UNIVERSITY OF 
 5LLINOIS LIBRARY 
 BANAO ,:GM
 
 ELEMENTARY PROPOSITIONS 
 
 CURRENCY. 
 
 WITH 
 
 ADDITIONS, 
 
 SHOWING 
 
 THEIR APPLICATION TO THE PRESENT TIMES. 
 
 BY 
 
 HENRY DRUMMOND. 
 
 THE FOURTH EDITION. 
 
 LONDON: 
 
 i 
 JAMES RIDGWAY, PICCADILLY. 
 
 J 826.
 
 LONDON t 
 
 PRINTED BY CHARLES WOOD, 
 Poppin's Court, Fleet Street.
 
 PRELIMINARY OBSERVATIONS. 
 
 When the following Propositions were first 
 drawn up, they were thought to be so self-evident 
 to every one who would consider the subject, 
 that it would be superfluous to publish them. Ex- 
 perience, however, has shown, that the public re- 
 quires much more instruction in the mere elements 
 of every branch of Political Economy ; and that, 
 until it is more enlightened, the correct principles, 
 generally entertained by his Majesty's present 
 ministers, are liable to be perpetually thwarted. 
 
 Although merchants and bankers are not ulti- 
 mately more affected by the state of the currency 
 than any other class of the community, yet they 
 are the first to be influenced, either by any sudden 
 extension, or sudden contraction of its amount : 
 the manufacturers and their labourers follow next; 
 and the landlords and agricultural population feel 
 it the last ; and these, ordinarily, not until the 
 merchants and bankers have ceased to suffer 
 from it : but every class feels its consequences,
 
 sooner or later, and therefore are equally in- 
 terested in understanding its operations : if 
 
 Paper credit, that worst, tho' last supply, 
 Which lent corruption lighter wings to fly, 
 
 had never been in existence, nothing would have 
 been more simple than all the offices of a circu- 
 lating medium of barter ; but paper-money has 
 not only put the whole system, in old and highly 
 civilized, and extensively commercial states, out 
 of joint, but has introduced so many discordant 
 terms of credit, exchange, par, mint price, bullion 
 price, &c. &c, that many persons are deterred 
 from an examination of the subject, by the unin- 
 telligible jargon of the language in which it is 
 expressed. 
 
 But there is encouragement to persevere. Above 
 two hundred years ago, Lord Bacon pointed out 
 defects in our statute law, and urged the amend- 
 ment and consolidation of it. His complaints 
 and his arguments have been re-echoed ineffec- 
 tually at various subsequent periods ; but it is 
 only now, that Mr. Peel, to his immortal credit, 
 has begun to rectify them. In 1713, the London 
 Merchants unanimously (Mac. An. Com. vol. iii, 
 p. 31) declared the trade with France a nuisance, 
 because it produced an annual export of bullion 
 to that country : a position, which the most stub- 
 born opponent of the principles of free-trade 
 would hardly venture to maintain in any public
 
 assembly at the present day. The Navigation 
 Laws which were first passed by the Revolutionary 
 Parliament, for the avowed purpose of destroying 
 the commercial prosperity of the Dutch (a pur- 
 pose, indeed, which Sir J. Child had the sense to 
 see these laws did not eifect), are happily at an 
 end. The excise scheme of Sir Robert Walpole 
 was founded upon the same principle as the 
 warehousing system which was introduced by 
 the present administration ; but Sir Robert was 
 so opposed by the merchants, whose knavery 
 would have been checked, and by the factious 
 violence of the opponents to his ministry, that he 
 was compelled to abandon it. In 1803, Sir 
 Robert's principles, under the auspices of George 
 Rose, were triumphant. 
 
 Et tibi vel Betty, tibi vel nitidissima Letty 
 Gloria factorum temere" conceditur borum. 
 
 Fifty years ago, Adam Smith proved the mono- 
 poly of the Bank of England was a nuisance to 
 the country; but Mr. Robinson has been the 
 first Chancellor of the Exchequer who has com- 
 prehended his reasoning, and been able to act 
 upon it. In 1810, the few bankers and mer- 
 chants, who ventured to maintain, in opposi- 
 tion to the bank directors, that a piece of paper 
 and a silver shilling were not equal to a golden 
 guinea, were looked upon by their brethren as 
 visionary theorists ; but we have lived to see
 
 those, who at that time denied the depreciation 
 of bank notes, heartily ashamed of that cele- 
 brated resolution, which still disgraces the 
 Journals of the House of Commons. 
 
 A great change of opinion, however, yet remains 
 to be effected. To determine the laws which re^u- 
 late the value of the currency, its uses, and its 
 operation upon all the employments of civilized so- 
 ciety, is the most important branch of economical 
 science. Upon the Jixedness of the value of the 
 currency depends, whether every part of internal 
 and foreign commerce shall be lucrative, or other- 
 wise. Unless the value of the currency be Jixed, 
 the landlord is at one time defrauded of his due 
 proportion of the produce of his soil, while, at 
 another time, the tenant is robbed of his capital : 
 the manufacturer and merchant binds himself to 
 obligations, which it becomes impossible for him 
 to discharge; and the labourer finds every fluc- 
 tuation alike deprive him of some farther portion 
 of his scanty earnings # . 
 
 Political Economy is the science which teaches 
 us how to procure the greatest quantity of conve- 
 niences at the least expense of time and labour: 
 
 * " The object of every description of currency should be 
 to make the value of property as steady, and as little variable 
 as possible. The truth lay there; and he who solved that 
 problem, would certainly come to the wisest conclusion." — 
 Lord Liverpool's Speech, Times, Feb. 17, 1826.
 
 and, although it is the want and not the science 
 of mankind which has ever been the parent of in- 
 vention, yet it is science alone that has taught us 
 to explain the causes of obvious phenomena, and 
 thereby enabled us to direct them to our own ad- 
 vantage. But it requires some labour to reason, 
 and to reflect; and since ease is the first of animal 
 gratifications, as few men like mental as bodily 
 exertion. Hence they invent all kinds of pretexts to 
 excuse themselves from the trouble of examining 
 into subjects, which they are conscious it is their 
 duty to understand. Nothing can be more in- 
 disputable, than that it is the duty of men to 
 study the principles by which their actions ought 
 to be governed ; yet when, in 1810, the committee 
 on bullion excited the public attention to the 
 nature of currency (a subject which had been 
 lost sight of for some years), they, who supported 
 the principles therein developed, were assailed as 
 visionaries and theorists by those, who, assuming 
 to themselves the title of " practical men," proved 
 themselves, at the same time, utterly ignorant of 
 any rule by which to regulate their own conduct; 
 so that, to every one of the assailants it might be 
 justly said, 
 
 Nescis, quovaleat nummus, quem prsebeat usuni. 
 
 A merchant or banker, who does not under- 
 stand the principles of currency, is a mere au-
 
 8 
 
 tomaton; he might as well be made of cast iron, 
 and sign his name by steam : and to hear men in 
 those stations ridiculing all study of these prin- 
 ciples as matters of mere theory, the truth or 
 falsehood of which is immaterial for any practical 
 purpose, is as reprehensible as it would be in a 
 physician to ridicule anatomy and chemistry, as 
 theories with which the art of healing had no im- 
 mediate connection. 
 
 There are some persons, who, having investi- 
 gated the truth of this department of economical 
 science, perceive, that they cannot by any legiti- 
 mate reasoning contravene its positions; but who, 
 being bred up in the trammels of old habits, and 
 the contracted sphere of a counting-house, either 
 cannot apply general views to their own little em- 
 ployment, or apprehend that the adoption of 
 them, if universally acted on, would interfere 
 with their particular gains. The objections of 
 such persons are*, " that these positions, although 
 undeniably true, and such as would be excellent, 
 if they were to be applied to a new country, or to 
 one in which opposite maxims had not long been 
 acted upon, are dangerous to be adopted in this 
 country, burdened with so heavy a debt, and so 
 oppressed by taxation : that we had thriven well 
 under a contrary system, and that these views 
 
 * See, for an example, the debates on the Silk Trade.
 
 
 would make great inroads upon our financial and 
 commercial arrangements ; that, however true 
 upon paper, the wisdom of statesmen is shown in 
 knowing when to depart from and modify prin- 
 ciples, which might be too rigidly followed up; 
 and that, above all, this is not the time." It is 
 waste of words to argue with such objectors : no 
 time would ever arrive in which they could be 
 brought to confess it was right to act upon prin- 
 ciples which they could not overthrow. These 
 objectors are like the slave-owners, who, under the 
 mask of arguing against the present being the 
 time for the abolition of slavery, secretly intend 
 to keep their fellow-creatures for ever in their in- 
 human fangs. The utmost that can be allowed 
 to them is, that in those cases in which large 
 capitals have been embarked in pernicious mo- 
 nopolies, sufficient time should be granted for 
 the capitals to be withdrawn, and invested in 
 some other employment : but the more time it 
 is necessary to grant for this purpose, the more 
 indispensable it is not to delay an hour in taking 
 the first step. 
 
 They, who plume themselves upon being what 
 they please to term " practical men," are fond of 
 bringing forward insulated facts, from whence 
 they draw unwarrantable conclusions ; and when 
 these facts are shown to be irrelevant, and tin
 
 10 
 
 conclusions false, abuse as theories the argu- 
 ments by which they are exposed. A collection 
 of facts, however extensive, is perfectly useless 
 for every practical purpose ; that is, as a guide 
 for future conduct, until it has enabled us to 
 frame a theory which explains the causes and the 
 consequences of those facts ; and so far is it from 
 being true, that a mere practical man (that is, a 
 man who has no theory on the subject which he 
 is handling) is a person to be relied on for facts, 
 as some people erroneously suppose, no man is 
 competent to observe and note a fact, who is not 
 conversant with the theory of the subject to 
 which the fact relates ; for the observation of 
 Cullen is perfectly correct, that there are many 
 more false facts than false theories in the world. 
 Neither is it true, that correct principles of cur- 
 rency can be departed from with impunity, and 
 are of no practical importance ; for a wrong ap- 
 prehension of them has led to more direct ruin 
 of individuals, and classes, than any other error 
 in government. It is painful to speak of the 
 directors of the Bank of England, because they 
 are most amiable and honourable men* ; but it is 
 
 * These are not words of unmeaning compliment ; and I 
 fully subscribe to the following- observations of Mr. Jobn 
 Smith : " I would defy any man to show, in the history of the 
 commercial world, a more strict personal integrity than is to
 
 11 
 
 indisputable, that their conduct has been directly 
 at variance with the principles developed in the 
 following* Propositions ; and that, consequently, 
 their practice has been erroneous, and has ag- 
 gravated the evil, arising from fluctuations in the 
 value of the currency, which has occurred. Nor 
 can they on that account be justly blamed : they 
 declared their conviction of the truth of opposite 
 maxims in their evidence before repeated com- 
 mittees of parliament : they asserted in their 
 
 be found in the conduct of the Governors of the Bank of 
 England, in the whole of their money transactions with 
 the public. I will take, for instance, the period of 1816, 
 when the Bank was deriving enormous profits ; how acquired, 
 1 will not stop to consider. At this period, when they divided 
 the immense sum of 25/. per cent, upon the capital stock (a 
 circumstance, the previous knowledge of which would have 
 made the fortune of any individual), yet, on examining the 
 books, not a single director was found to have availed himself 
 of his private knowledge, or to have possessed one shilling 
 more of stock than was necessary to his being constituted a 
 director, according to the charter." — Debate on S?nall Note Bill, 
 Feb. 1826. Notwithstanding this testimony to the personal 
 character of the directors, it is not inconsistent to contend 
 with Hardcastle (p. 62), " That no greater evil can be 
 imagined, than that an establishment should have the power 
 (not by means of its capital, but by the expansion or con- 
 traction of its issues of mere paper), either to raise or lower 
 the money-value of all property, both real and personal ; and, 
 according to its good will and pleasure, to influence and regu- 
 late the transactions of every member of the community."
 
 12 
 
 own court, on Sept. 22, 1825, that the fluctua- 
 tions in the money market had not been oc- 
 casioned by them. They would, with their views, 
 have been wrong if they had acted otherwise 
 than in the way they have ; it is owing to their 
 ignorance of the power they possessed that they 
 have done so little harm : the fault has been with 
 Government, which, in the report presented pre- 
 viously to the introduction of Mr. Peel's bill, ad- 
 mitted the principle here contended for, and yet 
 left the power of creating unlimited paper money 
 in the hands of various irresponsible individuals 
 all over the kingdom. 
 
 If the principles of currency had been well un- 
 derstood, not a particle of the distresses, which 
 have so often occurred, could have been expe- 
 rienced. We should not have heard at one time 
 of the ruin of the country being threatened by a 
 drain of gold from the bank, nor of a bank re- 
 striction bill as a remedy for so visionary an evil. 
 We should not have had the effects of a sudden 
 and violent return from depreciated paper to a 
 metallic currency, ascribed to a transition state 
 from war to peace, nor to too great a remission of 
 taxes ; to over-population, nor to over-produc- 
 tion ; to over-trading, nor to over-farming : 
 neither should we have had a rapid rise in the 
 prices of all the productions of industry, cited as
 
 J3 
 
 a proof of solid and permanent commercial pros- 
 perity*. 
 
 The ordinary refuge for wilful ignorance on 
 this question is the alleged discrepancy between 
 writers on political economy. As long as the 
 minds of men are of varied powers, so long must 
 the portion of truth which each can perceive, on 
 any given subject, vary in a corresponding de- 
 gree. If the objection on that ground be made 
 against the study of all sciences, and that of po- 
 litical economy be only included with the rest, 
 the assertion at least has the merit of impartiality, 
 although it scarcely merits serious refutation. 
 But if it be meant to insinuate, that the diversity 
 of sentiment be greater among political econo- 
 mists, than amongst writers upon any other 
 science, the charge has not a vestige of truth to 
 rest upon. Let the charge, however, be granted ; 
 it proves nothing but the anxiety of the objector 
 to receive the dictum of some great name as 
 
 * " There never was a period in the history of this 
 country, when all the great interests of the nation were at the 
 same time in so thriving a condition." — King's Speech, 
 Feb. 1825. 
 
 " These are persons who imagine our prosperity is not 
 permanent ; but the House, I am sure, will concur with me 
 in opinion, that it rests on the most solid foundation." — 
 Chancellor of the Exchequer, March, 1825.
 
 14 
 
 the article of his faith, without giving himself the 
 trouble to investigate the foundation upon which 
 it stands. The greater the ignorance, the greater 
 difficulty the of reconciling apparent contradictions 
 on any subject. If a person, unskilled in medi- 
 cine, read two or three medical treatises consecu- 
 tively, he will rise from them with his mind in 
 a state of complete confusion, and the last read 
 work will appear to be at variance with all the 
 preceding ; yet the bases on which medical 
 science is supported are as fixed as the nature 
 of the subjects on which it treats will permit, al- 
 though not more fixed than those of political 
 economy. Even in those arts which are nearly 
 mechanical, variations perpetually take place ; 
 yet it would be in the highest degree absurd to 
 say, that the art itself were useless, or its princi- 
 ples unfixed, because certain anomalies presented 
 themselves to a superficial observer. In agricul- 
 ture, for example, no point can be more settled than 
 the advantage of an alternation of crops; yet the 
 longer a pasture has been unbroken, the more pro- 
 ductive with due care it becomes : does the dis- 
 cordance of these two facts prove, that there are no 
 fixed principles in agriculture, or that there is no 
 agreement of opinion amongst farmers ? that it 
 is immaterial whether the seed be thrown into the 
 ground at one season or at another ? and that the
 
 15 
 
 principles winch direct the alternation and course 
 of cropping are matters of mere theory, and of 
 no practical importance? Unless every transaction, 
 of whatever business a man carries on, be con- 
 ducted upon fixed principles, it never can be car- 
 ried on securely, nor stand the storms and 
 tempests which must agitate, at one time or 
 other, every portion of human society. 
 
 I recommend to those who affect to justify 
 their own want of steady principles by the al- 
 leged discrepancy in the statements of Smith, 
 Ricardo, M'Culloch, Mills, and Malthus*, to 
 attend to the following extract from the London 
 Magazine, on the discordance of physicians : the 
 reasoning is quite as logical, and the humour 
 much greater : — 
 
 " The history of small-pox is as well known to 
 the people as to physicians. It was the fashion 
 to keep the patient as warm as possible ; in warm 
 rooms, warm blankets, with warm fires, and so 
 on ; fresh air was esteemed poison ; cold air, 
 death. And if this was a fashion, it was one not 
 without its philosophy and its good reasons. The 
 eruption was ' better out than in :' it might be 
 checked; and, therefore, also, cordial and hot 
 drinks formed part of the fashion. But times at 
 
 * See Debates in the House of Commons, Feb. 24, 1826.
 
 16 
 
 last revolved, though old women, here and there, 
 still hold to the old doctrines and fashions ; and 
 it is not very likely that the fashion will retro- 
 grade again. 
 
 " A rational physician knows, that cold has the 
 same virtues in measles and scarlet fever as in 
 small-pox ; but it is still the fashion to keep the 
 measles warm, for the same reason, or lest the 
 eruption should be repelled; and should the reverse 
 be attempted, all the women, and nine-tenths of 
 the apothecaries, would be up in arms." 
 
 What a series of apparent absurdities be- 
 wilder the tyro who dabbles with practical che- 
 mistry ! He finds that water is made of the most 
 combustible materials ; that earth is no earth, but 
 a metal ; that instea of but one air, there are a 
 score ; that diamonds are only charcoal, and 
 charcoal diamonds; that there are substances of 
 immense power which he can neither see nor 
 weigh ; that he himself has been all his life a 
 plus or minus electrifying machine ; and that if 
 he were distilled he would be found to con- 
 tain little but azot and carbon. 
 
 But it is not with the sciences of medicine and 
 chemistry alone that political economy will bear 
 the strictest comparison. Let us take at once the 
 sublimest of all sciences, astronomy, and it will be 
 found, that the conclusions of political economy
 
 17 
 
 are drawn from premises as susceptible of proof, 
 are as much in agreement with each other, and are 
 as little affected by the differences of writers who 
 have treated it, as those of astronomy itself. Every 
 astronomer knows, that by far the larger portion of 
 that which he believes to be true concerning it, rests 
 entirely upon hypothesis ; and that " the highest 
 degree of certainty to which he can arrive is an 
 ascertained and tangible analogy, and that, con- 
 sequently, it admits of more abstract argument, 
 and allows a greater play of the imagination than 
 any other of the sciences." The proportion of 
 the magnitudes of the heavenly bodies to each 
 other rests purely upon hypothesis. The annual 
 and diurnal revolution of the earth, directly op- 
 posed to the daily sensations and eyes of tl\e 
 practical ploughboy, are founded on hypothesis. 
 So absurd, indeed, did this revolution appear to 
 all sober practical men when it was first de- 
 monstrated, that Copernicus dared not mention it 
 for many years : the practical men in Italy con- 
 strained the pope reluctantly to put Galileo in 
 prison, and made him learn penitential psalms by 
 heart to purge away his philosophy ; and when 
 Jaquier, and Le Sieur, published at Rome, so late 
 as 1742, the theories of that speculative heretic, 
 Sir Isaac Newton, upon the same subject, they 
 wisely inserted in a preface, that they did not 
 presume to believe that which they had proved to
 
 18 
 
 be true, unless that practical man, the pope, 
 should happen to be of the same opinion. 
 
 The great misfortune is, that the " practical" 
 men, that is, those who act without the guide of 
 reason or reflection, are always the most nume- 
 rous, and the most powerful. Dr. Harvey, the au- 
 thor of the most important discovery that ever was 
 made in physiology, complains in a letter to his 
 friend, that he was no longer consulted as a 
 physician by the " practical" men of his day : he 
 was a theorist in their eyes, and therefore con- 
 sidered unsafe to be trusted. There is scarcely 
 an instance in the history of human merit to be 
 found, of a man conferring a benefit on his fellow- 
 creatures by the superior powers of his head or 
 heart, who has not been feared, hated, and slan- 
 dered by his " practical" contemporaries ; and at 
 this present time we daily find attacks made 
 upon the personal characters and motives of the 
 more enlightened members of the king's govern- 
 ment, when all efforts to defeat their arguments 
 have proved unavailing. " Calumny is the tax 
 paid for celebrity," and an increase of information 
 is never made by the generation in which it is 
 first promulgated; for, as Locke observes, few 
 men after fifty acquire a new idea. 
 
 It is to merchants and bankers particularly, that 
 correct views of the principle of currency are in- 
 dispensable. This has been generally felt of late
 
 19 
 
 years, and there are many merchants and bankers 
 who have consequently made themselves perfect 
 masters of the subject. In 1793, 100 banking 
 houses in various parts of the country were 
 annihilated.* In 1825, nearly as many more 
 were destroyed t ; and. it is not too much to 
 assert, that not one such failure could have taken 
 place, if the managers of these houses had under- 
 stood and acted upon a correct rationale of their 
 business. If there be one part of the empire, in 
 which just views require to be more rigidly ad- 
 hered to than another, it is in this metropolis. 
 Here the common language of every day is cal- 
 culated to delude : I refer particularly to that 
 which points to the price of the public funds, as 
 the sole criterion of financial and commercial 
 prosperity. In the language of the Stock Ex- 
 change, the word " better " is made to mean, that 
 the funds are rising; although, by so doing, in- 
 terest is falling ; and it is universally admitted, 
 that a country is advancing in wealth, in propor- 
 tion as the rate of interest is high J. All causes 
 
 * Macpherson's Annals, p. 266. 
 
 t Tooke, p. 38 ; Lord Liverpool, Debate, Feb. 17, 1826. 
 
 X " From a decline in the public funds (not proceeding 
 from political causes), we must infer a rise in the rate of 
 interest ; and as the rate of interest is governed by the rate 
 of profit on the employment of capital, and that an increasing 
 rate of profit is highly favourable to the acquisition and ac- 
 cumulation of capital ; so docs it argue a much sounder state
 
 20 
 
 of the rise of the funds are totally left out of con- 
 sideration ; if they have risen they must be 
 " better"; the rise may have taken place from 
 causes the most ruinous in their ultimate conse- 
 quences; it may have taken place, as it almost 
 always has*, from a progressive depreciation of 
 the currency, which must in its re-action produce 
 the ruin of thousands ; it is of no consequence ; 
 stocks are rising, and therefore, in the cant of the 
 Stock Exchange, " things are better." On the other 
 hand, no consideration is ever paid to the causes 
 of the fall of stocks : this fall may arise from en- 
 lightened ministers removing shackles from com- 
 merce, and thereby rendering trade more advan- 
 tageous for the investment of money than the 
 public funds : it may arise from greater activity 
 in men leading them to prefer employing their 
 money in some business, wherein, by the addition 
 of their personal superintendance, they may gain 
 a larger income than they can by leaving it idly 
 in the Government annuities ; such considerations 
 never alter the phraseology of the stockjobbers, 
 which is still the same to denote falling stocks, 
 namely, " things are worse." 
 
 of things, that the rate of interest should be gradually ad- 
 vancing, than that it should gradually recede," — Hardcastle, 
 p. 69. 
 
 * See Mushet.
 
 21 
 
 I once heard a young man, who spent his 
 nights at a gaming table, say, that he liked to 
 have some money in the funds, because it was 
 pleasant to him, when he went to bed in the 
 morning, to think, that his money was still 
 playing, although he could not personally play 
 with it. Whatever else may be thought of the 
 sentiment, it is at least to be allowed, that this 
 worthy personage had correct views of the nature 
 of the Stock Exchange. It is little better than a 
 great gaming house ; and it is as absurd to sup- 
 pose, that a high price of the funds is an infallible 
 test of public prosperity, as it would be to quote the 
 bets at Tattersall's for the same purpose. Although 
 some honourable and respectable men are to be 
 found there, yet many of the habitual frequenters 
 of the Stock Exchange exist solely by gaming in 
 the funds, and do not hesitate to propagate any 
 falsehood by which their interest may be served. 
 Let the following extract, from the Morning Chro- 
 nicle of Feb. 24, 1826, serve as an example : — 
 
 " The extraordinary excitation, which was pro- 
 duced in the city on Wednesday, by the 'propaga- 
 tion of rumours as malicious as they were un- 
 founded, had yesterday subsided, and a strong 
 feeling of indignation was expressed, not only to- 
 wards those persons who were the inventors of the 
 calumnies, but those who assisted in giving them 
 greater publicity. There appears to have been no
 
 22 
 
 ground whatever for the suspicion, that two 
 London Houses would fail, and it is now pretty 
 evident that all these alarms were spread by a. 
 gang of organised conspirators, whose interests 
 were to be promoted in producing a fall in the 
 market, so as to relieve them from the effect of 
 the rise which had taken place, on the approaching 
 settling-day" 
 
 I have already observed, that, of all the sub- 
 divisions into which the science of political 
 economy may be separated, there is not one of 
 so much importance as the laws which regulate 
 the currency. It is on this account that I have 
 endeavoured to condense the subject into the 
 shortest possible space in the following Proposi- 
 tions, hoping thereby to overcome the reluctance 
 of some persons to their consideration. It might 
 be admitted, that the subject is dry ; but the 
 elements of every subject are always dry; all 
 grammar is dry ; mere technicology must be dry : 
 but ignorata sermo, ignorata et ars ; and as it is a 
 point upon which the property of every indi- 
 vidual, from the king to the peasant, turns, there is 
 no one, whether landlord, farmer, labourer, manu- 
 facturer, merchant, or banker, who is not deeply 
 interested, not only in understanding the subject 
 himself, but in assisting others to understand it 
 likewise.
 
 ELEMENTARY PROPOSITIONS, 
 fa. fire. 
 
 1. Trade is the Exchange of one Commodity 
 for another*. 
 
 2. The intrinsic value of a commodity is the 
 quantum of skill and labour required for its pro- 
 duction : the marketable value is as the supply 
 and demand. 
 
 3. As simple barter is inconvenient, a common 
 representative of all commodities has been chosen 
 to facilitate exchange. 
 
 * This proposition seems so self-evident, that no one, on first 
 hearing it. thinks of denying- it. Yet it is denied every day : 
 and the country is annually congratulated by Chancellors of 
 the Exchequer upon the excess of its exports over its imports. 
 But if this proposition be true, as it indisputably is, 1st. there 
 is no such excess : and. 2d!v. if there were, it would be matter 
 for regret and not for congratulation ; because it is in fact 
 saying, that our manufacturers hare sent out a portion of their 
 commodities for which they have received nothing in return. 
 I do not believe that they annually do any such thin? ; and 
 if they do, they are foolish, and deserve censure, not con- 
 gratulation. 
 
 D
 
 26 
 
 4. This common representative is Precious 
 Metal. 
 
 5. Precious Metal is less liable to waste than 
 most things ; it is also little likely to be suddenly 
 increased or diminished in any considerable quan- 
 tity ; it is therefore the best representative that can 
 be found. 
 
 6. Being the representative, it is consequently 
 the standard measure of the values of the repre- 
 sented commodities ; and if it could be as fixed 
 a measure of value as a foot rule is of space, it 
 would be so much the better ; it is only the best 
 that can be found. 
 
 7. Coining is the State's warrantry of the Metal's 
 purity*. 
 
 8. All commodities are said to be dear or cheap 
 as they require more or less of this representative 
 to be given for them ; which expressions can have 
 no meaning but in reference to the standard (6) 
 by which the commodities are measured f. 
 
 * It is necessary for a State to fix the number of parts into 
 which it will divide a given portion of metal for its currency, 
 and this fixed number of parts is called the Mint Price of the 
 metal : i. e. if a pound of gold is coined into 40 equal parts, 
 each called a Sovereign, the Mint Price of a pound of gold is 
 said to be 40 Sovereigns. The Mint should coin any bullion 
 that is brought to it, either gratis, or at a very low price. 
 
 f As Precious Metal is the standard by which all other 
 commodoties are measured, to say that it is dear or cheap, is 
 a contradiction in terms.
 
 27 
 
 9. If there be a smaller quantity of metal in a 
 country at one period than at a prior one, the 
 price of other commodities (their quantities and 
 intrinsic value remaining the same) is said to 
 have fallen : i e. a smaller quantity of Metal must 
 represent the same quantity of commodities, and 
 vice versa*. 
 
 10. A country must always contain that quan- 
 tity of Metal which is necessary for its trade : for 
 if the quantity of Metal in it were so small that 
 commodities had greatly fallen in price, they 
 would be sent out of the country to be exchanged 
 for Metal to be brought back. If the quantity of 
 Metal in it were so great that commodities had 
 greatly risen in price, the Metal would be exported 
 rather than the commodities, and foreign commo- 
 dities brought back instead t- 
 
 * If there be a joint currency of Metal and Paper, and any 
 circumstances should cause an export of the metal, it will be 
 necessary for the issuers of that Paper to diminish its quantity 
 also, that the Paper, becoming smaller in quantity, may rise in 
 value in proportion as the Metal rises. At the time of the 
 Bank Restriction Bill, Paper ought to have been withdrawn, 
 and the Bill immediately repealed : and had the true princi- 
 ples of currency been understood, it would never have been 
 passed. 
 
 t The quantity of payments to be made is no criterion of 
 the quantity of currency required to make them. It follows 
 also, that no foreign loans, nor subsidies, nor remittances to 
 troops abroad, nor overtrading, nor overspei illation, however
 
 28 
 
 1 1 . Thus a country must keep that quantity of 
 Metal which is necessary to facilitate its barter, 
 and no more*. 
 
 12. As trading by means of Precious Metal is 
 more convenient than simple barter (3, 4), so Paper 
 is more convenient than Metal ; but Paper is de- 
 ficient in all the other qualities that Metal pos- 
 
 absurd as was ignorantly asserted to be the case in 1796, 1810, 
 and 1826, need necessarily occasion the export of a single 
 ounce of precious Metal. 
 
 * The old notion of the Balance of trade continuing against 
 a country is, it is to be hoped, becoming exploded, for it is 
 seen to be impossible and absurd. The opinion entertained 
 by the wisdom of our ancestors was, that the riches of a man 
 or of a country consisted exclusively in gold. This fanciful 
 theory still hangs about many people, and they accordingly 
 think, that when what they call an unfavourable balance of trade 
 exists against any country ; i. e. when at any given day of 
 making up accounts it is found that the country has imported 
 more than it has exported, the deficiency can only be adjusted 
 by an export of Gold — so much for the theory ; but the fact 
 is, that a balance is liquidated less often in gold than in any 
 other commodity ; and never, unless gold is cheaper in the 
 remitting country than any other commodity. There are 
 men, however, who still maintain that the loans to Austria 
 caused a drain of gold on the bank previous to the stoppage 
 in 1797 ; and that the scarcity of coin in 1810 was owing to 
 its being remitted to our army in the Peninsula. But, in point 
 of fact, the Emperor never saw an English guinea in his life ; 
 and sending the precious metals to Spain must be about as 
 wise a process as sending coals to Newcastle. 
 
 Any Law tending to control the export and import of Pre- 
 cious Metal may do harm, but can do no good.
 
 29 
 
 sesses ; 1st, It is very liable to waste ; 2dly, It 
 may be suddenly increased or diminished in any 
 quantity; it wants, therefore, all the necessary 
 qualifications which ought to constitute a stan- 
 dard (6)*. 
 
 13. Paper then is an equivalent for Precious 
 Metal, only inasmuch as it is convertible into it 
 at the will of the holder. Paper being the repre- 
 sentative of a representative. 
 
 14. The coined Metal or Paper, used in the 
 internal trade of a country as its representative, 
 is called the Currency of that country. 
 
 15. A given portion of Paper is said to be 
 worth a given portion of Metal (not according to 
 its intrinsic, nor to its marketable value), (2) but, 
 because it is convertible into that quantity of 
 metal which it professes to be. 
 
 16. It has been (10) shown, that the necessary 
 quantity of Metal is preserved in a country by its 
 free import and export : if Paper be substituted 
 for Metal, besides the other defects mentioned 
 (12), this is superadded, viz. that it cannot be ex- 
 ported, because it is useless everywhere but in 
 the country in which it was first issued : the same 
 methods, therefore, which regulate the due quan- 
 
 * Precious Metal is of great intrinsic value ; Paper is of 
 very low intrinsic value ; so that a greater quantity of unpro- 
 ductive capital is locked up in a Metallic than in a Paper cir- 
 c illation, which is another advantage in favour of Paper.
 
 30 
 
 tity of Metal in a country, cannot regulate the due 
 quantity of Paper. 
 
 17. If the currency of a country be composed 
 partly of Metal and partly of Paper, and if, from 
 too great a quantity of Metal being imported and 
 coined, or too great a quantity of Paper issued, 
 the currency become redundant, as the Paper 
 cannot be exported to rectify it (16), the Metal 
 will (10) ; and if the Paper be convertible into 
 Metal, as much will be so converted, and the 
 Metal exported, as will reduce the quantity of 
 currency to the same amount as if there had been 
 no Paper at all. 
 
 18. As long therefore as the Paper currency be 
 convertible into a metallic one, the joint quantity 
 of the two will never be greater nor less than it 
 would be if there were no Paper at all, and there- 
 fore the Paper will be as efficient a representative 
 as the Metal. 
 
 19. The relative quantities of the two at any 
 given period will vary from any other given period, 
 according to the convenience of traders, and are 
 immaterial, as the joint quality is the essential cir- 
 cumstance*. 
 
 * As it is the paper, which has a constant tendency to be- 
 come redundant, and as, sooner or later, this redundancy must 
 be diminished, the greater the proportion of convertible paper in 
 the currency of any country, the greater will be the fluctua- 
 tions in the value of the whole currency.
 
 31 
 
 20. If the Paper be not convertible ; if the 
 quantity of currency become redundant ; and if 
 the redundancy be greater than thejexport of 
 Metal can correct (10, 16), the remaining Paper 
 currency will be depreciated ; i. e. will not be 
 worth so much as it professes to be (15), and the 
 prices of all other commodities will rise (9). 
 
 21. It has been shown (9) that the smaller the 
 quantity of currency be in a country at any one 
 given time, the lower must be the prices of all 
 other commodities at that time ; and that if the 
 Metallic part of that currency be exported, it is 
 because there is a redundancy of currency ; if 
 this redundancy were to be relieved by any 
 other means, the same effect would be produced 
 as if the Metal were exported*. 
 
 22. It has been shown also, that as soon as the 
 redundancy is reduced, no farther export of Metal 
 
 * The first clause of this proposition is the clue by which 
 all the intricacies, which have marked the rise and fall in 
 commodities since 1793, may be unravelled. Whenever com- 
 modities were dear, prices high, and people thought them- 
 selves in a state of prosperity, it was owing to more of this 
 representative being created ; that is, more paper issued. 
 The recal of this extra paper produced the subsequent falls 
 in the prices of commodities, and consequent ruin of those 
 persons, who had bought them dear, and were compelled to 
 sell them cheap ; the fall being proportionate to the pre- 
 ceding rise.
 
 32 
 
 can take place; consequently if the redundancy 
 were relieved by any other means, no export at 
 all would take place. 
 
 23. As the Metal is exported because the joint 
 currency is in excess (17), and as, if this excess be 
 removed by an^ other means, the metallic part 
 would not be exported (22) ; were a sufficient part 
 of the Paper withdrawn from circulation, no ex- 
 port of Metal would take place*. 
 
 24. It follows, therefore, that wherever there 
 is no Metal in circulation, it is because the Paper 
 is in excess : and that no measure can be effec- 
 tual to make Metal return to a country from 
 whence it has disappeared, but the withdrawing 
 part of its Paper currency from circulation, and 
 making the remainder convertible into metal, 
 ad libitum. 
 
 The country has recently been involved in what 
 has been unanimously described by his Majesty's 
 ministers, and by all the merchants and bankers in 
 
 * Other circumstances besides the quantity of Paper can 
 cause a variation in the supply of Bullion, but nothing can 
 permanently exclude it, nor permanently maintain it as cur- 
 rency, but the regulation of the Paper which circulates to- 
 gether with it.
 
 33 
 
 the House of Commons, to be a state of " unex- 
 ampled distress." It is necessary to inquire what 
 was the cause of this distress ; because, if the 
 same cause exists now, no one will venture to 
 deny, that similar causes must produce similar 
 results ; and that it is our bounden duty to pro- 
 vide a remedy, or to warn the public to be pre- 
 pared for the result. 
 
 The currency of Great Britain is computed to 
 consist of 60,000,000/., of which 20,000,000/. is 
 said to be in the precious metals; 20,000,000/. 
 in Bank of England paper, 12,000,000/. in 
 country bankers' paper, and 8,000,000/. private 
 bills. ' 
 
 If the whole of this currency were to be made 
 of the precious metals, it would cause 40,000,000/. 
 of the capital of the country to be immediately 
 sunk in forming it ; and it would cost a farther 
 sum of 2,000,000/. annually, to supply the wear 
 and tear of the coins, expense of assaying, coin- 
 ing, &c, and the loss of interest on the whole ad- 
 ditional 40,000,000/. 
 
 But as the withdrawing of the paper from cir- 
 culation would lead to a great demand for metals 
 from abroad, producing a scarcity, and conse- 
 quently a rise in their value elsewhere, it is 
 probable that paper, of private traders, would be 
 more resorted to than it is at present ; and thus 
 
 E
 
 34 
 
 less currency would answer the purposes of trade, 
 and that 20,000,000/. of metallic currency would 
 suffice, in addition to the 20,000,000/. already 
 existing. 
 
 A currency of 40,000,000/. of gold would, how- 
 ever, not only be a currency of higher value than 
 the present, in the proportion of two to three, 
 causing, consequently, the reduction of the price 
 of all commodities to that extent, but it would be 
 as much higher than the value of the present cur- 
 rency, as the proportion of gold in this country, 
 as compared with the rest of the world at that 
 time, would be greater than the proportion of 
 metal now in this country, as compared with the 
 rest of the world at this time ; so that the effect 
 of resorting to a metallic currency might be to 
 lower the price of all commodities nearly one- 
 half. 
 
 This would of itself be immaterial ; but another 
 effect would be to double the amount of the 
 taxes; to double the amount of debts, mort- 
 gages, annuities, &c. ; to double the salaries 
 of the public servants, pensioners, soldiers, sai- 
 lors, &c; causing a pressure upon the people 
 which would probably produce some ruinous 
 convulsion. 
 
 If, therefore, any bill, which enacts that we 
 shall return to a metallic currency, were to be
 
 35 
 
 carried into full effect, it would be absolutely ne- 
 cessary to make some regulation upon the points 
 specified in the last paragraph ; otherwise, such a 
 bill cannot be carried into effect ; and merely to 
 enact, that this country shall return to a metallic 
 currency, without accompanying that measure 
 by others, is absurd, because it is not possible, 
 shnpliciter, to adopt it. There would besides be 
 a flagrant injustice in doing so ; for it would com- 
 pel us to pay the fundholder in a currency of a 
 higher value than he lent ; or, in other words, to 
 pay him more than we borrowed. 
 
 There are two modes, however, by which it 
 may be partially adopted : the one is by avowedly 
 depreciating the coin ; that is, enacting that one 
 sovereign should pass for two (a measure for 
 which much might be said, which is here passed 
 by) ; the other mode is, and it is in fact the same 
 as the former, only in a more circuitous, and 
 therefore less obvious way, by keeping up, as 
 we are doing at present, the largest possible 
 amount of paper, with the smallest possible 
 amount of metal. 
 
 This mode being the one now actually in 
 operation, is certainly the better one to continue 
 to adopt ; but it is absolutely absurd to enact, that 
 any body or bodies, be they Bank of England, or 
 others holding this paper, shall, on any sudden
 
 36 
 
 emergency, no matter from what cause arising, 
 be called upon for the payment of a debt in one 
 description, and one value of currency, which was 
 contracted in another description, and another 
 value ; whilst, on the other hand, there is no 
 preservative against an over-issue of paper, and 
 consequent depreciation of the currency to any 
 amount, except the convertibility of that paper, 
 under some form or other, into the precious 
 metals, at the will of the holder. 
 
 To meet the first branch of this dilemma, it is 
 indispensable that paper, the existence of which 
 is sanctioned by the Legislature, should be a 
 legal tender; and for this reason, I doubt the 
 propriety of there being more than one chartered 
 bank, which should be the bank of the state, and 
 its paper alone the legal tender. But however 
 this may be, all in substance that I contend for is, 
 that if we are to have a paper currency autho- 
 rized by law, that paper shall be made avail- 
 able to us at the time we want it most, and not 
 only at the times when we want it least ; that it 
 shall be of use to us in times of sudden panics, 
 when it is physically impossible to procure gold 
 to give in exchange to the holder of paper, and 
 not of use only when it is as easy to procure gold 
 as paper. To meet the other branch of the di- 
 lemma, it is necessary to enact, that paper shall
 
 37 
 
 be legal tender for no sum above the value of 
 100 ounces of gold bullion; and, in order to 
 save the delay and expense of useless coining, 
 that bullion, stamped at the Mint, shall be given 
 instead of coin, according to the plan of Mr. Ri- 
 cardo. 
 
 Recent events have shown, that the mere con- 
 vertibility of paper into metal is not sufficient to 
 constitute a safe currency, without there be a 
 farther control upon the issue of paper. For it 
 appears, that the public is not aware sufficiently 
 early of the depreciation that is going on, to 
 check it before it gets to so great a height, that 
 the difference between its greatest amount (i. e. 
 the highest price of commodities) and its lowest 
 amount, which ensues in consequence of the 
 reaction by the contraction of the paper (i. e. the 
 lowest price of commodities) is so great, as to 
 cause enormous loss to, if not the ruin of, all men 
 who have engaged to make payments, at the time 
 of the latter state of the currency, for commodities, 
 which were contracted for in the former. The 
 rise in the price of every production during the 
 year 1824, and beginning of 1825, showed to 
 all persons who understood the principles of cur- 
 rency, that there was a depreciation of the cur- 
 rency going on, although it was impossible to 
 ascertain the amount of it, nor precisely the
 
 38 
 quarter whence it originated*. It has subse- 
 
 * The following Comparative Statement of the Prices of 
 different Articles is taken from Mr. Tooke, p. 196: — 
 
 ARTICLES. Price, 1823. Price, 1825. 
 
 Cochineal, Spanish 24 26 
 
 Cotton, Bowed Georgia 10| 18| 
 
 Bengal, Surat 8J 13| 
 
 Indigo, East India 12 16 
 
 Iron, British 7 13 
 
 Lead, ditto 23| 30f 
 
 Spices, Cinnamon 8£ 13| 
 
 Mace 6f 18 
 
 Nutmegs 3| 12 
 
 Pepper, black 71 9§ 
 
 Sugar, B. P. Gaz. average 38 45 
 
 Havannah, white 48 57 
 
 Silk, Reggio 16 17 
 
 China, raw .. 22 28 
 
 Speltre 30§ 41| 
 
 Tallow, St. Petersburgh, yellow, common 37 43 
 
 Tobacco, Virginia, ordinary and middling... 3J 6f 
 
 Wool, German, fine 8| 9| 
 
 Wheat (Torrens, p. 274) 51| 66 
 
 Three per Cent. Consols (March) 73 J 94 
 
 Whilst currency is becoming redundant, interest continues 
 falling, and men endeavour to employ the capital so created 
 in any way which seems to promise a higher rate than they 
 make in their ordinary business. Hence a variety of dis- 
 turbing causes are immediately put into operation; otherwise, 
 the rise of prices would be exactly commensurate with the 
 fall in the currency ; but such is not the case in all instances ;
 
 39 
 
 quently appeared to have arisen partly from the 
 issue of Bank of England, but chiefly from the 
 issue of country paper. The convertibility of the 
 paper into gold prevented the depreciation going 
 farther than it did, and caused its being again 
 diminished in quantity ; but the suddenness of 
 its contraction produced the ruin of thousands, 
 which many of the sufferers, such as labourers 
 and tradesmen, could not prevent by any manage- 
 ment, however prudent. It has been said in the 
 House of Commons, that the ignorance of the 
 Bank Directors, of sound principles of currency, 
 prevented their taking such steps as would have 
 obviated much of the evil ; but as there is no 
 reason to suppose that any mode of appointing 
 Directors of the Bank would ensure the election 
 of more intelligent men (and more honest and 
 conscientious cannot be found) than are there at 
 present, it ought not to be left in their power to 
 produce the ruin of any individual, far less of any 
 large class of the king's subjects. 
 
 It is true that the mere convertibility of the 
 paper is sufficient to prevent its ultimate depre- 
 ciation, and to make the currency right itself*; so 
 
 for a small artificial fall in the value of currency, causes a 
 very great artificial and unequal rise in the prices of all com- 
 modities. 
 
 * " There was one point to which he would advert, because 
 he thought the doctrine contained in it was most erroneous.
 
 40 
 
 that at the end of 100 years, the paper, upon the 
 average, during that period, will not have been 
 depreciated. But the mere convertibility is not 
 sufficient to prevent ruinous vacillations, ebbs 
 and flows to an immense amount, so that it may 
 be doubtful whether as much capital would not 
 have been destroyed at the conclusion of 100 
 years, as would have been, by at once returning 
 to a complete metallic currency, and depreciating 
 the coin one-half. It is the more necessary to 
 dwell upon this subject, because Mr. Maberley, 
 in a speech much commended by Mr. Huskisson, 
 erroneously contended, that the foreign exchanges 
 immediately indicated the depreciation of the 
 currency, the very moment that it occurred; 
 whereas, the bare fact of the coin being exported, 
 is proof sufficient of the currency being in ex- 
 cess, whether the exchanges indicate it or not. 
 
 That the mere convertibility of the paper can- 
 not check depreciation until it has proceeded 
 
 On that doctrine the country bank-note circulation had been 
 principally defended, and that was, that there was nothing 
 better than a paper circulation, convertible into gold. Now, 
 that doctrine was true only to a certain extent, namely, that 
 wherever a paper circulation was convertible into coin, its 
 evils would, in the end, cure themselves. That cure, how- 
 ever, could only be carried into effect at the expense of the 
 ruin of hundreds of thousands of persons ; and a cure with 
 such consequences was almost as bad as the endurance of the 
 evil itself." — Lord Liverpool's Speech, Feb. 17, 1826.
 
 41 
 
 great lengths, will be obvious from considering 
 the rise and progress of the evil. An issuer of 
 paper lends an extra quantity of paper, say 
 10,000/. to a manufacturer of cloth, who causes 
 therewith so much extra cloth to be produced. 
 This is exported, in the usual course of trade, by 
 the merchant, and as much cochineal as was 
 heretofore equivalent, and which would have re- 
 mained equivalent, if the currencies had remained 
 the same, is imported in its stead. But it is not 
 until the adjustment of the account, between the 
 merchants in this country and the merchants to 
 whom the cloth is remitted, and who have re- 
 mitted the cochineal in exchange for it, that it is 
 discovered whether the balance be in favour of 
 one party or the other, and whether a further 
 export of commodities or of bullion must be sent 
 out in return for what has been received*. If the 
 
 * A small extra issue of Bank of England paper may fa- 
 cilitate a much greater extra issue of country paper, and the 
 two together will facilitate and produce an extra quantity of 
 private bills, acceptances, &c, to a greater amount of this 
 latter than can be well ascertained. A large proportion of 
 the transactions which caused the rise of prices was done by 
 means of acceptances, and transfer of joint-stock-companies' 
 shares. The amount of these shares, which were transferred 
 for commodities, was considerable ; and it is said by some 
 very inquisitive and intelligent men, that the excess of these 
 acceptances exceeded by many times the amount of the excess 
 of bank and country notes. On this subject, a gentleman of 
 great accuracy wrote to me as follows : " The issues of 
 
 F
 
 42 
 
 cloth cost 10,000/. here, it should sell for 10,000/. 
 there also. But as the extra issue of paper here 
 made currency more plentiful, more of it was 
 given for the making of the cloth ; and the real 
 value of the cloth, when measured by the cur- 
 rency of the country to which it was sent, and 
 from whence the cochineal was returned, was 
 found to be only 9,000/. More cloth, therefore, 
 must be sent, or bullion to the amount of another 
 1,000/. ; and as the same process that had raised 
 the cloth, which was really only worth 9,000/., 
 to the apparent value of 10,000/., had been per- 
 forming the same operation upon all other manu- 
 factures, bullion would be the cheapest commo- 
 dity in the country, and would be sent out to 
 make up for the deficient value of the cloth. 
 
 The time of the adjustment of this account will 
 vary according to the place to which the pro- 
 ductions have been sent. An adjustment with 
 China, obviously cannot take place so soon as an 
 adjustment with France ; and although the cur- 
 paper-money were aided to a monstrous extent by accept- 
 ances. I know three men in one connection, and five in 
 another (I do not mean as partners), who contrived to get out, 
 and to keep out, nearly half a million of their notes ; and 
 it appears, that they only wanted a little more time to make 
 the large businesses, in which they embarked, and supported, 
 profitable. They have all failed but one, and have put up- 
 wards of 300 persons out of employment. Such things as 
 these were carried on to a monstrous extent."
 
 43 
 
 rency was in point of fact in excess, the moment 
 the notes were paid out of the hands of the is- 
 suer into those of the manufacturer, it is probably 
 a year or eighteen months, at the soonest, that 
 the depreciation can be suspected. 
 
 If this were an insulated transaction, the evil 
 would be soon remedied; but, unfortunately, vires 
 acq air it eundo. The first operation is an extra 
 demand for labour, and consequently, of all the 
 things consumed by the labourers : extra demand 
 for their goods, causes more manufacturers to 
 seek for assistance to manufacture more goods, by 
 applying for notes, which they erroneously be- 
 lieve to be solid money : the more prices rise, 
 the more notes are demanded ; and the more 
 notes are lent, the more prices rise. The country 
 bankers, one and all, avow, that the more prices 
 rise, the more notes they issue ; so that before the 
 adjustment of the first transaction of over-issue, 
 the whole country has become inundated with a 
 false currency, which suddenly reveals itself, by 
 the public hearing that all the gold has gone out 
 of the country, at which the people are seized 
 with amazement and alarm. The evil also will 
 be severer or lighter, according to whether a large 
 stock of the extra commodities shall have been 
 accumulated at home, before they were sent abroad; 
 for as long as the employment of the notes, and 
 the labour they have set in motion, be confined to
 
 44 
 
 this country, it is impossible for any variation to 
 take place in the foreign exchanges. 
 
 As soon as the public becomes alarmed, the 
 poorest members of it very wisely endeavour to 
 convert all the paper in their possession into gold. 
 Their doing so, however, encreases the embar- 
 rassment ; and it is now proposed in Parliament, 
 to take from them the power of aggravating such 
 an evil, by suppressing all notes under the value 
 of 51. If the country bankers have lent upon 
 mortgage, or locked up, in any similar way, the 
 funds deposited with them, this measure will 
 cause many of them to break. This, however, 
 may be called only a temporary evil, and as 
 such justified. The permanent effect of the 
 measure will be to cause a considerable loss to 
 the capital of the country, diminishing the power 
 of employing labour, produce a great fall in 
 prices, dismissal and starvation of labourers, and 
 increase of the taxes and salaries of the public 
 servants ; because it will raise the value of the 
 currency. But since the breaking of the country 
 banks affects principally the labouring classes, 
 whose wages are exclusively paid in such notes, 
 producing the greatest misery and distress 
 amongst them, it is a lesser evil that the capital 
 should be sunk, than that the labourers be so 
 much robbed. At all events, this measure ought 
 to be resorted to, until some plan be found out
 
 45 
 
 adequate to give us a secure paper currency. At 
 the same time it is to be remembered, that this 
 measure is not an absolute preservative against 
 the effects of panic, because the largest run that 
 ever was made upon the Bank of England, was 
 made at a period when no small notes were in 
 existence; and farther, that the chance of forging 
 coin successfully is much greater than that of 
 forging country paper ; and if the punishment of 
 death were taken away altogether for forgery, the 
 issuers of paper would readily find means of pre- 
 venting its successful imitation. 
 
 The only effectual preservative against over- 
 issues of paper, is to take from all persons, who 
 have a personal interest in depreciating the cur- 
 rency, the power to do so. It is idle to contend, 
 that laws to regulate the issue of notes, payable 
 on demand, is an uncalled for interference of go- 
 vernment with the freedom of trade. Issuing 
 notes is not trading, but coining money : a power 
 which no sovereign but that of England ever suf- 
 fered to depart from his own hands, and which 
 never can be safely lodged in any other. If it 
 is deemed necessary to continue the punishment 
 of death as the penalty for putting into circula- 
 tion worthless coin, it is passing strange that no 
 penalty whatever should be affixed to putting into 
 circulation worthless paper. It would puzzle a 
 whole college of Jesuits to explain the moral
 
 46 
 
 difference between the two offences, and the evil 
 to the community must be acknowledged equal 
 in both cases. No promissory notes, payable on 
 demand, ought to be issued by any company or 
 individual, but the bank of the state ; and an 
 account of its affairs ought to be regularly pub- 
 lished every quarter, together with the amount 
 of bullion purchased, imported, exported, and 
 coined, that the public may always know exactly 
 how it stands, and upon what principles its 
 conduct is regulated ; at the same time, means 
 should be found to prevent its being a mere 
 tool of the executive, as the Bank of England 
 has often been hitherto. 
 
 As we cannot dispense with a paper currency, 
 paper must be made a legal tender ; for if it be 
 not, great ruin must ensue at particular periods, 
 whenever a sudden and general demand for gold 
 shall be made upon the banks which issue the 
 paper. It is obvious, that it is physically im- 
 possible for 20,000,000/. of coin to satisfy the 
 demanders of it in exchange for 40,000,000/. of 
 paper. On the other hand, if all paper be made 
 legal tender, there is an end to its convertibility 
 into gold, and consequently to all prevention of 
 an over-issue of it. This is a dilemma necessarily 
 arising out of a large paper currency, the fluctua- 
 tions in the value of which must be commensu- 
 rate with the proportion, that the paper shall
 
 47 
 
 exceed the coin ; and the best remedy is to make 
 one paper only legal tender, and this paper should 
 be one over which Parliament can exercise a 
 control. 
 
 There is one other mode by which fluctuations 
 in the value of the currency might be prevented, 
 that is by fixing the amount of paper, which shall 
 be issued, by law. Suppose, for instance, that 
 the commerce of the country requires a currency 
 of 60,000,000/. ; let a law authorize the issue (if by 
 the Treasury*, so much the better) of 40,000,000/- 
 of paper; this of course to be the only paper 
 payable on demand in the country, legal tender, &c, 
 and let the remainder of the currency be made 
 up of coin. The state of trade could never be 
 such as to make 40,000,000/. of paper excesssive, 
 and the fluctuations in quantity of currency would 
 take place in the coin alone, by which the value 
 of the currency would remain fixed. 
 
 A plan has been recommended for giving in- 
 creased solidity to the system of country banking, 
 which is to increase the number of their partners, 
 and ensure these partners being men of con- 
 siderable property. But no number of partners, 
 nor no extent of property can prevent men from 
 over-issuing their paper, when it is their interest 
 to do so. It must never be lost sight of, that the 
 
 * The political objections to this I purposely pass by.
 
 48 
 
 root of all the distresses which have occurred ever 
 since 1793, is to be found in an over-issue of 
 paper. The partners in the Bank of England are 
 numerous and opulent ; but no country bank is 
 more desirous of forcing its paper into circulation 
 than is the Bank of England. The measure is 
 no doubt a wise one, for other reasons * ; that is, 
 the law which limits the number of partners is 
 very absurd and mischievous, and therefore it is a 
 good thing to repeal it ; but as to being a cure, 
 or even the smallest prevention against the recur- 
 rence of evils similar to those which we are at 
 this moment experiencing, it will not, nor cannot 
 
 * "The present system of law, as to banks, must now be 
 altered in one way or other. It was the most absurd, the 
 most inefficient; it had not one recommendation to stand 
 upon. The present system was one of the fullest liberty, as to 
 what was rotten and bad ; but of the most complete restriction, 
 as to all that was good. By it, a cobbler or a cheesemonger, 
 without any proof of his ability to meet them, might issue his 
 notes, unrestricted by any check whatever ; while, on the 
 other hand, more than six persons, however respectable, 
 were not permitted to become partners in a bank, with whose 
 notes the whole business of a country might be transacted. 
 Altogether, this system was one so absurd, both in theory and 
 practice, that it would not appear to deserve the slightest sup- 
 port, if it was attentively considered, even for a single mo- 
 ment." — Lord Liverpool's Speech, 17 th Feb. 1826. 
 
 Is it not astonishing, after this speech, that Lord Liverpool 
 has left the cobbler and cheesemonger the power still to 
 issue his notes unrestricted by any check whatever ?
 
 49 
 
 have the remotest influence. It is farther pro- 
 posed, that all issuers of notes should deposit a 
 security for the notes which they issue ; but this 
 is as futile as the former part of the plan. Sup- 
 pose a man with an estate or stock worth 50,000/. 
 deposits this security, and obtains leave to issue 
 50,000/. notes ; he then, with these, buys more 
 land, to the amount of 10,000/., deposits this, and 
 issues again so many more notes. Thus he 
 would proceed upon a system precisely analogous 
 to that which the country bankers at present pur- 
 sue ; namely, increasing their issues in proportion 
 to the rise in prices. 
 
 As it has been contended by Lord Liverpool, 
 in a speech of great length*, " that the principal 
 
 * " Their lordships would recollect, that on a former occa- 
 sion a noble lord had referred to an expression of his on the 
 first day of the present session ; referring- also, as their lord- 
 ships would recollect, to what had passed last session, that 
 such a crisis as that now existing was not unforeseen by himself 
 and others. The noble lord, their lordships would recollect, had 
 not on that occasion repeated his whole declaration, and had 
 said that he (Lord Liverpool) had not connected the great 
 speculation in the country (to which he had referred) with 
 country banks. Now it was distinctly in his own recollec- 
 tion, and their lordships would find, on referring to those 
 floating records, which, however loose, generally gave an ac- 
 count of what passed before their lordships undoubtedly 
 correct in substance, that he had, in some respects, gone out 
 of his way to give notice to those embarked in the specula- 
 tions of that period ; and had then stated, that those specvla- 
 
 G
 
 50 
 
 source of the recent distress is to be found in the 
 rash spirit of speculation, which has pervaded the 
 
 tions, which he foresaw would bring on distress and ruin, and 
 which induced him then to make the declaration, were not 
 confined to this town, but had spread much more widely, and 
 had extended through the whole of the country, through the 
 medium of the country banks. Government had received 
 intelligence of this, and numerous individuals knew of it as 
 well as government. When he referred to this declaration, 
 he did it out of no view of laying claim, he could assure their 
 lordships, to any prophetic spirit, beyond that possessed by 
 any other noble lords, who, in the course of business, had di- 
 rected their attention to questions of that nature. Their 
 lordships must say, when they recollected the numerous 
 speculations of the last year, the mining speculations, the 
 loans to foreign countries, the various extravagant projects 
 which were on foot, that it was impossible but sooner or later 
 a re-action must take place. In discussing the proposed 
 measures, he should first endeavour to ascertain the causes of 
 the present distress. And he had no difficulty in stating, that 
 he agreed with those who had ascribed the principal part of the 
 evil to those extraordinary and extravagant speculations which 
 were afloat in this country during the last year, and which un- 
 doubtedly had their origin in the then great prosperity of the 
 country. ," — Lord Liverpool's Speech, ljlh Feb. 1826. 
 
 That is, speculation has brought on distress and ruin — The 
 great prosperity of the country has brought on speculation — 
 Ergo, great prosperity has brought on distress and ruin ! 
 
 It is impossible, therefore, that his lordship can have given 
 any warning, for it is obvious that he is even now in 
 error as to the cause of the recent distress ; and moreover, 
 he represented, in the king's speech at the close of the session 
 of 1825, as did also his colleague, the Chancellor of the Ex- 
 chequer, the high prices as founded upon, and being a proof
 
 51 
 
 country for some time," and as such a position is 
 most alarming, as it proves the utter ignorance of 
 the Government as to the real cause of these evils, 
 and as it will be likely to divert attention from 
 the only true source of the recent distress, namely, 
 the over-issue of paper, it is of importance shortly 
 to refute that position. No over-trading nor over- 
 speculation can produce injury or inconvenience 
 to any one, but to those who over-trade, and who 
 over-speculate. In " the recent distress," ruin 
 came upon thousands, who did neither the one 
 nor the other. Supposing a man to over-trade, 
 that is, to buy up, or cause to be manufactured, 
 commodities to the amount of 100,000/. more 
 than he can obtain an equivalent for, he will lose 
 to that amount ; but no more. The commodity 
 which he has bought up will have become dearer, 
 but some other must have become cheaper; for 
 the 100,000/., which he invested in the commo- 
 dity in which he was speculating, must have been 
 withdrawn from some other commodity, which 
 must have become cheaper in a corresponding 
 
 of solid and durable prosperity ; whereas, they were a proof 
 of nothing but of an over-issue of worthless paper. 1 pre- 
 sume, therefore, that this report of his speech is incorrect, 
 Messrs. Cobbett, Hardcastle, and Atwood foretold in print, 
 as clearly as language could express, every thing that has 
 taken place.
 
 52 
 
 degree. It is said, that over- trading, and over- 
 speculating, has been carried on to the extent of 
 17,000,000/. ; that is, people have invested 
 17,000,000/. in the purchase, or manufacture, of 
 more commodities than they had previously. But 
 where did these 17,000,000/. come from? They 
 did not coin it; neither did 17,000,000/. fall into 
 their pockets, like aerolites, from the moon. They 
 did not sell out of the public funds to that amount 
 in order to invest the produce in the objects of 
 their speculations ; for if such had been the case, 
 the public funds must have fallen, instead of con- 
 tinuing to rise, as they actually did, as fast as all 
 other commodities ; and unless some source can 
 be pointed out, whence these 17,000,000/. were 
 derived, it is absurd to say, that over-trading 
 caused a rise in the price of any other commodi- 
 ties than those in which the over-trading was 
 carried on. 
 
 The fact is, that over-trading was the necessary 
 consequence of an inundation of depreciated 
 paper. Currency became so plentiful, that the 
 use of it, instead of being worth five per cent., was 
 scarcely worth two per cent. Hence people were 
 tempted to invest it in any way that seemed likely 
 to yield them a larger profit : hence too the rise 
 in every commodity, stocks, land, corn, &c, is 
 easily accounted for : hence there might be over-
 
 53 
 
 trading to any amount, without a corresponding 
 fall in any one, nay, even with a rise in every one 
 marketable commodity. 
 
 If not one shilling of the 17,000,000/.* which 
 
 * I subjoin here a list of the Bubbles in which people 
 have been investing, not their property, but their depreciated 
 paper. 
 
 Foreign Loans, Mining, and other Schemes. 
 The following is a list of payments made on foreign loans, 
 mining shares, and other undertakings, during the present 
 year, and which amount to the sum of 17,582, 773J. 
 
 Per cent. £. <£. 
 
 35 on 1,000,000 Brazilian Loan of 1824 350,000 
 
 75 ... 2,000,000 Do. do. 1825 1,500,000 
 
 75 ... 3,500,000 Danish do 2,625,000 
 
 56£ ... 2,000,000 Greek do 1,130,000 
 
 25 ... 1,428,571 Guatimalado 357,143 
 
 60 ... 400,000 Guadalajara do 240,000 
 
 89| ••• 3,200,000 Mexican do 2,872,000 
 
 70 ... 2,500,000 Neapolitan do 1,750,000 
 
 78 ... 616,000 Peruvian do 480,480 
 
 11,304,623 
 £ per share. 
 25 on . 10,000 Anglo Mexican Mine shares... 250,000 
 
 5 15,000 Anglo-Chilian 75,000 
 
 7 6,000 Arigna Iron and Coal 42,000 
 
 25 500 Bolanos 12,500 
 
 3 10,000 Bolivar 30,000 
 
 5 10,000 Castello 50,000 
 
 5 10,000 Chilian 50,000 
 
 2 2, . r ,00 Cobalt and Copper 5,000 
 
 5 10,000 Chili and Peru 50,000
 
 54 
 
 have been foolishly subscribed in illusory schemes, 
 
 had been so employed ; if they had remained in 
 
 15 10,000 Cornwall and Devonshire 150,000 
 
 2 2,500 Consolidated Copper 5,000 
 
 2% 10,000 English Mining., 25,000 
 
 2 4,000 Equitable 8,000 
 
 12f 1,000 Famatina 12.500 
 
 5 20,000 General Mining 100,000 
 
 3 1,800 Gwennappe 5,400 
 
 5 10,000 Haytian 50,000 
 
 2 10,000 Hibernian 20,000 
 
 3 5,000 Hoomeavy 15,000 
 
 71 10,000 London United 75,000 
 
 2 2,000 Manganese 4,000 
 
 5 10,000 Pasco Peruvian 50,000 
 
 5 20,000 Potosi 100,000 
 
 1 3,000 Polbreen Tin and Copper 3,000 
 
 3| 16,000 Royal Irish 56,000 
 
 330 500 Real del Monte 165,000 
 
 5 8,000 Royal Stannary 40,000 
 
 1 5,000 Waldeck. 5,000 
 
 2 5,000 South Wales 10,000 
 
 3 10,000 Scottish National Mining 30,000 
 
 3 10,000 Tywarnhale 30,000 
 
 20 1,000 Tlalpuxahua 20,000 
 
 10 500 Tarma 5,000 
 
 10 6,000 United Mexican Mines 60,000 
 
 10 18,000 Ditto (New) 180,000 
 
 15 10,000 Welch Iron and Coal 150,000 
 
 10 10,000 Ditto Slate, Copper and Lead 100,000 
 
 2 250,000 Protector Fire Assurance 500,000 
 
 10 8,000 British Gas 80,000 
 
 5 10,000 International Gas 50,000
 
 55 
 
 the pockets of the silly people who have ex- 
 pended them, the recent distresses would have 
 
 6 2,500 London Portable 15,000 
 
 20 5,000 New Imperial 100,000 
 
 3 10,000 Provincial Portable 30,000 
 
 15 2,000 Independent Gas 30,000 
 
 5 9,000 Phoenix Gas 45,000 
 
 8 20,000 United General 160,000 
 
 2 10,000 Birmingham & Liverp. Railway 20,000 
 
 3 4,000 Manchester and Liverpool ... 12,000 
 
 5 10,000 Anglo Mexican Mint 50,000 
 
 10 6,000 American and Col. Steam 60,000 
 
 2 10,000 Australian 20,000 
 
 10 10,000 Atlantic and Pacific 100,000 
 
 2 5,000 Egyptian Trading 10,000 
 
 25 20,000 British Iron 500,000 
 
 6 50,000 British Rock and Patent Salt 300,000 
 
 3 10,000 British and Foreign Paper ... 30,000 
 
 2 20,000 British, Irish, and Col. Silk... 40,000 
 
 1 10,000 Bristol Ship Canal 10,000 
 
 5 5,000 Steam and Packet Navigation 25,000 
 
 5 20,000 British and Foreign Timber... 100,000 
 
 1 5,000 Brit. Chuan & Roman Cement 5,000 
 
 5 10,000 Canada 50,000 
 
 1 5,000 Canal Gas Engine 5,000 
 
 5 13,000 Colombian Agricultural 65,000 
 
 10 1 ,000 Canada and Nova Scotia 10,000 
 
 2 4,000 Devon Haytor Granite 8,000 
 
 10 5,000 Droitwich Patent Salt 50,000 
 
 2 1 ,000 Elbe and Weser Steam 2,000 
 
 2 5,000 East London Drug 10,000 
 
 2 2,000 French Brandy 4,000 
 
 2| 20,000 General Steam 50,000
 
 56 
 
 been exactly as great, and probably greater : for 
 
 these 17,000,000/. (if they were sent out of the 
 
 5 10,000 Gold Coast 50,000 
 
 6 8,000 Great Westminster Dairy 48,000 
 
 2 20,000 Guernsey and Jersey Steam... 40,000 
 
 3 3,500 Ground Rent 10,500 
 
 25 10,000 Hibernian Joint Stock 250,000 
 
 5 10,000 Honduras 50,000 
 
 1 20,000 Irish Manufactory 20,000 
 
 2 2,000 Imperial Plate Glass 4,000 
 
 10 12,000 Imperial Distillery 120,000 
 
 2 5,000 Imperial Estate 10,000 
 
 1 2,000 Investment Bank 2,000 
 
 3 10,000 London Brick 30,000 
 
 1 1,000 London and Gibraltar Steam... 1,000 
 
 2 1,000 Ditto Window Glass 2,000 
 
 1 1,000 Lower Rhine Steam 1,000 
 
 1 5,000 London Drug 5,000 
 
 1 4,000 London Smelting 4,000 
 
 2 1,000 London and Portsmouth Steam 2,000 
 
 2 2,000 Ditto and Gravesend . 4,000 
 
 10 10,000 Mexican Company 100,000 
 
 4 6,000 Metropolitan Dairy 24,000 
 
 10 2,000 Medway Lime and Coke 20,000 
 
 2| 7,500 Netherland Patent Salt 18,750 
 
 2 5,000 New Brighton 10,000 
 
 3 5,000 New Corn Exchange 15,000 
 
 1 10,000 National Drug and Chymical... 10,000 
 
 5 6,000 Patent Bricks 30,000 
 
 5 4,000 Pacific Pearl Fishery 20,000 
 
 4 15,000 Pearl and Coral Fishery 60,000 
 
 10 20,000 Provincial Banks 200,000 
 
 15 6,000 Patent Distillery 90,000
 
 57 
 
 country, which I doubt) were remitted in commo- 
 dities, for which, some other commodities (not, 
 
 10 5,000 Rio de la Plata 50,000 
 
 2 3,500 Roman Brick and Tile 7,000 
 
 3 2,500 Scarlet Dye 7,500 
 
 1 4,000 Swedish Iron 4,000 
 
 3 3,000 Steam Engine Machinery 9,000 
 
 2 2,000 Tobacco and Snuff 4,000 
 
 3 4,000 Thames &Medw. Brick & Lime 12,000 
 
 2 1,500 Ditto and Rhine Steam 3,000 
 
 1 1 ,000 Ditto and Loire ditto 1,000 
 
 5 20,000 West India Company 100,000 
 
 5 20,000 United Pacific 200,000 
 
 5 10,000 United Chilian 50,000 
 
 1 10,000 Do. Lond.&Hib. Corn & Flour 10,000 
 
 5 1,000 For. Stock & Share Investment 5,000 
 
 10 4,000 Thames Tunnel 40,000 
 
 25 1 ,600 Hammersmith Birdge 40,000 
 
 <£17,582,773 
 
 In point of fact, I very much doubt, whether any con- 
 siderable part of this sum was sent out of the country : the 
 question is immaterial, but the following is an extract of a 
 communication from a gentleman, upon whose accuracy the 
 greatest reliance may be placed. " Very little of the 
 17,000,000/. was sent abroad. You can hardly imagine the 
 
 extent of the roguery. I was consulted by on the 
 
 subject of the Chili Loan before it was contracted for, and I 
 
 learned what was intended to be done : came with a 
 
 letter of introduction to me, and I was well acquainted with 
 all that passed. Not one shilling was sent to Peru. Of the 
 Chili Loan, 750,000/. for a million ; all that Chili received 
 was about 100,000/. Next to nothing has been sent of the 
 country in any projects, except to Mexico, so that little more 
 
 H
 
 58 
 
 indeed, of equivalent value) will be returned ; 
 whereas, had they remained unemployed, nothing 
 would have been returned. In exchange for 
 these 17,000,000/. improvidently employed, the 
 country will in that case be benefited to the 
 amount of 1,000,000/., and the speculators will 
 lose sixteen parts out of seventeen. 
 
 The cause of the present distress is exactly the 
 same as that which was the cause of all former 
 similar distresses, namely, a return from a depre- 
 ciated to a sound currency. During the last, in 
 1813, it was attributed to a " transition state, 
 from war to peace." Now it is attributed to 
 " over-trading and a rash spirit of speculation ;" 
 and men catch at any sounds that are uttered, 
 without ever being at the trouble of analyzing 
 the ideas which they are intended to convey. 
 
 A rise in the prices of all commodities can only 
 take place owing to a fall in the value of the cur- 
 rency. This is a rule of universal application, and 
 will serve as an infallible guide for judging of the 
 signs of a real, or of a fallacious prosperity. Al- 
 though an issue of Bank of England paper 
 causing prices to rise, produces a corresponding 
 issue of the paper of other banks, it does not 
 follow that a contraction of Bank of England 
 
 than a change of hands took place ; and this, however much 
 it may inconvenience many, will not diminish our capa- 
 bilities."
 
 59 
 
 paper will produce a corresponding- contraction of 
 the paper of country banks ; nor is the converti- 
 bility of the paper of country banks into gold 
 practically of any use in preventing, by timely 
 checks, their over-issuing ; for none of their 
 neighbours know when to apply them, and very 
 few dare do so, even if they knew. The balance 
 of currency vibrates with so much delicacy, that 
 its regulation is entirely in the hands of the 
 bullion-merchants, and bill brokers, of London : N 
 a very slight variation in the equilibrium, when 
 once discovered, affords a sufficient profit on the 
 export of gold, in small daily quantities, to these 
 persons resident in London, although such trans- 
 actions are of too minute a nature to engage the 
 attention of a general merchant. I say, when 
 once discovered ; because it must be remembered, 
 that for a long time after the paper part of the 
 currency has become excessive, both the metallic 
 part and the paper part are depreciated together, 
 which prevents the depreciation of the paper from 
 being immediately visible to the public eye. 
 When once it is apparent, by the pric° of the 
 carriage of gold being less than the price of a bill 
 of exchange, then the depreciation begins to be 
 corrected by the export, through the persons 
 above-mentioned ; from which consideration it 
 follows, that the consequence: of an excessive 
 issue of paper from any quarter, do matter from
 
 60 
 
 what, would cause a drain upon the Bank of 
 England exclusively for gold # ; when her coffers 
 were nearly emptied, alarm would make the peo- 
 ple fly for gold to the country bankers, who 
 would be unable to supply them. 
 
 The probable end of the recent effects of the 
 sudden contraction of the currency, if the Bank 
 of England and the Government had not inter- 
 fered, would have been the establishment of two 
 prices of all commodities — a metal and a paper 
 price ; and this, perhaps, after all, would be the 
 best and safest end to the difficulties of this ques- 
 tion. Besides the temporary interference (if it 
 will be really only temporary), by the issuing of 
 small notes, and by the advancing of more notes 
 upon goods, a law has been passed, prohibiting 
 the issuing of all small notes after three years. 
 During three years, however, it gives power to 
 the Bank of England, and country banks, to issue 
 them or not, according to their fancies ; and i . 
 gives power to the people to receive them or not, 
 according to their fancies ; so that the operation 
 of this law depends upon two contingencies, 
 neither of which can be accurately calculated 
 
 * Supposing we had an exclusively metallie currency, it 
 would be possible for a great spirit of gambling adventure to 
 give rise to so large a quantity of bill transactions, as to pro- 
 duce a kind of paper currency, sufficiently extensive to cause 
 an export of the coin.
 
 61 
 
 upon. If the effect shall be to keep out the 
 small notes till the three years are nearly expired, 
 then we shall have at that period the same dis- 
 tress, failures, &c. again, that we have lately had. 
 If, on the other hand, we shall have the small 
 notes all bona fide withdrawn, we shall have stag- 
 nation of trade, manufacturers out of employ, no 
 rents for the landlords, thousands of our fellow- 
 creatures starved to death, and an increased pres- 
 sure of taxation. Between these two extremes, 
 any middle state may exist, dependent upon the 
 way in which the bill is carried into effect. But 
 let us suppose that we have got through the ope- 
 ration of the bill, and that we have settled into as 
 steady a situation as we could desire ; still the 
 bill permits, under the most favourable view, so 
 great a proportion of convertible paper, that it 
 is impossible they can circulate together without 
 producing violent and ruinous fluctuations*; for 
 as soon as confidence shall return, out will come 
 paper in some form or other; prices will rise ; we 
 shall be congratulated on our " prosperity ;" away 
 
 * " No fact had been more clearly established by all ex- 
 perience on the subject than this — that gold and paper never 
 could be brought to circulate together. No paper would 
 circulate where gold did, and no gold where paper circulated. 
 There could be no common issues of both. This, he repeated, 
 was clearly proved by all experience." — Lord Liver poofs 
 Speech, Feb.]'J, 1826.
 
 62 
 
 will go the gold ; and then another " pecuniary 
 crisis," which will be much more destructive than 
 the last, if banks shall have been formed pre- 
 viously with more numerous and opulent partners, 
 all possessing the power of issuing paper, ad 
 libitum. 
 
 Mr. Tooke assured us, that " the country 
 bankers, who are supported by the power of the 
 landed aristocracy, would spare no efforts, and 
 leave no sophistry untried, to prevent the sup- 
 pression of the notes under 5/." (p. 129.) This 
 prophecy has been realized only with respect to 
 Scotland ; the history of the conduct of the land- 
 owners on this subject is curious. 
 
 When the land-owners supported the series 
 of measures usually expressed under the term of 
 Mr. Peel's bill, they were ignorant, that by 
 raising the value of the currency rents must fall, 
 while mortgages, jointures, &c, would remain the 
 same ; and accordingly they voted for the minis- 
 ter's plan. Agricultural produce fell, and they 
 then began to remember, that when they had small 
 notes it did not fall, and they teazed the ministers 
 till they passed the small note bill, of which 
 Mr. Peel complained this year, as a measure 
 which frittered away his plan. The necessary 
 consequence of this measure was an over-issue of 
 paper, and consequent re-action, such as we have 
 just seen. Parliament met in the midst of the panic :
 
 63 
 
 all parties ran at the country banks (who were 
 more sinned against than sinning, and the victims 
 rather than the cause of the system under which 
 they were acting), and again a bill has been 
 passed avowedly for the purpose of suppressing 
 notes ; the land-owners evidently again not per- 
 ceiving what its effects will be on the price of 
 corn. 
 
 The Scotchmen, however, have been much 
 keener : to the " efforts and sophistry," antici- 
 pated by Mr. Tooke, they have added declama- 
 tion and menace. They have smelt out clearly 
 enough the connection between small notes and 
 high rents ; and not an ounce of gold shall get 
 into Scotland, nor a worthless stinking bit of dirty 
 paper be suppressed, if they can keep it out. 
 But if the small notes be not suppressed there as 
 well as here, all the measures of the present 
 session, from the king's speech down to this hour, 
 are perfectly nugatory, as far as the public is con- 
 cerned, and can only have the effect of enriching 
 Scotch landlords and paper-money makers, at the 
 expense of the English. 
 
 The question is, what is to be done ? Eveiy 
 body, who has paid the smallest attention to the 
 subject, however he may differ from others about 
 the remedies to be applied, agrees, that the late 
 distresses originated in an excessive issue of 
 paper, and a consequent contraction of that
 
 64 
 
 paper; and that, therefore, the problem to be 
 demonstrated is, " how to render the value of the 
 currency fixed*." 
 
 It is indispensably necessary to every plan that 
 shall be adopted, that an immediate end should 
 be put to the connection which has subsisted be- 
 tween the Government and the Bank. Whoever 
 will be at the trouble of reading the appalling 
 facts detailed in Messrs. Tooke's, Mushett's, 
 Daniel Hardcastle's, and Attwood's Pamphlets, 
 will be convinced, that that connection has been 
 hitherto productive of nothing but mischief to 
 the country. The state of the affairs of the Bank 
 ought to be published in the Gazette, every 
 quarter ; the amount of its capital ; the amount 
 of its notes j" ; the amount and nature of its invest- 
 
 * " The object of every description of currency should 
 be to make the value of property as steady and as little 
 variable as possible. The truth lay there, and he who solved 
 that problem, would certainly come to the wisest conclusion." 
 — Lord Liverpool's Speech, Feb. 17, 1826. 
 
 f Whilst these pages were in the press, a most important 
 law has passed, which gives to issuers of paper-money, all 
 over the kingdom, the power of compounding with the 
 Stamp Office in such a manner as shall render it impossible 
 for the public to know the extent of their issues. The amount 
 of stamps was hitherto the sole criterion by which the 
 quantity of country paper could ever be guessed, but by 
 Mr. Sedgwick's tables, a tolerably correct appreciation could 
 be made. It was to the amount of stamps alone that Lord 
 Liverpool, Mr. Peel, and Mr. Huskisson appealed this year to
 
 65 
 
 merits ; and the quantity of bullion in its chests. 
 For, whether the directors know it or not, no one 
 can read the above pamphlets, nor have paid any 
 attention to the nature of currency, without being 
 assured that that establishment possesses a for- 
 midable power over the properties of all its fel- 
 low-subjects ; which has been, and can be again 
 productive of the most ruinous effects, without 
 the possibility of conferring one redeeming 
 benefit. 
 
 There are three modes of attaining this desirecl 
 end : — 
 
 1. By having a wholly metallic currency. The 
 ablest advocates for this are Mr.Cobbett and Daniel 
 Hardcastle. To effect this object, however, such 
 concomitant measures would be necessary as are 
 
 prove the quantity of country paper in circulation, and there- 
 fore it was the sole criterion hy which they had to judge. 
 Publicity is a sine quu non in any system which is to make 
 currency steady ; yet even the little we had is now by Lord 
 Liverpool taken away. So that every cause which facilitated 
 over-issues of papers last year, is in as full operation as 
 ever, with this additional help, and are we to believe that we 
 shall not have another " panic ?" Very well, Gentlemen, 
 vague la galere ; but when we are told that we are in the 
 most perfect calm, " look out for a squall," say I. There is 
 one comfort at any rate, which is, that whoever will attend 
 to the rule laid down in p. 58, and believe no one, be he 
 minister, or merchant, or banker, who tells him that high 
 prices are signs of permanent prosperity, may escape the 
 ravages of the storm. 
 
 I
 
 66 
 
 not likely to be adopted, and therefore it is idle 
 here to discuss them. 
 
 2. By having a currency partly metallic, and 
 partly paper. This can only be done by fixing 
 the amount of paper, and allowing this paper to 
 be issued solely by the Government, or by the 
 State Bank; by which means the fluctuations will 
 take place in the quantity of coin only, and the 
 value of the whole currency will remain unim- 
 paired. 
 
 3. By having an entire paper currency. The 
 ablest advocates for this plan are Mr. Ricardo 
 and Mr. Attwood j and the writings of the former 
 are, or ought to be, so well known, that it is use- 
 less to relate the details here. This is the plan 
 which I prefer, because it is the cheapest; and 
 " cheap money, if it means any thing, means 
 cheap taxes, cheap debts, and cheap burdens." 
 
 One objection has been started against this 
 plan which must not be passed over, and that is, 
 an alleged facility to the crime of forgery. 
 
 The way to obviate this objection is, to repeal 
 the punishment of death for that offence. As 
 long as the Bank of England could hang as many 
 forgers as it pleased, it took not the smallest 
 trouble to improve the construction of its paper, 
 nor vary the engravings on its notes. When the 
 disgust of the public would no longer suffer the 
 immolation of so many human victims, it set its
 
 67 
 
 wits to work to find a pattern which should 
 be absolutely inimitable ; an idea as absurd as 
 its former negligence was culpable. Let it only 
 have the engravings of such patterns, that none 
 but a few of the first engravers in London can 
 make them (and it is possible to multiply the 
 pattern upon a rose engine ad irifinitum), and let 
 the patterns be changed frequently, it can suffer, 
 little or no loss from forgery ; certainly not more 
 than is sustained by coining. 
 
 The public, however, must not be led to expect 
 impossibilities from the Government, nor turn 
 round and abuse the Executive for every conse- 
 quence of its own improvidence. It is impos- 
 sible (and I assert it without fear of refutation) 
 for any legislative enactments whatever to pre- 
 vent circumstances arising which shall cause va- 
 cillations in the value of the currency, fully as 
 great as those from which the country is now 
 suffering. Even if we had a wholly metallic cur- 
 rency to-morrow, causes in some degree similar 
 might sooner or later occur. It is a necessary 
 concomitant of old commercial countries, that 
 the rate of interest, and consequently the rate of 
 profits, should be progressively diminishing. One 
 consequence of this is, that capital is sent out of 
 the country to seek more lucrative employment : 
 another consequence is, that a spirit is engen- 
 dered in the people, if not of extravagance, at 
 least of the opposite of saving, and a desire to
 
 68 
 
 embark in any scheme that promises to give a 
 larger return of interest on their capital than 
 their ordinary business. Payments, by means of 
 bills of private individuals, traders and others, 
 are now made to an immense amount, and might 
 be multiplied to such an extent as to drive out a 
 considerable portion of (and why not all ?) the coin 
 in the kingdom. During such a period prices 
 would be rising, and all the false signs of pros- 
 perity, which have so often deceived many to 
 their ruin, would be manifested as heretofore. 
 No government nor laws could obviate such a 
 course of events, nor any thing but the increased 
 intelligence on the part of the community, and 
 thorough knowledge of the principles of currency 
 and profits, and a manly determination to be 
 content with diminished powers for the gratifica- 
 tion of luxury. 
 
 In conclusion, I again repeat, that no descrip- 
 tion of currency can be so bad as that which we 
 have at present, because no other could be so un- 
 fixed, and liable to so great fluctuations in its 
 value, without even the Government having any 
 power over it. Our blindness upon this point 
 is the more extraordinary, because no people 
 value so highly the advantages of security ; none 
 have paid a higher price for the adoption of this 
 principle ; and for this alone various iniquities, 
 such as slavery and monopolies, are suffered to 
 exist, rather than commit a violation upon vested
 
 69 
 
 interests. This idol, to which we shamefully sacri- 
 fice so much, viz. security of property, is tottering 
 every day : Bel boweth down, and Nebo stoopeth : 
 the prosperity and peace of the country depends 
 upon people securely enjoying that which they 
 have acquired ; but repeated disappointments, 
 and losses of the fruit of their earnings, cannot 
 fail to induce a reckless spirit of improvidence 
 and speculation, nowhere so dangerous as among 
 a commercial people. And, says Mr. Attwood 
 (p. 36), " Our situation is a choice of difficulties, 
 but no human power can avoid them. We may, 
 perhaps, toil and struggle on for a little longer, 
 amidst all manner of dangers, and all manner of 
 sufferings and privations ; but the end of our 
 career is death. Not death to the people, but to 
 the political system under which we live. One 
 important fact I ought to mention in proof, or 
 confirmation of this opinion. I have never met 
 one single individual, who has had leisure and 
 disposition to turn his thoughts to the subject, 
 who has not fully adopted the same opinion in 
 the end." 
 
 THE END. 
 
 LONDON : 
 
 PRINTED BY CHARLES WOOD, 
 
 Poppin's Court, Fleet Street.
 
 I
 
 lO*JN0. 
 
 -NMj