Ut^lVERSlTY OF 
 _ ILLINOIS LIBRAPT 
 
 STACKS
 
 LETTERS 
 
 TO 
 
 THE EDITOR OF "THE TIMES" JOURNAL, 
 
 ON THE 
 
 AFFAIRS AND CONDUCT 
 
 OF 
 
 THE BANK OF ENGLAND; 
 
 INTRODUCTION OF BRITISH SILVER MONEY INTO 
 THE COLONIES; 
 
 AND GENERALLY, ON THE 
 
 CURRENCY OF THE UNITED KINGDOx^T, BOTH PAPER AND 
 METALLIC : 
 
 WITH NOTES, AND AN APPENDIX. 
 
 n 
 
 K 
 
 BY DANIEL HARDCASTLE. 
 
 " I have been young', and now am old ; yet did I never see an English 
 Guinea, or a Spanish Dollar protested for non-payment." 
 
 MOSES EZECHIELS, 
 
 LONDON: 
 PRINTED FOR RICHARD LONG, 
 
 31, FINSBIIRY PLACE. 
 182G.
 
 PRINTED BY JAMES BULLOCK, LOMBARD STREET, WHITEFRIARS.
 
 CONTENTS. 
 
 LETTER I. 
 
 Page 
 On the affairs and conduct of the Bank of E no-land . 1 
 
 LETTER II. 
 On Bank-notes and Credit 24 
 
 LETTER III. 
 
 On the profits of the Bank during the Restriction . 43 
 
 LETTER IV. 
 
 Comparison between the expense of a paper currency, 
 and the loss by wear and tear of a metallic currency 50 
 
 LETTER V. 
 On the excessive circulation of the Bank of England, 
 and means for its reduction ... .65 
 
 LETTER VL 
 
 On the exportation of gold. ..... 72 
 
 LETTER VII. 
 
 On the circulation of the Bank of England . . 78 
 
 LETTER VIII. 
 
 On our metallic currency, and on the introduction of 
 British silver money into the Colonies . . .101 
 
 LETTER IX. 
 
 On our metallic currency . . . . .121 
 
 LETTER X. 
 
 The same subject continued . . . . . 142 
 
 LETTER XI. 
 
 On a rumoured arrangement between the Bank of 
 England and the Government . . . .160 
 
 LETTER XII. 
 
 On our metallic currency . . . . .162 
 
 b2
 
 IV CONTENTS. 
 
 LETTER XIII. 
 
 The same subject continued ..... 179 
 
 LETTER XIV. 
 The same subject continued . . . .194) 
 
 LETTER XV. 
 On Money 209 
 
 LETTER XVI. 
 The same subject continued 227 
 
 LETTER XVII. 
 On the abuses of paper money .... 244 
 
 LETTER XVIII. 
 
 Plan for the regulation of our paper currency . . 257 
 
 NOTE I. 
 
 On the rate of interest — The causes which regulate it 
 — A high rate of interest the sign of prosperity . 275 
 
 NOTE IL 
 
 That it is false even in speculation, that one standard 
 of value is less variable than two — That the relative 
 value between gold and silver is the same, or as 
 nearly as possible the same, as it was forty years 
 ago; and that this relative value has not altered 
 more than 2 per cent, in the last century , . 277 
 
 NOTE IIL 
 
 On a seignorage . . . . . .291 
 
 APPENDIX I. 
 
 On the opinion of Mr. Alexander Baring, that the Act 
 of 1819, augmented the ancient metallic standard of 
 the country ....... 294 
 
 APPENDIX II. 
 
 Whether gold or silver be the more accurate measure 
 of value. • 301 
 
 APPENDIX IIL 
 
 Relating to our silver currency . . " . . 308
 
 PREFACE. 
 
 The first Letter of this collection was published 
 in the " Times,'' on the 20th December, 1824, 
 and the last on the 30th January, 1826; they 
 relate to our currency, both paper and metallic ; 
 and will be found, I believe, to contain principles 
 applicable to all currencies, and to every state of 
 affairs. I have added some Notes and an Ap- 
 pendix, containing new and (as I think) curious 
 matter. 
 
 In the composition of these Letters I have be- 
 stowed some labour, but much more in the study 
 of the subject to which they relate : on which, at 
 every moment of leisure during the last seven 
 years, I have meditated to the full extent of my 
 capacity ; and, therefore, whatever my errors, 
 they cannot be imputed to haste and precipi- 
 tation. 
 
 In discussing the subject of money — in com- 
 paring a paper with a metallic currency — and in 
 treating of the defects in our metallic system, I 
 have taken great pains ; but I have laid down no 
 new principles ; nor was it necessary, because it is 
 quite certain that every thing worth knowing in 
 principle has been long since discovered ; and 
 curious indeed would be the situation of the civi- 
 lized world, if after ages of experience, it should 
 still be necessary to inquire into the nature of 
 money, and the functions it has to perform. 
 Here, therefore, I have contented myself with 
 clothing old and long-established principles 
 (which never have, nor ever can be departed 
 from, with safety) in a new dress ; and in which I 
 think they will appear to advantage. 
 
 Having propounded no new principles, it will 
 be quite in vain to criticise this work ; because, 
 whoever quarrels with me, must quarrel with
 
 VI PREFACE. 
 
 Sir Isaac Newton and Mr. Locke ; and with such 
 men I am quite satisfied to be in the minority. 
 In short, he that quarrels with me quarrels with 
 facts, and with the system of currency at present 
 established in France, and with that which ex- 
 isted in Holland during the flourishing and most 
 illustrious period of the Republic. 
 
 In more than one part of these Letters I have 
 had occasion to advert to the value of Bank-notes 
 during the restriction ; and in computing this 
 value, I have proceeded on the only hitherto ac- 
 knowledged principle, "the difference between 
 the Mint and the market price of gold bullion :" 
 but I have long been convinced that this principle 
 does not go far enough, and that the excess in the 
 market price of gold bullion beyond the Mint 
 price did not, at the period to which we allude, 
 designate to the full extent the depreciation in the 
 value of the Bank-note. I intended to have said 
 something on this matter in the Appendix ; but 
 my health is not good, and I must set bounds to 
 my lucubrations ; I therefore defer it to a future 
 opportunity. 
 
 In all that relates to the affairs and conduct of 
 the Bank of England, and its connexion with 
 Government, I have expressed myself with great 
 freedom, and even boldness ; but I have said 
 no more than I believe, and no more than the 
 occasion called for ; and I have given my reasons. 
 
 Having from early youth been brought vip in 
 the fear and veneration of the Bank of England, 
 I once fancied that I saw a certain usefulness in 
 the system, and at any rate that it was necessary 
 to enable us to carry on the late war ; but time 
 has passed over my head, the investigation into 
 the affairs of the Bank, in 1819, brought much to 
 light which before was shrouded in obscurity, 
 fact upon fact has been disclosed ; and, I am
 
 PREFACE. VU 
 
 undeceived : and 1 am now as fully convinced, as 
 I can be of any thing upon earth, that the Bank 
 never did, nor ever can, render the least effectual 
 assistance to the Government ; but, on the con- 
 trary, that every transaction between the Bank 
 and the Government must eventually lead to 
 mischief. 
 
 The present moment is highly propitious to the 
 establishment of a sound system of currency in 
 this country. A great part of the debt due to 
 foreigners, (the fruit of those improvident specu- 
 lations which had their origin in an excessive 
 paper currency), have already been liquidated ; not 
 honestly, and by means of goods or money, but 
 by Bankruptcy ; and part of that which remains, 
 will in all probability be liquidated in the same 
 manner. In this state of things, and with a 
 ruined credit, we shall probably sell more than we 
 buy ; this will bring in the precious metals ; and 
 the government of this country will be disgraced 
 for ever if it does not at once and effectually, put 
 down a system which, every four or five years, 
 (and this as sure as effect follows cause), converts 
 a whole nation into a gang of swindlers. 
 
 Something also, it appears, is to be done, and 
 some of the plans suggested in these Letters are 
 to be acted upon. All notes under 5l. are to be 
 withdrawn from circulation : silver, as well as 
 gold is, it is said, to be a legal tender ; and, it is 
 even whispered, that a branch of the Mint is to 
 be constituted a bank of deposit for silver bullion ; 
 but part of this may not be true ; and except what 
 I occasionally glean from the Newspapers, I know 
 but little of the occurrences of the day. 
 
 It is certain, however, that these measures, if 
 carried into effect, will greatly improve our mo- 
 netary system ; our metallic system will tlien be 
 as perfect as it can be ; but witli respect to our
 
 Vlll PREFACE. 
 
 paper currency, it is clear to me that the proposed 
 measure does not go far enough, and that by al- 
 lowing notes to circulate under 20/., or at any rate 
 under 10/., we shall be constantly exposed to an 
 excess of currency ; but permit no notes under 20l. 
 to circulate, and dissolve the connexion between 
 the Bank of England and the Government, and 
 then, whether we establish Joint Stock Banking 
 Companies, or leave the trade in banking upon its 
 present footing; or, whether we do or do not 
 renew the Charter of the Bank of England, are 
 matters of very little importance. And how it 
 comes to pass (at least with reference to a sound 
 state of things) that these banks of credit should 
 at all be necessary, I am at a loss to divine ; for 
 most certainly there is no proposition in Euclid so 
 clear as this, that every individual may, by means 
 of industry, get money of the precious metals, as 
 well as money of paper, and that therefore the 
 whole community may get money in the same 
 manner. But if it be held that money is to have 
 its origin in the mere act of borrowing and not in 
 labour, and that rotten parchment bonds, mort- 
 gaged land, and Government securities, are to 
 circulate as money, then indeed do we come to a 
 different principle, and from that moment things 
 assume a different aspect ; but then there is no 
 limit to the quantity of money, and then as money 
 (that is as a measure of value) it is of no use. 
 
 Writing, for neither fame nor profit, and with- 
 out the slightest connexion with any political 
 party, I now leave these Letters to their fate ; 
 merely premising that they are to be considered 
 as so many protests against a long course of folly 
 and delusion, which has no parallel in the history 
 of any other nation upon earth. 
 
 13^^ February, 1826.
 
 LETTER I 
 
 ON THE AFFAIRS AND CONDUCT OF THE BANK 
 OF ENGLAND. 
 
 " Money is neither Whig nor Tory." — Swift. 
 
 The good people of these realms are destined 
 to acquire great experience in all matters re- 
 lating to currency ; and deservedly, for none 
 are more willing- to pay for it, or possess to a 
 greater degree that most invaluable cast of 
 mind, which constantly disposes men to re- 
 ward those by whom they are cheated. But 
 experience (says tlie old proverb) is a dear 
 school, though fools will learn in no other ; 
 and, therefore, as we confessedly have still 
 much to learn, so will it naturally follow that 
 we have much to pay for ; apres le fait, sage 
 Breton. 
 
 More than five years have now elapsed 
 since I addressed some letters to you on the 
 
 B
 
 subject of our Mint regulations and the Bank 
 restriction ; the former remain ; a monument 
 of human folly and absurdity ; but of this, as 
 a strictly scientific (and therefore dry and 
 uninteresting-) subject, I shall say nothing at 
 present. 
 
 My present business is with the Bank of 
 England. The Restriction Act was repealed 
 in 1819; the Bank has since resumed cash 
 payments ; every thing has appeared to go on 
 smoothly and comfortably ; and I little 
 thought that I should again have to trouble 
 you on this point : when, lo and behold ! 
 fresh matter arises ; the Bank rushes headlong 
 into a vast variety of engagements and under- 
 takings, some of immense magnitude, others 
 of less, but all of them at variance with 
 every sound principle. It is, therefore, very 
 far from impossible, that while others warble 
 a " Beatus ille" (that is, " blessed is the Bank 
 Director"), you and I may have to chant the 
 " miserere' of another restriction. But I will 
 explain myself. 
 
 The first operation in which we find the 
 Bank engaged since the resumption of cash 
 payments, is the purchase from Government 
 of a part of the annuity created for the de- 
 fraying of the naval and military pensions. 
 The part so purchased by the Bank was
 
 585,740/., and for 
 
 which i 
 
 t agreed to 
 
 in the following manner : — 
 
 
 1823— April 
 
 .f885,719 
 
 July . 
 
 
 1,225,000 
 
 October 
 
 
 67,870 
 
 1824 — January 
 
 
 1,175,000 
 
 April 
 
 
 67,870 
 
 July 
 
 
 1,175,000 
 
 October 
 
 
 27,870 
 
 1825 — January 
 
 
 1,135,000 
 
 April 
 
 
 27,870 
 
 July 
 
 
 1,130,370 
 
 1826 — January 
 
 
 1,097,870 
 
 July 
 
 
 1,067,870 
 
 1827— January 
 
 
 1,037,870 
 
 July 
 
 
 992,870 
 
 1828— January 
 
 
 947,870 
 
 July 
 
 1,027,500 
 
 
 
 .^13,089,419 
 
 Now, in consequence of this transaction, a 
 very considerable addition has already been 
 made to the paper money of the country; 
 from the same cause it is regularly increasing, 
 and by the time the transaction is completed 
 the addition will be enormous. 
 
 Now I say nothing on the measure itself, 
 except that it was perfectly useless, for if it 
 had been necessary to borrow at all, why not 
 borrow from the sinking fund, and construct 
 a new sinking fund out of the naval and mili- 
 tary pensions as they fell in and became ex- 
 
 B 2
 
 tinct ? The expedient was simple, the country 
 might equally have been relieved from taxes, 
 it would not have had the annuity to pay 
 during forty-five years, and still a sinking 
 fund of this description (taking the rate of 
 interest at 4 per cent.) would have amounted, 
 at the expiration of the forty-five years, to 
 upwards of 240,000,000/. 
 
 But, leaving all this out of the question, 
 why sell this annuity to the Bank, and not to 
 the public ? Because the public, though 
 partial to perpetual annuities, is averse to the 
 purchase of annuities for a term of years. 
 But the nature of things v/ill not be changed, 
 and, whether in a terminable or a perpetual 
 annuity, to borrow is still to borrow ; the two 
 modes stand in a certain defined, fixed re- 
 lation to each other. To compare the value 
 of an annuity for a term of years with a per- 
 petual annuity is easy ; and, therefore, if the 
 public objected to lend money on annuities 
 for a term of years, why not borrow in per- 
 petual annuities ? 
 
 But let us proceed. The next operation in 
 which we find the Bank engaged is the 
 making advances on the security of landed 
 property : what these advances may amount 
 to I do not know, but they are supposed to be 
 about 2,000,000/.
 
 The next expedient hit upon, in order to 
 increase the issues of Bank paper, is to make 
 advances upon funded property, nouveau genre 
 de folic I The extent of tliese advances I am 
 at a loss to determine : it may be two, but it 
 certainly does not fall short of one, million ; 
 but, be it what it will, it is an addition to the 
 general mass of paper. 
 
 I might go on, but where so many points 
 remain to be discussed we must be short on 
 each : add, then, to all I have stated, the 
 advances made by the Bank to the dissentients 
 in the operation of reducing the 4 per cents., 
 and its regular advances to Government on 
 Exchequer-bills, and you will find a mass of 
 paper far exceeding what would have circu- 
 lated in the natural course of things, and which 
 must therefore necessarily interfere with the 
 usual and pecuniary transactions of the com- 
 munity. There is also one observation which 
 is applicable to all these transactions — viz. that 
 they are completely at variance with the ori- 
 ginal purposes for which the Bank was estab- 
 lished, and with every sound principle of 
 banking. 
 
 To this it is said that tlie trade of the 
 Bank in discounts falls off, and that therefore 
 it has recourse to these expedients in order 
 to increase its issues. But whose fault is this J
 
 6 
 
 and who will apply to it for discount, when 
 money may be had in the streets ? And this 
 shows the folly of the system ; for in a regular 
 state of things, whenever the currency is 
 deficient, great and frequent applications are 
 made to the Bank for discounts, and this soon 
 cures the evil ; but our present system is the 
 very reverse of this, and leads to very dif- 
 ferent consequences: for we first create 
 money, and then, instead of waiting for solid 
 customers and a regular demand, we attempt 
 by every possible species of quackery to slink 
 it into circulation. At length we succeed, 
 and then we immediately cry out that the 
 applications for discount diminish ; that is, 
 we first overstock the market with money, 
 and then, in pure simplicity of soul, we 
 wonder that people do not ask for more. 
 
 Then again it is contended, that the Bank 
 has a large capital and great resources, and 
 that, keeping within certain limits, it has a 
 right to employ this capital as it pleases. 
 Now all this is very easily said, and perhaps 
 not quite so easily answered. Involved in 
 the gloom of a mysterious intricate system, 
 the Bank studiously withholds all knowledge 
 of its affairs from the public ; but here and 
 there, through chinks and crannies, light 
 breaks; a few leading facts, which can be
 
 neither misrepresented nor controverted, jut 
 out as promontories to direct us in our course ; 
 and, therefore, though we cannot speak with 
 the utmost accuracy and precision, yet I 
 believe it will be found that we know quite 
 enough of the affairs of the Bank for all the 
 purposes of illustration. 
 
 The original capital of the Bank and sub- 
 sequent additions to this capital, amounting 
 altogether to 14,686,800/., is lent to Govern- 
 ment at 3 per cent. ; here, therefore, the Bank 
 stands in the simple relation of a fundholder, 
 and this is not property of which the Bank 
 stands possessed, but property that it has 
 parted with, and in lieu of which it receives 
 an annuity ; it is not available for any of its 
 present operations, nor is it indeed available 
 for any purpose whatever, because the money 
 has been long since spent and gone ; and 
 before it can be returned by Government to 
 the Bank, it must be raised by loan or taxes 
 on the public ; and, therefore, though this 
 capital so lent by the Bank to Government 
 may be a good security for the ultimate sol- 
 vency of the Bank, yet it is no security 
 whatever against a suspension of cash pay- 
 ments : it was not so in Mr. Pitt's time, and 
 at the period of the last suspension, nor will 
 it be in any other. 
 
 Come we then to the active disposable
 
 6 
 
 capital of the Bank — to that capital, in short, 
 which alone is applicable to its present trans- 
 actions. 
 
 When the affairs of the Bank were inves- 
 tigated in the year 1819, the Bank Directors 
 delivered in a statement, dated the 31st of 
 March, 1819, and by which it appeared that 
 the then capital of the Bank was 5,231,190/. 
 
 Since that time the Bank has made profits, 
 and on the other hand has paid dividends to 
 its proprietors ; but by the considerable re- 
 duction in the rate of interest in general, and 
 particularly on all Government securities, 
 the profits of the Bank must have materially 
 diminished ; and, including the remuneration 
 for the payment of the dividends, and the 
 interest it receives on its capital lent to 
 Government, I do not believe (its own ex- 
 penses deducted) that the annual average net 
 profits of the Bank since 1819 have exceeded 
 900,000/., and certainly not 1,200,000/. 
 Take them, however, at the latter sum, and 
 then the account will stand thus : — 
 
 The active capital of the Bank, accord- 
 ing to the statement dated the 31st 
 of March, 1819, was . . . ^5,231,190 
 
 Add profits made from April, 1819, till 
 Oct., 1824, at the rate of 1,200,000/. 
 per annum • 6,600,000 
 
 ^11,831,190
 
 9 
 
 Brought forward . . i:^ll,831,190 
 Deduct 4 yearly dividends of 
 
 10 per cent., on 14,553,000/. ^5,821,200 
 Deduct 2 yearly dividends of 
 
 8 per cent., on the same sum 2,328,480 
 
 8,149,680 
 
 Remains . . . =^3,681,510 
 It would therefore appear that the active 
 capital of the Bank is at present only about 
 three and a half millions. 
 
 Now I believe that nothing- 1 have here said 
 can be materially or substantially contra- 
 dicted. The item of 5,231,190/. is founded 
 on the Bank's own statement; and that its 
 profits since 1819 must have materially dimi- 
 nished, not only from the resumption of cash 
 payments, but also from the great decline in 
 the rate of interest on all Government secu- 
 rities, is, I believe, past all question. And, 
 indeed, if this were not the case, where was 
 the necessity to reduce the annual dividend 
 from 10 to 8 per cent. ? But I have no wish 
 to exaggerate ; the profits of the Bank may 
 have been greater than I have stated ; I am 
 willing to be in error, and to allow (what I do 
 not believe) that the profits of the Bank have 
 been such as to admit of the dividends it has 
 made since 1819, without the least diminution 
 of its then active capital ; and then I will leave 
 it to the determination of any prudent, con-
 
 10 
 
 siderate, sober-minded man, whether, upon 
 the foundation of so limited a capital as five 
 miillions, the Bank of England is wari'anted 
 in entering into such stupendous engagements 
 and operations. 
 
 But then there is a great deal of gold in the 
 country. This is not quite so certain. On 
 the contrary, I am fully persuaded that all the 
 gold in the country does not exceed fourteen, 
 and certainly not sixteen, millions. How this 
 is divided between the Bank and the public 
 is not very easily determined : perhaps about 
 seven or eight millions may be deposited in 
 the coffers of the Bank, and the remainder in 
 circulation, and in the hands of the public. 
 But at the period of the suspension in 1797> 
 upwards of thirty millions of gold currency 
 existed in the country, and yet Mr. Pitt, 
 merely by borrowing about ten millions from 
 the Bank, caused it to stop payment. 
 
 Then, again, we are told that some or all of 
 the new mining associations are to introduce 
 large quantities of gold from Mexico. Very 
 likely ; but this gold is not yet concocted, it 
 is gold in futuro, and as far as the fact stands 
 at present, the whole idea is ridiculous ; because 
 at this present moment of time large quanti- 
 ties of both gold and silver are on their pas- 
 sage from this country to Mexico, Colombia,
 
 11 
 
 and the Brazils. Indeed, these Mexicans and 
 Colombians are most excellent customers to 
 the people of this country, for not only are 
 they content to take our goods, but they are 
 willing to take our money into the bargain. 
 What a pity it is that they are not also willing 
 to take the notes of the Governor and Com- 
 pany of the Bank of England 1 But some- 
 how or other this is a commodity which fo- 
 reigners do not rate quite so highly as 
 ourselves. Thus, if I go to Paris with 100 
 sovereigns, I am sure to receive from 2,515 to 
 2,520 francs ; but if I take a 100/. Bank-note, 
 I shall only get about 2,490 francs ; and there- 
 fore, in the estimation of a Frenchman at 
 least. Bank-notes are at a discount. 
 
 But, get gold from Mexico, or the moon, or 
 where you like, and where is the utility ? 
 You will only receive it in transitu, and it 
 will immediately be exported to other coun- 
 tries. It is a maxim in currency, that the 
 money which is worthless or of inferior value 
 will drive out that which is good. How, then, 
 is gold to remain in the country when the 
 currency is already redundant ? And as to 
 export the paper would be of no utility (be- 
 cause nothing could be had in return for it), 
 it is evident that the gold must be sent out. 
 During the restriction immense quantities of
 
 12 
 
 gold and silver were imported, and yet the 
 whole disappeared, and along with it all the 
 gold currency of the country. 
 
 Now, let us view the matter in another 
 light ; let us contrast the state of things pro- 
 duced by these operations of the Bank, with 
 that state which exists when things are left to 
 themselves, and in their natural order. 
 
 Thus, if the money borrowed by Govern- 
 ment of the Bank for defraying the naval and 
 military pensions had been borrowed of the 
 public, the latter would have advanced a real 
 capital, and the amount of currency would 
 have remained the same ; but when the same 
 transaction is entered into with the Bank of 
 England, the case is altered immediately, be- 
 cause the Bank, having no capital to lend, 
 does, and can, in reality, only furnish the 
 Government with a certain amount of paper : 
 and then, as a result of the operation, an im- 
 mediate addition is made to the paper cur- 
 rency of the country, and which but for this 
 would not have existed ; and which clearly is 
 not necessary, because the quantity of com- 
 modities still remains the same ; the operation 
 itself neither tends to increase nor diminish 
 them ; that they should circulate, at their fair 
 natural value, no additional quantity of cur- 
 rency was therefore necessary ; and therefore,
 
 13 
 
 the quantity of commodities remaining the 
 same, while the quantity and amount of cur- 
 rency is increased, it is quite evident that the 
 natural tendency of that operation which 
 borrows paper from the Bank instead of capi- 
 tal from the public, is necessarily to raise the 
 money value of commodities : and this is the 
 natural tendency of every jobbing transac- 
 tion which takes place between Government 
 and the Bank of England. 
 
 So, again, when the 4 per cents, were re- 
 duced, the Bank, by paying the dissentients, 
 in reality advanced nothing : but there was 
 merely a certain quantity and amount of 
 Bank paper added to that which already 
 existed : whereas, if the money to pay the 
 dissentients had been borrowed from the 
 public, the currency would not have been 
 affected. And why this was not done I am 
 at a loss to imagine ; for upon what grounds 
 and upon what pretence do we reduce the 
 4 per cents. ? Simply because the rate of 
 interest is reduced. Borrow then at a re- 
 duced rate of interest — not in rags, but in 
 reality ; borrow from the public that has 
 something to lend, and not from the Bank 
 that has nothing. 
 
 Again : when money is advanced by in- 
 dividuals on mortgage, this money is lent in
 
 14 
 
 a currency which already exists, which passes 
 from hand to hand, and is applicable to this 
 and every other purpose of the community : 
 but let the same advances be made by the 
 Bank, and immediately the quantity of money 
 in circulation is augmented, because the ad- 
 vance is made in paper created expressly for 
 the occasion, and which, but for this, would 
 never have existed. 
 
 Finally, let advances on funded property 
 be made by individuals, and the amount of 
 currency will remain unaltered ; but let the 
 same advances be made by the Bank, and 
 immediately the amount of currency will be 
 augmented. 
 
 Now let us endeavour to ascertain the present 
 amount of the legal currency of the country, 
 and compare it with the greatest amount of 
 money in circulation during the war. I am 
 aware that to do this exactly is impossible, 
 because the Bank, true to its system of 
 mystery and concealment, obtained leave, 
 (I believe) during the last session of Parlia- 
 ment, to withhold all knowledge of its issues 
 from the public ; but here again we know 
 enough for the purposes of illustration ; and 
 if I err, it shall not be wilfully, or to favour 
 my own hypothesis. 
 
 The average amount of Bank-notes in cir-
 
 15 
 
 culation during the last nine months, may, 
 I think, at the highest, be estimated at 
 twenty-six millions, and at the lowest, at 
 twenty-two millions ; and, therefore, I might 
 take the mean, and estimate it at twenty- 
 four millions, but I will take it at twenty- 
 two millions — I will even take it at twenty 
 millions ; and it is quite impossible, I believe, 
 with the least regard to truth, to rate it 
 below this amount. To this must be added 
 the gold and silver currency ; and all this 
 together will furnish us with the following 
 statement : — 
 
 Bank-notes in circulation* . . . .£'20,000,000 
 Total amount of gold currency, about 16,000,000 
 Ditto of silver currency, about . 7,000,000 
 
 Total . . 43,000,000 
 Deduct the amount of gold currency 
 
 in the coffers of the Bank . , 8,000,000 
 
 Remains . . .£'35,000,000 
 
 * From a return made to the House of Commons after 
 the publication of this Letter, [viz. on the 2nd June, 1825) 
 it appears, that the amount of Bank-notes in circulation in 
 the month of December, 1824, was as follows : — 
 December 4 . . . i:'20,352,087 
 11 . . . 19,500,444 
 18 . . . 18,915,157 
 25 . . . 19,447,396 
 giving an average circulation during the month of De- 
 cember, 1824, of 19,553,771/. ; and, as the period when this
 
 16 
 
 Therefore, the total amount of the legal cur- 
 rency of the country in circulation, amounts, 
 I believe, at the lowest to 35,000,000/. 
 
 Now let us look at the state of our currency 
 during" the war and the late restriction. 
 
 The period during the late war at which 
 our paper currency stood the highest, was in 
 the year 1813, and there was also, during 
 that year, raised by loan for the public 
 service, the enormous sum of 27,000,000/. 
 
 Now the average amount of Bank-notes 
 in circulation during the year 1813, was 
 23,612,300/.; there was not a particle of gold 
 coin in circulation. The average price of 
 gold during the year was 51. 6s. per ounce, 
 and, therefore, the Bank-note was worth 
 only 145. Sf/. ; and, therefore, the real value 
 of the 23,612,300/., when reduced into gold, 
 or into paper on a par with gold, was only 
 17,315,686/. 135. Ad. Add now to this about 
 five millions (at the very utmost) in Bank- 
 tokens and a depreciated silver currency, and 
 
 Letter was published was just before the payment of the 
 dividends, when the circulation would naturally be low, 
 not only was my estimate of the Bank circulation accurate, 
 and this without the assistance of official documents, but it 
 also was moderate, because, cceteris paribus ^ that circulation, 
 which, in the month of December, is 19,500,000/., will be 
 much more than 20,000,000/., upon an average, throughout 
 the year.
 
 17 
 
 you will have a total amount of legal currency 
 for the year 1813, of about 22,000,000/., 
 and then the conclusion is irresistible; and 
 if, during a period of war, of great Govern- 
 ment expenditure, heavy loans, excessive 
 taxation, and difficult communication with 
 other parts of the world, a currency of 
 22,000,000/. was sufficient for all the purposes 
 of the community, it is quite certain that 
 during a period of profound peace, reduced 
 taxes, and a prompt and easy communication 
 with all parts of the world, a currency of 
 35,000,000/. must be redundant. 
 
 But we want no calculations, we are under 
 no necessity to prove, or even to inquire 
 into the actual amount of our currency ; for 
 the fact being, that the real (not the nominal) 
 exchange has for this some time past been 
 below par, and that gold has been regularly 
 exported to France, and other parts of the 
 Continent; this alone is conclusive evidence, 
 that the currency is redundant. 
 
 Now, leave the public out of the question, 
 and view the matter, iri se, and with relation 
 to the Bank alone. • 
 
 The Bank was instituted for the purpose 
 of discounting merchants' acceptances, and 
 against these it issued its notes; does it 
 discount merchants' acceptances now ? — 
 
 c
 
 18 
 
 Certainly. To a larg-e extent? — Very tri- 
 fling ; and indeed so trifling, that nine-tenths, 
 and perhaps nineteen twentieths of the Bank 
 circulation is founded, not on merchants' 
 acceptances, but on land, and on Govern- 
 ment securities. But does it consist with 
 any sound principle of banking, that nine- 
 teen-twentieths, or even nine-tenths of the 
 issues of an establishment, which prides itself 
 on its solidity and good conduct, should be 
 founded on securities which, before they can 
 become assets, must first be sold in the 
 market ? 
 
 Now look at the extreme ridicule of the 
 thing. Is it in the nature of things, that 
 land should circulate and float up and down 
 the country in the shape of Bank-notes ? 
 Or does it consist with right reason, that 
 Government securities should become the 
 currency of the country through the instru- 
 mentality of Bank-paper ? But it will be 
 said that this was the case during the war 
 and the late restriction. No doubt; but, 
 distingue tempora^ the war is at an end, and 
 the act of 1819 repealed the restriction, and 
 all the state doctors assured us that we should 
 recover our senses. But I see how matters 
 stand, and as the dog returns to his vomit, 
 so is it intended that we should again be
 
 19 
 
 brought to take up with this vile trash of a 
 paper currency. 
 
 But how is this a public question, or how 
 does it concern the public that the Bank 
 should make advances on land, and on pro- 
 perty in the funds ? Not at all, provided 
 these advances be made in real capital ; but 
 by advancing mere paper, which costs nothing, 
 but which the law acknowledges as money, 
 and which, in point of fact, performs all the 
 functions of money, the relation which before 
 subsisted between money and commodities is 
 destroyed ; money, from its greater abun- 
 dance, becomes cheaper, and commodities 
 become dearer; while all this time no one 
 real thing, not one single particle of wealth, 
 is added to the public stock, and there is 
 merely a certain profit made by the Bank, 
 which, somehow or other, must come out of 
 the pockets of the people. 
 
 Now, mark the progress of the operation : 
 first, by means of a mortgage of land, or 
 advances on Government securities, a certain 
 quantity of money is thrown into the market? 
 which otherwise would not have existed ; 
 and then, as the instrument is ready to 
 the hand, and that this money must be em- 
 ployed, we immediately begin to think of 
 speculating in commodities, or to form some 
 
 c '2
 
 20 
 
 new company, and so the public is deluded ; 
 and, therefore, this is directly and essentially 
 a public question, and one in which every 
 plain, honest, industrious man in the kingdom 
 is interested. 
 
 '' It cannot, and it will not come to good." 
 But I will neither break my heart nor hold 
 my tongue; but as long as this frail body 
 draws breath, and in utter disregard of all 
 consequences, I will continue to deprecate a 
 system which tends to raise the price of the 
 poor man's loaf of bread, and to abridge his 
 comforts. 
 
 And now upon the whole matter. We 
 have seen what the Bank has undertaken, 
 the truly slender means at its disposal to 
 enable it to carry such gigantic operations 
 into effect ; we have ascertained that our 
 currency is redundant; and we have also 
 seen the way in which a most unnatural in- 
 flux of currency must necessarily influence 
 the transactions of the community. And are 
 we, then, so unskilled in the signs of the 
 times, that we must yet wait for a sign from 
 Heaven ? Do we wonder that corn has risen 
 — that laud has risen — that the exchange for 
 this some time past has been declining, and 
 is now below par ? — that gold is regularly 
 exported — that new companies spring up, one
 
 21 
 
 after the other, like mushrooms — and that the 
 abundance of paper, and the consequent fa- 
 cility with which it may be obtained, is the 
 signal and sanction for every wild and des- 
 perate species of adventure ? Where, then, 
 shall we be, if (in addition to all I have 
 stated) this country should next year require 
 an importation of foreign corn ? And what 
 is there then to prevent the Bank from sus- 
 pending- cash payments ? 
 
 But is this system to be continued ? — I be- 
 lieve so. Hitherto, at least, there is not 
 the slightest indication of a change. Ask 
 the Bank for money on mortgage : it is 
 granted. Ask for an advance on consols : 
 you have it immediately. In making ad- 
 vances upon stock, there is, however, one 
 part of the conduct of the Bank which is 
 highly deserving of approbation : there is no 
 exception of persons ; but you are gjeeted 
 with a " Walk in, gentlemen ; the cash is 
 ready :" first come, first served, whether it be 
 a lord or chimney-sweeper. 
 
 But is there no remedy ? — A very simple 
 one. The Bank must recall a part of its 
 issues : and the sooner it does this the better : 
 but if the present course be persisted in, then 
 that impulse which has already been given to 
 things, and wliich now creeps as a canker,
 
 22 
 
 will become too powerful to be checked, and 
 we shall have a catastrophe, and this very 
 shortly, if the country should require an im- 
 portation of foreign corn ; but something" 
 later, though with equal certainty, if this 
 importation should not be necessary. The 
 eyes of the public will then be opened, and 
 the Bank of England will be put down as 
 a public nuisance. 
 
 There is, therefore, no alternative, and no 
 means exist to avert the impending evil, and 
 to restore the equilibrium of things, but to 
 reduce the Bank issues. The same cause, 
 generally speaking, will produce the same 
 effect ; and if Mr. Pitt, merely by borrowing 
 about 10,000,000/. from the Bank, in 1797, 
 caused it to stop payment, the same and 
 other jobbing transactions of the like nature, 
 but to a still greater extent, will inevitably 
 now lead to the same result. 
 
 Every reliance, I know, may be placed on 
 the honor and integrity of the Bank Di- 
 rectors, but this is not sufficient ; new 
 maxims prevail, and this is an era of specu- 
 lation and experiment. Uncertain, therefore, 
 as to the course they will adopt, let us be 
 prepared for a denouement ; and as we shall 
 in that case have to travel again over the 
 vsame ground, it will not be amiss that we
 
 2a 
 
 consider the nature and effects of our paper 
 currency during- the late restriction : and 
 this I will do, if I have time, and you will 
 allow me space in your columns. 
 
 In the meantime, what shall we do with 
 the large establishment on Tower-hill (the 
 Mint) ? Shall we shut it up at once in order 
 to save expense ? or shall we convert it into 
 a paper-manufactory ? Talk, indeed, of 
 coining money, and of a perfect mathe- 
 matical system of currency ! Talk of rags, 
 and egg-shells, and eel-skins, and leave the 
 currency of the country (where it has been 
 before) in the hands of the Governor and 
 Company of the Bank of England. You 
 will be sure of a plentiful supply usque ad 
 nauseam. 
 
 December 20, 1824.
 
 24 
 
 LETTER II. 
 
 ON BANK-NOTES AND CREDIT. 
 
 " Fungus est quod una nocte nascitur," 
 
 We hear much of the great capital of the 
 Bank of England, but I really can see no 
 traces of this capital in its operations. 
 
 How does the Bank buy gold ? — With 
 Bank-notes. When it lends to Government, 
 in what are the advances made ? — In Bank- 
 notes. When a man mortgages his estate to 
 the Bank, or when he pawns consols, what does 
 he receive? — Bank-notes, toujours^2iuk-xiotes; 
 and so that Bank-notes would appear to be 
 the universal elixir, and a remedy for all 
 disorders ; like the assignats during the early 
 period of the French Revolution. Mais si 
 maladia opiniatria non vult se garire, quid illi 
 facere? Assignare — postea assignare, ensuita 
 assignare. — (See Burke on the French Revo- 
 lution). 
 
 As, therefore, in all our operations. Bank- 
 notes are the unum. necessarium, then comes
 
 25 
 
 the question, What is a Bank-note ? A piece 
 
 of paper with the figure of an old sybil in 
 the corner, depicted in the act of issuing 
 prophecies and promises to the British public. 
 What is the foundation of a Bank-note ; — 
 that is, on what does it rest ? — On credit. 
 And what is credit ? — A phantom — a mere 
 abstract idea. Credit is nothing that is ma- 
 terial or tangible; it is neither wealth nor 
 capital ; it is not gold, nor is it silver : it is 
 neither food nor clothing, nor a ship, nor a 
 steam-engine : but all these and other things 
 existing, credit intervenes, and, by a variety 
 of hocus pocus tricks, influences their distri- 
 bution ; and so that the man who has nothing, 
 coming in contact with the man who has 
 something', the one very dexterously, and by 
 means of credit, contrives to get his hand 
 into the pocket of the other : and though I 
 will not be positive fear il ne faut jurer de 
 rienj, yet I clearly take this to be the reason 
 why all these mighty issuers of paper are so 
 loud in their praises of credit. Inter se con- 
 venit ursis; and (consult the currier) there's 
 nothing like leather. 
 
 Did credit enable us to carry on the late 
 war ? — Ask those that paid the taxes ; and 
 ask those, again, that furnished supplies to 
 Government by means of loans, and they
 
 26 
 
 will all tell you, that if they had not supplied 
 the Government with something more sub- 
 stantial than credit, the war could not have 
 been carried on even for an hour. Shall we 
 put the same question to the Bank of En- 
 gland ? — If you like : but all there is silent as 
 the grave, and you will get no answer. 
 
 As credit, therefore, did nothing for us at 
 home, was it of any use to our allies ? — Ask 
 the Emperor of Austria, who took our gold, 
 and gave us credit in return ; and which 
 credit, in the shape of so many mortgage 
 bonds, is still (or was lately) locked up in that 
 grand emporium of all credit, the Bank of 
 England. 
 
 Can credit build a house ? — ^Yes, provided 
 some man that has capital will pay for the la- 
 bour and materials ; and credit can do still 
 more, and after the house is built credit can 
 mortgage it. And this brings us exactly to 
 the transactions between the Bank of Eng- 
 land and the Government. Nothing so easy 
 as for the Bank to furnish credit (that is, pa- 
 per), but nil ultra; and the supplies — that 
 which the Government really requires — must 
 come from the people ; and then it follows as 
 a matter of course, under our system, that the 
 Bank must be paid — for what ? For doing 
 worse than nothing-. Fools and madmen ! —
 
 27 
 
 why all this roundabout way of proceeding- ? 
 Why not move openly and directly towards 
 your object ? And since it must come to this 
 at last, why not apply at once, and for all you 
 want, to the public ? But then less machinery 
 would be set in motion, and we should have 
 less opportunity to show our g-reat skill in 
 matters of finance. Certainly, and therefore 
 there would be less expense, and less injury 
 to the public ; and, therefore, unless we are 
 bound to consider the w aste and dilapidation 
 of the public resources, as part of the craft 
 and mystery of finance, we should most as- 
 suredly g-ain by the change. 
 
 Now, let all I have said be denied, and 
 then it will immediately follow, that whoever 
 shall busy himself with making out an ac- 
 count of the wealth and resources of this 
 country, must necessarily include in his es- 
 timate all the Bank-notes in circulation, and 
 all the credit of the Bank of England. And 
 then it will again follow, that as paper may 
 be multiplied at will, and ad infinitum, so 
 there would be no end to the multiplication 
 of our wealth and resources, and we might 
 drive all the world before us like a flock of 
 wild geese; and public wealth would no 
 longer, as heretofore, be obtained by labour 
 nnd real capital, but by dint of sheer trick
 
 28 
 
 and manoeuvre — a most preposterous idea ; 
 and, therefore, it is clear to conviction that a 
 Bank-note is but a piece of paper, and that 
 credit is a phantom which a breath may 
 dissipate and resolve into thin air. Not that 
 I mean altogether to disparage credit : as one 
 of the means for distributing the wealth of 
 the community, it has its place, acting some- 
 times to our loss, and sometimes to our ad- 
 vantage ; but credit creates nothing, and will 
 stand us in no stead in the day of trial, and 
 when our real resources must be called into 
 action. In one word, call credit what you 
 will, and picture it to yourself as great as you 
 will, and then trace it through all its wind- 
 ings and doublings, you shall find it wander- 
 ing about like a beggar, and still it is power- 
 less till it reaches some man, or set of men, 
 who want no credit themselves, but who, on 
 the contrary, are in the possession of all those 
 things that credit requires, and then a bargain 
 is struck, and credit gets assisted. 
 
 But is not credit of utility to the Go- 
 vernment? — Yes, provided it has something 
 whereon to feed and batten ; but here the 
 argument has no place, for we maintain that 
 the Bank lives, and moves, and has its being 
 in credit, and in credit alone : and, therefore, 
 for the Government which has but credit, to
 
 29 
 
 apply for assistance to the Bank which also 
 has but credit, is in reality to make a most 
 useless application, and to get nothing at all ; 
 and the real supplies must come from the 
 people. And, therefore, the sole and mere 
 result of every transaction between the Bank 
 and the Government is the derangement of 
 the currency; and, pay the Bank what we 
 will, we do not merely pay it for doing 
 nothing, but for doing harm. 
 
 As credit, therefore, is nothing, and a 
 Bank-note in reality but a piece of paper, 
 what is the result of an emission of Bank- 
 notes founded on a loan to the Government, 
 either on the security of Exchequer-Bills, or 
 any other security of a similar nature ? — This 
 may easily be shown, and though (according 
 to Mr. Burke) cases are but dead things, and 
 that principles alone are living and pro- 
 ductive, yet the public shall be treated at all 
 points, and as we have already laid down 
 principles, so will we now lay down a case. 
 
 There shall, then, be a period in which no 
 connexion whatever shall subsist between the 
 Bank of England and the Government: at 
 this period there shall be a currency (partly 
 paper and partly metallic, but the whole, as 
 to value, on a par with metallic) of the nu- 
 merical amount of 20,000,000/.: this cur-
 
 30 
 
 rency shall operate on a mass of transactions 
 of the value of 200,000,000/., and this shall 
 be called a sound regular state of things; 
 and all things (money as well as commodities) 
 shall be said to circulate at their fair pro- 
 portionate value. This being laid down, it 
 will follow, that 20,000,000/. being the value 
 of the currency, and 200,000,000/. the value 
 of the commodities on which it is to operate, 
 that the relation between money and com- 
 modities will be as two to twentv, or as one 
 to ten. 
 
 !Now, this sound state of things existing, let 
 the Bank all of a sudden lend 10,000,000/. to 
 the Government on the security of Ex- 
 chequer-Bills ; and then I say, that this 
 being a transaction which has no foundation 
 in, or relation to, commodities, but being 
 merely a loan on the security of paper, if 
 that which when it is issued is to act as 
 money, I say that its only effect will be to 
 disturb the former proportion between money 
 and commodities ; and this proportion, in- 
 stead of being as one to ten, or as two to 
 twenty, will immediately be as 1^ to ten, or 
 as three to twenty ; and then it is evident 
 that the action of money on commodities will 
 be such as inevitably to raise their prices ; 
 for it is only by doing this that the money
 
 31 
 
 can find employment : and, therefore, all 
 other things remaining- the same, if, when 
 the currency was 20,000,000/., the price of 
 the quarter of wheat was 60?., when the cur- 
 rency comes to be augmented to 30,000,000/. 
 the price of the same quarter of wheat will be 
 90s.; and by this rise in the price of corn, 
 and of commodities in general, the former 
 proportion between money and other things 
 will be restored;' the money will find em- 
 ployment, and the demand for money will be 
 precisely the same as before. In short, if 
 twenty millions of money are sufficient for 
 the circulation of 200 millions of connnodi- 
 ties, then thirty millions of money will cir- 
 culate 300 millions of commodities ; but at 
 fair money prices there are but 200 millions, 
 and, therefore, either the prices of commodi- 
 ties must rise, or the money must remain 
 without employment. 
 
 But, though by this rise in the price of 
 commodities, the former relation between 
 money and commodities will be restored, yet 
 this will only apply as to value, and not as to 
 quantity ; for the former quantity of com- 
 modities still remaining the same, while the 
 quantity of money is increased, and all the 
 money finding emplopnent, the same quan- 
 tity of gold or silver will no loue;-er exchange
 
 32 
 
 for the former quantity of commodities ; and if 
 in one state of things an ounce of gold is ex- 
 changed for any given quantity of wheat, it 
 will in the other require one ounce and a 
 half of gold in order to obtain the same quan- 
 tity. But one ounce and a half of gold can 
 never be obtained with the same facility as one 
 ounce alone ; for then both would be alike, 
 and this would be to confound all ideas whe- 
 ther of weight or quantity. It would also be to 
 confound all ideas of value ; for if gold has an 
 exchangeable value (which it has, and thereby 
 it is fitted to serve as money), then it is quite 
 impossible that two differing quantities of 
 gold can, as to value, stand in one and the 
 same relation to any other thing. 
 
 Nor can the operation between the Bank 
 and the Government influence the value of 
 gold generally, and by diminishing the de- 
 mand for it, alter its relation to other things ; 
 for this is not an operation by which we merely 
 substitute one species of money for another, 
 and reject a certain quantity of gold in order 
 to supply its place with paper ; but it is an 
 operation by which, without reason or neces- 
 sity, or the least foundation in any real trans- 
 action, we merely add ten millions to the 
 already existing' currency of the country ; and 
 most assuredly (whether the currency be en-
 
 33 
 
 tirely metallic, or partly paper and partly 
 metallic) this will neither diminish the de- 
 mand for the precious metals, nor cause them 
 to be obtained with greater facility. And, 
 therefore, all that our grand operation accom- 
 plishes is merely this — that it reduces the 
 exchangeable value of the precious metals 
 when compared with other things, not gene- 
 rally and universally, but partially and ex- 
 clusively, and confined to our own particular 
 country ; and then it will follow, that, as 
 compared with other commodities, the pre- 
 cious metals will be cheaper with us than in 
 countries where things are left to themselves, 
 where no overgrown monopolies exist to dis- 
 turb their natural relations ; and where men 
 have not yet reached that pitch of insanity 
 as to suppose that every issue of paper is a 
 supply of real capital to the community. 
 
 Now it is evident at first sight that this great 
 redundancy and consequent cheapness of mo- 
 ney must be highly injurious, and particularly 
 to a manufacturing nation that has large fo- 
 reign dealings ; because at home a large quan- 
 tity of money will but exchange for a small 
 quantity of commodities; whereas, in every 
 other country with which it has dealings, a 
 small quantity of money (by comparison) ex- 
 changes for a large quantity of commodities, 
 
 D
 
 34 
 
 and, therefore, the country that has a redun- 
 dant currency must necessarily buy dear and 
 sell cheap ; and as long as things are in this 
 state, it is quite impossible to get over the 
 difficulty, and so as to be able to compete 
 with other countries but by additional la- 
 bour, or by greater skill and ingenuity, or 
 improved machinery ; and then in our inter- 
 course with foreign nations (and to the extent 
 of all that difference in the value of money 
 which we have described), will our labour, 
 and skill, and machinery, be thrown away 
 and count for nothing.* 
 
 The evil, then, resulting from a redundant 
 
 * According to Hume, it will have all the effects I have 
 here mentioned, these are his words : " What pity Lycurgus 
 did not think of paper-credit when he wanted to banish gold 
 and silver from Sparta ! It would have served his purpose 
 better than the lumps of iron he made use of as money ; and 
 would also have prevented more effectually aU commerce 
 with strangers, as being of so much less real and intrinsic 
 value." 
 
 But if not true to the full extent, this at least is certain 
 that the effect of a redundant currency, particularly of pa- 
 per, is to sink the value of the precious metals ; and this is 
 an evil, because gold and silver being productions, commo- 
 dities equivalents, to reduce by artificial means the value of 
 any production must be productive of mischief; and the 
 greater the foreign commerce of a country, the greater will 
 be the mischief.
 
 35 
 
 currency being great, what is the remedy ? — 
 The first is, that the excess should be hoarded ; 
 and, whatever ideas may obtain to the con- 
 trary, it is nevertheless quite certain that when 
 the currency is entirely metallic, to hoard 
 (that is, to stock and store up) money, does 
 good : not merely (as in the present case), by 
 relieving the currency from its excess ; but 
 for this reason — that as that which is sent out 
 of the country is in reality not sold till the 
 commodity which we receive in return is dis- 
 posed of; so will it follow that the man who 
 hoards a guinea, is in reality the purchaser of 
 the British manufacture by means of which 
 it was obtained : and then all the gold hoarded 
 in this manner, is but so much wealth vested 
 in a substance comparatively imperishable, 
 and stocked and stored up, as it were, against 
 a future emergency. And to say otherwise is 
 to deny the exchangeable value of gold, and 
 to affirm (what no one will believe) that if we 
 have given the materials of food, or clothing, 
 in exchange for gold, we cannot get the same 
 materials in return. 
 
 Not that I mean to hold forth in praise of 
 avarice, or to contend that to lock up the pre- 
 cious metals is at all times better than to give 
 them active employment ; but this I maintain, 
 that of two principles, the one good and the 
 
 d2
 
 36 
 
 other better, that which I here lay down is 
 good, and as a remedy for a redundant cur- 
 rency it clearly is efficacious ; because, if all 
 that is excessive in a currency is locked up, 
 it is evident that the excess can do no harm, 
 and in point of fact there is no excess. Again : 
 particular circumstances may arise, in which 
 it may be highly useful to a country to have a 
 pretty considerable stock of the precious me- 
 tals, and then the principle which I have laid 
 down becomes the best of all. We all know 
 that during the most flourishing period of the 
 Seven United Provinces, gold and silver to an 
 immense amount were deposited in the bank 
 of Amsterdam ; and though some of it was 
 constantly employed by means of transfers 
 from merchant to merchant, in the payment 
 of their acceptances (and was therefore in cir- 
 culation), yet by far the greater part existed 
 in excess, and had no employment whatever. 
 Did this excess do harm ? — Certainly not ; 
 and why ? Because it was not in circulation. 
 Was this excess productive of good ? — Un- 
 doubtedly ; and precisely the same utility re- 
 sulted from it as would have resulted from 
 any stock of the same value, in any other 
 kind of merchandise ; and indeed greater, be- 
 cause the commodity was imperishable, and 
 might be kept for ever without expense, or
 
 37 
 
 the least risk of diminution or deterioration. 
 And, therefore, (and with relation to thepresent 
 matter), as one individual may be said to be 
 richer than his neighbour, because he has a 
 greater stock of furniture, whether useful or or- 
 namental — and this, notwithstanding he should 
 have more than is necessary — so, coeteris pari- 
 bus, may one nation be said to be richer than 
 another, that has a greater stock of the pre- 
 cious metals, and this notwithstanding it 
 should have more than is necessary with re- 
 lation to other things ; because in addition to 
 every other exchangeable value (and to those 
 things in which both are equal), it will still 
 have one exchangeable value in reserve which 
 the other does not possess. 
 
 But these observations apply solely to a 
 metallic currency, and it is evident at first 
 sight that to amass and lay in a large stock 
 of paper is and must be destitute of all public 
 utility. 
 
 The second remedy for a redundant cur- 
 rency is, that the excess shoidd be exported ; 
 but this cannot be done when the currency is 
 entirely of paper, because, export as much 
 paper as you will, you will get nothing in 
 return. But if the currency be entirely 
 metallic, the operation is easy ; the currency 
 by this exportation will be relieved of its ex-
 
 38 
 
 cess, and as that portion of currency which 
 still remains in the country after the export- 
 ation will be of the same nature as that which 
 is sent out, not the slightest unpleasant con- 
 sequence will ensue. But if the currency 
 consist for the greater part of paper, and for 
 a small part only of the precious metals, then 
 to get relieved (by means of exportation) from 
 an excess of currency of this nature, becomes 
 a somewhat difficult and delicate operation ; 
 because the precious metals alone being sent 
 out, and the paper remaining, that which 
 remains is not of the same nature as that 
 which is exported ; then comes a run on the 
 issuers of paper, and this leads to embarrass- 
 ment and a convulsion. 
 
 The third remedy where the currency is 
 partly paper and partly metallic is, to 
 withdraw from circulation and cancel a por- 
 tion of the paper ; not violently, perhaps, but 
 gradually, but at all events sufficiently and 
 effectually, and this at the risk of every kind 
 of inconvenience and even injury to indivi- 
 duals or particular classes; for it is quite 
 impossible that any inconvenience or even 
 injury sustained by individuals or particular 
 classes by reducing the currency, can be 
 equal to the injury inflicted on the com- 
 munity at large by its excess.
 
 39 
 
 Come we now to another point. How 
 much, during the restriction, did it cost the 
 people of this country for the use of the 
 paper of the Bank of England, and as founded 
 alone on the transactions between the Bank 
 aud the Government ? — About forty millions. 
 Did the matter end here ? — Oh, no ; the peo- 
 ple had also to pay the country bankers. 
 How much did this come to ? — Reckoning 
 the gains of all the country bankers, and 
 again the loss to the public by the failure of 
 many : I say, reckoning all this, it amounted 
 to at least thirty millions. Was any thing 
 of this kind necessary? — Not in the least; 
 and this for various reasons which it would 
 be tedious to enumerate, and two will suffice. 
 First, by borrowing paper from the Bank 
 which was to act as money, the Government 
 in reality borrowed nothing but the power 
 of raising the prices of commodities, that is, it 
 borrowed the power to work mischief; and 
 secondly, that at the period of the restriction, 
 at least thirty, and perhaps forty millions of 
 gold coin existed in the country, which im- 
 mediately got locked up, and the greater part 
 of which was not exported till towards the 
 close of the war; and then the inference is 
 obvious ; and it will clearly follow, that while 
 the people had good money of their own,
 
 40 
 
 they were still compelled to pay the Bank of 
 England and the country bankers for the use 
 of bad. And this shows us the folly of our 
 doings, and the extreme ridicule of that 
 operation, which, by borrowing paper from 
 the Bank, at once, and as if by magic, ren- 
 dered all the real solid currency of the coun- 
 try entirely useless. 
 
 But why did this gold get locked up, and 
 why would it not circulate with the paper ? 
 — Because the law, in defiance of fact and 
 reason, and common sense, declared good 
 gold and bad paper to be of the same value, 
 and made the paper (though depreciated) a 
 legal tender at its full denominative value in 
 all payments. And then the gold fled from 
 the paper as from a contagion ; as money it 
 refused to perform its functions — every gui- 
 nea became a mere medal, and never I believe 
 within the memory of man was the King's 
 picture held in greater veneration : and all 
 this was quite natural, for what man so 
 senseless as to give a good guinea in ex- 
 change for a piece of paper and a defaced 
 shilling, which together were perhaps worth 
 only fourteen or fifteen shillings ? Talk, 
 indeed, of keeping the gold in circulation 
 with paper ! Why, even the Spanish dollar 
 was brought to it with difficulty, and this.
 
 4i 
 
 notwithstanding we raised its denominative 
 value to 5s. 6(L, while its real value was only 
 As. 4td. And as the nature of things is inflex- 
 ible, and will not bend to the theories of 
 fanciful men, precisely the same thing hap- 
 pened in France during the prevalence of 
 Law's system ; and the same thing again, 
 during the reign of the assignats ; but no 
 sooner were things left to themselves, and 
 the paper allowed to circulate at a discount, 
 than out came the gold and the silver, and 
 drove away all this vile contemptible trash, 
 and the paper returned to its original uses — 
 that is, pour en faire des papillotes et des 
 torche-culs. And would to God ! that we had 
 been wise enough to do the same thing, that 
 is, that we had allowed the Bank-note to 
 circulate at its real value, and therefore at 
 a discount ; for we may talk for ever, and yet 
 this will be true — that if a thing be worth 
 only fourteen or fifteen shillings, and the law 
 nevertheless fixes its value at twenty shillings, 
 and compels every man to take it at this 
 value, this is a great and crying evil. But 
 allow the note to circulate at its real value, 
 and the evil is remedied ; the people would 
 then have seen the folly of all mere paper sys- 
 tems ; the gold would have re-appeared, the 
 Bank of England would have been abolished
 
 42 
 
 for ever, and the country would have been 
 rid of a most intolerable nuisance. 
 
 But so little have we profited by the ex- 
 perience either of ourselves or others, that 
 even now we cannot leave things to them- 
 selves, and a great part of the notes at pre- 
 sent in circulation proceed from bargains and 
 transactions between the Bank and the Go- 
 vernment, and on transactions with individuals 
 in Government securities: and, therefore, 
 these notes, not being founded on any real 
 transactions in commodities, but merely on 
 Government paper, every such operation es- 
 sentially, and, per se, constitutes an excess of 
 currency ; and the Bank-note being still (I be- 
 lieve) a legal tender, either we must continue to 
 suffer all the evils resulting from an excessive 
 currency, or the paper must gradually drive 
 the gold out of circulation; unless, indeed, 
 the Bank will condescend to relieve us from 
 a portion of its issues, but this it will be 
 brought to with difficulty; these profits on 
 paper and fictions are fine things, and like 
 the gains of the conjuror, they derive from 
 no other capital than dexterity and the blind 
 unthinking confidence of a multitude willing 
 and even anxious to be deluded, let who will 
 be the operator. 
 
 To conclude. Our present scheme of
 
 43 
 
 things is fraught with evil to the community. 
 Viewed with relation to the Bank alone, it is 
 dangerous ; and upon no ground or principle 
 whatever (except that the issuers of paper 
 should make large profits at the expense of 
 the public) can it or ought it to be continued. 
 
 February '2nd, 1825. 
 
 LETTER III. 
 
 ON THE PROFITS OF THE BANK DURING THE 
 RESTRICTION. 
 
 " J'appelle un chat un chat, ct Rolet un fripon." 
 
 BoiLEAU. 
 
 I ASSERTED in my last letter, that during the 
 continuance of the restriction, it cost the 
 people of this country about forty millions, 
 and as proceeding alone from the transactions 
 between the Bank of England and the Go- 
 vernment. It has since been hinted to me, 
 that this sum is large beyond all bounds of 
 credibility ; and as 1 do not like to be thought
 
 44 
 
 a dealer in mere assertions, I shall now pro- 
 ceed to establish what I have said. 
 
 The averag-e of the advances made by the 
 Bank to the Government, from 1797 to 1819, 
 was 1,779,635/. {Vide Report of the Lords' 
 Committee, p. 3 19-) 
 
 This, at 5 per Cent., (as the rate of interest 
 then stood) amounts to an annual sum of 
 889,802/.; and at compound interest, during 
 twenty-three years, to 36,864,920/. I say 
 at compound interest, because it is evident 
 that in this particular case, in which we are 
 called upon to estimate what the Bank has 
 gained, and the public lost, the basis of our 
 calculation must be compound interest ; and 
 this for two reasons. 
 
 First, because the proprietors of Bank 
 stock having, in consequence of the trans- 
 actions between the Bank and the Govern- 
 ment, received a great and unexpected 
 addition to their annual incomes, all the 
 excess beyond what that income would have 
 been, if things had remained in their natural 
 state, might have been, and probably was, 
 regularly employed by them in the purchase 
 of Government securities ; and, consequently, 
 their excess of gain, during the period of the 
 restriction, either did, or might have accu- 
 mulated at compound interest ; and
 
 45 
 
 Secondly, the sinking" fund established by 
 Mr. Pitt being, throughout the whole period 
 of the restriction, in full operation, the sum 
 of 889,802/., which was annually levied by 
 taxes on the people, to be distributed amongst 
 the proprietors of Bank stock, might again, 
 if the currency had been left in its natural 
 state, have been paid to this sinking fund, 
 to accumulate at compound interest in the 
 discharge of debt. 
 
 That the debt of this country will never 
 be discharged by the operations of a sink- 
 ing fund, is evident. But what are we to 
 think of the conduct of men, who first tax 
 the people for the avowed purpose of sup- 
 porting a sinking fund, and then give away 
 the money to the proprietors of Bank 
 stock ? 
 
 But the matter did not end here ; and in 
 the different transactions between the Bank 
 and the Government, this was not the only 
 loss sustained by the ])ublic : for the advances 
 of the Bank were made in a depreciated 
 currency, but the Bank was repaid after the 
 act of 1819, vvhich restored the currency to 
 its original value ; and, therefore, taking the 
 average of the Bank advances during the 
 restriction, in round numbers at eighteen 
 millions, and the average price of gold (for
 
 46 
 
 example), during the same period, at 90^. 
 per ounce, it is exactly as if the Government 
 should lay out eighteen millions in the pur- 
 chase of gold, at 90^. per ounce, for the 
 purpose of re-selling it at 3/. I7s. lO^d., and 
 which would leave a loss of 2,425,000/. A 
 very pretty speculation ! And this is to 
 deal in gold with a vengeance. 
 
 The sum of 36,864,920/. having, therefore, 
 been paid to the proprietors of Bank stock 
 for the use of their trumpery ware, and 
 2,425,000/. being lost by borrowing in bad 
 money, and paying the debt in good, this, 
 together, constitutes a sum of 39,289,920/., 
 and so my position is established ; and then 
 I say nothing of the profligately wasteful 
 expenditure to which a mere paper currency 
 must naturally give rise, or of the doubt and 
 uncertainty which a perpetually varying 
 standard necessarily threw over the property 
 and transactions of every man in the king- 
 dom. This was, indeed, a precious state of 
 things : one man worked, and another (with- 
 out the exercise of any one single power, 
 either bodily or mental) received the wages 
 of his labour ; and the quack doctor marched 
 off in triumph with the fee of the regular 
 physician. Quod capis alter habet. 
 
 And yet, precisely as if all this was foreign
 
 47 
 
 to us, and that the fact of the Bank restric- 
 tion, with all its circumstances and conse- 
 quences, was only to be found in the annals 
 of China or Babylon — I say just as if all this 
 did not concern us in the least, we still go on 
 the same way, and the Government jobs with 
 the Bank, and the Bank jobs with individuals. 
 And then, as I have already stated, every 
 such jobbing- transaction must per se consti- 
 tute an excess of currency : for, as before the 
 transaction takes place, a certain quantity of 
 money exists, and that the Bank is open for 
 the discount of bills founded on real transac- 
 tions in commodities, and that the Mint is 
 also open to the coinage of gold bullion for 
 the public — (and that, therefore, every man 
 who has a real value to give for money may 
 always have it, and that consequently, and 
 as compared with commodities, there can 
 never be a real scarcity of money), so after 
 the transaction has taken place do the same 
 facilities still subsist; and, therefore, if to 
 all the money which is (or can be) fairly 
 called into action by commodities, we super- 
 add another quantity of money, which has 
 no original connexion with commodities, but 
 is founded on a mere fiction, it is of plain and 
 undeniable consequence, that there must be 
 an excess. And then, with precisely the
 
 48 
 
 same mass of wealth as before, there does 
 ensue a most irregular and vicious distribu- 
 tion ; the money prices of commodities rise ; 
 all debtors gain, and all creditors lose ; and 
 to its injurious effects on our foreign com- 
 merce I have already alluded : but amid the 
 general confusion, and, lose who may, it 
 fares well with the dealers in paper. 
 
 Our system inverts the order, and turns 
 aside the natural bent of things. We exult 
 in our great wealth: but in all rich coun- 
 tries, says Adam Smith, the precious metals 
 are dear — -that is, when compared with other 
 productions, they have a great value in ex- 
 change. Now, though this author is often 
 wrong (and must, therefore, be read with cau- 
 tion), yet I am quite sure that he is right 
 here ; for to be rich is to have more than is 
 needful, and to be greatly rich is to have 
 much more than is needful. As great wealth, 
 therefore, implies a great surplus, and as 
 where much exists to be given in exchange 
 for the precious metals, much will be given 
 in exchange for them, so will it naturally 
 follow, that in all rich countries the pre- 
 cious metals will be dear. Again : take a 
 people that are distinctly and positively poor, 
 and give them gold or silver you may ; but 
 to sell it, to get any thing in exchange for it.
 
 49 
 
 is impossible ; because, being- poor, they have 
 no surplus ; and, therefore, it is clear to con- 
 viction, that precisely in the degree that a 
 country is rich will the precious metals be 
 dear. But with us they are cheap, and, 
 therefore either we are not rich, (which we 
 shall be slow to allow) or else our system of 
 currency tends to divert things from their 
 natural course, and by making that cheap 
 which would otherwise be dear, to introduce 
 great uncertainty and confusion. 
 
 And now, to conclude. What shall we say 
 to the '' Heaven-born Minister," the original 
 inventor of a scheme of things (the restric- 
 tion), by which the public was taxed for the 
 benefit of a few individuals ? — Nothing. The 
 man is dead, and gone to his own place, and 
 I will not reflect on his memory. Let others, 
 if they list, apply the rule — Involuntarium 
 ortum ex voluntario censetur pro voluntario 
 — but I will not : and not only do I acquit 
 him of all bad intentions towards the public, 
 but I do also most clearly absolve him from all 
 knowledge whatever of the principle of his 
 own system of the manner in which it ope- 
 rated during its progress, or of the conse- 
 quences to which it must lead eventually. 
 In short, I blame nobody : the thing is past, 
 and without remedy, and all censure is un- 
 
 E
 
 50 
 
 availing — extra fortunam est quicqiiid donatur; 
 and I simply regret that all the money which 
 has been wasted on the proprietors of Bank 
 stock had not been given to the poor. 
 
 March 15, 1825. 
 
 LETTER IV. 
 
 COMPARISON BETWEEN THE EXPENSE OF A PAPER 
 CURRENCY, AND THE LOSS BY WEAR AND TEAR 
 OP A METALLIC CURRENCY. 
 
 " hi hoc signo vinces.'''' — Inscription on the Portugal Coin. 
 
 We have treated of the ill-effects produced 
 by the present excessive circulation of the 
 Bank of England, and we have also treated 
 of our paper-money during the long and 
 memorable period of the restriction, and 
 much more might be said on these matters ; 
 but your columns are valuable, and we must 
 be brief; come we then now to another point, 
 which I never yet recollect to have seen dis-
 
 51 
 
 cussed, but which is, perhaps, deserving of 
 attention. We find it, then, stated, that by 
 adopting a paper, instead of a metalHc cur- 
 rency, we save all the expense of coining, 
 and all the loss occasioned by what is called 
 the wear and tear of a metallic currency. 
 Now the question here, as I understand it, 
 restricts itself to this — whether the mere ex^ 
 pense of issuing paper be greater or less than 
 the expense of coining, with the addition of 
 the loss occasioned by the wear and tear of the 
 coin ; and it is so restricted and unconnected 
 with any other point, that I shall bring it 
 under discussion. 
 
 The expense of coining gold and silver, 
 taking the two metals together, does not, 
 probably, exceed one-third per cent., and 
 certainly not one-half per cent. 
 
 The waste and diminution of the coin by 
 wear and tear, is more difficult to estimate : 
 it is probably different in different countries, 
 and must depend, in some measure, on the 
 proportion of alloy in the coins. Pure gold 
 and pure silver waste more by circulation than 
 when mixed with a certain portion of copper ; 
 and though I cannot say that I possess any 
 practical knowledge of the subject, yet I 
 have reason to believe that gold, twenty-two 
 parts fine and two parts alloy, and silver, 
 
 e2
 
 52 
 
 nine parts fine and one part alloy, is the best 
 of all proportions for money, and that which 
 best resists the eifects of circulation.* And 
 if this be true, then our gold coin is in this 
 respect as perfect as possible ; but our silver 
 coin is something- (though not materially) 
 removed from perfection. 
 
 But to return to the question. The loss 
 by wear and tear will again be different, 
 according to circumstances and the abun- 
 dance or scarcity of the currency. With an 
 abundant currency, the loss by wear and 
 tear will, in my opinion, be much less than 
 when the currency is scarce, because in the 
 one case the money will have much more 
 work to perform than in the other. And 
 this is probably the reason why our silver 
 currency, previously to the late recoinage, 
 became greatly degraded. I believe, how- 
 ever, that silver is something less durable 
 than gold, but by being alloyed in a parti- 
 cular manner, it might, perhaps, be ren- 
 dered equally durable. This is, however, a 
 question which I am not able to determine, 
 nor is it of much importance. 
 
 Taking all circumstances into consider- 
 
 * See the result of various experiments made by Mr. 
 Hatchett, as detailed in Phil. Tram, for 180.3.
 
 53 
 
 ation, and making an average of tlic whole 
 currency of a country, gold and silver, large 
 and small pieces together ; and taking it 
 again that the Mint shall be open to the 
 public, and so as that the people may have 
 just as much coin as they choose to bring 
 bullion to the Mint ; — I say, taking all these 
 things together, I have good reason for think- 
 ing that the wear and tear of a metallic cur- 
 rency will not exceed 10 per cent., and 
 most certainly it will not exceed 15 per cent . 
 in a century : and I found this opinion on 
 different experiments made by the officers of 
 the French Mint * 
 
 ' * L'admmistration des monnoies de France a reconnu en 
 1802, par des experiences faites sur un grand nombre de 
 pieces, que les ecus de six liv. et de trois liv. fabriqucs 
 depuis 1726, jusqu'en 1793, avoient perdu de leurs poids, 
 les premiers If pour cent, ou 0.0175, et les seconds 8 pour 
 cent, ou 0.08, y compris la moitie de la tolerance, ou dix- 
 huit grains par marc. Elle trouva aussi a la meme epoque 
 que les Louis fabriques depuis 1785 jusqu'en 1793, avoient 
 perdu de leurs poids 1 pour cent, ou 0.01, y compris une 
 partie de la tolerance qui etait de quinze grains par marc. 
 Cette perte de poids et les fraix de fabrication deS vieilles 
 pieces doivent etre pris sur les impots, et ne peuvcnt ctre 
 exiges des porteurs d'especes — ' Notions simples sur Ic mon- 
 noies, par M. Mongez.' — Vide Bonneville XXVI. 
 
 N.B. Taking these experiments, and what is here stated, 
 for the basis of our calculations, we shall find that the average 
 loss on gold and silver money by wear and tear amounts to 
 8^ per cent, in a century. From the experiments made by
 
 54 
 
 Not that we are to suppose that with a 
 Mint open for the coinage of both gold and 
 silver, and wise laws that should prevent any 
 coin from passings current that was depreci- 
 ated beyond a certain moderate extent, there 
 could ever be any coin in circulation that 
 was greatly deteriorated ; for such coin, not 
 being current, and being in fact mere bullion, 
 would be either exported or taken to the 
 Mint to be recoined, and so that constant 
 provision would be made for the integrity of 
 the currency. It is to this point, and not to 
 idle theories about standards of value, that a 
 wise Government will direct its attention; 
 and this point it will effectually secure by 
 giving every possible facility to the coining 
 of money. 
 
 Now let us compute the expense of a paper 
 currency ; and then, taking our system 
 during the restriction for a basis, we shall 
 find that paper costs money; and that en- 
 graving and printing also costs money, and 
 
 Mr. Hatchett at the request of the late Lord Liverpool, it 
 also appears that the waste of coin by mere circulation is 
 very trifling. Including the expense of coining, it will be 
 seen that I have taken the loss at 15 per cent, in a century — 
 that is, at nearly double what it probably is in reality ; and 
 this not in opposition to the great authorities I have quoted, 
 but because, in arguing with the advocates of a paper system, 
 I am always willing to concede more than they can require-
 
 55 
 
 that the convenience of the public requiring 
 that Bank-notes should be frequently ex- 
 changed and converted from small into large, 
 and vice ve)'sd,t]ie expense altogether is not in- 
 considerable. Then we have a great number of 
 clerks, and a variety of other expenses inci- 
 dental to so vast an establishment as that of 
 the Bank of England ; and so that we shall 
 probably find that the total expense of the 
 Bank of England during the restriction will 
 not have been less than 1 per cent, annually 
 on the amount of its issues. But take the 
 expense of issuing notes at f per cent. — take 
 it even at J per cent., and then, by com- 
 paring the expense of a paper currency of 
 twenty millions with the expense of coinage, 
 and the wear and tear of a metallic currency 
 to the same amount, let us see how the ac- 
 count will stand at the expiration of twenty 
 years. 
 
 Expense of coining 20,000,000/., at^ per cent. ^100,000 
 The loss by wear, being according to the high- 
 est estimate, 15 per cent, in 100 years, this 
 will give 3 per cent, in twenty years, and on 
 20,000,000/. will amount to . • . 600,000 
 
 dC700,000 
 
 On the other hand, the expense of issuing 
 Bank-notes amounts at the most reduced rate 
 to I per cent, per annum ; this on 20,()00,()()0/. 
 will amounl to 100,000/. per annum, and in
 
 56 
 
 twenty years will form a sum of 2,000,000/. ; 
 and so that the expense of issuing paper will 
 exceed the expense of coinage, and the loss 
 by wear and tear of the coin, in a sum of 
 1,300,000/. 
 
 This, then, will be the result of the whole 
 — that supposing on the one hand a paper 
 currency to be issued at an annual expense 
 of only 4 per cent., it would on the other re- 
 quire an expense of coinage and a loss by 
 wear and tear to the extent of 10 per cent, in 
 twenty years, before the expense of paper 
 would be reduced to the expense of a metallic 
 currency : or, in other words, the expense of 
 a paper would exceed the expense and loss 
 by wear and tear of a metallic currency by 7 
 per cent, in twenty years, or 35 per cent, in 
 a century. 
 
 But if we take the annual expense of 
 issuing paper at f per cent., this upon 
 20,000,000/. will, at the expiration of twenty 
 years, amount to 3,000,000/. which is equi- 
 valent to an expense of coinage and loss by 
 wear and tear, during the same period, of 
 15 per cent, on a metallic currency: and so 
 that the expense of a paper would exceed the 
 expense and loss by wear and tear of a me- 
 tallic currency by 12 per cent, in twenty 
 years, or 60 per cent, in a century. 
 
 And that, finally, if we take the annual
 
 57 
 
 expense of paper at 1 per cent., this upon 
 20,000,000/. will, at the expiration of twenty 
 years, amount to 4,000,000/., which is equi- 
 valent to an expense of coinage and the loss 
 by wear and tear, during* the same period, of 
 twenty per cent, on a metallic currency. 
 And if, taking the expense of issuing paper 
 at 1 per cent, per annum, we carry on the 
 calculation for 100 years, the mere expense 
 of issuing 20,000,000/. of paper during that 
 period will amount to the whole of its de- 
 nominative value ; and the expense of coinage 
 and the loss by wear and tear, during the 
 same period, on a metallic currency not ex- 
 ceeding at the utmost 15 per cent.; the ex- 
 pense of paper will exceed the expense of a 
 metallic currency in the enormous sum of 
 17,000,000/. 
 
 And therefore we are much mistaken when 
 we suppose that the expense of issuing paper 
 is less than the expense of coinage and the wear 
 and tear of a metallic currency. 
 
 And yet there have been men amongst us 
 who have carried their ideas of the cheapness 
 of a paper currency so far as to imagine that 
 it might even be extended to paper half-crowns 
 and shillings with great advantage to the 
 community; not reflecting that in the course 
 of a very few years the mere expense of such
 
 58 
 
 a currency would be more than equal to the 
 whole of its denominative value. 
 
 It is not impossible, however, that precisely 
 to this pass would matters have come in this 
 country, if the war had continued, and the 
 law which made a Bank-note (not convertible 
 into cash) a legal tender in all payments had 
 remained in operation ; and this not from po- 
 verty, nor from any disinclination on the part 
 of the people, if left to themselves, to resort 
 to a metallic currency ; but because it is totally 
 impossible that gold and silver should remain 
 in circulation with a paper money, which, 
 while it is continually and progressively de- 
 clining in value, is still made a legal tender, 
 and ordered to be taken at its full denomi- 
 native value in all payments. 
 
 Now to all this it will be objected, that though 
 the expense of keeping up a paper currency 
 be much greater than that of a metallic, yet 
 that the first cost of the material is much less, 
 and that herein consists the great advantage 
 of a paper currency. But this is a very dif- 
 ferent question, and which you and I will take 
 up some months hence, when we shall be more 
 at leisure. Our case here will be much stronger, 
 and we shall be able to prove beyond the pos- 
 sibility of doubt or contradiction — 
 
 1. That nothing is or can be gained by
 
 59 
 
 substituting the less for the more expensive 
 material — that is, paper for gold and silver ; 
 but on the contrary. 
 
 2. That the direct effect of a paper curren- 
 cy is to set limits to the employment of labour 
 and capital. 
 
 3. That the gains of those who issue paper 
 are a tax on the productive classes, and a di- 
 minution of the real resources of the state. 
 
 All this, as already said, will we make clear 
 at some future period of leisure ; and if I at 
 all allude to any of these points in the present 
 letter (which I may perhaps have occasion to 
 do), it shall be but slightly. 
 
 Come we now to other matters ; and then 
 I say that, taken as a whole, (that is, coupling 
 our Mint regulations with the monopoly of 
 the Bank of England), our present scheme of 
 currency would disgrace a pedlar. Look at 
 the fact. During 1818-19 we sent out gold 
 to exchange it for silver. From 1820 till to- 
 wards 1824, we sent out silver to exchange it 
 for gold : that is, in both cases we sent out 
 money (or, which is the same thing, the ma- 
 terials of money) that we might receive money 
 in return, and thereby lost all the charges of 
 transport both out and home ; and so that, in 
 point of fact, our conduct has been precisely 
 that of a man, who, fresh from his studies in
 
 60 
 
 the new college in St. George's-fields, should 
 take it into his precious noddle to send a car- 
 go of corn or sugar to France for no other 
 purpose than to get it back again ; and all this 
 proceeded from our Mint regulations. Now, 
 however, the scene is varied a little, and both 
 gold and silver are exported, being driven out 
 by the notes of the Governor and Company 
 of the Bank of England. What fancy will 
 next spring in our heads it is impossible for 
 me to determine ; but of this at least I am 
 certain, that as relating to the principles of 
 currency every thing worth knowing was 
 known 4,000 years ago ; and, therefore, in- 
 stead of making experiments, and listening to 
 the dreams of idle speculation, we should do 
 well in my opinion to attend (and this solely) 
 to plain matter of fact. But, ad iiova semper 
 hians. 
 
 But what, if these novelties are expensive ? 
 — What, if it can be shown that these precious 
 Mint regulations have cost us during the last 
 four or five years upwards of 500,000/., and 
 this from sheer innate vice and defect ? — What, 
 if when they succeed, and work the best, 
 they are then productive of the greatest mis- 
 chief, and act as a bar to industry, and a tax 
 on the manufacturers of Great Britain? — 
 What, in short, if the whole system be false;
 
 61 
 
 not simply when tried by facts (for this test it 
 will not stand for a single instant), but in 
 theory, speculatively, and taking up the ques- 
 tion by way of amusement ? And yet, all I 
 say is true, and may, (if necessary) be so 
 clearly proved, that a child shall understand 
 the whole proposition. 
 
 The system, however, has its advantages: 
 it fits us exactly ; and then we have it so snugly 
 all to ourselves. In no other country upon earth 
 will it ever be adopted from choice, and who- 
 ever will be at the pains to study Abraham de 
 Moivre f Doctrine of' Chances J , or the illus- 
 trious Abulfeda, in his Dissertation on the 
 Atoms of Epicurus, will find that a very con- 
 siderable period must elapse before it can be 
 stumbled upon by accident. 
 
 Novv, why do I mention these things, and at 
 this time ? — Because I am given to understand 
 that it is intended to assimilate the currency 
 of Ireland to that of Great Britain; and there- 
 fore I think it will not be amiss that we look 
 to the state and security of the present build- 
 ing, before we construct another on the same 
 principle. Talk of a currency for Ireland ! 
 Look to your currency at home; see that your 
 Mint has something to do ; if not, give up the 
 establishment, and leave the currency of the 
 two countries to the Bank of England, and the
 
 m 
 
 Bank of Ireland, and the country bankers ; 
 and you may take my word for it you will have 
 money enough, not only for the present, but 
 for many succeeding', generations ; but I will 
 not be answerable for its quality. 
 
 But, whatever the system in other respects, 
 and were our Mint regulations as perfect as 
 they are absurd and ridiculous, still, as long as 
 the connexion between the Bank and the Go- 
 vernment subsists, and that the Bank is 
 allowed to make advances on Government se- 
 curities, either to the Government itself, or to 
 individuals, it is quite impossible that the 
 currency of the country can be in a sound 
 healthful state; and just so long will the Bank 
 of England be a public nuisance. I say a 
 public nuisance; for what greater nuisance 
 can be imagined than that an establishment 
 should have the power (not by means of its 
 capital, but by the expansion or contraction 
 of its issues of mere paper), either to raise or 
 lower the money value of all property, both 
 real and personal, and according to its good 
 will and pleasure to influence and regulate the 
 transactions of every member of the com- 
 munity ? 
 
 But destroy the connexion between the 
 Bank and the Government, bring the Bank 
 back to sound principles, and debar it (as
 
 63 
 
 was formerly the case) from all traffic in and 
 advances on Government securities, and the 
 evil is removed ; and then I will undertake 
 to say, that the Bank shall never be able (per- 
 manently at least) to keep 8,000,000 of notes 
 in circulation which shall not be founded oil 
 the precious metals. And this shows us at 
 once that a paper currency is not the choice 
 of the people ; but that by force, by artifice, 
 and not as arising from bonajide transactions 
 between the Bank and the public, but from 
 transactions between the Bank and the Go- 
 vernment, a mass of paper gets into circula- 
 tion which must necessarily drive the gold 
 out of the country. 
 
 By dissolving the connexion between the 
 Government and the Bank, we at once de- 
 termine the question (and this by the mere 
 fact) whether a paper or a metallic currency be 
 the most advantageous to the community; 
 for, if the people should prefer a paper cur- 
 rency, they will regularly take bills to the 
 Bank to be discounted ; and if a metallic, then 
 they will export commodities, and bring in 
 the precious metals, and take them to the 
 Mint to be coined into money ; and I repeat 
 it, that generally speaking the latter will be 
 the course pursued ; and this for the best of 
 reasons, because it affords the greatest en-
 
 64 
 
 couragement to the industry of the productive 
 classes, and relieves them from a tax which 
 they would otherwise have to pay to the 
 issuers of paper. Indeed, indeed, our con- 
 duct is ridiculous. We determine d priori 
 that of all possible systems of currency ours 
 is the best ; and then, in order to prove the 
 truth of the proposition, we forcibly prevent 
 the people from having any other. Whereas, 
 if things were left to themselves, the fact 
 alone (as already said) would decide the 
 principle, and that would be the best system 
 of currency which the people should adopt of 
 their own free choice and inclination. But 
 then less paper would circulate, and the Bank 
 dividends would be reduced, and the Bank 
 charter would be of little value, and the 
 prices of commodities would decline, and 
 honest men with moderate capitals would 
 flourish: all of them very desirable things, 
 no doubt ; but such is our infatuation, that if 
 ever they are accomplished in this country, 
 it must be by miracle. 
 
 May 9th, 1825.
 
 60 
 
 LETTER V. 
 
 ON THE EXCESSIVE CIRCULATION OP THE BANK 
 OF ENGLAND, AND MEANS FOR ITS REDUCTION. 
 
 t* El Herrero y su dlnero, todo est negro." — Spanish Proverb. 
 
 If we except those who gain by our present 
 fraudulent delusive system of currency, it is, 
 I believe, pretty generally admitted that the 
 excessive circulation of the Bank of England 
 is highly injurious to the public ; and there- 
 fore the only question to determine is, in 
 what way this circulation can be reduced. 
 
 The concerns of the Bank are so intimately 
 blended with the operations of the Govern- 
 ment, (and this to the disgrace of both), that 
 the Bank has not the control of its own 
 affairs. Very few (perhaps not to the extent 
 of 2,000,000/.) of the Bank-notes, either in 
 existence or in circulation, are founded on 
 transactions between the Bank and the pub- 
 lic, but on Government securities — that is, 
 on the annuity purchased of the Government 
 for defraying of the naval and military pen-
 
 66 
 
 sions, on advances for the payment of the 
 dissentients in the reduction of the 4 per 
 cents., and on the usual and ordinary ad- 
 vances to the Government on Exchequer Bills. 
 And here we must always bear in mind, that 
 the advances of the Bank on the score of the 
 naval and military pension scheme already 
 amount to 5,787, 199^. — that they will in July 
 amount to 6,917,^691- — that they are pro- 
 gressively increasing — that they will reach 
 their climax in the year 1828— and that they 
 will then amount to 13,089,419/. 
 
 We get no information from the Bank, and 
 we get no information from the Government, 
 and therefore we cannot speak in the last de- 
 gree of accuracy ; but, as arising from the 
 different transactions which I have enume- 
 rated, I have not the least doubt that the 
 actual amount of the Bank advances to Go- 
 vernment is at least 18,000,000/. — a most 
 enormous sum, particularly when we come to 
 reflect that Mr. Pitt, merely by borrowing 
 10,000,000/. from the Bank caused it to stop 
 payment ; and this too, at a period when the 
 quantity of gold in the country was three, 
 and perhaps four, times greater than at pre- 
 sent. 
 
 This being the state of things, we may at 
 once perceive that the nature and foundation
 
 6Y 
 
 of our present currency is precisely the same 
 as during the war : that is, it is a Govern- 
 ment paper money, but with this difference 
 — ^that the Bank now pays in gold ; and of 
 this some people think a great deal, but of 
 which I think but little, and all I say is, that 
 it is mighty well as long as it lasts ; but un- 
 less we change our measures, it cannot last 
 long. The amount of gold in the coffers of 
 the Bank cannot, I think, exceed 5,000,000/., 
 and it probably falls much short of this sum ; 
 and therefore, if the excess in the Bank cir- 
 culation be equal to or greater than the whole 
 amount of the gold in its coflfers, a suspension 
 of cash payments is more than probable ; and 
 if, while the Bank circulation is in excess, 
 the circulation of the country bankers should 
 also be in excess, this suspension, sooner or 
 later, is inevitable — I mean, without a re- 
 duction of the Bank issues ; and it is of this 
 reduction we have now to speak ; and in my 
 view of the case a reduction of the Bank cir- 
 culation can only be accomplished in some 
 or all of the following modes : — 
 
 1 . By a public loan, and therewith to pay 
 the Bank. 
 
 2. By the sale of Exchequer-Bills for the 
 same purpose. 
 
 3. By applying the whole of the sinking 
 
 F 2
 
 68 
 
 fund in discharge of the debt due to the 
 Bank. 
 
 4. By a sale, either in whole or in part, of 
 the annuity purchased by the Bank of the 
 Government. 
 
 But of all these methods the most simple 
 and effectual is for the Government to raise 
 money by loan, and at once to pay off the 
 whole of the floating* debt due to the Bank 
 and to get rid of the connexion. 
 
 And if it should be objected that this will 
 occasion a decline in the public funds, then I 
 answer — 
 
 1. That this in itself, and in every public 
 point of view, is of no importance, for get 
 consols (if you can) up to 100, and the 
 country will not be the richer; send them 
 down to 50, and it will not be the poorer : 
 and whatever the burden of the national debt, 
 as this burden resolves itself into the payment 
 of an annuity, the capital value of this annu- 
 ity can be of no public importance unless with 
 a view to the operations of the sinking fund ; 
 and then the less the capital value, (that is, 
 the lower the price of the funds) the greater 
 will be the power of the sinking fund in the 
 redemption of debt. 
 
 2. That, from a decline in the public funds, 
 not proceeding from political causes, we must
 
 69 
 
 infer a rise in the rate of interest ; and as the 
 rate of interest is governed by the rate of pro- 
 fit on the employment of capital, and that an 
 increasing rate of profit is highly favourable to 
 the acquisition and accumulation of capital ; 
 so does it argue a much sounder state of things 
 that the rate of interest should be gradually 
 advancing, than that it should gradually re- 
 cede. But this is the error which constantly 
 runs through our whole system of finance. 
 We say that it is desirable that money should 
 be cheap, and then, not satisfied with leaving 
 things to the slow progressive action of natural 
 causes, we endeavour to bring about this 
 cheapness by artificial means, and so we work 
 mischief. And then, so erroneous is our 
 doctrine, that in every truly sound flourish- 
 ing state of things money is not cheap, but 
 dear; and this in a double sense — dear when 
 borrowed, and so that much shall be given for 
 the hire of it ; and dear again when the com- 
 parison is direct between money and com- 
 modities. And this is no speculation, but 
 plain simple fact, to which all history bears 
 witness. 
 
 3. That at all events it is much better that 
 the public funds should decline at once, than 
 that the Bank should stop payment, as in that 
 case the decline would be much more con-
 
 70 
 
 siderable; for what man in his senses would 
 invest money in securities, the dividends of 
 which should be payable in a rotten paper 
 money, progressively declining in value, and 
 which eventually, perhaps, would not be 
 worth 15^. in the pound ? 
 
 The great thing to be apprehended in 
 raising money by loan, and that which would 
 more particularly interfere with our system of 
 finance, is a decline in Exchequer-Bills ; and 
 the way to obviate this is to fund a portion of 
 them; and if this should not be effectual, then 
 to exchange the whole of them for bills bear- 
 ing a higher rate of interest ; and to do this 
 will be wisdom in any case. It is impossible 
 to control the tide of events, it is madness 
 even to attempt it ; and, do what we will, Ex- 
 chequer-Bills, bearing the present low rate of 
 interest will in all probability be at a discount 
 in less than a twelvemonth, unless, indeed, 
 the Bank, instead of reducing, should gra- 
 dually increase its issues of paper. But then 
 a suspension of cash payments is inevitable ; 
 and then good night at once to Exchequer- 
 Bills, and Consols, and every other descrip- 
 tion of Government security. 
 
 This is my view of the case ; and I say, that 
 unless a reduction be made in the circulation 
 of the Bank to the extent of at least six mil-
 
 71 
 
 lions, there is neither health nor safety in the 
 currency. 
 
 See, now, how things are perverted from 
 their original purposes; the avowed object in 
 the institution of the Bank was, that a facility 
 should be afforded to the merchants of Lon- 
 don by the discounting of their acceptances ; 
 but now the Bank is become a mere instru- 
 ment in the hands of the Government, and 
 not one tenth part of its notes is founded 
 on transactions with the public — that is, on 
 bills discounted for the merchants. 
 
 Consider, again, how we have degenerated 
 from the plain straight-forward solid sense of 
 our ancestors. In the good old times of the 
 Bank, whenever the Government wanted to 
 borrow of the Bank, the Directors applied to 
 the Bank Proprietors for an increase of capi- 
 tal, and then the whole transaction was in the 
 nature of a public loan, a real capital was 
 advanced, and the currency was not disturbed; 
 but no increase of capital is called for now; 
 the Bank Proprietors are never consulted; 
 and millions upon miUions are advanced to 
 Government without the least regard to con- 
 sequences. 
 
 And not only is this state of things to be 
 continued, but it would appear that every 
 possible extension is to be given to the
 
 72 
 
 system, and that Ireland is also to be fur- 
 nished with a regular banking apparatus : 
 that is, I understand the matter to be this — 
 A banker's shop is to be opened in every 
 village in Ireland for the circulation and dis- 
 tribution of notes ; and as advances (in paper) 
 are to be made on every species and de- 
 scription of property, it is not difficult to 
 foresee how all this will end. Alas ! alas ! 
 that at this time of day there should men be 
 found, who fondly believe that every increase 
 of paper is an increase of capital, and that to 
 jnultiply paper is to multiply resources. 
 
 June 13, 1825. 
 
 LETTER VI. 
 
 ON THE EXPORTATION OF GOLD. 
 
 " — Je dis la chose comrae elle est," — Voltahie. 
 
 The present price of standard gold bullion is 
 3/. 17^. lO^d. per ounce, and considering
 
 73 
 
 that the delay in coining at the Mint is equi- 
 valent to a small loss of interest on the outlay 
 of capital, this price for standard gold is in 
 reality something above the Mint price ; but 
 as long as the Bank continues cash payments, 
 gold bullion, whatever the quantity in the 
 market (which at present is very trifling), 
 cannot well exceed the present price, because 
 at this price of 3/. IJs. lO^d. per ounce, gold 
 sovereigns may be had at the Bank. 
 
 The exportation of gold (particularly to 
 France) goes on regularly, and the exchange 
 on Paris remains below par. In short, 
 whether with relation to the exchanges, or 
 the price or exportation of gold, the position 
 of things during the last six months has 
 varied but little. 
 
 The Bank circulation since last year has 
 not diminished : on the contrary, it has in- 
 creased, and, as a natural consequence of the 
 cheapness of money, our imports increase 
 and our exports diminish ; and then various 
 schemes are afloat in order to eflect an eternal 
 separation between fools and their money. 
 
 Things standing in this condition, it be- 
 hoves us, before it be too late, to look to our 
 stock of gold ; and here our task is delicate, 
 for if, in order to quiet the public mind, we 
 give the go-by to the question, and swear oft*
 
 74 
 
 hand as it were, and without entering into 
 particulars, that we have a great deal of gold, 
 then we lie, and are not to be trusted : and 
 if, on the other hand, we say, and even prove 
 beyond the possibility of doubt, that we have 
 but little, then we destroy various pleasing 
 illusions, and with the best intentions in the 
 world, we make to ourselves a host of ene- 
 mies. 
 
 '* L'homme est de glace aux verites, 
 II est de feu pour le mensonge." 
 
 But come what may, truth and plain dealing 
 must be adhered to, and therefore I shall very 
 frankly tell you all I know of the matter. 
 
 In the month of January or February last 
 year, and before any exportation of gold had 
 taken place, it was the constant daily com- 
 plaint of the Bank Directors that they had 
 too much gold, and the amount of this gold 
 in coin and bullion was then stated to be 
 about 12,000,000/. — a sum large in itself, and 
 considering that, with the exception of a 
 capital of between four and five millions, the 
 Bank has no means of obtaining gold but by 
 an issue of notes — considering, again, that the 
 Bank-notes in circulation during the month of 
 January, 1824, amounted to about 20,000,000/. 
 — and, finally, considering that a very great
 
 75 
 
 proportion of these notes rested on Govern- 
 ment securities — I say, considering* all these 
 things, it is quite impossible that the stock of 
 gold at the Bank in the month of January, 
 1824, could exceed 12,000,000/.; and the 
 probability is, that it fell one or two millions 
 short of this amount. As it has, however, 
 been stated most confidently, that the Bank, 
 at the period alluded to, possessed 12,000,000/, 
 of gold, we will at once put an end to all 
 dispute by taking this sum as the basis of our 
 calculations. It is admitted, then, that on 
 the 1st of January, 1824, the Bank v/as in 
 the possession of gold coin and bullion of the 
 value of 12,000,000/. 
 
 Now, according to a return made to the 
 House of Commons, it appears that the 
 quantity of gold exported, during the year 
 1824, was 1,134,407 ounces, being of the 
 value of about 4,400,000/. ; and, according 
 to a second return, it appears that the quan- 
 tity of gold exported from the 5th of January 
 to the 5th of April, of the present year, is 
 536,673 ounces, being of the value of about 
 2,100,000/.; and as the exportation of gold 
 has regularly continued up to the present 
 period, if we add to the official accounts the 
 quantity of gold exported in the interval 
 between the 5th of April and the present
 
 76 
 
 date, we shall find that the vakie of the gold 
 exported during the present year will amount 
 to about 4,000,000/. 
 
 But these returns, which are made by the 
 Customs to the House of Commons, neither 
 do nor can include the whole of the gold 
 exported : for as the exportation of gold is 
 free, and that it pays no outward duty, it is 
 quite clear, that what with smugglers, tra- 
 vellers to the continent, and captains of ships, 
 who take home the balance of their freights 
 in gold, the quantity of gold exported must 
 greatly exceed the returns made from the 
 Custom-house ; but of this I shall say nothing, 
 because, while gold has been exported in large 
 quantities, some small quantities may also 
 have been imported, though, from the state 
 of the exchanges for this long time past, this 
 could have been but to a very trifling extent, 
 and can never be equivalent to the quantity 
 exported, and which does not appear in the 
 official returns, because it was never entered 
 at the Custom-house. 
 
 This is the account; and having laid things 
 carefully together, I have little doubt but it 
 is correct. 
 
 Seeing, therefore, that the stock of gold in 
 the Bank of England, on the 1st of January, 
 1824, was 12,000,000/.— seeing that gold of
 
 77 
 
 the value of upwards of 8,000,000/. has since 
 been exported — seeing that the exportation 
 of gold (according to the official returns) pro- 
 ceeds at the average rate of about 700,000/. 
 per month — seeing that the circulation of the 
 Bank of England since last year has not 
 diminished but increased, and seeing that 
 no measures are in progress to reduce this 
 circulation ; seeing, I say, all these things, 
 I think we may very fairly calculate on 
 another suspension of cash payments.* 
 
 July 9, 1825. 
 
 * Shortly after this the Bank called in a portion of its 
 issues ; the prediction contained in this Letter was, how- 
 ever, in substance verified in the following month of De- 
 cember, when the stock of gold in the coffers of the Bank 
 was reduced, if I am not mistaken, to less than 300,000Z., 
 and with a circulation of 20,000,000/,, whether the Bank 
 possessed this paltry stock of gold, or none at all, is the 
 same thing. More might be said on this matter, but I 
 forbear.
 
 78 
 
 LETTER VII. 
 
 OBSERVATIONS ON THE CIRCULATION OF THE 
 BANK OF ENGLAND, AND ON THE CURRENCY. 
 
 " Peor es meneallo amigo Sancho." — Cervantes. 
 
 I HAVE addressed several letters to you on the 
 state of the currency of this country, the object 
 of which was to point out the evil resulting 
 from an excessive paper currency, and then to 
 establish the fact, that this evil existed in the 
 circulation of the Bank of England, which I 
 maintained did greatly exceed what the fair 
 legitimate commerce of the country required : 
 the subject has also been handled by others, 
 till at length (and deservedly) it is become a 
 public question of some importance. 
 
 Pending these discussions, two General 
 Courts of Proprietors of Bank stock have 
 been held at the Bank of England ; the one 
 on the 17th of March last, and th^ other on 
 the 22d of September ; and on what took 
 place on these two days, as I find it detailed
 
 79 
 
 in your journal, I shall take the liberty to 
 make a few observations. 
 
 At the Court held on the 17th of March, 
 it was stated by the Governor of the Bank, 
 " that the amount of Bank-notes then in cir- 
 culation was something under 20,000,000/., 
 that the amount of the Bank issues had not 
 increased within the last six months, nor was 
 it believed to be larger than the real business 
 of the country required." 
 
 At the Court held on the 22d of September, 
 it was stated by the Governor of the Bank, 
 " that the amount of Bank-notes then in cir- 
 culation was 18,200,000/., that this was about 
 400,000/. less than it was this time twelve- 
 months, and that consequently there has not 
 been within the last year any great change in 
 the amount of the circulation." 
 
 In reply to some further questions, the 
 Governor stated, *' that the Court of Direc- 
 tors had gone through their business regu- 
 larly and quietly, in a steady and silent 
 manner, without listening to evil or good 
 report ; that they had steadily and justly per- 
 formed their duty, and that whatever fluc- 
 tuation had prevailed in the money-market 
 had not been occasioned by the Bank of 
 England." 
 
 From what took place at these two meet-
 
 80 
 
 ings or courts — call them which you will — 
 we have, therefore, learned a great deal ; for 
 in March, we are assured that there had been 
 no increase of the currency within the pre- 
 ceding six months ; and, in September, we 
 are informed that within the last year there 
 has been no great change in the amount of 
 the circulation ; and, therefore, as both asser- 
 tions relate to the same period of time, the 
 one merely serving to confirm the other, it 
 will necessarily follow, that amid every fluc- 
 tuation in the money-market during the last 
 twelvemonth, the paper circulation of the 
 Bank of England has continued invariable, 
 and that all our complaints on the state of 
 the currency, and the conduct of the Bank 
 Directors, are without foundation. 
 
 But, in the whole of these proceedings there 
 lurks a fallacy, and while we are made ac- 
 quainted with some one particular fact which 
 may be true, but which has no bearing on the 
 question, every other fact is concealed from 
 us. Thus we are told, for instance, that 
 the present amount of the Bank issues is 
 18,200,000/., and that at the same period last 
 year it was 18,600,000/. ; but what the circu- 
 lation has been during the intervening period 
 we are not informed, except that we have the 
 declaration of the Governor, that within the
 
 81 
 
 last year there has not been any great change 
 in the amount of the circulation. But man's 
 memory is treacherous ; millions of figures, 
 and the circulation of the Bank of England 
 during a whole twelvemonth, cannot safely 
 be intrusted to the brain of any man, however 
 great his powers of recollection, and there- 
 fore the worthy Governor may have forgot, 
 or he may be mistaken ; and at any rate this 
 is a matter of too great importance to be 
 allowed to pass without proof. Let us, there- 
 fore, see how the fact stands, and whether (for 
 this alone is the material question) in the last 
 twelvemonth the circulation of the Bank of 
 England has not been materially increased, 
 and afterwards as materially reduced ; and if 
 I go into the matter at some length, and place 
 it in various points of view, the importance of 
 the inquiry is a sufficient excuse. 
 
 During the last session of Parliament an 
 account of Bank of England notes in circu- 
 lation, commencing the 5th of April, 1820, 
 and ending the 2d of April, 1823, was re- 
 turned to the House of Commons, and ordered 
 to be printed ; and certain averages or general 
 results taken from this account were published 
 in the different journals of the metropolis, 
 and by which it appeared that —
 
 82 
 
 The average amount of Bank-notes in cir- 
 culation from April, 1 820, till April, 1823, 
 was J'20,603,548 
 
 That from April, 1821, to April, 1824, it 
 was 18,984,499 
 
 And from April, 1822, to April, 1825, it 
 was 19,092,005 
 
 And therefore from these accounts the public 
 was induced to believe, that so far from any 
 increase having taken place in the circulation 
 of the Bank of England, it had, on the con- 
 trary, decreased since 1823, and had remained 
 without alteration since the preceding year 
 1 824 ; and then it necessarily followed that all 
 the complaints of an excessive circulation, and 
 of the conduct of the Government and of the 
 Bank of England, were without foundation. 
 
 Now the statement published in the differ- 
 ent journals is correct : that is, the average 
 amounts are the result of the particulars on 
 which they are founded. But it is one thing 
 to tell the truth, and another to tell the whole 
 truth ; and the average of various quantities 
 at different periods of time will throw no 
 light on any particular fact or quantity at any 
 particular period of time : and it having been 
 objected to the Bank that its issues were then 
 excessive, and that as a consequence of this, 
 the gold coin of the country was regularly
 
 83 
 
 exported ; it could be no answer to this ob- 
 jection to furnish the public with certain 
 average amounts founded on a circulation 
 which reached as far back as the year 1 820 ; 
 that is, to a period, when in point of fact the 
 Bank had not even resumed cash payments. 
 But the trick passed, for we are fond of average 
 results ; we like truth in the gross, and on all 
 occasions Va peu pres is our motto. 
 
 Now let us see how the fact really stood ; 
 and then, from the same official documents 
 which give us those general results to which 
 we have already alluded, we learn that 
 
 The amount of Bank-notes in circulation 
 
 on the 5th of April, 1823, was . d^l 6,945,840 
 
 That the amount on the 3d of April, 1824, 
 was 19,313,989 
 
 And that on the 2d of April, 1825, it 
 
 was 20,328,979 
 
 And this at once presents us with a very 
 different picture ; and while, according to the 
 averages published in the different journals of 
 the metropolis, we should be induced to be- 
 lieve that between April, 1823, and April, 
 1825, there had been a reduction in the Bank 
 circulation of about 1,600,000/., there is, in 
 reality an increase of about 3,500,000/. ; and 
 farther, that while, according to the same sys- 
 tem of averages, it would appear that the 
 
 G 2
 
 84 
 
 Bank circulation in April, 1824, and April, 
 1825, was as nearly as possible the same; yet 
 in reality we find that the Bank circulation 
 in 1825 exceeds the same circulation in 1824, 
 in the sum of 1,100,000/.; and therefore I 
 come to the conclusion that these averages 
 and general results were got up with a view 
 to mislead the public. 
 
 But this is not all; and, to give it no 
 worse name, the folly of the Bank Directors 
 is without example. It is notorious, that 
 towards the middle of the year 1824, the gold 
 coin of the country began to be exported, 
 that it continued to be exported in large 
 quantities up to the period of the Bank meet- 
 ing in March ; that without a reduction in 
 the circulation it was likely to continue, and, 
 in point of fact, did continue ; and so that 
 during the year 1824-25, gold of the value 
 of upwards 8,000,000/. was sent out of the 
 country. Now, in the natural order of things, 
 when notes are sent into the Bank to be ex- 
 changed for gold, if these notes are not re- 
 issued for other purposes, the exportation of 
 gold is checked, because the amount of cur- 
 rency is reduced, and things soon settle them- 
 selves on a solid foundation. But here we 
 find, that notwithstanding at the period of 
 the Bank meeting in March, the gold had
 
 85 
 
 been exported for nearly a twelvemonth, and 
 this in large quantities, yet the circulation 
 of the Bank, so far from having diminished, 
 had increased ; and, therefore, it is evident, 
 that as fast as notes were sent into the Bank 
 to be exchanged for gold, they were re-issued 
 for other purposes ; and then it follows, that 
 as the excessive circulation had occasioned the 
 exportation of the gold, so, with the same un- 
 diminished circulation, would it still continue 
 to be exported ; and, accordingly, it was ex- 
 ported in still greater quantities. At length 
 the Bank Directors were alarmed, and they 
 began to reduce their issues, as we shall have 
 occasion to show hereafter. 
 
 One word more on what passed at the 
 Court held in March, and I have done. It 
 was stated by the Governor, that the amount 
 of Bank-notes then in circulation was some- 
 thing under 20,000,000/., and that the 
 amount of the Bank issues had not increased 
 within the last six months — a statement most 
 plainly and manifestly incorrect, because, on 
 the 26th of February, 1825, the amount of 
 Bank-notes in circulation was 21,060,144/., 
 on the 5th of March it was 20,342,416/., and 
 on the 17th of March, according to the Go^ 
 vernor's own statement, it was something 
 under 20,000,000/.; but on the 25th of
 
 86 
 
 September, 1824, the circulation was but 
 18,715,299/., and on the 2d of October, 1824, 
 it was 19,065,32^/. ; and, therefore, there had 
 been a considerable increase in the circulation. 
 Come we now to the proceedings of the 
 Court held on the 22nd of September, and 
 then we find it stated, that within the last 
 year there had been no great change in the 
 amount of the Bank circulation. Now let us 
 see how this is borne out by the fact, and to 
 this effect we will take three periods just 
 before the payment of the quarterly divi- 
 dends : — 
 
 On the 2nd of Oct., 1824, the amount 
 
 of Bank-notes in circulation was . £12,065,322 
 On the ,1st of Jan., 1825, it was . . 20,756,948 
 On the 2nd of April, 1825, it was . 20,328,979 
 
 With the precise amount of Bank-notes in 
 circulation in the beginning of July, 1825, I 
 am not acquainted, as the return to Parlia- 
 ment only goes to April; but the items I 
 have put down are quite sufficient, and they 
 clearly show that, dating from the month of 
 October till the month of January, the cir- 
 culation had increased 1,700,000/.; and that 
 from the month of October till the April 
 following, it had increased 1,400,000/.: and 
 yet we are gravely assured by the Governor 
 of the Bank of England, that within the last
 
 87 
 
 year there had been no great change in the 
 amount of the circulation. 
 
 Now let us view the matter in another 
 light, and let us see what was the amount of 
 Bank-notes in circulation during the years 
 1 823 and 1 824 ; and this account I shall state 
 according to official practice — that is, I shall 
 put down the amount of Bank-notes in cir- 
 culation during the months of February, 
 May, August, and November, of each year, 
 and then compare the one year with the 
 other : — 
 
 BANK-NOTES IK CIRCULATION. 
 
 1823. Feb. 1 
 
 8 
 
 15 
 
 24 
 
 May 3 
 
 10 
 
 17 
 
 24 
 
 31 
 
 Aug. 2 
 
 9 
 
 16 
 
 23 
 
 30 
 
 Nov. 1 
 
 8 
 
 15 
 
 22 
 
 29 
 
 Average of) 
 1823. i 
 
 0^18,652,607 
 . 18,404,360 
 . 17,802,629 
 . 17,839,486 
 . 18,994,049 
 . 18,585,349 
 . 18,464,533 
 . 17,971,839 
 . 17,425,713 
 . 20,221,912 
 . 19,966,005 
 . 19,716,775 
 . 19,582,348 
 . 19,231,240 
 . 21,779,665 
 . 20,679,004 
 . 20,353,142 
 . 19,820,208 
 . 19,400,803 
 
 Xn 9,204,825 
 
 1824. Feb. 7 
 
 14 
 
 21 
 
 28 
 
 May 1 
 
 8 
 
 15 
 
 22 
 
 29 
 
 Aug. 7 
 
 14 
 
 21 
 
 28 
 
 Nov. 6 
 
 13 
 
 20 
 
 27 
 
 Avei'age of 
 1824. 
 
 ^20,309,188 
 
 . 20,357,168 
 
 . 19,866,854 
 
 . 19,736,986 
 
 . 20,514,142 
 
 . 20,289,684 
 
 . 19,961,919 
 . 19,719,356 
 
 . 19,149,378 
 
 . 21,312,124 
 
 . 20,960,542 
 
 . 20,535,550 
 
 . 20,293,326 
 
 . 21,413,902 
 
 . 21,411,425 
 
 . 20,817,879 
 
 . 20,850,260 
 
 X^20,44l,128
 
 88 
 
 In one year, therefore, there was an aug- 
 mentation in the currency of upwards of 
 1,200,000/.; nor did it stop here ; and in the 
 month of February, 1825, the circulation of 
 the Bank of England was increased still 
 further, as will be seen from the following* 
 accounts ; — 
 
 1825. Feb. 5 Bank-notes in circulation dg'SljgSljQS? 
 
 12 21,307,879 
 
 19 . ... 21,234,673 
 
 26 21,060,144 
 
 Average amount . . . .^21,383,658 
 
 Now the average amount of the Bank cir- 
 culation in the month of February, 1823, 
 was 18,174,770/., and in the month of Fe- 
 bruary, 1824, it was 20,067,544/. ; and, there- 
 fore, comparing 1824 with 1823, there is an 
 augmentation of about 2,000,000/. ; and com- 
 paring 1825 with 1824, there is an augmen- 
 tation of 1,300,000/.; and, finally, if we in- 
 stitute a comparison between 1823 and 1825, 
 the circulation of the latter year presents us 
 with an increase of 3,200,000/. 
 
 Having treated very fully of the increase 
 in the Bank circulation, let us now say a 
 word on the subject of its reduction. 
 
 We are informed that the present amount 
 of Bank-notes in circulation is 18,200,000/.,
 
 89 
 
 and we now approach the payment of the 
 dividends; but on the IJth March last we 
 were informed by the Governor of the Bank, 
 that the amount of the Bank circulation was 
 about 20,000,000/.; on the 26th March it 
 was 19,611,349/.; and on the 2nd April it 
 was 20,328,979/. Now, at the Bank meeting 
 in March precisely the same dividends were 
 approaching" as at the meeting in September, 
 and therefore the two periods exactly corres- 
 pond ; and, therefore, supposing no alteration 
 to have taken place, the circulation in Sep- 
 tember, and up to the beginning of the present 
 month of October, would be equal to the cir- 
 culation in March and up to the beginning of 
 April, and yet there is a diminution of about 
 2,000,000/.: and so that, notwithstanding 
 every assertion to the contrary, and though 
 these assertions proceed from the highest au- 
 thority, it is nevertheless quite certain that 
 our currency during the last twelvemonth 
 presents every feature of change, vicissitude, 
 and fluctuation ; it has been increased, it has 
 been diminished, and before we get to a 
 sound state of things, it must, probably, be 
 still farther diminished; and for this I will 
 state my reasons. 
 
 The present amount of Bank-notes in cir- 
 culation is 18,200,000/.; but this is just
 
 90 
 
 before the payment of the dividends, when 
 the circulation is naturally at the lowest, and 
 therefore without a farther reduction that cir- 
 culation which immediately before the pay- 
 ment of the quarterly dividends amounts to 
 18,000,000/., will give an average circulation 
 throughout the year of about 20,000,000/.; 
 and taking this sum for the basis of our cal- 
 culations, we shall, I think, be enabled to 
 ascertain with tolerable accuracy the whole 
 amount of what may be termed the legal 
 currency of the country ; and then, by com- 
 paring it with some former period, come to a 
 conclusion as to whether it is or is not in 
 excess. 
 
 Bank-notes in circulation . . ^20,000,000 
 
 Total amount of gold currency in the 
 
 kingdom, about .... 10,000,000 
 Total amount of silver currency, about 7,000,000 
 
 37,000,000 
 Deduct the gold in the coffers of the Bank, 
 
 about 4,000,000 
 
 Remain ^33,000,000 
 
 And so that, assuming that no farther re- 
 duction is to take place in the Bank issues, 
 the whole of our circulation (apart from the 
 notes of the country bankers) may be esti- 
 mated at 33,000,000/.
 
 91 
 
 Now, in this estimate there can be no 
 mistake except in the quantity of gold, and 
 this cannot be much : nor in any sense can 
 the error, supposing it to exist, be of much 
 importance to the present inquiry, for I have 
 all along been treating of the eflPect produced 
 by an excessive currency, and then I natu- 
 rally bring in the whole of the currency, 
 whether of gold, or silver, or paper; and, 
 therefore, if the quantity of gold in the 
 coffers of the Bank be greater than I have 
 stated, then it is fair to presume that the 
 total quantity of gold is also greater, and this 
 gives the same final result ; and if the total 
 quantity of gold be less than I have stated, 
 while the gold in the coffers of the Bank is 
 also less, this again gives the same result. If 
 my estimate of the total quantity of gold be 
 correct, but that the gold in the coffers of the 
 Bank should be less than I have stated, then 
 the total amount of currency in action goes 
 beyond my estimate. And, finally, if my 
 estimate of the quantity of gold in the coffers 
 of the Bank be correct, but that the total 
 quantity of gold is greater than I have stated, 
 then this again is in favour of my position, 
 because it goes to an increase in the total 
 amount of currency in action. And, there- 
 fore, there is but one thing to militate against
 
 92 
 
 my position, and that is, that upon a suppo- 
 sition that my estimate of the total quantity 
 of gold is correct, yet that a larger proportion 
 than I hav^e assigned remains with the Bank, 
 and less with the public ; and this I take to 
 be impossible. In short, the only material 
 point to determine here, is the amount of 
 gold in circulation, and the quantity of gold 
 in the coffers of the Bank (be it great or 
 small) has no bearing on this part of the in- 
 quiry ; for this gold is not in action, and can 
 therefore have no influence on the trans- 
 actions of the community. Idem est non esse 
 et non apparere. 
 
 Having seen what is the amount of our 
 currency at the present period, let us now 
 take a survey of our currency during the 
 war; and here my task is easy, and I shall 
 merely have to transcribe what I have stated 
 on a former occasion. 
 
 The highest point which our paper cur- 
 rency reached during the late war was in the 
 year 1813. During this year the enormous sum 
 of 27,000,000/. was raised by loan for the 
 public service, and taxation was at the 
 highest; in short, things were precisely in 
 that condition in which there was full em- 
 ployment for money. 
 
 Now the average amount of Bank-notes in
 
 93 
 
 circulation in the year 1813 was 23,612,300/., 
 and there was not a particle of gold coin in 
 circulation. The average price of gold during 
 the year was 5/. 6s. per ounce, and therefore 
 the value of the Bank-note was 145. Sd. ; and 
 so that the real value of the 23,612,300/., 
 when reduced to gold, or into paper on a par 
 with gold, was 17,315,686/. 13*. 4d. Add 
 now to this, about five millions (at the ut- 
 most) in Bank-tokens and a defaced worn-out 
 silver currency, and you will have a total 
 amout of about 22,000,000/. ; and the amount 
 of our present currency being 33,000,000/., 
 and this at a period when the taxes are 
 so materially reduced, and that an immense 
 reduction has also taken place in the costs of 
 production of almost every species of manu- 
 factured commodity, I shall with difficulty 
 be brought to believe that our present cur- 
 rency, when viewed with relation to a sound 
 state of things, is not redundant. 
 
 It will here be said that gold of the value 
 of 8,000,000/. having been sent out of the 
 country during the last 16 months, that in- 
 dependent of the reduction in the circulation 
 of the Bank of England, there must have 
 been a farther reduction during this period 
 in the amount of our currency ; and this to a 
 certain extent is true ; but it must always be
 
 94 
 
 recollected that the great demand for gold, 
 would, and must be supplied from the coffers 
 of the Bank, and but very little from the ge- 
 neral circulation of the country ; and for this 
 reason — that there being for some time past 
 no small Bank of England notes in circulation, 
 a certain quantity of gold is absolutely neces- 
 sary ; and therefore, to take away from this 
 quantity of gold for the purpose of exporting 
 it, is to straiten the circulation, and then 
 application will be made to the Bank, and 
 this gives the same result as an application 
 to the Bank in the first instance. It is cer- 
 tain, however, that some gold must have been 
 taken from the general circulation, itmay 
 perhaps have amounted to 1,000,000/., and it 
 certainly cannot have exceeded 2,000,000/., 
 and then, if we add this to the 2,000,000/. 
 reduction in the Bank circulation, we shall 
 have a total reduction of from 3,000,000/., 
 to 4,000,000/. ; and I doubt whether this is 
 sufficient. It will however be said, that 
 besides the reductions of which we have 
 spoken, there is also a reduction in the cir- 
 culation of the country bankers, but of this I 
 know nothing : it may be true, but I doubt 
 it. 
 
 From the reduction in our circulation 
 which has already taken place, and insuffi-
 
 95 
 
 cient as it is in my opinion, good effects have 
 however already flowed ; the exchanges have 
 improved, the exportation of gold has been 
 checked, and we are now promised an im- 
 portation of gold from the continent ; but 
 without a further reduction in our paper cir- 
 culation, I much doubt whether this gold, 
 when it arrives, will long remain in our pos- 
 session. 
 
 This is my view of the case ; and in reply 
 to all this, it will be said that I am an 
 alarmist; be it so, but we learn from King 
 Solomon and Mr. Burke, that in early fear 
 there is much wisdom; it is by early fear 
 that mischief is prevented, but when once 
 the mischief has happened, fear comes too 
 late ; remedies must then be applied, and all 
 remedies are painful. I am then an alarmist, 
 I sounded the alarm in the month of December 
 last ; and if the Bank had then reduced its 
 issues, much of the mischief which has since 
 ensued would have been prevented ; and 
 against a reduction of the circulation at that 
 period there could exist no solid objection. 
 The Government had already worked its will 
 in the reduction of the 4 per cents., the fund- 
 holder had been relieved from a portion of 
 his income, and as far as regards the finance 
 of the country, all the grand purposes of
 
 96 
 
 delusion had been accomplished ; and there- 
 fore, I repeat it, that from the moment the 
 Directors perceived that the gold was rapidly 
 leaving the country, they ought to have 
 curtailed their issues of paper, because this 
 was an infallible sign that the circulation was 
 redundant. 
 
 And now, for the sake of argument, let all 
 I have said pass for nothing, and let there be 
 no ground of alarm, and then I simply ask 
 this question — Shall the natural order of things 
 be inverted that the Bank of England may 
 make large profits ? and are the people of this 
 country to be burdened with the expense, 
 and subjected to all the disadvantages of a 
 paper currency, against their choice and in- 
 clination ? I say against their choice ; for, 
 disconnect the Government from the Bank, 
 and leave the currency to itself, and it is cer- 
 tain that the Bank will never be able (perma- 
 nently at least) to keep 8,000,000/. of notes 
 in circulation which shall not be founded on 
 the precious metals. But when once (as aris- 
 ing from transactions between the Bank and 
 the Government) a mass of paper has slunk 
 into the circulation, and that paper is thereby 
 made to supply the place of gold, then the 
 gold must eventually be exported as useless ; 
 and without a reduction of the paper, a sound
 
 97 
 
 metallic currency becomes impossible. And 
 then what is the consequence of this artificial 
 state of things ? An eventual rise in the mo- 
 ney prices of commodities, and a temporary 
 reduction of the rate of interest. I say tem- 
 porary, because permanently the rate of 
 interest is governed by the rate of profit ; but 
 whatever the rate of profit, the influence of 
 money (be its quantity great or small) is on 
 the prices of commodities ; and so that in- 
 crease the quantity of money as much as you 
 will, yet when once this increase is absorbed 
 by a rise in the prices of commodities, there 
 must be precisely the same demand for money 
 and the same rate of interest as before the in- 
 crease took place ; and therefore it is only in 
 the interval between an increase in the quan- 
 tity of money and the full effect of this in- 
 crease on the prices of commodities, that the 
 rate of interest can be affected ; and this in- 
 terval is dangerous — it is the period of all 
 those wild extravagant projects which end in 
 the total destruction of capital.* 
 
 One question more. What caused the gold 
 a few years ago to flow into this country ? — A 
 reduced circulation of the Bank of England 
 and low prices of commodities. What has been 
 
 * See note 1, at the end of the work. 
 
 H
 
 98 
 
 the cause of its exportation ? — An increased 
 circulation of the Bank, and high prices of 
 commodities. And then we see at once that 
 we are fools — for we bought this gold dear, 
 and we have sold it cheap ; and during the 
 last thirty years we have regularly pursued 
 the same line of conduct. The country had 
 need be rich that squanders its wealth in this 
 manner : to have got drunk with the money 
 had been something : we work hard, and it 
 is but fair that we should now and then treat 
 ourselves to a little honest recreation : but to 
 waste our wealth on such (not merely unpro- 
 fitable, but) mischievous concerns as banks of 
 credit and paper circulations, does, it must be 
 confessed, greatly exceed all common mea- 
 sures of folly. 
 
 And now, to conclude. Have we formed 
 any plan for the regulation of our future con- 
 duct, and what are our wishes ? Shall we 
 continue in that happy state of uncertainty 
 which is so congenial to our speculative fa- 
 culties — perpetually floating between a me- 
 tallic currency on the one hand, and the 
 chance of a suspension of cash payments on 
 the other ? Then we must continue to act as 
 we have done during the last 18 months ; that 
 is, we must buy and sell Exchequer-Bills ; we 
 must make advances on stock and land, and
 
 99 
 
 then again call in these advances ; and above 
 all things, we must job and huckster with the 
 Government. Do we wish for a gold cur- 
 rency, and in sincerity and good faith to 
 follow up the intendments of the Act of 
 1819 ? Then the account between the 
 Bank of England and the Government must 
 be closed, and the connexion dissolved for 
 ever ; nor will it be amiss that we prohibit 
 the country bankers from issuing small notes. 
 Or, scattering all theories to the winds, shall 
 we, for once, be wise, and leave the currency 
 to the choice of the people themselves ? Then 
 we must go a step further, and while we dis- 
 solve the connexion between the Bank and 
 the Government, we must also reform our 
 Mint regulations, and return to a double 
 standard of gold and silver. This was our 
 ancient system; this is the system which has 
 existed from time immemorial in France and 
 Holland; and in every country upon earth 
 where the currency is free, a double standard 
 obtains naturally, and as a matter of course. 
 It was for this I contended in the year 1819; 
 and this is the system which was recommended 
 a few years ago by Mr. Baring, in a most able 
 speech in the House of Commons. Every 
 other scheme of things is vain and delusive, 
 and can only be maintained by force and re- 
 
 H 2
 
 100 
 
 straint, and a variety of regulations, the one 
 more ridiculous than the other, and which, 
 whether they succeed or fail, are alike inju- 
 rious to the community. 
 
 But why do I waste words ? We have no 
 plan at all, our measures are directed by the 
 whim and occurrence of the day ; we know 
 not even what to wish, and all our notions on 
 this subject are so vague and unsettled, that 
 with us any thing may be said to be any 
 thing : and a hawk is a hand-saw. Take up, 
 now, our scheme of currency, and view it on 
 every side. Look first at our Mint regula- 
 tions ; they are a tissue of absurdity. Look 
 at our paper currency ; it is fraud and delu- 
 sion : and the result of the whole is a con- 
 fused, uncertain, jumbled condition of things, 
 which none but a people absolutely deprived 
 of their senses would tolerate for a single 
 moment. 
 
 October Ath, 1825.
 
 101 
 
 LETTER Vm. 
 
 ON OUR METALLIC CURRENCY, AND ON THE IN- 
 TRODUCTION OF BRITISH SILVER MONEY INTO 
 THE COLONIES. 
 
 " Nihil tam absurde dici potest, quod non dicatur ab aliquo 
 Philosophorum.""— C i c ero. 
 
 Balbum balbus rectius intelligit. It is but 
 fair to presume, that the Master of the Mint 
 and His Majesty's Ministers understand one 
 another, but to plain practical men their pro- 
 ceedings are altogether unintelligible. 
 
 Leaving, for the present, the Bank of En- 
 gland and our ineffable paper-money out of 
 the question, I find the foundation of our 
 metallic currency to be laid in two principles, 
 which, ex omnium consensu, (that is, with the 
 consent of all the philosophers), are regarded 
 as so certain and indubitable, that they have 
 passed into axioms, and of which it is no 
 more permitted to doubt than of any other 
 first principles. 
 
 The first is, that as a measure of value, one 
 standard is less variable than two ; and the
 
 102 
 
 second, that gold is less variable than silver ; 
 and upon this we have erected our system of 
 a gold standard ; but, 
 
 1. It is false even in speculation, that one 
 standard is less variable than two; and if true, 
 yet in practice it will amount to little or 
 nothing; for we must always recollect that 
 this is not a question which relates to the 
 production of wealth, but to its distribution, 
 and a variation in the relative value between 
 gold and silver, which should not exceed two 
 or three per cent., would have but little effect 
 on the distribution of wealth, if even it were 
 to take place in a few years ; but if this varia- 
 tion should be so slow and gradual as to re- 
 quire a whole century for its completion, 
 then the effect would be next to nothing. 
 
 Now it is a fact, that by comparing the 
 present relative value between gold and silver, 
 with the relative value between these two 
 metals, as it existed a century ago, the dif- 
 ference will not exceed two, or at most, three 
 per cent.; and it is also a fact, that though 
 there have been temporary aberrations arising 
 from the influence of supply and demand, 
 yet during the last forty years there has been 
 no real variation whatever ; that is (not mean- 
 ing to entangle myself in cobwebs, and at- 
 tending solely to the broad features of the
 
 103 
 
 case), I say this, that the present relative 
 value between gold and silver is precisely, or 
 as nearly as possible, the same as it was 
 forty years ago. And, therefore, in practice, 
 and apart from all speculation, there is no 
 question, and the whole dispute is de umbra 
 asini, or of and concerning the shadow of a 
 pot of drink, or any other such foolish mat- 
 ter : very fit, if you will, to be discussed in 
 the schools of the philosophers, but totally 
 undeserving the notice of a man of common 
 sense.* 
 
 2. It is false, both in practice and specu- 
 lation, that gold is less variable than silver ; 
 but, on the contrary, silver is less variable 
 than gold : this is proved by facts and in 
 theory, and from the very nature of things 
 it cannot be otherwise.f 
 
 Thus much on questions which in the sight 
 of idle speculation are of great price, but at 
 bottom, and with reference to all real pur- 
 poses, they have no value whatever; for, 
 supposing it to be true, that one standard is 
 less variable than two, and supposing it again 
 to be true, that gold is less variable than 
 
 * Touching these matters, see Note 2, at the end of the 
 work. 
 
 f Vide Appendix.
 
 104 
 
 silver, still this is no sufficient argument for 
 confining ourselves exclusively to the single 
 standard of gold ; for the existence of two 
 standards in law does not preclude the choice 
 and selection of one standard (that is of 
 either) by convention. And, therefore, the 
 argument, to be of any avail, ought to go to 
 this point — that silver existing in the pos- 
 session of one individual, and corn, or any 
 other production in the possession of another, 
 it would be injurious to the community to 
 allow these two individuals to make any 
 bargain or contract, by means of which the 
 silver should be exchanged for the corn : a 
 monstrous proposition, and when presented 
 simply and nakedly to the mind, most emi- 
 nently absurd and ridiculous ; and yet these 
 are precisely our tactics; for first, by the 
 law which makes silver a legal tender for 
 only 405., all bargains in commodities, and 
 all contracts whatever which are to be com- 
 pleted in silver, are illegal; and secondly, 
 by refusing to coin silver for the public, and 
 placing the silver coinage of the country 
 under the entire and sole control of the Go- 
 vernment, all such bargains and contracts are 
 de facto impossible. 
 
 All science is simple, and it is the property 
 of every truly sound constituent scheme of
 
 105 
 
 things to be able to stand alone ; but this test 
 will not do for us, and our system can only 
 be maintained by force and restraint, and 
 must be fenced in by a great variety of regu- 
 lations ; and then the natural consequence is 
 this — that precisely when our measures suc- 
 ceed the best do they work the greatest mis- 
 chief : and so here, for it can be proved 
 beyond the possibility of doubt, that dating 
 only from 1820 till 1824, the education of 
 this bastard system of a currency cost the 
 manufacturers of this country upwards of 
 500,000/., and since that period it has been, 
 and as long as it exists ever will be, pro- 
 ductive of serious injury. 
 
 There are two men in the Legislature who 
 understand the subject of which we are 
 treating, both theoretically and in practice — 
 I mean the Earl of Lauderdale and Mr. 
 Alexander Baring ; and had their suggestions 
 been attended to, a very different scheme of 
 things would have obtained. 
 
 By the system of the Earl of Lauderdale, 
 silver alone is made the legal standard, but 
 the Mint is open to the coinage of gold for 
 the public, and gold is allowed to pass, and 
 circulate by convention. 
 
 By the system of Mr. Baring, both gold 
 and silver are legal tenders, and when there
 
 106 
 
 is no condition to the contrary, the debtor 
 may pay his creditor in either, or partly in 
 one and partly in the other. 
 
 Now, in terms, and speculatively speaking, 
 these two systems appear to differ; but in 
 substance, and when reduced into practice, 
 they are precisely the same. 
 
 By the system of the Earl of Lauderdale, 
 silver is the standard in law, but gold is not 
 precluded from being a standard by con- 
 vention; and by agreement between the 
 parties to a contract either or both metals 
 may be adopted as a standard ; and, there- 
 fore, however the matter may appear in spe- 
 culation, yet, under this system of the Earl of 
 Lauderdale, there are in practice two stand- 
 ards, and the obligation to acquit a contract 
 in one metal alone (that is silver) only applies 
 to cases where there is no stipulation to the 
 contrary, and the law then only speaks when 
 the contract is silent. 
 
 By the system of Mr. Baring, (that is, by 
 the system of a double standard of value) both 
 metals are a legal tender, but either may be 
 adopted by agreement between the parties to 
 a contract, and then the option which the 
 law allows to fulfil a contract, in either or 
 both of the metals, is overruled by con- 
 vention.
 
 107 
 
 And, therefore, whether, (as under the 
 system of the Earl of Lauderdale) with one 
 standard existing in law, I have the choice of 
 another standard by convention, or whether, 
 (as under the system of Mr. Baring) with two 
 standards existing in law, I have the choice 
 and selection of either by convention, must 
 be the same thing ; and if what the law gives 
 me in one case, I can obtain in the other by 
 convention, then virtually and to every real 
 purpose, my situation is the same in both 
 cases. In short, if two systems exist, and if 
 under either, indifferently, and at my choice, 
 I can accomplish the same things, then these 
 two systems are the same; and that this is 
 the case here may be easily demonstrated. 
 
 Take, then, a case of rent, and let the 
 system of the Earl of Lauderdale be adopted 
 and in full operation, and then there are four 
 ways in which the landlord may bargain for 
 the payment of his rent : — 
 
 1. For a payment in corn or cattle — that 
 is, for a payment in kind : 
 
 2. For a payment in gold : 
 
 3. For a payment in silver : 
 
 4. For a payment partly in gold and partly 
 in silver. 
 
 But all this may also be done under Mr. 
 Baring's system, that is, under the double
 
 108 
 
 standard : and, therefore, we see at once that 
 however the thing may appear in speculation, 
 yet in substance and in practice the two 
 systems are precisely the same. Under both 
 the currency is free; both give the greatest 
 possible latitude of action; the man that 
 bargains for gold gets gold, and the man that 
 bargains for silver gets silver ; he that believes 
 gold to be less variable than silver, takes gold 
 for his standard, and he that believes silver 
 to be less variable than gold, takes silver ; 
 all do as they like, and therefore none are in- 
 jured; the caveat emptor is the rule in all 
 cases, and this rule is infallible. 
 
 Let us now say a few words on another 
 point. It was proposed, I believe, by Mr. 
 Mushet, that every individual bringing gold 
 bullion to the Mint should receive his money 
 immediately, or within a few days ; a wise 
 and judicious proposition, which, while it left 
 things in their natural order, and offered no 
 direct bounty or encouragement, afforded 
 every facility to the coining of money : but 
 has this been acted upon ? — I believe not ; and 
 if I have been rightly informed, the delay in 
 coining gold for individuals is very great, 
 and the constant excuse has been that the 
 Mint is occupied in coining for the Bank of 
 England : and the natural consequence is,
 
 109 
 
 that individuals sell their bullion at 3/. IJs. 6d. 
 to the Bank, instead of obtaining- 3/. 17^. lO^d. 
 from the Mint, to which by law they are en- 
 titled. 
 
 Now the excuse of being occupied in coin- 
 ing for the Bank is most lame and impotent ; 
 for that a few thousand ounces of gold should 
 be coined for an individual can be of very lit- 
 tle consequence to the Bank, but the delay of 
 coining this gold may be of very serious pre- 
 judice to the individual ; and therefore, either 
 (as caring nothing about the matter) we have 
 no motive at all for our conduct, or this 
 conduct must rest on one of these two 
 grounds : — 
 
 1 . We wish to deter individuals from bring- 
 ing bullion to the Mint, because, founded on 
 reasonings a priori, the d — d philosophers have 
 determined that paper is better than gold ; but 
 the fact here overturns the doctrine, and from 
 the very circumstance that an individual 
 brings bullion to be coined, must we infer that, 
 to him at least, gold is better than paper. But 
 so it is, and when a plain dull fact comes before 
 us, and that a man applies to us to coin his 
 bullion, then, instead of setting about our 
 work, we begin immediately to speculate on 
 the true principles of currency. But if what
 
 110 
 
 I have here stated be not the ground of our 
 conduct, then — 
 
 2. We wish to force the individual to sell 
 his gold at 31. IJs.-Gd. to the Bank, that the 
 Bank by reselling it at 3/. 17^. 10^6?. may 
 make a profit, and thereby we act unjustly ; 
 and in this, as in every thing else, all our mea- 
 sures appear to be directed to the aggrandize- 
 ment of an already overgrown monopoly. 
 
 But not only is our conduct against reason, 
 it is also against law ; for by law any person 
 bringing gold bullion to the Mint is to have it 
 coined free of expense, and to an individual 
 complaining of delay in the coining of bullion, 
 it is no answer to say that we are busied in 
 coining for the Bank : for why have we so 
 much to do for the Bank ? — Simply because 
 we delay and put off the concerns of indivi- 
 duals. But act up to the spirit of the law, 
 coin promptly for individuals, and you will 
 have but little to do for the Bank ; for gold 
 will then regularly be at 3/. 17^. lO^d. per 
 ounce ; and how then in ordinary circum- 
 stances can it answer the purpose of the Bank 
 to buy gold at 3/. 17*. lO^d. per ounce, when 
 it can only obtain the same price by a resale ? 
 
 Thus much on these matters : but it is in 
 vain to talk; we have to do with a perverse
 
 Ill 
 
 generation, and say what we will they will 
 have it that ours is a perfect system, and per- 
 fect therefore it is and shall be. But then I 
 ask this question — Why, this system, being- 
 perfect, we do not in all cases act up to it? — 
 And why we have two systems — one for this 
 country, and another, (and this totally differ- 
 ent) for the colonies? 
 
 We have introduced our silver currency in- 
 to the colonies, and we say that we do this 
 upon the principle of uniformity, and to the 
 effect that the currency of the colonies should 
 be assimilated to the currency of this country ; 
 but as every man in the colonies, or that trades 
 with the colonies, does or ought to know the 
 value of a French 5-franc piece, or a Spanish 
 dollar, and as, do what we will, silver is but 
 silver, so is it no more destructive of the 
 principle of uniformity that these coins should 
 be allowed to circulate at their fair value, than 
 if they had been coined at our own Mint ; and 
 therefore to introduce our silver currency into 
 the colonies is to innovate, for it is to intro- 
 duce something which eo nomine did not before 
 exist. But let this pass. Regard only is to 
 be had to things and not to names ; we do 
 after all but introduce silver, and to this per 
 se there can be no objection. 
 
 But by introducing our silver currency into
 
 112 
 
 the colonies, is it certain that we have at- 
 tained this highly valued principle of uni- 
 formity, and so as to assimilate the currency 
 of the colonies to the currency of the mother 
 country ? — Quite the reverse, I believe ; for, 
 according to the system at home, silver is only 
 a legal tender to the amount of forty shillings, 
 but in the colonies we have made it a legal 
 tender to any amount ; and therefore the two 
 systems are widely different; and this dif- 
 ference, if I am not mistaken, will eventually 
 be productive of some very extraordinary 
 consequences. 
 
 Let us now see in what way our measures 
 are to be carried into effect. 
 
 I have before me the proclamation issued at 
 the Cape of Good Hope, and I am informed 
 that in all our other colonies and possessions 
 the proclamations in substance are the same. 
 From this document I collect the following 
 particulars : — 
 
 " 1 . That in every colony where the Spanish 
 dollar is a legal tender for the discharge of 
 debts, the British silver money shall also be a 
 legal tender at the rate of 4*. Ad. for the Spa- 
 nish dollar. 
 
 "2. Any person bringing 103/. in British 
 silver money may have a bill for 100/. on the 
 Treasury in London, at 30 days' sight.
 
 113 
 
 "3. In all future cases when articles are 
 contracted for on account of the Government, 
 payment is to be made in British silver mo- 
 ney, or in bills on the Treasury, at the rate of 
 a bill for 100/. for every 103/. due upon the 
 contract." 
 
 Then comes a table by which the good 
 people of the colonies are informed not only 
 of the gross weight of the Spanish dollar, the 
 French 5-franc piece, and some other coins, 
 but also of their contents in pure silver ; to 
 which is added a reduction of their value into 
 British silver money, according to the ancient 
 standard of 5^. 2d. for the ounce of standard 
 silver ; and these reductions may be, and I 
 dare say are, correct ; but as this ancient 
 standard no longer exists, they are of no value 
 whatever, and the whole table is false : but for 
 the present let this pass. 
 
 In the midst of the whole there is a vain 
 parade of science : and not satisfied that 
 things should be carried into effect plainly 
 and simply, we are told, for example, that 
 
 '' A pound troy of standard silver contains 
 lloz. 2dwts. of pure silver, and ISdwts. of 
 alloy; and that the proportion between pure 
 and standard silver may be ex|)ressed by the 
 fraction 222.240." And that 
 
 1
 
 114 
 
 *' The pound troy weight of Spanish dollars 
 contains lOoz. 14dwts. of pure silver, and 
 loz. 6dwts. of alloy; and that the proportion 
 between the gross weight of the Spanish dol- 
 lar and its contents in pure silver may be ex- 
 pressed by the fraction 214.240." 
 
 Then, again, we are told, that in no case 
 whatever is regard to be had to the gross 
 weight of the coins, but solely to their con- 
 tents in pure silver. 
 
 Now it is quite befitting that all this should 
 appear in a book of science. It looks well, 
 for instance, in that highly valuable work, 
 "Dr. Kelly's Cambist;" but non erat hie 
 locus f and here it is sheer pedantry. 
 
 At length comes the grand arcanutn, and we 
 are gravely told that the fraction 222.240 is 
 equal to the fraction 37-40; and that the 
 fraction 214.240 is equal to the fraction 107- 
 120; and thereby all our youthful studies 
 are immediately brought to our recollection, 
 and we are at once reminded that fractions of 
 one denomination may be reduced to fractions 
 of another denomination ; or, in other words, 
 that put on what appearance it will, a thing 
 is still itself; and by this we are greatly 
 edified. But never mind ; and after all it 
 concerns us but little that his Majesty's
 
 11,5 
 
 Ministers should cause it to be proclaimed to 
 the whole world that they have lately gone 
 through a regular course of arithmetic. 
 
 These are the chief particulars ; and then, 
 at one single glance of the eye, we may per- 
 ceive that the whole system is bottomed in 
 error : for in comparing the Spanish dollar 
 and all other foreign silver coins with British 
 silver money, the foundation of the com- 
 parison is the ancient standard of the country 
 according to which the pound of silver was 
 coined into 62 shillings; but this standard 
 no longer exists, and the pound of silver is 
 now coined into 66 shillings. 
 
 Now, in favor of our system at home, we 
 have this argument — that though we have 
 altered our ancient silver standard, yet we 
 have not altered the gold ; and that by 
 making silver a legal tender to the extent of 
 only forty shillings, things are restored to 
 their former equilibrium ; and therefore as 
 when a man sells silver he get gold in pay- 
 ment, provided he get 5s. 2d. per ounce for 
 his silver, this payment in gold does de facto 
 (and notwithstanding the alteration in the 
 silver standard) establish the same relative 
 value between gold and silver as existed 
 under our ancient Mint regulations. But 
 here the argument has no place, because no 
 
 I 2
 
 116 
 
 gold is paid, gold never intervenes, but the 
 comparison is direct between Spanish silver 
 dollars and British silver money, under pre- 
 cisely the same circumstances, and both a 
 legal tender in payment of debts to any 
 amount : and then the departure from our 
 ancient silver standard becomes of conse- 
 quence, and the ds. 4<i. which was equivalent 
 in value to the Spanish dollar when the pound 
 of standard silver was coined into 62 shillings, 
 is no longer equivalent when the same pound 
 of silver is coined into 66 shillings; and 
 therefore the whole is founded in delusion. 
 And yet this system proceeds from men who 
 are really become so enlightened as to be able 
 to inform us, that no regard whatever is to be 
 had to the gross weight of the coins, but only 
 to their contents in pure silver. A most ex- 
 cellent rule ; and the more excellent, because 
 being grounded in the nature of things, it has 
 stood the test of experience ; for this rule is 
 of very ancient date : we - find it already 
 established, and in full operation, at the 
 period when Abraham bought a burying- 
 place for 400 shekels of silver current money 
 with the merchant; and it therefore, in all 
 probability, was of much higher antiquity. 
 
 The rule, then, being good, let us now 
 attend to the modus operandi, and see a little
 
 117 
 
 farther how these Nimrods in science have 
 carried it into practice. 
 
 They order, then, as we have ah'eady seen, 
 that in all cases whatever the Spanish dollar 
 and British silver money shall equally be a 
 legal tender in payment of debts to any 
 amount, and that 45. 4d. in British silver 
 money shall be equivalent in value to a 
 Spanish dollar; and therefore if one man 
 owes 3,000 dollars to another, and the cre- 
 ditor comes to demand payment, this debt 
 may be acquitted by the payment of 650/. in 
 British silver money. But 3,000 Spanish 
 dollars contain 2,3l6oz. lldwts. of pure 
 silver, while 650/. in British silver money, 
 contain only 2,186oz. 7dwts. of pure silver ; 
 and therefore the creditor is cheated of 130oz. 
 of silver : and their own rule that we arc only 
 to look to the contents of the coins in pure 
 silver is departed from. 
 
 Now we all know that both silver and gold, 
 when compared with other commodities, will 
 have different values in different places, and 
 this, too, at the same period of time ; but 
 that at the same time, and in the same place, 
 and merely by virtue of a proclamation, 
 2,186oz. of silver should be equal in value 
 to 2,3l6oz. of silver, and in point of fact the 
 same thing is indeed most wonderful.
 
 118 
 
 Then comes this point. Either we shall 
 send much of this pretty silver money to the 
 colonies, or we shall send but little. To send 
 much will obviously lead to serious conse- 
 quences ; and to send but little, is to pass 
 condemnation on the whole system. For what 
 more profoundly ridiculous than first to enact 
 a law, declaring this silver money to be a 
 legal tender in all payments, and then so to 
 order our measures as that there shall be little 
 or none of it in circulation, to enable the law 
 to be carried into effect ? This is not to coin 
 money but medals, and from that moment 
 the law is a dead letter. 
 
 If we say that silver is scarce in the 
 colonies, and that therefore we send out this 
 money, this is no valid defence of our con- 
 duct ; for this were indeed a good argument 
 for sending out Spanish dollars, but it is none 
 whatever for sending out British silver money, 
 which is to be a legal tender in all payments, 
 but which at home is only considered as a 
 mere token ; and it was upon this principle 
 (whether right or wrong is here of no conse- 
 quence) that the reduction of our silver 
 standard at home was justified. 
 
 I have stated facts, and I have laid down 
 principles ; but the precise consequences that 
 will result from our foolish measures are no
 
 11.9 
 
 concern of mine : if, however, I am truly in- 
 formed, a part of the silver which we have 
 coined and sent out to Gibraltar, has been al- 
 ready returned to this country ; and it is 
 probably in this way that the system will 
 operate — that is, the money that is coined 
 and sent out, will gradually find its way back 
 again. But this will work the destruction of 
 the home system, because the relative value 
 between, gold and silver in our coinage being- 
 very different from the relative value be- 
 tween the two metals as bullion and in the 
 market, it is quite impossible that the system 
 can stand alone ; and, therefore, we have 
 found it necessary to prop it up by regula- 
 tions, one of which is, that silver shall only 
 be a legal tender to the extent of 40^., and 
 the other, that the silver currency of this 
 country shall be placed under the control of 
 the Government, and that no silver shall be 
 coined for the public ; and, therefore, to 
 ensure the safety of the system, silver to a 
 certain degree must be scarce. But if, as 
 fast as we coin silver for the colonies, this 
 silver is regularly returned to us, a much 
 larger quantity of silver will be thrown into 
 the home circulation than was ever intended. 
 By this means gold will be driven out of cir- 
 culation, and we shall at length arrive at a
 
 120 
 
 silver standard: not, be it observed, the 
 ancient silver standard of the country of 62*. 
 to the pound, but a depreciated standard of 
 66s. to the pound. 
 
 But with consequences, as already said, I 
 have nothing to do : the system may or may 
 not operate in this manner, but to suppose 
 that a system of this kind is to lead to no con- 
 sequence whatever, is of all things in the 
 world the most absurd and ridiculous. 
 
 This is my view of the case ; and this would 
 appear to be the result — that not satisfied with 
 having established one absurd system at home, 
 we have determined to introduce another, 
 which is still more absurd and contradictory, 
 into the colonies. Nor do we confine our- 
 selves to occasional deviations from the dic- 
 tates of common sense, but such is the warmth 
 and luxuriance of our fancy, that in every 
 thing which regards our currency, whether 
 paper or metallic, sheer immaculate folly is 
 the order of the day. Skilful men first find 
 their facts, and then they reason, but our 
 procedure is the very reverse; for first we 
 reason, and then comes the fact and upsets 
 the argumemt, and all our work is to begin 
 again. In one word, there is neither plan, 
 nor principle, nor design, in any thing we do ; 
 and in one respect this is fortunate, for as our
 
 121 
 
 present systems are the product of accident, 
 so by accident may other systems be pro- 
 duced ; till at length and by repeated revo- 
 lutions of the atoms of Epicurus, things will 
 perhaps get jumbled into something like a 
 sound condition. 
 
 October 2b, 1825. 
 
 LETTER IX. 
 
 ON OUR METALLIC CURRENCY. 
 
 " The business of money and coinage is by some men, and 
 amongst them some very ingenious persons, thought a 
 great mystery, and very hard to be understood. Not tliat 
 truly in itself it is so, but because interested people that 
 treat of it wrap up the secret they make advantage of in a 
 mystical, obscure, and unintelligible, way of talking; 
 which some, from a pre-conceived opinion of the difficulty 
 of the subject, taking for sense in a matter not easy to be 
 penetrated but by the men of art, let pass for current, 
 without examination."" — Locke. 
 
 I COME now to treat of the ill effects resulting 
 from our Mint regulations, and of the act
 
 122 
 
 passed in 1816, which made g-old alone a legal 
 tender in all payments above the value of 405., 
 and by closing the Mint against the public for 
 the coinage of silver, excluded this metal, 
 except to a defined limited extent, from the 
 home-market. But before we do this, it will 
 be necessary that we lay down a few prin- 
 ciples, plain and easy of apprehension, and 
 which, I believe, will admit of little or no 
 dispute. 
 
 The first question to be determined is this — 
 what are we to understand by certain money, 
 whether of gold or silver, being a legal tender ? 
 And to this question there appears to be a 
 plain easy answer ; and that the idea of a 
 legal tender implies nothing but this — that 
 gold or silver existing in the possession of one 
 man, and corn in the possession of another, 
 the law allows these two men, if they like, to 
 make a bargain, by means of which a certain 
 quantity of the one shall be sold or exchanged 
 for a certain quantity of the other; and the 
 operation being the result of a free uncon- 
 strained agreement between the parties, where 
 is the injury to the community that both 
 silver and gold, or either indifferently, should 
 be a legal tender ? and that the bargain 
 should be upon credit, or, in other words, that 
 the contract should be only determinable and
 
 123 
 
 the money paid at a future period, makes no 
 manner of difference ; for this credit is again 
 the result of convention and of agreement be- 
 tween the parties to the contract. Pre- 
 cisely the same observations apply to a case of 
 rent (and to all other cases), and no injury in 
 the world can result to the community from 
 the circumstance that a landlord and his 
 tenant are allowed to make a bargain for the 
 payment of rent in either gold or silver, or 
 both, at their choice, and as they can best 
 come to an understanding. 
 
 What I have here said I hold it to be quite 
 impossible (at least with any show of reason) 
 to contradict ; for it is notorious that bargains 
 of all sorts are made in money, and then no 
 reason can be given why (the parties thereto 
 agreeing) these bargains should not be allowed 
 to be made in silver money as well as in gold ; 
 and to say that silver is more variable than 
 gold is (apart from the utter nonsense of the 
 proposition) to say nothing ; for once for all, 
 every bargain of this nature is the result of a 
 voluntary agreement, and volenti non Jit in- 
 juria : but to proceed — 
 
 In all countries where a metallic currency 
 obtains, that both gold and silver are legal 
 tenders, and the Mint open to the public lor 
 the coinage of both metals, nothing is so
 
 124 
 
 easy to comprehend as the whole subject of 
 currency. 
 
 An individual brings a certain quantity of 
 gold or silver bullion to the Mint, it is refined 
 to a certain standard, coined into pieces of a 
 certain weight, size, and form, and which re- 
 ceive a certain stamp or impression as a 
 voucher for their contents. 
 
 If (the fineness remaining unaltered) the 
 individual get back precisely the same weight 
 in coin which he had brought in bullion, then 
 the coinage is at the expense of the State. 
 
 If what he get back be less than he brought, 
 then, technically speaking, he either pays a 
 seignorage or a brassage, according to the 
 amount of that which is retained. 
 
 If that which is retained exceed the ex- 
 pense of coining, then the individual pays a 
 seignorage ; but if it does not exceed this ex- 
 pense, then it is merely a brassage. 
 
 Now a seignorage is of no utility whatever, 
 for that is and must be useless which adds 
 nothing to the wealth of the community. 
 A seignorage is of no utility in our intercourse 
 with foreigners, for they estimate our money 
 according to its real, and not according to its 
 denominative, value. With them our money 
 is mere bullion, and whenever they get it they 
 pay nothing for seignorage. They get it, in
 
 125 
 
 short, upon the very principle which obtained 
 4,000 years ag-o, when Ephron, the Hittite, 
 sold a field to Abraham for 400 shekels of 
 silver, probatce monetce jmblicce, and that 
 Abraham took a pair of scales and weighed 
 the money. 
 
 A seignorage is equally useless in our do- 
 mestic concerns ; for whatever the quantity 
 of the precious metals which a country may 
 be able to obtain in exchange for the surplus 
 produce of its industry, a seignorage will add 
 nothing to this quantity, but it will merely 
 have this effect — that of the quantity ob- 
 tained and coined into money, a portion will 
 belong to the Government, and the remainder 
 to those who bring the bullion to the Mint. 
 But whatever the Government gains, some- 
 body must lose : and therefore a seignorage 
 is a tax, which either falls on certain indivi- 
 duals, or on the public at large ; and it is 
 totally impossible that a tax of this kind can 
 add to the wealth of the community. 
 
 With respect to a brassage — that is, to a 
 charge at the Mint, which shall not exceed 
 the mere expense of coining — this may, per- 
 haps, be justified ; and upon this ground, 
 that to the extent of the cost of the work- 
 manship, the metal (from the more conve- 
 nient form which it has received, and from
 
 126 
 
 its carrying on the face of it a certificate of 
 its contents) has really acquired an additional 
 value ; but still it may be doubted whether it 
 would not be better that even this expense, 
 trifling- as it is, should be paid out of the 
 general revenue of the State. 
 
 As when neither seignorage nor brassage is 
 charged, the Mint gains nothing, and the 
 whole expense of the coinage falls on the 
 public, it is quite clear that all the operations 
 of the Mint finally resolve themselves into 
 this single point — " The certifying a parti- 
 cular fact ;" that is, that a certain piece of 
 metal, of a certain weight and form, and with 
 a certain impression, contains a certain de- 
 fined quantity of either gold or silver, as the 
 case may apply. And, therefore, in every 
 well-organised system of currency, a Mint is 
 a mere passive instrument, instituted and 
 established for the sole purpose of carrying 
 the wishes of the people into effect. 
 
 But whether a seignorage exist, or a mere 
 brassage, or neither, provided the Mint be 
 but open to the public, and that the whole 
 system of currency is free from restraint; 
 then, in the same manner that the individual 
 was first free to bring his bullion to the Mint, 
 or not, as he liked, so when he gets it back, 
 coined into money, is he again free to do
 
 12: 
 
 what he likes with his money. His gold is 
 left to find its value in silver, and his silver 
 is left to find its value in gold, and both are 
 left to find their value in other commodities. 
 And why the Government of this or any 
 other country upon earth should interfere to 
 prevent this, is to me a great mystery. 
 
 This, then, is how the matter stands with a 
 system perfectly free from restraint; and in 
 all this there is so little of difficulty, that in 
 one single half hour a child may become 
 master of the whole subject. But when arti- 
 ficial regulations prevail, and that the Mint 
 is open to the public for the coinage of gold 
 alone, and shut to the coinage of silver which 
 is placed under the control of the Government, 
 then the subject becomes more perplexed and 
 intricate, and that which if left to itself is of 
 all things the most simple and easiest to be 
 understood, gets to be a little more difficult 
 of comprehension, and it then becomes neces- 
 sary to assign reasons (good or bad) why two 
 metals, which, when uncoined and in their 
 rude state, were left to find their own value, 
 either as between themselves, or with relation 
 to other commodities, should, after they are 
 coined, and notwithstanding they remain 
 intrinsically the same, no longer (one of them 
 at least) be allowed to enjoy the same liberty ;
 
 128 
 
 and that this system of coining' the one for 
 the public, while we refuse to coin the other, 
 should again so operate as to disturb, in the 
 home-market, the natural relation between the 
 two metals as bullion. And this brings us to 
 our Mint regulations, which establish very 
 different proportions betvveen gold and silver, 
 when coined, from those which, in a natural 
 state of things, existed between them as bullion; 
 and from the single circumstance that such a 
 system inverts the natural order of things, it 
 cannot stand alone, but must be supported by 
 a series of restrictions and regulations — that 
 is, by artifice and violence. 
 
 And then the first regulation, and which it 
 was considered would alone be sufficient to 
 support the whole fabric, was to make silver 
 a legal tender in small payments only — that 
 is, to the extent of forty shillings : a regula- 
 tion per se, and inherently and essentially, so 
 contradictory and absurd, that it amounts to 
 a complete condemnation of the principle on 
 which the silver was originally obtained ; for 
 it was acquired by the exchange of a mass of 
 commodities for a mass of silver, and without 
 the least limitation (in principle) to the 
 amount of either ; and therefore, either we did 
 wrong to acquire silver upon this principle, or, 
 if not, then it is right that silver should be
 
 129 
 
 allowed to cxcliange for other commodities en 
 masse, and without limitation or restriction as 
 to the amount ; that is, it should be allowed 
 to circulate on the same principle on which it 
 was originally obtained. 
 
 But to return to the subject. It was found 
 that the regulation which allowed silver to be 
 a legal tender to the extent of only 405., so 
 far from being a support to the system, would 
 (if the Mint were open to the public for the 
 coinage of silver) be the occasion of its over- 
 throw ; and therefore a second expedient was 
 resorted to, which was to place the whole of 
 the silver coinage under the control of the 
 Government; and so that if an individual* 
 bringing silver bullion to the Mint, should be 
 willing to pay a seignorage of 4r/. per ounce, 
 the Mint should still be closed against him ; 
 but he might bring just as much gold as he 
 liked, and it should be coined for him free of 
 all seignorage and expense. And this, again, 
 is absurd; for neither gold nor silver interfere 
 with any production of our soil or produce of 
 our industry, but both are obtained by the 
 same means that we obtain coffee, or sugar, 
 or tobacco — that is, in exchange for the sur- 
 plus produce of our industry ; and therefore, 
 to say that we will allow gold to be coined 
 for the public, but not silver, is just the same
 
 130 
 
 as to say that we will allow both coffee and 
 sugar to be imported, but that sugar alone 
 shall be allowed to be consumed in this coun- 
 try. And this is really a case in point ; be- 
 cause to exclude silver from the Mint is to 
 exclude it from the home-market. And then 
 why should silver be excluded from the home- 
 market ? And seeing that, mould it into what 
 form we will, silver is still but silver, why not 
 (as is justly observed by the Earl of Lauder- 
 dale) pass sumptuary laws against the use of 
 silver plate ? But these laws not existing, if 
 it be right that one man should have a service 
 of plate, how can it be wrong that another 
 should have as many crown pieces as he likes 
 or can command ? In one word, where is the 
 harm to the community that the Mint, on the 
 application of an individual, should be allowed 
 to divide a bar or cake of silver into a certain 
 number of fractional parts ? Let him that 
 will, and is at leisure, answer these questions — 
 I cannot. 
 
 Now it is this latter expedient of excluding 
 silver from the home-market, this after- 
 thought (a clear and decided violation of the 
 rights of the merchant and the manufacturer), 
 that has mainly contributed to support a sys- 
 tem, which, of itself, would have fallen to 
 pieces in an instant ; but whether the misera-
 
 131 
 
 ble expedients to which we have resorted iri 
 order to prop up a forced unnatural state of 
 things will always be successful, may, I think, 
 very fairly be doubted. It is not, however, 
 with their failure which I have to do at pre- 
 sent, but with their success ; for, like all other 
 artificial systems, it is precisely when they 
 succeed, and not when they fail, that they are 
 productive of the greatest mischief. 
 
 Now, in my view of the case, dating from 
 1820 till 1824, the system was crowned with 
 complete success, and it is therefore to this 
 period that my observations will relate ; and if 
 I succeed in showing, that during this, the pe- 
 riod of its greatest success, the system was pro- 
 ductive of great injury to the manufacturers of 
 Great Britain, I shall have gained my cause. 
 
 The mischief, then, has consisted in this — 
 that silver being deprived of the home-market 
 (the Mint), has been and still is degraded 
 below its fair natural value ; and that this is 
 the fact is evident from the price of standard 
 silver, which from 1820 till 1824 was upon 
 an average about 45. llr/. per ounce; and 
 most assuredly if the Mint had been open for 
 the coinage of silver, it never could have been 
 for a single instant at this price ; for the 
 pound of standard silver being coined at the 
 Mint into 66 shillings, this gives 5s. 6d, per 
 
 K 2
 
 132 
 
 ounce ; and four shillings on each pound of 
 silver being- the rate of seignorage, this leaves 
 OS. 2d. per ounce ; and with a Mint open for 
 the coinage of silver, this price it would 
 always maintain. 
 
 And then, this state of things is productive 
 of great injury to the manufacturer. For, 
 let a manufacturer send goods to South Ame- 
 rica, and get silver in return, if by being 
 deprived of the home-market for his returns 
 (which is the Mint) he is obliged to sell his 
 silver at As. \\d. per ounce; it is perfectly 
 clear that the loss of "dd'. per ounce on his 
 returns, will be a diminution of five per cent, 
 on the proceeds of his adventure. And there- 
 fore we see the evil resulting from a system 
 which absolutely drives a man to seek, to his 
 prejudice, that market for his silver abroad 
 which he ought to be allowed to find at 
 home. For, once for all, the natural market 
 for silver bullion is the mint ; and if it be 
 excluded from our own Mint, then it must 
 necessarily find its way to some other; but 
 for whatever purpose this silver is sent out of 
 the country, and whatever is obtained in re- 
 turn for it, that which we get can never be 
 equal to the advantages which would have 
 been derived from the home-market, for then 
 silver could never be at 4.9. l\d. per ounce :
 
 133 
 
 and to say otherwise is to say that an ounce 
 of silver is not an ounce of silver. 
 
 Nor does the matter stop here ; for it has 
 happened, and will happen again under our 
 system, that the demand for silver is slack, 
 even at a low price ; and then, what follows ? 
 Why, that the man who wants money, either 
 to make purchases of goods for exportation* 
 or to pay for those which he has ah^eady ex- 
 ported, and for which he has received silver 
 in return, is obliged to borrow on his silver 
 and to pay interest on the loan ; and so that 
 the country banker who is allowed to deluge 
 the country with his paper without stint or 
 limit, is enabled to get interest for the loan 
 of his accursed trash from the very man, who, 
 in a free natural state of things, and while he 
 supplied the country with a sound metallic 
 currency, would, if the Mint were open, be 
 under no necessity to borrow money at all. 
 And this shows us at once that there is 
 neither common sense nor even common 
 honesty in our proceedings ; for at all events 
 the banker and the manufacturer ought to be 
 placed on terms of equality ; and that is and 
 must be a monstrous state of things in 
 which a rascally country banker shall be 
 allowed to issue paper without the least limita- 
 tion or restriction, while the manufacturer
 
 134 
 
 shall not only be debarred the liberty of sup- 
 plying- the country with a metallic currency, 
 but shall even be taxed and plundered that 
 paper may circulate. 
 
 It will then be said that the low price of 
 silver in this country to which I have alluded 
 may have been occasioned, either by a real 
 augmentation in the value of gold, or by a 
 real decline in the value of silver ; and that 
 thereby the relative value between the two 
 metals must necessarily have changed : but 
 this is not the fact, and from Mr. Tooke's 
 book on "High and Low Prices," we learn 
 three things which have a most important 
 bearing on the present inquiry. 
 
 1. That from January, 1818, up to June, 
 1820, both inclusive, there was no premium 
 whatever at Paris on gold in bars, but the 
 premium on silver in bars was throughout the 
 whole period one franc fifty cents per 1,000 
 francs ; and what is still more remarkable, 
 the average premium on Spanish dollars 
 throughout the same period was twenty cents 
 per dollar, for the average price of Spanish 
 dollars was five francs forty-eight cents, but 
 the Mint price for Spanish dollars in France 
 is only five francs twenty-eight cents. And, 
 therefore, so far from gold during this period 
 having risen as compared with silver, the
 
 13.5 
 
 latter metal, on the contrary, had risen as 
 compared with gold : and this may easily be 
 accounted for, because it is a fact, that during 
 part of this period, gold had been sent from 
 this country to France, and silver received in 
 return. From the same authority we also 
 learn, 
 
 2. That from July, 1820, till December, 
 1823, both inclusive, the average premium on 
 gold in bars, was seven francs per 1,000 
 francs ; and the average premium on silver; 
 in bars, was two francs fortv-three cents per 
 1,000 francs; and that tue average price of 
 Spanish dollars throughout this period, was 
 five francs thirty-four cents, (being a little 
 more than 1 per cent, above the Mint price) ; 
 and here it would appear, that by comparing 
 gold in bars with silver in bars, the former had 
 increased in value four francs fifty-seven cents 
 per 1,000 francs, or about ^ per cent.; but 
 that, by comparing gold in bars with Spanish 
 dollars, the premium on the latter was greater 
 than that on the former. 
 
 Now that there should, during the latter 
 period, be this very trifling decline in the 
 price of silver in bars, as compared with the 
 price of gold in bars, may again be very easily 
 explained ; for whereas, in the first period, 
 gold was sent from this country to France to
 
 136 
 
 be exchanged for silver, so in the latter was 
 silver, on the contrary, sent from this country 
 to be exchanged for gold. And, therefore, 
 the state of the Paris market was this — that 
 in the first case there was a supply of gold and 
 a demand for silver, and in the second, a 
 supply of silver, and a demand for gold. 
 
 3. If we take in the whole period from 
 January, 1818, till December, 1823, we shall 
 find that the greatest variation was on the 
 13th of June, 1821, when the premium on 
 gold in bars was twelve francs, while silver 
 was at par : and that the average premium 
 throughout the whole period of gold in bars 
 was four francs twelve cents, while the average 
 premium on silver in bars was two francs 
 forty-four cents ; and so that while, during 
 the same period, the price of silver in the 
 English market had varied from 5s. 6d. to 
 45. lO^d. per ounce, making a difference of 
 full 12 per cent., the greatest variation in 
 Paris (and this lasted but a day) was only 
 1 l-5th per cent., and that the average vari- 
 ation throughout the whole period was only 
 l-5th per cent. 
 
 This was the state of things from January, 
 1818, till December, 1823; and if we turn 
 our attention to what has since occurred, we 
 shall find, that for this considerable time past,
 
 137 
 
 and down to the present period, the premium 
 on silver at Paris has exceeded the premium 
 on gold ; and this may again be explained, 
 because it is a notorious fact that, during a 
 great part of this period, both silver and gold 
 have been exported from this country to 
 France, but the value of the gold exported 
 has greatly exceeded that of the silver. 
 
 Every thing, therefore, is explained, and 
 there iias been no real general decline in the 
 value of silver as compared with gold, but 
 merely a decline which is peculiar to our- 
 selves, and which arises solely from our Mint 
 regulations, and the exclusion of silver from 
 the home-market, and the consequences of 
 which do not fall on the public at large, but 
 on a particular class and description of 
 persons ; that is, on the importers of silver 
 bullion, who receive this metal in return for 
 British manufactures. And then the whole 
 case becomes clear ; for our principle being 
 this, that gold shall be coined for the public 
 free of expense, while silver is excluded from 
 the Mint, it is necessarily and inevitably im- 
 possible that these two metals can remain to- 
 gether, or that their relative value in the 
 English market should at all accord with the 
 nature of things; but either, as in 1818 and 
 part of 1819, gold will be exported to ex-
 
 138 
 
 change for silver, or, as since that period, 
 silver will be exported to exchange for gold. 
 And in no sound system of currency where per- 
 fect liberty is obtained, and where the home- 
 market was open for both metals, could this 
 by possibility take place ; or if it should, it 
 would be beneficial, because the only ground- 
 work for an operation of this nature must be 
 some error in the monetary system of other 
 nations, and which we, by having a system 
 free from restraint, are enabled to convert to 
 our advantage. 
 
 The fact then being that large quantities 
 of silver have been sent to France, while gold 
 at the same moment of time has been received 
 fro7n France, this fact alone is conclusive of 
 the whole argument; for the only rational 
 foundation for an operation which sends 
 silver to France to be exchanged for gold, 
 must be this, that more gold can be obtained 
 in France in exchange for any given quantity 
 of silver than in England : for if less were 
 obtained, the operation would be impossible ; 
 and if the same quantity only were obtained, 
 it would again be impossible, because this 
 would be to lose all the charges of transport 
 on both the gold and the silver. 
 
 Now view it in another light. The export- 
 ation of a great quantity and value in silver,
 
 139 
 
 produces the same effect as the exportation of 
 a considerable quantity and value in any other 
 merchandise; that is, it raises the course of 
 exchange ; and to raise the course of exchange, 
 is to induce an importation of the precious 
 metals : but we cannot import silver, for this 
 we export because it is excluded from the 
 home-market ; and therefore we import gold : 
 and therefore the exportation of silver leads 
 to the necessity of an importation of gold. — 
 And, therefore, this view of the case leads 
 to precisely the same results, and there is an 
 exchange of silver for gold. But in a free 
 system of currency this exchange, as already 
 said, would be impossible, because in the same 
 manner that silver in France (by the Mint 
 being open to its coinage) finds its value either 
 when compared with gold or with other com- 
 modities, would silver (if the English Mint 
 were open to its coinage) find its value in Eng- 
 land, when compared either with gold or with 
 other commodities. In short, as silver can be 
 coined, and can, and does in all parts of the 
 earth, serve for money as well as gold, to ex- 
 port silver, that it may be exchanged for gold, 
 is to send abroad, and at great expense, for 
 that commodity which already exists at home : 
 or, in other words, it is to export money that 
 we may get money in return ; and than this,
 
 140 
 
 nothing, 1 am sure, can be more absurd and 
 ridiculous. 
 
 Put it now, finally, that there shall be no 
 exchange of silver for gold, but that the course 
 of exchange between France and England 
 shall be at par, when every importation of 
 gold from France into England, either in ex- 
 change for silver, or for any other commodity, 
 will consequently be impossible, and still the 
 proprietor of silver bullion will be injured, 
 though not to the same extent; for still his 
 silver, in consequence of its exclusion from 
 the home-market, must be exported, and there- 
 fore he must still lose all the charges of trans- 
 porting his silver to France, and the profit of 
 those who make the exportation. And what 
 
 1 here say is not mere reasoning or supposi- 
 tion, but, like all the rest, plain matter of fact: 
 for it is notorious, that for this considerable 
 time past the exchanges have been below par, 
 that both gold and silver have been exported, 
 and that the premium on silver at Paris has 
 exceeded the premium on gold, and yet the 
 price of standard silver has never exceeded 
 5s. Id. per ounce-^that is, it has been about 
 
 2 per cent, lower than it would have been if 
 the Mint had been open to its coinage. This 
 may alter, certainly, and silver may again ad- 
 vance to 5s. 6d., or it may go down to 4^. lid.;
 
 141 
 
 and to draw any inference as to the real re- 
 lative value between gold and silver from what 
 takes place under our system, is to go to 
 Bedlam for a rule of common sense. 
 
 Now if, in answer to all this, it should be 
 said that by the exportation of silver the ex- 
 changes are kept up, then I ask why the 
 exchanges being kept up, should operate to 
 the injury of the proprietor of silver bullion ? 
 Every other man has the range of the home- 
 market for his commodity ; give him also the 
 range of the home-market ; and then whether 
 the exchanges be at, or above, or below par, 
 his commodity (like the commodity of every 
 other individual) is sure to find its value. For 
 what connexion is there between a par, or a 
 course of exchange, and the real value of any 
 particular commodity ? And (apart from the 
 cost of production, and the influence of supply 
 and demand) how can the value of any com- 
 modity be affected, except by regulation and 
 restraint? And this it is precisely of which 
 we complain. 
 
 This for the present. In my next letter I 
 shall continue the inquiry. 
 
 November 12fh, 1825.
 
 142 
 
 LETTER X. 
 
 ON OUR METALLIC CURRENCY. 
 
 " Ou est le philosophe qui pour sa gloire ne tromperoit pas 
 volontiers le genre humain ? II n^y en a pas un seul qui, 
 venant a connoitre le vrai et le faux, ne preferat le men- 
 songe qu'il a trouve a la verite decouverte par un autre." 
 — Rousseau. 
 
 I STATED in my last letter, that in conse- 
 quence of the exclusion of silver from the 
 Mint, this metal had been, and still is, in the 
 English market, degraded below its fair natu- 
 ral value, and that at one period large quan- 
 tities of silver had been sent to France to 
 exchange for gold. 
 
 Now to this it will be said, that if we have 
 sent silver to France to be exchanged for gold, 
 the French on the other hand have sent us 
 gold to be exchanged for silver; and this is 
 true; but then comes this very remarkable 
 difference, that while we lose by the opera- 
 tion, the French gain; and the slightest atten- 
 tion to facts will convince us that this cannot 
 be otherwise. For the Mints of France being
 
 143 
 
 open for the coinag'e of both metals, the cur- 
 rency being free from all restraint, and both 
 metals left to find their value, either between 
 themselves, or as compared with other things, 
 it is quite impossible that either gold or silver 
 in France can fall below the Mint price, 
 though they may and generally do exceed it ; 
 and therefore, if we send them silver to ex- 
 change for gold, the premium on gold will be 
 high ; and if we send them gold to exchange 
 for silver, the contrary will take place : and 
 therefore the freedom and simplicity of their 
 system constantly enables them to take ad- 
 vantage of our errors, and having a Mint at 
 home, who but madmen would think of send- 
 ing their bullion to the Mint of a neighbour- 
 ing kingdom to be coined into money ? And 
 turn it as you will, this is the operation ; and 
 though the silver is exchanged for and re- 
 turned to us in the shape of gold, yet this is 
 but to send out money to get money in return ; 
 and in an operation of this nature we must 
 necessarily lose the profit made by the French 
 Mint on the coinage of the silver — the pre- 
 mium on the gold received in return — the 
 charges of transport on both the gold and the 
 silver — interest of the money — and the profit 
 of those who conduct the operation. 
 
 But whether the French gain or lose, or
 
 144 
 
 what has become of all the silver that has 
 been imported; whether it has been sent out 
 of the country to exchang^e for gold, or to 
 provide for foreign loans negotiated in this 
 country ; or whether part has been purchased 
 by the English Government to convert into 
 silver currency ; or whether, in fine, part has 
 been exported to receive commodities in re- 
 turn; the loss to the manufacturers of Great 
 Britain will still be the same; and this loss 
 will always amount to the difference between 
 the market-price of silver and the price of 
 5s. 2d. per ounce, which they would, and must 
 have obtained if the Mint had been open for 
 its coinage. And this is true, whether we 
 suppose our ancient Mint regulations still to 
 subsist, by which thepoundof standard silver 
 was coined into 62 shillings free of all seignor- 
 age or expense, or whether we take our pre- 
 sent regulations, by which the pound of 
 standard silver is coined in 66 shillings, of 
 which 4 shillings are retained by the Govern- 
 ment for seignorage. 
 
 But to open the Mint for the coinage of 
 silver would be to depart entirely from our 
 present system. No doubt : but why did we 
 abandon the old system } and where did we 
 get the present ? What madman invented it ? 
 and where is the harm of getting rid of a
 
 145 
 
 manifestly unsound state of thino^s ? Who 
 are the innovators ? We who wish them to 
 return to the ancient order of thing-s, or they 
 who no longer ago, as it were, than yesterday, 
 framed a scheme, the like of which does not 
 exist on the face of the earth, and which, as 
 compared with the systems of other nations, 
 stands like a well furnished Bedlam in the 
 midst of a populous city ? By whom was our 
 ancient system established ? — By Sir Isaac 
 Newton. Who of late years have had the 
 direction of our currency ? — Metaphysicians, 
 and sophisters, and theorists ; and so that 
 instead of being (as it really is) a question of 
 fact, every thing that regards the subject of 
 currency is become a matter of mere specula- 
 tion — a theme for idle wanderers. But on 
 this subject of throwing open the Mint for 
 the coinage of silver, I shall say more here- 
 after. 
 
 Now let us apply what has been said, and 
 place the matter in a point of view which 
 shall render it plain to the meanest capacity. 
 
 There shall then be two manufacturers, the 
 one residing in England, and the other in 
 France ; they shall both manufacture the 
 same commodity at the same cost and expense 
 of production ; each shall send the commodity 
 
 L
 
 146 
 
 which he has manufactured at the same tim6 
 to the same market in South America, and, 
 being the same in every respect, they will 
 naturally sell for the same price ; each shall 
 receive returns in silver, and the quantity 
 received by each shall be 10,000 ounces. 
 The Mint of France being constantly open 
 for the coinage of silver, the French manu- 
 facturer finds an immediate market for his 
 returns ; but the Mint in England being- 
 closed, the silver imported by the English 
 manufacturer must necessarily be sent out of 
 the country. 
 
 The French manufacturer takes his silver 
 to the Mint, and gets paid for it immediately 
 in money. And here I will not enter into 
 the question of the seignorage of IJ per cent, 
 retained by the French Mint. According to 
 the doctrine of the modern philosophers, to 
 all the extent of a seignorage (be it much or 
 little) value is added to the coin — a theory 
 which is, and must be, false, because all facts 
 are opposed to it ; though it may perhaps be 
 true of a brassage* But here it is not neces- 
 sary that I should go into the question, be- 
 cause, generally speaking, silver bullion in 
 
 * See note 3, at the end of the work.
 
 147 
 
 France is at a premium on the Mint price ; 
 and therefore, this premium existing-, we have 
 only to suppose that to all the extent of the 
 cost of workmanship (brassage) value is added 
 to the coin ; and then the French manu- 
 facturer gets back in coin the whole of what 
 had been taken to the Mint in bullion, and 
 his 10,000 ounces of silver remain undimi- 
 nished. 
 
 Now let us see the position of the English 
 Hianufacturer ; and then, upon the supposition 
 that our ancient Mint regulations, by which 
 the pound of silver was coined into 62 shil- 
 lings, free of expense to the individual, were 
 now to subsist, and again, that the Mint should 
 be open for the coinage of silver (and so as to 
 place the Englishman in this respect on the 
 same footing with the Frenchman), to say 
 that an ounce of standard silver bullion is 
 worth bs. 2d. in the market, is merely to say 
 that an ounce of silver is an ounce of silver. 
 But the Mint being closed, and it being abso- 
 lutely necessary that the silver should be 
 exported that it may find a market, and the 
 price being reduced in consequence to 4^. \\d. 
 per ounce, the proprietor of silver bulUon is 
 placed in that peculiar situation that an ounce 
 of silver to him is no longer an ounce of silver. 
 
 l2
 
 148 
 
 but only about 19d\vts,* and the 10,000 ounces 
 which the manufacturer received in return 
 
 * This is true, because 4-?. lie?, in reality contains but 
 about 19dwts of silver, and the argument will hold whether 
 with relation to our ancient, or the present, system. 
 
 Under our ancient system the pound of standard silver 
 was coined into 62 shillings, this gave 5s. 2d. per ounce ; and, 
 therefore, with the Mint open for its coinage, it was quite 
 impossible that standard silver should be regularly below 
 this price. 
 
 Again: Under the ancient system, gold was coined at 
 S/. 17* lO^d. per ounce ; and then two things are clear; 
 
 1 . That the possessor of 10,000 ounces of silver bullion, 
 after it had been coined at the Mint, would still retain his 
 whole quantity of 10,000 ounces. 
 
 2. That both metals being a legal tender, and silver being 
 coined at 5s. 2c/., while gold was coined at 31. l*7s. lO^d. per 
 ounce, 10,000 ounces of standard silver, when coined into 
 money, would discharge the same debt, and command the 
 same quantity of other commodities as 663.456 ounces of 
 standard gold when coined into money ; or, in other words, 
 that 10,000 ounces of standard silver, and 662.4)56 ounces of 
 standard gold, were of precisely equal value. 
 
 Under the present system, if the possessor of 10,000 
 ounces of silver (in consequence of his commodity being ex- 
 cluded from the Mint) sell it in the market for 4*. lid. per 
 ounce, he will (in consequence of the law which makes silver 
 a legal tender to the extent of only 40*.) be paid in gold; 
 but 10,000 ounces, at 4*. lie?, will produce 2,458/. 6s. 8d., 
 which is only equal to 631.353 ounces of standard gold. — 
 But if the silver had been sold for 5s. 2c?. per ounce, then, 
 by a payment in gold, he would receive precisely the same 
 quantity of gold, and, as to all real purposes, be placed in 
 precisely the same situation as under the ancient system.
 
 149 
 
 for his commodity, get reduced to 9,^16 
 ounces, and the difference gets dissipated by 
 the charges of exportation, and in the various 
 ways to which we iiave alluded. 
 
 And therefore there is an absolute waste 
 and dissipation of a portion of the thing itself, 
 and consequently the less remains to be ex- 
 changed for any other object; and all this 
 falls exclusively on the manufticturer, and 
 without the least benefit being derived to the 
 rest of the community ; for it clearly can be 
 of no advantage to any one ihat, out of every 
 100 ounces of silver brought into the country 
 in return for our manufactures, five ounces 
 should be absolutely thrown away. 
 
 We see, tlien, how the matter stands ; and 
 as long as silver is silver, as long' as silver has 
 a value in exchange and as compared with 
 other commodities, and as long' as silver has a 
 value per se and in use (which it always will 
 have), just so long will the French manufac- 
 turer with 10,000 ounces of silver be in a better 
 
 And, therefore, the loss to the proprietor of silver bulhon, 
 will be precisely the difference between the market-price of 
 silver bullion, and the 5s. 2d. per ounce, which he would 
 have obtained under the ancient system ; and which he would 
 still obtain under the present, if the Mint were open to the 
 public for the coinage of silver bullion.
 
 150 
 
 condition than the Eng-lish manufacturer with 
 only about 9*500 ounces. 
 
 Nor is the advantage to France restricted 
 to the point to which we have alluded ; but 
 while the French manufacturer gets more for 
 his commodity than the English, the French 
 Mint and the French nation will gain all the 
 advantages which result from the English 
 manufacturer being occasionally obliged to 
 send his silver to France to be coined, and 
 afterwards exchanged for gold. O le beau 
 systeme ! O le beau systeme ! 
 
 It is past all doubt that we are mad. We 
 glory in the emancipation of South America, 
 on the ground that a more extensive field is 
 opened for the employment of our capital, 
 and the sale of our manufactures ; but all facts 
 tell us, that send what we will to South Ame- 
 rica, our principal return must consist of sil- 
 ver ; and yet we exclude this commodity 
 from our market. And it is in vain to deny 
 the fact ; for the great demand for the precious 
 metals is for the purpose of their being coined 
 into money: but that this may be done, they 
 must be taken to the Mint, and the Mint must 
 receive them; and therefore to exclude silver 
 from the Mint is to exclude it from the home- 
 market.
 
 in 
 
 This is what I have to say on the subject; 
 and the whole arg-ument appears to me to be 
 conclusive; and that no one point of view can 
 be taken, and no one possible cause imagined, 
 in which the exclusion of silver from the 
 home-market can be advantageous to the 
 community. 
 
 Now, if in answer to all this, it should be 
 said that our silver niqney is only a token or 
 counter, then this is childishly to beg the 
 question, because this is the very thing of 
 which we complain ; and to g'ive a satisfactory 
 reason why that which is a legai tender to 
 any amount in every other part of the earth, 
 should only be a token with us, is beyond 
 their power. Will they say that silver is 
 more variable than gold ? — This is false. Will 
 they say that one standard is less variable 
 than two ? — This is false even in speculation ; 
 and if true in every respect, then we ought 
 to have taken silver, and not gold, for our 
 standard. Shall all they say be true ? — It 
 amounts to nothing, because every man may 
 choose what standard he pleases,; and, there- 
 fore, to the supposed fixedness of one stand- 
 ard, there is superadded the advantage of 
 choice. After this, what will they say ? 
 Shall it be, that to introduce a silver standard 
 conjointly with gold is to render the position
 
 152 
 
 of the public creditor uncertain ? — It is non- 
 sense, but the remedy is easy. Pass a law 
 that his dividends shall continue to be paid 
 in gold, but do not deny to other persons the 
 liberty of making what bargains they please 
 in silver. But what reasonable objection can 
 the public creditor make to a payment in 
 either gold or silver, at the choice of the Go- 
 vernment, when this mode does but bring us 
 back to first principles, and to that precise 
 standard and state of things which existed 
 when the debt was originally contracted ? 
 Not that I mean that his dividends should 
 be paid in our present trumpery silver cur- 
 rency, but in good old-fashioned silver money, 
 coined at the rate of sixty-two shillings to 
 the pound of standard silver. 
 
 As every principle (whether good or bad), 
 when carried into practice, must have a 
 certain result, let us now endeavour to ascer- 
 tain the amount of the loss sustained by the ex- 
 clusion of silver from the home-market from 
 the year 1820 till 1824, being the period 
 alluded to in my last letter, and to which my 
 observations more particularly relate ; because 
 it was precisely during that period that the 
 philosophers chuckled and vaunted the great 
 success of the system. It is true that their 
 tone is altered a little, and some of them now
 
 153 
 
 begin to think that the scheme will fail en- 
 tirely ; but this they say is because sufficient 
 attention is not paid to the quantity of silver 
 in circulation. Be it so. Whether the 
 system succeed or fail, concerns me but little, 
 and it will always be bad either way ; but 
 that must, indeed, be a precious scheme of 
 things which requires that the Government of 
 a country (a most excellent judge in all 
 matters of this nature) should incessantly be 
 occupied in calculating to within half-a- 
 crown, the precise quantity of silver that 
 ought to circulate. 
 
 But to return to the subject. To ascertain 
 with precision the loss to the English manu- 
 facturer, will not only be difficult, but im- 
 possible ; and from this circumstance — that 
 gold and silver bullion being allowed to come 
 into the country without its being necessary 
 to pass an import entry at the Custom-house, 
 there is no official document which shows us 
 the precise quantity of silver imported. 
 Some idea of this may, however, be formed 
 from the quantity of silver deposited in the 
 Bank of England, though this will naturally 
 be imperfect, because large quantities of silver 
 are imported into different parts of the United 
 Kingdom, which are never deposited in the 
 Bank.
 
 134 
 
 The rule, therefore, which I shall adopt 
 will be this — I shall first take the quantity of 
 silver deposited in the Bank of England, and 
 to this I shall add one-half for other silver 
 bullion imported, but which has not been so 
 deposited. 
 
 According to a return made to the House 
 
 of Lords on the motion of the Earl of 
 
 Lauderdale, it appears, that from the 1st 
 
 of January, 1820, to the 8th of June, 
 
 1822, the quantity of silver bullion 
 
 brought into the Bullion office of the 
 
 Bank of England, was . . Oz. 19,730,000 
 
 To which add one-half, according to the 
 
 rule laid down .... 9,865,000 
 
 Total quantity up to the 8th of June, 1822 29,595,000 
 
 Add for the period elapsed since the return, 
 
 that is, from the 8th of June, 1822, to 
 
 the 8th of January, 1824, the quantity 
 
 being estimated in proportion with the 
 
 above 16,769,014 
 
 Total Oz. 46,364,014 
 
 Now, I am quite aware that this statement 
 is imperfect : first, because the official return 
 does not go beyond the 8th of June, 1822, and 
 therefore we are even unacquainted with the 
 total quantity of silver deposited in the Bank 
 of England for the whole period ; and there 
 being no returns from the Custom-house, for 
 the reason we have stated, we are still less 
 acquainted with the total quantity of silver
 
 155 
 
 imported ; and therefore, to a certain extent, 
 this statement is mere matter of opinion ; but 
 as I have set out the grounds of this opinion, 
 and which are open to examination, I can 
 have no intention to deceive. And then we 
 are again to consider — 
 
 1. That in consequence of the preceding 
 high price of silver, which induced a large 
 importation, a pretty considerable stock of 
 this metal must have existed in the country 
 in January, 1820, and of which no mention 
 whatever is made in the official return ; but 
 as this silver was afterwards sold at reduced 
 prices, it ought in strictness to be added to 
 the account. 
 
 2. I find from Mr. Tooke's book "on High 
 and Low Prices," that the silver coined at the 
 Mints of France during the years 1821, 1822, 
 and 1823, was of the value of 250,230,994 
 francs (about 10,000,000/. sterling). Now it 
 was precisely during this period that the in- 
 genious operation of sending silver from this 
 country to France to be exchanged for gold 
 was carried on to the greatest extent ; and, 
 therefore, if we suppose a great part of the 
 silver coined at the French Mints during the 
 period to which we have alluded to have been 
 imported from this country, then the total 
 quantity I liavc set down is under-rated ;
 
 156 
 
 because, independently of the exports to 
 France, silver must also have been exported 
 to other countries. 
 
 3. 1 am contending for a principle, and, 
 therefore, whether the statement be or be not 
 strictly accurate is of no consequence. To a 
 certain extent it must be right, because it 
 is founded on an official document ; and 
 whether we add to, or deduct from, this state- 
 ment, a few millions of ounces of silver, the 
 reasoning will not be affected. 
 
 We have now to ascertain the price of 
 silver from January, 1820, to January, 1824; 
 and then, taking the first price of standard 
 silver in bars in each month during the period 
 alluded to, I find the average price of the 
 whole period to be as nearly as possible 
 As. md. per ounce. 
 
 Now the loss to the proprietor of silver 
 bullion is the difference between this price of 
 As. Hid. and the 5^. 2d. per ounce which he 
 would have obtained if our ancient system 
 still subsisted ; and which he would again 
 obtain, even under the present system, if the 
 Mint were open for the coinage of silver. 
 
 The difference, then, being 2id. per ounce, 
 this, on the total quantity of 46,364,014 
 ounces, will amount to 482,958/. 9*'- 7^-? a^d 
 so that our immaculate system of ■<\ gold cur-
 
 157 
 
 rency, to the exclusion of silver, during the 
 short period of four years, ending in January, 
 1 824, tost the manufacturers of this country 
 about 500,000/. ; and the injury has been and 
 still is going on ; for though, since January, 
 1 824, the average price of silver has increased, 
 yet it has been very far from 5s. 2d. per 
 ounce. A blessed system, truly ; vs^hich, 
 without cause or necessity, and without any 
 one single solid reason to be advanced in its 
 defence, is kept up and maintained by an 
 annual tax of about 125,000/.; and which 
 tax falls solely and exclusively on the manu- 
 facturers of Great Britain ! 
 
 This it is, then, to trust in lying schemes 
 which cannot profit, and this comes of inge- 
 nious devices and fine-spun theories, and 
 idle nonsensical debates onth e true prin- 
 ciples of currency. Just as if all that is 
 worth knowing in point of principle was not 
 known 4,000 years ago ; and, therefore, if 
 truth be our object, this has long since been 
 found to our hand, and we disquiet ourselves 
 in vain. Just as if gold and silver, being 
 commodities, every law or principle which 
 when applied to other commodities will be 
 productive of a certain effect, will not pro- 
 duce the same effect when applied to gold and 
 silver; and then our absurdity in excluding
 
 158 
 
 silver from the home-market becomes mani- 
 fest ; because every dabbler in political eco- 
 nomy will tell us that to narrow the market 
 for the returns of the manufacturer, is, by 
 necessary consequence, to reduce the price 
 of his manufacture. Just as if there can be 
 any other true principle of currency than to 
 throw the gates of the Mint wide open to 
 the people, and to leave it to themselves to 
 take either gold or silver, and this in any 
 quantities and in any proportions they please, 
 or that their transactions may require. Just 
 as if, in any well-regulated system of cur- 
 rency, the Government of the country has 
 any other function to perform than to provide 
 for the purity and integrity of the coinage, 
 and so that the real value of its money be 
 equal to the denominative. And just as if 
 every interference beyond this is not pro- 
 ductive of mischief. 
 
 But quod est ante pedes nemo spectat, and 
 these doctrines are much too plain and simple 
 to be relished by men whose judgments are 
 vitiated by systems, and paper, and projects. 
 And indeed (to repeat here what I have said 
 on a former occasion) our conduct is not a 
 little curious. Founded on reasonings, d 
 priori, we determine that of all possible sys- 
 tems of currency ours is the best ; and then.
 
 lo9 
 
 in order to prove the wisdom of our deter- 
 mination, we forcibly prevent the people 
 from having- any other. Whereas, if thing-s 
 were left to themselves, the fact alone woUld 
 decide the principle ; and that would be the 
 best system of currency which the people 
 should adopt of their own free choice and 
 inclination. But then we should have to 
 throw open the Mint to the public, and then 
 less paper would circulate ; and what would 
 then become of the philosophers ? 
 
 This is my view of the matter ; and be it 
 recollected, that I speak nothing from myself; 
 I propound no new principles ; I lay no claim 
 to inventions ; and if I am wrong, then. Sir 
 Isaac Newton was wrong, and Mr. Locke was 
 wrong, and the Earl of Lauderdale and Mr. 
 Alexander Baring are wrong. In short, I 
 argue solely from facts which are known to 
 exist, and if I am wrong, then the system of 
 currency established in France is a heap of 
 absurdity ; whereas I take it to be a model of 
 perfection. Look at this noble scheme of 
 things, you see a giant ; look at our own 
 miserable abortive system, you see a dwarf, 
 withered and blasted ab ovo — a very carica- 
 ture, a burlesque. The present French sys- 
 tem has existed about forty years, and free in
 
 160 
 
 its action as the wind that blows, and from 
 the very principles on which it is founded, 
 it will not require revision ad diem longissi- 
 mum; but take what precautions we will, if 
 our puny system lasts five years longer, I 
 shall be very much mistaken. 
 
 November 26, 1825. 
 
 LETTER XI. 
 
 ON A RUMOURED ARRANGEMENT BETWEEN THE 
 BANK AND THE GOVERNMENT. 
 
 " Crescit indulgens sibi, dirus Hydrops." 
 
 We are all right again. The Government 
 and the Bank of England have come to an 
 understanding, and consols are to be at 150, 
 and the rate of interest is to be 2 per cent., 
 and commerce is to reviye, and credit is to 
 be re-established ; and the hungry are to be 
 filled with good things, and we are to have a
 
 161 
 
 merry Christmas and a bonfire.* This is the 
 true character of Master John Bull — it can 
 never rain but it pours. But how are all 
 these wonders to be brought about ? — By- 
 liberal issues of Bank paper. Fools, and 
 blind ! not to see that paper is still but paper, 
 and that all the paper in the world w ill not 
 add a bushel of corn, nor a gallon of beer, 
 nor a yard of cloth to our stock ; and, there- 
 fore, we shall have no more to eat, and no 
 more to drink, and no more to wear than we 
 had before : and, therefore, all other things 
 remaining the same, the sole effect of an in- 
 creased issue of Bank-notes, acting as money, 
 will be to disturb the existing relation be- 
 tween money and commodities, and, by 
 raising their prices, to give the death-blow 
 to our export trade, which has already suffered 
 so severely. Fools, and blind ! not to see 
 that a reduction in the rate of interest, pro- 
 ceeding from natural causes, is an infallible 
 sign that the prosperity of a country is on 
 the wane, and that to bring about this reduc- 
 tion by artificial means is downright dis- 
 honesty. But let them go their lengths : let 
 
 * A pretty Christmas, indeed, they made cf it ! Witness 
 the failure of about eighty country bankers ; and tlie Bank 
 of England reduced to the necessity of issuing one-pound 
 notes. 
 
 M
 
 162 
 
 the feast be set out by adding paper to paper ; 
 the very, food with which they shall be re- 
 galed is poison, and will turn to their de- 
 struction : " there is deatii in the pot !" 
 
 pecember 5, 1825. 
 
 LETTER XTI. 
 
 ON OUR METALLIC CURRENCY. 
 
 *• Le Gouvernement reglera la. proportion de I' or a Vargefd; 
 mais ilsmanifestera rintention de la changer sans refondr6 
 sa monnoie, lorsque Tequilibre aura ete rompu par des 
 causes politiques ou naturelles." — Mongez. 
 
 Having given my opinion in favour of a 
 double standard of gold and silver, I shall 
 now proceed to answer some objections. 
 
 And first it is said, that if two standards 
 exist, we must fix and establish the relative 
 value between our gold and silver money. 
 Be it so ; and where is the harm, seeing that 
 to fix a proportion is but to declare a fact ?
 
 163 
 
 But the relative value may afterwards come 
 to vary from that which we have established. 
 Let it vary : and then, all we have to do is, 
 publicly to declare that it has varied. And 
 here, again, we do but declare a fact. Thus, 
 supposing' the proportionate value between 
 gold and silver on this very day, to be such, 
 that a gold sovereign is worth exactly 20s. , 
 we declare this to be the value; and supposing, 
 ten years hence the value of the gold sove- 
 reign to be 2ls., then we have but to alter 
 our declaration ; and, in both cases, we do but 
 declare a fact with which all the world is ac- 
 quainted, as well as ourselves. 
 
 In every free system of currency there 
 is, however, no declaration of proportionate 
 value which is essentially obligatory and 
 binding on both the debtor and creditor ; and 
 when the French declare a gold Napoleon to 
 be worth 20 francs, we are not to understand 
 that the debtor is not to get more for it from 
 his creditor, if he can ; but merely this — 
 that it shall not be obligatory on the creditor 
 to receive it for more than this value in the 
 discharge of a debt. 
 
 In the ordinary transactions of society, of 
 what consequence is, or can be, either the 
 real or the established relative value between 
 gold and silver ? — Of none whatever ; for let 
 
 M 2
 
 164 
 
 there be two standards — that is, let there 
 be gold and silver money, and allow both to 
 pass current, and let all contracts be free ; 
 and then, what does the law declare ? — Why 
 nothing, but this plain, simple, incontestible 
 fact — that gold exists, and that silver exists, 
 and various other thino;-s existinof at the same 
 time, that men are allow^ed to make their 
 bargains in what way they please ; and if 
 one man has wheat, and another gold, and 
 if these two men find it convenient to make 
 a bargain, by w4iich the one shall be ex- 
 changed for the other, what has the relative 
 value between gold and silver to do with the 
 business ? And precisely the same observa- 
 tions apply when the exchange is of silver 
 for corn, or any other commodity ; and the 
 relative value between gold and silver is out 
 of the question. In short, to make a bargain 
 by which gold is to be exchanged for corn, 
 is solely to institute a direct comparison be- 
 tween gold and corn, and the result of this 
 comparison does but establish the relative 
 value between p-old and corn. And to make 
 a bargain by which silver is to be exchanged 
 for corn, is to institute a comparison between 
 silver and corn ; and the result of this is to 
 establish a relative value between silver and 
 corn. In both cases there is no other com-
 
 166 
 
 parisou, and no other result ; and in both 
 cases the relative value between g'old and 
 silver is entirely out of the question. In the 
 bargain for gold there is no idea of silver, 
 and in the bargain for silver there is no idea 
 of gold. And in every bargain w^iatever, 
 the two things which are first compared with, 
 and afterwards exchanged for, one another, 
 alone belong to the question.. 
 
 Now, that all this is true, and that in a free 
 state of things, and where two standards exist, 
 any deviation from proportions once estab- 
 lished will be productive of no consequence, 
 we may be convinced of i i an instant ; for^ 
 first, gold has a value as compared w^ith other 
 commodities ; then silver has a value as com- 
 pared with other commodities ; and then 
 again there is a relative value between gold* 
 and silver which is dependent on the absolute 
 value of each. 
 
 This being laid down, let there be a devia- 
 tion from the relative proportions first estab- 
 lished betw^een gold and silver; and so that 
 (the absolute value of silver remaining un- 
 changed) gold shall be over valued in the 
 currency, and then any given quantity of 
 gold will exchange for a smaller quantity of 
 commodities ; and any given quantity of gold 
 will exchange for a smaller quantity of
 
 166 
 
 silver ; and, as between gold and silver, there 
 will be an agio on silver. 
 
 Let silver (upon the same principle) be 
 overvalued in the currency, and we shall have 
 precisely the same result, and there will be 
 an agio on gold. And so that first in exchang- 
 ing gold or silver for other commodities, each 
 and all are rated according to their absolute 
 value; and again, in exchanging gold for silver, 
 each is rated according to its absolute value ; 
 and the deviation from the proportions origin- 
 ally established between gold and silver is 
 rectified by the agio. 
 
 This, as relating to the domestic concerns 
 of a country, and its intercourse with foreign 
 nations, will be governed by the same prin- 
 ciple. 
 
 For let the real proportion between gold 
 and silver at any given period of time be as 1 
 to 15 — let this be the proportion established 
 in England, but let the proportion established 
 in France be as 1 to 16. Then let the Mints 
 of both countries be open for the coinage of 
 gold and silver, and let the currency of both 
 countries be free — that is, let every thing be 
 left to find its own value ; and then, though 
 the difierence between the established propor- 
 tions of the two countries would seem to in- 
 dicate that a great advantage might be gained,
 
 167 
 
 by sending' gold to France to exchange for 
 silver, and, ordine inverso, yet in reality there 
 wonld be no such advantage, and no exchange 
 could take place. For, first, in exchanging 
 gold for commodities, there is a direct com- 
 parison between gold and commodities; in 
 exchanging silver for commodities, the com- 
 parison is again direct ; and, finally, in ex- 
 changing gold for silver, there is also the 
 same comparison ; and then, tliough the es- 
 tablished proportion between gold and silver 
 in France be as 1 to 16, yet 1 to 15 being the 
 real proportion between tiic tv.o metals, and 
 this real proportion being also the established 
 proportion in England, it is quite clear (all 
 other things remaining the same), not only 
 that 15 ounces of silver will exchange both in 
 England and France for the same quantity of 
 commodities, but 15 ounces of silver will in 
 both countries exchange for one ounce of gold 
 also ; and the deviation from the real propor- 
 tions being corrected in France by an agio ou 
 silver, it is quite impossible either that an ex- 
 change of one metal for the other can take place 
 between the two countries, or that there will 
 be the least advantage in e:sporting one metal 
 in preference to the other to exchange for 
 commodities. 
 
 Now take a case. The men of Peru have 
 plenty of silver, and comparatively but little
 
 168 
 
 gold ; and then, I ask, of what consequence is 
 it to them whether the relative value between 
 gold and silver be as 1 to 15, or as 1 to 30 ? 
 Of none whatever ; and the only real point 
 for them to ascertain is, what quantity of 
 British manufactures can be obtained in ex- 
 change for any given quantity of their silver. 
 If, on the contrary, they have gold in plenty, 
 and but little silver, it will be the same thing ; 
 and if they have both in abundance, it will 
 again be the same thing ; and the real ques- 
 tion to be determined in all these cases is, 
 not what one metal is worth as compared with 
 the other, but both existing, what each will 
 command in other commodities. 
 
 Of what consequence again is it to the 
 British naanufacturer who supplies the peo- 
 ple of Peru with manufactures, receiving sil- 
 ver in return, whether one ounce of gold be 
 worth 15 or 30 ounces of silver ? Of none 
 whatever ; and the only real point to ascertain 
 is, what value the silver which he gets shall 
 have when compared with other commodities 
 in the home-market. And, instructed by 
 the philosophers, we settle this point for him 
 at once, by declaring, that as money, it shall 
 have no value whatever, but that he may ex- 
 port his silver, and get out of his adventure 
 as well as he can. And then, when I come 
 to consider that the whole continent of South
 
 169 
 
 America is now open to the introduction of 
 British manufactures, this system of ours does, 
 I must confess, appear to me a little extraor- 
 dinary. 
 
 Thus much in the way of argument, and as 
 relating- to proportions between gold and 
 silver ; and now to matter of fact : and then I 
 say, (and I can demonstrate it at any time), 
 that the relative value between gold and sil- 
 ver is precisely, or as nearly as possible, the 
 same as it was forty years ago ; and therefore, 
 supposing two perpetual annuities of the 
 same nominal amount to have been created 
 forty years ago, in a country where the cur- 
 rency is free, the one payable in gold, and 
 the other in silver, these two annuities would 
 now be of precisely, or as nearly as possible, 
 the same value. And therefore, the philoso- 
 phers may get on the benches and amuse 
 themselves as long as they please, but in 
 reality there is no question. 
 
 Proceed we now to other objections ; 
 and then the authority of Mr. Locke is 
 brought forward, who, it is said, recom- 
 mended one standard. Be it even as they 
 please ; but first in recommending one stand- 
 ard, Mr. Locke suggested that this standard 
 should be silver, and he again as expressly 
 suggested that the Mint should be open for
 
 170 
 
 the coiiiag"e of gold, and that there may be 
 no mistake in this matter, I will here set 
 down his very words. 
 
 ''What then! (will you be ready to say) 
 would you have gold kept out of England ? 
 Or, being here, would you have it useless to 
 trade, and must there be no money made of 
 it? — I answer, quite the contrary. 'Tis fit 
 the kingdom should make use of the treasure 
 it has. 'Tis necessary your gold should be 
 coined and have the King's stamp upon it, to 
 secure men in receiving it, that there is so 
 much gold in each piece. But 'tis not neces- 
 sary that it should have a fixed value set on it 
 by public authority ; 'tis not convenient that 
 it should in its varying proportion have a 
 settled price. Let gold, as other commodities, 
 find its own rate. And when, by the King's 
 image and inscription, it carries with it a 
 public assurance of its weight and fineness, 
 the gold money so coined will never fail to 
 pass at the known market-rates as readily as 
 any other species of your money." (Vide 
 Locke, fol. edit. vol. 2. p. 52.) And again, in 
 p. 78, we have the following : — 
 
 " Gold, though not the money of the world, 
 and the measure of commerce, nor fit to be 
 so ; yet may and ought to be coined to ascer- 
 tain its weight and fineness, and such coin
 
 17» 
 
 may safely have a price as well as a stamp set 
 upon it by public authority, so the value set 
 be under the market-price. For then such 
 pieces coined will be a commodity as passable 
 as silver money, very little varying in their 
 price : as guineas which were coined at the 
 value of 205. but passed usually for between 
 2ls. or 225. according to the current rate; 
 but not having so high a value put upon them 
 by the law, nobody could be forced to take 
 them to their loss at 2 Is. 6d. if the price 
 of gold should happen at any time to be 
 cheaper." 
 
 It is, therefore, quite easy to see that, under 
 Mr. Locke's system, there would have been 
 two standards, the one of law and the other of 
 convention ; for gold would have been coined, 
 gold would have been current by convention ; 
 no man would have refused gold when ten- 
 dered to him at a fair price. Gold would, 
 therefore, have found its value at home both 
 in silver and in other commodities, and con- 
 sequently there would have been no necessity 
 to export it in order that it should find this 
 value. 
 
 Now all this is very different from our sys- 
 tem, which, by excluding silver from the 
 Mint, renders its exportation a matter of 
 absolute and indispensable necessity.
 
 172 
 
 Then comes Sir Isaac Newton, whom to 
 name only is sufficient; and he never dreamt 
 of establishing" a single standard either of gold 
 or silver, and to whom the very idea of ex- 
 cluding either gold or silver from the Mint 
 would, I am persuaded, have appeared most 
 absurd and preposterous; and yet the subject 
 in all its bearings must have been familiar to 
 him, for he was Master of the Mint, and in 
 171 8 remodelled our whole system of cur- 
 rency ; and what did he do ? — Simply estab- 
 lish different legal proportions between gold 
 and silver from those which before existed. — 
 And here it is worthy of remark, that he did 
 this after Mr. Locke had given his testimony 
 in favour of a single standard; and therefore 
 we are to presume that this great man saw 
 that there would be no advantage in a single 
 standard, and that whether we had two stand- 
 ards in law, or one of law and the other of 
 convention, would, as to all real practical 
 purposes, be the same thing. 
 
 If from the ancients we descend to the 
 moderns, we find the Earl of Lauderdale 
 treading in the footsteps of Mr. Locke, and 
 Mr. Alexander Baring in those of Sir Isaac 
 Newton; and as I have already shown that 
 for every real purpose these two systems centre 
 in the same point, it naturally follows that we
 
 173 
 
 may safely adopt either. The essential thing- 
 (and it cannot be too often repeated) is, that 
 all contracts should be free, and that the Mint 
 should be open for the coinage of both metals : 
 in short, that men should be left to make their 
 own bargains their own way, and the rest (ex- 
 cept to a crack-brained philosopher) is of very 
 little importance. 
 
 Again, and in favor of the double standard 
 of gold and silver, we have the authority of 
 Mr. Mongez, a member of the French Insti- 
 tute, and one of the administrators of the 
 French Mints; and the testimony of such a 
 man, when treating of a subject which he had 
 made his peculiar study, and with all the de- 
 tails of which he was practically and inti- 
 mately acquainted, is most material. 
 
 Then the example of Holland is brought 
 forward, and it is alleged that the Dutch have 
 now, and never had, but one standard. Now, 
 though I am willing to admit that any prac- 
 tical example taken from the flourishing pe- 
 riod of the Seven United Provinces ought to 
 have great weight, yet I am quite certain that 
 the history of Holland furnishes no example 
 which by possibility can give the least coun- 
 tenance to our present system; for, 
 
 First, If we admit that Holland had but 
 one standard, still this standard was silver.
 
 174 
 
 and still gold was not excluded from the Mint; 
 and therefore gold was allowed to find its value 
 in the home-market either in exchange for sil- 
 ver or for other commodities. But, 
 
 Secondly, It is not true that the Dutch had 
 but one standard; for the coins called the 
 ryder and the half-ryder, which were of gold, 
 were a legal tender in all payments ; and the 
 debtor not only had the option to pay either 
 in gold or silver, according to the proportions 
 established by the Mint, but with the consent 
 of his creditor (and according to the market 
 Talue of gold and silver) he might depart from 
 those propositions, and pay in gold with the 
 deduction of an agio; or in silver with the 
 deduction of an agio, as the case might apply. 
 
 Thirdly, Not only did the laws of Holland 
 allow an agio to be taken on either gold or 
 silver, when exchanged for one another, but 
 it allowed of an agio on any one species of 
 silver coin when exchanged for silver coin of 
 another species. 
 
 Finally — the Bank of Amsterdam refused 
 to receive deposits of florins (a silver coin) 
 without an equal portion in value of ryders 
 or half-ryders. The Bank also gave credit 
 for deposits of gold bullion and foreign gold 
 coin; and therefore, apart from the general 
 principle which constituted the gold ryder and
 
 half-ryder a legal tender in all payments, it 
 is quite certain that in all the large payments 
 made by transfer at the Bank of Amsterdam, 
 gold formed an ingredient. 
 
 Nothing, therefore, can be more erroneous 
 than to suppose that the Dutch had but one 
 standard of value; and to compare their sys- 
 tem with ours, either in principle or practice, 
 would be ridiculous. 
 
 For the rest, it is not difficult to see what 
 gave rise to the supposition that the Dutch 
 had but one standard ; it is this — that the gold 
 ducat was not a legal tender in any payment 
 without the consent of the creditor. But the 
 ducat was coined upon very different princi- 
 ples from the ryder, and was never intended 
 for domestic circulation, but solely for the 
 purpose of foreign commerce; and in point 
 of fact, it was intended (in the intercourse of 
 the Dutch with foreign nations) as a rival to 
 the Venetian sequin, w^hich it so nearly re- 
 sembles both in weight and fineness, that the 
 difference between the two in real value is 
 only about 2d., and this in favour of the se- 
 quin ; and therefore it was, that in theUkraine, 
 and among the Tartars of the Crimea, the 
 Dutch ducat and the Venetian sequin circu- 
 lated at the same price. 
 
 The ducat, then, as we have seen, was not
 
 176 
 
 a legal tender in any payment without the 
 consent of the creditor. Still, however, the 
 owner of ducats, if at any time he should 
 want money, and there was not a demand for 
 his commodity for exportation, was not left 
 without resource ; for the Bank at Amsterdam 
 would receive them in deposit, and allow him 
 to draw against them. 
 
 This, then, was the principle of the cur- 
 rency of Holland; and here we have the 
 example of a prudent, industrious people, 
 who first provide an abundant circulation of 
 the precious metals for the domestic transac- 
 tions of the community. We then find an 
 immense stock of bullion deposited in the 
 Bank of Amsterdam, which, even while it 
 exists in its rude state, and as mere merchan- 
 dise, is still (and this without even stirring 
 from its place) made subservient to the liqui- 
 dation (by means of a simple transfer from one 
 account to the other) of immense mercantile 
 transactions: and that full latitude might be 
 given to every species of enterprise, we then 
 find the Mints of Holland occupied in coin- 
 ing gold (and even silver) for the sole purpose 
 of exportation. 
 
 Now there is to the full as much wisdom in 
 coining gold and silver for a foreign market 
 as to manufacture any other commodity for
 
 J 77 
 
 the same purpose; but we think diifereutly, 
 and so little does any thing- of this kind enter 
 into our notions, and so wholly is our atten- 
 tion engrossed by a vile paper money, that 
 precisely as if we had no Mint of our own, we 
 occasionally send our silver, at great expense, 
 to be coined in France, that we may after- 
 wards (and this at a second expense) g-et it 
 back in another metal. 
 
 " Miraberis quam pauca sapientia mundus regltur/' 
 
 This is what I have to say on the subject of 
 a double standard of value; and that this 
 double standard, whether wholly of law (ac- 
 cording to the system of Sir Isaac Newton), 
 or partly of law and partly of convention (ac- 
 cording- to the system of Mr. Locke), offers 
 no one obstacle to the transactions of the 
 community, but that, on the contrary, it 
 greatly facilitates them all, will immediately 
 appear by reflecting on the different uses to 
 which money of the precious metals may be 
 applied; and then, in my view of the case, a 
 man can only want money for some or all of 
 the following purposes. 
 
 1 . He may want gold primo et per se — that 
 is, to use it as a metal in some manulacturing 
 process ; and then his being paid in silver will 
 be no obstacle to his wishes, because the cur- 
 
 N
 
 178 
 
 reiicy being free, he may exchange his silver 
 for g-old in the market. 
 
 2. He may want silver for the same pur- 
 pose, and then a payment in gold will present 
 no obstacle to his desires, for he may exchange 
 his gold for silver. 
 
 3. He may want money to discharge a 
 debt; and then, whether he be paid in gold 
 or in silver is all a case, because with the very 
 money which he receives from his debtor may 
 he pay his creditor. 
 
 4. He may want money for the purpose of 
 hoarding — that is, to stock and store it up 
 against some supposed future occasion ; and 
 then pay him in silver, and if he likes he may 
 buy gold: pay him in gold, and he may buy 
 silver. 
 
 5. He may want money that he may lend 
 it at interest; but under a free system of cur- 
 rency, gold being money and silver being- 
 money, both or either maybe lent at interest. 
 
 6. He may want money for the purpose of 
 employing it in the purchase of commodities ; 
 but when the currency is free, gold will pur- 
 chase commodities, and silver will purchase 
 commodities, each according to its value. 
 
 But all these things cannot be accomplished 
 with a single standard ; for let this standard be
 
 179 
 
 silver, and let gold be excluded from the Mint, 
 and then it is quite impossible to have gold 
 money. Let the standard be gold, and let 
 silver be excluded from the Mint, and then 
 (as a general principle, and without allusion 
 to our own particular system, which is an ex- 
 ception to every rule) it is equally impossible 
 to have silver money. And, therefore, while 
 with two standards I can have all the supposed 
 greater accuracy of one, because I can select 
 one (and this which I please) for the basis of 
 my operations ; so can I also do certain other 
 things, which with one standard alone could 
 not be accomplished. 
 
 December \6th, 1825. 
 
 LETTER XIIL 
 
 ON OUR METALLIC CURRENCY. 
 
 " Soyons sage, et ne philosophons plus. — Rousseau. 
 
 Having treated of the defects in our Mint 
 regulations, and of our laws regarding con- 
 
 n2
 
 180 
 
 tracts and payments, it now remains that 
 we suggest some remedies. 
 
 The first remedy which I propose is, that 
 mints should be established in some of the 
 principal towns and cities of the empire ; 
 and this is no novelty, as we may learn from 
 any one who is at all acquainted with English 
 history. The prerogative of coining, and de- 
 claring what shall be money, belongs solely 
 to the Crown and the Legislature ; that is, it 
 is the province of the Legislature to declare 
 by law what shall be money, and it belongs 
 to the Crown in its executive capacity to see 
 this law carried into effect. And if of late 
 years we have allowed these powers (and this 
 without the least check or control) to be 
 usurped by the Bank of England and the 
 country bankers, I am quite satisfied that we 
 have gained nothing by the experiment. 
 
 In Holland there was formerly one mint 
 at least in every province. 
 
 In the year 1806, there were thirteen 
 mints in France ; and though I will not be 
 positive, yet I believe this to be the number 
 at present. 
 
 To this it will be replied, that the French 
 give particular encouragement to a metallic 
 currency. It is quite certain, however, that 
 they do no such thing ; on the contrary,
 
 181 
 
 they impose a seignorage of 1^ per cent, on 
 all silvei' bullion brought to the Mint, and a 
 brassage on gold bullion. The French system, 
 therefore, holds out no bounty or encourage- 
 ment, but it simply grants facilities by allow- 
 ing every man the opportunity of converting 
 his gold or silver bullion immediately into 
 money, if he be so inclined. 
 
 Again : the Bank of France is allowed to 
 circulate as much paper as it pleases, subject 
 to the condition of paying its notes in specie 
 on demand ; and there is no law, I believe, in 
 France to prohibit the establishment of banks 
 in every part of the country, ilnd, there- 
 fore, according to the French plan, nothing 
 is either encouraged or discountenanced, but 
 full liberty is allowed to the circulation of 
 every species of money, whether of gold, or 
 silver, or paper. 
 
 If, then, under these circumstances, a 
 large metallic currency (amounting to at least 
 70 millions sterling) exists in France, it is 
 because the people prefer it to paper; and 
 this they will do in all countries when left to 
 themselves ; and for the best of all reasons, 
 because the one is infinitely more to their 
 ad v^antage than the other ; but if, from opera- 
 tions between governments and banks of 
 credit, a large mass of paper gets into circu-
 
 182 
 
 lation, the power of choice on the part of the 
 people is taken away, and a metallic currency 
 becomes impossible. 
 
 That there should be only one mint in this 
 country, is highly disadvantageous to the 
 community. We give full liberty to a 
 country banker to open a shop where he 
 likes, and to supply the people of every 
 village with his trumpery ware : but if the 
 merchants of Liverpool, and the manu- 
 facturers of Manchester and Glasgow, bring 
 home silver bullion in return for their com- 
 modities, then we tell them to re-export it, 
 for that as money it shall never pass in this 
 country : and if they bring home gold bullion, 
 then, before it can become money, it must be 
 sent up to London at a loss of time and ex- 
 pense, and then, in the natural order of 
 things, it must be sent back again at a second 
 loss of time and expense. Nor is this all, for 
 the delay in coining even gold bullion at the 
 Mint (except for the Bank of England) is so 
 great that an individual naturally prefers to 
 sell his gold bullion to the bank at 4^. or 6d. 
 per ounce below the Mint price : and so that, 
 what with a diminution in the price of his 
 gold, what with loss of time, expense of car- 
 riage, commission, and brokerage, a merchant 
 at the outports has but little temptation to
 
 183 
 
 bring home gold in return for his commodi- 
 ties ; and he has still less temptation to bring- 
 home silver, because, by our Mint regulations, 
 and our laws regarding payments, this metal 
 is absolutely excluded from the home-market. 
 And therefore, when every obstacle is thrown 
 in the way of coining money for the public, 
 that the Government is allowed to enter into 
 every kind of operation it pleases with the 
 Bank of England, and that full liberty is 
 given to a country banker to open a shop in 
 every village, are we to wonder that the 
 country is inundated with paper ? 
 
 Having established a sufficient number of 
 mints, we must next proceed to cure the 
 great and radical defect in our system of cur- 
 rency, and as this defect arises from the ex- 
 clusion of silver from the home-market, the 
 most simple and efficacious mode will be to 
 make both gold and silver a legal tender in 
 all payments ; to call in the whole of the pre- 
 sent silver currency, to throw open the Mint 
 to the public, to coin silver free of expense at 
 5s. 2d. per ounce, and gold (as at present) at 
 3/. 17*. lOhd. 
 
 By making both metals a legal tender, all 
 contracts would ipso facto be free, because the 
 law which declares both to be legal, declares 
 either to be legal ; and therefore bargains
 
 184 
 
 may be made in one, distinct and apart from 
 the other ; and therefore the man who fancies 
 gold to be a more accurate measure of value 
 than silver, may select this metal for the basis 
 of his operations ; and the man who is of a 
 different opinion may take silver : and he 
 who is willing' that the matter should be left 
 undefined and without condition, will be paid 
 in either gold or silver, or both, at the option 
 of his debtor. 
 
 Gold being coined at 3/. 17-?. lO^d. and 
 silver at 5s. 2d. per ounce, this establishes 
 what may be termed the legal proportion be- 
 tween gold and silver; but if the real or 
 market proportion should come to vary from 
 this legal proportion, then the law ought to 
 allow (in the exchange of gold for silver) an 
 agio to be taken on either gold or silver, as 
 the case may apply. I say this ought to be 
 allowed, because time and natural causes 
 having introduced a state of things which the 
 law" could not foresee, still to adhere to pro- 
 portions w4iich the law has established, but 
 which in reality no longer exist, is wilfully to 
 commit a mistake which the law never in- 
 tended ; and as every agio on either gold or 
 silver is but the correction of a legal (or mint) 
 proportion between gold and silver, which 
 from time and circumstances has become in-
 
 183 
 
 accurate, and as this agio is and must be the 
 result of a voluntary agreement between the 
 debtor and the creditor, to say that a man shall 
 not be allowed to take an agio on either gold 
 or silver, is to say that he shall not be allowed 
 to make the best bargain he can with his own 
 money. And though there may be, and cer- 
 tainly have been, laws passed of this nature, 
 yet we have still to discover upon what prin- 
 ciple they are to be justified. 
 
 This point being settled, there never can be 
 any real absolute necessity to alter the estab- 
 lished relative value between gold and silver, 
 because, however the real proportion (that is, 
 the proportion which shall result from the 
 general market prices of gold and silver) may 
 afterwards come to vary from that which we 
 have established, yet the difference will be 
 rectified by an agio on either gold or silver as 
 the case may apply; arid it never can be 
 necessary to pass a law to correct that which 
 regularly corrects itself. 
 
 But that which is not strictly necessary 
 may sometimes be expedient, and if the dif- 
 ference should become considerable then 
 (though not absolutely necessary), yet it 
 might be expedient that the legal (or Mint) 
 proportion should be changed : and the fact ex- 
 isting that the proportion had really changed.
 
 '186 
 
 it might, perhaps, be expedient that this fact 
 should be pubUcly made known. 
 
 When Sir Isaac Newton remodelled our cur- 
 rency in 171 8, he established the proportion 
 between gold and silver as 1 to 15,210; and 
 when the French revised their system in 1785, 
 they established this proportion as 1 to 
 15,500: and there is every reason to believe 
 that the French proportion is at present nearer 
 the truth than our own ; and therefore, if we 
 now reform our system of currency, it would 
 seem to be expedient that we should alter our 
 former proportion between gold and silver, and 
 still continuing to coin gold at 3/. 17*. lO^d., 
 that we ought to coiu silver at 5s. Id. instead 
 of 5s. 2d. per ounce : but to this there are 
 objections. 
 
 1. Wherever gold and silver pass current, 
 and that the law sets a price on gold compared 
 with silver, it is desirable that the gold should 
 be under rather than over- valued, and for this 
 reason — that every man will be willing of his 
 own free motion to pay that price for a thing 
 which it is really worth ; and therefore, if gold 
 should be undervalued, the difference will be 
 rectified by an agio ; but the law which com- 
 pels a man to take gold at more than its 
 value does him an injury. This principle is 
 strongly inculcated by Mr. Locke, and Sir
 
 187 
 
 Isaac Newton acted upon this principle in 
 171 8, by reducing- the value in silver of the 
 guinea. 
 
 2. Although the French proportion at this 
 present moment of time is probably more 
 accurate than our own, yet, in a few years 
 hence, the case may perhaps be different ; and 
 whatever opinions may prevail to the contrary, 
 yet I am very much inclined to believe, that 
 whereas from I7I8 up to 1785, gold gradually 
 and insensibly gained in value as compared 
 with silver, yet that silver on the contrary is 
 now imperceptibly gaining in value as com- 
 pared with gold : but I am free to admit that 
 in this 1 may be mistaken. 
 
 3. The great advantage in coining silver at 
 5s. 2d. per ounce free of all seignorage and 
 expense is, that it brings us exactly to our 
 ancient standard ; and the great objection to 
 coining silver at 5s. Id. per ounce is, that we 
 should thereby raise our standard, and every 
 debt discharged in silver could only be dis- 
 charged by the payment of a greater quantity 
 of silver. 
 
 These are my reasons. But after all (and 
 take what pains I will) I may be very much 
 mistaken : and fortunately the remedy is 
 easy ; and we have only to declare the value 
 of the sovereign in silver to be 20.v. 6d., and
 
 188 
 
 then (without touching our ancient silver 
 standard) every objection against what I have 
 said will vanish. This would establish the 
 proportion between gold and silver in our 
 coinage as 1 to 15,590, and so that while no 
 debt could be discharged by a smaller quantity 
 of silver, yet every debt might be discharged by 
 a smaller quantity of gold than formerly ; and 
 yet (supposing the relative value between gold 
 and silver to have increased since the es- 
 tablishment of our ancient Mint-regulations), 
 no breach of faith would be committed to- 
 wards the creditor. For let there have been 
 an annuity created 100 years ago, and which 
 annuity shall subsist down to the present day ; 
 but when this annuity was created the pro- 
 portion between gold and silver was as 1 to 
 15,210, and the debtor had the option to pay 
 in either metal ; and, supposing the same law 
 and the same proportion to be now in force, 
 he would still have the same option ; and 
 then the annuity would naturally be paid in 
 silver. But though (in consequence of an al- 
 teration in the relative value between gold 
 and silver) the same quantity of silver would 
 no longer purchase as much gold as when the 
 annuity was created, yet the contract would 
 be faithfully and literally acquitted, because 
 the creditor would still get that precise quan-
 
 189 
 
 tity of silver for which he bargained. Nor is 
 it certain-that the creditor would be injured, or 
 the debtor benefitted in any respect whatever, 
 because the difference in the proportion be- 
 tween g-old and silver may not have proceeded 
 from a decline in the natural absolute value 
 of silver, but from a rise in the natural ab- 
 solute value of gold, and of which an alter- 
 ation of proportion is the necessary result. 
 
 I mention these things, because, when a 
 man has to do with a set of hair-splitting me- 
 taphysicians, it is right to mention every 
 thing ; but they are trifles ; and that men 
 who waste and dissipate millions after mil- 
 lions upon a vile paper currency, should 
 amuse themselves with things of this kind,does, 
 I must confess, strike me with astonishment. 
 
 Then comes another point. Our gold 
 standard is twenty-two carats fine, and our 
 silver standard eleven ounces two dwts. fine, 
 and therefore the standard for silver is finer 
 than the standard for gold, and an ounce of 
 standard silver contains more pure silver than 
 an ounce of standard gold of pure gold ; and 
 it would not perhaps be amiss that our gold 
 and silver money should be of the same fine- 
 ness, and that our standard for silver should 
 be reduced to eleven ounces, and that con- 
 taining precisely the same quantity of pure
 
 190 
 
 silver, as under our ancient Mint-regulations, 
 our silver money should be increased in 
 weight. I mention this, however, with no 
 other object than that our coinage should be 
 uniform, and in no other point of view that 
 I know is the matter of the least importance, 
 unless, indeed, it should appear, that by adding 
 to our silver coins this very trifling additional 
 quantity of alloy, it would render them more 
 durable. With reference to this point, various 
 experiments were made by Mr. Hatchett, of 
 the Royal Society, at the request of the late 
 Lord Liverpool, and, if I am not wrong, the 
 result as stated is in favour of my proposition; 
 but I may be mistaken, and this point must 
 be determined by those who know more of 
 the matter than I do. 
 
 We have next to provide for the purity 
 and integrity of the coinage. With respect 
 to our gold currency, this is already done to 
 our hand by the law, which enacts, that if a 
 gold sovereign be more than 0.525 grains de- 
 ficient in weight, it shall no longer pass 
 current; but no such law I believe exists 
 with regard to our silver money, and which, 
 however defaced, or deficient in weight, is 
 still a legal tender by tale ; and if we remodel 
 our silver currency, this ought to be remedied, 
 and no silver money ought to be allowed to
 
 191 
 
 pass current that was deficient in weight beyond 
 a certain trifling extent. Both the gold and 
 the silver being then placed under and subject 
 to the same law, and the Mint being con- 
 stantly open to the public, free of expense, it 
 is impossible, in my view of the case, that the 
 currency (either of gold or silver) should ever 
 become greatly debased, because, from the 
 moment that any money falls short of the 
 weight prescribed by law, and as such, is no 
 longer current, it becomes mere bullion ; but 
 as bullion it is worth as much at the Mint as 
 in the market, and it would therefore be 
 taken to the Mint to be recoined. 
 
 It would also be of great advantage to the 
 community, that for all gold and silver bul- 
 lion brought to the Mint, money should be 
 given immediately, or within a few days. 
 With an increased number of mints, a com- 
 paratively moderate sum would be sufficient 
 for this purpose, and the public money cannot 
 be more beneficially employed. 
 
 Now, it is quite unnecessary here to re- 
 mark, that the individual who brings gold to 
 the Mint ought to have gold given him in 
 return, and that he who brings silver ought 
 to have silver given him in return ; but I 
 think it essential that the individual who 
 brings bullion (whether of gold or of silver)
 
 192 
 
 should have it coined into such pieces of 
 money as he himself should desire ; his gold 
 into double sovereig-ns, sovereigns, or half- 
 sovereigns, and his silver into crowns, half- 
 crowns, shillings, or sixpences. By this 
 means the currency being left to the people 
 themselves, will always square and keep pace 
 with their wants and transactions ; and in a 
 matter of this nature they are much better 
 judges than any Government whatever. 
 
 And now, to revert to my proposition, 
 which is, that the number of mints should be 
 increased ; that we should return to the 
 double standard of gold and silver ; and that 
 we should call in the whole of the present 
 silver currency : and to this it will be ob- 
 jected, that to issue silver money of sixty-two 
 shillings to the pound troy in exchange for 
 money of sixty-six shillings to the pound 
 troy, both having the same denominative 
 value, will be attended with loss and expense. 
 Be it so, for the sake of argument ; but to 
 whom is the loss to be imputed ? Who told 
 us to alter our ancient Mint regulations ? 
 And whjr did we coin silver at sixty-six 
 shillings to the pound ? And then, how pretty 
 it is to talk of the loss and expense of a re- 
 coinage, while our present system has already 
 cost the manufacturers of Great Britain a very
 
 193 
 
 large sum of money, and as long as it con- 
 tinues will subject them to the payment of a 
 considerable annual tax. The question, how- 
 ever, is, whether the operation is necessary, 
 and finally and remotely advantageous ; and 
 if so, then the loss in the first instance, be it 
 what it will, must be submitted to. 
 
 In point of fact, however, there neither 
 will nor can be any other loss than the mere 
 expense of the recoinage ; and this it will not 
 be difficult to prove ; for, 
 
 Let there be a silver currency of the de- 
 nominative value of 10,000/. coined at the 
 rate of sixty-six shillings to the pound, this 
 will give a precise quantity of 36,363 42-66ths 
 ounces of silver ; then let this currency be 
 called in, and other silver given in exchange 
 for it, of the same denominative value, but 
 coined at the rate of sixty-two shillings to 
 the pound, and then it is clear that while the 
 denominative value of the currency remains 
 the same, its real value will be increased. 
 
 To accomplish the operation will require 
 an additional quantity of about 2,346 ounces 
 of silver; because to coin 10,000/. at the rate 
 of sixty-two shillings to the pound will re- 
 quire 38,709 ounces ; whereas only 36,363 
 ounces will be returned to the Mint. 
 
 To purchase this additional quantity of 
 
 o
 
 194 
 
 silver let there be a tax imposed on the pubKc ; 
 and then I say that there will be no loss, be- 
 cause there will be value for value, and pre- 
 cisely to the extent of the tax will there be an 
 additional quantity of silver returned by the 
 Mint to the public. 
 
 All that would therefore result from the 
 calling in of the present silver currency would 
 be the mere expense of the recoinage, and 
 this is trifling. 
 
 We may, therefore, lay it down as a general 
 proposition, that call in what currency we 
 will, and from whatever cause, the only real 
 loss to the public will be the mere expense of 
 the recoinage. 
 
 This for the present: in my next I shall 
 suggest other remedies. 
 
 December 28, 1825. 
 
 LETTER XIV. 
 
 ON OUR METALLIC CURRENCY. 
 
 " Les Ecus n'ont point d'opinion." — French Proverb. 
 
 We have treated of the defects in our Mint 
 regulations, and of the law which enacts that
 
 19^ 
 
 gold alone should be a legal tender in all pay- 
 ments beyond 406.; and we suggested as a 
 remedy, that the whole of our present silver 
 currency should be called in, that the Mint 
 should be thrown open to the public for the 
 coinage of silver, free of seignorage and ex- 
 pense ; that silver should be coined at the 
 rate of sixty-two shillings to the pound troy, 
 and that silver conjointly with gold should be 
 a legal tender in all payments. 
 
 Let us now proceed to suggest other reme- 
 dies ; and then the next remedy which I 
 propose is, that the present silver currency 
 should be called in, that silver should be 
 coined at the rate of sixty-two shillings to 
 the pound troy, free of seignorage and ex- 
 pense, but that gold alone should continue to 
 be the foundation of our currency, and that 
 silver should not be a legal tender in any pay- 
 ment whatever beyond 40^., except by agree- 
 ment, and with the consent of the creditor. 
 
 Now this is reallv to ask so little, that it 
 ought not to be refused ; for — 
 
 1 . To those who contend that one standard 
 is less variable than two, and that gold is less 
 variable than silver, every thing is conceded ; 
 the law gives them this one standard, and it 
 gives it them in gold. 
 
 o 2
 
 196 
 
 2. No existing debt whatever can be le- 
 gally discharged, but by a payment in gold, 
 except with the consent of the creditor ; and 
 we may rest assured that no creditor what- 
 ever will accept of a payment which is to 
 turn to his injury. 
 
 3. By altering the law so far, and by ac- 
 ceding to the proposition I have laid down, 
 we in point of fact do so little, that the matter 
 is not worth a moment's discussion : for what 
 is the result of the whole ? — Simply this — that 
 if an individual brings a bar of silver to the 
 Mint, it shall be divided for him into a certain 
 number of fractional parts ; and here the 
 matter ends. What is afterwards to become 
 of the silver is the concern of the individual ; 
 he may or may not be able to pass it as money, 
 either in the discharge of a debt, or in ex- 
 change for commodities ; but happen w^hat 
 will, neither the law nor the Mint proffers 
 him the least assistance. 
 
 The next remedy which I propose is, that 
 we should adopt purely and simply the system 
 of the Earl of Lauderdale ; that is, to take 
 silver alone (coined at 5s. 2d. per ounce) for 
 our standard, and to allow gold (the Mint being 
 open for its coinage) to circulate by con- 
 vention.
 
 197 
 
 By adopting- this system we secure three 
 points — 
 
 1. That the currency will be free, and that 
 both gold and silver will find their value in 
 the home market, either when compared with 
 each other, or with other commodities. 
 
 2. That what we do will not require revision 
 till Doomsday ; and this is quite long enough 
 for any system to last. 
 
 3. That with the simplicity of one stand- 
 ard in law, we shall have all the facility 
 and convenience of two standards in practice. 
 
 The last remedy which I propose is, that 
 a branch of the Bank of England should be 
 constituted a bank ofdtjposit, upon something 
 like the following principle : — 
 
 That the proprietor of silver bullion, upon 
 taking it to the Mint, shall have it inniie- 
 diately refined and cast into bars of standard 
 silver, of the weight of 25, 50, or 100 oz, or 
 any other weight that may be determined 
 upon. 
 
 That upon depositing this silver at the 
 Bank, the latter shall give credit to the pro- 
 prietor for its amount at the rate of 5s. 2d. 
 per ounce. 
 
 That this credit be transferrable from hand 
 to hand ad infinitum, and by this means, and
 
 193 
 
 without stirring- from their place, these bars of 
 silver will perform ail the functions of mone3^ 
 
 That these transfers be made a leoal tender 
 in the discharg-e of all debts whatever, and 
 whatever their amount ;• and it is impossible 
 that any thing can be less objectionable, be- 
 cause the debtor, by transferring to the credi- 
 tor a credit which he has with the Bank, does 
 in point of fact assign to the creditor a certain 
 quantity of silver, and which the creditor may 
 take out of the Bank when he pleases. 
 
 But the whole business ought to be con- 
 ducted by transfer, and the Bank ought never 
 to be called upon to furnish Bank-notes against 
 deposits of silver ; nor would it ever be neces^ 
 sary. 
 
 This is a hasty sketch and outline of a bank 
 of deposit, and now attend for a moment to 
 its advantages : — 
 
 1 . The merchant and manufacturer would 
 find that market at home for their silver bul- 
 lion which now (and to their great disadvan- 
 tage) they are obliged to look for abroad. 
 
 2. This silver performing the functions of 
 money without stirring from its place, the 
 expense of coining, and the loss by what may 
 be termed the wear and tear of the coins, 
 would be avoided.
 
 199 
 
 3. It would save the expense of a paper cur- 
 rency, and which expense, as I have proved 
 in one of my former letters, is very consider- 
 able. 
 
 4. A bank of deposit is adapted to, and is 
 in point of fact an improvement upon, every 
 system of currency ; and so manifold are its 
 advantages, that upon the supposition that we 
 were to make any of the other alterations 
 which I have suggested, I should still say that 
 we ought to have a bank of deposit. Nor 
 ought the deposits to be contined to silver 
 bullion, but this bank ought also to receive 
 gold bullion and the gold coin of the realm 
 in deposit. 
 
 But this plan will be objected to by the 
 Bank of England, and the proprietors of this 
 establishment will naturally say, that while 
 the public reaps all the benefit of this bank 
 of deposit, they (the Bank proprietors) will 
 be put to a certain expense for which they 
 will receive no remuneration ; and to this I 
 reply :— 
 
 1. That though certain fees were paid at 
 the Bank of Amsterdam, and certain profits 
 derived, yet profit was not the object of the 
 establishment; for the whole expense was do- 
 frayed out of the city purse, and tiie gross 
 profits of the esta})lishment were given to the
 
 200 
 
 poor. Whoever, therefore, opened an account 
 with the Bank of Amsterdam, made a gift to 
 the poor ; charity and utility went hand in 
 hand, and never did it enter into the notions 
 of the good honest citizens of Amsterdam, 
 that an institution, intended for the common 
 benefit, should be made a source of emolu- 
 ment for individuals. But this doctrine will 
 not go down at the Bank of England, where, 
 from the long-established practice of dealing 
 in fictions, and getting paid for those fictions 
 as if they were realities, large profits must 
 necessarily have been made. With such men, 
 good to the public means gain to the Bank; 
 and therefore we must come to other grounds ; 
 and then I say — 
 
 2. That the Bank of England is already 
 in some respects a bank of deposit, and is 
 bound by its charter to receive and keep for 
 any length of time the bullion of the mer- 
 chants of Great Britain free of expense. To 
 the greater expense the Bank being' therefore 
 already subject by its charter, what we far- 
 ther want is so trifling as to be undeserving 
 of notice ; because all that we should farther 
 require, would be two or three clerks to keep 
 a few books, and to make transfers. 
 
 3. It must be considered that the Bank is 
 most amply remunerated for the payment of
 
 201 
 
 the dividends on the national debt ; and it 
 would therefore be unreasonable that it should 
 refuse to take upon itself the very trifling 
 additional expense to which it would be sub- 
 ject by a branch of the establishment being 
 constituted a bank of deposit. 
 
 4. And, fiually, it must be considered that, 
 during' the restriction, and, as arising' from 
 its transactions with the Government alone, 
 the Bank made a profit of about 40 millions, 
 and this without the advance of a single shil- 
 ling of real capital. Now, in its transactions 
 with the Government, not only did it do no 
 good, but it did infinite harm to the commu- 
 nity ; for all its advances being made in paper 
 which intrinsically was worth nothing, but 
 which paper (though not convertible into 
 specie), by being made a legal tender, acted 
 as money, the Bank neither did nor could do 
 any thing else than raise the prices of com- 
 modities ; and thereby all the transactions of 
 the community were unhinged ; the war was 
 rendered infinitely more expensive than it 
 otherwise would have been, and great mis- 
 chief was the consequence : and to reward 
 a company of merchants with a sum of 
 40,000,000/. sterling, not for an advance of 
 capital, not for doing good, but for working
 
 202 
 
 mischief, is a thing without example in the 
 history of any other nation upon earth. 
 
 These are the reasons which induce me to 
 think that the Bank of England will consent 
 to become a bank of deposit; not for the 
 mere purpose of receiving- and delivering bul- 
 lion (to which it is already bound by charter), 
 but to transfer it from account to account, and 
 by that means to enable the merchants to 
 liquidate their transactions with each other, 
 not as at present in paper and doubtful pro- 
 mises, but in the precious metals. But such 
 is and must be the objection of the Bank pro- 
 prietors to every thing that carries the face of 
 solidity, that the reasons which I have urged 
 will perhaps not be satisfactory ; and then 
 they may do as they like, for what care we 
 for an establishment which, having departed 
 from every sound principle, ought long since 
 to have been put down as a public nuisance > 
 And what signifies every objection when the 
 remedy is at hand, by constituting a branch 
 of the Mint a bank of deposit upon the prin- 
 ciples which I have laid down } And in one re- 
 spect the Mint is to the full as well, if not even 
 better calculated for an institution of this na- 
 ture than the Bank of England ; for it might 
 sometimes be convenient to the holder of a
 
 203 
 
 credit on the bank of deposit to receive the 
 amount in the current coin of the realm, and 
 not in buUion, and with this he might im- 
 mediately be furnished by the Mint, and the 
 latter might replace the amount by taking 
 the bullion and coining it into money. 
 
 But if the Tviint of London is to become a 
 bank of deposit, then I propose that all the 
 expense which is thereby incurred should be 
 deducted from the allowance made to the 
 Bank of England for the management of the 
 national debt. It is a trifle ; the whole ex- 
 pense would not, perhaps, be 1,000/. ; it cer- 
 tainly could not exceed 2,000/. per annum ; 
 but 1 contend for it upon principle. 
 
 Farther : I proposed in my last letter that 
 Mints should be established in different parts 
 of the empire,* and I now propose that 
 wherever we establish a Mint, there should 
 we also establish a bank of deposit ; from this 
 no harm could result, because every thing is 
 voluntary, and no man would be obliged to 
 deposit either bullion or coin in these banks, 
 but he might still continue to carry on his 
 transactions in the usual way, or in any other 
 way he thought proper. On the other hand, 
 the utility of these banks is manifest, and from 
 the great inroads which have been repeatedly 
 made on the property of the people of this
 
 204 
 
 country by the failures of country bankers, it 
 is become absolutely necessary that establish- 
 ments should exist where the money of honest 
 men will be in safety. 
 
 This is what I have to say on the subject of 
 banks of deposit, but it is doubtful whether 
 the idea will be relished ; for after all it must 
 be admitted that we have no notion of a solid 
 system of currency, and that, taken in the 
 lump, we are a nation of philosophical mad- 
 men ; immense speculators, great boasters* 
 and very large dealers in paper and promises, 
 alieni appetens, sui profusus. But all have not 
 bowed down the knee to Baal, and there are 
 still some prudent plain dealing men left 
 among us, vvho wish to see their property 
 in safety, and their transactions reposing 
 on a solid foundation ; and to such my ideas 
 may be acceptable. 
 
 And now to conclude. Wherever a free 
 system of currency is established, every 
 speculative opinion on the subject of money, 
 however wild and extravagant on the one 
 hand, or sound and judicious on the other, 
 will lead to no practical result, and therefore 
 can do neither harm nor good : the people 
 are already in the enjoyment of all that the 
 best advice can procure for them, and the very 
 ' worst can do them no harm ; every question
 
 205 . 
 
 that can possibly be started is immediately 
 met by a fact, and then the question is at an 
 end. 
 
 Thus, when the Earl of Lauderdale recom- 
 mends that the only legal standard should be 
 silver, there can be no doubt, speculatively 
 speaking (and if we are to have but one legal 
 standard) that his Lordship is right ; but 
 carry his system into effect, let all contracts 
 be free, and then let him be wrong, and where 
 is the consequence ? For still the Mint is 
 open for the coinage of gold, and gold passes 
 by convention ; gold, therefore, in all con- 
 tracts is a standard by convention ; he, then, 
 that chooses silver for his standard, may abide 
 by the law, and have silver ; and he that 
 chooses gold for his standard may deviate 
 from the law by convention, and have gold. 
 He that has chosen one, may, by convention, 
 convert it into the other ; and again, by con- 
 vention, return to his former position. We 
 see, therefore, that a system quite simple in 
 the outline, admits of every possible variety 
 of combination ; whereas our stupid system 
 (like Hobson's choice) admits but of one com- 
 bination, and that one, unfortunately, is to 
 the prejudice of the public. 
 
 Thus, when I suggest that both gold and 
 silver should be a legal tender, (being certain
 
 206 
 
 that there is. no one position in which the cre- 
 ditor can be placed with two standards, in 
 which he might not equally have been placed 
 if one standard alone had existed) ; whether 
 I am right or wrong is all a case, because 
 every man that is dissatisfied with my opinion 
 may not merely confine himself to one stand- 
 ard, but may choose which he likes, either 
 gold or silver. Again, when I recommend 
 that the Mint should be open to the public for 
 the coinage of both gold and silver, and that 
 both metals should be free to find their value, 
 either with relation to one another, or other 
 productions, what possible injury can result 
 from carrying the measure into effect ? For 
 if it be not to the advantage of the public that 
 gold should be coined, gold will not be coined ; 
 and if it be not advantageous that silver should 
 be coined, silver will not be coined; and I 
 shall merely have given an opinion which, 
 leading to no practical result, will do neither 
 good nor harm. 
 
 What matters it that both gold and silver 
 are a legal tender in France, according to cer- 
 tain proportions of value between the two 
 metals established by the French law ? — when 
 the same law allows everv man to choose his 
 own standard, and to make what bargain he 
 pleases, either in the exchanging of gold for
 
 207 
 
 silver, or both for other productions; and 
 when, therefore, the standard of convention 
 must necessarily control the standard of law; 
 and every regulation which establishes the re- 
 lative value between gold and silver, becomes 
 a mere matter of speculation, which, whether 
 right or wrong, is of very little importance. 
 
 If, during the Bank restriction, the currency 
 of this country had been free, what harm 
 could have resulted from that notable decision 
 of the House of Commons, that gold and 
 Bank-notes were at par — that is, that gold 
 and paper were of equal value ? The gold 
 and the paper would have circulated together, 
 each according to its value ; the paper would 
 have been at a discount, and the gold would 
 have been at a premium ; and the fact alone 
 (without injury to any one) would have deter- 
 mined the falsity of the proposition. But this 
 decision of the House of Commons being 
 backed by an Act of the Legislature which 
 made Bank-notes a legal tender at their de- 
 nominative value in all payments, and by 
 another act which made it penal to accept of 
 more than a one-pound note, and a defaced 
 worn-out shilling, in exchange for a guinea, 
 mischief was produced; because a man was 
 obliged to take that as an equivalent for 
 twenty shillings in gold, which, perhaps, was
 
 208 
 
 worth only fourteen or fifteen ; and the guinea 
 not being" allowed to find its value when com- 
 pared with paper, disappeared from the 
 circulation of the country. 
 
 We write book upon book, every fancy 
 that springs in a fool's head is fashioned into 
 a system ; and our disputes about standards 
 of value, and the true principles of currency, 
 are interminable; whereas the people of France 
 write few books on these matters, and have 
 still fewer disputes. Why is all this? — Be- 
 cause we are constantly in search after that 
 good of which they are in the practical enjoy- 
 ment. If a free system of currency were to 
 obtain in this country, all the books that have 
 ever been written on the subject of money 
 might very safely be committed to the flames ; 
 for it is incontestable that all a man would be 
 required to know is the weight and fineness 
 of the gold and silver coins of the realm ; and 
 if he had dealings with foreign countries, the 
 weight and fineness of the money of those 
 countries: and all this might be gathered on 
 the one hand from the King's Proclamation, 
 and one or two Acts of Parliament; and on the 
 other from Dr. Kelly's Cambist. How simple 
 is science ! and the knowledge which is useful 
 and necessary, how easily is it obtained ! 
 
 January 2nd, 1826.
 
 209 
 
 LETTER XV. 
 
 ON MONEY. 
 
 " I scarcely know any method of sinking money below its 
 level, but those institutions of banks, funds, and paper 
 credit, which are so much practised in this kingdom." — 
 Hume. 
 
 In a letter which I addressed to you, and 
 which you had the kindness to insert in your 
 vahiable journal of the 9th of May last, I insti- 
 tuted a comparison between the expense of 
 coinage, and the loss by wear and tear of a 
 metallic currency, and the mere expense of a 
 paper currency ; and I proved, beyond the 
 possibility of doubt, that the latter greatly ex- 
 ceeded the former. 
 
 But to this I said that it would naturally 
 be objected, that though the expense of keep- 
 ing up a paper currency be infinitely greater 
 than that of a metallic, yet that the first cost 
 of the material is much less ; and in reply to 
 this, I asserted, that every paper currency acts 
 as a discouragement to industry, and is a tax 
 on the productive classes of the community, 
 
 p
 
 210 
 
 and this I must now endeavour to prove ; and 
 then the question to be discussed is, which of 
 the two, a pure metallic currency, or a well- 
 regulated paper currency, which as to value 
 shall be on a par with the precious metals, 
 is the most beneficial, and affords the great- 
 est encouragement to the industry of the 
 community. 
 
 " Money," says Solomon, " answers all 
 things." — " With money," says Caesar, '^ we 
 have men, and with men we have money." — 
 " So much money," says Hobbes, '' is equi- 
 valent to so much power." — But nothing of all 
 this is to be understood as of paper money, 
 but of what the French call especes sonnantes, 
 money that sounds like a bell. 
 
 According to Adam Smith, '^ money is a 
 commodity;" and why, after this, he should 
 argue in favor of a paper currency, I am at 
 a loss to conjecture. For if money (that is, 
 money of the precious metals) be a commo- 
 dity, then it is right to favor its circulation 
 the same as that of any other commodity; but 
 to substitute a paper for a metallic currency, 
 (that is, the sign for the substance, and the 
 promise of a thing for the thing itself), is 
 most assuredly not to favor its circulation, 
 but on the contrary it is to exclude it entirely 
 from circulation; and we thereby lay down
 
 211 
 
 this principle, that by substituting a thing* 
 which is of inferior quality, and therefore 
 cheap, for that which is of superior quality 
 and therefore dear, is in all cases advanta- 
 geous to the community; and than this, 
 nothing, I am sure, can be more absurd, for 
 let a thing cost me what it will, yet if when 
 I part with it I can always obtain for it that 
 which I have given, I have lost nothing ; and, 
 work as much as I will, yet, if the object 
 which I have acquired by my industry will 
 always command that quantity of labour 
 which I have expended in its acquisition, 
 then my industry has been directed to a pro- 
 per object — I have acquired wealth, and my 
 labour is not in vain. 
 
 And therefore for Adam Smith to define 
 money to be a commodity, and after this to 
 argue in favor of a paper currency, is to reason 
 wrong from right principles ; and from true 
 and correct premises to draw false conclusions : 
 and this is his constant failing. 
 
 According to Mr. Locke and the Earl of 
 Lauderdale, ^' money is an equivalent;" and 
 this is the true definition. Now an equivalent 
 is some one thing, which, when compared with 
 any other thing, or with all other things, has 
 a value in exchange ; but then money, again, 
 is a commodity, and then all commodities 
 
 p2
 
 212 
 
 stand in the relation of equivalents to one an- 
 otliei% and so much of one thing-, at any- 
 given time and place, is worth so much of 
 another thing- at the same time and at the 
 place, and then every commodity may be 
 money : and therefore if ex omnium consensu, 
 we have fixed on the precious metals for 
 money, it is on account of certain properties 
 which they possess, and which to the same 
 degree are not to be found in any other sub- 
 stance : these properties (among others) are 
 ductility, malleability, fusibility, incorrupti- 
 bility ; but the most essential thing of all is, 
 that from their scarcity, and the great labour 
 attendant on their acquisition, they contain 
 great value in a small bulk : and therefore it 
 is quite clear, that of all equivalents, gold 
 and silver are the cheapest and the most con- 
 venient. They decay not by keeping, they 
 waste not by fusion ; and therefore it is that 
 the ancient chymists call them noble metals. 
 According to the same Earl of Lauderdale, 
 and others, " money is a standard or measure 
 of value ;" and this also is correct ; but then 
 money is an equivalent, and this brings us to 
 the last definition : for as a measure of ca- 
 pacity must itself have capacity, and be 
 capable of containing a certain portion of the 
 thing which is to be measured ; and as a
 
 213 
 
 measure of length must itself have length — so 
 likewise must a measure of value be some- 
 thing which intrinsically is valuable ; for 
 how can that be a measure of the value of 
 other things, which is itself without value ? 
 And, therefore, to call money a measure of 
 value, is but to recognize the plain old geo- 
 metrical principle that qua sunt a'qualia uni 
 tertio sunt wqualia inter se. 
 
 According to some, " money is a sign or 
 representative," but money is truly a sign of 
 nothing but itself; for though we are used to 
 say of a man possessed ol" houses and land 
 and merchandise, that he is worth (for ex- 
 ample) 10,000/., yet this is only by form and 
 manner of speech ; and we do not hereby in- 
 tend to convey the idea, that the man is really 
 possessed of this numerical amount in gold 
 and silver, but merely this — that the different 
 things of which he stands possessed would, if 
 sold, and converted into money, produce this 
 amount in gold or silver. And, therefore, 
 when stripped of all ambiguity and looseness 
 of expression, money here is not a sign, but 
 an equivalent : and so that while, on the one 
 hand, the different possessions of this man 
 are equivalent in value to that quantity of 
 gold or silver which is contained in 10,000/., 
 so, on the other, is this quantity of gold o!
 
 214 
 
 silver equivalent in value to these different 
 possessions. 
 
 According- to Rousseau, /'money is a 
 medium or standard of comparison/' (terme 
 de comparaisonj ; but this again brings us to 
 the former definition, because that it may be 
 a true medium of comparison it must be an 
 equivalent, and this brings us again to the 
 principle that "things equal to a third are 
 equal to one another;" and as the things 
 compared are only considered to be equal to 
 one another because each is equal to some 
 other thing (the medium of comparison), so is 
 this other thing singly equal to either of the 
 things with w^hich it has been compared, and 
 from that moment all are equivalents : and 
 therefore, when I say of certain sugar that it 
 is worth 60s. the cwt., and again, of certain 
 corn that it is worth 60s. the quarter, I do 
 but say that the cwt. of sugar and the quarter 
 of corn are each equivalent in value to the 
 quantity of silver contained in sixty shillings, 
 and the silver is the medium of comparison 
 for the sugar and the corn, but it is only so 
 because it is equal in value to either. 
 
 According to some, " money is a medium 
 of exchange;" but this definition is clearly 
 erroneous, for if a man take cotton manu- 
 factures to South America, and sell them for
 
 213 
 
 silver, he has but exchanged one production 
 (cotton) for another production (silver) ; and 
 if he bring this silver to England, and get it 
 coined at the Mint, and purchase manu- 
 factures, and pay for them with this silver, 
 he will again but have exchanged one pro- 
 duction for another. Let him carry on the 
 operation as long as you please, it will still 
 be the same thing ; and supposing the trade 
 to be profitable, and that he should, during a 
 certain number of years, continually employ 
 his whole capital in this manner, his gains, 
 and even his entire capital, will alternately 
 be in manufactures, and alternately in silver. 
 For first a certain quantity of manufactures 
 is exchanged for a certain quantity of silver ; 
 then this silver, on its arrival in England, 
 and being coined into money, exchanges for 
 a greater quantity of manufactures ; this 
 greater quantity of manufactures is again ex- 
 changed for a greater quantity of silver, and 
 this greater quantity of silver again exchanges 
 for a greater quantity of manufactures, and 
 sic in injinitum. Now, in all this there is no 
 medium of exchange — that is, there is no ex- 
 change of one thing for another by the 
 medium or intervention of a third ; but as 
 between the silver and the manufactures the 
 exchange is direct, and there is merely an
 
 216 
 
 exchange of one production for another pro- 
 duction, upon the ground that the one is an 
 equivalent for the other. And so it is in 
 every other transaction, whether small or 
 great, foreign or domestic. Money, there- 
 fore, is not a mere medium of exchange, but 
 it is one of the things exchanged : nor is it a 
 medium of circulation, but it is one of the 
 things which circulate : in short, and to use 
 the words of Mr. Locke, ''money is not 
 merely the measure of the bargain, but it is 
 the thing bargained for." He, therefore, 
 that introduces gold and silver into a country 
 where none existed before, does but introduce 
 new productions ; and he that introduces 
 silver where nothing but gold existed before, 
 does but introduce a new production ; the 
 same as if, diamonds alone existing, he should 
 introduce pearls, or that coffee alone existing, 
 he should introduce sugar. In every one of 
 these cases, the number of equivalents (com- 
 modities or things having' a value in ex- 
 change) is increased, this increases the num- 
 ber of exchanges, and this is to increase trade 
 and commerce ; and there is no other way. 
 
 All this by way of definition, and as re- 
 lating to money of the precious metals. But 
 is paper-money also an equivalent ? Certainly 
 not, for if I sell 100 quarters of wheat for
 
 217 
 
 400/., and receive the notes of a country 
 banker in payment, and this banker should 
 fail while the notes are still in my possession, 
 I shall as certainly have lost my wheat as if I 
 had thrown it into the sea ; and, therefore, 
 when I parted with my wheat for this paper, 
 I received no real equivalent. And, there- 
 fore, paper money is not an equivalent, but 
 merely the promise of an equivalent ; and we 
 all know that this is a kind of promise which it 
 frequently is very convenient to break. Wit- 
 ness the Bank of England from 1797 to 1819, 
 and all the country bankers that have failed 
 during the last thirty years. 
 
 Money, then, being an equivalent (that is, 
 something which has a value in exchange), 
 and it being certain that to increase the 
 number of equivalents is to increase the num- 
 ber of exchanges, and to facilitate them all, 
 and thereby to increase and facilitate trade 
 and commerce ; it will necessarily follow that 
 to substitute money of paper for money of the 
 precious metals is injurious to the com- 
 munity ; because this is not to increase, but, 
 on the contrary, it is to reduce the number of 
 equivalents ; and, therefore, it follows from 
 the very definition of money, that paper 
 money is prejudicial. 
 
 A moment's consideration will be sufficient
 
 218 
 
 to convince us that nothing can be more 
 ridiculous than to object to the precious 
 metals on account of their clearness ; for to 
 say that the precious metals are dear, is really 
 to say nothing else but that they contain 
 great value in a small bulk ; but this is one 
 great argument in their favor, and it is pre- 
 cisely on this account that they are so emi- 
 nently adapted to serve for money. 
 
 It is quite clear, that to substitute money 
 of paper for money of the precious metals is 
 to set bounds and limits to the employment 
 of labour and capital ; for, 
 
 1 . It is certain (as we have already shown) 
 that gold and silver are equivalents, and that 
 by the universal consent of mankind, every 
 thing which has been given in exchange for 
 them may again be had in return. 
 
 2. It is equally certain, that like all other 
 things they may be obtained by labour ; and 
 therefore to say that we will not have gold 
 and silver, but that paper shall supply their 
 place, is to say that there is something valu- 
 able which may be obtained by labour, but 
 which we nevertheless refuse to acquire. 
 And here it is no answer to say that by sub- 
 stituting a paper for a metallic currency, 
 more labour and capital may be devoted to 
 the acquisition of other things ; for then, to
 
 219 
 
 be consequent, we must also say that we will 
 not have pearls and diamonds, because our 
 capital may be better employed ; and again, 
 we must say that we will not have a service 
 of plate because one of tin will answer the 
 same purpose. And indeed, it is worse than 
 no answer at all ; because it being certain 
 that all things are obtained by labour, so may 
 we by labour not only acquire an abundance 
 of all other things, but of gold and silver into 
 the bargain. 
 
 And therefore I come to the conclusion, that 
 a paper currency, even when well regulated 
 (and so as to be on a par as to value with the 
 precious metals which it represents), by set- 
 ting limits to the employment of labour and 
 capital, is essentially and inherently de- 
 structive of industry ; because every paper 
 currency goes to the recognition of this most 
 absurd, and false, and dangerous principle, 
 that though there is something valuable which 
 may be obtained by labour, yet that, from 
 choice, we will debar ourselves from its ac- 
 quisition. 
 
 That a paper currency acts as a tax on the 
 productive classes is equally evident ; for let 
 an individual borrow 1,000/. in the notes of a 
 rascally country banker, at an annual interest 
 of 5 per cent. ; then let this individual be able
 
 220 
 
 to discharge the debt — that is, let him by his 
 labour acquire 1,000/. in gold or silver; and 
 then it is quite certain, that (while, in every 
 other respect, his position is the same) he will 
 be relieved from an annuity which he before 
 paid to the country banker. Now, the case 
 of this individual is that of the whole com- 
 munity, quoad the issuers of paper, but with 
 this difference, that though the individual 
 may have many ways of discharging his debt, 
 yet the debt due from the whole community 
 to the issuers of paper can only be discharged 
 by a payment in gold or silver — that is, by 
 the. substitution of a metallic for a paper cur- 
 cency. Now every thing is attainable by 
 labour ; for industry nothing is too difficult ; 
 by labour we obtain the precious metals; by 
 labour, then, we substitute a metallic for a 
 paper currency; and to say that from choice 
 and from principle we will not do this, is to 
 say that we will not relieve ourselves from a 
 tax though it is in our power. 
 
 If those who speak in favour of a paper 
 currency had contented themselves with 
 saying, that the money of a country forms 
 no part of its revenue, they would not per- 
 haps be wide of the mark, and there would 
 be no great reason to quarrel with the pro- 
 position ; but diamonds, and pearls, and
 
 221 
 
 pictures, and statues, and costly furniture, 
 and, in point of fact, a great part of the per- 
 sonal property of the community, stand 
 precisely in the same predicament. A service 
 of plate, for example, yields neither interest 
 nor income to its owner, and yet we do not 
 quarrel with him on this account, nor do we 
 presentl}^, call him a fool because he does not 
 convert his plate into money, and lay it out 
 at interest. Now, if we neither do nor can 
 object to the conduct of this man, (because 
 our objection would go to discountenance the 
 acquisition of all wealth), what have we to ob- 
 ject to the conduct of another who holds a 
 certain quantity of silver in crown-pieces — 
 that is, in money ? Is silver any thing but 
 silver ? and is not the real power and position 
 of these two men precisely the same ? — Cer- 
 tainly : the one holds a certain quantity of 
 silver plate, and by losing the cost and ex- 
 pense of the fashion, he may get it coined 
 into crown-pieces ; and the other, by paying 
 the cost of the fashion, may get his crown- 
 pieces converted into a service of plate ; both, 
 if they like, may have plate ; and both, if they 
 like, may have money. And this applies to 
 the whole community ; some have plate and 
 some have money, some have both, and some 
 neither ; but to no one individual of the com-
 
 222 
 
 munity (and therefore not to the whole com- 
 munity) can the honest possession of either 
 plate or money prove injurious. 
 
 And therefore, though the metallic cur- 
 rency of a country (like many other things) 
 forms no part of its revenue, yet it clearly 
 constitutes a portion of its wealth — that is, of 
 the sum-total of its exchangeable values ; and 
 in times of public calamity and distress the 
 gold and silver may be exported in order to 
 exchange for the materials of food and 
 clothing ; and this purpose it will much more 
 readily accomplish than any other production 
 whatever. And therefore the gold and silver 
 money of a country, is that portion of the 
 surplus produce of the industry of a former 
 period, which, not being required for the use 
 and enjoyment of its inhabitants, has been 
 exchanged for and vested in the precious 
 metals ; and productions that were expensive 
 in the keeping, and perishable, have been ex- 
 changed for others which are imperishable, 
 and may be kept at no expense whatever. 
 And that this exchange is most beneficial 
 to the community there can be no doubt, 
 because, under every circumstance, all that 
 has been parted with in order to obtain the 
 precious metals, may again be had in return 
 for them; if we have parted with food, we
 
 223 
 
 can again have food ; and if we have parted 
 with clothing", we can again have clothing. 
 
 Now let all this be denied, and then it will 
 immediately follow, that though corn exist in 
 abundance in foreign parts, and no impedi- 
 ment to its exportation, yet if we want corn 
 we shall not be able to obtain it for gold and 
 silver. 
 
 Again, let it be denied, and then it will 
 follow that, cctteris paribus, if one country 
 possess a metallic currency of 10 millions, 
 while another has the same numerical amount 
 in paper, that the wealth of these two 
 countries will be equal ; and this, I believe, 
 no one will maintain. 
 
 But not only will the wealth of one be 
 greater than that of the other, but the dis- 
 tribution of the income or revenue of that 
 country which possesses a metallic currency, 
 will be much more beneficial than that of the 
 other ; because, having by its industry 
 acquired a metallic currency, the whole of its 
 revenue [quoad the present matter) will belong 
 to the productive classes, while the other will 
 have to feed and pamper the distributors of 
 paper and promises, and nostrums and fictions 
 — a whole army of quack doctors, men who 
 thrive by the very diseases and irregularities
 
 224 
 
 which themselves have been the means of in- 
 troducing into the commonwealth. 
 
 Precisely and to the same extent will also 
 the resources of the Government of that 
 country which has the metallic currency be 
 greater than those of the country which has a 
 currency of paper ; because that tax which in 
 the one country is paid to the issuers of paper, 
 may, in the other, and this without the least 
 inconvenience, to the productive classes, be 
 paid to the State. 
 
 From what has been said, I therefore come 
 to these conclusions : — 
 
 1 . That wherever a large metallic currency 
 exists, great industry must have been ex- 
 ercised ; as without this it could not have 
 been obtained. 
 
 2. That the existence of a large metallic 
 currency presupposes an abundance of every 
 other species of wealth, as without this the 
 money could not find employment. And 
 where is the use of an equivalent, when there 
 is nothing to be exchanged ? And therefore, 
 as 10 millions of paper currency in one 
 country, and 10 millions of metallic currency 
 in another, presupposes the same amount of 
 other values in both ; and that paper may be 
 had for nothing, while the precious metals
 
 225 
 
 can only be obtained by labour, it is quite 
 clear that greater industry must have been 
 exercised in one country than in the other. 
 
 3. That by comparing a metallic with a 
 paper currency, the distribution of the wealth 
 of the community is much more equable, ap- 
 propriate, and judicious, under the former 
 than the latter, because more belongs to the 
 productive classes. 
 
 4. That as every tax must ultimately fall 
 on the productive classes, and be defrayed by 
 means of the labour and real capital of the 
 community, the Government of that country 
 where a metallic currency obtains has the 
 greatest resources ; because, quoad the present 
 matter, the whole of the revenue of the pro- 
 ductive classes is a net revenue ; but when a 
 paper currency exists, the revenue of the pro- 
 ductive classes is, quoad the present matter, 
 not a net but a gross revenue. In the first 
 case the revenue is clear and without incum- 
 brance ; in the second it is incumbered with 
 an annuity which must regularly be paid to 
 the issuers of paper. 
 
 And this is true upon another ground, 
 which is unanswerable; because, by com- 
 paring a country which has a metallic with 
 another that has a paper currency, there is in 
 the one a greater amount of wealth than in 
 
 Q
 
 226 
 
 the other, by all the difference between paper 
 that is worth nothing* and the precious metals 
 by which every thing may be obtained ; and 
 therefore where more exists there is more to 
 be given to the State. The country which 
 possesses 10 millions of the precious metals, 
 can afford to g-ive the whole of these 10 
 millions to the State ; and if the whole of it 
 were to be exported, in order to support a 
 foreign war, it would still be in the same 
 condition as a country with 10 millions of 
 paper. The road to hell is always open, and 
 to descend from a metallic to a paper cur- 
 rency is always in our power ; but to return 
 from paper to the precious metals, hoc opus 
 hie labor est. And yet we must come to it, or 
 never will the property of individuals be in 
 safety — never will there be the least certainty 
 in their transactions with one another — never 
 will there be a just and equable distribution 
 of the wealth of the community ; and never 
 will the affairs of the State rest on a solid 
 foundation. 
 
 In my next I shall endeavour to bring the 
 argument to a conclusion. 
 
 January, 10 fh 1826.
 
 227 
 
 LETTER XVI 
 
 ON MONEY. 
 
 " Our modern politics embrace the only method of banishing 
 money — the using of paper-credit ; they reject the only 
 method of amassing it — the practice of hoarding."" — 
 Hume. 
 
 We have given a definition of money, and 
 we have maintained that all paper money is 
 a bar to industry, and a tax on the com- 
 munity : and if our premises are sound, and 
 our conclusions just, then it is in vain to 
 allege that this country has prospered during 
 the continuance of the paper system because 
 precisely the same argument may be adduced 
 to prove the benefit of public loans, a national 
 debt, and heavy taxes ; but no man will se- 
 riously maintain that loans and taxes are an 
 occasion of wealth : and therefore if, under a 
 system of loans and taxes, we have continued 
 to prosper, it has not been by means of these 
 things, but in spite of them. 
 
 Again ; with reference to the public service, 
 a loan may be of necessity, and a tax may be 
 
 Q 2
 
 228 
 
 of necessity, and as necessitas pars rationis est, 
 wise men submit and pay their money ; but 
 the tax imposed by a paper currency can 
 never be necessary — that is, it never can be 
 necessary, or just, or expedient, or beneficial, 
 to the community, that a set of men dealing- 
 in promises and fictions, trading with no 
 capital (and therefore doing no good, and 
 therefore not entitled to profit), should reap 
 the same advantages as men trading with a 
 real capital. If we pay a conjuror and a 
 harlequin, and a jack-pudding for their 
 tricks, it is because they amuse us ; but what 
 amusement is to be found in the antics of the 
 Governor and Company of the Bank of Eng- 
 land, or in those of a rascally country banker, 
 I am at a loss to imagine. Instructed, indeed, 
 we sometimes are, but the instruction always 
 comes too late : it is after the fact, and when 
 our pockets have been lightened. But we 
 soon forget all, and scarcely has one country 
 banker failed in our debt, but we hasten to 
 remedy the evil by setting up another, who 
 again serves us the same turn ; and then enters 
 into our precious noddles some confounded 
 crotchet about joint-stock banking companies; 
 and we never reflect that the system itself is 
 an evil, and that every paper currency (ex- 
 cept to a moderate extent), however well
 
 229 
 
 regulated, is a public nuisance : sero sapiunf 
 Phryges. 
 
 Let us now go on with the inquiry, and let 
 us see whether our definitions, and the line of 
 argument we have adopted, are supported by 
 facts. 
 
 From the commencement of the reign of 
 his late Majesty (I76O), to the year 1819, 
 about 74,000,000/. of gold were coined at the 
 Mint ; if we add to this, the quantity of gold 
 in circulation at the period of his accession, 
 the whole amount cannot fall short of 
 100,000,000/.; but of all this gold, probably 
 not 6,000,000/. remained in the country in 
 the year 1819- 
 
 It is well known that a great part of this 
 gold disappeared from circulation, and was 
 exported to the Continent during the late 
 war; and then, whether the exportation of 
 this gold was or was not necessary to enable 
 us to carry on the war, will equally serve the 
 purpose of the present argument; for if it 
 was not necessary, but forcibly brought about 
 by the Restriction Act, and the substitution 
 of Bank-notes for the legal coin of the realm 
 (which may, I think, very easily be demon- 
 strated), then the natural order of things was 
 violated, and if things had been left to them- 
 selves, something- that would have turned to
 
 230 
 
 the greater advantage of the community 
 would have been exported in lieu of the gold. 
 And if the exportation was necessary, then 
 this is a confirmation of what I have said, 
 that having acquired gold by industry, and 
 in the day of prosperity, it becomes our stay 
 and support in the hour of trial. 
 
 Now take another fact, which is equally 
 deserving of attention. It is well known that 
 immediately after the American war, a great 
 impulse was given to the industry of this 
 country, all the springs and wheels of action 
 were quickened, and the period from thence 
 to the breaking out of the war with the 
 French Republic was one of great and in- 
 creasing prosperity ; and yet we find it was 
 precisely during this part of the reign of his 
 late Majesty, that notwithstanding the great 
 and increasing demand for capital to be em- 
 ployed productively, and notwithstanding the 
 facility of obtaining the paper of the Bank of 
 England, by the discounting of bills of ex- 
 change, the greatest quantity of gold was 
 brought to the Mint to be coined. 
 
 Now take the longer period, from the reign 
 of Queen Elizabeth to Charles I., a period to 
 which Mr. Locke in his writings repeatedly 
 refers, and he says that, " England never 
 throve so well, nor was there ever brought
 
 231 
 
 into England so great an increase of wealth ;" 
 and yet large quantities of the precious 
 metals flowed into the country during this 
 period, and the currency was entirely me- 
 tallic, without the least commixture of paper ; 
 and the rate of interest was 8 or 10 per cent. 
 And this settles more than one point, and we 
 not only learn that a metallic currency, but 
 also that a high rate of interest consists with 
 great prosperity. 
 
 It will be found, I believe, that in every 
 country where a metallic currency obtains, 
 there exists a large quantity of the precious 
 metals, wdiether coined or uncoined, which 
 does not act as money. This w^as formerly 
 the case in Holland ; an immense stock of the 
 precious metals was deposited in the Bank of 
 Amsterdam ; and though a part regularly 
 performed the functions of money, yet the 
 greater part existed as mere merchandise : 
 and the Dutch considered it in the same 
 light as they would a stock of any other kind 
 of merchandise : and, if I mistake not, this 
 is precisely the state of things in France at 
 the present period. 
 
 There are Frenchmen who estimate the 
 numerical amount of their metallic money at 
 110,000,000/. sterling; others estimate it at 
 100,0(XJ,000/., but none, I believe, bring it 
 lower than 90,000,000/. sterling: but in all
 
 232 
 
 thing's we must be moderate, and therefore I 
 shall take the estimate of Mr. Alexander 
 Baring, which is 70,000,000/. sterling : add 
 to this the paper circulation of the Bank of 
 France (about 8,000,000/., or 10,000,000/.), 
 and we shall have a total numerical amount 
 of currency of about 80,000,000/. sterling. 
 
 Now this amount greatly exceeds that of 
 the United Kingdom, both paper and me- 
 tallic, and yet the trade of France, both 
 foreign and domestic, is supposed to be much 
 less, and the prices of commodities (and this 
 abstracted from the effects of taxation) are 
 certainly much lower than in the United 
 Kingdom : and therefore of two things, the 
 one, either the mass of commodities (as com- 
 pared with money) must be greater, and the 
 dealings and exchanges between individuals 
 be more frequent and active than we imag-ine, 
 or are willing to allow ; or else there must 
 constantly be a large quantity of money out 
 of action, existing as a corps de reserve, as so 
 much wealth, and available in the day of 
 need. And either way this is a solid enviable 
 position ; for let all the money be in action, 
 and then it is evident from the greater quan- 
 tity of money, and the lower prices of com- 
 modities, that the total mass of wealth must 
 be much greater in France than in England. 
 
 Let a part of the money only be in action,
 
 233 
 
 and then, from the non-appearance of money, 
 we are not to infer the absence and want of 
 commodities, but the reverse ; for here the 
 quantity of money per se is of no consequence, 
 and 100,000,000/. of money, by raising* the 
 prices of commodities, may be brought to act 
 on precisely the same surface as 20,000,000/. 
 at lower prices ; and therefore we are to infer, 
 not only that commodities exist in abundance, 
 but that they exist in proportionably still 
 greater abundance than money, as otherwise 
 the money which is out of action would be ex- 
 ported in order to procure them. 
 
 And then comes the final consideration, 
 that whatever the quantity of commodities ex- 
 isting in France, these commodities do not cir- 
 culate in company with vile trumpery paper, 
 but along with the precious metals, and 
 therefore, in one respect at least, and to the 
 extent of the ditference in value between 
 70,000,000/. of the precious metals, and 
 50,000,000/. or 60,000,000/. of paper (the pre- 
 cise amount is of no consequence), is France 
 richer that England. 
 
 We see, therefore, from the example of 
 France, that a very large metallic currency is 
 not always incompatible with an abundant 
 stock and low prices of commodities. But 
 this will not hold with regard to paper money.
 
 234 
 
 because all, or the greater part of this money, 
 owes its existence to borrowing : those who 
 issue it do so upon condition that they are to 
 receive an annual sum by way of interest for its 
 use ; and as no man borrows and pays interest 
 for the use of money but with a view to its 
 employment, it necessarily follows that all or 
 the greater part of this money must regularly 
 and constantly be in action ; and then its in- 
 fluence on the prices of commodities must be 
 great. 
 
 And then we perceive at once the difference 
 between a metallic and a paper currency : the 
 one has its origin in industry, the other in the 
 mere act of borrowing and lending — that is, 
 generally speaking, in a mere dealing between 
 a spendthrift and a swindler, and by which, 
 sooner or later, the honest part of the public 
 is sure to be cheated. The one is real solid 
 wealth, while the other is but the sign and 
 evidence of debt and distress ; and yet, out of 
 this worse than nothing do we form the ster- 
 ling money of Great Britain. 
 
 Come we now to a case. It is well known 
 that the precious metals are introduced into 
 this country in return for our manufactures. 
 This being the fact, let it be in the choice of 
 the people of Manchester either that a mint 
 shall be established among them which shall
 
 235 
 
 coin their gold and silver bullion, or that a 
 bank of credit shall be established which shall 
 issue paper money. If they choose a mint, 
 they find an immediate market for their re- 
 turns, and without the least trouble, difficulty, 
 or delay, their adventure is wound up and 
 realised. Let them choose a bank of credit, 
 and immediately the gold and silver which 
 they import is exc hided from the home-mar- 
 ket, and must be exported. And it is no 
 answer to say that though the return is ex- 
 cluded from the home-market, yet it still 
 has the range of the foreign-market; for 
 yet, by the exclusion from the home-market, 
 the whole market for the commodity is 
 narrowed, and this is to sink its value ; and 
 in the natural order of things the home- 
 market would first be supplied with the 
 precious metals, and then the foreign by the 
 overflowings from the home-market. But the 
 whole argument about a foreign market is 
 ridiculous ; for if it be right that one coun- 
 try should resort to paper-money to the exclu- 
 sion of the precious metals, then this must be 
 right upon principle, and then it is right that 
 every other country should be in the same 
 position, and then what becomes of the fo- 
 reign-market ? or where, in point of fact, will 
 there be any market whatevf^r for the precious
 
 ^ 236 
 
 metals, either foreign or domestic? And 
 therefore I say this — that in a country 
 eminently commercial and manufacturing, 
 abounding in skill, labour, and capital, (and 
 where it, of course, is advantageous that equi- 
 valents of every description should be multi- 
 plied), that is and must be most damnable 
 doctrine which recommends that paper should 
 circulate as money to the exclusion of the 
 precious metals. 
 
 Having seen how the matter stands in ar- 
 gument, and having supported this argument 
 by facts, let us now come to figures and cal- 
 culation, and apply the whole of what has 
 been said to our own peculiar situation : the 
 text is ample ; be it our task to furnish the 
 commentary. 
 
 Paper exists : let then, the paper-issues of 
 the Bank of England and the country 
 bankers be 50,000,000/., and let them have 
 10,000,000/. of specie in reserve to answer 
 those demands for cash that may occasionally 
 be made upon them. 
 
 Let the rate of interest be 5 per cent,, and 
 let all the paper in circulation be issued on 
 these terms: 2,500,000/. annually will then 
 be the profit made by the Bank and the 
 country bankers on a capital of 10,000,000/. 
 
 But a gain of 2,500,000/. on a capital of
 
 237 
 
 10,000,000/. (which is all that is really em- 
 ployed) gives a rate of 25 per cent, on the 
 capital employed ; and the rate of interest 
 being only 5 per cent., it will follow that 20 
 per cent, (amounting to 2,000,000/.) is gained 
 by a fiction, and 5 per cent, (amounting to 
 500,000/.) on a reality. 
 
 Large profits, then, being made where no 
 real capital is employed, this is to make a 
 profit on that which has no existence ; and it 
 is quite impossible that a thing which has no 
 existence, a mere fiction, can be made to pro- 
 duce the least benefit : not but what dreams 
 and visions are sometimes beneficial, but they 
 are only so to the expounders, the lying 
 soothsayers of the community. 
 
 From what is here stated, it will follow, that 
 of all the monopolies that ever existed, that 
 of the Bank of England during the restric- 
 tion was the most grievous and oppressive ; 
 in every other monopoly a certain capital is 
 employed, and (whatever the profits of the 
 monopolist) to this extent at least the commu- 
 nity is benefitted, because to this extent there 
 is a corresponding production ; but here enor- 
 mous profits were made without the employ- 
 ment of any capital whatever. And, there- 
 fore, it was quite impossible tliat the opera- 
 tions of the Bank of England could be pro-
 
 238 
 
 ductive of the least advantage ; and, there- 
 fore, all the profits made by the Bank were a 
 sheer dead loss to the community. 
 
 After this slight digression, let us return to 
 the subject. 
 
 We have supposed the issues of paper to be 
 50,000,000/., the stock of specie 10,000,000/., 
 the rate of interest 5 per cent., and then, as 
 already said, the gains of the issuers of paper 
 will be 2,500,000/., of which 500,000/. will be 
 gained on a real capital, and 2,000,000/. on a 
 fiction ; and then the position of these men is 
 very different from that of the rest of the 
 community, because the gain of every other 
 man is and must be in a ratio with the quan- 
 tum of labour and capital employed ; but 
 here the less the capital employed in any given 
 extent of business, the greater, proportionably, 
 is the profit. 
 
 Again : as when no capital is employed 
 there can be no production ; if profit be yet 
 derived, this must be at the expense of the 
 productive capital ; and therefore all these 
 mighty issuers of paper are supported by the 
 productive classes. 
 
 This being the state of things, the revenue 
 of the community iinder the paper system 
 may be represented in this way : —
 
 239 
 
 Total annual revenue of the community 
 
 from land, labour, and capital . ^200,000,000 
 Deduct what is annually furnished to the 
 
 Bank and the country bankers for a 
 
 paper-currency of 40,000,000/. at 5 
 
 percent 2,000,000 
 
 Net revenue . .f 198,000,000 
 
 After this, let the system be altered, that is — 
 let us resolve to set to work, and by our in- 
 dustry to substitute a metallic for a paper 
 currency ; and let us begin by the exportation 
 of 5,000,000/. of manufactures, in return for 
 which we receive the precious metals ; and 
 then as 5,000,000/. of gold and silver will dis- 
 place 5,000,000/. of paper, we have secured 
 an immediate market for our returns ; and 
 this is a great point gained : and then, taking 
 the profit on the capital employed in pro- 
 ducing and exporting these manufactures at 10 
 per cent., we shall have the following general 
 position of things : — 
 
 Former annual revenue of the commu- 
 nity dP200,000,000 
 
 Profit on 5,000,000/. of manufactures, 
 
 at 10 per cent 500,000 
 
 Total revenue » ^^200,500,000
 
 240 
 
 Brought forward— Total revenue .^200,500,000 
 
 Former amount of paper 
 in circulation on which 
 profit was made . 6^40,000,000 
 
 Reduced by the importa- 
 tion of the precious 
 metals . . . 5,000,000 
 
 .£'35,000,000 
 
 at 5 per cent. 1,750,000 
 
 Net revenue . .^198,750,000 
 
 And so that there will be a real and imme- 
 diate addition of 7-50,000/. to the annual 
 revenue of the productive classes of the com- 
 munity. 
 
 And I say this position cannot be contra- 
 dicted, because the resolution to displace 
 5,000,000/. of paper by means of 5,000,000/. 
 of the precious metals, created a demand for 
 this quantity of the precious metals which 
 otherwise would not have existed : and this is 
 to create a demand for the manufactures by 
 means of which they are obtained. 
 
 Let the same operation, or others of a simi- 
 lar nature (and by means of which the pre- 
 cious metals may be obtained) be annually 
 continued to the extent of 5,000,000/., till 
 the whole quantity of paper on which profit 
 is made be displaced, and this will be the 
 position of the community : —
 
 241 
 
 Former annual revenue . . ^200,000,000 
 
 Deduct what is annually furnished to the 
 
 issuers of paper .... Zero. 
 
 Revenue . . .£'200,000,000 
 
 And then the following will be the final 
 result : — 
 
 1st. There will be a revenue of 200,000,000/., 
 and the whole of this will be a net revenue-^ 
 that is, it will be divided amongst those who 
 worked for it. Whereas, when a paper 
 currency existed, the whole revenue was 
 200,000,000/., of which, 2,000,000/. being 
 given to those who merely issued paper but 
 produced nothing, 198,000,000/. only re- 
 mained as the net revenue of the productive 
 classes. 
 
 2dly. The resources of the state will be 
 improved to the annual extent of 2,000,000/., 
 and yet every thing will remain the same as 
 when paper circulated : for, as when the com- 
 munity possessed a revenue of 200,000,000/. 
 it could afford to pay 2,000,000/. annually to 
 the issuers of paper, so, when it has nothing 
 to pay to these dealers in promises, can it 
 afford to pay an additional sum of 2,000,000/. 
 to the state in a case of emergency, and which 
 it could not liave paid if ])aper had still con- 
 tinued to circulate.
 
 242 
 
 And lastly, with every other commodity 
 existing in the same abundance, the commu- 
 nity will possess 40,000,000/. in the precious 
 metals in lieu of 40,000,000/. in paper — that 
 is, it will have 40,000,000/. in a production 
 which is real wealth, and with which, in the 
 day of difficulty and distress, it can obtain 
 all that had been given in exchange for it, in 
 place of 40,000,000/. of paper, with which it 
 could have obtained nothing. 
 
 This is my view of the matter ; and the 
 whole of what I have stated may be summed 
 up in these few words : — 
 
 That every paper currency is primarily et 
 per se a check to industry, because something 
 valuable existing (the precious metals) which 
 may be obtained by labour, and it being im- 
 possible that a paper currency can exist with- 
 out excluding a metallic, every paper currency 
 must be a bar to the acquisition of the pre- 
 cious metals ; and to content ourselves with 
 money of paper, when money of the precious 
 metals is to be had, is all one as if a man 
 being able by means of a little exertion to 
 obtain a diamond, should yet prefer to 
 sit still and content himself with a bit of 
 glass. 
 
 That a metallic currency, on the contrary, 
 acts as a stimulus to industry, and gives all
 
 243 
 
 possible scope to the employment of labour 
 and capital: its very existence proves that 
 industry has been exercised, and this existence 
 being no bar to future industry, can present 
 no obstacle to the future acquisition of every 
 other species of wealth: the guinea which I 
 have in my pocket, or laid by in a corner cup- 
 board, is no hindrance to my labour, and can 
 therefore be no hindrance to the acquisition of 
 farther wealth. 
 
 I have confined my remarks to a well re- 
 gulated paper currency. In my next I shall 
 treat of the abuse of this pretty kind of 
 money, and then bring the argument to a 
 conclusion. 
 
 January 2\st, 1826, 
 
 ti2
 
 244 
 
 LETTER XVII. 
 
 ON THE ABUSES OF PAPER-MONEY. 
 
 " Law proposa son systeme au Due de Savoie, depiiis pre- , 
 mier roi de Sardaigne, Victor- Amedee, qui repondit qu"* il 
 n'etait pas assez puissant pour se miner." — Voltaire. 
 
 Having compared a metallic with a well- 
 regulated paper currency, it now remains 
 that we treat of the abuses of paper money, 
 and this I shall do with as much brevity as 
 possible. 
 
 The evils resulting from the abuse of paper- 
 money (among others too numerous to men- 
 tion) are the following: fluctuations in the 
 rate of interest and in the prices of commodi- 
 ties, not resulting from natural causes, but 
 from frequent variations in the quantity of 
 money in circulation — a wasteful and pro- 
 fligate expenditure, both public and private — 
 a greatly fluctuating and uncertain public 
 revenue — an insatiate appetite for gambling 
 and speculation, arising from the facility with 
 which money may be borrowed on little or no
 
 245 
 
 security — in the foreign trade, diminished 
 exports and increased imports — goods fre- 
 quently imported from foreign parts ; not be- 
 cause they are wanted at home, but because 
 they are dear in consequence of the abun- 
 dance of paper — a resale of these commodities 
 at a great loss, in consequence of gluts and a 
 general stagnation — an uncertainty in all 
 transactions, and, generally speaking, in the 
 value of all property, both real and personal — 
 sudden and general revolutions in property of 
 all sorts, which frequently changes masters, 
 and so that every four or five years honest 
 men are brought to the brink of ruin, they 
 know not how — an intense wide-spreading 
 desire to get rich ; not slowly, gradually, and 
 by labour, but by trick and contrivance; 
 which an individual here and there may cer- 
 tainly do, because he may pick his neighbour's 
 pocket : but that a whole community should 
 get rich in the same manner (that is, by rob- 
 bing one another) is quite impossible. In one 
 word, a destruction of the wealth and morals 
 of the public. 
 
 But still, say the philosophers, this money 
 is cheap — a bold assertion : let us see how it 
 squares with the fact ; and to determine the 
 question we need not travel far, and, from the
 
 U6 
 
 state of things in this country pending, and 
 since the Bank restriction, it will not be diffi- 
 cult to arrive at conclusions. 
 
 In a letter which I addressed to you, and 
 which was inserted in your valuable journal 
 of the 15th of March last, I proved that, as 
 arising solely from the transactions between 
 the Bank of England and the Government 
 during the restriction, it cost the people of 
 this country about 40,000,000/. 
 
 Again, in the course of the different letters 
 which I have addressed to you, I have occa- 
 sionally given reasons which induced me to 
 think that in the various transactions between 
 the Bank and the Government, the Bank 
 neither did nor could render the least effectual 
 assistance; and if this is correct, then the 
 whole of the 40,000,000/. paid by the Govern- 
 ment to the Bank was just so much money 
 thrown away. But as this is an important 
 point, I shall here set down all that occurs to 
 me, and this at the hazard of a few repeti- 
 tions ; our object is truth, and not variety. 
 
 1 . The Bank had nothing, and could there- 
 fore lend nothing ; the Government said to 
 the Bank, " Let there be money ;" and though 
 none existed before — presto there was money : 
 but money of what nature ? — Of paper, of
 
 247 
 
 which 20,000,000/. may be created with the 
 same faciUty, and with but little more ex- 
 pense than 1,000,000/. 
 
 Now, had the advances made by the Bank 
 to the Government been in the precious 
 metals, it clearly would have been entitled to 
 remuneration, because it would have ad- 
 vanced a real equivalent — something which 
 mig-ht have been exported to enable us to 
 procure naval and military stores ; but paper 
 being of no use in foreign payments, the only 
 effect which this paper acting as money could 
 have was, to get up the prices of commodities 
 at home, and by reducing the course of ex- 
 change, to cause all foreign commodities to 
 stand higher when imported ; and to raise the 
 prices of commodities, whether foreign or do- 
 mestic, by adventitious means, is most cer- 
 tainly to render no service either to the Go- 
 vernment or the community ; but it is, on the 
 contrary, to work infinite mischief. 
 
 And here it is quite useless to allege that the 
 Bank did occasionally advance some small 
 sums to the Government in gold ; for be it 
 much or little, this gold was not the property 
 of the Bank ; the Bank could possess no gold of 
 its own beyond the extent of its active capital, 
 and this, at the period of the restriction, was
 
 248 
 
 only about 3,000,000/.* The gold advanced 
 by the Bank was therefore the property of 
 those individuals w^ho held Bank of England 
 notes, and w^ho had received these notes as a 
 pledge that at vrhatever period they applied 
 for gold it should be forthcoming ; and then 
 came the restriction, w^hich defrauded all 
 
 * From the official returns it appears, that, at the period of 
 the restriction in February, 1797, the active capital of the 
 Bank was 3,826,903Z.; the amount of its advances to Go- 
 vernment was 10,181,862/.; and the amount of Bank-notes 
 in circulation was, in February, 1797, 8,640,250/.; the 
 value of the cash and bullion in the coffers of the Bank was 
 kept a secret, but it was compvited at about 1,000,000 to 
 1,200,000/. In May, 1797, the notes in circulation had in- 
 creased to 10,592,870/. As the war proceeded, (the Re- 
 striction continuing), the Bank and the Government broke 
 througb all bounds, till at length, in August, 1813, the 
 amount of notes in circulation was 23,877,630/. ; and the 
 amount of the Bank advances to Government at the same 
 period was 25,731,239/. 
 
 In the absence of all official information, I conjecture the 
 state of things on this present day, the 2nd February, 1826> 
 to be as follows : 
 
 The amount of the Bank advances to Government, 
 or on Government Securities, (including the payments 
 on the famous annuity), cannot, I think, fiall short of 
 18,000,000/.; the Bank-notes in circulation probably 
 amount to 20,000,000/. and perhaps 22,000,000/.; and I 
 think we may pronounce with safety that the stock of gold in 
 the Bank coffi?rs does not exceed 2,500,000/.; a very pretty 
 posture of affairs !
 
 ^49 
 
 these people of their rights. Who g-ained by 
 the fraud ? — The Bank of England. Who 
 suffered by it ? — The holders of Bank-notes — 
 in short, the whole community ; and to every 
 other tax to enable us to carry on the war, 
 was superadded a tax to enable the Bank 
 proprietors to divide large profits. 
 
 2. At whatever period (in consequence of 
 an operation between the Bank and the Go- 
 vernment) a certain quantity and amount of 
 paper was emitted, there existed also at the 
 same period a certain quantity of commodi- 
 ties. But this paper could add nothing to 
 the quantity of commodities (and therefore 
 added nothing to the wealth of the com- 
 munity) ; and therefore it could only disturb 
 the existing relation between money and 
 commodities, by artificially sinking the value 
 of the former, and raising the value of the 
 latter ; and this was to produce mischief. 
 
 3. As all the Bank-notes in the world will 
 add nothing to the real wealth of the com- 
 munity, it will then be said, that the system 
 effected a better and more equable distri- 
 bution of that wealth, which had been created 
 and existed without it. But that is the best 
 distribution of public wealth which leaves 
 every man in the enjoyment of the fruits of 
 his la})0ur ; and here, on the contrary, a part
 
 250 
 
 of the fruits of every man's labour was taken 
 away, to be given to the proprietors of Bank 
 Stock, who all this while were occupied in 
 doing worse than nothing. 
 
 4. I have said, and it has been said by 
 men of better information than myself, and 
 I think it may be demonstrated, that at 
 the period of the restriction there existed 
 40,000,000/. of gold in this country. Add 
 now to this, the quantity of paper which 
 might always be brought into circulation, in 
 consequence of applications for discounts at 
 the Bank of England, and it is quite certain, 
 that whether with relation to the trading in- 
 terests of the community, or the financial 
 operations of Government, there was money 
 enough in the country, and that consequently 
 there could be no real necessity for the Go- 
 vernment to apply to the Bank : and by ap- 
 plying in all cases to the public the currency 
 could not have been disturbed. 
 
 But gradually, slowly, and in proportion as 
 the issues of the Bank of England and the 
 country bankers increased, the gold was 
 driven from circulation ; it was first locked 
 up, and towards the close of the war it was ex- 
 ported to the Continent : and therefore the 
 people of this country stood for a considerable 
 period of time in this most singular of all pre-
 
 251 
 
 dicaments, — that while they had good money 
 of their own, they were still compelled to pay 
 the Bank of England and the country bank- 
 ers for the use of bad ; and upon no principle 
 whatever can this be justified. 
 
 And therefore, upon these and other 
 grounds which I have occasionally urged, I 
 come to the conclusion, that the 40,000,000/. 
 raised by taxes on the public, and paid to the 
 proprietors of Bank Stock, in the period from 
 1797 to I8I9, was just so much money thrown 
 away. The foundation of the evil was bor- 
 rowing from the Bank, which had nothing to 
 lend but rags, instead of borrowing real effi- 
 cient wealth from the public, when the cur- 
 rency and the natural relation between money 
 and commodities would have been undis- 
 turbed. 
 
 The next item in the cost of our blessed 
 paper-money results from the operations be- 
 tween the Bank of England and the Govern- 
 ment from I8I9 up to the present period. 
 To these our former observations and princi- 
 ples will equally apply ; for though not carried 
 to the same extent, yet they are of precisely 
 the same nature as the operations during the 
 war : all of them unnecessary and destructive 
 of the best interests of the community. But 
 having much to spare, I shall here be liberal.
 
 262 
 
 and though I am confident that it amounts to 
 more, yet I shall set down this item at only 
 5,000,000/. 
 
 The third item in the account results from 
 the operations of the country bankers ; for 
 gold (as already said) existing in the country, 
 it never could be necessary to pay for the use 
 of this trumpery ware. Taking, then, on the 
 one hand, only part of the gains of these men, 
 and, on the other, the whole of the loss to the 
 community from their failures and bankrupt- 
 cies we are very moderate when we set down 
 this item at 30,000,000/. 
 
 The last item is derived from the loss to 
 the nation in its foreign trade : and this re- 
 quires a little explanation. We have often 
 insisted on it, and it has been insisted upon 
 by others, and indeed the thing is too clear to 
 admit of doubt, that it is the effect of an ex- 
 cessive issue of paper to drive gold out of the 
 country ; but this it neither does, nor can ac- 
 complish, without first raising the prices of 
 commodities ; for as, in a country highly 
 commercial and manufacturing, full of labour 
 and capital, all commodities in a natural state 
 of things are generally at moderate prices, and 
 that thereby gold and silver are induced to 
 fiow in ; so must a contrary state of things 
 arise, and commodities which had been cheap
 
 253 
 
 must become dear, before gold and silver can 
 be exported. And then we see the influence 
 of excessive issues of paper acting as money, 
 because this influence being exercised on all 
 commodities with which it comes in contact, 
 not only are home products high in the home 
 market, but foreign products also ; and this, 
 be it again observed, is not owing to natural 
 causes — not to an increased cost of production, 
 or to the state of supply and demand, but 
 goods of all sorts are dear, because the vile 
 money with which they are compared is 
 cheap. 
 
 Foreign products then being dear in the 
 English market, not only does this produce 
 a rise of prices in the foreign markets, but 
 the abundance of money having generated an 
 artificial speculative demand for these pro- 
 ducts, a much larger quantity is imported 
 than consists with the regular natural demand : 
 this produces a glut, and the consequence of 
 a glut is, that sales must be effected at low 
 and ruinous prices. But the great loss results 
 from the mode in which we pay for these 
 foreign products : in something the payment 
 must be made, and it is quite natural that this 
 should take place in that commodity which is 
 cheapest; but this commodity is gold, and 
 therefore gold is exported. But as when this
 
 254 
 
 gold was imported, commodities of all sorts 
 were low, an 1 as when it is exported com- 
 modities of all sorts are high, this is to buy 
 gold dear and to sell it cheap, and this leaves a 
 loss. Now, to estimate this loss with accuracy 
 is impossible, but it must have been very con- 
 siderable; and I am quite sure that to take 
 the average loss throughout a series of years 
 at 1,000,000/. per annum, is to keep much 
 within the mark ; and therefore for this item, 
 and for the period elapsed from 1797 to 1826, 
 I shall set down 29,000,000/. 
 
 This is the account; I have exaggerated 
 nothing, and I have set down nothing that is 
 not palpable, visible, tangible, and then I have 
 said nothing at all of the irregular, vicious 
 distribution of public wealth which this paper 
 system has produced, nor of the utter con- 
 fusion into which it has thrown the affairs 
 of the community. 
 
 What is the sum-total of the different items 
 which I have enumerated ? — 104,000,000/. ; 
 and yet the philosophers maintain that paper 
 is a cheap currency ! 
 
 But all this loss arises, it will be said, from 
 the abuses of a paper currency. Be it so; 
 but when did there ever exist a paper cur- 
 rency that sooner or later was not abused to 
 the very worst and vilest of purposes ? Abuse,
 
 255 
 
 indeed ! Give us but one such abuse in 2,000 
 years, and then it is quite certain, even upon 
 their own principles, that the cost of a paper 
 currency will exceed that of a metallic ; for 
 I lay it down as a position, which I think 
 cannot be impugned, that 50,000,000/. of a 
 pure metallic currency is more than sufficient 
 for all the purposes of this country, whether 
 commercial or financial. It is equally certain 
 that the loss by wear and tear of a metallic 
 currency does not exceed 10 per cent, in a 
 century; and then the matter will stand 
 thus : — 
 
 First cost of a metallic currency 50,000,000/. , 
 which by tlie effect of wear and tear will be 
 lost in 1,000 years; then a second sum of 
 50,000,000/. must be expended, which at the 
 expiration of another 1000 years will again be 
 lost; and so that in 2000 years, a metallic 
 currency will cost 100,000,000/. being at the 
 rate of 50,000/. per annum ; whereas we have 
 seen, that in the space of 29 years this paper 
 system has cost us 104,000,000/. which is at 
 the rate of 3,586,206/. per annum : and yet 
 we are told that paper is a cheap currency ! 
 
 Now attend to the final result in another 
 point of view. 
 
 This paper money, as we have shown, has 
 cost the poor deluded people of this country
 
 256 
 
 104,000,000/. : and then, taking the rate of 
 interest at five per cent., this is equivalent 
 to a perpetual annuity of 5,200,000/. ; and all 
 this has happened, and all this injury has 
 accrued, because Adam Smith and Mr. Pitt 
 vs^ould have it that paper was better than 
 gold.. Novr, that Adam Smith, so far as 
 regards these matters, vs^as the most superficial 
 man alive, is quite certain ; and that Mr. Pitt 
 knew nothing whatever of the subject, is 
 equally certain ; and therefore the only 
 wonder is this — ^that the plain common sense 
 of the country would allow of the perpetration 
 of such enormities. Little did Mr. Burke 
 think, when in such just and forcible language 
 he was describing the evils resulting from 
 paper money in France, that very soon the 
 same system (which though not carried to 
 the same extent, has been of infinitely longer 
 duration) would be introduced into his own 
 country ! 
 
 I have now brought the argument on 
 money in general, and on the abuses of paper 
 money in particular^ to a conclusion : it now 
 remains that we point out a few remedies, and 
 this I shall do in my next letter. 
 
 January 27th, 1826.
 
 257 
 
 LETTER XVIII 
 
 PLAN FOR THE REGULATION OF OUR PAPER 
 CURRENCY. 
 
 " Rappeller les hommes aux maximcs anciennes, cVst orJi- 
 nairement Ics ramener h la vertu." — Montesquieu. 
 
 In my last I treated of the abuses of paper 
 money, as derived from fact and the workings 
 of our own system ; and to this there can be 
 no reply. But then we are promised wonders 
 for the future ; and though paper is still to 
 circulate, yet this is to be upon entirely new 
 and different principles, and poor people are 
 no longer to suffer by the failures of country 
 bankers. How is this to be accomplished ? 
 By the establishment of joint-stock banking- 
 companies, all composed of prime solvent 
 men ; and we are even to go further than 
 this, and no man or set of men is to be 
 allowed to issue notes without giving security. 
 Now this is certainly to have a solvent paper 
 currency, and such as any man may take 
 without fear ; but if we think that by this
 
 258 
 
 means we shall have a well-regulated paper 
 currency, we are very much mistaken. For, 
 as reg-ards a paper currency, that only is a 
 sound and well-regulated state of things, 
 when no greater numerical amount of paper 
 is in circulation than would have circulated 
 of the precious metals if no paper had ex- 
 isted. And, therefore, that a paper currency 
 should be well regulated, it is not sufficient 
 that the parties who issue it are solvent, but 
 we have also to guard against an excessive 
 issue; and this is not to be accomplished, 
 either by the certainty that those who issue 
 paper are solvent, or by their giving security : 
 for let this security be in land, and then in 
 principle we have no other limit to the cir- 
 culation of paper than the value of all the 
 land in the country : let it be in Government 
 securities, and we have no other limit to the 
 circulation of paper, than the amount of the 
 national debt, and yet the paper might be 
 valid. And then I ask, whether it is possible 
 to lay down a more ridiculous proposition, or 
 to invent a more monstrous scheme than this, 
 which in principle has no other limit than the 
 conversion of all the land and personal pro- 
 perty of the country into currency ?* 
 
 * Nihil sub sole novum. The principle here laid down
 
 259 
 
 For the rest, I am quite certain that a 
 paper currency is not deserving a moment's 
 consideration, and that the best remedy 
 we can devise is (not violently, perhaps, but 
 gradually) to abolish it altogether. But if we 
 will have a well-regulated paper currency, 
 the thing is quite simple, and we must allow 
 no small notes to circulate, either of the Bank 
 of England or of the country bankers. And 
 here my opinion is, that we ought to adopt 
 th^ method pursued in France, where they 
 have no notes under 20/.; but I am quite 
 certain that no notes ought to circulate of a 
 less value than 10/. 
 
 In shortj if we wish for a paper currency 
 that cannot by possibility lead to abuse, I 
 should propose the following plan : — 
 
 1 . The foundation of the evil being in the 
 intimate connexion subsisting between the 
 Bank of England and the Government, this 
 
 was precisely that of Law, the largest dealer in paper and 
 ideal values that ever existed, and who converted the whole 
 national debt of France into currency. This is what Vol- 
 taire says on the subjects 
 
 " Law, soduit lui-meme par son systeme, et ivre de 
 rivresse publique et de la sienne, avait fabrique tant de 
 billets que la valeur chimerique des actions valait en 1719, 
 quatre-vingt fois tout Targent qui pouvait circiiler dans le 
 royaume. Le Gouvernement remboursa en ])apiers tous 
 les rentiers de TEtat." 
 
 s2
 
 260 
 
 connexion oiig-ht to be dissolved, and this by 
 means of a public loan sufficient to pay ofF 
 the whole of the floating- debt, due from the 
 Government, to the Bank : and by a loan of 
 this kind, and for this object, payable in 
 small instalments, and at periods pretty con- 
 siderably distant from each other, no incon- 
 venience would result from the withdrawing 
 (as would be the case) of Bank-notes from cir- 
 culation, because their place (to all the extent 
 at least that a sound state of things should 
 require) would be supplied, either in con- 
 sequence of applications for discounts, or by 
 an importation of the precious metals. 
 
 By dissolving the connexion between the 
 Bank and the Government, I do not, how- 
 ever, mean that the Bank should be deprived 
 of the exclusive privilege which it now 
 enjoys, of paying the dividends on the 
 national debt, or of any remuneration to 
 which on that score it may be entitled : nor 
 do I mean that in a case of emergency, it 
 should absolutely be debarred from making 
 advances to Government; but the amount 
 ought to be defined and limited, and however 
 small it may be, this amount ought, almost 
 immediately after, to be raised by public 
 loan, and the debt due to the Bank discharged. 
 By this means it would be impossible that
 
 261 
 
 any great excess of currency should be pro- 
 duced by operations between the Bank and 
 the Government ; because every thing- that 
 was borrowed, though borrowed in the first 
 instance from the Bank, would ultimately be 
 borrowed from the public, and this leaves the 
 currency undisturbed ; and this is the true 
 principle, and it is from not having attended 
 to this principle that we owe all the mischief 
 that has happened. 
 
 2. The sum to be paid by the Bank for the 
 purchase of the far-famed annuity, will, in 
 1828, amount to so considerable a sum, as to 
 be out of all proportion to its active capital ; 
 and being totally incompatible with its 
 regular business, and the original principles 
 of the institution, it is well deserving of con- 
 sideration whether the Bank ought not to be 
 compelled to sell a part of this annuity. 
 
 3. I w^ould prohibit the Bank from making 
 advances to individuals on land or on Go- 
 vernment securities. Advances of this nature 
 are clearly contrary to every sound principle 
 of banking ; and when the peculiar nature of 
 a bank of credit (that is, of a bank which 
 issues promissory notes, and which notes are 
 to pass as money) is taken into consideration, 
 they are objectionable on other grounds. 
 For, take the case of an advance on land, and
 
 262 
 
 (as already said) there clearly is no limit in 
 principle to the circulation of paper, but the 
 value of all the land in the country : and 
 here it is quite useless to say that the Bank 
 will use discretion and limit its advances ; 
 for then, of two men having precisely the 
 same security to offer, the one is to have 
 money and the other not ; and this is con- 
 trary to all principle. 
 
 The same observations apply to advances 
 on Government securities ; but nothing of 
 this applies to regular banking business — 
 that is, to the discounting of bills of exchange; 
 because, though as mere bills of exchange 
 they are all alike, yet, from the different 
 degrees of credit and solvency, one bill of ex- 
 change having a much greater certainty of 
 being paid than another, scope is afforded for 
 the exercise of judgment and discretion ; and 
 so that while one bill is discounted, another 
 may very fairly be rejected. In short, all 
 advances on land and Government securities, 
 when made by banks of credit, naturally and 
 inevitably lead to an excess of currency ; and 
 therefore all such advances ought to be made 
 by individuals who, having money (but not 
 money of their own creating), may employ it 
 in any manner they please. By this means 
 all excess of currency is prevented, because
 
 263 
 
 all the money brought into action, and how- 
 ever employed, proceeds from real trans- 
 actions in commodities. 
 
 4. I would enact, that after a certain time 
 to be named, no notes, either of the Bank of 
 England or of country bankers, should cir- 
 culate of a less denominative value than bl. ; 
 and that after a certain other time to be 
 named, no notes should circulate of less value 
 than 10/. ; and finally, and at a more distant 
 period, that no notes should circulate of a less 
 denominative value than 20/. ; it being clearly 
 understood that every note issued is to be in- 
 stantly paid in specie on demand, the remedy 
 for a refusal to be by summary process. 
 
 Upon this plan, and subject to the con- 
 ditions I have enumerated, I would leave the 
 trade of banking free as air; and never 
 would I think of establishing joint-stock com- 
 panies by charter, or favor in any way 
 whatever the circulation of paper; for the 
 main evil to be remedied is an excessive 
 paper currency ; and this is not to be done 
 by restricting the issues of this paper, either 
 to persons that give security, or that are 
 known to be perfectly solvent; but, on the 
 contrary, this is to increase the evil, from the 
 facility with which paper of this description, 
 from its known validity, would circulate. 
 
 ,
 
 264 
 
 It will then be said, that to adopt my plan, 
 is to destroy the trade of the banker — not of 
 the real banker, but of the false, the spurious, 
 the illegitimate banker. What is a banker ? 
 « — One that trades or deals in money : but to 
 this the existence of paper money is not 
 necessary ; for why should a banker not deal 
 in money of the precious metals as well as in 
 money of paper ? Is it otherwise in France ? 
 — Certainly not. Why, then, should it be 
 otherwise in England ? 
 
 Take the trade of a London banker, or 
 more properly speaking of a London cashier ; 
 this man keeps the cash and makes the pay- 
 ments of merchants and tradesmen, and he 
 may be remunerated either by allowing him 
 a small per centage, or by leaving a balance 
 in his hands, which he may employ in dis- 
 counting bills of exchange ; and in whatever 
 way he is paid, his gains are fair and legiti- 
 mate : but this man issues no paper, and a 
 balance of 10,000/. left in his hands, in the 
 precious metals, may be employed by him to 
 the same advantage as if it had been in paper. 
 I am also quite certain, that with a metallic 
 currency, his business would rest on a much 
 more solid foundation than at present. 
 
 Then take the trade of a country banker, 
 whose business differs in some respects from
 
 265 
 
 that of a London banker, inasmuch as that, 
 g-enerally speaking, he allows interest on the 
 deposits of his customers ; or, in other words, 
 he borrows money at a low rate of interest, 
 and lends it at a higher ; and to this no ob- 
 jection can or ought to be made : but whether 
 the currency were of paper or metallic, he 
 might still continue to do the same thing. 
 What branch of his business, then, would be 
 curtailed ? — The power of inundating the 
 country with paper ; the power to derive pro- 
 fit without the employment of capital ; and 
 which ought to belong to no man. 
 
 And therefore it is quite clear that the real 
 solid trade of a banker has no sort of con- 
 nexion with a paper currency ; and that the 
 faculty of issuing paper ad libitum is but an 
 abuse of this trade, which ought to be 
 abolished. 
 
 But if we destroy altogether, or greatly 
 diminish, our paper currency, how are the 
 taxes to be levied ? — In just the same way, 
 and with just the same facility, as at present; 
 unless, indeed, the advocates of a paper cur- 
 rency will give up the whole argument, and 
 confess that our present paper currency is 
 not on a par as to value witli the precious 
 metals ; and this would be an additional rea- 
 son for its abolition. JJut if it be as to value
 
 266 
 
 on a par with the precious metals, then, 
 whether we remain as we are, or displace our 
 paper currency by a metallic, will, as far as 
 the taxes are concerned, be the same thing. 
 
 France is heavily taxed : her public revenue 
 amounts, I believe, to upwards of 35,000,000/. 
 sterling-: and yet a metallic currency pre- 
 sents no obstacle to its collection. 
 
 But if our present currency should not, as 
 to value, be on a par with the precious metals, 
 what are we then to infer, and to what will 
 it lead ? Not to an argument in favor of a 
 paper currency ; but the argument, if available 
 at all, must go to a reduction of the metallic 
 standard. And what does this amount to ? — 
 To a declaration of insolvency, and a com- 
 pounding with the public creditor. But if 
 this is to be the end of all our folly and ex- 
 travagance, it ought to be done plainly and 
 openly, and not by the fraudulent clandestine 
 method of a reduction of the standard, either 
 by means of paper, or by a reduction either 
 in the weight or fineness of the coins of the 
 realm. Has not the fundholder been cheated 
 enough already ? — Certainly: witness the pay- 
 ment of his dividends in vile depreciated paper 
 from 1797 to 1819: and witness the more 
 recent transactions of the reduction of the 5 
 and 4 per cents. Was it necessary that he
 
 267 
 
 should be cheated then, or is it necessary that 
 he should be cheated now ? — Certainly not : 
 because, from the very principle on which 
 our national debt is constructed, it is as clear as 
 any proposition in Euclid, that if it even were 
 double its present amount it might be honestly 
 and faithfully discharged. And this, though 
 not strictly appertaining to the present in- 
 quiry, is perhaps deserving of attention. 
 
 On what principle, then, is our national 
 debt constructed ? — On this — that the fund- 
 holder having always been, and still being 
 (and this most justly), taxed in common with 
 every other class of the community, it neces- 
 sarily follows that he contributes to the pay- 
 ment of his own dividends; and then it will also 
 follow that, in every question which regards 
 a discharge of the debt, this debt itself must 
 contribute to, and assist in, its own redemp- 
 tion. In this there is no injustice to the fund- 
 holder; on the contrary, it emanates from the 
 very principle on which the debt was con- 
 tracted, and in point of fact a redemption of 
 the debt upon this principle does but place the 
 fundholder in that precise position in which 
 he stood when the debt existed; for as when 
 the debt existed he was entitled to a certain 
 revenue, but which revenue was subject to a 
 tax, so by the discharge of the debt will he
 
 268 
 
 come into the possession of a certain capital 
 which will yield him a certain I'evenue, and 
 which, though less than his former revenue, 
 will be subject to no tax whatever. 
 
 This being the principle, let us suppose a 
 debt of 800,000,000/. to exist, and that the 
 real and personal property of the country 
 taxable and applicable to the discharge of this 
 debt shall amount 1,600,000,000/. It would 
 then, prima facie ^ appear, that in order to re- 
 deem the debt, a tax of 50 per cent, would be 
 necessary ; in reality, however, a tax of only 
 33 and one third per cent, would be required, 
 because to the real and personal property of 
 the country must be added the amount of the 
 debt itself; and then the sum applicable to 
 redemption of the debt is not 1,600,000,000/., 
 but 2,400,000,000/. 
 
 Again: let the debt be 1,600,000,000/., 
 and let the real and personal property of the 
 community amount to the same sum; and 
 then, prima facie, it would appear that to dis- 
 charge the debt would require a tax of 
 100/. per cent., or, in other words, that all 
 the real and personal property of the country 
 must be taken from the present possessors to 
 be given to the fundholders : in reality, 
 however, a tax of 50/. per cent, only would 
 be necessary, because to the amount of
 
 269 
 
 1,600,000,000/. of real and personal property 
 must be added another 1,600,000,000/., the 
 amount of the debt itself, and which, ex na~ 
 turd rei, must contribute to its own redemp- 
 tion. 
 
 In various plans which have been devised 
 for the discharge of our national debt, this 
 which I have mentioned has been laid down ; 
 but here has been the error — that it has con- 
 stantly been brought forward in the shape of 
 an arrangement, and as a proposition to be 
 submitted to the fundholder ; whereas it is a 
 principle derived from the very nature of the 
 thing; and from the very contract between 
 the Government and the fundholder (by 
 which as long as the debt exists the fundholder 
 is to contribute to the payment of his own 
 dividends) the public debt is bound to contri- 
 bute to its own redemption. 
 
 I am not here arguing for or against a dis- 
 charge of the debt ; nor does a matter of this 
 nature properly belong to the present inquiry ; 
 but this, at least, is certain — that whether we 
 redeem the debt, or impose an income-tax for 
 the payment of the dividends, must, as to 
 every real purpose, come to the same tiling ; 
 and indeed in one respect an income-tax is 
 the preferable mode, as by that means many 
 would contribute (and who ought to contribute)
 
 270 
 
 to the payment of the dividends, who^ having 
 no property, would contribute nothing to the 
 discharge of the debt. 
 
 By imposing an income-tax we also secure 
 two other most important points : — 
 
 1. Low prices of commodities; because to 
 all the amount of the income-tax, might taxes 
 on commodities be either wholly repealed or 
 reduced. 
 
 2. A tax on income would reach absentees ; 
 and this is highly desirable. There are many 
 Englishmen who derive their incomes from 
 the British funds, and from the rent of land 
 situate in this country, but who, by residing 
 and spending their money in foreign parts, 
 escape all taxation; and not only would an 
 income-tax reach those persons, but I am also 
 persuaded that by means of a metallic cur- 
 rency, and a total repeal or reduction of taxes 
 on commodities, every thing would be at such 
 moderate prices in this country, that all or the 
 greater part would be induced to return. 
 
 A few words more. It appears to me that 
 the nature of our national debt is entirely 
 misunderstood. Now, as I take it, this debt 
 is nothing but the record and evidence of 
 money spent, which had voluntarily, and free 
 of expense, been furnished by the people, but 
 which money, if it had been raised by taxes.
 
 271 
 
 (and at great expense) would have been spent 
 in the same manner. 
 
 Our national debt has been produced, and 
 has reached its present amount, by a succession 
 of loans ; and, whatever may be advanced to 
 the contrary, every loan is in substance a tax, 
 and leads to precisely the same results ; for as 
 when taxes are imposed, a certain portion of 
 the wealth of the community is thereby 
 placed at the disposal of the Government, so, 
 when money is raised by loan, is it the same 
 and no other thing ; and the interest of the 
 loan is entirely out of the question, because 
 this interest is not placed at the disposal of, 
 and is consequently not spent by, the Govern- 
 ment ; but in the receipt of this interest by 
 means of taxes, and in its payment to the 
 fundholder by means of dividends, the Go- 
 vernment merely acts as trustee to the fund- 
 holder. And then from all this it follows, that 
 annually to raise any given sum by an income- 
 tax, or annually to raise the same sum by 
 loan, with an income-tax for the payment of 
 the dividends, requires that a country in both 
 cases should be possessed of precisely the same 
 resources. 
 
 Having said something on the subject of 
 loans and a national debt, it will not be amiss 
 that we say a few words touching the charac-
 
 272 
 
 ter and situation of a t'undholder ; and tken 
 a very small measure of reflection will be 
 sufficient to convince us that the fundholder 
 is a person who, when money was wanted 
 for the service of the State, advanced (and 
 this, consequently to the relief of others) more 
 than his contingent would have amounted 
 to if this money had been raised by taxes ; 
 for let him advance less, and then his quota 
 of the tax imposed for the payment of his di- 
 vidends will amount to more than his divi- 
 dends; let him subscribe precisely that 
 sum to the loan to which he would have been 
 assessed if the money had been raised by 
 a tax, (an income-tax, for example), and the 
 proportion of the tax which he will have to 
 pay in order to secure the payment of his di- 
 vidends, and the amount of the dividends 
 which he will receive will be precisely equal. 
 And therefore it is only by advancing moie 
 than his contingent would have amounted to 
 if the money had been raised by taxes, that 
 this man becomes a fundholder. And then I 
 simply ask this question, whether it is right 
 that the man who, when money was w^anted 
 for the service of the State, voluntarily came 
 forward and relieved others by advancing 
 more than his proportion, should be cheated 
 out of the smallest portion of his income.
 
 273 
 
 either by a vile paper currency or a reduction 
 of the metallic standard ? 
 
 This concludes my labours : and should I 
 have occasion to trouble you hereafter, it will 
 be merely on some detached points of minor 
 importance. I now address the good people 
 of these realms, and I say this : — Pay for an 
 opera-dancer if you like ; pay Braham ; pay 
 Catalani ; pay Mathews ; pay even for a song- 
 at an ale-house — it will cheer your spirits, and 
 you will return to your usual labour with re- 
 newed alacrity : and even Adam Smith's fru- 
 g-al man will tell you, that it is oije of the 
 properties of wealth to be able to command 
 amusements : but that you should waste your 
 wealth and resources in the support of a 
 trumpery paper-system, in which there is no 
 amusement, and set limits to the employment 
 of your labour and capital, for no other earthly 
 purpose than that certain grave plausible men 
 may ride in their carriages, does, I must con- 
 fess, greatly exceed my comprehension. 
 
 January 3lsf, 1826. 
 
 T
 
 NOTES. 
 
 NOTE I.~LETTER VII. PAGE 97. 
 
 The immediate effect of an increase in the quantity of 
 money, is a reduction of the rate of interest ; but the ulti- 
 mate effect is a rise in the prices of commodities, and then 
 the rate of interest returns to its former level, because, by a 
 rise in the prices of commodities, all the additional quantity 
 of money infused into the system finds employment, and 
 then there is the same demand for money, and consequently 
 the same rate of interest as before the addition was made. 
 
 On the other hand, the immediate effect of a diminution 
 of the quantity of money, is a rise in the I'ate of interest; 
 but the ultimate effect is a fall in the prices of commodities j 
 and when once this fall has taken place, (the proportion be- 
 tween money and commodities being thereby restored), the 
 rate of interest returns to its former level. 
 
 The rate of interest being ultimately governed by the rate 
 of profit, and not by the quantity of money, all interest for 
 the use of money is effect, and not cause; and, therefore, 
 per se^ it can be of no consequence whether the rate of in- 
 terest be high or low; but it is of consequence that the rate 
 of interest should neither be raised nor lowered (even tem- 
 porarily) by artificial means, because by this means sudden 
 and violent changes take place in the distribution of the 
 wealth of the community, for which no man is prepared. — 
 And this is one of the curses of the paper system, that is of 
 the power suddenly to throw into, and then as suddenly to 
 withdraw from, the circulation, a large quantity of money 
 which had no original connection with commodities or any 
 real transaction, and which could therefore have no other 
 ultimate effect than to disturb the natural relation and pro- 
 portion between money and all other things. 
 
 T 2
 
 276 
 
 liut nothing of this could happen with a metallic cur- 
 rency, because every part, and down to the smallest particle 
 of this currency, having its origin in labour and industry, it 
 can neither be increased nor diminished ad libitum; if we 
 liave too much it will be exported, and something valuable 
 obtained in return : and then, by the diminution of money 
 on one hand, and the increase of commodities on the other, 
 tlie former equilibrium will be restored: if we have too little, 
 this is but to say that compared with money the quantity of 
 commodities is too great ; and then commodities will be ex- 
 ported in order to bring in the precious metals, when the 
 equilibrium is again restored; and that which is the measure 
 of the bargain, (money), being also the thing bargained for, 
 there is the same wealth, the same mass of exchangeable 
 values as before, but a part of this wealth is in a different 
 production. 
 
 The rate of interest being then in itself of no conse- 
 quence, and being ultimately governed by the rate of profit, 
 the only real question is between a high and low rate of 
 profit; and as derived from the nature of things, and all fact 
 and experience, there can be no doubt that an increasing 
 rate of profit is favorable to the acquisition of wealth ; 
 so can there be no doubt that an increasing rate of in- 
 terest, when not produced by artificial means, is a sign of 
 increasing prosperity. 
 
 Let us now see what one of the wisest of men (Mr. Locke) 
 says on the same subject; these are his words : 
 
 " High interest is thought by some a prejudice to trade ; 
 but if we look back we shall find that England never throve 
 so well, nor was there ever brought into England so great an 
 increase of wealth since, as in Queen Elizabeth's, and King 
 James I., and King Charles I., time, when money was at ten 
 and eight per cent. I will not say high interest was the cause 
 of it, for I rather think our thriving trade was the cause of 
 high interest, every one craving money to employ in a pro- 
 fitable commerce. But this I think I may reasonably infer
 
 277 
 
 from it, that lowering of interest is liot a sure way to improve 
 either our trade or wealth." 
 
 Now if all this is correct, then what erroneous notions we 
 entertain regarding these matters! and what pretty innocents 
 we are ! to vaunt (as we have done) the high price of land and 
 of government securities, and the low rate of interest, and all 
 the great and glorious effects produced by the operations of 
 a sinking fund. Just as if the high price of land will increase 
 its fertility, or augment its rental. Just as if the high 
 price of government securities can add one })article to the 
 general wealth of the community. Just as if a reduced rate 
 of interest is not a sign of a reduced rate of profit ; and 
 thereby indicating that the resources and prosperity of a 
 country are on the wane. And just as if the effect of a 
 sinking fund is not to increase the value of that debt which 
 it is intended to discharge, and by that means to counteract 
 its own purpose, and to render the final discharge more 
 difficult. 
 
 NOTE 2.— LETTER VIII., PAGE 103. 
 
 We have asserted three things which we have neitiier 
 proved, nor attempted to prove, because, whether true or 
 false, they can lead to none, or but very slender consequences; 
 they are — 
 
 1. That it is false even in speculation that one standard 
 is less variable than two. 
 
 2. That the present relative value between gold and silver 
 is the same, or as nearly as possible the same, as it was 40 
 years ago. 
 
 3. That the difference in the relative value between gold 
 and silver, has not exceeded two or at most three per cent, 
 in the last century ; and that a diHerence to this extent could 
 have but little influence on the position of either debtor or 
 creditor. 
 
 And that nothing may remain untouched, we will now
 
 278 
 
 say a few words on these points; if it should lead to no re- 
 sults in practice, we are at least offered matter for curious 
 arid amusing speculation. 
 
 And first, of the first. It is admitted on all hands that 
 there is no invariable measure of value; and it is equally 
 certain, I believe, that if an invariable measure of value were 
 to exist, it would lead to no greater utility, nor any different 
 results in practice than a variable standard. For though it 
 is highly necessary that we should have uniform measures of 
 length and capacity, and this upon two grounds : 
 
 1. With reference to the use to be derived from the thing 
 measured, and its adaptation to certain purposes. 
 
 2. With reference to the exchangeable value of certain 
 portions of different things; for though when means exist of 
 determining different quantities of different things, we are 
 enabled to pronounce that a yard of cloth (for example) is 
 worth two bushels of corn ; yet, if we had no means of 
 measuring either the one or the other, it is quite impossible 
 that an exchange of the one for the other could be effected 
 upon any accurate principle. 
 
 Yet nothing of this applies to a measure of value, be- 
 cause a measure of value, if even invariable, is still an 
 equivalent ; and, therefore, unless we can communicate the 
 same fixedness and invariableness of value to all those things 
 with which it is compared or exchanged, we should have 
 precisely the same state of things as with a variable measure 
 of value; and any given quantity of gold, (or any other 
 production), though invariable in its value, would still con- 
 tinue, as at present, to exchange for a greater or less quan- 
 tity of other productions, the value of which should be 
 variable ; and if the corn, which last year was worth forty 
 shillings, shoxild this year be worth sixty shillings the quar- 
 ter, it matters nothing, either to the owner of corn, or the 
 owner of money, whether the variation be in the money or 
 in the corn ; and the bare knowledge of the fact would not 
 alter the position of either.
 
 279 
 
 It being then admitted that there is no invariable standard, 
 it will follow : 
 
 That either by the increased difficulty or facility of pro- 
 ducing gold on the one hand, and the increased difficulty or 
 facility of producing silver on the other ; or that either the 
 difficulty or facility of producing both shall have increased, 
 though in different degrees and proportions ; I say it will 
 follow, that we have no fixedness or certainty, if we take gold 
 alone for our standard ; and for the same reasons we have 
 again no certainty if we take silver alone for our standard. 
 
 But then in favour of one standard this is alleged, that if 
 we take gold alone for a standard, we are only exposed 
 to the variations between gold and commodities ; and that if 
 we take silver alone for a standard, we are again exposed 
 but to this one variation between silver and commodities : 
 whereas, if we take the double standard of both gold and 
 silver, we are not only exposed to the variation with commo- 
 dities before alluded to, but that we have also to contend 
 with the variations that may take place between gold and 
 silver. 
 
 This then is the question to examine ; and wc have to 
 ascertain (there being no invariable standard) whether there 
 is any one state of doubt or uncertainty, or any one single 
 position in which a man can be placed by the adoption of 
 two standards, in which he might not equally have been 
 placed by the adoption of one standard alone. 
 
 This being the question, it appears to me, that every 
 thing relating to it may be summed up in this manner. 
 
 Let there be one standard, and if it advance in value, as 
 compared with commodities, the creditor will gain at the ex- 
 pense of the debtor ; and, if it decline, the debtor will gain 
 at the expense of the creditor ; and therefore one standard 
 gives no certainty. 
 
 Let there be two, and as long as they continue to main- 
 tain the same proportions with each other, and to bear again 
 the same value as compared with commodities, it will be the
 
 280 
 
 same as if there were one standard, and neither the debtor 
 nor the creditor will gain. 
 
 Let both advance (and this in an equal degree) as com- 
 pared with commodities, and the creditor will gain at the 
 expense of the debtor ; but it will still be as if there were 
 only one standard. 
 
 Let both decline (and this in an equal degree) as com- 
 pared with commodities, and the debtor will gain at the ex- 
 pense of the creditor, but it will still be as if there were only 
 one standard. 
 
 Let one advance in value as compared with commodities, 
 while the other remains stationary, and though all payments 
 will be made in the latter (except by convention and at an 
 agio), yet all contracts will be strictly fulfilled, and the debtor 
 will neither gain at the expense of the creditor, nor the 
 creditor at the expense of the debtor ; because that metal 
 which has the least value as compared with the other, will 
 still bear the same relative value to commodities as when the 
 contract was made. 
 
 Let one decline as compared with commodities while the 
 other remains stationary, and the debtor will gain at the ex- 
 pense of the creditor ; but precisely the same thing might 
 have happened with one standard, because the metal which 
 has declined might have been selected for that standard. 
 
 Let one metal advance while the other declines in value, 
 and then the result will be the same as if one alone had 
 declined ; because the loss to the creditor will proceed from 
 the decline in the one metal, and the debtor can gain nothing 
 by the advance of the other. 
 
 And, therefore, as the result of the whole, it does appear, 
 that when two standards exist, there is no one real injury 
 that the creditor can sustain, but when that metal in which 
 payment is made shall have declined in value as compared 
 with other commodities. But precisely the same thing 
 must have taken place, if that metal alone in which he 
 receives payment, had been the standard : and to precisely
 
 281 
 
 the same thing was he exposed (there beuig no invariable 
 standard) if the other metal had been taken for a standard. 
 From what has been stated, we therefore see, that there is 
 but one case in which the creditor can gain ; and that is 
 when the standard in which the contract is to be fulfilled 
 shall command or exchange for a greater quantity of com- 
 modities than when the contract was made: but here we 
 must carefully distinguish; and though I have already 
 slightly alluded to the point, yet its importance is of that 
 nature as to demand a more ample elucidation. 
 
 It will not then follow in all cases, that the gain of the 
 creditor will be at the expense of the debtor, or because the 
 creditor gains, that therefore the debtor will lose ; for this 
 gain may not arise from an increase in the value of the 
 standard, but from that real decline in the value of com- 
 modities, which is the result of an increased facility of produc- 
 tion ; and in this case the creditor does but participate in a 
 benefit which is common to all ; but if the gain to the cre- 
 ditor should not proceed from a decline in the value of com- 
 modities, but from a real advance in the value of the stand- 
 ard, while the value of commodities remains unaltered, then, 
 as already said, the creditor will most certainly gain at the 
 expense of the debtor. 
 
 As there is only one case in which the creditor can gain, 
 so is there also but one case in which he can lose, and that is 
 when any given portion of the standard in which his contract 
 was made, shall exchange for a diminished quantity of com- 
 modities ; but here again we must distinguish ; for if this 
 proceeds from a real advance in the value of commodities 
 occasioned by increased difficulty of production, then, though 
 the creditor will lose, yet the debtor will not gain : but if 
 the loss of the creditor be occasioned by a real decline in the 
 value of the standard, while the value of comuiodltics ren)ains 
 unaltered, then the debtor will gain at the expense of the 
 creditor.
 
 282 
 
 There being therefore but one case in which the creditor 
 can gain, and again, but one case in which the debtor can 
 gain ; I shall now proceed to sum up all that relates to this 
 part of the inquiry. 
 
 That which is easily obtained is cheap, and that which 
 is obtained with difficulty is dear, and therefore cheapness 
 implies facility, and deamess difficulty, of production ; nnd, 
 therefore, 
 
 By increased facility in the obtaining of the precious 
 metals, without a corresponding and proportionate increase 
 in the facility of producing commodities, the creditor will 
 lose, and the debtor will gain ; for, as compared with com- 
 modities, every given debt in money will be acquitted by a 
 smaller quantity of commodities, while, on the other hand, 
 any given quantity of commodities may still be obtained 
 with the same facility as before. The creditor therefore 
 receives less, because the money in which his debt is paid 
 will exchange for a smaller quantity of commodities ; and 
 the debtor pays less, because arty given quantity of com- 
 modities (the facility of production remaining the same) will 
 exchange for a greater quantity of money, and therefore it 
 will cost less labour, or the price of labour, to acquit a debt- 
 
 By increased facility in the obtaining of the precious 
 metals, accompanied by a corresponding and proportionate 
 increased facility in the production of commodities, as the 
 prices of all commodities when estimated in money will 
 remain unchanged, there will be no gain either to the 
 debtor or the creditor as such ; but as consumers of com- 
 modities, both will gain. 
 
 By increased facility in the production of commodities, 
 without a corresponding and proportionate increase in the 
 facility of obtaining the precious metals, the creditor will 
 gain, but the debtor will not lose ; for though on the part 
 of the debtor it will require a greater quantity of commodi- 
 ties to enable him to acquire that assigned quantity of the
 
 283 
 
 pi-ecious metals which is due to his creditor, yet to acquire 
 this increased quantity will subject the debtor to no increase 
 of labour or difficulty. 
 
 By increased difficulty in the production of commodities, 
 without a correspoiiding and pi'oportionate increase in the 
 difficulty of obtaining the precious metals, the creditor will 
 lose, but the debtor will not gain, for though on the part 
 of the debtor, a smaller quantity of commodities will 
 suffice to exchange for that quantity of the precious 
 metals which is destined to acquit a debt, yet to obtain this 
 smaller quantity will be attended with as much labour and 
 difficulty, as to obtain a greater quantity in the former state 
 of things. Taken therefore in their respective characters of 
 creditor and debtor, one will lose while the other will not 
 gain ; but as consumers of commodities both will suffisr. 
 
 By increased difficulty in the obtaining of the precious 
 metals, Avithout a corresponding and proportionate increase 
 in the difficulty of producing commodities, the creditor will 
 gain, and the debtor will lose; a larger quantity of com- 
 modities will be required to obtain that quantity of the 
 precious metals which is destined to acquit a debt, and the 
 powers of production remaining the same, this larger quan- 
 tity of commodities can only be obtained by means of 
 additional labour and difficulty. 
 
 By increased difficulty of production, not merely with re- 
 lation to the precious metals, but to commodities also ; the 
 debtor will lose, but the creditor will not gain ; for the 
 prices of all things when estimated in money will remain the 
 same as before, the same quantity of commodities will there- 
 fore suffice to obtain that quantity of the precious metals, 
 which is to acquit a debt ; but the debtor can only obtain 
 this quantity by means of additional labour and difficulty. 
 
 One point still remains, and this I shall discuss with as 
 much brevity as consists with a proper explanation. 
 
 It is well known, then, that independent of their value in 
 exchange, gold and silver have a value per sc^ and in use,
 
 1 
 
 284 
 
 and this because they may be manufactured into plate and 
 trinkets, in short, into a variety of articles both useful and 
 ornamental; and their having. been converted into money 
 does not unfit them for this purpose, for being malleable, 
 ductile, and fusible, they may easily be converted from 
 money into plate, and from plate again into money ; and all 
 this without waste or diminution. 
 
 This being laid down, put it now that the established 
 legal proportion between gold and silver shall be as 1 to 15, 
 and that by virtue of a contract one man shall owe a debt to 
 another, and which debt, according to these proportions, 
 shall be equal to 10 ounces of gold or 150 ounces of silver, 
 and that the debtor shall have the option to pay in either 
 gold or silver. Then put it that 10 ounces of gold will be 
 sufficient to make ten gold watches with their cases; and 
 that 150 ounces of silver will be sufficient to make 150 
 silver watches with their cases ; put it finally, that when the 
 debt is discharged, the proportion between gold and silver 
 shall have so varied, as that 10 ounces of gold shall be worth 
 160 ounces of silver. 
 
 The payment of the debt will then naturally be made in 
 silver, but still the creditor will not be injured, because he 
 will still receive that precise defined quantity of 150 ounces 
 of silver which he bargained for, and which will be sufficient 
 to make 150 watches. 
 
 Now there is no answer to this, for if the creditor should 
 say that he is paid in a metal which has fallen in value, then 
 this may be denied, because, first, its value in use cannot 
 have sunk, and getting the quantity of silver which was bar- 
 gained for by the contract, this quantity may be applied to 
 all those purposes for which it was originally intended. 
 Secondly : although by comparison with gold its value in 
 exchange has declined, yet its exchangeable value, as com- 
 pared with other commodities, may still remain the same ; 
 and then still to require that the debtor should pay 10 
 ounces of gold, is to require that the debtor should be in-
 
 285 
 
 jurcd in order to benefit the creditor. Thirdly: admittin<T 
 tliat silver has declined, not only as compared with gold, hut 
 with other commodities also, still this would be no argument 
 in favor of a single standard ; because, there being no inva- 
 riable standard, if even one standard had been adopted, this 
 standard might have been silver, and then the position of the 
 creditor would have been the same ; or if a single standard 
 of gold had been adopted, again his position might have 
 been the same, because gold might have declined in value. 
 In one word, if silver alone had been the standard, and 
 silver had declined, then tlie creditor, with any given quan- 
 tity of silver, would be able to buy less gold, and less of 
 other commodities ; and if gold had been the standard, and 
 gold had declined, then the creditor, with any given quantity 
 of gold, would be able to buy less silver and less of other 
 commodities. If we take both metals for a standard, the 
 position of both debtor and creditor is one of uncertainty : 
 if we take one metal alone for a standard, this position is 
 again uncertain ; but there being no invariable standard, 
 this uncertainty neither is, nor can be, greater in one case 
 than in the other. 
 
 Let us now conclude the argument by going back to the 
 contract, which was this, that the debtor should pay 10 
 ounces of gold or 150 ounces of silver; and the proportion 
 between gold and silver having so varied, that the creditor 
 can no longer get 10 ounces of gold, let him allege that it 
 always was his intention to have 10 ounces of gold ; ar)d 
 then I say, first : that this was not the bargain ; and 
 secondly : that he is a fool, because if this was really his in- 
 tention, the remedy was in his own hands ; he ought to 
 have stipulated for a payment in gold to the exclusirm of 
 silver ; and to ^his his debtor would not have objected, be- 
 cause at the tin e of the contract 10 ounces of gold and 150 
 ounces of silver oeing of precisely the same value, whether 
 the debtor had bargained for a payment in either gold or 
 silver, or in both, would have been a matter of indifierencc
 
 286 
 
 And, as neither the debtor nor the creditor could look 
 into futurity, so, whether the bargain were made in this or 
 in any other way, either might gain or either might lose. 
 
 This is all that occurs to me, and if from reasoning we 
 proceed to calculation we shall have precisely the same re- 
 sult. For the rest, I have taken up the question merely 
 because it oiFered matter for curious and amusing specula- 
 tion, but in practice it amounts to nothing ; and whether I 
 am right or wrong is of no consequence, as I have shewn in 
 different parts of the body of the work. 
 
 Come we now to the second point : and here we have to 
 shew that the present relative value between gold and silver 
 is the same, or as nearly as possible the same as it was forty 
 years ago. 
 
 To prove this I refer to the French system, where the 
 Mint is open for the coinage of both gold and silver, where 
 both metals are a legal tender ; where either as compared 
 with the other is allowed to circulate at an agio ; where the 
 law allows a free importation and exportation of the precious 
 metals, whether coined or uncoined ; and where, in one word, 
 the currency is as free as the wind that blows : here then, if 
 any where, shall we be able to ascertain and determine the 
 relative value between gold and silver. 
 
 The French Mint regulation, which fixes the relative 
 value between gold and silver in the French coins as 1 to 15|, 
 was established in the year 1785, and it subsists down to the 
 present day ; and then, by attending to the following facts, we 
 shall be able to arrive at correct conclusions. 
 
 1. That whatever may be the extent of casual and oc- 
 casional fluctuations, yet, if we make an average of the 
 relative value between gold and silver throughout the whole 
 period from 1785 to the present day, we shall find that the 
 agio on gold (on the established Mint proportion between 
 gold and silver of 1 to I55) has been about |, and it certainly 
 has not exceeded ^ per cent. ; which in point of fact is no- 
 thing, because this is no more than would naturally be paid
 
 287 
 
 for the convenience of liaving the same value in a smaller 
 bulk. 
 
 2. That throughout the whole, or nearly the whole, period, 
 l)oth gold and silver bullion have regularly been coined at 
 the French Mints ; and this alone is more than conclusive 
 of the whole argument : for if it is a fact that forty years 
 ago both gold and silver were coined at the French Mints ; 
 and if it again be a fact, that both metals are now coined, 
 then (the proportions fixed by the Mint forty years ago not 
 having been altered) whatever may have happened in the 
 intermediate period, we may I think be tolerably certain that 
 the relative value between gold and silver is now the same, 
 or as nearly as possible the same, as it was forty years ago. 
 
 3. That from January, 1818, to December, 1823 (both in- 
 clusive), the average premium on the Mint price for gold 
 bullion has been 4f. 12c. per lOOOf. and the average premium 
 on the Mint price for silver bullion has been 2f. 44c. per 
 lOOOf. {Vide Tooke on high and low prices) which gives a 
 difference of about ^ per cent, in favour of gold. 
 
 4. That during the last twelvemonth the average premium 
 on gold bullion has been about If. 71c., and on silver bullion 
 about 6f. 50c., which gives a difference of about 5 per cent, 
 in favor of silver. 
 
 5. That on this present day, the 4th February, 1826, the 
 premium on gold bullion at Paris is 5f. 50c., and on silver 
 bullion 6f., which is so trifling a difference as not to be worth 
 noticing. 
 
 And therefore, from these facts, it is plain that whatever 
 trifling casual vai'iations may have taken place in the inter- 
 mediate period, yet the relative value between gold and sil- 
 ver is the same, or as nearly as possible the same, as it was 
 forty years ago ; and that whether the French had taken gold 
 alone, or silver alone, or had acted as they have done by 
 taking both metals for a standard, Avould, as to the position 
 between debtor and creditor, have been the same thing. 
 
 Come we now to the last point : and here we have to cs-
 
 288 
 
 tabllsli, that the variation in the relative value between gold 
 and silver has not exceeded 2 or at most 3 per cent, in the 
 last century, and that a difference to this extent would have 
 but little influence on the position of either debtor or creditor. 
 
 Our ancient Mint regulations which fixed the relative 
 value between gold and silver, as 1 to 15.210, were estab- 
 lished in 1718, by Sir Isaac Newton. From his memorial to 
 the Treasury, dated 1717, he appears to have taken a great 
 deal of pains, in a matter which was peculiarly within his 
 province as Master of the Mint ; and from the transcendant 
 abilities of the man, we are bound to presume that the pro- 
 portion which he established, was as near the truth as it is 
 possible to arrive, in a matter which must necessarily be 
 somewhat uncertain. 
 
 Then come the French in 1785, and alter the whole of 
 their monetary system, and fix the relative value between 
 gold and silver in their coins as 1 to 15.500. 
 
 Now we have already seen, that from 1785 to the present 
 period, there has been no change in the relative value 
 between gold and silver ; and we have also seen, from the 
 very principle on which the French currency is founded, 
 that in order to ascertain the relative value between gold 
 and silver, we cannot have higher authority than the facts 
 which this system offers for our consideration ; and, there- 
 fore, we are bound to take it that the relative value between 
 gold and silver, in 1785, was as 1 to 15.500, and that the 
 present relative value between the two metals is the same : 
 and, therefore, 
 
 Sir Isaac Newton being correct in 1718, and the French 
 being correct in 1785, and down to the present day, we are 
 bound to infer that the proportion between gold and silver 
 has varied between 1718 and the present period, by all the 
 difference between 15.210 and 15.500 (which is about 2 per 
 cent, in favor of gold): and that the whole of this variation 
 took place in the period between 1718 and 1785. 
 
 This is the best account I am able to give of the matter :
 
 289 
 
 and we will now see (all other things remaining the same) 
 how, and to what extent, a change of value of 2 or even 
 3 per cent, in a century, in that money in which the creditor 
 is to receive payment, will affect his position. 
 
 Let the alteration amount to 3 per cent, in a century, and 
 let it be slow and regular. 
 
 Let the century be divided into five equal parts of twenty 
 years each ; and then : 
 
 1. It is quite clear that this slow, and as it were im- 
 perceptible, variation, will have no effect on the daily trans- 
 actions of the community ; and its effects on contracts, 
 terminable within a twelvemonth, will also be next to 
 nothing. 
 
 2. It is equally clear that where there is one contract, not 
 terminable till within twenty years, there are one hundred 
 which are terminable much sooner. 
 
 And, finally, at whatever period the contract terminates, 
 the parties are at liberty to make a fresh bargain, and to fix 
 the rate or price according to the variation which may have 
 taken place in the value of the money in which payment is 
 to be made. 
 
 Let us then take the average of all contracts to be twenty 
 years ; let both gold and silver be legal tenders in all pay- 
 ments, and then let silver decline 3 per cent, in a century 
 (and in this proportion for any part of a century), not only 
 as compared with gold, but with every other commodity ; 
 and let us then see what will be the position of the creditor 
 at the end of every twenty years till the century is com- 
 pleted. 
 
 Now 3 per cent is 300 pej. cent., and this for a century 
 is equal to ~-°^ in twenty years, and this again is equal 
 to i~o^ P^"^ annum ; and, therefore, supposing a man to be 
 entitled to the annual receipt of 100/., he will lose of this .03 
 the first year ; .06 the second ; .09 the third year, and so 
 on ; and so that, at the end of twenty years, his total loss 
 will be y^Tj^ parts of a pound, which is (il 6s. And, there- 
 
 U
 
 290 
 
 fore, upon a rent of 100?. per annum, the total loss to the 
 landlord, at the end of twenty years, is 6/. 6s.; but 100/. 
 per annum amounts at the end of twenty years to 2000/., 
 and a loss of 61. 6s. on 2000/. is but 6s. 4c?. per cent. ; and 
 therefore the average annual loss of the landlord, throughout 
 the whole period of the contract on a rent of 100/., is only 
 6s. 4c?. 
 
 The twenty years having expired, and the contract being 
 at an end, the parties are at liberty to make a fresh bargain. 
 Let this bargain for a second twenty years be made on the 
 basis of the altered value of silver; and as silver still con- 
 tinues to decline, the total loss to the landlord, at the end of 
 the second twenty years, will again be 61. 6s.; and his 
 average annual loss on a rent of 100/. will again be 6s. 4c?. 
 
 Let the bargain be renewed in the same manner till the 
 end of the century, and the average annual loss on a rent of 
 100/. will still be but 6s. 4r7., and the total loss will be 
 311. 10*. on a sum total of 10,000/. 
 
 Now let us apply the principle to contracts of a longer 
 duration — to a national debt for example ; and let the whole 
 of our national debt (as it now stands) have existed since 
 1718, being the period when Sir Isaac Newton fixed the 
 proportion between gold and silver in our coinage as 1 to 
 15.210 ; and silver since 1718 having declined, as compared 
 with gold, about 2 per cent., let us see how this will have 
 affected the public creditor throughout a period of 100 
 years ; and then, (without giving, as in the former case, the 
 details of the operation) we shall find that by being paid in 
 silver instead of gold, his total loss on an annuity of 100/. 
 will amount to lOlZ.; and that his average annual loss 
 throughout the whole period will be 1/. — ^hd. per cent. 
 
 But in this as well as the former case, the loss to the cre- 
 ditor is not certain, because (presume what we will) our 
 calculations neither are nor can be founded on the real abso- 
 lute value of silver, but on the relation in which it stands to 
 gold ; and then it will follow that the difference in the pro-
 
 291 
 
 portion between gold and silver may not have proceeded 
 from a decline in the value of silver, but from a rise in the 
 value of gold. 
 
 And therefore, and as the sum of the whole, it is plain 
 that neither in fact nor in speculation, are two standards less 
 variable than one : and indeed the whole argument is ridi- 
 culous ; for a standard of value being in reality nothing but 
 an equivalent (not merely as Mr. Locke justly observes, " the 
 measure of the bargain, but the thing bargained for"), to 
 introduce silver as a standard where gold alone existed be- 
 fore, is but to introduce a new equivalent ; and to multiply 
 equivalents is to multiply exchanges, and to extend and give 
 facilities to trade and commerce. 
 
 NOTE 3.— LETTER X., PAGE 146. 
 
 That to the extent of a seignorage, value is not added to 
 the coin, we shall immediately be convinced, by attending to 
 tlie following facts and observations. 
 
 According to the evidence given by Mr. Allen, in 1810, 
 before the Bullion Committee, it appears, 
 
 That, by the Mint regulations of Spain, a seignorage of 
 8 per cent, is imposed in that country on the coinage of silver; 
 and he then goes on to tell us, that therefore the price of 
 silver bullion in Spain, is always higher than the Mint price, 
 p;encralhj about 6 per cent. 
 
 But it is the coinage of France which affords us the best 
 and most ample information as to the effects of a seignorage. 
 
 In the reign of Louis XIIL, the seignorage on gold was 
 G liv., and on silver it was 10 sols per marc ; but by an edict 
 of Louis XIV., dated in 1679, it was abolished. In 1689, 
 however, the seignorage was re-established, and was fixed at 
 7 liv. 10 sols for the marc of gold, and 12 sols 6 den. for the 
 mark of silver. — Vide Savary. 
 
 In 1726, according to the continuator of the work of 
 
 u 2
 
 292 
 
 Ricard, tlie seignorage on gold amounted to 1-^^ per cent., 
 and on silver to 5|. per cent., after deducting the charges of 
 the Mint; huf, according to Mr. Mongcz, It would appear, 
 that the seignorage on gold was 6g per cent. ; in the seignor- 
 age on silver they both agree. 
 
 But this seignorage could not be supported, for it appears 
 that, in 1720, the Mint price for gold was augmented 4 den. 
 per livre; and that in 1755, it was again augmented to the 
 same extent, and at the same periods the same augmentation 
 took place in silver ; and, therefore, in 1729, the seignorage 
 on gold was reduced from 7-i*^ to 5^' percent., and in 1755, 
 to S-^-j; per cent. : and the seignorage on silver was reduced, 
 in 1729, from 5^ to 4^ per cent., and in 1755, to 2%j per 
 cent. 
 
 It also appears from M. Mongez, that the precious metals 
 were supplied to the French Mints either by companies or 
 individuals to whom the exclusive privilege was granted, and 
 that they received a premium on the Mint price ; these are 
 his words — " On appeloit en France Surachat, et le privi- 
 lege exclusif accorde a une Compagnie, ou a un particulier, 
 de fournir les metaux precieux aux hotels des monnaies, et une 
 prime pour les dedommager des pertes supposees que devait 
 causer cette operation. En 1772, la prime fut de 9 livres 
 par marc d'or, et de 1 sols par marc d'argent." 
 
 Come we now to other facts. According to the present 
 French system, a mere brassage of J per cent, is charged on 
 the coinage of gold, and a trifling seignorage of 1| percent, 
 on the coinage of silver ; and yet we learn from Mr. Tooke''s 
 book " on high and low prices,"" that the average premium 
 on gold bullion at Paris, from January, 1818, to December, 
 1823, (both inclusive), was 4f. 12c. per lOOOf. ; and that 
 the average premium on silver bullion during the same pe- 
 riod was 2f. 44c. During the year 1824, the average 
 premium on gold bullion was about 4f. 46c., and the 
 average premium on silver bullion during the same period 
 was about 4f. 2.2c. During the vear 1825, the average
 
 293 
 
 premium on gold bullion was alwiit If. Tic, and tlie 
 average premium on silver bullion during the same period 
 was about 6f. 50c. And, dierefore, from January, 1818, 
 to December, 1825, (embracing a period of eight years), the 
 average premium on gold was 3f, 86c., and the average 
 premium on silver was 3f. 17c. And so that while both 
 metals have been regidarly at a premium on the Mint price, 
 yet the average variation in the relative value between gold 
 and silver has been only 69c., being about ~ per cent. 
 
 During the montli of January, 1826, the average pre- 
 mium on gold bullion was 4f. 60c., and the average pre- 
 mium on silver bullion 7f. And on this present day, the 
 4th of February, 1826, the premium on gold bullion is 
 5f. 50c., and on silver bullion 6f. per lOOOf. 
 
 How then, in the face of all these facts, is it possible to 
 maintain that, to all the extent of a seignorage, value is 
 added to the coin ? For if this were the case, then the mar- 
 ket price of gold and silver bullion must almost regularly 
 and constantly be at or below the Mint price ; whereas from 
 the history of the French currency, it appears, that they 
 regularly exceed this price ; and this whether the seignorage 
 be heavy or light. 
 
 But if the doctrine were as true as it is false, it would 
 still be quite impossible to show that the least utility what- 
 ever can result from a seignorage.
 
 APPENDIX 1. 
 
 ON THE OPINION OF MR. ALEXANDER BARING, THAT 
 THE ACT OF 1810 HAD AUGMENTED THE ANCIENT 
 STANDARD OF VALUE. 
 
 In the motion made by Mr. Alexander Baring, a few 
 years since, for an inquiry into the currency, and the effects 
 produced by the Act of 1819, he was of opinion, not merely 
 that we had returned to our ancient standard of value, but 
 that we had overstepped the line and augmented this stand- 
 ard. I thought little of the point at the time, or if I had 
 any opinion at all, it was that Mr. Baring was wrong ; but, 
 upon an attentive and careful examination of the matter, I 
 have every reason to believe that he was right, and that the 
 Act of 1819, coupled with our new Mint regulations, and the 
 making gold alone a legal tender in all payments exceeding 
 forty shillings, have augmented the standard of value in this 
 country ; and for this I will state my reasons. 
 
 According to our former Mint regulations, and the estab- 
 lished relative value between gold and silver, which bear 
 date, I think, about the year 1718, standard silver was 
 coined at 5s. 2c?., and standard gold at SI. 17*. lO^d. per 
 ounce ; and this established a proportion between gold and 
 silver of 1 to 15.210 ; and the law allowed the debtor to pay 
 either in gold or in silver. 
 
 Now, if tliis standard and these regulations had not been 
 departed from, but had existed down to the present day, and 
 that the Mint were open to the public for the coinage of 
 silver, the debtor, upon any antecedent contract, would have 
 the option either to pay in gold coined at 31. 17*. lO^rf., or
 
 29.5 
 
 in silver coined at 5s. 2d. per oz. And, tlicrefore, to deter- 
 mine whether the standard has been altered to the prejudice 
 of the debtor, we have merely to ascertain whether, since the 
 year 1718, any and what alteration has taken place in the 
 relative value between gold and silver; and every other 
 point is foreign to the inquiry ; for the value of either gold 
 or silver, when compared with other productions, being com- 
 mon to both the debtor and the creditor, and at all times 
 uncertain,* could form no part of a contract which ex 
 naturd rei was restricted to this, that whether the debtor 
 paid in gold or in silver, he should never be obliged to pay 
 a greater quantity of one metal than was sufficient (according 
 to the legal or Mint proportions between gold and silver) to 
 purchase that quantity of the other metal which was bar- 
 gained for by the contract. 
 
 In the year 1718, the relative value between gold and sil- 
 ver in this country, stood, as we have already seen, as 1 to 
 15.210; and in France, at the same period, this relative 
 value was established as 1 to 15. 
 
 This proportion remained without alteration in England 
 up to the period of our new Mint regulations ; but in France 
 the proportion of I to 15 continued only till the year 1 726, 
 when an alteration took place, and the proportion between 
 gold and silver was fixed as 1 to about 14.460. On this 
 footing the proportions (at least the legal proportions) be- 
 tween gold and silver remained in France till the year 1785, 
 
 • The value between gold and silver on the one hand, and com- 
 modities on the other, being common to both the debtor and tiie 
 creditor, it follows, that if, with a less quantity of commodities, the 
 debtor can buy "that quantity of silver which is sufficient to dis- 
 charge a debt, than he must have parted with in order to accomplish 
 the discharge of this debt in gold, that not only he has a right to do 
 this, but Ihut by not doing it he n>ight be injured; because a dif- 
 ference in tlic relative vabie buUveen gold and silver may proceed 
 from a rise in (lie value of gold, and not from a dcchne in Ihe value 
 of silver.
 
 296 
 
 when it was found absolutely necessary to change them, and 
 to fix the relative value between gold and silver in the French 
 coins as 1 to 15^,* and this proportion has continued to the 
 present day. And that it is accurate (as far at least as ac- 
 curacy can be attained in a matter of this nature) there can 
 I think be little doubt ; because, although the whole system 
 of "currency in France is free from restraint, and that both 
 
 * I take the proportion here from the French coins, but the French 
 Mint prices for gold and silver, give a somewhat diflFerent propor- 
 tion, which arises from this circumstance ; that the seignorage in 
 France has scarcely ever been the same on both metals. Formerly 
 (for instance) the seignorage on gold was higher than on silver j but 
 now, on the contrary, there is no seignorage,but merely a brassage, on 
 gold, while the seignorage on silver is \\ per cent. Two other 
 reasons have also induced me to prefer the mode I have adopted ; 
 1. Because there has almost constantly been a premium (greater or 
 smaller) on the Mint price, and therefore the real price paid by the 
 Mint was always uncertain. 2. The expense of coining is, I believe, 
 greater on silver than on gold. 
 
 I have thought it necessary to say thus much, by way of explana- 
 tion ; but whether, with a view to ascertain the proportionate value 
 between gold and silver, we take the Mint prices, with the addition 
 of the two circumstances I have mentioned; or whether we adopt 
 (as I have done) the method of ascertaining this proportionate value 
 by means of the gold and silver coins, the result though not pre- 
 cisely, will, I believe, be pretty nearly, the same, and de minimis non 
 curat lex. 
 
 There still remains one consideration, which is final and con- 
 clusive; viz. that in the commercial intercourse between different 
 nations, all transactions are regulated by the contents of the coins 
 in fine gold or silver, and in what manner the Mints of these coun- 
 tries obtain the nietals,or the prices paid for each metal respectively, 
 is out of the question ; and therefore, if according to the contents 
 of the French coins, the proportion between gold and silver is 
 now as 1 to 15|, and that the experience of the last forty years has 
 proved this proportion to be accurate ; and that the proportion in 
 the coins, established in this country by Sir Isaac Newton, in 1718, 
 was as 1 to 15.210, then, I think, we may pronounce with safety, 
 that since 1718, gold as compared with silver, has advanced about 
 2 per cent.
 
 297 
 
 metals, whether coaied or uncoined (and to the total exclusion 
 of all Mint regulations), are left to find theu* value in ex- 
 change for one another, yet (as we have already seen) the 
 agio on gold during a period of forty years has, upon an 
 average, been so triflins as to amount to no more than would 
 very naturally be paid for the greater convenience of gold, 
 when compared with silver. 
 
 Now this determines the p'oint, that since the year 1718, 
 gold, as compared with silver, has increased in value ; and it 
 again determines the point, that since the year 1785 (the 
 period wlien the French altered their proportion), but very 
 little, if any, alteration in the relative value betw^een the two 
 metals has taken place : but it leaves us quite in the dark, as 
 to the different variations which may have taken place in the 
 relative value between gold and silver, between the years 1718 
 and 1785 ; for at the former period our proportion stood as 
 1 to 15.210, while the French proportion was as 1 to 15, 
 and from the circumstance that the French in 1726, reduced 
 the relative value to as 1 to about 14|, it is not impossible 
 that the value of gold, wdien compared >vith silver, had de- 
 clined. But as this alteration took place a few years after 
 the breaking up of Law's system, and that the French cur- 
 rency, till 1 785, was generally speaking, in a state of great 
 confusion ; no sound inference can be drawn as to the real 
 relative value between gold and silver, from any thing which 
 then took place in France. Nor is it at all material to the 
 present inquiry, that we should determine the variations of 
 value between gold and silver, which took place between 
 1718, and 1785; it is suflRcicnt that we know on the one 
 hand, what were the proportions in England, in the year 
 1718, and on the other, the value of the two metals, gold 
 and silver, when compared with one another at the present 
 day : and this we have already ascertained, and we have found 
 that, by our ancient .standard, the relative value between 
 gold and silver was as 1 to 15.210, and that the real relative 
 value iwtwcen gold and silver, at the ])rcscnt day, is as I to
 
 298 
 
 15.500. And, therefore, though gold still continues to be 
 coined at the English Mint, upon the former principle, yet 
 the debtor being deprived of the option which he before 
 possessed to pay in silver, the standard as to him is aug- 
 mented to the extent of about 2 per cent. And this aug- 
 mentation embraces in its consequences the whole of the 
 national debt, and every contract entered into by individuals 
 prior to the year 1816, (56 Geo. III., Cap. 68.) the date of 
 the Act which established the present Mint regulations, and 
 which made silver a legal tender to the extent of only forty 
 shillings. All which may easily be shown ; for whether in 
 a comparison between gold and silver, the one has declined, 
 or the other has advanced, in value, is quite immaterial to 
 the debtor who formerly had the option to pay in either gold 
 or silver, but is now restricted to the payment in gold alone, 
 and who is therefore deprived of a facility which he before 
 possessed. It is sufficient to him that the same relative 
 value between the two metals no longer exist ; and that by 
 the mere change in the proportions between gold and silver, 
 (and from whatever cause proceeding) it will cost him more 
 labour (or what comes to the same thing, the result of more 
 labour in commodities) to acquit any given debt in gold, than 
 to acquit the same debt in silver, according to the ancient 
 standard of the country. 
 
 The whole of this reasoning when reduced to calculation, 
 will stand in this manner : 
 
 That supposing an annuity of 100/. to have been created 
 100 years ago, this annuity might then, and down to 1816, 
 (when our Mint regulations, and the old law regarding pay- 
 ments were altered) have been discharged by a payment in 
 either gold or silver ; and according to the proportion be- 
 tween gold and silver, in our coinage which then existed, 
 25.682 ounces of standard gold, or 387.092 ounces of stand- 
 aj*d silver, (each being equivalent to 100/.) at the option of 
 the debtor, would have been good, lawful, and sufficient pay- 
 ment.
 
 299 
 
 But the Act of 1816, having rendered it imjDerative that 
 this debt should be discharged in gold, and in no other way, 
 and the proportion between gold and silver having so varied, 
 that gold, as compared with silver, has advanced about 2 per 
 cent. ; the debtor, by being deprived of the facility which he 
 before possessed to pay in silver, is in reality obliged to pay 
 that quantity of gold, which is equivalent in value to about 
 395 ounces of standard silver. And then, whatever the 
 value between gold or silver on the one hand, and commodi- 
 ties on the other, the debtor is injured, because it clearly will 
 require more labour, (on the result of more labour in other 
 tilings) to obtain 395 ounces than 387 ounces of silver. 
 
 Or it will stand in this manner ; that as to obtain 25.682 
 ounces of standard gold (the contents of lOOZ.) will, according 
 to the present proportion between gold and silver, require 
 more labour (or what comes to the same thing, the result of 
 more labour in commodities) than to obtain 387.096 ounces 
 of standard silver ; and as by the ancient law of the land, a 
 debt of 100/. could be discharged by the payment of 387.096 
 ounces of standard silver ; so does it follow, that to all the 
 extent of the difference in value between 25.682 ounces of 
 standard gold, and 387.096 ounces of standard silver, is the 
 metallic standard of the country increased, and the debtor 
 injured. This matter ought therefore to have been carefully 
 looked into, before the passing of the Act of 181 6, and if in 
 our great wisdom we should still have determined that gold 
 alone should be the standard, the weight of the gold coins 
 ought to have been diminished. 
 
 But the great singularity throughout the whole proceed- 
 ing, is the Amendment of Mr. Huskisson on the Motion of 
 Mr. Western, for an inquiry into the currency, which was 
 to this effect : " that we would not change the ancient 
 standard of the country :"" whereas, and in })oint of fact, the 
 administration, of which he was a member, had very re- 
 cently innovated in a most extraordinary manner on the 
 ancient standard of the counlrv ; first, by converlin" a
 
 300 
 
 double standard of both gold and silver into a single standard 
 of gold alone, and thereby depriving the debtor of a facility, 
 and even an advantage, which he would otherwise possess ; 
 and secondly, by coining the pound of standard silver into 
 sixty-six shillings, whereas, by the ancient standard of the 
 country, the same pound of silver was coined into sixty-two 
 shillings. Not only, therefore, was the ancient standard 
 departed from, but a complete change was also effected in 
 the whole of our monetary system : for first, a seignorage 
 was imposed on the coinage of silver, whereas, by the 
 ancient system, no seignorage was exacted ; and secondly, 
 the silver currency was placed completely under the control 
 of Government, and so that if an individual brought silver 
 to the Mint and was willing to pay the seignorage, it should 
 be in the discretion of the Government whether it should be 
 coined for him or not. At length, and finding that if 
 liberty were given to individuals to bring silver to the Mint 
 to be coined, that the system on which they had bestowed so 
 much thought and attention would fall to pieces in an 
 instant, they determined that no silver whatever should be 
 coined for the public : and then, because they were able to 
 bring their system to bear by force of law (that is, in this 
 case, by dint of sheer violence), they crowed over their ad- 
 versaries, the scheme was extolled to the skies, and it was 
 called admirable for its simplicity ; whereas, and in reality, 
 it was only to be admired for its extreme absurdity, and the 
 shackles which it imposed on the pursuits of individuals : 
 and to call that simple, which from beginning to end is but 
 one compound of regulation and restraint, is a strange abuse 
 of language. 
 
 This is a true picture, and, therefore, after we have so 
 completely changed and metamorphosed all things, that 
 scarce a single vestige remains, either of our ancient standard, 
 or our ancient system, to pass a resolution that we will 
 change nothing, is not a little extraordmary.
 
 APPENDIX II. 
 
 WHETHER GOLD OR SILVER BE THE MORE ACCURATE 
 MEASURE OF VALUE. 
 
 It is useless to agitate the question whether gold or silver 
 he the more accurate measure of value, because (whatever 
 alteration may have transiently and temporarily obtained in 
 the interim) the fact being, that the real relative value 
 between gold and silver is precisely, or as nearly as possible, 
 the same as it was forty years ago ; whatever the value of 
 these metals, when compared with other things, no alteration 
 has taken ])lace in their value when compared with one 
 another : and, therefore, the one is quite as accurate a 
 measure of value as the other. And, therefore, in point of 
 fact, there is at present no question to discuss ; and an an- 
 nuity granted forty years ago, would (in every other country 
 but this, where in all matters relating to money, common 
 sense is set at defiance) at the present day, not only be of pre- 
 cisely, or as nearly as possible, the same value, whether pay- 
 able in gold or in silver ; but upon an average, throughout 
 the whole period, the annuitant would also have received the 
 same, or, as nearly as possible the same, vahic, whether he 
 had been paid in one metal or the other. 
 
 But if we take reason for our guide, it must follow from 
 the very nature of things, that gold, so far from being less 
 variable, is liable to much greater, and much more frequent, 
 fluctuations of value than silver. 
 
 The existing quantity of gold, when compared with the
 
 302 
 
 existing quantity of silver, is probably as about 1 to 50;* but 
 the relative value between gold and silver is but as 1 to 15 
 or 16: and, therefore, the relative quantity does not de- 
 termine the relative value of the two metals; and regard 
 being had to quantity alone, gold, as compared with silver, 
 is cheap. 
 
 Now this being the fact, and the value of gold, when 
 compared with silver, being in a ratio, which, even in or- 
 dinary times, and when things are at rest, has not the 
 slightest correspondence with the relative quantity of the 
 two metals : and the fact again being, that gold will and 
 does serve for money as well as silver ; and that even when 
 the demand falls equally on both metals, gold as money, 
 when compared with silver as money, contains an immense 
 value in a small compass ; I say, that the commodity gold is 
 placed in that precise situation in which its exchangeable 
 value, either when compared with silver or with other pro- 
 ductions, must be liable to sudden fluctuations ; because, on 
 every occasion of a great demand for gold, all require a 
 commodity, which, relation being had to quantity alone, is 
 really scarce, but which, on the other hand, relation being 
 had to value combined with quantity, would, when compared 
 with silver, appear to be plentiful. And, therefore, on every 
 such occasioi), a rise in price is inevitable ; and we conse- 
 quently find that, in all cases of invasion, in times of panic, 
 and generally in all periods of public calamity, the price of 
 gold rises immediately. 
 
 But with silver it is quite the reverse, because, as we have 
 already said, relation being had to quantity alone, silver, as 
 compared with gold, is infinitely overvalued ; and, therefore, 
 on every occasion of a demand for silver, this demand falls 
 on a commodity which, regard alone being had to quantity? 
 is in reality, when compared with gold, extremely abundant ; 
 
 * See Heron de la Villefosse, and Humboldt, and the evidence 
 given by Mr. Allen to the Bullion Committee.
 
 303 
 
 but regard being had to value, as dependent on quantity, 
 woidd, wlien compared with gold, appear to be extremely 
 dear. 
 
 Now let us reduce what we have said to more precise 
 terms. Take it then that the existing quantity of gold is, 
 when compared with the existing quantity of silver, as 1 to 
 50 ; while the relative value between the two metals is as 1 
 to 15 ; and it will follow, that while the total quantity of 
 gold that exists is, when compared with the total quantity of 
 silver that exists, as 1 to 50, the total value of the gold 
 that exists, when compared with the total value of the silver 
 that exists, will be as 15 to 50, or as 1 to 3^. And then the 
 deduction is easy ; for as the total value of the silver is much 
 greater than the total value of the gold, and that the total 
 quantity of silver, with relation to the total quantity of gold, 
 is beyond all comparison still greater ; and that, therefore, 
 (and this Avhether with relation to quantity or value) it must 
 at all times be much easier to satisfy any given demand for 
 silver, than to satisfy the same demand for gold ; so is it of 
 plain and undeniable consequence, that every extra demand 
 for gold must have a much greater tendency to raise the 
 price of gold, than the same demand for silver can have a 
 tendency to raise the price of silver. And, therefore, what- 
 ever the averao;e relative value between gold and silver 
 throughout a long period of time, it is quite certain that 
 gold (for the reasons we have stated), being easily operated 
 upon, is liable to sudden fluctuations, and is therefore a 
 much more variable measure of value than silver. 
 
 This Is my opinion on the subject, and it certainly is sup- 
 ported by facts; for though (as we have had frequent 
 occasion to remark) the real relative value between gold and 
 silver is as nearly as possible the same as it was forty years 
 ago; and though, again, all the variations that have taken 
 place during this period, when reduced to an average, are 
 so trifling as to be undeserving of attention ; yet at different 
 periods the fluctuations in the price of gold have been very 
 considerable. In Holland, during the late war, the price of
 
 304 
 
 gold has sometimes advanced 3 or 4 per cent, in the course 
 of a few weeks ; while all this time the prices of other com- 
 modities, when measured by silver, remained unchanged. 
 Again, at the period when the French territory was evacu- 
 ated by the allied armies, there was a pretty considerable 
 agio on gold, in consequence of a great demand for this 
 metal for Russia ; and whenever there is a demand for gold 
 in France to be exported to England, there is immediately 
 an agio on gold, and the extent of the agio is in proportion 
 to the demand. 
 
 - It being then mathematically certain, and as derived from 
 the very nature of things, that gold is a more variable 
 measure of value than silver, and every fact tending to 
 prove the truth of the proposition, it will naturally follow, 
 that if in any country gold alone, to the exclusion of silver, 
 should be the standard of value, that upon every sudden 
 (though temporary) demand for gold, all those who have 
 engagements to acquit will be injured, and all the excess in 
 price, which they will be obliged to pay in order to obtain 
 gold, will pass into the pockets of their creditors. Whereas, 
 if the law had left them the alternative to pay either in gold 
 or silver, the position of both the debtor and the creditor 
 would have remained unchanged ; because as between silver 
 and all other productions (to the exclusion of gold) there 
 would be no alteration : but as between gold and every other 
 production (silver included) the alteration would be con- 
 siderable. 
 
 Now let us look at the other side of the question, and then 
 I believe we shall find that those who contend for the greater 
 accuracy of gold as a measure of value, do not pretend to 
 found their opinion on any fact that either has or does exist, 
 but they simply speculate on a fact which they suppose will 
 exist hereafter ; that is, they say that new silver mines may 
 be discovered, or that by the use of additional and more per- 
 fect machinery, the mines which already exist may be ren- 
 dered more productive, and worked at less expense; and then 
 they infer, that the value of silver, by an increase in its quan-
 
 305 
 
 tity, and by a diminution in the expense of working the mines, 
 would decline, while the value of gold would still remain 
 tationary. To this I reply : 
 
 1. Tliat the probability that new silver mines may be dis- 
 covered, is balanced by the probability that new gold mines, 
 or new Terreins (Talluvion, may also be discovered. And 
 here it is not even requisite that the probability should be 
 equal; for the present proportion between gold and silver, as 
 to quantity, being as about 1 to 50, it would be quite suffi- 
 cient in order to maintain this proportion, that for every ad- 
 ditional 50 pounds of silver, added to the common stock, 
 there should only be added, one pound of gold. 
 
 2. That all, or nearly all, the silver mines in South America, 
 are auriferous, and contain gold, which is so completely mixed 
 with the silver, that it can only be separated from it by a 
 distinct and peculiar process ;* and therefore to increase the 
 quantity of silver, either by the discovery of new mines, or 
 by rendering those which already exist more productive, is 
 necessai'ily to increase the quantity of gold. 
 
 3. That to increase the supply of silver while the supply 
 of gold remains stationary, is not to render gold less variable, 
 or even to enable it to maintain its present supposed greater 
 uniformity of value ; because this is to increase that dispro- 
 portion between the quantity of gold and silver which is 
 already too great, and which, having no affinity or connection 
 w^th value, is the occasion, that gold being easily acted upon, 
 is liable to fluctuations of price. And, therefore, the true 
 way to render gold less variable, is not to increase the supply 
 of silver, but to increase the supply of gold. And though 
 I will grant, that this might possibly (though even here I 
 am in doubt) reduce the exchangeable value of gold for the 
 moment, yet I have no doubt that its future value would 
 thereby be rendered much more permanent. 
 
 4. That to increase the su])ply of silver will not necessarily 
 
 * Sc-c Iluiiiboldt.
 
 306 
 
 diminish the value of silver. The countries in which the 
 mines are situated, are improving in commerce and civiliza- 
 tion ; the whole world is making rapid advances towards 
 improvement ; a greater supply of silver will therefore be 
 required, and therefore a greater quantity may be produced 
 and sent to market without occasioning a reduction of price ; 
 and this is not theory but fact. The produce of the mines 
 of South America, since their first discovery, has increased 
 considerably ; these mines have been most productive within 
 what may be called a recent date, that is, from 1790 to 1810;* 
 and yet, I believe, that silver has not declined ; certainly not 
 as compared with gold, and probably not as compared with 
 other commodities. And, therefore, if shortly after the dis- 
 covery and conquest of South America, the influx of the 
 precious metals into Europe, had so material an influence in 
 raising the prices of commodities, this is to be attributed to 
 the narrow space within which commerce and manufactures 
 were then confined, and to the scarcity of commodities ; that 
 is, to the paucity of every other equivalent when compared 
 with gold and silver. 
 
 As the result of the whole, it therefore appears, that if 
 we were to take all the subtile fine spun speculations of the 
 advocates for a gold standard, as plain absolute matters of 
 fact, their cause would not be advanced ; and that gold, so 
 far from being a more accurate measure of value than silver, 
 would, as compared with silver, be a still less accurate mea- 
 sure of value, and hable to still greater fluctuations than at 
 present. 
 
 For the rest, (and except by way of amusement), I am 
 quite sure that the whole matter is not deserving a single 
 moment's consideration ; and that it is of no more conse- 
 quence, that either gold or silver should vary when compared 
 with other productions, than that these otlier productions 
 
 *. See Humboldt, and the Statement of Jacob, referred to by 
 Mr. Tookc.
 
 307 
 
 should vary when compared with gold and silver ; and as no 
 means ever yet have, or can be devised, to prevent the one, 
 so is it in vain to expect, that means should be discovered to 
 prevent the other. And as to the variations in either gold or 
 silver, when compared with one another, these are of still less 
 consequence. The great point is, that all or the greater part 
 of things should be cheap ; and (always dependent on this 
 principle) their relative value, either when compared with 
 gold or silver, or with one another, is of very little import- 
 ance. Without real absolute value, there can be no value of 
 relation or proportion ; and as the proportion between any 
 two or more quantities must result from this, that each 
 quantity is essentially itself and no other ; so must the rela- 
 tive value between different things result from the real abso- 
 lute value of each ; and it is this absolute value which alone 
 is of moment; and though gold, in consequence of an 
 increase in its real value, (increased difficulty of production), 
 should be twice as dear as at present, it would still be a pure 
 unmixed blessing that corn (whatever its relation to other 
 things) should be twice as cheap. 
 
 X 2
 
 APPENDIX III. 
 
 I HAVE treated very largely of the defects in our metallic 
 currency, as arising from the exclusion of silver from the 
 Mint ; and I have suggested various remedies ; but all these 
 remedies (as the reader will perceive) are dependent on the 
 principle of calling in the present silver currency, and sub- 
 stituting, in lieu thereof, silver money coined at the rate of 
 62s. to the pound. 
 
 It will then be asked, can we not dispense with the ne- 
 cessity of calling in the present silver currency ? that is, can 
 there not be a scheme devised, which shall leave the present 
 silver currency untouched, still allowing it to be a legal 
 tender to the extent of only forty shillings; and then to coin 
 other silver money which shall be a legal tender in all pay- 
 ments ? This is also practicable, and may be accomplished 
 by coining pieces of silver money at 5s. 2d. per ounce, free 
 of all seignorage and expense, of the value of six or seven 
 shillings, and which silver money shall be a legal tender in 
 all payments. 
 
 Another remedy would be to call in merely all the crown 
 pieces at present in circulation, and to issue other crown 
 pieces coined at the rate of 5<y. 2d. per ounce, free of seignor- 
 age and expense, and which should be a legal tender in all 
 payments. 
 
 And, therefore, without interfering at all, or to a very 
 trifling extent, with our present silver currency, a silver cur- 
 rency may be introduced which shall accord exactly with the 
 ancient standard of the country, and be a legal tender in all 
 payments. But though this would go to the removal of the 
 great defect in our metallic system, (the exclusion of silver
 
 309 
 
 from the Mint), yet it is evident that a plan of this nature 
 is not free from great and serious objections. 
 
 1. We shall have two sorts of silver money in circulation ; 
 one, of which the denominative and the real value will be 
 alike ; and the other, in which the real value will differ from 
 the denominative; and this must eventually lead to con- 
 fusion. 
 
 2. On all the silver money below the denominative value 
 of Is., 6*., or 5s., the government will gain a seignorage of 
 about 6^ per cent. ; and, as if no seignorage existed, the 
 price of silver bullion would seldom or never exceed the 
 Mint price of 5s. 2d. per ounce, so will there always be a 
 temptation held out to the government to purchase silver 
 bullion, and coin it at 66,?. to the pound, by which it would 
 gain the seignorage, but the quantity of inferior silver money 
 would thereby be increased. 
 
 3. Inferior silver money coined at the rate of QQs. to the 
 pound, being a legal tender to any amount, in all the British 
 colonies, and part of the money coined here upon this prin- 
 ciple, and sent to the colonies, having already returned ; 
 and as this will probably be the fate of all that has been sent, 
 or may be sent for the future, so if the government should 
 continually proceed in this manner, and in proportion as sil- 
 ver becomes scarce in the colonies (in consequence of its 
 being returned to this country) coin and send out a fresh 
 supply ; so will there at last, be so large a quantity of this 
 inferior silver currency at home, that the good silver money 
 would infallibly be driven out of circulation, and the stand- 
 ard of the country would be altered. 
 
 This is my opinion ; and though either of the plans I now 
 suggest would go to the removal of the great and serious 
 defect in our present system (the exclusion of silver from 
 the Mint), yet they might eventually be productive of other 
 consequences. But to call in the whole of the present silver 
 money, is free from every objection ; the remedy is effectual, 
 all our .silver money would be coined on one uniform prin-
 
 310 
 
 ciple, and the ancient standard and system of the country 
 would be restored. 
 
 But not only would the plan alluded to be objectionable, 
 but to a certain extent it would also not be necessary ; for if 
 the present silver currency is to remain in circulation, the 
 only other defect in our system is the exclusion of silver from 
 the home-market, and as a tender either in the discharge of 
 debts, or for the purchase of commodities : and this would 
 to a very great extent be removed, by the institution of a 
 Bank, or Banks of deposit for silver bullion ; the next thing 
 to be done, is to pass a law that no more silver should be 
 coined on the present principle of 66s. to the pound, either 
 for this country, or the colonies ; after this there will be no 
 harm in calling in the present crown pieces, and substituting 
 others coined at 5s. 2c?. per ounce. And then we may pro- 
 ceed gradually, if we please, to call in the whole of the pre- 
 sent silver currency, which is a great blemish in our system ; 
 because, by declaring 20*. in this silver money to be equiva- 
 lent in value to a gold sovereign, it declares that to be truth 
 which is a notorious falsehood. 
 
 THE END.
 
 ERRATA. 
 
 Page 17, fourteenth line from top — instead of " proposi- 
 tions", read "proportions". 
 44, fifth line from ^op— instead of « ^1,779,635", 
 read « =£'17,796,035".
 
 LOJNDON: 
 PRINTED BY JAMES BULLOCK, LOMBARD STREET, WHITEFRIARS. 
 
 ^