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Un daa aymbolaa suivants apparaUra sur la darnlAra imaga da chaqua microficha. salon la cas: la aymbola — »- signifia "A SUIVRE". la aymbola V aignifia "FIN". Maps, platas, charts, ate, may ba filmad at diffarant raduction ratios. Thosa too larga to ba antiraly includad in ona axposura ara filmad baginning in tha uppar laft hand cornar, laft to right and top to bottom, aa many framaa aa raquirad. Tha following diagrama iiluatrata tha mathod: Laa cartas, planchas, tablaaux. ate, pauvant Atra filmte A daa taux da reduction diffArants. Loraqua la documant aat trop grand pour Atra raproduit an un saul clichA, 11 aat film* it partir da I'angia aupAriaur gaucha, da gaucha h droita, at da haut an bas, an pranant la nombra d'imagas nAcaaaaira. Las diagrammaa suivants illustrant la mAthoda. 1 2 3 1 2 3 •;•• 4: . ^-■f :.■ i 'M. ) V. i^ y — -: ANALYSIS OF THE MONEY SITUATION Of 4, t-v. GREAT BRITAIN, WXTH RESPECT TO ITS COINS AND BANK NOTES 4 .* „ " t ■" '- ■ . ■ , « , -^ «;-'■. . - ., _.' ■ I, :4. 1 J LONDON: iS 1 la VRXNTBD FOR J. MACKINLAY, 87, STRAND ; AN% RICHARDSON, CORNHILL; ■T •fM*Mlt.(iAK» BOW STREET, COVKNT OARDIN- 1810. n ] J' CONTENTS, CHAP. L VACt ON THE BALANCE OF TRADE, AND THE CONSeO QUENT PLENTY OR SCARCITY OF TEE PRECIOUS > 1 METALS, ^ CHAP. 11. ON THE CIRCULATION OF PAPER MONEY, WHEN^ A BALANCE OF TRADE HAS CARRIED OUT OF I j^ THE COUNTRY THE GREATEST PART OF THE f CIRCULATING COIN, J . •. ; *.•'''.".,;"».•' I » .■ , • ■<' 1 ,1 • • . ' • ' • • . • • ..; ■ • * » • I ANALYSIS, i'ik-j\ij » .i Sfc. S^c, :.'/..: : Th! !r CHAP. I. \..M' I On the Balance of Trade, and the consequent Plenty or Scfircity of the "Precious Metals. >.<)'.' TN order to form a complete idea of a ba- lance in the Precious Metals which may be coming into, or going out of a Trading Nation, it is necessary to take into view, and to state, in addition to the value of goods exported and imported, various other money transactions on the Debtor and Creditor sides of the general National Account. For in- stance, '#; B J)i\ iderids on public or private debts due lo Foreigners ; Stocks bought or sold by the same, and money lent to, or borrowed from them. In short, every transaction must be taken into account in one way or the other; and the balance ultimately due to one or to the other, becomes apparent in the favourable or unfa- vourable exchanges with Foreign Nations, as there must naturally be too many or too few Bills to be drawn on, or to be drawn by the exchanging Nation. ,. :; y i . f , '%^ 'T r The result must, of course, be an import or export of the Precious Metals to the amount of such balance for the purpose of liquidat- ing the impending accounts ; without which, the exchanges would become more and more fa- vourable or unfavourable on all the transac- tions of that Nation, excepting for the Public Pividends which are for account of the Fo- reign Creditor. » ' * I To put a stop by Law to the export of the Precious Metals, is like an individual refusing to let bis money go out of his house for the purpose of paying bis debts, though be must ultimately pay them with an increased ex- pence, for having refused to do it at first. Without debts to pay, they must naturally remain where they were before. Force would be employed to compel the individual, and a clandestine exportation of the Metals, even of the National Coins, would take place, in order to pay the National Balance, whenever the exchange became so unfavourable as to afford a premium or profit adequate to the risk of melting down the Coin of the Country into Bullion, as well as of exporting it as Coins, 1 iM It cannot appear surprising, that the ba- il 2 8 lance should for some time past have been against Great lirituin with the Continent of Europe, when it is considered how great a sum is to be paid annually to Foreigners for dividends, for corn, for subsidies, for naval stores, and for troops serving abroad. Add to this the difficulty of disposing of a sufficient quantity of manufactures, West and East India, as well as of American produce, to the Powers on the Continent, /.' The various drawbacks on the amount ex<« ported (even at very low prices), such as bankruptcies, capture, confiscation, fraud, and losses at sea, prevents her receiving also the full amount of it. The usual, and proba* bly very much increased exports to the East and West Indies, as well as to South and North America, have been for the most part paid for in produce, which has so much in- creased the dead stock of Great Britain, after providing for her own consumption, as to 9 ereate no small alarm to the Mercantile ln« terest. The home consumption hnn no doubt considerably increased, which has been the cause of the annually increasing produce of various taxes. Many years have past, since between thirty and forty millions sterling were thought to be the amount of the circu- lating Coins of Great Britain, for the purpose of supporting the then existing fabric of na- tional industry. • - i But since that time (the new coinage) this febric is very considerably increased in bulk and value also; while the circulating Coins are, on the contrary, very much diminished, from the balance being so often against Great Britain, and from a sufficient Coinage not having taken place of late years, in order to replace it and fill up the measure wanted. Paper Money or Bank-Nolcs have been issued in greater quantities, and substituted for the deficiency that arose, to supply tbo hitherto required quantity of circulating re- ■i- 10 presentative signs, and produced the desired effect in many respects ; yet however great the confidence which is due to it at home, it is an article which cannot be ex- ported towards paying a balance due to Fo- reign Nations. ' The stoppage of the Bank of England, arose from a considerable export of the Me- tals having taken place sometime before, so as to render Coin and Bullion very scarce ; for if that had not been the case, the Bank ought and would have bought all the im- ported Bullion, and turned it into Coin in order to continue or resume its payments. A small sum would, however, not have been sufi^lcient for the purpose. It must here be observed, that the Bank of Eng- land's Notes amounted tjien only to fourteen millions ; that Bullion can only be called for with the intention of coining it, or for paying a balance to Foreigners ; that the Directors 11 of the Bank are always acquainted with the existing quantity ; and that no great stock of imported Bullion can be existing, because it is in that state not worth keeping, on account of its not circulating, or giving any interest to the proprietor, but only the prospect of profit from a future unfavourable balance. Gold may even with a favourable balance, from its general scarcity throughout Europe, be higher than the coinage price; but in tiiat case Silver will become cheaper than the coinage price, and thereby become the cur- rency of the country in place of Guineas. It may possibly come to this in Great Bri- tain, as Gold is settled in other countries at a dearer rate relative to Silver, and it does not appear that so much Gold comes now into Europe, as at the time that Great Bri- tain settled her Gold and Silver standard in her Coins. .•(•Ill < 4 7. ' ■1 i 12 When or how a sufficient quantity of the Metals will return to Great Britain in order to convert them into Coin, and thereby ena- ble the Bank to resume and to continue its payments, no individual can possibly state, or even conceive, and particularly now that Paper Money is of necessity so much in* creased, and tliat the call for Coin is so ge- neral. Several years favourable balances must take place in order to give the Directors the fa- culty of doing it, and that only by gradually accumulating new Coin, which will necessa- rily occasion an increase of their paper during this operation, in order to pay for it, and for keeping up the same accommodation to the Government and to the Merchants : in short, the evil arose from there not being a sufficiency of Coin in circulation to admit of Bank- Paper passing freely without payment being called for, and that evil is very far, in- deed, from being yet remedied. The first 13 sy Itiptom of an unfavourable ^ lande appears then in the unfavourable exchcfnges ; and the second symptom must naturally be a demand for Gold and Silver Bullion or foreign Coihs (of all which the exportation is allowed), ac- cording as the one or the other metal will sell in the highest relative proportion in foreigti countries. ' first If a sufficient quantity of the preferable metal is not to be procured, the other will naturally be demanded in its place, which occasions the price of both metals to rise above their coinage price, furnishing thereby a premium or profit to the melter of the Cut- rent Coin into Bullion, and to the clandestine exporters of it (particularly of Guineas), in addition to the advantage obtained on foreign exchanges by sending Bullion. That pre* mium is now about fifteen or sixteen per centi on Gold, and twelve or thirteen on Silver, which can well be afforded, when the ex- change of Bills is so unfavourable to Gitat c 1. 1 1 I 14 Britain as eighteen or twenty per cent, and that Guineas sell so high abroad as to make the whole profit above twenty-five per cent, instead of three or four per cent, on Bullion. It has been already stated, tliat gold and silver have a relative price to eadi other (in. the proportion of one ounce of gold to about fifteen or sixteen ounces of silver), which is constantly varying, though fixed by Law in the respective Coins of the kingdom. , Both have also a relative price to Bank- paper, when called upon to settle foreiga accounts, because the last cannot serve that purpose, and the current price of the metals above the coinage price, denotes that relative price, which would be the same whether ten or twenty millions of paper existed, because it does not proceed from discredit, but from the danger attached to the exportation of the Current Coin of the kingdom, and on which account twenty-three Guineas will sometimes 15 be given for the weight of twenty Guineas in Bullion. I . . . • . This last resource will therefore only be re- Borted to when a sufficient quantity of Bullion is not to be procured, which must constantly happen when unfavourable exchanges exist. It appears then, that the sole cause of the unfavourable exchanges, of the high price of the Precious Metals, and ultimately of the melting down or clandestine exportation of the Current Coin, is the balance of trade having been too often against Great Britain during this and former wars. The facts just mentioned are known to exist, and a comprehensive examination of the cause, cannot fail of bringing it fully to view, without any reference to individuals for information on partial points, which will in general tend to darken the subject from many existing prejudices, and from a variety ofundi- c2 16 gested opinions entertained on each point by men of reputed penetration, yet inadequate to the analysation, and to the comprehension of the whole system, which nature follows, or rather, to which each individual is prompted by the spur of self^nterest, and necessary caution in his money transactions. 17 CHAP. II. On the Circulation of Paper Money, when a Balance of Trade has carried out of the Country the greatest part of the Circulate ing Coin, THE balance of trade has been so often pgainst Great Britain during the last eighteen years, that we cannot wonder at its having bpen drained of its Bullion ajid of its Coin. This demanded of course a greater mass of the circulating medium called Bank of Eng- land, and Country Bank Notes being sub- ;itituted in their place. Though the Country Bank-Notes may in their general utility be equal to those of the B?ink of England, yet they are much exposed 18 to being stopped in their circulation from a temporary discredit, without the possibility of making them a legal tender by general con- sent, as is the case with Bank of England Notes. The great circulation of money in Great Britain consists therefore, at present, mostly in Country Bank-Notes, aided and supported by those of the Bank of England, We are assured by respectable authority, that the first amounts to thirty millions, and the last to twenty millions sterling ; that the Bank of England issued only thirteen years ago, to the amount of fourteen millions sterling, and that the Country Banks have since that time increased in number from one hundred and seventy to above seven hundred. We may therefore conclude, that this most precarious part of all the circulating Notes, has of late years been increased by fifteen or a i9 twenty millions sterling, in order to piovicle for the want ol' a siifticicncy ot* coin through- out the whole kingdom. , These Country l*)anks were (when so much more limited in their number, and in the amount of their paper) supported by the de- posit of a certain number of coin, but now anostly by the deposit of a certain quantity of Bank of England Notes, as a necessary pre- caution against any sudden call upon them* The Bank of England was also obliged for- merly to have a more considerable deposit of Coin than at present, when their Notes are no more payable on demand, but are received by general consent as the Current Coin of the kingdom. The scarcity of Coin has therefore been gra- dually provided for in the most ample manner by additional PaperrMoney. But a temporary discredit, oi; i\}e failure 20 of Country Banks, produces a total change irt the quantity, and in the activity of this gene*- ral medium of circulation, and a scarcity of what is now called Money, takes place in con- sequence. It obliges, in the first place, the Bankers of London, as well as the Country Banks, to keep a greater quantity of Bank of England Notes locked up as a deposit, to answer any sudden run upon them, which in its effect is equal to the diminution of their quantity. The Country Banks may possibly be also obliged, for their own safety, to diminish the quantity of their own Notes in circulation. There can be no doubt that the late fai- lures, and the consequent general discredit, derived their origin from the very great accu- mulating dead stock of West and East India produce, &c. in Great Britain and in Heligo- land. Is it then to be wondered at, on con- t 1^ 31 sidering all these facts, that Interest of Mo- ney should rise, and that Public Stocks, iis well as houses, land, and all other capitals giving an annual income, should fall in their value, when they must, in order to find pur- chasers, be sold at such a price as to give an increased annual income to the purchaser, pro- portioned to the rise in the Interest of Mo- ney. . ; : That multitude of theorists, who maintain that the great or small quantity of Money circulating in a country, determines the high or the low price of other objects of daily use, are about to experience in Great Britain, even without diminishing the Bank of England Paper, which they seem so desirous of, the full effects of a great scarcity of Money. They will probably lament the first effect of an increased Interest of Money, of the conse- quent fall in the value of Public Stocks (not- withstanding the weekly purchases of the Sinking Fund Commissioners), as well as of D 22 hou.^rs, land, &c. and congratulate them- sflvc'S solrly with the reduced price of other objects ot'gcnrral and daily use, from the want of sutlirient nioans to pay them. . But it certninly cannot afford real cause of gratulation, that West and East India pro- r]uce should fall still lower, and produce the total ruin of West India property, as well as of the commerce with India. To such lamentable consequences, however, must a scarcity of Money lead; and if these theorists would apply to those who (kal in other objects of daily want, in order to know what they would do next year, in case they now only got three-fourths of I heir present prices, they would l>e uniformly answered, " We should abandon our occupations, because we should be suffering a considerable loss instead of gaining our daily bread." .• , ; What Mould frecr^iC c^'the v/hole commu* 23 r of nity on every thing l>econilii«; scau.f •! ix- iiewed and even iiicreiisud dcMrnuss i'or sonic persons, and a total want ot' various (oji^cts for others, must take place. These ideas oi great cheapness from a scarcity of Money, arise from taking a superficial view of the sub- ject, and from I'^t a< .Riding to the ultimate consequences o^ thai check upon industry, which arises from it, and also that rents re- main the same while their capital falls in value. They never examine the combination of circumstances, from which each object as- sumes its proportional, its natural, and its permanent value, so necessary for its repro- duction, independent of good, middling, or bad crops, but dwell solely upon its competi- tion price with the scarcity or plenty of Mo- ney, the effect of which can only be tempo- rary. It is indeed mu( h to be lamented, that 1^ •/ natural price due to so many objects of daily use, is doubled within '20 years past, and .that therc])y all person-, who have had 1)2 24 fixed incomrs since that period, or who even exist by an income since acquired through the means of the usual interest granted them on pubhc or private debts, may justly be stated as reduced (by the double expence of living) to the proportion of fifty for every one hun- dred pound sterling income, and by the fur- ther reduction often per cent, for the Income Tax, to forty pound sterling. It is in its effects, for the holders of Public Funds, tantamount to those which would arise from a National Bankruptcy ; and the cause will most probably not be attended to, until it is too late to be remedied. If it was true, that plenty of money pro- duced ultimately the dearness of every article, a balance of trade in favour of Great Britain would in that case be a national curse instead of a blessing, which the inhabitants are go anxious of obtaining by it. . . 25 The truth however is, that plenty of Mo- ney causes every diing to fructify, while scarcity of Money causes every thing to wi- ther; and Great 'Britain is about to experi- ence the last, if some genius does not arise to •avert the impending blow. Superabundance of Money in Coin (not Paper Money) can do no harm ; and of this there was in former days sufficient proof in Holland, when the interest of money fell there to two and two and a half per cent, from its very great abundance, and yet every thing of daily use remained cheap and equally abun- dant, until Great Britain called for large supplies of corn, butter, cheese, &c. &c. The Bank Directors are perfectly aware of the consequences attending a diminution of their Paper at a time when Money, taken in its most general sense, is so much wanted ; and it must be furtlier observed, that the quarterly payments of six millions for the 26 Dividends on the Public Debt, brings at that period only the total emission of their Paper to twenty millions. They are certainly the best judges of any danger attending the in- ' creasing or decreasing of their Notes, and It would be an unpardonable presumption in any individual, to dictate to them on that point, upon which they alone are com- petent judges. They have fully merited at all times the confidence of the Public, and are therefore entitled to its gratitude. No part of their conduct can have produced the awful situa- tion to which Great Britain is now reduced, bv means of a continuallv increasino" and un- saleable stock of merchandize, of a balance of trade still continuin£r ao-ainst it, of the small quantity of Current Coin in the king- dom, and of the necessity to keep Paper \fonry within certain bounds, in order to ^^ecu^e Us i\ec circulation without the danger .'27 of a depreciation from discredit, which would occasion every thing to have a coin price and a paper price, and be more alarming than giving more Gold in Guineas for less Gold in Bullion. Tlir END. !1 Lon4on : Printed by B. M'Millan, J Bow Street, CorciU Ctrdca- ^