' ^ff .? Hiaa THE UNIVERSITY OF ILLINOIS UBRARY 332. v.\0 ^ ' LIBRARY OF THE UNIVERSITY OF ILLINOIS observes Mr. Bosan- quet, there was a profit on the export of gold from hence to Hamburgh of 5^ per cent.; it fol- lows that at 1044 (the prices in Hamburgh June, July, August and September, 1809), and 28 J. there was a profit of 12^ per cent.; or, de- ducting the expences of conveyance, that gold, if bought here at 4/. 12*. per ounce, was a cheaper remittance by 5i per cent, than a bill at the current exchange." As I have already shewn that when the exchange was 29j and the price of gold in Hamburgh 101, gold was a dearer remittance than by bill by Q^ per cent.; it follows that at 28*. and 104^, it was only cheaper by 4|- per cent. These facts prove that in June, July, August, and September, 1809, whilst the exchange was at Hamburgh 28*. and gold 104^:, the real ex- change was in favour of Hamburgh ; whilst in the spring of 1810 it was so much less fa- vourable, that it vv^ould not cover the expences attending the importation of gold. As for the rise of gold in Hamburgh with an invariable exchange, it is what would have been naturally expected if there had been a corre- sponding rise in the price of gold here. In proportion ( «9 ) proportion as the English currency becomes de- preciated, as compared with gold, will it become worth fewer of the schillings of Hamburgh, un- less a rise in the value of gold at Hamburgh should counteract the depreciation, by making a gold pound sterling more valuable. The exchanges again would partake in all the variations in the value of a depreciated pound sterling, whilst the price of gold con- tinued invariable at Hamburgh. " It appears," says Mr. Bosanquet, " by the return from the Bullion-office at the Bank, No. 7 and 8 in the Appendix to the Report, that the total amount of gold bullion imported and deposited in the Bullion-office in 1809 amount- ed in value to only . . £. 520,225 That during the same period, the quantity of gold delivered out of the Bullion-office amounted in value to . . . . £. 805,568 of which only 592/. was not exportable. " The amount of the importation is therefore such as, when compared with the amount of ex- ports and imports, and that of the circulating medium, tojustify the assumption of comparative scarcity; and the excess of delivery beyond the importation is sufficient evidence of unusual demand." The ( 60 ) The fact itself here insisted on would be of little importance in the question which we are now discussing; but it appears to me that Mr. Bosanquet is not warranted in his conclusions by the statements in the accounts to which he refers. The excess of delivery beyond the importation is not any evidence of unusual demand, as it is accounted for by the following note to No. 7> from which the larger sum is extracted. " Note, — The above is the amount of gold which has passed the Bullion-office in the time above named, as sales and pur- chases by private dealers, but which may ha*ve passed more than once the Bullion- office, having no information generally from whence the seller procures his gold." The importations stated in No. 8 are actually deposited by importers from abroad, and can only be received once. Besides this objection, these accounts were not fair subjects of com- parison. No. 7 being made up to the 18th April, 1810; No. 8 to 30th March, 1810. " The point of view in which these facts are important," continues Mr. Bosanquet, " is that which places the amount of gold imported or delivered in line of comparison with the amount of paper currency supposed to be depreciated on ( 61 ) on the evidence of the increased price of bul- lion. The advance of 12*. per oz. on the total quantity of gold delivered in one year, about 200,000 ounces, amounts to 120 or 130,000/.; and this is assumed as an unequivocal symptom of a depreciation of 12 or 13 per cent, on SO or 40 millions of paper, the probable amount of our paper currency." " We may soon expect to be told that the value of Bank notes has in- creased, because the paper on which they are made is somewhat dearer than heretofore." The value of a Bank note is ascertained, not by the number of transactions which may take place in the purchase or sale of gold, but by tlie actual comparative value of the note with the value of the coin for which it professes to be a substitute. As it is allowed that a Government Bank might force a circulation of paper, although our Bank cannot^ how would Mr. Bosanquet cal- culate the depreciation of such forced notes, but by a comparison of their value with the value of bullion ? Would he think it necessary to enquire whether 100 ounces only had been the amount transacted in the year, or whether it had been a million.^ If gold be not a test by which to estimate depreciation, what is ? Whilst it is a criminal offence to buy guineas at a premium, it ( G2 ) it does not seem probable that we can possess the only test which would satisfy these gentle- men, namely, two prices for commodities, a price in guineas, and another in Bank notes. They might, even in that case, contend, that it was the scarcity of gold abroad which had raised the value of the guinea. SECTION IV. Failure ascribed to Mr. Locke's Theory relative to the Recoinage in l6g6. It is correctly stated by Mr. Bosanquet that Mr. Locke's theory was similar to that now held. He did most certainly maintain that an ounce of silver in coin could not be less valua- ble than an ounce of siver bullion of the same standard. And the Committee now maintain that in the sound state of the British currency an ounce of gold bullion cannot, for any length of time, be of more value than 3l. 17*. 10*^., or an ounce of gold coin: but neither of these opinions have been yet found incorrect. The effects expected from the recoinage in King William's reign failed of being realised, not because Mr. Locke's theory was followed, but because it was not followed. It did not fail, because ( 65 ) because he could not be convinced that " the value of silver bullion was become greater than the standard or mint price" {that being impos- sible if estimated in silver coin), but because his suggestions were not adopted. It was proposed by Mr. Locke that silver coin should be the only fixed legal standard of currency, and that guineas should pass current in all payments at their bullion value. Under such a system, a guinea would have partaken of all the variations in the relative value of gold and silver; it might at one time have been worth 20 shillings, and at another 25; but con- trary to Mr. Locke's principle, the value of the guinea was first fixed at 22 shillings, and af- terwards at 21 shillings and sixpence, whilst its value as bullion was considerably below it *. At the same time the silver coin, for the very reason that gold was rated too high, passed in currency at a value less than its bullion value. It was to be expected, therefore, that the gold coin would be retained, and that the silver coin * It may be said, that although guineas were by law prohi- bited from passing at more than 2ls.6d., they were not declar- ed a legal tender till 17J7; and, therefore, that no creditor was obliged to accept of thera in discharge of a debt at that rate. But if Government received them in the payment of taxes at such value, the effects would be nearly the same as if they had by act of Parliament been made a legal tender. would ( 64 ) would disappear from circulation. If the value of the guinea in currency had been lowered to its true market value in silver, the exportation of the silver coin would immediately have ceased, and, in fact, this was the remedy which was at last adopted. The matter being referred to Sir I. Newton in 1717, then master of the Mint, he reported " the principal cause of the export- ation of the silver coin was, that a guinea, which then passed for 2ls, 6d., was generally worth no more than QOs. 8d., according to the relative value of gold to silver at the market, though its value occasionally varied." " He then suggested, that 6d. should be taken off from the value of the guinea, in order to diminish the temptation to export and melt down the silver coin, acknow- ledging, however, that lOd. or l^d. ought to be taken from the guinea, in order that gold might bear the same proportion with silver money in England, which it ought to do by the course of trade and exchange in Europe*." The same effects would have followed without the inter- vention of Government, if the relative value of gold and silver in the market had so varied as to have made them agree with the Mint pro- portions. Lord Liverpool, in speaking of the recoinage * Lord LiverpooPs letter to the King. in ( 65 ) in 1696, is of a very different opinion from Mr. Bosanquet ;— so far from considering that mea- sure as having " subjected the nation to disap- pointment and inconvenience, under which we still labour, and to an unprofitable expence of nearly three millions sterling," he observes, " that great as this charge was, the losses which the Government as well as the people of this kingdom continued daily to sufter till the re- coinage was completed, justified almost any expence which might be incurred for their relief." Mr. Bosanquet is not quite correct in saying, page 34, that the price of silver has never been under the Mint price since the recoinage in the reign of King William. On a reference to Mr. Mushet's tables, it appears that it was as low as 5s. Id. in 1793 and 1794, and in 1798 it fell to 5s., which was the occasion of the law for pro- hibiting the coinage of silver which I have al- ready noticed*. * Since this was sent to the press I have seen the second edition of Mr. Bosanquet's work, in which this inaccuracy is <:orrected. CHAP ( 66 ) CHAPTER IV. Mr, Bosanquefs Objections to the Statement, that the Balance of Payments has been in Favour of Great Britain, eocamined. Having considered all those points deemed so important by Mr. Bosanquet in contradiction of the opinion of the Committee, " that it is by a comparison of the market and Mint value of bullion, that the fact of the depreciation of the currency can be estimated ;" and having, I trust, made it evident that there is no other test singly, by which we are enabled to judge of the sound or unsound state of our paper cur- rency, I shall proceed to the consideration of the next disputed position of the Bullion Com- mittee ; namel}^ " That so far as any inference is to be drawn from Custom House returns of exports and imports, the state of the exchanges ought to be peculiarly favourable." Mr. Bosanquet has been at the trouble of consulting numerous documents to prove that the ( 67 ) the Committee have not only committed an error to the amount of 7,500,000/. in their esti- mate of the balance of exports, but other errors to a still greater amount ; and that, in fact, so far from their opinion being well founded, that the state of the exchange ought to have been favourable to this country during the past year, the actual amount of the balance of payments to the continent had been unusually great. As I am desirous only of defending the prin- ciples of the Committee, and as these facts are by no means essential to those principles, I shall not enter into any examination of the correct- ness either of the statements of the Committee, or of those of Mr. Bosanquet, but will at once concede to him the facts, difficult as he would find it to prove all of them, for which he contends. That the balance of payments has been against this country cannot, I conceive, admit of dispute. The state of the real exchange suf- ficiently proves it, as that infallibly indicates from which country bullion is passing. It would, however, have been of some satisfaction to those who are desirous of clearly understand- ing this difficult subject, if Mr. Bosanquet had acquainted us with the means which we pos- sessed of paying the very large unfavourable balance for which he contends. Does he ima- F 2 srine t 68 ) gine that it das actually been discbauged with our own hoard of gold ? Do we usually keejv unemployed su^b a large amount of bullion that we can afford to pay such balances year after year ? As w^e have no mines of our own, if we do not actually possess it, we must purchase it from foreign countries ; but Bank notes will be , useless for such purpose. If the price of gold in Bank notes be 4/. per ounce, or 10/. per ounce, we shall not obtain the slightest addition to our quantity of bullion, as it can only be procured by the exportation of goods. If we obtain it from America, for example, it is with goods we must purchase it. In that case, on a view of the whole trade of the country, we have dis- charged a debt in Europe by the exportation of goods to some other part of the world, and the balance of payments, however large it may be, must ultimately be paid by the produce of the labour of the people of this country. Bills of exchange never discharge a debt from one country to another; they enable a creditor of England to receive, at the place where he is resident, a sum of monej^ from a debtor to Eng- land ; they effect a transfer of a debt, but do not discharge it. That a demand for gold (if it could be allowed that our creditor would accept ( 69 ) accept nothing but gold) might occasion a rise in its value no one denies. If, therefore, goods had become exceedingly cheap; it would have been the natural effect of such a cause. But how is any rise in Its price in Bank notes to procure it, even if we suppose it hoarded in England ? The seller is not to be deluded with an in- crease of nominal value ; it will be to him of little importance whether he sells his gold at 3/. 17^. lOldy or at 4/. \^s. per ounce, provided either of those sums will procure him the com- modities for which he intends ultimately to ex- change his gold. If then Bank notes to the amount of 3/. 17*. ^O^cL be rendered of equal yahie in procuring the commodities which he seeks to purchase, with 4/. 12^., as much gold will be procuretl at one price as at the other. Now €an it be denied, that by reducing the amount of Bank notes their value will be increased? If so, how can the reduction of Bank notes prevent us from obtaining the same amount of gold both at home and abroad to discharge our fo- reign debt, as we now obtain by a nominal and fictitious price ? " At a moment," says Mr. Bosanquet, " when we were compelled to receive corn, even from our enemy^ without the slightest stipulation in fa- vour ( 70 ) vour of our own manufacturer, and to pay neu- trals for bringing it, Mr. Ricarclo tells us, that the export of bullion and merchandize, in pay- ment of the corn we may import, resolves itself entirely into a question of interest, and that, if we give corn in exchange for goods, it must be from choice, not necessity. Whilst providing against famine, he t>ells us, that we should not import more goods than we export, unless we had a redundancy of currency." Mr. Bosanquet speaks as if the nation collec- tively, as one body, imported corn and exported gold, and that it was compelled by hunger so to do, not reflecting that the importation of corn, even under the case supposed, is the act of indi- viduals, and governed by the same motives as all other branches of trade. What is the degree of compulsion which is employed to make us receive corn from our enemy ? I suppose no other than the want of that commodity whicli makes it an advantageous article of import ; but if it be a voluntary, as it most certainly is, and not a compulsory bargain between the two nations, I do still maintain that gold would not, even if famine raged amongst us, be given to France in exchange for corn, unless the export- ation of gold was attended with advantage to the exporter, unless he could sell corn in Eng- land ( 71 ) land for more gold than lie was obliged to give for the purchase of it. Would Mr. Bosanquet, would any mer- chant he knows, import corn for gold on any other terms ? If no importer would, how could the corn be introduced into the country, unless gold or some other commodity were cheaper here ? As far as those two commodities are concerned, do not these transactions as certainly indicate that gold is dearer in France, as that corn is dearer in England ? Seeing nothing in Mr. Bosanquet's statement to induce me to change my opinion, I must continue to think that it is interest, and in- terest alone, which determines the exportation of gold, in the same manner as it regulates the exportation of all other commodities. Mr. Bo- sanquet would have done well, before he had deemed this opinion so extravagant, to have used something like argument to prove it so; and he would not have hurt his cause, if, even in the year 1810, he had explained his reason for supporting a principle advanced by Mr. Thornton in 1802, the correctness of which was questioned in 1 -Og. Bullion will not be exported unless we have pre- viously imported it for such purpose,orunlessfrom some circumstanceK in our internal circulation It ( 72 it has been rendered cheap and less useful to us. If Milan d£*crees, embargoes, non-intercourse acts, &c. affect the exportation of commodities, they also affect their importation, as no countrj'' can long continue to buy unless it can also sell ; and least of all England, who by the abun- dance of her paper has driven from her circu- lation every vestige of the precious metals. " If the currency be depreciated below the value of gold," Mr. Bosanquet tells us, " it is so positively, not relatively, and all exchanges must equally feel the influence of the deprecia- tion." (Page ^0.) Most true ; and therefore if Mr. Bosanquet could have shewn that with any one country in the wprld, whose currency is not debased nor depreciated, the exchange had been favourable to England, he would have success- fully controverted the opinion of the Commit- tee. Some able writers on this subject have lately taken, I think, a mistaken view of the exporta- tion of money, and of the eflects produced on the price of bullion by an increase of currency through paper circulation. Mr. Blake observes, " All writers upon the subject of political economj^ that I have met with, seem to be persuaded that when the rate of exchange has deviated from par beyond the expeuces ( 7J ) expences of the transit of bullion, bullion will immediately pass ; and the error has arisen from not sufficiently distinguishing the effects of 'd real and a nominal exchange;" and many pages are employed in proving, that on every addition to the paper circulation, even when a great part of the currency consists of the precious metals, the price of bullion will be raised in the same proportion as other commodities ; and as the foreign exchange will be nominally depressed in the same degree, no advantage will arise from the exportation of bullion. The same opinion is maintained by Mr. Huskisson, page 27. " If the circulation of a country were sup- plied partly by gold and partly by paper, and the amount of that circulation were doubled by an augmentation of that paper, the effect upon prices at home would be the same as in the former case," (a rise in the price of commodi- ties). " But gold not becoming by this augment- ation of currency more abundant in such a country than in other parts of the world, as a commodity^ its relative value to other commodi- ties would remain unaltered ; as a commodity also, its price would rise in the same proportion as that of other commodities, although, in the state of coin, of which the denomination is fixed by ( 74 ) by law, it could only pass current according to that denomination. " When paper is thus augmented in any coun- try, the exportation of the gold coin, therefore, will take place ; not because gold, as a commo- dity^ is become more abundant and less valua- ble with reference to other commodities in such a country j but, from the circumstance of its value as currency remaining the same, while its price in that currency is increased in common with the prices of all other commodities." I should perfectly agree with these writers, that the effects on the value of gold as an exportable commodity would be as they describe, provided the circulation consisted wholly of paper, but no rise would take place in the price of bullion, in consequence of an addition of paper cur- rency, whilst the currency was either wholly metallic, or consisted partly of gold and partly of paper. If an addition be made to a currency consist- ing partly of gold and partly of paper, by an increase of paper currency the value of the whole currency would be diminished, or, in other words, the prices of commodities would rise, estimated either in gold coin or in paper cur- rency. The same commodity would purchase, after ( 75 ) after the increase of paper, a greater number of ounces of gold coin, because it would exchange for a greater quantity of money. But these gentlemen do not dispute the fact of the con- vertibility of coin into bullion, in spite of the law to prevent it. Does it not follow, therefore, that the value of gold in coin, and the value of gold in bullion, would speedily approach a per- fect eq -ality ? If then a commodity would sell in consequence of the issue of paper for more gold coin, it would also sell for more gold bul- lion. It cannot therefore be correct to say that the relative value of gold bullion and commodi- ties would be the same after as before the in- crease of paper. The diminution in the value of gold, as com- pared with commodities, in consequence of the issues of paper in a country where gold forms part of the circulation, is, in the first instance, confined to that country only. If such country were insulated, and had no commerce whatever with any other country, this diminution in the value of gold would continue till the demand for gold for its manufactures had withdrawn the whole of its coin from circulation, and not till then would there be any visible depreciation in the value of paper as compared with gold, what- ever { 76 ) ever the amount of paper might be which was in circulation. As soon as the gold had been wholly with- drawn, the demand for manufactures still con- tinuing, gold would rise above the value of pa- per, and would soon obtain that relative value to other commodities which subsisted before any addition had been made to the circulation by the issues of paper. The mines would then supply the quantity of gold required, and the paper currency would continue to be permanently depreciated. During this interval the gold mines of such country, if it possessed any, could not be work- ed, because of the low value of gold, which would have reduced the profits on capital employed in the mines below the level of the profits of other mercantile concerns. As soon as this equality of profit were established, the supply of gold would be as regular as before. These would be the consequences of a great issue of paper in a country having no intercourse with any other. But if the country supposed, as is the case with England, had intercourse with all other countries, any excess of her currency would be counteracted by an exportation of specie, and if that excess did not exceed the amount of coin in circulationi which could be easily collected by ( 77 ) by those who evade the law, no depreciation of the currency would take place. Suppose England to have 1000 ounces of gold in the state of bullion, and 1000 ounces in the state of coin, whilst her exchange with foreign countries was at par ; that is to say, whilst the value of gold abroad was precisely the same as here, and therefore could be neither advantage- ously exported nor imported. Suppose, too, that the Bank were at such time to issue notes to an amount which should repre- sent 1000 ounces more of gold, and that they were not exchangeable for specie. If her bullion retained the same value after as before the issue of paper (which is the point contended for), how could a single guinea be exported ? Who would be at the trouble and risk of sending guineas to the continent to be sold therefor their value as bullion, while the value of bnllion continued here as high as before, and consequently as high as the price abroad ? Would not the coin be melted and sold as bullion at home, till the value of bullion had so much diminished in its relative value to the bullion of other countries, and therefore to the relative value of commodi- ties here, as to pay the expences of transporta- tion ; or, in other words, till the exchange had fallen to the price at which it would repay such expences ? ( 78 ) expences? At that price the whole 1000 ounces would go at once, or if any part were retained in circulation, it would not be of less value than an equal weight of gold bullion. I am all along considering the law as having no effect in pre- venting exportation, and if it be contended that the law could be strictly executed, that argu- ment would be equally applicable if the addi- tion to the currency had been made in gold coin, and not in paper currency. It appears, therefore, evident, first, that by the addition of paper to a currency consisting partly of gold and partly of paper, gold bul- lion will not necessarily rise in the same degree as other commodities; and, secondly, that such addition will cause depression not in the nomi- nal but in the real exchange, and therefore that gold will be exported. But to return to Mr. Bosanquet. He observes, " that the three propositions," viz. those on which I have been commenting, " appear to have been brought forward by the Committee as well as by the authors on whose theories the report is founded, to induce the admission of the depre- ciation of the paper currency of this country as the necessary consequence of the impossibility of accounting for the depression of the ex- changes and the increased price of bullion m any ( 79 ) any other way. They may be termed negative arguments." Now, as far as I, who am one of the authors arraigned, am concerned, Mr. Bosanquet is in- correct: tlie third of these propositions was not on any occasion brought forward by me. The fact of the balance of payments being for or against this country could be of little conse- quence, in my estimation, to the proof of the theory which I maintain. Whether a part of our exports or a part of our imports consisted of gold cannot in the least affect this question, it is abundantly certain that our currency is nei- ther by ourselves nor by foreigners estimated at its bullion value. And why should our currency be degraded below such value more than those of America, France, Hamburgh, Holland, &c. ? The answer is, because neither of those coun- tries have a paper currency not convertible info specie at the will of the holder. CHAP. ( 80 ) CHAPTER V. il/r. Bosanquefs Argumetit to prove that the Bank of England has not the Pozver of forcing the Circulation of Bank Notes — considered. The fourth proposition is what now presents itself for discussion : " That the Bank, during the restriction, pos- sesses exclusively the power of limiting the cir- culation of Bank notes." It is difficult to determine whether Mr. Bosan- quet thinks that even a forced paper circulation could have the effect of lowering the exchange; so confidently is it asserted hy him that there is no connexion between the exchanges and the amount of Bank notes. If the Bank were to be- come truly a government Bank, in the sense in which Mr. Bosanquet somewhere uses that term; if they were to advance all the money requisite for the service of the year ; if from twenty mil- lions they were to raise the amount of their notes to fifty millions, would not such a Bank be justly said to force a circulation of paper ? and would not the effect of such a forced circulation of paper be, that their notes would be depreciated, that the price of bullion would rise and the foreign exchanges fall ? Would not these effects take place C 81 ) place although Government were to guarantee the notes of the Bank, and the final payment of them should by no one be doubted ? Would not the abundance of the circulation alone produce depreciation ? Or is it to be maintained that no abundance of paper money, provided its final redemption be certain, can cause depreciation ? A proposition so extravagant will hardly, I think, be supported, and it must therefore be admitted that depreciation may arise from the abundance of notes alone, however great might be the funds of those who were the issuers of them. As these symptoms, then, which accom- pany a forced paper currency are, at this mo- ment, too glaring to be denied, as they cannot be accounted for in any other way either by theory or by an appeal to experience, are we not justified in our suspicions that the Bank of England, as at present constituted, is not so de- void of the power of forcing a circulation as their friends would have us believe ? It is not intended by the words forced circulation to ac- cuse the Bank of having departed from those cautions which have usually accompanied the issue of their paper ; it is meant only that the restriction bill enables them to keep in circula- tion an amount of notes (allowance made for the coin that would then be in circulation) greater o than ( 82 ) than they could maintain but for that measure. It is this surplus sum which 1 consider as pro- ducing precisely the same effects as if it were forced on the public by a Government Bank. The plea that no more is issued than the wants of commerce require is of no weight ; because the sum required for such purpose cannot be defined. Commerce is insatiable in its demands, and the same portion of it may employ 10 mil- lions or 100 millions of circulating medium; the quantity depends wholly on its value. If the mines had been ten times more productive, ten times more money would the same commerce employ. This Mr. Bosanquet admits, but de- nies the analogy between the issues of the Bank and the produce of a new gold mine. On this subject Mr. Bosanquet makes the following observations. " Mr. Ricardo has assimilated the Bank of England during the restriction, so far as relates to the effects of its issues, to a gold mine, the produce of which being thrown into circulation, in addition to the circulating medium already sufficient, is an excess; and has the acknow- ledged effect of depreciating the value of the existing medium, or, in other words, of rais- ing the prices of commodities for which it is usually exchanged. But Mr. Ricardo has not stated ( 83 ) stated what is essential to the comparison, why it is that the discovery of a gold mine would produce this effect. It would produce it, be- cause the proprietors would issue it, for whatever services, without any engagement, to give an equal value for it again to the holders, or any wish, or any means, of calling back and anni- hilating that which they have issued. By de- grees, as the issues increase they exceed the wants of circulation ; gold produces no benefit to the holder as gold ; he cannot eat it, nor clothe himself with it ; to render it useful, he must ex- change it either for such things as are immedi- ately useful, or for such as produce revenue. The demand and consequently the prices of commodities and real properties measured in gold, increases; and will continue to increase as long as the mine continues to produce. And this effect will equally follow whether, under the circumstances I have supposed, the issue be gold from a mine or paper from a government-bank. All this I distinctly admit; but in all this state- ment, there is not one point of analogy to the issues of the Bank of England. " But the principle on which the Bank issues its notes is that of loan. Every note is issued at the requisition of some party, who becomes in- debted to the Bank for its amount, and gives se- curity to return this note, or another of equal G 2 value ( 84 ) value at a fixed and not remote period; paying an interest proportioned to the time allowed." Now supposing the gold mine to be actually the property of the Bank, even to be situated on their own premises, and that they procured the gold which it produced to be coined into guineas, and in lieu of issuing their notes when they discounted bills or lent money to Government that they is- sued nothing but guineas; could there be any other limit to their issues but the want of the further productiveness in their mine ? In what would the circumstances differ if the mine were the property of the king, of a company of mer- chants, or of a single individual? In that case Mr. Bosanquet admits that the value of money would fall, and I suppose he would also admit that it would fall in exact proportion to its in- crease. What would be done with the gold by the owner of the mine ? It must be either employed at interest by himself, or it would finally find its way into the hands of those who would so em- ploy it. This is its natural destination; it may pass through the hands of 100, or 1000 persons, but it could be employed in no other manner at last. Now if the mine should double the quantity of money, it would depress its value in the same proportion, and there wouldbe double the demand for it. A merchant who before required the loan of ( 85 ) of 10,000/. would now want 20,000/.; and it could be of little importance to him wiiether he conti- nued to borrow l0,000/. of the Bank, and 1 0,000/. of those with whom the money finally rested, or whether he borrowed the whole 20,000/. of the Bank. The analogy seems to me to be com- plete, and not to admit of dispute. The issues of paper not convertible are guided by the same principle, and will be attended with the same effects as if the Bank were the proprietor of the mine, and issued nothing but gold. However much gold may be increased, borrowers will in- crease to the same amount, in consequence of its depreciation ; and the same rule is equally true with respect to paper. If money be but depreciated sufficiently, there is no amount which may not be absorbed, and it would not make the slightest difference whether the Bank with their notes actually purchased the commo- dities themselves, or whether they discounted the bills of those who would so employ them. If it were granted to Mr. Bosanquet that a given sum, and no more, could be absorbed in the circulation, the effects he states would follow : but I deny that there would be a surplus seek- ing in vain for advantageous employment, and which, not being able to find it, would necessarily either return to the Bank in payment of a bill already ( 86 ) akeady discounted, or would prevent an appli- cation to them for an advance of money to tliat amount. If money, however abundantly issued, could retain its value, such might be the effects j but as, when once it is brought into circulation, de- preciation commences, the employment for the additional sum would retain it in the currency. Let us recur to the effect which would result from the establishment of a Bank of undoubted credit in a country where the circulation was wholly metallic. Such a Bank would discount bills or make ad- vances to government as oar Bank does; and if the principle now contended for by Mr. Bosan- quet be correct, their notes would necessarily re- turn on them as soon as issued; because the me- tallic currency being before sufficient for the commerce of the country, no additional quantity could be employed. — But this is contrary both to theory and experience. The issues of the Bank would, as they now do, not only depreciate the currency, but the value of bullion at the same time, as I have endeavoured to explain at page 73 ; this, again, would be the temptation to exportation, and the diminution of the: currency would make it regain its value. The Bank would issue more notes, and the same effects would ( 87 ) would follow; but in no case would tliere be such an excess as would induce any holder of notes to return them to the Bank in payment of loans, if the law against the exportation of mo- ney could be effectually executed. Money would be demanded because it could be pro- fitably exported, and not because it could not be absorbed in the circulation. But let us sup- pose a case in which money could not be profit- ably exported — Let us suppose all the countries of Europe to carry on their circulation by means of the precious metals, and that each were at the same moment to establish a Bank on the same principles as the Bank of England — Could they, or could they not, each add to the metallic circulation a certain portion of paper? and could or could they not permanently maintain that paper in circulation? If they could, the ques- tion is at an end, an addition might then be made to a circulation already sufficient, without occasioning the notes to return to the Bank in payment of bills due. If it is said they could not, then I appeal to experience, and ask for some explanation of the manner in which Bank notes were originally called into existence, and how they are permanently kept in circulation. I should find it laborious to follow up in all its bearings the analogy between the first esta- blishment ( 88 ) blishment of a Bank, the discovery of a mine, and the present situation of our Bank; but of this I am fully certain, that if the principle ad- vanced by the Bank Directors be correct, not a Bank note could ever have been permanently kept in circulation, nor would the discovery of the mines of America have added one guinea to the circulation of England. The additional gold would, according to this system, have found a circulation already adequate, and in which no more could be admitted. The refusal to discount any bills but those for bondjide transactions would be as little effectual in limiting the circulation ; because, though the directors should have the means of distinguish- ing such bills, which can by no means be al- lowed, a greater portion of paper currency might be called into circulation, not than the wants of commerce could employ, but greater than what could remain in the channel of cur- rency without depreciation. It is well known that the same thousand pounds may settle 20 bondjide transactions in one day. It may pay for a shipi the seller of a ship may pay with it his rope-maker; — he again may pay the Russian merchants for hemp, &c. &c. Now as each of these was 2i bond Jide transaction, a bill might have been drawn by each, and the Bank, by their ( «9 ) their rule, might discount them all; so that 20,000/. might be called into circulation to per- form those payments for which 1 000/. was equal. I am aware that the opinion of Dr. Smith, as quoted by Mr. Bosanquet, appears to favour his opinion ; but that able writer has in various passages of his work, and within a [ew pages of that from whence Mr. Bosanquet has quoted, declared that, " The whole paper money of every kind which can easily circulate in any country can never exceed the value of the gold and silver of which it supplies the place, or which (the commerce being supposed the same) would circulate there if there were no paper money" To this test we must not submit our currency. If at its present amount it consisted of gold and silver, no laws, however severe, could retain it in circulation ; a part would be melted and ex- ported till it was reduced to its just level. At that level it would be as impossible to force the exportation of it. In such case we should no longer hear of the balance of payments being against us, nor of the necessity of exporting gold in return for corn. That such would be the consequences cannot be doubted by those who are familiar with the writings of Dr. Smith. But if it should be otherwise, if the continent should ( 90 ) should adopt the almost impossible, absurd policy of wishing to buy more of that of which they already had too much, what evil consequences would ensue to us, even if our currency were reduced to the same level at which it stood before the discovery of America ? Would not this be a national gain ? inasmuch as the cir- culation of the same commerce being carried on with a smaller amount of gold, the balance might be profitably employed in procuring a return of more useful and more productive com- modities. And if the circulation of paper were reduced in the same proportion, would not the profits now gained by the Bank be enjoyed by those who can shew a much better title to them ? It is fortunate for the public that there should exist the disinclination to discount at the Bank which Mr. Bosanquet mentions, — as without some such check, it is impossible to say to what amount Bank notes might by this time have been multiplied. Indeed, to all those who have given the subject any consideration it is matter of surprise that our circulation has been con- fined within such moderate bounds, after know- ing the principles which the Bank Directors have avowed as their guide in regulating their issues. CHAP. ( 91 ) CHAPTER VI. Observations on the Principles of Seignorage. Dr. Smith, though favourable to a small seignor- age on the coin, was fully aware of the evils which might attend a large one. The limits, beyond which a seignorage cannot be advantageously extended, are the actual ex- pences incurred by the manufacturing of bullion into coin. If a seignorage exceeds these ex- pences, an advantage will accrue to false coiners by imitating the coins, although they should actually make them of their legal weight and standard ; but even in this case, as the addition of money to the circulation beyond the regular demands of commerce will diminish the value of that money, the trade of false coiners must cease when the value of the coin does not ex- ceed the value of bullion more than the actual expences of fabrication. If the public could be secured from such illegal additions to the circu- lating medium, there could be no seignorage so high which a government might not advan- tageously ( 92 ) tageously exact; as the coined money would, in the same degree, exceed the value of bullion. If the seignorage amounted to 10 per cent, bullion would necessarily be lO per cent, under the Mint price; and if it were 50 per cent., that also would the value of coin exceed the value of bullion. It appears then, that although a given weight of bullion can never exceed in value a given weight of coin, a given weight of coin may exceed in value a given weight of bullion by the whole expence of seignorage, however great that seignorage may be, provided that there was effectual security against the increase of money through the imitation of the coins by il- legal means. And it appears also, that if no such security could be given, the trade of the false coiner would cease as soon as he had added so much to the amount of the coin as to di- minish its value, on a comparison with bullion, to the actual expences incurred. That these principles are correct may be proved from the consideration of the circumstances which give value to a Bank note. A Bank note is of no more intrinsic value than the piece of paper on which it is made. It may be considered as a piece of money on which the seignorage is enormous, amounting to all its value ; yet if the public is sufficiently protected against the too ( 93 ) too great increase of such notes, either by the indiscretion of the issuers, or by the practices of false coiners or forgers, they must, in the ordi- nary operations of trade, retain their value. Whilst such money is kept within certain li- mits any value may be given to it as currency; 3i. 17*. 10^^. may be worth an ounce of gold bullion, the value at which it was originally issued, or it may be reduced to the value of half an ounce ; and if the Bank which issued had the exclusive privilege of procuring money to be coined at the Mint, 31. I7s. lO^d. of their notes might be rendered of equal value to 1,2, 5, or any number of ounces of gold bullion. The value of such money must depend wholly upon its quantity, and in the case supposed the Bank would not only have the power of limiting the amount of paper money, but of metallic mo- ney also. I have before endeavoured to show, that pre- viously to the establishment of banks the pre- cious metals, employed as money, were necessa- rily distributed amongst the different countries of the world in the proportion that their trade and payments required ; that whatever the va- lue of the bullion so employed for the purposes •f currency might be, the equal demands and necessities of all countries would prevent the quantity allotted to each from being either in- creased ( 94 ) creased or diminished, unless the proportions in the trade of countries should undergo some al- teration which should make a different division necessary ; that England or any other country might substitute paper instead of bullion for the uses of money, but that the value of such pa- per must be regulated by the amount of coin of its bullion value, which would have circulated had there been no paper. Under this point of view the paper currency of any particular country represents a certain weight of bullion which, her commerce and payments continuing the same, could neither be increased nor diminished ; SI. 17*. lO^d. of coin or paper currency might represent an ounce of gold bullion, or 4/. 1 3s. might, in con- sequence of some internal regulation, do the same ; but the actual amount of bullion so re- presented would, under the same circumstances of commerce and payments, be eternally the same. Suppose that England's share amounted to a million of ounces, if by a law which could be effectually executed a million and a half of ounces in coin could be forced or retained in cir- culation, by preventing its being melted or ex- ported, or if by means of a restriction bill the Bank should be enabled to maintain an amount ©f paper which should represent a million and a half ( 95 ) half of ounces of coined gold in circulation, such million and a half would be of no more va- lue in currency than a million of ounces; and consequently an ounce and a half of coined gold, or bank-notes which represented that amount, would purchase no more of any com- modity than an ounce of gold bullion. If, on the other hand. Government were to charge a seignorage of iO per cent, or if the issues of the Bank were to be exceedingly limited, whilst they had also the exclusive right of coining, so that the whole amount of their notes did not exceed what should represent at the mint price half a million of -^ounces of gold, that half million would^in currency pass for the same value as the million of ounces in one case, and the mil- lion and a half in the other did before. \ From these principles it results, that there can I exist no depreciation of money but from excess; 'however debased a coinage may become it will preserve its mint value, that is to say, it will pass in circulation for the intrinsic value of the bullion which it ought to contain, provided it be not in too great abundance. It is a mistaken theory, therefore, to suppose that guineas of 5 dvvts. and 8 grains cannot circulate with gui- neas of 5 dwts. or less. As they might be in such limited quantity that both the one and the other ( 96 ) other might actually pass in currency for a value equal to 5 dwts. 10 grains, there would be no temptation to Mdthdraw either from circula- tion ; there would be a real profit in retaining them. In practice, indeed, it would seldom occur that the heavier pieces would escape the melting pot, but it would arise wholly from the augmentation of such currency, either by the liberal issues of the Bank, or by the supply of false money which the arts of the false coiner would throw into circulation. Our silver currency now passes at a value in currency above its bullion value, because, not- withstanding the profit obtained by the counter- feiter, it has not yet been supplied in sufficient abundance to affect its value. It is on this principle too that the fact must be accounted for, that the price of bullion pre- viously to the recoinage in 16^6, did not rise so high as might have been expected from the then debased state of the currency ; the quantity had not been increased in the same proportion as the quality had been debased. It also follows from these principles, that in a country where gold is the measure of value, the price of gold bullion (where the law offers no restraint against exportation) can never exceed its mint price ; and that it can never faU ( 97 ) fail more below it than the expences of coinage ; and that these variations depend wholly on the supply of coin or paper currency being propor- tioned to the trade of the country, or, in other words, that nothing can raise the value of bullion even so high as the mint price but an excess of circulation. If, indeed, any power in the state have the privilege of increasing the paper cur- rency at pleasure, and be at the same time pro- tected from the payment of its notes, there is no other limit to the rise of the price of gold than the will of the issuers. CHAPTER VII. Mr. Bosanquefs Objections to the PropositioHy that the Circulation of the Bank of England regulates that of the Country Banks, consi- dered. The next proposition which Mr. Bosanquet attempts to disprove is that in which the Com- mittee give it as their opinion, " That the circu- lation of country bank-notes depends upon, and is proportionate to, the issues from the Bank." H There ( 98 ) There are many practical authorities for the truth of this principle also. It appears to be sin- gularly unfortunate, that few of the principles of the Bullion Committee which Mr. Bosanquet has selected have not the authority of practical men, to whose opinions on these subjects so much deference is paid. That the exchange can never vary for any length of time beyond the limits defined by the Committee has been, and is, the opinion of the ablest practical men. That the price of bullion cannot long conti- nue, with a sound system of currency, above the mint price has received full confirmation from the same quarter, and the proposition now under dis- cussion is not without the same sanction. Mr, Huskissonhas already availed himself of the au- thority of the Governor of the Bank for its truth, who declared in his evidence to the Committee, page 127, " The country banks by not regulating their issues on the principle of the Bank of Eng- land might send forth a superabundance of their notes; but this excess, in my opinion, would no sooner exist in any material degree, than it would be corrected by its own operation, for the holders of such paper would immediately return it to the issuers, when they found that in consequence of the over issue its value was re- duced, or likely to be reduced, below par ; thus, though ( 99 ) though the balance might be slightly and tran- siently disturbed, no considerable or perma- nent over issue could possibly take place, as from the nature of things the amount of bank- notes in circulation must always find its level in the public wants." Mr. Gilchrist of the Bank of Scotland stated to the Committee, that " If the Bank of England were to restrict their issues, of course the Scotch banks would find it neces- sary to diminish theirs." " The issues of the Bank of England," he observed, " operate upon the issues of the banks of Scotland in this man- ner. If the banks of Scotland issue more than they ought to do in proportion to the issues of the Bank of England, they would be called upon to draw bills upon London at a lower rate of exchange." (Page 114, App.) Mr. Thompson, a country banker, and a member of the Committee, was asked, " By what criterion do the country banks now regu- late their issues of paper r" — Ans. " By the plenty or scarcity of bank-notes." " Then their issues bear a proportion to the issues of the Bank ?" — Ans. " In my opinion they do." " The Committee," Mr. Bosanquet observes, " has not defined the sense in which they use the term excess of currency; I, therefore," he conti- nues, " suppose it to be used in the Report in h2 the ( 100 > the sense in whfch it is used by Dr. Smith, as denoting a quantity greater than the circulation of the country can easily absorb or employ." And in another place, *' As the fact is not apparent at least (I mean that there is more paper than the country can easily absorb and employ), the otius probandi seems to lie on the Committee." This is not the sense in which I consider the Committee to use the word ejcceas. In that sense there can be no excess whilst the Bank does not pay in specie, because the commerce of the country can easily employ and absorb any sum which the Bank may send into circulation. It is from so understanding the word excess that Mr. Bosanquet thinks the circulation cannot be excessive, because the commerce of the country could not easily employ it. In proportion as the pound sterling becomes depreciated will the want of the nominal amount of pounds in- crease, and no part of the larger sum will be excessive, more than the smaller sum was be- fore. By excess, then, the Committee must mean the diflerence in amount of circulation be- tween the sum actually employed, and that sum which would be employed if the pound sterling were to regain its bullion value. This is a dis- tinction of more consequence than at first sight appears. ( 101 ) appears, and Mr. Bosanqnet was well aware that it was in this sense that it was used by me. He has been so obliging as to express my mean- ing in a passage where it appeared obscure ; he has done it most ably, and completely understood the sense in which I used the words an excessive circulation. He observes upon the passage, page 86, " If this interpretation be adopted, it will be nearly useless to search for, and enquire after, ex- cess of paper as a fact ; we must be content to admit proof of its existence from its effects, and our attention must be directed to ascertain depre- ciation, or an increased price of commodities, solely arising out of, and occasioned by, the in- creased amount of the circulating medium." I do most unequivocally admit, that whilst the high price of bullion and the low exchanges conti- nue, and whilst our gold is undebased, it would to me be no proof of our currency not being de- preciated if there were only five millions of bank-notes in circulation. When we speak, therefore, of an excess of bank-notes, we mean that portion of the amount of the issues of the Bank, which can now circulate, but could not, if the currency were of its bullion value. When we speak of an excess of country currency, we mean a portion of the amount of the country bank-notes, which cannot be absorbed in the circulation, ( 102 ) circulation, because they are exchangeable for, and are depreciated below, the value of bank- notes. This distinction appears to me to be an answer to Mr. Bosanquet's objection, where he says, " But does it follow that the country bank paper, if issued to excess, will not be checked, because there is already more bank paper in circula- tion than the country can absorb and employ ? If it be admitted, and how can it be denied? that the price of commodities must every where rise or fall in proportion to the increase or diminu- tion of the money which circulates them ; must not an increase of London money increase the prices of commodities in London only, unless a part of that money can be employed in the country circulation ? and, on the contrarj^, must not the same rise take place in the country prices only if the country currency be increased, and if it be not convertible into London cur- rency ; or cannot circulate in London ? If the case put by Mr, Bosanquet be supposed possible, that the London currency only should be in- creased, and that London bank-notes were not current in the country, then we should have an exchange with the country in'the same manner as we have with Hamburgh or France, and that exchange would shew that London paper was on ( 103 ) on a coniparrison with country paper depre- ciated. If each of the country banks were protected by a restriction act from paying their notes in any other medium than their own paper, and if these notes were each confined to tiie circulation of their particular districts, they would each be depreciated en a comparison with bullion, in pro- portion as their amount exceeded the amount of money of bullion value, which would have circu- lated in those districts if they had not been pro- tected by such an act. The notes of one bank might be depreciated 5 per cent, of another 10, another 20, and so on. The restriction bill be- ing confined to the Bank of England alone, and all other notes being convertible into their notes, country notes can never be issued in a greater proportion than those of the London bank. Mr. Bosanquet thinks, " I was bound to shew that some physical impossibility obstructs the in- crease of bank-notes at the expence of country notes, and ^ice versa , before I assume that an increase of bank-notes must produce an increase of country notes." From what I have already said, I think it will appear that unless London notes are employed in the circulation of places where they were not before admitted, there is, if not a physical, at least ( 104 ) least an absolute, impossibility, that an increase of Bank of England notes should not either be followed by an increase of country bank-notes, or by a depreciation in the value of the London notes, as compared with the country notes. But how is this effected ? How do the issues of the Bank produce an increase in the country circulation ? Mr. Gilchrist has informed us. Reverse the case which he has supposed, and it w^ould stand thus : If the Bank of England in- crease their issues, the country banks might in- crease theirs : the prices of commodities being raised in London, whilst those of the country continued as before, money would be wanted in the country to purchase in the cheaper market ; bills would be demanded for that purpose upon the country, which would therefore sell at a pre- mium, or, in other words, bank-notes would be depreciated below the value of the country cur- rency. Such demand would cease as soon as the country currency were either brought up to the level of the London currency, or the Lon- don currency reduced to the level of the country currency. I should not have thought that a principle so clear could have been questioned : the value of our gold currency formerly regulated the value of a pound sterling all over England. If gold became ( 105 ) became abundant from the discovery of new mines, and more money were therefore em- ployed in the circulation of London, a propor- tionate increase must necessarily have taken place in the country to preserve tlie equality of prices. Bank-notes perform now the same of- fice, and if they be increased the country cur- rency must either partake in the use of the addi- tional quantity, or the country banks must make a proportional increase to their issues. It is not difficult, under such circumstances, to determine what will be the choice of the country banks. The Committee having stated, that " If an excess of paper be issued in a country district, while the London circulation does not exceed its due proportion, there will be a local rise in prices in that country district, but prices in London will remain as before ; that those who have the country paper will prefer buying in London, where things are cheaper, and will therefore return that country paper upon the banker who issued it, and will demand of him Bank of England notes, or bills upon London ; and that thus the excess of country paper being returned upon the issuers for Bank of England paper, the quantity of the latter necessarily and effectually limits the quantity of the for- mer." Mr. ( 106 ) Mr. Bosanquet asks, " Does this follow as a consequence ? Admitting the accuracy of the reasoning, under the supposition that the coun- try notes were actually paid in bank-notes, does it apply under the admission that they are paid by bills on London, since, as we have already shewn, the payment of these has very little re- ference to bank notes ?" Most certainly it does. Suppose the excess of country paper to be 1000/. and in consequence a thousand pounds in Bank of England notes is demanded of the issuer, and sent up to London for the purchase of goods, will not 1000/. be added to the London circu- lation, whilst that of the country is diminished 1000/. Now suppose that, instead of a Bank of England note of lOOO/. a bill on London is given to the holder of the country note : this will as sufficiently answer his purpose of making a purchase in London, but as a bill is only an order to A in London to pay to B in London, the London currency will remain as before ; but the country currency will be reduced 1000/. Now the only difference in the two cases is this, that in the former 1000/. was added to the London circulation, in the latter it continued at the same amount. But will not the country banker, having by the payment of the thousand pound Bank of England note diminished that deposit. { 107 ) deposit, which he thinks it necessary for the safety of his estabhshment to have by him, give directions to his correspondent, either by the sale of an exchequer bill, or in any other way that might be agreed upon, to send him Bank of England notes to the amount of 1000/. ? " If things are cheaper in Liverpool than in London, I shall prefer buying there, and if I have too many bank-notes, I shall send them to Liverpool in payment," — provided they can cir- culate there. If they can, Liverpool will par- take with London in the increase of circulation, but it is not improbable that a Liverpool banker will find an opportunity of persuading the people of Liverpool, that his note will an- swer their purposes as well as the Bank of England note* j he will, therefore, possess him- self of it for one of his own, and will send it to London, thus will the circulation of Liverpool be increased by the issues of the Bank of Eng- land ; and thus Mr. Bosanquet is mistaken, when he observes that " they may restrict, but can never augment, one shilling the circulation * The Committee asked Mr. Stuckey, " Is it not your interest as a banker to check the circulation of Bank of England notes, and with that view do you not remit to Lon- don such Bank of England notes as you may receive beyond the amount which you may think it prudent to keep as a de- posit in your coffers ?" Ans. Unquestionably. of ( 108 ) of the Liverpool banks." The Committee hav- ing " assumed as an axiom, that country bank paper is a superstructure raised on the founda- tion of the paper of the Bank of England," Mr. Bosanquet asks, where they have learnt this ? "They learned from Mr. Stuckey," he continues, " a considerable and experienced banker in So- mersetshire, that his houses regulate their issues by the assets they have in London to pay theni, consisting of stock, exchequer bills, and other convertible securities, without much reference to the quantity of Bank of England notes or specie which they have, although they always keep a quantity of both to pay occasional de- mands. What is there in this evidence to sanc- tion the opinion, that bank-notes either generate or limit country notes ?*' It may, I think, be shewn, that the increased issues of the Bank would induce Mr. Stuckey, or any other country banker, to increase the amount of his issues, although he kept pre- cisely the securities which he has enumerated. There would be such a demand for country notes, in consequence of the alteration of prices in London, that a country banker would be en- abled to obtain bills upon London in return for his notes. With the produce of the bills he might possess himself of a larger sum of stock, exchequer ( 109 ) exchequer bills, &c. the foundation being thus increased, the superstructure might be further raised. The Committee could not have supposed that the Scotch Bank in the year 1763, when they reduced their circulation by giving bills at 40 days upon London, actually deposited bank- notes, in the first instance, in the hands of their London correspondents. They might, if such were the case, have redeemed their notes at once with bank-notes in Scotland. No ; the Scotch Bank were situated as Mr. Stuckey describes; they had securities of some sort in London, which they authorised their correspondents to turn into money in time to pay their bills. There was a transfer of money from A to B in London, and the Scotch note was withdrawn. CHAPTER VIIL Mr. Bosanquet's Opinion — that Years of Scarcity and Taxes have been the sole Cause of the Rise of Prices, ejccessive Circulation no Cause— con- sidered. Mr. Bosanquet, after having shewn, as he imagines, the insufficiency of the arguments of the Committee, to prove that the Bank circu- lation ( no ) lation is excessive, brings forward positive ar- guments to prove that it is not. The ground of these arguments is, the cause of an advance of prices which arises from years of scarcity, and increased taxation. He has quoted a pas- sage from Dr. Smith in support of this opinion, which I regard as in favour of the opinion which I hold on that subject. " A prince," says Dr. Smith, " who should enact that a certain proportion of his taxes should be paid in a paper money of any kind, might thereby give a certain value to this pa- per money, even though the time of its final discharge and redemption should depend alto- gether on the will of the prince. If the bank which issued this paper were careful to keep the quantity of it always somewhat below what could easily be employed in this manner, the demand for it might be such as even to make it bear a premium, or sell for somewhat more in the market than the quantity of gold and silver for which It was issued." Now, asks Mr. Bosanquet, as the annual amount of taxes far exceeds the amount of bank-notes, how can paper according to this principle be depreciated ? But where does Dr. Smith talk of the annual amount of taxes .? It might as fairly be contended, that the compa- rison of the amount of paper should be made with ( 111 ) with the amount of two or three years taxes. I understand Dr. Smith to mean, that if the quan- tity of paper does not exceed that amount, which can be wholly and solely employed in the payment of taxes, it will not be depre- ciated ; he never could have maintained so ex- travagant a proposition as that which Mr. Bo- sanquet ascribes to him. To try our paper cir- culation by this rule of Dr. Smith, it should be proved that the daily payment of taxes is equal in amount to the whole of the bank-notes in cir- culation. According to Mr. Bosanquet's in terpretation of this passage, as the amount of the total payments into the exchequer is 76,805,440/., bank-notes cannot become ex- cessive or depreciated till they exceed that amount. Who, on reading the passage, can believe that such was the fair meaning of Dr. Smith's words ? When Mr. Bosanquet talked of a premium having been given for bank-notes, I conceived he meant a premium in gold or in silver; I can have no other idea of a premium : but it seems Mr. Bosanquet meant that a premium was given for them in paper more depreciated than them- selves ; in exchequer bills or banker's check.s. Now both of these securities being payable in bank-notes at some future period, may, on some occasions, ( 112 ) occasions, be less valuable than the notes which are wanted for immediate use, 'and which will sufficiently account for the preference. An as- signat at ;a discount of 50 per cent might have borne such a premium as Mr. B. supposes. One of the proofs with which Mr. Bosanquet has favoured his readers of the very small in* crease that has taken place in the actual amount of bank-notes, compared with the business which it has to perform, is, that the increase in the amount of currency since the year 1 79«3 is three millions, and the increased amount of payments to Government alone above sixty millions. In this calculation the addition to the country currency is wholly omitted. I shall endeavour presently to shew, that it does not by any means necessarily follow that this enormous increase in the amount of taxes should have made any in- crease of circulation necessary, unless during the same time there had been an increase of com- merce and trade. At present it will be sufficient for me to re- mark, that had Mr. Bosanquet made a compa- rative statement from the year 1793 to 1797> he would have possibly seen reason to doubt the accuracy of his theory on this subject. Dur- ing those four years there must have been a considerable addition to the taxes i and, there- fore. i 113 ) tore, on Air. Bosanquet's principles, there should also have been an addition to the circulating ine(hum, whicli does not appear to be the fact. It is not probable that any very great addition was made to the amount of the coin in circula- tion; on the contrary, from the very great coin- age in 1797 and 1798, the metallic currency must, in 1797, have been at an unusually low level. And it appears from the account deli- vered in to the Lords' Committee, that the amount of Bank notes in circulation In the year 1793 amounted to . ;f 11,451,180 1796 it varied from . 10,713,460 to 9,204,500 and in 1797 the general average, even after the restriction, did not exceed the amount of 1793. The amount of Bank notes in circulation in 1803 was nearly 18 millions. In 1808 it was not more; and yet no one will deny that in those five years our taxes and expences must have been greatly augmented. — Thus, then, it ap- pears, that considerable additions may be made to the taxes of a country without a correspond- ing increase in its circulating medium. The Committee is charged by Mr. Bosan- quet with not having sufliciently considered the effect of taxation on the prices of commodities; I and ( 114 ) and it is implied in that accusation, that they have exclusively attributed the rise in the prices of commodities to the depreciation of the cur- rency. The Committee would indeed have been highly deserving of censure, if they had held out hopes to the people of this country, that the reformation of the currency could pos- sibly reduce the prices of commodities to that level at which they were previously to the re- striction bill. The effect produced on prices by the depreciation has been most accurately de- fined, and amounts to the difference between the market and the mint price of gold. An ounce of gold coin cannot be of less value, the Committee say, than an ounce of gold bullion of the same standard ; a purchaser of corn there- fore is entitled to as much of that commodity for an ounce of gold coin, or 3/. lis, \0\d,^ as can be obtained for an ounce of gold bullion. Now, as 4/. 19,8. of paper currency is of no more value than an ounce of gold bullion, prices are actually raised to the purchaser J 8 per cent., in consequence of his purchase being made with paper instead of coin of its bullion value. Eigh- teen per cent, is, therefore, equal to the rise in the price of commodities, occasioned by the depreciation of paper. All above such rise may be either traced to the effects of taxation, to the increased ( 11.-5 ) increased scarcit}^ of the commodity, or to any other cause which may appear satisfactory to those who take pleasure in such enquiries. The theory which Mr. Bosanquet has ad- vanced with respect to taxation, and the effects which it produces on the amount of circulating medium, is exceedingly curious, and is a proof that even practical men are sometimes tempted to wander from the sober paths of practice and experience, to indulge in speculations the most wild, and dreams the most chimerical. Air. Bosanquet observes, there are two causes of the augmentation of prices in Great Britain since the date of the restriction bill. 1st, " The altered state of the corn trade, and the scarcity arising out of it, in 1800 and 1801." 2dly, *' The increase of taxes since the commencement of the war in 1793." That the scarcity of corn, and the expences which have attended its importation, must have produced some rise in the prices of commodities I do most readily admit. But is it a self-evident proposition — is it, as Mr. Bosanquet Jays it down, an axiom in political economy, that the effect of taxation is to raise the prices of com- modities in the full amount of the taxes levied ? Does it by any means follow, because taxes since the year 1793 have increased to the enormous I 2 amount ( 116 ) amount of forty-eight millions, that all that sum must have gone to the increase of the prices of commodities, and that, therefore, this fact alone will account for a rise of .50 per cent, on the prices of 1793? Does it follow that every person, excepting the stockholder, has the power of indemnifying himself for the taxes which he pays? Does it make no difference, for example, whe- ther the tax be laid on consumable commodi- ties, or whetiier it be such a tax as an income tax, assessed taxes, and twenty others that may be named ? Do they all tend to raise the prices of commodities ? And is every contributor but the stockholder enabled to rid himself of the burthen? If this argument were correct, it would appear that the whole weight of taxation falls exclusively on the stockholders ; that the whole annual augmentation since 1793, amounting now to fifty-three millions, must have come from their pockets. Their taxes must at this rate have exceeded their income, because they ex- ceeded the interest of the national debt. This I do not consider very correct doctrine; and, if true, it would not make stockholders very much enamoured with that species of property. Wars vvould, on such a principle, never impoverish, and the sources of taxation could never be exhausted. To ( 117 ) To me, however, it appears convincingly cer- tain, that neither the income tax, the assessed taxes, nor many others, do in the least affect the prices of commodities. Unfortunate indeed would be the situation of the consumer, if he had to pay additional prices for those commodities which were necessary to his comfort, after his means of fjurchasing them had been by the tax considerably abridged. The income tax, were it fairly imposed, would leave every member of the community in the same relative situation in which it found him. Each man's expences must be diminished to the amount of his tax; and if the seller would wish to relieve himself from the burthen of the tax by raising the price of his commodity, the buyer for the same reason would wish to buy cheaper. Thesecontending interests would so exactly coun- teract each other, that prices would undergo no alteration. The same observations are applica- ble to the assessed taxes, and to all other taxes which are not levied on commodities. But if the tax should in its operation be unequal, if it should fall particularly heavy on one class of trade, the profits of that trade would be dimi- nished below the general level of mercantile pro- fits, and those engaged in it would either de- sert ( 118 ) sert it for one more profitable, or they would raise the price of the commodities in which they dealt, so as to bring it to produce the same rate of profits as other trades. Taxes on commodities would certainly raise the price of the commodity taxed to the full amount of the tax. The price for such commo- dities may be jejonsidered as divided into two portions ; one portion, its original and natural price, and the other a tax for the liberty of con- suming it. If this tax again were laid on a com- modity, the consumption of which, by each in- dividual, was in exact proportion to his income, no other commodity would rise but the one tax- ed ; but if it were not in such proportion, those who paid more than their just portion would de- mand an increased price for the commodity in which they dealt, and, by obtaining it, the so- ciety would be put in the same relative situation in which they were before placed. If, instead of the tax being laid on the com- modity, each individual were to pay no more for the commodity than the original price, and were to pay tlie amount of the tax at once to govern- ment for a licence to consume it, it would act precisely as the assessed taxes do, there would be only a partial rise in the prices of some com- modities { 119 ) moditiesto compensate the inequality uliicli, in spite of the best wishes of the legislature, must accompany every tax. If this view of the effect of taxation be correct, it will follow that Mr. Bosanquet's estimate, that 48 millions has been actually added to the prices of commodities in consequence of taxation since the year 1793, and that such addition will suf- ficiently account for the rise in the prices of com- modities, without having recourse to the depre- ciation of the circulating medium as the cause, is a false theory, neither supported by reason nor probability. From these statements Mr. Bosanquet has deduced another consequence, viz. that As the value of commodities has been raised 48 millions since 1793, and the circulation only increased 3 millions, such increase cannot be called excessive*. Although in the preceding statement I have conceded to Mr. Bosanquet, that in conse- quence of some of our taxes the prices of com- * If we add to tliese 3 millions the increase in the country circulation, and bear in mind the economy in the use of circulating medium, so ably and so clearly explained b)'^ Mr. Bosanquet, it would appear to me that, granting all the facts for which Mr. Bosanquet contends, the circulating medium has increased in an undue proportion, Hiodities ( 120 ) modities will be increased, it does not appear necessarily to follow that more money will be requisite to circulate them. That amount of money which is received by government in the shape of taxes, is taken from a fund which would otherwise have been ex- pended on consumable commodities. In proportion as the taxes are great, must the expences of the people diminish. If my income amounts to 1000/., and government requires 100/. in taxes from me, I shall have but 900/. to expend on such necessaries and comforts as are requisite for the use of my family. If govern- ment take 'iOO I shall have but 800 for such pur- poses. Now, as the amount of money actually expended by government and by me cannot exceed 1000/., no additional circulating me- dium would, I think, be required, although the taxes were 50 per cent, of each man's income. If the tax were laid upon bread, and, in con- sequence, the wages of labour were raised, the tax would eventuall}^ fall on all those who con- sumed the produce of the labour of man. It would make no real difference to these con- sumers if they had at once paid the amount of such tax into the exchequer, or if it had gone through the circuitous channel which it would then take. Nor ( l^^l ) t^or would any additional snm be required. Government would be in the daily receipt of a portion of the taxes, whether it was paid to the exciseman or to the tax-gatherer, and their ex- pences in tlie one case would be precisely the same as in the other. Whatever the government expended would cause a diminished expenditure in the people to the same amount: the same amount of commodities would be circulated, and the same money would be adequate to their circulation. This is on the supposition that the people were sufficiently prudent or sufficiently rich to pay all the taxes from their annual income, and were not tempted or compelled to diminish their capital to satisfy the calls of government. If capital were however diminislierl, the aggregate amount of productions would also diminish; and if the mone}^ which was before nccessar}^ for their circulation were to continue of the same amount, it would bear a larger proportion to the goods, and it might therefore be expected that commodities would rise; but we must not forget that the amount of money in a country is regulated by its value, and as its value would in this case be diminished, it would become rela- tively excessive to tlie money of other countries, and the excess would therefore be exported. When ( 122 ) AVhen we talk of a scarcity of corn, and a cofi- sequent increase of price, it is naturally con- cluded, because its value is doubled, that double the value of money will be necessary to circulate it, but this is by no means obvious or necessary. If double the money be necessary, there should be an equal quantity of corn at double the usual price,— but it is because there is a diminished quantity of corn that its price is doubled. If the commerce of a country increases, that is to say, if by its savings it is enabled to add to its capital, such country will require an ad- ditional amount of circulating medium; but, under all circumstances, the currency ought to retain its bullion value ; that is the only sure test by which we may know that it is not ex- cessive. CHAPTER IX. Mr. Bosanquet's Opinion^ that Evil would result from the Resumption of Cash Payments — co«- sidered. To conclude, Mr. Bosanquet is persuaded that much evil will ensue from the resumption of cash ( 123 ) cash payments, and he cannot anticipate any improvement in the course of exchange, or any fall in the price of bullion from a reduction of the circulation, unless our imports are dimi- nished and our exports increased. To me,however, it appears perfectly clear, that a reduction of Bank notes would lower the price of bullion and improve the exchange, without in the least disturbing the regularity of our present exports and imports. It would neither enable us to export or import gold in any way different to what is now actually taking place. Our trans- actions with foreigners would be precisely the same, we should possess only a more valuable money of the same name; and instead of being credited by Hamburgh for a depreciated pound sterling, which will only purchase 104 grains of gold, at the rate of 28 Flemish schillings, we should, by restoring our pound sterling to its true bullion value, viz. 123 grains, have a credit at the rate of 34 schillings. The difference, however, of six schillings, which would thus ap- pear in our favour, would be an advantage in name and appearance solely. No mistake would be greater than to suppose there was in it any real advantage. If, by a reduction of Bank notes, they were so raised in value as to be above the value of gold bullion ( 124 ) bullion, we should then interfere with the real course of exchange ; we should disturb the pre- sent equilibrium of imports and exports; and we should cause an importation of bullion, or, in the language of merchants, a favourable balance of trade. If Mr. Bosanquet's view of our affairs were indeed correct, gloomy would be our prospects. Obliged to support a great foreign expenditure, " to import articles with which we cannot dis- pense," and in return for which nothing but gold will be accepted, we might almost calculate the period at which the contest must terminate, from a want of this most essential commodity. For a balance of payments so enormous as he calculates, gold could not be found in this coun- try for one twelvemonth; and if our goods can no Where purchase it, how hopeless must be our condition ! For my part, however, I have no such ap- prehensions. I am persuaded that our foreign expenditure is neither paid with gold nor with bills of exchange,— that it must eventually be discharged with the produce of the labour and industry of our people. It is only to a blind perseverance in our present system of circulation that I look with alarm, — a system which is gradually undermining our re- sources. ( 125 ) sources, and the inconveniences and evils of which, in the language of the Committee, " if not checked, must at no great distance of time work a practical conviction upon the minds of all those who may still doubt their existence; but even if their progressive increase were less probable, the integrity and honour of Parliament are con- cerned not to authorize longer than is required by imperious necessity, the continuance in this great commercial country of a system of circula- tion in which that natural check or controul is absent, which maintains the value of money, and, by the permanency of that common standard of value secures the substantial justice and faith of monied contracts and obligations between man and man." May we be permitted to hope, that what an enlightened Committee has so, happily begun, is a pledge of what will be accomplished by the wisdom of Parliament ? APPENDIX. After the preceding sheets were sent to the press, I read the supplementary observations of Mr. Bosanquet, annexed to the second edition of his pamphlet. I shall have but few remarks to make on them. 1st, From what I have already said it may be seen that I deny the accuracy of all Mr. Bosan- quet's calculations concerning the exchange with Hamburgh. Those calculations are made on the assumptionofafixed invariable par, whilst the true par, on which they should have been made, is sub- ject to all the variations to which the relative value of gold and silver is exposed. These two metals having varied no less since the year 1801, than from Gf per cent, under the mint propor- tions, to 9 per cent, above those proportions; calculations made on such a principle may in- volve errors to no less an amount than I.5f per cent. 2dly, The argument attempted lo be founded ( un ) founded on the fact of the increase or diminution in the amount of Bank notes, not having in- variably been accompanied by a fall or rise in the exchange, or by a rise or fall in the price of bullion, is of no avail against a theory which ad- mits that the demand for circulating medium is subject to continual fluctuations, proceeding from an increase or decrease in the amount of capital and commerce; from a greater or less facility which at one period may be afforded to payments by a varying degree of confidence and credit; and, in short, which supposes that the same commerce and payments may require very different amounts of circulating medium. An amount of Bank notes which at one time may be excessive, in the sense in which I use that term, and which may therefore be depreciated, — ftiay, at another, be barely sufficient for the pay- ments which it may have to perform, barring the effect of a temporary increase in its value above that of the bullion which it represents. It will therefore be useless to admit or to deny the cor- rectness of the grounds on which Mr.Bosanquet's calculation of the amount of country paper in circulation is founded. Those facts do not, in my opinion, bear upon the subject in dispute. Whether the paper currency be 25 or 100 mil- lions, I consider it equally certain that it is ex- cessive. ( 129 ) cessive, because I am not aware of any causes but excess or a want of confidence in the issues of the paper (which I am sure does not now exist), which could produce such effects as w^e have for 7i considerable time* witnessed. Mr. Bosanquet has thrown the inferences which he wishes to be drawn from the facts he has newly brought forward into the shape of four problem* ; the solution of which, upon the prin- ciples of the Committee, he presumes to be im- possible. I hope I have already shewn that his facts fall abundantly short of proving the points which he makes to rest upon them, and I think the difficulty will not be great in giving him even a solution of his problems in perfect con- formity with the principles of the Committee. The first problem is, " The fall of the ex- change, from an average of 6 per cent, in favour, * Mr. Bosanquet has remarked as incorrect, my liaving used the words " length of time" in reference to a discount on Bank notes, because Mr. Mushet's tables did not indicate a very unfavourable exchange for more than a year before I wrote, in Dec. 1S0(). We should once have thought a year a cofisidenible time, when speaking of a discount on Bank notes, but as I have constantly maintaiiicd that the high price of bullion was the test on whicli I most relied for the proof of depreciation, and as the price of gold has not been under the Mint price for abo'it ten years, the correctness o( my conclusion cannot, I think, on my princi^ilcs, be questioned. K li'om ( 130 ) from 1790 to 1795, to 3 per cent, below par, in 1795 and 6, with an equal circulation of eleven millions of Bank paper, convertible into specie on demand, and the advance of the exchange to 11 per cent, above par, on average in 1797 and 1798, the circulation being increased to thirteen millions and not so convertible." The reader will perceive that this problem has already received its solution in the body of the work. The exchanges are not correctly stated, and no one denies that the exchanges may rise and fall from many causes. It has been proved that the demand for gold for the Mint, and for silver for the East Indies, in the years 1797 and 1798, had their natural eifect on the exchange, and was not counteracted by an extravagant issue of paper currency. The gold "was required to fill up the exhausted coffers of the Bank -, it was therefore not sent into circula- tion ; and the addition of two millions in Bank notes served only to supply the vacuum which the hoarding of money had occasioned j so that there was no real increase to the circulation of those years. The second problem is " The fall of the ex- change to 6 per cent, below par, and gold 9 per cent, above the mint price in ] 800 and 1801, the Bank circulation rather above 15 millions, and the ( 131 ) the advance to 3 per cent, above par, on average of six years, from l80J to J 808, and gold nearly at the mint price, with an augmented circulation of 17 to 18 millions." Besides the effects from a varying degree of commerce and credit, it should be recollected that whilst our circulation consisted partly of gold and partly of paper, the effect of an in* creased issue of paper, both on the exchanges and the price of bullion, was corrected, after a sufficient interval, by the exportation of the coin. That resource has been for some time lost to us. The third problem, viz. " The fall of the ex- change, from o per cent, above par, in July 1808, to 10 per cent, below par, in June 1809, the Bank circulation being the same in both instances;" is of easy solution, f cannot find the document from which Mr. Bosanquet has stated that the amount of Bank notes was the same in July 1808 as in June iSOy; but, ad- mitting its correctness, are they fair subjects of comparison? One period is immediately after the payment of the dividends, the other immediately before. In January and July 1809 there was no less an increase in the amount of Bank notes, after the payment of the dividends, than 2,450,000/. and in the January following, 1,878,000/. K 2 I am ( 132 ) I am not disposed to contend that the issues of one day, or of one month, can produce any ef- fect on the foreign exchanges; it may possibly require a period of more permanent duration ; an interval is absolutely necessary before such effects would follow. This is never considered by those who oppose the principles of the Com- mittee. They conclude that those principles are defective, because their operation is not im- mediately perceived. But what are the facts re- specting the circulation of Bank notes in the years 1808 and 1809? There are only three re- turns of their amount in the year 1808 made to the Bullion Committee. Let us compare them with the returns for the same periods in 1809, and I think my readers will agree with me, that these facts will rather confirm than appear to be at variance with the principles of the Com- mittee. Amount of Bank notes Amount of Bank notes In 1808. . In 1809. 1 May . 17,491,yOO 1 May . 18,646,880 1 August . 11,644,670 1 August . 19,811,330 1 November 17,467,170 1 November 19,949,290 As for the fourth problem, viz. "The gra- dually increasing price of commodities, during the American war, when the circulation was gold, and during the six years from 1803 to 1808, ( 133 ) 1808, when the exchange was in favour," where has it been disputed that tiiere are not other causes besides the depreciation of money which may account for a rise in the prices of commo- dities? The point for which I contend is, that when such rise is accomj)anied by a permanent rise in the price of that bullion which is the stand- ard of currency, then to the amount of that rise is the currency depreciated. During the American war the rise in the prices of commodities was not attended with any rise in the price of bullion, and was therefore not occasioned by a depreciation of the currency. A\'e are now, for the hrst time, left to doubt, whether the principles of the Committee against which Mr. Bosanquet in the body of his work had so strongly contended, are really at variance with his own. We are now told not that the theory is erroneous, but " that the facts must be established before they can be reasoned upon," " and that tlie importance of those facts would, in no degree, be lessened even by an un- reserved admission of the accuracy of the prin- ciples assumed." Does this declaration accord with Air. Bosanquet's conclusions.^ Certain principles are brought forward by the Bullion Committee, and which, if true, prove the fact of the depreciation of the currency. Your prni- ciples ( 1'34 ) ciples are plausible, and reason appears to sanc- tion them, says Mr. Bosanquet, but here are facts to prove that they are inconsistent with past ex- perience; and he further observes from Paley, ** that when a theorem is proposed to a mathe- matician, the first thing he does with it is to try it on a simple case ; if it produce a false result, he is sure there must be some error in the de- monstration." " The public must proceed in this way with the report, and submit its theories to the test of fact." Can, then, Mr. Bosanquet be consistent in contending " that the import- ance of what, in his preceding pages, he had offered to the public, would be in no degree lessened even by an unreserved admission of the accuracy of the principles assumed?" If the theory of the Committee is allowed to be accurate on the one hand, and Mr. Bosan- quet's facts are accurate on the other, what follows ? Either that Mr. Bosanquet agrees with the Committee, or that his facts are totally in- applicable to the question. One other con- clusion there is, but one which I have no in- tention to ascribe to Mr. Bosanquet; — That there may be a theory on the one side, and facts on the other; both true, and yet inconsistent. As for Dr. Paley's test, of trying the Commit- tee's theory by a simple case; Mr. Bosanquet might ( 15^ ) might have tried it by a thousand, and would have found it accurately to correspond. Had he employed his leisure and ingenuity in tracing its apphcation to the thousands of cases with which it accords, instead of hunting for two or three cases seeminglif contradictory, and adopting them with fond creduHty, he would have pro- bably arrived at more just conclusions. Air. Bosanquet calls in question the accuracy of the following proposition of Mr. Huskisson, " that if one part of the currency of a country (provided such currency be made either directly or virtually legal tender according to its deno- mination) be depreciated, the whole of that cur- rency, whether paper or coin, must be equally depreciated." The fact brought forward by Mr. Bosanquet, that the " extraordinary depreciation of the silver coin, in the reign of King William, did not depreciate the gold ; that, on the contrary, the guinea, worth Ql perfect shillings, passed cur- rently for dO shillings," does not prove the prin- ciple advanced by Mr. Huskisson to be at va- riance with experience, because gold was not then the current coin; it was not either directly or virtuaUy legal tender ; nor was it estimated at a fixed value by public authority: it passed in all payments as a piece of bullion of known weight ( 1^^^ ) weight and fineness. If by law it could not have passed for more than ^\s. of the de- based silver currency, it would, whilst in the state of coin, have been equally debased with the 2U. for which it would have exchanged. If guineas were now to be considered as a commo- dity, and were not by law prohibited horn be- ing exported or melted, they might pass in all payments at 24 or 25 shillings, whilst the Bank note continued of its present value. Neither is the following principle of Mr. Hus- kisson, from which Mr. Bosanquet dissents, coji- trciry to authority ; " That if the quantity of gold, in a country whose currency consists of gold, should be increased in any given propor- tion, the quantity of other articles and the de- mand for them remaining the same, the value of any given commodity measured in the coin of that country would be increased in the same proportion." Mr. Huskisson does not question, as Mr. Bosanquet supposes, the truth of the principle advanced by Dr. Adam Smith, " that the increase in the quantity of the pre- cious metals, which arises in any country from ail increase of wealth, has no tendency to diminish their value ;" but says, that if the quantity of the precious metals increases in any country, whilst its wealth does not increase, or ( 137 ) or whilst its commodities remain the same in quantity, then will the value of the gold coin of such country diminish, or, in other words, goods will rise in price. Mr. Bosanquet himself, in the argument relating to the mine, has admit- ted that such would be the effect. To this passage from Mi\ lluskisson's book, however, I have an objection to offer, because he adds, that an increase in the prices of commodities would take place (page 5) under the circumstances supposed, " although no addition should actu- ally be made to the coin of the country." I hold it as a conclusion which will not admit of dispute, that if neither commodities, nor the de- mand for them, nor the money which circulates them, suffer either increase or diminution, prices roust continue unaltered, whatever quantity of gold or silver may exist in the state of bullion in such country*. It is hardly necessary to re- mark, that the case is wholly hypothetical, and is indeed impossible. There can be no great addition to the bullion of a country the curren- cy of which is of its standard value, without causing an increase in the quantity of money. I confess I was not a little surprised by the * It is to be understood that I am supposing no increas- ed or diminished confidence operating, so as to give a diminish- ed or increased value to the coin. next ( '38 ) next point brought forward by Mr. Bosanquet, and I have no doubt it must have excited equal astonishment in many of his readers. Having contended throughout his work that Bank notes were not depreciated as compared with gold coin, that the same rise in the price of gold might have taken place, and actually had, on some occasions, taken place, whilst our currency consisted partly of gold, and partly of paper convertible into gold, at the will of the holder ; after denying that there was any point of con- tact between gold for exportation and gold in coin, and that it was for want of such contact that its price had risen, we are now seriously told by Mr. Bosanquet that, " applying to this subject the most approved theories, he inclines to the belief that gold, since the new system of the Bank of England payments has been fully established, has not, in truth, continued to be the measure of value. Bank notes," he main- tains, " have since 1797 unquestionably become the measure of commerce, and the money of ac- count, and it is on these grounds that he consi- ders the proposition respecting the price of gold, on which so much reliance is placed, as one of those which, though he admits the principle, he hesitates at the application." Whether the Bank Directors, or others who have so confidently as- serted ( 139 ) serted that, admitting gold to be the standard, its high price did not prove the depreciation of the currency, will be pleased with a defence on such principles, which yields all for which the Committee contend, it is not for me to enquire. That gold is no longer in practice the standard by which our currency is regulated is a truth. It is the ground of the complaint of the Com- mittee (and of all who have written on the same side) against the present system. The holder of money has been injured, inas- much as there is no standard reference by which his property can be protected. He has suffered a loss of 16 per cent, since 1 797, and there is no security for him that it may not shortly be 25, 50, or even 50 per cent. more. Who will con- sent to hold money or securities, the interest on which is payable in money, on such terms? There is no sacrifice which a man holding such property should not make, to secure to himself some provision for the future whilst such a sys- tem is avowed. Mr. Hosanquet has, in these few words, said as much in favour of the repeal of the restriction bill as all the writers, all the theorists, have advanced since the discussion of this subject commenced. What, then, does Mr. Bosanquet admit that we have no standard be- cause it is no longer gold } Let us hear what he says; ( 140 ) says : " If a pound note be the denom'mation, it will, of course, be asked what is the standard ? " The question is not easy of solution. But, considering the high proportion which the deal- ings between government and the public bear to the general circulation, it is probable the standard may be found in those transactions ; and it seems not more difficult to imagine that the standard value of a one pound note may be the interest of 33/. 6s, 8d. — 3 per cent, stock, than that such standard has reference to a me- tal, of which none remains in circulation, and of which the annual supply, even as a commodity, does not amount to one twentieth part of the foreign expences of government in one year." So then we have a standard for a pound Bank note, it is the interest of 33/. 6s, 8d. — 3 per cent, stock. Now, in what medium is this interest paid ? because that must be the standard. The holder of 33/. 6s. Sd, stock receives at the Bank a one pound note. Bank notes are, therefore, according to the theory of a practical man, the standard by which alone the depreciation of Bank notes can be estimated ! A puncheon of rum has 16 per cent of its con- tents taken out, and water poured in for it. What is the standard by which Mr. Bosanquet attempts to detect the adulteration } A sample ( 141 ) ef the adulterated liquor taken out of the same cask. We are next told, that " if the Bank really possess a large stock of gold, or only to the ex- tent of six or seven millions, the best use they can make of it is to call in all the notes under 51,, and not re-issue any of this description." How could bankers and manufacturers be en- abled to ejOfect their small payments if the gold, thus partially issued, were at the present ex- change and price of bullion to be either export- ed or melted ? If the Bank did not issue small notes, and they could not procure guineas for large ones, they would be obliged to cease such payments altogether. The more I have reflect- ed on this subject, the more convinced I am that the evil admits of no other safe remedy but a reduction in the amount of Bank notes. THE END. Mmi^i^:: m