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 LIBRARY 
 
 OF THE 
 
 UNIVERSITY OF CALIFORNIA. 
 
 Class 
 
 
 
 
 
 I 
 
Ir' 
 
 \ 
 
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 COMPARATIVE ESTIMATE 
 
 OF 
 
 THE EFFECTS 
 
 WHICH 
 
 A CONTINUANCE AND A REMOVAL OF THE RESTRICTION 
 
 UPON 
 
 ARE RESPECTIVELY CALCULATED TO PRODUCE 
 
 WITH 
 
 STRICTURES 
 
 Mb. RICARDO's PROPOSAL FOR OBTAINING A SECURE 
 AND ECONOMICAL CURRENCY. 
 
 By R. TORRENS, Esq. F.R.S. 
 
 AUTHOR OF "AN ESSAY ON MONEY AND PAPER CURRENCY;" 
 AND " AN ESSAY ON THE EXTERNAL CORN TRADE. " 
 
 . OF THE T 
 
 PRINTED FOR R. HUNTER, SUCCESSOR TO MR. JOHNSON, 
 
 No. 72, St. Paul's Church-Yard ; and 
 
 RIDGWAYS, Piccadilly. 
 
 1819. 
 

 COMPARATIVE ESTIMATE 
 
 OF 
 
 THE EFFECTS 
 
 WHICH 
 
 A CONTINUANCE AND A REMOVAL OF THE RESTRICTION 
 
 UPON 
 
 ARE RESPECTIVELY CALCULATED TO PRODUCE 
 
 WITH 
 
 STRICTURES 
 
 Mn. RICARDO's PROPOSAL FOR OBTAINING A SECURE 
 AND ECONOMICAL CURRENCY. 
 
 By R. TORRENS, Esq. F.R.S. 
 
 AUTHOR OF " AN ESSAY ON MONEY AND PAPER CURRENCY f 
 AND H AN ESSAY ON THE EXTERNAL CORN TRADE. n 
 
 . Or THE r 
 
 UNIVERSITY 
 
 PRINTED FOR R. HUNTER, SUCCESSOR TO MR. JOHNSON, 
 
 No. 72, St. Paul's Church-Yard ; and 
 
 RIDGWAYS, Piccadilly. 
 
 1819. 
 
& 1 * 
 
 « & ;-ti« 
 
 GENERAL 
 
 Printed ly J. Breltell, 
 Rupert Street, ITaymarket, London. 
 

 TO 
 
 GEORGE PHILIPS, Esq. M. P. 
 
 AS AN ACKNOWLEDGMENT 
 
 FOR MANY ACTS OF KINDNESS AND REGARD, 
 
 AND AS 
 
 A TESTIMONY OF RESPECT, 
 
 FOR THE DISTINGUISHED ABILITY WITH WHICH, 
 
 AS A MEMBER OF THE LEGISLATURE, 
 
 HE HAS ADVOCATED THE 
 
 MOST IMPORTANT PRINCIPLES OF ECONOMICAL SCIENCE, 
 
 THE FOLLOWING PAGES ARE INSCRIBED BY 
 t 
 
 THE AUTHOR. 
 
 Woolwich, May 7, 1819. 
 
 1 04775 
 
COMPARATIVE ESTIMATE, 
 
 *■ 
 
 1 HE Money, or Currency of a country, is 
 liable to variations in its exchangeable value, 
 from two distinct and very different causes. It 
 will undergo a permanent alteration in value, 
 either from an increase, or from a diminution, 
 in the expense of producing the commodity of 
 which it is composed; and it will be subject to 
 occasional and temporary fluctuation of value, 
 from any circumstance which affects the rate of 
 exchange, and the balance of foreign pay- 
 ments. 
 
 The permanent alterations in the value of 
 money, which arise from an increase or dimi- 
 nution in the expense of producing the pre- 
 cious metals, are so rare in their occurrence, 
 
2 
 
 and so gradual in their approach, that they 
 can scarcely influence the decisions of the 
 practical statesman. With regard to the tem- 
 porary fluctuation occasioned by variations in 
 the rate of exchange and balance of payments, 
 the case is different. These are both frequent 
 and sudden, and it is impossible to come to a 
 right decision on any practical question in the 
 science of money and currency, without under- 
 standing their principles, and taking their ope- 
 ration into account. Before I proceed to the 
 question respecting the expediency of resum- 
 ing cash payments, I shall therefore endeavour 
 to explain, with as much clearness and brevity 
 as possible, those occasional variations in the 
 value of the circulating medium which are 
 produced by fluctuations in foreign trade, and 
 in the balance of foreign payments. 
 
 Let us suppose, tliat the rate of exchange 
 between England and the Continent is at par : 
 that, after the demand for each other's commo- 
 dities is mutually supplied, the debts are ex- 
 actly balanced by the credits ; now this being 
 the previous state of things, we will suppose 
 farther, that a bad harvest occurs in England, 
 
and compels her to import from the Continent 
 a large supply of corn. As all commerce is an 
 exchange of equivalents, something must be 
 sent abroad to pay for this foreign grain. The 
 first question, therefore, to be considered in 
 this case is, what commodity will be sent out 
 to pay for it ? The ordinary continental de- 
 mand for British goods is, by the supposition, 
 already supplied : what articles, therefore, will 
 form the basis of that extraordinary exporta- 
 tion which must now take place ? 
 
 Self-interest is the spring of every commer- 
 cial transaction ; and the merchants who have 
 incurred foreign debts by an extraordinary 
 importation of corn, will export in return such 
 articles as may enable them to discharge those 
 debts at the cheapest rate. The basis of the 
 extraordinary exportation, therefore, will not 
 be taken, in equal proportions, from the general 
 mass of commodities, but will consist of those 
 particular articles which may be sent abroad 
 at least expense, and which are least likely to 
 glut the foreign market. For example, if, 
 after the two countries had mutually supplied 
 each other's ordinary wants, England were 
 
obliged to import corn from France, to the 
 amount of a million sterling, she would not 
 pay this debt by sending to France an in- 
 creased quantity of coals or of cast iron, upon 
 which she would incur an enormous expense 
 for carriage ; neither would England attempt 
 to liquidate her extraordinary debt to France 
 by an extraordinary exportation of steel watch- 
 springs; because those articles, though pos- 
 sessing great value in proportion to their bulk, 
 are yet of such limited demand, that they 
 would speedily overstock the foreign market, 
 and consequently be sold at considerable loss. 
 Those particular articles, therefore, which can 
 be conveyed at the cheapest rate, and which 
 are least liable to glut the foreign market, will 
 always form the basis of that extraordinary 
 exportation which is resorted to for the pur- 
 pose of paying foreign debts. 
 
 Whatever may be the commodity which> 
 from the cheapness of its carriage, and the 
 universality of its demand, merchants may 
 select for the purpose of liquidating extraor- 
 dinary foreign debts, that commodity, as its 
 supply diminishes in the home market, and 
 
increases in the foreign, will necessarily have 
 its value raised in the former and lowered in 
 the latter. Here, therefore, the important 
 question presents itself, namely, when the com- 
 modity which the merchant has selected for 
 the purpose of liquidating an extraordinary 
 foreign debt, has been rendered dearer in the 
 home, than in the foreign market, will it con 
 tinue to be exported ? If we can arrive at a 
 right decision upon this question, we shall 
 obtain a clue for some of the most intricate 
 recesses of the theory of money and exchange. 
 Let us suppose that a deficient harvest in 
 England has raised the price of corn so high, 
 that a merchant who imports a supply of grain 
 from France can, on this first part of his trans- 
 action, obtain a profit of thirty per cent. 
 Now, if fine cottons are the commodities which 
 he exports in payment, and if those will sell in 
 France, at a price which exactly covers the 
 expense of sending them thither, then it is evi- 
 dent that the merchant, in balancing his ac- 
 count by the exportation of cotton, can sustain 
 no loss ; and that when the whole of his trans- 
 action is completed, he will still obtain a 
 
6 
 
 profit of thirty per cent. But if cottons con* 
 tinue to be sent out of England, not for the 
 purpose of supplying the ordinary commercial 
 demand of France, but in order to balance an 
 unfavourable account incurred by an extraor- 
 dinary importation of corn, it is evident that 
 the supply will diminish in the former, and 
 increase in the latter country; and conse- 
 quently, that those goods, when measured by 
 every other commodity, except corn, will ac- 
 quire a higher value in England than in 
 France. Let, therefore, the value of cottons rise 
 in England, and fall in France, to such a de- 
 gree, that the merchant, by sending them from 
 the former to the latter country, in order to 
 balance his account, sustain a loss of ten per 
 cent. But in importing the corn, in paying 
 for which he must incur this loss, he had ac- 
 quired thirty per cent. His profit, therefore, 
 Upon the whole transaction, will be twenty per 
 cent. ; and* in order to secure this, he will, 
 unless some other goods can be sent abroad at 
 a cheaper rate, continue to export cottons, 
 though they should be dearer in the home, 
 than in the foreign market. 
 
The question therefore arises, Cannot some 
 other goods be sent abroad at a cheaper rate ? 
 By the supposition, all commodities, except 
 corn and cottons, are, both in England and in 
 France, at their ordinary and level value ; and 
 we have now to inquire, whether some of those 
 commodities on which no loss could be sus- 
 tained, except that which arose from the ex- 
 pense of carriage, might not be substituted for 
 the cotton, on which a loss of ten per cent, 
 must be sustained. This can be determined 
 only by comparing the loss arising from the 
 carriage of other commodities, with the loss 
 sustained by sending the cottons from the 
 dearer to the cheaper market* Cottons could 
 have beeh selected as the basis of extraordi- 
 nary export only because they furnished the' 
 means of liquidating, at the cheapest rate, the 
 debt incurred for the foreign corn ; and, if the 
 loss now sustained by their becoming dearer 
 in the home, than in the foreign market, be 
 less than the loss sustained upon the carriage 
 of the next eligible article for export, then it 
 is evident that they will still furnish the cheap- 
 est means of discharging the extraordinary 
 
8 
 
 foreign debt ; and that they will continue id 
 be sent abroad, though dearer in the home; 
 than in the foreign market. Let, for example, 
 woollens be the next eligible article of ex- 
 portation ; let them be of equal value in Eng- 
 land and in France ; and let the expense of 
 sending them from the former to the latter 
 country be fifteen per cent. In this case, one- 
 half of the profit obtained by importing the 
 corn would be lost by balancing the account 
 with woollens ; but the loss sustained by ba- 
 lancing the account with cottons would be 
 only ten per cent., or one-third of the profit 
 obtained upon the corn. It is evident, there- 
 fore, that the merchant would not begin to 
 purchase corn with woollens, until cottons had 
 become so dear in the home market, that he 
 could not dispose of them abroad without sus- 
 taining, on that part of his transaction, a loss 
 of fifteen per cent. Hence, when a conside- 
 rable profit can be made by an extraordinary 
 importation of any commodity, articles on 
 which the expense of carriage is small, and 
 which are little liable to glut any particular 
 market, will be employed to balance the ac- 
 
9 
 
 •count, until their diminishing supply raises 
 their value in the home, so far above their 
 value in the foreign market, that the loss upon 
 sending them abroad equals the loss attending 
 the transmission of the next eligible article of 
 export. 
 
 Having thus shewn, that a commodity may 
 continue to be exported, though its value in 
 the home, should exceed its value in the foreign 
 market, I proceed to apply this principle to 
 the bullion market, and to the expounding 
 of the theory of money and exchange. 
 
 The precious metals possess, in an eminent 
 degree, the qualities which render commodi- 
 ties eligible as the basis of that extraordinary 
 exportation, which a great foreign expendi- 
 ture, or an unusual importation of corn, may 
 occasion. Possessing great value in small 
 bulk, they can be transmitted at little expense ; 
 and being employed as the measure of value, 
 and as the universal equivalent, they rapidly 
 pass off in exchange for any thing which may 
 be more in demand than themselves ; and 
 therefore are, of all commodities, the least 
 likely to glut any particular market. Thence, 
 
10 
 
 whenever any foreign debts, beyond what the 
 ordinary transactions of commerce can liqui- 
 date, are incurred, the precious metals will, in 
 the first instance, be sent abroad to pay them ; 
 and hence, in all such instances, gold and 
 silver will become scarcer and more valuable 
 in the home, than in the foreign market. A 
 rise in the value of the metals is, indeed, the 
 same thing as a reduction in the price of all 
 other commodities. This reduction must ne- 
 cessarily encourage export, and check import ; 
 and thus, without any farther transmission of 
 gold and silver, tend to balance the account. 
 It k evident, however, that this forced expor- 
 tation of other commodities is the consequence 
 of the diminished supply and increased value 
 of the metals ; and, instead of being a proof 
 that they every where preserve a level, is the 
 certain indication that they have acquired an 
 extraordinary elevation in the home market. 
 
 After gold and silver have acquired an 
 extraordinary elevation in the home market, 
 those foreign debts which the usual operations 
 of commerce cannot balance, maybe liquidated 
 by other commodities; &nd the expense of 
 
11 
 
 transmitting those will constitute the limit, 
 beyond which the value of the metals in the 
 home, cannot exceed their value in the foreign 
 market. For example: if an extraordinary 
 foreign debt caused bullion to be subtracted, 
 until its value in the home market became so 
 high that the loss upon sending it abroad 
 amounted to ten per cent. ; and if the loss 
 upon transmitting sugar and coffee (the arti- 
 cles in the next degree eligible as the basis of 
 extraordinary exportation)/ should also be ten 
 per cent., then the farther subtraction of bul- 
 lion would be prevented ; because, should its 
 supply in the home market be any farther 
 diminished, its value would rise until the loss 
 upon sending it abroad would be more than 
 ten per cent. ; that is, more than the loss sus- 
 tained by balancing the account with sugar 
 and coffee. But merchants always seek to 
 balance their accounts in the cheapest manner ; 
 and, therefore, while sugar and coffee could 
 be transmitted at ten per cent., the exportar 
 tion of bullion would cease before the cost of 
 sending it abroad began to exceed that rate. 
 But should the forced exportation of sugar and 
 
12 
 
 coffee occasion such a glut of those articles 
 in the foreign iharket, that the loss upon send- 
 ing them abroad amounted to fifteen per cent., 
 then, indeed, the exportation of bullion would 
 be resumed, ahd its value in the home, would 
 be elevated so far above its value in the foreign 
 market, that the loss upon sending it abroad 
 would be also fifteen per cent. This would 
 form a new limit to the farther diminution in 
 the supply, and rise in the value, of bullion. 
 In every instance, and every stage of the pro- 
 cess, the degree of loss sustained upon export- 
 ing the last article with which the merchant 
 may most cheaply balance those foreign debts, 
 which the ordinary operations of commerce 
 cannot liquidate, will regulate the degree in 
 which the value of bullion may rise in the 
 home, above its value in the foreign market. 
 
 From the principles which have already been 
 unfolded, it necessarily follows, that when an 
 unfavourable balance of payments raises the 
 value of bullion, the bullion of different metals 
 will be raised in different proportions; As the 
 commodity which can be transmitted at the 
 least expense, or, in other words, which con- 
 
13 
 
 tains the greatest value in the smallest bulk, 
 will always be the first article selected as the 
 basis of extraordinary exportation, whenever 
 a foreign debt, beyond what the ordinary ope-? 
 rations of commerce can liquidate, is incurred, 
 gold will begin to disappear before silver ; and 
 will, to the full amount of the difference in the 
 expense of carriage, acquire a higher value. 
 For example, if gold can be sent to Paris for 
 two per cent, and if silver cannot be trans-* 
 mitted to the same place under a cost of seven 
 per cent., then, on an unfavourable balance of 
 payments occurring with Paris, gold would be 
 preferred as the basis of the extraordinary 
 export, until its diminishing supply in the home 
 market elevated its value five per cent, above 
 that of silver ; that is, until the loss sustained 
 by the increased value of gold balanced the 
 advantage of its cheaper carriage, and rendered 
 it indifferent to the merchant which of the 
 metals he remitted. 
 
 Having thus shewn how an unfavourable 
 balance of payments affects the bullion market, 
 •wp must now proceed to trace out the manner 
 
14 
 
 in which the same cause disturbs the relative 
 value of bullion and of coin : — 
 
 In the first place, metal in the form of bul- 
 lion, is a more eligible article of export than 
 metal in the form of coin. By assaying a small 
 portion of a bar of gold, we ascertain the fine- 
 ness of the whole ; but in order to ascertain 
 with equal exactness the fineness of a quantity 
 of gold in the state of coin, we must either 
 assay each individual piece, or else melt the 
 whole, and then assay a portion of the united 
 mass. The first would be an almost endless 
 process ; and even the latter would be attended 
 with more trouble, delay, and expense, than 
 ascertaining the fineness of gold already united 
 into bars. Now, whatever might be the amount 
 of the greater labour, delay, and expense, which 
 would be necessary to ensure us, that no coun- 
 terfeit or adulterated pieces had been insinuated 
 amongst the coins, to that amount would gold 
 in bars be more valuable for the payment of a 
 foreign debt, than an equal quantity of metal 
 in the form of coin. The division and manu- 
 facturing of metals at the Mint, will often 
 
15 
 
 render them more valuable for the purpose of 
 domestic circulation, but will render them less 
 valuable for the purposes of exportation. Hence, 
 whenever an unfavourable balance of payments 
 leads to a subtraction of the metals, the in- 
 crease in the value of bullion will be greater 
 than the increase in the value of the domestic 
 coin*. We will assume that the difference 
 
 * An unfavourable balance of payments may sometimes 
 render foreign coin more valuable, as an article of export, 
 than bullion. If I owe a thousand livres to a correspondent 
 in Paris, transmitting French coin to that amount, might 
 be cheaper than transmitting bullion, which, when it 
 arrived at its destination, would have to be assayed and 
 sold before it could effect the desired payment. But 
 though, in this case, a premium might be given for French 
 coin, yet the coin of England would be found less valuable 
 than bullion. For this coin, not passing by tale as a 
 legal tender in Paris, would also require to be assayed and 
 sold before it could effect the payment of my debt. But 
 assaying it would be more troublesome and expensive 
 than assaying bullion ; and hence for the purpose of ex- 
 portation, it would be of less value: this principle accounts 
 for the fact, that during our great foreign expenditure 
 in the Peninsula, Spanish coin sold in our market at a 
 higher price than bullion of equal fineness. 
 
16 
 
 thus induced between the value of the bullion 
 and of coin, may amount to one per cent. 
 
 In the second place, those laws which, in al- 
 most every country, have been enacted for the 
 purpose of preventing the melting down and 
 exporting of the coin, must necessarily, when- 
 ever an unfavourable balance of payments 
 diminishes the supply of specie, cause metal in 
 the form of bullion to rise in a higher ratio 
 than metal in the form of coin. It is no doubt 
 true, that as long as the metals are the most 
 eligible basis of extraordinary exportation, all 
 laws prohibiting the coin from being melted 
 and sent abroad, will be evaded by self-interest. 
 But then, evading the laws will always be at- 
 tended with risk and expense ; and therefore, 
 to the full amount of these, metal in the form 
 of coin, will, during an unfavourable balance 
 of payments, experience a less rise than metal 
 in the form of bullion. Gold which could be 
 sworn off for exportation was, during the great 
 expenditure occasioned by the war, three per 
 cent, dearer than gold of equal fineness which 
 could not be legally sent abroad. We shall there- 
 fore take three per cent, as the amount of the 
 
difference which the laws against defacing and 
 exporting the coin may, when an unfavourable 
 balance of payments diminishes the supply of 
 metals, induce between the value of gold bul- 
 lion and of gold coin. 
 
 In the third place, whenever an unfavour- 
 able balance of payments diminishes the supply 
 of specie in the home market, the value of gold* 
 as we have already seen, must, to the full amount 
 of the difference in the expense of transmitting 
 the two metals, experience a greater rise than 
 the value of silver. We have assumed this 
 difference in the expense of transmission to be 
 five per cent. If this be correct, during an un- 
 favourable balance, gold bullion would become 
 more valuable by five per cent, than the silver 
 coin : even though this coin should, during the 
 unfavourable balance, retain its full bullion- 
 worth. But this, as we have already seen, it 
 could not retain. Domestic silver coin could 
 not rise so high as silver bullion, because it 
 would be less eligible for the purpose of expor- 
 tation ; and because, to this natural and neces- 
 sary drawback, would be added the artificial 
 arid accidental drawback arising from the 
 
 c 
 
18 
 
 Jaws which prohibit the defacing and export- 
 ing the coin. The first we have taken at one 
 per cent, and the second, as it is more difficult 
 on account of its greater bulk, to smuggle 
 silver than gold, we may take at four per cent. 
 Thus then, under these assumptions, an unfa- 
 vourable balance of payments may cause silver 
 bullion to rise by five per cent, higher than it 
 raises silver coin of standard weight and fine- 
 ness. But the same cause has by the difference 
 in the expense of carriage which we take at 
 five per cent, increased the value of gold, be- 
 yond what it may have increased the value of 
 silver bullion. Consequently gold bullion must 
 have received an elevation of ten per cent, 
 above silver coin. 
 
 Thus an unfavourable balance of foreign 
 payments, independently of the deterioration 
 of the coin to which it may give occasion, leads 
 by a three-fold process to a difference between 
 the value of bullion and of standard coin. In 
 the first place, it gives metallic bars and masses 
 an advantage over small metallic pieces ; in the 
 second place, it elevates the metal which can 
 be sworn off for exportation, above that which 
 
19 
 
 cannot legally be sent out of the country ; and 
 in the third place, it alters, by the amount of the 
 difference in the expense of the carriage, the 
 customary level value of the metals from which 
 the coinage is composed. The second of these 
 causes of variation arises out of the laws which 
 prohibit the defacing and exporting of the 
 coin, and by the repeal of such laws it might 
 be removed ; but the first and the third causes 
 of the difference between the value of bullion 
 and of coin, are not of this accidental and arbi- 
 trary nature, and would continue to produce 
 their effect, though every restriction upon traf- 
 ficking in the coin of the realm were removed. 
 The difference between the value of bullion 
 and of coin is, while coin constitutes the cur- 
 rency, the same thing as the difference between 
 the market and the Mint price of the metals. 
 By the regulations of the Mint, a pound of gold 
 is coined into forty-four guineas and a half; 
 consequently, forty- four guineas and a half con- 
 stitute the Mint price of a pound of gold. But 
 if the causes above explained should raise gold 
 bullion four per cent, above the gold coin, then, 
 of course it would require more than forty-four 
 guineas and a half to purchase a pound of gold ; 
 
20 
 
 or, in other words, the market price of the metal 
 would be elevated above its Mint price. Again, 
 an ounce of silver is, by the regulations of the 
 Mint*, coined into 5^ shillings ; five shillings 
 and two-pence, therefore, is the Mint price of 
 the ounce of silver. But should silver bullion, 
 from the above causes, have risen five per cent, 
 above the silver coin, it would require more 
 than five shillings and two- pence to purchase 
 an ounce of silver; and the market price of 
 this metal would rise five per cent, above its 
 Mint price. Once more; the Mint price of an 
 ounce of gold is £. 3 1 7s. I0±d. now the pound 
 sterling is a denomination standing for four 
 ounces, all to a small fraction, of coined silver ; 
 if therefore, under the circumstances already 
 stated, gold bullion should rise five per cent, 
 above gold coin, and silver bullion five per cent, 
 above silver coin, then, it is evident that 
 £.3 17s. 10^d. could no longer be identical 
 with one ounce of gold ; but that the market 
 price of this metal, when expressed in the pound 
 
 # Under the late Coinage Act the weight of the silver 
 coin is reduced ; but this does not in any way affect the 
 principle contended for. 
 
21 
 
 sterling and its fractions, would have risen ten 
 per cent, above its Mint price. 
 
 Whenever the market price of the metals 
 rises above their Mint price, the question of 
 depreciation presents itself for consideration. 
 Now the term depreciation always implies a 
 diminution of value. It is only when the money 
 of a country has lost a portion of its exchange- 
 able value, that it can justly be said to be de- 
 preciated. If while the precious metals retain 
 their customary relation to other things, the 
 coin should be clipped, or worn, or adulterated, 
 its value would sink, and it would be in a state 
 of depreciation. Again; if a diminution of 
 commercial transactions, or the introduction of 
 greater economy in the use of currency, should 
 diminish the demand for money, then the coin 
 would become redundant with respect to bul- 
 lion ; though of standard weight and fineness, 
 it would to the full amount of the labour and 
 risk required to restore it to the state of bullion 
 lose a portion of its exchangeable value ; and 
 therefore in this case also it would be depre- 
 ciated. But when an unfavourable balance of 
 foreign payments diminishes the supply of the 
 metals, and raises the market price of bullion 
 
22 
 
 above the Mint price, the effect is very different. 
 In this case, the value of money is raised, in- 
 stead of being lowered. When the metals are ex- 
 ported to balance an unfavourable account 
 bullion, as we have seen, will rise in a higher 
 ratio than coin ; but then, as soon as the rise in 
 the value of the metals exceeds the premium 
 necessary to cover the risk and expense of ex- 
 porting the coins, the coin will also be sent out 
 of the country, its supply will be diminished, and 
 its value raised. Now, when coin, or the money 
 of a country, is raised in value, it is a con- 
 founding of terms, nay an absolute contradic- 
 tion, to say that it is depreciated. 
 
 Thus we see, that a difference between the 
 market and the Mint price of the metals may 
 be produced by distinct and very different 
 causes ; namely, by a rise in the value of bul- 
 lion, and by a fall in the value of coin. To ap- 
 ply the same term, and to attribute the same 
 character, to effects so opposite, both in their 
 origin and in their consequences, is surely not 
 very philosophical or accurate. There are 
 three distinct states, in which the coin or money 
 of a country may be placed in respect to bul- 
 lion: it may be of the same value with bullion; 
 
23 
 
 it may be of a different value from bullion, in 
 consequence of its own value having become 
 deteriorated ; and it may be of a different value 
 from bullion, in consequence of the value of 
 bullion having risen. Now, those distinct states 
 should be marked by distinct names ; the first 
 is non-depreciation ; the second is real depre- 
 ciation; the third, apparent depreciation. 
 
 All that we have said respecting the dif- 
 ference between the value of bullion and of 
 coin, applies equally to the difference which 
 may arise between the value of bullion, and of 
 a paper currency, convertible at the option of 
 the holder into coin. A paper currency, pos- 
 sessing itself no intrinsic value, must necessarily 
 be equivalent to the commodity which it repre- 
 sents, and into which it can at will be turned. 
 All the circumstances which, when the balance 
 of payments is unfavourable, prevent coin, must 
 also prevent a paper currency, convertible 
 into coin, from experiencing so great a rise as 
 bullion. As measured in the paper currency, 
 therefore, the market price of bullion will rise 
 above its Mint price ; but this will be an ap- 
 parent, not a real depreciation of currency. 
 
24 
 
 Depreciation implies diminution of value ; and 
 in all instances of a subtraction of the metals, 
 in consequence of an unfavourable balance of 
 payments, the value of a currency convertible 
 into coin, will be found to rise, not to fall. 
 
 What has been stated with respect to the 
 occasional difference between the value of 
 bullion and of coin is also true in reference to 
 the occasional difference between the value of 
 coin and of a paper currency not convertible 
 into coin. If an unfavourable harvest con> 
 pelled England to get from the Continent an 
 extraordinary importation of corn, to the 
 amount of a million sterling, then an extras- 
 ordinary exportation of her commodities, to a 
 like amount, must take place in order to pay 
 for this supply. The commodities most easily 
 conveyed, and least likely to glut the foreign 
 market, would go out first. As those became 
 scarce and dearer, commodities in the next 
 degree eligible would be made the basis of the 
 extraordinary exportation ; and so on, until 
 the account became balanced. The result 
 would be, that England would have lost some 
 of her commodities ; but that in consequence of 
 
25 
 
 some being better calculated for exportation 
 than others, she would have lost them in different 
 proportions. The supply of gold, and of some 
 of the finer articles of manufacture, might be 
 considerably diminished; while that of cast 
 iron and of coals would remain very nearly, if 
 not altogether, as before. Now, coin being, 
 with the exception of bullion, one of the most 
 eligible articles of export, it would, with rela- 
 tion to the great mass of commodities, have 
 its supply diminished, and its value raised. 
 Supposing, therefore, that while the value of 
 coin is thus raised, a paper currency not coi> 
 vertible into coin is so cautiously issued, that 
 it retains the same relative proportion to 
 the mass of commodities, and consequently 
 the same exchangeable power as before; 
 then the value of the coin, and of the paper 
 will be different, and any given sum in the 
 former, will purchase a greater quantity of 
 goods, than the same given sum in the latter. 
 But this does not prove that the paper cur- 
 rency is depreciated. Depreciation always 
 implies a fall in value, a diminution in the 
 power of purchasing. This the bank note has 
 
not undergone; on the contrary, it retains, by 
 the supposition, the same power, and equiva- 
 lency in the market as before. But as its 
 value remains unaltered, it cannot have under- 
 gone a real depreciation, though, in conse- 
 quence of its remaining stationary, while the 
 standard to which we generally refer it, has 
 risen, it exhibits an apparent depreciation. 
 
 The principles above unfolded, respecting 
 those occasional and temporary variations in 
 the value of the precious metals, which are 
 induced by an unfavourable balance of foreign 
 payments, and rate of exchange, afford a satis- 
 factory explanation of almost all the important 
 facts, presented in the history of our currency, 
 and enable us to form an accurate estimate of 
 the wisdom of certain plans, proposed with a 
 view of imparting to it a greater degree of 
 security and uniformity. For several years 
 past the market price of gold has been above 
 its Mint price ; or, in other words, any given 
 sum in the paper currency has not been equiva- 
 lent to the quantity of metal contained in the 
 coin which it purports to represent. Respect- 
 ing the cause, and the effects of this fact, dif- 
 
27 
 
 ferent opinions are entertained. Those political 
 economists, who have been denominated BuU 
 lionists, contend that the precious metals are 
 the only standard of money. That the rise in 
 the price of gold is occasioned by the paper 
 currency, having fallen below its customary 
 value, and that the remedy for this evil, and the 
 way to give the bank note a steady and uniform 
 power in exchange, is, to render it at all times 
 convertible into a given quantity of bullion. 
 The practical men, on the contrary, maintain 
 that a rise in the price of gold does not indicate 
 any loss of value in the currency, that bullion, 
 being nothing more than so much merchandise 
 in the market* cannot be regarded as the stand- 
 ard of money, any more than sugar or coffee, 
 and that rendering the bank note, at all times 
 equivalent to the same given quantity of metal, 
 instead of imparting to it the character of a 
 fixed and uniform measure of value, would ex- 
 pose it to perpetual and deep vibrations. 
 
 When these opposite theories are examined 
 upon the principles above unfolded, it will be 
 found that each contains something which is 
 correct, combined with something which is 
 
28 
 
 erroneous, and that truth lies at a middle point 
 between them. It must be conceded to the 
 bullionist that the precious metals are the only 
 standard of money. The proper definition of 
 money is any commodity which general consent 
 has rendered the practical measures of value 
 and medium of exchange ; and in all civilized 
 countries, the commodities which general con- 
 sent has selected for these functions, are por- 
 tions of the precious metals with stamps affixed 
 to them, certifying tfyeir weight and fineness. 
 Paper currency, indeed, serves in the market 
 as a practical measure of value, but it does so 
 only as the substitute and representative of the 
 metals. When the price of gold rises, it is true, 
 as the bullionists contend, that a given sum of 
 the paper currency represents a smaller quantity 
 of the material of money, than before ; but it 
 is not true, as they affirm, that the paper must 
 therefore be below its customary value. Gold 
 may have increased in value. If an extra- 
 ordinary exportation of the metal should have 
 so diminished its quantity as to give fifteen 
 ounces the same power of purchasing which 
 sixteen ounces formerly possessed; then the 
 
29 
 
 bank note which represented fifteen instead of 
 sixteen ounces, though apparently depreciated as 
 compared with a given quantity of the material 
 of money, would continue to pass at the same 
 identical value which sixteen ounces formerly 
 passed for, and which they must pass for again, 
 when the unfavourable balance of payment 
 ceases, and the usual equilibrium is restored. 
 The same principle holds good with respect to 
 coin. Whenever an unfavourable balance 
 raises the value of bullion sufficiently high to 
 cover the expense and risk of melting, or ex- 
 porting the coin; it will also begin to acquire 
 an extraordinary elevation, and fifteen shillings 
 may obtain the same power in the market 
 which twenty shillings formerly possessed. 
 But if such were the case, the pound note, 
 which represented fifteen shillings instead of 
 twenty shillings, would not have sunk below its 
 proper and usual value, but would retain pre- 
 cisely the same power in the market as before. 
 The error of the bullionists consists, not in 
 their assuming false principles, but in their 
 failing to give due consideration to the limi- 
 tations and exceptions to which just principles 
 
30 
 
 are occasionally liable. Gold is by law the 
 basis of our money, and therefore there can 
 exist no reasonable doubt, that the only way 
 to keep our currency fixed and invariable is to 
 preserve it at the ordinary and level value of 
 gold, as that value is determined by the metal's 
 cost of production. But gold is liable to con- 
 siderable elevation above its ordinary and 
 level value, and consequently rendering the 
 same sum in the currency at all times equiva- 
 lent to the same quantity of metal, instead of 
 rendering the currency fixed and invariable, 
 would expose it to frequent and deep vibra- 
 tions. The general principle is liable to oc- 
 casional exceptions. The value of the circu- 
 lating medium, instead of fluctuating, may 
 often be rendered more steady by a deviation 
 from the customary standard. Indeed it would 
 be highly expedient, if gold could be made the 
 standard of currency, only when it is at that 
 average level value which is determined by 
 the cost of its production, and which may be 
 considered for any moderate period of time, as 
 fixed and invariable. 
 
 To this a bullionist would object, — "there is 
 
31 
 
 no criterion by which we can ascertain the 
 degree in which an unfavourable foreign ba- 
 lance may raise gold above its average and 
 level value. The average and level value^ 
 therefore, itself undefined, and undefinable, 
 cannot be rendered the standard of currency. 
 If we once admit the principle that the bank 
 note should be allowed to depart from the 
 actual value of the metal, which it purports to 
 represent, we have no longer any check upon 
 its issue, nor any assignable limit to its fluc- 
 tuations." 
 
 I answer that the difficulty of ascertaining 
 the average and level value of gold, is a cir- 
 cumstance which should render a bullionist 
 cautious in applying his general principle, and 
 diffident to assert, that when the price of the 
 metal is raised, the bank note has sunk in 
 value. For aught he can tell, the effect may 
 have been produced by an extraordinary de- 
 mand for gold ; and his inability to assign the 
 cause of the irregularity, should check his 
 haste for the application of a remedy. The 
 rash empiricism which employs the same uni- 
 versal medicine for disorders, different in their 
 
32 
 
 origin and character, is at least as likely to 
 injure, as to heal. Raising the bank note to 
 an equivalency with gold, would restore the 
 currency to a sound and natural state, if an 
 over-issue of paper had degraded it below the 
 customary level of the metal, it purports to 
 represent; but if the difference had been occa- 
 sioned by an extraordinary demand for gold, 
 would produce that very fluctuation, in the 
 value of the circulating medium, which w r e 
 erroneously assumed to have taken place and 
 ignorantly attempted to correct. The objec- 
 tion of the bullionists, therefore, would make 
 against themselves. When it is a doubtful 
 matter whether gold is, or is not at its average 
 and level value, it must be a certain matter, 
 that we should refrain from interfering at ran- 
 dom, and in the dark, to raise the currency to 
 an equivalency with it. 
 
 But I deny that it is impossible to ascertain 
 whether the gold is not at its average and level 
 value. There is no absolute scale, indeed, 
 which we can apply to the metals, so as to ren- 
 der their ascent or descent actually palpable 
 to the senses ; but there are a variety of cir- 
 
33 
 
 eumstances from which their variations may be 
 deduced, with sufficient accuracy, for all prac- 
 tical purposes. If, at the time when gold rises 
 in price, a deficient harvest or a foreign loan 
 should have called for an extraordinary ex- 
 portation of those commodities which are most 
 easily carried, and least likely to glut any par- 
 ticular market, general principles would lead 
 us to conclude that this metal had received a 
 temporary elevation above its average and level 
 value. This conclusion would be strengthen- 
 ed, if, at the same time, silver, the next eligible 
 article with which to balance an extraordinary 
 foreign debt, rose in a less proportion than 
 gold. And if those finer articles of commerce 
 which contain the greatest value, in the small- 
 est bulk, experienced a graduated elevation, 
 whilst the coarser and more bulky commodities 
 remained nearly at their former price ; if, with 
 the principal foreign markets, the real* as well 
 as the computed and apparent exchange, was 
 against us ; and if the issues of the Bank were 
 not unusually enlarged, or were rather dimi- 
 nished than increased ; then should we possess 
 a resistless chain of circumstantial evidence., 
 
 p 
 
34 
 
 proving that the fluctuations of foreign trade, 
 had given to gold a temporary elevation above 
 the level marked by the cost of its production. 
 On the other hand, if the price of gold were to 
 rise at a time when there was no deficient har- 
 vest, or foreign loan ; if silver, and all the 
 commodities rose in the same proportion with 
 gold, and not in a proportion graduated by 
 their respective eligibility, to become the basis 
 of extraordinary exportation ; if while the 
 computed exchange became unfavourable, the 
 real exchange remained at par; and if the 
 amount of bank notes in circulation, had in- 
 creased ; then we should possess a body of evi- 
 dence, amounting almost to demonstration, 
 that gold was not elevated above its ordinary 
 and level value, and the bullionist would be 
 perfectly correct in attributing its advanced 
 market-price, to a diminution in the value of 
 the currency, in which that price was com- 
 puted. 
 
 The errors of the bullionists are not confined 
 to pushing their general principles too far, and 
 failing to take into consideration the exceptions 
 and limitations to which they are liable. Many 
 
35 
 
 of the measures they propose for correcting 
 the irregularities in our currency would have 
 the effect of increasing the fluctuation to which 
 it is exposed. It is stated that the laws against 
 exporting and melting down the coin, are of 
 very questionable policy, and that the utmost 
 freedom should be given, not only to the manu- 
 facturing of bullion into coin, but also to the 
 reducing of coin into bullion. This is an error. 
 The repeal of the laws against melting and 
 exporting the coin, would be clearly pernicious. 
 We have seen that when an unfavourable 
 balance of payment occurs, these laws consti- 
 tute one of the causes which render coin the 
 less eligible article for export, and prevent it 
 from rising so much above its level value as 
 bullion. If there were no longer any risk in 
 melting and exporting the coin, then on all oc- 
 casions of extraordinary elevation, the value 
 of coin would confirm more nearly that of bul- 
 lion, and consequently the market price of 
 bullion, as expressed in coin, or in paper con- 
 vertible into coin, would not rise so high above 
 the -Mint price. But this greater steadiness 
 
36 
 
 in the market price of bullion would be the 
 effect, not of a greater, but of a less degree of 
 steadiness in the value in the currency. If an 
 unfavourable balance of foreign payments were 
 to raise bullion six per cent, above its level 
 value, and if the risk incurred by melting and 
 exporting the coin amounted to five per cent, 
 then the coin, or a paper currency circulating 
 at par with the coin, would rise only one per 
 cent, and the price of bullion would be five 
 per cent, higher in the market than at the 
 Mint ; while, if all the risk and difficulty at- 
 tending the melting and defacing of it were 
 removed, the rise in the value of the coin, or of 
 a paper currency equivalent to the coin, would 
 rise six, instead of one per cent, while the 
 market and the Mint price of bullion remained 
 at par. In the case we have stated, the dif- 
 ference between the market and the Mint price 
 of the metals is occasioned by the currency 
 not having risen, in so great a degree as bul- 
 lion, above its customary and level value. A 
 repeal of the laws against defacing and ex- 
 porting the coin of the realm, instead of ren- 
 
37 
 
 dering the currency more uniform and steady, 
 would increase the fluctuation in its exchange- 
 able power. 
 
 On the same principle that the laws against 
 melting and exporting the coin ought not to 
 be repealed, we ought to reject the propositions 
 contained in Mr. Rioardo's proposal for ob- 
 taining a secure and uniform currency. Of 
 all those who have espoused the doctrines of 
 the bullionists, this gentleman is unquestionably 
 the most able. He has done more for political 
 economy than any other writer, with the single 
 exception, perhaps, of Doctor Adam Smith ; 
 and the authority of one who combines so much 
 profound science, with such extensive practical 
 knowledge, must stand extremely high. Yet 
 it seems to me that he occasionally falls into 
 that species of error to which men of great 
 original genius are peculiarly exposed, and 
 that in the ardour of discovery, he pushes his 
 general principles too far, and arrives at con- 
 clusions practically inadmissible. This I con- 
 ceive to be the case with respect to his propo- 
 sal for causing the Bank to pay their notes, not 
 in coin, but in bullion. If there be any truth 
 
m 
 
 in the principles, which I have laboured to 
 establish in the preceding pages, coin is a less 
 eligible article for export than bullion, and on 
 the occurrence of an unfavourable harvest, or 
 a foreign loan, will not experience so great an 
 elevation above its customary and level value. 
 If therefore the paper currency were rendered 
 convertible into bullion, instead of into coin, 
 its exchangeable power would be subject to 
 deeper vibrations than at present. Small pieces 
 of metal, the exportation of which involves the 
 risk of punishment and loss, cannot in the na- 
 ture of things pass off in the payments of foreign 
 debts so readily, as masses of metal which may 
 be legally exported ; and consequently an un- 
 favourable balance of foreign payments cannot 
 diminish the supply, and the value of coin in 
 the same degree that it diminishes the supply, 
 and raises the value of bullion. In certain 
 states of the market, a currency convertible 
 into bullion, would rise several per cent, above 
 a currency convertible into coin ; and the 
 adoption of Mr. Ricardo's proposal would only 
 serve to increase those calamitous fluctuations 
 in the value of the circulating medium, which 
 
39 
 
 it is the great object of the practical statesman 
 to prevent. 
 
 In some cases indeed, the Bank might gain 
 by paying its notes in bullion instead of in coin. 
 Bullion would never be required for domestic 
 circulation, and when the exchange was at par, 
 and our debts to foreign countries were can- 
 celled by our credits, it would not be sought 
 for exportation. While things continued in 
 this state, the paper currency, unless issued in 
 excess, would scarcely ever be brought to the 
 bank for payment, and, if it were brought, 
 gold could immediately be obtained at the 
 Mint price, so that the Bank would be under 
 no necessity of keeping specie locked unpro- 
 ductively in its coffers, for the purpose of meet- 
 ing occasional demands. The profits of the 
 Bank proprietors would experience an increase, 
 and this increase, not being obtained at the 
 expense of any other class, would be a clear 
 addition to the net revenue of the community. 
 But these advantages would be temporary, and 
 would cost too much. When an unfavourable 
 harvest, or a foreign loan occurred, gold would 
 be the first thing in demand for balancing the 
 
40 
 
 account with the creditor country, and con-> 
 sequently, in the home market, its supply would 
 diminish, and its value rise. On the supposi- 
 tion that the paper currency did not partake in 
 this fluctuation, but was issued to the same 
 amount, and retained the same value as before, 
 the market price of gold would rise above the 
 Mint price, and a ruinous run would be made 
 upon the Bank ; and if we suppose, that in 
 order to obviate this, the Bank contracts its 
 issues until paper attains the same extraordi- 
 nary elevation as gold, then the sudden increase 
 in the value, and diminutions in the amount of 
 the currency, would inflict upon the public the 
 greatest embarrassment and distress. The 
 very moderate saving of capital which could 
 be obtained in ordinary cases from rendering 
 Bank paper payable in bullion, and thereby 
 enabling the Bank directors to carry on their 
 business, with a less quantity of the metals 
 locked up in their coffers, would be purchased 
 at a price much too dear, and by aggravating 
 the calamities incident to unproductive seasons 
 and the revulsions of trade. 
 
 Having thus examined the principles main- 
 
41 , 
 
 tained by the bullionists, I shall proceed to 
 consider the doctrines espoused by those, who 
 have denominated themselves practical men. 
 
 It is a singular fact, that in the controversies 
 respecting the state of the currency, those who 
 have assumed, by way of excellence, the charac- 
 ter of practical men ; and who have endeavour- 
 ed to discredit their opponents by the designa- 
 tion of theorists, are themselves the advocates 
 of one of the most refined and subtle theories, 
 which has ever been advanced in political 
 economy, namely, that of an abstract currency, 
 or ideal standard of value. This theory, in- 
 deed, is not always avowed in direct terms ; 
 but it is uniformly implied in their reasonings* 
 They deny the leading principle of the bul- 
 lionists, that the standard of money must be 
 some commodity possessing an intrinsic ex- 
 changeable value ; and between this denial and 
 the admission of an abstract or ideal standard, 
 there exists no middle point. The pound sterling 
 must either be a term applied to a given quan- 
 tity of some particular commodity, such as 
 gold, or silver; or else a denomination not 
 standing for any commodity in particular, but 
 
42 
 
 expressing, indifferently, some portion of the 
 value possessed by commodities in general, such 
 as half the value of a sheep, or one-fourth of the 
 value of a cow, or one-sixteenth of the value of 
 a horse. 
 
 The practical men, or rather the idealists, 
 who deny that a commodity can be the standard 
 of money, because it must always be variable 
 in its value, have failed to reflect that their 
 standard unit is itself the most fluctuating and 
 unsteady thing imaginable ; and can never, for 
 two seconds of time, express the same degree 
 of exchangeable power. Value in exchange 
 does not possess a separate and independent 
 existence ; it is a property belonging to com- 
 modities. A standard unit, therefore, as it does 
 not represent, or express, the exchangeable 
 value of any particular commodity, must, if it 
 express any value at all, represent indifferently, 
 parts of the value of commodities in general; as 
 half the value of one, or a fourth of the value 
 of another. Now we will divide all commodities 
 into two classes, — agricultural produce, and 
 manufactured goods ; and suppose that the 
 pound sterling, or standard unit, represents in- 
 
43 
 
 differently either one-fourth of the value of a 
 quarter of corn, one-eighth of that possessed by 
 a cow, or one-thirteenth of that belonging to 
 a horse; one-fourth of that of a coat, one-eighth 
 of that of a table, or one-thirteenth of that of a 
 bed. In this case, if I were to take a hundred 
 pound sterlings, or standard units, to market, 
 they would purchase for me agricultural pro- 
 duce, consisting of two quarters of corn, two 
 cows, and two horses, with manufactured goods, 
 consisting of two coats, two tables, and two beds. 
 Now, let agricultural produce acquire twice its 
 former value with respect to wrought goods, 
 and then the standard unit, or pound sterling, 
 must retain its former proportion either to the 
 one class of commodities or to the other. But if 
 it retain its former proportion to manufactured 
 goods, and continue to represent one-fourth of 
 the value of a coat, one-eighth of that of a 
 table, and one-thirteenth of that of a bed, then 
 it must lose one-half of its former proportion to 
 agricultural produce, and will represent only 
 one-eighth of the value of a quarter of corn, 
 one-sixteenth of that of a cow, and so on. 
 While, on the other hand, if it retain its former 
 
44 
 
 proportion to agricultural produce, and con- 
 tinue to represent one-fourth of the value con- 
 tained in a quarter of corn, and so on as before, 
 it must acquire double its former proportion 
 with respect to wrought goods ; represent one- 
 half of the value contained on a coat, one- 
 fourth of that of a table, and one-sixth and half 
 of the value of a bed. In the former case, if I 
 took a hundred pounds, or units to market, 
 they would procure for me manufactured goods, 
 consisting of two coats, two tables, and two 
 beds, with a quantity of agricultural produce, 
 equal to one quarter of com, one cow, and one 
 horse ; and in the latter case my hundred units 
 would procure me just twice this quantity of 
 commodities, or agricultural produce equal to 
 two quarters of corn, two cows, and two horses ; 
 with wrought goods equal to four coats, four 
 tables, and four beds. 
 
 Thus then, we see that a currency founded 
 on the principle of a standard unit, cannot by 
 possibility acquire a fixed and uniform value. 
 Value is a quality existing only in commo- 
 dities. If the pound sterling or unit, does not 
 represent the value of some one commodity in 
 
45 
 
 particular, such as a piece of metal of a certain 
 weight and fineness, it must represent parts of 
 the values of commodities, as half the value of 
 one ; a third of the value of another, and so on, 
 according to the proportional worth of each. 
 It is plain that a denomination, standing neither 
 for the value of any thing in particular, nor for 
 parts of the values of things in general, must be 
 perfectly powerless in the market and cannot 
 be made the measure of value and medium of 
 exchange ; and it is evident that if it represent 
 indifferently parts of the values of commodities, 
 its power as a medium of exchange must rise or 
 fall with every alteration in the relative value 
 of commodities. But the relative value of com* 
 modities is liable to great, to sudden, and to in- 
 cessant change. Those who maintain that the 
 precious metals ought not to be regarded as the 
 standard of money, because, as commodities, 
 they cannot possess a fixed and uniform value, 
 go either expressly, or by inference, to establish 
 a species of standard infinitely more irregular 
 than that which they reject. 
 
 The opponents of the bullionists did not per- 
 ceive the origin and precise nature of the error 
 
46 
 
 which they detected and set themselves to re- 
 fute. As practical men they had experienced 
 that a rise in the price of bullion was not ne- 
 cessarily accompanied by a corresponding fall 
 in the value of currency, or, which amounts 
 to the same thing, by a general and equivalent 
 rise in the price of other commodities. They, 
 therefore, denied the conclusions of the bul- 
 lionists, that the bank note was depreciated, 
 and that the measure of its degradation was to 
 be found in the difference between the Mint 
 and the market price of gold. So far they 
 were correct; but the very next step they 
 took, they involved themselves in error. They 
 did not perceive that the bullionists arrived at 
 conclusions inconsistent with the existing facts, 
 not in consequence of arguing from unsound 
 principles, but from failing to attend to the 
 exceptions and limitations to which correct 
 general principles are occasionably liable. 
 Not content with establishing facts, they set 
 themselves to propound theories. They con- 
 troverted doctrines known and established ever 
 since the time of Locke ; they denied the prin- 
 ciple that the standard of money must be found 
 
41 
 
 in some commodity possessing an intrinsic 
 value; and thus involved themselves in all the 
 mystery, confusion, and error, of abstract cur- 
 rencies and ideal units. 
 
 But, if those who have been styled practical 
 men, were less successful than the bullionists, 
 in expounding the theory of money, they were 
 more accurate in observing facts. The history 
 of our currency, both before and after the 
 passing of the Restriction Act, bears them out 
 in their practical conclusion, that gold rose 
 above its customary and level value, and that 
 the difference, between the market and the 
 Mint price of bullion, did not measure the de- 
 gradation in the value of the paper currency. 
 In the year 1 795, we incurred, in consequence 
 of our contributions to the Continental struggle, 
 a great foreign expenditure ; while a deficient 
 harvest at home caused our imports of grain 
 to exceed our exports by 1,900,000 quarters. 
 The consequences were, that, as the Bank 
 directors declared*, the market price of gold 
 rose to £4. 3s. and £4. 4s. the ounce ; and 
 
 * Secret Committee of the House of Lords, page 152. 
 
48 
 
 that silver which, in the beginning of the year, 
 had been to gold as 1 to 14.94, became only 
 as 1 to 15.24. At this time the amount of 
 Bank paper in circulation was £.11,000,000. 
 From this period to the year 1799, our foreign 
 expenditure diminished, and more favourable 
 harvests reduced our animal importations of 
 grain, by half a million of quarters. The con- 
 sequences were, that the market price of gold 
 fell something below the Mint price ; and that 
 silver, in reference to gold, became as 1 to 14.30, 
 and even as 1 to 14.09; though, while those 
 events were in process, the amount of Bank 
 paper in circulation amounted to £. 14,000,000. 
 In 1800, our foreign expenditure again be- 
 came considerable; while the very deficient 
 harvest of the preceding year, caused our 
 imports of grain to exceed our exports by 
 2,089,608 quarters. The market price of gold 
 now rose to £4. 5s. per ounce, and the amount 
 of Bank of England paper in circulation was 
 £.15,000,000. From 1802 to 1808 our foreign 
 expenditure, and our importations of grain 
 were considerably reduced, and consequently 
 the market price of the metals fell ; though the 
 
49 
 
 amount of Bank of England paper in circu* 
 lation rose to £.17,000,000. In 1809 and 1810, 
 we incurred the enormous foreign expenditure 
 of the Peninsula war ; and deficient harvests 
 required great importations of grain. The 
 market price of the ounce of gold rose to 
 £.4 lis.; silver, in relation to gold, was only 
 as 1 to 16.49; the amount of Bank paper was 
 £. 20,000,000. From 1810 to the conclusion of 
 peace, though the importation of corn dimi- 
 nished, the foreign expenditure became enor- 
 mous. In April 1814, the market price of 
 gold was £. 5 5s. the ounce ; and the Bank 
 paper £.24,280,220 : and in July of the same 
 year, the once of gold fell to £.4 lis. ; while 
 the amount of Bank paper in circulation rose 
 to £.31,301,510* 
 
 These facts do not indeed bear out the 
 practical men in rejecting the metals as the 
 standard of money, and substituting instead of 
 the received theory, their doctrine of an ab- 
 stract currency or ideal unit ; but they furnish 
 a complete practical illustration of the prin- 
 ciple which I have endeavoured to establish 
 in the preceding pages, respecting the in- 
 
 OF THE Y 
 
 DIVERSITY 
 
50 
 
 fluence which the fluctuation of trade, and an 
 unfavourable balance of payments, has upon 
 the exchangeable value of the precious metals. 
 Whenever a large foreign expenditure, or an 
 unfavourable harvest, turned the balance of 
 foreign payments against us, gold not only 
 rose in price, but, as the more eligible article 
 of export, rose in a higher ratio than silver. 
 The effect invariably followed its cause, what- 
 ever was the amount of paper currency, which 
 the wants of commerce called into circulation. 
 In April 1814, when the amount of Bank notes 
 was £. 24,000,000, gold was £.5 5s. the ounce, 
 and in July of the same year, it fell to £. 4 1 Is. 
 the ounce, though the issues of the Bank rose 
 to £.31,000,000. Thus experience, no less than 
 general principles, proves to us, that the metals 
 are occasionally exposed to considerable eleva- 
 tions above the level marked by the cost of 
 their production ; and that their market may 
 rise considerably above their Mint price, though 
 no depreciation, or diminution of value, has 
 been sustained by the currency. 
 
 These facts are not sufficient to prove, nor is 
 it my intention to contend, that since the pass- 
 
51 
 
 ing of the Restriction Act the paper currency 
 has never sustained any real depreciation, and 
 sunk beneath the customary and level value of 
 the coin. The contrary has probably been the 
 case. When we consider that the transac- 
 tions of the Bank, have not been sufficiently 
 confined to the discounting of bills of ex- 
 change payable again at a short date, but 
 that it has been the practice to make advances, 
 beyond the due proportion, upon Government 
 securities, we must admit that paper may 
 have been occasionally issued in excess. But, 
 on the other hand, when we reflect that gold 
 often rose the highest, when the amount of 
 paper was diminishing; and that the elevation 
 invariably took place during times of unfa- 
 vourable harvest, or great foreign expenditure, 
 we must be convinced that it is to these causes 
 that the far greater part of the effect is to be 
 ascribed. If paper sunk a little below the 
 level, the metals rose considerably above it. 
 If some evil was incurred by the currency 
 sinking in value, much evil was avoided by 
 its being prevented from rising to the extra- 
 ordinary elevation in valuewhich gold attained. 
 
52 
 
 It seems to follow, that the question respect- 
 ing the resumption of cash payments resolves 
 itself into that of a choice between two 
 evils. If the Restriction Act continues, and 
 particularly if the Bank does not sufficiently 
 limit its transactions to the discounting of bills 
 of exchange, but makes advances to Govern- 
 ment either in the form of excessive loans, 
 or by a too extensive purchase of Exchequer 
 bills*, — the currency will occasionally sustain 
 some depreciation ; and if cash paymants are 
 resumed, then it will partake in those extra- 
 ordinary elevations, which, on the occurrence 
 of a foreign loan, or deficient harvest, the un- 
 favourable balance of payments communicates 
 to the coin, into which it may be made con- 
 
 * The reason why a considerable proportion of the 
 notes in circulation should always be issued in the dis- 
 count of bills of exchange, is, that the falling due of such 
 bills throws any occasional redundancy of paper back upon 
 the Bank. When currency is abundant in the market, 
 private bankers discount for less than five per cent. ; and, 
 consequently, no bills are offered to the Bank of Eng- 
 land, which never discounts under five per cent. No 
 new issues, therefore, take place, while the notes already 
 
53 
 
 vertible. It becomes the business of the prac- 
 tical statesman, therefore, to inquire into the 
 effects which, in the actual circumstance of 
 the country, a fall and a rise in the value of 
 the currency, are respectively calculated to 
 produce; and, after a careful examination 
 and comparison, to adopt that alternative 
 which shall appear to be productive of the 
 least injurious consequences. 
 
 The first, and certainly the most injurious, 
 consequence of a fall in the value of the cir- 
 culating medium, is the reduction which it 
 effects in the real wages of labour. A fall in 
 the value of money is the same thing as a rise 
 in the price of all the necessaries of life; and 
 experience proves to us, that the rate of wages 
 
 in circulation are gradually returned by the payment of 
 the outstanding bills of exchange, until currency becomes 
 so scarce in the market, that private bankers cannot con-? 
 tinue to discount below five per cent. ; and the merchant 
 is compelled to resort to the Bank of England. In this 
 manner, when too great a proportion of the issues of the 
 Bank are not made on Exchequer bills, the currency 
 acquires an elastic power, and expands, or contracts, in 
 conformity to the demand. 
 
54 
 
 is somewhat tardy in proportioning itself to 
 the price of necessaries. In almost all trades 
 the sum which is paid for labour is regulated 
 by a contract, tacit or implied, between the 
 masters and the workmen ; and, notwithstand- 
 ing the fluctuations in the value of money, and 
 in the price of necessaries, it varies but little 
 for considerable periods. The tardiness with 
 which wages adjust themselves to be the price 
 of subsistence, is, in England, increased by 
 the operation of the Poor Laws. The reward 
 of labour has a constant tendency to settle 
 down to that quantity of subsistence which, 
 from climate and custom, is necessary, to 
 enable the labourer to bring up such a family 
 as will keep the supply of labour even with 
 the demand : for, if he receives more than 
 this, the quantity of labour will increase, and 
 its value fall ; and if he receive less, its quan- 
 tity will diminish, and its value rise. But if 
 the parish undertake to support the labourer's 
 family, either wholly or in part, the masters 
 will no longer be compelled, by the law of 
 supply and demand, to give their workmen a 
 sum sufficient to purchase this quantity of sub- 
 
55 
 
 sistence ; and a fall in the value of money, or 
 a rise in the price of provisions, will be fol- 
 lowed, not by an advance in wages, but by 
 an increase in the poor rates. While the 
 Restriction Act remains in force, and particu- 
 larly if the Bank continue to make undue ad- 
 vances in favour of Government, the currency 
 may occasionally fall below its customary level, 
 and thereby render wages inadequate to the 
 support of the labourer's family, increase the 
 number of paupers, and render the pressure 
 upon the parishes more heavy. 
 
 These evils, however, could only be of short 
 duration, and would be counteracted by the 
 other effects of an increased circulation. When 
 the value of money falls, there is nothing to 
 prevent the price of labour from rising in the 
 same proportion with that of other things, 
 except the compact, expressed or implied, 
 which regulates the rate of wages in the 
 several trades. The laws against combination 
 have probably the effect of rendering this com- 
 pact less flexible than it otherwise would be, 
 and of preventing the money rate of wages 
 
56 
 
 from conforming to the price of subsistence, 
 so as to keep their real rate at the level marked 
 by the proportion between the supply of labour 
 and the demand for it. However, notwith- 
 standing these laws, a fall in the value of 
 money would gradually force upon masters a 
 proportional rise in the wages of their work- 
 men — unless, indeed, a diminution in the 
 demand for labour were to take place. But a 
 fall in the value of money, instead of diminish- 
 ing, would, for some time, increase the demand 
 for labour. As long as this fall raised the 
 price of goods, without effecting an equivalent 
 rise in the rate of wages, the profits of stock 
 would be increased ; and thus the master's 
 capital would accumulate more rapidly, while 
 he would have a stronger motive to employ 
 upon productive labour all the stock which 
 his wealth or credit enabled him to command. 
 The alterations, too, which a fall in the value 
 of the currency would effect in the distribution 
 of wealth, would all be in favour of the pro- 
 ductive classes, and tend to encourage industry, 
 and to increase the demand for labour. During 
 
57 
 
 the currency of his lease, the farmer reserves 
 an important benefit ; the amount of his rent 
 remaining stationary, while the price of his 
 produce rises. So far indeed, as the landlord is 
 concerned, it is unjust and injurious that the rent 
 should be paid in a currency of diminished 
 value. What the farmer gained, he would 
 lose. But wealth, in the hands of the farmer, 
 is more beneficial to the country than wealth 
 in the hands of the landlord. By the one, 
 it is expended productively— as capital; by 
 the other, unproductively — as revenue. While, 
 therefore, we cannot defend the injustice of 
 violating the spirit of the contract between 
 landlord and tenant, by causing the stipulated 
 rent to be paid in a depreciated currency, we 
 must admit, that increasing the former's pro- 
 fits, though it be at his landlord's expense, 
 gives him at once the power and the induce- 
 ment to cultivate with more spirit, and to 
 afford employment to a greater number of 
 hands. 
 
 In the other branches of industry a diminu- 
 tion in the value of the currency would also be, 
 in some respect, favourable. Until wages rose 
 
58 
 
 in proportion to the necessaries of life, all 
 would obtain as a rate of profit, somewhat 
 higher than before. Besides, a rising scale of 
 prices has a kind of magical effect upon trade, 
 and inspires that confidence and credit, which 
 give an heightened power to all the springs of 
 production. Confidence, like those prophecies 
 which occasion their own fulfilment, creates 
 that increased demand which it anticipates. 
 The masters in every trade fabricate that quan- 
 tity of their respective commodities, for which 
 they expect a profitable sale. Increase this 
 expectation, inspires them with more confi- 
 dence in obtaining a favourable market, and 
 the supply of all sorts of goods will be imme- 
 diately augmented. Now, if a single individual 
 were to be seized with an unusual confidence, 
 and, under its influence, were to fabricate a 
 more than customary quantity of his peculiar 
 article, then the other individuals of the com- 
 munity not having an enlarged power of pur- 
 chasing, the supply of this article would be 
 increased beyond the demand, and its pro- 
 ducer's expectations of advantage would be 
 disappointed. Very different is the resu;l when 
 
59 
 
 the increase of confidence becomes general. 
 In this case there is a greater quantity of 
 commodities produced in all the branches of 
 industry, and each class, having more goods 
 to dispose of, will enlarge the market for the 
 others. For example ; if, in consequence of 
 a growing and universal confidence, commo- 
 dities in general were increased by a fourth, 
 then the shoe-maker would have more shoes 
 to dispose of; but as the hatter and the clothier 
 would have more hats and clothes to exchange 
 against them, the demand for shoes would in- 
 crease, in an equal proportion with the supply. 
 The other industrious classes having a greater 
 quantity of their respective commodities to 
 exchange against hats and clothes, these arti- 
 cles would also meet an enlarged demand, 
 proportioned to their augmented supply, and 
 would consequently retain the same value as 
 before. It is easy to see, that if the general 
 confidence had occasioned an improvement in 
 the quality, instead of an increase in the quan- 
 tity of commodities, the effect would be the 
 same. In this manner, confidence, w T hen ge- 
 neral, always creates that enlargement of the 
 
60 
 
 market which it anticipates ; and hence a 
 rising scale of prices imparts a brisker flow to 
 industry, through all its varied channels. 
 
 With respect to those engaged in commerce, 
 a depreciation in the currency is beneficial to 
 the debtor, and injurious to the creditor. But 
 as every considerable trader must have bills to 
 pay, as well as to receive, and is, at one and 
 the same time, both a debtor and a creditor, 
 the injury and the benefit will in some degree 
 balance each other. Even he who is exclu- 
 sively a creditor will receive some compen- 
 sation for his loss. The brisker flow of trade 
 will render the backward more prompt , in 
 their payments, and enable some to make 
 good their engagements, who could not other- 
 wise have paid at all ; and will thus insure 
 him a quicker return, and diminish the number 
 of his bad debts. The greater facility in ob- 
 taining discounts, which an increased issue of 
 currency bestows, is also to be taken into the 
 account. To the rash and gambling trader 
 this may be an injury ; encouraging him to 
 engage in speculations ultimately ruinous to 
 himself, and prejudicial to the country. But 
 
61 
 
 this objection proves too much. It might be 
 urged with equal force against every species 
 of commercial credit. An advantage is not 
 to be disregarded, because imprudent people 
 may use it to their own destruction. A few 
 may make over-sanguine calculations, and 
 undertake losing speculations, but the great 
 majority of those who engage in mercantile 
 pursuits will profit by every facility of dis- 
 count and increase of credit* which enables 
 them to extend their transactions. 
 
 A diminution in the value of the currency 
 would have the effect of lowering the salaries 
 of all the servants of the state, whether civil 
 or military. Now the labour of these persons, 
 however useful and important, effects no direct 
 addition to the wealth of the community. The 
 salaries advanced to them are not expended 
 productively, as capital ; and if their services 
 are as efficiently performed, when they are 
 paid in a depreciated currency, as when paid 
 in one of undiminished value, the difference is 
 a clear gain to the public. With respect to 
 all other annuitants, to the mortgagee, and to 
 the fund-holder, their case would be nearly the 
 
62 
 
 same as that of the land-owner. The diminu- 
 tion effected in their real income would be 
 manifestly unjust, but it would in no way- 
 obstruct production, nor retard the prosperity of 
 the country. It would have rather a contrary 
 effect: what was taken from the annuitant 
 would be turned into the channels of profit and 
 wages, and would thus give a new stimulus to 
 industry, and ameliorate the condition of the 
 great mass of the population. 
 
 But in the present state of this country, the 
 most beneficial effects resulting from a lower- 
 ing of the value of the circulating medium, 
 would be the diminution of the public debt, 
 and the reduction of the taxes. Excessive 
 taxation banished manufactures and commerce 
 from the republic of Holland, and we are not 
 to expect that in England a similar cause will 
 be followed by a dissimilar effect. If, in the 
 science of political economy, there is any one 
 proposition more capable of demonstration 
 than another, it is, that excessive taxation dries 
 up the spring of production. When taxes 
 raise the necessaries of life, and cause the la- 
 bourer to pay a higher price for his subsistence 
 
63 
 
 than before, then, if his wages do not rise, they 
 will be insufficient for his support; and his 
 family must go upon the parish or starve. But 
 if, in order to place the labourer in the same 
 independent circumstances as before, wages 
 are raised in an equal ratio to the increased 
 price of necessaries, then the capitalist must 
 either raise the price of his goods in proportion 
 to the higher wages which he pays, or receive 
 a lower rate of profit upon his trade. Suppose 
 that he raises the prices of his goods, and then 
 he will be under- sold i'n the foreign market; 
 the commerce of the country will be destroyed ; 
 and all those to whom it afforded employment, 
 will be thrown out of work. On the other 
 hand, supposing, what is more probable, that 
 the capitalist cannot increase the price of his 
 goods in proportion to the higher wages which 
 he pays, and then the diminished profits of his 
 trade will tempt him to transfer his capital to 
 countries where it will fetch a higher re- 
 turn, the funds for the maintenance of in- 
 dustry will be diminished, and our people 
 deprived of the means of earning an indepen- 
 dent livelihood. Thus we see, that heavy 
 
taxation, by rendering wages inadequate, by 
 raising the prices of goods in the foreign mar- 
 ket, or by driving capital abroad, is the great 
 parent of pauperism. In the deficiency of 
 employment, in the amount of the poor rates, 
 and in the millions of capital sent out of the 
 country as foreign laws, we may discover the 
 awful truth, that exorbitant taxation is bring- 
 ing us to the limits of our resources, and to 
 the verge of decline. A lowering of the value 
 of the currency would enable us, in a certain 
 degree, to slip from beneath a burthen which 
 bows the people to the earth, and which has 
 become too heavy for our strength to bear. 
 
 Having thus traced the effects of a diminu- 
 tion, I will now endeavour to point out the 
 consequences of an increase in the value of the 
 circulating medium. 
 
 As a depreciation of the currency would, in 
 the first instance, occasion a fall in the real 
 wages of labour; so a rise in the value of the 
 medium in which he is paid, would give the 
 labourer a greater command over the neces- 
 saries of life than before, and thus reduce the 
 number of paupers, and lower the amount of 
 
65 
 
 the poor rates. Unfortunately these benefi- 
 cial effects could not be permanent. Masters 
 can lower wages much more rapidly than 
 workmen can raise them. In proportion as 
 their numbers are smaller, a combination 
 among them becomes more easy; while, as 
 they can always subsist for a considerable 
 time upon their capital, their competition to 
 obtain workmen can never be so active and 
 urgent as that of the workmen, whose labour 
 is their daily bread, to obtain employment* 
 Besides, a rise in wages always diminishes, by 
 a two-fold operation, the demand for labour* 
 It lowers the profits of stock, and thereby 
 checks the accumulation of capital, and 
 takes from the inducement to engage in 
 productive industry ; while, at the same time, 
 it prevents any given quantity or amount of 
 capital, from putting so great a number of 
 hands in motion as before. If the labourer 
 receives two shillings a-day as wages, and if 
 he daily works up material to the amount of 
 two shillings more, then a capital of two 
 thousand shillings will put in motion five hun- 
 dred days' labour; but if wages rise to three 
 
66 
 
 shillings a-day, then a capital amounting to 
 two thousand shillings would not give employ- 
 ment to more than four hundred days' labour, 
 it requiring five shillings instead of four shil- 
 lings, to furnish the labourer with wages and 
 material for each day. Thus the combination 
 of masters, the competition of workmen, the 
 less rapid accumulation of capital, and its di- 
 minished power of putting industry in motion, 
 would irresistibly tend, not only to bring the 
 real wages of labour down to their former 
 level, but to depress them somewhat lower 
 than they would have been, had the rise in the 
 currency never taken place. 
 
 We have seen that a fall in the value of the 
 circulating medium alters the distribution of 
 wealth in favour of the productive classes. A 
 rise in its value has a contrary effect, enriching 
 the class whose revenues are expended unpro- 
 ductively, at the loss of those by the agency of 
 whose labour and capital the wealth of the 
 community is created. A greater portion of 
 the farmer's produce would be required to pay 
 his rent, and a less portion would remain to be 
 re-invested in cultivation and improvement. 
 
67 
 
 The salaries of public functionaries, the wages 
 of all the civil and military servants of the state, 
 though nominally the same, would in reality be 
 increased. The mortgagee, the annuitant, 
 and the fund-holder, all those, who, without 
 actively engaging in the work of production, 
 live upon the interest of money, would have 
 their revenues increased at the expense of the 
 funds which pay the profits of stock, and the 
 wages of labour. 
 
 In all the transactions of trade, the creditor 
 would be benefited at the cost of the debtor. 
 The diminution in the amount of the circula- 
 ting medium, would compel the monied capi- 
 talist, and banker, to restrict their discounts, 
 and thus deprive the merchant of the accus- 1 
 tomed accommodation on which he calculated. 
 Credit would encounter a s\ock, and as an 
 increase of confidence creates the extension of 
 demand, which it anticipates; so a diminution 
 of confidence occasions that narrowing of the 
 market which it fears. One individual under 
 the apprehension that he will be able to sell 
 less, employs fewer workmen in preparing 
 goods, than before ; but the diminished quan- 
 
$8 
 
 tity of his goods will not enhance their price, 
 because, as a similar impression caused less busi- 
 ness to be done in other trades, there will be 
 fewer articles to offer in exchange for them, 
 and the demand will be contracted in the same 
 proportion as the supply. The shock which 
 injures credit, suspends production. 
 
 But under the present circumstances of this 
 country, the most injurious effect of a rise in 
 the value of money, would undoubtedly be the 
 addition which it would occasion in the real 
 amount of our debt, and taxation. These are 
 already sufficiently exorbitant. The agriculture, 
 the manufactures, the commerce, the capital, 
 and the population of the country, sink beneath 
 their pressure. The vessel is full, and another drop 
 may cause the waters of bitterness to overflow. 
 From the brief sketch which has here been 
 given of the effect, which a fall and a rise in 
 the value of currency are respectively calcu- 
 lated to produce, it must be sufficiently appa- 
 rent, that the consequences of the latter would 
 be beyond all comparison more injurious than 
 those of the former. With respect indeed to 
 an unjust alteration, in the distribution of pro- 
 
69 
 
 perty, both would be upon a par. The pro- 
 prietor who had granted leases, the creditor, 
 who had made advances either to the public, or 
 to individuals, with all those whose income was 
 estimated, or whose capital was invested in mo- 
 ney, would suffer by the one ; while the tenant, 
 the debtor, and the payer of taxes, would be 
 surcharged by the other. But though a fall 
 and rise in the value of currency, might inflict 
 equal injustice upon individuals, they would 
 produce very different effects upon the general 
 wealth and prosperity. The violations of pri- 
 vate property in the former case, would be 
 accompanied by an increase of confidence, of 
 production, and of trade ; in the latter, aggra- 
 vated by a universal stagnation, and revulsion, 
 and, perhaps, in this over- taxed country, by a 
 national bankruptcy. 
 
 It is to be remembered, that in deciding 
 upon the expediency of cash payments, our 
 choice does not lie between a currency, always 
 conforming to the customary and level value of 
 the metals, and one liable to be degraded below 
 this level. If the Bank restriction is removed, 
 the pound note will partake in those sudden 
 
70 
 
 and considerable elevations to which the sove- 
 reign is exposed. We have lately invested 
 considerable portions of capital in foreign 
 loans, and the deficiency of the last harvest has 
 caused us to import foreign corn, to the amount 
 of ten millions sterling. The effect produced 
 by these causes, has been in exact conformity 
 to that, which general principles would have 
 led us to anticipate. Gold gradually rose, and 
 on the 8th of January last, was £A 3s. per 
 ounce, or nearly eight per cent, above its Mint 
 price. If therefore the Bank had been paying 
 in gold, it would have been compelled to con- 
 tract its issues, and the run upon its coffers 
 would not have ceased, until the market and 
 the Mint price of the metals were restored to 
 par, that is, until the supply of currency became 
 so reduced, that its value rose by eight per 
 cent. 
 
 Now let those who express so much solici- 
 tude for a return to cash payments, carefully 
 consider, what, in the actual circumstances of 
 this country, would have been the conse- 
 quences, of having the amount of the circu- 
 lating medium diminished, until any given 
 
n 
 
 sum in it acquired an increased value of eight 
 per cent. Was the farmer in a condition 
 which enabled him to add one-twelfth to the 
 rent due to his landlord? Are trade, and 
 commerce, and credit, in so flourishing a state 
 as to feel no shock, from a diminished circula- 
 tion and contracted discounts? and do the 
 taxes fall so lightly on the people, that an ad- 
 dition of eight per cent, upon their real amount, 
 would have been unattended with calamity and 
 hazard ? These questions, unfortunately, can 
 be answered only in the negative. The state 
 of the country resembles that of a man, to 
 whom habit has rendered intoxicating liquors 
 a necessary aliment ; and a sudden withdraw- 
 ing of the customary stimulus, may bring on 
 paralysis and death. 
 
 After having bestowed upon this important 
 subject the fullest consideration of which I 
 am capable, I feel convinced that in the very 
 artificial situation, in which the country is 
 placed, a continuance of the Bank restriction, 
 though accompanied by a permanent, and even 
 considerable degradation of the currency below 
 the level marked by the cost of producing gold. 
 
72 
 
 would be a less evil than a return to cash pay- 
 ments, communicating to the circulating me- 
 dium, as it inevitably must, those extraordinary 
 elevations in value, to which the precious me- 
 tals are exposed, whenever the balance of fo- 
 reign payments becomes unfavourable. But 
 the restrictions may be continued, without 
 being accompanied by a permanent or consi- 
 derable degradation of the bank note below the 
 customary and level value of the sovereign. 
 When a difference takes place, between the 
 value of the note, and that of the coin, which 
 it purports to represent, there is not, it is true, 
 any fixed and absolute scale, by which we can 
 render it palpable to the senses, whether and in 
 what degree, this difference may have been 
 occasioned, by gold having risen above the cus^ 
 tomary level, or by paper having fallen below 
 it. There will always, however, be concurring 
 circumstances, and unequivocal symptoms, 
 from which the fact may be deduced with suf- 
 ficient precision for all practical purposes. If 
 our monied capitalists are negociating a foreign 
 loan, of considerable amount, or if an unpro- 
 ductive harvest at home have caused an unu- 
 
m 
 
 sual importation of corn, we may fairly presume 
 that the difference between the coin and the 
 paper, has been occasioned by the elevation of 
 the former: and if at the same time, gold rises 
 higher than silver ; commodities easily trans- 
 ported ascend in a greater ratio, than those 
 less portable ; the real, as well as the computed 
 exchange, turns against us ; and the amount of 
 paper in circulation, is not increased ; — then this 
 presumption becomes certainty, and we have 
 a combination of circumstantial proof amount- 
 ing to demonstration, that the metals are above 
 the level, marked by the expense of their pro- 
 duction. On the other hand, if the customary 
 relations of commerce are not disturbed either 
 by foreign loans, or by unusual importations of 
 foreign corn ; if gold is not higher in propor- 
 tion than silver ; if the advance in the price of 
 commodities is general and uniform, and not 
 graduated according as each article may be 
 more or less eligible, as the basis of extraordi- 
 nary export; — if the real exchange is at par,and 
 only the computed exchange against us; and if 
 the amount of paper in circulation has in- 
 creased ; — then it will become a matter of per- 
 
74 
 
 feet certainty, that whatever difference exists 
 between the value of the pound note and the 
 sovereign, has been occasioned by the paper 
 currency having sunk beneath the customary 
 level of the coin. It is impossible, therefore, 
 that the intelligent and experienced persons in 
 the Bank direction should be at any loss in 
 ascertaining whether a high market price of 
 gold indicated a rise in the value of the metals, 
 or a fall in the value of the currency. Under 
 the former set of circumstances, they would 
 feel that their discounts had not been too libe- 
 ral, under the latter they would perceive the 
 expediency of narrowing their issues, and hence 
 every deviation of the currency from the cus- 
 tomary and level value of the coin might be 
 corrected. 
 
 But if we are to have nothing but pure 
 theory ; if we must adopt general principles 
 without regard to the particular circumstances 
 which limit their application ; and if it is decreed 
 that the taxes of this over-burthened country 
 shall be paid in a metallic currency; then it 
 becomes necessary that we should previously 
 devise and adopt, some means of avoiding, as 
 
75 
 
 much as possible, the effects of those occasional 
 elevations above their level value, to which the 
 metals are exposed. 
 
 As a preparatory step to the resumption of 
 cash payments, it seems highly expedient that 
 we should conform to the practice of other 
 commercial countries, and render silver once 
 more the standard of our money. This metal, 
 as we have already shewn, both from general 
 principles, and from recorded facts, is much 
 less liable to vary in its value than gold. It is 
 true, indeed, that for twenty years previous to 
 the suspension of cash payments, the market 
 price of silver varied much more than the 
 market price of gold. But the price of the 
 metals is very different from their value. The 
 barrenness, or the fertility of the mines may at 
 any time occasion an excessive elevation, or 
 depression in their value, while their price is 
 liable only to those very moderate fluctuations 
 which, as we have seen in the preceding pages, 
 arise from the domestic coin being less eligible 
 as a foreign remittance, than bullion. A dimi- 
 nution in the supply of gold may, at any time, 
 raise its value a hundred per cent.; but its price, 
 
76 
 
 as expressed in gold coin, cannot be raised 
 above four or five per cent. Hence, while 
 gold was the standard to which our currency 
 was referred and conformed, the price of this 
 metal might appear nearly stationary, while its 
 value was subject to great and frequent fluc- 
 tuation. This was the case for many years 
 previous to the suspension of cash payments. 
 Gold, having sunk below its relative value to 
 silver, became the cheapest medium for paying 
 any given sum; and was therefore preferred 
 as the standard of value and currency. The 
 pound sterling became a denomination stand- 
 ing for a given quantity of gold, and the price 
 of gold, being expressed in gold, was nearly 
 stationary, while the price of silver as neces- 
 sarily varied with the varying value of the 
 gold coin, in which it was also expressed. 
 The case was reversed, when the suspension 
 of cash payments caused the price of the metals 
 to be no longer expressed in gold. Both gold 
 and silver were now measured by the bank 
 note ; and, as general principles would have 
 led us previously to conclude, the price of gold 
 fluctuated frequently and considerably, while 
 
77 
 
 the price of silver, though also subject to 
 variations, was comparatively steady. Thus 
 both general principles and experience concur 
 to demonstrate, that the value of silver is more 
 uniform than that of gold ; and that therefore 
 whenever cash payments are resumed, silver 
 should be rendered the only standard of our 
 currency. • r fg 
 
 No person who will investigate principles, 
 or who will examine faults, can hesitate to 
 admit, that for all domestic purposes, silver is 
 a better standard for currency than gold. With 
 reference to foreign exchanges, it will also be 
 found to be a far preferable standard. Silver 
 is the standard adopted by all the commercial 
 nations except England ; and in consequence 
 of our deviating in this respect from the general 
 custom, considerable confusion and uncertainty 
 occurs in calculating the par of our foreign 
 exchanges. As twenty-four livres from the 
 French Mint contain the same quantity of 
 silver as twenty shillings from the English 
 Mint, twenty-four is, with reference to our sil- 
 ver coinage, the par of exchange with France. 
 But if gold is to be the standard of our cur- 
 
78 
 
 fency, and the pound sterling is not to be 
 equivalent to twenty shillings in silver, but to 
 the It parts of a guinea, then the par of ex- 
 change must partake in all the fluctuations to 
 which the value of gold is liable. Twenty- 
 four livres in France, will purchase a bill for 
 a pound sterling in England, when the pound 
 sterling is equivalent to the same quantity of 
 silver which is contained in the twenty-four 
 livres. But if the quantity of gold expressed 
 by the pound sterling rose in value, so as to 
 be equivalent to the quantity of silver con- 
 tained in thirty livres, then it would require 
 thirty livres in France to purchase a bill 
 upon England for a pound sterling; and the 
 par of exchange between the two countries 
 would become thirty instead of twenty-four. 
 Hence, if gold is made the standard in Eng- 
 land, while silver continues to be the standard 
 in other countries, the par of exchange with 
 those countries cannot, for any length of time, 
 be ascertained, but must fluctuate with every 
 alteration which takes place in the relative 
 value of gold and silver. 
 
79 
 
 Thus we see, that whether with a view to 
 uniformity in the value of our domestic cur- 
 rency, or to steadiness in the par of our foreign 
 exchanges, it is necessary that we should 
 adopt silver for our standard. 
 
 To conclude: Under the actual circumstances 
 of this country ; and while the present amount of 
 taxes must be levied, the object of the practical 
 statesman should be, to prevent any sudden or 
 considerable rise in the value of the circulating 
 medium. Even if no other means could be 
 devised for preventing the currency from being 
 permanently degraded below the customary 
 level of the metals, this would not be the time 
 for the restoration of cash payments. To the 
 person who has lived on artificial stimulants, a 
 sudden return to a natural and simple regimen 
 might be immediate death. In a country where 
 the contracts between man and man had been 
 entered into under the high prices of a redun- 
 dant currency, the immediate withdrawing of 
 the customary accommodation might induce 
 universal stagnation, and palsy all the nerves of 
 industry. Whether with respect to physical, 
 
80 
 
 or to political health, a too sudden transition, 
 even from a bad to a good system, is attended 
 with pain and danger. When deviations from 
 the established course of things become neces- 
 sary — 
 
 " Slow should the change arrive, and stage by stage j 
 Slow as the shadow o'er the dial moves, 
 Slow as the stealing progress of the year." 
 
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