THE UNIVERSITY OF ILLINOIS^ LIBRARY 33Z B875 V5 A METHOD OF Increafmg the Quantity OF CIRCULATING- MONEY: Upon a new and f olid Principle, LETTER I. * . CONTENTS. Sect. I. — Assumes the Neceffity of an Ex- tenfion of the Circulating Medium. Page 7 Sect. II. — Bafis of a Plan for fuch an Ex- ten/ion, 9 Sect. 111.— The Planjlated. - - ih Sect. IV. — Confequences of the Plan to Stock- Proprietors. - - - 13 Sect. V. — No Danger to them. - 15 Sect. VI. — 'They might gain too much by it. ib. Sect. VII. — Government muft partake with them in the Profits. - - -18 Sect. VIII. — So mufi the Bank of England. 19 Sect. IX. — Quejlion Juggefted. - 20 Sect. X. — The Plan may be improved. %i Sect. XI. — General Obfervations. - 22 Sect. XII.— Originality of the Plan. - 23 A 2 INTRODUCTION. THE Principle of this Propofal is to put a jjew and great Capital into circu- lation, by Loans of Money, to be created in the manner and upon the foundation defcribed in the following Letter, addrefTed to a Member of the late Secret Committee of the House of Commons on Bank Affairs. The gentleman, to whom the Letter was ad- drefTed, (whofe name, if I thought myfelf at liberty to mention it, would add much authority to the whole propofal,) being himfelf ftruck with the no- velty of the meafure, and its apparent tendency to public utility, has been the means of procuring a confiderable degree of favour to it elsewhere. —But, if I were to fay more of this, it could only be with a view to obtain attention, — not to in- fluence the public judgment ', which alone can de- cide in this cafe, as in all others where public credit is concerned.— Therefore, I (hall only fay, I have good reafon to think that the firft im^rejftonsy ( 6 ) impreffions, made in the quarter to which I allude, are ftill retained. It is my intention to point out in a future Letter, for which I have prepared materials, how I propofe to confine the increafe of money, in its firft application, to the afiiftance of the Landed Interest j and I (hall, at the fame time, anfwer fuch Objections as I may hear of, or which my own thoughts may fuggeft to me; for, I fhall difguife nothing. — In the mean time, I admit that it is necefifary to the practical execution of the plan, that the notes in queftion fhould be ex- changeable for all commodities, — by no means excepting Gold; and exchangeable at par: other- wife they cannot perform the office of Money.—. I beg permiflion to add, that I think this may be accomplished. And I fhall (hew how the Se- curity may be doubled, both in its nature and amount, without leffening the fimplicity of the ori- ginal defign j and this to the extent of proving it to be absolutely impossible that the Note- Creditors mould be defrauded, or even difappGinted, so long as any notion of Law and Property {hall continue practically to prevail in Great Britain. London, 2 id April 1799. METHOD, &c. fcfr. &c. Sect. I. — Affumes the Neceffity of an Extenfion of the Circulating Medium, SIR, OF late, we have heard but little of the plans for a New Circulating Medium, with which the public attention was much engaged about the time of the Bank's ceafing to make payments in cafh. No plan of that kind feems yet to have ob- tained general approbation; and, perhaps, that which I am about to fubmit to your confideration may not be free from objection. I have entered thus upon the fubject without ceremony ; becaufe, Sir, the indulgence you have (hewn me in the feveral conferences you have ho- noured me with on the occafion, has fbperfeded the neceffity of any introductory matter, unlefs I had ( 3 ) had attempted to exprefs the feeling I have of your obliging attention in this inftance, which I decline, as a tafk not eafy in itfelf, and ftill lefs fo, in con- nection with other acts of condefcenfion which I cannot fail to recollect, though I am not able to acknowledge them in the manner I mould wifh to do* In common with all thofe who have preceded me in this track, I begin with afluming that there would be found great convenience in the eftablifh- ment of a good, folid, circulating medium, upon a more enlarged fcale than any that exifts at pre- fent, and adapted to the extended and extending date of our National Commerce, and particu- larly to the wants of the landed interest. If this was denied, or generally doubted, I mould have little to fay at prefent ; for, if the neceffity or uti- lity of fuch an eftablifhment is not felf- evident, I mould think the time for it is not yet come. My experience in bufinefs, however, informs me that it is wanted. — Permanent loans of money are now, and for a long time have been, difficult to be obtained ; and this difficulty muft, from obvious caufes, continue to increafe fo long as the war lafts. Sect. ( 9 ) Sect. II. — Bafts of a Plan for fuch an Extenfton. Having premifed this, I proceed to ftate my plan for the eftablifhment of a New Circulating Medium. The bafis of it, as I have remarked in what you have heard from me already, I fix upon the Na- tional Debt, which is the Wealth of Indivi- duals.— For commercial purpofes at leaft, I con- ceive this may be deemed folid fubftantial property —to a limited extent. Suppose the National Debt due to individuals to be equal to Four Hundred Millions (or more) of 3 per Cent. Annuities of the value of 50 per cent.; that is, Two Hundred Millions fterling. This fuppofition is fufficiently accurate for my prefent purpofe. Sect. III.— The Plan fated. Now, my fcheme goes to the putting of a large portion, Fifty Millions, or more, of this pro- perty into circulation, if fo much could be em- b ployed 5 ( * ) ployed ; and this I propofe to be done in the follow- Let any flock- holder, who would wifh to cir- culate fome part of his Stock, without felling it, transfer a certain quantity of it, fuppofe twenty thoufand pounds 3 per Cents, to the Governors and Directors of the Bank. The Bank is then to deliver to him fifty certificates, or notes of the transfer, each of them to be marked as of the value of £.100, or a greater quantity in number, and of lefs value refpedlively ; but the whole together to be of the amount of £. 5000 fterling. By this means every particular quantity of flock might produce a fourch part of its nominal amount for the purpofes of circulation. For, I make what I believe to be a well-grounded fuppofition, that the mercantile world, who now take Bank-Notes in payment, would, with equal confidence, receive and circulate thefe Stock-Notes ; the Governors and Directors of the Bank of England being, in re* fpect to the flock to be transferred to them, truflees for thofe who transfer the flock, and for thofe who take the flock- notes in payment, (as they now are truflees for the Bank-Proprietors and the holders of Bank-notes,) and the fecurity being fully equal to that ( u ) that upon which the credit of Bank-notes is found- ed : — for, the capital and other effects of the Bank (reckoning its property in flock at the prefent market-rate) is certainly fhort of twice the amount of its debts. But the dock, transferred as I pro- pofe, would be double in value to the notes circu- lated upon its credit. In the cafe I have fuggefted, the 3 per Cents, would be taken at 25 ; a fuppofition low enough, I fhould fuppofe, for thofe who give any degree of credit whatever to the Public Funds. There can be no doubt that bankers and others would allow £.100 (lock to be a fufficient fecurity for £.25 money, notwithstanding all the poflible fluctuations to which the {locks are fubjeft. The notes I have defcribed might be ufed for loans or for capitals to trade upon j their ufe in trade, and for other purpofes, being fuppofed the fame as fpecie or Bank-notes. These notes being, by fuppofition, of the fame value, and paffing with the fame facility as Bank- 1 notes do, will be confidered as cash, and confe- quendy, if lent by the original holders, or by any others who may become the holders of them, would entitle the lender to receive interest on b 2 the t «« ) the loan, in like manner as the lender of bank- notes now receives intereft on the loan of thofe notes. The fuppofition that thele notes would be circu- lated like bank-notes is efTential to my plan. — That foundation taken away, the whole would be an unfubflantial vifion ; and therefore, if this be not aflented to, it would be of no ufe for me to go on. But, that point granted, (fubjecl to re-con - fideration,) I fay that every particular quantity of flock, transferred in the manner I have ftated, would yield a profit to the flock-transferrer equal to 5 per cent, on the amount of flock-notes obtained by him. Twenty thousand pounds, 3 per Cent, flock, would, as obferved before, produce £. 5000 of flock-notes, the interefl of which would be £. 250, to be added to £. 600, the amount of the divi- dends on £. 20,000 of that flock. Thus £. 850 would be gained annually, inflead of £. 600, by every proprietor of £. 20,000 flock, who fhould avail himfelf of the opportunity of procuring ftock-notes, as above mentioned. What I have faid of 3 per Cent, flock, is to be applied to the other public funds in the like proportion j ( 13 ) proportion; the 3 per Cents, being mentioned only by way of example. Sect* IV .—Confequences of the Plan to Stock' Proprietors. I shall purfue the fuppofition thus made, and fhall trace its confequences to the dock- proprietor, treating the matter at prefent as if no other intereft than his was to be confulted ; difregarding, there- fore, at this moment, the interefts of Govern- ment and the Bank of England, both of which I fhall Separately confider in what I have farther to fay. In this point of view, I fuppofe the whole dividends on the (lock are to continue payable to the (lock- transferers ; a fuppofition to be corrected in the farther progrefs of this difcufiion. £. 850 being gained annually inftead of £. 60c, the value of (lock may be expected to rife in pro- portion to the increafe of gain. In the fubfequent details on this point, I fhall fuppofe the flock- proprietor would transfer his flock to the truftees, upon my plan, for the fake of much lefs advantage than what 1 have above defcribed ; for, out of the great profit above alluded to, it is necefiary to provide inducements to ( 14 ) to Government and to the Bank of England to countenance the plan. At prefent I fliall proceed to attend farther to the interefts of the (lock-proprietor. What objection can he make ? Can he fay his flock is tied up and put out of his power ? No : — he may redeem it by bringing in to the Bank a quantity of (lock-notes equal in amount to thofe originally obtained by him. Thefe being can- celled, his (lock would be again entirely free : or he may fell the flock fubject to the charge upon it : this would make it light to hold ; which, by ren- dering the (lock more marketable, would increafe its value. Merchants, bankers, country-gentlemen, farm- ers, and in general (lock-holders of all defcriptions, would be benefited by the plan, and particularly the timid would derive encouragement to hold on their Jlock. For if they withdraw half the amount of the prefent price of (lock, they may realize that part on land, by procuring purchafes or mort- gages. This would alfo accommodate thofe who want to fell land, or borrow money on it, or to borrow on other fecurity. The ( «5 ) The transferrer would retain to himfelf the advantage of future increafe of price, juft as if he had not taken the ftock-notes. Sect. V. — No Danger to them. But is there no final danger of lofs to the flock- proprietor upon this plan ? None, I think. For fuppofe the holders of the ftock-notes fhould be- come alarmed for their fecurity by the falling of ftock to 25 ; and fuppofe the plan mould provide, that then the ftock fhould, at that price, become the property of the holders of the ftock-notes, and be transferred to them in proportion to the amount of the notes held by them refpecYively, unlefs redeemed immediacely by the proprietors of the ftock ; it may be made clear, that he that was the original ftock-holder cannot be hurt by having received the notes, even though he fhould not redeem the ftock. For if he has retained the right of redemption, and confequently the rifk, it is by his own voluntary ac~t that he has done fo. He might have fold out ; but, having retained the ftock, he cannot fufFer more by parting with his ftock now, than if he had held it on, and was now to fell it, without having received any ftock-notes. He may even have an advantage by buying an equal quantity ( '6 ) quantity of the flock at the reduced price, fuppofing it below 25, or prevent a lofs if the price is 25, or upwards; and, upon both fuppofitions, five thoufand pounds, or thereabouts, would replace his twenty thoufand pounds (lock. Four things mud concur in order to occafion any actual lofs to the transferrer of flock upon this plan. Firft ; the flock muft fall below 25. Secondly j the transferrer muft be unable to re- deem it at that reduced rate. Thirdly; the flock muft afterwards rife to a higher price. Fourthly'; if there be (as of courfe there muft be) an interval of time between the fall and the rife, the tranferrer muft continue, during the whole interval, unable to purchafe a quantity of flock equal to what he had when he obtained the notes. The occurrence and operation of thefe numerous caufes is a moft improbable fuppofition j efpecially confidering that the transferrer muft be underflood to have received an equivalent in property of fome kind on parting with his notes, and, therefore, may be expected to be able to redeem his flock, or to buy an equal quantity at the fuppofed price of 25. But perhaps the flock-notes may have been applied to purchafe land or land-tax.—/^//, at leaft ( «7 ) leaft the transferrer has then realized half the amount of his ftock at the prefent price, befides the annual increafe of £. 250 upon his £. 20,000: and he muft confider that, if he had continued to hold his ftock till the fuppofed period of ultimate depreciation, his lofs would be greater than it can be upon any fuppofition affecting this plan j which includes the annual gain of £. 250 upon the £. 20,000 ftock. Sect. VI.— They might gain too much by it. If, according to the fuppofition above made, fifty millions could thus be brought into circula- tion, the gain to the flock-holders would be £. 2,500,000 fterling annually, and fo in propor- tion, if the circulating medium mould be ufed in lefs or greater extent. But two millions five hundred thoufand pounds would be too great a gain for the ftock-holder, who could not reafonably expect to have fo much, efpe- cially if the fcheme be attended with only part of the other advantages (including that of fafety) which I have ftated. Sect, ( '8 ) Sect. VII. — Government mufi 'partake with them in the Profits, Therefore I come now to confider the interefts of Government and the Bank of England, It may be thought proper that fo much of the dividends as is equal to 5 per cent, on the flock- notes mould be kept back by Government : that is, that the payment of fo much of the dividends fhould be fufpended during the war, and that the amount of thefe dividends fhould at the end of the war be divided between the flock-holders, the Government, and the Bank of England, in fuch proportions as may be agreed upon. In fpeaking of the flock-holder in this place, I mean the perfon who mould actually pofTefs the flock at that period j and his fhare of the accumulated dividends fhould then be added to his capital, and the future intereft of it provided for by taxes, unlefs Government fhould then be able to pay the arrears of dividends; I mean the flock-holder's fhare of thofe dividends. In cafe a fufpenfion of dividends fhould be thought improper, fome other arrangement might be adopted, as the mutual interefts of Government and the flock -proprietors might dictate. If ( i9 ) If Government could, by this means, fufpend during the war the payment of dividends to the amount of two millions five hundred thoufand pounds, or even half of that fum, fuch a post- ponement, or any equivalent advantage to Govern- ment, would be attended with important confe- quences. Future Loans might be negociated on better terms, the price of ftocks being fuppofed to rife as well in conference of the advantages given to the flock- transferrers, as of the taking of a great quantity of ftock out of the market. The Re- demption of the Land-tax would be facilitated, and the necefiity to fell ftock would be very much diminiuVd, at the fame time that there would be a great increafe of inducements to buy and hold ftock. Sect. VIII. — So mufl the Bank of England. In regard to the Bank of Encland, the advan- tages to be allotted to that company would be fuch as might be agreed upon between them and the ftock-transferrers, by way of an annual increafe of the Bank Profits j and alfo as a compenfation for the charges of management. But there is no occafion at prefent to enter into details upon this part of the fubject. c a Sect. ( *0 ) Sect. IX. — Quejlion Juggejled. After all, however, there remains the queftion before fuggefted: " Could thefe Stock-Notes be " ufed as a Circulating Medium; or, in other words, " would they pafs as Money ?" This I cannot determine ; but I fee many con- futations which may be fuppofed to operate towards caufing the free and general currency of thefe notes. The fecurity upon which the notes are to circu- late, would be a first mortgage on the pro- perty and industry of the Nation. Thefcheme would raife the value of the funds, and would advance our Agriculture, as well as extend our Trade, both foreign and domeftic, by bringing into action a new and great Capital : and all this would tend to improve the Strength of the Nation. Hence greater Safety to every part of our property. These appear to me to be fufficiently powerful inducements to the public to receive and circulate as Cajh the propofed ftock-notes. But ( y ) But if, in fact, the fecurity for the National Debt is not to be efteemed good for a fourth part of its nominal amount, then, I fear, our cafe i$ hopelefs indeed. This, however, appears to me to be a groundlefs apprehenfnn. At all events, the caution of the moft fearful muft have fome limits ; and if, through the pre- valence of diftruft, the notes defcribed could not be circulated at 25, they might undoubtedly at fome lower rate. Therefore, the objection founded on fuppofed infecurity, does not reach the principle of the meafure, and can only at the utmoft confine its operation. Sect. X. — The Plan may be improved. This fcheme, if it has any thing of value in it, may undoubtedly be improved', and, perhaps, the indirect and collateral refults from it may be as con- fiderable as its direct and immediate effects. I am not, however, fo fond of my plan as to make an unqualified fuppofition that it is capable of producing fuch great advantages as I have de- fcribed. Yet I do not mean to conceal that I have a ftrong confidence in it j and I own, if I were to indulge ( * ) indulge my prefent thoughts, I mould fay much more of the advantages I expect from it. Sect. XI.- -General Obfervations, But I fhall now only make a few general Ob- servations, which fhall conclude this Letter, and the trouble which, Sir, you have allowed me to give you. Firft, In a commercial Country there SHOULD BE AS LITTLE DEAD OR UNPRODUCTIVE Capital as possible: but the wealth of indivi- duals collected in the funds is dead to trade and ge- neral u/e, except only fo far as the dividends are fpent and circulated, and not inverted in the fame funds by way of farther accumulation. And, fecondly, There ought to be no such thing known as want of money ; — and, in my opinion, no fuch want could be known in a perfectly well-regulated commercial fiate : I mean no want of that kind fhould be known or felt by thole who pofiefs property of any kind, whether it confifts of lands, merchandize, or credits well fecured. All fuch property fhould enable the owner to procure a representative Gign capable of general cir- culation. I fay this, fubjecl to many obvious restrictions. Sect. ( 2 3 ) Sect. XII. — Originality of the Plan. It was, by thinking for a long time upon thefe tv/o principles, and by turning over in my mind feveral plans for procuring money for fome perfons of property, who found it difficult to obtain Loans, that I was led to the prefent Discovery, if it is one, as I believe it to be. To me, at lead it is new, and fo it has appeared to thofe friends to whom I have communicated it : but if any one fhall difpute the abfolute originality of the thought, I (hall not be much concerned about that, becaufe it is quite certain that in its operation it will be new, and, what is infinitely more material, the advantages of it will be confined, almoft exclufively, to our own. Country, where alone fuch a great capital as I have propofed to put in circulation is to be found. I have the honor to be, SIR, London, &C. &C. &C Sept. 27, 1798. *%>&* M