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Les diagrammes suivants illustrent la mithode. 1 2 3 32X 1 2 3 4 8 e C( V ■/ I REMARKS ON A PAMPHLET INTITLED, " The Question concerning the Depreciation of the ** Currency Stated and Examined*'' By William IIusKissoN, Esq. M. P. r tOGETHER WITH '%' SEVERAL POLITICAL MAXIMS REGARDING COIN AND PAPER CURRENCY, Intended to explain the real nature, and advantages, of the ipresent system. BY . THE RIGHT HONOURABLE SIR JOHN SINCLAIR, BART. M. P. AUTHOR OF THE HISTORY OF THE PUBUC REVENUE OF THE BRITISH EMPIRE. / LONDON : PRINTED BY W. BULMER AND CO. CLETELAND-ROW, ST. James's; AND SOLD BY T. CADBLL AND W. DAVIES, STRAND; J. STOCKDALEj PICCADILLY; AND J. H. RICHARDSON, CORNHILL. 1810. (Price Two Shillings and Sixpence..] I S'i.^U. ADDRESS TO THE READER. iSoME facts have recently come to my know- ledge regarding, i. A fall in the price of gold ; and, 2. The rate of exchange with Ireland, which, I trust, will put an end to any pro- longed discussion respecting the propriety of altering our present system of circulation : I thought it right, therefore, to lose no time in lay- ing them before the Public. It seemed to me also necessary, to state some observations, on the proposed measure of compelling the Bank of England to purchase bullion at any price, and to add a statement of that fall in the value of funded property, which has taken place, in con- sequence of the alarm occasioned by the pro- ceedings of the Bullion Committee. 1. Fall in the Price of Gold. The foundation of the whole proceedings of the Bullion Committee rested ujxjn this fact, that the market price of gold, when the Report was ordered to be printed, (8th June, i8io), was £^, 105. per oz. or 151. per cent, above the Mint price, (Rep. p. 1). This was attributed to an excess in the paper circulation of the country : It C62 i I I I t (Rep. p. 50). It was therefore contended, " that " a rise in the market price of gold, was the " effect of an excessive quantity of circulating " medium in a country, which has adopted ^ " currency, not exportable to other countries, " or not convertible at will into a coin which is "exportable." (Report, p. 8). '^ ." All these speculations, however, are now for-^ tunately overturned by one plain fact, of which I have just been informed, from most unexcepr tionable authority (Mr. Merle). Restates, that according to the last prices, gold bullion has al-? ready fallen in price 7 per cent, and consequently that the price of gold, instead of beins^ i^i, is only 8^ per cent, above the Mint price .^ There is reason also, to hope that, notwithstanding the * The Committee made the difference 15I per cent, in the follow! rs manner : Foreign bars 22oz. 4 10 a 90 ^loo o o. Bars at the coin- 7 ^ . o< , - > 22 4 10 a 77 86 10 5 age price ■/ £^3 9 7 which on £S6. los 5^. is a^ the rate <'f i si p-*" ^^"V The" present difFerer.cc is ihiis calcula.cd : Foreiffn bars fat the 1 /. '''.•, • ^" T ., A >22oz. A. loaoo / 100 00 priceinjuneihio), / ^ iwayu ^ The preseiit price 22 4 10 a 84 6 9? 17 J' 6 ci 5 Tvhich upon the sum oi £,{)7. lys 7^. is as nearly as possible 7 percent. ; and which deducud troin 151^, leves the dif- ference between the present market price, and the Mint price, only 81 percent, which has often been the case before. C73 alledged excess of Bank notes, and the conse- quent alledgjed depreciation of our currency, (neither of which assertions have any just foun- dation), that it will be still lower; but at any rate, if there were any good grounds for the doctrines of the Committee, regarding the effect of paper currency on the price of gold, how could it have fallen even *p per cent, in so short a period ? r . .. ! 2. Exchange with Ireland. . . x\nother favourite doctrine is, that any great fall in the rate of exchange, is owing to excess of currency : let us see how far such an idea is justified by fact. In the year 1804, an alarm was created re- garding the state of exchange between this country and Ireland, which it was contended, was altogether owing to the excess of paper issued by the Bank of Ireland ;* and it genious men amused themselves with speculations re- garding the alarming state of Ireland, and the necessity of redressing its pecuniary grievances. The Directors of the Bank of Ireland took • This doctrine was very ably maintained by Lord Lau- derdale, in a pamphlet intitled ** Thoughts on the Alarming ** State of the Circulation, and on the means of redressing ** the Pecuniary Grievances in Irtland." Printed Anno 1S05, • • • . I! 'r ' i t C ^1 fright at the inquiry, and actually reduced their circulation from -1^3,000,000. to £3,410,000. It appears, however, from the Report of the Bullion Committee, (p. 19), that the Directors of that Bank, had again, most wisely, increased their issue to £3,100,000. What has been the consequence of a greater issue than ever? Not an exchange of 18 per cent, against Ireland, as was the case in the year 1804, but an exchange of 9I, which is only 1^ per cent, above par; and about two years ago, it was under 8 per cent, whilst the par is 8^. Is not that fact a de- cisive proof, that abundance of currency has nothing to do with the rate of exchange, and that the Directors of the Bank of England, did not fail into a great practical error, when they regulated their issues, neither by the price of bullion, nor the rate of exchange ? 3. On the Bank of England being compelled to purchase Gold at any Price^ to carry on its Circulation, It is recommended by the Bullion Committee, that two years hence, the Bank of England shall be compelled to exchange its notes for gold, in which case, it must purchase bullion at any price. This plan was recommended by the Com- mittee, when the price of gold was £4.105. per oz. and as the Mint price is only £3. 17^. io\d, it 18 evident, that the Lank must lose 15^ per cent, by all such transactions. The Bank of Enelani maintains its credit and character, by carrying on a profitable business, under a most judicious system f but if it were to engage in great trans- actions, by which it was to lose is^ per ccnt^ I should be glad to know, what would bethought of the wisdom of its Directors;. In fact, the Bank, with such a burden, must give up issuing paper. Indeed, no one would take the notes of a corporation, that would persevere in carrying on so ruinous a business. Mr. Huskisson having, however, proved to his own conviction, that a light guinea is more valuable than a heavy one, he will next, I sup- pose, undertake to persuade the Directors of the Bank of England, that purchasing bullion, with a loss of only 10 or 15 per cent, is a most profitable transaction. * The rules of the Bank of England are highly judicious, and I believe strictly observed. They never issue a note but, I. On mercantile paper, that seems to them per- fectly unexceptionable ; (and I believe the losses they sustain by discounting such paper, considering the extent of their transactions, are very inconsiderable ;) or, 2. On Parlia- mentary security. And here it is proper to observe, that they never advance any money on public securities, unleis a Bill has not only gone through both Houses, but has actually received the Royal Assent ; the Votes of the House of Commons, though sanctioned by the Lords,, not being considered as sufficient. Cio3 4 II I 1 I m I mi y,\ l;- J: ^, UpoJi the Fall in the Value of the Funded Property of the Country, in consequence of the Proceedings of the Bullion Committee, It is admitted by the Bullion Committee, that the country was in a high state of mer- cantile, and of public credit, when its inquiries Gommenced. The numerous bankruptcies, which have since happened, may have been principally occasioned by other causes, but the fall which has taken place in the value of stocks, must be greatly owing to the attack that has most unfortunately been made on our cir- culation. Its effects abroad have been so great, that, I understand, there never was so much stock belonging to foreigners, in proportion to the extent of foreign property, sold, as since the Report of the Bullion Committee has been in circulation. The remitting of the value of the stock thus sold, has rendered the exchange, (if any exchange can be said to exist at such a time) , less favourable than otherwise would have been the case. In order to ascertain to what extent that fall has gone, I thought it necessary to pro- cure, a statement of the prices of the different stocks, on the 2 2d February, and 1st Decem- ber 1810, to which the reader's attention is earnestly requested. ' ; ^ «' .' ' ' Pi- ["3 c o ,u *! •»-: '-»-■ 'u "S- O o. rt 2 i; ^ CUV 00 o c< o t«^vo m f^ o^ ^'^ #« M ^ M n A .« .^^ ^ ^ •r O iri O i^ fO rrOO o© i-« Cl iM .^ -»>^ COCO r^OO '50 ro CMH c< c< .« ^ A #\ o «A> CO N Ij rl f^ o u '*■ ON '^ • •» #k M 0* o i<^ «N ^ -+ o oo I ^ -o *^ ^ u .^ -+ t^ r^i On O O COO O ON NO T^O^'^C^ »0C<0 ON"* #\ » #\ M .^' K tt CO C It M !>. CO M 00 o o o o o o so ti Q2. U O *- so in V •nloe m|oo t-|x nl«mK \-* " '" "•" C) C^ M M m\r* MM CI CO to ►5 ^Jzi c< frf* in|eo *0 C< ^ !*• rt-O NO OO M NO C^NO NO CO CO oo 5- 00 O u o «)» - >v ft 00 n S S wKhI^ .N> On to -< t«|pi '00 c-s. cooo NO r^ M ao c< NO VO 00 M VO r«»NO NO oo O M M iV> QJ ti ti iJ CO •-* «-> ^ - a (A t: • I ii 8^ o t/i CQ 3/. per cent, reduc 3/. per cent, consc 4/. per cent, annu Long annuities Imperial 3 per cei Ditto annuities South Sea stock Old South Sea am New do. do. 3/. per cent. 1751 India Stock C • #• C"3 tfi I it i. i- «■ Thus it appears, that the value dT funded property, has already fallen to the enormous amount of 17,>82,49«/. it is to be hoped that such a statement will awaken the attention of the proprietors of the stocks in general, to the necessity of preserving our present system of circulation unimpaired, and to the cfenger of tampering with our paper qurrency ait such a time as this. From the preceding statement it is evident, that the proprietors of Bank stock, have already suffered, in the value of their property, to the amount of nearly four millions sterling, (3,725,568/.) It is farther suggested, that they shall carry on a commerce, by one branch of what they are to lose at the rate of from 8 to 15^ per cent. ; yet when these proprietors are assembled, it is considered to be indecorous in them, to raise any clamour against pro- ceedings, by which their most substantial in- terests are so deeply affected. On the whole, whoever will take the trouble of considering the facts above detailed, and the observations arising therefrom, must see the danger of pernuttiog visioiiary speculations, to interfere with the practical concerns of Govern- ment; more especially, regarding measures, on which depend the interests and the comforts [ 13 ] of all classes of society. In the words of Sir James Steuart, « if matters are left without any « change at all, no bad consequences will « follow. These exist only in the heads of " theorists." m i ifi' il III ADVERTISEMENT. ' - f :'•;"»■ It is much to be lamented, that any contro- versy regarding the circulation of the country, should have arisen at a moment, when we have so many other important questions to distract our attention. Those who wish for an altera- tion in the established system, admit, that the nation, immediately prior to the publication of the Bullion Report, « was in a high state " of mercantile, and of public credit;" the friends of the existing system, therefore, are extremely apprehensive, that any change in our circulation, might completely overthrow that proud situation which we have so long maintained. The opponents of the present sys- tem, on the other hand, contend, that an unre- Ci6 3 ^ i' stricted issue of paper, has occasioned the high price of Bullion, and an unfavourable rate of exchange ; and instead of exercising their inge- nuity, to discover other modes by which the ex- cess might be limited, there is none, they affirm, but the power of converting our paper currency into coin. If the issue of Paper, however, be too extensive, various modes might be thought of, that would answer that purpose, without run- ning the risk of destroying a system, under which, although it may have been attended with some disadvantages, the nation has flourished. All that the friends to the present system seem to wish for is, that matters should be suf- fered to remain as they are, during the course of the present war, resting the responsibility of any mischief that can possibly result therefrom, on the Ministers of the Crown, on the one hand, and on the Bank Directors on the other. If the power vested in the latter, should be reckoned too great, restrict their power, but do not destroy the system. When the war shall be over, the sub- ject may then be resumed without public danger ; and Parliament, with more leisure to discuss 4 Ci7 3 the subject, and with some additional experience, will be enabled to devise such regulations, re- garding the circulation of the country, as may contribute to, and, I trust, confirm, its prosperity. Comparison of the years 1809 and 1796, m regard to Commerce, Public Credit and Revenue. In order that the reader may be fully aware of the importance of the subject now under discussion, how much the nation has flourished, in a variety of important particulars, since the Restriction Bill took place, and what its state would be, if the former system was re- established, his attention to the following statements is earnestly requested. It may be proper to add, that the year 1809, was the one immediately prior to the appoint- ment of the Bullion Committee ; and the year 1796, was the one immediately prior to the restriction on payments in cash at the Bank of England. Exports, An, 1809 • . , - £S^*l^^>l^'i Pitto, An. 1796 •: '* - 3o>5i8,9i3 Difference, ;f 19,782,850 B C iM * Imports, An. 1809 0hto,' Ari. 1796 Average price of 3 per cent consols. An. 1809 Ditto, An. 1796 if3^»255,^09* - 23,187,319 Difference, £i3»o67,890 •} 68 I 9 •JS iff 7 Difference, ^9 3 2t Rate of Interest on Loan> An. 1809 Ditto, - An. 1796 4 4 2f 4 13 3 Public Revenue, An. 1809 Ditto, . An. 1796 Difference, ;f o 9 o| I9>95i»589 Difference, ;f ;9»o8o,259 Is it possible that any individual can seriously • Estimating the East India and the China trade as in 1808, the account not being yet made up. t This is the average price of the 3 per cent, consols, as purchased by the Commissioners for reducing the na- tional debt. If the value of the interest paid to the public creditor be depreciated, what an object it is, to have such an increased price for the capital ? :{: How could such a revenue, and the immense trade, and more extended agriculture of this country be carried on, if the circulation of Bank notes were reduced to eleven millions, independent of Government paper, and com- mercial discount, as recommended by Sir Francis Baring } i ■? C 19 H 67,890 I 9 4 2i 13 3 9 oi 51,589 80,259 riously ide as in nsols. as the na- editor be increased se trade, e carried to eleven nd com* Baring ? )« resolve to tamper with the situation of a country, which the preceding statements represent to be so uncommonly flourishing ? Is it not fair to reason, that if our circulation were reduced to its amount in 1796, (which would necessarily result from the suggestions of the BuUbn Committee), that our commerce and revenue would not differ materially from what they were at that time ? That our stocks would be reduced to the same jwice, which then was the case? whilst the interest on our public loans would be increased to the same standard?-^ Above all, 1k>w would it be possible, with a crr«« culatlon diminislied to at least one iTalf of itJSF present amount, to furnish the same revenue ? i question much, whether in that case, we should? be able to pay even the nineteen nlillioAsT^hich were raised in the year 1796; and if more were attempted to be exacted, cart' it be doubted, that every individual in the country? would he placed in a situatit)n of the u<;most difficulty and distress ? ; J /., I earnestly, have any stake therefore, intiteat n the country,! those, who of whatever Bs C 20 3 description, to unite in maintaining a system, which, in the present circumstances ol Europe, can alone preserve the nation from destrucnon. It is an old and a true sayini>, *' Fas cst^ "t ah hoste doccn : '' Let us endeavour, therefore, to ascenain, wh t are the wishes of the enemy in regard to the renewiil of casii payments at the Bank ; for we may be v/ell assured, that the measures that France w^ould recommend^ it is not for our interest to follow. . Fortunately, the wishes of France, in this respect, have been pubhcly announced from official authority.* Napoleon has not been able to dissemble his joy, at the prospect, of seeing the greatest obstacle to his ambitious views, (the credit and circulation of this country), as he vainly flattered himself, on the eve of being destroyed ; and he had already anticipated the glorious era, when one half of the merchants of England woula be compelled to stop payment, and . when his favourite measures of commercial hostilities against us, (his decrees of Berlin and of Milan), would be • The journal de I Empire is a Government paper.] L < C^i 3 felt in their full force. He believes us so infatuated, that bis warning voice will not awaken us to a sense of our danger. The measure of opening the Bank, however, fortu- nately has not yet been resolved on, by any authority capable of carrying it into effect ; and I trust, when its mischievous consequences are dulv considered, it will not, till the times are materially altered, be seriously attempted. » I cannot conclude without stating my full con- viction, if it were to be enacted that the Bank should resume its payments in cash, that it would be utterly impossible to procure coin sufficient, to carry on our immense commerce, and our improving and more extended agriculture ; to maintain our great fleets, and our numerous armies; to collect our increasing revenue; to defray our vast expenditure; and, in short, to carry on the multiplied daily and hourly tran- sactions of common life. All these would in a great measure be brought to a stand, if our paper currency were to be annihilated. It would be much the same thing, in these unheard of times, if the Bank were again compelled to C« 1 resume its payments in cash ; Jor, in that case, it could hardly venture to issue a note, without having specie ready to exchange for it. We have lately heard much of the miserable state to which numbers in Salisbury were reduced, where, for want of a circulating medium that would pass, they could hardly procure a morsel of bread. If those who have excited a clamour against bank-notes, were to be successful, the public at large, would soon experience the same difficulties. Men, from distress and despair, WGuld> then become ripe for revolution, and ready 1)0 involve themselves and their country, ill all the horrors attending it. If our present system therefore were unfor- tunately to be overturned; whoever might live to make the comparison, would probably find, that the year 1809, and the commencement of theyear 1810, werethe most flourishing periods in our history, in regard to commerce, revenue, finance, and every species of agricultural and in* ternal improvement ^ thebestand most substan- tial sources of public prosperity, London^ [«3] PRELIMINARY OBSERVATIONS. Having already stated, in the History of the Public Revenue of the British Empire,* my sen- timents on the circulation and paper currency of the country ; and having so lately published my thoughts on the Report of the Bullion Com»T2ittee ; I had resolved to reserve, what fartlier observations hiid either occurred to my- self, or had been communicated to me by * See Hist, of the Revenue, printed, An. 1803, Vol. II. p. 318 and 319, &c. It is therein stared, about seven years ago, " that it is hardl}' possible to suppose, that the Bank *< of Englan^U as at presc.it coustitutedj can ever sgain open ** to any effective purpose, as the least rumour of war, ** or any continuance ot an unfavourable state of exchange, ** must compel it to shut again its crifcrs, and to suspend its «* payments in ca?h." Nothing can be more unfair th-rrc- fore than to attribute any change of opinions in th« autncr of that work, though, where there are grounds for it, why should an erroneous opinion be pertinncccu'ly persevered in, because it happened once, perhaps hastily, to be tak<^n up. In regard to coin and paper currency, the authcr of this work, wished to maintain, as long as possible, the credit of the Bank of England on its original footing : he now sees cleaily t* e advantages of the new system, and is bounds as a friend to the yubllc welfare, to detcud it. Ih3 others, regarding these important subjects, until the question came to be discussed in Par- liament, where the solidity of the arguments to be adduced on either side must ultimately be determined ; but having been led to peruse a work, entitled, *' The Question concerning the " Depreciation of our Currency, stated and ex- " amined, by W. Huskisson, Esq." I found myself therein so pointedly called upon, to ex- plain, and vindicate the opinions I entertain,* that, however unwilling to enter the lists of political controversy, I could hardly avoid accepting of a challenge thus publiclj'' an- nounced. It seems to me, independently of these personal considerations, incumbent upon those, • Mr. Huskisson says in his Preface, p. ii. " I am ** anxious to meet upon a fair and equal footing, those per-. ** sons wh9 have publicily attacked the Report of the Com- ** mittee. I wish to draw from them either an admission of ** the principles which I state ; or a clear and explicit expo- <* sition of their own. If they admit the principles stated " by me, it is for them to reconcile their own deductions to " those principles so admitted ; and to disprove mine. If the *' difference between us be as to principles, let them lay ** faiily before the public those on which their theory is * built, and shew the practical consequences to whichtjieir own principles would, in their own opinion, lead.'* I have therefore annexed a clear and explicit exposition of the principles I maintain. It might easily have been spun out into a pamphlet as long as Mr. Huskisson's, had I judged it necessary. i * ii ■■>,M [ 25 ] whose attention has been directed to such in* quiries, to lay before the public, a clear and explicit declaration of their sentiments on the subjects of coin and paper currency, and that with as littlo delay as possible, on two grounds, recognized by Mr. Huskisson; i. the importance of the question ; and, 3. the neces- sity of having it thoroughly considered, pre- viously to its discussion in Parliament. In regard to the first point, the importance of the question, mv ideas go far beyond those which the Honourable Gentleman seems to en- tertain. He admits " that it aifects,in its prac- " tical consequences, the interests and the com- *' forts of every class of society," (Preface p. 13) ; but that is nothing to the view in which the question ought, in my apprehension, to be considered. On thedecision of that question, depend, not only the interests and the comforts of every class of society, but the very safety and existence of this great Empire ; in other words, its security against foreign conquest, or internal convulsion ; either, or both, of which must necessarily follow, if the currency of the coun- try be rashly tampered with, or its estabhshed system of circulation overthrpwn. As to the propiietyof having the subject thoroughly discussed, previously to its being [:*6 3 brought under the consideration of Parliament, I perfectly concur with Mr. Huskisson in the observation he makes, (Preface, p. 12), "that ** it is a subject upon which many persons « would rather collect their i.ieas, and form *' their decision, in the leisure of the closet, than *" in the warmth of debate." These grounds have induced me, however reluctantly, to undertake the unpleasant t »sk of examining the lucubrations of a gentleman, who having held offices of considerable moment, and whose character, as a person of business, intelligence and ability, being well known, it was natural to expect much important infor- mation from any observations which he might be disposed to publish. I certainly lament, as much as he does, that the subject should at all be considered as a party question ; but, most unfortunately, the motion for the appointment of the Bullion Com- mittee was made by a gentleman connected ^ith the opposition party ; the majority of the members who constituted the Committee, are supposed to be hostile to tiie ministers who governed the country at the time when the Report was presented ; the doctrines of that Report have been applauded by all those who, in newspapers or other publications, support i I ament, in the " that )ersons I form it, than ^'wever laSk of leman, oment, isiness,' )wn, it infor- i might ss, that d as a ly, the iCom- mected of the ee, are rs who 211 the of that e who, lupport C^7 3 the claims of a particular party to the govern- ment of the Empire ;— and any person, who presumed to controvert the opinions of the Coinnaittee, became the object of their most virulent abuse. These circumstances tend to indicate, that a number of individuals have formed an idea, that maintaining the doctrines of the Bullion Committee, may serve the pur- poses of the party to which they are attached. As to the clamour raised on the other side, ( which is greatly inferior to what might have been expected regarding a question which affects the interests and comforts of every class of society ), it is impossible for those, who see such a subject unnecessarily pressed forward, and the discussion persevered in, to abstain from loudly proclaiming their horror at such proceedings ^ More especially when the bare suggestion of such measures as the Committee has recom- mended » has already proved the source of infinite mischief, and when, to the best of their judg- ment, such measures, if they were really to be acted upon, would terminate in the destruction of the country. . ,. We are told> however, ** that it was for the " House of Commons to consider whether " they should api)oint a Committee at all, or '* refer such a subject to buch a mode of I " examination ; and that noticing can be more " unjust than to impute blame to the Members ** of a Committee, acting under the orders of " the House, in the due discharge of a duty, " which the House had thought proper to im- " pose upon them," There never was, in my apprehension, a more unjust attack on the House of Commons, upon whom all the odium of any mischief that may arise from the Report, is thus attempted to be thrown. On a motion made by a learned Member of the House, a Committee was appointed " to enquire into « the cause of the high price of Gold Bullion, " and to take into consideration, the state of the " circulating medium, and of the exchange be- " tween Great Britain and Foreign] Parts, and " to report the same, with their observations " thereupon, from time to time, to the House." The Committee were certainly thus authorised, not only to report the evidence, but to make their observations upon it, if they judged it necessary. They might, even, with perfect propriety, have reported the evidence alone, re- quesingthe House itself to form the conclusions ; or, if the subject appeared to them of great difficulty and importance, they might have post- poned presenting the Report altogether until another session, instead of hastily throwing to- gether so defective a performance, which ihey C 29 3 had not leisure thoroughly to digest ;* above all, it is questionable, whether it was proper to pre- sent a Report, on such a subject, involving in it, as the Honourable Gentleman admits, " the ** interests and the comforts of every class of *f society, at the very close of a session, when it was impossible for the House to know its con- tents, or to judge whether it was fit to be j)rinted and circulatrd as a parliamentary document. Here again, I suppose, the House is to be blamed, for having received the Report at such a time, and, having oi'deied it to be printed, from the coniidence it placed in the judgment and the patriotism of its Committee. This leads me to allude to a circumstance, connected with the appointment of the Bullion Committee, which it is impossible to contem- plate for a moment, without ir^iinite regret. The appointment ol Select Committees, to collect useful information, — to digest the in- formation ti.us collected, — to suggest, when specially authorised to that etfect, wiiat pro* ceedings it might be proper for Parliament to adopt, regarding a subject thus investigated, — and afterwards to bring in such Bills as might be necessary to carry the measures proposed by them, if a|)proved of by the House, into ctRct, is a system, which has been productive of * The last evidence was examined on the 25th of May, and the Report presented on the 8th of June. Cso J xnany usieful regulations : but the proceedings of the BuUion Committee will make future minis- ters, and future parliaments, extremely cau- tious in sanctioning such appointments ; it is impossible therefore to foresee the public mis- chief which may thence arise. A Committee may be appointed on very plausible pretences, it may unnecessarily postpone bringing its pro- ceedings to a close, and, at the very last day of a session, it may present a Report, in the pre- paring of which, the Committee have gone far beyond the powers with which they were in- trusted. The Report however is printed, and is circulated during a long recess, under the sa>K- tion of Parliament; and after much mischief has been done, when the Committee are asked, how all this came to pass f it is gravely answwed, — " The House of Commons, and not we, are to ** blame — ^the House appointed us, and we have " done but our duty." I mention a possible case, the very idea of which may prevent many useful inquiries. Indeed respectable members of the House will, in future, become extremely unwilling to take any share in such investiga- tions, since they may inadvertently be led, to concur in the recommendation of measure.^, wijtich may ultimately pcove destructive tx> tlic public interest. However muph these circumstances are to » ( iings of minis- f cau- ; ; it is ic mis- imiltee tences, ts pro- day of \e pre- one far ere in- »and is e sanc- liefhas jd,how ^ed, — , are to ire have ossible many ambers "^mely estiga- led, to asurcH, to the are to be lamented, I beg to have it understood, that, thuugh now under the necessity of controvert- ing the doctrines of the Committee, yet th^t I feci no want of respect for the gentlemen whp constititted it, nor any ^Iteration in that personal regard which I have long entertained for some of its members. They were placed indeed, ^s many Committees are, in a v^ry ^wkw^rd situa- tion. Great thing? were expected frorp theix^^and they vfere of course perpetually teas^ to bjring forward their Report, from an anxiety t9, know what they intended. The variety of impprt^nt business discussed in the course of the l^st ses- sion, prevented them from paying that ^tKianS" ing attention to the subject, which its uitricacy and imix)rtance demanded ; and probably^ they thought, that it was of less consequence what doctrines were contained in the Keport, as they were afterwards to be fully discussed in the House, before they could possibly be acted upon. Bvjsides, the subjects of coin and pfiper currency, are questions of great difficulty, re- garding which much may be said on both sidec^ and in the deciding of which, persons may. I trust, fairly and conscientiously, entertain dis- cordant opinions. I must now take the liberty of explaining the circumstances which have induced me t*; take so active a part in, this ir^yestig^tion* tl t I 't C 32 3 Some years have elapsed since I originally published the " History of the Public Revenue ** of the British Empire,*' in the second volume of the third edition of which, printed Anno 1803, I fully explained the ideas which had occurred to me, on the subjects of Circulation and Paper Currency, and which are exactly si- milar to those which I have lately maintained. Being fully convinced that the power and prosperity of this country, entirely depended on supporting its established systeri! of circulation, as soon as it was surmised that the Bullion Committee had proposed to open the Bank, and consequently to overturn tliat system, I took the liberty of addressing a Letter to tile Chairman, of which the follovving is a copy. Copy of a Letter from Sir John Sinclair, to the Chairman of the Bullion Committee, Sir, I HEGRET much to understand, that some ideas are entertained, of restricting the number of Notes issued by the Bank of England, which I am persuaded would be attended with the most injurious consequences to the agriculture, the commerce, and the revenue of the coun*^rv. I have thought it necessary therefore, to submit to the consideration of the Bullion Committee, jome thoughts upon the subject, in the enclosed CS3 3 rinally evenu? rolume Anno :h had ulcition ctly si- lined, er and ided on ilatiDn, Bullion Bank, stem, I to the copy. , to the t some number which nth the ulture, )Un*TV. Isubmit Imittee, icloscd paper. Some check to the unh'mited circulation of private Banks, would, I am persuaded be highly expedient; but in regard to Corporations, established for the purpose of issuing either large or small notes, any restriction can hardly be politic or advisable, if the security is unex- ceptionable; for any real unnecessary surplus of Notes, will soon return upon those who issue them. I beg to conclude, with expressing my full conviction, that if the paper circulation of the kingdom is put on a proper footing, in regard to the following particulars: i. Suffering none to be issued, but on the most undoubted secu- rity : 2. Taking care that as much pdper cur- rency is in circulation, as the increasing wealth, population, and revenue of the country de- mands : and 3. Issuing small notes, as well as large ones, without which the system is not complete ; — if these principles are acted upon, there will be no difficulty, in finding pecuniary resources, for carrying on the war in which we are at present engaged, for twenty years more, and longer if it should be necessary. I have the honour to be, . Sir, Your faithful and obedient Servant, No, 5, TerracCf Palace^yard, 19th Jpril, mi). C sil No notice was taken of this communication. Whoever will give theniselves the trouble of reading it, will probably admit, that if any mis- chief shall arise frorii the Report of the Bullion Committee, they were fairly warned, on the 19th of April last, of the dangerous consequences which would result fi'om the measures they in- tended to propose. The Report, though ordered to be printed on the 8th June, did net reach me in Edinburgh till about the 16th of August. I hapj)ened then to be on the eve of setting out for London, and resolved to take the Report with me, as a com- panion during the journey. It is impossible to express the astonishment and regret wliich I felt on the perusal of that performance. On my arrival in London, I found the whole mer- cantile world in the utmost distress, which was greatly aggravated by the idea, that the Report would be acted upon as soon as Parliament re- assembled. Not a person seemed resolved, eiiher to maintain the advantages, or to vindicate the solidity of the established currency of the coun- try. I could not therefore resist the inclination which 1 felt, to come forward at such a crisis; being apprehensive that the Bank Directors mi/^ht be deterred from acting witli sufficient energy in ch^ckinj^tlie misfortunes of tlic com- mercial world at that time, ur.less they v.xre CS5 ] convinced, that the doctriii*^*? of the Committee, were not so universally adrr tted, as they had been led to imagine, and con«;equontly might nc^t be ultimately adopted. I wis thence le' to publish some observations on the Report of the Committee, which have been for some time be- fore ths Public. I shall now proceed, to make some observa- tions en Mr. Huskisson's pamphlet, in so far as it seems tome essential to remark upon it, stat- ing, first his sentiments in the words he has made use of, and next the Remarks which have occurred to me on the doctrines he has pro- mulgated. I shall then conclude, with explaining the principles on which I conceive the paper currency of this country is now established ; any tampering with which, in the present moment, would, 1 am persuaded, be attended with infinite, and endless mischief. In the following Observations, the third edition of the pamphlet is referred to. OBSERVATIONS ON MR. HUSKISSON'S . . PAMPHLET. Preface, page 9. " The necessary information (regarding the ** doctrines of coin and paper currency) is to " be easily obtained, by resorting lo liie history " of our currency /« former periods, and to C 2 I 1 '' those authors, in our own language, who are «' looked up to, as of the highest authority in " political economy." Observation. This paragraph explains the origin of all those erroneous ideas regarding coin and paper currency, which the Honourable Gentleman has unfortunately imbibed. Instead of resting on the improved experience of modern times, he has suffered his judgment to be warped, by the his- tory of former periods, and by authors whose supreme authority, in questions of political eco- nomy, can be no longer recognized. A Locke, and other authors of former periods, could only reason according to the circum- stances of the times in which they lived, and on the facts to which they had iccess ; but the same doctrines could never be applicable to such an era as that in which we live. Could they have formed an idea, of the whole Conti- nent of Europe being made subject to the dominion of one man ? Could they have fore- seen, a general anxiety to hoard, arising from the oppression to which whole states were subjected, and the commercial intercourse of nations put under trammels hitherto un- heard of? No man can be absurd enough to suppose, that the same rules or principles, are who are lority in n of all nd paper ;man has isting on r, he has y the his" rs whose tical eco- rperiodsy circum- ived, and but the icable to Could le Conti- t to the ave fore- ng from tes were tercourse Ejrto un- lough to pies, are 4 C 37 3 applicable to a state so forced and uPiiatural, as to the more fortunate period, when Europe was divided among a number of independent states, under governments either free, or not tyrannically exercised ; where, in the midst of war, no idea was entertained of any general stop to commercial intercourse; and where, for the sake of mutual convenience, nations regu- lated their conduct, according to principles, to which the emphatic name of " The code of nations" was given, the authority of which unfortunately is no longer recognized. Besides, new discoveries are constantly making in com- merce, in manufactures, in medicine, in agri- culture, in mechanics, and in all the other arts and sciences; and why should not some be also made in political economy ? I must here take the liberty of remarking that, whatever respect we may entertain, for the celebrated Locke, as a metaphysician, and as a zealous and able friend to liberty and morals, yet no one, at all acquainted with the political history of this country and of America, will ever be disposed to quote him, as decisive authority, by which any practical measure of Government ought to be regulated.* It is well known that • The plan of government for this new colony, (Carolina), Csn ■M Mr. Locke was desired to draw up a Co^sf itu- tion for the province of Carolina. He exercised, on that occasion, all the political ability of which he was capable; but so dife ent is theory from practice, that this constitution was found, by experience, totally unfit for thc^ government of a country. The theories of Mr. Locke on coin and paper currency, are equally in:; pplica'>ie to the circumstances of these times. Were A'lricuiture I. 7 the subject of discussion, it would be idle to rest on the ancient dogmas of a Columella, or the Georgics of Virgil. More useful information is to be obtained, from an experienced farmer of the improved modern school, than from all the ancient authors who have written on husban- dry.* In the same manner, intelligent mer- \vas drawn up by the famous Locke ; a philosopher, who was a friend to uiankind, and to that moderation and justice which should be the only rule of their actions. Being more of a metaphysician than a statesman, it is certain that the same man, who had dissipated and destroyed so many errors in his th(.o;y concerning the origin of ideas, made hut very feeble advances in the paths of legislation. Raynal's Hist, of the Indies, translated by Justamond, VoL VII. p. 341, &c. • Suppose that an author was dcterrnined to write a book on Agriculture, and wished to explain to his readers, the best n;ude of separating the grain from the straw. He might, on consulting ancient authorities solely, collect much informutior., as to the different sorts of flails, their length. I 'I C 39l xercised, ibility of is theory found, by men t of a 1 cciii and >le to the ;ricuiture He to rest ja, or the brmation :d farmer )m all the husban- ent mer- cpher, who 1 and justice Being more ain that the many errors ade but very ivnal's Hist, ill p- 34^ yrite a book readers, the straw. He :oUect much their length. I ■i chants, well-informed bankers, or even the reprobated Directors of the Bank of En .land, who are guilty, according to the Repon of the Bullion Committee, of great practical errors in the m.magement of that vast concern * would have given the Honourable Gentleman, more valuable information regarding coin and paper currency, than he has been *ible to d' rive, from all those ancient authors by whom he appears to have been misled. Preface, page i and 2. ** I committed to paper, the substance of ** my opinions, in part before, and the remain- ** der very soon after, the publication of the *' Report. — I trus^lhat I shall be justified in " submitting, what was originally prepared for an indulgent, and limited circle only, to the examination and judgment of a more ex- " tended and impartial tribunal." their weight, the various sorts of wood of which they might be made, the \\vm\q of spreadir^.g the sheaves, and a number of other minutix, and after all, he would find, on consulting a modern pract'c-il husbandman, that his la- bours were altogether thrown away, for, that v/henever agriculture was well und i lood, the thrashing mill had en- tirely superseded the useoi the flail. * See Rep. ot the Dal. Coui. as priiUcd by the House of Commons, p. 24. cc country; — Indeed a convulsion would take place, which must throw every thing hito confusion. Preface, page 5. " Sir John Sinclair defines Monty to be, " a ivtll regulated paper currency ivitb a cert.iin '^proportion oj coin. Such an axiom seems ** to me wholly unintelligible, and must of " ccurse be wholly unanswerable." « Observation, . . The Honourable Gentleman appears to have so completely immersed himself in antient litera- C 43 1 former has been erienced. circuin- mi^^chief ? Report ur, how- any at- stions of :lie pub- Jed from medium, y to pay ir would ^'11 in the nvulsion ry thing to be, certain n seems must of ; to have It litera- ture, that he cannot r )mprehe]Kl tlie common IanhouUl be Q;lad to know, whether it wouid not be payment /7v'/7o;z<:;y, according to the modern mean- ing of tiiat word, if iie Vvcre to den ver to his credi- tor a ten pound Bank note, half a guinea hi gold, four shiUin<]:sin sliver, an J two- pence halfpenny in copper? Bees not that exemplify the deii- nition of Money giv:.;n b}'' me, namely, *' Paper " Currency, with a certain proportion of coin." In fact, coin is of no real uso in a country, except as small money, or change for Notes. A moderate proportion of silver, and of the smaller pieces of gold, therefore, is all that is necessary. , , Pamphlet^ page 1. " It is of tlie essence of money to possess *' intrinsic value/' Obserjation. If the Honourable Gentleman by Money ^ n^.eans Coin, it certainly posseses intrinsic value; but his researches have not been very deep or extensive, if l:c does not know, tliat various ar- ticles have passi'd ior mmey, wiiicli are without any material intrinsic value. A]i:o:i.; the ancient Britons, iron rings or |J;t:s \\cre used as money. The ISjartani: preferred iron bars, [ 44^ ] quenched with vinegar, that they might not serve for any other purpose. Seneca observes, that anciently, there was stamped money of leather The Hollanders, in 1574, coined great quantities of pasteboard. Cowries, a kind of shell, are made use of as money on the coast of Africa, and in the East Indies. All these sorts of money have little or no intrinsic value. Pamphlet^ page 2. " Paper Currency has obviously no intrinsic value." Ohservatio7i, The Honourable Gentleman cannot have studied the subjects of coin, and Paper Cur- rency, with that intelligence and ability which might be expected from him, when he states that circumstance as an objection to paper cur- rency, which is in fact its greatest advantage, namely, that it has no intrinsic value. The chief objection to coin is, that you must purchase it at a great expense from foreign countries, and after all, it is only a transferable commodity, or a medium of barter ; whereas paper currency answers the same purpose, with many addi- tional advantages, and being of no intrinsic value, the nation has it for nothing. From fifty to sixty millions, carrying on our agriculture, our conniicrce, and our manufactures, and pro- C 45 3 ducing a revenue, (and consequently a national force), altogether incredible, are created by paper money. It is a species of circulation, ob- tained at little or no expense, and which has saved the exportation of many millions of property, by the loss of which the nation would have been impoverished. Pamphlet^ page 2. " The money, or coin, of a country is so much «* of its capital." Observation. Here money, and coin, are considered as sy- nonimous terms, and in that point of view it may be admitted, that it is ''- of the essence of <« money, or coin, to possess intrinsic value." It is astonishing to me, that either the Honour- able Gentleman himself, or the indulgent and limited circle to whom his opinions were origi- nally communicated, could suffer themselves to be deceived by such fallacies. They seem to have considered money, sometimes as different from, but at other times as synonymous with, coin. * Sir James Steuart has well observed, (Book III. cap. 1.) that the metals have so long performed the use of money, that money and coin have become almost synonymous, though [46] in their principles they be quite different. Thij? difference he afterwards thus explains. — '* Money is the scale for reckoniruij value ; and " coin, certain denominations of money, re- " alized in a proportional weight of the precious " metals." (Book IV. ch. i^.) Bank notes are as just a scale for reckoning value as coin, and conscqucutly, equally as well c!ititlcd to be comprehended under t!ie general tevm of money. in regard to the idea, that the circulating coin of a country, V:, to be considered as part of its capital, in every sense of that word, (and if nf>t, why ('och iu)t tlie Honourable Gentleman p'-hit out the distinction), it is totally inadmissible; and it is astonishing how any one, wlio has undertaken the task of teaching others the elementary j)rinciples and doctrines of finance, should have fallen into such a mistake. The capital of a country, a'7 Dr. Smith justly observes, is of three sorts, 1, consumable^ which yields no revenue or profit, as food, clothes, housel^old furniture, &c. ; Q.Jixedy as useful macliines, profitable build- ings, improvements of land, &c. tlie character- istics of which is, that it affords a revenue orprofit without circulating: or chan'rinp" masters: q. the circulating^ consisting of money, stock of provi- sions, rude materials for manufacture, &c. which he afterwards observes, though a very C47:] md ire- >us lare md be ley. valuable part of the capital, makes no part of the revenue of the society to which it belongs ; to which a 4th might be added, namely, the disposable, or property which a community can export or part with, without any material injury, as bullion and plate. The coin, or specie of a country, therefore, forms no part of its consumable, fixed, or disposable capital : It is included in its circulating capital, which produces no revenue; and wliich cannot be parted with, without injury to the public pros- perity. The coin of a country may bci compared to its roads, for neither the roads, nor the cur- rency of a country, produce any thing : they are only indirectly the sources of national wealth, or the instruments by wlrlch it can be obtained. PamphU'tjp.i, ** Whoever buys, gives — wliocver sells, re- " ceives, — such a quantity of jvare gold or .silver, " as is equivalent to the article bcu^rrht or sold : ** or, if he gives or receives paper instead of " money, he gives or receives that which is va- ** luable, only as it stipuiatcn the payment of a ** given quantity of gold or silver." Observation^ There never vms a more erroneous idea, and it could only orif.nnate froai a biin i deference to ancient autiiority, whic!i cannot j>ossi!)lv be 4 * •>' 1:48 3 admitted. There is not one transaction in a million, where the object of the sale is to pro- cure coin, except merely for the purpose of employing that coin to purchase some other article. If, therefore, that article can be pur- chased by paper, instead of coin, the object of the seller is equally well answered, by the one as by the other; and there is not the least occa- sion, either for pure gold or pure silver. Pamphlet, p, 6. " I assume, as admitted, that in Great Britain, " gold is the scale to which all prices are re- " ferred, and, since the g9th of the King, the ** only legal tender, except for payments under Observation. The Honourable Gentleman does not seem to be aware of the origin of those laws which were enacted, for the purpose of regulating our coin. The great object was, the preservation of the King's revenue.* It was thought hard, • See articula de moneta. ao Edw. I. stat. vi. Ces sount les articles qe sount dela la mcer, et de cea, a graunt damage mstre Signur Je Rot, et de son poeple, ct a graunt corruption de sa monnoye Denglaterre. For the protection of the King's Revenue, the Tellers in the receipt of the Exchequer, by their duty and oath of office, were required, to 1 in a o pro- ose of other e pur- yect of le one It occa- Britain, are re- ig, the under eem to which tig our 'vatioa t hard, C 49 3 however, that individuals should be compelled to receive a species of money, which would not be accepted ofdt the Exchequer, in pay tneht of those taxes to which they were liable. But since the Exchequer has received Batik notes in payment of taxes, all those ancient regulations are virtually abrogated ; and whilst bank paper is Jieceived at the Exchequer, as readilyaigdld,and will purchase with is much facilityj every article he wishes for, no man can justly coniplaitt of any defect in our circulation. Pamphlet, p. 13. " It follows that the difference betwe^ft 5W. *' and 46/. 14J. 6d» or between l^ and ib^ " ounces of gold, arises from t\iQ depreciation of " the paper; and is the tneasijre 6f that dej^rd- « ciatiOrt, as Weil With respedt to gold, the ** universal equivalent , k^ to eVelfy other cortl- **modity." receive no money, but good and true ; and, by the ancient course of the receipt of the Exchequer, all money ought to be received there, by weight as well as by tale ; See Pre- amble 9 and lo, Will. III. c. 21. By the Gold Act in 1 773, the Tellers of the Exchequer, their deputies and clerks, were required to weigh all gold money tendered to theim, and to cut, break or deface all pieces thereof, which, by the weight, or otherwise, shall appear to be counterfeit, or diini* iiished otherwise than by reasonable weighing. D 1150 3 • • • - . . . Observation, - It is well observed by a witness before the Bullion Committee (Mr. Greffulhe, Ap. p. 71), that the clearness of gold and silver cannot be called a discount on bank notes, or, in other words, a depreciation of paper.* From a variety ' of circumstances, unnecessary here to dwell upon, the price of bullion has become high ; an ' event of a temporary nature merely, and which will be restored to its ancient standard so soon as Europe shall be settled, and general tran- quillity restored. A pound of gold it is said is exchangeable for 567. in paper currency ; but can any one seriously maintain, that that is an argument for the convertibility of paper into coin. Is it not demonstrable, that no man in his senses would issue 46/. 145. 6d, in paper, when the very next moment, 56/. might be de- manded from him. It puts an end at once to all paper currency ; and the Rank of England could no more issue paper, with the risk of such a de- mand, than it could convert its iron chests into * It has been well observed, that if Bank notes are at a discount, when gold rises in value above the mint price, that gold coin is certainly at a discoui.t, when bullion is below the mint price, which has been the case. Can any thing br more absurd ? [51] )efore the rannot be in other a variety to dwell (high; an and which rd so soon leral tran- t is said is ency; but that is an paper into lo man la in paper, jht be de- once to all land could such a dc- ;hests into lotes are at a nt price, that lion is below any thing k ingots. We aregravely told, however, that though the Bank must pay 56/. for 4^/. 14^. g^., «^ yet, " as a trading company there is very little, *' or perhaps no inducement, to make a sudden " and violent reduction of its issues." Pamphlet^ page 111. Preface, page 17. " Every month our exchanges were growing " worse, and the price of gold rising* notwith-* *' standing that our expedition to the Conti- " nent was terminated, and our pecuniary aid " to Austria was discontinued." Ohservatioji. Were there no other causes for the unfavour- able state of the Exchange, and the high price of Bullion, than those which the Honourable Gen- tleman has enumerated P-f By the expedition to the Continent, I suppose he means the attack on the Isle of Walcheren. But had the expenses of that expedition been winded up .'^ Were there no expeditions to Spain and Portugal ? Have we not an army to maintain in Sicily ; and fleets and armies to support in various other quarters of the globe ? The great defect however, in the inquiries * The price of gold has since fallen considerably. See Address prefixed. f In my observations on the Report of the Bullion Com- mittee, I have endeavoured to enumerate them. of the Committee is, thdt after having ascer- tained the fact " that the price of bullion was high, and the exchange unfavourable;" and havinc: also inquired into the causes thereof, that they did not investigate the possibility of diminishing the price of bullion, and rendenng the exchange more favourable, without disturb- ing the established system of circulation? Why did they not inquire, whether new channels of export trade might not have been disco- vered; and above all, whether we could not have supplied ourselves at home, or from out* own colonies, with a variety of articles, such as corn, naval stores, and timber, the price of which, with the enormous freights for their con- veyance, were in fact the sole causes of those evils, which the Honourable Gentleman, and tha Bullion Committee have so loudly deplored. That would have been an investigation worthy of statesmen. The Committee would then have proved themselves real benefactors to their country; and the tide of exchange would soon have become favourable to the British merchant. Pamphlet, page 19. " Creditors, annuitants, and all who possess *' incomes fixed in their amount by a contract " of any description, would be able to measure ** the extent of their loss." Observation. The loss which annuitants sustain by the progressive increase of paper currency, has long been a subject of complaint, but without any just foundation ; for any great increase of me- tallic money would have exactly the same ef- fect, that of diminishing the relative value of all such payments; nor can it be ad mitted,that a na- tion is to be kept in an insecure or impoverished state, merely that annuitants, and other persons havingmoney to receive by contract, may becomr paratively richer. Indeed the money received by annuitants is not depreciated by an excess of paper. It will not go so far as it is used to do, because taxes have been necessarily augmented. The price of provisions also has been considerably increased, because the harvests have been unfavourable. Some imported articles must likewise sell higher, from the hitherto unheard of restrictions under which our commerce with the continent has been placed. Besides, the peculiar circumstances of of these timts ought never to be lost sight of, in the course of the discussion. When the state of Europe is as much chani'^ed, as if a volcano had suddenly burst forth, threatening to cover one Illll C 5h 3 half of the kingdom with ruin, we must not act or reason, as if nature had remained in its ancient quiescent state. Indeed, if our paper circulation had not given us the command of forty millions sterling, which otherwise we must have imported in bullion from other coun- tries, sending them property to that amount in return, we could not have gone on at all; and had we not been thcrtbv enabled to resist the power of France, the payments to annuitants, and others entitled to receive money by con- tract, would not have been very reii^nlarly liqui- dated. How can t!?ey expec*^ to j cape a share of that pressure, to which every o her branch of the community has been subjected ? I have thus gone through the preface, and the first nineteen pages of the pamphlet of the Honouiable Gentleman ; and I trust it will be evident, from these observations, that the doc- trines maintained by Mr. Huskisson are founded upon principles, inconsistent with those which are sanctioned by the improvements progressively made in the science of political economy. The Honourable Gentleman, indeed, has very candidly, and very justly admitted,' (Preface, p. 8), that his observations contain not/ti7i^ which is new ; and it were to be wished. [55] not its that from the old matter, so anxiously and la- boriously searched into, he had made a happier, and more judicious selection. Instead of per- severing therefore in the task of commenting on such a publication, which, after the remarks I have already made upon it, and the want of novelty in its contents, seems to me perfectly unnecessary, I shall proceed to the principal object I had in view in publishing this work, namely, to state those Political Maxims, which explain the ideas which have occurred to me upon the subjects of coin and paper currency, the meaning of which, I hope, that any author, of even common penetration, will find little dif- ficulty in comprehending. It may be proper to add, to prevent any idea being entertained, that these Observations are published at the instigation of any party in the country, that they have not been communicated to a single member of either House of Parlia- ment ; and that the individual who writes them, is alone either implicated in, or responsible for, their contents. It would give him infinite plea- sure, if hi3 anxious endeavours, in conjunction with those of many others, by whom the cause, he trusts, will be advocated, should be the means of preserving from deainiciion, t bat cojnmon bond, (the established currency of the country), by the [55 J inteK*ang» ©f which, numbers of insulated in-? ({ividqals, are qombin^d into on^ whola; each, in various ways, promoting his own interest^ and thereby increasing the wealth, securing the safety, and augmenting the hoppin^sSi of a great community. K I r'; 1 i €57 3 POLITICAL MAXIMS DE0AR9INQ COIN AND PAPER CURRENCY. INTENDEP TO EXPI^ilN, THE REAI, NATUHB, AND ADVANTAGES, OF THE PRRS^NT SYSTfiM. *♦ That it is of the utmost importance. In an early period of society, to have metals, or any other substance of a similar nature, fixed upon by common consent, by means of which, in"' ; luals may receive the reward of their lauuur, and the public its revenue, in an article equal in value, when sold, to that for which it has been exchanged, and which will answer as a medium for transferring property in goods, without the necessity of actual barter ; and that the precious metals, from their intrinsic value, and other advantages, are peculiarly calculated for such useful purposes, in periods of society, when property is ii>sv cure, payments few, credit unknown, and the population inconsiderable. s. That when a society becomes morf* nnme- rous, property more secure, and payments I [58 ] larger, and more frequent, it is a most essential improvement in the political circumstances of a country, to have some means of paying the wages of labour, raising a revenue, and '^rffect- ing the transfer of goods, with such a circulating medium as paper currency, being of a nature less cumbrous than coin or bullion, and not liable to the various disadvantages, to be after- wards explained, attending a metallic circula- ting medium; and that in countries where no mines of the precious metals exist, the neces- sity of procuring them from foreign countries, at an enormous ex pence, for no other purpose, but merely to act as the medium of circulation, is thereby prevented. , 3. That the establishment of a paper cur- rency is of great importance to a nation, were it only for the purpose of saving the expence of purchasing bullion to be converted into coin ; but that such a currency does not answer the object effectually y more especially in times of war, if l/ie paper is convertible into coin on demand^ as, in that case, a large quantity of specie is uselessly hoarded up, to be ready for any probable, or even possible demand, and hence that, in times of alarm, the circulation of a country is most diminished, when its abundance is most required. ' % tial CGS the V4 ft 'm^ not [59] ' 4. That coin, though highly useful when no other medium of transfer can well be es^ tablished, yet is attended with great disadvan- tages. — 1. It is perfectly unfit for making large payments, in so much, that neither the commerce of this country, to its present ex- tent, could be carried on, nor its great revenue collected, if coin were the sole medium of cir- culation. — 2. It can never be procured in suf- ficient quantities for the demands of an indus- trious, and a prosperous nation. — 3. It is con- stantly diminishing in its value by wear, which diminution must be made good, either by the public or by the individual.* — 4. It is liable to various operations, as filing, clipping, sweating, &c. by which its weight may be so much re- duced, as to render it unfit for passing. — 5. It is apt to be hoard^^d up when it is most wanted, namely, in times of alarm, and the hoards being generally secret, they are frequently totally lost ; — and, 6. Private individuals pos- sessing a quantity of specie, are more liable to lose their right of property in it, than in paper; *' In the reign of King William alone, the rccoinagc cost tht public ,£"3,170,480. — History of the Revenue, Vol. II. p. 45. The average expencc of the Revolution yfiT was only about three millions per annum. > V E6o] and when nation? possess it in great abundance it is a temptation to invasion.* 5. That paper currency, on the other hand, uhen properly regulatedy is not liable to any one of these objecHons, whilst it possesses many advantages of peculiar importance. ~i. A na- tion has the advantage of this currency at little or no expence, instead of exporting millions worth of goods to purchase bullion to be con^ verted into coin, which after all could only answer the same purpose as paper currency, but not so well. — 9. This currency need never be diminished in its amount, which uniformly occasions infinite misery to a country ; on the contrary, it may be augmented whenever the wants of agriculture, to carry on its improve- ments, or of an increasing commerce or revenue, render it necessary. — 3. Where paper currency is the medium of circulation, • When an individual is plundered qf coin, there are no meanii of distinguishing it from the other spcqiq in circula- tion ; but notes may be marked, or the payment stopped, and any loss thereby prevented. In regard to nations, abundance of coin or bullion becomes the immediate object of the pi under of an invading enemy \ whereas thf paper currency pfCuJiar to a country, if he succeeds in his views of conque&t, i& of no use to him j whilst it circuUte$ among those who place confidence in the §ovcynip«pt;| uo4cr whose s^^BQtioa it had been issued. [61] iHidance er hand, any one is many I . A na- r at little millions be con- lid only urrency, 2d never liformly on the ?ver the nprove- jrce or Where culation. eitlver coin or bullion, instead of being use- lessly hoarded up, may be exported, for thd purpa^e of carrying on necessary wafs, or of purchasing grain in times of scarcity, which could ncA. otherwise be hazarded, without thft risk of throwing the whole country into con* fusion. — 4* With an abundant circulation, the necessary result of a paper currency, a nation prospers to a degree beyond all possible con- ception : Thousands of people are c ployed, who, under a different system, might either have been almost entirely idle, or a burden on the community 5 and money, whether bor- rowed by individuals or by the public, is pro- curable, (a point of the most essential importance), At a moderate rate ctf interest. With such facilities, the payment of taxes, however great, is accompanied with much less difficulty ; industry doe^ not languish for want of employment, and every species of improve- metit is carried on with spirit. The mischiefs of a cramped drculatbn, on the other hand, are incalciilabie ; agriculture decays,*— com- merce fades,— public credit is annihilated,— the public revenue becomes unproductive,-*- and men, from distress and despair, are ready to involve themselves and their country in all the lK)rrors of revolution. i iliwtni mill [ 63 1 6. That the state of Great Britain, for a period of thirteen years, during which, a paper currency, not convertible into coin, was the medium of circulation, proves, beyond the possi^ hility of doubt, the advantages of the new system. During that whole period, our exertions in foreign war, and domestic im- provement, have been great beyond all example. We have at least occasionally fought France single-handed, which her Emperor had boldly declared to be impossible; we have con- firmed our empire of I he sea; we have every where defended our friends ; we have every where combated our enemies ; and yet, during all that period, the Bank of England was not compelled to issue gold; — the whole was effected by paper, not convertible into coin. Would it be wise to overturn a system capable of accom-* plisl ling such astonishing effects ? 7. That there is a most essential difference between a Paper Currency, acting merely as the representation, not of coin, but of mar- ketable property in general, and issued by a respectable, opulent, and well conducted Corporation ; and State notes, or Government paper, circulated by compulsion, issued without limits, and founded on no security ; and though such Government paper may liave be- ; C63 3 n, for a 1, a paper was the the possi'^ the new iod, our estic im- fond all ly fought peror had have con- ive every ave every 2t, during i was not ^as effected ould it be 3f accom- i I . I difference nerely as : of mar- sued by a conducted vernment id without 'ity ; and have hc- I i i I 'i .1,1 I I come depreciated in other countries, when multiplied beyond all bounds, that is no reason why a Paper Currency, of a description com- pletely different, namely, mercantile paper, v^'hich is never issued but on the most unques- tionable security, may not, under proper regu- lations, be perfectly unexceptionable. . 8. That coin or bullion, as a species of mer- chandise merely, may be of service in the transactions between commercial nations, and is a ready means of making remittances from one country to another ; but that unless where the balance is unfavourable, (in which case the exportation of goods is much more expedient), the exchange between one country and another is best arranged, by means of bills of exchange, which are always at the command of an active and industrious nation, when wars, and ob- stacles aiising from commercial jealousy, or political rancour, do not intervene. 9. That even where the exchange is unfa- vourable, it is much better to be subjected to any loss thereby occasioned, than for a nation to deprive itself of the advantages of Paper Currency, even if that currency were the cause of tlie lowness of the exchange; for that a paper currency, by promoting industry, and every species of agricultural and com- hiercial impfovement, will soon bring about ^ favourable state of exchange, either by the solid exportable wealth which it would be the means of producing, or by raising articles at home, with which we are now supplied by foreign Countries. lo- That the Bank of England cannot well exceed in the amount of its circulation, whilst it issues its notes, on the security of good mar- ketable property of any description , and that to compel the Bank to pay in gold, art article which, from the failure of the mines, or a ge- neral disposition to hoard, it may be impossible to obtain, and which, aft^r all, is itself nothing but a species of marketable property, would infallibly shake and subvert, not cnly the credit of our circulating medium as it is now established, but also the whole fabric of the commercial and public credit of the kingdom, on the maintenance of which its prosperity so essentially depends. 11. That it is highly desirable, that the cir- culation and commerce, not only of any par- ticular country, but of society in general, should be carried on with as small a proportion of the precious metals as possible, the extracting of which from the bowels of the earth, requires so much labour and expence, and for the pro. C65 3 curing of which, the lives of so many millions of human beings have been unnecessarily, and it may be safely contended, in a great measure, even wantonly, sacrificed ; and, 12. That the price of bullion rising in the market, much above the mint price, is a cir- cumstance attaching to gold merely as mer^ chandize, and which must vary with the demand for that merchandize, as in every other similar case; and that we might as well institute an inquiry into the price of diamonds, of cocliineal, of sugar, or of any other commo- dity, as into that of bullion. CONCLUSION. The conclusion of the whole is this, that Par- liament can find no difficulty, in rectifying any abuses, (if any shall be found to exist), which may have arisen, in our paper circulation, as it is now established, /or it is only the abuse that can be justly objected to ; but that wholly to over- turn a system, which has proved such a source of national prosperity, which has stood the test of the experience of 13 years, the most event- ful IN THE HISTORY OF MANKIND, and a systcm E mMlttt0/lmMt^mm. ^M i " [66] which, if maintained, will enable us to resist the utmost efforts of all our enemies, would be a species of political suicide, altogether unpar- donable. JOHN SINCLAIR. 5, Terracct "Palace-yard, m\ [67] resist uldbe unpar- LAIR. 4 II POSTSCRIPT. After these Political Maxims had been drawn up, I rcsv)lved to ascertain, how far they were consistent with the principles laid down in a work i^^ great merit. Sir James Steuart*s Inquiry into the principles of Poli- tical Economy. Not having Iiad any occasion to consider that work for several vears, I found, with peculiar satisfaction, th n the sys- tem which seemed to me the best calcul ted for the prosperity of this country, was sanc- tioned by the autliority of that UiOs' intelli- gent and respectable writer. Ev^ry word he says regarding coin and currency, merits the attention of those who wish to be master of those intricate subjects. I shall subj nn. for the consideration of the reader, (host* passages which seem to me the most essenual ; wi h such obser\ations as have occurred to me on the perusal of tlicm. 1. Oti the Origin of the Obligalion to pay Bank Pap: I in Coin* ** The obligation to pay Bank paper in " coin, owes its origin to the low state of < 1168 3 " credit In Fairope, at the time when Banks first ' began to he introduced ; and it is not likely that any other expedient will soon l)e lalleii *' upon,U) remove the incouvcniencies wliich ** resuh from it, in domeslic circulation, as ** lonjT as some persons c)l [he most acuie un- ** derstanding in many thinj^s, consider all *' money, except coin, to be false and ficti- " tious." Book IV. cliap. 7. Observalion. One would imiiv-ic that this distlii- guislicd ^vrilcr had lorsecn the ap[)ointnient ula Bullion ('(..injitLcc, hi tiie course of* whose j3rocecdings, pcibons (){ ijie most acute un- derstand iii.'i in many thi/ij^s, seem to have been imj)rcsscu widi most erroneous opinions on the subjects of coin and paper currency. 2. Oil the AdiouuI of Gold Coin^ necessary (o citculale a.t/j ^iveu quanlilfj oj Bank paper. It i". sMj^poscd that (he r>ank of Enghmd was formerly obii[;cd lo keep in coin one third jviiL ol t!ic value of all its notes in cir- culation. On this sidjjcct Sir James Steuart ol;sci\es, *' hut the consequence of" the obli- *' c;ation to j)ay in coin is, that when the na- •' tion comes to owe a (oreign balance, tlie *' notes which ti:e Bank had issued to sup- *' port dumci>tic circulation onhj^ come upon C%3 "it for the payment of this halance; and '* thereby the coin, which it had provided " for home demand only, is drawn out.** Book IV. chap. 7. / Observation. The justness of these remarks can hardly be questioned ; it is evident, therefore, that it would ref]nire^7,00(),0()0. in specie, to cir- culate j^2!,OOOobo. of Bank Notes, the a- mount neccssaiy lor the demands of the coun- try at this time. If the Bank were compelled to have a 1 way s^f 7 ,000,000 in its coffers, which it must now purchase at a loss of £%^ per cent., and which, from any great additional demand, would soon rise to 15 or £0 per cent. and which it must be constantly replacing; I should be glad to know, in what the prolit of the Bank would consist, and whether it would be worth its while to issue a single note, with the risk of its being converted, at such an ex- pence, into specie. 3. On the Advantages oj Paper Currency, ** In countries where nothing ciiculatcs but ** the metals, when coin becomes scarce, it is *' hardly possible to hnd any credit at all in *' the remote provinces; and even in the cen- ** tre of circulation, ihc interest paid for the " use of it, must rise vcrv consldcrablv, and [ 70 ] •' iiiu<:t stand higli for some time, before Bul- " iioii, for tlie [yurpose oi coinage, can be ini- ** ported, r (per nioncy, on the other hand, *' whea Banl'; and trade are well established, " is always lo be louud. No part oi it lies " dead — net even (or a day, wi»eii employed "in trade: it is not so of coin." iSteiiart's Polit. Ecoii. Book IV, chap. ll>- " To the Banks ol'ScuLla^id, the iiiiprove- " merit of that couiitry is entirely owing.'* Ditto, Vol. ill. p. 19 7. ' Observalion. These remarks are perfectly just. The prosperity both of Enj;land arid of Scotland, ought principally to be attributed to t!ie Bank- ing establishments in those two countries, and the judicious principles by which they are regulated. Any attempt therelbre, cal- culated lor the purpose of diminishing their power, or restricting their circulation, carniot be two vigorously ()])posed. 4. Oh I he ncccssihj of having Bank jYoles con- ic r lib It into SjKcic, ** It is said that bank notes can never be re- " ceivctl as s| ecic, but from a persuasion that ** they ir.ay be cxciiangcd ibr it on demand." *''lo lids tlic answer h obvious; that it ** is snlLcient tliat bank liOtcs be received as [7»] " value, and that they answer every purpose " in carrying on alienation. The use of paper " money is to keep the reckoning between " parties who ar^ solvent; the use of specie ** or coin, is, to avoid the inconvenience of ** giving credit to persons who perhaps may " not be so." ** Again it is said, that if I have coin, I *' may pay any wliere within the commercial " world, at the expense of transportation and " insurance." *' To this it may he answered, that the " principal use of coin is lot to send it out " of the country, hut to '.'jon. Book IV. chap. 2,0, CrO Observation. ' .. Those who are not convinced by these judicious remarks, must be either warped by interest, as jobbers in money often are, (who perliaps have been at the bottom of all this miscliicf), or they must be im- pressed with prejudices not to be surmount- ed. It is astonishing how any doubt of tiie utility of our present system of circulation, should remain in the breast of any one, Iter we have witnessed the beneficial effects Wiiich have resulted from it, during the course of the last 13 years. 5. On l/ie J\"cccssitij of Maintaining Banks, " If a siatcsinan do not support his banks by ** a systematical cliain ol coiirhict, he will *' drain the fund of circulation by his rcmit- *' tances, his credit will fail, his taxes will no *' nv;rc be paid, and his pcoj)le will be op- '' pressed. Bnt if lie j)ursue his [)lan syste- ** matically, circulati(jn will be kept full, his *'• credit will be suj^poried, his taxes will be ** paid, an/ill be j)ut cither lo their indus- *' try or consumption for want of money,** Steuart s Pol. Eeon. Book. IV. chap. 10. Obsovation, The doctrines eonlaiiied in tli's j)iiragraph» ccmpletely justify the observatious couiaincd [73] in the fifth political maxim. It were to be wished that those, who are anxious to form a just opinion regarding coin and paper cur- rency, would study the works of an author, whose " Inquiry into the principles of Poli- " tical Economy," was the labour of 18 years diligent research, aud whose works cannot be surpassed by those of any otiicr political au- thor, for ingenuity of thought, justness of rea- soning, and soundness of judgment. " C. On Public Loans, " As the object of ihe borrower is, to have " interest low, the statesman vrho intends to " borrow, niust use all possible means to in- ** crease thequantityof money in circulation." " But if coin alone be used as moncv, and if " this coin be sent out of the country, when " borrowed, and if what is sent away cannot be " replaced, at will, the scheme of augmenting " money l)Ccomes in)practicable: it will daily *' become more scarce, more dillicult to pro- *' cure, and interest must rise iiighcr every ** day. Symbolical, or paper money,lhLit iscrc- " dil,must then be eaablishedai home, upon " the firmest basis : this will enable every one " to j)ay what he owes, consequently ihe taxes ** vvill be paid, the creditors will receive wiiat " is due to them regularly, money every vear • ** will augment in proj)()rtion as debts arc ** contracted, and if borrowing do not augment " beyond this proportion, interest will not rise, " and if borrowing should fall below this pro- " portion, interest will sink." Steuart^s Polit.. Econ. Book IV. chap. 10. . «»-■ »a»»*^ n Observation, These doctrines are invaluable, and are completely justified by the recent expciience of this country. Those who cannot feel ilicir importance, do not merit the name of States- men. •• » * - . x"-. •i^ > auc^'ij ..'» < 4 ■ Wo :.L^ London t rriuinlhy VS . Btilmcr und C*. CIcf cliituUruw, St. Jaincii't. ; i }• . ';rv..'/> . 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