
 or 13 per cent, above the mint-price. During 
 this period bank-notes were at once convertible 
 into gold, and the coin was in the most per- 
 fect state. The real question before us is, 
 not what was the price of that gold which the 
 
30 
 
 Bank was compelled to deliver to the public on 
 demand at < 3 : 17 : 10J, but what was the 
 price at which gold could be elsewhere ob- 
 tained ? 4 : 3 : 0. 4:4:0, say the Bank 
 directors. Aye, .4:8:0, says Mr. Newland. 
 An ounce of standard gold did then sell for 
 more than an ounce of standard gold. This, 
 says Mr. Mushett, is impossible. <c / do not say 
 it is possible ; I only say it is true. " 
 
 The Committee is not, however, quite so 
 peremptory ; they have discovered, that standard 
 gold, in bullion, may be worth 5| per cent, 
 more than gold in British coin ; because the 
 one, being an exportable commodity and the 
 other not so, may be worth 5% per cent, more 
 to him who has occasion to send it abroad ; 
 and Mr. Goldsmid had told them the fact was 
 so. This admission is like the letting out of 
 water; it must have its way, you cannot stop 
 it. Be it granted, that the rubbing of guineas 
 deteriorates English gold in coin, as compared 
 with gold in bars, 1 per cent. That the con- 
 science of the exporter, and the value of a 
 false oath, are correctly estimated by the Com- 
 mittee at 4J per cent, (page 6,) which two 
 circumstances account for the increased price 
 of 3 or 4 s. an ounce, which foreign gold bears 
 over that produced from British coin. What 
 occasions the difference in value ? the demand 
 
31 
 
 for exportation. May not this demand increase 
 in its proportion to the supply of exportable 
 gold ; may not consciences grow more tender, 
 as custom-house officers become more active? 
 The principle being admitted, that foreign gold 
 has an extrinsic value beyond English gold, 
 how can the Committee limit its operation ? and fi 
 say, " that the highest amount of the depres- 
 sion of the coin * which can take place when 
 the Bank pays in gold, is 5| per cent, (page 
 6, 7.) " The statement is erroneous as a fact, for 
 4 : 3 : 'or 4 : 4 : per ounce, which the 
 Bank paid for foreign gold in 1795, is, on aver- 
 age, an advance on the mint-price of 71 per 
 cent, and the extreme case of ^ : 8 : is an 
 advance of 1% or 13 per cent. But, granted 
 that the fact were as stated, English gold is 
 not now to be obtained (none being issued) at 
 the mint-price ; who can then pretend to limit 
 the value of gold as an exportable, or even as 
 3, consumable, commodity ? Where is the point 
 of contact? between English and foreign gold, 
 upon which the comparison of their respective 
 values shall be established? If the demand for 
 foreign gold was at any time very great, and 
 the melting and exportation of guineas, howe- 
 
 * This is a very singular expression to denote a high mar- 
 ket-price of bullion, and will point out to an attentive reader 
 feow extremely theoretical the arguments of the Report are. 
 
\ 
 
 32 
 
 Ver abundant, by any means effectually pre j 
 vented, foreign gold might double its price in 
 English gold, and yet the intrinsic value of 
 guineas remain undiminished. How far any 
 circumstances, in our present situations, run 
 parallel with this supposition will be seen here- 1 
 after. 
 
 The Committee hesitate, however, to admit 
 either a scarcity of gold or an unusual 
 demand for it, and, on these points, few direct 
 facts are to be found in the Appendix. Mr. 
 Goldsmid stated that his sales of gold in the 15 
 months preceeding his examination were grea- 
 ter than on an average of years ; that large quan- 
 tities had been purchased at the high price by 
 individuals; that none, he believed, had been 
 received within that period from the continent 
 of Europe; and that gold has been of late sent 
 to the Brazils, instead of coming from thence 
 as formerly through Lisbon. 
 
 It appears, by the returns from the bullion- 
 office at, the Bank, Nos. 7 and 8, in the Appen- 
 dix to the Report, that the total amount of 
 gold Bullion imported and deposited in the 
 bullion-office in 1809 amounted in value to 
 only ................. 520,225 
 
 That, during the same period, the 
 
 quantity of gold delivered out of 
 
 the bullion-office amounted in value to 805,568 
 
 of which only 592 was not exportable, 
 
33 
 
 The amount of the importation is therefore 
 such as, when compared with the amount* of 
 exports and imports, and that of the circulating 
 medium, to justify the assumption of compara- 
 tive scarcity ; and the excess of delivery beyond 
 the importation is sufficient evidence of unusual 
 demand. The point of /view in which these 
 facts are important is that which places the 
 amount of gold imported or delivered in line of 
 comparison \vith the amount of paper- curren- 
 cy, supposed to be depreciated on the evidence 
 of the encreased price of bullion. The advance 
 of ]Qs. per oz. on the total quantity of gold de- 
 livered in one year, about 200,000 ounces, a- 
 mounts to 120 or 130,0007. ; and this is assumed 
 as an unequivocal symptom of a depreciation of 
 12 or 13 per cent, on 30 or 40 millions of paper, 
 the probable amount of our paper-currency. 
 Yet this account of gold, trifling as it is, ex- 
 ceeds, as Mr. Goldsmid states, the average sales 
 of preceding years. We may soon expect to 
 be told, that the value of bank-notes has increa- 
 sed, because the paper, on which they are made, 
 is somewhat dearer than heretofore. 
 
 In confirmation of their opinion, that the price 
 of gold has not been influenced by natural causes, 
 the Committee observe, " that the rise in the mar- 
 ket-price of silver in this country, which has 
 nearly corresponded to that of the market-price 
 
 F 
 
34 
 
 of gold, cannot, in any degree, be ascribed to a 
 scarcity of silver: the importations of silver 
 have of late been unusually large." This state- 
 ment is unpardonably erroneous ; for the fact 
 which refutes it had drawn the attention of the 
 Committee. 
 
 In Mr, Merle's evidence, I find it stated, 
 that silver is about 5 pence per ounce above the 
 coinage-price. 
 
 Question by the Committee. That is about 9 
 per cent, is it not? Answer. I suppose therea- 
 bouts. Question. How do you account for the 
 circumstance of gold being 16 per cent, above 
 its coinage-price, and silver only 9 per cent. 
 <c I cannot answer that question." Mr. Merle 
 says also, that he never recollects silver so low 
 as the standard price ; in fact it never has been 
 so low since the days of King William. A very 
 low average, taken before the suspension, would 
 fix the price of standard silver at 5s. 3%d. or 
 three halfpence above the mint-price: deduc- 
 ting this amount from the increased price 
 of 5d. per oz. there remains an advance on the 
 present occasion of 3%d. per oz. or 5$ per cent. 
 whilst the advance on gold is stated at 16 per 
 cent. The rise on the market-price of silver 
 has not, therefore, " nearly corresponded'* with 
 the rise in the market price of gold, and the 
 ample supply ; noticed by the Committee, has 
 had the natural effect of restraining the price ; 
 
35 
 
 and the fact adds strength to the opinion, that 
 the price of gold has been augmented by its 
 scarcity. 
 
 I will refer my reader to one fact more on this 
 subject. The paper No. 1, in the Appendix, 
 shews the amount of gold exported for several 
 years past, so far as the Custom-House have 
 knowledge of it. The account stands thus: 
 
 Year ending first February 
 
 1805 1805 1807 1808 1809 1810 
 
 None 17,007 3,019 13,008 14,716 69,962 oz. 
 
 I have now submitted to my readers all the 
 facts and figures contained in the Report and 
 its Appendix, which appear to me to bear 
 directly on the propositions respecting the ex- 
 changes and price of bullion, on which the 
 Committee formed their opinion of the excess 
 and depreciation of our paper-currency. It 
 will not escape notice that, admitting their 
 theoretical accuracy, they involve exceptions 
 to the amount of 12 or 13 per cent, on the 
 admission of the Committee, when applied to 
 practice. 
 
 But the accuracy of the theory is one ques- 
 tion, the correctness of its application is an- 
 other, and on this point the public may rea- 
 sonably entertain jealously, because the same 
 theory, in the hands of the ablest men this 
 country has known, has been once already er- 
 roneously applied, and, by such application, 
 
5(3 
 
 has subjected the nation to disappointment 4nd 
 inconvenience, under which we still labour, and 
 to an unprofitable expense of nearly three 
 millions sterling. A theory brought forward 
 by Mr, Locke, as counsel to the chancellor 
 of the exchequer, and acted upon by Sir Issac 
 Newton, as' warden of the mint, might challenge 
 the world for higher sanction. Yet the recoinage 
 of silver, in the reign of King William, directed by 
 these great men, was made on erroneous prin- 
 ciples and failed in its object. Mr. Locke as- 
 sumed it as an incontrovertible principle that 
 "an ounce of silver, whether in coin or in 
 bullion, is and eternally will be of equal value 
 to any other ounce of silver, under what stamp 
 or denomination soever,"" and he inferred from 
 thence that, whenever the silver coins (then 
 grievously depreciated) were restored to their 
 due weight, the price of silver bullion would 
 fall to the mint-price.- At this time, silver 
 was the. common money of account, as gold is 
 -now ; and Mr Locke seems to have considered 
 that it was naturally or necessarily so. Men 
 of less powers but more practical information 
 foretold to Mr Locke the evils which would 
 follow from the unlimited adoption of his theory. 
 Sir Richard Temple,* endeavoured, in vain, 
 
 * See a tract in Lord Sorters' collection, d^ted \6p6 f by 
 Sir Richard Temple, 
 
37 
 
 to point out the distinction between coin and 
 bullion, and to convince Mr. Locke that the 
 value of silver bullion was become greater than 
 the standard or .mint-price. He was not listened 
 to; (he might perhaps have erred too much 
 on the other side, which numbers were ready 
 to do, ) and the recoinage took place at the 
 old standard of 5s. 2d. per ounce. As the 
 new money came out, it disappeared : between 
 seven and eight millions were coined, yet 
 little was found in circulation ; and, within 
 17 years, Sir Issac Newton reported to the 
 treasury, that, "should silver become a little 
 scarcer, people would in a little time refuse 
 to make payments in silver without a pre- 
 mium," * the standard being taken below 
 the -value of bullion, the coins were melted 
 down as fast as they were issued. The 
 expense of this recoinage was between 
 .2,500,000 and 2,600,000, and it would 
 probably cost as much more at present to 
 remedy the defect. It will probably therefore 
 
 * Earl of LiverpooPs letter to the king. As Lord Liver- 
 pool could not obtain, from the public offices, any account 
 of the expense of this recoinage, I refer those who take 
 an interest in such subjects to an official statement of the 
 public income and expenditure from the revolution to the 
 quarter-day following the death of King William, preserved 
 in Lord Seiners' collection, vol. 12, whence it appears that 
 the deficiency exclusive of' the expense was 2,415>HO. 
 
38 
 
 be admitted as possible, that an incontrovertible 
 theory may, even in the hands of the ablest 
 men, be erroneously applied. 
 
 I will next call the attention of my readers 
 to that part of the Report which relates 
 to the balance of trade and payments : The 
 Committee is of opinion, that the favoura- 
 ble balances of the two former years ought 
 to render the exchanges in the present year 
 peculiarly favourable ; but, observing how en- 
 tirely the present depression of the exchange 
 'with. Europe is referred by many persons 
 ( being indeed all those who were examined ) 
 to the great excess of our imports above our 
 exports, they called for an account of the actual 
 value of those for the last five years: what 
 they called for they received ; but, by a most 
 unaccountable omission, they have never re- 
 ferred to it, and appear to have formed their 
 opinion upon documents altogether irrelevant 
 to the subject before them. 
 
 In the body of the Report, pages 12 and 
 1 3, are two statements of exports and imports 
 for five years preceding 1810; from the first 
 of which it appears, that the balance of the 
 actual value of exports and imports to all 
 parts of the 'world in 1809 was ,14,834,000: 
 by the second, it is shewn that the balance 
 in favour of Great Britain on its trade, with 
 
39 
 
 the continent of Europe alone, computed in 
 official value, for the year 1 809, was 1 4, 1 70, 758, 
 to which latter statement the Committee adds 
 this observation. " The balances with Europe 
 alone, in favour of Great Britain, as exhibited 
 in this imperfect statement, are not far from 
 corresponding with the general and more ac- 
 curate balances before given. The favourable 
 balance of 1809, with Europe alone, com- 
 puted according to. the actual value, would 
 be much more considerable than the value of 
 the same year in the former general statement? 
 that is much more than ,14,834,000: we will 
 suppose, in even numbers, 15 millions. Now 
 this assertion involves an actual error of half 
 its object, for it appears, by the papers 75 
 and 76 in the Appendix, being accounts of offi- 
 cial and real values of exports and imports to die 
 continent of Europe, that the amount of the 
 actual value of exports in 1 809 was <27, 109,337 
 of the imports 19,821,601 
 
 leaving the balance in favour only ^7, 368,736 
 
 If the average of the two years 1809 and 1810 
 were taken, the balance would be c6,200,000, 
 being a difference on the two years of 
 .8,600,000 ; or, on the single year to which 
 the observation, though not the reasoning, 
 
40 
 
 of the Committee was confined, of <7,500,GOa, 
 but this is not by any means the extent to 
 which the impression conveyed by the obser- 
 vation of the Committee is erroneous ; the 
 sin of omission greatly exceeds in this in-?, 
 stance the positive fault. These Custom-Hotise 
 documents are defective, the Committee ob- 
 serve, because they do not include any ac- 
 count of freight paid to foreigners, at this time 
 peculiarly large, or of the sums received from 
 them for the employment of British shipping. 
 They leave out of consideration interest on ca- 
 pital on either side ; the pecuniary transactions 
 between the governments of Great Britain and 
 Ireland ; contraband trade, and the imports 
 and export of bullion ; also the important ar- 
 ticles of bills drawn on government for naval, 
 military, and other foreign, expenses. 
 
 A Committee, appointed to inquire, might 
 have been expected to endeavour at least 
 to ascertain the extent and operation on the 
 balance of these several items of exception; 
 but they dismiss the subject with a regret, 
 that there has been some difficulty and de- 
 lay in executing an order for the account of 
 the government bills. I have thought it right 
 to be more inquisitive, and am enabled, from the 
 documents in the Appendix, and where these 
 are deficient from accounts obtained from the 
 
41 
 
 public offices, to exhibit the following statement 
 
 of the foreign expenses of government 
 
 Amount of bills drawn on the Trea- 
 sury, between Dec. 1808, and 
 Dec. 1809, (Army Extraordina- 
 ries,) Appendix, 70, A 1 . . . 4,162,390 
 
 Deduct bills .drawn from the West 
 
 Indies, Africa, and America . . 903,366 
 
 Amount affecting the European ba- 
 lance 3,258,824 
 
 The specie and bullion exported by 
 the paymasters-general amount- 
 ed, in 1808 and 1809, to upwards 
 of five millions, of which, in 
 1809, (Appendix, 79-). 1,540,000 
 
 In addition to these sums, 
 and of the same nature, 
 are bills drawn on the 
 commissary-in-chief . 328,767 
 
 On the Pay-Office, (ordi- 
 nary of the army,) . . 1,793,778 
 
 On the Victualling-Office 897,095 
 
 On the. Navy-Board V. . 672,820 
 
 On the Transport-Board . 295,705 
 
 On the Board of Ordnance 212,753 
 
 4,200,918 
 
 The accounts I have ob- 
 tained do not distinguish 
 European from other 
 
42 
 
 services, admitting a de- 
 duction in equal pro- 
 portion to that on the 
 extraordinaries, 'which 
 is ascertained, about . . 900,000 
 
 Leaves the amount affecting the Eu- 
 ropean balance .......... 3,300,918 
 
 In estimating the neutral freight, I 
 will suppose the amount paid by 
 foreigners to British ships, in 
 18C>9, equal to that paid by Great 
 Britain to neutrals for corn,* wine, 
 and brandy, from France, and 
 for the intercourse between Heli- 
 goland and the continent, and 
 confine the deduction to the neu- 
 tral freight in the Baltic trade 
 alone. I have sufficient grounds 
 for estimating this trade, in 1809, 
 " at 200,000 tons and upwards, 
 the rate of freight 20 per ton 
 and two-thirds neutral," hence 
 arises a debt of 2,600,000 
 
 10,6.99,732 
 
 This sum-exceeds by three millions the ba- 
 lance arising on British trade with the conti- 
 
 * The importation *)f .corn in six months exceeded 
 600,000 quarters 
 
43 
 
 nent in 1809, supposing the whole amount of 
 our exports to have been paid for within the 
 year. This, it appears by the evidence, was 
 not the fact Nor can the deficiency have 
 been made good (according to the idea of the 
 Committee) by balances due from former years ; 
 for, by reference to t\ie same documents, Nos. 
 75, ?6, we learn that, in 1808, the balance in 
 our favour was only five millions, subject to 
 deductions of a like nature,* and that, in 1807, 
 it was two millions against us, without rcfer^ 
 cnce to them, the real value of imports from 
 the continent of Europe having 
 
 been 17,442,755 
 
 and the value of exports, only . . 15,420,514 
 
 Balance against us, 2,022,241 
 
 * 
 
 Nor does the preceding statement adequately 
 represent the amount of our foreign payments. 
 The pay of officers on foreign service and in 
 garrisons is, for the most part, received by, and 
 drawn from, their respective agents. The mo- 
 ney transactions with Ireland are not noticed, 
 the first feature of which is the loan of If mil- 
 lions, raised in this country for the service of 
 that; neither is any deduction made for that 
 
 * In 1808, the Treasury -bills for European services 
 
 amounted to . . . . : lj millions, 
 
 and the exportation of specie by the paymasters 3| ditto. 
 These two items alone absorbing the whole balance. 
 
44 
 
 proportion of our exports, which being the produce 
 of foreign colonies in our possession belong to 
 residents abroad, or, if sold in England, con- > 
 stitutes a debt to the Dane or Hollander. The 
 interest due to foreigners, for money in our 
 funds, is also left out of the account ; but, ta- 
 ken as it stands, the result is, that from the 
 estimated favourable balance of fifteen millions, 
 as assumed by the Committee, are to be deduct- , 
 ed, first, the error in point of fact, 7,500,000 
 and next, the account of the items 
 of foreign service, &c. on the prin- 
 ciples established in the Report . . 10,700,OOQ 
 
 constituting a real difference affect- 
 ing the argument respecting the 
 course of exchange of 18,200,000 
 
 I need not solicit attention to th result of 
 this inquiry into the accuracy of the opinion 
 promulgated in the Report, viz. that the state of 
 the exchanges ought, during the present year, 
 to be peculiarly favourable, but I offer one ob- 
 servation to the serious consideration of the 
 public. 
 
 The usual cause of variations in the foreign 
 exchanges and price of bullion being the fluc- 
 tuations in the balance of payments, due to or 
 by Great Britain, the real object of the ap- 
 pointment of the Committee was to ascertain 
 
45 
 
 whether the same .or any other cause operated 
 in the instance referred to them.. The chief ob- 
 ject of investigation would naturally he, there- 
 fore, the actual state of trade and payments;, 
 and the reader of the, Report presumes, that the 
 facts stated, and the inferences drawn, are de<- 
 duced from every procurable document, tending 
 to illustrate this leading point of inquiry. In- 
 stead . of this, the Committee has, it appears, 
 supposed and assumed the fact on which 
 the whole question turns, without waiting for 
 the means of information, (for Mr. Irving's pa- 
 pers 75 and 76 are dated on 1st of June, and 
 the Report was presented on the 8th) or making 
 use of it when in their possession. 
 
 The Report states loosely, that this favourable 
 balance of 15 millions should be subjected to some 
 rectifications, without ascertaining what their 
 effect would be ; and, owing to this haste, con- 
 veys to parliament this most erroneous impres- 
 sion, that our resources and means of foreign 
 expenditure are still great; instead of apprising 
 them of a fact which would, I apprehend, 
 have been new, and perhaps not very accepta- 
 ble to the public, that, in 1807, the whole of 
 our foreign expenditure, whatever it was, was 
 an addition to a debt to the continent of Eu- 
 rope of two millions sterling; that, in 1808, the 
 total of the foreign expenditure for the ordinary 
 
46 
 
 of the army abroad, of Bills on the Navy, Vic- 
 tualling, Transport, and Ordnance, Boards, was a 
 debt incurred ; and that in the last year there 
 was a deficiency of 3 or 4 millions encreased by 
 whatever proportion of 27 millions of exports 
 was not paid for within the year. The evidence 
 of all this was before the Committee, or at its 
 command; had they thought fit to bring it for- 
 ward, it is probable the public would have deem- 
 ed the rate of exchange and price of bullion 
 sufficiently accounted for, without engaging in 
 any very vehement controversy, respecting the 
 accuracy of the abstract theories of the Report. 
 
 In proportion as our faith in the Report is 
 staggered, in proportion as we feel compelled to 
 receive with caution the opinions of the Com- 
 mittee, will those of the practical men rise in 
 estimation. In defiance of documents and of 
 statements to Parliament on authority of vast 
 favourable balances, it was the declared opinion 
 of every such man before the Committee, that 
 the balance of payments has been against us, 
 and so the fact has proved. 
 
 I trust it will not be thought that I treat 
 lightly, much less with anything like disre- 
 spect, the arguments contained in the Report, 
 and the publications to which I hav r e alluded. 
 I pass them by, because my sole object is tp 
 adduce facts on which others may reason. It 
 
47 
 
 would unquestionably be difficult to deny 
 the abstract truth of many of the theories con- 
 tained in them ; but, if abstractedly true, they 
 are not always applicable. At a time when the 
 absence, at least, if not the scarcity of gold is 
 the ground of complaint, they reason on its 
 operation as a vis mediatrix, as if it still form- 
 ed the circulating medium, and was every 
 where attainable. They speak of increased ex- 
 portation from reduced prices as a general con- 
 sequence, wholly disregarding the operation of 
 embargoes, non-intercourse enactments, licen- 
 ces, orders of council, and Milai decrees, in 
 the particular case. At a moment when we 
 were compelled to receive corn, even from our 
 enemy, without the slightest stipulation in fa- 
 vour of our own manufacturer, and to pay neu- 
 trals for bringing it, Mr. Ricardp tells us, that 
 the export of bullion and merchandize, in pay- 
 ment of the corn we may import, resolves it- 
 self entirely into a question of interest, and 
 that, if we give coin in exchange for goods, it 
 must be from choice, not necessity. Whilst 
 providing against famine, he tells us, that we 
 should not import more goods than we export, 
 unless we had a redundancy of currency : wri- 
 ting in the end of 1809, Mr. Ricardo tninks 
 it necessary for Mr. Thornton to shew, (in sup- 
 port of his opinion, that a demand for bullion, 
 
48 
 
 and an increased price, might be occasioned by 
 an importation of corn,) " Why 'an unwilling- 
 ness should exist in the foreign country to re- 
 ceive our goods in exchange for their corn; 
 and, that if such an unwillingness did exist, we 
 should consent to indulge it." This equalising 
 system is a very just one, where it meets with 
 no external impediments ; but, when applied to 
 practice, it appears to me like the experiment 
 in vacuo, where all friction, all obstruction, 
 being removed, and the power of gravitation 
 alone allowed to operate, the guinea and the 
 feather descend with equal velocities. The fact 
 is undeniably true under the circumstances of 
 the experiment, but it is true only within 'the 
 limits of an exhausted receiver, and is, there- 
 fore, wholly inapplicable to any of the common 
 purposes of life. 
 
 The three propositions, to which I have in the 
 preceding pages called the attention of the rea- 
 der, appear to have been brought forward by 
 the Committee, as well as by the authors on 
 whose theories the Report is founded, to induce 
 the admission of the depreciation of the paper- 
 currency of this country as the necessary con- 
 sequence of the impossibility of accounting for 
 the depression of the exchanges and the in- 
 creased price of bullion in any other way; 
 they may be termed negative arguments. If, 
 
49 
 
 by what has been brought under the notice of 
 the reader, this dilemma is in any degree re- 
 moved, the positive arguments which remain to 
 be examined are relieved of a weight which 
 oppresses and restricts their free operation in 
 the Report of the Committee. 
 
 The Committee is of opinion, that the paper- 
 currency is issued to excess. This opinion is 
 founded on two minor propositions : 
 
 1st. That the Bank possesses the power of 
 adding to the amount of their notes in circu- 
 lation beyond the absolute deman^l for paper, as 
 a circulating medium. 
 
 2nd. That their issues regulate those of the 
 country banks, which are dependant upon and 
 proportionate thereto. 
 
 Previously to the year 1797, the affairs of 
 the Bank of England were veiled in mystery; 
 the amount of their notes in circulation was not 
 even conjectured by the best-informed men ; 
 and it was deemed a sort of sacrilege to pry 
 into their secrets. At that period many lead- 
 ing facts were made known, and information 
 has since been annually communicated to Par- 
 liament of the extent of their issues ; much ad- 
 ditional light was thrown on the nature of their 
 dealings, by the Finance Committee, in 1807; 
 and it might reasonably have been expected, 
 that all that could, with propriety, be made 
 
 H 
 
50 
 
 public would have been developed on the pre- 
 sent occasion. Such expectation, wherever it 
 was entertained, has been greatly disappointed : 
 instead of ascertaining facts which the expe- 
 rience of the Governors and Directors who 
 were examined would have stamped with the 
 seal of authority, the Committee has, generally 
 speaking, called for opinions, and, where these 
 have proved adverse to the theory which it 
 was intended to establish, has been more occu- 
 pied in refuting them, and proving their ab- 
 surdity, than in ascertaining on what they were 
 founded. 
 
 In the examinations of the Directors of the 
 Bankj inserted in the Appendix, I find but two 
 facts of any importance bearing on the question 
 now under consideration, viz. the power of the 
 Bank to increase at pleasure the circulation of 
 their notes, the one was wholly disregarded 
 and the other treated as absurd ; both occur 
 in answer to the question ; " What is the cri- 
 terion which enables the Bank to keep the issue 
 of bank-notes within the limit which the occa- 
 sion of the public requires, and to guard against 
 excess in the circulation of the country?" 
 This question occurs virtually more than once, 
 and the answer is this ; 1st. The paper would 
 revert to us, if there were a redundancy in cir- 
 culation ; 2dly. By discounting only solid paper, 
 
51 
 
 given, as far as we can judge, for real transac- 
 tions. 
 
 It would have been highly interesting to 
 have procured some practical illustration of 
 the first part of the answer, and it was indis- 
 pensihly necessary to a right understand- 
 ing of the subject, to have obtained full ex- 
 planation of the latter. To the former, the 
 Committee paid very little attention ; and they 
 appear to have held the latter extremely cheap; 
 yet this latter criterion seems to be considered 
 as a sort of Bank axiom, and has a sanc- 
 tion which entitles it to more respect than it 
 has received. To understand this subject 
 aright, it is requisite to analyse, in some de- 
 gree, the circumstances attending the circu- 
 culation of bank-paper. Mr. Kicardo has 
 assimilated the J3ank of England, . during 
 the restriction, so far as relates to the effects 
 of its issues, to a gold-mine, the produce 
 of which, being thrown into circulation, in 
 addition to a circulating- medium already suf- 
 ficient, is an excess; and has the acknow- 
 ledged effect of depreciating the value of the 
 existing medium, or, in other words, of raising 
 the prices of commodities for which it is 
 usually exchanged. But Mr. Ricardo has 
 not stated, what is essential to the compari 7 
 sion, why it is that the discovery of a gold- 
 
mine would produce this effect. It would pro- 
 duce it, because the proprietors would issue 
 it, for whatever services, without any engage- 
 ment, to give an equal value for it again to 
 the holders, or any wish, or any means, 
 of calling back and annihilating that which 
 they have issued. By degrees, as the issues 
 'increase they exceed the wants of circula- 
 tion ; gold produces no benefit to the holder 
 as gold; he cannot eat it, nor clothe himself 
 with it; to render it useful, he must ex-* 
 change it either for such things as are im- 
 mediately useful, or for such as produce re- 
 venue. The demand and consequently the 
 prices of commodities and real properties, 
 measured in gold, increases and will continue 
 to increase so long as the mine continues to 
 produce. And this effect will equally follow 
 whether, under the circumstances I have 
 supposed, the issue be gold from a mine 
 or paper from a government-bank. All this 
 I distinctly admit ; but, in all this statement, 
 there is not one point of analogy to the 
 issues of the Bank of England. 
 
 The principle on which the Bank issues its 
 notes is that o' ? loan. Every note is issued 
 at the requisition of some party, who be- 
 comes indebted to the Bank for its amount, 
 and gives security to return this note, or an^ 
 
53 
 
 other of equal value, at a fixed and not re- 
 mote period, paying an interest, proportion- 
 ed to the time allowed. " The notes of the 
 Bank of England," the Committee observes, 
 " are principally issued in advances to govern- 
 ment for " the public service," (anticipations 
 ; of the taxes and instalments of loans, to be 
 repaid by the public,) and in advances to the 
 merchants upon the discount of their bills/' 
 
 It is a consequence of this mode of issue that 
 it costs something, namely the interest on the 
 the money borrowed, to take a note out. of the 
 Bank. No note is isued in payment of any ser- 
 vice, moral or physical, constituting the cowhide-, 
 ration font, and there is therefore no analogy be- 
 tween the circumstances of the issues from a gold 
 mine and those from the Bank of England* In the 
 case of an excessive issue of gold beyond the 
 the wants of circulation, the excess is brought 
 to market to be made 'productive, it grows cheap, 
 and commodities grow dear. In the case of 
 an excess of bank-paper the remedy is more 
 simple : the " surplus/' says tiie late Governor of 
 the Bank, " would revert to us by a diminished 
 application for discounts and advances on go- 
 vernment-securities." This parr of the subject 
 requires illustration, because it cannot be very 
 generally understood by those who must ulti- 
 mately decide on the merits of the Report. 
 
.54 
 
 The Comniit^e has entered into some detail 
 in the Report, and has annexed some documents 
 in the Appendix, to illustrate the practice which 
 obtains in the transaction .of business by the 
 London bankers, and in the money-circulation of 
 the metropolis, but their observations afford 
 a very inadequate view of the subject, and the 
 whole of page 23 must be taken as evidence 
 that, by those who drew the Report, the subject 
 was not perfectly understood. 
 
 By the practice of London, strengthened by 
 a, resolution of the Bank of England, not to 
 discount any bill unless payable at the house of 
 a reg,iilar banker, all the commercial payments 
 of the metropolis, as well as those of the coun- 
 try transacted in London, are made through the 
 agency of a banker. In 19 cases out of 20, 
 where the payment is not to a revenue-board, 
 the business is transacted between two bankers, 
 one on the part of the debtor, the other on the 
 paTfcof the creditor. It is become an establish- 
 ed practice between bankers not to call upon each 
 other for these payments before 4 o'clock ; and 
 then mutually to write off or exchange the res- 
 pective charge which each has upon the other,and 
 to pay the difference only ; by which contri- 
 vance, so great an economy of bank-notes is ef- 
 fected, that an average of ,220,000 of notes 
 is found sufficient, according to the evidence of 
 
55 
 
 the inspector of the clearing-house, to settle the 
 balance of daily transactions to the amount of 
 ^4, 700,000. Owing to this circumstance the 
 bankers have been enabled to lower, yery consi- 
 derably, their stock of notes, and < to place the 1 
 same productively in bills and others securities. 
 This comparatively unprepared state to answer 
 unforeseen demands has led to other improve- 
 ments in banking. A great proportion of ban- 
 kers have now accounts open with the Bank, 
 where, if they take care to hold a sufficiency of 
 good bills, they can always get money at one 
 day's notice ; and, as a still farther accommoda- 
 tion, accredited brokers now hourly walk Lom- 
 bard-street, take the superfluous cash of one 
 banker, and lend it to another, in any sums for 
 any time, a week, a day, or for an indefinite pe- 
 riod, to be repaid when called for ; nay, so nicely 
 is the scale now adjusted, that a loan of bank- 
 notes before 3 o'clock, repayable by draft at the 
 clearing at four, is no uncommon or unimportant 
 accommodation to the most opulent parties in 
 the money-market. 
 
 From this statement it is evident that the 
 banking-houses in London are like so many cis- 
 terns, disposed on each side of the street, be- 
 tween which pipes of communication are intro- 
 duced, the overplus of one will presently find- 
 
56 
 
 its way into the next, and whilst one is deficient 
 none will overflow. 
 
 The Bank has of late become a party to 
 a very important arrangement to economise 
 bank-notes. The daily demand of the Bank on 
 the bankers for the amount of bills accepted 
 and payable at their Several houses is of course 
 considerable, and used to be made at an early 
 period of the day, before the notes were, issued 
 for bills discounted on the same day, and with- 
 out any previous information to the bankers of 
 what the amount charged on them might be, 
 and of which they had no means of judging. 
 The Bank has, for some time past, notified 
 the extent of the demand in the early part of 
 the day, and taken the amount at four o'clock ; 
 receiving in part-payment any draft on the Bank 
 for discount, or otherwise, which the bankers 
 may happen to hold, instead of bank-notes. 
 Every endeavour, it may fairly be inferred, 
 therefore, is used to economise bank-notes, and 
 restrict the circulation ; by the bankers, for the 
 purpose of increasing their profits, which depend 
 on the proportion of their deposits which they 
 can turn into quick stock ; and by the Bank, 
 with a view to the public accommodation, or to 
 save an unprofitable issue of bank-notes. Still, 
 it may be said, if the Bank gives way to the 
 
57 
 
 applications for discount, which may be as un- 
 limited as the spirit of adventure, bank-notes 
 may be multiplied ad infmitum, at the will of 
 the Directors. The Bank Directors say other- 
 wise, " If we issue too many notes, the excess 
 will return upon us." 
 
 There exists in the commercial world that de- 
 gree of disinclination to discount at the Bank 
 which leads every man to recur to his banker 
 for assistance before he sends his paper to the 
 Bank ; and on the other hand a banker does not 
 allow a respectable customer to go to the Bank 
 for accommodation, whilst he can with any 
 convenience furnish it himself. This is, in some 
 measure, matter of feeling on both sides ; and 
 not only so, for the Bank advances money on 
 bills of a particular description only, and is un- 
 deviating in its adherence to rules, and even to 
 forms ; neither does it take bills as a security 
 for money to be repaid at the will of the bor- 
 rower, as bankers do; but assumes the pro- 
 perty in the bills, deducting discount for the 
 whole term unexpired ; so that a party wanting 
 money for a week must pay two months iu- 
 terest for it, if he have no bills at shorter date 
 to offer. 
 
 I have already shewn with what degree of 
 rapidity money finds its level amongst the 
 bankers in London, and it results, therefore, as 
 
 i 
 
58 
 
 a general inference, that, whilst there is money 
 unemployed and to spare in the city, discounters 
 of the first class will not present themselves 
 at the Bank ; this statement will lead, I 
 apprehend, to an explanation of the an- 
 swer of the Directors to the inquiry of the 
 Committee as to any rule by which they 
 regulate their issues of notes so as to prevent 
 excess. So long as the amount of notes in the 
 hands of the public is not more than the par- 
 ties holding them are willing to retain in their 
 hands unemployed, for the purpose of making 
 their daily payments, there is obviously no ex- 
 cess of that description which influences the 
 price of commodities. When the amount goes 
 beyond this, the surplus instantly fastens on the 
 best bills and most eligible government-securi- 
 ties, chiefly on the first ; and the effect even of 
 a very small surplus will, whilst it continues, be 
 surprisingly great. If it fall into the hands of 
 any discounter who lias occasion to pay money 
 to the re venue- boards or to the Bank, the notes 
 are cancelled, and the excess removed. If other- 
 wise, the same sum of ,50,000 may pass suc- 
 cessively through the hands of every banker in 
 Lombard-street, and absorb in its passage all the 
 best bills in the market, to an unlimited amount; 
 for if A. a merchant, borrow it of B. a banker, 
 fae immediately pays it away to C. who deposits 
 
59 
 
 it without loss of time (indeed, as I before ol> 
 served, he never withdraws it) with the same 
 or other bankers ; but, however often this trans- 
 action takes place during the day, it makes no 
 real reduction in the supposed excess of notes, 
 which will be as superabundant after the last 
 discount it has effected as before the first. But 
 the ca^se will be speedily altered, the demand 
 for discounts at the Bank is diminished on the 
 morrow, to the extent of the multiplied acconir 
 modation afforded by the excess, whilst its call 
 on the public for the payment of discounted 
 bills falling due is undiminished. 
 
 The redundancy of .notes reverts, therefore, 
 (and in more than a due proportion, which ac- 
 counts for some of the effects frequently ex- 
 perienced,) to the Bank, more being paid in than 
 are taken out, and the amount in circulation is 
 diminished. 
 
 The recurrence of a demand for notes by the 
 first class of discounters (those which the di- 
 rectors distinguish as solid paper for real trans- 
 actions) will indicate at once the abatement of 
 the excess ; and it does appear to me that the 
 criterion, or rule, which the directors have stated 
 is a sufficient one. 
 
 The effectual and rapid operation of this con troul 
 over the Bank issues receives satisfactory illus- 
 tration by reference to the amount of bank-notes 
 in circulation at the period immediately preceding 
 
60 
 
 and following the issue of dividends, the in- 
 creased circulation arising from an issue on each of 
 these occasions of upwards of five millions being 
 within very few days hardly perceivable. 
 
 In April 1809, for instance, im- 
 mediately preceding the payment of 
 dividends, the amount of notes of 
 c5 and upwards was . < 13,000,000 
 
 Subsequently to the 1 1 th an issue 
 took place of four millions, yet on 
 the 7th of May the amount in cir- 
 culation was only 13,100,000 
 
 On the 7th of July, after the quar- 
 terly payment had been made to 
 the Bank, and when the circulation 
 was at its lowest ebb, the amount 
 of notes above 5 was 12,800,000 
 
 And of the issue of seven millions 
 between the 1 1th and the end of the 
 month, no evidence appeared on the 
 7th of August beyond a circula- 
 tion of 13,100,000 
 
 How much earlier the effect was produced 
 the paper in the Appendix to the Report does not 
 in these instances shew, but the more detailed 
 accounts No. 38, 39, and 40, enable me to 
 state that in January, 1810, the large issue made 
 on the 9th and subsequent day had lost its ef- 
 fect by the 22d, on which day the circulation 
 was reduced below the average of December ; 
 
61 
 
 on this occasion, the speedy reduction may be 
 considered, perhaps, as promoted by the partial 
 redemption of the loan in the hands of the Bank 
 at that period. But in April no such cause 
 operated, yet it appears that by the 2 1st of April 
 the circulation was within ,100,000 of the 
 amount on the 31st of March, although in the 
 intervening period nearly four millions had been 
 issued for dividends on the public funds. 
 
 In the year ending Jan. 1810, the interest on 
 the public funds, exclusive of the proportion 
 received by the commissioners for reducing the 
 debt, amounted to about 26 millions, or, de- 
 ducting the property-tax, to 23^ millions; which 
 was issued to the public quarterly, in the pro- 
 portions of 7^ millions in Jan. and July, and 44- 
 millions nearly in April and October.* 
 
 It is observable that, although the January and 
 July dividends exceed by three millions those of 
 the other quarters, there is no perceivable dif- 
 ference in the period within which the circula- 
 tion is reduced to the average amount. 
 
 The efficiency of thecontroul which the pub- 
 lic holds over the issues of the Bank is in some 
 
 * It appears by the account No. 4, in the Appendix to the 
 second report of the Finance Committee of ISO/, thet the 
 amount of dividends due is generally issued within about 
 500,000, before the end of the month in which it is pay w - 
 M* 
 
62 
 
 measure governed by the amount of discounted 
 bills in the hands of the Bank, compared with 
 the amount of advances to government on se- 
 curities payable at more remote or less .certain 
 periods, and the total amount of notes. The 
 two latter amounts we know, the former is not 
 distinctly before the public, but the Committee 
 has stated, from a communication made in con- 
 fidence, that, whilst the advances to govern- 
 ment for the two last years are less than they 
 were for any of the six years before the restric- 
 tion, the amount of bills discounted in the last 
 year bears a very high proportion to their largest 
 amount in any year preceding 1797; without 
 going into calculation it will readily be allowed 
 that the amount of these bills, this demand on 
 the public, far exceeds any possible or supposed 
 excess; and, if there be any where a superabund- 
 ance of notes, it is therefore very easy to re- 
 duce it. 
 
 I have entered into the preceding detail for 
 the purpose of shewing the practical operation 
 of the rule by which, as the directors have stated, 
 the bank regulates its issues so as to avoid ex- 
 cess. I think it will be satisfactory to my prac- 
 tical readers. By those of a more speculative 
 cast the theories of the Report will still be pre- 
 ferred, but for such I have a more cogent ar- 
 gument in stove, and one to which they will 
 
63 
 
 hardly demur; whether the rule in question be 
 really the governing principle of the Bank, 01 
 whether it was thrown before the Committee 
 with any malicious intent, I dare not decide, 
 but the fact certainly is, that the axiom, 01 rule 
 of conduct, on which the Committee has been 
 pleased to heap contempt and ridicule, respect- 
 ing which they have declared that the doctrine 
 is fallacious, and leads to dangerous results, was 
 promulgated by, and is founded on, the autho- 
 rity of Dr. Adam Smith, and was proposed to 
 the Committee nearly in his own words. I 
 quote the passage from the second chapter of the 
 second book of the Wealth of Nations. 
 
 " What a bank can with propriety advance to a 
 merchant or undertaker of any kind is not either 
 the whole capital with which he trades, or even 
 any considerable part of that capital, but that 
 part of it only which he would otherwise be 
 obliged to keep by him unemployed, and in 
 xeady money, for answering occasional demands. 
 If the paper which the Bank advances never 
 exceeds this value, it can never exceed the 
 value of the gold and silver which would 
 necessarily circulate in the country if there 
 were no paper-currency, it can never exceed 
 the quantity which the circulation of the 
 country can easily absorb and employ." True ; 
 but how shall we ascertain when it exceeds 
 this value. " When a bank discounts to a 
 
64 
 
 Merchant a real bill of exchange, drawn by a 
 real creditor upon a real debtor, which, as soon 
 as it becomes due, is really paid by that debtor, 
 it only advances to him a part of the value which 
 he would otherwise be obliged to keep by him 
 unemployed and in ready money jor answering 
 occasional demands" Consequently its advances 
 will not exceed the quantity which the circula- 
 tion of the country can easily absorb and em- 
 ploy. 
 
 That the Committee may be right and Dr. 
 Smith wrong is very possible ; I am not theorist 
 enough to decide between them ; but the whole 
 weight of Adam Smith's authority lies on the 
 passage, and must be raised before the theory 
 contained in it can be overturned. It is brought 
 forward by him expressly as a rule for the con- 
 duct of banks, and he adds, " little expense can 
 ever be necessary for replenishing the coffers of 
 such a bank. (Ed. 179& vol. 1, page 455.) 
 
 In the course of the examination of the 
 Bank Directors by the Committee, it appear- 
 ed thatf they do not refer to the state of 
 the exchanges and price of bullion as a 
 rule by which to regulate their advances, 
 conceiving " that there is no connexion be- 
 tween the exchanges and the amount of Bank 
 circulation. " That this is also a great prac- 
 tical error, the Committee infers from the ex- 
 
65 
 
 periehce of all nations, where a paper-currency 
 has been in use, and they advert briefly to the 
 effects produced on the exchanges by the 
 paper-currencies of North America, of France, 
 of Portugal, and Austria. They observe, how- 
 ever, that "-excess and want of confidence 
 have usually combined to depreciate the paper- 
 currency of foreign countries ; but, as want 
 of confidence has no place in our situation 
 at present, they adduce examples of the 
 other sort, in which the depreciation was 
 produced by excess alone." As the anecdotes 
 are stated, it would certainly appear that the 
 paper was in the adduced instances excessive, 
 and yet the fact most assuredly is, that in 
 neither case was excess the cause of the de- 
 preciation, and the assumption directly con- 
 tradicts the obvious meaning of the docu- 
 ments referred to. The first instance pur- 
 ports to be cited from Adam Smith, and 
 refers to the latter part of the 2d chap, of the 2d 
 book of the Wealth of Nations. It is thus given 
 in the Report, (page 17.) "In Scotland, about 
 the end of the seven years war, banking was 
 carried to a very great excess, and, by a prac- 
 tice of inserting in their promissary notes 
 an optional clause of paying at sight or 6 
 months after sight with interest, the conver- 
 tibility of such notes into specie at the will 
 
 K 
 
66 
 
 of the holders was, in effect, suspended. These 
 notes accordingly became depreciated, in com- 
 parison with specie ; and while the abuse lasted 
 the exchange between London and Dumfries, 
 for example, was sometimes 4 per cent against 
 Pumfries, while the exchange between London 
 and Carlisle, which is not 30 miles distant 
 from Dumfries, was at par. The Edinburgh 
 banks, when any of their paper was brought in 
 to be exchanged for bills on London, were 
 accustomed to extend or contract the date 
 of the bills they gave, according to the state 
 of exchange, diminishing in this manner the 
 value of their bills, nearly in the same degree 
 in which the excessive issue had caused their 
 paper to be depreciated. This excess of 
 paper was at last removed by granting bills 
 on London at a fixed date," Sec. 
 
 That the depreciation might be thus re- 
 medied is natural enough ; but it is not an 
 equally obvious remedy for excess. The 
 fact is, that, in the original passage in the 
 Wealth of Nations, there is not one word 
 about excess ; and Dr. Smith assigns a dif- 
 ferent cause and also a different remedy for 
 the depreciation. Speaking of the optional 
 clause, he says " the promissary notes of 
 those banking companies constituted, at that 
 time, the far greater part of the currency 
 
67 
 
 of Scotland, which this uncertainty of pay- 
 nent degraded below the value of gold and 
 silver money ;" he states the fact respecting 
 the difference of exchange between Dumfries 
 and Carlisle, and adds : " but at Carlisle bills were 
 paid in gold and silver, whereas at Dumfries they 
 were paid in scotch bank-notes, and the un- 
 certainty of getting those bank-notes exchanged 
 for gold and silver coin had thus degraded 
 them below the value of that coin: The act 
 of parliament which suppressed 10 and 5 
 shilling notes suppressed likewise this op- 
 tional clause, and, thereby restored the ex- 
 change between England and Scotland to 
 its natural state." 
 
 Again the Committee refers to two tracts 
 in Lord Somers' collection, one by Mr. God- 
 frey, one of the original directors of the 
 Bank, the other by Dr. Drake, published in 
 16*99; as authority for the statement, "that 
 within a short period after the establishment 
 of the Bank, (during the financial distresses 
 in the reign of King William,) the effects of a 
 depreciation of the coin, by wear and clipping, 
 was coupled with the effects ofanexcessiveissue 
 of paper, and that, by the liberality of their 
 loans," ( to government and to individuals, ) 
 " the quantity of the notes of the Bank became 
 excessive, their relative value was depreciated, 
 and they fell to a discount of 17 per cent,* 
 
68 
 
 and the exchange with Holland, which had 
 been before a little affected by the remittances 
 for the army, sank as low as 25 per cent, 
 below par. At length the true remedies 
 were resorted to, first by a new coinage of 
 silver, &c. and, secondly, by taking out of 
 circulation the excess of bank-notes; this 
 operation appears to have been effected very 
 judiciously, : Parliament consented to enlarge 
 the capital-stock of the Bank, but annexed 
 a condition, directing that a certain propor- 
 tion of the new subscriptions should be made 
 good in bank-notes, In proportion to the 
 value of bank-notes sunk in this manner the 
 value of those which remained in circula- 
 tion began to rise; in a short time the notes 
 were at par, and the foreign exchanges near- 
 ly so." 
 
 I have referred attentively to both these 
 tracts, and have endeavoured fully to compre- 
 hend their meaning as well as their language, 
 and am unable to extract one syllable from 
 either of them, to countenance the idea of 
 excessive circulation in the instance referred to 
 as the cause of depreciation of the notes, or of 
 the reduction of the rates of exchange, al- 
 though the fact of depreciation is distinctly sta 
 ted . Mr. Godfrey's tract is important to the 
 present purpose only as it shews that the adr 
 
f>9 
 
 vances of the Bank were made, at that tune, 
 on principles so different from those which for 
 a century past have governed its conduct as to 
 preclude all comparison or analogy. The Bank 
 advanced money on real securities ; mortgages 
 and pledges of commodities not perishable ; 
 they also allowed an interest of 3 per cent, on 
 their notes in circulation. But Mr. Godfrey 
 mentions neither excess nor depreciation. 
 
 The important parts of the statement are 
 taken from Dr. Drake ; but I cannot con- 
 cur in the paraphrase of the Committee : he 
 speaks of the deteriorated state of the coin, 
 and of the difficulties which had attend- 
 ed the recoinage just then completed. He 
 states that the notes of the Bank had been at a 
 discount of 20 per cent. and the government- 
 tallies at a discount of 40, 50, and 60, per 
 cent, and that Parliament had provided a re- 
 medy, 1st, by a new coinage of silver, and, 2dly, 
 by authorising the Bank to augment its capital 
 on condition that the subscriptions should be 
 made ^ in tallies and in bank-notes. The sub- 
 scription amounted to one million,and Parliament 
 assigned funds for interest thereon at 8 per cent, 
 to be raised by a tax on salt. By this measure 
 ^800,000 of tallies were taken out of the mar- 
 ket, and ,200,000 of bank-notes also; but 
 the condition of the subscription referred obvi-r 
 
70 
 
 pusly to the obligation to take 4 tallies ; which 
 hung as a weight on the exchequer, and which 
 it could not discharge; be this as it may, Par- 
 liament had certainly no idea that bank-notes 
 were excessive in the sense of the Committee; 
 for Dr. Drake says, that, as a r* medy for the 
 scarcity of money, Parliament issued 2 millions 
 of .exchequer-bills as low as 5 and jlO each, 
 ** which answered the necessities of commerce 
 among the meaner people for the common con- 
 veniences of life," and, " these bills passed in 
 payment as so many counters, which the peo- 
 ple were well enough satisfied to receive, be- 
 cause they knew the exchequer would receive 
 them again as so much ready money." Can it 
 be assumed under these circumstances that the 
 depreciation of bank-notes was occasioned by 
 their excess as a medium of circulation ? Dr. 
 Drake certainly says, " the value of 200, 000 
 of bank-notes having been sunk ,by the new 
 subscriptions, the rest, as it was reasonable to 
 believe they would, began presently to rise in 
 worth," and this expression might seem to 
 countenance the statement of the Committee, 
 but Dr. Drake's opinion, supposing he intend- 
 ed to distinguish between excess and discredit, 
 is of less weight than his facts, and he states 
 that no other way could have been found out 
 to have retrieved their sinking credit;" " that 
 Parliament took into consideration by what 
 
71 
 
 means they might restore t}it wedit of the bank 
 of England, which was then at a low* ebb," and 
 I know not where the Committee has met with 
 the information (the correctness of which I do 
 not mean to impeach) that the Bank Stock 
 was at a premium, whilst the notes were at a 
 discount. An adequate cause of the deprecia- 
 tion of their paper might easily be discovered, 
 without supposing it excessive. 1st. Bank- 
 notes were payable in silver, then a legal ten- 
 der and the usual medium of payment, which 
 was so depreciated by clipping, that 30s. were 
 given in exchange for a guinea : moreover, du- 
 ring the recoinage the Bank " thought proper," 
 as Dr. Smith expresses it, " to discontinue the 
 payment of their notes, which necessarily oc- 
 casioned their discredit ;" and the Bank had 
 not only lent their whole capital to govern- 
 ment, (then in such difficulties, that Dr. Drake 
 observes, unless a remedy had been found for 
 the loss of credit, the new government could 
 not have continued much longer,) but held 
 tallies (then at a disconnt of 40, 50, and 60, 
 per cent.) to an amount exceeding that of 
 their notes outstanding, and had even borrow- 
 ed money in Holland, as appears by the ac- 
 count presented by them to the House of Com- 
 
 * See Dr. Drake's tract, entitled " a short History of the last 
 Ptr!tament,"in vol. 8. of Lord Somers* Collection, page 164. 
 
72 
 
 irons, on the 4th of Dec. 1696, which I find 
 tran sen bed in Mr. Fairman's Brief, and appa- 
 rently accurate, Account of the British Funds. 
 The account is thus stated : 
 
 To sealed bills outstanding . 893,800 
 
 To notes for running-cash . 764,196 10 O 
 
 To money borrowed in Holland 300,000 O 
 To interest due on bank-bills 
 
 outstanding 17,876 
 
 ,1,975,872 10 O 
 
 The assets to answer this debt \vere : 
 
 By tallies on several parlia- 
 mentary securities .... <!, 784,576 16 
 
 By half a year's deficiency 
 on the fund of ,100,000 
 per annum 50,000 
 
 By cash, pawns, mortgages, 
 
 &c. 266,610 16 
 
 Total credits . . . 2,101,18? 12 
 Total debt .... 1,975,872 10 
 
 Balance in favour of the Bank .125,315 2 O 
 
 . 
 
 Mr. Fairman observes, but does not state 
 his authority, that, when the " new coinage 
 was completed, Bank-stock, from being consi- 
 
73 
 
 forcibly under par, got up to' 112." It will be 
 recollected that these two cases are cited, in 
 the Report, as instances in which the depre- 
 ciation of the paper-currency and consequent 
 depression of the exchange were produced by 
 excess alone:* that viewed in this light they 
 " appear to the Committee to afford much 
 instruction on the subject of their inquiry;" 
 and I have not therefore thought it altogether 
 unimportant to ascertain the nature and extent 
 of the instruction to be derived from them. 
 
 The next proposition to be examined is that 
 which relates to the country banks ; that the 
 Bank, by its issues, regulates the amount of 
 country- bank paper also. The practical im- 
 portance of this question would not be great 
 if it were admitted, which I cannot assume, 
 that the public demand controuls the issue of 
 bank-notes, for thenit necessarily controuls, on 
 the principle of the Committee, the circulation 
 of the country banks also. The paragraph in 
 the Report in which this proposition is brought 
 forward in page 28 runs in these words. 
 
 They " must observe that so long as the 
 
 * The famous Mr. Law, who wrote in 1720, ninety years 
 nearer the transaction, observes, " I do not know how their 
 notes came to be at a discount, whether from the circumstances 
 of the nation or their own ill management.'' 
 
 L 
 
71 
 
 cash-payments of the Bank are suspended the 
 whole paper of the country bankers is a super- 
 structure, raised on the foundation of the 
 paper of the Bank of England. The same 
 check which the convertibility into specie,under 
 a better system, provides against the excess of 
 any part of the paper-circulation, is, during 
 the present system, provided against an excess of 
 country-bank paper by its convertibility into 
 Bank-of-Eiigland paper. If an excess of pa- 
 per be issued in a country district, whilst the 
 London circulation does not exceed its due 
 proportion, there will be a local rise in prices 
 in the country district, but prices in London 
 will remain as before. Those who have the 
 country paper will prefer buying in London, 
 where things are cheaper, and will therefore 
 return that country paper upon the banker who 
 issued it, and will demand of him Bank-of- 
 England notes or bills upon London ; and 
 thus, the excess of paper being returned upon 
 the issuers for Bank-of-England paper, the 
 quantity of the latter necessarily and effectual- 
 ly limits the quantity of the former. This is 
 illustrated by the account which has been given 
 of the excess and subsequent limitation of the 
 paper of the Scotch banks, about the year 
 1763. If the Bank-of-England paper itself 
 should at any time during the suspension of 
 
75 
 
 cash-payments be issued to excess,, a corres^ 
 ponding excess of country-bank paper may be 
 issued, which will not be checked : the founda- 
 tion being enlarged the superstructure admits a 
 proportionate extension : and thus, under such 
 a system, the excess of Bank paper will pro- 
 duce its effect upon prices not merely in the 
 ratio of its own increase, but in a much higher 
 proportion." The nature and limits of my ob- 
 servations forbid my engaging in a controversy 
 with this formidably-metaphysical paragraph. 
 I offer it to my readers as a specimen of the 
 happy facility with which foundations arc laid 
 without possessing the soil, and superstructures 
 erected on it without ascertaining its solidity. 
 
 The Committee has not defined the sense in. 
 which they use the term excess of currency, J 
 therefore suppose it to be used in the Report 
 in the sense in which it is used by Dr. Smith, 
 as denoting a quantity greater than the circu- 
 lation of the country can easily absorb or em- 
 ploy. Excess being assumed in the country 
 paper, London notes or bills upon London will, 
 it is said, be demanded in exchange; and thus 
 the excess of country paper being continually 
 returned upon the issuers, what follows? that 
 the country paper is kept within the point of 
 excess? not at all; " that the quantity of the 
 latter necessarily and effectually limits the 
 
76 
 
 quantity of the former." Does this follow as a 
 consequence? admitting the accuracy of the 
 reasoning, under the supposition that the 
 country notes were actually paid in bank-notes, 
 does it apply, under the admission that they 
 are paid by bills on London, since, as we have 
 already shewn, the payment of these has very 
 little reference to bank-notes? Again. " If 
 the Bank-of-England paper itself should at any 
 time be issued to excess, a corresponding ex- 
 cess may be issued of country-bank paper, 
 which will not be checked. The foundation 
 being enlarged, the superstructure admits of a 
 proportionate extension:" is this a legitimate 
 inference? The country notes, if issued to 
 excess, will be brought back to be exchanged 
 for London notes; but does it follow that the 
 country-bank paper, if issued to excess, will 
 not be checked, because there is already more 
 Bank paper in circulation than the country can 
 absorb and employ. Admitting for the mo- 
 ment the theory about local prices and districts, 
 which some of my readers will, I doubt, think 
 a very wild one, how is it applicable to the 
 case of an excess of Bank-notes occasioning 
 an additional issue of country notes. The 
 Report supposes a case, that an excess of paper 
 is issued in a country district, and draws an 
 inference from it different, perhaps, from th^t 
 
77 
 
 which is obvious ; but the question before us is 
 the effect on country notes of an increase, be 
 it excess, of London notes. J will therefore 
 repeat the argument of the Committee, chang- 
 ing town for country, and see what result it 
 produces. 
 
 If an excess of paper be issued in the Lon- 
 don district, while the country circulation does 
 not exceed its due proportion, there will be a 
 local rise in prices in the London district ; 
 those who have the London paper will prefer 
 buying in the country, where things are cheap- 
 er, and will therefore return that paper upon 
 the Bank, who issued it, and will demand 
 what? Country-bank notes from the Bank ; that 
 cannot be : of the country banker in exchange for 
 Bank-notes ; equally improbable : and yet unless 
 it comes to this how will the superstructure ~f 
 country notes be enlarged in proportion to 
 the extention of the foundation ? If things 
 are cheaper in Liverpool than in London I 
 shall prefer buying there, and if I have too 
 many Bank-notes, I shall (in theory at least) 
 send them to Liverpool in payment ; where, till 
 they are got rid of and returned to London, 
 they may restrict but can never augment by 
 one shilling the circulation of the Liverpool 
 banks. 
 
 The Committee has assumed as an axiom 
 
78 
 
 that country -bank paper is a superstructure rai- 
 sed on the foundation of the paper of the 
 Bank of England. But where do they learn 
 this? They learned from Mr. Stuckey, a conside- 
 rable and experienced banker in Somersetshire, 
 that his houses regulate their issues by. the assets 
 they have in London to pay them, consisting 
 of stock, exchequer- bills, and other con- 
 vertible securities, without much reference 
 to the quantity of Bank-of-En gland notes 
 or specie which they have, although they 
 always keep a quantity of both to pay occa- 
 sional demands. -That it is unquestionably 
 Ins interest, as a banker, to check the cir- 
 culation of bank-notes, and to remit to Lon- 
 don such as he receives beyond the amount 
 which he retains as a deposit. That he ima- 
 gines, if Bank-of-England notes were with- 
 drawn from the parts where they now circu- 
 . dilate, as from the county of Lancaster, 
 where they form the chief circulation, their 
 places Would be immediately filled up by 
 the notes of the country bunks. What is 
 there in this evidence to sanction the opinion, 
 that bank-notes either generate or limit coun- 
 try notes? But, adds the Report, this principle, 
 viz. "that the quantity of bank-notes neces- 
 sarily and effectually limits the quantity of 
 country notes, is illustrated by the account 
 
79 
 
 which has been given of the excess and sub* 
 sequent limitation of the paper of the Scotch 
 hanks, in the year 1763:" The illustration 
 runs thus: "this excess of paper v as at last 
 removed, hy granting hills on London, at a 
 fixed date, for the payment of which excess 
 of paper it was necessary in the Jirst instance 
 to provide large pecuniary funds in the hands of 
 their London correspondents." This illustration 
 affords no assistance to the theory it is intro- 
 duced to support, because it depends on a 
 fact, and the fact relied on is altogether un- 
 founded. Did the Committee really suppose 
 that a Scotch bank, or any other bank, when 
 giving a bill at 40 days date, on London, in 
 payment of its notes, actually deposits, in the 
 first instance, Bank-notes in the hands of its 
 London correspondents ; and farther, that the 
 hanker having possession of them holds them 
 specially appropriated to the discharge of the 
 bills for which they are to provide ? that they 
 could mean this is impossible, yet, if the fact 
 be not so the illustration is wholly inapplicable 
 to the case. In confirmation of the opinion re- 
 specting the dependance of country on town 
 paper, the Committee has adduced a fact and 
 figures which it is necessary to examine, be- 
 cause they afford a remarkable instance of the 
 bias with which evidence is brought forward in 
 
80 
 
 favour of what Mr. Locke terms an " espou* 
 seel proposition." 
 
 Referring to documents received from the 
 Stamp-office, the Report states, that, in 1809, 
 the number of stamps on notes reissuable, in 
 the classes between 2 : 2 and 20 alone, 
 indicate, on an average calculation, an increased 
 issue of notes, to the amount of 3,095,340 
 beyond that of 1808, whence they infer an 
 increased circulation to that extent. The state- 
 ment is given thus : " Number of country- 
 bank notes exceeding , 52 : 2, each stamped in 
 the year ending the 10th Oct. 1808, and 10th 
 Oct. 1809; 
 
 1 80S 1809 
 
 Exceeding ,2 : 2 & not exceeding. < 5 : 5 666,0/1 922,073 
 Exceeding 5 : 5 & not exceeding <20 198,473 380,006 
 
 Averaging the first class at 5, and the second 
 at 10, the stated result is produced. Con- 
 sidering the authority from whence the state- 
 ment proceeds, there is not, I am persuaded, one 
 reader in a hundred who has doubted* its fairness 
 or the justness of its application; yet am I bound 
 to impeach both. Extracting from the docu- 
 ments from the Stamp-office a similar compara- 
 tive statement for the years 180o, 1806, and 
 1809; it will stand thus : 
 
81 
 
 1805 1806 1809 
 
 Exceeding 2 : 2 and not 
 
 exceeding 5 : 5 823,460 832,940 522,073 
 Exceeding 5 : 5 and not 
 
 exceeding 20 302,600 323,100 380,006 
 
 Adopting the calculation of the Committee, it 
 will be found that the increased circulation in 
 1809, beyond that of 1806, is 5 12,000 in three 
 years, instead of 3, 005, 000 in a single year ; and 
 this is the fair mode of comparison; for the Re- 
 port states that these notes are reissuablefor three 
 years. Those issued in 1806 are, therefore, re- 
 ceived in 1809, as those of 1805 are in 1808. 
 The aggregate issue of the two years 1808 and 
 1809 is less than that of 1805 and 1806 by 
 115,477 stamps, equal to 775,000. Had the 
 statement been a fair and correct one, it 
 would yet have been inapplicable to the case. 
 Antecedently to June, 1809, no increase had 
 taken place in the amount of bank-notes 
 beyond the circulation of 1808 ; yet it appears, 
 by the return from the Stamp-Office, No. 53, 
 that the increased demand for stamps alluded to 
 by the Committee took place in the latter end 
 of 1 808 and beginning of 1 809, and that, as the 
 issue of bank-notes increased between July 
 1809, and May 1810, the issue of stamps for 
 country notes materially diminished. 
 
 M 
 
88 
 
 Number of stamps of the classes before stated 
 issued in the following quarters; 
 
 In the quarter ending 5th Jan- 1 809 465,071 
 
 5th April 324,C08 
 
 5th July 371,960 
 
 Total hsues of 3 quarters 1,1 61,03$ 
 
 Between July 1809 and May 1810, 
 the amount of bank-notes increased 
 from 18 to 31 millions, the issue of 
 stamps for country notes (of the 
 same chases) was 
 
 In the quarter ending Oct. J8CJ9 221,719 
 Jan. 1810 284,658 
 
 April 262,365 
 
 . 768,742 
 
 Issue, less in the 3 last quarters $92,297 
 
 Which would imply a reduction in the country 
 circulation, so far as the evidence of the stamps 
 goes, of ^S, 600,000 during the period in which 
 the Bank circulation was increased very nearly 
 to the same amount : had this fact been no- 
 ticed by the Committee, it might, perhaps, 
 have led them to inquire whether the Bank 
 Directors could trace their increased issue to 
 any cause connected with a dimunitiou of coun- 
 try bank-notes.* 
 
 * Mr, Ricardo is also of opinion that the Bank of England 
 
83 
 
 Whatever opinion be entertained on these 
 points, however the questions resecting the 
 powers of the Bank be disposed of, still the 
 opinion of the Committee, that, in point of fact, 
 the paper-circulation of the country is exces- 
 sive, stands as the prominent feature of die Re- 
 port. As the fact is not apparent at least, 
 (I mean that there is more paper than the 
 country can easily absorb and employ) the onus 
 probandi seems to He on the Committee, but 
 they have thrown it altogether off their should- 
 ers, they have brought forward neither evi- 
 dence nor documents in support of the opinion, 
 
 is the great regulator of country-bank paper, " when they in- 
 crease or decrease the amount of their paper, the country 
 banks do the same." And he grounds this opinion on the 
 theory of prices tending; to equalize the circulating medium in 
 dislrie.* having free intercourse. It is foreign to my purpose 
 to enter into an argument on this subject ; but it appears to 
 me, that Mr. Ricardo was bound to shew that some physical 
 impossibility obstructs the increase of bank-notes at the ex- 
 pense of country notes, and vice rma, before he assumes that 
 an increase of bank-notes must produce an increase of country 
 notes ; fee seems to consider il probable tbat the endeavours of 
 country bankers to displace bank-notes has bten successful, 
 in which caseth? proportion between town and country notes 
 has varied withou any such fluctuation, in the price of com- 
 modities has formed jtbe -basis of his argument. On the other 
 hand any intro Juction of bank-notes to supply the place of 
 discredited country notes, a* recently in the West of England, 
 augments the positive amount of the former, whilst that of th 
 latter is positively diminished. 
 
84 
 
 and they distinctly admit that the high price 
 of bullion and the low state of the continental 
 exchanges are the most unequivocal symptoms 
 of excess they have to adduce. 
 
 They have, indeed, added materially to the 
 difficulties of the inquiry, for they state (what 
 is probably true) that the mere numerical 
 amount of bank-notes in circulation is no evi- 
 dence of inadequacy or excess, as the same 
 amount may bear a very different proportion 
 to the necessities of commerce under different 
 circumstances of trade and payments, and that 
 the quantity of currency bears no fixed propor- 
 tion to the price of commodities ; they take 
 also to themselves the benefit of any argument 
 to be drawn from the economy introduced 
 in the use of bank-notes, which they think 
 must have produced a greater effect than has 
 been ascribed to it, in lessening the quantity 
 of bank-notes necessary to the circulation. It 
 is therefore needless to dwell on the fact of an 
 exchange 6 to 8 per cent, in our favour in 1804 
 and 5, with a circulation of ,18,300,000 of 
 bank-notes, (Finance Committee, 1807, App. 8.) 
 or to shew that, in the end of 1808 and begin- 
 ning of 1809, it turned against Great Bri- 
 tain, with a circulation less by one million; to 
 point out an improvement of 10 per cent, on the 
 exchanges, with a continually-increasing circu- 
 
85 
 
 lation, between Nov. 1809 and May 1810; or 
 to recur to the state of the exchanges and price 
 of bullion in 1800, when they were nearly as 
 unfavourable, with a circulation of 15 or 16 mil- 
 lions, as in 1810 with a circulation of 21 millions. 
 The circumstances" of the internal circulation, 
 it will be said may have been such in 1804 and 5, 
 that a greater amount was not then an excess, 
 although in 1809 a smaller amount was found 
 to be so. But is it not then a fit subject of in- 
 quiry, whether circumstances so varying, and 
 so greatly operative, whatever they be, may 
 not also produce a direct effect on the course 
 of exchange and price of bullion ? With respect 
 to the contrivances to economise bank-notes, it 
 should be observed that the London clearing- 
 house, the great feature of this economy, has 
 existed, as appears by the evidence of the in- 
 spector, 35 years, and its operation was long 
 anterior, therefore, to the restriction-bill, and 
 the increased issue of bank-notes. 
 
 But these are not the only difficulties attending 
 a comparison of the amount of bank-notes with 
 their object Mr. Ricardo states, " that the cir- 
 culation can never be overful," (page 40.) mean- 
 ing thereby, as I apprehend, (for in this in- 
 stance Mr. Ricardo's language is not quite so 
 clear and perspicuous as it usually is) that, as 
 
86 
 
 the nominal price of commodities rises in pro* 
 portion to any increase of currency, the cur- 
 rency, though of greater numerical amount, \vill 
 not bear a higher proportion to the value of the 
 commodities ; and although there is an obvious 
 depreciation there is no excess. If this inter- 
 pretation be adopted it will be nearly useless 
 to search for, and inquire after, excess of pa- 
 per as a fact; we must be content to admit 
 proof of its existence from its effects, and our 
 attention must be directed to ascertain depre- 
 ciation, or an increased price of commodities, 
 solely arising out of, and occasioned byi th,e 
 increased amount of the circulating medium. 
 
 There is a passage, however, in the Wealth 
 of Nations, which introduces a mode of com- 
 paring the amount of currency with its object, 
 not noticed by the Committee. 
 
 " A prince," says Dr. Smith, " who should 
 enact that a certain proportion of his taxes 
 should be paid in a paper-money of any kind, 
 might thereby give a certain value to this pa- 
 per-money, even though the time of its final 
 discharge and redemption should depend alto- 
 gether on the will pf the prince. If the Bank 
 which issued this paper were careful to keep the 
 quantity of it always sqmevyhat below what 
 could easily be employed in this manner, the 
 demand for it might be such as to make it even 
 
67 
 
 bear a premium, or sell for somewhat more in 
 the market than the quantity of gold and sil- 
 ver for which it was issued." The principle 
 being admitted, on the authority of this eminent 
 writer, it remains to be shewn how far the con- 
 ditions are, in our case, fulfilled. 
 
 The enactment is ample: not only the 
 whole amount of the taxes of Great Britain 
 are payable in bank-notes into the Bank of 
 England, but even the economy heretofore 
 spoken of in mercantile transactions has in 
 this instance no place. The revenue-boards 
 take no drafts, orders, nor commutations, of 
 any kind, nor does the Bank aribrd in the re- 
 ceipt of the revenue any of the facilities to 
 which it has become a party in its dealings 
 with bankers, even on the most pressing emer* 
 gency ; and bank-notes do, therefore, actually, 
 (as Dr. Smith supposed they might,) in many 
 cases bear a positive premium : I mean at those 
 periods previously to the issue of dividends, 
 when the receivers-general or their agents, 
 being bound to make their payments within a 
 given day to the Bank, are content to accept a 
 less price for funds or exchequer-bills, if paid 
 for in notes immediately, than if paid for on 
 the next or any following day, nay even by 
 draft payable in the afternoon of the same day. 
 This difference, not unfrequently 3 or 4 times 
 the value of the interest of the money, is a 
 
positive premium for bank-notes, sincg it 
 would not be given for a consideration of any 
 other kind ; the acceptances of the first mer- 
 chants or bankers, East-India bonds, country- 
 bank notes, will not obtain it: nothing procures 
 it, but that precise commodity, money or bank- 
 notes, which alone answers the purpose of ma- 
 king the payment required. And if the law 
 required that the taxes should be paid exclu- 
 sively in notes, there is no question but bank- 
 notes would bear the same premium, on these 
 occasions, against money also; for it is their 
 scarcity, at these moments, which gives rise to 
 it Nor, if we refer to figures, shall we be 
 surprised at this effect, or that Bank-notes 
 should, at particular periods, be scarce and 
 insufficient in amount for the public accommo- 
 dation. 
 
 
 Antecedently to the commencement 
 
 of the war in 1793 the total 
 amount of the permanent taxes, 
 on an average of four years, (9d 
 Report of the Finance Commit- 
 tee, 1797,) was 13,800,000 
 
 Add the real amount of the annual 
 
 grant of land and malt 2,558,000 
 
 Total payments to the revenue 
 
 in one year 16,358,000 
 
89 
 
 At this period the amount of Bank- 
 notes in circulation, on an ave- 
 rage of four years, 1793, (Rep. 
 Appendix, 49,) was . 11,200,000 
 
 And the amount of gold coin, be- 
 yond that now in circulation, ta- 
 ken at the amount of 1 and 
 % notes since issued, being e- 
 qual to one-tenth part of the gold 
 coinage between 1760 and 1797 6,100,000 
 
 The total amount of currency, 
 
 in 1793, being, therefore. . 17,300,000 
 
 and equal in amount to, or rather exceeding, 
 the payments to the revenue in the course of 
 one year. At this period the exchanges were 
 much in our favour, gold below the miut- 
 price, and bread at ld. the quartern loaf. 
 
 
 
 The net amount of the public re- 
 venue paid into the Bank of En- 
 gland, for the year ending 5th 
 Jan. 1810, was 62,129,781 
 
 Add amount of loan, including 
 3 millions for Ireland, the pay- 
 ments for which are made to the 
 
 N 
 
90 
 
 Bank in the same manner as 
 
 the taxes , 14,674,66$ 
 
 Total payment as per account 
 delivered to Parliament on 
 24 March last 76,805,449 
 
 At the period of the greatest depression of the 
 exchange, in the autumn of 1809, the amount 
 of Bank-notes, including those of 1 and 
 2 and Bank post bills, did not exceed 20 
 millions. The increased amount of currency 
 beyond that of 1793 was therefore 3 millions, 
 and the increased amount of payments to 
 government alone above 60 millions. The 
 currency being now little more than one- 
 fourth of the amount of these payments ; 
 whereas, before the war, it exceeded it ; when 
 there was no ground of complaint against the 
 rate of exchange, the price of bullion, or that 
 of commodities. At present, the total amount 
 of Bank-notes in circulation, throughout the 
 kingdom, is cancelled between 3 and 4 times 
 in each year, in payments to the revenue; and 
 every reader must form his own opinion, whe- 
 ther, under such circumstances, the amount 
 is greater than " can be easily employed i n 
 this manner," according to the idea of facility- 
 
91 
 
 i 
 
 which Dr. Smith entertained when he used the 
 expression.* 
 
 It is not equally easy to form an estimate of 
 the commercial circulation at the two periods; 
 and, if it were formed, the observations of the 
 Committee would preclude any application of 
 it. But, it is not altogether an unimportant 
 fact that, since the restriction, the increase in 
 the amount of Bank post-bills, a species of 
 note not seen in London, and used chiefly for 
 the purpose of making remittances to the 
 country, is nearly in proportion to the increase 
 of notes generally. When the amount of Bank- 
 notes was 10 to 11 millions, the Batik post-bills 
 outstanding amounted to 5 or 600,000 : now 
 that Bank-notes have increased to 20 or 21 mik- 
 Jions, the post bills have amounted to one mil- 
 lion, which I consider as evidence of increased 
 internal circulation in the same proportion. 
 
 It was more within the power of the Com- 
 mittee to have investigated the question of de- 
 preciation ; it was fully within their power, at 
 least, to have ascertained in what sense, and 
 
 * Having occasion, in the course of the last year, to trace 
 the payment to the Bank of a note of 1000, 1 collected, 
 from the mode of search and the observations matte, that it 
 would be an unusual case it a note of thU description had 
 not returned within a month from the period of its issue. 
 
92 
 
 to what extent, they mean to impute the in- 
 creased price of commodities to the paper-cii> 
 culation, when they intimate, that the cause of 
 the increased price of all commodities is to be 
 found in the state of the currency of the coun- 
 try; and, that the Bank is responsible for the 
 effect on prices not merely in the ratio of its 
 own excess of paper, but in that of the excess 
 of country-bunk paper also. But nothing is 
 done in the Report towards either of these ob- 
 jects, and its language has an obvious tendency 
 to sanction the popular notion, that the in- 
 creased price of commodities is evidence of a 
 depreciation of currency. 
 
 Theiv are two obvious and practical causes 
 of the augmentation of prices in Great Britain, 
 since the date of the restriction-bill, the effects 
 of which should have been accurately ascer- 
 tained, before a cause not obvious, wholly 
 speculative, and against the hasty adoption of 
 which even theorists have cautioned us, was 
 assigned in the Report. 
 
 The caur.es to which I allude are, the alter.- 
 ed state of the corn-trade, and the scarcity 
 arising put of it in 1800 and 1801 : 
 
 And the increase, of taxes since the com- 
 mencement of the war in 1793. 
 
 From the year 1790, Great Britain has cea- 
 sed to produce com enoggh for its own con- 
 
sumption ; and has annually imported large 
 supplies. At the end of 17.99, there was no 
 stock on hand, and, during the deficient har- 
 vests of 1800 and 1801, the importations were 
 greatly inadequate to -supply the loss. The 
 scarcity and consequent measures of those 
 years are yet fresh in our recollection ; seven- 
 teen acts of parliament passed with reference 
 to this subject in the last six weeks of 1800. 
 Bounties were granted, and every substitute 
 adopted, yet the average price of wheat jf0r the 
 two years, throughout England and Wales, 
 was 109s. to llOs. and bread rose to 18 d. the 
 quartern loaf. It became necessary to advance 
 the wages of all descriptions of labour, and 
 these, as well as the pay of the army and navy, 
 Avere raised to the standard of the current pri- 
 ces. Although the price of grain subsequently 
 fell, the wages of labour did not experience a 
 reduction ; and they remain at present nearly 
 at the standard to which they were advanced 
 about the years 1800 and 1801. If the price 
 of labour be now, as it is generally understood 
 to be, fully adequate to the present high price 
 of provisions and commodities, the excess, 
 during the abatement of price, in the years 
 succeeding 1801, from an average of 110s. to 
 an average of 67^. in 1802, 75s. 76s. and 79 s. 
 in 1805, 1806, and 1807, has operated as 
 
94 
 
 a cause instead of being the effect of high 
 prices, and has defeated the endeavours of Parlia- 
 ment so to apply the taxation as not to affect 
 the wages of labour, and has produced the 
 $ame effect which a direct tax on labour would 
 liave occasioned. It is, perhaps, impossible to 
 ascertain in what degre e the prices of commo- 
 dities generally have been affected by this ex- 
 traordinary advance of the wages of labour, 
 but it appears from the communications made 
 to the Board of Agriculture, that the advance 
 of wages to labourers in husbandry, between 
 179 , when export ceased, and 1804, amount- 
 ed to 37 per cent, on the prices of 17.90. 
 
 There are readier means of ascertaining the 
 effects of increased taxation. In 1793, as I 
 before stated, the net revenue amounted to 
 about sixteen millions ; but it is the gross re- 
 venue which the subject pays, and we may, 
 therefore, call it, at that time, seventeen mil- 
 lions. 
 
 The gross revenue of one year, to January, 
 IcSlO, amounted to ,70,240,226, as appears by 
 the account delivered to Parliament, on the 24th 
 of March, being an addition to the charge on 
 the land, the labour, the revenue, and expen- 
 diture, of British subjects, since 1793, of 
 5 3, 240, 000. 
 
 According to every principle of political eca- 
 
95 
 
 nomy, a tax on land, labour, or industry, is a 
 tax on the produce of each, as fully, if not so 
 directly, as the taxes levied on goods at the 
 Custom-house or Excise- office, and, therefore, 
 this sum of fifty-three millions must be, and 
 now is, added to the aggregate price of com- 
 modities in Great Britain, beyond their price 
 in 1793, except in so far as the direct and per- 
 sonal taxes fall on those who, living on fixed 
 incomes, have not the means, by the increased 
 price of their labour, increased profits, or in- 
 creased rents, to relieve themselves of the bur- 
 then. The direct taxes amount to about one- 
 fourth of the whole, and the proportion of 
 these, which falls on certain incomes, does not 
 affect the price of commodities. If certain in- 
 comes be taken at an amount equal to the in- 
 terest on the funds, (not meaning thereby, 
 that a large proportion of stock-holders do not 
 indemnify themselves elsewhere, as proprietors 
 of land, merchants, traders, and manufacturers, 
 but to allow a sum adequate also to the an- 
 nuities on land, salaries of office, &c.) a pro- 
 portion equal to one-sixth of a fourth of the 
 general taxation may be considered as posi- 
 tively taken out of the pockets of those who 
 pay it. To obviate objection, let it be admit- 
 ted that -rVth instead of ~th is so taken. The 
 remainder, about 47 to 48,000,000, is an annual 
 
96 
 
 augmentation to the price of commodities in 
 Great Britain, Now, the aggregate price of these 
 commodities cannot exceed the total income, 
 or revenue, by means of which they are consu- 
 med, which, from the best judgement that can 
 be formed of it from parliamentary documents^ 
 does not exceed 140,000,000, so that, of the 
 present price of commodities, one-third taken 
 on average, (some more, some less, according 
 as they are more or less immediately affected 
 by taxation,) must be considered as represent- 
 ing the taxes imposed since 1793; and one- 
 third of the present price is, of course, equal 
 to half the price of 1793. 
 
 If any doubt should be entertained, whether 
 landholders, for instance, have really been able 
 to indemnify themselves to this extent, and to 
 raise an additional income equal to such an 
 amount of taxation, I may at once refer to satis- 
 factory documents in proof of it. In the Re- 
 port of the Commissioners of Naval Inquiry, 
 on Greenwich Hospital, is a statement of the 
 rents of the Derwentwater estates, now pos- 
 sessed by the Hospital, shewing an increase, be- 
 tween the years 1790 and 1805, from ^1^,300 
 to of 24,700, being one-fourth of the present 
 rents; but the last four years, in which very 
 considerable additions have been made to the 
 rents, are not included. The average increase 
 
97 
 
 of rent on arable land, thoughout the king- 
 dom, between 1790 and 1803, as returned to 
 the Board of Agriculture, was 40 per cent, 
 on the rents of 1790, or < 28 per cent, on 
 those of 1803, to which returns the sam^ 
 observation respecting the period not included 
 will apply. 
 
 To what rise in the price of commodities does 
 the Committee allude which is not justified by 
 the multiplied operation of an increased public 
 demand on the produce of the land and labour 
 of the country, to the extent which has here 
 been stated ? The price of corn has fluctuated 
 so much since the supply has, under the incon- 
 veniences of war, depended on importation, 
 that it is become, except on very long averages, 
 an unfit standard of comparison : as early as 
 1795 and I79fy I find the quartern loaf, for 
 many months together, at \5d. and, as late as 
 1807, the average of the year not exceeding 
 1 1 d. and 11^ d. in the course of a single 
 year, and even in succeeding mouths, varia- 
 tions in price, on the average of the kingdom, 
 of _L and even % of the value of the commo- 
 dity. The average price of wheat for the 
 year 1800 was 1 V2s. 8^/. and, for the year 1802, 
 67s. 7 d. such fluctuations have obvious re- 
 ference to supply and demand, and can in no 
 degree be referred to corresponding variations, 
 
 o 
 
98 
 
 either in* the cost of the article or the medium 
 of payment*. Meat has fluctuated less in price 
 than corn : the increase of price appears to have 
 been progressive, from about 7 (L to 10 d. per Ib. 
 but has not exceeded the proportion resulting 
 rom the natural effect of taxation. 
 
 The metals which are the produce of British 
 soil, of which the supply is always equal to ttie 
 demand, might perhaps form a better standard 
 of comparison : but, in this commercial coun- 
 try, it is difficult to fix on any commodity 
 which is not affected by the circumstances of 
 war or peace, as in the case of timber or hemp ; 
 comparative scarcity or superabundance, as 
 tallow and coffee ; want of demand, as in the 
 
 * ] have extracted from the Gazette the weekly prices of 
 grain in the five years preceding the restriction, from 1792 
 to 1796, and the five last years, from 1806 to 1810 inclusive, 
 both periods including great fluctuations of price, but neither 
 the extremes of the years 1800 and 1801. 
 
 Wheat. Barley. Oats. 
 
 s. d. s. d. s. d. 
 
 The average of the last five years is, 87 2 43 30 6 
 
 A deduction of these prices of 4 29 144 102 
 
 would leave 582 288 204 
 
 The average of 1792 to 1796 is 57 6 34 20 6 
 
 but I do not think that any fair 1 inference can be drawn from 
 the result, because, throughout the whole period, the prices 
 have been regulated more by importation than any internal 
 circumstances. 
 
case of East-India goods ; or want of supply, 
 as those from Italy and the Levant. Then, 
 again, speculation intervenes, and raises ex- 
 orbitantly the price of wool, the bubble bursts, 
 and wool is an unsaleable commodity. A bad 
 harvest occasions a large demand for sugar at 
 home; a friendly disposition in Sweden carries 
 all the surplus abroad. A good harvest closes 
 the distillery against sugar ; French influence 
 shuts the Swedish ports against us, and sugar 
 has no price. The price of wheat depends on 
 intercourse with America; the distillery influen- 
 ces barley ; the value of oats is regulated by im- 
 portation from Holland. How, in this chaos, 
 the Committee can discover the depreciation of 
 our currency in the price of commodities I 
 know not ; yet, says the Report, " the prices 
 of all commodities have risen, and gold appears 
 to have risen in its price only in common with 
 them. If this common effect is to be ascribed 
 to one and the same cause, that cause can only be 
 found in the state of the currency of this coun- 
 try." On this most extraordinary pas? .ge I shall 
 only observe " that your if is a great peace- 
 maker." 
 
 It is not possible to follow the subject of re- 
 lative prices to any satisfactory point^ without 
 engaging in a very protracted investigation 
 and a multitude of figures, which I wish to 
 
100 
 
 avoid ; enough has been adduced to shew that 
 an increase in the prices of commodities of nearly 
 one-half on those current in 1793 is naturally 
 accounted for, without assuming a deprecia- 
 tion of currency, and that, unless a pair of shoes, 
 a hat, or a coat, which would, in 1793, have 
 cost 8 s. a guinea, and 3 guineas, cost now 
 niore than 12 $. 51 s. 6d. and four guineas and 
 a hai the increase of price is not greater than 
 may he naturally accounted for, from the effect 
 of increased taxation. 
 
 Should any persons be disposed to pursue the 
 inquiry farther, they will recollect that the ef- 
 fect on prices produced by taxation is exclusive 
 of, and independent upon, such increase as may 
 be occasioned by circumstances specially af- 
 fecting particular commodities ; as great scared 
 ty compared with the demand, restraints impo- 
 sed on introduction or exportation, or heavy 
 direct duties, as in the case of Wine, Spirits, or 
 Sugar. In adducing taxation as the cause of 
 an increased price of commodities I am not 
 certainly introducing any novel principle, but 
 the more men of every rank have felt the 
 necessity of augmenting their incomes, the more 
 attention has been paid to obtain such increa- 
 sed income from land, the more operative has 
 the principlebecoine ; and it does not appear 
 
101 
 
 that the Committee have allowed sufficiently 
 for its effect. 
 
 I shall only add a few observations on the 
 recommendation of the Committee to Parlia- 
 ment, as the result of their inquiry. 
 
 This recommendation is conveyed in the 
 shape of opinion, " That the system of the 
 circulating medium of this country ought to 
 be brought back with as much speed as is com- 
 patible with a wise and necessary caution to 
 the original principle of cash-payments, at the 
 option of the holder of Bank-paper/' " Ac- 
 cording to the best judgement the Committee 
 has been able to form, no sufficient remedy for 
 the present or security for the future can be 
 pointed out, except the repeal of the law 
 which suspends the cash-payments of the Bank 
 of England." And the Committee " suggest 
 that the restriction of cash-payments cannot 
 safely be removed at an earlier period than two 
 years from the present time, as it would be 
 hazardous to compel the Bank to pay in six 
 months, should peace be concluded within that 
 period, and would be found wholly impracti- 
 cable." The Committee are, therefore, of 
 opinion, " that, even if peace should intervene, 
 two years should be given to the Bank for resu- 
 ?ning its payments ; but that, even if the war 
 
102 
 
 should* be prolonged, cash-payments should 
 be resumed by the end of that penod." 
 
 Persuaded as I am that both the rate of ex- 
 change and price of gold are controuled at 
 present by the foreign expenses of government, 
 operating upon a small favourable balance, I 
 cannot of course anticipate any difficulty in 
 the resumption of cash- payments by the Bank, 
 when those expenses shall have ceased. Nor, 
 supposing them to continue, can I contemplate 
 greater facility in resuming them at the expira- 
 tion of two years than is now experienced. 
 The Committee can hardly expect any increa- 
 sed activity in our manufactures from a reduc- 
 tion of the accommodation they have experien- 
 ced; or an increased exportation to the conti- 
 nent as the effect of reduced prices ; (presu- 
 ming, as the Committee seem disposed to do, 
 that such reduction is just and practicable ;) 
 because we see already that a profit of 3 and 
 even 400 per cent, on colonial produce, on 
 coffee particularly, the article most wanted in 
 France, and most superabundant here, is not 
 a lever powerful enough to obtain for it an in- 
 troduction. Our imports consist, for the most 
 part, of articles \vith which we cannot dis- 
 pense, without abandoning altogether the con- 
 test in which we are engaged. Jf our imports 
 
103 
 
 are not diminished, our exports increased, or 
 our foreign payments lessened, I do not see 
 how the utmost stretch of inconvenience which, 
 by reducing the circulation, the nation may be 
 made to suffer, will improve the exchange or 
 lower the price of gold. I could point out 
 effects of a very different nature, which will 
 unquestionably result from it. On former oc- 
 casions, mercantile distresses improved the ex- 
 change, by inducing the, merchants to draw 
 bills on their correspondents abroad to raise 
 money, which they would provide for by ex- 
 ports, even at a loss. But even this wretched 
 shift cannot now be practised ; there is no mar- 
 ket on which bills are current to which goods 
 can be sent. 
 
 Whilst offering their suggestions to Parlia- 
 ment no doubt the Committee had distinctly 
 in view 
 
 The evils and inconveniences which they 
 propose to remedy ; 
 
 The mode in which the remedy will be pro- 
 duced by the adoption of the recommenda- 
 tion ; , 
 
 And the consequences with which that a- 
 doption will be attended. 
 
 These points are not, however, brought promi- 
 nently forward in the Report, and we are left to 
 discover, as we can, what the measure is intend- 
 
104 
 
 ed to effect, and how it is to be effected,, 
 u A return to the ordinary system of bank- 
 ing" can alone, say the Committee, " ef-> 
 fectually restore general confidence in the 
 value of the circulating medium of the king- 
 dom ;" "the serious expectation of this event 
 must enforce a preparatory reduction of the 
 quantity of paper;" "and the anticipation 
 of the time when the Bank will be constrained 
 to open, may also be expected to contribute 
 to the improvement of the foreign exchanges," 
 which, the Committee informs us, " they have 
 abundantly shewn the Bank to have the 
 power of controuling." On these intima- 
 tions of the objects of the Committee it is 
 obvious to remark, that the restoration of 
 confidence is a work of supererogation : the 
 Report had previously informed us that "want 
 of confidence has no place in our present 
 situation." The Committee have admitted 
 that the fall of the exchange was occasioned 
 by political circumstances, operating on the 
 commerce of the country, yet they anticipate 
 its improvement from modifications of our 
 currency; They say nothing about the price 
 of bullion, which is expected, doubtless, to 
 return when the Bank shall have sufficiently 
 controuled the exchange; although "Mr. 
 Locke and many other writers have clearly 
 
105 
 
 demonstrated, that the coins of any country 
 can only be retained within it when the ge- 
 neral balance of trade and payments is not 
 unfavourable," (Lord Liverpool's letter to the 
 King, page 10$,) and these effects are all to be 
 produced by a reduction in the quantity of pa- 
 per, although no attempt has been made to 
 shew from whence any superfluity can be with- 
 drawn. "The rate of wages of common country 
 labour adapts itself more slowly to the changes 
 which happen in the value of money than 
 the price of any other labour or commodity; 
 and the pay of some classes of public servants, 
 if once raised, in consequence of a depreciation 
 of money, cannot so conveniently be reduced 
 again," such is the opinion of the Committee. 
 Yet, in the midst of war, when those classes 
 are numerous, when that labour is scarce, 
 and the wages of both have adapted them- 
 selves very fully to the present value of com- 
 modities, the Committee recommend a forced 
 reduction in the price of the produce of land 
 and labour, from whence those wages are to 
 be. defrayed. That this is the intended effect 
 of the reduction of Bank-paper will be 
 readily understood and admitted by those 
 who have attentively considered the princi- 
 ples of circulation laid down by the Committee. 
 Let it be remembered also that the taxes are 
 
106 
 
 for the most part^erf, not proportional, rates; 
 they, too, as well as the wages of labour, are 
 adapted to the existing value of commodities, 
 or rather the value of these has adapted itselt 
 to the rate of taxation. Nor is this reduction 
 intended to be a trifling one: the Committee 
 observe, that, in the present state of our cir- 
 culation, to compel the Bank to pay specie in 
 six months would be most hazardous, and 
 would bj found wholly impracticable. <c In 
 effecting so important a change, some diffi- 
 culties n:ust be encountered and some contin- 
 gent dangers to the Bank must be carefully 
 guarded against ;" and, therefore, time is to be 
 given to .the directors to feel their way, and 
 tread back their steps slowly, by a gradual re- 
 duction of their paper, which, on the princi- 
 ple of the Committee, will produce a four- 
 fold reduction in the country-bank paper also : 
 the effect on the agricultural and commercial 
 interests of the country of such a curtailment 
 of the usual means of circulation I pretend not 
 to define.* 
 
 * Many persons may feel disposed to coincide with the Com- 
 mittee in their hostility to paper, under the idea that the ac- 
 commodation afforded by it to merchants and farmers tends to 
 encourage speculation and enhance prices ; l his objection ob- 
 tains no sanction from the Report; for the Cummittee is of opi- 
 nion " that the largest amount of mercanti.e accounts by the 
 
107' 
 
 Suppose by any means, as the effect of these 
 measures, gold to return generally into circula- 
 tion, what should we gain ? We adopt an in- 
 strument of circulation most costly in place of 
 one which costs nothing ; being greatly in debt 
 and little to pay withal, we wish to play at agri- 
 culture and commerce with gold counters, when 
 paper ones answer our purpose to the full as 
 well ; and expend in the purchase of them a large 
 portion of the produce of our soil and labour, 
 the whole of which we find already inadequate 
 to defray our foreign expenditure. 
 
 But this part of the subject is fully treated 
 by Sir John Sinclair, and is out of the line of 
 my practical observations, 
 
 My object has been to ascertain the sound- 
 ness of the ground on which the Committee 
 
 Bank, if it could be considered by itself,' ought never to be re- 
 garded as any other than a great public benefit, and that it is 
 only the excess of paper-currency, thereby issued and kept out 
 in circulation^ which is to be considered as the evil." 
 
 I very much wish the Committee had not stamped with its 
 authority a doctrine which requires far more consideration 
 than they have bestowed upon it. Were the speculations in, and 
 consequent increased price of, tallow and wool in the last year 
 maintained by increased circulation or by mercantile discounts 
 to individuals ? Must we admit that, if 3 millions now lent to ^/ 
 government were repaid and lent out again to such speculators, / 
 it must necessarily prove a great public benefit ? 
 
108 
 
 has founded its arguments ; and, on a reperusal 
 of the preceding pages, I appear to myself to 
 have piov :-,-:. three things ; 
 
 1st. That tne propositions stated by the Com-, 
 mittee, as the basis of their argument, are not 
 generally true, and do, not therefore form a 
 solid foundation for the abstract reasoning of 
 the Report : 
 
 2d. That the facts, where any are brought 
 forward in support or illustration of the ar- 
 gument, are erroneously stated ; and, when 
 corrected, lead to opposite conclusions : 
 
 3d. That the effects we witness are sufficiently 
 accounted for, by obvious and ordinary causes, 
 and not necessarily referable to such as are 
 speculative and undefined. And it occurs, as a 
 general observation, that the Report does no(; 
 convey the substance of the information ac- 
 quired by the Committee, but has been framed 
 under the influence of a judgement very early 
 formed (see Rep. page 2. ) on the subject re- 
 ferred to them, which, embracing in the objects 
 offered to their consideration those points only 
 which accorded with the intended references, 
 would almost lead to the belief, that the Report 
 had emanated from the school of those econo- 
 mists, of whom Mr. Playfair speaks, " who, 
 not very attentive to facts, have established 
 ingenious theories, and attempted to reduce 
 
109 
 
 every thing to a system, on which they rea- 
 soned till they became enthusiasts, incapable of 
 appreciating any thing that did not conform to 
 the theories they had laid down." Pref. 12th 
 edit. Wealth of Nations. 
 
 P. S. The greater part of the preceding 
 work was printed before I had seen Mr. Blake's 
 Observations on the Principles of Exchange. 
 The reputation which I understand they deser- 
 vedly enjoy would have led me to consider 
 them attentively before I offered my observa- 
 tions to the public, had I met with the work 
 at an earlier period. I have not even now had 
 an opportunity to read it : but, observing a re- 
 publication of Mr. Mushett's tables appended to 
 that work, I am led to notice it here as the cause 
 of my not again publishing those tables, and I 
 refer my readers to them either in Mr. Mushett's 
 pamphlet or that of Mr. Blake. 
 
 In glancing over the pages of Mr. Blake's 
 4 Observations' 1 a passage has caught my eye, 
 in page 78, which appears to me not quite free 
 from objection. I submit to Mr. Blake whe- 
 ther the paragraph, beginning " The effect," 
 
110 
 
 &c. contains altogether a candid statement; 
 whether the impression it is intended to convey 
 is quite consistent with the hints given to Mr. 
 Wheatley, in the note in page 91? If it be, 
 perhaps in a new edition Mr. Blake will incor- 
 porate the note in the paragraph alluded to, 
 and allow the latter part ofit to fill up the 
 long interval between the circulation of Sj mil- 
 lions in 1797 and the 21 millions in November, 
 1809- 
 
 Nov, 14, 1810. 
 
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-5 
 
 OBSERVATIONS 
 
 ON THE 
 
 DEPRECIATION OF MONEY, 
 
 AND THE 
 
 STATE OF OUR CURRENCY. 
 
 WITH SUNDRY RELATIVE TABLES. 
 
 By EGBERT WILSON, ESQ. 
 
 ACCOUNTANT IN EDINBURGH, 
 ONE OJ? THE DIRECTORS OF THE BANK OF SCOTLAND; SfC. 
 
 EDINBURGH : 
 
 Printed by C. Stewart, 
 
 JOHN ANDERSON, PARLIAMENT SQUARE, EDINBURGH 
 
 AND 
 LONGMAN, HURST, REES, ORME & BROWN, LONDON. 
 
 1811, 
 
ARRANGEMENT. 
 
 1. Respecting the Existence and Extent of the Deprecia- 
 
 tion 1 
 
 2. Respecting the Causes of the Depreciation, considered 
 
 as affecting the real value of Gold and Silver ... 5 
 
 3. As to the Question Whether a Depreciation has taken. 
 
 place in our Currency, independently of the real 
 
 Depreciation of Gold and Silver 19 
 
 4.Tables illustrative of the preceding Observations .... 35 
 
 No. 1. Abstract of the Yearly Importation and Expor 
 tation of Grain of all sorts to and from Britain. 
 Of the Prices at which the Importation of Wheat 
 has been permitted, and the actual Prices of 
 Wheat in England and Wales, from 1700 to 
 1810, both inclusive 37 
 
 No. 2. Abstract of the average Price of Wheat. The 
 Course of Exchange with Hamburgh, and the 
 Market Price of Gold, taken Quarterly, from 
 Jan. 1780 to Jan. 1811 ; and the Price of the 
 Three per Cents, from Jan 1792 to Jan. 1811 51 
 
 No. 3. Abstract of the Amount of Bank of England Notei 
 
 in Circulation, from 1790 to 1810 57 
 
 No. 4. Comparative Values of the Annuities to the Na- 
 tional Creditors in 1797 and 1810 65 
 
 With Remarks on each of these Tables. 
 
 CONCLUSION, 67 
 
 APPENDIX. Abstract of the Fiar Prices of Wheat, Bar* 
 ley, and Oats, for the County of Edinburgh, from 1640 
 to 1809 inclusive 73 
 
OBSERVATIONS, &c. 
 
 SECTION I. 
 
 Respecting the Existence and extent of the Depre- 
 ciation. 
 
 IT is observed by Dr Adam Smith, that, in all the 
 different stages of wealth and improvement, we can 
 judge better of the real value of silver by comparing 
 it with corn, than by comparing it with any other 
 commodity, or set of commodities. 
 
 Labour and subsistence, indeed, as they are the 
 original price paid for gold and silver, so in all the 
 future transmissions thereof, they are the only real 
 standards of the exchangeable value of these metals. 
 
 Previously to the discovery of America, a small 
 quantity of silver exchanged for a large quantity of 
 corn; but after that discovery, silver, as stated by Dr 
 
Smith, ' sunk in its real value, or would exchange 
 
 * (or a smaller quantity of labour than before, and 
 
 * corn rose in its nominal price, and, instead of be- 
 ' ing commonly sold for about two ounces of silver 
 ' the quarter, or about ten shillings of our present 
 ' money, came to be sold for six and eight ounces 
 < of silver, or about thirty and forty shillings of our 
 6 present money.' 
 
 On a review of the prices of corn, before and after 
 the discovery of the American mines, Dr Smith con- 
 cludes, that the discovery of these mines, in lower- 
 ing the value of silver, had produced its full effect 
 at or about the year 1636. That, for a considerable 
 time afterwards, little variation took place in the value 
 of silver, and it again rose somewhat in proportion 
 to the value of corn, during the first sixty-four years 
 of the eighteenth century. 
 
 About the year 1763, a very considerable rise in 
 the money price of corn took place in Great Britain, 
 from causes to be afterwards explained ; but from 
 that time till the year 17.94 there was little or no va- 
 riation in the value of silver, compared with that of 
 corn. 
 
 Since the year 1794, however, there has taken 
 place in this country, a rise in the nominal price of 
 
corn, or depression in the Value of gold and silver, 
 altogether without example, since the first discovery 
 of the American mines. 
 
 Thus, on comparing the average price of wheat 
 for the 16 years, i 7 79 and 1794 inclusive, with the 
 average price for the 1 6 years, 1795 and 1810 in- 
 clusive, the difference will be found to be equal to 
 about 73 per cent.-: or, 1731. now, will only pur- 
 chase the same quantity of wheat which 100/. would 
 have done prior to the year 1795. 
 
 On many other articles of home produce, not af- 
 fected by direct taxation, the rise has been still 
 greater ; and, on the price of ordinary labour, it will 
 be found very nearly to correspond with that on 
 wheat. Thus, preceding the year 1795, the aver- 
 age price of labour might be taken at seven shillings 
 per week, but cannot now be stated at less than 
 twelve shillings, making a difference of betwixt 7 1 
 and 72 per cent. 
 
 In like manner the money prices, or nominal 
 value of all real property, of whatever nature or de- 
 scription, have risen in an equal, if not a greater, 
 proportion. 
 
 This depreciation may have affected either the real 
 
value of gold and silver, or it may have been con- 
 fined to our currency, or it may have consisted not 
 only of a depreciation of gold and silver, but also 
 of our currency. 
 
 It is of importance to keep in view the distinc- 
 tion betwixt a real depreciation of gold and silver, 
 whether arising from general or local causes, and 
 a depreciation of our currency : for, in so far as it 
 may arise from general causes, it can admit of no 
 remedy on our part ; but if it is either a depreci- 
 ation of gold and silver, arising from local causes, or 
 a mere depreciation of our currency, the evil, in 
 either case ought to admit of a remedy, though the 
 remedies in these two cases may be very different. 
 
SECTION II. 
 
 Respecting the Causes of the Depreciation, considered 
 as affecting the real value of Gold and Silver. 
 
 A DEPRECIATION of the real value of gold and sil- 
 ver, may be owing either to general causes affect- 
 ing their value in the general market of the com- 
 mercial world, such as the increased fertility of the 
 mines, or it may be owing to the particular institu- 
 tions and circumstances of the country in which it 
 has taken place. _/ 
 
 Had the depreciation which has taken place in 
 this country been owing to the increased fertility of 
 the mines, it might have been expected that gold 
 and silver would have appeared in great abundance 
 in this, the most commercial country in the world. 
 So far from such being the case, however, it must be 
 admitted, that the suspension of our cash-payments 
 in the year 1797, and its subsequent continuance to 
 
6 
 
 the present time, afford proofs of a scarcity, rather 
 than of plenty of gold and silver. 
 
 The value of gold and silver would also have fallen^ 
 in the rest of Europe, to an equal degree as in this 
 country. It will be difficult, however, on that sup- 
 position, to account for the strong tendency which 
 gold and silver have shewn, ever since the year 1 794, 
 to leave this country, and to flow to the Continent ; 
 and for the difficulty that has been experienced, in 
 all our endeavours to bring them back, even with the 
 advantage of a favourable exchange : and, even al- 
 though a considerable depreciation of money may be 
 shown to have taken place on the Continent, this 
 may be, in part, attributed to the addition of a large 
 portion of the gold and silver of Great Britain to the 
 stock of the rest of Europe. 
 
 It is, no doubt, true, that the silver mines of A- 
 merica have become greatly more productive within 
 the last hundred years ; but it is not from the abso- 
 lute quantity of gold or silver raised, that any depre- 
 ciation of their value can be inferred. The increased 
 quantity maybe, and most probably has been, owing 
 to the increased demand ; and, in that case, though 
 the absolute quantity should be ever so much in- 
 creased, yet if they are still attainable only at the 
 same expense of labour, their real value in relation 
 
to corn and labour, the true standards of that value, 
 will remain unchanged. 
 
 Besides, it is proved by the accounts subjoined to 
 the report of the Bullion Committee, that the great 
 increase in the produce of the silver mines took 
 place as far back as the year 1773 ; and if the pre- 
 sent depreciation of money is owing to that cause, 
 it may be asked, why it did not operate prior to 
 1 794, as it certainly did not, or, at least, in a very 
 slight degree ? 
 
 It may be concluded, therefore, that, although the 
 extraordinary depreciation of money in this country, 
 within the last sixteen years, may have been in part 
 owing to the increased abundance of gold and silver 
 in Europe ; yet it cannot be altogether accounted 
 for by that cause, and must have depended, in part 
 at least, on local or temporary causes peculiar to this 
 country. These, I apprehend to be 
 
 1. The increase of our consumption of corn to 
 such an extent as greatly to exceed our ordinary 
 annual production. This increased consumption is 
 to be ascribed to the extension of our colonial terri- 
 tories, the increase of our commerce and manufac- 
 tures, and the progress of the funding system. Its 
 commencement may be dated from about the year 
 
8 
 
 1763; at or soon after which Britain ceased to be 
 an exporting, and became a regularly importing 
 country of corn; and a permanent rise in the 
 price of corn was the necessary consequence. But 
 all the above-mentioned causes of increased con- 
 sumption have operated to a much greater extent 
 since the year 1790, than in any former period 
 of equal duration, as is clearly proved by our pro- 
 gressive increase of importation since that period; 
 and they have been further aided by a great war ex- 
 penditure in that period. 
 
 2. The frequent recurrence of deficient crops, and 
 interruption of our usual supplies from abroad, par- 
 ticularly the failure of crop 1795, the still greater 
 failure of crops 1799 and 1800, and the partial fail- 
 ure of crops 1 804, 5, 6, 8, and 9? while our supply 
 from abroad was rendered more precarious than 
 formerly, by the effects of the war, and by scarcities 
 existing at different times in other countries ; and the 
 expense of importation was greatly increased by the 
 high rates of freight and insurance. 
 
 3, The state of our corn importation laws, par- 
 ticularly the law of 1804, by which the price at 
 which wheat might be imported, at a low duty, was 
 at once raised about 24 per cent. 
 
9 
 
 To which may be added the effect of the Order's 
 in Council, 1 807, and their consequences. 
 
 t 
 
 * All these causes tending to the raising of the mo- 
 ney-prices of corn and labour ; and, 
 
 4. The suspension of our payments in specie, en- 
 abling us to maintain these increased nominal prices, 
 which must otherwise have been checked by the li- 
 mited nature of the circulating medium, while it con- 
 sisted either of gold and silver, or of paper convert- 
 ible into gold and silver, at the will of the holder. 
 
 The influence of the price of corn in regulating 
 the price of labour, and of all articles of home pro- 
 duce, is thus stated by Dr Smith, in his argument 
 -respecting the effect of our corn laws. 
 
 ' This enhancement of the money-price of corn, 
 ' however, it has been thought, by rendering that 
 e commodity more profitable to the farmer, must ne- 
 ' cessarily encourage its production. 
 
 ' I answer, that this may be the case, if the effect 
 ' of the bounty was to raise the real price of corn, or 
 ' to enable the farmer, with an equal quantity of it, 
 
 B 
 
10 
 
 * to maintain a greater number of labourers in the 
 c same manner, whether liberal, moderate, or scanty, 
 e than other labourers are maintained in his neigh 
 ' bourhood. But neither the bounty, it is evident, 
 ' nor any other human institution, can have any such 
 ' effect. It is not the real, but the nominal price of 
 c corn which can, in any considerable degree, be 
 c affected by the bounty ; and, though the tax which 
 c that institution imposes upon the whole body of the 
 
 * people may be very burdensome to those who pay 
 1 it, it is of very little advantage to those who re- 
 
 * ceive it, 
 
 c The real effect of the bounty is not so much to 
 c raise the real value of corn, as to degrade the real 
 
 * value of silver ; or to make an equal quantity of it 
 
 * exchange for a smaller quantity not only of corn, 
 ' but of all other home-made commodities ; for the 
 c money-price of corn regulates that of all other 
 6 home-made commodities. 
 
 e It regulates the money-price of labour, which 
 
 . * must always be such as to enable the labourer to 
 
 ' purchase a quantity of corn sufficient to maintain 
 
 ' him and his family, either in the liberal, moderate, 
 
 e or scanty manner in which the advancing, station- 
 
 * ary, or declining circumstances of the society oblige 
 ' his employers to maintain him. 
 
 1 
 
11 
 
 c It regulates the money-price of all the other parts 
 ' of the rude produce of land, which, in every pe- 
 
 * riod of improvement, must bear a certain proper- 
 ' tion to that of corn, though this proportion is dif- 
 ' ferent in different periods. It regulates, for ex- 
 e ample, the money-price of grass and hay, of but- 
 6 chefs meat, of horses and the maintenance of 
 6 horses, of land-carriage consequently, or of the 
 c greater part of the inland commerce of the coun- 
 ' try. 
 
 c By regulating the money-price of all the other 
 ' parts of the rude produce of land, it regulates that 
 ' of the materials of almost all manufactures. By 
 e regulating the money-price of labour, it - regulates 
 ' that of manufacturing art and industry; and by re- 
 e gulating both, it regulates that of the complete ma- 
 ' nufacture. The money-price of labour, and of 
 
 * every thing that is the produce, either of land or 
 ' labour, must necessarily either rise or fall, in pro- 
 
 * portion to the money-price of corn. 
 
 * Though, in consequence of the bounty, there- 
 c fore, the farmer should be enabled to sell his corn 
 ' for four shillings the bushel instead of three and 
 c sixpence, and to pay his landlord a money-rent 
 c proportionable to this rise in the money-price of 
 
 * his produce ; yet if, in consequence of this rise in 
 
14 
 
 * the price of corn, four shillings will purchase n<* 
 ' wore home-made goods, of any other kind, than 
 ' three and sixpence would have done before, neither 
 6 the circumstances of the farmer, nor those of the 
 t landlord, will be much amended by this change. 
 4 The farmer will not be able to cultivate much bet- 
 4 ter ; the landlord will not be able to live much 
 ' better. In the purchase of foreign commodities, 
 ' this enhancement in the price of corn may give 
 ' them some little advantage. In that of home-made 
 ' commodities, it can give them none at all ; and al- 
 ' most the whole expense of the farmer, and the far 
 ' greater part even of that of the landlord, is in 
 c home-made commodities, 
 
 c That degradation in the value of silver, which 
 ' is the effect of the fertility of the mines, and which 
 
 operates equally, or very nearly equally, through 
 ( the greater part of the commercial world, is a mat- 
 '. ter of very little consequence to any particular coun- 
 f try. The consequent rise of ail money-prices, 
 ' though it does not make those who receive them 
 c really richer, does not make them really poorer. 
 c A service of plate becomes really cheaper, and 
 i every thing else remains precisely of the same real 
 : value as before. 
 
 f But that degradation in the value of silver, which 
 
* being the effect either of the peculiar situation, or 
 
 * of the political institutions of a particular country, 
 
 * takes place only in that country, is a matter of very 
 
 * great consequence, which, far from tending to make 
 6 any body really richer, tends to make every body 
 ' really poorer. The rise in the money-price of all 
 < commodities, which is in this case peculiar to that 
 
 * country, tends to discourage, more or less, every 
 
 * sort of industry which is carried on within it, and 
 4 to enable foreign nations, by furnishing almost all 
 ' sorts of goods for a smaller quantity of silver than 
 ' its own workmen can afford to do, to undersell 
 
 * them not only in the foreign, but eveu in the home 
 
 * market' 
 
 And, afterwards, he observes, 
 
 ' The bounty, as it raises in the home market not 
 c so much the real as the nominal price of our corn, 
 as it augments not the quantity of labour which a 
 c certain quantity of corn can maintain and employ, 
 c but only the quantity of silver which it will ex- 
 e change for, it discourages our manufactures, with- 
 
 * out rendering any considerable service either to 
 ' our farmers or country gentlemen. It puts, in- 
 c deed, a little more money into the pockets of both ; 
 
 * and it will, perhaps, be somewhat difficult to per- 
 c suade the greater part of them, that this, is not ren- 
 
14 
 
 dcring them a very considerable service. But if 
 this money sinks in its value, in the quantity of la- 
 bour, provisions, and home-made commodities d 
 all different kinds, which it is capable of purchas- 
 ing, as much as it rises in its quantity, the service 
 will be little more than nominal and imaginary.' 
 
 The effect of the re-action of a rise in the price of 
 labour, in raising and keeping up the price of corn, 
 is thus illustrated by Mr Malthus. 
 
 c No person/ he observes, e will venture to doubt, 
 ' that if we were to give three additional shillings a- 
 { day to every labouring man in the kingdom, in 
 ' order that he might have meat for his dinner, the 
 ' price of meat would rise in the most rapid and un- 
 
 * exampled manner. But, surely, in a deficiency of 
 6 corn, which renders it impossible for every man to 
 
 * have his usual share, if we still continue to furnish 
 1 each person with the means of purchasing the same 
 c quantity as before, the effect must be in every re- 
 
 ' spect similar.' 
 
 < 
 
 > 
 
 And again, ' If we were to double the fortunes of 
 
 f all those possessing 100/. a-year, the effect on the 
 ' price of grain would be slow and inconsiderable ; 
 
15 
 
 f but if we were to double the price of labour through- 
 ' out the kingdom, the effect in raising the pries of 
 c grain would be rapid and great. The general prin- 
 ( ciples, on this subject, will not admit of dispute/ 
 
 MrMalthus seems, also, to have been fully aware, 
 that the effects he has supposed, could not have been 
 produced in the ordinary state of our circulating me- 
 dium. e On the commencement, therefore, of this 
 'extensive relief, which would necessarily occasion 
 ' a proportional expenditure in provisions throughout 
 ' all the ranks of society, a great demand would be 
 4 felt for an increased circulating medium. The na- 
 ' ture of the circulating medium, then (1799 and 
 
 * 1800) principally in use, was such, that it could be 
 ' created immediately on demand, From the ac- 
 ' counts of the Bank of England, as laid before Par- 
 ' liament, it appeared that no very great additional 
 
 * issues of paper took place from this quarter. The 
 ' 3% millions, added to its former issues, were not 
 ' probably much above what was sufficient to supply 
 
 * the quantity of specie that had been withdrawn 
 
 * from the circulation,' Sec. 
 
 6 The demand, therefore, for an increased circu- 
 Mating medium, was left to be supplied by country 
 
 * bankers ; and it could not be expected that they 
 c would hesitate in taking the advantage of so pro- 
 
16 
 
 f fitable an opportunity. The paper issues of a 
 ' country bank are, as I conceive, measured by the 
 4 quantity of the notes which will remain in circula- 
 c tion ; and this quantity is again measured, suppos- 
 c ing a confidence to be established, by the sum of 
 
 * what is wanted to carry on all the money trans- 
 ' actions of the neighbourhood. From the high price 
 of provisions all these transactions became more 
 c expensive. In the single article of the weekly pay- 
 c inent of labourers wages, including the parish al- 
 6 lowances, it is evident that a very great addition to 
 ' the circulating medium of the neighbourhood would 
 ' be wanted. Had the country banks attempted to 
 
 * issue the same quantity of paper, without a parti- 
 e cular demand for it, they would quickly have been 
 6 admonished of their error, by its rapid and pressing 
 ' return upon them : but at this time it was wanted 
 ' for immediate and daily use, and was therefore ea- 
 ' gerly absorbed into the circulation.' 
 
 By the combined action and re-action of this en- 
 hancement of the prices of corn and labour, aided 
 by the suspension of our cash payments, a tempo- 
 rary depreciation, in the exchangeable value of mo- 
 ney, has been produced in this country ; one conse- 
 quence of which has been an increase in the quan- 
 tity of our paper currency, partly by its forcing gold 
 out of circulation, and partly (through the enhance- 
 
17 
 
 ment of prices) by its increasing the demand for 
 Circulating medium. 
 
 And what proves, indisputably, that this deprecia- 
 tion was the result of temporary and particular, and 
 not of permanent and general causes, was the return 
 of the prices of corn to their usual level, uniformly 
 as these causes ceased to operate. Thus, in winter 
 1798 1799, after the two abundant crops of 1797 
 and 1798, the price of wheat fell so low as 48s. per 
 quarter: and again, even after the extravagant prices 
 of 1799 and 1800, it fell, in Spring 1804, in conse- 
 quence of the abundant crops of 1801, 2, and 3, to 
 49s. per quarter. 
 
 Another important conclusion to be derived from 
 the return of the prices of corn to their natural level 
 on the two above-mentioned occasions., is, that the 
 bank restriction, and the increased issues of paper 
 currency, had of themselves no direct effect in rais- 
 ing or keeping up these prices; for, in Spring 1799? 
 when wheat was at 48s. to 49s. the quarter, the sus- 
 pension had subsisted two full years, accompanied 
 with a considerable increase of paper currency ; and, 
 in Spring 1804, it had subsisted seven years, and the 
 paper circulation had nearly attained its highest a- 
 
 mount, yet, on both occasions, the price of wheat was 
 
 C 
 
18 
 
 under, rather than above its natural standard, the 
 importation price. 
 
 Since the year 1804, the return of these low 
 prices of wheat must have been effectually prevent- 
 ed by the operation of the corn law of that year, 
 whatever had been the state of our crops. 
 
 Note. From the year 1773 to the year 1791, 
 wheat was permitted to be imported from foreign 
 countries, when the price in this country reached 
 48s. the quarter. 
 
 By act passed in 1791, the importation of wheat 
 from foreign countries was prohibited till the price 
 reached 50s., and then only on payment of a duty 
 of 2s. 6d., falling to 6d. when the price reached 54s. 
 
 In 1804, the prohibition was extended till the 
 price in this country should reach 63s. the quarter, 
 and then only on payment of a duty of 2s. 6d., falling 
 to 6d. when the price should reach 66s. the quarter. 
 
 l 
 This alteration in 1804 was equal to about 35 J 
 
 per cent on the price prior to the year 1791, or 24 
 per cent, on 52s. 6d., the price and duty from 1791 
 to 1804. 
 
SECTION III. 
 
 On the Question Whether a depreciation has taken 
 place in our Currency., independently of the real 
 depreciation of Gold and Silver ? 
 
 THE only certain proofs of a depreciation of cur- 
 rency, are, 
 
 1st, A nominal rise in the price of gold and silver 
 bullion, when estimated in the depreciated currency, 
 commensurate with the extent of the depreciation : 
 thus, supposing a guinea of the debased money to be 
 worth only ten shillings and sixpence, the price of 
 gold, in place of 3l. 17<?. 10%d. per ounce, its stand- 
 ard mint price, would rise to 7 1- 15s- 9d. ; and this 
 increased price would remain stationary so long as 
 the depreciation of the currency continued. 
 
 2<%, A difference on our exchanges with foreign 
 countries, of the same nature and extent, betwixt the 
 nominal value of our depreciated currency and their 
 standard coins, as betwixt our currency and bullion 
 at home. Thus, supposing our currency to have 
 fallen to one half of its standard value, in purchasing 
 a bill on Hamburgh, the pound sterling in place 
 

 
 of exchanging for 34s. 3%d. Flemish, the par as 
 reported by the Bullion Committee, would have 
 exchanged only for 17s lf^/ Besides the differ- 
 ence from this cause, however, the course of ex- 
 change is subject to another -source of fluctuation, 
 in the state of the balance of payments. These 
 payments are transacted by means of bills of ex- 
 change ; and if there happens to be at any time a 
 surplus of bills on the Continent in the London mar- 
 ket beyond the amount of foreign drafts on London, 
 the bills on the Continent will be sold in the London 
 market at a small discount, the limit to which is the 
 actual expense of bringing over the payment in spe- 
 cie from the Continent. In the same way, if the 
 bills on the Continent are insufficient to balance the 
 bills on Britain, a premium will be given at London 
 for bills on the Continent, but which will also be li- 
 mited to the expense of sending over payment from 
 this country to the Continent, so long as our cur- 
 rency is convertible into gold and silver. This ex- 
 pense is, in either case, from 3 to 6 per cent., which, 
 accordingly, is the usual extent of the fluctuations in 
 the course of exchange. Thus, taking the par of ex- 
 change with Hamburgh at 34$ . 3%d,,- the usual fluc- 
 tuations are from 32*., being about 6 per cent, a- 
 gainst Britain to 36s., being about 6 per cent, in fa- 
 vour of Britain. When the course of exchange rises 
 or falls beyond these limits, it must be either owing 
 
21 
 
 to a depreciation of the currency of one or other of 
 the opposite countries, or to some local impediment 
 to the transmission of specie. 
 
 In so far as the transactions betwixt this country 
 and the continent of Europe relate to the interchange 
 of articles of luxury or convenience, the balance of the 
 trade betwixt them will be always nearly equal ; for 
 a very unequal balance of such trade cannot perma- 
 nently exist. But if, through the failure of the corn 
 crops in Britain, a great importation of corn takes 
 place from the Continent, at an enhanced price, this 
 must create a balance against Britain, which her or- 
 dinary exports of mere articles of luxury or conveni- 
 ence, for which there may be no unusual demand on 
 the Continent, cannot compensate. In this case the 
 balance must be paid in bullion, and the exchange 
 will experience a fall equal to the expense of sending 
 it over ; and if the balance is very large, the increas- 
 ed demand for bullion will raise the price of it here. 
 
 A depression in our exchange with the Continent 
 may also be occasioned by an increase of our foreign 
 expenditure, appearing in the shape of bills or drafts 
 on this country in the foreign markets ; but, in so far 
 as this expenditure is supplied by the transmission of 
 specie from this country, it will not affect the ex- 
 change. 
 
Supposing no depreciation of our currency, it is 
 obvious that the mere scarcity of gold and silver in 
 this country, accompanied by the suspension of our 
 cash payments, must have the effect of removing the 
 usual limit to the depression of the exchange, when 
 the balance of payments happens to be against us ; 
 more especially if the sale of our other goods in the 
 foreign markets is at the same time interrupted. 
 Instead, therefore, of being limited to 6 per cent, 
 the depression of the exchange may extend to 10, 
 15, or even 20 per cent, before it can be restored; 
 and, in proportion as the difference increases against 
 us, will the demand for bullion increase, and a pre- 
 mium nearly equal to the difference on the exchange 
 will come to be given for it. Thus, supposing that, 
 in such a state of the exchange, a person in London 
 going to Hamburgh wishes to purchase a bill on that 
 place for 100/,, he finds that it cannot be got without 
 paying a premium of 15/. for it. Had the bank been 
 paying in specie, he could have been .under no diffi- 
 culty in procuring 100/. in exportable foreign, coins, 
 so as to have saved this discount on the exchange ; 
 but this not being the case, he tries to purchase gold 
 from private dealers ; and the premium lie can af- 
 ford to give for it will be equal to that on the bill of 
 exchange, minus the expense and risk of carrying over 
 the specie : and this rise on the price pf bullion must 
 
necessarily hold out a strong temptation to the melt- 
 ing, and illicit exportation of our coin. 
 
 If no depreciation exists in our currency, it is evi- 
 dent, that no sooner will the balance of payments be 
 turned in our favour, than all symptoms of this ex- 
 traordinary depression in the exchange will vanish, 
 and the price of bullion will return to its usual level. 
 But if a depreciation exists in our currency, the re- 
 storation of a favourable balance on our transactions 
 with foreign countries will not restore the par of the 
 exchange ; and both the nominal rate of the ex- 
 change, and the nominal price of bullion, must con- 
 tinue to be affected by the depreciation, until that 
 depreciation is corrected. 
 
 Having said thus much in general, it will be pro- 
 per next to examine the actual state of the exchange, 
 and prices of bullion, since the suspension of our cash 
 payments. 
 
 It appears from the table subjoined, No. 2, that, 
 in the beginning of the year 1797, when the bank 
 restriction took place, the exchange with Hamburgh 
 was from 3 to 4 per cent, in favour of London, and 
 the price of gold 31. 17s. Gd. per oz,, or fourpence 
 halfpenny under the mint price. From spring *797 
 to spring 1799, the exchange was generally from 
 
9 to 1 1 per cent, in favour of London, and gold at 
 or under its mint price. So far, therefore, from our 
 paper currency being under depreciation in this pe- 
 riod, it was bearing a high premium against the spe- 
 cie of the Continent. In harvest 1799, the exchange 
 turned against Britain evidently in consequence of 
 the failure of that year's crop, and continued so till 
 autumn 1802, when it was nearly restored to par. 
 During this period, the depressions frequently ex- 
 ceeded the expense of the transmission of specie, 
 and a rise in the price of gold bullion was the neces- 
 sary consequence. Throughout the year 1 803, the 
 exchange was in general at or about par, and, in 
 
 1 804 and 1 805, was usually about 4 per cent in 
 favour of Britain ; and, with some inconsiderable fluc- 
 tuations, it continued at or about par from the year 
 
 1 805 till harvest 1 808 ; and, in the mean time, the 
 price of gold had continued stationary at 4/. per oz. 
 
 During all this period, our paper currency was con- 
 vertible into foreign specie, without any loss, which 
 could not have been the case had it been in a state 
 of depreciation : and, with regard to the small rise 
 of 2-J per cent, on the price of gold, this seems to 
 have been altogether a voluntary measure of the 
 bank, noways connected with any excess of our pa- 
 per currency. 
 
25 
 
 Since harvest 1808, the exchange has again be- 
 come unfavourable, and the price of gold has risen. 
 But these circumstances may be sufficiently account- 
 ed for, by a reference to causes unconnected with 
 the supposed excess and depreciation of our paper 
 currency. These are, 1. The partial failures of our 
 wheat crops in 1808 and 1809, and consequent large 
 importation of bread- corn. 2. A great importation 
 of Baltic stores in 1 808 and 1 809- 3. The high 
 freight paid to foreigners, chiefly in specie, most of 
 our importations being in foreign vessels. 4. The 
 remittances for the maintenance of our armies in 
 Spain and Portugal : and, Lastly, the severe mea- 
 sures adopted by France to prevent our goods from 
 being imported into the Continent; and the occupa- 
 tion of Holland by France. The four first of these 
 causes must have turned the balance of payments 
 against this country ; and the last prevented that ba- 
 lance from being discharged in the usual way. A 
 great depression on the exchange, and demand for 
 gold for exportation, must, therefore, have been the 
 necessary consequence. Even the fluctuations of 
 this depression, however, have been such as to evince, 
 that the depression itself did not arise from any de- 
 preciation of our currency. Thus, though in July 
 1809 the exchange was 16 per cent, against this 
 country, and the same in January 1810, yet in April 
 and May 1810 it was only 9j per cent., being not 
 
 D 
 
more than 3j per cent, beyond the expense and risk 
 of transporting specie. 
 
 Neither has the increase of our paper currency 
 been such as to warrant the conclusion, that the fall 
 in the exchange could have been any ways owing to 
 that cause. Thus the whole increase, on the circu- 
 lation of Bank of England notes, of 5/. and upwards, 
 from the year 1 802 to the year 1810, does not ex- 
 ceed one million, or one-fourteenth part of the cir- 
 dilation in 1 802, which is by no means equal to the 
 real rise in the prices of provisions and labour in the 
 intervening period, independent altogether of the in- 
 crease of trade. The greatest increase in the Bank's 
 circulation has been in one and two pound notes : 
 but as these have only come in place of guineas with- 
 drawn from circulation, chiefly since the fall of the 
 exchange in ] 808, they cannot be considered as hav- 
 ing increased the circulation of the country. 
 
 So that, on the whole, it seems abundantly evident, 
 that the state of our foreign exchanges, and price of 
 gold, afford no real proof of the exisence of any ac- 
 tual depreciation of the currency of this country. 
 
 On the other hand, a favourable state of our fo- 
 reign exchange, though inconsistent with a depre- 
 ciation of our currency, is noways inconsistent with 
 
27 
 
 the existence of a real depreciation of gold and 
 silver in this country. 
 
 Let it be supposed, that, without altering or de- 
 basing our coin, it could be brought about, either by 
 internal regulations or accidental circumstances, that 
 corn and labour, in this country, should be made ex- 
 changeable for double the usual quantity of the pre- 
 cious metals they were in use of being exchanged for. 
 
 If no such alteration had taken place in other 
 countries, and if the trade in bullion remained free, 
 it is obvious that this would immediately lead to the 
 exportation of bullion from this country. It would 
 also lead to an extended use of the precious metals 
 in our manufactories, the infallible consequence of 
 all which would be the melting of our coin, not- 
 withstanding any prohibition to the contrary, inso- 
 much, that it would very soon be found altogether 
 impossible to continue the use of gold and silver as 
 the medium of circulation. 
 
 Let it next be supposed, that the use of specie, as 
 the medium of circulation, shall be laid aside, and 
 its place supplied with a paper money, which, though 
 not exchangeable for specie, yet commands the con- 
 fidence of the country in an equal degree as if it 
 were so exchangeable, and is by law declared a legal 
 
28 
 
 tender of payment. The consequence of these mea- 
 sures, in so far as they regarded foreign countries, 
 while the depreciation and exportation of our specie 
 and bullion were going on, would be nearly the same 
 as if a gold mine had been discovered in this coun- 
 try ; and the exportation would tend to raise, instead 
 of depressing the exchange. 
 
 Let it be further supposed, that the commodities 
 which we are in use to export to the Continent, con- 
 sist either of articles of manufacture, the prices of 
 which, from the improvement of machinery, are lit- 
 tle affected by the expense of labour, or of colonial 
 produce raised by means of labour, the price of 
 which has not been materially increased, and that 
 from the circumstances of the other states of Europe 
 there is no rival nation to compete with us in these 
 commodities, our goods will continue to find sales in 
 the Continental markets, so as to create a general 
 balance of trade in favour of this country, notwith- 
 standing the depreciation of money here : and, while 
 that is the case, it is perfectly clear, that though 
 we may have very little gold and silver in circula- 
 tion, and no more bullion than what is necessary for 
 pnr manufactures, yet our exchanges, real as well as 
 nominal, with the Continent, will continue to be in 
 our favour, in the same manner as if we were paying 
 in specie. Neither would the circumstance, here 
 
supposed, have the effect of raising the market price 
 of bullion in this country, seeing that, as long as the 
 i3xchange was at or above par, bullion could be com- 
 manded by our paper currency, from foreign coun- 
 tries, at the mint price. 
 
 And these circumstances are not essentially differ- 
 ent irorn those that have taken place in this country, 
 within the last sixteen years. 
 
 It may be further observed, on this branch of the 
 subject, that a depreciation of our currency alone 
 could have given no tendency to the precious metals 
 to flow out of this country, as they have shewn a 
 strong tendency to do, without regard to the state of 
 the exchange ; seeing a depreciation of currency im- 
 plies no depreciation of bullion, which, on the con- 
 trary, would rise in its nominal price, along with all 
 other commodities, and might continue equally 'dear 
 here as in other countries ; so that there would be 
 no temptation to export it. 
 
 It has been said, that the supposed depreciation 
 of our currency has been occasioned by the bankers 
 having issued an excessive quantity of their notes. 
 But it has never yet been once attempted to be ex- 
 plained, how such an excessive issue could take place; 
 or, if it did take place, how it could be maintained 
 
so 
 
 in 'circulation : and a few observations xvill suffice to 
 v, that, under the present mode of issuing our 
 paper currency, this can never happen. 
 
 No toank issues its notes but in the way of loans 
 or advances, to be repaid at short dates, on bills dis- 
 counted, or other securities. 
 
 In the case of the country banks, all the notes is- 
 sued by them more than the circulation will absorb, 
 are instantly returned upon them, and must be pro- 
 vided for, either by specie, by Bank of England notes, 
 or by drafts on their bankers in London, in whose 
 hands funds are impressed for the purpose, or kept 
 ready at command, in the shape of Exchequer bills, 
 or other transferable securities ; so that no excess of 
 currency from their issues can possibly take place. 
 
 With regard, again, to the Bank of England/ its 
 notes are continually returning upon it, for the pur- 
 pose of retiring discounted bills, or in repayment of 
 its advances in anticipation of taxes, no payments 
 being received by the bank but in its own notes, or 
 in specie ; so that the daily return of its notes must, 
 on the average, be nearly equal to its daily issues. 
 It is evidently against any man's interest to keep 
 more of these notes in his possession than he has im- 
 mediate occasion for; and, as they cannot be obtain- 
 
 6 
 
31 
 
 ed from the bank but at a certain expense, no more 
 will be drawn out than what is wanted for immediate 
 vise. But if there should happen, at any time, to be 
 more of them drawn out by the merchants, or by the 
 government, than can be employed in circulation, 
 this excess will be immediately perceived in the di- 
 minished demand for fresh discounts. The super- 
 fluous quantity will speedily find its way into the 
 hands of the private bankers, and by them will either 
 be employed in retiring bills due at the bank, or in 
 loans to the merchants, which would in so far lessen 
 the applications for discounts at the bank ; so that, 
 in this way, its issues of notes can never permanently 
 exceed the real employment for them : and it would 
 surely be absurd, in these circumstances, to suppose 
 that any person could be laid under the necessity of 
 disposing of the bank's notes at an undervalue, by 
 way of getting rid of an unprofitable commodity, 
 while they must be in constant and daily request, m 
 order to retire the bills unpledged for their return. 
 
 It is equally a mistake to suppose, ,that the issues 
 of the provincial banks depend upon, and are pro- 
 portionate to, the issues of the Bank of England. 
 
 It is no doubt true, that, as the restriction applies 
 only to the Bank of England, the security of the pro- 
 vincial banks rests on the restriction of the Bunk, of 
 
32 
 
 England ; but it does not follow from this, that the 
 issues of the provincial banks must always be pro- 
 portionate to those of the Bank. 
 
 So long as the provincial banks enjoy the public 
 confidence, they will hot be exposed to any great 
 demand, either for specie or Bank of England notes. 
 In place, therefore, of keeping Bank of England notes 
 in their coffers, to any great amount, it is the prac- 
 tice among them to establish a credit with a baaker 
 in London, on whom they give drafts in return for 
 their own notes, of which the payment is demanded. 
 All these drafts come into the daily clearing account 
 among the London bankers, the balance of which 
 only is paid in Bank of England notes : and it is 
 evident that this balance may be very small, or al- 
 most nothing, though the transactions which termin- 
 ate in it may have been very considerable : and what 
 shews, in point of fact, that the circulation of the 
 country banks depends very little on that of the 
 Bank of England, is this, that the number of the 
 country banks has been greatly more than doubled 
 .since the year 1802; and yet the circulation of the 
 Bank of England notes, of 51. or upwards, has only 
 increased about one-fourteenth part. 
 
 If, while the country bankers had the option of 
 paying in Bank of England notes, these notes were 
 
33 
 
 exchangeable into specie at the Bank of England, 
 the country bankers would be necessitated to keep 
 f \ large stock, either of these notes or of specie, con- 
 tinually by them, and their issues would be propor- 
 tionate to that stock; because, in such case, they 
 might be exposed to an extraordinary demand for 
 Bank of England notes to be converted into gold : 
 but, at present, while the Bank of England notes are 
 not so convertible, there can be no just cause for 
 such extraordinary demand, and, of course, no pro- 
 vision will be made for it. 
 
 Lastly, it may be observed, that, even admitting 
 the evidence of a depreciation of our currency to its 
 fullest extent, it leaves the fall in the value of money, 
 previous to summer 1808, the existence of which 
 must have been felt by every person, wholly unex- 
 plained and unaccounted for; and, since the year 
 ] 808, it can only account for the depreciation to 
 the amount of from 6 to 10 per cent. 
 
 . Since this was written, the Author has seen Mr Bo- 
 sanquet's Pamphlet on the subject of the preceding Section ; 
 and he is happy to find, that, in the inferences drawn from the 
 state of the Exchange, &c., they in general coincide. 
 
 E 
 
TABLES 
 
 ILLUSTRATIVE OF THE PRECEDING 
 
 OBSERVATIONS, 
 
TABLE I. 
 
 ABSTRACT of the yearly Importation and Exportation of Corn of all 
 sorts. Of the Prices at which the Importation of Wheat was permitted, 
 and the actual Prices of Wheat in England and Wales, from 1700 t 
 1810, both inclusive. 
 
 FIRST PERIOD from 1700 to 1763 inclusive. 
 
 
 Total Ex 
 portation. 
 
 Total Im- 
 portation. 
 
 Excess of 
 Exportation. 
 
 Excess of | 
 mportation 
 
 Importation 
 mce of Wheat, 
 ncludin^ duty. 
 
 Average actual 
 3 rice for England. 
 
 
 Quarters. 
 
 Quarters. 
 
 Quarters. 
 
 Quarters. 
 
 
 
 1700 
 
 140,14-7 
 
 239 
 
 139,908 
 
 
 L.3 9 4 
 
 L. 2 
 
 1 
 
 214,927 
 
 21 
 
 214,906 
 
 
 394 
 
 1 17 8 
 
 2 
 
 230,167 
 
 1 
 
 230,166 
 
 
 394 
 
 1 9 6 
 
 3 
 
 360,028 
 
 52 
 
 359,976 
 
 
 394 
 
 1 Ib 
 
 4 
 
 253,422 
 
 2 
 
 253,420 
 
 
 394 
 
 266 
 
 5 
 
 279,128 
 
 
 279,128 
 
 
 394 
 
 1 10 
 
 6 
 
 389,592 
 
 656 
 
 388,936 
 
 
 394 
 
 1 6 
 
 7 
 
 224,215 
 
 12 
 
 224,203 
 
 
 394 
 
 1 8 6 
 
 8 
 
 238,858 
 
 186 
 
 238,672 
 
 
 394 
 
 2 1 6 
 
 9 
 
 536,607 
 
 2,232 
 
 534,375 
 
 
 394 
 
 3 18 6 
 
 1710 
 
 122,502 
 
 1,260 
 
 121,242 
 
 
 394 
 
 3 18 
 
 1 
 
 303,199 
 
 19 
 
 503,180 
 
 
 394 
 
 2 14 
 
 2 
 
 421,082 
 
 1 
 
 421,081 
 
 
 394 
 
 264 
 
 3 
 
 536,752 
 
 
 536,752 
 
 
 394 
 
 2 11 
 
 4 
 
 481,521 
 
 37 
 
 481,484 
 
 
 394 
 
 2 10 4 
 
 5 
 
 349,516 
 
 
 349,516 
 
 
 394 
 
 230 
 
 6 
 
 404,865 
 
 
 404,865 
 
 
 394 
 
 280 
 
 j 
 i 
 
 366,244 
 
 62 
 
 366,182 
 
 
 3 9 4 
 
 256 
 
 8 
 
 567,382 
 
 21 
 
 567,361 
 
 
 3 9 4 
 
 1 18 10 
 
 9 
 
 605,322 
 
 320 
 
 605,002 
 
 
 394 
 
 l' 14 9* 
 
 1720 
 
 456,050 
 
 254 
 
 455,796 
 
 
 394 
 
 1 17 
 
 1 
 
 563,688 
 
 445 
 
 563,243 
 
 
 394 
 
 1 17 6 
 
 8,239,394 
 
 L.47 18 5$ 
 
TABLE T. 
 
 HRST PERIOD from 1700 to 1763 inclusive. 
 
 
 Total Ex- 
 portation. 
 
 Total Im- 
 portation. 
 
 Excess of 
 Exportation. 
 
 Excess of 
 Importatio 
 
 Importation 1 A 
 price of Wheat, Average actual 
 including duty.| Pncefor En g lan <* 
 
 
 Quarters. 
 
 Quarters. 
 
 Quartet's. 
 
 Quarters 
 
 
 
 
 Brought 
 
 forward 
 
 8,239,39 
 
 
 
 L.47 18 5^ 
 
 172 
 
 654,471 
 
 1 
 
 654,47C 
 
 
 L.3 9 4 
 
 1 16 
 
 3 
 
 526,267 
 
 262 
 
 526,00s 
 
 
 394 
 
 1 14 9 
 
 t 
 
 525,947 
 
 61,798 
 
 464, 14<< 
 
 
 394 
 
 1 17 
 
 ( 
 
 578,232 
 
 2,187 
 
 576,04, 
 
 
 394 
 
 286 
 
 ( 
 
 555,669 
 
 20 
 
 555,649 
 
 
 394 
 
 2 6 
 
 t 
 
 350,08'] 
 
 117 
 
 349,96f 
 
 
 394 
 
 220 
 
 8 
 
 219,064 
 
 198,595 
 
 20,469 
 
 
 394 
 
 2 14 6 
 
 c 
 
 1730 
 
 174,450 373,655 
 531,8121 95,612 
 
 236,200 
 
 199,205 
 
 394 
 394 
 
 276 
 1 16 
 
 ] 
 
 367,078 
 
 19,400 
 
 347,678 
 
 
 394 
 
 1 13 
 
 t 
 
 410,737 
 
 12,044 
 
 398,693 
 
 
 394 
 
 169 
 
 < 
 
 719,117 
 
 16 
 
 719,101 
 
 
 394 
 
 1 8 4 
 
 4 
 
 759,555 
 
 19 
 
 759,536 
 
 
 394 
 
 1 17 9 
 
 5 
 
 490,868 
 
 6,449 
 
 484,419 
 
 
 394 
 
 230 
 
 6 
 
 359,898 
 
 286 
 
 359,612 
 
 
 394 
 
 204 
 
 *- 
 7 
 
 624,159 
 
 42 
 
 624,117 
 
 
 394 
 
 1 17 9 
 
 8 
 
 923,459 
 
 29 
 
 923,430 
 
 
 394 
 
 1 15 6 
 
 9 
 
 595,838 
 
 so 
 
 595,758 
 
 
 394 
 
 1 17 6 
 
 174-0 
 
 243,762 
 
 8,553 
 
 235,209 
 
 
 394 
 
 2 15 
 
 1 
 
 184,396 
 
 158,437 
 
 25,959 
 
 
 394 
 
 270 
 
 <2 
 
 600,297 
 
 76 
 
 600,221 
 
 
 394 
 
 1 12 Of 
 
 3 
 
 774,524 
 
 24 
 
 774,500 
 
 
 3 9 4 
 
 1 5 
 
 4 
 
 596,075 
 
 75 
 
 596,000 
 
 
 394 
 
 1 4 11 
 
 5 
 
 787,056 
 
 24 
 
 787 
 
 
 394 
 
 1 7 6 
 
 6 
 
 6f:8,S35 
 
 4 
 
 6S8,8ai 
 
 
 394 
 
 1 19 
 
 7 
 
 863,382 
 
 27 
 
 863, 3,05 
 
 
 :; 9 4 
 
 1 14 10 
 
 8 
 
 ,123,953 
 
 20 
 
 1,123 
 
 
 394 
 
 1 17 
 
 9 
 
 ,250.306 
 
 4'J1 
 
 1,249,S75 
 
 
 394 
 
 1 17 
 
 1750 
 
 1,667,77^ 
 
 319 
 
 1,667,4-59 
 
 
 3 9 4 
 
 1 12 (> 
 
 J [1,048,324- 
 
 2,^08 
 
 1,04'J,016 
 
 
 394 
 
 1 18 6 
 
 n 
 
 L.lOi- 10 11 
 
TABLE I. 
 FIRST PERIOD from 1700 to 1763 inclusive. 
 
 
 Total Ex- 
 
 Total Im- 
 
 Excess of- 
 
 _ j Improtatibn i . 
 Excess of L r ice of Wheat' Average actual 
 
 
 portation. 
 
 portation. 
 
 Exportation. 
 
 Im P ortationjf ncJuding duty | Price for England. 
 
 
 Quarters. 
 
 Quarters. 
 
 Quarters. 
 
 Quarters. 
 
 
 
 
 Brought 
 
 forward 
 
 26,443,081 
 
 199,205 
 
 
 L.104 10 11 
 
 1752 
 
 886,712 
 
 14,629 
 
 872,083 
 
 
 L.3 9 4 
 
 2 1 10 
 
 3 
 
 683,244 
 
 7,066 
 
 676,178 
 
 
 394 
 
 245 
 
 4 
 
 795,697 
 
 57,047 
 
 738,650 
 
 
 394 
 
 1 14 9 
 
 5 
 
 665,739 
 
 2,899 
 
 662,840 
 
 
 394 
 
 1 13 9 
 
 6 
 
 408,170 
 
 56,461 
 
 351,709 
 
 
 394 
 
 253 
 
 7 
 
 80,656 
 
 167,301 
 
 
 86,645 
 
 law suspended. 
 
 300 
 
 8 
 
 22,484 
 
 64,561 
 
 
 42,077 
 
 394 
 
 2 10 O 
 
 9 
 
 484,916 
 
 1,688 
 
 483,228 
 
 
 394 
 
 1 19 10 
 
 1760 
 
 752,434 
 
 12 
 
 752,422 
 
 
 394 
 
 1 16 6 
 
 1 
 
 925,119 
 
 73 
 
 925,046 
 
 
 394 
 
 i 10 ar 
 
 2 
 
 763,070 
 
 18,432 
 
 744,638 
 
 
 394 
 
 1 19 
 
 3 
 
 661,212 
 
 238,248 
 
 422,964 
 
 
 394 
 
 209 
 
 33,072,839 327,927 
 327,927 
 
 L.129 7 3 
 
 Total excess of exportation 32,744.912 
 Average annual excess 5 1 1 ,639 
 
 Average price of Wheat for these 64 years 
 
 - L.2 5 
 
40 
 
 TABLE I. 
 
 SECOND PERIOD from 1763 to 1794. 
 
 
 Total Ex- 
 portation- 
 
 Total Im- 
 portation. 
 
 Excess of 
 Exportation. 
 
 Excess of 
 Importation 
 
 Importation 
 price of Wheat, 
 including duty, 
 
 Average actual 
 Price for England. 
 
 
 Qtiarters. 
 
 Quarters. 
 
 Quarters. 
 
 Quarters. 
 
 
 
 1764 
 
 675,459 
 
 139,931 
 
 535,528 
 
 
 L.3 9 4 
 
 L.2 6 9 
 
 j^ 
 
 457,730 
 
 218,031 
 
 239,699 
 
 
 394 
 
 2 14 
 
 6 
 
 302,794 
 
 247,518 
 
 54,276 
 
 
 law suspended. 
 
 216 
 
 7 
 
 50,481 
 
 907,420 
 
 
 856,939 
 
 ditto. 
 
 346 
 
 8 
 
 40,256 
 
 649,173 
 
 
 608,917 
 
 ditto. 
 
 306 
 
 9 
 
 119,190 
 
 114,273 
 
 4,917 
 
 
 ditto. 
 
 231 
 
 1770 
 
 294,866 
 
 124,225 
 
 170,639 
 
 
 394 
 
 290 
 
 1 
 
 96,573 
 
 217,375 
 
 
 120,802 
 
 394 
 
 272 
 
 2 
 
 61,685 
 
 140,651 
 
 
 78,966 law suspended. 
 
 2 10 8 
 
 3 
 
 44,070 
 
 520,598 
 
 
 476,528; 280 
 
 2 11 
 
 1,005,059 2,142,152 
 1,005,059 
 
 L.25 8 2 
 
 Total excess of Importation - 1,1 37,093 
 
 Yearly average 1 1 3,709 Quarters. 
 Average price of Wheat for these ten years 
 
 L.2 10 10 
 
 1774 
 
 51,099 
 
 926,174 
 
 
 875,075,L.2 8 
 
 L.2 12 8 
 
 5 
 
 191,007 
 
 1.1')3,407 
 
 
 972,400| 280 
 
 284 
 
 6 
 
 .. ? 
 
 448,801 
 315,127 
 
 449,901 
 690,033 
 
 
 1,100; 280 
 374,906! 280 
 
 1 18 2 
 256 
 
 8 
 
 340,924 
 
 417,138 
 
 
 76,614 
 
 280 
 
 220 
 
 9 
 
 378,116 
 
 406,073 
 
 
 27,957 
 
 280 
 
 1 13 8 
 
 1780 
 
 471,819 
 
 224,616 
 
 247,275 
 
 
 280 
 
 1 15 8 
 
 1 
 
 317,251 
 
 297,864 
 
 19,387 
 
 
 280 
 
 248 
 
 2 
 
 326,344 
 
 141,407 
 
 184,937 
 
 
 280 
 
 2 7 10 
 
 3 
 
 134,159 jl,070,960 
 
 
 936,801 
 
 280 
 
 2 12 8 
 
 451,599 3,264,853 L.22 1 2 
 
 
 
 451,599 
 
 
 
 
 Total excess of Importation 
 
 2,813,254 
 
 Yearly average 281,325 Quarters. 
 Average price of Wheat for these ten years 
 
 L.2 4 
 
4-1 
 
 TABLE I. 
 SECOND PERIOD from 1763 to 1794. 
 
 
 Total Ex- 
 portation. 
 
 Total Im- 
 portation. 
 
 Excess of 
 Exportation. 
 
 Excess of 
 Importation 
 
 Importation 
 irice of Wheat, 
 ncluding duty. 
 
 Average actual 
 jeice for England* 
 
 
 Quarters. 
 
 Quarters. 
 
 Quarters. 
 
 Quarters. 
 
 
 
 1784 
 
 187,395 
 
 631,722 
 
 
 444,327 
 
 L.2 8 
 
 L.2 8 10 
 
 5 
 
 353,433 
 
 497,738 
 
 
 144,305 
 
 280 
 
 2 1 10 
 
 6 
 
 359,402 
 
 631,662 
 
 
 272,260 
 
 280 
 
 1 18 10 
 
 7 
 
 303,666 
 
 664,525 
 
 
 360,059 
 
 280 
 
 212 
 
 8 
 
 356,555 
 
 584,918 
 
 
 228,363 
 
 280 
 
 250 
 
 9 
 
 513,019 
 
 564,576 
 
 
 51,563 
 
 280 
 
 2 11 2 
 
 1790 
 
 312,816 
 
 1,046,515 
 
 
 833,699 
 
 280 
 
 2 13 2 
 
 1 
 
 146,743 
 
 1,380,436 
 
 
 1,233,693 
 
 2 12 6 
 
 270 
 
 2 
 
 417,390 
 
 1,008,401 
 
 
 591,011 
 
 2 12 6 
 
 2 2 11 
 
 3 
 
 117,686 
 
 1,382,701 
 
 
 1,265,015 
 
 2 12 6 
 
 2 8 11 
 
 4 
 
 154,170 
 
 1,462,575 
 
 
 1,308,405 
 
 2 12 6 
 
 2 11 8 
 
 Excess of Importation 6,732,700 
 
 Yearly average 612,063 Quarters. 
 
 Average price of Wheat for these eleven years 
 
 Average price for 16 years, 1779 & 1794 inclusive 
 Average price for 31 years, 1764 & 1794 inclusive 
 
 L.25 10 6 
 
 L.2 6 5 
 
 L.2 5 4 
 
 L.2 7 1 
 
 Difference on the average of the 16 years, 1779 and 1794 inclusive, 
 and the average of the succeeding 16 years, 1795 and 1810 inclusive, 
 73 * T per cent, on the former. 
 
43 
 
 Mi 
 
 TABLE I. 
 
 THIRD PERIOD from 1794 to 1800. 
 
 
 Total Ex- 
 portation. 
 
 Total Im- 
 portation. 
 
 Excess of 
 Exportation. 
 
 Excess of 
 Importation 
 
 Importation 
 price of Wheat, 
 including duty. 
 
 Average actual 
 price for England. 
 
 
 Quarters. 
 
 Quarters. 
 
 Quarters. 
 
 Quarters. 
 
 
 
 1795 
 
 18,208 
 
 822,831 
 
 
 804,623 
 
 L.2 12 6 
 
 L.3 14 2 
 
 6 
 
 38,757 
 
 1,875,646 
 
 
 1,836,889 
 
 2 12 6 
 
 3 17 1 
 
 7 
 
 74,207 
 
 1,146,250 
 
 
 1,072,057 
 
 2 12 6 
 
 2 13 1 
 
 8 
 
 82,438 
 
 1,295,276 
 
 
 1,212,838 
 
 2 12 6 
 
 2 10 3 
 
 9 
 
 89,483 
 
 1,008,808 
 
 
 919,325 
 
 2 12 6 
 
 376 
 
 1800 
 
 33,169 
 
 2,030,875 
 
 
 1,997,706 
 
 2 12 6 
 
 5 13 7 
 
 1 
 
 
 
 
 
 2 12 6 
 
 5 18 3 
 
 2 
 
 
 
 
 
 2 12 6 
 
 375 
 
 3 
 
 
 
 
 
 2 12 6 
 
 2 16 6 
 
 4 
 
 
 
 
 
 356 
 
 3 1 
 
 5 
 
 
 
 
 
 356 
 
 4 7 10 
 
 6 
 
 
 
 
 
 356 
 
 3 19 
 
 7 
 
 
 
 
 
 356 
 
 3 13 3 
 
 8 
 
 
 
 
 
 356 
 
 3 19 
 
 9 
 
 
 
 
 
 356 
 
 4 15 7 
 
 1810 
 
 
 
 
 
 356 
 
 563 
 
 Total excess of Importation - 7,843,438 
 Yearly average 1,307,239 Quarters. 
 Average price of Wheat for these 16 years 
 
 Average price for ten years, 1801 & 1810 inclusive 
 Ditto for six years, 1805 1810 inclusive 
 Ditto for three years, 1808 & 1810 inclusive 
 
 L.62 18 10 
 L.3 18 8 
 
 L.4 2 3 
 4 6 10 
 4 13 7 
 
 NOTE. The accounts of the yearly importation and exportation of Corn 
 having been taken from different sources of information, may 
 not be in every instance minutely correct ; but any inaccu- 
 racy of this kind can have no effect on the general argument. 
 It was intended to have completed them to the year 1811; 
 but this was delayed for want of the* necessary information. 
 There is no reason to believe, however, that the average ex- 
 cess of importation for the years 1801 & 1810 inclusive, has 
 been under the average excess for the years 1795 & 1800 in- 
 clusive. Had the usual consumption of the distillery') jen 
 going on, it must have been still greater. 
 
REMARKS. 
 
 1. It will be observed, that the great change by 
 which Britain, from being an exporting, became 
 an importing country of corn, took place at or about 
 the conclusion of the war which terminated in 176S, 
 and was probably the consequence of that war, 
 which contributed more than perhaps any preceding 
 one, to the increase of the wealth and power of the 
 empire. 
 
 2. So long as Britain continued an exporting coun- 
 try of corn, the importation price of wheat, however 
 high, had no effect whatever in keeping up the ac- 
 tual price of it: but, so soon as it became an im- 
 porting country, the importation price had an obvi 
 ons influence on the actual price. This influence 
 seems to have been greatest immediately after the 
 change took place, probably because a provision for 
 this new demand was not yet legularly established in 
 
44 
 
 the foreign markets. The average price of wheat 
 was, accordingly, higher during the ten years from 
 1763 to 1773, than for the succeeding ten years 
 from J773 to 1783, or from 1783 to 1793. This, 
 however, may have been in part owing to the then 
 debased state of the gold coin which was reformed 
 in r/73 and 1774 
 
 3. The excess of our importation over our ex- 
 portation of corn, seems to have increased in the 
 greatest ratio since the year 178.9, the commence- 
 ment of the troubles in France ; and from the enor- 
 mous amount to which that excess has now arisen, 
 the nominal price of coin in this country must be 
 considered, in a great measure, if not altogether, re- 
 gulated by the prices at which importation is per- 
 mitted. 
 
 4 Keeping in view the effect of this great change 
 in the circumstances of this country, there seems to 
 be nothing in the price of corn that can warrant the 
 conclusion, that any general depreciation of money 
 had taken place from the year 1700 to 1794 ; and, 
 assuming the price of wheat as the standard, the 
 value of money must be held to have risen rather 
 than fallen, during the last 31 years of that period. 
 
 5. The two great and fundamental errors in our 
 
 3 
 
internal economy, to which the late depreciation 
 of money, and the continued suspension of our 
 y;dy meats" in specie are to be principally ascribed, 
 seem to have been these. 
 
 1. The assumption of the fallacious principle, 
 that to raise, by artificial means, the price of corn, 
 would, by encouraging agriculture, increase pro- 
 duction, and ultimately tend to lower the price of 
 corn. This principle appears to have been acted upon 
 in raising the importation prices of corn in the year 
 1791, and probably had also some effect in again 
 raising these prices in the year 1804. 
 
 2. The raising of the nominal price of labour, in 
 order to enable the labourer to pay the enhanced 
 prices of provisions, which may be considered as 
 the necessary consequence of the former. This 
 was first acted upon in the year 1795*; again in 
 the years 1 800 and 1801; and, lastly, since the year 
 1 804 : and this increased price of labour was, in its 
 turn, made the principal ground for raising the impor- 
 tation prices of corn in 1804. The exactness with 
 which the price of labour has adjusted itself to the 
 enhanced price of corn since 1795, shews clearly the 
 connection betwixt them. 
 
 * See Burke's Tract, entitled, Thoughts and Details oa 
 Scarcity, written in November 1795. 
 
46 
 
 The obligation to pay in specie was the only check 
 on this mode of depreciating money, and was oper- 
 ating to correct the depreciation which had takes 
 place in t79 5 and 1796, when the check itself was 
 removed, in the beginning of the year 1797. So 
 that, although the suspension of our cash payments 
 was not, in itself, the direct cause of the depre- 
 ciation of money, yet it was the sine qua non, with- 
 out which the depreciation could not have taken 
 place. 
 
 6. The alteration of the corn law in 1804 opposes 
 the greatest obstacle, if not an absolute bar, to the 
 resumption of our cash payments : for not only does 
 it infer such a depreciation of money, here, as must 
 give it a strong tendency to leave the country, but it 
 must increase the drain, either of specie or other 
 goods, from this country, by making us pay higher 
 prices for the corn we import, than we otherwise 
 would be obliged to do. 
 
 Were it not for our corn laws, the importation 
 would be regular and gradual, and the demand would 
 have comparatively little effect on the foreign markets; 
 but by the operation of our corn law, the demand 
 from this country is necessarily irregular and uncer- 
 tain; and as, at all everts, the existing prices in this 
 country must be high, the foreign merchants are led, 
 to demand, and our importing merchants enabled to 
 
47 
 
 give; higher prices than would otherwise have ob- 
 tained. This effect of our corn law, together with 
 the exportation of our specie, must have contributed 
 greatly to the raising of the price of corn in the fo- 
 reign market 
 
 7. Corn, as the principal means of subsistence, 
 must always be the ultimate real standard of value; 
 and the chief use of money is to regulate the nomi- 
 nal price of that standard; and in this respect it 
 served as a check to keep that price within limited 
 bounds, till the check itself was removed by the sus- 
 pension of our cash payments. Since that event, the 
 price of corn has lain under no check, excepting 
 what may arise from the influence of its price in other 
 countries; and this, again, lies entirely unjer the 
 controul of our importation laws, and has also been 
 prevented from operating by various causes. It 
 seems evident, therefore, that, under these circum- 
 stances, to raise the importation prices of corn, is, in 
 so far as the national creditors and moneyed interest 
 are concerned, a meusure of much the same nature 
 as to raise the denomination of the coin. The prac- ' 
 ticability of paying in specie may be considered as 
 the limit, beyond which this mode of raising prices, 
 ought, on no account, to be carried. 
 
 It may be further remarked on this subject, that 
 
48 
 
 the enhancement of the price of corn, by means of 
 the importation laws, can ultimately have no effet . 
 whatever in encouraging agriculture, as the increas sd 
 nominal amount of the gross produce will be fully 
 counterbalanced by increased rent, increased taxes, 
 and increased expense of management. Neither will 
 the increase of rent ultimately benefit the landlord ; 
 so that, in the final result, the raising of our impor- 
 tation prices of corn can have no other effect, than 
 that of operating, through the depreciation of money, 
 as an indirect tax, exclusively affecting the national 
 creditors and moneyed interest, and as a discourage- 
 ment to the sale of our manufactured produce in fo- 
 reign countries. 
 
 8. With regard to the effect of taxation, as con- 
 nected with the depreciation of money, it may be ob- 
 served, that the proper fund of taxation consists of 
 that part of the national income which goes to the 
 maintenance of luxury. Taxation, in this country, 
 has generally proceeded on this principle; and, in so 
 far as it has done so, it is evident that it could have 
 had little or no effect on the prices either of labour, 
 or the necessaries of life, nor, of course, on the ge- 
 neral vdiue of money ; and, accordingly, no general 
 depreciation of money seems to have taken place 
 either during the course of the American war, or in 
 consequence of it. 
 
49 
 
 This fund of taxation is derived either (].) from 
 the profits of skill, and capital actively employed; 
 ;a) From the rent of land; or, (3.) From the in- 
 terest of money, annuities, or fixed salaries ; all of 
 which ought to bear the burden of the taxes rate- 
 ably and proportionally, according to the means of 
 the above description respectively attached to them. 
 
 In so far as regards the third class, this fund of 
 taxation has been much narrowed by the deprecia- 
 tion of money. But, as to the first and second 
 classes, to judge from their expenditure, the fund 
 of taxation, so far from being impaired, is probably 
 much greater than it was at the commencement of 
 the last war, in the year 1793. 
 
 If the above-mentioned principle be well-founded, 
 there can be no just reason for any one of the classes 
 being allowed to shift their share of the burden from 
 their own shoulders, and throwing it upon those of 
 the other ; though, it must be admitted, that the de- 
 preciation of money has operated greatly to the re- 
 lief of the first and second classes, at the expense of 
 the third. 
 
 9- That the increase of national wealth or capital 
 does not infer any depreciation of money, is clearly 
 
 G 
 
shewn by Dr Smith (Wealth of Nations, Book I. 
 Chap. 2.). The effect of such increase is, not to de- 
 preciate gold and silver, but to reduce the profits 
 capital, or the rate of interest ; and the application 
 of the sinking fund merely accelerates the accumula- 
 tion of capital, and reduction of the rate of interest, 
 but has no effect on the value of money. 
 
 10. If, by the re-establishment of a general commer- 
 cial intercourse with other countries, the prices of 
 corn in this country w r ere to be reduced to the stand- 
 ard of the importation prices, it would speedily be 
 found that the price of labour had adjusted itself to 
 a still higher standard, insomuch that there would be 
 equally just grounds for again raising the importation 
 prices as existed in the year 1804, and to at least as 
 great an extent. But, in the present circumstances 
 of the country, no such measure can be proposed, 
 without the most obvious injustice. 
 
TABLE II. 
 
 ABSTRACT of the Average Prices of Wheat; the Course of Exchang 
 with Hamburgh ; and the Market Price of Gold, from January 178 
 to January 1811 ; and of the Prices of the 3 per cent. Consols, fro: 
 January 1792 to January 1811. 
 
 The per centage on the Exchange is computed from the par of 34 5| 
 Flemish Shillings to the Pound Sterling, and the right hand 
 Jigures are decimal parts. 
 
 Dates. 
 
 Average price 
 of Wheat per 
 quarter for 
 England and 
 Wales. 
 
 Course of 
 Exchange 
 with 
 Hambro'. 
 
 Per Cent- 
 age in fa- 
 vour of 
 London. 
 
 Per Cent- 
 age against 
 London. 
 
 Price of stand- 
 ard Gold per 
 ounce. 
 
 
 1780 Jan. \ 
 
 
 34.6 
 
 0.6 
 
 
 L.3 17 6 
 
 
 April, f 
 July, ( 
 
 L.I 15 8 
 
 35.2 
 34.8 
 
 2.25 
 1.1 
 
 
 3 17 6 
 3 17 6 
 
 
 Oct. 3 
 
 
 33.10 
 
 
 1.33 
 
 3 17 6 
 
 
 1781 Jan. ^ 
 
 
 34.1 
 
 
 06 
 
 3 17 6 
 
 
 April, f 
 
 2 A ft 
 
 33.7 
 
 
 2.06 
 
 3 17 6 
 
 
 July, ? 
 
 ft JS 
 
 32.1 
 
 
 6.44 
 
 3 17 6 
 
 
 Oct. 3 
 
 
 31.11 
 
 
 6.92 
 
 3 17 6 
 
 
 1782 Jan. ->, 
 
 
 31.9 
 
 
 7.41 
 
 3 17 6 
 
 
 April, ( 
 
 2 7 10 
 
 32.11 
 
 
 4.02 
 
 3 17 6 
 
 
 July, ? 
 
 
 32.11 
 
 
 4.02 
 
 3 17 6 
 
 
 Oct. 3 
 
 
 31.8 
 
 
 7.65 
 
 3 17 9 
 
 
 1783 Jan. ^ 
 
 
 32.7 
 
 
 4.97 
 
 3 17 9 
 
 
 April, f 
 
 21O Q 
 
 31.9 
 
 
 7.41 
 
 3 18 
 
 
 July, ( 
 
 J. ** \J 
 
 31.6 
 
 
 8.13 
 
 3 18 
 
 
 Oct. ) 
 
 
 32.9 
 
 
 4.5 
 
 3 18 
 
 
Dates. 
 
 Wheat per 
 Quarter. 
 
 Exchange 
 with 
 Hambro'. 
 
 Per Cent- 
 age in fa- 
 vour of 
 
 Per Cent- 
 age again s 
 London. 
 
 Price of Gold 
 per ounce. 
 
 Price of 
 3 p. cent. 
 Consols. 
 
 
 
 
 London. 
 
 
 
 
 1784 Jan. "| 
 
 
 33.8 
 
 
 1.82 
 
 L.3 18 
 
 
 April, 1 
 
 LQ ft 1O 
 
 34.3 
 
 
 0.12 
 
 3 18 
 
 
 July, f 
 
 O J. V/ 
 
 34.3 
 
 
 0.12 
 
 3 17 10 
 
 
 Oct. J 
 
 
 34.7 
 
 0.85 
 
 
 3 17 10^ 
 
 
 1785 Jan. | 
 
 
 35. 
 
 2.06 
 
 
 3 17 10^ 
 
 
 April, 1 
 
 2 1 10 
 
 35.4 
 
 3.03 
 
 
 3 17 10 ; 
 
 
 July, f 
 
 
 35.4 
 
 3.03 
 
 
 3 17 6 
 
 
 Oct. J 
 
 
 35.3 
 
 2.8 
 
 
 3 17 6 
 
 
 1786 Jan. ^ 
 
 
 34,10 
 
 1.57 
 
 
 3 17 6 
 
 
 April, I 
 
 1 18 10 
 
 34.11 
 
 1.82 
 
 
 3 17 6 
 
 
 July, f 
 Oct. J 
 
 
 34.6 
 34.4 
 
 0.6 
 0.12 
 
 
 3 17 6 
 3 17 6 
 
 
 1787 Jan. S 
 
 
 34.5 
 
 36 
 
 
 3 17 6 
 
 
 April, 1 
 
 212 
 
 34.7 
 
 0.85 
 
 
 3 17 6 
 
 
 July, f 
 
 
 34.9 
 
 1.33 
 
 
 3 17 6 
 
 
 Oct. J 
 
 
 34 11 
 
 1.82 
 
 
 3 17 6 
 
 
 1788 Jan. "} 
 
 
 35.1 
 
 2-3 
 
 
 3 17 6 
 
 
 April, I 
 
 250 
 
 35.5 
 
 3.27 
 
 
 3 17 6 
 
 
 July, f 
 
 
 35.1 
 
 2.3 
 
 
 3 17 6 
 
 
 Oct. J 
 
 
 34.11 
 
 1.82 
 
 
 3 17 6 
 
 
 1789 Jan. -| 
 
 
 34.11 
 
 1.82 
 
 
 3 17 6 
 
 
 April, 1 
 
 2 11 2 
 
 35.7 
 
 3.78 
 
 
 3 17 6 
 
 
 July f 
 
 
 35.7 
 
 3.78 
 
 
 3 17 6 
 
 
 Oct.' J 
 
 
 35.3 
 
 2.8 
 
 
 3 17 6 
 
 
 1790 Jan. "| 
 
 
 35. 
 
 2.06 
 
 
 3 17 6 
 
 
 April, 1 
 
 O 1 Q O 
 
 35.6 
 
 3.51 
 
 
 3 17 6 
 
 
 July, f 
 
 * 
 
 35.7 
 
 3.78 
 
 
 3 17 6 
 
 
 Oct J 
 
 
 35.10 
 
 4.5 
 
 
 3 17 6 
 
 
 1791 Jan. ^ 
 
 
 35.7 
 
 3.78 
 
 
 3 17 6 
 
 
 April, [ 
 
 9. 7 O 
 
 35.10 
 
 4.5 
 
 
 3 17 6 
 
 
 July, f 
 Oct. J 
 
 X> / V/ 
 
 35.10 
 35.4 
 
 4.5 
 
 3.03 
 
 
 3 17 6 
 3 17 G 
 
 
 1792 Jan. > 
 
 
 34.9 
 
 1.33 
 
 
 3 17 6 
 
 90{ 
 
 April. 1 
 
 o <* 1 1 
 
 34,4 
 
 0.12 
 
 
 3 17 6 
 
 95 
 
 July, f 
 
 *- ft X 
 
 34.5 
 
 0.36 
 
 
 3 17 6 
 
 91 
 
 Oct. J 
 
 
 34.3 
 
 
 0.12 
 
 3 17 6 
 
 89{ 
 
 1793 Jan. ^ 
 
 
 35.3 
 
 2.8 
 
 
 3 17 6 
 
 76 
 
 ApriU I 
 
 Q Oil 
 
 38.2 
 
 11.29 
 
 
 3 17 6 
 
 78 
 
 July, f 
 
 *4 Oil 
 
 36.5 
 
 6.2 
 
 
 3 17 6 
 
 77 
 
 Oct. J 
 
 
 35.8 
 
 4-02 
 
 
 3 17 6 
 
 75 
 
 1794 Jan. ^ 
 
 
 35.10 
 
 4.5 
 
 
 3 17 6 
 
 70 
 
 April, 1 
 
 211 ft 
 
 36.7 
 
 6.68 
 
 
 3 17 6 
 
 68 
 
 July, f 
 
 11 O 
 
 36. 
 
 4.97 
 
 
 3 17 6 
 
 67 
 
 Oct. J 
 
 
 33,3 
 
 
 3.03 
 
 3 17 6 
 
 64 
 
Dates. 
 
 Wheat per 
 Quarter. 
 
 Exchange 
 with 
 Hambro'. 
 
 Per Cent- 
 ge in fa- 
 vour of 
 London. 
 
 Per Cent- 
 age against 
 London. 
 
 Price of Gold 
 per ounce. 
 
 Price of 
 3 p. cent. 
 Consols. 
 
 1795 Jan. 
 
 L.2 15 5 
 
 34.10 
 
 1.57 
 
 
 L.3 17 6 
 
 62J 
 
 April, 
 
 312 
 
 34.8 
 
 1.1 
 
 
 3 17 6 
 
 65 2 
 
 July, 
 
 41 
 
 32.3 
 
 
 5.95 
 
 3 17 6 
 
 67| 
 
 Oct. 
 
 3 14 2 
 
 32.9 
 
 
 4.5 
 
 ~| from 
 
 
 1796 Jan. 
 
 4 11 3 
 
 33. 
 
 
 3.78 
 
 U 4 to 
 
 68" 
 
 April, 
 
 4 18 3 
 
 34.10 
 
 1.57 
 
 
 /4 ft 
 
 67 
 
 July, 
 
 4 1 5 
 
 33.7 
 
 
 2.06 
 
 3 17 6 
 
 59 
 
 Oct. 
 
 322 
 
 34.6 
 
 0.6 
 
 
 3 17 6 
 
 59 
 
 1797 Jan. 
 
 2 16 
 
 35.5 
 
 3.27 
 
 
 3 17 6 
 
 55 
 
 April, 
 
 296 
 
 35 6 
 
 3.51 
 
 
 3 17 6 
 
 51 
 
 July, 
 
 298 
 
 36.7 
 
 6.68 
 
 
 3 17 lOf 
 
 52 
 
 Oct. 
 
 335 
 
 37.10 
 
 10.3 
 
 
 3 17 lOf 
 
 50 
 
 1798 Jan. 
 
 2 11 2 
 
 38.2 
 
 1 1 29 
 
 
 3 17 10{ 
 
 48 
 
 April, 
 
 2 11 3 
 
 37.8 
 
 9>2 
 
 
 3 17 10| 
 
 49 
 
 July, 
 
 2 10 8 
 
 37.7 
 
 9.5b 
 
 
 3 17 10* 
 
 47f 
 
 Oct. 
 
 292 
 
 37,9 
 
 10.06 
 
 
 3 17 9 
 
 51 
 
 1799 Jan. 
 
 589 
 
 37.8 
 
 9.82 
 
 
 3 17 9 
 
 53 
 
 April, 
 
 2 16 1 
 
 36.10 
 
 7.4t 
 
 
 3 17 9 
 
 55 
 
 July, 
 
 3 3 10 
 
 35.2 
 
 2.55 
 
 
 3 17 9 
 
 62 
 
 Oct. 
 
 3 16 1 
 
 32. 
 
 
 6.68 
 
 3 17 9 
 
 60 
 
 1800 Jan. 
 
 4 12 7 
 
 31.6 
 
 
 8.13 
 
 Sfff*SkYVl 
 
 61f 
 
 April, 
 
 583 
 
 31.8 
 
 
 7.65 
 
 1 1 U ill 
 
 64 
 
 July, 
 
 6 14 5 
 
 32.3 
 
 
 5.95 
 
 to 
 
 63 
 
 Oct. 
 
 4 19 6 
 
 32.2 
 
 
 6.2 
 
 I. is 
 
 4 /? 
 
 64 
 
 1801 Jan. 
 
 6 19 
 
 31. 5 to 
 
 
 8.37 
 
 4 o - 
 
 60 
 
 
 
 29.8 
 
 
 
 
 
 Anril, 
 
 7 14 8 
 
 31.4 
 
 
 8.61 
 
 43 
 
 61 
 
 July, 
 
 698 
 
 31.7 
 
 
 7.89 
 
 
 60| 
 
 Oct. 
 
 466 
 
 32.8 
 
 
 4.73 
 
 
 6S 
 
 1802 Jan. 
 
 3 15 6 
 
 32. 
 
 
 6.68 
 
 
 68 
 
 April, 
 
 3 9 10 
 
 33.1 
 
 
 3.51 
 
 430 
 
 77 
 
 July, 
 
 3 6 10 
 
 33.3 
 
 
 3.03 
 
 
 74 
 
 Oct. 
 
 3 1 10 
 
 33.5 
 
 
 2.55 
 
 
 68 
 
 1803 Jan. 
 
 2 16 9 
 
 34.3 
 
 
 0.12 
 
 
 70 
 
 April, 
 
 2 16 5 
 
 34.2 
 
 
 0.36 
 
 
 64 
 
 July, 
 
 2 19 7 
 
 34.2 
 
 
 0.36 
 
 
 54 
 
 Oct. 
 
 2 14 6 
 
 34.5 
 
 0.36 
 
 
 
 53 
 
 1804 Jan. 
 
 2 12 3 
 
 34.8 
 
 1.1 
 
 
 4 
 
 55 
 
 March, 
 
 297 
 
 35. 
 
 2.06 
 
 
 4 
 
 56 
 
 April, 
 
 2 10 9 
 
 35.10 
 
 4.5 
 
 
 4 _ _ 
 
 56 
 
 July, 
 
 2 12 1 
 
 35.8 
 
 4.0* 
 
 
 4 
 
 55 
 
 Oct. 
 
 3 5 10 
 
 35.8 
 
 4.U2 
 
 
 4 . 
 
 57 
 
 1805 Jan. 
 
 462 
 
 3 .5.0 
 
 3.51 
 
 
 4 . 
 
 60 
 
 April, 
 
 4 11 11 
 
 35.5 
 
 3/27 
 
 
 4 _ 
 
 58 
 
 July, 
 
 4 13 5 
 
 35,7 
 
 3.78 
 
 
 4 
 
 59 
 
 Oct. 4 4 11 
 
 33.9 
 
 
 3.03 
 
 4 5$ 
 
Dates. 
 
 Wheat per 
 Quarter. 
 
 Exchange 
 with 
 Hambro'. 
 
 Per Cent- 
 age in fa- 
 vour of 
 London. 
 
 Per Cent- 
 age against 
 London. 
 
 Price of Gold 
 per ounce. 
 
 Price of 
 3 p. cent. 
 Consols. 
 
 1806 Jan. 
 
 L.3 15 11 
 
 33.8 
 
 
 1.82 
 
 
 59 
 
 April, 
 
 3 14 5 
 
 34.2 
 
 
 0.36 
 
 
 60 
 
 July, 
 
 4 1 10 
 
 34.5 
 
 0.36 
 
 
 
 62 
 
 Oct. 
 
 42 
 
 33.6 
 
 
 2.3 
 
 
 61 
 
 1807 Jan. 
 
 3 16 9 
 
 34.8 
 
 1.1 
 
 
 
 59 
 
 April, 
 
 3 16 10 
 
 34.10 
 
 1.57 
 
 
 
 62 
 
 July, 
 
 3 13 
 
 34.5 
 
 0.36 
 
 
 
 6S 
 
 Oct. 
 
 3 10 5 
 
 34.4 
 
 0.12 
 
 
 
 62 
 
 1808 Jan. 
 
 396 
 
 34.4 
 
 0.12 
 
 
 
 63 
 
 April, 
 
 3 10 1 
 
 34.6 
 
 0.6 
 
 
 
 66 
 
 July, 
 
 4 1 1 
 
 35.5 
 
 3.27 
 
 
 
 68 
 
 Oct. 
 
 465 
 
 33. 
 
 
 3.78 
 
 
 66 
 
 1809 Jan. 
 
 4 10 4 
 
 31.3 
 
 
 8.86 
 
 L 
 
 65 
 
 April, 
 
 4 14 1 
 
 31. 
 
 
 9.58 
 
 1 from 
 
 68 
 
 July, 
 
 4 8 1 
 
 28.8 
 
 
 16.4 
 
 f L. 4 9 
 
 68 
 
 Oct. 
 
 5 8 10 
 
 29. 
 
 
 15.42 
 
 V to 
 
 68| 
 
 1810 Jan. 
 
 516 
 
 28.9 
 
 
 16.15 
 
 t L. 4 13 
 
 68{ 
 
 April, 
 
 554 
 
 31. 
 
 
 9.58 
 
 1 
 
 69f 
 
 July, 
 
 5 13 4 
 
 30.2 
 
 
 12.02 
 
 r 
 
 69 
 
 Oct. 
 
 5 1 1 
 
 30.10 
 
 
 
 
 66 
 
 1811 Jan. 
 
 4 14 7 
 
 26.6 
 
 
 22.7 
 
 
 66 
 
 In stating the exchange, the Author has purposely avoided taking into 
 account the occasional variations in the relative values of gold and silver, as 
 these appear to be of such an undefined or accidental nature as to be unfit 
 to be assumed as the ground of any general conclusions : and, at any rate, 
 it does not appear that the doing so could have any ways tended to invali- 
 date the hypothesis maintained by him. 
 
REMARKS. 
 
 1. The effect of the depreciation, in increasing 
 the floating capital, and making money plentier in 
 the market, will be apparent from observing the fluc- 
 tuation of the three per cents, after January 1795. 
 
 From the beginning of the war, in 1793, they had 
 continued gradually to fall till January 1795; but 
 from that time they gradually rose, along with the 
 price of corn, till spring 1796, when they again sunk 
 with the price of corn, till they reached their lowest 
 point of depression in summer 1798- They did not 
 much recover till spring 1799? when they again rose 
 with the price of corn, and continued high during the 
 whole of the year 1 800, and afterwards till the peace. 
 
 In like manner, after the renewal of the war in 
 1803, they shewed little signs of recovery, till the 
 high prices commenced in harvest 1804; since which, 
 their fluctuations have corresponded pretty regularly 
 with those of the price of corn. 
 
 Had it not been for the Bank restriction, the dearth 
 of corn would have tended to depress, in place of 
 raising, the price of the public funds. 
 6 
 
66 
 
 2. It will be observed, that the fluctuations in the 
 price of gold bullion have uniformly been dependent 
 on the state of the exchange. Thus, the first instance 
 in which it rose above the mint price was during the 
 depressed state of the exchange in 1783; the second 
 instance during the depression of the exchange in 
 1795; the third instance in 1800, 1801, and 1802; 
 and the last instance in 1809 and 1810. 
 
 3. The unusually high state of the exchange dur- 
 ing the years 1797 and 1798, may, perhaps, have 
 been owing to the lessened demand for specie in this 
 country, after the suspension of our cash payments. 
 So that the difference on the exchange might extend 
 to the expense not only of the transmission, but of 
 the re-transmission of bullion, or to double its usual 
 limit. 
 
 4. The drain of specie which preceded the sus- 
 pension, may be accounted for by the effect of the 
 real depreciation of money which had taken place in 
 1795 and 17P6, with at least as much probability as 
 by the practice of hoarding, through the fear of in- 
 vasion, the cause to which it was ascribed at the time, 
 and which it is difficult to conceive could be carried 
 to such an extent as materially to affect the circula- 
 tion of the kingdom. 
 
TABLE III. 
 
 ABSTRACT of the amount of Bank of England Notes in circulation. 
 
 
 L. 5 and upwards, 
 including post bill. 
 
 Under L.5 
 
 Total 
 
 Average of 1790 
 
 L. 10,217,360 
 
 
 L.I 0,2 17,360 
 
 1791 
 
 11,699,140 
 
 
 11,699,140 
 
 1792 
 
 11,349,810 
 
 
 11,349,810 
 
 1793 
 
 11,493,125 
 
 
 11,493,125 
 
 1794 
 
 10,699,520 
 
 
 10,699,520 
 
 1795 Jan. 31 
 
 12,715,310 
 
 
 12,715,810 
 
 Feb. 28 
 
 14,017,850 
 
 
 14,617,850 
 
 Mar. 28 
 
 10,444,359 
 
 
 10,444,350 
 
 April 24 
 
 12,040,110 
 
 
 12,040,110 
 
 May 30 
 
 10,316,600 
 
 
 10,316,600 
 
 June 27 
 
 10,661,920 
 
 
 10,661,920 
 
 July 24 
 
 11,420,350 
 
 
 11,4-20,350 
 
 Aug. 29 - - 
 
 11,176,280 
 
 
 11,176,280 
 
 Sept. 26 
 
 10,775,130 
 
 
 10,775,130 
 
 Oct. 31 
 
 11,082,120 
 
 
 11,082,120 
 
 Nov. 28 
 
 11,503,110 
 
 
 11,503,110 
 
 Dec. 24 
 
 11,696,270 
 
 
 11,696,270 
 
 1796 Jan. 29 
 
 10,746,650 
 
 
 10,746,650 
 
 Feb. 27 
 
 10,647,720 
 
 
 10,647,720 
 
 Mar. 26 
 
 10/287,180 
 
 
 10,287,180 
 
 April SO 
 
 11,661,760 
 
 
 11,661,760 
 
 May 28 
 
 10,303,630 
 
 
 10,303,630 
 
 June 25 
 
 9,882,190 
 
 
 9,882,190 
 
 July 30 
 
 9,788,480 
 
 
 9,788,480 
 
 Aug. 27 
 
 9,427,510 
 
 
 9,427,510 
 
 Sept. 24 
 
 9/109,050 
 
 
 9,409,050 
 
 Oct. 29 
 
 9,744,510 
 
 
 9,744,510 
 
 Nov. 26 
 
 9,914,970 
 
 
 9,914,970 
 
 Dec. 31 
 
 9,204,500 
 
 
 9,204,500 
 
 1797 Jan. 28 
 
 10,024,740 
 
 
 10,024,740 
 
 Feb. 25 
 
 8,64-0,250 
 
 
 8,640,250 
 
 Prior to March 1 797, there were not any Bank of England Notes in 
 
 circulation under the value of 5. 
 
 H 
 
TABLE III. 
 
 ABSTRACT of Bank of England Notes in circulation. 
 
 
 5. and upwards, 
 including post bill. 
 
 Under 5. 
 
 Total. 
 
 1798 Feb. 1 
 
 L.I 1,855,430 
 
 L. 1,541,910 
 
 L.I 3,397,340 
 
 May 1 
 
 13,160,030 
 
 1,956,060 
 
 15,116,090 
 
 Aug. 1 
 
 10,397,340 
 
 1,928,090 
 
 12,325,430 
 
 Nov. 1 
 
 10,696,100 
 
 1,814,950 
 
 12,511,05Q 
 
 1799 Feb. 1 
 
 12,066,310 
 
 1,680,010 
 
 13,746,320 
 
 May 1 
 
 12,774,340 
 
 1,663,500 
 
 14,437,900 
 
 Aug. 1 
 
 12,279,540 
 
 1,600,000 
 
 13,879,540 
 
 Nov. 1 
 
 12,513,900 
 
 1,671,650 
 
 14,185,550 
 
 1800 average above 
 
 - 
 
 _ 
 
 15,000,000 
 
 1801 average 
 
 13,454,367 
 
 2,715,182 
 
 16,169,549 
 
 1802 - 
 
 13,917,977 
 
 3,136,477 
 
 17,054,454 
 
 1803 to 1807, average about 
 
 . 
 
 . 
 
 17,000,000 
 
 1808 May 
 
 13,429,640 
 
 4,062,260 
 
 17,491,900 
 
 Aug. 
 
 13,521,380 
 
 4,123,290 
 
 17,644,670 
 
 Nov. 
 
 13,255,460 
 
 4,211,710 
 
 17,467,170 
 
 1809 Feb. 
 
 13,226,860 
 
 4,333,200 
 
 17,560,060 
 
 May 
 
 14,137,410 
 
 4,509,470 
 
 18,646,880 
 
 Aug. 
 
 14,649,090 
 
 5,162,240 
 
 19,811,330 
 
 Nov. 1 
 
 14,481,100 
 
 5,468,190 
 
 19,949,290 
 
 1810 Jan. 7 
 
 13,864,950 
 
 5,663,080 
 
 19,528,030 
 
 20 
 
 14,699,090 
 
 5,914,400 
 
 20,613,490 
 
 Feb. 1 
 
 15,040,360 
 
 5,894,040 
 
 20,934,400 
 
 23 
 
 14,775,580 
 
 5,857,500 
 
 20,633,080 
 
 Mar. ii 
 
 14,795,110 
 
 5,922,900 
 
 20,718,010 
 
 April 7 
 
 14,703,580 
 
 6,104,170 
 
 20,807,750 
 
 May 5 
 
 15,143,910 
 
 6,161,020 
 
 21,304,930 
 
 12 
 
 15,009,290 
 
 6,114,540 
 
 21,123,830 
 
REMARKS. 
 
 1. It will be evident, on comparing the preceding 
 Table with the Table, No. 2, that, although for 
 the first two years after the Bank restriction, the 
 quantity of its notes was greatly increased, yet this 
 had no effect w : hatever in raising prices. On the 
 contrary, the prices, both of provisions and of the 
 public funds, continued gradually to fall till spring 
 1799) when the price of corn was first raised, by the 
 unfavourable prospect of that year's crop; which 
 3hews that the mere increase of our paper circulation 
 was not the efficient cause of the rise of prices. 
 
 C 2. The most considerable increase of the Bank's 
 circulation took place in the years 1800, 1801, and 
 ] 802 ; after which it continued nearly stationary till 
 1 809, excepting in the articles of ll. and 2/. notes, 
 which have gone on progressively to increase as 
 guineas have been withdrawn from circulation, and 
 melted or exported. During 1809 and 1810, the 
 Bank's circulation again underwent a considerable 
 
60 
 
 increase : but this, also, chiefly in the small notes, 
 owing to the depressed state of the exchange drain- 
 ing the country still more of its gold ; and partly, 
 also, to the increased exertion in our manufacturing 
 industry and export trade, to which our great foreign 
 expenditure acted as a powerful stimulus. 
 
 3. The real increase of the* total circulation of the 
 country is not to be measured by the increase of 
 bank notes; but allowance must be made for the 
 specie withdrawn. 
 
 If the following estimate be correct, it will be 
 found, that the absolute increase of circulating me- 
 dium since the Bank restriction, has been much less 
 than what is commonly supposed. 
 
61 
 
 Circulation in 1794. 
 
 'Paper Bank of England - - L. 11.000,000 
 
 Other Banks, say 250, at 35,000/. each 8,750,000 
 
 L. 19,750,000 
 
 Specie, at the lowest estimate by the Earl of Li. 
 verpool, viz. 
 
 Gold - - - L. 25,000,000 
 Silver ... 5,000,000 
 
 ' 30,000,000 
 
 L. 49,750,000 
 Deduct Bankers Deposits, say . 7,750,000 
 
 Real circulation in 1794 - L.42 5 000 3 000 
 
 Circulation in 181 0. 
 
 Paper Bank of England . . - L. 20,000,000 
 
 Other Banks, 735, at 35,000/. each , 25,725,000 
 
 L. 45,725,000 
 
 Specie Gold . . L. 3,000,000 
 
 Silver . . 4,000,000 
 
 _ 7,000,000 
 
 L. 52,725,000 
 Deduct Bankers Deposits, say . 2,725,000 
 
 Real circulation in 1810 L, 50,000,000 
 
 Making an addition of eight millions to the 
 total circulation io 1794. 
 
Iti place of tliis addition implying any excess w 
 our circulating medium, the wonder is how the bu- 
 siness of the country can now be carried on with so 
 small an addition to it : for not only has there been 
 a great increase of our trade since the 1794, but the 
 effect of the corn-law of 1804, alone, must have been 
 to raise the prices of provisions and labour about 24 
 per cent, above their prices in 1794; and, of course, 
 must have given employment to a corresponding ad- 
 dition to our circulating medium, and this altogether 
 independent of the other accidental causes by which 
 the prices of provisions and labour have been kept 
 up, generally far above the standard of the corn-law 
 of 1804. So far } therefore, from the circulating me- 
 dium having been issued to excess, it is evident that 
 it must have been managed with much greater eco- 
 nomy than formerly. 
 
 4. It will be observed, on comparing the two Ab- 
 stracts, No. 2 and 3, that the state of our foreign ex- 
 changes has been noways connected with the increase 
 or diminution of our paper currency. Thus, after 
 its depression in 1795, the par of the exchange was 
 restored in the beginning of 1796, without any re- 
 striction of our paper currency. A restriction, in 
 deed, afterwards took place ; but this was owing to 
 an entirely different cause, the run on the Banks, in 
 6 
 
the end of 179$ and beginning of 1797', aftc 
 exchange was restored. 
 
 Again, after the great and long continued depres- 
 sion in 1800, 1801, and 1802, the par of the ex- 
 change was restored, under an increasing rather than 
 a diminishing paper circulation in 1803 and 1S04. 
 
 The reduction of our paper circulation, indeed, 
 never can be the means of restoring the exchange. 
 The only way of correcting an unfavourable ex- 
 change, is by increasing our exportations relatively 
 to our importations, which a low rate of exchange 
 holds out a strong inducement to do ; and this may 
 be done with equal effect, either by exporting bullion 
 or other goods. The export of bullion generally oc- 
 casions a demand on the banks for gold ; and this 
 may induce them to restrict their paper circulation ; 
 but such redaction is evidently the consequence of 
 adopting that method of restoring the exchange, and 
 not the means of restoring it. 
 
 If a reduction, or great restriction of our paper 
 circulation were now to be adopted, as the means of 
 enforcing the re- importation of gold, this must ne- 
 ccs.-arily expose the trading part of the community 
 to great inconvenience and distress ; and gold might 
 be re-imported, but under circumstances of great na- 
 
64 
 
 t-ional disadvantage, as our goods would be given 
 away for probably less than half their value in ex- 
 change for it. But, in place of restoring the par of 
 the exchange, the importation of gold, like the im- 
 portation of any other commodity, would increase 
 the balance against us, and must have the effect of 
 depressing the exchange, as much as the exportation 
 of our gold had the. effect of supporting it. In the 
 present circumstances of the country, however, any 
 measure of this kind seems to be altogether imprac- 
 ticable. 
 
 5. Were it declared that the banks should pay in 
 specie against a given time, they would be induced, 
 i'roin a regard to their own safety, to call in their 
 notes before that period arrived. But they could do 
 so without putting specie in their place. They have 
 only to discontinue their issues for a few months, 
 and the whole of their notes would be returned to 
 them ; not for payment in specie, but to retire the 
 bills and other obligations, on the security of which 
 they were issued. The distress, therefore, would be 
 more felt by the public than by the banks, and most 
 justly ; because it was by them, and not by the bank- 
 ers, that the gold and silver were abstracted from 
 circulation, and melted or exported. 
 
TABLE IV. 
 
 COMPARATIVE values of the Annuities payable to the Na- 
 tional Creditors in the year 1797, and in the year 1810, 
 converted into Wheat ; the first according to the average 
 price of six years, 1789 & 1794 inclusive; and the second 
 according to the average price of six years, 1805 & 1810 
 inclusive. 
 
 The amount of the annuities payable to the national credi- 
 tors as they stood in January 1797, including the interest of 
 the loan of 18,000,000 in December 1796, but exclusive of 
 the interest of the debt redeemed, was about 14,000,000. 
 
 Quarters. 
 Which converted into wheat, at the average price 
 
 of the six years, 1789 & 1794, inclusive, being 
 
 2 : 9 : 2 per quarter, is equal to - - 5,694,915 
 
 The amount of the annuities to the national cre- 
 ditors payable in 1810, exclusive of those redeem- 
 ed, may be stated at about ^23,000,000. 
 
 Which converted into wheat, according to the aver- 
 age price of the six years, 1805 & 1810 inclusive, 
 being * 4 : 6 : 10 per quarter, is equal to - 5,297,504 
 
 Difference in favour of the annuities 1797 - 397,411 
 
 To which might be added 529,750 quarters ior the tenth 
 retained in 1810 ia name of property tax. 
 
 i 
 
66 
 
 This result does not proceed from inability to pay the na- 
 tional creditors according to the real value of their annuities, 
 as well as to defray the expence of the war, since it could be 
 shown, that the unmortgaged surplus produce of the capital 
 and industry of the country and its dependencies, is certainly 
 at least as great as it ever was at any former period. 
 
 These annuities, and the interest of money due from one indi- 
 vidual to another, exist merely in the shape of burdens, general 
 or special, on the active capital, and industry of the country. 
 The real capital consists of its lands, houses, machinery, agri- 
 cultural, mining and manufacturing stock, and the stock of 
 goods on hand prepared for consumption : and it is evident, 
 that, in proportion as the value of the national annuities and 
 interest of money is diminished, the real capital and industry 
 must be relieved. 
 
 The circumstance of the depreciation of money having been 
 progressive, must have given a great stimulus to industry, as 
 rising prices, from whatever causes produced, never fail to do. 
 
 To form an estimate of its effect in increasing floating capi- 
 tal, let the real capital be stated at 2000 millions, and the de- 
 preciation to go on at the rate of 5 per cent, per annum ; here 
 is a nominal addition to the fund of credit of the country of 
 100 millions yearly. 
 
 The exportation of our specie must have also considerably 
 increased the resources of the country. 
 

 CONCLUSION. 
 
 UPON the whole of what is before stated, it may be 
 concluded, 
 
 1. That the depreciation of money within the pe- 
 riod of the last sixteen years, has originated from the 
 peculiar circumstances, and internal regulations of 
 this country, pointed out in the second branch of 
 the foregoing observations, and not from general 
 causes. 
 
 2. That this depreciation, which has affected gold 
 and silver, as well as our currency, has given a tend- 
 ency to these metals to flow out of this country, as 
 well as to an increased consumption of them in our 
 manufactures ; and the same cause has presented an 
 impediment to their return from the continent of 
 Europe, when the exchange happened to be favour- 
 able to this country, 
 
 1 
 
68 
 
 3. That the suspension of our cash payments has 
 no otherways contributed to the depreciation of mo- 
 ney, than by removing that check on the nominal 
 prices of corn and labour, which a medium of circu- 
 lation of limited extent must have necessarily im- 
 posed, and by admitting of the addition of a consi- 
 derable part of our gold and silver to the stock of the 
 rest of Europe ; and that the increase of our paper 
 currency has been merely the effect, 1. Of the en- 
 hanced prices of labour and commodities : 2. Of 
 a real increase of our trade : and, 3. Of the ab- 
 straction of gold and silver from circulation. 
 
 4. That the extension of our paper circulation has 
 had no effect whatever in producing the present un- 
 favourable state of the exchange with foreign coun- 
 tries : but the measure of the depression is materi- 
 ally affected by the disuse of specie in the circulation 
 of this country ; and the present high price of bul- 
 lion is the effect of the demand for it, occasioned by 
 the low rate of the exchange, 
 
 5. That the experiment of resuming our payments 
 in specie cannot be tried with any chance of success, 
 while the exchange with foreign countries is unfa- 
 vourable; and that, therefore, the first step to be 
 taken, is to restore the par of the exchange by en- 
 couraging exportation, and discouraging importation, 
 
69 
 
 and by a reduction of our foreign expenditure, so 
 soon as circumstances will permit : but the reduc- 
 tion of our paper circulation would, of itself, have 
 no such effect. 
 
 Lastly, supposing the exchange favourable, the 
 practicability of our resuming, and persevering in, 
 the use of specie in our internal transactions, will 
 depend not so much on our ability to procure the; 
 necessary supplies of gold and silver, as on the dif- 
 ficulty of reducing the enhanced prices of corn and 
 labour which have taken place under the system of 
 restriction of our cash payments ; and this difficulty 
 has been greatly increased by the alteration of our 
 corn importation laws in 1804. 
 
 THE ENt). 
 
APPENDIX. 
 
APPENDIX, 
 
 ABSTRACT of the fiar prices of the best Wheat, Barley and Oats 
 for the County of Edinburgh from 1640 to 1809. 
 
 NOTE. The Boll of Wheat is equal to - .51997 r , 
 And the Boll of Barley or Oats to .7573 J ^ ns " 8J 
 The first being about one half and the second about three-fourths 
 of the English Quarter. 
 
 Years. \ 
 
 Wheat p. Boll. 
 
 Barley p. Boll. 
 
 Oats p. Bell. 
 
 1640 
 
 L. 11 1A 
 
 L. 10 
 
 Lff Q 8 
 . 7 2&nr 
 
 41 no return 
 
 
 
 
 
 , 
 
 42 
 
 16 8 
 
 16 IA 
 
 
 
 43 
 
 14, 5 A' 
 
 n 1A 
 
 9 T 
 
 44 
 
 13 4 
 
 10 6A 
 
 - 8 10A 
 
 45 
 
 11 IA 
 
 8 10A 
 
 6 8 
 
 46 
 
 11 8 
 
 8 4 
 
 6 1A 
 
 4T 
 
 18 4 
 
 12 2A 
 
 10 6A 
 
 48 
 
 i i 1A 
 
 16 8 
 
 , 15 6 8 
 
 49 
 
 1 2 2A 
 
 18 4 
 
 16 $ 
 
 50 
 
 1 2 2A 
 
 17 gA 
 
 16 8 
 
 51 
 
 1 10 
 
 18 4 12 
 
 16 8 
 
 52 
 
 18 4 
 
 16 8 
 
 12 6 
 
 53 no return 
 
 __ 
 
 
 
 __ - 
 
 54 
 
 - 7 6A 
 
 7 9 
 
 4 5A 
 
 55 
 
 11 8 
 
 n 1A 
 
 5 6A 
 
 56 
 
 11 HA 
 
 10 6A 
 
 ~ 6 11A 
 
 57 
 
 11 1A 
 
 10 6A 
 
 6 8 
 
 58 no return 
 
 
 
 
 
 , -.,.. 
 
 59 
 
 18 4 
 
 10 6A 
 
 -- 10 10 
 
 60 
 
 18 4 
 
 10 6A 
 
 10 10 
 
 61 
 
 18 4 
 
 15 
 
 10 6A 
 
 62 
 
 15 
 
 - 12 6 
 
 7 9A 
 
 63 
 
 15 
 
 11 8 
 
 ^7 O 4- ^ 
 
 64 
 
 11 8 
 
 9 5A 
 
 5 6A 
 
 65 
 
 12 6 
 
 9 2 
 
 6 4 
 
 66 - - 
 
 - 10 6A 
 
 10 
 
 6 8 
 
 67 
 
 9 2 
 
 10 10 
 
 6 4 
 
 68 
 
 10 6 
 
 10 
 
 '68 
 
 Carried forward L,19 3 
 
 1L.15 14 SAIL. 11 
 K 
 
 9 11 
 
76' 
 
 Years. \ 
 
 Wheat p. Boll. 
 
 Barley p. Boll. 
 
 Oats p. Boll. 
 
 Brought forward 
 
 L.23 5 1 
 
 L.19 13 2 
 
 L.15 12 6A- 
 
 1737 
 
 L. 13 4 
 
 11 8 
 
 8 10 
 
 38 
 
 11 
 
 9 10 
 
 6 10 
 
 39 
 
 13 7 
 
 12 
 
 9 4 
 
 40 
 
 1 2 11 
 
 17 8 
 
 14 6 
 
 41 
 
 14 2 
 
 11 i-A 
 
 9 4 
 
 42 
 
 11 
 
 11 Mr 
 
 7 6 
 
 43 
 
 10 
 
 9 4 
 
 6 6 
 
 44 
 
 11 10 
 
 10 6 
 
 9 4 
 
 45 
 
 15 6 
 
 11 8 
 
 11 
 
 46 - 
 
 14 
 
 11 8 
 
 9 4 
 
 47 
 
 13 8 
 
 11 2 
 
 7 8 
 
 48 
 
 14 4 
 
 11 4 
 
 9 
 
 49 
 
 13 4 
 
 10 6 
 
 9 
 
 50 
 
 13 6 
 
 10 7 
 
 9 4 
 
 1751 
 
 16 10 
 
 12 
 
 11 8 
 
 2 
 
 15 
 
 13 
 
 12 
 
 3 
 
 15 
 
 14 
 
 10 6 
 
 4 
 
 12 8 
 
 10 5 
 
 9 
 
 5 
 
 13 8 
 
 11 
 
 11 
 
 6 
 
 1 2 
 
 16 8 
 
 15 
 
 7 
 
 18 9 
 
 14 9 
 
 12 
 
 8 
 
 15 
 
 10 6 
 
 8 8 
 
 9 
 
 13 4 
 
 10 5 
 
 8 
 
 1760 
 
 13 6 
 
 10 3 
 
 8 4 
 
 1 
 
 14 
 
 10 6 
 
 90 
 
 2 
 
 19 6 
 
 14 3 
 
 15 
 
 3 
 
 16 8 
 
 14 
 
 10 6 
 
 Total 
 
 L. 43 13 2 
 
 L.36 5 O^jL.29 8^ 
 
 Average of 62 years 
 
 L. 14 1 
 
 L. 11 6f |L._ 9 4A 
 
77 
 
 Years. \ 
 
 Wheat p. Boll. 
 
 Barley p. Boll. 
 
 Oats p. Boll. 
 
 1764 
 
 L. 19 
 
 L. 13 9 
 
 L. 12 2 
 
 5 
 
 1 
 
 16 6 
 
 14 6 
 
 6 
 
 19 6 
 
 18 
 
 14 3 
 
 7 
 
 110 
 
 14 
 
 14 
 
 8 
 
 1 
 
 11 9 
 
 10 
 
 9 
 
 18 
 
 13 
 
 11 6 
 
 1770 
 
 18 6 
 
 13 9 
 
 12 
 
 1 
 
 1 1 
 
 16 3 
 
 14 8 
 
 2 ... 
 
 1 2 6 
 
 17 6 
 
 14 G 
 
 3 
 
 1 2 3 
 
 17 4 
 
 14 
 
 Sums 
 
 L.1Q 1 9 
 
 L. 7 11 10 
 
 L. 6 11 7 
 
 Average of these 10 years 
 
 L. 1 2 
 
 L. 15 2 
 
 L. 13 1 
 
 1774 
 
 L. 1 1 
 
 L. 16 3 
 
 L. 13 6 
 
 5 
 
 19 
 
 13 4 
 
 10 
 
 6 ... 
 
 18 6 
 
 12 o 
 
 10 
 
 7 
 
 1 
 
 13 9 
 
 10 6 
 
 8 
 
 18 
 
 14 
 
 11 
 
 9 
 
 14- 6 
 
 11 3 
 
 090 
 
 1780 
 
 1 
 
 14 
 
 11 
 
 1 - 
 
 106 
 
 13 
 
 10 
 
 2 
 
 1 5 
 
 1 1 
 
 17 
 
 3 
 
 1 
 
 18 
 
 14 6 
 
 Sums 
 
 L. 9 16 6 
 
 L. 7 6 7 
 
 L.5 16 6 
 
 Average of these 10 years 
 
 L.19 7 
 
 L.O 14 7]- 
 
 L.O 11 7J. 
 
 1784 
 
 L. 00 
 
 L. 17 
 
 L. 14 
 
 5 
 
 9 
 
 14 
 
 11 
 
 6 
 
 19 6 
 
 16 6 
 
 14 3 
 
 7 ... 
 
 1 4 
 
 1.5 6 
 
 13 4 
 
 8 
 
 1 10 
 
 13 6 
 
 10 6 
 
 9 
 
 3 11 
 
 15 3 
 
 12 
 
 1790 , - 
 
 3 
 
 17 4 
 
 14 10 
 
 1 
 
 7A 
 
 18 3 
 
 14 4 
 
 2 ... 
 
 1 
 
 19 11 
 
 15 
 
 3 
 
 3 4 T % 
 
 18 104- 
 
 15 6 
 
 4 ... 
 
 4 9 
 
 19 9 
 
 15 
 
 Sums 
 
 L. 12 1^ 
 
 L.9 5 10* 
 
 L.7 9 10 
 
 Average of these 11 years 
 
 L. 1 1 11 
 
 L.O 16 10| 
 
 L.O 13 7|- 
 
Years. \ 
 
 Wheat p. Boll. 
 
 Barley p. Boll. 
 
 Oats p. Boll. 
 
 1795 .... 
 6 
 
 8 
 9 
 
 Average of these 5 years 
 
 1800 .... 
 1 
 2 
 3 
 4 
 5 - - 
 6 
 7 
 8 
 9 
 
 Average of these 10 years 
 
 L. 2 3 
 1 5 9 
 133 
 1 2 7 
 209 
 
 L. 1 3 
 
 1 2 6 
 17 7 
 17 4 
 1 13 1 
 
 L. 19 6 
 14 4 
 13 6 
 14 
 1 9 4 
 
 L. 7 15 4 
 
 L. 5 13 6 
 
 L. 4 10 8 
 
 L. 1 11 0| 
 
 L. 1 2 8i 
 
 L. 18 1*- 
 
 L. 2 18 9 
 1 15 
 1 6 6 
 163 
 220 
 1 10 
 1 18 
 1 :2 6 
 276 
 220 
 
 L. 2 7 
 1 5 6 
 H 6 
 18 6 
 1 10 
 139 
 1 6 
 1 10 
 1 10 
 1 10 6 
 
 L. 1 13 2 
 16 6 
 15 6 
 17 6 
 18 6 
 18 9 
 1 
 1 7 
 1 4 
 1 9 
 
 L. 18 18 6 
 
 L. 13 12 4 
 
 L.10 Jl 8 
 
 L.I 17 10 
 
 L. 1 74 
 
 L. 1 1 2 
 
 Amo'. of Prices from 1763 to 1 773 L.10 1 9 
 from 1773 to 1783 9 16 6 
 from 1783 to 179* 12 U 
 
 7 11 10 
 76? 
 9 5 10^ 
 
 6 11 7 
 5 16 6 
 
 7 9 10 
 
 Average of these 31 years 
 
 Amo r . of Prices from 1795 to 1799 
 from 1800 to 1809 
 
 i 
 
 Average of these 15 years 
 
 L.31 18 4-i 
 
 L.24 4 3,; 
 
 L.19 J7 11 
 
 L.I 7 
 
 L. 15 74 
 
 L. 12 10 
 
 L.7 15 4 
 ]8 18 6 
 
 L. 5 13 6 
 
 13 12 4 
 
 L. 4 10 8 
 10 11 8 
 
 L.26 13 10 
 
 L.19 5 JO 
 
 L. 15 2 4 
 
 L. 1 15 7 
 
 L. 1 5 8.; 
 
 L.I 1 
 
 Difference on the averages of the 31 years, 1764 and 1794 inclusive, and tin 
 15 years, 1795 and 1809 inclusive, 72,V P er ccnt - of the former. 
 
COMPARATIVE PRICES of Wheat, Barley, and Oats converting the 
 Wheat Measure to that of Barley and Oats the proportion of the 
 former to that of the latter being as 2236.111 to 3257.226. 
 
 Wheat p. Boll. Barley p. Boll. Oats p. Boll. 
 
 From 1640 to 1700 L. 1 1 L. ]2 3 L. 9 
 
 1700 to 1763 106 11 8J 09 4-^,- 
 
 1763 to 1794 1 9 11-*- 1.5 74- 12 JO 
 
 to 1809 - 2 11 10 1 5 8i 1 1|- 
 
 Thus, from 1640 to 1700, the price of Barley was 58 per cent, of the price of 
 Wheat. 
 
 From 1700 to 1763, about 57 per cent. 
 1763 to 1794, about 52 per cent. 
 1794 to 1809, about 50 per cent. 
 
 Oats were, in the first period, about 43 per cent, of the price of Wheat. 
 
 In the second period, about 45 i- per cent. 
 
 In the third period, about 43 per cent. 
 
 And in the fourth period, about 39} per cent. 
 
 So that, upon the whole, the rise in the price of Wheat has exceeded that in 
 the price of Oats and Barley, and both nearly in -the same proportion, which 
 may be accounted for from Wheat having become more and more the food cflf 
 the labouring part of the community. 
 
 Printed by C. Stewart. 
 
THE PRINCIPLES 
 
 OF 
 
 CURRENCY AND EXCHANGES 
 
 APPLIED TO 
 
 Report 
 
 FROM 
 
 THE SELECT COMMITTEE 
 or 
 
 THE HOUSE OF COMMONS, 
 
 APPOINTED TO 
 
 INQUIRE INTO THE HIGH PRICE 
 
 OF 
 
 GOLD BULLION, 
 
 LONDON: 
 
 PRINTED AND SOLD BY 
 
 W. -WINCHESTER AND SON, 61, STRAND. 
 
 Dec. 1, 
 
T//E PRINCIPLES 
 
 OF 
 
 CURRENCY AND EXCHANGES, 
 
 1 HE House of Commons have ordered the 
 Report of the Bullion-Committee to be printed. 
 By so doing they have enabled the public to avail 
 itself of the various information which it contains, 
 and to form a judgment on the recommendations 
 with which it concludes. These recommenda- 
 tions are now waiting the final decision of Par- 
 liament. On a subject usually so little studied, 
 yet at this time so interesting to every part of 
 the community, an examination of some of the 
 leading principles of currency and exchanges may 
 contribute somewhat to a just decision; and, 
 however much the opinions resulting from such 
 examination may differ from those of the Com- 
 mittee, they cannot be considered as in the Jeast 
 degree disrespectful to the Members of which it 
 was composed. 
 
 A 9 The 
 
The subjects proposed to the Committee for 
 consideration were 
 
 The high price of gold bullion, 
 
 The state of the circulating medium, and 
 
 The state of the exchanges between Great 
 Britain and foreign parts ; 
 
 On which, after entering into a detail of prin- 
 ciples, and of the evidence submitted to them, 
 they came to the following conclusions : 
 
 " That there is at present an excess in the 
 i; paper circulation of this country, of which 
 * the most unequivocal symptom is the very 
 *' high price of bullion ; and, next to that, the 
 * low price of continental exchanges. 
 
 " That the excess is to be ascribed to the want 
 
 of a sufficient check and control in the issues 
 
 * of paper from the Bank of England ; and origi- 
 
 ' nally to the suspension of cash-payments, 
 
 " which removed the natural and true control. 
 
 " And they add, that, upon a general review 
 4i of the subject, they are of opinion, that no 
 " safe, certain, and constantly adequate provision 
 " against an excess of paper-currency, either oc- 
 " casional or permanent, can be found, except in 
 " the convertibility of ail such paper into specie." 
 
 After the most careful examination, I presume 
 to differ from the Committee in each of these 
 conclusions : 1 shall therefore, according to the 
 
 plan 
 
plan of examination which I have stated, first 
 submit such other opinions as appear to me more 
 justified by existing appearances; and then ex- 
 plain, as distinctly as I can, on what ground I 
 venture to dissent from such high authority. 
 My own opinions are 
 
 That there is at this time no excess in the 
 paper circulation of the country. 
 
 That there is a sufficient check and control on 
 the issues of paper, both from the Bank of Eng- 
 land and from country banks. And 
 
 That the currency of the country is in no de- 
 gree depreciated by the use of paper. 
 
 That the high price of bullion is owing to the 
 present state ofthe foreign commerce of the coun- 
 try combined with its foreign expenditure, entirely 
 unconnected with the extent of its paper cir- 
 culation. And 
 
 That our present unfavourable exchanges are 
 in no way caused by our paper-currency. 
 
 These opinions range themselves into two 
 classes, the three first being governed by the 
 principles which affect circulation, and the two 
 Fast by those which regulate exchanges. I shall 
 accordingly examine them separately under those 
 heads. 
 
 PART I. 
 
PART I. 
 
 That there is at this time no excess in the paper 
 circulation of the country ; that there is a 
 sufficient check and control on the issues of 
 paper, both from the Bank of England 
 and country banks ; and that the currency 
 of the country is in no degree depreciated 
 by the use of paper. 
 
 THE first money which circulated in any 
 country must have been, as our coin is, alto- 
 gether composed of the precious metals, or of 
 some other article intrinsically valuable ; but, in 
 almost every modern State where regular laws pre- 
 vail, the currency has received a mixture of paper, 
 which is not valuable in itself, but is only the 
 representative of what is so. In the early stages 
 of society, the seller of any article of use or con- 
 venience felt he was not secure in parting with 
 it, unless, at the moment, he received in return 
 an equivalent of some article of like intrinsic, 
 value; and thus money, during this rude state of 
 th,ngs,was, of necessity, composed of some mate- 
 rial in universal estimation : but, in the progress of 
 
 time, 
 
( 7 ) 
 
 time, as the force of established laws became more 
 and more felt and relied upon, men became more 
 and irioi'e satisfied that a pledge or written en- 
 gagement, promising the payment of a specific 
 sum at a fixed time, was, during the existence 
 of such laws, nearly of the same value as an 
 actual transfer, at the moment, of gold or silver, 
 or any other article of intrinsic worth, and was 
 often more convenient. 
 
 Within this period, individuals and establish- 
 ments, seeing the economy of specie which sucji 
 written notes gave rise to in single transactions, 
 began, under the sanction of their general cha- 
 racter for wealth and prudence, not only to grant 
 such notes in all their own dealings, but to make 
 them pass in the intercourse between other men. 
 These notes (at first in England termed goldsmiths' 
 notes) engaged to pay to the holder of them, on de- 
 mand, a certain portion of the coin of the country ; 
 and it was apparent, that, so long as the parties en- 
 tering into such contracts were capable of fulfill- 
 ing them, their notes or obligations were of equal 
 value with the precious metals ; and, in some 
 respects of convenience, more desirable. 
 
 If an absolute assurance could be given with 
 every note, whether of the Bank of England or 
 of an individual, that the holder could at com- 
 mand convert it into real property of the value 
 
 which 
 
( 8 ) 
 
 which it purports to bear, it must be owned that, 
 at least for all the larger payments, it would 
 be preferred to gold or silver. If, for every 
 transaction of one thousand pounds, 952 guineas 
 were to be carried, as would often be required, 
 to a considerable distance, to be there told over, 
 and each piece examined separately, as to weight 
 and purity, how would the great operations of 
 the State and of commerce be embarrassed ? Al- 
 though in a less degree, something of the same 
 disadvantage still attends the use of gold for smaller 
 payments ; while, in the use of paper, not only 
 we are saved the trouble of a more tedious reck- 
 oning, but. we know there can be no deteriora- 
 tion in passing from hand to hand : and in case 
 of loss, either by fraud, by violence, or by acci- 
 dent, there are easier means of remedying the 
 injury. 
 
 It is not pretended that a paper currency, or 
 one principally composed of paper, is wholly 
 free from objection. I admit that it is more 
 liable than coin is to be counterfeited ; arid 
 that it gives, perhaps, too great facility to 
 men who issue notes without capital, as some 
 country bankers certainly do, to impose upon the 
 lower classes of the community in their neigh- 
 bourhood. It is not, however, the immediate 
 object of the present Inquiry to go into a com- 
 parison 
 
( 9 ) 
 
 parison of the advantages or disadvantages of 
 paper-currency, contrasted with gold and silver : 
 that point may, 1 think, fairly be considered as 
 having been decided by the relative quantities 
 which, till 17Q7, the public voluntarily held of 
 each. The leading object of the present section 
 is to ascertain one fact, whether there be an 
 actual excess in that part of our circulation which 
 is composed of paper ? 
 
 To decide on this we must first agree on the 
 
 O 
 
 duties to be performed by money. By money, 
 in the sense in which I here use it, I mean the 
 circulating medium, or currency of the country, 
 whether it be composed of the precious me- 
 tals, of paper, or a mixture of both. The duty 
 of this mass, be it pure or mixed, is solely 
 to facilitate and render convenient the pay- 
 ments, the exchanges, and, generally, the 
 transactions of the community : but, to perform 
 such a duty, it is necessary that there should be 
 some limit to its amount : it is indispensable that 
 no set of men should be able, by issuing paper for 
 their own advantage, to increase the quantity of 
 this useful instrument, until its essential qualitv, 
 that of a measure of value, is lost; and happily 
 such is the case. The restriction of the Bank, 
 which is supposed by some persons to have 
 foroken down the only guard against excess, by 
 
 suspending 
 
suspending its payments of cash, has still left in 
 full force another more powerful limitation im- 
 posed upon the circulating medium of the coun- 
 try by one of the first principles of our nature 
 our self-interest. 
 
 To illustrate this, I ask, I ask my reader, what 
 sum of money, what value in the circulating me- 
 dium of the country, whether of gold and silver, 
 or of notes, he keeps in his pocket, or in his 
 house? The answer must necessarily be, from 
 one, a little more; from another, a little less; 
 but, from the richest to the poorest, from the 
 highest to the lowest condition, there will be ad- 
 mitted to exist this governing rule a constant 
 desire that the actual sum so kept should be as 
 little as the convenience or supposed necessities 
 of the individual will admit. All have so apparent 
 an interest in this rule, that its existence must find 
 a ready assent in every mind. Too large a value 
 in what is transferable by mere possession not 
 only exposes our persons and our homes to un- 
 necessary risk, but the value thus left in some 
 hazard is kept at an actual sacrifice of the ad- 
 vantage which we forego in its not being usefully 
 employed. Generally speaking, one of our first 
 cares, on receiving large sums of money, is how 
 again to dispose of them to our advantage; and 
 if we are more regardless of lesser sums, it is 
 
 because 
 
( 11 ) 
 
 because they form a part of that limited mass 
 of which we anticipate the use. A care so re- 
 gulated occupies the whole district in which we 
 live, and the whole kingdom. Like the general 
 anxiety which Nature has implanted in us for 
 the preservation of our health, we have a desire 
 as uniform, though perhaps not so powerful, for 
 the care of our fortunes; and if, occasionally, 
 there be found an exception in the passion for 
 hoarding, which sometimes seizes distrustful 
 minds, the pity and surprise which such mis- 
 taken avarice excites are only new proofs of the 
 universal operation of a more reasonable eco- 
 nomy. 
 
 But, admitting that individuals thus act under 
 the influence of prudential considerations, are 
 there not, I shall be asked, merchants, trading 
 companies, corporations, and the Government it- 
 self, who all contribute in adding to the circulating 
 currency of the country, and in increasing it to an 
 indefinite amount ? I admit that they all do ex- 
 tend the limits of circulation ; but all are go- 
 verned by the same or a greater degree of eco- 
 nomy in the sums they keep at their own cost 
 and risk. The Government (we see by the Re- 
 port) keeps no useless money in the Exchequer ; 
 and it will easily be believed that merchants 
 and traders, who deal in iffcney for no other end 
 
 than 
 
( 1* ) 
 
 try, carry them on for the profit they yield ; and 
 their profit clearly must depend upon the extent 
 of paper they send forth. Is there, then, no li- 
 mitation ? Is it owing to the moderation of their 
 desires that these rrjen, instead of issuing only 
 forty-five millions, do not issue four hundred? 
 Fortunately, it is not to such moderate desires 
 that we owe our security against redundancy : 
 the check of a saturated circulation interposes; 
 and the least excess beyond the wants of the 
 public, estimated by each individual for himself, 
 flows back upon the Bank of England or the 
 country banker who occasions it. 
 
 The way in which this takes place is different 
 in London from what it is in the country. In 
 the latter situation, the methods to which bank- 
 ers have recourse for introducing their notes into 
 circulation are loans to their neighbours on bonds, 
 on bills discounted ; and sometimes, though 
 rarely, on mortgage. The borrower, in retnrn 
 for the accommodation of such loans, receives 
 the sum, with which he is indulged, in the 
 notes of the lending banker, who thus, in fact, 
 advances only his credit, and not his money, 
 and it is the interest of both parties, especially 
 of the lender, that these notes should not re- 
 turn soon for payment ; they therefore cir- 
 culate at first from favour, till at length cus- 
 tom, 
 
torn, and the regularity with which they are al- 
 ways acquitted when brought for payment, gives 
 them, and succeeding issues, the ready accept- 
 ance of the whole neighbourhood. In the un- 
 equal contest between gold and paper which 
 hence ensues, it is easy to foretel which will at 
 last prevail : every accommodation and induce- 
 ment is held out by the parties interested to dif- 
 fuse the latter, while the former has no advocate 
 but its intrinsic value, which, while great con- 
 fidence in paper prevails, is little regarded. 
 What then follows ? The range of this bank, 
 we have supposed, which is confined to the 
 circle in which the partners are known, are ob- 
 served, and are trusted, becomes filled with their 
 notes to the extent of the former circulation of 
 metals, joined perhaps to the notes of some for- 
 mer establishments ; and gold, no longer wanted 
 here, but still possessing qualities of universal at- 
 traction, finds its way to other districts, and finally 
 to other countries. This done, the measure is 
 full ; the banker can, by no assiduity or skill, force 
 upon his neighbourhood more of his notes than 
 there was before of specie and of other notes : 
 should he attempt to do so, they will return in- 
 cessantly upon him, and he will be called upon 
 for their value in what is of universal, not of 
 local, request ; that is, he will be called upon for 
 
 gold? 
 
gold, or for Bank of England notes; which last, 
 although not absolutely of universal value, are 
 so in England, when compared with the paper 
 of any county or district. 
 
 But I have stated that there are two sources 
 whence notes proceed and, admitting that the 
 circulation of provincial banks is thus limited 
 by liability "to payment in Bank of England notes, 
 what check is there on that great and powerful 
 body, the Bank itself? Although of a different 
 kind, there is one possessing equal powers of con- 
 trol which restrains here also, I put out of 
 view the respectability of the Directors of the 
 Bank, whose character secures us against any at- 
 tempt at a forced circulation. I likewise leave 
 out of my argument the original duties imposed 
 upon that establishment, which was first formed, 
 not, for the mere purpose of profit to the under- 
 takers, but for the convenience and support of 
 commerce and commercial men. Absolving the 
 Directors from these obligations, I will, for the 
 sake of argument, suppose them entering into 
 the management of therr trust with all the eager- 
 ness of private adventurers, and seeking only th 
 extension of their profits in the diffusion of their 
 notes. I will add to this, what is the fact, that, 
 since the Suspension Act, they are placed in a 
 more favourable situation for effecting a redun- 
 dant issue than country bankers ever were, be- 
 cause, 
 
( 17 ) 
 
 cause, as I have shewn, the latter must pay any 
 excess they may have sent forth in the paper of 
 some other establishment, esteemed more solid 
 than their own, which cannot be the case with 
 the Bank of England. Still the circulation even 
 of this apparently unfettered establishment is li- 
 mited: its managers cannot induce the population 
 within their sphere to carry in their pockets, 
 or hoard in their bureaus, more of bank-notes 
 than each man anticipates the want of for his own 
 purposes; and that this universal limitation ex- 
 ists here, as it does every where, becomes appa- 
 rent when we trace the mode in which the issues 
 of the Bank are made. 
 
 They are of three kinds : The first consists 
 of advances to Government of their own notes in 
 anticipation of some of the established taxes. 
 The second consists in issuing to the public 
 their notes in payment of the public dividends. 
 The third is the fund destined for commercial 
 accommodation, and consists of the like notes 
 issued in discount of bills. In one or other 
 of these channels all Bank of England notes find 
 their way into circulation ; and a very little con- 
 sideration will shew how necessarily, and how 
 soon, they must all find their way back into the 
 bank from whence they issued. 
 
 As the public Exchequer is, bylaw, alike open 
 
 B tO 
 
( 18 ) 
 
 to bank-notes and to the gold and silver coin of 
 the country, and as scarcely any of these pre- 
 cious metals now mix in the payments of the 
 metropolis, it follows, that, in the course of the 
 year, the anticipations to Government on account 
 of taxes must necessarily be repaid to the Bank 
 by a return of its own notes thus paid as duties 
 into the public Exchequer, and afterwards trans- 
 mitted to the Bank. 
 
 Jn the same manner the public dividends are 
 issued from and returned to the Bank : from five 
 to six millions every quarter are thrown into cir- 
 culation from this source ; but, though thus sent 
 forth, the notes of which these issues are com- 
 posed cannot remain out above a certain length of 
 time. Before the expiration of the same quarter, 
 the duties and taxes, which are to provide the 
 means of paying the next issue of dividends, must 
 find their way into the Exchequer, and from thence 
 must without delay be transmitted to the Bank, 
 thus occasioning an absorption equal to the late 
 effusion. 
 
 The last mode which the Bank employs for 
 diffusing its notes is the discount of bills ; this 
 operation, as is generally known, consists in ad- 
 vancing to merchants and traders the amount of 
 bills which have a limited term (not exceeding 
 sixty-five days) to run, and which the wants 
 
 of 
 
( 19 ) 
 
 of the parties make it necessary for them to 
 turn into money before the period of payment 
 arrives. The sum thus issued, it is believed* 
 amounts to ten or twelve millions; be it what it 
 may, it is evident that the whole of the bills so dis- 
 counted arid transferred into the hands of the Bank 
 will become due in two months, that they will then 
 be sent out for payment, and that as many 
 notes will be received by the Bank in their dis- 
 charge, and be thus withdrawn from circulation, 
 as were issued by that body at the time of their 
 discount. 
 
 But may not the sum thus issued in payment 
 of dividends and in anticipation of taxes become 
 so enormous, that, joined with the issues on 
 discounted bills, the aggregate may be redun- 
 dant without the means of relief which holders 
 of country notes possess, in having the power to 
 demand payment in other currency ? This can- 
 not be ; above a million of notes are every week 
 returned to the Bank in discharge of bills dis- 
 counted, and are thus altogether withdrawn from 
 circulation ; above a million, it is true, are again 
 usually sent forth upon other bills discounted : 
 but they are advanced on fresh applications occa- 
 sioned by public wants, and the amount is accord- 
 ingly continued the same, or experiences an in- 
 crease or a diminution exactly corresponding to 
 
 H 2 those 
 
( 20 ) 
 
 those wants. This applies to every similar period ; 
 in every ten weeks, that is, five times in every year, 
 the public, by forbearing to desire new advances 
 of notes, have the power to suppress one half of 
 the Bank's circulation. During all this time, 
 too, the Exchequer is affording the same protec- 
 tion against excess : in every thirteen weeks above 
 fifteen millions of notes are withdrawn from cir- 
 culation in payment of contributions and taxes ; 
 and thus, four times a year, the public have, 
 through this channel, the means of closing its 
 transactions with the Bank to the extent of the 
 remaining half of its circulation. It therefore 
 appears, that should any distrust of the Bank's 
 good conduct ever be excited, or should any rival 
 to its present universal circulation ever be esta- 
 blished, it is possible for the community at any 
 time to recover payment of every note issued by 
 that body within three months. 
 
 What is thus possible, in an extreme case, is 
 possible and practised every day, to a limited ex- 
 tent. Whenever the quarterly payments of the 
 public dividends, or any other cause, throws an 
 unusual number of notes into circulation, the 
 Bank feels the demand commonly made to it 
 for issues upon discount immediately reduced. 
 At such times the depositories of mercantile men 
 being overcharged with bank-notes, the owners 
 
 seek 
 
( 21 ) 
 
 seek for productive employment of the excess in 
 discounting bills ; and the industry which the 
 interest of individuals inspires, added to the 
 greater latitude and convenience which their rules 
 admit of, in many important respects, will always 
 insure to them, in preference to the Bank, this 
 means of investing their surplus money. Ex- 
 actly, therefore, by so much as the excess of its 
 notes in the hands of the public at any moment 
 amounts to, the Bank will immediately be 
 abridged of its usual power of diffusion. 
 
 In this manner the portion of our currency 
 which is of paper expands with the expansion of 
 the operations it has to perform, and collapses as 
 these operations become less numerous or of less 
 value ; and thus it is never redundant, nor 
 ever deficient in amount. In this respect it is 
 infinitely preferable to gold, which cannot be 
 increased by the wants of the public ; and which, 
 depending on foreign influences, is liable to be 
 often inconveniently reduced, and sometimes to 
 be almost annihilated (as we now see it is) by our 
 foreign exchanges turning against us. Yet this 
 convenience arising from the use of paper the 
 Committee would take away, and they recom- 
 mend as a measure of precaution, preparatory to 
 the Bank resuming payments in gold, that part 
 of its circulation of paper should be abridged. 
 Should such ^gmctjp4i:J T jMiiii4. be adopted, the 
 
 -ifl. <i4>Tr*'m^e rt&f&XZ**-**^ 
 
 consequence 
 
( 20 ) 
 
 those wants. This applies to every similar period ; 
 in every ten weeks, that is, five times in every year, 
 the public, by forbearing to desire new advances 
 of notes, have the power to suppress one half of 
 the Bank's circulation. During all this time, 
 too, the Exchequer is affording the same protec- 
 tion against excess : in every thirteen weeks above 
 fifteen millions of notes are withdrawn from cir- 
 culation in payment of contributions and taxes ; 
 and thus, four times a year, the public have, 
 through this channel, the means of closing its 
 transactions with the Bank to the extent of the 
 remaining half of its circulation. It therefore 
 appears, that should any distrust of the Bank's 
 good conduct ever be excited, or should any rival 
 to its present universal circulation ever be esta- 
 blished, it is possible for the community at any 
 time to recover payment of every note issued by 
 that body within three months. 
 
 What is thus possible, in an extreme case, is 
 possible and practised every day, to a limited ex- 
 tent. Whenever the quarterly payments of the 
 public dividends, or any other cause, throws an 
 unusual number of notes into circulation, the 
 Bank feels the demand commonly made to it 
 for issues upon discount immediately reduced. 
 At such times the depositories of mercantile men 
 being overcharged with bank-notes, the owners 
 
 seek 
 
( 21 ) 
 
 seek for productive employment of the excess in 
 discounting bills ; and the industry which the 
 interest of individuals inspires, added to the 
 greater latitude and convenience which their rules 
 admit of, in many important respects, will always 
 insure to them, in preference to the Bank, this 
 means of investing their surplus money. Ex- 
 actly, therefore, by so much as the excess of its 
 notes in the hands of the public at any moment 
 amounts to, the Bank will immediately be 
 abridged of its usual power of diffusion. 
 
 In this manner the portion of our currency 
 which is of paper expands with the expansion of 
 the operations it has to perform, and collapses as 
 these operations become less numerous or of less 
 value ; and thus it is never redundant, nor 
 ever deficient in amount. In this respect it is 
 infinitely preferable to gold, which cannot be 
 increased by the wants of the public ; and which, 
 depending on foreign influences, is liable to be 
 often inconveniently reduced, and sometimes to 
 be almost annihilated (as we now see it is) by our 
 foreign exchanges turning against us. Yet this 
 convenience arising from the use of paper the 
 Committee would take away, and they recom- 
 mend as a measure of precaution, preparatory to 
 the Bank resuming payments in gold, that part 
 of its circulation of paper should be abridged. 
 Should such *","'" MmM-nln* 1 *"** be adopted, the 
 
 'i**' 
 
 consequence 
 
( 22 ) 
 
 consequence would necessarily be, that the pub- 
 lic would either experience the embarrassment 
 and inconvenience of a deficient medium for their 
 daily transactions., or, following the practice of 
 the country, they would be obliged to have re- 
 course to the notes of private bankers to supply 
 the void. 
 
 With such a control, then, as exists in our 
 habits of economy, and with such additional 
 limitations as I have just shewn are imposed 
 by their own interest on the Bank of England 
 and country bankers, it seems unnecessary to 
 adduce other arguments to prove that there is 
 no excess in the circulating medium of the 
 country. If any other evidence be required, it 
 may, I think, be found in a comparison of the 
 actual circulation in 1797 (which was exempt 
 from all imputation of redundancy) with that of 
 the present time. 
 
 In this comparison I shall omit entirely the 
 whole circulation of country banks. The Report 
 justly remarks, " that the same check, which the 
 " convertibility into specie under a better sys- 
 44 tern provides against the excess of any part 
 " of the paper circulation, is, during the present 
 " system, provided against an excess of country 
 
 " bank 
 
( 23 ) 
 
 " bank paper, by its convertibility into Bank of 
 " England paper." The alleged superflux, then, 
 must be found in the issues of the Bank of Eng- 
 land ; and this I shall now examine. 
 
 Referring to the Report, page 25, I find that 
 the average amount of bank-notes in circula- 
 tion in May last, when the amount was at the 
 highest, was 
 
 In Notes of 5, In Notes 
 
 and upwards, under <$, 
 
 14 Millions. 6 Millions. 
 I find, also, that, pre- 
 vious to the restriction 
 of 1797, the sum of 
 notes of 5 and up- 
 wards was from 10 to 
 1 1 millions ; I will take 
 
 the average 10| Millions. 
 
 And that of notes under 
 
 that value there were None. 
 
 3\ Millions. 6 Millions. 
 
 Thus shewing an increase in thirteen years of 
 six millions in notes under d, and three mil- 
 lions and a half in notes of a higher value. Of the 
 first description, (those under 5,) the Commit- 
 tee admit " that a part must be considered as 
 " being introduced to supply the place of the 
 
 " specie 
 
( 24 ) 
 
 " specie which was deficient at the period of 
 " suspending cash-payments ;" but this admis- 
 sion is evidently insufficient. In considering 
 what void is filled up by small notes, our con- 
 cern is not with the degree of deficiency of 
 gold at the time of suspension, but with the 
 actual amount of the void at this moment, after 
 thirteen years of great waste by melting and 
 exportation. At the time when the Bank ceased 
 to pay gold, the proportion of the precious metals 
 in our payments was still great, compared with its 
 present amount ; and accordingly we see, in the do- 
 cument referred to, that the whole issue of small 
 notes in the first two years was under two mil- 
 lions ; by regular progression the sum increased 
 to 3, to 4, to 3, until now it has reached to 
 6 millions ; but the experience of every man 
 in the habit of witnessing the money tran- 
 sactions of the capital will, I think, tell him 
 that gold, in the same or in a much greater pro- 
 portion, has gradually disappeared ; arid that now, 
 so far from a part of this hew description of notes 
 being sufficient, the whole of jt is unequal to sup- 
 ply the decrease of specie in the last thirteen 
 years, during a great part of which there have 
 been such strong temptations to melt it down. 
 
 It appearing then that the substitution of notes 
 for guineas in our lesser transactions is a mere con- 
 version 
 
version of our currency from one kind of circulat- 
 ing medium to another, and not an addition to its 
 amount, it follows that the whole of the excess 
 (if there be any) of Bank of England paper is to 
 be found in the class of notes which are above 
 the value of five pounds : this increase, or this 
 excess, has, in the period referred to that is, in 
 the last thirteen years amounted to three mil- 
 lions and a half. 
 
 I have stated, that, in the unimpeached times 
 which preceded the restriction, the notes of the 
 Bank of England in circulation amounted to 
 between ten and eleven millions ; and in those 
 days there also was seen in use that pro- 
 portion of guineas which has been banished by 
 the smaller notes. These, I have shewn, there 
 is every reason to believe, amounted to as much 
 as the notes which now supply their place six 
 millions ; many circumstances lead me to think 
 they amounted to more : taking them, however, 
 at the computation I have made, the mixed cir- 
 culation of London before 1797* in gold and 
 Bank of England notes, could not be less than 
 sixteen millions and a half. It is now twenty 
 millions, exclusive of the small portion of gold 
 which yet remains, being an increase of about 
 one -fourth. 
 
 But in the same period has there been no 
 
 change 
 
( 26 ) 
 
 change whatever in the condition of society ? has 
 there been no addition to the population within 
 the sphere of the Bank's circulation? has there 
 been no greater number of commercial tran- 
 sactions to adjust, or larger public revenue to re- 
 mit into the Exchequer? In each of these, singly, 
 1 think I see almost a sufficient demand to draw 
 forth the additional sum in dispute; and I must 
 have recourse to a suggestion of the Committee, 
 " that the notes are of late more economised in 
 " great transactions," to account for the fact, 
 that this increase is not greater. Some of these 
 points, which I have touched on as necessarily 
 involving an increased use for Bank paper, admit 
 of more certain calculation ; these all warrant my 
 position, that the increase we witness is not more 
 than is necessary for the extended functions it 
 has to perform. The issues for the public service, 
 and the emissions from theBankin dividends,have 
 each risen much above a fourth ; and while these 
 great operations in the capital are thus inviting an 
 increase of notes by our increased occasions, above 
 seven hundred country banks, which formerly 
 held in gold the sum which they deemed it prudent 
 to keep as a deposit in their command, now retain 
 that portion in Bank of England paper, thus at- 
 tracting a great permament issue of bank-notes to 
 districts to which they never reached before. It 
 
 is 
 
( 27 ) 
 
 is difficult to form any conjecture of the sum thus 
 locked up ; but, stating it so low as one thou- 
 sand pounds for each house, we find, in a single 
 general measure, one-fourth of the alleged ex- 
 cess accounted for. 
 
 The increase of wealth and population in 
 London and its neighbourhood, where bank- 
 notes almost exclusively circulate, does not ad- 
 mit of a like certainty of calculation ; but the great 
 towns, for so ^hey are, which have been added 
 to the northern and eastern parts of the City and 
 Westminster, and the increase of villages in 
 every direction, as well as the crowded appear- 
 ance of our streets and markets, must satisfy us 
 of the increased number of candidates for the 
 currency in use. But not only is the number 
 of persons greater, but a large proportion have 
 greater concerns to adjust ; not only there are 
 more considerable merchants, more bankers, -more 
 agents, more dealers in every species of pro- 
 perty, in the period under consideration ; but 
 each man^s transactions are numerically and 
 actually increased. 
 
 He has, in most instances, more rent to pay, 
 more taxes, and more for the purchase of most 
 articles of consumption ; while, on the other hand, 
 there is an equal increase in his receipts. In the 
 upper ranks of society, except to those who 
 unfortunately have only fixed incomes, there are 
 
 every 
 
( 28 ) 
 
 every where increased rents of land, increased pro- 
 fits of trade ; while, in the lower ranks, there are 
 increased wages in every employment. When I 
 take all this into view, I cannot think that the 
 increase of one-fourth in the circulation of this 
 prosperous and busy district exceeds that just 
 demand which, I still hold, is regulated by each 
 man's view of his own convenience. 
 
 5 
 
 I think I have shewn the existence of a re- 
 stricting principle in our nature and habits, which, 
 by limiting the quantity of money in every man's 
 pocket or possession to the amount he finds ne- 
 cessary for his daily exchanges, limits, by con- 
 sequence, the whole circulation of the realm. 
 I have shewn how this principle operates in 
 the limits it imposes on the two great sources of 
 paper-currency, the Bank of England and country 
 banks, and I have shewn, by a comparison be- 
 tween 1797 (a time of acknowledged purity of 
 system) and the present day, that the Bank of 
 England has not increased its issues beyond the 
 amount they would have naturally reached had 
 payments in cash never been suspended. 
 
 But the Committee, not placing (as I think) 
 sufficient weight on these considerations, decide 
 " that no safe, certain, and constantly adequate 
 " provision against an excess of paper-currency, 
 
 " either 
 
( 29 ) 
 
 " either occasional or permanent, can be found, 
 " except in the convertibility of all such paper 
 " into specie." Let us shortly examine this 
 position : 
 
 Taken in its utmost extent, it would lead to 
 a practical impossibility. If, in times of the 
 greatest abundance of specie, the public, from 
 any cause, had called upon the Bank, and upon 
 every country banker, for the sum declared in 
 their notes to be held on the usual condition of 
 repayment on demand, the Bank of England and 
 the country banker must have been alike in- 
 capable of fulfilling the letter of their engage- 
 ments. The Bank, even in times when its en- 
 gagements only amounted to about ten millions* 
 when there was much more than that sum in 
 specie in the kingdom, and when its credit was as 
 yet unquestioned, found, in 1797, that it had 
 pledged itself to a promise which it was unable to 
 fulfil ; and the Legislature was obligsd to inter- 
 pose, by a suspension of the established law, 
 and by exempting it from the obligation of pay- 
 ing in specie. What then was the actual de- 
 gree of convertibility of paper before the Re- 
 striction Act? It was something greater than 
 sufficed for common and ordinary occasions on 
 one hand, and less than was necessary for the 
 extreme of popular alarm on the other. The 
 
 truth 
 
( 30 ) 
 
 truth is, as the times become more secure, and 
 more confidence prevails, there will always be a 
 greater proportion of paper; and this has been 
 uniformly the case in the last century, till now, 
 when little else is seen in use. Happily we have 
 not lately experienced, except in the short 
 alarm of 1797, a doubtful state of public se- 
 curity. Should any such state of things, or 
 any internal dangers, unfortunately arise in 
 this country, our regular laws being sus- 
 pended, our mutual confidence being banished, 
 gold and silver, these so much desired metals, 
 will reappear; but they will come, in such sup- 
 posed case, not as tokens of plenty and security, 
 but as proofs that want of confidence prevails ; and 
 that once more, as in early times, the seller of any 
 article will feel no security but in receiving at 
 the moment another article of like intrinsic value 
 from the buyer. 
 
 It is clear, then, that whether now, or before 
 the restriction of 1797, the convertibility of pa- 
 per into gold beyond a very limited extent never 
 existed. But if it is not convertible into gold, is 
 it therefore of no value ? is there nothing of intrin- 
 sic worth into which those who are fearful of its 
 security may convert it in the temporary absenca 
 of thisone article ? Yes, into every thing that men 
 desire, or that gold can purchase ; and, when or- 
 dinary 
 
dinary times return, it will again be exchangeable 
 into gold itself, as if the present interruption had 
 not happened. Gold, it must be remembered, is 
 but one of the many articles which minister to 
 our comfort or convenience : in the poorest times 
 of our history, we, perhaps, had proportionably the 
 greatest quantity of it, because there was then least 
 dependence on the force of laws, and fulfilment 
 of written obligations ; but, taking any mo- 
 ment since the Revolution, there never were 
 twenty-five millions in circulation in the country. 
 How small, then, is this portion of our wealth, 
 which we so much regard, compared with the great 
 mass of two or three thousand millions, which 
 we enjoy in lands, in houses, in merchandise, in 
 shipping, in manufactures, and in every thing that 
 constitutes wealth. If we have reason to be satis- 
 fied that the issuers of corporate or private 
 notes possess a sufficient portion of these ar- 
 ticles, of intrinsic W9rth, which the law will com- 
 pel the conveyance of to us, when required, 
 why should we be thus tenacious of payment in 
 gold, which the next moment it would be our bu- 
 siness not to hoard or to enjoy, but again to send 
 forth in purchase of some one or other of these 
 very objects we now so much set at nought ? 
 
 Practically speaking, men have always acted 
 on this conviction ; and have, on no emergency 
 of late years, save that of 1797, demanded gold 
 
 in 
 
( 32 ) 
 
 in their dealings : and although, in theoretical dig- 
 qussions, we are pleased with a supposed power of 
 calling for our debts in the precious metals, it is 
 obviously impossible to exercise that power to any 
 extent. However much in theory we may be 
 pleased to contemplate the pure system of con- 
 vertibility into gold, we can have no proof more 
 convincing of the public being satisfied with other 
 security than we saw in the effects of the suspen- 
 sion of the Bank's payments in coin ; a measure 
 as sudden as it was unprecedented ; one, too, 
 adopted at a moment of general alarm from other 
 causes, but which never for an hour rendered the 
 notes of that body of less ready acceptance. 
 
 Had the paper part of our currency retained 
 its value only by its convertibility into gold, it 
 must have fallen gradually for the last twenty 
 years ; during which time the proportion it contains 
 of the precious metals has been declining. In the 
 last ten years, it ought, by this rule, to have fallen 
 above a half; and, judgingby the power of conver- 
 sion it now possesses, a bank-note of one pound 
 ought not to be worth five shillings ; yet we see our 
 notes retaining their original credit, commanding 
 every article at their original value, and ex- 
 changing for our coin itself in every transaction in 
 which they meet. The truth appears to be, 
 that all excess of paper-currency is restrained 
 by the causes we have stated; and its con- 
 vertibility 
 
( 33 ) 
 
 vertibility into gold, in a very small degree, 
 is sufficient for convenience, as well as for pre- 
 serving it from depreciation. I repeat, then, after 
 assigning my reasons for so thinking, that, 
 
 There is no excess in the paper circulation 
 of the country; 
 
 That there is a sufficient check and control 
 over the issues of paper from the Bank of Eng- 
 land and from country banks ; and 
 
 That the currency of the country is in no de- 
 gree depreciated by the use of paper. 
 
 AT this place it is possible I may be asked, by 
 some person not attending to the scope of this 
 discussion, why I detain the reader with argu- 
 ments about restrictions and limitations ? why 
 I do not appeal to every man's and every day's 
 experience, and shew that the currency of the 
 land will buy as much bread, as much meat, 
 and as much of every, necessary of life now, as 
 it did thirteen years ago. I answer, that this 
 makes no part of my present plan. A Commit- 
 tee of the House of Commons having stated, 
 that a depreciation has taken place in our cur- 
 rency, arising from the specific cause of an ex- 
 cessive infusion of paper, my plan and object is 
 
 c to 
 

 ( 34 ) 
 
 to shew that there is no such excessive infusion, 
 and that consequently any remedies grounded 
 upon that assumption must be unnecessary. But, 
 consenting to a momentary departure from the im- 
 mediate question, 1 am again asked generally, 
 whether the currency of this country has not of 
 late years lost some part of its value, compared 
 with all the other articles which we usually em- 
 ploy it to purchase ? I answer, that I feel and be- 
 lieve it has; and that the same nominal income 
 will not now enable the owner to obtain the 
 same comforts and conveniences of life, which it 
 did twenty or even ten years ago. But, to use a 
 homely expression, let us put the saddle on the 
 right horse, and not blame paper for a fault 
 which is, in part, ascribable to gold* itself. 
 
 Not only in England, but throughout Eu- 
 rope, gold has lost part of its value, compared 
 with commodities ; and the presumption there- 
 fore is, that that depression which took place 
 after the discovery of America, and which had 
 such manifest effects at that time, still exercises 
 an unobserved, but gradual, power. Writers are 
 divided in opinion as to the degree of this excess 
 in the supply of gold and silver above the wants 
 of Europe ; but, considering the care with which 
 such precious articles are husbanded, it is scarcely 
 possible that the annual importation from the new 
 
 world 
 
( 35 ) 
 
 World should not considerably exceed the annual 
 waste and the export to Asia, and thus pro- 
 duce some slight diminution of their value. An- 
 other cause for the loss of value which money 
 experiences in this'country is the actual increase 
 in price of the articles themselves which it is 
 used to purchase. In a country insulated as ours 
 now is, by political as well as natural circum- 
 stances, every increase of population must make 
 an increase in the demand for all the articles 
 which land and industry produce. To raise the 
 former, worse soils and more unfavourable situ- 
 ations must be taken into cultivation ; and the 
 produce therefore will be obtained, and must be 
 sold, at an increased expense. To create the latter, 
 men must be paid at a higher rate of wages, be- 
 cause in every state of society, and especially in 
 one progressive, as that of England is, men must 
 receive somewhat above what is necessary for 
 their support ; and the expense of that support 
 will be regulated principally by the cheapness or 
 dearness of food. The operation of taxes is ana- 
 lagous to that of an increased price of the pro- 
 duce of land, and has had its full share in the 
 enhancement of prices. The lower orders in 
 every country pressing closely upon the limits 
 which will suffice to nature for their sub- 
 sistence, it -follows, that, after a certain 
 
 c 2 point 
 
( 36 ) 
 
 point, whatever is taken from them in taxes, 
 which are either direct, or which mix in the 
 price of their food or clothing, must be com- 
 pensated in greater wages or earnings. The taxes, 
 indeed, which reach this humble rank of society 
 in Great Britain, are very light ; but, added to the 
 increased price of food, they have every where 
 produced an increase of wages. When then we, 
 on one hand, take into our view the depreciation 
 which, in some given degree, is experienced 
 throughout Europe in the precious metals; and 
 when, on the other, we consider how often increased 
 wages mix and accumulate in every production 
 we pay for; when, also, we find every article 
 brought to us loaded with the taxes necessary 
 for the State ; surely we may see in these very 
 powerful and universal causes, operating upon 
 one hundred and fifty or two hundred millions, 
 at which we may estimate the income of the 
 country, a sufficient explanation of the declining 
 power of money, without seeking for it in the 
 comparatively trifling actual addition, if any, to 
 our circulating medium. 
 
 But, in this enumeration of causes which take 
 from the power of money, by enhancing the price 
 of all the articles of life, 1 am told I have omitted 
 one not only very important in its effects, but one, 
 immediately connected with the subject of cir- 
 culation : 
 
( 37 ) 
 
 culation : it is conceded to me that there is no 
 depreciation of bank-notes, nor any excess in 
 their amount; yet it is maintained that the fa- 
 cility with which they are procured from the 
 Bank, by the mode of discount peculiar to com- 
 mercial men, calls into existence an increase of 
 purchasers in our markets, whose competition 
 heightens the price of every article!! This will 
 not be urged by any person acquainted with the 
 subject of production ; an increase of capital 
 (which this is to the small degree in which it ex- 
 ists) never raises the price of commodities, but 
 has exactly the opposite effect ; an increase of 
 consumers, in any given state of supply, will 
 raise the price of every article which is the ob- 
 ject of their wants ; and the enhanced price will 
 continue until the stimulus of the increased de- 
 mand has created a proportionably increased pro- 
 duction ; but a competition of consumers is re- 
 gulated by principles quite distinct from a com- 
 petition of merchants, who buy to sell again : 
 these must always have in view the price which 
 the article they are in treaty for will obtain at its 
 ultimate market ; and, whether there be ten such 
 competitors or a hundred, whether each has car- 
 ried to the place of competition one hundred 
 pounds of bank-notes or one thousand, he must 
 still be limited, in the offer he can afford to make, 
 
 by 
 
( 38 ) 
 
 by the price which he expects to obtain in selling 
 again. So far, indeed, from this increased capital 
 being the occasion of high prices, it is one of the 
 principal means of keeping them down ; a com- 
 petition of capitalists, like a competition of ma- 
 nufacturers, restricts their respective profits: at 
 this moment we see so much capital in the coun- 
 try, that, from the want of more productive em- 
 ployment, it is lent to Government on terms 
 much lower than during any former war. In 
 Holland, where individual capital* was more ge- 
 neral than in any other part of Europe, the profits 
 arising from it were the' lowest. A great capital 
 is the principal advantage which any country 
 has in entering into a competition of sales 
 with other nations; it makes roads, it erects 
 machinery, it promotes canals ; and, in the exact 
 proportion in which it produces these facilities to 
 production, it brings into our own and into fo- 
 reign markets every article of necessity or luxury 
 at a diminished price. Such are the effects of 
 capital ; and, in a trifling degree, such would be 
 the effect on the price of commodities resulting 
 from an increased degree of accommodation from 
 the Bank, were it not prevented by the restricting 
 bounds which limit circulation. 
 
 PART 
 
PART II. 
 
 That the high price of bullion is owing to the 
 present state of the commerce of this coun- 
 try with the rest of Europe, entirely un- 
 connected with the extent of the paper cir- 
 culation; and that our present unfavourable 
 exchanges are in no way caused by our paper 
 currency. 
 
 HAVING shewn that the amount of our cur- 
 rency is fixed by an impassable boundary, which 
 precludes the possibility of excess; having shewn 
 that the convertibility of the portion which is 
 paper, into that which is of the precious metals, 
 was always limited ; having shewn that (except 
 in times of alarm, when it might be better if there 
 were none) a very moderate degree of conver- 
 tibility is necessary for the common purposes 
 of life ; and appealing to every man's experience, 
 that, in the small, indeed, but frequent exchanges 
 in which gold and silver now mix, paper and 
 these precious metals pass at a like value, thus 
 establishing a standard for the former; it follows, 
 that our currency is not now depressed by the 
 use of paper. 
 
 But I am desired to take a guinea, and to melt it 
 
 down ; 
 
- ( 40 ) 
 
 down ; and I am shewn that the moment it is freed 
 from the stamp of law, as soon, in short, as it be- 
 comes bullion, it rises in value; and that that 
 portion of gold, which yesterday exchanged only 
 for a one-pound note and one shilling, novy ex- 
 changes for the same note, and four shillings and 
 six-pence. 
 
 This evidently must proceed from one of two 
 causes ; it must proceed from the currency of 
 which it late made a part having fallen below its 
 usual value, or from gold in the shape of bullion, 
 which it has now become, having risen above it. 
 
 I think I have shewn that it is not in the 
 former of these causes : and when I turn to the 
 other alternative, and see so many circumstances 
 combining to prove that bullion has risen above 
 its ordinary price to the whole extent of the dis- 
 parity, yam led to express my surprise that any 
 doubts should ever have arisen on the subject. 
 
 At this place let me again revert to a few ge- 
 neral principles ; and guard my reader against what, 
 till this discussion arose, I should have termed 
 the exploded belief, that gold is an unvarying 
 standard. In addition to the many excellencies 
 which gold possesses, of divisibility, of portability, 
 of being less perishable and more pure than any 
 other substance we know of, it possesses also the 
 merit of varying less in value from year to year, 
 
 or 
 
{ 41 ) 
 
 or in one place compared with another, than 
 any other metal : but it must not be inferred that 
 gold is therefore subject to no variation ; since the 
 discovery of America, and the influx which the 
 mines of that part of the world have poured upon 
 Europe, its value has fallen in this country to 
 one-third : like every other article which ministers 
 to our convenience or comfort, it is bought by 
 human labour ; and, being obtained in the new 
 world with less expense of trouble than it was in 
 the old, it has proportionably become cheaper in 
 the great degree we have seen. Upon the same 
 principle, it is also subject to some variation 
 from locality : in America, where it is recently 
 dug from the mine, it must necessarily be cheaper 
 than in Europe, which it reaches with all the ex- 
 penses of freight and hazard attending upon so 
 long a conveyance. 
 
 It is, therefore, subject, like other commodities, 
 to variation of value, according to time and place; 
 although, from the regularproduction of the mines 
 whence it issues, and the small expense of trans- 
 porting it compared with more bulky articles, it 
 is less so than any other substance ; and in 
 ormnary times, when the intercourse between 
 every part of the world is free, it is, for all the 
 common purposes of society, a sufficiently per- 
 fect measure of value. 
 
 Thus 
 
Thus it has continued (allowing for the consi- 
 derable but regular depreciation just mentioned) 
 for nearly three centuries, and thus it will pro- 
 bably always continue, to serve as the best ap- 
 proximation to a perfect standard : it has not 
 changed its nature, nor will it in any material 
 degree be less useful to mankind that we occa- 
 sionallysee,andnowfeel,itsnatural tendency to an 
 equal value transiently interrupted by political cir- 
 cumstances. We have hitherto experienced very 
 little inconvenience from such local and tem- 
 porary alterations ; nor shall we now from that we 
 witness, if we do not create inconveniences by 
 improper interference. 
 
 Without entering into the intricacies of foreign 
 exchanges, it must be evident to every man, who 
 will consider the subject, that when a country, 
 like an individual, makes purchases more in value 
 than it sells in return, that country must, for the 
 moment, remain in debt to the extent of the differ- 
 ence: it must be equally clear, that, if a nation 
 obtains from other countries advances for the 
 maintenance of its subjects detained abroad, for 
 the support of its armies on foreign service, or for 
 the payment of its subsidies to other States or 
 Princes, to the extent of all these, for the time, 
 the accommodated country will be in debt. In all 
 these ways has England been accommodated and 
 
 become 
 
( 43 ) 
 
 become indebted to the Continent ; in most of 
 them does it still continue to be accommodated, 
 and to contract new debts ; and, unlike as in 
 former times, when the intervention of neutral 
 States, or the ingenuity of our merchants, made 
 exportation, even in a period of war, little liable 
 to obstruction, England is now, with teeming 
 warehouses, unable to force the articles with 
 which she would discharge her obligations, 
 through the barrierwhich political circumstances 
 have interposed. 
 
 But there is a limit to all credit, and particu- 
 larly to the extent in which merchants on the 
 Continent, who are generally less affluent than 
 our own, can afford to make advances to this 
 country. Something then must be remitted in 
 discharge of past advances, or intercourse must 
 cease. In endeavouring to continue so useful 
 and so profitable an intercourse, every expedient 
 which private ingenuity can suggest will be de- 
 vised to defeat the obstruction, of whatsoever 
 nature jt may be : the convenience of every port 
 for admission will be examined, the assistance of 
 neutral flags and neutral ships will be resorted 
 to ; and, above all things, the aptitude of particu- 
 lar articles for secret and expeditious transport 
 will be anxiously investigated : and in this inves- 
 tigation, in this comparison of qualifications, will 
 
 gold 
 
gold be forgot ? Is it probable that that commo* 
 dity, which, of all others, is, in proportion to its 
 value, the most easily transported, the most 
 easily concealed, and the most sure to find a ready 
 market, will be overlooked by men so acute as 
 our merchants are ? The very reverse is the case : 
 the first thing that feels the impulse of an unfa- 
 vourable exchange is this very gold, which the 
 Committee would seem to think unsusceptible 
 of influence. 
 
 What then follows this demand for gold ? All 
 the train of appearances which result from a de- 
 mand for other articles : it becomes more and 
 more scarce it gets higher and higher in price. 
 
 But, if the demand for any article of which 
 there is an extended market if the demand for 
 woollens or linens, for example, the supply of 
 which is capable of being increased to a great 
 extent, raises the price in their respective in- 
 stances, how much more suddenly must the 
 price of gold be affected, of which the English 
 market is so limited ? There is, perhaps, no 
 country in the world, in proportion to its wealth, 
 that has so little. We have not, as at Ham- 
 burgh and Amsterdam, a constant transmission 
 through our provinces of foreign coins: our own 
 coin is. very limited ; what there is can afford but 
 little relief, being barred by penal statutes from the 
 
 use 
 
use immediately desired of exportation. Our 
 gold and silver plate can contribute as little to the 
 end in view, as scarcely any increase of value, by 
 a high exchange, would compensate the loss it 
 would sustain in being deprived of its fashion 
 and workmanship, What then remains to con- 
 stitute the English market ? Only the small 
 sura of a few hundred thousand pounds, which we 
 find, from the Report, passes annually through the 
 Bullion-Office ; and which, stimulated by such 
 urgent occasions, it is no wonder we see in- 
 creased in price. 
 
 In reply, I am asked, are not the mines of 
 the new world open to us as to the other na- 
 tions of Europe ? But the produce of the 
 American mines are usually brought to Spain, 
 and, being there, we do not want to have them 
 brought to England at a time when the sole 
 purpose for which they are in such request is to 
 send them back to that country, or some other 
 part of the continent of Europe. Such quanti- 
 ties of specie, indeed, as our commercial inter- 
 course with the Portuguese and Spanish settle* 
 ments enable us to procure, are brought home, 
 and form, as we see, the principal part of 
 the scanty fund deposited at the Bank ; -but 
 how ineffectual is this to settle the heavy ba- 
 lance of payments we are every day incurring ? 
 
 If we require an additional proof that gold and 
 
 silver 
 
( 46 ) 
 
 silver are urgently wanted by this country, and 
 that its usual stock and ordinary resources are 
 unequal to the demand, we shall find that 
 proof in the conduct of Government itself, which, 
 after exhausting every scheme for supplying 
 our necessities on the Continent by common 
 means, have been obliged, in repeated instances, 
 to enter into contracts with the Spanish settle- 
 ments, and to grant licences for the transmission 
 of specie from thence, even when intercouse 
 was shut against other things. Could Govern- 
 ment have found the precious metals as* it could 
 have done shoes, or clothing, or provisions, in 
 England, would it have had recourse to such 
 modes? The conclusion is inevitable: it is a 
 new proof that the British market or deposit of 
 the precious metals is extremely small, and 
 must necessarily be easily affected in price by 
 any urgent demand, 
 
 Whenever the imports and the foreign ex- 
 penses of this or any other country exceed its ex- 
 ports, its exchanges will be unfavourable, and gold 
 dear ; whenever the reverse is the case, when our 
 exports exceed our imports and foreign charges, 
 our exchanges must be favourable, and gold 
 cheap. How then can that be considered as an 
 undeviating measure, which is thus ever affected 
 by circumstances so uncontrollable? 
 
 It will be asked how it then happens, that, in 
 
 all 
 
( 47 ) 
 
 all the changes we have seen arising from the 
 state of our exports and imports, gold, after a 
 long series of years favourable to England, has 
 never fallen much under the price it bears re- 
 latively to other commodities ? The answer is 
 plain: when the balance of trade was against 
 the Continent, it had always the option to pay 
 its debts in whatever best suited our market, 
 and, consequently, there never could be any 
 redundancy of this, more than of any other ar- 
 ticle of commerce ; as soon as the measure of our 
 wants became full, the surplus would flow back 
 to where it was more desired, and other articles 
 would be selected, more suited to our market. 
 
 But it will be said this theory does not hold 
 good at the present moment. The measure of the 
 Continental market is admitted to be full : gold, 
 therefore, not being dear there, there cannot be 
 the usual attraction of a high price to excite ex- 
 portation from England ; yet the tendency of the 
 current is strongly that way. This is one of the 
 phenomena arising from our new situation : our 
 motive for exportation now, is not as it used to 
 be a high foreign market ; but it is one equally 
 powerful the necessity of discharging a large 
 foreign debt, which "the political obstruction of the 
 times makes it more advantageous to liquidate 
 by this, than by any other article more difficult 
 to transport. At such moments our commercial 
 
 greatness 
 
greatness even turns against us by the unwieldi* 
 ness of the operations it imposes on the precious 
 metals to perform. Should France, in her com- 
 paratively limited intercourse with other States, 
 experience a depression of her exchanges, the 
 currency of that immense empire would scarcely 
 feel the drain; while England, dealing as it does 
 for millions, and expending millions in foreign 
 objects of policy, must necessarily with a li- 
 mited currency have greater variations in her ex- 
 changes, and these variations will be greater or 
 less as her trade and payments happen to con- 
 cur or counteract each other. 
 
 I cannot anticipate the necessity of further 
 illustrations to prove that at this time, and in 
 this country, gold is dear: it seems extraordinry, 
 that, instead of acknowledging it, as we do every 
 other article of commerce, to be dearer when it 
 is of more difficult attainment, we look, at the 
 expense of insuperable objections on the other 
 side, for arguments to shew that its rise in price 
 is not a proof of an increase in its exchangeable 
 value, but of an excess in the currency with 
 which it is bought. Let us try these two op- 
 posite opinions one way more, by the test of 
 consistency in their effects. 
 
 First, to shew that gold varies, that is, rises 
 
 and 
 
and fails with the demand for it, I compare it 
 with the state of our exchanges, which indicate 
 the decree of that demand : 
 
 In the years 1797, 1793, 
 and 1799, I find the exchanges 
 greatly in favour of this coun- 
 try- 
 
 In 1800, 1801, and 1802, 
 the exchange became unfa- 
 vourable, and was 4, 5, and 6 
 per cent, against England. 
 
 In 1803, 1804, and 1805, 
 1806, 1807, and 1808, the ex- 
 change, with the exception of 
 a few months in 1805 and 
 1806, continued favourable. 
 
 At the end of 1808, and 
 through all 1809, a very great 
 and unfavourable alteration 
 took place in our exchanges ; 
 they fell to 1 5, 16, and 20 per 
 cent, under par. 
 
 Gold, not then being want- 
 ed for more than ordinary de- 
 mands, remained at its stand- 
 ard price. 
 
 Accordingly gold, the most 
 exportable of all articles, ac* 
 quired a new Value, arid be- 
 came dear, and sold at 4/. IJT. 
 4/. 2s. and 4/. 3s. per ounce, 
 which is an increase of about 
 4, 5, and 6 per cent. 
 
 And we find gold, as we had 
 reason to expect, at a corre- 
 sponding price ; it was all this 
 time almost unvaryingly at 
 4/. per ounce. 
 
 Then gold became in re* 
 quest ; it was wanted to satisfy 
 foreign demands, and accord- 
 ingly it rose to 12, 14, and 
 15 per cent. 
 
 In April of the present year And gold accordingly fell 
 
 the exchanges recovered a to within 10 per cent, of the 
 little, and were only about Mint price. 
 10 per cent, against this 
 country ; - 
 
 Next, to shew that currency has not fallen, I 
 j> take 
 
( 50 ) 
 
 Gold never altered its 
 price ; its price in currency 
 never increased. 
 
 take the same test of a comparison. -If it has 
 lost its value from excess, it must have sunk in 
 some degree proportionable to the increase of 
 that excess. Let us see how the fact corresponds 
 with that principle : 
 
 In the years 1797, 1798, 
 and 1799, during those im- 
 mediately succeeding the sus- 
 pension of cash-payments, 
 and consequently of the 
 greatest alarm, and during 
 which there was sent forth an 
 addition of 5\ millions to the 
 circulation of bank-paper, be- 
 ing an increase of above 50 
 per cent. in these years, 
 when the effects of the excess, 
 had there been any, must 
 have be^n most apparent, 
 
 In the years 1800, 1801, 
 and 1802, an increase took 
 place in the issue of bank- 
 paper of three millions more, 
 being an additional increase 
 of 23 per cent. 
 
 In the years 1803, 1804, 
 1805, 1806, and 1807, a fur- 
 ther increase of issues took 
 place to the extent of a mil- 
 lion and a half, making in all 
 an increase on the original cir- 
 culation of a hundred per 
 cent, 
 
 From 
 
 Gold bullion became dear 
 in these years of unfavour- 
 able exchange ; gold rose in 
 value 4, 5, and 6 per cent. 
 
 Gold bullion became 
 cheaper ; it fell back to 
 within 25. of the Mint price. 
 
From January 1808, to Yet gold rose from par te 
 Christmas 1809, there was 12 or 15 per cent, above the 
 little or no increase of paper ; Mint price. 
 
 In April 1810, although Yet gold fell to 10 per 
 there was no decrease of Bank cent, 
 of England paper, 
 
 Can any proof be more decisive than that which 
 these statements afford that the prices of bullion 
 have had no correspondence with the issues of 
 bank-notes ? The Committee do not indeed allege 
 that our currency is depreciated to the whole 
 extent of the rise which bullion has experi- 
 enced ; they limit the charge they bring by stating 
 only that it must exist to a certain degree : even 
 so qualified, this opinion is not just, but, car- 
 ried to the full extent, as it has been by some 
 persons, it leads to the most obvious absurdities. 
 According to the creed of such persons, that gold 
 is invariable, and that the cause of its departure 
 from the Mint price must be found in the varia- 
 tion of our currency, it would follow 
 
 That in 1800 the whole currency of Great 
 Britain became depreciated to the extent of six 
 per cent, and consequently that it lost about three 
 millions of its value; 
 
 And that, in 1804, with a greater proportion of 
 paper, with a larger public debt, and with an ex- 
 
 D 2 tended 
 
tended war, the same currency, in all these re- 
 spects less secure, recovered all the value it had 
 lost. 
 
 Were such opinions just, it would follow also, 
 that if Mr. Goldsmid, in executing any very urgent 
 commission, should raise bullion two or three 
 per cent, above the usual price, he would by such 
 rash act strike off a million from the value of our 
 currency : but the truth is, in all these instances 
 it is only a few ounces of bullion that have got 
 dearer or cheaper; our currency remains just the 
 same. 
 
 At this place I shall again shortly depart from 
 the direct course of these Observations, to notice, 
 the argument of a class of advocates for the mea- 
 sure recommended by the Committee, but who 
 urge it upon different grounds. 
 
 These Gentlemen allow that our currency is 
 not depreciated ; that gold is increased in value to 
 the whole extent of the disparity we see; but, 
 admitting all* this, they say, a pound of gold, 
 having been coined into 44 guineas and a half, 
 the holder of a bank-note for 46/. l6s. 6d. (the 
 sum corresponding with 44i guineas) is entitled 
 at all times to a pound of gold ; and he is so, 
 they say, by the express letter of his contract, 
 
 ami 
 
and by the law of the country, even now, when 
 a pound of gold is worth fifty-six pounds. But, 
 independent of the injustice of placing the par- 
 ties to any contract in a situation not in contenv 
 plation at the time of making such contract (a 
 situation resembling that of a mortgager pressed 
 to sell his estate in a time of great depression of 
 property, which a court of equity would not 
 permit), the very terms of the contract are 
 against this reasoning. There is not in existence 
 any note of the Bank of England, or of a country 
 bank, engaging to pay a pound of bullion: tin? 
 engagement such notes contain is to pay a certain 
 portion of the coin of the realm ; which coin, 
 bereft as it is, and always has been, of exporta- 
 bility, is of the same value now that it was 
 when it issued from the Mint; and never was 
 intended to give to the possessor the fluctuating 
 and now very unusul advantages of bullion, from 
 which it is so distinctly separated by the law. 
 
 Of the same kind is the popular instance of a 
 public dividend ; inasmuch as it is the opinion of 
 the Committee carried to the extreme. A believer 
 in depreciation carries me to the Bank, and there 
 shews me a small ingot, which was once a guinea, 
 but which now he proves to me he could sell for 
 1 /. 4s. 6d. In coin of this value, he reminds me, 
 was once paid every pound of these dividends 
 now poured upon the public in notes, these 
 
 depreciated 
 
depreciated notes, which, compared with this 
 piece, are worth only seventeen shillings for every 
 nominal pound. But is not the answer plain ? 
 Let this ingot again receive the unvarying cha* 
 racterof coin which the law gave it, and meant 
 it should always retain; let it once more be 
 secured by the Tower stamp from those in- 
 fluences which its exportability subjects it to, and 
 which now affect it so much ; take from it that 
 susceptibility of change, which, as bullion, makes 
 it unfit for a measure of value ; confine it, as our 
 coin always has been, to its use of a domestic 
 standard ; then that ingot, that guinea, will 
 be of the value of this note and this shilling; it 
 will then be of the value it bore when you paid 
 it to the State in purchase of this very dividend ; 
 and it will be of the value to which it will once 
 more return when it has lost the enhancement it 
 now experiences from temporary and unexam- 
 pled causes. 
 
 SUCH 
 
SUCH is the reasoning which has led me to a 
 conriction that there is no depreciation of our 
 currency, and that the present enhanced price 
 of bullion is owing to the unfavourable state of 
 our intercourse with the Continent. In stating 
 the grounds of my opinion, I have endeavoured 
 to anticipate such objections as occurred to me 
 might be made on each point : I shall now very 
 shortly examine the principles and reasoning 
 which are detailed in the Report as the grounds 
 of an opposite conclusion. 
 
 In the first page the Committee state the price 
 of bullion for four years, ending with 1809 : in 
 the next page they state our foreign exchanges 
 for the same period, and shew that they exactly 
 correspond with each other, rising and falling 
 at the same time. The natural inference to be 
 drawn from this correspondence would seem to 
 be, that the high or low price of bullion arose 
 from the state of the exchange ; that they were 
 cause and effect; but a different conclusion is 
 formed " so extraordinary a rise in gold, cou- 
 " pled with so remarkable a depression of ex- 
 " change, points out something in our domestic 
 " currency as the cause of both appearances/' 
 
 They 
 
( 56 ) 
 
 They then proceed to examine separately the 
 high price of gold and the low state of exchange; 
 in each of which they appear to adopt very ob- 
 jectionable opinions. 
 
 In Part I. they lay down as a principle, " that, 
 " in a sound state of our currency, the founda- 
 " tion of which is gold, no demand for gold, 
 " however great, can have the effect of produc- 
 " ing here, for any considerable time, a mate- 
 " rial rise in its market-price." If I have made 
 myself at all understood in a former page, (p. 44,) 
 it must, I think, be apparent that a high market- 
 price of gold must continue just as long as the 
 exchange is unfavourable, however long that may 
 be : whilfe we have an unfavourable balance to 
 pay, we shall ever wish to pay it, amongst other 
 things, in that article which is of cheapest con- 
 veyance; and that article will in consequence be 
 dear : when we have no balance to pay, that article 
 will then, and not till then, resume its former level. 
 
 In the next paragraph the Committee state 
 that there is no unusual demand on the Con- 
 tinent, no high market-price of gold there, to ac- 
 count for the high price here, That there is no 
 unusual demand abroad is admitted; but there 
 is no uer.essfty for a high foreign market to make 
 a great demand at home ; it is dear here, as I 
 h^e shewn, because it is easier to convey the 
 
 value 
 
value of fifty pounds into the heart of France, or 
 of the Continent, in the shape of a pound of 
 gold, than in that of a hogshead of sugar or a 
 bale of cloth. 
 
 In page 5 the Committee enter into an ex- 
 amination of the nature of gold as a measure of 
 value, to shew that, however it may vary in 
 value, compared with other commodities, it 
 cannot vary from itself; that an ounce of gold, 
 therefore, now buying 4/. 2s. of our currency, 
 instead of 3l. \Ss. as it used to do, is a proof that 
 our currency is cheaper. This, too, I have ex- 
 plained : our currency is the same ; the export- 
 able gold here instanced has acquired a new 
 power that of paying at the cheapest rate a 
 foreign debt and consequently a new value; 
 but it is a value which it will lose when the 
 balance of trade and payments turns again in our 
 favour. That portion of our gold which is in 
 coin, which we have barred from exportation, 
 arid, of course, from this accidental quality, re- 
 mains as it was, at the Mint price ; and the dif- 
 ference, estimated in the Report, page 6, at 4J 
 per cent, is only an enhancement in the given 
 price of exportable bullion as an article of 
 trade, 
 
 The section concludes by this position " that a 
 44 general rise of all prices, and in the market-price 
 f< of gold, with a fall of foreign exchanges, will be 
 
 " c the 
 
" the effect of an excessive quantity ofcirculating 
 <ft medium, not exportable to other countries, or 
 " convertible into a coin which is so." But, So 
 long as the limitations I have explained exist, 
 there can be no excess.^ Our circulating me- 
 dium, when it was all of the precious metals, 
 was never exportable, consequently no change 
 has taken place in this respect; and, in its pre- 
 sent state, it is just as convertible into other 
 coin, and into every thing that is valuable, as 
 it ever was. One description of commodities 
 alone have changed their relative price those 
 particularly fitted by their qualities for facility of 
 transit ; and surely it is not by comparing our 
 currency with these only, that a fair test is offered 
 of its deterioration. 
 
 In part II. the Committee enter into the sub*- 
 ject of exchanges. They begin by admitting 
 candidly, that, in the opinion of Mr. Greffulhe, 
 Mr. Chambers, Mr. Coningham, and several 
 other witnesses examined, the present unfavour- 
 able state of this index of our foreign intercourse 
 resulted solely from the present state of our 
 trade and payments : in one Gentleman, how- 
 ever, whose name is not mentioned, they find 
 a qualification of this opinion, which, on ex- 
 amination, the Committee finally adopts, viz, 
 " that bullion is the true regulator both of 
 " the value of a local currency, and of the rate 
 
 " of 
 
( 69 ) 
 
 " of foreign exchanges ;" and in page 1 1 they 
 state, that the difference of exchange resulting 
 from the state of trade and payments between 
 any two countries, is limited by the expense of 
 conveying and insuring this bullion from the 
 one to the other, estimating at the same time 
 such expense at the highest at 7 or 8 per cent. 
 
 With a view to confirm this principle, certain 
 calculations are proposed to Mr. Greffulhe (page 
 14), of which the result is, that any man having 
 13 ounces of gold, in London, will be glad, 
 during an unfavourable exchange, to give one 
 of these ounces to pay a debt with the other 
 twelve in Paris. This loss of one in thirteen is equal 
 to about 7 \ per cent. exactly what we are shewn 
 are the expense and risk of conveyance to Paris; 
 in. other words, it amounts to what the Committee 
 call the real limit of exchange. But, admitting 
 this calculation in all its parts, the inference 
 which the Commtjtee draws from it, viz. that 
 all excess above this real limit must be ascribed 
 to a detect in our currency, is surely not 
 just. Of what avail is it to us to know that gold 
 would pay our Continental debt, at a loss of 
 only 8 per cent, if we have not gold to the ex- 
 tent of that debt which we can export ? Having 
 it not, we resort to silver; that too is ex- 
 hausted ; and, however much we should prefer 
 the precious metals, if they existed, we must 
 
 have 
 
have recourse to other articles, more bulky, more 
 expensive in conveyance, more liable to seizure, 
 till the risk and expense of transport extend 
 the real limit to 12, to 15, or 20 per cent, as we 
 have seen. 
 
 In the same section the Committee represents 
 the actual balance in favour of England, in its 
 European intercourse for 1809? as amounting to 
 about 15 millions ; while, in the Appendix, 
 Nos. 75 and 76, it is shewn that this is riot an 
 actual but an official valuation (which is made 
 on other principles), and that the actual balance 
 in our favour is only about seven millions : but, 
 although great in amount, this error is not ma- 
 terial in principle. Whatever may have been 
 the actual balance of trade in our favour for 
 1809, the Committee admit, that, when the 
 drafts on Government for its foreign expen- 
 diture, the freights due to foreigners, and the 
 interest -payable to them fr&m our funds, are 
 cast into the scale, that year exhibits (page J2) 
 a real balance of trade and payments against 
 England : yet, with this truth admitted, and 
 with evidence before them that there was not gold 
 ^in our markets sufficient to perform its supposed 
 office of a real limit, they conclude the section by 
 stating surely without cause " that they find 
 ! it difficult to resist an inference, that a portion, 
 44 at l.east, of tiielate great fall in our exchanges, 
 
 " must 
 
( 61 ) 
 
 " must have resulted, not from the state of trade, 
 " but from a change in the relative value of our 
 " domestic currency." 
 
 In part III. the Committee state the inquiries 
 they had gone into to ascertain " whether the Di- 
 " rectors of the Bank held the same opinions 
 " with them as to the necessity of watching 
 " the foreign exchange, and deriving from it a 
 " practical rule for the control of their circu- 
 <c lation ; and also whether the great fall of ex- 
 " changes and rise of gold last year had sug- 
 " gested any suspicion of the currency of the 
 " country being excessive." 
 
 The Governor, the Deputy Governor, and 
 the Director who were examined, all avow 
 that they had no reference to a criterion which, 
 if the limitations mentioned in the first part of this 
 inquiry exist, could have no influence on their 
 decisions in this respect. The issues of notes from 
 the Bank of England, as from otherestablishments, 
 can be regulated only by thedemand for them ; and 
 the concurring testimonies here recorded fbrrn 
 a strong corroboration of the principles I have 
 endeavoured to establish. 
 
 It would be an useless repetition to re-state 
 these principles in reply to those brought forward 
 in this section; I shall only make some remarks 
 
 on 
 
( 62 ) 
 
 on such positions or opinions as appear to me 
 inconclusive or erroneous. 
 
 In pages 16, 17> 18, and 19, in order to shew 
 the evils arising from excessive issues, the Com- 
 mittee refer to instances in the Bank of England 
 soon after its establishment ; in the Bank of Ireland 
 in J804, and in certain banking companies in 
 Scotland after the seven-years' war, in each of 
 which, great inconveniences are alleged to have 
 arisen from an over-issue of paper. These in- 
 stances are little more than glanced at in the 
 Report ; I shall therefore only notice each 
 as shortly. With regard to the first, the Com- 
 mittee themselves furnish us with the most com- 
 plete explanation, by stating that the coin of that 
 day was depreciated by wearing and clipping, 
 and that the credit of the Bank was injured for a 
 time by the "straits" it was in to keep up its pay- 
 ments in specie, then the only test of solvency : 
 this, coupled with an error it fell into of too much, 
 identifying itself with the Government, then also 
 in great difficulties, could have no other result at a 
 time when banking establishments were still new, 
 and when men must have watched their conduct 
 with a caution corresponding to their recent in- 
 troduction. 
 
 The case of Ireland is an illustration of all the 
 
 principles 
 
( 63 ) 
 
 principles I have laid down. Between 1799 and 
 1804, the alarm of a threatened invasion, and 
 the terrors of an existing rebellion, impelled 
 a considerable portion of the Irish community, 
 with an anxiety proportioned to the danger, to re- 
 move themselves and their property to a place 
 of greater security. What was the conse- 
 quence ? Exactly what we have seen is the con- 
 sequence of our present necessity in this country 
 to send remittances to the Continent: Irish 
 individuals and Irish families gave more and 
 more for bills upon England ; the exchange on 
 this country got higher and higher, and gold 
 rose in Dublin to a corresponding premium. It 
 not that an Irish gentleman, so alarmed, 
 thought the Bank of Ireland had issued too many 
 notes that he wished to exchange them for those of 
 England ; but because he wished the whole or 
 some part of his property to be out of the reach of 
 risks then peculiar to that part of the empire. 
 The whole phenomena of that day are in strict 
 uniformity with those of the present times: 
 gold, the most exportable of all commodities, con- 
 tinued in Dublin at a premium, while, in London, 
 a bill drawn upon Dublin could not be sold but 
 at a great loss ; and for the most obvious reason, 
 because the person purchasing was taking that 
 risk which the seller was so desirous to divest 
 
 himself 
 
himsejf of: jet, in this state of things, bills on 
 Belfast sold in London at their usual rate : they 
 did so, because, in the north, gold was still the cir- 
 culation of the country ; and as soon as the draft 
 was paid in this metal of intrinsic value and uni- 
 versal request, it was sent to England: but 
 Time, the silent yet certain restorer of an- ordi- 
 nary state of things, has gradually done what 
 Government and the Committee of that day 
 in vain attempted to perform ; the high ex- 
 change drew forth, in their natural succession, 
 the gold, the silver, the linens, the provisions, 
 the produce and the industry of Ireland ; those 
 individuals who were most alarmed, thus got 
 greater means of remittance ; while in the same 
 time the alarm itself was gradually subsiding, 
 till now we see in Ireland, what we ought to 
 anticipate seeing in this country, relatively with 
 the Continent, the exchange restored to par, 
 and that, too, with a circulation of notes in Ire- 
 land as unlimited and as great as it was in the 
 deprecated year of 1804-. 
 
 The case of the banking companies in Scot- 
 land seems at first view to be the most favour- 
 able to the arguments of the Committee ; their 
 fault was certainly in part that of over-issues : 
 it was an ill-advised attempt at extensive circula- 
 tion in an early stage of country banking, when its 
 
 principles 
 
principles were not understood; the evil com- 
 plained of, however, was corrected by with- 
 drawing from the notes of those banking com- 
 panies the optional clause, which made them 
 uncertain and inconvenient, and by assimilating 
 them to the notes which now circulate in the 
 same district at their full value. 
 
 In Part IV. the Committee is led to an ex- 
 amination of the progressive increase and present 
 amount of the paper circulation of the country, 
 whether of the Bank of England, or of provincial 
 banks. That of the Bank of England I have 
 already considered in the early part of these Ob- 
 servations : it only remains to examine the esti- 
 mates which are adopted of the last, and to re- 
 mark on an apparent mistake in principle in de- 
 tailing the extraordinary difficulties of 1793, in 
 page 27. 
 
 The year 1793 was one of singular distress 
 throughout the country ; there was a failure of 
 confidence and of private credit : in both cases, 
 men distrusting the solidity of houses engaged 
 in trade wished to withdraw their funds from a 
 real or supposed risk. In this moment of danger 
 the Committee imply that the Bank ought to 
 have extended its discounts, and thereby have 
 relieved the distress it witnessed ; but surely it 
 was not the duty of the Bank to take the peril 
 
 E on 
 
( 66 ) 
 
 on itself v and to assist every embarrassed establish* 
 merit at the risk of its own safety. What was the 
 real evil ? It was not a want of the currency of 
 the country then existing ; it was not a decrease 
 of the medium, used to make exchanges (the sole 
 legitimate purpose of money, and of the Bank's 
 circulation), that caused the distress ; the cur- 
 rency of that year of difficulty was probably as 
 great as it was in that before, or in that which 
 succeeded ; and had the Bank attempted to in- 
 crease it to any considerable degree, the super- 
 flux returning on them would have created that 
 drain on them which they saw so fatal to others. 
 But it was not notes, it was mutual confidence 
 which was wanting, and the evil was cured by 
 a restoration of that confidence. The Govern- 
 ment appointed Commissioners to inquire into 
 the solvency of such houses as applied for relief: 
 to such as established their claims it lent the 
 pledge of its own security by issuing Exchequer- 
 bills to them; and thus Government, without add- 
 ing to the circulation, did what the Bank would 
 in vain have endeavoured to do at the expense of 
 its established rules, and at the hazard of its 
 reputation for prudent management. 
 
 In pages 28 and 29 the Committee bring a 
 heavy charge of excess against country banks. ID 
 the latter they give a statement of the number of 
 
 notes 
 
( 67 ) 
 
 hotes of these establishments, above two guineas, 
 stamped in the year 1808, compared with those 
 stamped in 1809; and from it a conclusion is 
 drawn, " that the total amount in circulation 
 " of this class of notes alone was in 1809 in- 
 " creased three millions ; a sum which, added 
 " to an increase of a million and a half in the 
 " same year from the Bank of England, was an 
 " addition to the circulation of Great Britain 
 " alone little short of the amount which, in any 
 " one year sin^e the discovery of America, has 
 " been added to the circulating coin of the 
 " whole of Europe/' 
 
 But I submit whether the principle on which 
 this calculation is made be not evidently er- 
 roneous. The notes in question are limited in 
 their duration to three years ; if few ^Vere issued 
 in 1803, few, at the expiration of their term of 
 three years, would require to be restamped in 
 1808; while, if many were stamped in 1806, 
 many would require to be renewed in lfc>09 : so 
 that, even supposing there was no addition to 
 the circulation, a great increase would appear by 
 comparing the year 1808 with 1809: accord- 
 ingly we find, in the Appendix, No. 53, that the 
 corresponding years of 1806 and 1809 were both 
 unusually productive. The just test of compari- 
 son, then, is not the amount thus paid for stamps 
 
 E 2 in 
 
( 63 } 
 
 in any one year ; it is the amount paid in any three 
 years. On any given day, the amount of the 
 circulation of the country must be all the notes 
 stamped within the three preceding years of that 
 day : all the notes stamped after the commence- 
 ment of the period must be still in force and in 
 use ; all stamped before that era must be ex- 
 pired, and of course withdrawn : allowing, there- 
 fore, for a few which may remain out beyond 
 their appointed time, but which do not affect 
 the comparison, as the allowance applies alike 
 to every year, the comparison of which the Ap- 
 pendix affords us the materials stands thus : 
 
 Above 2 2s. Above 5 5s. 
 Duty paid for reissuable 
 
 notes in the three years 
 
 ending October, 1807 80,226 <38,4-S2 
 
 Ditto i 808 74,322 33,277 
 
 Ditto 1809 77,606 36,1S4 
 
 (Deducting increased duty 1809) 
 
 Shewing that, although there was an increase of 
 stamps corresponding to about a million in 1809, 
 yet that, even then, the circulation, so far frorri 
 being increased, was above half a million less 
 than it was in 1807. 
 
CONCLUSION 
 
 IN the present actual state of our foreign ex- 
 changes, when a given quantity of gold pays a 
 larger portion of a debt on the Continent than 
 any other article in this country of equal 
 value, a judicious merchant, in examining his 
 stores, would determine to export his stock of 
 the precious metals, and, after benefitting 
 by the present certain increased prices, he 
 would trust to a change of times for an oppor- 
 tunity of replacing it, when the tide of ex- 
 changes (as sooner or later it will do) sets in 
 the contrary way, and when gold and silver again 
 drop to the Mint price. Had our Government 
 or the public hoarded millions, it would have 
 been their true interest to have followed the 
 same course at this time : and the judicious part 
 of the latter now do so, to the extent of their 
 means, being ever careful to sell dear, and to buy 
 cheap. But the Committee, seemingly in op- 
 position to the maxims which govern us in 
 common life, reject the delay of a few months or 
 years, when peace, and its consequent, favour- 
 able exchanges, will have made the replenish- 
 ment 
 
( 70 ) 
 
 ment of our stores free from difficulty ; and they 
 select a most unfavourable moment for attempt- 
 ing what is nearly impossible ; but which, sup- 
 posing it possible, would at all events be inju- 
 dicious as to the time of execution. 
 
 They recommend that, in two years, the Bank 
 should resume its payments in gold, whether 
 peace be restored or not. If peace shall then pre- 
 vail, the order will have been superfluous, as 
 the law unaltered already directs cash-payments 
 in that event. Should peace not be restored, the 
 Bank,thenceforward,insteadofjoininginthecom- 
 mon tendency of the community to export in the 
 liquidation of our foreign debts, must counteract 
 that current, and must add to our unfavourable 
 balance by increasing our imports : they must 
 raise the difficult supplies, which they will be 
 obliged to provide for their cash-payments, by 
 the most ruinous means to themselves; for they 
 must purchase abroad, to bring it home, that very 
 commodity which the whole trading world are 
 seeking at home to send abroad. Still, if the 
 sacrifice of one, or two, or three millions, could 
 be supposed sufficient for the object in view, it 
 might be desirable to relieve fearful minds at that 
 expense ; but is it not apparent, that one supply, 
 or one hundred supplies, will not suffice in the 
 given state of exchanges ? Have we not seen at 
 
 least 
 
( 71 ) 
 
 least eight or ten millions of our specie melted 
 down and sent away in the last fifteen years ? and 
 can we expect, with the same inducements for 
 exportation, that the same consequence will not 
 follow again ? Certainly this will happen ; and 
 the Bank, to their sorrow, and to the surprise of 
 those who hoped better results, will, after years 
 of expense, and the waste of millions, find their 
 coffers as empty of the precious metals as they 
 are at present. 
 
 It is clear then we ought to leave to more fa- 
 vourable times, and to the alteration of our 
 foreign exchanges, (which will, of itself, correct 
 the evil,) that disparity in value of our bullion 
 and our currency which the proposed regulations 
 in the Bullion Report can never correct. Car- 
 ried to the extreme of possibility, those regu- 
 lations would produce the most inconvenient ef- 
 fects : it is within possibility, that the Bank, 
 constantly coining and constantly importing to 
 supply a waste greater than it could replace, 
 might be obliged to declare its inability to keep 
 out its notes at this expense, and might find itself 
 under the necessity (I put an extreme case) of 
 withdrawing its paper from circulation altogether. 
 What then would be the result ? Either the pub- 
 lic must be satisfied with a worse currency, and 
 accept for their convenience the notes of private 
 
 bankers 
 
( 72 ) 
 
 bankers to the extent of the void ; or they must 
 import twenty millions of the precious metals to 
 perform the offices which bank-notes now ex- 
 ecute so well. In the former case our exchanges 
 would remain exactly as they are now ; in the 
 latter almost inconceivable case, we should d 
 what ? not keep our currency at the standard, 
 not preserve an equal measure of value, but we 
 should, at the expense of a million a year in in- 
 terest for the use of this expensive instrument, 
 and of two or three millions in unfavourable ex- 
 changes to acqnire it, bring up our currency to 
 the war-price of bullion, which price, obtained by 
 such sacrifices, it would again lose the hour 
 after peace and free intercourse were restored. 
 To supply our wants at such a time would 
 seem to resemble the improvidence of an indi- 
 vidual who should lay in a stock of ice in sum- 
 mer, or of fruit in December. 
 
 But. admitting this expensive consequence of 
 ordering the resumption of cash-payments to be 
 highly inconvenient, I am asked, bad as the al- 
 ternative is, is it not better than a breach of 
 faith on the face of every note we see in cir- 
 culation ? The contract contained in every pro- 
 missory note is, that the holder should receive, 
 when he pleases, the sum therein specified, in 
 one or other of the precious meials, which our 
 
 laws 
 
( 7S ) 
 
 laws make exclusively a legal tender: what- 
 ever it might do, therefore, as to future con- 
 tracts, was it not a departure from justice when 
 the law of 1797- absolved the issuers of notes 
 from a positive engagement contained in all 
 these obligations then existing ? But let us here 
 not blame the statute of 1797 for more than it 
 has done : it has indeed prohibited the Bank of 
 England from payment of its notes in coin ; but, 
 with the exception of a trifling form in holding to 
 bail, it has left the law exactly as it stood before, 
 with regard to the rest of the community : every 
 individual stands precisely as he did before 1797, 
 and is as liable to a settlement of his debt in the 
 coin which the law alone acknowledges as he ever 
 was. If he is not called upon for gold, it is from 
 no legal bar to that demand, but from the acqui- 
 escence of the public in a difficulty imputable to 
 causes out of his control ; and if, in the thirteen 
 years during which the precious metals have been 
 so scarce, we have seen no exercise of this power 
 over the person and property of the iss u ers of notes, 
 it forms a strong additional evidence that the pub- 
 lic do not feel either inconvenience or any de- 
 creae of confidence. 
 
 But if the law (it will still be said) is left un- 
 altered between man and man, it is not so left 
 with reference to the Bank of England. With re- 
 gard' 
 
( 7* ) 
 
 gard to that body, the law is suspended ; and 
 the holder of one of its notes cannot, as against 
 his neighbour, proceed to judgment, and seize 
 its goods. But it must be always remembered 
 that this is not done from partiality to the Bank ; 
 the consequences of the new law may have 
 incidentally promoted the advantage of that body, 
 but it is on public grounds that the Restriction 
 Act is justified. When it foresees public incon- 
 veniences, does not the Legislature constantly 
 interfere with private rights ? When grain is too 
 profusely exported, does it not impose a restric- 
 tion on the owners against further exports ? When 
 an individual would circulate his own notes 
 for sums under twenty shillings, does not the 
 law interpose on the ground of public inconve- 
 nience ? Surely then, when the extraordinary 
 circumstances of the times presented such tempta- 
 tions to break one of our acknowledged laws, and 
 when the coin of the country was daily melted 
 down and exported by men who could neither be 
 controlled nor detected, it was timetoputan end 
 to the source of their traffic, and, by preventing the 
 Bank from being made the channel of supply for 
 such purposes, not only to preserve a part of our 
 coin from annihilation, but, in relieving the Bank 
 from such demands, to relieve the community 
 
 from 
 
( 75 ) 
 
 from the intolerable expense of purchasing 
 gold only to coin, and of coining gold only to be 
 melted down. 
 
 In the Act, as it now stands, it may be said 
 the innovation on the former law has been carried 
 to an unnecessary extent. It is true that, by the 
 liability which is imposed on the public Exche- 
 quer to receive Bank of England notes, the State 
 has pledged itself for their validity, and there can 
 never be any practical difficulty in the disposing of 
 any amount at the value they purport to bear : but 
 still it may be said, that it would be more con- 
 formable to our usual habits if the law were re- 
 stored to its former state, and if we could again 
 demand payment of our debt in this as we do in 
 all other cases, by a direct appeal to our debtor, 
 the Bank itself; by the Restriction Act we 
 can still demand of it to exchange a note of a 
 hundred or a thousand pounds for any others of 
 a like amount ; but here our power ceases ; 
 and we not only cannot by any legal pro- 
 ceeding seize its stock of the precious metals, 
 which may perhaps be considered as under the 
 guardianship of the State ; but we are prevented 
 from proceeding against its effects in bills dis- 
 counted, or against the mortgage it holds on the 
 whole property of the country, in the shape of 
 advances to Government. But it must ever be 
 
 borne 
 
( 76 ) 
 
 borne in mind that the Restriction Bill is not the 
 act of the Bank, imposed to protect it against the 
 just rights of its creditors; it was an act of the 
 Legislature, adopted on public grounds, and in 
 fulfilment of one of the duties of Govemutent 
 to prevent or lessen a public evil in the ex- 
 portation of our coin ; and it would be obviously 
 unjust to expose the whole property of the Bank 
 of England to confiscation because it does not do 
 what it declares itself willing to do, at all hazards, 
 when permitted, and which it will again do when- 
 ever the law declares it is no longer bound by 
 the fetters which public convenience now im- 
 pose upon it. 
 
 I trust it will not be thought that those who 
 thus argue against the removal of the Bank re- 
 strictions during war, and of course during the 
 probable continuance of unfavourable exchanges, 
 are therefore indifferent to the advantages of a 
 safe, a convenient, and an unvarying currency, 
 or to the benefit of a certain mixture of the pre- 
 cious metals in its composition. The efficient 
 state of this useful instrument, to which we 
 daily and hourly have recourse for assistance, 
 deserves our peculiar care; but we ought to 
 watch it without any of those prejudices or 
 alarms which we daily see in men otherwise in- 
 telligent, who impute our debts, our taxes, our 
 
 commercial 
 
( 77 ) 
 
 commercial distresses, to some irregular action 
 of this (to them) unintelligible machine. 
 
 The sole and exclusive use of money, in the 
 sense of currency, is to constitute a convenient 
 and certain standard of value in the exchanges 
 of society: other advantages being alike, what- 
 ever instrument performs this office at the least 
 expense must be the best. Between the ex- 
 pense of gold and that of paper there is no com- 
 parison ; and accordingly, during the last cen- 
 tury, in which paper began to be a candidate for 
 public favour in opposition to gold, it has gra- 
 dually gained upon its rival. In a former page I 
 have noticed the advantages it possesses in being 
 more portable, more easily reckoned ; in addi- 
 tion to these, I think I may now state, that, 
 joined with a certain mixture of gold and silver? 
 it is more unvarying in its value ; it is not sub- 
 ject to the influences of our foreign commerce or 
 our foreign policy ; and it increases or decreases in 
 exact correspondence as the society expands or 
 contracts. The security which gold affords to 
 its possessor, in a time of general alarm, is an ad- 
 vantage of a very questionable nature; it gives a 
 few persons a supposed safety, which it would 
 be better that they should only feel in join- 
 ing to ward off the common danger. With all 
 these considerations, however, to reconcile me to 
 
 the 
 
( 78 ) 
 
 the existing state of our circulation, I still admit 
 it to be one of necessity and constraint : nothing 
 short of urgent reasons of State warranted the first 
 Suspension Act ; and nothing but a continuance 
 of the same causes can justify the present. There 
 are real advantages attending the partial use of 
 gold, arising from its intrinsic value ; there are 
 other benefits not less desirable, resulting from 
 the confidence and security which in many cases 
 it inspires ; and, in a well-regulated currency, the 
 public ought to be unfettered in their choice of 
 an instrument which they pay for alike whether 
 it be composed of gold or of paper. That we have 
 not now thischoiceis the result of political circum- 
 stances entirely out ofour control. Happily, when 
 once removed, there is every reason to believe that 
 they can never recur; it is not to be antici- 
 pated that the Power which now holds the Con- 
 tinent in bondage, and shuts its ports against our 
 commerce, will always be able to exercise the 
 same injurious sway. Whenever that ceases, 
 and with it ceases the necessity ofour late foreign 
 expenditure, we shall again see the precious me- 
 tals at their Mint price ; and our currency will 
 then, without any expense, be restored to such 
 proportions of coin and paper as the community, 
 guided only by views of convenience, will require. 
 In the mean while it must be a source of great 
 
 satisfaction 
 
( 79 )' 
 
 satisfaction to those who concur in the opinions 
 I have submitted a satisfaction consistent with 
 the greatest respect 'for the Committee to feel 
 that the evils arising from a depreciated cur- 
 rency do not exist ; that our foreign exchanges 
 have not suffered from that cause ; and that 
 there is no real necessity for adopting the sug- 
 gestions of a Report, which, if followed up by an 
 act of the Legislature, there is much reason to fear 
 would disappoint the expectations of those who 
 framed it. 
 
 THE END. 
 
 Printed by W. CLOWES and Co. 
 Northumberland-court, Strand, London. 
 
OBSERVATIONS 
 
 ON THfi 
 
 REPORT 
 
 OF THE 
 
 BULLION COMMITTEE. 
 
 BY 
 
 THE RIGHT HONOURABLE 
 
 SIR JOHN SINCLAIR, BART. 
 
 M. P. 
 
 LONDON: 
 
 PRINTED BY W. BULMER AND CO. CLEVELAND-ROW,, 
 
 ST. JAMES'S; 
 
 AND SOLD BY T. CADELL AND W. DAVIES, STRAND; 
 
 J. STOCKDALE, PICCADILLY; AN1> 
 
 J. M. RICHARDSON, CORNHILL. 
 
 1810. 
 
 \ 
 
 [Pries Two Shillings and Six-pence.'] 
 
ADVERTISEMENT. 
 
 r OR several years past, my attention has 
 been almost exclusively directed, to objects 
 connected with the agricultural interests, and 
 improvement of the country. Financial in- 
 quiries, though formerly a favourite pursuit, 
 had been for some time laid aside, and would 
 not probably have been resumed, at least 
 for the present, were it not that some 
 rumours had gone abroad, that a Select 
 Committee, appointed " to enquire into the 
 " cause of the high price of bullion, and to 
 "take into consideration the state of the 
 " circulating medium, and of the exchanges 
 " between Great Britain and foreign parts/' 
 had resolved to recommend to Parliament, 
 restrictions on our paper circulation; an 
 idea which seemed to me likely to produce 
 the most fatal consequences to the most 
 important interests of these kingdoms. I 
 
IV ADVERTISEMENT. 
 
 was thence induced to feel the utmost 
 anxiety for the perusal of a Report, which, 
 at the conclusion of the session, they had 
 presented to the House. Upon examining 
 that Report-, I found it liable to various objec- 
 tions, to which it seemed to me essential, that 
 the attention of the public should be called 
 with as little delay as possible. That became 
 the more necessary as, owing to the state to 
 which mercantile credit had unfortunately 
 fallen, the adoption of such measures as the 
 Bullion Committee had proposed, would have 
 most seriously aggravated the evil. 
 
 Convinced indeed, that the prosperity of 
 the country, in regard both to its Agricul- 
 tural and "Commercial interests, nay, that 
 the very safety and existence of the British 
 Empire, depend on the preservation of our 
 present system of circulation, I could not 
 hesitate a moment, however unwilling to 
 engage in political controversy, to enter my 
 public protest against the doctrines promul- 
 gated by the Bullion Committee. With a 
 zeal for inforcing certain speculative prin- 
 
ADVERTISEMENT. 
 
 ciples, they seem to me to have incautiously 
 recommended measures, which, for the rea- 
 sons to be afterwards explained, cannot be 
 too strongly reprobated. We have already 
 difficulties enough to struggle with, pro- 
 ceeding from other causes ; it would not be 
 prudent, therefore, to add to the number, 
 by cramping our circulation, and introducing 
 all that train of internal misery which would 
 inevitably follow. I trust that the wisdom of 
 the legislature will shield us from the ruin 
 of which such measures would be productive. 
 When the subject is discussed in Parliament, 
 with all that information and ability, by which 
 the British Senate is distinguished, I am not 
 without hopes, that the Committee themselves 
 will see grounds to alter the opinions they 
 have hitherto entertained regarding it. In 
 the interim, the following Observations on 
 their Report, are respectfully submitted to the 
 consideration, both of the Committee, and of 
 the Public. 
 
 Terrace) Palace-yard, 
 Westminster, IQth September^ 1810. 
 
V* ADVERTISEMENT. 
 
 N. B. It is requested, that the reader will 
 nqt view this momentous subject, as a mere 
 mercantile question, but as one of general im- 
 portance, which ought to be considered on a 
 great scale. What though facility in obtaining 
 money, may have occasioned some unsuc- 
 cessful commercial speculations, (and their 
 want of success may perhaps be principally 
 ascribed to other causes), yet is such a cir- 
 cumstance, however much to be regretted, 
 to be put in competition with all the political 
 advantages of an abundant circulation ? Are 
 not new roads, new canals, new harbours, new 
 enclosures, and new improvements of every 
 description, going on successfully, in the midst 
 of this tremendous war, with a spirit hither- 
 to unpararelled ? Is not our revenue pro- 
 ductive beyond the expectations of the most 
 sanguine ? And are not our public loans pro- 
 curable on the most advantageous terms to 
 the nation? What cause then have we to 
 lament over public misery ? That abundance 
 
ADVERTISEMENT. Vll 
 
 of circulation, which is the great source of 
 our opulence and strength, may be attended 
 with some disadvantages ; but enforcing any 
 material diminution, of that mine of national 
 prosperity, would be a species of political sui- 
 cide, altogether unpardonable. 
 
OBSERVATIONS 
 
 THE REPORT OF THE BULLION 
 COMMITTEE. 
 
 ER since the commencement of the 
 Revolution in France, it has been the darl- 
 ing object of those who have successively 
 governed that country, to injure the public 
 credit, to diminish the financial resources, 
 and to undermine the commercial prosperity 
 of Great Britain. The trade and wealth 
 of these kingdoms, and the confidence so 
 justly reposed in their permanence and soli- 
 dity, were galling contrasts to the wretched 
 state, to which, in these, as well as in 
 other material respects, France had been 
 reduced, by the councils of the rash, the 
 ignorant, and the designing. The rulers of 
 France well knew, that our naval and mili- 
 tary power, and the influence we possessed 
 in the councils of other nations, depended on 
 
 B 
 
CO 
 
 our credit and opulence ; and if these could 
 be diminished or destroyed, the most efficient 
 obstacle would then be removed, to the ac- 
 quisition of that universal dominion, to which 
 France, under all its successive changes, 
 has uniformly aspired. 
 
 The steps taken by France in carrying 
 on its commercial warfare against this coun- 
 try, have been distinguished by unbounded 
 violence. Wherever its armies penetrated, the 
 private property of British subjects was most 
 anxiously searched for, and confiscated as 
 lawful plunder. In the harbours of nations, 
 nominally independent, French consuls and 
 custom-house officers were stationed, to 
 hinder the admission of British goods, or to 
 seize them wherever they might be landed. 
 Countries were subdued, seemingly for the 
 sole purpose of preventing the possibility 
 of their holding any trading % intercourse 
 with England ; and for the first time in the 
 history of mankind, armies were employed 
 along the coasts of trembling nations, not 
 to protect them from the ravages of con- 
 
C3 3 
 
 tagidus disease, as has sometimes beeri at- 
 tempted, but to prevent their obtaining 
 various articles, the acquisition of which, 
 they deemed so essential for their comfort, 
 that they were willing, at any price, to pur- 
 chase them. 
 
 There was reason to apprehend, that 
 measures of so unusual a nature, conducted 
 with much energy and perseverance, and in- 
 forced over a great extent of country, would 
 necessarily be productive of injurious conse- 
 quences to the commercial interests of Great 
 Britain. It was hardly possible to expect, that 
 under such penal restrictions, our trade would 
 be carried on in a regular manner, or through 
 the accustomed channels. The very remit- 
 ting of thedebts due to British merchants, was 
 attended with much difficulty and danger. 
 Great mercantile houses, by whose means 
 the commerce of exchange had formerly 
 been regulated, and conducted on the 
 fairest and most equitable principles, to the 
 general advantage of trading nations, had 
 been compelled to abandon that line of 
 business ; and the exchange, owing to the 
 Ba 
 
C43 
 
 want of such useful middle men, had no 
 guide to regulate it. In consequence of 
 these, and of other causes to be afterwards 
 explained, the rate of exchange had become, 
 in a considerable degree unfavourable to this 
 country ; the price of bullion rose ; the value 
 of our paper currency, it was alledged, was 
 proportionally depreciated; and these cir- 
 cumstances, which, without legislative in- 
 terference, would have gradually rectified 
 themselves, were represented, as grounds of 
 public danger, and of most serious alarm. 
 The evil, it was indeed contended, had at last 
 become so formidable, that a parliamentary 
 inquiry was indispensable; and great public 
 advantages were predicted from the propo- 
 sed investigation. 
 
 Inquiries regarding points of so delicate 
 a nature as the circulation of a country, (on 
 which its prosperity, and indeed the comfort 
 and happiness of every individual in it so 
 much depend), cannot be too cautiously 
 entered into, nor the subject too maturely 
 considered, before any step is taken, or even 
 remedies are suggested. Being a point of 
 
C5D 
 
 such general and common interest, it was 
 natural for any government to suppose, that 
 it would be impartially investigated, whoever 
 were appointed to examine it; and above all, 
 that the chimeras of political speculation, 
 would never be set up against the results of 
 practical experience. The minister therefore 
 consented to the motion for the appointment 
 of a Committee, took hardly any concern 
 in the nomination of its members, and no 
 part in its deliberations, until unfortunately 
 it was too late. The members of the Com- 
 mittee had made up their minds regarding the 
 points under discussion; and when the prin- 
 ciples on which the Report was to be drawn 
 up, came to be settled, the First Lord Com- 
 missioner of His Majesty's Treasury, found 
 himself in a small minority. 
 
 The members of the Committee thus 
 constituted, were certainly persons of distin- 
 guished abilities, and competent to the task 
 of conducting the proposed .investigation, 
 could they have totally divested themselves 
 of various prejudices, by which thejudgment 
 of the best Sntentioned may occasionally be 
 
warped, and had they given themselves suf- 
 ficient time to carry through so extensive 
 an inquiry. 
 
 To their labours we are indebted for a 
 great mass of useful information, and the 
 Report is drawn up with as much ingenuity 
 as the nature of the subject would admit 
 of. But to the general form and substance 
 of that Report there are, among many other, 
 the following most serious objections. 
 
 1. Though authorised merely to report 
 the result of their inquiries, and their obser- 
 vations thereupon, they have exceeded the 
 bounds of their commission, by stating their 
 opinions, and suggesting remedies; points 
 regarding which, the House had not autho- 
 rized them to inquire.* 
 
 2. They have also reported the evidence 
 of an anonymous witness, contrary to the 
 usage of Parliament, unless special reasons 
 can be, and actually are assigned, for the 
 concealment ; and they seem to have laid 
 peculiar weight on the doctrines of this 
 
 * See Report, p. 2. the second paragraph, Sect. No.I.j 
 
nameless individual. Yet this unknown in- 
 dividual may be a foreigner, or a person 
 usually resident abroad, who may not be so 
 anxious, as a British merchant would neces- 
 sarily be, to deliver opinions favourable to the 
 prosperity of this country. 
 
 3. In the third place they have reported, 
 as will afterwards be fully established, con- 
 trary to the weight and mass of evidence 
 brought before them ; and in regard to one 
 particular point, as they themselves admit, 
 contrary to the testimony of most of the wit- 
 nesses examined by them.* One fact, con- 
 nected with misstated or neglected evidence, 
 is particularly striking. On the s^th of 
 February Mr. Merle, who is practically 
 conversant with such inquiries, was ex- 
 amined, regarding the difference between 
 the mint price, and the actual value of silver. 
 He states, that a dollar is worth four shil- 
 
 also the first paragraph of Sect. III. p. 15; also p. 30, 
 and p. 31, where the following expression is made use 
 of: " The Committee report it to the House as their 
 tpinion" 
 
 t Report, p. 2. line 1 1 from bottom. 
 
lings and four-pence at its standard price ; 
 but at the time when he was examined, that 
 it would fetch in reality four shillings and 
 nine-pence, consequently the difference was 
 rather more than five-pence per ounce, or 
 about gi per cent, above coinage price * No 
 notice is taken of so important a fact in the 
 course of the Report. It was more conso- 
 nant to the prejudices of those by whom 
 that Report was framed, to rely on Wetten- 
 hall's tables, where the Committee found 
 new dollars quoted at five shillings and eight- 
 pence per ounce ; and the difference between 
 the mint and the current price, is then imme- 
 diately mounted up toi 5 instead of i$l. 6s, d. 
 per cent.-f With the same carelessness in 
 regard to accurate calculation, in page i of 
 the Report, Spanish gold is stated to be 
 
 * See Appendix, p. 54. A dollar weighs lydwts. 8grs. 
 Since the Report was printed, a dollar has become worth 
 *j. nd. or about 2 per cent, higher, and foreign bar 
 gold has fallen from 4| to 5 per cent. A further proof 
 that the exchange does not govern the price of bullion. 
 
 t 5-r. &/. per ounce, would only be 137. 6s. 4*/.,which 
 is nearly 2 per cent, less than the Committee have stated. 
 
C93 
 
 from 4,i to 4^ grains better, whereas it 
 should be worse than standard. 
 
 It is much to be lamented, that the draw- 
 ing up of a Report, of such vital consequence 
 to the most essential interests of the country, 
 should have been so hastily executed, before 
 all the members of the Committee could pos- 
 sibly have had leisure thoroughly to consider 
 such momentous questions, in all their bear- 
 ings, or minutely to examine all the evidence 
 that had been adduced on the occasion. It is 
 also unfortunate, that such a Report should 
 have been presented at the close of a session, 
 and printed and dispersed during a recess, 
 by means of which, Parliament is precluded 
 from taking immediate steps to counter- 
 act any ruinous doctrines that might be 
 therein circulated, under the sanction of its 
 name. It is the more necessary, therefore, 
 till the House is re-assembled, that the 
 Report, should, in the interim, be examined 
 by such private individuals, as may have 
 directed their attention to isiquiries of that 
 nature, more especially by those, who, like 
 
t io 3 
 
 myself, are deeply impressed with a convio 
 tion, (the grounds of which shall afterwards 
 be explained.); 
 
 " That the suggestions of the Bullion 
 " Committee, if ever carried into effect, 
 " would do more mischief to the British 
 " Empire, than the fleets and armies of Na- 
 " poleon will ev^r be able to accomplish/'. 
 
 Before we proceed, however, to examine 
 this Report, it may be proper to state the 
 situation of the country, in regard to its 
 commerce and finance, as admitted by the 
 Committee itself, and to consider whether 
 any pregnant proofs cannot be adduced of its 
 prosperity, at the period when the Report 
 was drawn up, and which nothing but doc- 
 trines, in the highest degree impolitic 'and 
 mischievous, circulated under the sanction 
 of a Parliamentary Committee, could have 
 clouded even for a moment. 
 
 In the Report, (page 28), the country is 
 said to possess " a high state of mercantile, 
 <f and public credit!' Permit me then to ask, is 
 it right that the state of a country thus si 
 
ted, should be at all tampered with ? Ought 
 not such a statement, to have suggested some 
 qaution and prudence in pointing out reme- 
 dies, where it would appear that none were 
 necessary? " I was well, would be better, 
 -took physic, and died," is a saying appli- 
 cable to nations, as well as to individuals. 
 It furnishes a useful hint, of which politic 
 cians, and statesmen in particular, ought 
 never to lose sight, nor blot out from their 
 remembrance. 
 
 Let us now proceed to give some proofs 
 of that high state of prosperity, so briefly re- 
 cognised in the Report, which it were to be 
 wished the Committee, (instead of uniformly 
 dwelling on the dark side of the question), 
 Jiad more minutely, and more complacently 
 considered. For that purpose it is proposed 
 to compare the commercial and the financial 
 circumstances of the country, for one year 
 preceding the suspension of payments in 
 cash at the Bank, and for another year pre- 
 ceeding the appointment of the Bullion 
 Committee. 
 
Comparison of the years 1809 and 1796, in 
 regard to Commerce, Public Credit, and 
 Revenue. 
 
 Exports, An, 1809 
 
 Ditto, An. 1796 3>5 I ^>9 I 3 
 
 Difference, 19,782,850 
 
 Imports, An. 1809 36,255, 209! 
 
 Ditto, An. 1796 23,187,319 
 
 Difference, 13,067,890 
 
 Average price of 3 per cent, -i 68 I 9 
 
 consols. An. 1809 / 
 
 Ditto, An. 1796 - 58 18 7 
 
 Difference, .9 3 2* 
 
 Rate of Interest on Loan, An. 1809 - 442! 
 Ditto, - An. 1796 4 13 3 
 
 Difference, o 9 oj 
 
 * Estimating the East India and the China trade as 
 in 1808, the account not being yet made up. 
 
 t This is the average price of the 3 percent, consols, 
 as purchased by the Commissioners for reducing the na- 
 tional debt. 
 
 If the value of the interest paid to the public creditor is 
 depreciated,what an object it is, to have such an increased 
 price for the capital ? 
 
C 3 
 
 Public Revenue, An. 1809 
 Ditto, . An. 1796 
 
 Difference, 30,079,759 
 
 Compared to our situation in 1796, such 
 was the state of this country immediately 
 prior to the year 1810, when we are told, " that 
 " the opinions of persons of practical detail, 
 " are vague and unsatisfactory ;"-j* a new 
 theory, unsanctioned by recent experience, 
 is recommended to our adoption, and we are 
 seriously called upon to overturn a system, 
 on which our power and prosperity have 
 arisen to a height altogether unexampled. 
 
 We shall now proceed more minutely to 
 consider this inauspicious Report, adopting, 
 with some alteration in point of arrangement, 
 the four heads dwelt on by the Committee, 
 namely, i. the state of our exchanges: 
 2. the high price of Bullion ; 3. the conduct 
 
 * How could such a revenue, and the immense trade, 
 and more extended agriculture of this country be car- 
 ried on, if the circulation of Bank notes were reduced 
 to eleven millions, independent of Government paper, 
 and commercial discount, as recommended by Sir Francis 
 Baring ? 
 
 t Report, p. 9, at bottom. 
 
t Hi 
 
 of the Bank of England, in the regulation of 
 its paper currency; and, 4, the amount of our 
 paper circulation, and whether it ought to 
 be restricted. It will then be proper to exa- 
 mine the plans suggested by the Committee, 
 for the amelioration of our unfortunate condi- 
 tion at the period when their labours com- 
 menced, of which miserable state, the rea- 
 der, from the preceding accounts will be 
 enabled to form some idea; a state which > 
 it would appear, required none of those 
 remedies, which the Committee have so in- 
 cautiously, and so hastily recommended. 
 
 SECTION I. 
 
 THE RATE OF EXCHANGE. 
 
 THE Rate of Exchange having been fr 
 some time past unfavourable to this country, 
 and that circumstance having occasioned 
 the high price of Bullion, and the alledged 
 depreciation of our paper currency, it is pro- 
 per to commence our observations on the 
 Report with that branch of the subject. In 
 the discussion of this head it will be necessary 
 
to advert to the following particulars; iThe 
 causes of the rate of exchange being against 
 this country ; . whether the present state 
 of our currency has any connexion what- 
 ever with that circumstance; and, 3. what 
 are the most likely means of restoring the 
 exchange to its former favourable rate. 
 
 1. CAUSES OF THE UNFAVOURABLE RATE OF 
 THE EXCHANGE. 
 
 IT were much to be wished that the Com- 
 mittee, instead of making a parade of the 
 superiority of speculative politicians, over 
 persons of practical detail,* had favoured us 
 with a distinct statement of the various cir- 
 cumstances, which, in the opinion of the 
 intelligent individuals who appeared before 
 them, had occasioned that unfavourable rate, 
 and not contented themselves with a few 
 extracts from the evidence given by some 
 of the witnesses. Nothing but the hurry 
 with which the Report seems evidently to 
 have been drawn up, can justify the neg- 
 
 * See Report, p. 10, 
 
lecting so important a part of the duties of 
 the Committee. It is not incumbent upon 
 any other individual to supply the defect. At 
 the same time, it may be satisfactory to the 
 reader, to have the circumstances detailed, 
 which are supposed to have contributed to 
 an event, which the fertile imaginations of 
 the Committee have magnified into such 
 transcendant importance, that we are bound, 
 in consequence thereof, to overthrow a sys- 
 tem, under which this country has so emi- 
 nently prospered. 
 
 The causes of the unfavourable rate of 
 exchange are in a great measure purely 
 commercial ; though some of them are of a 
 mixed, and some of a political nature, and 
 some may be arranged under the general 
 head of miscellaneous. 
 
 The purely commercial are, i. a greater 
 amount of import than usual, principally 
 from the Baltic, from France, and from 
 Holland.* 2. The trade having been carried 
 
 * Mr. Lyne's evidence, p. 60. 
 
C 73 
 
 on in foreign ships, and at a very heavy 
 expence of freight, sometimes to the amount 
 of fifty per cent, on the original cost of 
 the goods.* 3. The manner in Which the 
 price of the goods imported from the Baltic 
 were drawn for ; the bills being negociated 
 immediately on the shipments taking place, 
 without consulting much the interest of the 
 proprietors in this country, who would natu- 
 rally have wished to defer the negotiation till 
 a demand for such bills had taken place.-f 
 4. The greater difficulty and hazard in 
 carrying on bill and bullion operations be- 
 tween this country and the Continent, and 
 also between some parts of the Continent and 
 others, which consequently require greater 
 profit, to cover those risks, and occasioned 
 thereby an augmented depression in the ex- 
 change. J 5. The want of middle men, who 
 formerly were accustomed to employ great 
 capitals in exchange operations, but who, 
 from the increased difficulties and dangers 
 
 . * Mr. Greffulhe's evidence, p, 66. 
 
 t Evidence of Mr. - 
 
 J Mr, Lyne, p. 60. 
 
 c 
 
to which such operations are now subject, 
 are at present rarely to be met with : such 
 middle men were accustomed to make 
 combined exchange operations, which tended 
 to anticipate probable ultimate results;* and 
 the rates of Exchange were thus kept more 
 steady, than could have been the case with- 
 out such aid. 6. The small amount of 
 exports compared to imports in our trade 
 with France and the Baltic.-f 7. The 
 long credit given to foreign merchants for 
 goods exported, the price of which, particu- 
 larly those sent to South America, has not 
 vet come back.J and, 8. The lower prices 
 at which foreigners obtained their supplies. 
 The mixed causes, or those partly commer- 
 cial, and partly political, are, the system of 
 commercial warfare carried on against this 
 country, by which the admission of British 
 goods into the Continent was checked ; com- 
 munication even by letters became difficult 
 and uncertain ; whilst no suit at law could be 
 
 * Mr. , p. 82. Mr. Abraham Goldsmid, p. 94. 
 
 t Mr. Greffulhe, p. 66. Mr. Whitmore, p. 90. 
 J Mr. Lyne, p. 60. Mr. Greffulhe, p. 68. 
 
['9] 
 
 instituted in the Courts of Justice there,against 
 any person who chose to resist the payment 
 of a returned bill, or to dispute the charges of 
 re-exchange.* 2. The decrease of foreign 
 export, and consequently an unfavourable 
 state of exchange, was also owing, not only 
 to the decrees in France, but to the orders of 
 council in England, and to the American em- 
 bargo; the last in particular, by which the 
 Americans were prevented from carrying 
 their own produce, and the produce of the 
 enemies colonies, to the Continent of Eu- 
 rope, which would have operated upon the 
 exchange in a great measure, as an export 
 from this country. -f 
 
 The causes purely political, are, the pay- 
 ment of foreign subsidies, the maintenance 
 of our troops abroad, and the bills drawn 
 on our Government for naval and other ex- 
 pences in foreign countries J 
 
 The rate of exchange must also be affected 
 
 * Mr. evidence, p. 78. 
 
 t Mr. Cunningham's evidence, p. 130. 
 
 J Mr. Greffulhe, p. 68. Mr. p. 78. 
 
 Cs 
 
by various circumstances of a miscellaneous 
 nature, as the interest on capital in England 
 possessed by foreigners, as well as on capital 
 abroad belonging to inhabitants of Great 
 Britain ; the contraband trade between Great 
 Britain and other countries, and the amount of 
 bullion exported or imported.* These political 
 and miscellaneous causes,notbeingincludedin 
 those official documents, by which the balance 
 of trade is commonly estimated, hence the 
 rate of exchange must depend, not on that 
 balance, but on the balance of payments. 
 
 3. WHETHER THE PRESENT STATE OF OUR 
 CURRENCY HAS ANY CONNEXION WHAT- 
 EVER WITH THE STATE OF THE EXCHANGE. 
 
 IN addition to these causes, some have con- 
 tended, and it is the great object of the Report 
 to establish that point, that the unfavourable 
 rate of the exchange, is owing to the state of 
 our currency, and that if we were once more 
 to revert \b our old system, and to remove 
 all restrictions on the payment of cash at the 
 
 * Report, p. u. 
 
C 3 
 
 Bank, a favourable state of exchange would 
 be the necessary consequence. 
 
 No doctrine can possibly be more adverse 
 to the evidence annexed to the Report, whe- 
 ther as containing matter of opinion, or 
 matter of fact. Let the reader consider what 
 follows : " I do not agree in opinion with 
 those who conceive that the depression in 
 our exchanges, and the consequent export of 
 our specie are occasioned by bur circulating 
 medium being confined to Bank notes ; inas- 
 much as bills on foreign countries are here 
 attainable, precisely at the same rates of ex* 
 change, whether they be be paid for in Bank 
 notes, or in guineas/' (Mr. Lyne's evidence, 
 Report, p. 61.) " I conceive the state of the 
 paper currency of this kingdom, and the 
 state of the exchanges upon foreign parts, 
 are subjects almost unconnected, and that 
 have but little influence on each other. In 
 proof I beg leave to adduce two fac^s, from 
 which it appears, that at two several periods, 
 the exchange, for a length of time r improved 
 in favour of this country, whilst the amount 
 of Bank notes was gradually increasing/' 
 
(Mr. Greffiilhe's evidence, p. 70.) " I do 
 not conceive that the diminution of the paper 
 of the Bank, would, either immediately or 
 remotely, tend, in any shape whatever, to an 
 improvement of the exchange." (Mr. Har- 
 man's evidence, p. 14,3.) " The man who 
 takes a bill at Hamburgh on London, pur- 
 chases it for purposes of his own, either to 
 purchase a commodity, c/ to pay a debt." 
 Mr. Goldsmid's evidence, p. 43.3 In ei- 
 ther case it is evident the established currency 
 of England will answer his purpose. Two ac- 
 counts were also produced, one by Mr. Whit- 
 more, intituled, " The amount of Bank notes 
 in circulation on Saturday night in each week 
 of the year 1 797, and the course of exchange 
 on Hamburgh on the following Tuesday; 
 and the other by Mr. Pearse, intituled, a 
 comparison of the amount of Bank notes, 
 and rates of the Hamburgh exchange at va- 
 rious periods. (See Appendix to the Minutes 
 of Evidence, Nos. 47 and 49), both proving 
 in the most satisfactory manner, as a matter 
 of fact, that there is no connexion whatever, 
 between the amount of paper currency i 
 
by the Bank of England, and the rate of 
 exchange.* 
 
 Sir Francis Baring indeed states,(and much 
 weight is certainly due to the sentiments of so 
 respectable a character), that the two great 
 circumstances which affect theexchange, in its 
 present unfavourable state,are, the restrictions 
 upon trade with the Continent, and the in- 
 creased circulation of this country in paper, as 
 productive of the scarcity of bullion ;-f but he 
 does not seem to have considered the various 
 other causes enumerated in the preceding sec- 
 tion. By another evidence, the whole deprecia- 
 tion of the exchange is ascribed originally to 
 
 * Nothing can be more decisive in support of the doc- 
 trine, that the amount of Bank Notes has no effect upon 
 the exchange, than the paper given in by Mr. Pearse, 
 No. 49, p. 199. From January 1803 to the end of the 
 year 1807, a period of not less than about 4 years, the 
 amount of Bank Notes fluctuated from i6| to 18 mil- 
 lions, and the exchange on Hamburgh varied from 
 32*. \od. to 351. 6*/. becoming more favourable as the 
 amount of Bank Notes increased. 
 
 t Sir Francis Baring, in his evidence, alludes to the 
 seven years war, and to the American ; but how different 
 the scales, either in regard to extent or duration, com- 
 pared to the present ? 
 
the measures of the enemy, and its not hav- 
 ing recovered itself, is attributed to the cir- 
 cumstance, of the paper of England not being 
 exchangeable for cash.* But this doctrine 
 is ably refuted by Mr. Lyne, who contends, 
 that though gold, being of a more portable 
 nature, would sooner find its way to the 
 Continent, and consequently would produce 
 the speediest effect, yet that merchandize of 
 lawful export, would produce a greater effect 
 in reducing the difference of exchange ; for 
 guineas, colonial produce, manufacture, or 
 any other article of commerce, are all change- 
 able or saleable on the Continent for the same 
 article, namely, the circulating medium there, 
 whatever that may be. The effect on the 
 Continent, therefore, would be the same, whe- 
 ther goods or gold were made use of. 
 Whereas, on this side, it would be infinitely 
 better, instead of sending gold, (which would 
 be confined to a few), to export goods, which 
 would produce a competition, and a conse- 
 
 * Minutes, p. 79, 
 
C*5 J 
 
 quent advance of exchange in favour of 
 England.* 
 
 g. WHAT ARE THE MOST LIKELY MEANS OF 
 RESTORING THE EXCHANGE TO [TS FORMER 
 FAVOURABLE STATE ? 
 
 THE great corrective of any mischief, arising 
 from an unfavourable state of exchange, in 
 the judgment of the Committee is, the repeal 
 of the law which suspends the cash payments 
 of the Bank of England. -f 
 
 I wish most sincerely that the Committee 
 had examined the subject more minutely, 
 before they had hazarded such an opinion. 
 A favourite evidence had declared, " that a 
 free circulation, and liberty to export the 
 coin of the country, in his opinion was the 
 only effectual remedy;" but he adds, " if 
 that is not deemed practicable, I conceive 
 that many palliatives may be applied /'J Yet 
 the nature of those palliatives, the Committee 
 never gave themselves any trouble to ascertain. 
 
 * See Mr. Lyne's valuable Communication. Report 
 of the Committee, Appendix p. 60 and 61. 
 t Report, p. 31. $ See Appendix to the Report, p, 87. 
 
Mr. Greffulhe, a most intelligent witness, 
 states, " that at this moment the Board of 
 Trade might promote an increase of the ex- 
 ports to France ;"* but though such an expor- 
 tation would have in some degree contributed 
 to render the exchange more favourable, not 
 the least inquiry is made into the grounds of 
 so important an assertion. In short, it looks 
 as if there were a fixed determination, neither 
 to recommend, nor to make any minute 
 inquiry, regarding any other remedy, but the 
 opening of the Bank. That is the more to 
 be lamented, as the Committee might easily 
 have ascertained, that there was no difficulty 
 in raising at home, or procuring from our 
 colonies in America, or our possessions in the 
 East Indies, a variety of articles, by means of 
 which our imports would have been mate- 
 rially diminished, and by that alone an end 
 put to that mighty bugbear, the unfavourable 
 state of the exchange, the importance of which 
 has been so greatly exaggerated. I have not 
 the least doubt that our export trade also, 
 might be greatly improved ; but if we could 
 only reduce our imports from hostile nations, 
 the business would be accomplished. The 
 
 * Appendix to the Report, p. 68. 
 
practicability of a very considerable dimi- 
 nution in that respect, I pledge myself, in the 
 course of the ensuing session, to prove in 
 Parliament. 
 
 SECTION II. 
 
 ON THE HIGH PRICE OF BULLION. 
 
 THE necessary consequence of an unfa- 
 vourable rate of exchange is, an increased 
 demand for coin or bullion, as being the rea- 
 diest remittance, where bills, on moderate 
 terms cannot be procured ; in consequence of 
 that demand the value of the precious metals 
 must rise, as was experienced in the reign of 
 King William, when guineas were as high as 
 thirty shillings each.* Nothing however can 
 be more absurd, than to make any rise in the 
 price of bullion, the ground of serious alarm, 
 more especially at a period like the present, 
 when the nature and principles of circulation, 
 are so much better understood than formerly 
 was the case. To explain the grounds of this 
 assertion, I shall submit to the reader's con- 
 sideration, some political axioms regarding 
 coin and bullion, which, however, unworthy 
 they might be deemed the attention of 
 
 * Report, p. 17. 
 
speculative politicians, yet I am glad to find 
 are sanctioned by the authority of persons 
 of practical detail. 
 
 GENERAL PRINCIPLES REGARDING COIN OR 
 BULLION. 
 
 THE wealth of a nation properly consists 
 in the goods or merchandize it possesses, 
 whether arising from the produce of the soil, 
 from internal industry,-*--or from foreign 
 commerce. 
 
 The precious metals, in which a part of 
 that wealth consists, may be described as a 
 species of merchandize, which, by common 
 consent, answers three important purposes. 
 
 1. That of enabling individuals to receive 
 the value of their labour, for an article uni- 
 versally exchangeable. 
 
 2. That of transferring property in goods, 
 from one individual to another, or from one 
 nation to another, without the trouble of 
 actual barter ; and , 
 
 3. That of enabling the government of a 
 country to obtain a revenue, and to defray 
 the public expences; for if the Exchequer 
 were under the necessity of taking goods in 
 kind, in what manner could the various arti- 
 
cles it required, be either collected, or secured 
 till wanted ; or how could a nation fit out a 
 fleet, or maintain an army, or defray the va- 
 rious other expences to which it is liable ? 
 
 It is however, in early ages of society alone, 
 before the credit of a government is esta- 
 blished, and property, (whence the credit of 
 the individual arises), is secured, that the pre- 
 cious metals exclusively answer these impor- 
 tant purposes. In ages of civilization and 
 refinement, a well regulated paper currency, 
 with a small proportion of these metals in a 
 state of coinage, to which united, the gene- 
 ral appellations of emulation or of money may 
 be given, is equally useful, indeed on many 
 accounts, to be afterwards explained,* even 
 more advantageous ; and the precious metals 
 ought, in commercial periods of society, to 
 be accounted merely as a species of merchan- 
 dise, the increase or diminution of which, 
 has no decisive influence on the wealth or 
 prosperity of a country, and which, if left to 
 itself, soon finds its just level. 
 
 See the Appendix, 
 
Cs 
 
 IT was with much satisfaction, I found the 
 idea, that coin or bullion ought to be consi- 
 dered merely as merchandize, sanctioned by 
 the authority of some of the most respect- 
 able witnessses, examined before the Bullion 
 Committee.* 
 
 But the rate of exchange is not the sole 
 cause of the high price of bullion at present. 
 It appears from the Appendix to the Report, 
 that the following circumstances have contri- 
 buted to that event, i . The French when they 
 were in Portugal, so drained that country of 
 gold, that none could since be procured from 
 that quarter.-f 2. There is a great demand 
 for bullion from jewellers, in consequence of 
 their trade increasing,^ and much gold is pur- 
 chased for various branches of manufacture^ 
 3. From the apprehension of a rupture be- 
 tween Great Britain and North America,a great 
 desire was necessarily created on the part of 
 our manufacturers, and dealers in cotton, to 
 import that article from the Brazils, and in 
 
 * See Mr. Hughan's evidence, p. 62 ; Mr. Greffulhe's, 
 p. 70 ; and Mr. Chambers's, p. 102. 
 t Mr. Lyne's evidence, p. 60. 
 J Mr. Merle 's evidence, p. 50. 
 Mr. Binn's evidence, p. 44. 
 
US* 3 
 
 order to procure it, gold and silver were 
 exported to that country, both because in the 
 Brazils there were no takers of bills on Eng- 
 land, and as the importer could make his 
 purchases more rapidly by sending cash.* 
 4, It is also stated, that there has been an 
 unusual demand for gold, for the use of the 
 French armies .-f 5. But above all, the state 
 of the times, the failure of confidence, and the 
 apprehension of future revolutions, have led to 
 the practice of hoarding, and consequently 
 the withdrawing of gold altogether from cir- 
 culation, and that to a considerable extent. 
 Whilst matters therefore continue as they 
 are, it is in vain to expect that gold can be- 
 come abundant, however much it might be 
 given out. When a person is resolved to 
 hoard, he does not consider the price he pays 
 for the article he is in search of. A few 
 shillings more or less, which would alarm a 
 Bullion Committee, would be considered of 
 little moment, if he could thereby obtain his 
 object, that of securing a hidden store for 
 times of difficulty and danger. 
 Who ever takes the trouble of considering 
 
 * Evidence of Mr. Lyne. This gold and silver, I 
 understand, is now returning fast. 
 t Mr. Goldsmith's evidence, p. 56. 
 J Mr. Greffulhe's evidence, p, 101. 
 
these observations, will probably be of opi- 
 nion, that bullion . is merely merchandize; 
 that we might as well institute an inquiry 
 into the price of diamonds, of cochineal, or 
 of sugar, as of gold ; and that compelling 
 the Bank of England to pay in cash, were it 
 a practicable measure, could be of no service 
 whatever in the present state of Europe* 
 exposed as it is to endless calamities, and 
 liable to every species of plunder and op- 
 pression. 
 
 SECTION III. 
 
 ON THE CONDUCT OF THE BANK OF ENGLAND 
 IN REGARD TO ITS CIRCULATION. 
 
 THE lofty manner in which the Directors 
 of the Bank of England are told, " that they 
 possess no distinct and certain rule to guide 
 their discretion in controlling the amount of 
 their circulation, and that their recent policy 
 involves great practical errors, which, it is of 
 the utmost public importance to correct/'* 
 comes with peculiar grace from a Com- 
 mittee, who have not stated, in precise terms, 
 the rules which the Directors have actually 
 laid down, and examined their efficiency. 
 
 * Report, p, 24. 
 
C333 
 
 The rules on which the conduct of the 
 Bank is regulated, in regard to the issuing of 
 its notes, may thus be shortly stated, i. To 
 advance to Government on the security of 
 Exchequer Bills, issued on the credit of 
 taxes, the produce of which is constantly 
 coming in. 2. To advance on Exchequer 
 Bills, issued under the authority of Parlia- 
 ment for various purposes, if other purcha- 
 sers do net offer, when it is necessary to 
 relieve the market for the accommodation of 
 the public.* 3. To advance on the loans of 
 the year, the repayment of which can be 
 depended on, as the fund is pledged for the 
 advance, and can be sold if necessary. 4. To ad- 
 vance on legitimate mercantile paper, payable 
 within two months, or at any shorter period, 
 and having three names on it. 5. Never to 
 advance at less interest than 5 per cent. ; and 
 6. To consider not only the solidity of the 
 paper, but also the amount of the accommodation 
 the individual applying for it already has. -f 
 
 It is owing to the Committee having kept 
 this last rule entirely out of their view, that 
 they triumphantly exclaim, " though the 
 
 * Sec Mr. Pearse's evidence, p. 118. 
 t See Mr. Whitmore's evidence, p. 89. 
 
 D 
 
t 343 
 
 Directors state the broad principle that there 
 can be no excess of their circulation if issued 
 according to the rules of discount, yet they 
 disclaim the idea of acting up to it in its 
 whole extent."* They cannot act up to it in 
 its whole extent, because they must restrict 
 their advances to indiv lual applicants, and 
 must not risk too much property on the 
 same secu;ty. Besides, tiie instant any 
 superfluous issue is made, it reverts upon the 
 Bank; for no individual, particularly any 
 person conversant in business, will ever think 
 of keeping in his possession any paper for 
 which he has no occasion, and for which he 
 must pay an interest of 5 per cent. Bankers, 
 therefore, contrive every possible means, to 
 diminish the amount of notes in their pos- 
 session, in which, if they had not been suc- 
 cessful, even the present amount of notes 
 would have been too much restricted for the 
 circulation and increasing demands of the 
 country. 
 
 But the best answer to any charge of over- 
 issuing on the part of the Bank, is this, that 
 if the large notes of the Bank were to be di- 
 minished, in the proportion of one half, it 
 
 * Report, p. 24. 
 
C353 
 
 would be impossible to conduct the affairs of 
 the metropolis;* and as it is, with all the 
 paper now in circulation, w There is a period 
 prior to the payment of the dividends, in which 
 large sums of momy are paid to the Bank 
 from tax gatherers, which, at such times occa- 
 sions great scarcity, and is an inconvenience to 
 trade!'*^ 
 
 If that is the case at present, to what a 
 state OF ACTUAL MISERY would not the mer- 
 cantile interest be reduced, if there were to 
 be any material reduction in the accommo- 
 dation they now receive, or if the amount of 
 our paper circulation were to be materially 
 diminished ? 
 
 SECTION IV. 
 
 ON THE AMOUNT OF OUR PAPER CIRCULATION, 
 AND WHETHER IT OUGHT TO BE DIMINISHED* 
 
 IN a paper printed by way of Appendix, 
 I have endeavoured briefly to explain, the 
 general nature of coin, or money, the advan- 
 tages of paper currency, and the necessity of 
 preserving the circulating medium, in propor- 
 
 * See Mr. Tritton's evidence, p. 142. 
 \ Mr, Richardson's evidence, p. 149. 
 
 Da 
 
[36] 
 
 tion to the demands for it, rather than suffer- 
 ing it to diminish. 
 
 It is there observed, that Money, (by which 
 is meant a well regulated paper currency, 
 with a certain proportion of coin) becomes, 
 in a civilized state of society, the medium of 
 barter both for labour and goods, and in a 
 manner the source or basis of Public Revenue. 
 It is necessary therefore to preserve a due 
 proportion between its amount, and i. The 
 quantity of labour that must be paid for ; 2. 
 The quantity of goods or merchandize, the 
 property of which must be transferred ; and 
 3. The total amount of the demands and ex- 
 pences of the Exchequer, whether arising 
 from taxes, public loans, or any extraordi- 
 nary species of contribution, 
 
 The quantity of the medium of circulation, 
 however, instead of being stationary, ought 
 to be increasing. 
 
 i . To promote a greater quantum of labour, 
 oiithe increase of which the wealth and pros- 
 perity of a country so much depend, and 
 which is always increasing where a circulat- 
 ing medium abounds, 
 
 s. To facilitate the transfer of a greater 
 quantity of goods, among a greater body of 
 
[37'] 
 
 people, as the commerce and population of a 
 prosperous country are always augmenting; 
 and, 
 
 3. To enable the people, should it be ne- 
 cessary, to furnish, without inconvenience, 
 greater supplies to the Exchequer. 
 
 These general principles are then applied : 
 1. To the case of an increased quantum of 
 labour or industry ; z. To an increased com- 
 merce in, or transfer of goods ; and 3. To an 
 increased revenue : and the deduction from 
 the whole is this, " that an increase of labour 
 "or industry, a more extended commerce, 
 " and an encreased revenue, require perpetual 
 " additions to the circulating medium of a 
 " country." 
 
 Being deeply impressed with the incon- 
 trovertible solidity of these doctrines,- 1 can- 
 not possibly concur in any measures for re- 
 ducing our circulating medium, and thereby 
 cramping all our exertions, and materially 
 endangering 9ur security. Whether any re- 
 gulations are necessary regarding Country 
 Bankers, for the protection of the public 
 against fraud, is an important subject, diffe- 
 rent from the question regarding the quan- 
 tum of circulation ; but in regard to the Bank 
 
of England, as it is proved that no pains are 
 taken to force Bank notes into circulation, or 
 to retain them in it, no material excess, in 
 the opinions of the most respectable practical 
 authorities, can therefore take place. No 
 circulation, unless forced, can go beyond 
 what the immediate wants of the public re- 
 quire, for if there is any redundancy, it imme- 
 diately reverts on the Bank that issues it* 
 The Committee do not concur in these opi- 
 nions* Unfortunately they seem extremely 
 unwilling to give much weight to the doc- 
 trines of persons, who have nothing but ex- 
 perience, and practical detail, to recommend 
 them to attention. 
 
 SECTION V. 
 
 ON THE MEASURES RECOMMENDED BY THE 
 COMMITTEE. 
 
 WE shall now proceed to consider the plan 
 recommended by the Committee, that of 
 repealing the law which suspends the cash 
 payments of the Bank of England, and remov- 
 ing any restriction on such payments, at the 
 period of two years from the present time, 
 (Report, p. 31,) previously niaking some ob- 
 
 * Mr. Whitmore's evidence, p. 79, and 97. 
 
C 39 3 
 
 servations on the grounds on which that 
 system is founded. 
 
 We are told in the (Report, p. 31,) that 
 any sucli general excess of currency as lowers 
 its relative value, is attended with disadvan- 
 tages to the country. If it were granted, that 
 to a certain extent, such was the case, the 
 question is, whether tb? advantages do not 
 preponderate ? If the new system we have 
 adopted, contributes to the public safety, ena- 
 bles us to carry on the most momentous war 
 in which we ever were engaged, increases our 
 agriculture, our commerce and revenue, places 
 us, as admitted by the Committee, (Report, 
 p. 28), in a high state of mercantile and public 
 credit, and makes us, as 1 trust will continue 
 to be the case, the admiration of the uni- 
 verse ; what matters it then, whether the cir- 
 culation of gold or of paper is the instrument 
 of our prosperity ? But above all, the ap- 
 prehensions entertained by the Committee, 
 that the situation of the country labourer 
 is thereby deteriorated, has no foundation 
 whatever. Their comfort depends, not on 
 having occasionally high wages, bat on their 
 having a regular and constant demand for 
 their labour. That can only be the case where 
 
[ 4 ] 
 
 a circulating medium abounds. Where that 
 circumstance takes place, no man need to 
 remain idle ; and where the demand is great, 
 wages will rise more rapidly, than where 
 persons are deterred from employing labour- 
 ers, by the difficulty they find in paying 
 them. Besides, in England, the country 
 labourer and his family are secured by law in 
 their subsistence ; and in Scotland, servants 
 in husbandry, are chiefly paid in kind, and 
 consequently their income increases, with the 
 price pf those commodities in which the 
 greater part of their wages is advanced. 
 
 As to the idea entertained by the Com- 
 mittee, that our paper currency is depre- 
 ciated, a number of the most intelligent 
 witnesses brought before it, have proved the 
 reverse.* It may sometimes be difficult to 
 
 * " I do not believe that there has been any difference 
 in paying in specie, or Bank paper." [Mr. Merle's evi- 
 dence, Report p. 52,] " The dearness of gold and silver 
 cannot be called a discount on Bank notes." [Mr. 
 GrefFulhe's evidence, p. 71.] "I never considered Bank 
 notes to be depreciated. " [Mr. Abraham Goldsmid's 
 evidence, p. 93.] Mr. Chambers is asked, " Is it your 
 opinion that the currency of England is depreciated." 
 Answer " Ctrtainly not." [Report, p. 102.] Mr. Co- 
 ninghamis asked, " Do you consider the paper currency 
 
obtain silver for a note, but it would be 
 equally so to get change for a guinea; and'' 
 the scarcity of silver money will never be 
 got rid of, until we put a proper seignorage 
 on the coinage of that species of metal. Not 
 knowing what effects might result from the 
 doctrines of so respectable a Committee, I 
 had provided myself, when lately coming 
 from Edinburgh to London, with some gold, 
 in addition to the notes of the Bank of 
 England. I found, however, the coin quite 
 useless, and in a journey of about four hun- 
 dred miles, not the least hesitation was ex- 
 pressed, to receive, and, when necessary, to 
 change into silver, the depredated currency of 
 the country. 
 
 But we are told, that a reduction of paper 
 circulation, would diminish the price of pro- 
 visions. Would it not, however, in a still 
 greater proportion, disable the great body of 
 the people from having the means of pur- 
 chasing them ? Would not lower prices 
 also, have a tendency to discourage the 
 growth of grain, and to damp the exertions 
 of the farmer ? The wonder is, not that 
 
 of this country as depreciated." Answer- Certainly 
 not." Report, p. 128. 
 
provisions are high, but that with such a war, 
 against such an enemy, with armies in every 
 quarter of the globe, and fleets commanding 
 every ocean in it, we should be able at 
 the same time, to carry on our agriculture, 
 manufactures, and commerce, in the manner, 
 and to the extent we are doing. Nothing 
 else gives us ability to go on, but the abundance 
 of our circulating medium, which operates like 
 blood in the human frame, nourishing every 
 part of the system, and enabling it to perform 
 its functions. 
 
 In regard to the plan of opening the Bank 
 for payment in cash in two years, there are 
 three points to be considered, i. Is it prac- 
 ticable? 2. Would it be of any use? and, 
 3. Would it not be, instead of an advantage, 
 a material detriment to the public? 
 
 1. IS IT PRACTICABLE TO OPEN THE BANK IN 
 TWO YEARS. 
 
 SINCE it was found necessary to prevent the 
 payment of cash at the Bank of England, 
 when the exchange was in our favour, and 
 when the Notes in circulation, including 
 Bank Post Bills, amounted to the sum of 
 
C433 
 
 only 8,64,o,2o/. (which was the case on the 
 27th Feb. 1797) ' how is it possible then to 
 remove the restriction, when the amount of 
 the Bank circulation, is now stated by the 
 Committee, (Report, p. 25. ),at si^g.gSo/., 
 making a difference ot 12,609,7301., besides 
 an addition of at least io,ooo,ooo/. by the 
 paper of Country Banks ? It would be neces- 
 sary, in order to carry on this great operation, 
 to export goods, to the amount of at least 
 2o,ooo,ooo/., without knowing where to find 
 markets that would take such a quantity, 
 and give us bullion in return; and if we 
 could import bullion to that amount, the 
 present unfavourable rate of exchange, would 
 be constantly draining it away, in addi- 
 tion to all the diminution that would arise 
 from hoarding. The idea of sending out 
 2o,ooo,ooo/. of the property of this country, 
 for the sole purpose of obtaining a medium 
 of circulation, when we can do without it, is 
 so absurd, and the impracticability of acquir- 
 ing, and still more of the retaining the gold 
 or silver we could obtain, after it came, is so 
 self-evident, that it is astonishing how such a 
 measure could possibly be recommended 
 by any respectable authority. The Com- 
 
mittee itself, (Report p. 32.), admit, that 117 
 the present state of our circulation, it would 
 be hazardous to compel the Bank to pay cash 
 in six months; and indeed they acknow- 
 ledge, that in so short a period it would be 
 found wholly impracticable. They there- 
 fore recommend that the space of two years 
 should elapse before the restriction is re- 
 moved. But what reason have we to expect, 
 that the measure would be more practicable 
 two years hence, than at present? The real 
 cause why the payments in cash at the Bank 
 are suspended, is the unprecedented state of 
 the Continent of Europe. Whilst it remains 
 subjected to the power of one individual, the 
 determined enemy of this country, it is hardly 
 to be expected, that the Bank of England 
 can be opened. The attempt would be in 
 vain, and were it tried, we should once more 
 be reduced to the necessity, with increased 
 disadvantages, of shutting up the Bank. 
 
C 45 
 
 2, WOULD IT BE OF ANY USE TO OPEN THE 
 BANK FOR PAYMENT IN CASH ? 
 
 BUT were the measure practicable, I do 
 not see any possible advantage that could be 
 derived from it. The value of gold, instead 
 of falling, must rise, in consequence of the 
 greater demand for it. The exchange could 
 only be affected by it, in so far as the bullion 
 that was exported could go, and not a step 
 farther. Besides, there is a great fallacy in 
 the argument, that opening the Bank would 
 improve the exchange, by the exportation 
 of bullion. By the existing laws, no gold 
 can be exported but in the shape of foreign 
 coinage, or of bullion, not melted into bars 
 from the Coin of this country. It would be 
 of little consequence, therefore, if that law 
 continued in force, whether the Bank issued 
 guineas, or not, provided those guineas 
 ' could not be exported. The possibility of 
 such a measure having any effect upon the 
 exchange, must therefore entirely depend on 
 the supposition, that guineas might be ex- 
 ported in payment of our foreign debts, 
 
which cannot be done, without either smug- 
 gling, or a total alteration of the law with 
 regard to that important branch of our 
 policy. 
 
 Indeed compelling the Bank to give gold 
 and silver in exchange for notes, would in- 
 duce the nation in general to believe, that 
 there must be some considerable advantage 
 in possessing coin instead of paper. Every 
 individual would thence be anxious to secure 
 as much specie as possible, and the system 
 of private accumulation, however unneces- 
 sary, would increase, and thus the credit of 
 our paper circulation would inevitably be 
 shaken. 
 
C473 
 
 3. WOULD IT NOT BE, INSTEAD OF AN AD- 
 VANTAGE, A MATERIAL DETRIMENT TO THE 
 PUBLIC, TO OPEN THE BANK? 
 
 WHEN Mr. Whitmore, Governor of the 
 Blank of England at the time, was asked, 
 " Whether opening the Bank would be 
 likely to produce any derangement of our 
 commerce; and whether, if the measure 
 were determined on by Parliament, some re- 
 strictions of the Bank issues ought not to take 
 place, with a view to prepare for the opening ?" 
 his answer was ec Provided it was impera- 
 tive on the Bank to open, I should think a 
 restriction of the Bank issues would be 
 necessary, not-withstanding the fatal conse- 
 quences that might arise from it to the com- 
 merce and revenue of the country"* 
 
 With this declaration from the greatest 
 practical authority staring them in the face, 
 the Committee do not scruple to recommend 
 a measure, " that would be attended with 
 " fatal consequences to the commerce and 
 " revenue of the country." 
 
 * Appendix to the Report, p. 126. 
 
There is nothing, indeed, that speculative 
 politicians, who entertain a peculiar prejudice 
 in favour of any particular doctrine, will not 
 approve of, if it has the effect of establishing 
 the system they wish to recommend. All 
 the immediate mischief is overlooked, from 
 the expectation of future advantages which 
 may never be realized. There cannot be a 
 stronger proof of this assertion, than the opi- 
 nion declared to this Committee by one of 
 the witnesses brought before it. He broadly 
 states "that however great the inconvenience 
 to individuals, he conceives that a very mate- 
 rial reduction of the circulating medium in 
 this country, (by which he does not mean to 
 make any distinction between coin and 
 paper), would have the immediate effect of 
 raising the exchange so far above par, as to 
 enable foreigners to send bullion to this 
 country fen* the liquidation of their debt, pro- 
 vided this principle were carried to such an 
 extremity/'* Is it not astonishing the cool- 
 ness with which this witness tals of indivi- 
 duals being put to an inconvenience by the 
 want of the circulating medium; in other 
 
 * Appendix, p. 85* 
 
[49] 
 
 words, of money to carry on their business ? 
 Is it nothing but inconvenience to a merchant, 
 to be unable to pay the demands upon him ; 
 to be obliged to call his creditors together; 
 to appear as a bankrupt in the Gazette ; and 
 to see his wife and family, and perhaps a 
 number of his dearest connexions, reduced 
 to beggary v and ruin ? Yet thousands of re- 
 spectable individuals, now carrying on a 
 flourishing commerce, might be reduced to 
 such inconveniencies, if the wild and impracti- 
 cable chimera, of compelling the Bank to 
 pay in cash, were attempted to be carried 
 into effect. 
 
 Nor would these inconveniencies be re- 
 stricted to commercial men: the landed 
 and farming interests would stiffei perhaps 
 in a still greater degree. They are at pre- 
 sent enabled to go on, not-withstanding 
 the increased expence of cultivation, and 
 th? pressure of heavy taxes, in conse- 
 quence of the additional prices which their 
 commodities fetch, and the facility with 
 which they obtain payment, owing to the 
 abundance of a circulating medium ; but if 
 the taxes remain as they are, and if, incon- 
 
 E 
 
C503 
 
 sequence of the diminution of the circulating 
 medium, their commodities should become 
 unsaleable, except at low prices, and with 
 payments either distant or uncertain, the 
 agricultural interest would be undone. To 
 this important subject, I earnestly request 
 their particular attention before it is too late. 
 Let them recollect, that they are fully as much 
 interested, as any other class of the commu- 
 nity, in keeping up an abundant, rather than 
 a diminished medium of circulation. 
 
 But the most alarming circumstance is, 
 the mischievous effect that it would 'hare on 
 the public revenue and credit of the country. 
 If our circulating medium were reduced one 
 half, (which must be the case if the Bank 
 were opened ), the revenue would fall in pro- 
 portion. It would then be necessary, either 
 to diminish the interests of the public funds, 
 to one half, or to dismiss one half of our fleets 
 and armies. That is the dilemma to which 
 Napoleon would wish to reduce us. Little 
 did he imagine, that so favourite an object, 
 would be promoted by British politicians, 
 who, in their rage for establishing speculative 
 doctrines consider the opinions of persons of 
 practical detail, (< as vague and unsatisfactory." 
 
SIR JOHN SINCLAIR'S 
 REMARKS 
 
 ON 
 
 MR. HUSKISSON'S PAMPHLET. 
 
 MMM 
 
 WITH 
 
 AN EXPLANATION 
 
 OF 
 
 THE REAL NATURE, 
 
 AND 
 
 ADVANTAGES, 
 
 OP 
 
 THE PRESENT SYSTEM 
 
 OP 
 CIRCULATION. 
 
 " Had matters been left without any change at all, no bad 
 11 consequences would have followed. These existed only in ths 
 tl heads of Theorists." (Sir James Steuart's Pol. Ecom Book IV, 
 cap. 31). 
 
REMARKS 
 
 ,.,v5 
 
 ON A 
 
 PAMPHLET INTITLED, 
 
 " The Question concerning the Depreciation of the 
 " Currency Stated and Examined." BY WILLIAM 
 HUSKISSON, ESQ. M. P. 
 
 TOGETHER WITH 
 
 SEVERAL POLITICAL MAXIMS 
 
 REGARDING 
 
 COIN AND PAPER CURRENCY, 
 
 INTENDED TO EXPLAIN THE REAL NATURE, AND 
 ADVANTAGES, OF THE PRESENT SYSTEM. 
 
 BY 
 
 THE RIGHT HONOURABLE 
 SIR JOHN SINCLAIR, BART. M. P. 
 
 AUTHOR OF THE HISTORY OF THE PUBLIC REVENUE OF 
 THE BRITISH EMPIRE. 
 
 LONDON: 
 
 PRINTED BY W. BULMER AND CO. CLEYELAND-ROW, 
 ST. JAMES'S; 
 
 AND SOLD BY T. CADELL AND W. DAVJES, STRAND; 
 
 J. STOCKDALE, PICCADILLY; AND 
 
 J. M. RICHARDSON, CORNHILL. 
 
 l&LO. 
 
 [Pn'ce Two Shillings and Sixpence..] 
 
ADDRESS TO THE READER. 
 
 facts have recently come to my know- 
 ledge regarding, i. A fall in the price of gold ; 
 and, 2. The rate of exchange with Ireland, 
 which, I trust, will put an end to any pro- 
 longed discussion respecting the propriety of 
 altering our present system of circulation : I 
 thought it right, therefore, to lose no time in lay- 
 ing them before the Public. It seemed to me 
 also necessary, to state sme observations, on 
 the proposed measure of compelling the Bank of 
 England to purchase bullion at any price, and 
 to add a statement of that fall in the value of 
 funded property, which has taken place, in con- 
 sequence of the alarm occasioned by the pro- 
 ceedings of the Bullion Committee. 
 
 i. Fall in the Price of Gold. 
 
 The foundation of the whole proceedings of 
 the Bullion Committee rested upon this fact, that 
 the market price of gold, when the Report was 
 ordered to be printed, (bth June, 1810), was 
 4. 105. per oz. or 15^ per cent, above the Mint 
 price. (Rep. p. i). This was attributed to an 
 excess in the paper circulation of the country : 
 
(Rep. p. 30). It was therefore contended, " that 
 " a rise in the market price of gold, was the 
 " effect of an excessive quantity of circulating 
 " medium in a country, which has adopted a 
 " currency, not exportable to other countries, 
 '! or not convertible at will into a coin which is 
 ^exportable." (Report, p. 8). 
 * All these speculations, however, are now for- 
 tunately overturned by one plain fact, of which 
 I have just been informed, from most unexcep- 
 tionable authority (Mr. Merle). He states, that 
 according to the last prices, gold bullion has al- 
 ready fallen in price 7 per cent, and consequently 
 that the price of gold, instead of being i,5|, is 
 only 8i per cent, above the Mint price/* l^ere is 
 reason also, to hope that, notwithstanding the 
 
 * The Committee made the difference i$\ per cent, in, 
 the following manner : 
 Foreign bars 22oz, 4 10 a 90 .100 o o 
 
 [22 4 10 a 77 86 10 5 
 
 * 3 9 7 
 
 on ^86. 10^. 5^. is at the rate 6f 15^- per cent. 
 The present difference is thus calculated : 
 
 Foreign bars fat the 1 r 
 
 . to . T , >22oz. 4 10 a go ioo o o 
 
 price inJuneiSioj, / 
 
 The present price 22 4 10 a 84 6 93 17 7 
 
 625 
 
 which upon the sum of 93. 17^- yd. is as nearly as possible 
 7 per cent. ; and which deducted from 15^, leaves the dif- 
 ference between the present market price, and the Mint 
 price, only 8 percent, which has often been the case before,. 
 
C73 
 
 alledged excess of Bank notes, and the conse- 
 quent alledged depreciation of our currency, 
 (neither of which assertions have any just foun- 
 dation), that it will be still lower; but at any 
 rate, if there were any good grounds for the 
 doctrines of the Committee, regarding the 
 effect of paper currency on the price of gold, 
 how could it have fallen even Tf per cent, in so 
 short a period ? 
 
 2. Exchange with Ireland. 
 
 Another favourite doctrine is, that any great 
 fall in the rate of exchange, is owing to excess 
 of currency : let us see how far such an idea is 
 justified by fact. 
 
 In the year 1804,, an alarm was created re- 
 garding the state of exchange between this 
 country and Ireland, which it was contended, 
 was altogether owing to the excess of paper 
 issued by the Bank of Ireland ;* and ingenious 
 men amused themselves with speculations re- 
 garding the alarming state of Ireland, and the 
 necessity of redressing its pecuniary grievances. 
 The Directors of the Bank of Ireland took 
 
 * This doctrine was very ably maintained by Lord Lau- 
 derdale, in a pamphlet intitled " Thoughts OH the Alarming 
 '* State of the Circulation, and on the means of redressing 
 " the Pecuniary Grievances in Ireland." Printed Anno 
 
 1805. 
 
C 83 
 
 fright at the inquiry, and actually reduced their 
 circulation from 3,000,000. to 2,410,000. 
 It appears, however, from the Report of the 
 Bullion Committee, (p. 19), that the Directors 
 of that Bank, had again, most wisely, increased 
 their issue to 3,1 00,000. What has been the 
 consequence of a greater issue than ever? Not an 
 exchange of 18 per cent, against Ireland, as wag 
 the case in the year 1804, but an exchange 
 of 91, which is only i^ per cent, above par; 
 and about two years ago, it was under 8 per 
 cent, whilst the par is 8f . Is not that fact a de- 
 cisive proof, that abundance of currency has 
 nothing to do with the rate of exchange, and 
 that the Directors of the Bank of England, did 
 not fall into a great practical error, when they 
 regulated their issues, neither by the price of 
 bullion, nor the rate of exchange ? 
 
 3. On the Bank of England being compelled to 
 purchase Gold at any Price, to carry on its 
 Circulation. 
 
 It is recommended by the Bullion Committee, 
 that two years hence, the Bank of England shall 
 be compelled to exchange its notes for gold, in 
 which case, it must purchase bullion at any 
 price. This plan w^s recommended by the Com- 
 mittee, when the price of gold was ^\os. per oz. 
 and as the Mint price is only 3, 175. io{d. it 
 
is evident, that the Bank must lose ig-J per cent, 
 by all such transactions. The Bank of England 
 maintains its credit and character, by carrying 
 on a profitable business, under a most judicious 
 system ;* but if it were to engage in great trans- 
 actions, by which it was to lose \*>\ per cent. 
 I should be glad to know, what would be thought 
 of the wisdom of its Directors. In fact, the 
 Bank, with such a burden, must give up issuing 
 paper. Indeed, no one would take the notes of 
 a corporation, that would persevere in carrying 
 on so ruinous a business. 
 
 Mr. Huskisson having, however, proved to 
 his own conviction, that a light guinea is more 
 valuable than a heavy one, he will next, I sup- 
 pose, undertake to persuade the Directors of 
 the Bank of England, that purchasing bullion, 
 with a loss of only 10 or 15 per cent, is a most 
 profitable transaction. 
 
 * The rules of the Bank of England are highly judicious, 
 and I believe strictly observed. They never issue a note 
 but, i. On mercantile paper, that seems to them per- 
 fectly unexceptionable ; (and I believe the losses they sustain 
 by discounting such paper, considering the extent of their 
 transactions, are very inconsiderable ;) or, 2. On Parlia- 
 mentary security. And here it is proper to observe, that 
 they never advance any money on- public securities, unless 
 a Bill has not only gone through both Houses, but has 
 actually received the Royal Assent ; the Votes of the House 
 of Commons, though sanctioned by the .Lords,, not being 
 /considered as sufficient. 
 
4, Upon the Fall in the Value of the Funded 
 Property of the Country, in consequence of the 
 Proceedings of the Bullion Committee. 
 
 It is admitted by the Bullion Committee, 
 that the country was in a high state of mer- 
 cantile, and of public credit, when its inquiries 
 commenced. The numerous bankruptcies, 
 which have since happened, may have been 
 principally occasioned by other causes, but 
 the fall which has taken place in the value of 
 stocks, must be greatly owing to the attack that 
 has most unfortunately been made on our cir- 
 culation. Its effects abroad have been so great, 
 that, I understand, there never was so much 
 stock belonging to foreigners, in proportion to 
 the extent of foreign property, sold, as since the 
 Report of the Bullion Committee has been in 
 circulation. The remitting of the value of the 
 stock thus sold, has rendered the exchange, (if 
 any exchange can be said to exist at such a time) , 
 less favourable than otherwise would have been 
 the case. In order to ascertain to what extent 
 that fail has gone, I thought it necessary to pro- 
 cure, a statement of the prices -of the different 
 stocks, on the s^d February, and ist Decent 
 ber 181 o, to which the reader's attention is 
 earnestly requested. 
 
S'S'S 
 
 o 
 J 
 
 g 
 
 CU o3 
 0,g 
 
 c ^ 
 
 oo o 
 
 c< O 
 
 vO 
 
 OO 
 
 o 
 
 '"* T >^ O 
 i- <^ M OO c 
 
 'O vo o >. ro f.OO oc M 
 
 *, * ^*- rx co r> Ni co co oo 
 
 DO 
 ^i- 
 vo 
 
 CO 
 
 ro 
 
 VO 
 
 CO 
 
 00 
 
 \r\ ro O 
 OOO CO O 
 
 M SO O 
 
 O O 
 
 O 
 
 8 
 
 I>^ ON G O COO OON O 
 O>"^"C s IVftC<'OON' <t; t" O 
 
 \M\n*\r\ * ^ t *\ 
 
 *- CO C< M M t> CO M OO VO 
 
 M co n t^x HI 
 
 VC 
 
 I 
 I 
 
 oo" 
 
 
 CO 
 
 CO 
 
 
 
 "1 
 
 
 
 00 M 
 
 . 
 
 ro 
 
 00 
 
 o . 
 
 r/5 J3 
 
 
 to 
 N) K M r.| 
 
 w u > 
 
 I I'? 
 
 ON vo W 
 
 vo VO 00 M VO 
 
 M 
 
 
 . 
 
 -o .2 ' *: ' ' '1 ' 
 
 a'o-H C C M 
 
 S- 
 
Thus it appears, that the value of funded 
 property, has already fallen to the enormous 
 amount of 17, i82,4g2/. It is to be hoped that 
 such a statement will awaken the attention of 
 the proprietors of the stocks in general, to the 
 necessity of preserving our present system of 
 circulation unimpaired, and to the danger of 
 tampering with our paper currency at such a 
 time as this. 
 
 From the preceding statement it is evident, 
 that the proprietors of Bank stock, have already 
 suffered, in the value of their property, to the 
 amount of nearly four millions sterling, 
 (3,725,568/.) It is farther suggested, that they 
 shall carry on a commerce, by one branch of 
 what they are to lose at the rate of from 8 to 
 i^i per cent. ; yet when these proprietors are 
 assembled, it is considered to be indecorous 
 in them, to raise any clamour against pro- 
 ceedings, by which their most substantial in- 
 terests are so deeply affected. 
 
 On the whole, whoever will take the trouble 
 of considering the facts above detailed, and the 
 observations arising therefrom, must see the 
 danger of permitting visionary speculations, to 
 interfere with the practical concerns of Govern- 
 ment; more especially, regarding measures, 
 on which depend the interests and the comforts 
 
[ 13 ] 
 
 of all classes of society. In the words of Sir 
 James Steuart, " if matters are left without any 
 " change at all, no bad consequences will 
 " follow. These exist only in the heads of 
 " theorists." 
 
ADVERTISEMENT. 
 
 IT is much to be lamented, that any contro- 
 versy regarding the circulation of the country, 
 should have arisen at a moment, when we have 
 so many other important questions to distract 
 our attention. Those who wish for an altera- 
 tion in the established system, admit, that the 
 nation, immediately prior to the publication 
 of the Bullion Report, " was in a high state 
 c of mercantile, and of public credit;" the 
 friends of the existing system, therefore, are 
 extremely apprehensive, that any change in 
 our circulation, might completely overthrow 
 that proud situation which we have so long 
 maintained. The opponents of the present sys- 
 tem, on the other hand, contend, that an unre- 
 
stricted issue of paper, has occasioned the high 
 price of Bullion, and an unfavourable rate of 
 exchange ; and instead of exercising their inge- 
 nuity, to discover other modes by which the ex- 
 cess might be limited, there is none, they affirm, 
 but the power of converting our paper currency 
 into coin. If the issue of Paper, however, be too 
 ex tensive, various modes might be thought of, 
 that would answer that purpose, without run- 
 ning the risk of destroying a system, under 
 which, although it may have been attended with 
 some disadvantages, the nation has flourished. 
 
 All that the friends to the present system 
 seem to wish for is, that matters should be suf- 
 fered to remain as they are, during the course 
 of the present war, resting the responsibility of 
 any mischief that can possibly result therefrom, 
 on the Ministers of the Crown, on the one hand, 
 and on the Bank Directors on the other. If the 
 power vested in the latter, should be reckoned 
 too great, restrict their power, but do not destroy 
 the system. When the war shall be over, the sub- 
 ject may then be resumed without public danger; 
 and Parliament, with more leisure to discuss 
 
C '7 3 
 
 the subject, and with some additional experience, 
 will be enabled to devise such regulations, re- 
 garding the circulation of the country, as may 
 contribute to, and, I trust, confirm, its prosperity. 
 
 Comparison of the years 1809 and 1796, in 
 regard to Commerce, Public Credit and 
 Revenue. 
 
 In order that the reader may be fully aware 
 of the importance of the subject now under 
 discussion, how much the nation has flourished, 
 in a variety of important particulars, since 
 ( the Restriction Bill took place, and what its 
 state would be, if the former system was re- 
 established, his attention to the following 
 statements is earnestly requested. 
 
 It may be proper to add, that the year 1809, 
 was the one immediately prior to the appoint- 
 ment of the Bullion Committee ; and the year 
 1796, was the one immediately prior to the 
 restriction on payments in cash at the Bank of 
 England. 
 
 Exports, An, 1809 
 
 Ditto, An. 1796 35 l8 >9 x 3 
 
 Difference, 19,782,850 
 
 B 
 
C * D 
 
 Imports, An. 1809 - 3 6, 25 5 ,209* 
 
 Ditto, An. 1796 23,187,319 
 
 Difference, $3,067^890 
 
 Average price of 3 per cent, "i 68 I 
 
 consols. An. 1809 / 
 
 Ditto, An. 1796 r 58 18 7 
 
 Difference, 9 3 2t 
 
 Rate of Interest on Loan, An. 1809 4 4 2.J 
 
 Ditto, - An. 1796 4 13 3 
 
 Difference, o 9 of 
 
 Public Revenue, An. 1809 - ^59>3 I >84-B J 
 
 Ditto, . An. 1796 - I 
 
 Difference, ^39*080,259 
 
 Is it possible that any individual can seriously 
 
 * Estimating the East India and the China trade as in 
 1808, the account not being yet made up. 
 
 t This is the average price of the 3 per cent, consols, as 
 purchased by the Commissioners for reducing the na- 
 tional debt. 
 
 If the value of the interest paid to the public creditor be 
 depreciated, what an object it is, to have such an increased 
 price for the capital ? 
 
 J How could such a revenue, and the immense trade, 
 and more extended agriculture of this country he carried 
 on, ii the circulation of Bank notes we^e reduced to eleven 
 millions, independent of Government paper, and com- 
 mercial discount, as reeommended by Sir Francis Baring ? 
 
resolve to tamper with the situation of a country, 
 which the preceding statements represent K> bk 
 so uncommonly flourishing ? Is it not fair to 
 reason, that if our circulation were reduced to 
 its amount in 1790, (which would necessarily 
 result from the suggestions of the Bullion 
 Committee), that our commerce am! revenue 
 would not differ materially from whkt they 
 were at that time ? That our stocks would be 
 reduced to the same price, which then vfras the 
 casie? whilst the interest on our public loaHns 
 would be increased to the sairie standard? 
 Above all-, ho-\tf wotild k be pbssibte, with a cir- 
 culation diminished to' at feast OTC half of itsr 
 present amount, to furnish the same revenue ? I 
 question much, whether in that case, we should 
 be able to pay even the ttrnfcteen millions' which 
 were raised 1 in the year 175)6; and if more 
 were attempted to be exacted, can it be 
 doubted, that every individual' it* the country 
 would be placed ih a situation of the utmost 
 difficulty and distress ? 
 
 I earnestly,, therefore, intreat those, who 
 have any stake in the country,* of whatever 
 
 Bo 
 
i^ 
 
 C 
 
 description, to unite in maintaining a system, 
 which, in the present circumstances of Europe, 
 can alone preserve the nation from destruction. 
 
 It is an old and a true saying, " Fas est> et 
 abhoste doceri:" Let us endeavour, therefore, 
 to ascertain, what are the wishes of the enemy 
 in regard to the renewal of cash payments at 
 the Bank ; for we may be well assured, that 
 the measures that France would recommend, 
 it is not for our interest to follow. 
 
 Fortunately, the wishes of France, in this 
 respect, have been publicly announced from 
 official authority.* Napoleon has not been 
 able to dissemble his joy, at the prospect, of 
 seeing the greatest obstacle to his ambitious 
 views, (the credit and circulation of this 
 country), as he vainly flattered himself, on the 
 eve of being destroyed ; and he had already 
 anticipated the glorious era, when one half of 
 the merchants of England would be compelled 
 to stop payment, and when his favourite 
 measures of commercial hostilities against us, 
 (his decrees of Berlin and of Milan), would be 
 
 * The Journal de V Empire is a Government paper.] 
 
C 3 
 
 felt in their full force. He believes us so 
 infatuated, that his warning voice will not 
 awaken us to a sense of our danger. The 
 measure of opening the Bank, however, fortu- 
 nately has not yet been resolved on, by any 
 authority capable of carrying it into effect ; and 
 I trust, when its mischievous consequences are 
 duly considered, it will not^ till the times are 
 materially altered, be seriously attempted. 
 
 I cannot conclude without stating my full con- 
 viction, if it were to be enacted that the Bank 
 should resume its pay mentsin cash, that it would 
 be utterly impossible to procure coin sufficient, 
 to carry on our immense commerce, and our 
 improving and more extended agriculture ; to 
 maintain our great fleets, and our numerous 
 armies ; to collect our increasing revenue ; to 
 defray our vast expenditure ; and, in short, to 
 carry on the multiplied daily and hourly tran- 
 sactions of common life. All these would in a 
 great measure be brought to a stand, if our 
 paper currency were to be annihilated. It 
 would be much the same thing, in these unheard 
 of times, if the Bank were again compelled to 
 
resume its payments in cash ; for, in that case, 
 it could hardly venture to issue a note, without 
 having specie ready to exchange for it* We 
 have lately heard much of the miserable state 
 to which numbers in Salisbury were reduced, 
 where, for want of a circulating medium that 
 would pass, they could hardly procure a morsel 
 of bread. If those who have excited a clamour 
 against bank-notes, were to be successful, the 
 public at large, would soon experience the same 
 difficulties. Men, from distress and despair, 
 would then become ripe for revolution, and 
 ready to involve themselves and their country, 
 in all the horrors attending it. 
 
 If our present system therefore were unfor- 
 tunately to be overturned, whoever might live 
 to make the comparison, would probably find, 
 that the year 1809, and the commencement of 
 they^aj 1810, were the most flourishing periods 
 in our history, in regard to commerce, revenue, 
 finance, and evtry species of agricultural and in** 
 ternal improvement, the best and most substan- 
 tial sources of public- prosperity. 
 
 London, 
 
PRELIMINARY OBSERVATIONS. 
 
 HAVING already stated, in the History of the 
 Public Revenue of the British Empire,* my sen- 
 timents on the circulation and paper currency 
 of the country ; and having so lately published 
 my thoughts on the Report of the Bullion 
 Committee ; I had resolved to reserve> what 
 farther observations had either occurred to my- 
 self, or had been communicated to me by 
 
 * See Hist, of the Revenue, printed, An. 1803, Vol. II. 
 p. 318 and 319, &c. It is therein stated, about seven years 
 ago, " that it is hardly possible to suppose, that the Bank 
 " of England, as at present constituted, can ever again open 
 " to any effective purpose, as the least rumour of war, 
 " or any continuance of an Unfavourable state of exchange, 
 " must compel it to shut again its coffers, and to suspend its 
 " payments in cash." Nothing can be more unfair there- 
 fore than to attribute any change of opinions in the author 
 of that work, though, where there are grounds for it, why 
 should an erroneous opinion be pertinaciously persevered 
 in, because it happened once, perhaps hastily, to be taktn up. 
 In regard to coin and paper currency, the author of this 
 work, wished to maintain, as long as possible, tnc credit of 
 the Bank of England on its original footing: he now sees 
 clearly the advantages of the new system, and is bound, 
 as a friend to the public welfare, to defend it. 
 
others, regarding these important subjects,/ 
 until the question came to be discussed in Par- 
 liament, where the solidity of the arguments to 
 be adduced on either side must ultimately be 
 determined ; but having been led to peruse 
 a work, entitled, " The Question concerning the 
 " Depreciation of our Currency, stated and ex- 
 " amined, by W. Huskisson, Esq." I found 
 myself therein so pointedly called upon, to ex- 
 plain, and vindicate the opinions I entertain,* 
 that, however unwilling to enter the lists of 
 political controversy, I could hardly avoid 
 accepting of a challenge thus publicly an- 
 nounced. It seems to me, independently of these 
 personal considerations, incumbent upon those, 
 
 * Mr. Huskisson says in his Preface, p. n. " I am 
 " anxious to meet upon a fair and equal footing, those per- 
 " sons wh have publicUy attacked the Report of the Corn* 
 *' mittee. I wish to draw from them either an admission ot 
 " the principles which I state ; or a clear and explicit expo- 
 " sition of their own. If they admit the principles stated 
 " by me, it is for them to reconcile their own deductions to 
 " those principles so admitted ; and to disprove mine. Ifthe 
 " difference between us be as to principles, let them lay 
 * fairly .before the public those on which their theory is 
 ** built, and shew the practical consequences to which their 
 " own principles would, in their own opinion, lead." I 
 have therefore annexed a clear and explicit exposition of the 
 principles I maintain. It might easily have been spun out 
 'into a pamphlet as long as Mr. Huskisson's, had I judged ii 
 necessary. 
 
whose attention has been directed to such in- 
 quiries, to lay before the public, a clear and 
 explicit declaration of their sentiments on 
 the subjects of coin and paper currency, and 
 that with as little delay as possible, on two 
 grounds, recognized by Mr, HuSkisson; i. the 
 importance of the question ; and, 2. the neces- 
 sity of having it thoroughly considered, pre- 
 viously to its discussion in Parliament. 
 
 In regard to the first point, the importance 
 f the question, mv ideas go far beyond those 
 which the Honours ole Gentleman seems to en- 
 tertain. He admits " that it affects,in its prac- 
 " tical consequences, the interests and the com- 
 " forts of every class of society/' (Preface 
 p, 13) ; but that is nothing to the view in 
 which the question ought, in my apprehension, 
 tobe considered. On thedecision of that question, 
 depend, not only the interests and the comforts 
 of every class of society, but the very safety and 
 existence of this great Empire ; in other words, 
 its security against foreign conquest, or internal 
 convulsion ; either, or both, of which must 
 necessarily follow, if the currency of the coun- 
 try be rashly tampered with, or its established 
 system of circulation overthrown. 
 
 As to the propriety of having the subject 
 thoroughly discussed, previously to its 
 
brought under the consideration of Parliament, 
 I perfectly concur with Mr* Huskisson in the 
 observation he makes, (Preface, p. 12), "that 
 " it is a subject upon w r hich many persons 
 " would rather collect their ideas, and form 
 " their decision, in the leisure of the closet, than 
 *' in the warmth of debate/' 
 
 These grounds have induced me, however 
 reluctantly, to undertake the unpleasant task of 
 examining the lucubrations of a gentleman, 
 who having held offices of considerable moment, 
 and whose character, as a person of business, 
 intelligence and ability, being well known, it 
 was natural to expect much important infor- 
 mation from any observations which he might 
 be disposed to publish. 
 
 I certainly lament, as much as he does, that 
 the subject should at all be considered as a 
 party question ; but, most unfortunately, the 
 motion for the appointment of the Bullion Com- 
 mittee was made by a gentleman connected 
 with the opposition party ; the majority of the 
 members who constituted the Committee, are 
 supposed to be hostile to the ministers who 
 governed the country at the time when the 
 Report was presented ; the doctrines of that 
 Report have been applauded by all those who, 
 in newspapers or other publications, support 
 
CM 
 27 J 
 
 the claims of a particular party to the govern- 
 ment of the Empire ; and any person, who 
 presumed to controvert the opinions of the 
 Committee, became the object of v their most 
 virulent abuse. These circumstances tend to 
 indicate, that a number of individuals have 
 formed an idea, that maintaining the doctrines 
 of the Bullion Committee, may serve the pur- 
 poses of the party to which they are attached. 
 As to the clamour raised on the other side, 
 ( which is greatly inferior to what might have 
 been expected regarding a question which affects 
 the interests and comforts of every class of 
 society ), it is impossible for those, who see such 
 a subject unnecessarily pressed forward, and the 
 discussion persevered ir-, to abstain from loudly 
 proclaiming their horror at such proceedings : 
 More especially when the bare suggestion 
 of such measures as the Committee has recom- 
 mended, has already proved the source of infinite 
 mischief, and when, to the best of their judg- 
 ment, such measures, if they were really to be 
 acted upon, would terminate in the destruction 
 of the country. 
 
 We are told, however, " that it was for the 
 " House of Commons to consider whether 
 " they should appoint a Committee at all, or 
 " refer such a subject to such a mode of 
 
" examination ; and that nothing can be more 
 " unjust than to impute blame to the Members 
 c * of a Committee, acting under the orders of 
 " the House, in the due discharge of a duty, 
 " which the House had thought proper to im- 
 " pose upon them." There never was, in my 
 apprehension, a more unjust attack on the 
 House of Commons, upon whom all the odium 
 of any mischief that may arise from the Report, 
 is thus attempted to be thrown. On a motion 
 made by a learned Member of the House, 
 a Committee was appointed " to enquire into 
 " the cause of the high price of Gold Bullion, 
 " and to take into consideration, the state of the 
 " circulating medium, and of the exchange be- 
 " tween Great Britain and Foieign| Parts, and 
 " to report the same, with their observations 
 " thereupon, from time to time, to the House." 
 The Committee were certainly thus authorised, 
 not only to report the evidence, but to make 
 their observations upon it, if they judged it 
 necessary. They might, even, with perfect 
 propriety, have reported the evidence alone, re- 
 quesing the House itself to form the conclusions ; 
 or, if the subject appeared to them of great 
 difficulty and importance, they might have post- 
 poned presenting the Report altogether until 
 another session, instead of hastily throwing to- 
 gether so defective a performance, which they 
 
C 39:3 
 
 had not leisure thoroughly to digest ;* above all, 
 it is questionable, whether it was proper to pre- 
 sent a Report, on such a subject, involving in it, 
 as the Honourable Gentleman admits, " the 
 interests and the comforts of every class of 
 " society -, at the very close of a session, when it 
 was impossible for the House to know its con- 
 tents, or to judge whether it was fit to be printed 
 and circulated as a parliamentary document, 
 Here again, I suppose, the House is to be blamed, 
 for having received the Report at such a 
 time, and, having ordered it to be printed, 
 from the confidence it placed in the judgment 
 and the patriotism of its Committee. 
 
 This leads me to allude to a circumstance, 
 connected with the appointment of the Bullion 
 Committee, which it is impossible to contem- 
 plate for a moment, without infinite regret. 
 
 The appointment of Select Committees, to 
 collect useful information, to digest the in- 
 formation thus collected, to suggest, when 
 specially authorised to that effect, what pro- 
 ceedings it might be proper for Parliament to 
 adopt, regarding a subject thus investigated, 
 and afterwards to bring in such Bills as might 
 be necessary to carry the measures proposed 
 by them, if approved of by the House, into 
 effect, is a system, which has been productive of 
 
 * The last evidence was examined on the 25th of May, 
 and the Report presented on the 8th of June. 
 
many useful regulations : but the proceedings of 
 the Bullion Committee will make future minis- 
 ter*, and future parliaments, extremely cau- 
 tious in sanctioning such appointments ; it is 
 ' impossible therefore to foresee the public mis- 
 chief which may thence arise. A Committee 
 may be appointed on very plausible pretences-, 
 it may unnecessarily postpone bringing its pro- 
 ceedings to a close, and, at the very last day of 
 a session, it may present a Report* in the pre- 
 paring of which, the Committee have gone fiatf 
 beyond the powers with which they were in- 
 trusted. The Report however is prifirted,aawl is 
 circulated during a long recess, under the sanc- 
 tion of Parliament; and after much mischief has 
 been done, when the Committee are asked,.how 
 all this came to pass ? it is gravely answered, 
 " The House of Commons, and not we,, are to 
 " blame the House appointed- us> atid we have 
 " done but our duty/* I mention a possible 
 ease,, the very idea of which may prevent many 
 useful inquiries. Indeed respectable members 
 of the House will, in future, become extremely 
 unwilling to take any share in such investiga- 
 tions, since they may inadvertently be led, to 
 concur in the recommendation of measures, 
 wJiich may ultimately prove destructive to t/he 
 public, interesti 
 
 However, much these circumstances are to 
 
CsO 
 
 be lamented, I beg to have it understood, that, 
 though now under the necessity of controvert- 
 ing the doctrines of the Committee., yet that I 
 feel no want of respect for the gentlemen who 
 constituted it, nor any alteration in that personal 
 regard which I have long entertained for some 
 of its members. They were placed indeed, as 
 many Committees are, in a very awlovard situa- 
 tion. Gre::t thin gs were expected from tten^and 
 they were of course perpetually teased to bring 
 forward their Report, from an anxiety to, know 
 what they intended. The variety of important 
 business discussed in the coarse of the> Isust ses- 
 sion, prevented them from paying that unceas- 
 ing attention to the subject, which its iitfrica^y 
 and importance demanded ; a#d probably % they 
 thought, that it was of less consequence what 
 doctrines were contained in the Report, as they 
 were afterwards to be fully discussed in the 
 House, before they could possibly be acted 
 upon. Besides, the subjects of coin and paper 
 currency, are questions of great diffic ultv,, re- 
 garding which much may be said on bath &k j , 
 and in the deciding of wh : ch, persons ixsay 3 I 
 trust, fairly and conscientiously, entertain dis- 
 cordant opinions. 
 
 I must now take the liberty of explaining 
 the circumstances which have induced me to 
 sqactiye a part in, this investigation, 
 
C 30 
 
 Some years have elapsed since I originally 
 published the " History of the Public Revenue 
 " of the British Empire," in the second volume 
 Of the third edition of which, printed Anno 
 1803, I fully explained the ideas which had 
 occurred to me, on the subjects of Circulation 
 and Paper Currency, and which are exactly si- 
 milar to those which ! have lately maintained. 
 
 Being fully convinced that the power and 
 prosperity of this country, entirely depended on 
 supporting its established system of circulation, 
 as soon as it was surmised that the Bullion 
 Committee had proposed to open the Bank, 
 and consequently to overturn that system, I 
 took the liberty of addressing a Letter to the 
 Chairman, of which the following is a copy. 
 
 Copy of a Letter from Sir John Sinclair, to the 
 Chairman of the Bullion Committee. 
 
 SIR, 
 
 I REGRET much to understand, that some 
 ideas are entertained, of restricting the number 
 of Notes issued by the Bank of England, which 
 I am persuaded would be attended with the 
 most injurious consequences to the agriculture, 
 the commerce, and the revenue of the country. 
 I have thought it necessary therefore, to submit 
 to the consideration of the Bullion Committee, 
 some thoughts upon the subject, in the enclosed 
 
t 33 3 
 
 paper. Some check to the unlimited circulation 
 of private Banks, would, I am persuaded be 
 highly expedient; but in regard to Corp orations, 
 established for the purpose of issuing either 
 large or small notes, any restriction can hardly 
 be politic or advisable, if the security is unex- 
 ceptionable; for any real unnecessary surplus 
 of Notes, will soon return upon those who 
 issue them. 
 
 I beg to conclude, with expressing my full 
 conviction, that if the paper circulation of the 
 kingdom is put on a proper footing, in regard 
 to the following particulars: i. Suffering none 
 to be issued, but on the most undoubted secu- 
 rity : 2. Taking care that as much paper cur- 
 rency is in circulation, as the increasing wealth, 
 population, and revenue of the country de- 
 mands : and 3. Issuing small notes, as well as 
 large ones, without which the system is not 
 complete : if these principles are acted upon, 
 there will be no difficulty, in finding pecuniary 
 resources, for carrying on the war in which we 
 are at present engaged, for twenty years more, 
 and longer if it should be necessary. 
 
 I have the honour to be, 
 
 Sir, 
 Your faithful and obedient Servant, 
 
 No. 5, Terrace, Palace-yard, 
 April, 1810. 
 
 c 
 
No notice was taken of this communication. 
 Whoever will give themselves the trouble of 
 rig it, will prohahly admit, that if any mis- 
 chv' shall arise from the Report of the Bullion 
 Committee, they were fairly warned, on the igth 
 of Apr 1 last, of the dangerous consequences 
 which would result from the measures they in- 
 tended to propose. 
 
 The Report, though ordered to he printed on 
 the 8th June, did not reach me in Edinburgh 
 till about the i6th of August. I happened then 
 to be on the eve of setting out for London, and 
 resolved to take the Report with me, as a com- 
 panion during the journey. It is impossible to 
 express the astonishment and ivgret which I 
 felt on the perusal of that performance. On 
 my arrival in London, I found the whole mer- 
 cantile world in the utmost distress, which was 
 greatly aggravated by the idea, that the Report 
 would be acted upon as scon as Parliament re- 
 assembled. Not a person seemed resolved, either 
 to maintain the advantages, or to vindicate the 
 solidity of the established currency of the coun- 
 try/ I could not therefore resist the inclination 
 which 1 felt, to come forward at such a crisis; 
 being apprehensive that the Bank Directors 
 might be deterred from acting with sufficient 
 energy in Checking the misfortunes of the com- 
 mercial world at that time, unlejs they were 
 
C w 3 
 
 \ that thedortrii es of the Committ, 
 
 were not so univerially admitted, as they had 
 
 M led to inv -nd con,si v |ii(*mly illicit not 
 
 bo n!: adopt-'d. I v . th n< Ul to 
 
 publish some observations on ilu- !!oj on of the 
 
 C nnuMcr, which h n lor :;i;mr lime ! 
 
 ! thr I'uhlir. 
 
 1 .shall no\v { to m,: rva- 
 
 tions on Mr. Huskisson's painp laras 
 
 it scerps 1 
 
 inv,. iiiM liis .scntinuMi!,s in t!ic \u>rds Iw 
 ma;!-, ui of, and next the KVrnai-ks \\hu-n , 
 OCCUrmd ; n the dortriiu:; he has pro- 
 
 mi: I .shall then conclude, with explaining 
 
 the princij)K s on \vhic:h I (Miiceive (lie pa; 
 cm i nmtry is now established ; any 
 
 ; \\ith which, in the f moineni, 
 
 would, I am ! 'led with infinite, 
 
 and ( , misch. 
 
 In llie follow!" 'rva(ioiis ; thctliirdcditio:i 
 
 of i!ie ^-.inh. 
 
 OliSIOilVATIONS ON MR. IIUSKISSON'S 
 
 PAMPHLET. 
 
 
 
 J'/r/'ti! <). 
 
 " The necessity jtoftrmation (r'^:uv!injr the 
 
 <l d I coi?i :m i papor lo 
 
 *' 1 v obtained, by re-ortin^ toilie history 
 
 44 of our cunvnry in former periods, and lo 
 
 C 9 
 
" those authors, in our own language, who are 
 " looked up to, as of the highest authority in 
 " political economy." 
 
 Observation. 
 
 This paragraph explains the origin t>f all 
 those erroneous ideas regarding coin and paper 
 currency, which the Honourable Gentleman has 
 unfortunately imbibed. Instead of resting on 
 tbe improved experience of modern times, he has 
 suffered his judgment to be warped, by tbe his- 
 tory of former periods, and by authors whose 
 supreme authority, in questions of political eco- 
 nomy, can be no longer recognized. 
 
 A Locke, and other authors of former periods, 
 could only reason according to the circum- 
 stances of the times in which they lived, and 
 on the facts to which they had access; but the 
 same doctrines could never be applicable to 
 such an era as that in which we live. Could 
 they have formed an idea, of the whole Conti- 
 nent of Europe being made subject to the 
 dominion of one man ? Could they have fore- 
 seen, a general anxiety to hbard, arising from 
 the oppression to which whole states were 
 subjected, and the commercial intercourse 
 of nations put under trammels hitherto un- 
 heard of? No man can be absurd enough to 
 suppose, that the same rules or principles, are 
 
applicable to a state so forced and unnatural, 
 as to the more fortunate period, when Europe 
 was divided among a number of independent 
 states, under governments either free, or not 
 tyrannically exercised ; where, in the midst of 
 war, no idea was entertained of any general 
 stop to commercial intercourse; and where, for 
 the sake of mutual convenience, nations regu- 
 lated their conduct, according to principles, to 
 which the emphatic name of " The cdde of 
 nations" was given, the authority of which 
 unfortunately is no longer recognized. Besides, 
 new discoveries are constantly making in com- 
 merce, in manufactures, in medicine, in agri- 
 culture, in mechanics, and in all the other arts 
 and sciences; and why should not some be also 
 made in political economy ? 
 
 I must here take the liberty of remarking 
 that, whatever respect we may entertain, for 
 the celebrated Locke, as a metaphysician, and as 
 a zealous and able friend to liberty and morals, 
 yet no one, at all acquainted with the political 
 history of this country and of America, will ever 
 be disposed to quote him, as decisive authority, 
 by which any practical measure of Government 
 ought to be regulated.* It is well known that 
 
 * The plan of government for this new colony, (Carolina), 
 
C383 
 
 Mr. Locke was desired to draw up a Constitu- 
 tion for the province of Carolina. He exercised, 
 on that occasion, all the political ability of 
 which he was capable; but so different is theory 
 from practice, that this constitution was foundry 
 experience, totally unfit for the government of a 
 country. The theories of Mr. Locke on coin and 
 paper currency, are equally inapplicable to the 
 circu instances of these times. Were Agriculture 
 the .subject of discussion, it would be idle to rest 
 on the ancient dogmas of a Columella, or the 
 Georgics or Virgil. More useful information 
 is to be obtained, from an experienced farmer 
 of the improved modem school, than from all the 
 ancient authors \vh'o have written on husban- 
 dry.* In the same manner, intelligent mer- 
 
 was drawn up by the famous Locke ; a philosopher, who 
 \vas a friend to mankind, and to that moderation and justice 
 which should be the only rule of their actions. Being more 
 of a metaphysician than a statesman, it is certain that the 
 same man, who had dissipated and destroyed so many errors 
 in his theory concerning the origin of ideas, made but very 
 feeble advances in tie paths of legislation. Raynal's Hist, 
 of the Indies, translated by Justamond, Vol. VII- p. 341, 
 &c. 
 
 * Suppose that an author was determined to write a book 
 on Agriculture, and wished to explain to his readers, the 
 best mode of separating the grain from the straw. He 
 might, on consulting ancient authorities solely, collect much 
 information, as to the different sorts of flails, their length, 
 
393 
 
 chants, well-informed bankers, or even the 
 reprobated Directors of the Bank of England, 
 who are guilty, according to the Report of the 
 Bullion Committee, of great practical errors in 
 the management of that vast concern,* would 
 have given the Honourable Gentleman, more 
 valuable information regarding coin and paper 
 currency, than he has been able to derive, from 
 all those ancient authors by whom he appears 
 to have been misled. 
 
 Preface, page i and 2. 
 
 " I committed to paper, the substance of 
 <c my opinions, in part before, and the reinain- 
 < e der very soon after, the publication of the 
 " Report. I trust*5J$t I shall be justified in 
 " submitting, what .$& originally prepared for 
 " an indulgent, and limited circle only, to the 
 " examination and judgment of a more ex- 
 " tended and impartial tribunal." 
 
 their weight, the various sorts of wood of which they 
 might be made, the made of spreading the sheaves, and 
 a number of other minutiae, and after all, he would find, 
 on consulting a modern practical husbandman, that his la- 
 bours were altogether thrown away, for, that whenever 
 agriculture was well understood, the thrashing mill had en- 
 tirely superseded theHise of the flail. 
 
 * See Rep. of the Bui. Com. as printed by the House of 
 Commons, p. 24. 
 
Observation. 
 
 * 
 
 The Honourable Gentleman, after his retire- 
 ment from office, having directed his attention 
 to the subjects of coin and paper currency, and 
 having formed a system on the foundation of 
 ancient authorities merely, wished to gain as 
 many proselytes to his creed as possible. He 
 therefore prepares the substance of his opinions? 
 communicates that substance to an indulgent 
 and limited circle, perhaps to some parti- 
 cular Members of the Bullion Committee, 
 and by such a mark of confidence, induces 
 them to become converts to bis faith. But, 
 I should be glad to know, if the communi- 
 cation of these opinions wm*e restricted to par- 
 ticular Members of the Committee, why it v/as 
 not general ? and if it was general, why the 
 doctrines of the Honourable Gentleman were 
 not incorporated with the Report? The House 
 was intitled to know all the grounds on which 
 the Committee had formed its opinions, and it 
 was not right to withhold information from the 
 House, in order that a Member of that Com- 
 mittee might appear, in the course of any future 
 contest, with more advantage, and, as the 
 Champion or Goliah of the ancient system, 
 
might acquire all the. credit, and carry off all 
 the glory, of the expected victory. 
 
 Preface, page i. 
 
 " Proportionate to the general interest excited 
 " by that Report, had been the clamour raised 
 against it," 
 
 Observation. 
 
 It is to me a matter of astonishment, that 
 the clamour has not increased ten-fold, consi- 
 dering the mischief it has already done, and 
 how much it is likely to affect, " in its 
 " practical consequences, the interests andcom- 
 " forts of every class of society/' The Honour- 
 able Gentleman, (Pamphlet, p. n.) talks of 
 the restriction u having wrought so much mis- 
 " chief, and laid the foundation of so much 
 " confusion in all the dealing, and transactions 
 " of the community ;*' I should be glad to know, 
 where was the mischief, and where the confu- 
 sion, prior to the Report of the Bullion Com- 
 mittee? The mischief and the confusion has 
 since been great; and will be fatal indeed, if that 
 Report shall be acted upon. Is it to be wondered 
 at, that a clamour should be raised, when a fire 
 has been kindled, which may spread devastation 
 and ruin over a whole kingdom ? The stocks 
 have already fallen materially, since that inau- 
 spicious Report has been printed and circulated ; 
 
C 42 3 
 
 bankruptcies have increased beyond all former 
 precedent; and mercantile confidence has been 
 shaken to an extent, never before experienced. 
 All this may partly be owing to other circum- 
 stances ; but a considerable share of the mischief 
 ought certainly to be attributed to the Report 
 of the Bullion Committee. The clamour, how- 
 ever, is nothing to what it will be, if any at- 
 tempt shall be made to carry the suggestions of 
 the Committee into effect. What will the pub- 
 lic feel, when the same taxes are demanded from 
 them, with but half of that circulating medium, 
 on the abundance of which, its ability to pay 
 those taxes entirely depends. A clamour would 
 then be excited, beyond any thing known in the 
 history of this country ; Indeed a convulsion 
 would take place, which must throw every thing 
 into confusion. 
 
 Preface', page 3. 
 
 " Sir John Sinclair defines Monty to be, 
 t a well regulated paper currency with a certain 
 ce proportion of coin. Such an axiom seems 
 u to me wholly unintelligible, and must of 
 u course be wholly unanswerable." 
 
 Observation. 
 
 The Honourable Gentleman appears to have 
 so completely immersed himself in antient litera- 
 
C 43 
 
 ture, that he cannot comprehend the common 
 language of modern times. If he 'has to pay any 
 individual such a sum as id. i^s.S^d.in mo ey, I 
 should be glad to know, whether it would not be 
 payment in money, according to the modern mean- 
 ing of that word, if he were t er to his credi- 
 tor a ten pound Bank note, half a guinea in gold, 
 four shillings in silver, and two-pence halfpenny 
 in copper? Does not that exemplify the defi- 
 nition of Money given by me, namely, " Paper 
 " Currency, with a certain proportion of coin" 
 In fact, coin is of no real use in a country, 
 except as small money, or change for Notes. 
 A moderate proportion of silver, and of the 
 smaller pieces of gold, therefore, is all that is 
 necessary. 
 
 Pamphlet, page i . 
 
 " It is of the essence of money to possess 
 " intrinsic value/' 
 
 Observation. 
 
 If the Honourable Gentleman by Money, 
 means Com, it certainly posseses intrinsic value; 
 but his researches have not been very deep or 
 extensive, if he does not know, that various ar- 
 ticles have passed for money, which are without 
 any material intrinsic value. Among the ancient 
 Britons, iron rings or plates were used as 
 money. The Spartans preferred iron bars, 
 
[ 44 ] 
 
 quenched with vinegar, that they might not 
 serve for any other purpose. Seneca observes, 
 that anciently, there was stamped money of 
 leather. The Hollanders, in 1574, coined great 
 quantities of pasteboard. Cowries, a kind of 
 shell, are made use of as money on the coast of 
 Africa, and in the East Indies. All these sorts 
 of money have little or no intrinsic value. 
 
 Pamphlet, page $. 
 
 " Paper Currency has obviously no intrinsic 
 value/' 
 
 Observation. 
 
 The Honourable Gentleman cannot have 
 studied the subjects of coin, and Paper Cur- 
 rency, with that intelligence and ability which 
 might be expected from him, when he states 
 that circumstance as an objection to paper cur- 
 rency, which is in fact its greatest advantage, 
 namely, that it has no intrinsic value. The chief 
 objection to coin is, that you must purchase it 
 at a great expense from foreign countries, and 
 after all, it is only a transferable commodity, or 
 a medium of barter; whereas paper currency 
 answers the same purpose, with many addi- 
 tional advantages, and being of no intrinsic 
 value, the nation has it for nothing. From fifty 
 to sixty millions, carrying on our agriculture, 
 our commerce, and our manufactures, and pro- 
 
ducing a revenue, (and consequently a national 
 force), altogether incredible, are created by 
 paper money. It is a species of circulation, ob- 
 tained at little or no expense, and which has 
 saved the exportation of many millions of 
 property, by the loss of which the nation would 
 have been impoverished. 
 
 Pamphlet, page 2. 
 
 " The money, or coin, of a country is so much 
 " of its capital/' 
 
 Observation. 
 
 Here money, and coin, are considered as sy- 
 nonimous terms, and in that point of view it 
 may be admitted, that it is " of the essence of 
 " money, or coin, to possess intrinsic value/' 
 It is astonishing to me, that either the Honour- 
 able Gentleman himself, or the indulgent and 
 limited circle to whom his opinions were origi- 
 nally communicated, could suffer themselves 
 to be deceived by such fallacies. They seem 
 to have considered money, sometimes as different 
 from, but at other times as synonymous with, 
 coin. 
 
 Sir James Steuart has well observed, 
 (Book III. cap. i.) that the metals have so long 
 performed the use of money, that money and 
 coin have become almost synonymous, though 
 
[4,6] 
 
 in their principles they be quite different. This 
 difference he afterwards thus explains. 
 " Money is the scale for reckoning value; and 
 " coin, certain denominations of money, re- 
 " alized in a proportional weight of the precious 
 " metals/' (Book IV. ch. 19.) Bank notes are 
 as just a scale for reckoning value as coin, and 
 consequently, equally as well entitled to be 
 comprehended under the generalterm of money. 
 In regard to the idea, that the circulating 
 coin of a country, is to be considered as part 
 of its capital, in every sense cf that word, 
 (and if not, why does not the Honourable 
 Gentleman pc-fnt out the distinction), it is 
 totally inadmissible; and it is astonishing 
 how any one, who has undertaken the task of 
 teaching others the elementary principles and 
 doctrines of finance, should have fallen into 
 a mistake. The capital of a country, as 
 Dr. Smith justly observes, is of three sorts, 
 3 . consumable, which yields no revenue or profit, 
 as food, clothes, household furniture, &c. ; 
 z.jixed, as useful machines, profitable build- 
 ings, improvements of land, &c. the character- 
 istics of which is, that it affords a revenue or profit 
 without circulating or changing masters ; 3. the 
 circulating, consisting of money, stock of provi- 
 sions, rude materials for manufacture, &c. 
 which he afterwards observes, though a very 
 
C473 
 
 valuable part of the capital, makes no part of the 
 revenue of the society to which it belongs ; 
 to which a 4th might be added, namely, 
 the disposable, or property which a community 
 can export or part with, without any material 
 injury, as bullion and plate. The coin, or 
 specie of a country, therefore, forms no part of 
 its consumable, fixed, or disposable capital : It 
 is included in its circulating capital, which 
 produces no revenue ; and which cannot be 
 parted with, without injury to the public pros- 
 perity. The coin of a country may be compared 
 to its roads, for neither the roads, nor the cur- 
 rency of a country, produce any thing : they are 
 only indirectly the sources of national wealth, 
 or the instruments by which it can be obtained. 
 
 Pamphlet, p. 2. 
 
 " Whoever buys, gives whoever sells, re- 
 " ceives, such a quantity of pure gold or silver, 
 " as is equivalent to the article bought or sold : 
 " or, if he gives or receives paper instead of 
 u money, he gives cfr receives that which is va- 
 " luable, only as it stipulates the payment of a 
 " given quantity of gold or silver." 
 
 Observation. 
 
 There never was a more erroneous idea, and 
 it could only originate from a blind deference 
 to ancient authority, which cannot possibly be 
 
admitted. There is not one transaction in a 
 million, where the object of the sale is to pro- 
 cure coin, except merely for the purpose of 
 employing that coin to purchase some other 
 article. If, therefore, that article can be pur- 
 chased by paper, instead of coin, the object of 
 the seller is equally well answered, by the one 
 as by the other; and there is not the least occa- 
 sion, either for pure gold or pure silver. 
 
 Pamphlet, p. 6. 
 
 " I assume, as admitted, that in Great Britain, 
 " gold is the scale to which all prices are re- 
 " ferred, and, since the ggth of the King, the 
 <c only legal tender, except for payments under 
 " 25*-" 
 
 Observation. 
 
 The Honourable Gentleman does not seem to 
 be aware of the origin of those laws which 
 were enacted, for the purpose of regulating our 
 coin. The great object was, the preservation 
 of the King's revenue.* It was thought hard, 
 
 * See articula de moneta. 20 Edw. I. stat. vi. Ces sount 
 les articles qe sount dela la meer, et de cea, a graunt 
 damage nostre Slgnur le Roi y et dc son poeple, et a graunt 
 corruption de sa inonnoye Denglaterre. For the protection 
 of the King's Revenue, the Tellers in the receipt of the 
 Exchequer, by their duty andeath of office > were required, to 
 
however, that individuals should be compelled to 
 receive a species of money, which would not be 
 accepted of at the Exchequer, in payment of those 
 taxes to which they were liable. But since the 
 Exchequer has received Bank notes in payment 
 of taxes, all those ancient regulations are 
 virtually abrogated ; and whilst bank paper is 
 received at the Exchequer, as readily as gold,and 
 will purchase with as much facility, every article 
 he wishes for, no man can justly complain of 
 any defect in our circulation. 
 
 Pamphlet, p. 13. 
 
 " It follows that the difference between 
 " and 4$/. 145. 6d. or between 12 and 
 " ounces of gold, arises from the depreciation of 
 " the paper ; and is the measure of that depre- 
 " ciation, as well with respect to gold, the 
 <c universal equivalent, as to every other com- 
 " modity." 
 
 receive no money, but good and true ; and, by the ancient 
 course of the receipt of the Exchequer, all money ought to 
 be received there, by weight as well as by tale; See Pre- 
 amble 9 and 10, Will. III. c. 21, By the Gold Act in 
 1773, the Tellers of the Exchequer, their deputies and clerks, 
 were required to weigh all gold money tendered to them, 
 and to cut, break or deface all pieces thereof, which, by the 
 weight, or otherwise, shall appear to be counterfeit, or dimi- 
 nished otherwise than by reasonable weighing. 
 
 D 
 
Observation. 
 
 It is well observed by a witness before the 
 Bullion Committee (Mr. Greffulhe, Ap. p. 71), 
 that the dearness of gold and silver cannot be 
 called a discount on bank notes, or, in other 
 words, a depreciation of paper.* From a variety 
 of circumstances, unnecessary here to dwell 
 upon, the price of bullion has become high ; an 
 event of a temporary nature merely, and which 
 will be restored tojts ancient standard so soon 
 as Europe shall be settled, and general tran- 
 quillity restored. A pound of gold it is said is 
 exchangeable for &61. in paper currency; but 
 can any one seriously maintain, that that is an 
 argument for the convertibility of paper into 
 coin. Is it not demonstrable, that no man in 
 his senses would issue 4,6!. 14$. 6d. in paper, 
 when the very next moment, $61. might be de- 
 manded from him. It puts an end at once to all 
 paper currency ; and the Bank of England could 
 no more issue paper, with the risk of such a de- 
 mand, than it could convert its iron chests into 
 
 * It has been well observed, that if Bank notes are at a 
 discount, when gold rises in value above the mint price, that 
 gold coin is certainly at a discount, when bullion is below 
 the mint price, which has been the case. Can any thing be 
 viore absurd r 
 
[51] 
 
 ingots. We aregravely told, however, that though 
 the Bank must pay $61. for ^6L 14*. 6d., " yet, 
 " as a trading company there is very little, 
 " or perhaps no inducement, to make a sudden 
 " and violent reduction of its issues." Pamphlet, 
 page 111. 
 
 Preface, page 17. 
 
 " Every month our exchanges were growing 
 " worse, and the price of gold rising,* notwith- 
 " standing that our expedition to the Conti- 
 " nent was terminated, and our pecuniary aid 
 " to Austria was discontinued/' 
 
 Observation. 
 
 Were there no other causes for the unfavour- 
 able state of the Exchange, and, the high price of 
 Bullion, than those which the Honourable Gen- 
 tleman has enumerated ?-j- By 'the expedition to 
 the Continent, I suppose he means the attack on 
 the Isle of Walcheren. But had the expenses 
 of that expedition been winded up^? Were there 
 no expeditions to Spain and Portugal ? Have we 
 not an army to maintain in Sicily ; andfleets and 
 armies to support in various other quarters of the 
 globe? The great defect however, in the inquiries 
 
 * The price of gold has since fallen considerably. See 
 Address prefixed. 
 
 f In my observations on the Report of the Bullion Com- 
 mittee, I have endeavoured to enumerate them. 
 
pf the Committee is, that after having ascer- 
 tained the feet " that the price of bullion was 
 high, and the exchange unfavourable; 1 ' and 
 having also inquired into the causes thereof, 
 that they did not investigate the possibility of 
 diminishing the price of bullion, and rendering 
 the exchange more favourable, without disturb- 
 ing the established system of circulation ? Why 
 did they not inquire, whether new channels 
 of export trade might not have been disco- 
 vered; and above all, whether we could not 
 have supplied ourselves at home, or from our 
 own colonies, with a variety of articles, such as 
 corn, naval stores, and timber, the price of 
 which, with the enormous freights for their con- 
 veyance, were in fact the sole causes of those 
 evils, which the Honourable Gentleman, and the 
 Bullion Committee have so loudly deplored. 
 That would have been an investigation worthy 
 of statesmen. The Committee would then 
 have proved themselves real benefactors to their 
 country; and the tide of exchange would soon 
 have become favourable to the British merchant. 
 
 Pamphlet, page 19. 
 
 " Creditors, annuitants, and all who possess 
 incomes fixed in their amount by a contract 
 
" of any description, would be able to measure 
 " the extent of their loss." 
 
 Observation. 
 
 The loss which annuitants sustain by the 
 progressive increase of paper currency, has long 
 been a subject of complaint, but without any 
 just foundation ; for any great increase of me- 
 tallic money would have exactly the same ef- 
 fect, that of diminishing the relative value of all 
 such payments ; nor can it be adrnitted 5 that a na- 
 tion is to be kept in an insecure or impoverished 
 state, merely that annuitants, and other persons 
 having money to receive by contract, may become 
 paratively richer. Indeed the money received by 
 annuitants is not depreciated by an excess of paper. 
 It will not go so far as it is Used to do, because taxes 
 have been necessarily augmented. The ptfce of 
 provisions ^Iso has been considerably increased, 
 because the harvests have been unfavourable. 
 Some imported articles must likewise sell higher, 
 from the hitherto unheard of restrictions under 
 which our commerce with thecontinent has been 
 placed. Besides, the peculiar circumstances of 
 of these times ought never to be lost sight of, in 
 the course of the discussion. When the state of 
 Europe is as much changed, as if a volcano had 
 suddenly burst forth, threatening to cover one 
 
C 54 !3 
 
 half of the kingdom with ruin, we must not 
 act or reason, as if nature had remained in its 
 ancient quiescent state. Indeed, if our paper 
 circulation had not given us the command of 
 forty millions sterling, which otherwise we 
 must have imported in bullion from other coun- 
 tries, sending them property to that amount in 
 return, we could not have gone on at all ; and 
 had we not been thereby enabled to resist the 
 power of France, the payments to annuitants, 
 and others entitled to receive money by con- 
 tract, would not have been very regularly liqui- 
 dated. How can they expect to escape a share 
 of that pressure, to which every other branch of 
 the community has been subjected ? : 
 
 I have thus gone through the preface, and 
 the first nineteen pages of the pamphlet of the 
 Honourable Gentleman ; and I trust it will be 
 evident, from these observations, that the doc- 
 trines maintained by Mr. Huskisson are 
 founded upon principles, inconsistent with those 
 which are sanctioned by the improvements 
 progressively made in the science of political 
 economy. The Honourable Gentleman, indeed, 
 has very candidly, and very justly admitted, 
 (Preface, p. 8), that his observations contain 
 nothing which is new ; and it were to be wished, 
 
[55] 
 
 that from the old matter, so anxiously and la- 
 boriously searched into, he had made a happier, 
 and more judicious selection. Instead of per- 
 severing therefore in the task of commenting 
 on such a publication, which, after the remarks I 
 have already made upon it, and the want of 
 novelty in its contents, seems to me perfectly 
 unnecessary, I shall proceed to the principal 
 object I had in view in publishing this work, 
 namely, to state those Political Maxims, which 
 explain the ideas which have occurred to me 
 upon the subjects of coin and paper currency, 
 the meaning of which, I hope, that any author, 
 of even common penetration, will find little dif- 
 ficulty in comprehending. 
 
 It may be proper to add, to prevent any idea 
 being entertained, that these Observations are 
 published at the instigation of any party in the 
 country, that they have not been communicated 
 to a single member of either House of Parlia- 
 ment ; and that the individual who writes them, 
 is alone either implicated in, or responsible for, 
 their contents. It would give him infinite plea- 
 sure, if his anxious endeavours, in conjunction 
 with those of many others, by whom the cause, 
 he trusts, will be advocated, should be the means 
 of preserving from destruction, thatcommon bond, 
 (the established currency of the country), by the 
 
[56 J 
 
 interchange of which, numbers of insulated in^ 
 dividuals, are combined into one whole; each, 
 in various ways, promoting his own interest, 
 and thereby increasing the wealth, securing the 
 safety, and augmenting the happiness, of a great 
 community. 
 
C57 3 
 POLITICAL MAXIMS 
 
 REGARDING 
 
 COIN AND PAPER CURRENCY, 
 
 INTENDED TO EXPLAIN, THE REAL NATURE, AND 
 ADVANTAGES, OF THE PRESEN f SYSTEM. 
 
 * THAT it is of the utmost importance, in an 
 early period of society, to have metals, or any 
 other substance of a similar nature, fixed upon 
 by common consent, by means of which, 
 individuals may receive the reward of their 
 labour, and the public its revenue, in an 
 article equal in value, when sold, to that for 
 which it has been exchanged, and which will 
 answer as a medium for transferring property 
 in goods, without the necessity of actual 
 barter ; and that the precious metals, from 
 their intrinsic value, and other advantages, are 
 peculiarly calculated for such useful purposes, 
 in periods of society, when property is insecure, 
 payments few, credit unknown, and the 
 population inconsiderable. 
 
 2. That when a society becomes more nume- 
 rous, property more secure, and payments 
 
[58 ] 
 
 larger, and more frequent, it is a most essential 
 improvement in the political circumstances 
 of a country, to have some means of paying the 
 wages of labour, raising a revenue, and effect- 
 ing the transfer of goods, with such a circulating 
 medium as paper currency, being of a nature 
 less cumbrous than coin or bullion, and not 
 liable to the various disadvantages, to be after- 
 wards explained, attending a metallic circula- 
 ting medium; and that in countries where no 
 mines of the precious metals exist, the neces- 
 sity of procuring them from foreign countries, 
 at an enormous expence, for no other purpose, 
 but merely to act as the medium of circulation, 
 is thereby prevented. 
 
 3. That the establishment of a paper cur- 
 rency is of great importance to a nation, were 
 it only for the purpose of saving the expence 
 of purchasing bullion to be converted into 
 coin ; but that such a currency does not answer 
 the object effectually, more especially in times 
 of war, if the paper is convertible into coin on 
 demand, as, in that case, a large quantity of 
 specie is uselessly hoarded up, to be ready for 
 any probable, or even possible demand, and 
 hence that, in times of alarm, the circulation 
 of a country is most diminished, when its 
 abundance is most required. 
 
[ 59 ] 
 
 4. That coin, though highly useful when 
 no other medium of transfer can well be es- 
 tablished, yet is attended with great disadvan- 
 tages. i. It is perfectly unfit for making 
 large payments, in so much, that neither the 
 commerce of this country, to its present ex- 
 tent, could be carried on, nor its great revenue 
 collected, if coin were the sole medium of cir- 
 culation. 2. It can never be procured in suf- 
 ficient quantities for the demands of an indus- 
 trious, and a prosperous nation. 3. It is con- 
 stantly diminishing in its value by wear, which 
 diminution must be made good, either by the 
 public or by the individual.* 4. It is liable to 
 various operations, as filing, clipping, sweating, 
 &c. by which its weight may be so much re- 
 duced, as to render it unfit for passing. 5, It 
 is apt to be hoarded up when it is most wanted, 
 namely, in times of alarm, and the hoards 
 being generally secret, they are frequently 
 totally lost ; and, 6. Private individuals pos- 
 sessing a quantity of specie, are more liable to 
 lose their right of property in it, than in paper; 
 
 * In the reign of King William alone, the recoinage 
 cost th public 3,170,480. History of the Revenue, 
 Vol. II. p. 45. The average expence of the Revolution 
 war was only about three millions per annum. 
 
[6o] 
 
 and when nations possess it in great abundance 
 it is a temptation to invasion.* 
 
 5, That paper currency, on the other hand, 
 uhen properly regulated, is not liable to any one 
 of these objections, whilst it possesses many 
 advantages of peculiar importance. i. A na- 
 tion has the advantage of this currency at little 
 or no expence, instead of exporting millions 
 worth of goods to purchase bullion to be con- 
 verted into coin, which after all could only 
 answer the same purpose as paper currency, 
 but not so well. 2. This currency need never 
 be diminished in its amount, which uniformly 
 occasions infinite misery to a country ; on the 
 contrary, it may be augmented whenever the 
 wants of agriculture, to carry on its improve- 
 ments, or of an increasing commerce or 
 revenue, render it necessary. - 3. Where 
 paper currency is the medium of circulation, 
 
 * When an individual is plundered of eoin, there are no 
 means of distinguishing it from the other specie in circula- 
 tion ; but notes may be marked, or the payment stopped, and 
 any loss thereby prevented. In regard to nations, abundance 
 of coin or bullion becomes the immediate object of the plunder 
 of an invading enemy \ whereas the paper currency peculiar 
 to a country, if he succeeds in his views of conquest, is of 
 no use to him ; whilst it circulates among those who plgicte 
 confidence in the government, under whose sanction it had 
 been issued. 
 
[Si] 
 
 cither coin or bullion, instead of being use- 
 lessly hoarded up, may be exported, for the 
 purpose of carrying on necessary wars, or of 
 purchasing grain in times of scarcity, which 
 could not otherwise be hazarded, without the 
 risk of throwing the whole country into con- 
 fusion. 4. With an abundant circulation, the 
 necessary result of a paper currency, a nation 
 prospers to a degree beyond all possible con- 
 ception : Thousands of people are employed, 
 who, under a different system, might either 
 have been almost entirely idle, or a burden on 
 the community ; and money, whether bor- 
 rowed by individuals or by the public, is pro- 
 curable, (a point of the most essential 
 importance), at a moderate rate of interest. 
 With such facilities, the payment of taxes, 
 however great, is accompanied with much less 
 difficulty ; industry does not languish for want 
 of employment, and every species of improve- 
 ment is carried on with spirit. The mischiefs 
 of a cramped circulation, on the other hand, 
 are incalculable ; agriculture decays, com- 
 merce fades, public credit is annihilated, 
 the public revenue becomes unproductive, 
 and men, from distress and despair, are ready 
 to involve themselves and their country in all 
 the horrors of revolution. 
 
[69] 
 
 6. That the state of Great Britain, for a 
 period of thirteen years, during which, a paper 
 currency, not convertible into coin, was the 
 medium of circulation, proves, beyond the possi- 
 bility of doubt, the advantages of the new 
 system. During that whole period, our 
 exertions in foreign war, and domestic im- 
 provement, have been great beyond all 
 example. We have at least occasionally fought 
 France single-handed, which her Emperor had 
 boldly declared to be impossible ; we have con- 
 firmed our empire of ihe sea ; we have every 
 where defended our friends ; we have every 
 where combated our enemies ; and yet, during 
 all that period, the Bank of England was not 
 compelled to issue gold ; the whole was effected 
 by paper, not convertible into coin. Would it be 
 wise to overturn a system capable of accom- 
 plishing such astonishing effects ? 
 
 7. That there is a most essential difference 
 between a Paper Currency, acting merely as 
 the representation, not of coin, but of mar- 
 ketable property in general, and issued by a 
 respectable, opulent, and well conducted 
 Corporation ; and State notes, or Government 
 paper, circulated by compulsion, issued without 
 limits, and founded on no security ; and 
 
 'though such Government paper may have be- 
 
come depreciated in other countries, when 
 multiplied beyond all bounds, that is no reason 
 why a Paper Currency, of a description com- 
 pletely different, namely, mercantile paper, 
 which is never issued but on the most unques- 
 tionable security, may not, under proper regu- 
 lations, be perfectly unexceptionable. 
 
 8. That coin or bullion, as a species of mer- 
 chandise merely, may be of service in the 
 transactions between commercial nations, and 
 is a ready means of making remittances from 
 one country to another ; but that unless where 
 the balance is unfavourable, (in which case the 
 exportation of goods is much more expedient), 
 the exchange between one country and another 
 is best arranged, by means of bills of exchange, 
 which are always at the command of an active 
 and industrious nation, when wars, and ob- 
 stacles arising from commercial jealousy, or 
 political rancour, do not intervene. 
 
 9. That even where the exchange is unfa- 
 vourable, it is much better to be subjected to 
 any loss thereby occasioned, than for a nation 
 to deprive itself of the advantages of Paper 
 Currency, even if that currency were the 
 cause of the lowness of the exchange; for 
 that a paper currency, by promoting industry, 
 and every species of agricultural andL.com- 
 
mercial improvement, will soon bring about a 
 favourable state of exchange, either by the 
 solid exportable wealth which it would be the 
 means of producing, or by raising articles 
 at home, with which we are now supplied by 
 foreign countries. 
 
 10 That the Bank of England cannot well 
 exceed in the amount of its circulation, whilst 
 it issues its notes, on the security of good mar- 
 ketable property of any description, and that to 
 compel the Bank to pay in gold, an article 
 which, from the failure of the mines, or a ge- 
 neral disposition to hoard, it may be impossible 
 to obtain, and which, after all, is itself nothing 
 but a species of marketable property, would 
 infallibly shake and subvert, not only the 
 credit of our circulating medium as it is now 
 established, but also the whole fabric of the 
 commercial and public credit of the kingdom, 
 on the maintenance of which its prosperity so 
 essentially depends. 
 
 11. That it is highly desirable, that the cir- 
 culation and commerce, not only of any par- 
 ticular country, but of society in general, should 
 be carried on with as small a proportion of the 
 precious metals as possible, the extracting of 
 which from the bowels of the earth, requires 
 so much labour and expence, and for the pro* 
 
curing of which, the lives of so many millions 
 of human beings have been unnecessarily, and 
 it may be safely contended, in a great measure^ 
 even wantonly, sacrificed ; and. 
 
 12. That the price of bullion rising in the 
 market, much above the mint price, is a cir- 
 cumstance attaching to gold merely as mer- 
 chandize, and which must vary with the 
 demand for that merchandize, as in every other 
 similar case ; and that we might as- well institute 
 an inquiry into the price of diamonds, of 
 cochineal, of sugar, or of any other commo- 
 dity, as into that of bullion. 
 
 CONCLUSION. 
 
 THE conclusion of the whole is this, that Par- 
 liament can find no difficulty, in rectifying any 
 abuses, (if any shall be found to exist), which 
 may have arisen, in our paper circulation, as 
 it is now establishedjfor it is only the abuse that 
 can be justly objected to ; but that wholly to over- 
 turn a system, which has proved such a source 
 of national prosperity, which has stood the test 
 of the experience of 13 years, THE MOST EVENT- 
 FUL IN THE HISTORY OF MANKIND, and a system 
 
 E 
 
[66] 
 
 which, if maintained, will enable us to resist 
 the utmost efforts of all our enemies, would be 
 a species of political suicide, altogether unpar- 
 donable. 
 
 JOHN SINCLAIR. 
 
 5, Terrace, Palace-yard, 
 London, November 24, 1810. 
 
[67] 
 
 POSTSCRIPT. 
 
 AFTER these Political Maxims had heen 
 drawn up, I resolved to ascertain, how far 
 they were consistent with the principles laid 
 down in a work of great merit, Sir James 
 Steuart's Inquiry into the principles of Poli- 
 tical Economy. Not having had any occasion 
 to consider that work for several years, I 
 found, with peculiar satisfaction, that the sys- 
 tem which seemed to me the best calculated 
 for the prosperity of this country, wus sanc- 
 tioned by the authority of that most intelli- 
 gent and respectable writer. Every word he 
 says regarding coin and currency, merits the 
 attention of those who wish to be master of 
 those intricate subjects. I shall subjoin, for 
 the consideration of the reader, those passages 
 which seem to me the most essential; wiih 
 such observations as have occurred to me on 
 the perusal of them. 
 
 1. On the Origin of the Obligation to pay Bank 
 Paper in Coin 
 
 " The obligation to pay Bank paper in 
 " coin, owes its origin to the low slate of 
 
68 3 
 
 " credit in Europe, at the time when Banks first 
 " began to be introduced ; and it is not likely 
 44 that any other ex pedient will soon be fallen 
 " upon, to remove the inconveniencies which 
 44 result from it, in domeslic circulation, as 
 44 long as some persons of the most acute un- 
 44 derstanding in many things, consider all 
 44 money, except coin, -to be talse and ftcti- 
 44 tious." Book IV. chap. 7. 
 
 Observation. 
 
 One would imagine that this distin- 
 guished writer, had forseen the appointment 
 of a Bullion Committee, in the course of whose 
 proceedings, persons of (he most acute un- 
 derstanding in many things, seern to have 
 been impressed with most erroneous opinions 
 on the subjects of coin and paper currency. 
 
 f 
 2- On the Amount of Gold Coin, necessary to 
 
 circulate any given quantity of Bank paper. 
 
 It is supposed that the Bank of England 
 was formerly obliged to keep in coin one 
 third part ol the value of all its notes in cir- 
 culation. On this subject Sir James Steuart 
 observes, " but the consequence of the obli- 
 44 gation to pay in coin is, that when the na- 
 " tion comes to owe a foreign balance, the 
 " notes which the Bank had issued to sup- 
 4t port domestic circulation only> come upon 
 
" it for the payment of this balance ; and 
 " thereby the coin, which it had provided 
 !6 for home demand only, is drawn out." 
 Book IV. chap. 7. 
 
 Observation. 
 
 The justness of these remarks can hardly 
 be questioned ; it is evident, therefore, that 
 it would require 7, 000,000. in specie, to cir- 
 culate ^2 f, 000 ,000. of Bank Notes, the a- 
 mount necessary for the demands of the coun- 
 try at this time. If the Bank were compelled 
 to have always 1 ,000 ,000. in its coffers, which 
 it must now purchase at a loss of 8% per 
 cent., and which, from any great additional 
 demand, would soon rise toJ5 or 20 per cent. 
 and which it mast be constantly replacing; I 
 should be glad to know, in what the profit of 
 the Bank would consist, and whether it would 
 be worth its while to issue a single note, with 
 the risk of its being converted, at such an ex- 
 pence, into specie. 
 
 3. On the Advantages of Paper Currency. 
 
 " In countries where nothing circulates but 
 " the metals, when coin becomes scarce, it is 
 " hardly possible to find any credit at all in 
 " the remote provinces ; and even in the cen- 
 " tre of circulation, the interest paid for the 
 " use of it, must rise very considerably, and 
 
" must stand high for some time, before Bui- 
 " lion, for the purpose of coinage, canbe-im- 
 " ported. Paper money, on the other hand, 
 <; when Banks and trade are well established, 
 " is always to be found. No part of it lies 
 " dead not even for a day, when employed 
 " in trade ; it is not so of coin/ 1 Steuart's 
 Polit. Econ, Book IV. chap 12- 
 
 " To the Banks of Scotland, the iroprove- 
 " ment of that country is entirely owing." 
 Ditto, Vol. III. p. 197. 
 
 Observation. 
 
 These remarks are perfectly just. The 
 prosperity both of England and of Scotland, 
 ought principally to be attributed to the Bank- 
 ing establishments in those two countries, 
 and the judicious principles by which they 
 are regulated. Any attempt therefore, cal- 
 culated for the purpose of diminishing their 
 power, or restricting their circulation, cannot 
 be two vigorously opposed. 
 
 4. On the necessity of having Bank Notes con- 
 vertible into Specie. 
 
 " IT is said that bank notes can never be re- 
 " ceived as specie, but from a persuasion that 
 " they may be exchanged for it on demand.*' 
 
 u To this the answer is obvious ; that it 
 " is sufficient that bank notes be received as 
 
tc 
 
 " value, and that they answer every purpose 
 44 in carrying on alienation. The use of paper 
 44 money is, to keep the reckoning between 
 44 parties who are solvent; the use of specie 
 <c or coin, is, to avoid the inconvenience of 
 44 giving credit to persons who perhaps may 
 44 not be so." 
 
 44 Again it is said, that if I have coin, I 
 44 may pay any where within the commercial 
 " world, at the expense of transportation and 
 " insurance." 
 
 44 To this it may be answered, that the 
 " principal use of coin is not to send it out 
 44 of the country, but to keep accounts clear 
 
 among the inhabitants within the country; 
 
 and that the only complaints against paper 
 44 money, and regrets for want of coin, issue 
 " from those who wish to profit from the rising 
 64 value of the metal contained in the coin, 
 46 and who endeavour to persuade the public, 
 44 that its interest, and not their own, is their 
 44 object ; but let us not say, that because 
 i4 some of our money may be made of the pre- 
 44 cious metals, that all oar money should be 
 44 made of them, in order that those, who 
 44 carry on transactions in money, may have 
 44 an opportunity of sending our metals away 
 " with greater ease, and thereby of depriving 
 44 us of the means of carrying on alienations 
 44 among ourselves." (Steuart's Polit. Econ. 
 Book IV. chap, 20. 
 
C70 
 
 Observation. 
 
 Those who are not convinced by these 
 judicious remarks, must be either warped 
 by interest, as jobbers in money often are, 
 (who perhaps have been at the bottom 
 of all this mischief), or they must be im- 
 pressed with prejudices not to be surmount- 
 ed. It is astonishing how any doubt of the 
 utility of our 'present system of circulation, 
 should remain in the breast of any one, after 
 we have witnessed the beneficial effects which 
 have resulted from it, during the course of 
 the last 13 years. 
 
 5, On the Necessity of Maintaining Banks. 
 
 " If a statesman do not support his banks by 
 u a systematical chain of conduct, he will 
 " drain the liind of circulation by his remit- 
 " tances, his credit will fail, his taxes will no 
 <; more be paid, and his people will be x>p- 
 4t pressed. But if he pursue his plan systo 
 u matically, circulation will be kept full, his 
 " credit will be supported, his taxes will be 
 " paid, and his people will be easy, because 
 " no check v/ill be put either to their indus- 
 " try or consumption for want of money/' 
 Steuart's Pol. Econ. Book. IV. chap. 10. 
 
 Observation. 
 
 The doctrines contained in this paragraph* 
 ccmpletely justify the observations contained 
 
in the fifth political maxim. It were to be 
 wished that those, who are anxious to for 11 a 
 just opinion regarding coin and paper cur- 
 rency, would study the works of an author, 
 whose " Inquiry into the principles of Poli- 
 44 tical Economy," was the labour of IB years 
 diligent research, and whose works cannot be 
 surpassed by those of any other political au- 
 thor, for ingenuity of thought, justness of rea- 
 soning, and soundness of judgment. 
 
 6. On Public Loans. 
 
 " As the object of the borrower is, to have 
 " interest low, the statesman who intends to 
 " borrow, must use all possible means to in- 
 " crease the quantity of money in circulation." 
 
 "But if coin alone be used as money, and if 
 " this coin be sent out of the country, when 
 " borrowed, and if what is sent away cannot be 
 " replaced, at will, the scheme of augmenting 
 *' money becomes impracticable : it will daily 
 46 become more scarce, more difficult to pro- 
 4t cure, and interest must rise higher every 
 44 day. Symbolical, or paper money, that is cre- 
 44 dit, must then be established at home, upon 
 44 the firmest basis : this will enable every one 
 44 to pay what he owes, consequently the taxes 
 " will be paid, the creditors will receive what 
 ct is due to them regularly, money every year 
 46 will augment in proportion as debts are 
 " contracted, and if borrowing do not augment 
 
 F 
 
C 74 3 
 
 CJ 
 
 beyond this proportion, interest will not rise, 
 u and if borrowing should fall below this pro- 
 " portion, interest will sink." Steuart's Polit. 
 Econ. Book IV. chap. 10. 
 
 Observation. 
 
 These doctrines are invaluable, and are 
 completely justified by the recent experience 
 of this country. Those who cannot feel their 
 importance, do not merit the name of States- 
 men. 
 
 London : printed by W. Bulmer and Co. 
 Gere land-row, St. James's* 
 
DEPT 
 
 &- 
 
 [late recall. 
 
 REC 
 
 JUN" 7 
 
 ; 
 
 i*W76" 
 
 Uni5 5en - era] Ll ' b rary 
 University of r^i;*/__-