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 LIBRARY 
 
 OF THE 
 
 UNIVERSmr OF B.UN0I8
 
 INTO THE 
 
 EFFECTS PRODUCED 
 
 ON THE 
 
 NATIONAL CURRENCY 
 
 AND 
 
 RATES OF EXCHANGE, 
 
 BTTHE 
 
 B^MK MESTRICTIOJV BIL,]L ; 
 
 EXPLAINING THE/CAUSE 
 
 OF THE • 
 
 HIGH PRICE OP BULLION; 
 
 WITH PLANS FOR MAINTAINING 
 
 THE NATIONAL COINS 
 
 IN A STAtE OF UNIFORMITY AND PERFECTION. 
 
 THE SECOND EDITION. 
 
 With some Observations on Country Banks, and on Mr. Gren- 
 . fell's Examination of the Tables of Exchange annexed to 
 the first Edition. 
 
 By ROBERT MUSHET, 
 
 OF HIS majesty's MINT. 
 
 Hontion: 
 
 PRtXTED sr AND FOR C. AND R. BALDWIIT, NEW BRIDOE-gTRSGT. 
 1810, 
 
 Price 4s.
 
 vj W 
 
 CONTENTS. 
 
 Chap. I. — On the General Principles of Money 1 
 
 Chap. II. — On the connection between coined and 
 paper Money d 
 
 Chap. III. — General Principles of Exchange — fluc- 
 tuations in the par confined to the expense of 
 transmitting the precious metals from one country 
 to another s 
 
 Chap. IV. — On the Effects produced on the rates of 
 Exchange by a debased currency 14 
 
 Chap. V. — Bank Restriction Bill — its general effects 
 — high price of bullion — of connnodities— the de- 
 preciation of currency — unfavorable exchange with 
 foreign countries 17 
 
 Chap. VI. — Bank Restriction Bill— its particular ef- 
 fects — injury or injustice to annuitants and others 
 — debasement of the national currency — Country 
 Banks not the cause of these evils 31 
 
 Chap. VII. — On the Effects produced on the lates of 
 Exchange by a depreciated currency 41 
 
 Chap. VIII. — Proofs adduced to shew that there exists 
 no necessity for the continuance of the Restriction 
 Bill 50 
 
 Chap. IX. — On the Remedy which tlie foregoing 
 facts suggest as calculated to redress the evils of the 
 
 Bank Restriction Bill 57 
 
 Chap. X. — Concluding Remarks on the pernicious 
 
 tendency of the Bank Restriction Bill O'O 
 
 Chap. XI. — Summary View of the Doctrines which 
 the reasoning in the foregoing chapters tend to 
 establish .... vv.^. **' 
 
 3o934! 
 
 '0'X(<^
 
 CONTENTS. 
 
 Pag«. 
 
 Chap. XII.— Observations on the principle on which 
 the coins constituting the principal measure of 
 property are fabricated— on the propriety of estab- 
 lishing but one standard of money, and on the 
 
 principles of seignorage 68 
 
 Chap. XIII. — Observations on the principle by which 
 our silver coins have been fabricated ; a plan of a 
 re-coinage for preserving the silver currency in a 
 
 state of uniformity and perfection 79 
 
 Appendix 93 
 
 I . A Table of the Market Prices of standard gold 
 and silver, shewing their relative proportion to 
 each other ; with the par and course of exchange 
 between London and Hamburgh; shewing the 
 per cenvage in favour and against London ; also 
 the per centage above and below the mint price 
 
 of gold, from 176'0 inclusive .96 
 
 i\ A Table of the Monthly Account of the market 
 prices of standard gold and silver, shewing their 
 relative proportions to each other, with the par, 
 course, and rates of exchange between London 
 and Paris, from the 3d day of January 1792, to 
 the 3d day of December 1793, both inclusive . . .106 
 
 3. A Table of the Monthly Account of the market 
 price of standard gold and silver, their relative 
 proportion to each other, with the par, course, 
 and rates of exchange between London and 
 Paris, from the 3d day of January 1809, to the 
 
 6th day of March 1810, both included 107 
 
 4. A Reply to Mr. Grenfeil's Examination of the 
 Tables of Exchange annexed to the first edition 
 
 of this Work 108 
 
 J
 
 AN ENQUIRY. 
 
 CHAPTER r. 
 
 0?i the General Piinciples of Mojiey. 
 
 The complexity attendant on the study of 
 money is not inherent in the subject, but has 
 arisen, as Sir James Stewart remarks, (Book III. 
 Chap, vi.) from the defective information of 
 those who have treated of it. They have been 
 chiefly practical men, whose habits have led 
 them to a view of the money system, in parti- 
 cular stages only, without affording them a 
 comprehensive survey of its origin and progress. 
 They have consequently perplexed themselves, 
 and obscured the study, by a multiplicity of 
 technical words, as well as by theories formed on 
 
 contracted notions. 
 
 ■ 
 
 B
 
 The debasements of coin also, to which 
 almost all governments have resorted, have led 
 to a perversion of words from their original 
 meaning, and have created in our money dialect, 
 an apparent contradiction, which forms no small 
 impediment to an accurate comprehension of the 
 subject. 
 
 In order to attain an accurate and distinct no- 
 tion of the theory of money, it will be necessary 
 to take a view of its origin, and progressive ad- 
 vancement to that state in which it is found in all 
 civilized countries. 
 
 In some very simple states of society men are 
 without the use of money ; wealtli is a name 
 unknown among them ; their wants are little 
 more than the suggestions of nature, and these 
 wants are easily supplied. In such states of 
 society, all traffic must be carried on by barter 
 alone. Great inconvenience must have attended 
 the first operations of such a system, from the 
 difficulty of proportioning payments to the 
 commodity purchased. If a man, says a writer 
 in the Edinburgh Review,* wishes to purchase a 
 hatchet, but has only a sheep to dispose of, 
 which is worth six hatchets, he knows not how 
 
 ♦ Edinburgh Review, vol. 13. p. 47. It is, indeed, requi- 
 site to state, that the wi.ole of this chapter is principally taken 
 from the article in that work to which the reference above is 
 made.
 
 to accomplish bis purpose. The man who has 
 the hatchet to sell, wants not to purchase a 
 sheep, but a cloak j while the man who has the 
 cloak to dispose of has no occasion for a hatchet, 
 but for some other commodity. In such circum- 
 stances it becomes a matter of expediency for 
 every man to provide himself, if pobsible, with 
 more or less of that commodity which most 
 people will be willing to purchase, and with 
 which he can most readily command the various 
 articles for which he may have occasion. 
 
 In some states of society this commodity is 
 cattle. " The armour of Diomede," says Homer, 
 " cost only nine oxen ; but that of Glaucus cost 
 an hundred." In some parts of the coast of 
 India, shells are said to be the medium of ex- 
 change, and on the sea coast of Africa iron at 
 present is made use of for that purpose. 
 
 But in the progress of society towards civi- 
 lization, the inconvenience of such traffic was 
 severely felt ; and no doubt, after various trials 
 of other commodities, the course of affairs led 
 to the use of the precious metals, as the com- 
 modity for which most people would be willing 
 to exchange the articles of which they had to 
 dispose. Gold and silver, therefore, are the 
 commodities wliich every man at last purchases 
 with the articles which he has to dispose of, 
 knowing that he can most conveniently exchange 
 B 2
 
 them again in such proportions as he pleases, for 
 the other goods that he may want. 
 
 When the precious metals were first used, they 
 were in the rude and unfashioned state of bars, 
 and were bought and sold, in the different ex- 
 changes, by weight, like any other commodity. 
 
 In time, however, it was found, that these 
 metals might be adulterated, and the means of 
 detection were not very obvious or easy. An 
 expedient is devised. The governors of the 
 community agree to fix a mark upon certain 
 pieces of those metals which they have proved, 
 and the people will not receive any pieces, but 
 those on which that mark is found. These 
 pieces accordingly — these bars or ingots, they 
 purchase with the goods they have to sell, and 
 offer these bars again in sale for such goods as 
 they wish to purchase. Still, however, consi- 
 derable inconvenience exists. Those bars have 
 often to be divided, and always to be weighed ; 
 and tliis is very troublesome. The governaaent 
 again extends its services. It agrees to fix a mark 
 which shall indicate both the fineness of the 
 metal, and its weight ; and to fix it on such pieces 
 of various weights, as shall most effectually answer 
 all the conveniences of purchasers. 
 
 This is now the coined money of civilized 
 society ; and it will appear abundantly evident, 
 that there is nothing in all this which alters the
 
 nature of the metal, so coined, from that of a 
 commodity. If it were a commodity bought and 
 sold for its mere value, when it was rude bullion, 
 it surely cannot be any thing else for the stamp, 
 which is only intended to declare its quantity and 
 quality.* 
 
 From this it will follow, that gold and silver 
 are commodities, whose values are determined, 
 like that of all other commodities, by the demand 
 for them ; and that gold and silver, in coin, are 
 nothing more or less than bullion in such con- 
 venient shapes as to facilitate all exchanges in ci- 
 vilized society. 
 
 Had a pound in silver coin remained equivalent 
 to a pound weight of silver, our ancestors would 
 not have been perplexed with the difference be- 
 tween mint and market price ; nor the country 
 subjected to the heavy expense of coinage, neces- 
 sitated by their misapprehensions. 
 
 * Consistently with this principle, the denominations of coin 
 in this, as well as in other countries, were denominations of 
 weight } a penny being originally (Reign of Edward J.) a pen- 
 nyweight of silver j a pound, a pound weight of silver ; and 
 a shilling, a weight Riaking the twentieth part of a pound. — 
 Now, it willappear evident that, when an ir.dividual goes to 
 market to purchase the commodity that he wants, he exchanges 
 a given quantity of pennyweights of silver of an ascertained 
 purity, as the equivalent of that commodity. It is an exchange 
 of value for value.
 
 CHAPTER II. 
 
 0« the Connection between coined and 
 paper Money. 
 
 Having seen that coins are commodities, which 
 are bought and sold in the market for their value, 
 like other commodities — it will follow, that 
 Bank notes are an obligation upon the issuers 
 to pay a certain quantity of those coins, or 
 commodities ; and these obligations are also 
 bought and sold for their value, or that quantity 
 of coin which they specify. Nothing can be 
 more simple than this ; nor can it be conceived 
 possible that a conanunity would take in pay- 
 ment notes of Bankers which possess no in- 
 trinsic value, if they were not payable in some- 
 thing that possessed value to the amount ex- 
 pressed in the body of the note. With us the 
 notes of Bankers are payable in gold or silver. 
 Hence every individual in the community ac- 
 cepts of such notes, upon the faith of their 
 receiving on demand a certain quanti-y of gold 
 or silver, as therein specified. 
 
 Another, and a very different species of
 
 paper money consists of notes, like the French 
 assignats, forced into circulation by the autho- 
 rity of government, and, containing no obliga- 
 tion on the issuer to pay in coin. The value of 
 this kind of paper money is of course very 
 doubtful ; while the value of the former can 
 undergo no diminution, so long as the obligation 
 to pay in coin continues to be fulfilled. 
 
 In this country we are, happily, but little 
 acquainted with such government paper.
 
 CHAPTER in. 
 
 General Principles qf Exchanger-flucfua-^ 
 iions in the par confined to the expense of 
 transmitting the precious metals from one 
 country to another. 
 
 The par of exchange between different coun- 
 tries is determinea by a comparison of the in- 
 trinsic value of their respective currencies ; for 
 instance we say, 34 114-* thirty-four schillings, 
 eleven grotes and a quarter, are the par between 
 Hamburgh and London ; because 34 schillings, 
 1 1 grotes and a 4- contain a quantity of pure silver 
 equal to the pure silver contained in twenty of our 
 standard shillings. Again, in the case of Ireland, 
 the currency of that country is inferior to ours by 
 8^ per cent. ; hence ^108 G 8, Irish, is the equi- 
 valent at par of ^100 British. 
 
 It is evident that if the currency of a country 
 undergo alterations, its exchange with other 
 countries will vary in proportion to these alte- 
 rations. Let us first examine the rate of ex- 
 
 * Upon enquiry upon change, I have ascertained from re- 
 spectable ajithorityj that 3-*, ll| are the real par between Ham- 
 burgh and London, and not 33, 8. as was stated in the first ediiiorj 
 pf this work.
 
 change, considered without reference to altera- 
 tions in currency. It is affected by the balance 
 of mercantile transactions. If at Amsterdam, 
 for examole, a larger sum than usual is required 
 for remittance to England, the brisk demand for 
 bills creates a rise in the rate of exchange, a 
 rise greater or smaller, according to the de- 
 mand ; — this rise may continue progressive for 
 weeks, yet it has a natural limit, beyond which 
 in a free state of trade, it cannot go — namely, 
 the expen'sc of transmitting the precious metals 
 to England. The contract on the part of a buyer 
 of goods is to pay a certain sum in specie, or in 
 the equivalent of specie ; now the price of 
 specie is, in fact, nearly equal all over the world ; 
 and when the buyer finds for his creditor specie, 
 instead of bills of exchange, he equally fulfils 
 his contract. 
 
 The expense of transmitting gold from 
 London to Hamburgh, or vice versd^ was in 
 1797, according to the evidence of Mr. Eliason, 
 (an eminent continental merchant) before the 
 committee of secrecy, ^3 12 ]l per Cent. In 
 a state, therefore, of peace and unrestrained 
 intercourse, the rate of exchange between England 
 and Hamburgh could not, for any length of 
 time, greatly exceed that rate, either on the one 
 (side of the water or the other. 
 
 In regard to Ireland, it appeared by evidence
 
 10 
 
 before the committee, on Irish exchange in 
 1804, that the expense of transmitting ^100 
 in cash, from DubHn to London, or vice versd, 
 was between one and one and a half per Cent, 
 and the statement of Mr. Foster, (Essays, p. 175,) 
 affords a remarkable confirmation of the rule laid 
 down in the preceding paragraph ; for he informs 
 lis, that in the long interval from 1728, to 1797, 
 the exchange never rose beyond the expense of 
 sending gold from one country to the other, 
 except under the temporary, and very peculiar 
 circumstances of the year 1733. 
 
 It has, however, been contended, that in time 
 an unfavourable balance of debt might exhaust a 
 country of its gold, and then the rate of ex- 
 change would be regulated in exact propor- 
 tion to the balance of debt ; it is, however, 
 generally admitted, that an unfavourable balance 
 of debt has no such effect, that its tendency 
 is to force exports, and diminish imports ; 
 but neither to raise the exchange indefinitely, 
 nor yet to exhaust the country of its circulating 
 medium. For this reason, an unfavourable 
 balance of debt produces an uiafavourable rate of 
 exchange ; and while this rate is less than the 
 expense of transmitting gold, the debts of a 
 pountry may be discharged through the medium 
 of bills of exchange. When the exchange rises
 
 11 
 
 to the fall amount of sending gold from one 
 country to another, it necessarily stops there, 
 as every person who has a debt to discharge 
 would rather send gold, than pay a premium for 
 a bill, surpassing the expense of sending gold. 
 This exportation of gold causes a diminution of 
 it in the country so exporting, and what remains 
 must acquire a superior value from its scarcity. 
 Consequently, the price of commodities must be 
 diminished m proportion to the diminution of 
 the circulating medium, and their cheapness has 
 a natural tendency to force exportation. On the 
 other hand, the country thus receiving the ba- 
 lance of debt must have a redundant quantity 
 of gold; its value must diminish; and the price 
 of commodities will rise ; which high price will 
 cause a diminution of exports, as a country 
 cannot sell so much of a dear, as of a cheap 
 commodity. The low price of gold, also, will 
 attract the cheap commodities of that country 
 which had parted with a quantity of its circu- 
 lating medium. These imports being exchanged 
 for gold, increase the exports of the one country, 
 and diminish the exports of the other, or increase 
 the exports of the one country, and the imports 
 of the other. 
 
 To render this more apparent, let it be sup- 
 posed, that the whole circulation of England con- 
 sisted of ten millions of gold, and that Ireland 
 1
 
 12 
 
 posiessed the same amount; and, in the course of 
 commercial transactions between the two coun- 
 tries, that Ireland became indebted to England 
 one million sterling, which debt could not be 
 discharged, but by Ireland remitting to England, 
 in gold, this amount; it will be evident, that if 
 Ireland export one million of her circulating me- 
 dium, while the produce of her land and labour 
 remains the same, that the nine millions which 
 remain will represent the same quantity of com- 
 modities that ten millions did before this debt 
 was paid; and, consequently, the price of Irish 
 commodities will fall in their value, in proportion 
 to the diminution of the circulating medium. 
 Their cheapness will give rise to exportation. 
 England having added one million of gold more 
 to her circulating medium, eleven millions vAW 
 represent the same quantity of commodities as 
 ten did formerly; this importation of gold will 
 enhance the value of all English commodities in 
 a correspondent proportion to its increase, which 
 will consequently discourage their exportation. 
 The cheap commodities, however, of Ireland, 
 the cheapness of which forces their exportation, 
 will come to England" to be exchanged, not for 
 English commodities which are dear, but for the 
 redundant quantity of circulating medium which 
 is cheap ; and this necessarily diminishes the ex- 
 port of English, and increases the import of Irish
 
 13 
 
 commodities, till such time as the level of the 
 circulating medium of each country is restored. 
 And if this principle governs the balance of debt 
 between England and Ireland, it will also govern 
 it in all their commercial transactions with the 
 rest of the world. 
 
 The conclusion, therefore, at which we arrive 
 is, that whatever may be the temporary and limited 
 effect of mercantile transactions on the rate of 
 exchange, the permanent and great variations 
 from par are caused by the altered value of the 
 circulating medium.
 
 14 
 
 CHAPTER IV. 
 
 On the Effects produced on the rates of 
 Exchange hy a debased currency, 
 
 I HAVE already stated, that when the par of 
 exchange has been fixed between two countries, 
 the rate of exchange will vary in proportion to 
 the variation in the value of the currency of 
 y / either country; if, for instance, the legislature 
 
 ' J< r./ifl^^ this country debased the standard of our 
 gold currency five per cent, while that of Ham- 
 burgh remained stationary, it would follow, 
 that the pure gold contained in our pound sterling 
 would no longer be worth thirty-four schillings, 
 eleven grotes and a quarter, but would only be 
 worth a smaller proportion of Hamburgh cur- 
 rency. The diminution would be equal to the 
 debasement in the British currency ; the rate of 
 exchange, in consequence, would nominally be five 
 per cent, against England. 
 
 Similar effects would be produced on the rates 
 of exchange, if the currency of this country 
 became debased from a deficiency of weight; 
 as the rate of exchange is always calculated.
 
 15 
 
 not according to what the currency contains, 
 but what it ought to contain ; the rate, there- 
 fore, will be in the exact proportion to the defi- 
 ciency in the value of the currency. The his- 
 tory of commerce abounds with examples of 
 this. Previous to the re-coinage in King Wil- 
 liam's reign, our silver coin was twenty-five per 
 cent, below standard, and our exchange with 
 Holland was twenty-five per cent, against us. 
 Before the reformation of our gold currencv, in 
 1774, the exchange with France was computed 
 to be three per cent, against us, the French 
 coins being much less worn than curs. Since 
 1774, the exchange has been against France, 
 and in our favour. In the same manner, before 
 that reformation, the exchange was generally 
 against us with Amsterdam, HambLirgh, Venice ; 
 but since the reformation, it has generally been 
 in our favour.* 
 
 A recent instance of the effects of degraded 
 currency on exchange, has been afforded by tb.e 
 barbarous policy of the Turkish government. 
 They have made three great adulterations of tlieir 
 coin; the first in 1770; the second in 17S7 ; 
 and the third in 179^- Before these frauds, the 
 Turkish piastre contained nearly as much silver 
 as our half-crown; and, in exchange, the com- 
 mon computation was eight pi;istres to the 
 ♦ Wealth of Nation?, vol. 2. p. '^73— j.
 
 16 
 
 pound sterling. The consequence of these re- 
 peated adulterations has been a reduction of the 
 silver in the piastre to one half, and a fall in 
 the exchange of one hundred per cent. ; bills on 
 London having been bought, in 1803, at sixteen 
 piastres to the pound sterling.* 
 
 In this country an unfavourable exchange, 
 caused by a debased currency, has been accom- 
 panied with a high market price of bullion. In 
 the case of the silver currency in King William's 
 time, the price of silver rose to 6s. 5d. per ounce, 
 as stated by Mr. Lowndes. In the case of the 
 gold coins, previous to their reformation, the 
 market price of gold, on an average of l6 years, 
 was £3 1 9 24 per ounce. When the currency 
 was reformed, the exchange fell to par, and the 
 market price of bullion fell to its mint price. 
 
 It would seem, therefore, that a currency de- 
 based, either by adulteratioo, or by a deficiency 
 of weight in the coins, may cause the exchange 
 to be permanently unfavorable to a country; a 
 circumstance which can only be remedied by a 
 reformation of the circulating medium, and does 
 not in the least degree depend on the balance of 
 debt; as the exchange depending on the balance 
 of debt can at no time exceed the amount of 
 transmitting the precious metals from one coun- 
 try to another. 
 
 * Foster's Essays on Commercial Exchange, p. 94.
 
 If 
 
 CHAPTER V. 
 
 Bank Restriction BUI — its general effects — 
 high price of bullion — of commodities — • 
 the depreciation of currency — unfavoura-- 
 hie exchange ivith foreign countries. 
 
 As the unexpected continuance of the present 
 system of the Bank of England has been at- 
 tended with effects which appear to have excited 
 considerable surprise and attention, it is of some 
 importance to shew in what manner they have 
 taken place ; and in so doing it will be proper to 
 consider the state of the gold currency from 176O 
 to 1797, and from 1797 to 1810. 
 
 On the atcession of his present Majesty to 
 the throne, the gold coins of this country were 
 in a very debased state. Their deficiency in 
 weight increased so rapidly, that, in the year 
 1773, the government found it necessary to 
 take the subject into consideration ; the result 
 of which was, the recallhig of all the light 
 coins from circulation, which were re-coined in 
 the years 17/4, 5, 6, and 7. From this period the 
 gold coins were in a state of great perfection, 
 c
 
 18 
 
 and were maintained in this state by frequent 
 new issues from the mint. 
 
 It is a fact worthy of particular notice, that 
 for several years before the reformation of the 
 gold coins, the market price of gold was con- 
 siderably higher than its mint price. From 1757 
 to 1773, a period of sixteen years, its average 
 price was ^3 IQ 2|- per ounce. But imme- 
 diately after the re-coinage in 1774, the market 
 price of bullion fell below the mint price ; and, 
 during a period of twenty years, from 1777 to 
 to 1797, the average price paid by the Bank Di- 
 rectors for gold, was only £3 1 7 T\, which is 
 2-|d. under the mint price. 
 
 From this fact the conclusion cannot be con- 
 sidered doubtful, that the high price of gold 
 bullion was occasioned by the defective state of 
 the gold coins; that £Z 19 2^ of these coins 
 did not contain more than an ounce of standard 
 gold ; consequently, it would not exchange for 
 its nominal value, but according to the quan- 
 tity of standard gold which it contained. And 
 this fact is fully proved by the reformation of 
 the coins. When every £3 17 lO-^ contained 
 an ounce of gold, the market price of gold im- , 
 mediately fell to its mint price; an ounce of stand- 
 ard gold bullion could be readily obtained for 
 ^3 17 10-i- in coins. 
 
 During the above mentioned period of the 
 defective state of our gold coins, Lord Liver-
 
 19 
 
 pool states, that foreign exchanges were very 
 much influenced to our disadvantage, and this cir- 
 cumstance was one of the principal causes which 
 induced the government to reform the coins. 
 
 Lord Liverpool states another fact worthy of 
 notice, that during the period already mentioned 
 of the defective state of the gold coins, the 
 price of silver was influenced by their deficient, 
 or perfect state. From 1757 to 1773, the ave- 
 rage price which the Bank Directors paid for 
 dollars, was 64-|-d. per ounce, equal to 66f d. for 
 standard silver. But immediately after the re- 
 coinage of the gold coins, the price of dollars 
 fell, so that, on an average of twenty-four years, 
 ending 1797, the Bank Directors have paid for 
 dollars 6 lid. per oz. equal to Ss^d. per oz. for 
 standard silver, and less than the average price for 
 sixteen years previous to the re-coinage by 3-|-d. per 
 ounce, or 5-Vt per cent. 
 
 From these facts, it would appear of very 
 considerable consequence to keep the gold coins 
 in a state of the greatest possible perfection. 
 By neglecting to do so, the exchange with 
 foreign countries becomes against us. We have 
 a rise in the price of gold ; the new and heavy 
 coins are selected from the light and debased, 
 and exported for the profit attending the high 
 market price of bullion. The price of all com- 
 modities rises in proportion. The price of silver 
 c 2
 
 %0 
 
 is also raised, which, with a currency somewhat 
 assimilated to the perfection of our gold coins, 
 would hold out a considerable temptation to 
 melt, and export it ; and this is now prevented 
 only by the very debased state of the silver cur- 
 rency. 
 
 I come now to consider the state of the currency 
 since 1797, the year in which the Bank suspended 
 payment. The causes which led to this memora- 
 ble crisis in our pecuniary affairs, have already oc- 
 cupied a great share of the public attention ; I 
 will, therefore, proceed to the consite&tion of the 
 effects that have followed. 
 
 It is generally admitted, that th^ value of a 
 commodity depends, greatly on its scarcity or 
 plenty. Now there has been, within these twelve 
 years, a remarkable increase in our amount of 
 Bank notes. For several years before 1797, the 
 amounl of them in circulation did not exceed 
 eleven millions, and bullion was cheap, being 
 about £% 17 f per ounce. But after 1797, the 
 amount of Bank notes was progressively increased, 
 and as soon as this increase became considerable, 
 the price of bullion rose. 
 
 Notes in circulation. Price of 
 
 gold bullion. 
 
 On SithDec. 1797 there were ^11,641,400 3 17 6 
 
 1798 ....:.. 12,708,657 3 17 6 
 
 1799 13,672,405 3 17 6 
 
 1800 15,251,240 4 5 
 
 The tables in the Appendix contain the quan-
 
 21 
 
 tity of notes, and price of bullion for the remain- 
 ing years, and concur to shew, that the rise of 
 bullion has been consequent on the increase of 
 notes. Bullion has never since 1800 been below 
 ^4, and it was lately so high as ^4 13. 
 
 In further illustrating the subject of the high 
 price of gold, it is of consequence to remark, 
 that when silver was the money in which all 
 bargains were concluded, the course of ex- 
 change for or against this country, was in pro- 
 portion to the defective or perfect state of 
 the currency, and this unfavourable exchange 
 was accompanied with a high market price of 
 silver bullion. Previous to the re-coinage of 
 King William III. the exchange was as much 
 as twenty-five per cent, against this country, 
 and the market price of silver was 6s. 5d. per 
 ounce. Foreigners considered the silver coins as 
 the principal measure of property, and rated their 
 exchanges accordingly. In 1717? the gold coins 
 of this country were, by proclamation, declared 
 legal tender, at the rate of twenty-one shillings 
 fo a guinea ; and since that period, no such un- 
 favourable exchange has taken place, although 
 the silver coins were, and still continue, in a very 
 defective state. The course of affairs seems to 
 have transferred from the silver to the gold coins, 
 the power or quality of being the principal mea- 
 sure of property. Accordingly we find, that the
 
 22 
 
 course of exchange was considerably affected 
 to our disadvantage, in consequence of the de- 
 fective state of the gold currency, previous to 
 its reformation in 177^^' With this unfavoura- 
 ble exchange, we had a rise in the price of 
 gold ; on the reformation of the coins, however, 
 we had a fall in the rate of exchange, and also in 
 the market price of bullion, as has been already 
 stated. 
 
 In these two instances, the defective state of 
 the currency acted on the price of all commo- 
 dities in the same manner as an increase of gold 
 and silver would have done ; it was like increasing 
 the nominal amount of pounds sterling in circu- 
 lation. Let us suppose that they were increased 
 one°fourth, as in the case of the silver coins^ 
 while the quantity of commodities remained the 
 same, or nearly the same ; does it not follow, 
 that the price of all commodities would be 
 augmented in a similar ratio ? That the conse- 
 quences here stated actually followed the de- 
 fective state of the silver currency, will appear 
 from Mr. Lowndes' report to the Lords of the 
 Treasury, of the 12th Sept. 1695 ; in which he 
 states, " that great contentions daily arose in all 
 fairs, markets, shops, and other places through- 
 out the kingdom, to the disturbance of the pub- 
 lic peace, in consequence of the defective state, 
 of the silver coins ; that trade in general was
 
 23 
 
 on that account greatly lessened ; that persons 
 before they concluded any bargains, were under 
 the necessity of settling the price, or vahie of the 
 very money they were to receive for their goods ; 
 and that they set a price on them accordingly ; 
 that these practices had been one great cause of 
 raising the price, not only of all merchandizes, 
 but of every article necessary for the sustenance 
 of the people ; that the receipt, and collection of 
 the public taxes^ revenues, and debts, were greatly 
 retarded." p. 115. 
 
 fn 1797j when Bank of England notes were 
 declared a legal tender, at the rate of twenty 
 shillings to the pound, for such I conceive to be 
 the spirit of the Restriction Bill, there was no 
 longer any restraint on the Bank. Directors in the 
 emission of their notes. Previous to this period, 
 they were perfectly aware that, if they issued 
 their notes to excess, a rise in the price of gold 
 would be the consequence, and that these notes 
 would be returned to them to be exchanjjed for 
 guineas, which would be melted down, and ex- 
 ported at the advanced market price. When the 
 excess of their notes was thus withdrawn from 
 circulation, the market price of gold fell to its 
 mint price. This check alone was always sufficient 
 to prevent, for any considerable time, an excess 
 of Bank notes : and in the remonstrances of the 
 Bank Directors with Mr. Pitt, on the subject of
 
 24 
 
 advances to government, sufficient evidence is 
 adduced to shew, how well aware they were 
 of the inconvenience of that excess. The evi- 
 dence of Mr. Giles, the Governor of the Bank, 
 before the Committee of Secrecy, tends also to 
 the same conviction, as does the evidence at 
 large.''*' 
 
 Since, however, the Bank Directors have been 
 liberated from all restraint in the issue of their 
 notes ; if they increase them in an undue pro^ 
 portion to the whole produce of the land, and 
 labour of the country, in which they are cir- 
 culated, does it not follow, that this increase 
 of money will operate, in a similar manner, on 
 the price of all commodities, as the discovery 
 of a gold or silver mine would do ? The effects 
 of the discovery of the American mines are in 
 the recollection of every one. Silver, compared 
 to commodities, became cheap from so great an 
 increase, and the money price of all commodi- 
 ties was enhanced. If, therefore, the Bank of 
 England has issued notes to such an excess as 
 to raise the money price of all commodities, it 
 is no difficult matter to account for the very 
 high price of gold, whi«h is bought and sold in 
 the market like any other commodity. Gold 
 can no longer be said to be the principal mea- 
 
 * See Report of that Cororaittee, 
 
 I
 
 25 
 
 sure of property in the country ; and the trans- 
 fer which I mentioned, as having taken place 
 from the silver to the gold, on the latter being 
 declared a legal tender, seems to have taken 
 place in respect to Bank notes. Hence the 
 money price of gold in Bank notes has been of 
 late jr4 13 per ounce, and, from the great in- 
 crease of Bank notes, the amount of the nomi- 
 nal pound sterling has been increased in the 
 country ; and the whole produce of the land 
 and labour having continued the same, or having 
 not increased in the same proportion, the price 
 of all commodities has risen in proportion to this 
 increased quantity of money. I have already 
 proved, that when the defective state of the 
 silver coins, previous to the re-coinage of King^ 
 William III. increased the nominal amount of 
 pounds sterling in the country, the price of 
 silver bullion, and all other commodities rated 
 in silver, rose in proportion to the increase oi 
 money. Now the very saine thing has hap- 
 pened with respect to gold, and all other commo- 
 dities, whose prices are rated in Bank of England 
 notes. Having increased in an undue proportion 
 to the whole produce of the land and labour of 
 the country, these notes have become depreciated, 
 and the same nominal amount will not command 
 the same quantity of the necessaries and conve- 
 niences of life.
 
 26 
 
 To render this subject still more simple, let 
 us suppose the whole circulation of the Bank 
 of England to consist of ten millions of gold ; 
 and that they possessed a piece of ground, in 
 which they discovered a gold mine, which ena- 
 bled them to add, in a period of ten years, five 
 millions more to the money in circulation ; and 
 let us suppose also, that the produce of the 
 country is not rapidly advancing or declining : 
 would the value of gold, and all other commo- 
 dities rated in gold, be the same to-day as they 
 were ten years ago, the day previous to the 
 discovery of the gold mine ? — No, surely. — The 
 money price of all commodities rated in gold 
 would rise in price, in proportion to its increased 
 quantity. 
 
 However much the value of gold might be 
 increased or diminished, yet its price would 
 remain unaltered. If the ounce of standard 
 gold were coined into ^3 17 104- of gold coins, 
 the price of that ounce would be precisely 
 ^3 17 104^. It could never exceed, and could 
 never fall below that price ; and if the ounce of 
 gold were coined into ^5, the price of that 
 ounce would be precisely ^5. The stan- 
 dard or mint price of gold is invariable in 
 its name or denomination, though not in its 
 value. 
 
 Let us suppose again, that the circulation of
 
 27 
 
 the Bank of England consisted of ten millions 
 of gold, and from a wish to save the expense 
 of maintaining the whole of this metallic cur- 
 rency in a state of perfection, they issue Bank 
 notes, which they find considerably cheaper ; 
 and that upon the faith of these Bank notes 
 being exchanged for gold when demanded, the 
 community accept of them the same as if they 
 were in reality pieces of coined money. Let us 
 suppose further, that by an act of the Legis- 
 lature, the Bank is liberated from the obligation 
 of exchanging her notes for gold when de- 
 manded. All restraints on her issues immedi- 
 ately cease to exist : she may, as in the first sup- 
 position, add five millions of notes to those in 
 circulation, in a period of five or ten years ; the 
 community continuing to receive them, either 
 from necessity, or from a confidence that the 
 Bank, at some future period, not very far re- 
 mote, will give to the holders of these notes, 
 gold to the amount therein specified in ex- 
 change. Now, the reality of this supposition 
 has been verified in the transactions of the 
 Bank within these last thirteen years. In 1797, 
 the Legislature liberated the Bank of England 
 from the obligation of paying her notes in gold 
 when demanded ; the consequence has been, 
 that the average amount of her notes in circu- 
 lation has increased from 10 to 20-^. millions.
 
 2» 
 
 And wKife iKie. c6mmliriity accept of these 
 notes on the faith of the Bank being able some 
 d^y to give gold in exchange for them, ther^ 
 can be no difference in the effects arising from 
 this increase of money, whether it consist in 
 the notes of Bankers, or in an increase of gold. 
 In confirmation of this fact, it is only neces- 
 sary to state, that Bank of England notes do 
 not circulate out of the Island of Great Britain, 
 and that any increase of them, while the public 
 confidence, and the produce of the land and 
 labour remain the same, must operate on the 
 price of all commodities in the same degree, 
 that an increase of the precious metals would 
 do, and with this increased security, that the 
 precious metals might find their way out of our 
 island, and from scarcity become more valuable, 
 while the paper money, from its possessing no 
 intrinsic value, is sure to remain at home, and 
 produce all the effects which are here attributed 
 to it. And if the Bank is allowed to retain her 
 present monopoly for thirteen years longer, 
 and increase the issue of her notes to twenty- 
 deven or thirty millions, the price of gold, and 
 every other commodity, will experience a pro- 
 portionate rise in price. Allowing that Bafik 
 of England, notes are competent to supply the 
 place of guineas in our currency, a great diffi- 
 culty, however, arises in proportioning their
 
 29 
 
 number to the demands or necessities of the 
 country-rwhile it is the interest of the Bank to 
 lend, they will find borrowers even beyond the 
 necessities of the community, ^nd as all re- 
 straint is now taken off the Bank Directors, 
 they have increased the issues of their notes 
 beyond all former precedent ; nor is it natural to 
 suppose, that they will diminish the quantity of 
 their notes in circulation, seeing it is not their 
 interest, until they are obliged to do so. Let 
 the check be restored, therefore, which formerly 
 regulated the Bank in the issue of her notes. 
 This check was the obligation to pay them in 
 cash. 
 
 Some have supposed, that the Bank cannot 
 increase the issue of her notes to any improper 
 length ; for, say they, the rate of interest, 
 which is regulated by the scarcity or abundance 
 of money, will be a proof of there not being 
 too much money in circulation, if the rate of 
 interest remain stationary. The fallacy of this 
 doctrine has been distinctly proved by Mr. Hume, 
 in his Essay on Interest, and by Dr. Smith, who 
 has also proved, that the rate of interest for 
 money is regulated by the rate of profits on that 
 part of capital which does not consist in circu- 
 lating medium ; and that those profits are not re- 
 gulated by, but are wholly independent of, the 
 greater or smaller quantity of money, which may
 
 30 
 
 be employed for the purposes of circulation ; that 
 the increase of circulating medium will increase 
 the prices of all commodities ; but will not lower 
 the rate of interest. — Wealth of Nations, vol. ii. 
 book ii, chap. iv.
 
 31 
 
 CHAPTER VI. 
 
 BanJc Restriction Bill — its particular effects 
 — injury or injustice to annuitants and 
 others — debasement of the national air- 
 rency — Country Banhs not the cause of 
 these evils. 
 
 The depreciation of money which has followed 
 in consequence of the Bank Restriction Bill, 
 bears particularly hard on all annuitants, and 
 that large class of individuals, whose sole de- 
 pendence is placed on a fixed income ; those 
 persons have the value of their revenue dimi- 
 nished to the whole amount of the depreciation 
 on the currency, which appears from the tables 
 in the Appendix to be about l6 per cent, so that 
 £^A per annum before the Restriction Bill 
 passed, could command the same quantity of the 
 necessaries of life as i^TlOO would at the pre- 
 sent day, if no other cause whatever had acted 
 upon the price of commodities.* It seems an 
 
 • That money has depreciated more than \6 per cent, since 
 1797. I believej is generally allowed 3 but the depreciation 
 ■which I here mention, as having taken place in the currency of 
 the country, is very different from that caused by taxation. 
 We have the misfortune, however, to suffer under both evils !
 
 32 
 
 unheard of evil, that the Bank of England 
 should possess the power of diminishing, at her 
 pleasure, the value of all the monied interest in 
 the kingdom ! 
 
 Every contract made during the present system 
 of the Bank of England must be founded in in- 
 justice, as will appear, if wc suppose for example, 
 that a farmer leases a farm of his landlord at the 
 rate of ^100 per annum, which rent the farmer 
 is induced to give from the general high market 
 price of all species of grain, which he supposes 
 will continue and enable him to pay his rent. 
 He finds, howcTer, that the Bank is obliged to 
 resume payments in cash, from which circum- 
 stance a fall of ^16 per cent, takes place in the 
 price of the whole produce of his farm. — It is un- 
 necessary to relate the distressing consequences to 
 the poor farmer. 
 
 Another evil, resulting from the continuance 
 of the Restriction Bill, is the debasement which 
 must necessarily take place in the gold currency 
 from constant circulation, and from few new 
 coins being issued to supply the place of those 
 that become deficient in weight, which, accord- 
 ing to the King's proclamation, are not a legal 
 tender below a certain weight ; (the guinea for 
 example, is not a legal tender, when it weighs 
 less than five penny-weights and eight grains ;) 
 also, from the tendency which Bank notes
 
 33 
 
 tiave to force the gold coins out of circulation ; 
 circumstances which on the repeal of the Re- 
 striction Bill might subject the country to the 
 expense of a general re-coinage of all the gold 
 monies. 
 
 I have already stated, that for l6 years pre- 
 vious to the re-coinage of gold, the market- 
 price of that metal averaged ^3 IQ 2^- per 
 ounce. ^3 19 2-^- of the gold coins then in 
 circulation did not weigh more than an ounce, 
 being a deficiency of ^l 14 6-l per cent. 
 The gold coins, now in circulation, are rapidly 
 advancing to this state of debasement : accord- 
 ing to the last experiments made by the officers 
 of his Majesty's mint, and laid before the com- 
 mittee of council for coin, in 1807, the guineas 
 were debased by a deficiency in weight ^1 3 4 
 per cent, being ^0 1 1 24- per cent, less than 
 the average debasement for 16 years previous to 
 the re-coinage. On the average of guineas and 
 half-guineas, the debasement by a deficiency in 
 weight was ^'1 12 11-i- per cent, being only 
 ^0 1 7 per cent, less than before the re- 
 coinage. On the average of the guinea, half- 
 guinea, and seven shillings piece, the debase- 
 ment, by weight, was ^l 7 8v> being only 
 <^0 6 10;- per cent, less than before the 
 re-coinage : and it is probable, that by this 
 time, the debasement of the gold currency is 
 
 D
 
 34 
 
 fully equal to what it was before its reformation in 
 1774. 
 
 If the Restriction Bill were just now repealed, 
 it must be expected that the market-price of 
 gold will not fall to its mint price, because of 
 the deficiency in the weight of the coins : it 
 required on an average of all species of gold 
 coins in circulation, in 1807, about a^3 18 ll-^- 
 to weigh an ounce. The market-price of gold, 
 (according to the principles to be laid down 
 in the eighth chapter,) would be precisely 
 ^3 18 114-. 
 
 Since the Restriction Bill passed, little atten- 
 tion has been paid to the state of the gold cur- 
 rency — no guineas have been coined since 1799: 
 several small coinages of half-guineas and seven 
 shillings pieces have been executed ; these, how- 
 ever, have only enabled the Bank to answer the 
 demands on her for change in transacting the pub- 
 lic business, and have not been able to prevent the 
 debasement of the currency. 
 
 The gold coins now in circulation are defi- 
 cient to a greater extent than allowed by procla- 
 mation ; and if this proclamation is enforced, 
 the public at large will refuse the light coins, 
 as they did previous to 1797. If it is sus- 
 pended, the new guineas as issued from the 
 mint will be melted and sold for the high 
 market price of bullion, caused by the debase-
 
 35 
 
 ment of the coins ; a succession of the same 
 evils which existed previous to 1774, would be 
 the consequence of such a measure ; a general 
 re. coinage is therefore forced upon the country, 
 to avoid other evils ultimately as expensive. The 
 expense of the re-coinage in 1774, amounted 
 to about 5^750,000. A repetition of this ex- 
 pense seems unavoidable ; so that in whatever 
 point of view the Restriction Bill is considered, 
 it is fraught with oppression to the whole body of 
 the people. 
 
 It has been supposed by some, that every 
 increase of Bank notes drove an equal amount 
 of gold coin out of circulation. For example, 
 if the Bank of England increased her notet 
 from ten to twelve millions, the two millions of 
 additional paper forced two millions of gold 
 coins out of circulation. This, however, does 
 not appear to be the case ; for if the paper 
 money thus increased had only supplied the 
 place of gold, there would have been no rise in 
 the price of gold, as there would have been no 
 more notes in circulation, than there v/ould 
 have been gold had no notes been used. There 
 would have been no excess of currency. For 
 several years previous to the Restriction Bill, 
 the average amount of Bank notes was about 
 eleven millions. Since the restriction, they have 
 increased to upwards of 17 millions ; if these six 
 D 2
 
 56 
 
 miHions of Bank notes had displaced an equal 
 amount of coin, we should have experienced no 
 rise in the price of gold. If we could ascertain 
 what increase of Bank notes it would require to 
 raise the price of gold 20 per cent, above its 
 mint price, we could exactly determine the 
 amount of the gold coin forced out of circu- 
 lation ; having no means to ascertain this fact 
 positively, its place can only be supplied by con- 
 jecture. 
 
 We may suppose, that the whole produce of 
 the land and labour of this country is nearly 
 the same now, as it was in 1797? and the cala- 
 mities of war will perhaps admit the supposition 
 of but a small increase ; at the same time that, 
 whatever this increase may be, the improved 
 methods of banking now adopted may render 
 about the same quantity of circulating medium 
 necessary, as in the former period. If it be 
 allowed, that an increase of circulating medium 
 of one-fifth raises the price of gold, and of all 
 commodities, 20 per cent, it would follow, that 
 if two millions and one-fifth were added to the 1 1 
 millions in circulation, being one-fifth of that 
 sum, that the price of commodities would be 
 augmented 20 per cent. We find, however, 
 that six millions have been added to the Bank 
 notes in circulation, so that these six millions 
 have only displaced four millions and four-fifths
 
 37 
 
 of a million of gold coin, leaving thereby a per- 
 manent excess of currency of ^2,200,000. 
 Though this statem.ent does not determine exactly 
 the point in question, it gives an idea of the 
 matter somewhat approaching to truth ; and it 
 would appear, that if the Bank Directors dimi- 
 nished the amount of their notes to about 14 mil- 
 lions, the market-price of gold would fall as near 
 to the mint price as the debased state of the coins 
 would permit ; while, however, the present sys- 
 tem is continued, the evil of a debased currency 
 must be increased, and must render it both more 
 difficult, and more expensive, to return to the old 
 system of rendering Bank of England notes paya- 
 ble on demand. 
 
 Since the first edition of this work was pub- 
 lished, it has become a very general opinion, that 
 the country Banks are the cause of all the evils 
 which we have attributed to the Bank of Eng- 
 land. As this is a question of great interest to 
 the prosperity of the country at large, it may not 
 be unnecessary to explain the nature of the con- 
 nection existing between the Bank of England and 
 the Country Banks. 
 
 After the suspension of cash payments at the 
 Bank of England, it was deemed necessary for 
 the security of the country, to render the notes 
 of Country Bankers payable in those of the Bank 
 of England ; this obligation was a check upoji
 
 38 
 
 the Issues of the Country Banks ; they could only 
 increase their notes as the Bank of England in- 
 creased her notes. If the Bank of England di- 
 mhiished the amount of her notes, the Country 
 Banks, if they understood their own interest, 
 must have immediately followed her example. If 
 the Country Bankers did not diminish the amount 
 of their notes, as the Bank of England diminished 
 hers, they would be liable to the inconvenience 
 and danger of a run, caused by their mutual and 
 unceasing competition ; and if these Banks have 
 not Bank of England notes to answer all demands, 
 they must necessarily stop payment : it is their in- 
 terest to avoid this crisis. It may be asked, how 
 are the Country Bankers to know when the Bank 
 of England is diminishing her notes? To this it 
 may be answered, by the difficulty their London 
 correspondents find in getting discounts at the 
 Bank of England, of which they are apprised. 
 
 It will appear, therefore, that this obligation on 
 the Country Bankers to pay in Bank of England 
 notes, must operate on their issues in a similar 
 manner to an obligation to pay in cash. 
 
 This dependence of the Country Banks on the 
 pleasure of the Bank of England can be further 
 simplified and explained, by stating the natural 
 consequence of an over-issue of notes by the Bank 
 of England. 
 
 Let it be supposed, that the Bank of
 
 39 
 
 England has made an over-issue of note?, 
 say oae million. Bank of England notes do 
 not in general circulate many miles from Lon • 
 don ; in the district, therefore, in which this 
 over-issue has been made, a rise will take place 
 in the price of commodities, and will be pro- 
 portionate to the increase of money. In the 
 country, however, where no such increase has 
 taken place, the price of commodities will have 
 experienced no rise in price ; the high money price 
 of commodities in London, however, will tempt 
 the commodities of the country to come to the 
 London market for the advantage of the high 
 price; in the country a scarcity will be experi- 
 enced, and a consequent rise in price ; this in- 
 creased price, however, cannot be paid without an 
 increase of money. Money will be demanded, 
 and, as it is the interest of the Country Bankers to 
 lend, the void will be supplied ; and the high price 
 of commodities, caused by this over-issue, will 
 become general, and not local. 
 
 It would, therefore, appear, that Country 
 Banks can only increase the evil of an excessive 
 paper circulation, by the latitude which is given 
 to them, or rather the necessity which is imposed 
 upon them, by the Bank of England. By an 
 over-issue of the Bank of England to-day, she 
 creates a demand uj;on the Country Bankers for a 
 similar and correspondent issue to-morrow or
 
 40 
 
 next day. On the other hand, if after such over-f 
 issue the Bank of England found it her interest 
 or necessity to withdraw a considerable quantity of 
 her notes, the act might be attended with the 
 failure of almost any number of Country Banks; 
 they would be unexpectedly deprived of the means 
 of upholding their credit, their notes being paya- 
 ble in those of the Bank of England. 
 
 Such is the precarious and dependant situation 
 of our Country Banks, as connected with the 
 Bank of England ; the extensive advantages de- 
 rived from those Banks render it desirable that 
 their security should be increased, and that they 
 should be entirely independent of the Bank of 
 England ; for, without imputing any improper 
 motives to the conductors of that concern, politi- 
 cal circumstances alone might compel them to 
 such a sudden diminution of their notes, as might 
 produce the calamitous circumstances here as- . 
 cribed to be within the limits of their present un- 
 controlled powers.
 
 41 
 
 CHAPTER VI. 
 
 On the Effects produced on the rates of 
 Exchange hy a depreciated currency. 
 
 The currency of a country is said to be depre- 
 ciated when a given quantity of it will no lon- 
 ger exchange for a like quantity of that of 
 another country ; for example, if the circulating 
 medium of England was reduced in value -^t\i' 
 below its standard and recognized level, while 
 that of Hamburgh remained stationary, the poun(J 
 sterling of England would not exchange for 
 34 schillings, 1 1 grotes and a 4 of Hamburgh 
 money, but for -^t\\ less. The depreciation of 
 English money would in this case be ten per 
 cent. ; and it is evident, that the rate of ex- 
 phange would be also ten per cent, against 
 England. But from the doctrine already ad- 
 vanced, it would appear, that a currency of 
 gold and silver only, or of gold and silver and 
 paper, the latter convertible into the former at 
 the option of the holders, could never, abstract- 
 ing from debasement, be depreciated ; for the 
 rapidity with which the precious metals retire
 
 4i 
 
 from a cheap in quest of a dear market, would 
 always take the surplus quantity out of the 
 country; and whatever excess and depreciation 
 we have in our currency has a direct tendency 
 to raise the value of the precious metals in 
 other countries in a similar ratio. The price of 
 commodities compared to the gold and silver 
 will be cheap, which will encourage exports to 
 bring home the quantity of bullion necessary 
 to restore the general level of those commo- 
 dities. 
 
 The depreciation of currency here described, 
 is different from that species of depreciation, 
 which the precious metals are subject to from the 
 discovery of new mines, or an accumulation of 
 gold and silver from those already known. In 
 this latter case, while the precious metals may 
 be depreciated to an indefinite extent, the cur- 
 rency of any one country cannot undergo a greater 
 permanent depreciation than another, from the 
 tendency which the precious metals have to seek 
 the best market. Hence in all ages, it has been 
 found impossible for any country to retain more 
 gold and silver than the demands of that country 
 required. 
 
 We must, therefore, seek the cause of a de- 
 preciation of currency, consisting of gold and 
 silver and paper, the latter convertible into the 
 former^ in something else than mere excess, as
 
 4S 
 
 any depreciation caused by such excess must be a 
 very temporary evil, and from the very nature of 
 things is daily working its own remedy. 
 
 Since the Bank Restriction Bill took place, it 
 has generally been supposed, that the excessive 
 quantity of Bank notes in circulation has caused 
 a considerable depreciation in their value. The 
 sign of this excess and depreciation has been a 
 permanently unfavorable exchange, and a high 
 market price of bullion, which never had taken 
 place in this country while Bank notes were pay- 
 able in gold on demand. 
 
 When the Directors of the Bank of England 
 were obliged to give gold for their notes on de- 
 mand, their quantity never could exceed the quan- 
 tity of gold and silver, that would have circulated 
 in their place, had there been no Bank notes; 
 but if they issued their notes to excess, it ap-^ 
 peared immediately in the high price of bullion, 
 and the unfavorable exchange. The price of gold 
 was no longer rated in gold, otherwise it could not 
 in the entire state of the gold coin have ex- 
 ceeded -3^3 17 10.L per ounce; but its price in 
 Bank notes varied in proportion to the amount of 
 notes in circulation. Bank notes, not gold, for 
 the time, became the principal measure of pro- 
 perty, in which the price of all commodities was 
 rated. Gold accordingly, as in Bank notes, was 
 sometimes .^3 18 and ^"4 per ounce. It will.
 
 44 
 
 however, appear evident, that while these notes 
 were convertible into gold at pleasure, the dealers 
 in bullion would take these to the Bank, and 
 exchange every -^3 17 10-i- for an ounce of gold 
 coin, which, if melted and sold at the then 
 market price, would make a considerable profit by 
 so doing. But the excess of Bank notes could 
 not remain for any length of time in circulation 
 while this was practised ; nor, indeed, was it the 
 interest of the Bank to force the issue of her notes 
 under such circumstances, as she, by that means, 
 rendered herself liable to be exhausted of her 
 guineas. On the contrary, it appears, from the 
 evidence adduced before the committee of se- 
 crecy, that when the exchange became unfavor- 
 able, and the price of bullion rose above its 
 mint price, the Bank Directors limited their 
 discounts, until such time as the value of their 
 notes was the same as their guineas, or until 
 the market price of gold fell to its mint price, 
 and with this fall the rate of exchange fell 
 also.* 
 
 • This principle, apparently so novel, and at present so 
 much disputed by those who are interested in its non-exist- 
 ence, has nevertheless been firmly established for nearly a 
 century, as will appear from the following extract from " A 
 Discourse concerning the Currencies of the British Plantations 
 in America, &c." 
 
 " The repeated large emissions of paper money are the cause 
 of the frequent rise in the price of silveip and exchange, which da.
 
 Since, however, the Bank Restriction Bill 
 passed, this salutary check upon the issues of the 
 Bank Directors has been entirely destroyed, 
 
 as regularly folloio the same as the tides do the phases or courses 
 of the moon. When no large sums are emitted for some time 
 than what is cancelled of former emissions, silver in exchange 
 is at a stand ; when less is emitted than cancelled, (which sel- 
 dom happens,) silver in exchange do fall. 
 
 " This is plain to a kind of demonstration, from the history 
 ©f the paper-money emissions in New England. 
 
 " After silver had rose. Anno 1706', to 8s. per ounce, by 
 light pieces of eight superseding the heavy pieces, it conti- 
 nued at that rate, while paper emissions did not exceed a due 
 proportion to tlie current silver : A. 171'i, we emitted ^50,000 
 upon loan, and A. 1715, Rhode Island, ^40,000, besides 
 emissions on distant funds for charges of Government : in the 
 autumn, A. 1715, silver became li per cent, advance above 
 8s. ; that is, about .Qs, 2d. per ounce. Massachuset's Bay, A. 
 1717, emitted e^ 100,000 upon loan, and a very long period, 
 silver rose to 12s. per ounce; A. 1721, Massechuset's Bay 
 emitted ^50,000, and Rhode Island ^^'40,000 upon loan ; 
 silver, A. 1722, became 14s. per ounce. From that time a 
 chargeable Indian war required large emissions, and silver rose 
 to l6s. per ounce ; it continued at this rate till A. 1728, emis- 
 sions not being larger than cancellings. A. 1727, Massechu- 
 set's Bay emitted ^6\),000, and A. 1728, Rhode Island 
 emitted ^^40,000 upon loan j silver became ISs. per ounce; 
 A. 1731, Rhode Island emitted ^60,000 upon loan, (N. B. 
 Besides the several loans in the course of this history, all the 
 charges of the four Governments were defrayed by paper 
 emissions,) and silver became, A. 1732, 21s. per ounce; A. 
 1733, Massechuset's Bay emitted ^76,QOO upon funds of 
 taxes, Rhode Island o^l04,000 upon loan and taxes, Con- 
 
 2
 
 46 
 
 ahd there can now exist no possible obstacle to the 
 increase of their notes, but what their own pru- 
 dience suggests. 
 
 If I am correct in my view of this subject, 
 the high permanent rate of Exchange is a con- 
 sequence of a depreciated currency, occasioned 
 by an excess of Bank notes, which act on the 
 rate of exchange in a similar manner, as if our 
 currency was debased, either by adulteration of 
 the standard, or by a deficiency in the weight 
 of the coins. This depreciation affects the 
 market price of the precious metals in the same 
 manner as- the debased currency affected it 
 in the reign of King William the Third, and 
 previous to the reformation of the gold cur- 
 rency in 1774 ; and while this depreciation con- 
 tinues, the unfavourable rate of exchange will 
 continue also ; and will be indicated by the ex- 
 cess of the market above the mint price of gold. 
 In the case of an unfavourable exchange, caused 
 by a balance of debt, the rate will at no time 
 exceed the expense of transmitting the precious 
 metals, bating the depreciation on Bank notes, 
 or the excess of the market above the mint 
 
 necticut ^50,000 upon loan, and A. 1734, silver became 273. 
 per ounce. From A. 1734, to A. 1738, more bills were can- 
 celled than etnitted, exchange fell from 440 to 400 per cent, ad^ 
 vance. A. 1738, Rhode Island emitted £-£100,000 upon loan, 
 silver rose from 27s. to 29s. per oioice.— page 2&.
 
 .47 
 
 price of gold. Withdraw the cause of the 
 depreciation, as was done when the currency 
 was debased, and we shall obtain the same bene- 
 ficial results in the one case as in the other. 
 
 Let the Directors of the Bank of England 
 resume those principles for the rule of their con- 
 duct now, by which they were guided before 
 the Restriction bill took place. Let them on 
 every rise of the exchange limit the amount of 
 their discounts, and it will invariably happen as it 
 did then, that a diminution of their notes will 
 cause a fall in the rate of exchange, and in the 
 market price of bullion. 
 
 The observance of the same rules by the Bank 
 of Ireland, in regard to the exchange, is stated ia 
 very explicit terms by the committee, which sat 
 on their affairs in the year 1803. The committee 
 in mentioning the necessity of contracting the 
 issues of paper money, say, (page 4) " such has 
 been the natural practice of Banks, previous to 
 the restriction. Mr. Colville, (a director) states 
 it in very clear and forcible terms, as to the Bank 
 of Ireland. Prior to 1797, they limited the 
 amount of their issues as exchange rose. If pru- 
 dence had not dictated such a course, necessity 
 would have compelled a diminution of their issues, 
 by diminishing the stock of specie which could 
 only be replaced at a loss proportionate to the 
 existing rate of exchange; and your committee 
 observe, that in fact, as well as in theory, the
 
 48 
 
 effect of such practice always was, and must be 
 the redress of the unfavorable exchange'"' Again, 
 (page Ip) " your committee do in express terms 
 declare their clear opinion, that it is incumbent 
 on the Directors of the Bank of Ireland, and 
 their indispensable duty, to limit their paper at all 
 times of an unfavorable exchange, during the 
 continuance ef the restriction, exactly on the 
 same principle as they would, and must have 
 done, in case the restriction did not exist; and 
 that all the evik of a high and fluctuating 
 exchange must be imputable to them if they 
 fail to do so." 
 
 That the language of this committee, pointed 
 as it is, was not overcharged, is evident from a 
 circumstance of v/hich Mr. Parnell informs us,* 
 that in Feb. 1804, guineas were openly bought 
 with these notes in Mr. Frank's office, Suffolk 
 Street, Dublin, at a premium often percent. In 
 London the sale of guineas at a premium has not 
 been so openly conducted; but it has, notwith- 
 standing, been carried on to a great extent, and 
 at a premium considerably above ten per cent. 
 
 According to the principle which I shall 
 endeavour to establish, viz. that the market 
 price of gold can at no time exceed its mint 
 price, provided every .^3 17 104- contain an 
 ounce of standard gold; it would appear, that 
 every excess of the mint price must be attri- 
 
 ♦ Parnell on Currency and Exchange, p. 15. 4th Edition.
 
 49 
 
 buted either to a debased, or a depreciated cur* 
 rency. For example, if ^3 17 104- contained, 
 an ounce of standard gold, tlie value of that 
 ounce would be precisely ^3 17 lO^-. But if 
 it required four guineas of our present gold coia 
 to weigh an ounce of standard gold, the price 
 of an ounce would be precisely four guineas^ 
 and if the price of an ounce of gold in Bank 
 notes is ^4 13, while the ounce contains only 
 ^3 17 10-i-, it follows that gold is more valuable 
 than Bank, notes by 15s. 1-i-d.; the difference be- 
 tween the price of an ounce of gold as rated in 
 respect to itself, and its price as rated in Bank 
 notes. Again, if it required of our present gold 
 currency four guineas to weigh an ounce, the price 
 of gold would not be higher than four guineas. 
 And if it required £4 13 of Bank notes to pur- 
 chase this ounce, or these four guineas, still the 
 Bank notes would be less valuable than the four 
 guineas by Qs. which is a positive depreciation of 
 Bank notes to that amount. But as the deficiency 
 in the weight of our present gold coins, according 
 to the last experiments made by the officers of his 
 Majesty's mint in 1807, amounted on the average 
 of all species in circulation, to about 1-^ per cent* 
 this, deducted from the excess of the mint price 
 of gold, will leave a depreciation of Bank notes 
 equal to about jCl4 13 per cent.* 
 
 * See Tables in the Appendix. 
 £
 
 so 
 
 CHAPTER VIII. 
 
 Proofs adduced to shew that there exists no 
 necessity for the co7itinuance of the JRe- 
 strietion Bill, 
 
 As the popular argument in favour of the con- 
 tinuanee of the Restriction Bill, has been the 
 impossibility of the Bank resuming her pay- 
 ments m cash, while the price of gold is so 
 much above its mint price, I shall here endea- 
 vour to prove that the price of gold can, in 
 reality, at no time, be above its mint price, and 
 that its being so at present, in appearance, is 
 caused by the excessive quantity of Bank notes in 
 ^iffeulation. 
 
 As much misapprehension has existed on this 
 subject, it will be necessary to explain the cause 
 of it. 
 
 «S^ie mint price of silver is 5s. 2d. per oz. and 
 at this rate was legal tender in all payments, 
 and to any amount, until the 1 4th of his present 
 Majesty, when it was enacted, that silver 
 should be a legal tender to the amount of 
 £0,5 only. 

 
 51 
 
 The mint price of gold is ^3 17 104. pef 
 oz.j that is, an ounce of gold is worth 
 ^3 17 10-^ of silver, coined at the rate of 5s. 2d. 
 per oz. The gold coins were declared ? legal 
 tender at this rate in 1717 to any amount. In 
 consequence of this measure, we became pos- 
 sessed of two standards of money, each legal 
 tender. I have already stated, that the course 
 of affairs gave a preference to the gold coins, 
 and they have continued since 1717 to be the 
 principal measure of property. As the silver 
 coins have continued to increase in debasement 
 since this period, it would appear that the gold 
 coins have only a nominal reference to those of 
 silver; for if the gold coins were valued in the 
 present debased ones of silver, it would follow 
 that in place of gold being worth ^3 17 104. 
 it would be worth about ^4 17 4 per oz. or 
 23 per cent, more than its mint price, the silvei' 
 coins being this much debased below thd 
 standard of 5s. 2d. per oz. Hence it would Ap- 
 pear that gold in bullion, since 17 17, has not irt 
 reality been rated in silver, but in gold coins* 
 The idea of gold in bullion being rated in our 
 silver coins, while in reality it has been rated in 
 those of gold, has been the cause of all the mis- 
 apprehension respecting the mint and market 
 price of gold, and which is likely to continue 
 while we have two standards of money each 
 
 B2
 
 52 
 
 legal tender. If the term ^3 17 lO^- had been 
 laid aside, and the word ounce substituted in its 
 place, would it not have followed, that an 
 ounce of gold was just an ounce of gold, and 
 would have continued so to the end of time; 
 its command over the conveniences and neces- 
 saries of life being exactly in proportion to the 
 quantity of ounces in the country. But if we 
 choose to continue the term ^3 17 lO-i-, which 
 is just another name for an ounce of gold, it 
 does not in the least degree alter the question; 
 for if ^3 17 104- contains an ounce of gold, 
 an ounce of gold cannot be worth more than 
 .^3 17 104; or in other words, an ounce of 
 gold cannot be worth more than an ounce of 
 gold, if the same in purity, which we take for 
 granted. 
 
 This reasoning is confirmed, first, by the de- 
 based state of the gold currency, previous to 
 its reformation, when ^3 IQ 2-|- did not con- 
 tain more than an ounce of gold ; and, secondly, 
 by the reformation of the gold coin. When 
 every a^3 17 lOi- was made to contain an 
 ounce of that metal, the price of gold immedi- 
 ately fell to its mint price, at which it continued 
 for 20 years, and must have continued so 
 ad infinitum, had not the Bank Directors, by 
 their imprudence, deranged the system of our 
 currency.
 
 53 
 
 If the gold coins liad in reality been rated in 
 silver, the guinea in place of being current for 
 2 is. would have been current for nearly 30s. as 
 it was in l6g5, previous to the re-coinage of 
 silver in the reign of William the Third. The 
 price of silver also would have risen in proportion, 
 had its value in bullion been rated by the debased 
 coin, to perhaps 5s. 5d. per oz.; 6s. 5d. of our 
 present silver coin not containing more than an 
 ounce of standard silver. The price of silver, 
 however, was rated in gold from 1774 to 1/97, 
 and was purchased 5 per cent, cheaper, during that 
 period, than it was for l6 years before, when the 
 gold currency was much debased. 
 
 Further, if silver had in reality been the standard 
 of our money, and the coins maintained in that 
 state of perfection, both as to weight and purity, 
 that our gold coins have been, we would theu 
 have had an invariable price of silver; if the mint 
 price of silver was fixed at 5s. 2d. per oz. and 
 every 5s. 2d. contained an ounce, the market price 
 of the same -standard silver never could exceed 
 and never could be below that sum; its price not 
 being referrable to any other standard of value, and 
 having a reference only to itself, its price could not 
 alter; for how could 5s. 2d. be worth 6s. 5d. or 
 an ounce become worth an ounce and a quarter ? 
 the thing is impossible. — Actording to this prin- 
 ciple, gold would vary in its price in proportion to
 
 M 
 
 Its quantity and the demand for It, its price would 
 have been measured by silver, as a standard inva» 
 riable in its price or denomination; the reverse of 
 this, however, has been the case; from 1777 to 
 1797 we had an invariable price of gold, and a 
 varying price of silver; which is a clear and de- 
 cided proof that gold, and not silver, has been the 
 standard of the money of England. 
 
 Having thus endeavoured to prove, that since 
 the period in which gold coins were declared legal 
 tender, their value has not been rated in silver, 
 but in gold coins, and that silver in bullion has 
 not been rated in the silver coins, but in 
 those of gold, and consequently, that while 
 j^3 17 304- of gold coins contained an ounce of 
 standard gold, no difference could possibly exist 
 between the mint and market price of that metal 3 
 let us next, to simplify this fact, still further sup- 
 pose, that we had only gold coins in circulation, 
 and in place of the arbitrary arrangement of 
 pounds, shillings, and pence, we had the more 
 simple and clear terms, ounces, half and quarter 
 ounces, it will be evident, that the value of these 
 ounces, half and quarter ounces, would be sub- 
 ject to a variation in real value, in proportion to 
 the quantity of them in the country ; but no force 
 of language can make an ounce more valuable 
 than four quarter ounces, or an ounce any thing 
 |3ut an ounce. Now the term ^3 17 10^ I have
 
 already proved to mean nothing but an ounce of 
 gold; it does not mean that amount in our 
 silver coins, for it would require nearly j^5 of 
 our silver coins to be equivalent in value to an 
 ounce of gold, taking them at the mint price. 
 I have also proved, that if ^3 17 10^ contain 
 an ounce of gold, no alteration even in that 
 arbitrary term can possibly take place, and we 
 have the experience of 20 years in proof of this 
 assertion. If my reasoning on this subject has 
 been correct, it will follow, that since Bank 
 notes were declared a legal tender, the price of 
 gold in bullion has no longer been rated in gold 
 coins. I have also proved, that it was not rated 
 in silver coins, otherwise its price would have 
 been considerably higher than it has hitherto 
 been. It appears then to have been rated in 
 Bank notes, and its price accordingly, in Bank 
 notes, has been ^4 13 per ounce. In this we 
 have a further proof of what I before stated^ 
 that gold is no longer the principal measure of 
 property, but Bank notes; for if gold had con- 
 tinued so, its market price never could exceed,, 
 bating the debasement of the coins, its mint 
 price of ^3 17 10-J-; and if silver had been so, 
 the market price of gold would have been about 
 ^5 per ounce, its equivalent in our debased 
 silver coins. 
 
 Further, if my view of this subject has been 
 d
 
 5fi 
 
 correct, it follows, that there exists no just cause 
 why the Bank of England should not resume 
 payments in cash ; and that the arguments of Mr. 
 Henry Thornton, and all those who advocated 
 the cause of the Restriction Bill, and its poHcy, 
 possess no real foundation in truth. The mode 
 of avoiding all danger will appear in the next 
 chapter.
 
 m 
 
 CHAPTER IX. 
 
 0?i the remedy ivliich the foregoing facts 
 suggest as calculated to redress the evils of 
 the Restriction Bill, 
 
 From what has been stated in the foregoing 
 Chapters, the remedy for the evils occasioned by 
 the Restriction Bill must be obvious. The 
 maimer of applying it, however, is of a delicate 
 nature. The immediate resumption of payments 
 in gold at the Bank would be attended with 
 serious inconvenience; and no doubt consider- 
 able embarrassments would follow. From the 
 doctrine which I have endeavoured to establish, 
 a diminution of Bank notes must take place 
 before the price of gold is affected. The par- 
 ticular mode of carrying this diminution into 
 effect, whether by a considerable reduction, in 
 the first instance, of one and two pound notes, 
 or by small, but simultaneous reductions of the 
 different classes of notes, is a question to be 
 decided by those who are practically conversant 
 with the business of the Bank, and with the 
 ramitications of paper circulation. It is clear.
 
 58 
 
 that ail operation of so serious a nature should 
 be gradual. As soon as any considerable reduc- 
 tion of paper shall take place, bullion will expe- 
 rience a fall ; the exchange will rise in propor- 
 tion, and the temptation to melt and export 
 guineas will be lessened. A further reduction 
 would bring paper still nearer to an equivalency 
 with bullion, arui exchange still nearer to 
 par. A continued diminution of Bank notes 
 would produce equality in the bullion market, 
 and bring the exchange to par, or above it, after 
 which the difficulty would be got over. The 
 money dealer would then find it his interest to 
 Import bullion, and the Bank might resume cash, 
 payments without apprehensions of a run, it 
 being at all times an accommodation to the 
 public to make their large payments in paper 
 money. 
 
 In pursuing this measure I do not pretend to 
 deny, that considerable inconvenience would be 
 felt by the mercantile community, for wane of 
 such liberal discounts as they may have had of late 
 from the Bank ; but the evils arising from this 
 temporary embarrassment are by no means so 
 great, as to plead for a continuation of the present 
 pernicious and oppressive system. 
 
 As far as the Bank is concerned, the public is 
 entitled to the most liberal exertions. The Re* 
 gtriction Bill has afforded the Bank enormous pro-
 
 fits. — Observe the surprising effects produced on 
 the value of Bank stock, by the exemption from 
 cash payments after 1797. 
 
 In 17^0, the average price of Bank stock was 1 10| 
 
 1777, ditto 133| 
 
 1797, (having fallen after the alarm) I27| 
 
 1808, (having risen progressively) the average was . . 235^ 
 
 1809, in July> Bank stock sold for 280 
 
 The usual dividend on Bank stock was seven 
 per cent, a year. Observe the large premiums or 
 bonuses, as they are called, given in addition to 
 the dividend. 
 
 In June, 1799, there was given on every ^100 Bank stock, a 
 bonus or present of ^10 Loyalty stock. 
 
 May, 1801 6 Navy, 3 per cent, stock. 
 
 Nov. 1802 2^ Ditto. 
 
 Oct. 1804 5 per cent. cash. 
 
 Ditto, 1805 5 Ditto. 
 
 Ditto, 1806 5 Ditto. 
 
 And in April, 1607, the dividend was raised to 
 ten per cent, at which it has since continued I
 
 60 
 
 CHAPTER X. 
 
 Concluding remarhs on the pernicious ten" 
 dency of the Bank Restriction Bill, 
 
 I CANNOT leave this important, and high}}' in- 
 teresting subject, without expressing my asto- 
 nishment, that the people of Great Britain 
 should have so long submitted to a system, 
 fraught with so much injury to individual pro- 
 perty, and to the prosperity of the country at 
 large. The people of this country have always 
 shewn a laudable zeal for the perfection of the 
 currency ; and had any member of the House 
 of Commons pleaded for a system that was to 
 debase the currency fifteen per cent, by an adul- 
 teration of the standard of our money, his 
 doing so would have been considered as a 
 grievous calamity to his country, and his mo- 
 tion would have been treated with the utmost 
 indignation. 
 
 The public mind has of late become conside- 
 rably enlightened on this importaHt suoject ; and 
 as the progress of truth is to expunge error, let 
 us hope to see that love for the prosperity of
 
 61 
 
 the country manifested by both Houses of Par- 
 liament, which was exhibited when the affairs of 
 the Bank of England occupied their attention 
 in 1797; when the welfare of the country was 
 said to be so closely interwoven with Ijer con- 
 cerns. The country has a right to expect, and 
 it looks to the Legislature for the discharge of 
 the important duty — an investigation whether 
 there now exist the same reasons for the conti- 
 nuance of the Restriction Bill ; and, if the same 
 reasons still exist, the enquiry again, whether these 
 reasons imply any necessity which has its founda- 
 tion in truth. 
 
 If the public were well-informed of the con- 
 sequences that have followed the Restriction 
 Bill, if they knew that the present high price 
 of provisions is in a great measure attributable 
 to the dangerous power granted to the Bank of 
 England, would not the ears of the Sovereign 
 have been assailed from every city and town in 
 Great Britain, for a repeal of that impolitic 
 measure ? Would not the fathers of families, 
 widows and orphans, have supplicated the 
 removal of an evil which was so rapidly and 
 unjustly depriving them of the means of pro- 
 curing daily bread ? Tiie calamities of war have 
 pressed sufficiently hard on the poor, in the de- 
 preciation of money that has ensued from tax- 
 ation ; but it is certainly cruel and unjust to
 
 62 
 
 aggravate those evils by a measure that has 
 been adopted in no country without the most 
 serious injury to the body of the people, and 
 ended in calamities that every good man would 
 wish his country and his fellow creatures to 
 avoid. The people of this country have cheer- 
 fully submitted to all the inconveniences and 
 expenses of a war, in defence of their rights 
 and liberties, and it is to be feared, that their 
 burdens will rather be increased than diminished. 
 With this prospect before them, it becomes the 
 Legislature to watch over their interests, to re- 
 dress the grievances of those who are injured 
 by the present system of the Bank of England ; 
 in general they will be found a meritorious class 
 of the community. The whole army and navy 
 are sufferers by the present system ; also all offi- 
 cers on half pay, the widows of officers who have 
 lost their lives in the service of their country ; 
 those who from age and other infirmities have 
 retired from the duties of office under Govern- 
 nment. These classes of the community must 
 suffer a diminution of comfort in proportion to 
 the extent of the depreciation on Bank of 
 England notes. They have no means to shift 
 the load from off their own shoulders. In this 
 respect they are worse situated than the day 
 labourer, who demands, and must obtain a re-
 
 63 
 
 compence for his services, proportionate to the ex- 
 isting price of provisions. 
 
 Whatever evils may now exist in consequence 
 of the Bank Restriction Bill, the public has no 
 security, that they shall not be increased. An 
 excessive paper currency, however, has, in those 
 countries where the experiment has been fairly 
 tried, worked its own remedy, but not without 
 giving an awful shock to commercial credit. On 
 the Bank of England depends the credit of all our 
 country Banks ; the notes of the latter being pay- 
 able in the former, the notes of all arc at a discount 
 of fifteen per cent. Must this evil be continued 
 until it overthrow the commercial credit of Great 
 Britain?* 
 
 • As the authority of Mr, Bnrke is, with an important 
 portion of our countrymen, liigh, it may not be useless to re- 
 mind them, not only that a forced paper circulation was one of 
 the effects of the French revolution on which he dwelt with the 
 greatest indignation ; but that the very circumstances which he 
 selected, as characterizing most strongly its mischievous effects, 
 are most of them the very circumstar<ces in which it is found 
 coincident with that kind of forced circulation, under the ejects 
 of which we now labour in this country. 
 
 Mr. Burke's opinion of the compulsory paper of the revo- 
 lutionary government of France is thus shortly expressed : " So 
 violent an outrage upon cfedit, property, and liberty, as this 
 compulsory paper currency, has seldom been exhibited by the 
 alliance of bankruptcy and tyranny, at any time, or in any na- 
 tion." Burke's Works, vol. v. p. 275. 
 
 Again, '* We entertain an high opinion of the legislative
 
 64 
 
 authority : but ar have never dreamt that parliaments had an^f 
 right whatever to violate property, to over-rule prescription, or 
 to force a currency of their oxm fiction in the place of that -which is 
 real, and recognized by the law of nations." — ^Vol. 5. p. 327. 
 
 Mr. Burke further remarks, that " when so little within, 
 or without, is now found but paper, the representative not 
 of opulence, but of wantj the creatXjre not of credit, but of 
 power ; they imagine that our flourishing state of England is 
 ©wing to that Bank paper, and not the Bank paper to the 
 flourishing condition of our commerce, to the solidity of our 
 credit, and to the total exclusion of all idea of power from 
 any part of the transaction. They forget that in England, not 
 one shilling of paper money of any description is received 
 but of choice ; that the whole had its origin in cash actually 
 deposited ; and that it is convertibky at pleasure, in an instant, 
 and tdthout the smallest loss, into cask again. Our paper 
 is of value in commerce, because in law it is of none. It 
 is powerful in change, because in Westminster Hall it is 
 impotent. In payment of a debt of twenty shillings, a cre- 
 ditor may refuse all the paper of the Bank of England. Nor is 
 there am.ongst us a single public security, of any quality or 
 nature whatsoever, that is enforced by authority. In fact, it 
 might be easily shewn, that our paper wealth, instead of lessen- 
 ing the real coin, has a tendency to increase itj instead of being 
 a substitute for money, it only facilitates its entry, its exit, and 
 its circulation ; that it is the symbol of prosperity, and not the 
 badge of distress. Never -was a scarcity of cash, and an exu'- 
 lerance of paper, a subject of complaint in this nation." — Vol. 5, 
 p. 461-2. 
 
 Mr. Burke, in further descanting on the measures of tlie 
 revolutionary government, adds, " As to the bankruptcy, that 
 event has. happened long ago, as much as it is ever likely to 
 happen. So soon as a nation compels a creditor to take paper 
 currency in discharge of his debt, there is a bankruptcy,''— Vol. 7* 
 page 47.
 
 ^5 
 
 CHAPTER XI. ' 
 
 Summary View of the Doctrifies, which the 
 reasoning in the foregoing Chapters tends 
 to establish. 
 
 It h^s appeared, that the rate of exchange 
 cannot exceed the expense of transmitting the 
 precious metals from one country to another. 
 And, should it so happen, that, with a currency 
 pf gold and silver only, the rate should appear 
 to exceed that amount, it must be occasioned 
 by the debasement of the coins, they being 
 deficient in weight ; and whatever that rate 
 exceeds the expense of transmitting the gol^ 
 or silver, must be the amount of the debase- 
 jnent of the currency, as (he rate of exchange 
 is calculated, not in what a currency contains, 
 but in what it ought to contain. 
 
 If the rate of exchange exceed the expenses 
 of transmitting gold from one country to another, 
 with a currency consisting of gold and silver 
 and paper, the latter convertible into the former, 
 it must necessarily be temporary, and will a\wayi 
 effect its own remedy. 
 p
 
 €6 
 
 I have endeavoured to establish, that the mar- 
 ket price of gold cannot exceed its mint price, 
 with a currency consisting of gold, and silver 
 only ; unless the coins be debased by a deficiency 
 in weight, in which case the excess of the 
 market above the mint price of gold will indi- 
 cate the exact degree of debasement. 
 
 With a currency consisting of gold and silver 
 and paper, the latter convertible into the former 
 at the pleasure of the holders, the market price 
 of gold may exceed its mint price ; but this 
 excess is necessarily temporary, and always ef- 
 fects its own remedy. 
 
 With a currency consisting of gold and silver 
 and paper, the latter not convertible into the 
 former, the market price of gold may rise above 
 its mint price to an indefinite extent, and may 
 become permanent, which altogether depends 
 on the discretion of the Bank, in the issues of 
 her notes. The price of gold being rated in her 
 notes will have a price according to their quan- 
 tity in circulation ; in this case, the excess of 
 the market above the mint price of gold, is the 
 amount of the depreciation on Bank notes. 
 
 With a currency consisting of gold and silver 
 and paper, the latter not convertible into the 
 former, the rate of exchange may exceed the 
 •expense of transmitting the precious metals 
 from one country to another; the excess may
 
 m 
 
 become permanent, and it may rise to an in- 
 definite extent, depending altogether on the 
 amount of paper in circulation ; an evil for 
 which the country can have no effectual and 
 permanent remedy, but in the obligation of the 
 issuers of those notes, to pay them in gold or 
 silver on demand. Whataver the rate of ex- 
 change exceeds the expense of transmitting the 
 precious metals must necessarily be the amount 
 of the depreciation of Bank notes, together 
 with the debasement in the currency, as the 
 rate of exchange cannot exceed the expense of 
 transmitting gold from one country to another, 
 but in consequence of a debased or a depreciated 
 currency. 
 
 t2
 
 68 
 
 CHAPTER Xil. 
 
 Qhservations on the prmcip/e on p)hich the 
 .coins constituting the principal measure of 
 property are fabricated — on the propriety 
 of establishing but one standard of money, 
 and on the principles of seignorage. 
 
 The principle by which our gold coins have 
 been fabricated during the greater part of a cen- 
 tury having been fully explained in a preceding 
 Chapter, it will be only necessary here to reca- 
 pitulate. It appears that gold coins are now 
 the exclusive standard measure of property in 
 this country, and that the price of gold, as fixed 
 at the mint, is invariable; that while every 
 ^3 17 104- of our gold coins contain an ounce 
 of standard gold, they will at all times com- 
 mand an ounce of gold bullion in the market. 
 It must appear evident, however, that any im- 
 perfection in these coins should be carefully 
 avoided, as the debasement will raise the 
 price of gold in the market in proportion to 
 its extent; the new and heavy coins that may 
 be issued from the mint, will be exchanged for
 
 69 
 
 the light aud debased ones, and will be melted 
 and sold for the profit attending the high market 
 price. This practice must subject the country 
 to a heavy loss in replacing the coins thus, 
 melted, and which in their turn are likely to 
 undergo the same fate. The reader is referred 
 to the Tables of the prices of gold, in the Ap- 
 pendix, from 1760 to 1773, to shew more par- 
 ticularly the effects produced by allowing the 
 gold coins, which then, as well as now, were 
 the principal measure of property, to become 
 debased. Upwards of seven hundred thousand 
 pounds on the average of every year during this 
 period were issued from the mint. There was, 
 however, no curing the evil but by a general 
 recoinage of the light and debased coins, which 
 reduced the price of gold to nearly a half per 
 cent below its mint price. 
 
 The judicious regulations of the late Lord 
 Liverpool, announced in his Majesty's procla- 
 mations, that the gold coins should pass by 
 weight as well as by tale ; and that the guinea 
 should not be a legal tender, when it weighed 
 less than five dwts. and eight grains, the half 
 and third of the guinea in the like proportion, 
 but should be returned to the mint lo be re- 
 coined, were well calculated to maintain our 
 gold currency in that state of perfection to 
 which it was brought by the general recoinage. 
 1
 
 70 
 
 Jt is probable, that if the Restriction Bill had 
 not deranged our monetary system, we should 
 have still possessed a currency in a state 
 of perfection which few or no nations have 
 ever enjoyed, and from which many and great 
 advantages would always result to the country 
 at large. If it is considered, that the rate of 
 exchange for or against a country, in a great 
 measure depends on the perfection of the coins 
 constituting the principal measure of property^ 
 this will further enforce the propriety and neces- 
 sity of watching over the perfection of this 
 standard of value, being a result in which the 
 commercial community is so much interested. 
 
 Among the objects which require the atten- 
 tion, vigilance, and study of the Legislature, 
 the state of the money is not one of the least 
 considerable. The aim of government should 
 be to obtain what is required in the shape of 
 taxes with the least possible oppression to the 
 subject, and this it cannot do, if it fetters his 
 industry « by imperfect systems of currency, of 
 which the country at large have complained as 
 often as they have existed. 
 
 If this country have the good fortune to see 
 the Restriction Bill repealed, the proclamations 
 of his Majesty should again be put in full force 
 in support of the perfection of our gold cur-
 
 71 
 
 rency for which so much money has been ex- 
 pended. 
 
 When this desirable object is attained, it 
 might be proper to establish an office in his Ma- 
 jesty's mint, for giving facility to the exchange 
 of the coins become deficient in weight from 
 wear, as stated in the proclamation ; the govern- 
 ment to determine at whose expense the ex- 
 change shall be made. An office of this nature 
 anciently existed in the mint, and the person 
 who held it was called the King's exchanger. 
 The following account of this office is given by 
 Lord Liverpool : " This officer appears not only 
 " to have exchanged the coins of one metal 
 " made at the royal mint, for those made of 
 *' another ; but as the exportation of the 
 " coins of the realm was prohibited, he fur- 
 '* nished persons going out of the kingdom with 
 " foreign coins, in exchange for English coins ; 
 " and he furnished merchants^ strangers, coming 
 " into the kingdom, with the English coins, in 
 " exchange for foreign coins : this officer had 
 " his deputies in many of the out-ports and 
 " principal cities of the kingdom : a consider- 
 ** able profit was made by this practice, of 
 *' which the king is said to have had his share. 
 " When gold coins were exchanged for silver 
 " coins, a silver penny of that time was taken 
 ** for the exchange of each gold noble, being-
 
 '* the largest gold coin then in currency, and in 
 " like proportion for smaller gold coins ; and when 
 *' silver coins were exchanged for gold coins, a 
 *^ silver penny of that time was given' for each 
 *^ gold noble received in exchange for them, and 
 ** in like proportion for smaller coins ; and the 
 '* exchanger is said to have gained thereby 1 J- 
 ** per cent. When this officer exchanged foreign 
 *^ coins for English, or English for foreign, the 
 *' exchange was regulated by a table, hnng up 
 *' in each of his offices. The last person that 
 '' was appointed to the office of king's exchan- 
 ** ger, was the Earl of Holland, in the third 
 " year of Charles the First." Lord Liverpool, 
 . 213-4. 
 It must be admitted, that an office of the 
 nature here described would be a great public 
 convenience, and would powerfully tend to 
 preserve the gold currency in that degree of per- 
 fection which is so essential to the prosperous 
 course of the country. The increased facility 
 of the operations of the new mint, by which 
 the light money could speedily be re-coined, 
 would render a large capital unnecessary ; and 
 if the government adopt any of the foregoing 
 regulations of the exchanger's office, in respect 
 to foreigners, it may defray the interest of the 
 capital employed. This tax on foreigners should
 
 73 
 
 not, however, exceed the expense which they 
 are subjected to in disposing of their coins to a 
 goldsmith, who has his reasonable profit by the- 
 transaction. 
 
 In a preceding Chapter, it has been proved, 
 that in point of practice, coins of gold have 
 been the exclusive standard measure of property 
 in this country since 1717, not only in our in- 
 tercourse with one another, but with foreign 
 nations. During this period, silver coins have 
 acted in the same subordinate situation in rela- 
 tion to gold coins, as copper coins have in rela- 
 tion to silver. In point of law, however, the 
 silver coins were equally a legal tender with 
 those of gold, and continued so until 1774, 
 when an act was passed declaring silver a legal 
 tender to the amount of i^25 only, except by 
 weight.* 
 
 The late Lord Liverpool has at considerable 
 length, in his letter to the King, stated the evils 
 
 * Although this Act of Parliament prohibits an individual 
 from paying a debt in silver currency by (ale beyond 25/., he 
 can, notwithstanding, pay to any amount, provided he does it 
 by weight, at the rate of 5s. 2d. for each ounce of silver ; this 
 law, therefore, cannot prevent silver from becoming the (stand- 
 ard of our money, when it is the interest of individuals to pay 
 in silver rather than in gold. 
 
 The clause of the Act here alluded to is as follows : " That 
 " no tender in payment of money made in the silver coin of 
 " this realm, of any sura exceeding the sum of twenty-five
 
 74 
 
 wliich arise from a nation having two standards 
 of money, each legal tender, and enforces the 
 propriety of declaring by law, that silver should 
 only pass in exchange for the guinea, as copper 
 now does for silver. 
 
 It will be unnecessary here to enter into a 
 detail of the particulars stated by his Lordship : 
 it is sufficient for our purpose, that the practice 
 of nearly a century justifies the sanction of a 
 practice by law, which has so long obtained, but 
 under heavy disadvantages without law.* 
 
 It will appear, from the principles laid down 
 in the foregoing Chapters, that a seignorage 
 Upon the coins constituting the principal mea- 
 
 *' pounds at any one time, shall be reputed in law, or allowed 
 *' to be legal tender within Great Britain or Ireland, for more 
 " than according to its value by weight, after the rate of js. 2d, 
 " for each ounce of silver." 
 
 * Every necessary measure should now be adopted to pre- 
 vent silvfc-r becoming again the standard of our money ; if it 
 were, great injustice would be done to every person who had 
 acquired property ; it being acquired in reference to gold 
 being the standard. It appears from the Tables in the Ap- 
 pendix, that the average relative value of gold and silver have 
 been for the last year fully as 1 to l6j the mint proportion 
 are as 1 to 15.07. If silver, therefore, was allowed to be- 
 come the standard -of our money, it will appear evident 
 that no individual who owed an ounce of gold, or 3/. 17*. ^O^d. 
 would discharge his debt with that ounce, he would avail him- 
 self of the cheapness of silver, and with his 3/. 17*. 10-i-rf. of 
 gold, purchase 1 6 ounces of silver, which, if coined at the rate 
 oi 0^1. 2d. per ounce, being the mint price of silver, would pro-
 
 73 
 
 sure of property is altogether arbitrary. For 
 example, if the Legislature of Great Britain 
 enacted, that five per cent, should be the 
 amount of seitrnorage levied on our gold coins, 
 the government would here derive a considerable 
 profit, but it would be only nominal ; the price 
 of all commodities would assume a price relative 
 to the value of the metal contained in the 
 coins, in the same way as if no seignorage had 
 been taken. In fact, every individual would 
 have to pay in his usual money transactions one- 
 
 duce 4.'. Qs. Sd. and with 3/. IJs. lO^r/. of that sum, he could, 
 and certainly would, discharge his debt, making a profit thereby 
 pf 1^ 9'(i, or 6'.3f.0l(I. per cent, so that every individual 
 ■who discharged a debt in this manner, would save 6/. 3v. O^il. 
 ■while the creditor would be defrauded to the same amount. 
 
 If the present market relative value of gold and silver should 
 become permanent, and our currency restored to that state in 
 which it was previous to 179", (and the act annulled prohibiting 
 the coinage of silver at the mint, and its great scarcity will 
 render this necessary sootrer or later) silver would unrjuestioii- 
 ably become the standard tf our currenc)', and the public credi- 
 tor defrauded to the extent here described) silver only would 
 be brought to the mint to be coined, and as the ounce of gold 
 would be worth 4/. 2^. 8f/. in silver, all the coins would be 
 melted and exported for the profit attending the high market 
 price of gold. 
 
 The necessity and justice, therefore, of declaring, by a spe- 
 cific Act of Parliament, gold to be the only standard of our 
 money, and silver a legal tender to the amount of a guinea only, 
 must appear obvious ; and it is to be hoped the importance oj 
 this measure will not esca^.e the ati-.-mion of the legi»laiure.
 
 76 
 
 twentieth more in the new coins, than he would 
 have had to pay in the old. The rates of ex^ 
 chjmge would be subject to similar laws, and if 
 computed in the old coins would appear against 
 us to the amount of the seignoragc. Notwith- 
 • standing this principle, it has been usual in the 
 mints of other countries to levy a seignorage 
 on the coins which are the measure of value. 
 Generally this seignorage was only sufficient to 
 pay the actual expense incurred in coining. In 
 the regulations respecting the French coinage, 
 passed in the year 1803, as detailed in the Mo- 
 niteur, it was enacted, that no charge was to 
 be made for coining, but the actual expense 
 incurred.* If the mere expense of coining were 
 deducted from our gold coins, which amounts 
 to about fifteen shillings per cent, the rise in 
 the pricie of commodities, and the variation in 
 the rate of exchange, would be so trifling as 
 not to be an obstacle of serious magnitude to 
 the adoption of the principle. The purity, 
 however, and perfection of the gold money of 
 the British mint has been so long, and so justly 
 
 * It is also enacted, in the French mint, that the importers 
 of bullion shall pay the expense of refining that portion which 
 is necessary to bring the whole to the standard of the money. 
 
 At his Majesty's mint this charge is defrayed by the public, 
 and is frequently a very serious expense, sometimes amounting 
 to a fourth, fifth, or sixth part of the whole charge of coinage.
 
 77 
 
 celebrated, that any alteration should be avoided 
 if possible ; and if it is an object to the Go- 
 vernment, that the importer of gold to the mint 
 should pay the expense of coining, it may be 
 done without making any alteration whatever in 
 the coins. 
 
 It appears from the . Tables of the prices of 
 gold in the Appendix that the Bank from 1777 
 to 1797, could purchase gold at ^3 17 6 per 
 ounce — this cannot be properly called the mar- 
 ket price of that metal ; if the bullion merchant 
 had brought his gold to the mint to be coined, 
 he must have waited some time until it was 
 manufactured ; it, therefore, became a matter 
 of calculation with him, whether he should sell 
 it to the Bank at ^3 i7 6, or wait the process 
 of coining, and receive ^3 17 lOi-. The Bank, 
 on the other hand, from her great command of 
 capital, and from the delay at the mini, which 
 was a certain expense to her by loss of interest, 
 would not give more than ^3 17 6 per ounce; 
 and it would be but reasonable to suppose, that 
 the Bank would derive some little advantage by 
 this use of her capital. 
 
 If the following plan was adopted at the 
 mint, a fund would be created which would 
 pay, if not the whole, at least the greater part 
 of the ex[)ense of coining our gold money, and
 
 73 
 
 without diminishing the weight, or purity of the 
 coins. 
 
 Let the Legislature enact, that every importer 
 of bulHon to the mint shall receive, on deliver- 
 ing the same, at the rate of ^3 17 6 per 
 ounce for standard gold ; the mint would derive 
 a seignorage, or profit of 4id. per ounce, which 
 is nearly ten shillings per cent. The interest of 
 the capital employed under this regulation, 
 would be very trifling from the great facility 
 of coining at the new mint. This seignorage 
 or profit, together with some other small 
 advantages, which the importers of gold have 
 derived, would be nearly equal to the expense of 
 coinage. 
 
 A particular advantage would be enjoyed even 
 from so small a seignorage, by diminishing that 
 speculation in the exportation of our gold coins, 
 which so frequently takes place, when the rates 
 of exchange make it a profitable transaction — 
 these coins having hitherto been replaced at the 
 expense of Government.
 
 CHAPTER XIII. 
 
 Observations on the principle hy ivhich our 
 silver coins have been fabricated ; a plan 
 of a re-coinage for irreserving the silver 
 currency in a state of uniformity and 
 perfection. 
 
 This country has hitherto been peculiarly unfor- 
 tunate in her attempts to retain a sufficient 
 quantity of silver in the state of coins. The 
 great re-coinage which took place in the reign 
 of King William, was executed according to 
 the present mint price of silver, which is at the 
 rate of 5s. 2d. per ounce, or 62s. to the pound 
 weight troy. On the completion of the re- 
 coinage, which is said to have cost about three 
 millions sterling, the market price of silver 
 kept superior to its mint price, thereby holding 
 out a considerable temptation to melt and ex- 
 port the coins, so that, in a few years, the great- 
 er part of them disappeared from circulation. 
 The growing debisement of the silver coins, 
 which at this period were deemed the principal 
 measure of property, led to the proclaniation in
 
 BO 
 
 1717, which I have already mentioned ; declaring 
 gold coins a legal tender, at the rate of 21s. to the 
 guinea- From this period to the reformation of 
 the gold coins, in 1773, the average market 
 price of silver v^'as more than five per cent, 
 above its mint price, which prevented any con- 
 siderable re-coinage from being executed at the 
 mint. After the re-coinage of the gold currency, 
 the price of silver fell somewhat nearer to its mint 
 price, so that on an average of twenty-four years, 
 from 1773 to 1797} its price was 5s. 34^d. per 
 ounce, or about two per cent, above its mint price. 
 This continued superiority of the market, was suf- 
 ficient to prevent any coinage from taking place, 
 and has been the cause of the great debasement 
 which has ensued in our silver surrency. 
 
 During the twenty-four years here men- 
 tioned, our gold coins were in a state of great 
 perfection, and should have purchased silver 
 bullion at the mint price, provided its relative 
 proportion to gold had been correctly fixed. 
 It appears, however, that silver could not be 
 purchased but at l^^d. per ounce above its mint 
 price, which renders the relative value of standard 
 gold to standard silver as 14-pV to 1. The mint 
 proportions are as 15.07 to 1. It appears, 
 therefore, that the relative value of gold to 
 silver is erroneously fixed at the British mint, 
 and if a silver coinage was executed on the pre-
 
 81 
 
 sent principle of 5s. 2d. per ounce, it would be 
 more valuable than the average price of silver in 
 the market by two per cent. This is supposing 
 that the Restriction Bill is repealed, and the coun- 
 try in possession of a gold currency as perfect as 
 it was from J 777 to 1797? and the relative value 
 of gold and silver the same. 
 
 It would appear from these facts, that before 
 any re-coinage of silver can take place in this 
 country, some alteration must be made in the 
 principle, by which the coins have hitherto been 
 fabricated. 
 
 The inconvenience which the country has 
 hitherto experienced from the scarcity of silver 
 coins, renders it desirable that some plan should 
 be adopted, by which that inconvenience might 
 be remedied. Jt is my intention here to pro})Ose 
 a plan for this purpose ; but, before entering into 
 the particulars of it, it becomes necessary to con- 
 sider the principle on which it ought to be exe- 
 cuted, that the country may enjoy the advantaoes 
 of a perfect currency, with the least [)ossible 
 expense. 
 
 I have already stated the principle which re- 
 gulates the amount of seignorage on our Q;old 
 coin?. In respect to silver, the' scignonige is 
 not limited by the same law, but may be ex- 
 tended with propriety beyond the expense of
 
 82 
 
 coinage. In fact, the expense of coinage would 
 not give that security to the silver coins which 
 may be necessary to retain them in the country. 
 Silver being an article of more universal employ- 
 ment as a commodity than gold, is subject to 
 greater fluctuations in price; and, although at 
 the expiration of a term of years, it may not 
 exceed its mint price above two per cent, yet 
 it is found, from experience, to rise from five 
 to twelve per cent, above its mint price.* 
 The price of silver is also affected by the per- 
 fect or imperfect state of the gold coins, and 
 from both causes is liable to considerable changes. 
 In some instances, since the Restriction Bill 
 passed, silver has risen as high as 6s. per ounce, 
 which is fifteen per cent, above its mint price. 
 That this would not be the case, if the cur- 
 rency was restored to that state in which it 
 existed from 3 773 to 1797, appears evident 
 from its average price not exceeding 5s. 34-d. 
 during that period. 
 
 To guard, therefore, against all hazard of melt- 
 ing the coin, the seignorage ought to be ten per 
 cent, above the average price in question ; were it 
 less, past experience shows the possibility of a 
 case existing, in which a profit would be made by 
 melting the coin. 
 
 * Lord Liverpool on the coins of the realm, p. 150.
 
 83 
 
 It is not sufficient protection, as was proposed 
 by Lord Liverpool, to make the seignorage equal 
 only to the expense of coinage, which might be 
 about 2-i- per cent. Besides, the additional y\ per 
 cent, would supply a fund to meet the deterioration 
 of the coin. 
 
 It is a matter of difficulty to fix what quantity 
 of silver currency is requisite for the wants of the 
 country. At present, it is supposed, there are 
 only three millions in circulation; but this is evi- 
 dently quite inadequate, as appears from the quan- 
 tity of shilling, half-crown, and crown Banknotes, 
 which from time to time have been in circulation, 
 and the otherwise general complaint of scarcity of 
 silver coins. 
 
 The amount issued at the recoinage in King 
 William's time is, perhaps, not a proper crite- 
 rion to judge by. The situation of the country 
 has considerably alt'.^red ; our population and trade 
 have greatly increased ; but as all great payments 
 have been made in gold, or in Bank notes, the 
 quantity of silver currency wanted, it being 
 so for the subordinate office of change solely, 
 may upon the whole be less now than formerly. 
 Without naming any specific sum, as an adequate 
 supply for the wants of Great Britain and Ireland, 
 on the plan about to be proposed, we may as- 
 sume, as the siij)|)osed demand, a currency of five 
 (> 2
 
 84 
 
 millions, supposing that less would not be a suffi- 
 cient supply.* 
 
 If we suppose then, that a recoinage of silver is 
 to take place ; that silver in place of the mint price 
 of 5s. 2d. per oz. shall be rated at 5s. S^d. the 
 average price of the 24 years before-mentioned, 
 or at the rate of 5s. 4d. to avoid the inconvenience 
 effractions ; and that a seignorage of 10 per cent, 
 is to be imposed, the plan in contemplation would 
 be, with a currency of five millions, that there 
 should be coined at the mint half a million yearly, 
 for ten successive years. 
 
 The following table will shew the operation of 
 the seignorage during that period. 
 
 * As an excess of silver currency would be attended with 
 great inconvenience, and loss of capital to those in whose hands 
 the superabundance might become fixed, it is necessary to 
 remark, that by the plan here proposed, this excess could not 
 in any great degree take place. As all demands would be made 
 at the mint, no more would be issued than demanded. But to 
 prevent the possibility of any such inconvenience, let it be en- 
 acted, among the regulations of the Exchanger's Office, that 
 every individual shall have the privilege of exchanging his silver 
 coins for gold ; and if gold is declared by law to be the standard 
 of our money, this convenience ought to be afforded to the 
 public.
 
 85 
 
 A Table of Seignorage upon Coinage of Silver, 
 at 10 per Cent. 
 
 First Year 
 Deduct for coinage Sg 
 
 Second Year 
 Deduct for coinage 
 
 Third Year 
 Deduct for coinage 
 
 Fourth Year 
 Deduct for coinage 
 
 Fifth Year 
 Deduct for coinage 
 
 Sixth Year 
 Deduct for coinage 
 
 Seventh Year 
 Deduct for coinage 
 
 Eighth Year 
 Deduct for coinage 
 
 Ninth Year 
 Deduct for coinage 
 
 Tenth Year 
 Deduct for coinage 
 
 Amount 
 
 paid for 
 
 coining y 
 
 million 
 
 at 2^ 
 
 per cent. 
 
 12,500 
 12,500 
 12,500 
 12,500 
 12,500 
 12,500 
 12,500 
 12,500 
 12,500 
 12,500 
 
 Amount 
 of seigno- 
 rage on 
 ^500,000 
 
 at 10 
 percent 
 
 50,000 
 12,500 
 
 50,000 
 12,500 
 
 50,000 
 12,500 
 
 50,000 
 12,500 
 
 50,000 
 12,500 
 
 50,000 
 12,500 
 
 50,000 
 12,500 
 
 50,000 
 12,500 
 
 Amount 
 
 of 
 surplus 
 on each 
 yearly 
 coinage. 
 
 37,500 
 37,500 
 37,500 
 37,500 
 37,500 
 37,500 
 37,500 
 37,500 
 37,500 
 
 Amount of 
 collective 
 interest 
 on each 
 yearly 
 surplus. 
 
 1,875 
 
 3,843.75 
 
 5,910.93 
 
 8,081.48 
 
 10,360.55 
 
 12,753.58 
 
 15,'266.36 
 
 17,90^,32 
 
 37,500 20,6'74.55 
 
 125,000 
 
 37,500 
 
 39,375 
 
 41,343,75 
 
 43,410.93 
 
 45,581.48 
 
 47,860.55 
 
 50,253.53 
 
 52,766.36 
 
 55,404,32 
 
 58,174.55 
 
 1375,000 !96",670.52 |471, 670.52 
 
 * 2§ per cent, is assumed as the expense of coinage, not with 
 any reference to what the real charge may be, but from its rendering 
 the calculation more distinct.
 
 86 
 
 x\t the end of ten years, that is to say, when 
 the 10th half million has been one year in circu- 
 lation, the clear amount of the seignorage fund 
 wouldbe J^47J,670. 
 
 According to experiments made at the mint on 
 the wear of our silver currency, (as quoted by 
 Lord Liverpool,) it was found that the silver coins 
 of King William's reign had lost about 0,5 per 
 cent, in a century, which is at the rate of 2-i- per 
 ccQt. every ten years. A silver currency already 
 debased 10 per cent, by a seignorage, should 
 be suffered to receive as little debasement from 
 wear as possible. It may therefore be proper to 
 recall it from circulation when it may have 
 undergone a debasement of 24- per cent, as no 
 law contributes more to the security of the public 
 against base money, than the newness and uni- 
 formity of the coins. 
 
 According, therefore, to our plan, supposing 
 for example that the first issue of half a mil- 
 lion took place in 1810, each coin bearing that 
 date, another in 181 1, another in 1812, &cc. &c. 
 until the whole ten half millions were issued, 
 when the half million, first issued, has been in 
 circulation ten years, it is recalled by procla- 
 ination, and exchanged for an equal quantity of 
 new coin, bearing date 1820, every annual issue 
 bearing the date of the year in which it was 
 coined. The issue and recall pre-supposes an
 
 87 
 
 eleventh half million coined, to be exchanged for 
 the half million just recalled. 
 
 The expenses attending this recall 
 and issue would be — loss by wear on 
 the half million recalled, at 2^ per cent. 1 2,500 
 
 Cost of coining the new half mil- 
 lion in exchange, at 2^ per cent. . . 12,500 
 
 Together 25,000 
 
 This expense to be defrayed as follows : 
 
 A year's interest on the 
 seignorage fund say 23,750 
 
 Part of the half million in 
 circulation may have been 
 lost, and of course not being 
 presented for exchange, there 
 will be no occasion to make 
 good the loss by wear on that 
 part. Suppose it to be a 
 twentieth, or .^25,000, the 
 sum saved on this, at 24- per 
 cent, would be 625 
 
 Expense of re-coinage 
 saved on that amount at 
 
 2-1- per cent 625 
 
 Together 25,000 
 
 Not that less than half a million would be 
 issued of the new coins, but that 25,000 of 
 this new half million not being wanted for the
 
 88 
 
 purpose of replacement, the expense of its coinage 
 does not apply to this account. 
 
 It is proposed, that the deficiency on the half 
 million recalled should be replaced by the importers 
 of bullion, and should also bear a seignorage of 
 10 per cent. 
 
 Next year, the second half million issued might 
 be replaced in the same manner, and the yearly 
 routine of recalling half a million of coin ten 
 years old, and re-issuing another half million of 
 new coin, might go on, ad infinkum, without 
 calling on the public revenue for a shilling towards 
 defraying the expense. 
 
 The eleventh half million necessary to com- 
 plete this plan, would have a clear surplus of 
 ^37,500, it bearing also a seignorage of 10 
 per cent. The interest on this sum added to the 
 seignorage on the annual supplies, which are 
 estimated at ^'25,000, will constitute a fund 
 of afA,375 per annum, which may be applied 
 to defray part of the expenses of the mint 
 establishment. 
 
 The seignorage fund would probably be invested 
 in the funds, under the management of public 
 commissioners appointed by Government. 
 
 The principal advantages resulting from the 
 adoption of such a plan would be : 
 
 1. The great public saving on the score of 
 coinage.
 
 89 
 
 2. The abundant stock of silver currency in a 
 state which would be very difficult to counterfeit. 
 
 3. Steadiness in the price of silver bullion, as, 
 instead of the present uncertainty of demand 
 for coin, the quantity wanted would be defined, 
 and after the first ten years would probably be 
 insignificant, perhaps from ^25,000 to ,^50,000 
 per annum. 
 
 4. Regularity in the employment of the officers 
 and workmen at the mint. Hitherto their em- 
 ployment has consisted of great temporary exer- 
 tions, with long intervals of inactivity. During 
 these intervals, their time and attention have been 
 directed to other occupations. Such alternations 
 are evidently unfavorable to the proper manage- 
 ment of the establishment. How much more 
 expensive would a large manufacture be if con- 
 ducted in this manner, than by that even course 
 which adapts supply to demand. 
 
 Let us now proceed to anticipate some of the 
 objections that are likely to be made to this 
 plan. 
 
 It may be urged that, were the old coins to 
 remain partially in circulation after the issue of 
 the new, frauds might be practised by filing 
 down the new coins to the reduced state of the 
 old, and that if it be determined to recall the 
 whole of the old coins at once, the half million 
 or million proposed to be issued in the first in-
 
 90 
 
 stance, would be a very inadequate substitute. 
 The better plan might be to ascertain, if pos- 
 sible, the present amount of silver coin in circu- 
 lation, to get ready a correspondent quantity of 
 new coin, to make arrangements for the issue of 
 the new at the same time in different parts of the 
 empire, to prohibit the circulation of the old by 
 proclamation, and to enjoin its speedy transmission 
 to the mint for the purpose of exchange. This 
 plan it would be advisable to follow, although the 
 first year's issue might in consequence be much 
 above a million. 
 
 It may be objected also, that the amount of 
 the seignorage would give encouragement to 
 counterfeiting. It is important to remark, that 
 there are two classes of counterfeiters. One class 
 prepares blanks of copper, or of some other 
 inferior metal, which they face or case with 
 silver or gold leaf of considerable thickness, and 
 afterwards stamp. The other fabricate coin in 
 the way practised at the mint, but with inferior 
 metal. Guineas have been couterfeited in this 
 manner, and are in intrinsic value about l/s. 6d. 
 They are nearly of the weight of the standard 
 guinea, and aiford a profit of about l6 per cent. 
 The former class would not be benefited by the 
 imposition of a seignorage: the second would 
 certainly have a considerable advantage by it. 
 However, if guineas chiefly have been forged by
 
 91 
 
 this class, the objection does not apply so much 
 to this argument which regards silver. To answer 
 all such objections, it is perhaps sufficient to ob- 
 serve, that the law should be made more explicit 
 and effectual, it being impossible to stop such 
 frauds, under any system of coinage, so long as 
 the law continues in its present vague and inope- 
 rative state. 
 
 It may be objected, that a currency, on which 
 a scignorage has been taken, may fall in value 
 below the denomination at which it was issued. 
 The answer is plain; no such depreciation has 
 taken jilace in consequence of the seignorage 
 of foreign countries, nor has any taken place in 
 our own, although our silver currency has been 
 degraded about 25 per cent, for half a century. 
 
 Finally, it may be objected that it would be 
 difficult to recall the whole of the annual issue 
 from circulation, and that part will remain out 
 through the ignorance or inattention of the 
 holders. The plan would be to give in the first 
 place every facility to the exchange of new coin 
 for old, appointing agents in every considerable 
 town for that purpose, proclaiming a limited time, 
 perhaps a month, for the completion of tha pro- 
 posed exchange, after which time it should cease 
 to be current, and be receivable only on the part 
 of the mint at its intrinsic value. The negligence 
 of the holders would thus be punished with a fine
 
 92 
 
 of 12-^ per cent., namely, 10 per cent, seignorage, 
 and 24- per cent. wear. The agents- for the ex- 
 change might be the country Bankers, and their 
 number, as well as the length of time allowed, 
 would admit of each piece being weighed at the 
 time of exchange, which would be a great secu- 
 rity, counterfeits being considerably lighter than 
 the lawful coin. As to the expense of this 
 agency, it would be small, and it may be fairly 
 looked on as provided for by the above-mentioned 
 bonus of 124- per cent, on the part omitted to be 
 sent within the time.
 
 APPENDIX. 
 
 i HE following Tables contain the market prices of 
 standard gold and silver, shewing their relative proportions 
 to each other ; with the par and course of exchange, shew- 
 ing^ the per centage in favour and against London; also the 
 per centage above and below the mint price of gold, from 
 the 1st day of January 176O to the 1st day of March 1810, 
 both days inclusive ; also a quarterly account of Bank of 
 England notes in circulation since 1790? taken from the 
 accounts laid before the committee of secrecy, and from 
 the annual statements laid before the House of Commons. 
 
 N. B. The notes under five pounds are included. The 
 prices of gold and silver, and the courses of excliange, 
 have been extracted from Lloyd's lists. The first number, 
 published every two months, has been selected and con- 
 tinued throughout the whole of the tables. 
 
 In the calculations in these Tables, gold has been made 
 choice of as being the principal measure of property, agree- 
 ably to the principles laid down in the foregoing Enquiry. 
 They concur in proving, that a debased currency has the 
 effect of raising the price of gold above its mint price — 
 they also concur in a remarkable manner in proving the in- 
 variability of the mint price of gold, to which important 
 fact the reader's attention is requested; it is also particularly 
 requested to the effect which the operation of the Bank 
 Restriction Bill has had on the price of gold, and to the 
 actual amount of discount now existing on Bank note:, in 
 consequence.
 
 94 
 
 In the first edition of this work I stated the par of ex- 
 change with Hamburgh at 33 schillings and 8 grotcs, and 
 at that considered it as a fixed par j from the best informa- 
 tion which I have been able to obtain upon 'Change since, 
 34 1 It are considered as the par, and in the present edition 
 I have stated it as such. I have also corrected the mistake 
 of considering the par to be fixed; because gold being the 
 standard of the money of England, and silver in Hamburgh, 
 there can be no fixed par between those two countries, it 
 Avill be subject to all the variations which take place in the 
 relative value of gold and silver. For example, if 34 
 schillings, 11 grotes and a |, of Hamburgh currency 
 be equal in value to a pound sterling, or l°- of a guinea, 
 when silver is 5s. 2d. per oz. they can no longer be so when 
 silver falls to 5s. id. or 5s. peroz, because a pound sterling 
 in gold being then worth more silver is also worth more 
 Hamburgh currency. 
 
 To find the real par, therefore, we must ascertain what 
 was the relative value of gold and silver when the par was 
 fixed at 34 11|, and what is the relative value at the time 
 we wish to calculate it. 
 
 For example, if the price of standard gold was 
 ^3 17 IO2 pel" oz. and silver 5s. 2d. an ounce of gold 
 would then be worth 15.07 ounces of silver, being the 
 mint proportions, 20 of our standard shillings would then 
 contain as much pure silver as 34 schillings, 11 grotes 
 and a |; but if the ounce of gold was ^3 17 10 h and 
 silver 5s. (which it was on the 2d Januarj^, 1798) the ounce 
 of gold would then be worth 15.57 ounces of silver. If 
 ^1 sterling at par, therefore, be worth 15.07 ounces of 
 silver, then at 15.57 it would be at 3 per cent, premium, 
 and 3 per cent, premium on 34 11| is 1 schilling, 1 grot 
 and -r^oj so that the par when gold is to silver as 15.57 to 1 
 will be 36 schillings, 1 grot and -j-'o-
 
 93 
 
 The above calculation will be more easily made by 
 stating as follows : 
 
 As 15.07 : 34 11| :: 15.57 : 36. ItV 
 
 These Tables satisfactorily prove, that the rate of ex- 
 change cannot exceed the expense of transmitting the 
 precious metals from one country to another. From 1777 
 to 1797j the period in which we possessed a perfect cur- 
 rency, the yearly average rate of exchange with Hamburgh 
 never exceeded 5 per cent, on either side of the water. 
 
 A comparison of the rates of exchange, from 176O to 
 1777^ and from 1777 to K^7y will prove the truth of the 
 principle, that a debased currency has the effect of causing 
 an unfavorable exchange. 
 
 The reader is requested to pay particular attention to the 
 state of the exchange with Paris during the years 17^2 and 
 3, when from a depreciated currency, caused by an ex- 
 cessive issue of assignats, the exchange was upwards of 85 
 per cent, in favour of London, even at that early period 
 of the depreciation of French paper. See* Appendix, 
 No. 2. 
 
 Appendix, No. 3, contains a monthly account of the 
 state of the exchange with Paris, from the 3d day of Ja- 
 nuary, 1809, to the 6th day of March, 1810. 
 
 A comparison of the rates of excliange with Hamburgli 
 since the Bank Restriction Bill, with the rates of an equal 
 number of years previous to that period, will suflTicicntly 
 prove, that our currency is depreciated, that its influence on 
 the rates of exchange accords with the principles laid down 
 in the foregoing ICnquiry. The present state of the ex- 
 change with Hamburgh and Paris, and the market price of 
 gold, are without precedent in tliese Tables, and can he ac- 
 counted for upon no other principle th:ui that of a depre- 
 ciated clrculatinf^ medium.
 
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 106 
 
 APPENDIX. No. II. 
 
 A Monthly Account of the market prices of standard gold 
 and s'dver, shewing their relative proportions to each 
 other, with the par, course, and rates of exchange, 
 between London and Paris, from the 3d day of January 
 1792, to the Sd day of Pecember 1793, both inclusive, 
 extracted from Lloyd's Lists. 
 
 
 1 J'n< e 
 
 ITue ■ 
 
 Their 
 
 Par 
 
 Course of, Per 
 
 
 
 
 of 
 
 of 
 
 relative 
 
 of 
 
 cxi-ha.ige 
 
 
 Per 
 
 
 
 st.imlard 
 
 stanaard 
 
 proportions 
 
 exchnnee 
 
 wilh^ 
 
 i.. fuvour 
 
 reutag* 
 
 
 
 colli 
 
 silver 
 
 to ejih 
 
 with 
 
 Puns 
 
 of , 
 
 aganst 
 
 
 
 
 peroi. 
 
 other. 
 
 Tans.- 
 
 msiKht. 
 
 London. 
 
 Loudon. 
 
 J 792 
 
 Jan. 3 
 
 3 17 6 
 
 5 4 
 
 14.53 tol 
 
 28. i 
 
 19.^ 
 
 31. fo 
 
 
 
 Feb. 3i3 IT 6 
 
 5 4 
 
 14.53 1 
 
 2S.i 
 
 17.f 
 
 39.;^ 
 
 
 
 March 2 3 17 6:0 5 4^ 
 
 14.41 1 
 
 28 
 
 I5.i 
 
 45-1, 
 
 
 
 April 3i3 17 60 5 5 
 
 14.3 1 
 
 27.f 
 
 17.i 
 
 37. 
 
 
 
 May ll3 17 6 5 5^ 
 
 14.25 1 
 
 27.i 
 
 n.| 
 
 36.3^ 
 
 
 
 June 1 3 17 60 5 6 
 
 14.09 1 
 
 27.i 
 
 n.| 
 
 35. fo 
 
 
 
 Jaiy 3 3 iT GO 5 6 
 
 14.09 1 
 
 il.i 
 
 18' 
 
 34.' 
 
 
 
 August 3i3 17 6|0 5 5 
 
 14.3 1 
 
 27.| 
 
 17.^ 
 
 37., 'o 
 
 
 
 Sept, 4 
 
 3 17 6 
 
 5 5 
 
 14.3 1 
 
 27.| 
 
 19.| 
 
 28.A 
 
 
 
 Oct. 2 
 
 3 17 6 
 
 055 
 
 14.3 1 
 
 27. i 
 
 I8.i 
 
 34.;i 
 
 
 
 Nov. i 
 
 3 17 6 
 
 
 
 
 
 19.| 
 
 
 
 
 Dec. 4 
 
 3 17 6 
 
 5 41 
 
 14.36 1 
 
 27.^ 
 
 19.a 
 
 28./, 
 
 
 1793 
 
 Jan. 1 
 
 3 17 60 5 4^ 
 
 14.36 1 
 
 27. i 
 
 17 
 
 38./ 
 
 
 
 Feb. 1 
 
 3 17 60 5 5 
 
 14.3 1 
 
 27.1 
 
 14.i 
 
 46.4 
 
 
 
 March 1 
 
 3 17 60 5 2h 
 
 14.88 1 
 
 2S.i 
 
 15 
 
 47.^ 
 
 
 
 April 2 3 17 6|0 5 2i 
 
 14.88 1 
 
 28.^ 
 
 12 
 
 5T.}, 
 
 
 
 May 3 
 
 3 17 610 5 2i 
 
 14.88 1 
 
 28.i 
 
 
 
 
 
 June 4 
 
 3 17 60 5 1^ 
 
 15.12 1 
 
 29.iA 
 
 
 
 
 
 July 2 
 
 3 17 6 5 1 
 
 15.24 1 
 
 29.i 
 
 9 
 
 69.fo 
 
 
 
 August 2 
 
 3 17 6'0 5 1 
 
 15.24 1 
 
 29.^ 
 
 4.i 
 
 85.A 
 
 
 
 Sept. 3 
 
 3 17 ejo 5 li 
 
 15.12 I 
 
 29.iT% 
 
 7.1 73.VI 
 
 
 Oct. 1 
 
 3 17 60 5 li 
 
 15.12 1 
 
 29.|fB 9 1 69.^^ 1 
 
 
 Nov. 1 
 
 3 17 6|0 5 lA 
 
 15.12 1 
 
 lutercouse with F 
 
 ranee 
 
 Dec. 3 
 
 3 17 6|0 
 
 
 ceased at this peri 
 
 ad. 
 
 * The par of exchange between London and Paris has been iixed at 
 SO^d. S#e Lord King on tlic Restriction Bill, p. 150, 2d edition,
 
 107 
 
 APPENDIX. No. III. 
 
 A Monthly Account of the market prices of standard gold 
 and silver, their relative proportions to each other, with 
 the par, course, and rates of exchange between London 
 and Paris, from the 3d day of January 1809, to the 6th 
 day of March 1810, both included : extracted from 
 Lloyd's Lists. 
 
 1810 
 
 Jan. 3 
 Feb. 3 
 March 3 
 April 4 
 May 
 June 2 
 July 4 
 August I 
 Sept. 5 
 Oct. 
 Nov. 
 Dec. 
 Jan. 
 Feb. 
 
 March 6 
 
 12 10^ 
 
 U 
 
 9 10^0 
 
 0" 
 
 
 
 
 
 
 12 10^ 
 11 lOi 
 
 1 6.49 to 1 
 
 7^1-6.18 
 6i 16.42 
 7^16. 
 8^16.27 
 
 8^ 15.74 
 
 
 H 
 
 
 
 74 
 8il6.97 
 9 |15.97 
 
 26. 5 
 25.15 
 26. 3 
 25. 9 
 25.18 
 
 25. 1 
 
 25.18 
 25. 9 
 
 22. 4 
 
 22. 4 
 20.19 
 20.19 
 20.19 
 
 20. 1 
 20. 1 
 20. 1 
 20. 1 
 20. 1 
 19. 6 
 19.16 
 19.16 
 19.10 
 19.16 
 
 20. 
 
 18.-A 
 
 21.i\ 
 
 22.-/0 
 
 20. 
 
 2-J.ft 
 22.A 
 
 In the above calculations I have considered the par be- 
 tween Ix>ndon and Paris to be 24 livres to the pound sterling, 
 which I am informed is the reputed par on the London 
 exchange.
 
 i08 
 
 APPENDIX. No. IV. 
 
 A Reply to Mr, GixnfelVs Examination of the 
 Tables of Exchange annexed to the first Edition 
 of this I'Fork. 
 
 Mr. GrenfelL;, In a Postscript to his Defence of Bank 
 NoteSy has given an examination of the Tables of Ex- 
 change annexed to the first edition of this work, by which 
 he has endeavoured to prove, that Bank notes are not 
 depreciated; because since 1797? the pound sterling in 
 Englaiid has exchanged for more than 33 schillings, 8 
 grotes, that being stated as the par between the two 
 countries. If Mr. G. had put himself to the trouble to 
 have made the same experiment on the thirteen years im- 
 mediately preceding the Restriction Bill, that he has made 
 on those that followed, that never-to-be-forgotten era, he 
 would have found, that in the former period the pound 
 sterling in England had really exchanged for 34s. lOggr. ; 
 so that according to Mr. Grenfell's own principle, the 
 currency of this country must liave undergone a deprecia- 
 tion of 10| grotes since that time, or about 2^ per cent, 
 because an equal quantity of it has not exchanged for a like 
 quantity of Hamburgh currency. 
 
 As the principle which Mr. G. has assumed may have 
 SI tendency to mislead those who are interested in the
 
 109 
 
 Defence of Bank Notes, it will be necessary to expose the 
 fallacy and absurdity of it. In the commencement of the 
 seventh chapter of the first edition of this work, I ha\'e 
 stated that, " the currency of a country is said to be de- 
 preciated when a given quantity of it will no longer ex- 
 change for a like quanilty of that of another country ; for 
 example, if the circulating medium of England v\^as re- 
 duced in value Voth below its standard, and recognized 
 level, while that of Hamburgh remained stationary, the 
 pound sterling of England would not exchange for 3Ss. 
 8gr. but for x'oth less." The meaning of this passage, 
 although it appeared to me sufficiently perspicuous, is not 
 understood by Mr. Grenfell, and his misunderstanding has 
 led him to conclude that, " the currency of tliis country 
 has not been depreciated, because an equal quantity of it 
 has actually been exchanged for rather more than an equal 
 quantity of the currency of another country." 
 
 It is necessary, on this account, to explain the passage 
 just cited. 
 
 If the guineas of England, which are admitted to l)e 
 the standard of our cuncncy, were diminished one-tenth by 
 clipping, it must appear obvious, that a mercliant in Ham- 
 burgh purchasing a bill upoil London, would not give 33s. 
 8gr. for the gold contained in the pound sterling so di- 
 minished ; he would give a number of schillings and 
 grotes which would be equal in value to the gold contained 
 in the pound sterling. It will also follow, that if tlie cur- 
 rency of England, being paper, is reduced in value -piyth 
 by an increase in its quanthy, a merchant in Hamburgh 
 will not give 33s. 8gr. for tlie pound sterling, because the 
 pound sterling in the English, or in the Hamburgh market, 
 will not purchase a quantity of silver equal in value to the 
 silver contained in 33s. 8gr. ; if it purc!)ase -*<rth loss then
 
 110 
 
 the Hamburgh merchant will only give about 30s. 4gr. for 
 the pound sterHng. It is in this manner that a comparison 
 of the intrinsic values of the respective currencies of two 
 countries will determine the par between them. 
 
 Had Mr. Grenfell sufficiently weighed this fundamental 
 principle, I believe he would havo paused a little longer 
 before he drew his conclusion that " Bank Notes are not 
 depreciated." But, for the sake of argument, let Mr. G's 
 assumption be admitted, let 33s. 8gr. be taken as the fixed 
 par between London and Hamburgh, that is to say, let 
 the pure silver in 33s. 8gr. be regarded as equal to the 
 pure silver contained in twenty of our standard shillings ; 
 these proportions being fixed, any derangement of them, 
 according to Mr. G's principle, must be a depreciation of 
 currency ; for example, if the pound sterling has ex- 
 changed for 34 schillings, on the average of thirteen years, 
 the currency of England has, during that period, been at 
 a premium of 1 per cent, while that of Hamburgh has 
 been depreciated to that amount. Mr. G's principle 
 proves the very converse of what he wishes and wliat he 
 pleads for. If the currency of Hamburgh was depreciated 
 when 34 schillings were given for our pound sterling, our 
 pound sterling must be depreciated at present, because 
 Hamburgh will not give more than 28s. 6"gr. or 29 schil- 
 lings for it, constituting an unfavorable exchange, or a 
 depreciation on our currency of about 20 per cent. 
 
 It would have been unnecessary to have added more on 
 this subject, but Mr. Grenfell has strayed so very wide of 
 the principle on which the doctrine of favorable or unfa- 
 vorable exchange depends, that it may be necessary to ex« 
 plain it to him, to shew him more clearly the absurdity of 
 the principl'e which he has advanced. 
 
 No exchange in strictness can exist between two
 
 Ill 
 
 countries, while the exports from tlie one balance the 
 imports from the other. For example, if the exports from 
 England to Hamburgh were to the same amount as tlie 
 imports from that country to this, the exchange would be 
 at par ; bills upon London sold on the Hamburgh exchange 
 would be at par, as would bills on Hamburgh sold on the 
 London exchange. But if the exports of England to 
 Hamburgh amounted to j^'' 100,000, while the imports 
 from Hamburgh were only ^^90,000, a balance of debt 
 would be created between the two countries. As more 
 bills in consequence would be drawn in London upon 
 Hamburgh, than in Hamburgh upon London Ijy ^10,000, 
 the bills in London would be naturally at a premium ; the 
 merchants in Hamburgh having this debt to pay in Lon- 
 don, and being inclined to give a premium upon London 
 bills for the pmpose of discharging it. Thus it appears, 
 that it is the scarcity of London bills, and the competition 
 among the Hamburgh merchants to discliarge each his 
 debt at the cheapest rate that causes bills on London to 
 sell at a premium. The amount of this premium is the 
 extent of the unftivorable exchange to Hamburgh, and 
 the favorable exchange to London. When all the bills, 
 however, which were drawn in Hamburgh upon London 
 are sold, Hamburgh is still indebted to London .^1 0,000 j 
 she has no mode of discharging this debt but by a direct 
 remhtance of tliat sum in gold or silver. The profit of 
 the bullion-racrciiant, and the expence of freight and in- 
 surance are the necessary and unavoidable charges attend- 
 ing the transportation of this metal. But it would be ab- 
 surd to say, as in the first instance, that because a Ham- 
 burgh merchant could pay his debt by giving one or two 
 per cent, premium for a bill on Ivondon, or four per cent. 
 for sending gold or silver to pay it, that the currency of 
 
 1
 
 112 
 
 Hamburgli was depreciated. It might with equal pro- 
 priety be affirmed, t!iat a bill remitted Ly a merehant in 
 Edinburgh to Iris correspondent in London, was depre- 
 ciated to the amount of the postage ; and with equal justice, 
 it may be said that the signature of a member of the House 
 of Commons could prevent the Edinburgh merchant's biU 
 from being depreciated. 
 
 According to tlie principle which I have just explained, 
 our unusual amount of imports from the Baltic during 
 tlie last year, can have no greater effect upon the rates of 
 exchange witli Hamburgh, through which our principal 
 payments to the northern states are made, than the ex- 
 pense of sending the precious metals there ; and as Mr. 
 Eliason stated the charge of sending gold to Hamburgh 
 to be ^3 12s. lid. p«r cent, in 1797> it certainly can- 
 not now cost upwards of '^20, the average of the exchange 
 with Hamburgh againstiLondon, during the year 1809. 
 
 I must refer Mr. Grenfell to the 8th chapter of the 
 foregoing Enquiry for information respecting the principle 
 which regulates the price of gold not only in the state of 
 coin, but in the state of bullion ; and this is the more ne- 
 cessary, as Mr; G. does not seem to be aware that such a 
 principle exists. 
 
 THE END. 
 
 C. and R. Baldwin, Prjateri, Kew Bridge Street, Londou;
 


 
 m